Insurance Journal West 2020-10-19 by Insurance Journal

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October 19, 2020 • Vol. 98 No. 20

Contents Idea Exchange

Special Report

News & Markets

SILVER Best Agency to Work For – East: Deland, Gibson Insurance

Pandemic Economic Uncertainty Could See Insurers Buying, Partnering with Insurtechs

14 Insurers Gain Early Wins

SILVER Best Agency to Work For – Midwest: DSP Insurance Services

16 Florida Homeowners

SILVER Best Agency to Work For – South Central: INSURICA

SILVER Best Agency to Work For – Southeast: Fisher Brown Bottrell Insurance

in COVID-19 Business Interruption Lawsuits

24 25

Insurtech TypTap Goes National; Plans Roll-Out in 20 States

Celebrating 50 Years at the Helm of Insurance Journal

SILVER Best Agency to Work For – West: Liberty Company Insurance Brokers

Replacement Cost and the 180-Day Limitation Myth

Tech Talk: Successful Recruiting Requires a Different Story

The Competitive Advantage: How Many Screwdrivers Do You Need?

Ask the Insurance Recruiter: 3 Indicators Your 2021 Talent Strategy Will Be Successful

28 Spotlight: U.S. Treasury Warns

Embracing Technology in a Changed World

Inflection Points in the Growth of an Agency

Closing Quote: Year of Challenges Brings Growth, Innovation and Change

Cyber Liability Insurers Against Paying Ransomware Demands Special Report: The Agency Tech Connection Closer Look: Commercial Property and Virus Exclusion

48 50

Spotlight: 10 Things to Know About Habitational Properties

Departments 8 Opening Note 6 | INSURANCE JOURNAL | OCTOBER 19, 2020

12 Declarations

12 Figures

18 Business Moves

20 People

46 My New Markets

INSURANCEJOURNAL.COM

IT’S NOT ENOUGH TO KNOW AN INDUSTRY INSIDE AND OUT. YOUR CARRIER HAS TO BE ABLE TO SERVICE IT AS WELL AS THEY KNOW IT.

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 real estate. 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-420149 © September 2020 The Hartford

Opening Note Write the Editor: awells@insurancejournal.com

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

ADMINISTRATION / CIRCULATION

Reshaping Claims Trends

he COVID-19 pandemic continues to alter how we work and live across the globe. It is also altering claims trends and risk exposures. According to a new report, Covid-19 – Changing Claims Patterns, from Allianz Global Corporate & Specialty (AGCS), with the reduction in economic activity during lockdown phases, traditional property and liability claims have been subdued. Below are a few highlights from AGCS’s report: Property/Business Interruption: Property damage claims were not significantly impacted by Covid-19. However, as production lines restart, this can exacerbate the risk of machinery breakdown and damage and even fire and explosion. Covid-19 has caused business closures globally – which often may not be covered. However, the pandemic has impacted the settlement of standard business interruption (BI) claims in different ways. On one hand, factories in hibernation will not produce large BI claims. On the other, lockdowns can lead to longer and more costly disruptions as restrictions prevent effective loss mitigation. Liability and Directors & Officers: To date, AGCS said it has only seen a few liability claims that are Covid-19 related. However, liability claims are typically long-tail with a lag in reporting, so general liability and workers’ compensation claims may yet materialize. A number of outbreaks of coronavirus have been linked to gyms, casinos, care homes, cruise ships or food/meat processing plants. Insolvencies, as well as event-driven litigation, could be potential sources of D&O claims. To date, there has been only a small number of securities class action lawsuits related to Covid-19 in the U.S. Aviation: The aviation industry has seen few claims directly related to the pandemic to date. A few passengers have sued airlines for cancellations or disruptions. Slip and fall accidents at airports – traditionally one of the most frequent causes of aviation claims – have declined. Joerg Ahrens, global head of Long-Tail Claims at AGCS, says grounded airline fleets might be exposed to damage from hurricanes, tornados or hailstorms. Cyber: During the pandemic, cyber risk exposures have heightened, with reports of the number of ransomware and business email compromise attacks increasing. To date, AGCS has only seen a small number of cyber claims which are Covid-19 related. Activity: Claims notifications from motor accidents, slips and falls or workplace injuries slowed as more people stayed at home, and with the temporary closure of many shops, airports and businesses during lockdowns across the world. AGCS said it noticed a positive impact on U.S. claims settlement from the suspension of courts and trials. Some claimants and plaintiffs have been more open to negotiating settlements out of court rather than opting to wait a long time until their case is scheduled. In general, claims activity is likely to pick up again following resumption of economic activity, the insurer predicts. Long-Term: According to the report, Covid-19 is accelerating trends such as a growing reliance on technology and rising awareness of the vulnerabilities of complex global supply chains. Going forward, many businesses are expected to review and de-risk their supply chains and build in more resilience. This could involve some reshoring of critical production areas because of disruption caused by the pandemic. Such a move would likely impact frequency of claims and the costs of any future business interruptions. Editor-in-Chief

Traditional property and liability claims have been subdued.

Andrea Wells

8 | INSURANCE JOURNAL | OCTOBER 19, 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: Christopher Boggs, Tony Caldwell, Doug Coombs, Dr. Robert Hartwig, Jim Sams Columnists: Chris Burand, Mary Newgard, Tom Wetzel

SALES / MARKETING

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

DESIGN / WEB / VIDEO

V.P. of Design Guy Boccia | gboccia@insurancejournal.com 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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Outside the US, call (847) 400-5951 Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2020 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Dept, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: Contact (800) 897-9965 x125 or visit insurancejournal.com/reprints

Life Insurance & Long-Term Care

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Brighthouse SmartCare, a hybrid life insurance and long-term care product, gives your clients power over the unexpected. Its long-term care benefit and death benefit can grow over time, helping them to keep pace with rising costs. Better yet, if your clients never use the long-term care coverage, their money is put to good use through a death benefit for their loved ones. Brighthouse SmartCare offers: • Preparation for long-term care needs • Protection from unexpected events, such as premature death • The ability to grow benefits over time to meet rising future costs Brighthouse SmartCare is the smart way to gain power over the unexpected. Learn more at brighthousefinancial.com. This is a life insurance policy that accelerates the death benefit for qualified long-term care services and is not a health insurance policy providing long-term care insurance subject to the minimum requirements of New York Law, does not qualify for the New York State Long Term Care Partnership Program, and is not a Medicare supplement policy. Brighthouse SmartCare® is an Indexed Universal Life Insurance Policy with Long-Term Care Riders issued by, with product guarantees that are solely the responsibility of, Brighthouse Life Insurance Company, Charlotte, NC 28277 and in New York only, by Brighthouse Life Insurance Company of NY, New York, NY 10017 (“Brighthouse Financial”). All guarantees, including any optional benefits, are subject to the claims-paying ability and financial strength of the issuing insurance company. Each issuing insurance company is solely responsible for its own financial condition and contractual obligations. Brighthouse SmartCare has exclusions, limitations, reduction of benefits, and terms under which the policy may be continued in force or discontinued. For costs and complete details of the coverage, please consult the product illustration. Not available in all states. Brighthouse Financial® and its design are registered trademarks of Brighthouse Financial, Inc. and/or its affiliates. 2002 BDUL802003 ICC20-AP1 5-20-AP1

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News & Markets

Pandemic Economic Uncertainty Could See Insurers Buying, Partnering with Insurtechs

nsurance carriers could increasingly target insurtechs for acquisition and partnerships in the coming months due to pandemic-related economic uncertainty, according to a report. “As insurers move toward late 2020 and into 2021, we believe there may be an increase in insurance carriers acquiring and partnering with insurtechs,” consultants at Deloitte said in a 2020 Insurance M&A Midyear Update. The reasons: Carriers are attempting to respond quickly to pandemic-driven digital demands, and insurtechs are displaying flexibility about their futures during uncertain times. “Insurtechs may have a greater willingness to partner or be acquired due to the uncertain economic outlook, and carriers seeking to quickly respond to a rapidly changing world (such as an increased need for virtual or touchless claims) may find insurtech investment a more appealing allocation of capital than investing in the current low-interest-rate environment,” 10 | INSURANCE JOURNAL | OCTOBER 19, 2020

the Deloitte report concluded. The pandemic has raised the stakes. Carriers and agents need to be able to do much, if not all, of the following: market, sell, bind and service commercial lines insurance online. For insurtechs, being acquired isn’t the only M&A option. Some insurtech have themselves already acquired small carriers. Hippo, a property/casualty insurance personal lines broker, bought the carrier Spinnaker in June for an undisclosed price. Another example is the workers’ compensation insurtech Pie Insurance, which raised $127 million in May and then earmarked most of the money to buy a licensed insurer or start a new one. Deloitte said both companies show insurtechs could pursue acquisitions in the months ahead, but it’s unclear whether the trend will mushroom. Insiders have speculated for months that the pandemic may accelerate insurtechs’ willingness to be acquired after forming collaborations with carriers.

The trend was already in play, but the coronavirus pandemic has accelerated it considerably, Martha Notaras, a managing partner at insurtech investor Brewer Lane Ventures, said during an interview that was part of Carrier Management’s InsurTech Virtual Summit in early May. “Some of the strategic relationships that have forged over time may result in actual insurers acquiring [companies from] some of the close relationships that they’ve had,” Notaras said. She also noted the pandemic-related fundraising challenges for some insurtech startups could also spur merger activity. “I don’t think everyone will get funded,” Notaras said. “I think some of those people will have to make tough decisions as to whether they are going to close down or whether they are able to find a home.” Deloitte’s report said that insurers in general are now pausing from M&A activity due to pandemic uncertainties, but longer-term disruption could increase M&A pressures. INSURANCEJOURNAL.COM

Figures $12.5 Million The amount of a settlement Macomb County, Michigan, has reached with an insurer for three contractors over a failed sewer line that caused a huge sinkhole, ruining three homes and temporarily displacing 20 families during the 2016 holiday season. Experts said the sewer line cracked and eventually collapsed on Christmas Eve 2016 after a “tsunami of sewage” was released too rapidly into the system during a repair in 2014. The waste should have been released over hours but was let go in seven minutes.

Declarations Urge to Swerve

“While the urge to swerve is instinctual, it could cause you to lose control of your vehicle or drive into oncoming traffic, increasing the severity of a crash.” — Illinois Transportation Secretary Omer Osman, in a press release, urges motorists to be watchful and remember the rule, “Don’t veer for deer.” Illinois recorded more than 16,200 crashes involving deer last year. Of these, 15,600 resulted in damage to property or vehicles. Nearly 4% caused personal injuries and four were fatal. More than 40% of crashes occurred in October, November and December, with the most being reported in November.

12 | INSURANCE JOURNAL | OCTOBER 19, 2020

Arkema Harvey Fire

$2.8 MILLION The penalty amount owners of a New Orleans horse racing track have agreed to pay for letting horse manure and urine into the city’s drainage system for at least six years. Churchill Downs Inc., owner of the Fair Grounds Race Course & Slots, also agreed to spend twice that on ending the discharges. The fine reportedly is the largest ever paid by a “concentrated animal feeding” operation under the Clean Water Act.

“This company, its employees and everyone associated with it believes strongly in a safe and good environment. They did everything you’re supposed to do here.” — Rusty Hardin, an attorney for Arkema Inc., said after Judge Belinda Hill tossed the remaining charges against the chemical manufacturer and former plant manager Leslie Comardelle related to the fire at its plant near Houston during Hurricane Harvey. Hardin said what happened at the plant “was a natural disaster and never a crime.”

High BAC

“I think that everyone would agree that this an avoidable accident, no doubt about that.” — Clint Johnson, National Transportation Safety Board Alaska office chief, said an Alaska airplane pilot involved in a fatal crash had a blood-alcohol level more than five times above the legal limit for pilots to fly.

INSURANCEJOURNAL.COM

$1 MILLION The amount a North Carolina construction worker who was punched and fired after he complained about his supervisor’s intoxication on the job was awarded in damages and legal costs by a 4th U.S. Circuit Court of Appeals. The worker brought claims for retaliatory termination in violation of the state’s Retaliatory Employment Discrimination Act (REDA) and wrongful discharge in violation of North Carolina common law. The court found that the evidence showed that not only did the employer violate REDA and common law in its treatment of its employee, but also it had acted with malice toward the former employee.

$875,000 A company that shreds scrap metal has agreed to pay the largest fine ever imposed under Rhode Island’s air pollution rules. Under a legal settlement, Sims Metal Management will pay $875,000 and install pollution control equipment at its facility in Johnston. Rhode Island Attorney General Peter Neronha’s office says the company didn’t get a necessary permit for the metal shredder and has been operating it without the proper pollution safeguards since 2013.

Distracted Driving

“The hands-free law is saving lives on Georgia roads, and we can save even more lives with everyone putting down their phone when they are behind the wheel. As more people return to the road, it is important that all drivers are obeying the speed limit, wearing seat belts, driving sober and always driving alert.” —The Georgia Governor’s Office of Highway Safety Director, Allen Poole, commenting on the state’s crackdown on distracted driving. Law enforcement officials took part in the effort in early October for the National Highway Traffic Safety Administration’s Distracted Driving Awareness Month.

INSURANCEJOURNAL.COM

Serious Harm

“Licensees must make proper disclosures so that New York consumers can effectively assess the offering. Assurant failed to provide these disclosures while also offering a product that included unauthorized insurance. These types of failings can cause serious harm to consumers.” — New York Department of Financial Services Superintendent Linda Lacewell said in a press release that The Signal LP, an Assurant Company, has been fined $2.8 million for failing to comply with New York insurance laws. DFS alleged The Signal provided inadequate consumer disclosures for insurance offerings for mobile phones, tablets and other wireless communication equipment and improperly bundled wireless insurance with the sale of a service contract or other non-insurance benefit. DFS also contended that Assurant offered identity theft insurance underwritten by an unauthorized insurer.

Crossing the Bridge

“If they have to cross over a bridge, it’s not only a consideration of can a car go over that bridge, but also can a fire engine.” — In a NerdWallet article about insuring homes in high risk areas, Jennifer Naughton, Chubb’s risk consulting officer for North America, said homeowners insurance premiums can depend in part on distance to the nearest fire hydrant and fire station. Homes that are on narrow roads or otherwise difficult for fire trucks to access could be more expensive to insure.

OCTOBER 19, 2020 INSURANCE JOURNAL | 13

News & Markets

Insurers Gain Early Wins in COVID-19 BI Lawsuits By Jim Sams

nsurers have succeeded in dismissing COVID-19 business-interruption lawsuits in 17 out of 23 cases heard so far, with a growing number of judges finding that some tangible alteration of a property is required to trigger coverage under commercial property policies. Motions to dismiss were denied in six cases, with three of those rulings from the same judge. “No one expected every court in the country to grant all of these early motions to dismiss,” said attorney Steven Badger, who defends insurers for the Zelle law firm. “That is an obvious trend showing that in the vast majority of these cases there was no credible argument for coverage.” In late September, U.S. District Court Judge Charles R. Wolle in Des Moines, Iowa became one of the latest judges to find no merit to arguments that a government closure order by itself constitutes a “direct physical loss” to a property. He dismissed with prejudice a lawsuit filed by Oral Surgeons P.C. against Cincinnati Insurance Co. Judge Wolle did not get into details in his two-page order, but other judges have explained their reasoning at length. On Sept. 21, U.S. District Court Judge Robert W. Gettleman in Chicago dismissed a lawsuit filed by Sandy Point Dental 14 | INSURANCE JOURNAL | OCTOBER 19, 2020

seeking coverage for COVID-19 closure losses. In his opinion, Gettleman noted what a colleague in New York wrote when rejecting a similar claim by a magazine against an insurer. That opinion said the coronavirus “damages lungs. It doesn’t damage printing presses.” “The coronavirus does not physically alter the appearance, shape, color, structure, or other material dimension of the property,” Gettleman wrote in his order. “Consequently, plaintiff has failed to plead a direct physical loss — a prerequisite for coverage.” U.S. District Judge Cathy Ann Bencivengo in San Diego wrote an 11-page order on Sept. 11 granting a motion by Farmers Group Inc. to dismiss a lawsuit filed by Pappy’s Barber Shops. The judge gave Pappy’s an opportunity to show how an amended pleading might persuade her that coverage is owed, but also said “any amendment is likely to be futile.” Bencivengo said no coverage is owed under Farmers’ policy unless government orders, at a minimum, prohibit access to the insured premises due to a direct physical loss of or damage to property elsewhere. “The policy insures property, in this case plaintiffs’ property and physical places of business, and not plaintiff’s business itself,” Bencivengo explained. “To that end, the civil authority coverage provision only provides coverage to the extent that access to plaintiff’s physical premises is prohibited, and not if plaintiff’s are simply prohibited from operating their business.” A database created by the Zelle law firm lists 17 COVID-19 cases that have been dismissed in 11 jurisdictions, and four where motions to dismiss were denied.

A separate database maintained by the University of Pennsylvania Carey School of Law shows two additional cases where dismissal motions were denied. Three of the dismissal motions were denied by the same judge: U.S. District Judge Stephen Bough for the Western District of Missouri in Kansas City. In Studio 417 Inc et al v Cincinnati Insurance Co., Bough said the plaintiffs plausibly alleged that coronavirus was a “physical substance” that attached to and damaged properties, rendering them unsafe/unusable. Bough later rejected two other insurer dismissal motions. He has not ruled on the merits of any of the cases. A U.S. District Court Judge in Orlando, Fla; a state judge in Bergen County, N.J. and a state judge in Philadelphia have also denied motions to dismiss COVID-19 business-interruption claims, the databases show. Those cases remain pending. Badger said the judges who denied motions to dismiss COVID-19 lawsuits did not determine that coverage is owed. “It means only that accepting the pleaded facts in the lawsuit as true, the court believed there may be some argument to be made for coverage,” he said. “In these cases the insured must still survive a motion for summary judgment and then establish coverage at trial.” Insurers still a long way to go. The University of Pennsylvania database shows 1,099 lawsuits seeking coverage for COVID-19 losses have been filed so far. The pace of new filings has slowed. The litigation tracker shows 30 cases were filed in the week ending Sept. 14, compared to a weekly peak of 70 cases filed during the week ending May 4.

Sams is editor of ClaimsJournal.com INSURANCEJOURNAL.COM

Intact Insurance is here. Introducing Intact Insurance Specialty Solutions, formerly OneBeacon.

2020 has been an unprecedented year, bringing us closer together as a community. Today weâ&#x20AC;&#x2122;re proud to announce that we are now operating under a single name throughout North America. Intact Insurance Specialty Solutions is here with the same depth of expertise youâ&#x20AC;&#x2122;ve come to know and trust, and tailored solutions for industries ranging from life sciences to marine transportation. Learn more at intactspecialty.com

Intact Insurance Specialty Solutions is the marketing brand for the insurance company subsidiaries of Intact Insurance Group USA LLC. Coverages may be underwritten by one of the following insurance companies: Atlantic Specialty Insurance Company, a New York insurer; Homeland Insurance Company of New York, a New York insurer; Homeland Insurance Company of Delaware, a Delaware insurer; OBI America Insurance Company, a Pennsylvania insurer; OBI National Insurance Company, a Pennsylvania insurer; or The Guarantee Company of North America USA, a Michigan insurer. Each of these insurers maintains its principal place of business at 605 Highway 169 N, Plymouth, MN 55441, except The Guarantee Company of North America USA, which is located at One Towne Square, Southfield, MI 48076.

News & Markets Florida Homeowners Insurtech TypTap Goes National; Plans Roll-Out in 20 States By Amy O’Connor

fter launching in Florida as a flood insurer in 2016 and expanding into the homeowners market in 2018, TypTap Insurance Co. has officially started the process of becoming a nationwide company. The technology-driven insurer and subsidiary of HCI Group launched the first phase of its nationwide expansion with the announcement this month it will begin applying to offer homeowners coverage in 20 states outside of Florida. Those states include: Arkansas, Colorado, Georgia, Idaho, Illinois, Indiana, Iowa, Maine, Massachusetts, Michigan, Mississippi, Montana, Nevada, New Mexico, South Carolina, South Dakota, Tennessee, Utah, West Virginia and Wisconsin. According to Paresh Patel, HCI founder and CEO, the timing was right to begin the national expansion as TypTap continues to see positive growth and is set to become a $100 million company in Florida by the end of 2020, with 80% of its premium from its homeowners business. TypTap considers itself an insurtech and refers to its technology process as “positive underwriting” to streamline the underwriting and sales process. Patel said the company’s reliance on technology to quote, underwrite and issue policies has proven successful and it has since realized that “this is how things will be done a

16 | INSURANCE JOURNAL | OCTOBER 19, 2020

decade from now.” “We started out eight years ago and said, ‘How will insurance be done some distance in the future?’… and we basically assembled it,” Patel said. “We’ve now seen it work in Florida with two very different product lines – homeowners and flood – and we therefore know the technology works.” Patel said the company has field-tested its product capabilities and systems technologies and has “gathered enough evidence in Florida, which is obviously a very difficult place to do business in, to say that it works so we are now spreading it to the rest of the country.” Florida’s market challenges have been well documented. Litigation has driven up Florida domestic carrier losses and reinsurance rates, and thus homeowners premiums, but starting a flood insurance and homeowners insurance company and getting hit by four hurricanes in four years was also a big hurdle for a new company to overcome. Like many Florida insurers, the company had to respond to the challenges in the Florida market. HCI announced in August when reporting its second quarter results that TypTap had implemented a 20% increase for its flood insurance product on July 15, and had applied for a 12-14% rate increase for its homeowners’ insurance product. The rate increase was expected to go into effect before the end of the year, if

approved. The increased reinsurance costs forced the company “reluctantly to seek rate increases,” Patel said then. Still, the company has remained profitable, which Patel says is a testament to how its technology has been successful. “At the end of it, TypTap is still there and it’s still healthy, which says it seems to be doing something right in terms of underwriting and selecting the right risks,” he said. “The technology is basically doing that, and the results speak for themselves.” Florida also isn’t the only state with issues, Patel noted. Moving forward with its expansion, TypTap will be open-minded in its approach and for now plans to stick to offering homeowners coverage and not flood, though Patel expects the company will eventually offer flood coverage. TypTap’s homeowners offering will be similar to what is available in Florida, but there will be nuances based on each individual state’s needs and legal requirements, Patel said. The company will gradually launch in its chosen states as it receives regulatory approval and appoints agents. Despite TypTap falling under the insurtech umbrella, Patel said the company is “very agent friendly.” Agents that would like to be appointed by TypTap can reach out via its website and when it begins operating in their particular state the company will begin the appointment process. Currently, 90% of TypTap’s business comes from agents, which Patel said differentiates the company from other large insurtechs that are moving to push agents out of the equation. “We have a viewpoint that agents add value,” Patel said. “That’s a philosophical difference that’s pretty big. “In a competitive industry, opinions vary. Everybody has a different philosophy as to how you build a better insurance company,” he said. “We’ve stayed true to what we thought were the key items. And we’re confident that it’s working and we’re expanding.” INSURANCEJOURNAL.COM

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Business Moves ICDC Ltd., NationsBuilders Insurance Co.

National Pathpoint

Pathpoint, a new brokerage for excess and surplus lines, is billing itself as an all-digital wholesale brokerage built from the ground up. Pathpoint is licensed across the U.S. and is a coverholder at Lloyd’s of London. It distributes admitted and non-admitted products across multiple lines of business to U.S.-based retail agents. The company connects retail agents and (excess and surplus lines) E&S carriers through its proprietary platform, which is built to quote and bind excess and surplus lines coverage in minutes. Retail agents receive their commission for every risk bound on Pathpoint, and there is no cost for them to use the platform. Carriers that have signed up include Westchester, Hiscox, Beazley and Crum & Forster. Touran, Alex Bargmann and Jay Palekar started Pathpoint in 2017 while at HVF Labs, a startup incubator in San Francisco. The formal launch for Pathpoint follows a soft launch that has been underway for several months involving several hundred agents in six states. The soft launch, in turn, follows two years of development of a proprietary platform that enables the service. It also changed its name from Outline Risk. In some states, it is licensed under the name Outline Insurance. The San Francisco firm has raised $6 million and is backed by SciFi VC, 18 | INSURANCE JOURNAL | OCTOBER 19, 2020

Founders Fund and Caffeinated Capital. In January of this year, commercial lines platform Bold Penguin acquired xagent, a digital platform for the E&S business. The offering from xagent connects agents to E&S insurance carriers, offering the ability to quote and bind policies with multiple carriers.

East

World Insurance Associates, Loveman, Kornreich & Steers

World Insurance Associates LLC (WIA) acquired Loveman, Kornreich & Steers Inc. of White Plains, N.Y., on July 1. Loveman, Kornreich & Steers specializes in a multitude of insurance programs for businesses and individuals. The agency’s staff uses risk management to analyze the insurance programs of clients to best protect their assets and earnings against a variety of hazards. WIA is headquartered in Tinton Falls, N.J., and is a full-service insurance brokerage providing asset and lifestyle protection with risk management, insurance and benefit consulting services for individuals and businesses. Since its founding in 2012, WIA has completed 68 acquisitions and serves its customers from 53 offices in 13 states and Washington, DC. Giordano, Haleran & Ciesla provided legal counsel to WIA, and legal counsel for Loveman, Kornreich & Steers Inc. was not disclosed. Manhattan Group advised Loveman, Kornreich & Steers Inc. on the transaction.

Following a previous announcement on June 5, Randall & Quilter Investment Holdings Ltd.’s wholly owned Vermont subsidiary, ICDC Ltd, has completed the acquisition of NationsBuilders Insurance Co. , a Washington D.C.-domiciled captive from NationsBuiders Insurance Services. This marks R&Q’s third captive legacy acquisition in 2020, according to Paul Corver, group head of M&A at R&Q, in a company press release. He added that R&Q expects to announce further legacy transactions before the end of the year. R&Q is a non-life global specialty insurance company operating two businesses: Program Management and Legacy Insurance. Legacy Insurance generates profits and capital extractions from management of legacy nonlife insurance portfolios. Program Management generates commission income from its licensed and rated carriers in the U.S., EU and the UK, writing niche program business, largely on behalf of reinsurers.

Jackson Sumner & Associates, Landers Underwriting

Jackson Sumner & Associates has acquired Landers Underwriting of Charlottesville, Va., in a deal inked earlier this month. JSA is an excess and surplus broker that began in 1981 in Boone, N.C. It offers a range of insurance products including property, casualty, automobile, garage, professional liability, workers’ comp and personal lines. Landers Underwriting was founded in 1988 as an independent, family-owned managing general agency licensed to write excess and surplus lines business across Virginia, Maryland and Washington, D.C. Founder and Principal Harry Landers announced his retirement with the deal. JSA has hired Landers Principal and Underwriter Noah McMurray to remain in Charlottesville and continue to manage the commercial accounts in Virginia, Maryland and Washington, D.C. McMurray will report directly to JSA P&C Manager Kristel McNeil. INSURANCEJOURNAL.COM

Midwest

First MainStreet Insurance, Brummel Madsen Insurance, The Engel Agency

First MainStreet Insurance L.C. (FMSI), an affiliate of TrueNorth Companies L.C., has acquired two Iowa agencies: Brummel Madsen Insurance in Cedar Falls and The Engel Agency in Maquoketa. Brummel Madsen Insurance has been serving the Cedar Valley area since 1960. Brian Brummel, who joined his father’s agency in 1991, will remain a partner in this newest First MainStreet office. Former owners Scott Cessna and Steve Schomaker will also continue working with the FMSI team. Bruce Engel, the second generation owner of The Engel Agency, plans to transition from the business. Agency Manager Jennifer Machande, who has been with Engel for more than 15 years, will be named partner. With the addition of these new agencies, FMSI collectively welcomes more than 15 new colleagues and two new partners to the team.

South Central

CRC Group, Specialty Risk Associates

CRC Group has acquired Specialty Risk Associates Inc. in Shreveport, La. The addition of Specialty Risk expands CRC Group’s binding, transportation binding and personal lines business. Specialty Risk Associates will be a part of CRC Group’s commercial solutions division. During the coming months, the CRC and Specialty Risk teams will work to integrate their operations. Until then, the firm will operate under its current brand name with no changes to location or underwriter. Specialty Risk Associates is a managing general agency and surplus line insurance broker that offers property and casualty insurance products. CRC Group is a wholesale distributor of specialty insurance products throughout the U.S.

G&G Independent Insurance, Arkansas Insurance Advisors

G&G Independent Insurance in Fayetteville, Ark., has acquired the Little INSURANCEJOURNAL.COM

Rock-based agency, Arkansas Insurance Advisors. The transaction became effective on Sept. 25, 2020. Founded in 2015, AIA is an independent insurance agency that focuses on ensuring clients have the proper insurance coverage at a competitive price in Central Arkansas. As a part of the transaction, AIA’s employees will join G&G’s operations and continue to work out of their existing location in Little Rock. G&G Independent Insurance is a full service independent insurance agency located in Fayetteville, Ark. G&G was founded, and is operated, with a commitment to providing clients the best possible protection at the most affordable price. G&G offers a wide variety of coverage including auto insurance, home insurance, motorcycle insurance, flood insurance, life insurance, commercial insurance and more.

NFP, Hutch Hubby & Associates

National insurance broker NFP has acquired the Austin, Texas-based employee benefits firm, Hutch Hubby & Associates. The acquisition is NFP’s third in central Texas in 2020. The firm’s principal, L. Hutch Hubby, brings NFP over 40 years of experience serving employers and executive leaders in the greater Austin market. Hubby joins NFP as vice president, reporting to Kevin Brown, managing director of NFP’s central Texas practice. NFP provides specialized property and casualty, corporate benefits, retirement and individual solutions through its licensed subsidiaries and affiliates.

Southeast

Trean, 7710 Insurance Company

The wholly-owned subsidiary of Trean Insurance Group, Benchmark Holding Co. Inc., has completed the acquisition of South Carolina-based 7710 Insurance Company, as well as its associated program manager and agency. 7710 Insurance Company is a national workers’ compensation insurer for first

responders. According to Andy O’Brien, TIG’s president and CEO, 7710 will aid the company in executing its growth strategy as it focuses on the underserved workers’ comp market for the emergency services industry. 7710 Insurance Company joins TIG’s other affiliated insurance companies American Liberty Insurance Company and Benchmark Insurance Company - both A.M. Best ‘A VIII’-rated carriers offering specialty property and casualty products in 49 states and D.C. Trean Insurance Group Inc. provides products and services to the specialty insurance market. Trean underwrites specialty casualty insurance products both through its program partners and its own managing general agencies. Trean also provides its program partners with services including issuing carrier services, claims administration and reinsurance brokerage. Trean is licensed to write business across 49 states and the District of Columbia.

West

Wholesale Trading Insurance Services, Landmark E&S

Wholesale Trading Insurance Services LLC and its parent company, Jencap LLC, have agreed to acquire privately held Landmark E&S Insurance Brokers LLC, an Anaheim, Calif.-based specialty wholesale brokerage firm. Jencap is part of Galway Insurance Holdings, which was formed along with The Carlyle Group’s addition of EPIC Insurance Brokers & Consultants, earlier this year. Wholesale Trading Insurance Services is a wholesale brokerage firm providing independent agents and brokers specialty insurance products from offices nationally. WTIS was formed in 2010 and was subsequently acquired by JenCap in 2016. Landmark E&S Insurance Brokers was formed in 2015 by Canaan Crouch, Nancy Huynh and Doug Mangus, with a focus on serving retail brokers across the U.S. by providing expertise in environmental classes of business.. OCTOBER 19, 2020 INSURANCE JOURNAL | 19

People National

Reinsurer AXIS Re announced the promotion of Dan Osterrieder to head of Casualty North America. Osterrieder will be responsible for general liability, auto, umbrella and excess, workers’ compensation, professional and management liability, among other areas. Osterrieder joined AXIS Re in March 2019 as a strategic account executive in North America. Prior to his work at AXIS Re, he held a number of underwriting and account manager roles at companies including American International Group, Willis Towers Watson and Swiss Re. He will continue to be based in AXIS Re’s New York region and will report to Jason Busti, AXIS Re president for North America.

American International Group

announced that David McElroy, previously president and David McElroy CEO of the North American operations of General Insurance, has been promoted to CEO of General Insurance and executive vice president at AIG. McElroy will lead the General Insurance Executive Leadership Team and join the AIG Executive Leadership Team, reporting to Peter S. Zaffino, AIG’s president and global chief operating officer. Zaffino, who has been serving as CEO of General Insurance, AIG’s property and casualty business, began taking on more enterprise-wide responsibilities as president and global chief operating offi-

cer in January. McElroy joined AIG as president and CEO of surplus lines writer Lexington Insurance Co. in October 2018 and was promoted to president and CEO of North America for General Insurance in June 2019. Before joining AIG, McElroy held numerous leadership roles within the insurance industry, including executive chairman of Arch Insurance Group and vice chairman of Arch Worldwide Insurance Group.

East

Lockton has promoted

Ryan Duffy

to president Ryan Duffy of its Washington D.C. and Northern Virginia offices. Duffy is responsible for the ongoing stewardship of new and existing clients in the region. He oversees new business development and the overall client experience. Since joining Lockton in 2005, he has become a member of Lockton’s Financial Services practice, specializing in the placement of management and professional liability, errors and omissions, corporate property and casualty insurance, corporate health and welfare consulting. Duffy has experience in the technology, government contracting, financial institution and real estate industries.

Massachusetts Attorney General Maura Healey has

announced the creation of the Data Privacy and Security Division within her office to protect consumers from threats to the privacy and security of their data. Healey has also

20 | INSURANCE JOURNAL | OCTOBER 19, 2020

named Sara Cable as chief of the new division. As division chief, Cable will expand the office’s work protecting consumers’ data privacy and empower consumers in the digital economy while also promoting equal and open access to the internet. Cable has served as the director of Data Privacy and Security within the AG’s Consumer Protection Division since 2016. In this position, she has spearheaded the office’s cybersecurity and data privacy protection efforts, including bringing an enforcement action against Equifax Inc. over its 2017 data breach that resulted in an $18.2 million settlement for Massachusetts. Cable has also led several multistate investigations of cybersecurity and data privacy incidents. She joined the AG’s Consumer Protection Division in 2011 as an assistant attorney general. She previously worked as a litigation associate at Bingham McCutchen LLP, focusing on antitrust and intellectual property claims.

Southeast

Palomar Insurance has added Austin Golson to its

sales team as an account executive, specializing in the transportation Austin Golson industry. Golson is licensed in property and casualty insurance and has experience in the transportation and commercial industries. He previously worked at Assured Partners Turner & Hamrick Agency. He will work to help clients understand the risks for their specific industry

and company and help shape Palomar’s insurance products for its clients. Palomar Insurance delivers insurance programs to U.S. and international companies. It is headquartered in Montgomery, Ala., with offices in Georgia and Tennessee.

Gridiron Insurance Underwriters Inc., a program

manager specializing in program business on a regional and national basis through select retail and wholesale producers, has hired Ben Murphy as its new head of Property. Murphy joins Gridiron after 15 years as an underwriter in the Lloyd’s of London market. He held previous positions with both Hiscox and Neon and has served in a variety of capacities in London, from underwriting commercial property business, to most recently, managing binder business at Neon. Murphy will focus on expanding Gridiron’s footprint and capabilities in both the commercial and homeowner’s marketplace, with an emphasis on expanding capacity and building a profitable and geographically diverse portfolio. Gridiron maintains relationships with several global insurers, with a focus on niche program business, and is headquartered in Plantation, Fla.

Insurance Office of America (IOA) has added Jared Mongold to its expanding team.

Mongold joins the Melbourne, Fla., branch office as an employee benefits specialist. Jared Mongold Before join-

INSURANCEJOURNAL.COM

ing IOA, Mongold was a senior benefits advisor at Brown & Brown of Florida. He brings more than seven years of insurance experience advising middle market clients on group benefits and commercial insurance with a focus on the high-tech and construction industries. IOA is a full-service insurance agency founded in 1988 by John Ritenour and Valli Ritenour. Headquartered in Longwood, Fla., IOA has more than 1,200 associates located in more than 60 offices in the U.S. and London.

ence building highly profitable property books. He previously was the head property underwriter at International Mining Industry Underwriters (IMIU) in London and most recently was the head of Energy and Mining at GuideOne National Insurance Co. HIIG is an insurance holding company formed in 2007. Based in Houston, Texas, HIIG has underwriting segments focused on specialty lines and industries, accident/health, programs and large commercial property.

South Central

Midwest

CAC Specialty (CAC) appointed Lisa Harris as

executive vice president of Client Service and Gary King as executive chairman of its newly formed Natural Resources Practice, based in Houston. The Natural Resources Practice will warehouse CAC’s resources focused on serving clients in the energy, mining, power and alternative energy sectors. Harris joins CAC Specialty with more than 17 years of experience in the insurance brokerage industry. Most recently, she served as managing director at Marsh JLT Specialty. King joins from McGriff, where he has been a client advisor in the Energy and Marine Division for 20 years. CAC Specialty is an integrated specialty insurance brokerage and investment banking business.

Houston International Insurance Group Ltd. (HIIG) hired Jason Rollins to join its

Commercial Property group as director of underwriting. Rollins has 20 years of experi-

INSURANCEJOURNAL.COM

Alera Group, a national

independent insurance agency, appointed Tina Hohman as executive vice president and Wealth Management practice leader. In this role, Hohman is responsible Tina Hohman for wealth management services offered throughout Alera Group, including financial planning, estate planning, investment management and individual insurance. Hohman’s expertise is in tailoring solutions and services to support clients’ financial needs. Hohman brings more than 25 years of experience in the insurance and investment industry to Alera Group. Previously, she served as the chief operating officer for Wealth Management at GCG Financial, an Alera Group company. Prior to GCG, Hohman was the director of Client Services at Cleary Gull, where she led the Investment Advisory Private Client Group in specialized client service,

operations and marketing. Hohman will be based out of Alera Group’s headquarters in Deerfield, Ill.

Hagerty, based in Traverse City, Mich., has added Laura Hunter to its Brand team

as vice president of Brand communications. Reporting to Soon Hagerty, senior vice president of Brand, Hunter oversees public relations, corporate citizenship and external communications. Hunter joins Hagerty from Nike, where she partnered with executive leadership in Digital Product Creation to execute digital transformation strategies and lead internal communications for adoption of new tech platforms to streamline digital workflows. Her background in communications encompasses both in-house and agency experience for Fortune 500 brands including Nike and Mattel, as well as government relations and public affairs for the City of Los Angeles.

West

Crest Insurance LLC of Denver, Colo., has promoted Jason VanGotten to assistant commercial lines manager. VanGotten’s prior experience includes Jason VanGotten ownership of a home inspection company and as a producer for Colorado Restaurant Insurance. He joined Crest Insurance in 2018 as a producer. CREST has offices throughout Arizona as well as in California and Colorado. The brokerage firm writes

insurance business throughout the Southwest and continental U.S.

Lockton Insurance Brokers LLC, the Pacific region of global

insurance broker Lockton Cos., has named Teena Hostovich as vice chair of Lockton Pacific and Greg Barnes as president of Greater Los Angeles. Barnes and Hostovich are based in Lockton’s Los Angeles office. Hostovich will oversee government relations and will focus on solidifying Lockton’s external engagement efforts with regional and national legislators. Barnes will lead a team of property and casualty insurance and employee benefits professionals who serve commercial clients nationally and globally. Barnes has been with Lockton for nine years in a client leadership role, most recently as executive vice president serving on the executive committee of Lockton Pacific.

Distinguished Programs

has named Donna Percival as a regional sales executive, covering territories including Washington state, Oregon, Idaho, Montana, Nevada, Alaska and Hawaii. Percival is based out of Bellevue, Wash., and will be responsible for the sales of the suite of products and services from Distinguished across all industry service sectors. Percival has more than 30 years of industry experience. She was previously a business development manager at Westchester, a Chubb company. She also worked as vice president of sales, strategic accounts and training for VAMA Inc.

OCTOBER 19, 2020 INSURANCE JOURNAL | 21

Special Report: Best Agency to Work For

East

Deland, Gibson Insurance Wellesley Hills, Massachusetts

A Commitment to Lifelong Learning

By Elizabeth Blosfield

t Deland, Gibson Insurance, being a lifelong learner isn’t just a hobby, it’s part of the agency’s core values held by all employees. And agency employees say access to resources and education, as well as a constant drive for improvement, are reasons they think Deland, Gibson Insurance is a great place to work. Its employees recently nominated the Wellesley Hills, Mass.-based agency for Insurance Journal’s annual Best Agency to Work For award, and it was selected as the Silver Award winner in the East region. Winners were selected based on responses to an anonymous survey filled out by agency employees. “Deland, Gibson is the best agency to work with because of their values,” one employee writes. “My favorite value is being a lifelong learner. The owners really want their employees to continue to learn and become the best version of themselves.” Beyond a commitment to lifelong learning, the agency lists its additional core values as working with urgency, showing compassion, having grit and innovating, which are commitments it takes seriously, says CEO Charles Gibson Jr. “Our purpose as an agency is to provide peace of mind through proactive service,” he says. “This isn’t just a tagline, but it’s what we do. We established a Client Experience committee to constantly improve our internal and

external client experience.” In 2018, the agency also established the Deland, Gibson Fund, a donor advised fund to give back to the communities where its employees work and live, Charles says. “This is where we raise money through our profits, our team and our partners to give back,” he says. “We are not just insurance, group benefits and HR. We are a part of the community.” Being a part of the community is something that extends back for generations at the agency, which is currently in its fourth generation of leadership. After being founded in 1900 by Charles E. Deland, his nephew George Gibson took over in 1935 before passing the torch in 1986 to his son, Charlie Gibson. For more than 30 years, Charlie served as president and CEO until 2015 when Charles Gibson Jr. and Ted Gibson assumed the roles of CEO and COO, respectively, as Charlie moved into a chairman and president role. The agency currently boasts $8 million in annual revenue and has approximately 45 employees. “DG is a fourth generation, family run business, and by nature, holds compassionate values contrary to traditional corporate culture,” one employee writes in the survey. “Being able to integrate family values into the business model allows us to put our personal and family lives first. Personally, that is priceless.” This is exemplified in its employee longevity, with many employees stating they’ve been with the agency for most of their careers. “I have been

22 | INSURANCE JOURNAL | OCTOBER 19, 2020

with them for 40 years,” one employee writes. “They are compassionate, smart, innovative and forward-thinking hard workers.” Another employee said in response to the survey questions: “My answers are the reason I have worked for this company for 26 years.” Charles said having the agency recognized by its employees as a best agency to work for demonstrates the team’s hard work and commitment. “It feels great,” he said. “An award like this realizes the hard work the team has put into the agency from top to bottom. People are constantly stepping up, and we couldn’t be happier.” Employees say their commitment to the agency is fueled by its open-minded, forward-thinking atmosphere. “DG offers its employees a work environment where we are pushed to be creative problem solvers, but also maintain a level of compassion for our clients that is not traditionally seen at an agency of our size,”

one employee writes. In fact, when asked about one accomplishment that stands out for the agency over the past year, Charles points to the team, reflecting back to the agency’s core values of constantly learning and innovating. “It has been the growth of the team,” he says. “There have been a number of people internally that have taken on more, challenged themselves on larger accounts and projects, and it has been a difference maker. That leadership within the team is something that can’t be taught, and we are so proud to have that at Deland, Gibson.”

Left to Right: Charles Gibson, Edward Gibson, and Charles Gibson Jr. INSURANCEJOURNAL.COM

Special Report: Best Agency to Work For

Midwest

DSP Insurance Services Schaumburg, Illinois

Different in All the Right Ways By Stephanie K. Jones

lways do what’s best for the customer. That’s one of the guiding principles at Schaumburg, Ill.-based DSP Insurance Services that employees cited over and over again in 2020 Insurance Journal’s Best Agencies to Work For survey as a reason why they think their agency is the cream of the crop. DSP’s employees like the fact that the agency’s leadership considers them valuable assets. They like that colleagues actively help and support one another, that there’s a clear perpetuation strategy, and that management seeks out staff input when making changes and decisions on the paths the agency will take going forward. For those reasons and many more, DSP’s employees promoted their workplace — which has 75 employees and annual revenues of between $11 million and $25 million — as being one of the finest, leading to the agency’s selection as the 2020 Silver Best Agency to Work For in the Midwest.

“DSP is different in all the right ways. Employees enjoy being around one another, and actively go out of their way to help each other. When someone is out sick, on vacation or needs an extra hand, DSP employees are ready to step in and help. DSP also understands that we always do what is in the best interest of the customer, and everyone lives and works by that principle. This makes DSP an incredible company to work for,” wrote one survey respondent. Another employee wrote that the “agency always takes time to make decisions on policies and procedures. It seeks and utilizes employee input and participation in the decision process. When warranted outside expertise is utilized as part of the decision process. The current COVID situation is a good example. All decisions on protocols and policies have been researched to be in compliance with COVID laws and any decisions made on company protocols and procedures err to the side of caution to protect the

DSP employees enjoyed helping build a Habitat for Humanity house. INSURANCEJOURNAL.COM

employees.” Still another noted that while DSP has “undergone dramatic changes” and has had “exponential growth in personnel and industry penetration” over the past several years, it has never waivered from its “two basic premises: (1) That we are first and foremost a service company and the customer is always the highest priority and (2) The most valuable asset of the agency is its employees.” An agency initiative to review and track each employee’s career path earned praise from a respondent, who wrote: “In getting to know each individual’s career goals, the agency is creating an environment to open up opportunity to those who wish to advance into different positions. The agency also has an education committee and budget for any coursework insurance related or not to advance the employee skillset.” DSP colleagues also lauded the personal attention paid to them by the agency's management. “I don’t think there has ever been a time where I’ve crossed paths with the president of the agency where he has not emphasized how much he appreciates me and the work I do for the agency,” one employee said. In an email to Insurance Journal, DSP President Steve Webster underscored employee comments, stating that the agency’s leadership is “humbled by our employees’ nomination and very proud of them and our culture. By supporting our people, we feel

it translates to a great customer experience as well as work experience.” Webster said the teamwork employees embrace is part of the agency’s core values. DSP’s employees are what makes it special, he added. “They care. It’s not just a job, it’s a profession,” for them. To other agency owners with an interest in becoming an employer of choice, Webster advised: “Never stop looking to improve, learn and grow and most of all ... empower those around you.” For instance, he said, even before the COVID-19 pandemic, employees had been working from home “so we were already set up for remote work. It has really paid off. We try to keep connecting with them in various ways and are looking for new ways to try to do that in the future.” That philosophy clearly works, as one employee on the verge of retirement after 44 years in the insurance industry commented: “I feel fortunate that when I retire in two years that I can say it will be from a job that I truly enjoy. And, I can also say that it might be the best one I have had, which makes retirement much more rewarding.”

OCTOBER 19, 2020 INSURANCE JOURNAL | 23

Special Report: Best Agency to Work For

South Central

INSURICA Oklahoma City, Oklahoma

A Special Community By Stephanie K. Jones

amazing company.” One employee explained that while the agency is a big one, “it doesn’t feel that way. From the top — the agency goes out of its way to care for their employees. The philosophy seems to be — take care of your colleagues and they’ll show it with care for our clients/ business.” INSURICA President and CEO Mike Ross, says what makes the agency “special, without a doubt, is our community. There’s a reason I use the word community instead of people. We do have great people, but it’s the way our colleagues work together — not only with each other, but also with our clients and carrier partners — that builds the INSURICA community and makes it a

ith nearly six hundred employees and annual revenues of $115 million, Oklahoma Citybased INSURICA may be a large agency with offices around the country but its employees still say that being at work is like being with family, albeit an extensive one. “Everyone works together as a team and it is like we are one big family. I feel comfortable going to other departments as well as my own with questions or concerns. We all look out for each other to make INSURICA the best place to work!” said one agency employee responding to Insurance Journal’s 2020 Best Agencies to Work For survey. The sentiment expressed in the comment above was reiterated by numerous INSURICA employees throughout the survey and led to the agency’s selection as the 2020 Silver Best Agency to Work For – South Central region. Another employee wrote: “We are a large company and I truly feel like each and every employee is valued and appreciated. I am very thankful to work for such an INSURICA's headquarters in Oklahoma City. 24 | INSURANCE JOURNAL | OCTOBER 19, 2020

great place to work.” In an email to Insurance Journal, Ross explained that for INSURICA, what works is “our precept of a connected community made up of our clients, colleagues, and carrier partners. We work under the vision that it takes all three to be a successful agency and that as long as we pay attention to each group, providing guidance and resources to strengthen them individually, the result will make us an agency, employer, and partner of choice.” INSURICA’s employees seem to appreciate that approach. Praising the ethics of the agency’s management team, one colleague noted: “This agency is respectful and appreciative of its colleagues and clients in every way and are very transparent with everything. They are always concerned about the colleagues and our work / life balance.” Employees also lauded INSURICA’s leadership during the coronavirus pandemic. “I like the way our company addressed the challenges created by COVID-19. All staff was immediately deployed to

work from home and supported with the appropriate technology and support. Not a single employee lost their job due to the pandemic,” one employee wrote. For his part, CEO Ross commended INSURICA’s employees during what has been a “year of unique learning opportunities and extraordinary change.” He added that despite the challenges, the agency has “performed well both from a financial and service standpoint and I cannot say enough good things about the way in which our colleagues have persevered over these past months.” Stating that he loves “to see people succeed in life while having fun doing it,” Ross offered this advice to agency owners seeking to create a workplace of choice: “Trust your team. Make sure they have the tools, resources, and support to achieve the agency’s vision then get out of their way.” One long-time INSURICA colleague summed up what seems to be the prevailing mindset among the agency’s employees, stating: “I guess that I have been here for 35 years says a lot. Love working here, love the culture, the support from fellow employees and from management. Everyone is committed to the success of the agency.” INSURANCEJOURNAL.COM

Special Report: Best Agency to Work For

Southeast

Fisher Brown Bottrell Insurance Jackson, Mississippi

Sticking Together Through Tough Times By Amy O’Connor

door policy with management, as well as the value-added services the agency offers, including technology, risk management and in-house claims handling, as reasons why it is the best. It isn’t just the offering of services, an employee wrote, that sets them apart, “it’s the team we have in place to deploy those services. That’s really what makes the difference.” FIBB employees said they especially appreciated the way the agency worked with them during the COVID-19 pandemic, allowing flexibility and taking every health precaution to keep them safe. “FBBI dove into response recommendations provided by the federal and state governments and quickly made adjustments to operations to protect our health and wellbeing,” said an employee. “Employees felt extremely valued as a result of FBBI’s initiative. These investments are costly and have taken extra work by many of the depart-

ments, and at the end of the day, I am proud to be part of a company that puts employees and their families first.” Employees said agency management surveyed employees on what they needed to work from home and responded to that feedback appropriately. “FBBI has done a great job of responding to the pandemic. They’ve always allowed us to put family first and treated us like responsible adults. We are set up with all the resources needed to work effectively from home. The leadership team lets us do our job without micromanagement,” another respondent noted. Executive Vice President Roger Elfert said there is a sense of validation in the agency being nominated by its employees, as the management team strives to create a culture “where everyone can progress professionally and enjoys where they work.”

pportunities for growth, a team-oriented culture and unwavering support during an unprecedented situation are just some of the reasons that employees of Fisher Brown Bottrell Insurance, Inc. nominated their employer as a Best Agency to Work For. The Insurance Journal Silver winner for 2020 is one of the oldest independent insurance agencies in the Southeast, offering services and products in commercial lines, group benefits, personal lines and bonding. A subsidiary of Trustmark National Bank, Jackson, Miss.-based FIBB ranks 54 on Insurance Journal’s Top 100 Agency List with more than $36 million in revenue. But employees say the agencies’ true value comes from its people. “The people I work with make the agency what it is. I would not trade that work environment for anything,” wrote one respondent. “Our agency is considerate of the communities, employees and charities. We have a reputation, morals and standards to live up to and do,” said another employee. “We strive to do the very best to be of service to our insureds as we understand without them we would not be in business [and] at the same time we are loyal to the insurance carriers we represent.” Employees also cited the agency’s industry Employees of Fisher Jackson, Miss.-based Fisher Brown Bottrell Insurance. knowledge and its openINSURANCEJOURNAL.COM

“Having our employees agree by nominating FBBI is very rewarding,” Elfert said. FBBI is set apart by its employees, Elfert said, as they are the ones in the trenches daily working for clients. “Their level of professionalism is what resonates to our customers and we take pride in having those long-term relationships,” he noted. Elfert said his whole family, back to both grandfathers were in the insurance industry so he “had no choice,” but to join too, but it has been a very rewarding career for him personally. FBBI’s response to the pandemic is a particularly proud point for the agency, Elfert said, and noted they’ve also had to deal with a hurricane affecting the area and go without power in several of its offices. Its team “did not miss a beat servicing our customers.” “I would put our agency’s performance during COVID up against anyone’s,” he said. “We had strategically placed ourselves in a great position to be able to do most agency functions remotely prior to this pandemic, so initially you are nervous to see how that will work when put into action, but our employees have been exceptional in adjusting.”

OCTOBER 19, 2020 INSURANCE JOURNAL | 25

Special Report: Best Agency to Work For

West

Liberty Company Insurance Brokers Woodland Hills, California

Caring at Liberty Company Insurance Brokers By Don Jergler

he Liberty Company Insurance Brokers Inc. in Woodland Hills, Calif., offered the perfect Hollywood ending for Bill Johnson. Johnson started the brokerage fresh out of college in 1987, then later took a break to get into the film industry with his film company Inferno Distribution, which produced films like The Grey with Liam Neeson, Just friends with Ryan Reynolds and Killing Them Softly with Brad Pitt. Then in 2017, he took another break to spend a year off with his family, and when he came back, he decided that what he wanted to do was create a company culture — complete with a mission statement and core values. It evidently worked well for Johnson, and for his employees. The firm was named

Insurance Journal’s Best Agency to Work For in the West region. Liberty Company Insurance Brokers earned the Silver Award. The nomination process has employees rank the firm in several categories in online forms and comment on just why theirs is the best agency to work for. Among the reasons employees nomiated the firm for the award was its growth, a caring enviornment, and it was lauded for its handling of the work-from-home pandemic situation. “They truly care about the health and wellness of each employee and continue to work towards better understanding and communication,” wrote one employee. “Our opinions and ideas matter. Even though we are fast growing, we feel like a family and celebrate everyone’s success and all help our teammates when they are having challenges.”

Pictured at a Liberty Company Insurance Brokers Inc. holiday party last year are (left to right): Jerry Pickett, CEO; Jon Axel, managing partner in L.A., Bill Johnson, chairman; Rick Butts, president in Orange County; Gustavo Ruano, managing partner in Novato; Adam Baillie, executive vice president; Gary Wells, managing partner in Orange County. 26 | INSURANCE JOURNAL | OCTOBER 19, 2020

Another employee, who joined the ranks remotely, noted that the management team is keen on technology and keeps collaboration open with productive meetings to keep employees informed, while department managers have maintained a “fun workplace” with happy hours and off-hours meet-ups. “I’ve never met anyone in person, yet I feel more connected to my teammates than I ever did working in an office of 25 people right next to me,” the employee wrote. “Liberty fosters creativity, advancement, and education. They are consistent in recognizing their employees’ talents and building on them. I’ve never before felt so recognized and significant in any organization as I do here.” Another called out the firm for its actions right after the pandemic, which led to drastic changes in the workforce nationwide. The firm’s leadership worked to ensure that everyone was taken care of first, and that employees could comfortably continue working. “Management immediately arranged social meet and greets via Zoom for all of us to continue socializing, and arranged a virtual concert and happy hour for everyone to blow off some steam,” the employee wrote. “Additionally, my manager made arrangements for virtual workout classes twice a week, sponsored by the company. My mind and my body were being cared for by the company that I’m devoted to work for.” After working for a time in

Liberty Company Insurance Brokers Inc.’s San Jose Office volunteered during the annual IICF Week of Giving by preparing sack lunches for families in need. the movie industry, Johnson said he and his wife and two children decided to take a trip around the world as a family, and when he returned, he decided he wanted to build a culture at Liberty Company Insurance Brokers. That started with a new mission statement and a fresh set of core values. Johnson says the credit for positive employee mindset at the firm should go to that mission statement, “Promoting peace of mind with great care,” and its core values — integrity, excellence, caring, kindness, fairness, team, good feelings and fun. “We’re just very intentional about the culture we’re creating here,” Johnson said. “And the employees have really embraced it.”

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News & Markets California Workers’ Comp Premium for First Two Quarters of 2020 Down 11%

ritten workers’ compensation premium in California for the first two quarters of 2020 was 11% below that for the first two quarters of 2019, according to a new report out. The Worker’s Compensation Insurance Rating Bureau of California released its quarterly experience report released earlier this month. “The impact of the COVID-19 crisis on the California economy is expected to significantly reduce employer payroll and insurer premium for the remainder of 2020,” the report states. The average charged rate for the first two quarters of 2020 was 8% below that for 2019 and 40% below the peak in 2014, the WCIRB report shows. The Jan. 1, 2020, approved advisory pure premium rates were on average 47%

below those for Jan. 1, 2015, according to the report. “Absent COVID-19, the indicated average advisory pure premium rate for January 1, 2021 was slightly below the 2020 level,” the report states. “However, when including the COVID-19 claim impact, the WCIRB proposed a 2.6% increase in average advisory pure premium rates.” The WCIRB in September 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. Premium decreases through the first quarter of 2020 were driven by decreases in insurer charged rates. However, after adjusting to a common charged rate level, premiums grew consistent with economic growth. “The large decrease in premium for the second quarter of 2020 is driven by the sudden and sharp slowdown in the economy,” the report states.

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News & Markets

Ridesharing Companies Spend Big in California to Oppose Even Costlier Gig Law By Tina Bellon

ber Technologies Inc. and Lyft Inc. together are spending nearly $100 million on a November California ballot initiative to overturn a state law that would compel them to classify drivers as employees. That sum looks less huge, however, than the potential costs of complying with the existing law, according to a Reuters analysis. The two ridesharing companies would each face more than $392 million in annual payroll taxes and workers’ compensation costs even if they drastically cut the number of drivers on their platforms, a Reuters calculation showed. Using a recently published Cornell University driver pay study in Seattle as a basis, Reuters calculated that each full-time driver would cost the company, on average, an additional $7,700. That includes roughly $4,560 in annual employer-based California and

federal payroll taxes and some $3,140 in annual workers’ compensation insurance, which is mandated in California. The companies say they would need to significantly hike prices to offset at least some of those additional costs, which in turn would likely cause a decrease in consumer demand, but cushion the blow of the added costs to the bottom line. Uber and Lyft have also said they could abandon the California market — an economy that would rank fifth in the world if the state were a sovereign nation. Other U.S. states have said they plan to follow California’s lead and pass similar laws. A “yes” vote on California’s Proposition 22 gives Uber and Lyft what they seek, which is to overturn the state’s gig worker law, known as AB5, which took effect in January. Uber and Lyft have insisted the law does not apply to them, sparking a legal battle. The tussle over classification

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of workers highlights the political and business risks facing Uber, Lyft, DoorDash and numerous other companies that have built businesses on workers who are not classified as employees eligible for health coverage, unemployment insurance or other benefits. Under the company-sponsored ballot measure, gig workers would receive some benefits, including minimum pay, healthcare subsidies and accident insurance, but remain independent contractors not entitled to more substantial employee benefits. The question of whether so-called gig workers should be treated as employees has become a national issue in U.S. politics. U.S. Democratic presidential candidate Joe Biden and his running mate, Senator Kamala Harris, have both voiced their strong support for California’s labor law and directly called on voters to reject the companies’ ballot proposal that would weaken it. The campaign of U.S. President Donald Trump has not directly weighed in on the ballot measure, but the administration’s Labor Department in September published proposed rules that would standardize legal definitions across the country and provide more room for companies to maintain independent contractors. U.S. Labor Secretary Eugene Scalia criticized AB5 in an opinion piece published on Sept. 22. California represents 9% — or roughly $1.63 billion in all of 2019 — of Uber’s global rides and food delivery gross bookings. However, California generates a negligible amount of adjusted earnings before

interest, taxes, depreciation and amortization, Uber said in November. Lyft, which operates only in the United States and does not have a food delivery business, in August said California makes up some 16% of the company’s total rides. Lyft does not break out ride-hailing revenue, but California contributed $576 million as a share of total 2019 revenue. California sued Uber and Lyft in May for not complying with AB5. The ride-hailing companies said their workers are properly classified as independent contractors, because they can set their own schedules. The companies say the majority of their drivers do not want to be employees, and work fewer than 25 hours a week. Many drivers use the service to supplement income from other jobs. While no legal requirements would prevent the companies from classifying part-time drivers as employees, Uber said administrative fixed costs per employee would make it more expensive to allow part-time employment. Uber said it would therefore be forced to reduce its California driver base by 76% to 51,000 full-time driver employees. Uber also said it could reduce cash wages to offset higher benefit costs, thereby lowering the potential tax burden. Lyft executives in court filings have said the company would have to “substantially reduce” its California driver base to a smaller number of driver employees, but has not provided a figure. The company did not respond to detailed requests for comment. Copyright 2020 Reuters. INSURANCEJOURNAL.COM

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News & Markets California Bills Signed into Law Related to Workers’ Comp

alifornia Gov. Gavin Newsom signed a handful of bills related to workers’ compensation. Following is a summary of the bills compiled by the Worker’s Compensation Insurance Rating Bureau:

Senate Bill No. 1159

Went into effect immediately as an urgency statute and will remain in effect until Jan. 1, 2023. The bill has created a disputable presumption that an employee’s COVID-19 infection arose out of and in the course of employment if the employee is tested or diagnosed as COVID-19 positive within 14 days of working at their place of employment (not including their residence) and at their employer’s direction. The bill has codified the governor’s Executive Order N-62-20 for between

March 19 and July 5. For on and after July 6, the bill has provisions relative to the disputable presumption for first responders and healthcare providers who provide direct care to patients, and employees who contract COVID-19 as the result of an “outbreak” at their place of employment.

Assembly Bill No. 685

Modifies occupational safety standards to require employers to provide notice and report information related to COVID-19 workplace exposure. It also expands Cal/ OSHA's authority to enforce COVID-19 notice requirements and impose penalties for an employer’s failure to comply. The changes will be in effect from Jan. 1, 2021 until Jan. 1, 2023.

Assembly Bill No. 2257

Went into effect immediately as an urgency statute. With respect to wages, workers’ comp and other benefits, there is a presumption that an entity’s workers are employees unless the worker meets the “ABC Test.” To qualify as an independent contractor, the ABC Test requires that: 1) The worker is free from the control and direction in the performance of the work, both under the contract for performance of the work and in fact; 2) The worker performs work outside the usual course of the hiring entity’s business; 3) The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity. Several professions and business relationships are exempt from the application of the ABC Test and are instead governed by the multifactor test in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) (Borello Test).

California Commissioner Asks Insurers to Cover Wildfire Losses Sans Home Inventory

alifornia Insurance Commissioner Ricardo Lara is asking insurers to help wildfire survivors by providing up to 100% of personal property coverage limits without a detailed inventory to those who suffered a total loss of their home. “Wildfire survivors who are still sifting through the ruins of their home should not have to face an exhaustive inventory in order to start the recovery process,” Lara said. “That is why I am asking insurance companies to do their part for their policyholders by providing coverage without the burdensome requirement of a detailed home inventory in order to have their claims paid.” The recent California wildfires have destroyed neighborhoods and devastated communities. The California Department of Insurance reported receiving numerous complaints from policyholders about the task of identifying every item of personal property they may have lost in the recent W6 | INSURANCE JOURNAL | OCTOBER 19, 2020

wildfires to collect the replacement cost of such items. Gov. Gavin Newsom in early October signed Senate Bill 872 and Assembly Bill 3012, designed to provide protections for policyholders who suffered a covered total loss resulting from a wildfire during a state of emergency. Even though the new laws are not yet in effect, Lara is asking that residential insurers to offer a payment under the contents coverage of no less than 30% of the policy limit applicable to the covered dwelling structure, up to a maximum of $250,000, consistent with requirements in chaptered AB 3012. Many insurance companies have already agreed to the Voluntary Expedited Claims

Handling Procedures requested by Lara’s Aug. 26 notice, which included an advance payment for personal property of at least 25% of contents coverage without an inventory. For major wildfires in the past handful of years, a large number of insurers made efforts to accommodate their policyholders by offering up to 100% of contents limits without an inventory, while giving policyholders the ability to recover additional benefits if they subsequently complete a full inventory. Lara is asking all insurers to notify the department by Oct. 23, whether they will comply with the notice and what percentage of total contents coverage they will provide without requiring a detailed personal property inventory. INSURANCEJOURNAL.COM

News & Markets Report: Washington Businesses Fined for Mask Violations, But Most Are Complying

handful of Washington businesses are facing fines for violations related to lack of mask use by customers and staff, however thousands of other businesses that were the subject of complaints and have been warned are now following a governor’s order, according to the Department of Labor & Industries. Since mid-July, L&I reported having looked into mask complaints concerning more than 4,200 businesses in the state. In the majority of cases, businesses that were violating the rules complied after L&I staff explained the requirements, or the initial complaints were not substantiated, according to the department. L&I can cite employers that do not follow masking and other requirements. The agency has reportedly fined eight companies for violating the state public mask mandate, while three others were cited for worker mask violations. In July, Gov. Jay Inslee ordered businesses to ensure that customers and visitors wear face coverings, unless they have a medical or disability issue. Businesses also were required to post signs at entrances reminding customers to wear a mask. The rules are in addition to earlier requirements, such as ensuring workers wear appropriate face coverings and keep at least six feet away from others. The state has reportedly received thousands of public masking complaints, and has directed many of them to L&I. In most of the other L&I cases, the department’s investigators visit the business anonymously. If they find the complaints

W8 | INSURANCE JOURNAL | OCTOBER 19, 2020

are valid, staff contact employers to inform them of requirements. At that point, most businesses agree to follow the rules. Uncooperative companies receive a warning letter. Any employer found through additional spot checks or complaints that continues to violate the law faces formal enforcement action. Since mid-July, L&I has conducted more than 4,300 checks at businesses. L&I has fined eight employers for public mask violations from July through September. Following are those businesses, and what L&I says their violations are for: Mail Express Business Center, in Enumclaw, fined $7,500 for four violations. Customers not wearing masks and within 6 feet of workers; no signs requiring customers wear masks and no policy if they refused; workers not wearing masks and within 6 feet of each other. Viking Sewing Center, in Spokane Valley, fined $5,700 for four violations. Did not require customers without masks to wear one; sign at entrance said “mask free zone, enter at your own risk;” workers not wearing masks. Business has appealed. Zips Drive-In Restaurants Inc., in Spokane Valley, fined $4,800 for three violations. Did not require customers without a mask to wear one; workers wore masks improperly below their chin; no signs requiring masks for customers. Business has appealed. Zips Drive In, in Ritzville, fined $2,400 for two violations. Did not require customers without masks to wear one; no signs

requiring customers wear masks and no policy if they refused; no social distancing markers or barrier between front-counter workers and customers. Country Square Western Wear, in Auburn, fined $1,800 for two violations. No signs requiring customers wear masks and no policy if they refused; workers not wearing masks. Zips Drive In Colfax, fined $1,800 for three violations. Did not require customers without masks to wear one; no signs requiring masks for customers; no social distancing markers for customers. Business has appealed. Thorebeckes Chehalis Inc., a fitness center in Chehalis, fined $1,800 for four violations. Did not require customers without masks to wear one; improper signage. Penhalluricks True Value, in Moses Lake, fined $1,500 for one violation. Workers not wearing masks; did not require customers without mask to wear one; no signs requiring customers to wear masks. L&I reported cited three other businesses for worker mask violations. Kalico Kitchen, in Spokane, fined $2,400 for one violation. Workers not wearing masks or wearing then incorrectly within 6 feet of each other. Business has appealed. American Tire Depot, in Spokane, fined $1,800 for one violation. Workers not wearing masks. Terrys Automotive Inc., in Olympia, fined $1,200 for one violation. Workers not wearing masks and within 6 feet of each other; workers not screened daily for COVID-19.

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News & Markets Celebrating 50 Years at the Helm of Insurance Journal By Stephanie Jones

ntrepreneur, innovator, oenophile, insurance industry icon, all around great guy. That’s Mark Wells, the force behind Insurance Journal and Wells Media Group, who this year is celebrating his 50th anniversary in insurance industry publishing. There have been plenty of challenges at Insurance Journal over the past 50 years, especially in the beginning, Wells told Peter van Aartrijk, host of the long-running On Point podcast on InsuranceJournal. com. Under Wells’ leadership, Insurance Journal has grown from a regional California print publication covering the property/casualty insurance industry to a national trade media force, birthing new brands such as Carrier Management, Claims Journal, MyNewMarkets, Insurance Journal TV and Insurance Journal Academy of Insurance, all of which reside under the aegis of Wells Media Group. Wells said his father bought the precursor to Insurance Journal during the Great Depression for $1,000, assuming the previous publication’s debts and converting it into a property/casualty magazine. “My father passed away in 1970, and my mother and I took over the business. It was not in good shape. We were kind of broke,” Wells told van Aartrijk. At the time, the publishing environment was very competitive, with numerous organizations covering the insurance industry, and it took a while to get the business back on its feet. “We started out as a California regional publication, and then West Coast. In the ’90s, the late ’90s, we started playing around with the internet. We put the magazine on the internet, and then we learned quickly that that was not going to work, so we decided to publish the news daily and email it out. It just took off from there,” Wells said. Over the years, Insurance Journal has covered the rise of the excess and surplus lines insurance industry, which began in INSURANCEJOURNAL.COM

The Insurance Industry Charitable Foundation event at the Natural History Museum in Los Angeles on March 16, 2017, honored Mark Wells with the Golden Horizon Award. Wells has directed Wells Media Group Inc., parent company of Insurance Journal, to donate more than $1.2 million over the past 10 years to insurance-related charities. California with the formation of Swett and Crawford in the 1960s. There were lots of local, successful regional carriers and wholesale brokers that eventually were acquired by national firms — a trend that endures today. “It’s interesting. We had had mergers and acquisitions for the last 50 years, and [it’s] going on again right now,” Wells said. The industry continues to be a vibrant one, he added. “The wholesale brokerage business, the excess and surplus lines business, has just grown dramatically. … It’s something to watch. It’s amazing. They’ve been able to answer a need and write a ton of business.” As the insurance industry has adapted and changed, Insurance Journal has evolved along with it. “When I started, we were a print publishing company. I’m an old-fashioned print person. The internet has changed everything. Changed it not only for our business, but business in general. Now, everything is digital. Even as late as 2008, 90% of our revenue was in print. Today,

it’s a little under 50%. Most of our advertising’s now digital. It’s really evolved. It’s hard to keep up. We’ve got a great group of people really running the business right now. They’re young, they’re innovative, they’re totally at home on the internet and the digital space,” Wells said. While the coronavirus pandemic has been a disruptive force worldwide, Wells remains optimistic that the industry and the community at large will rebound. “There will be a solution. It may not be what everybody wants, but there will be a solution,” he said. It will take time and a vaccine in order for the world to get back to normal, “but the industry will respond. They’ll innovate.”

On the Web To listen to the On Point podcast interview, visit: https://www.insurancejournal.tv/ channels/podcasts/on-point/

OCTOBER 19, 2020 INSURANCE JOURNAL | 27

Spotlight: Cyber U.S. Treasury Warns Cyber Liability Insurers Against Paying Ransomware Demands By Andrew Simpson

he U.S. Treasury Department is warning that individuals or businesses that help facilitate ransomware payments may be violating anti-money laundering and sanctions regulations. The warnings came in a pair of advisories, one from the Financial Crimes Enforcement Network (FinCEN) and the other from the Office of Foreign Assets Control (OFAC). “Cybercriminals have deployed ransomware attacks against our schools, hospitals, and businesses of all sizes,” said Deputy Secretary Justin G. Muzinich. “Treasury will continue to use its powerful tools to counter these malicious cyber actors and their facilitators.” FinCEN addressed companies that provide protection and mitigation services to victims of ransomware attacks, including digital forensics and incident response companies and cyber insurance companies that facilitate ransomware payments to cybercriminals, often by directly receiving customers’ fiat funds, exchanging them for convertible virtual currency (CVC), and then transferring the CVC to criminal-controlled accounts. “Depending on the particular facts and circumstances, this activity could constitute money transmission,” the advisory says. Entities engaged in money services business activities are required to register with FinCEN, and must file suspicious activity reports.

Persons involved in ransomware payments must also be aware of any Office of Foreign Assets Control (OFAC)-related obligations that may arise from that activity. A financial institution is required to file a suspicious activity report “if it knows, suspects, or has reason to suspect” that a transaction involves $5,000 or more in funds or other assets and involves funds derived from illegal activity. “Reportable activity can involve transactions, including payments made by financial institutions, related to criminal activity like extortion and

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unauthorized electronic intrusions that damage, disable, or otherwise affect critical systems. SAR obligations apply to both attempted and successful transactions, including both attempted and successful initiated extortion transactions,” the advisory says. FinCEN’s advisory provides information on how insurers and others should effectively report and share information related to ransomware attacks.

Sanctions Violations

OFAC issued an advisory highlighting the sanctions risks associated with facilitating

ransomware payments. OFAC said it has imposed and will continue to impose sanctions on those who “materially assist, sponsor, or provide financial, material, or technological support” for ransomware activities. OFAC has designated numerous malicious cyber actors under sanctions programs. Individuals and organizations are generally prohibited from engaging in transactions, directly or indirectly, with individuals or entities on OFAC’s Specially Designated Nationals and Blocked Persons List, other blocked persons, and those

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covered by embargoes. OFAC may impose civil penalties for sanctions violations based on strict liability. Thus persons subject to U.S. jurisdiction “may be held civilly liable even if it did not know or have reason to know” it was engaging in a transaction with a person that is prohibited under sanctions laws and regulations administered by OFAC. OFAC encourages companies to implement a risk-based compliance program to mitigate exposure to sanctions-related violations. “This also applies to companies that engage with victims of ransomware attacks, such as those involved in providing cyber insurance, digital forensics and incident response, and financial services that may involve processing ransom payments (including depository institutions and money services,” the government said. OFAC urged victims and those involved with addressing ransomware attacks to contact OFAC immediately if they believe a request for a ransomware payment may involve a sanctions nexus. OFAC provides its reasons for opposing the payment of ransoms including that ransomware payments may enable criminals and adversaries to profit and advance their illicit aims. For example, they could be used to fund activities adverse to national security. Ransomware payments may also embolden cyber actors to engage in future attacks, according to OFAC. Elsewhere in the federal government, the FBI has long advocated against paying a ransom, in part because “it does not guarantee an organization will regain access to its data.” INSURANCEJOURNAL.COM

But it has also recognized that some organization will decide to pay. In such cases, the FBI urges organizations to report ransomware incidents to law enforcement. ‘Unbearable’ Problem Charles Carmakal, senior vice president and chief technology officer with FireEye Mandiant, a global cyber and national security firm, called Treasury’s advisory “well-intentioned,” but said it will add more “pressure and complexity to victim organizations” trying to recover after a security incident. “OFAC already provides a list of sanctioned entities. Victim organizations are required to check the list prior to paying extortion demands,” Carmakal said. However, the true identity of the cyber criminals extorting victims is usually not known, so it’s difficult for organizations to determine if they are unintentionally violating the sanctions, he said. “Sometimes victims pay threat actors before they are sanctioned.” Carmakal called the ransomware and extortion problem “unbearable” and said Mandiant is aware of more than 100 organizations where ransomware operators had network access in September alone, more than double what was known in September of last year. He said threat actors may ask for money for a decryption tool, a promise to not publish the stolen data and a walkthrough of how they broke into the network. The extortion demands are in the 6-figure range for smaller companies and 7-8 figures for larger companies. Mandiant knows of several organizations that paid

demands between $10 million and $30 million, he added. The number of ransomware attack notifications against insurance clients rose by 131% in 2019 and the funds demanded by the attackers surged. According to a recent report from specialty insurer Beazley’s Breach Response (BBR) Services, cybercriminals have been asking for sevenand even eight- figure sums in some cases. The two most common forms of attack to deploy ransomware are phishing emails and breaching poorly secured remote desktop protocol (RDP). RDP enables employees to

access their work computer desktops or company’s primary server from home with the press of a button. Insurance executives note that insureds, not insurers, make any decision whether to pay a ransomware demand. “[A]lthough no one wants to support cyber criminals, organizations are forced to weigh the option of paying ransoms against the risk of operational disruptions that could last weeks or months and cost far more,” wrote insurance broker Marsh in a commentary last year entitled, “How Cyber Insurance Supports the Fight AGAINST Ransomware.”

Treasury Advisories Add to Victims’ Woes

ecent warnings from the U.S. Treasury about paying ransomware demands are unlikely to substantially change how cyber insurers cover or handle such situations, according to experts. However, ransomware victims are likely to be under more pressure to be sure that anti-money laundering and sanctions regulations are honored should they pay a ransom. The warnings are not a response to any wrongdoing. But, they have been issued at a time when ransomware attacks and ransomware payments are on the rise. “I believe that both the legal counsel advising insureds as well as the insurance carriers have been aware of OFAC and have taken OFAC regulations quite seriously,” said Nick Economidis, vice president

and e-risk underwriter, Crum & Forster. “We’ll likely see some small modifications to existing practices (to make doubly sure that actions are consistent with existing relations), but I do not foresee any big changes.” Insurers note that victims of such attacks are the ones who decide whether to pay a ransom. Catherine Lyle, head of claims at Coalition, thinks the advisories signal an “increasing willingness to enforce OFAC sanctions on ransomware payments” and “makes clear that victims of ransomware, and the organizations that assist them, must establish processes to comply with OFAC sanctions or risk the consequences.” FireEye Mandiant’s Charles Carmakal agrees that the advisory, while well-intentioned, will add more complexity for victim organizations after a security incident.

OCTOBER 19, 2020 INSURANCE JOURNAL | 29

Special Report: Agency Technology By Andrea Wells

echnology is helping the insurance industry in many ways. Technology is helping insurers to better understand the risks they take when insuring homes and businesses. Technology is helping agencies to manage operations more efficiently. And perhaps most importantly technology is helping the industry to connect and service its customers in new and more efficient ways. Communication barriers are being dropped and companies are developing more collaborative approaches among industry partners, according to Ilya Bodner, founder and CEO of Bold Penguin. Bodner says he wouldn’t consider today’s insurance world the “renaissance days of collaboration” but he believes a trend toward collaboration has begun. “And that is refreshing.” For a long time, insurance software systems were built with a “monolithic” approach, according to Bodner. “You come in and close circuit,” he said. “Insurtechs obviously helped change the script a little bit and now more and more companies are willing to partner — to push information and pull information to each other — to make the end-user experience better.” In Bodner’s view, collaboration is becoming easier as comfort levels of everyone involved — carrier executives, agencies and insurtech providers — eases. “Now we’re building in a way that there are gateways, there is authentication, and APIs that have been established to make it a little easier.” For Ohio-based Bold Penguin, which has raised

The

AGENCY TECH

Connection The Continuing Struggle to Bring Collaboration and Connection to P/C Agencies, Carriers and Vendors

more than $50 million in venture capital since its launch in 2016, building collaborative relationships with large brokerages and property/casualty insurer software providers took time and hard work. “There was certainly a period of, ‘Can we trust each other?’” That trust finally came around because customers

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demanded more collaboration, Bodner said. Things are finally changing. “We work with Vertafore, we work with Applied Systems, we work with Guidewire, we work with Duck Creek,” he said. “We push data and collect data that I don’t think would have even happened a few years ago,” Bodner said. “Insurtechs have

made it easier.” Bold Penguin, with investments from Lockton, Guggenheim Insurance and Lightstone, is a virtual exchange that helps agents and brokers triage, quote and bind commercial policies in a programmatic and rules-based system. It also helps carriers market their products to INSURANCEJOURNAL.COM

“Those are all important facets to make insurance all work and that’s where insurtech really should be and how it was focused to be,” he said. “It is not about technology replacing the existing models. It’s there to supplement the existing models by making them more efficient and more profitable.”

Barriers Still Exist

insurance agents. The original thesis behind the insurtech movement focused on “disintermediation,” said Larid Rixford, CEO at Insurance Technologies Corporation (ITC). “That proved to be a fallacy,” Rixford said. “The nature of the insurance industry is a collaborative model where INSURANCEJOURNAL.COM

agents, vendors, carriers and the consumers themselves are all collaborating to educate, to learn from each other and service insurance policies.” To be successful in the insurance industry, whether it be online, agency direct, carrier direct, or whatever channel, collaboration is key, Rixford said.

While relationships appear to be helping the industry connect more easily, not everyone is having the same experience of integrating data and that is a concern for some in the industry. One problem some agents have identified as a shortcoming in agency management systems is that the technology doesn’t focus on the communications component of the insurance agency business, according to Frank Sentner, sole proprietor for Sentwood Consulting. Sentner has been providing technology services to the insurance industry for 44 years. He has managed policy, billing, and claims system replacement projects for insurers and provided strategic consulting for The Council of Insurance Agents & Brokers. He now consults with ACORD and serves on the boards of several start-up insurtech firms. Sentner has spent the last six years working with a broad range of insurtechs. He is outspoken in wanting to eliminate the obstacles to better communication among partners and right what he sees as wrongs being done to agents by certain agency management technology vendors. “These innovators and their amazing technologies have the power to transform our

insurance industry,” he said. “Despite their promise, however, larger agency management system vendors prevent agents from integrating these technologies with their agency data by creating sham partner approval processes that screen out all probable competitors or by pricing integration technologies out of reach or by simply not enabling access at all.” Sentner believes that data is more important to the functioning of the insurance businesses than any other kind of business. “Unfortunately,” he told Insurance Journal, “most agents have ceded the rights to the data in their agency management systems to the vendors that control them. The agency management system license agreements should not provide these vendors with control over access to your agencies’ data.” According to Sentner, the largest agency management system vendors know the revenue potential of aggregating and controlling agency data, as do the private equity and large data companies that now control them. Roper Technologies acquired Vertafore for $5.35 billion in September 2020 and Google’s investment arm, CapitalG, made a “sizable minority investment” in Applied Systems in late 2018. It’s the value of the data driving these investments, according to Sentner. “No one could seriously believe that Roper Technologies would pay that kind of money for technology that is more than three decades old,” Sentner said. “It’s your agencies’ data … and you didn’t get a penny.” Sentner’s call to action for agencies: “Agents need to

continued on page 32

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Special Report: Agency Technology continued from page 31 mobilize their trade associations, and contact their state regulators and their elected representatives,” he said. “These contracts and vendor practices are in restraint of trade and they should not be allowed to stand.” Seth Zaremba, owner of Zinc Insurance in Broadview Heights, Ohio, and creator of Neon, Zinc’s custom-made technology platform, hopes to offer another solution to the data integration challenge, especially for smaller agencies. “I’m on a mission,” Zaremba told Insurance Journal. That mission is to inform agencies on the value of their data and how they can use it better. In Zaremba’s view, agency technology doesn’t often do everything that needs to be done — it might not integrate with other technologies, it is often difficult to connect with carriers, and it doesn’t always

allow agencies to utilize agency data in the way some owners want and need it to be used.

‘What’s happening is there’s a community being built around people who see our survival as dependent on each other, not as something that’s in spite of each other.’ He hears from agency owners that their technology is “broken.” They complain that “none of my technology connects. Items, overwrites, the bad data I have every time a policy renews … and nobody’s listening, nobody’s building, nobody cares about independent agents that are my size,” he said. Zaremba’s Neon platform, which launched Sept. 30, aims

to help these agencies better understand and analyze their own data without relying on agency management vendors. “So the idea that there’s a group of agents who have scaled technologies so that it’s affordable, that it’s built for them and then it has the potential to aggregate data together, anonymize and aggregate and that carriers can use that to make direct connections into a customer call or email,” he said. “All of that data is extremely valuable to understanding the consumer — and agents — the only people who have relationships with the consumer — are giving that away to our vendors so that they can turn it into revenue,” Zaremba said. “They’re packaging up this disparate, disconnected, not purpose-built data and selling it back to agents at a high markup,” he said. “But we figured out how to

directly connect agents and carriers together so that there’s no vendor between them, with connections that they own and can manage and improve,” Zaremba said. Within hours of Neon’s launch, 780 agents had signed up for a demo of its platform and 45 insurance carriers had reached out to Zaremba. “I’ve been saying it for five years and nobody’s listening, but I think finally people can imagine what I was talking about,” he said. Zaremba says part of the reason Neon came to be has a lot to do with increased collaboration among industry partners seeking to make things work better together. “I think about that every Friday,” he said, when Neon holds its weekly pilot agency call where competitive agencies help each other solve problems. “And once a month I have a pilot carrier call and all six carriers hop on the same

Insurtech Investments Continue at Rapid Pace

espite the COVID-19 outbreak and the pandemic’s economic fallout, total investments into the insurtech sector through the first six months of 2020 appear to be on pace to become, at least, the second highest year of investments on record. After sharp declines in March and April, May and June yielded two of the highest funded months on record in the insurtech sector, according to Deloitte’s third annual report on insurtech investments. At the end of the third quarter,

investments were at nearly $3.5 billion. Total 2019 insurtech investments reached $5.6 billion. Where are people placing their bets in the world of insurtech funding and development? Sam Friedman, Insurance Research leader at Deloitte’s Center for Financial Services, says investors are increasingly seeking out top performers in the insurtech space, or those with provable results rather than startups. This trend has been accentuated in greater demand during the pandemic, he said. Roughly, 55% of insuretech

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funding fell into the hands of the top 10 insurtechs through third quarter 2020. The number of new insurtechs continues to dwindle in a saturated market, according to the report. New insurtech launches are fewer and farther between since 2017. Funding for insurtechs in operations has soared for the second straight year, while customer acquisition is already the second highest in the first half alone, but personal lines investment dwindled after major spurts. Operational efficiencies are driving insurtech providers’

focus, Friedman noted. “Insurtechs dealing with internal operational issues led the way big time,” he said. “That is a continuation of what we saw in 2019. This makes sense as insurers are seeking greater operational efficiency, expense management and cost control being front and center, these are likely to remain high priorities especially given the possibility of top line growth challenges during the economic fallout of the pandemic and with low interest rates hindering investment portfolio returns.”

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call and share what they are doing and struggling with,” he said. “What’s happening is there’s a community being built around people who see our survival as dependent on each other, not as something that’s in spite of each other.”

the agency, and the carrier.” Ryan Collier, Risk Placement Services’ chief digital officer, says the future will be figuring out how to get things connected, better — agencies, carriers, and other industry partners.

‘Insurtechs obviously helped change the script a little bit and now more and more companies are willing to partner — to push information and pull information to each other — to make the end-user experience better.’

The Good of Three

Insurtech provider AgencyKPI, based in Austin, Texas, has been working to help another important segment — agency networks — solve data issues and improve collaboration as well. AgencyKPI is a business intelligence platform designed to address and manage the abundance of data produced by multiple software programs and legacy systems across the insurance industry. In June the firm received $5 million in Series A funding led by EMC Insurance Companies of Des Moines, Iowa. Two insurance agency networks are also investing in AgencyKPI: Keystone Insurers Group of Northumberland, Pennsylvania, and Austinbased Combined Agents of America. AgencyKPI Co-founder Bobby Billman believes part of the issue that has been holding back “digital transformation” in the insurance industry is what he calls, “technology for technology’s sake.” Agents and their partners need ways to connect various technology providers so they can extract more value from that technology, he said. In his view, the challenge is merely a tech challenge of being able to connect the pieces, including carriers, agency management system providers and agencies. “I think their intent is they do want to move to an open INSURANCEJOURNAL.COM

platform but it’s a technology challenge for them,” he said. “We actually meet with these AMS providers and talk about an integration path for AgencyKPI. Some of them have APIs that are not complete, and other ones are working on new microservices. They have to change the way they think about how you connect their systems.” AgencyKPI was started in 2017 by Trent Richmond, an insurance industry veteran, and Billman, a seasoned high tech executive. In 2019, AgencyKPI launched its business intelligence platform for networks, called Harmony, to addresses mass data fragmentation and unify data from various sources, so insurance networks could see how they are performing on any given level. Today, the Harmony

platform handles $15.8 billion in written premium from more than 9,100 affiliated agencies. The issue of data fragmentation is not unlike that of the retail agency but Billman says Harmony is one of the first platforms to tackle the problem for the network audience. Like retail agencies, agency networks need to understand their data so that they can help their retail agency members and show their carrier partners their results. Billman says it is AgencyKPI’s viewpoint that the agency owns the data. “That’s where it came from. Agents have the relationship with the clients,” he said. But at the end of the day, that’s not what matters. “It doesn’t really matter to us because what we’re using it for is for the good of the three, or the collective — the network,

At RPS, Collier saw a need to streamline the cyber insurance policy process in 2014, so he developed the RPS e-commerce platform. By focusing on the client, not the underwriter, cyber polices issued jumped from 58 in 2014 to 20,000 in 2020. Now with 17 products available, agents can quote/ bind/issue policies in the RPS online platform in minutes. Collier says he recognized the need to continue to disrupt the inefficient, albeit traditional way, of transacting business within the insurance industry. “It’s up to the incumbents to find innovation before the innovators find distribution,” Collier said. “Insurtech is no longer the threat. Insurtech should be the ally,” Collier said. “Insurtech will become the new norm.” Collier hopes the industry will embrace the ally for what it is. “And that’s where I’m trying to help the retail broker do better things for their customers. That’s it.”

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Closer Look: Commercial Property Commercial Property and Virus Exclusion

here is much being made about coverage for business income losses related to COVID-19. It seems that new lawsuits are filed daily, while the tally of By Patrick Wraight lawsuits that are being dismissed continues to rise. It appears that in many jurisdictions, the courts are agreeing with the industry that the policy tends to be clear that there simply is no coverage for this sort of loss. At least, that is what has happened so far in many places. On many policies, the trigger to initiate coverage is “direct physical loss of, or damage to, Covered Property.” This is important when we consider more than just the claim that the governmental order shut down the business. When we consider that some of these claims are going to be centered on a business closing down because someone at the business contracted COVID-19 - or at least it’s suspected that someone contracted the virus there - our question is now, is there coverage because of the presence (or suspected presence) of the virus? Is it possible for a virus to cause direct physical loss?

Physical Loss Defined

It depends on how you define direct physical loss. In the insurance world, we really have a hard time with a direct yes or no answer. In fact, I would say that maybe is the best phrase in insurance. If we

weren’t in insurance, we would have no problem defining direct physical loss or damage. Since we are in the insurance industry, we need to know what a direct physical loss, or damage, is to a property. We need to start with loss of or damage to property. Loss is being deprived of something, and damage is an injury or harm that reduces value or usefulness. Let’s ask ourselves: can a virus deprive us of property or reduced its value or usefulness? Consider that the virus appears to be able to survive for up to five days on certain surfaces, and we conclude that its existence can deprive us of the ability to use property or reduce its usefulness. What is a direct loss? A direct loss is loss to a specific piece of property, and since we understand that the virus can survive on specific surfaces, it appears to be a direct loss. But what about the other word: physical? Doesn’t that indicate that there has to be some kind of change to the property in a real, tangible way? That is where it gets sticky. In one Illinois case, the judge stated that for physical damage, there had to be some change in the characteristics of the property. That is to say, a color change or a change in its physical appearance that indicated something had happened. My thought is that while there are obvious physical alterations to property that meet the requirement of physical damage, is property that is contaminated also physically damaged? If contamination is a type of physical damage then

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can the presence of a virus contaminate a surface, therefore causing direct physical loss of or damage to property? Maybe.

The Exclusion

The existence of an exclusion indicates that it may be possible. In 2006, ISO filed CP 01 40 07 06 – Exclusion of Loss Due to Virus or Bacteria. This endorsement was filed after the 2002 SARS and 2006 bird flu outbreaks. According to IRMI (International Risk Management Institute), “ISO explained that it was introducing the virus or bacteria exclusion endorsement out of concern that, in the event of a pandemic, there could be ‘efforts to expand coverage and create sources of recovery’ despite the requirement of actual property

damage and the exclusion of loss from contamination within the pollution exclusion.” In filing the exclusion, ISO already believed that the presence of a virus was not direct physical damage and that the pollution exclusion would apply if it was claimed that the virus contaminated a surface or an area. However, if there were no possibility that one could reasonably consider the presence of a virus on surfaces as property damage, this creates an ambiguity, at least to me, because we don’t exclude events that are impossible in

most cases. Exclusions are written to limit the exposure from events that could happen, and in some cases, are likely to happen. It is also problematic to say that a pollution exclusion would also apply because of the definition of pollutant in the policy. “Pollutants” means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. A virus is not solid, liquid, gas or thermal in nature. It is true that viruses are carried by gasses and liquids, but that doesn’t make the virus either of those. Additionally, we should

interpret this policy language according to certain principles, including the idea that this list, while not all inclusive, is exemplary of the types of materials that should be considered pollutants. There’s nothing here that indicates that a virus should be considered a pollutant. Therefore, I conclude that at least in some way, the existence of the exclusion makes it possible to have direct physical loss of or damage to property.

More Than Physical Loss

The exclusion anticipates more than direct physical loss. First, do not forget that the first requirement to finding coverage on a commercial property policy is to find out whether there was direct physical loss of or damage to property. Without direct physical loss of or dam-

age to property, there isn’t a loss covered by the policy. That is the first key, but that doesn’t mean that this endorsement doesn’t anticipate other losses. Here’s how the endorsement reads related to itself:

We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces, or is capable of, inducing physical distress, illness or diseases.

The exclusion set forth in Paragraph B. applies to all coverage under all forms and endorsements that comprise this Coverage Part or Policy, including but not limited to forms or endorsements that cover property damage to buildings or personal property and forms or endorsements that cover business income, extra expense or action of civil authority.

This paragraph doesn’t limit the exclusion to only direct physical loss or damage. Without adding those two words, direct and physical, it expands its reach to any loss or damage related to viruses. That tells us that this broad exclusion is meant not to provide any coverage for any property damage related to a virus. If we go back to the original question, can a virus cause direct physical damage to property? It appears to be possible. It also appears that the intent of this exclusion, and others like it, is to exclude any property damage related to a virus. In the end, even if an insured could show that their property was damaged by a virus, there’s still no coverage available.

This paragraph lets us know that this endorsement applies across commercial property policies that include business income and extra expense. While those policies also require that there be direct physical loss of or damage to property, they don’t cover those losses. This endorsement applies to those policies and endorsements as well. It’s the next paragraph that excludes coverage:

Wraight is the director of the Academy of Insurance. Phone: 800-897-9965 ext. 130. Email: pwraight@ijacademy. com.

Spotlight: Habitational 10 Things to Know About Habitational Properties

fter years of losses in the multifamily habitational market, insurers have become far more cautious for both property and casualty coverages, cutting back capacity or even leaving the market altogether. Rates and deductibles have been rising as carriers more closely scrutinize the risks they are willing to entertain while adding a variety of exclusions. Below is a list of 10 things to know about the habitational market, according to CRC’s Wholesale & Specialty market report. 1. Markets have become extremely sensitive to valuation for frame habitational risks after large losses in 2017 and 2018 showed that reported values were often inadequate. As higher valuations are entered in catastrophe models, this tends to raise the potential modeled losses, in turn, making carriers more reluctant to extend larger limits on excess layers because they may find themselves closer to the potential loss. Larger, layered programs are more challenging to assemble. 2. Insurance to value is also coming into play, as

underwriters look to more carefully ascertain current property values. The values need to be appropriate because restrictive covenants related to valuation and recovery, which had been ignored in the more competitive market, are now very much active. — David Pagoumian, CRC Property Practice & Red Bank, N.J., office president 3. Habitational specific markets are seeking rate increases in the 10% to 15% range. On larger deals, carriers are seeking higher deductibles for all-risk or water damage. Markets are more often requiring split deductibles, such as for water damage, theft and vandalism. For some non-coastal frame apartment schedules, carriers are looking for deductibles ranging from $100,000 to $250,000 and may pair those with percentage deductibles for wind and hail in high risk hail areas. — Edward Magliaro, executive vice president, CRC Property Practice Leader 4. The habitational casualty market is beset by rate increases and capacity limitations after a decade of losses, which have worsened

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in the last several years. Many carriers have experienced significant losses that have driven a retraction of capacity. A number of markets have stopped offering general liability and excess coverage. 5. There is less capacity for lead excess in the E&S arena. Most companies don’t want to put more than $5 million, and the pricing is extremely high. — Mike McCall, CRC, Los Angeles Casualty Team

seeing increases of 100%. 8. Insurers are scaling back limits significantly for lead umbrella or excess coverage. Many carriers have reduced their lead capacity from $25 million to $10 million and in some instances to as little as $5 million. As a result, brokers must broadly expand their marketing efforts to renew the expiring umbrella or excess program limits.

6. Another issue facing apartment and building owners is habitability claims. While these claims seem to be affecting California owners currently, carriers are concerned they could spread across the country. Habitability claims involve the status and living conditions of a property. These claims are related to current living conditions and do not require a specific instance of bodily injury or property damage.

9. Crime statistics are playing a bigger role in casualty placements, as underwriters increasingly run crime scores for neighborhoods and specific locations based on actual crimes reported. With better empirical data readily available, casualty underwriters are placing more emphasis on crime scores from a variety of vendors for all submissions where they are available. Some underwriters are not quoting above a certain crime score.

7. For excess liability insurance, average risks are experiencing rate increases of 30% to 50%. Those with significant losses and more than an insignificant number of subsidized units may be

10. Our advice to agents and brokers: Market accounts and market accounts early. Bad news doesn’t get better with time. — Jeff Coles, CRC, team leader, Los Angeles Casualty Team INSURANCEJOURNAL.COM

Idea Exchange: Property Replacement Cost and the 180-Day Limitation Myth

hat's the best way to launch this article? Don’t know if I should say I’m itching for a fight or if it’s better to say By Christopher Boggs insurance carriers are misinterpreting coverage forms and I am trying to stop them. You decide. Here’s the situation, the insured suffered loss to an building eight months ago but did not discover the damage until yesterday (say it’s hail damage to the roof). Coverage is written on replacement cost basis and the insured plans to repair or rebuild. Does the

carrier owe replacement cost or actual cash value?

Whether coverage is written on a homeowners’ policy or a commercial property policy, the answer is the same. The carrier owes replacement cost if certain conditions are met. “Wait a minute, Boggs,” some might say. “The policy limits the carrier’s payout to actual cash value because of the 180-day provision. Take a look at the form:” (For this discussion, debated wording from both the homeowners’ and commercial property policy are presented.)

Commercial Property Policy Optional Coverages 3. Replacement Cost c. You may make a claim for loss or damage covered by this insurance on an actual cash value basis instead of on a replacement cost basis. In the event you elect to have loss or damage settled on an actual cash value basis, you may still make a claim for the additional coverage this Optional Coverage provides if you notify us of your intent to do so within 180 days after the loss or damage. Homeowners’ Policy

under this policy for loss to buildings on an actual cash value basis. You may then make claim for any additional liability according to the provisions of this Condition D. Loss Settlement, provided you notify us, within 180 days after the date of loss, of your intent to repair or replace the damaged building. “You see, Boggs, damage has to be discovered within 180 days of the loss to qualify for replacement cost. It's beyond that, so the carrier owes ACV only.” Where does the policy state that? Unendorsed ISO policies state coverage is provided on a replacement cost basis provided certain conditions are met: • The insured has met the coinsurance condition (in the commercial property policy) or the insurance-to-value condition (in the homeowners’ policy); • The building/structure is actually repaired or replaced; and • Repair or replacement must be made as quickly as possible (a CPP provision). Nothing requires the loss be discovered within 180 days. Both policies state that if the above conditions are met, replacement cost is paid. The commercial property policy states that when the replacement cost option is chosen replacement cost replaces actual cash value in the valuation provisions. Using replacement cost in place of actual cash value, the CPP now reads:

7. Valuation We will determine the value of Covered Property in the event of loss or damage as follows: a. At replacement cost as of the time of loss or damage….

SECTION I – CONDITIONS

Likewise, the Homeowners’ Policy states:

D. Loss Settlement e. You may disregard the replacement cost loss settlement provisions and make claim

a. If, at the time of loss, the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of

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the building immediately before the loss, we will pay the cost to repair or replace, without deduction for depreciation…. Note the common elements: if the conditions are met and coverage is written on a replacement cost basis at the time of the loss — the carrier owes replacement cost. “You are ignoring the 180-day limitation.” It doesn't apply to the situation. Did the insured meet the conditions and have replacement cost at the time of the loss? If "Yes," the carrier owes replacement cost. Don’t believe me just yet. Look at the “180-day” provision. Look at both provisions and note who makes the choice of ACV versus replacement cost. See it? Both forms say “You” (the insured) can disregard or make a claim on an ACV basis in lieu of replacement cost. It doesn’t say the carrier has this option. But if the “You” does make this choice, wording says they have 180 days from the date of loss to re-chose replacement cost. This is under scrutiny by ISO and will likely be changed to 180 days from the date the insured learns of the loss. Nothing in either form allows the carrier to make this decision. If the insured has met all the other provisions, they are owed replacement cost — even if the loss is discovered more than 180 days after the event. If the “You” doesn’t opt for ACV in lieu of replacement cost, no wording in either of these unendorsed ISO forms allow the carrier to limit payment to ACV. Boggs is executive director, Big I Virtual University of the Independent Insurance Agents and Brokers of America. Email: chris.boggs@iiaba.net. OCTOBER 19, 2020 INSURANCE JOURNAL | 37

Idea Exchange: Tech Talk Successful Recruiting Requires a Different Story By Tom Wetzel

he industry has long warned of the growing agent shortage and has prescribed more aggressive promotion of career opportunities especially in technology to attract the next generation. As the shortages grow more acute, agencies and insurers have taken a fresh look at the problem and are rethinking the solutions starting with an attitude change. One can learn much just by talking to students about what they want and what pushes them away. “The industry is slow-moving but is becoming better at adapting technology,” says senior Jesse Yan, a finance major at the AXIS Risk Management Academy at the University of Illinois – Champaign. “But if they only appreciate interns for doing data pulls all day long, that’s not what I am looking for.” Another U of I senior in finance, Lauren Gatziolis, had been considering investment banking but switched her focus and will take a position with a major insurer after graduation. “I have the requisite technical skills, but I also want to be able to apply and use my analytical skills,” she says. “What I do like about the insurance industry is the flexibility.” Every student we interviewed confirmed a marked improvement in internship experiences in recent years. “Alumni come back to campus to tell stories about their internships being far more rigid and their supervisors more resistant to intern input – a ‘this is the way it is, take it or leave it’ approach. That has not been

my experience. They want to learn from us while we learn from them.” The industry is taking note of the need to alter its approach, including ways in which agents can reach out and pull in young talent. “Agents do participate at some of our chapters’ campus career fairs,” says Sharla Floyd, senior vice president, Strategic Initiatives of Gamma Iota Sigma, an international professional fraternity in 33 states that is organized to promote, encourage and sustain student interest in insurance, risk management and actuarial science as professions. “Some agents do not see the value of signing up to participate,” says Floyd, “because they believe students don’t see the opportunity on the agency side, but the fact is students can’t pursue paths they don’t know exist. We want the industry to harness the skills these young people come in with to shape existing practices.” Floyd says agents can post internships to its GIS Career Center (always free to do so). “They should also reach out to faculty department heads, career services, and even student heads of relevant student organizations or clubs to schools to make an introduction and establish relationships, explore speaking opportunities, and expand the net for opportunities like internships,” she says. That approach is echoed by Deborah Pickford, Executive Director of Invest, a program affiliated with the Insurance Agents and Brokers of America (IIABA) that promotes insurance careers to high school and community college students. “We are working with the Maryland Insurance Administration in an apprenticeship program attract much-needed talent by allowing high school students to work at insurance companies and agencies to gain valuable experience” Pickford said.

“Agents need to think creatively to attract this young talent,” she said. “There are many examples of how to do this – a sailing enthusiast is now underwriting yachts and an experienced horseman can support an equine book. Combine a young person’s interests to your needs. We’re now dealing with new specialties such as smart homes, smart cars, and cyber liability that require new skill sets.” With all the demands from technology, students appreciate the human element of insurance. As student Jesse Yan said, “as artificial intelligence improves and comes into more wide use, there will be more need for the human touch, for correct input, without bias. The human should have the final say.” Wetzel is CEO of Thomas H. Wetzel & Associates, an insurance marketing firm for independent agents. Website: is www.wetzelandassociates.com. Email: twetzel@wetzelandassociates.com

Idea Exchange: The Competitive Advantage How Many Screwdrivers Do You Need?

Why Having the Right Tools, and Knowing How to Use Them, Matters

f you do not do much home or auto maintenance or build furniture, or in general, you just don’t do much with hand tools for any reason, then you probably only need two screwdrivers — a Phillips #2 and a flathead #2. Now, if you do a lot of work with hand tools and screws, the number of useful screwdrivers is almost infinite. Specialized handles for electrical work are shocking savers – pun intended. Specialized blades for reverse grips to insert By Chris Burand deep screws save massive frustration. A 90-degree handle can save busted knuckles. Star drives and hex drives are not optional depending on torque requirements (and whether the screw will need to be backed out). If you use a lot of screws, having exactly the right screwdriver is worth every penny when one is dealing with a difficult angle or specific situation. On the other hand, a screwdriver is a pretty simple tool. With just a few exceptions, if you learn to use one, you will know how to use them all. What you may not know is when to use which screwdriver. Using the wrong screwdriver leads to stripped screws, lots of frustration, buying different drivers, and sometimes, lots of extra money you did not want to spend (written from experience). Even with something as simple as a screw and screwdriver, a person needs to know how to choose the correct tool for the job and how to use that tool. What good is a tool if the person does not know how to use it? And this knowledge does not even get into the difference in quality between brands. My first socket set rounded off so 40 | INSURANCE JOURNAL | OCTOBER 19, 2020

many corners. Having wrenches that fit a nut perfectly not only saves nuts, but knuckles.

Wasted Tools

I see agencies wasting money on all kinds of tools for their producers, including an excessive number of carriers, and yet the true training to use those tools is minimal to nonexistent. A great example is risk management. “Here you go – a complete set of risk management tools, and you can now call yourself a risk manager. Go get ’em tiger!” Risk management tools are far more complex than screwdrivers. In fact, one cannot do risk management if one does not deeply understand insurance forms. Putting risk management tools in the hands of a novice who does not have a deep understanding of insurance is like telling a mechanic to rebuild a modern engine without knowing anything about engines or having the schematics or having a diagnostic computer to set all the electronic settings. Just because the customer does not know the difference between a true risk manager and a fake risk manager does not mean it is wise to call someone who has inadequate to immaterial insurance knowledge a risk manager, give them all the tools and expect anything good to come from it. This is similar with carriers. Give a producer 50 carriers, and they will work to shop all 50 carriers as often as possible. When they shop, they shop price because shopping 50 carriers, 25 carriers or even 10 carriers for coverage advantages is not practical. Material coverage differences will exist, but the producers either don’t know or care enough to use the tools. They shop for price and then they sell price. I’m just being real-world straight in this analysis.

They do not know or they do not care. The producers who truly know what they are doing don’t shop 10 carriers, or even five. At most, they will shop three. Give a producer a tool they don’t know how to use, and they will use it ignorantly. How is that good for anyone?

Training and Education

On the other hand, my clients that intensively train producers on the tools available to them all have far more success. Just like a good carpenter or mechanic who knows how to use their tools, producers who receive training are more efficient, and the quality of their work is better. Designing the correct coverages for a client is just a different version of building a house. Another example of having the right tools is getting the right education. I was in an auto dealership waiting on a repair. I was wandering around, and this sales guy approached me to see if I was interested in a new car. He was having a slow day, and I was bored, so we started talking. He was so well educated on the specifics of every car on the sales floor that I wondered if most young producers could provide the same level of detail on the policies they sell? Or, because the classes most producers take focus on a boilerplate they may or may not be selling, I wondered if the producers described the boilerplate, would they be describing a Chevrolet but selling in a Ford dealership? I have seen many errors and omissions (E&O) claims and potential E&O claims caused by producers taking an industry standard class and telling clients their policy has XYZ coverage. Then, selling them a policy that does not have XYZ coverage because the actual carrier they are using does not use the industry standard form. Education should be general and then specific to the forms being sold. Otherwise, one effectively has a bunch of standard wrenches working on a Japanese car. Every once in a while, a metric wrench will be close enough to a standard wrench to work, but not often enough and not for precise work (sometimes a 16 mm wrench will work on a 5/8” bolt but not if you want

to protect the bolt head). All the tools in the world won’t take the place of a good education. With a good education, a person can discover alternative tools, use the available tools wisely and, well, make customers happier. Giving producers tools and carriers but not providing them in depth training to use those tools is simply a waste. I’ll change analogies to fly fishing. I was with an expert fly fisher. He was gracious and liberal in sharing his flies with me. Flies are just tools. Not knowing how to use the tool made my use of the tool futile. He caught fish after fish, and I failed miserably. I did not know how to read the water or the breeze. I did not know how to cast adequately. The fish knew my lure was a hook in disguise. The same goes for painting or cooking or programming or baseball or just about anything. Until a person knows how to use a tool and has a need for a more exact tool based on their growing expertise, the person’s education is far more important than the tool. More tools may also contribute to a false sense of superiority that will usually lead to an E&O claim.

Time for Better Tools

As a manager, there is one other element that determines when a producer is ready for a better tool. If you’ve seen the movie Kill Bill, the work Uma Thurman’s character must go through to prove she’s worthy of a great sword is a good analogy. An amateur using a great tool just damages the tool and possibly themselves or others accidentally. But not giving a person better tools when they are ready can shake that person’s self-confidence. They quit getting better, but they don’t have any way of knowing that to get better, they now must have a better tool. A really good leader will pay attention and know when to give their people a better tool. Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com. OCTOBER 19, 2020 INSURANCE JOURNAL | 41

Idea Exchange: Ask the Insurance Recruiter 3 Indicators Your 2021 Talent Strategy Will Be Successful

ow do you measure recruiting success? If it is exclusively based on filling job openings, then you are doing a disservice to the process. Hiring is transactional. Talent strategy is a comprehensive plan that influences organizational leadership, retention, profitability and growth. I love to bake. It is one of my favorite hobbies. My other favorite hobby is running, so as you can see, one action clearly necessitates the other. When I first learned to bake, I tried to recreate my mom’s famous chocolate cake. The batter looked great going into the oven, but 40 minutes later, I could see something went very wrong. It looked like a chocolate pancake. Why hadn’t it risen? Well, if you know anything about baking, then you already know the answer to this question. Eggs. I had forgotten to add eggs. Talent strategies are like baking a cake. Recruiting is just one ingredient that makes the whole cake rise or fall. As you build your 2021 hiring plan, it is important to measure success along the way. These three indicators are adopted throughout the business community and can be applied to agency hires.

A Diverse Candidate Pool

“Are there specific benefits derived from having a multigenerational workforce?” According to AreaDevelopment’s Q4 2019, Recruiting & Managing The Multigenerational Workforce, highly successful organizations see value in a multigenerational workforce. It influences upskills and new hire training as well as perpetuation strategies for retirees. How can your agency build a diverse candidate pool?

Update policies to appeal to a multigenerational workforce. According to

LinkedIn’s 2020 Global Talent Trends report, “56% of companies say they’ve recently updated policies to appeal to a multigenerational workforce.”

42 | INSURANCE JOURNAL | OCTOBER 19, 2020

Utilize non-traditional employment strategies. Not every employee needs

to be W-2 or full-time. Multigenerational can also mean multi-engagement (1099, consultant, K-1, temp/contract-to-perm)

to understand and improve the health of each factor.”

Fully Utilize Data Analytics

Create a diversity and inclusion training program. Emphasizing community, unity

Notice my choice By Mary Newgard of words here — Utilize vs. Embrace. Your agency already embraces technology. Paperless systems, Salesforce and your agency management system are vital to sales and client service. Do you place the same value and reliance on talent management software? Why do you need technology to successfully recruit?

Focus on Employee Experience. Large

1. Recruiting is sales. Without a CRM, you have no candidate database building or management capabilities. A comprehensive HRIS software tool allows you to: a. Capture important applicant data; b. Manage the interview lifecycle; c. Communicate directly with passive and active candidates; and d. Foster centers of influence/referral streams.

and a welcoming workplace through dedicated training programs has a direct correlation with business success. According to Business News Daily (9/2020), “diverse workforces are 35% more likely to have above-average profit margins than companies with more homogenous employee bases.”

corporations have created specialized “employee experience” roles, and smaller organizations have stopped using the term Human Resources altogether. Studies show there is a direct link between employee experience and retention. Why should your agency focus on Employee Experience?

1. Retention and referrals are equally as important as new hire recruiting. “77% of

companies focus on employee experience to increase retention,” cites LinkedIn’s Global Talent Trends 2020. Are your priorities balanced between attracting candidates and retaining existing employees? Can you raise the percentage of new hires identified through employee referrals?

2. Your viewpoint shifts from institution to individuals. Mark Levy, former head

of employee experience at Airbnb and Allbirds, sums it up this way, “Employee experience is all about doing things WITH and FOR your employees, not to them.”

3. The employment “journey” holds the key. A foreign concept if you’re not a stu-

dent of employee experience, LinkedIn’s study suggests “The 4 P’s” to get started: People, Place, Product and Process. “For each key moment along the employment journey, from hiring through exiting, seek

2. People analytics make smarter hiring decisions. Essentially “people analytics”

derives measurable data from your current workforce to understand successful future hires. Below you can see how popular analytics categories specifically relate to agency hires like producers, account managers and executives. Popular analytics categories include: a. Identifying skills gaps; b. Predicting candidate success; c. Continuous improvement; d. Corporate training programs; e. Data security; and f. Diversity and inclusion analytics.

Newgard is partner and senior search consultant for Capstone Search Group, a national recruiting firm dedicated to the insurance industry. Email: asktherecruiter@ csgrecruiting.com. INSURANCEJOURNAL.COM

Idea Exchange: Technology Embracing Technology in a Changed World

aying this year has been a game changer for small business is an understatement. The pandemic is forcing small businesses, By Doug Coombs including independent agents, to do what they should have been doing all along — making essential investments to improve their technology, efficiency, sales and marketing. Whether independent agents are still commuting to the office, working from home or combining the two, the right technology can keep them competitive and help them move forward safely and securely. Before the pandemic, some independent agents were just getting by with simple, outdated technology. That is no longer

DIRECT

good enough. Today, any independent agency that wants to survive and thrive needs to have an agency management system (AMS) and an online presence with interactive technology, a website, social media and more.

Better Customer Service

Look no further than your existing base to understand why this is true. Clients — commercial lines and personal lines — shop, connect and interact through technology in almost everything they do. A high level of access via technology is expected, and without it, many clients will shop elsewhere. Review your current technology to understand what, if anything, is holding you back from running a fully virtual operation. This perspective will give you

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a look at what gaps exist in your ability to provide excellent customer service. An investment in client-facing technology begins with an informative and engaging presence online with a modern website and ways for clients to connect 24/7. Clients and prospects should have simple, secure ways to connect via phone, texting, email, or video chat — whether the agency is up and running five days a week or open only for limited hours. Using live chat or a chatbot on your website to answer questions is often anticipated. Enabling clients to speak with a live agent will ease stress and resolve issues faster. Agents can also hire a customer service center to answer calls and questions when agents are busy with other clients. These tools can help gather

continued on page 44

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OCTOBER 19, 2020 INSURANCE JOURNAL | 43

Idea Exchange: Technology continued from page 43 data and free up an agent’s time to work with existing clients on larger issues. A mobile-friendly website and social media enable clients to learn more about an agency quickly, while they are on the go. These tools should inform and educate consumers, and include comprehensive information about your agency, its menu of services, and share why you differ from your local competition. A mobile app makes it easy for clients to access their policies and billing information on the go. It also enables the independent agent to use push notifications and send direct emails to all clients at once. Agents can schedule calls and offer discounts or loyalty programs as well with a mobile app. To great effect, it puts your agency in the palm of your client’s hand.

Capturing Client Data

For independent agencies, using a trusted data network not only enables you to share files securely, schedule appointments, download and share data from carriers and conduct transactions, it can also provide the right tools to capture client data — data that can be used to target sales and marketing efforts. An AMS makes an independent agency more efficient. It enables all client data to live in one place, automates an agent’s office, provides a streamlined communication channel between carriers and agents, and provides the ability to use data analytics for targeted sales and marketing campaigns to increase

income generation. In addition, inbound marketing can encourage prospects to fill out a basic form on your website or social media pages, allowing you to collect their name and email. Then, you can reach out to them with a monthly e-newsletter or other in-depth content to drive new sales and ensure prospects receive valuable information. Google Analytics is another key tool. The data provides an understanding of how clients and prospects view or navigate your website — analyzing which pages inform and which pages need new content. Identifying strengths can help you streamline your marketing and change the course of your agency’s website content to best align with your clients' needs.

Identify who’s looking at and commenting on your agency’s social media as well as learn what calls to action are working and what can be modified or addressed to attract more visitors. Messages can be targeted to specific clients and prospects to share your branding, give succinct information and provide them with a call to action. Short videos can provide updates, invite clients to networking opportunities, and encourage client engagement. Lastly, comparative raters integrated within your website are essential to

provide fast quotes for clients and will capture their data while making a self-service option available for those who prefer it. A quality rater can also connect a client to an independent agent to answer questions and close the sale when needed. An important note: make sure your website has a posted privacy policy informing your visitors how you use information gathered about them. If you are using cookies, be sure to disclose the same information about them.

Working Virtually and Safely With more people working at home,

a virtual private network (VPN) for the home office is a solid investment in keeping information safe, retaining clients and maintaining a good reputation in the industry. A VPN will encrypt your information so you can send and receive emails and files while working within the agency’s network. Make sure all agency staff is using a VPN for the best security. Virtual meetings and presentations are here to stay, so subscribing to an online meeting platform is a must. It will enable video conference calls, networking and online conversations to engage clients and prospects while putting your expertise at the forefront. As long as content is valuable and concise, you can show your community how accessible you are to answer their questions. Adding cyber protections to staff computers will further protect your business. Agents working from home are tapping into the main office network — using a pathway to critical client information in their agency’s database. Every agency needs to ensure intruders won’t have access to confidential data. Communicate how vital it is for all staff to protect usernames and passwords, and change them often, especially when working from home. Finally, a Voice over Internet Protocol (VoIP) gives an independent agent a cloudbased, hosted telephone system at home. Many Windows PC-based phone systems enable agents to use their personal computer to make high quality voice and video calls privately for their business using the computer speaker or headphones, and INSURANCEJOURNAL.COM

perhaps a camera. By reviewing and integrating the most efficient, user-friendly technology, the independent agent can move forward efficiently, engaging clients with innovative tools, providing solutions and using effective sales and marketing tactics to drive agency growth.

Business principles don’t change much, but the manner in which we execute them does — largely because of improvements in technology. Coombs is the executive vice president and chief marketing officer of SIAA (Strategic Insurance Agency Alliance Inc.). Email: dougc@siaa.net.

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My New Markets Available limits: Maximum $15 million Carrier: Benchmark Insurance Group and

Last Mile Delivery: Workers' Compensation Markets

Market Detail: Freedom Risk Insurance

Services (www.freedomrisk.net) works with the growing parcel delivery industry, offering several competitive workers' compensation programs from large companies to start ups. Previous 1099 only exposure is OK (new laws in California are affecting these companies requiring employees be W2 and workers' comp is required). Submission requirements include: Acord 130; trucking supplemental; currently valued loss runs; explanation of losses over 20,000. $5K Minimum Limit Available limits: Minimum $5,000 Carrier: Unable to disclose States: All states except N.D., Ohio, Wash., and Wyo. Contact: Ryan Wakefield at 800-985-3028 or e-mail: submissions@freedomrisk.net

Cyber

Market Detail: Cowbell Prime (cowbell. insure) 250 is a standalone, admitted cyber insurance offering targeted at businesses with up to $250 million in revenue. Coverages include first-party loss, first-party expense and third party liability. Available coverages include: security breach expense (forensic, notification, call center, overtime salaries, post-event monitoring services, other expenses); extortion threats; replacement or restoration of electronic data; business income & extra expense; public relations expense; security breach liability (including PCI and regulatory); social engineering and cyber crime; ransom payment; telecommunication fraud; endorsements available for: cryptojacking, missed bid (construction), contractual damages (manufacturing), full media liability, full system failure, and contingent bodily injury and property damage. Up to $15 million in limit; deductible starting at $2,500. 46 | INSURANCE JOURNAL | OCTOBER 19, 2020

Obsidian States: Ariz., Calif., Colo., Ga., Ill., Ind., Iowa, Mich., Minn., Mo., Neb., Nev., Ohio, Ore., Pa., Texas, Utah, and Wisc. Contact: Brandon Murphy at 804-4750064 or e-mail: brandon@cowbellcyber.ai

Logistics Operations

Market Detail: AmWINS Specialty Logistics Underwriters (ASLU) (www. amwins.com) is a specialist in the nuances of logistics insurance focused on creative ways to protect a client’s assets and avoid costly chain disruptions that can occur when shipping goods both domestically and globally. Target clients are freight forwarders. Each policy issued by ASLU is specific to the client’s needs in accordance with the services they provided as well as the individual exposures attached to them. Services provided by a freight forwarder may include: international or domestic transportation brokerage; customs house brokerage; non-vessel common carriers (NVOCC); indirect air carriers (IAC); motor truck carrier (MTC); warehousemen. Providing “All Risk” coverage to clients through the insurer for ocean and inland shipments as well as for goods in storage/warehouse. Program highlights include: U.S. admitted paper (A.M. Best “A” rated); all necessary coverages under one package, which eliminates coverage gaps and minimizes the necessity for brokers to place different coverages with multiple carriers. AmWINS can work with the insured to standardize the insurance-related portion of their contracts and minimize exposures, and customize a coverage package suitable for each individual insured. Certificate issuing platform for shippers interest and warehousing with full report capabilities; global claims settling. AmWINS offers coverage on 100% admitted paper and includes no E&S taxes; quick claims handling; backed by government funds to pay claims in the event of bankruptcy. As an AmWINS Group company, the nation’s largest independent wholesale distributor of specialty insurance products, ASLU has access to all the tools and resources of the global

firm. Coverage & limits include: Shippers Interest Ocean Cargo - $15 million any one conveyance; Shippers Interest Domestic Transit - $15 million any one conveyance; Third-party Warehousing - $15 million any one location; Carriers Legal Liability (NVOCC, IAC, MTCLL & Contingent) - $5 million any one conveyance; Freight Forwarders E&O - $1 million any one occurrence; Warehouse Legal Liability - $15 million any one location. Premium starts at $10,000. Submission requirements: ASLU application or full broker application; contracts of carriage/warehousing in use by the insured; five-year loss experience; other information, if necessary, requested upon submission. Available limits: Minimum $10,000; maximum $15 million Carrier: Argo States: All states Contact: Alex Rosas at 754-260-2199 or e-mail: alex.rosas@amwins.com

Lawyers Professional Liability

Market Detail: Grayhawk General Agency Inc. (GGA) (www.ggagency.com) is a wholesale broker and managing general agent specializing in offering lawyers professional liability with access to an extensive group of carriers. The company’s team has more than 20 years of experience to this specialty market. Available limits: Minimum $100,000, maximum $5 million Carrier: Unable to disclose, admitted States: Ariz., Calif., Colo., Idaho, Mich., Mont., Nev., N.H., N.M., Ore., Tenn., Texas, Utah, Vt., and Wash. Contact: Dan Moore at 480-551-3854 ext. 11 or e-mail: dan@ggagency.com

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Idea Exchange: Agency Management

Inflection Points in the Growth of an Agency

ver the years, I’ve talked to many agency owners who are frustrated because the growth of their agency is stuck, and By Tony Caldwell they seem to be running in place. No matter what they try or how hard they work, agency growth has plateaued. While this is a common problem, it’s neither universal nor insurmountable. The solution is knowing when the inflection points are likely to occur and 48 | INSURANCE JOURNAL | OCTOBER 19, 2020

where to make adjustments to the business model or operational plans. In this way, agency owners can save a lot of time and frustration and ensure consistent and continued agency growth over time.

One: The First Hires

For some agency owners, the first plateau to be aware of comes as the agency grows through $250,000 of revenue. At $250,000, regardless of whether the agency is commercial or personal lines focused, the owner is faced with the need to hire additional staff. Many agency owners, who have

been spending increasing amounts of their time in administrative and customer service tasks, reflexively seek to hire a producer so that income will continue to grow. This is almost always a strategic error because a new producer means even more administrative and management tasks for the agency owner. This in turn takes away from sales time, which is usually the founder’s strongest capability. What generally works better at this point is to hire additional service and administrative staff and allow the agency owner to continue to build the book of business. INSURANCEJOURNAL.COM

Two: More Producers

The next inflection point, which is nearly universal, occurs somewhere around $500,000 of agency revenue. At this revenue size, the agency is generally established, operating well and producing a profit. For the agency to move to the next level, new production capacity will be required, and this means bringing on additional production capacity by hiring one or more producers. The addition of producers, beyond the agency owner, to any agency adds a tremendous level of complexity to the business. First, before the producers are hired, the agency must have very well-developed systems for business submissions, proposals and other routine administrative tasks. Second, it requires that the agency develop more sophisticated marketing to support the additional production capability. Third, it almost always means at least a temporary reduction in cash flow for the agency and, potentially, the agency owner to support the salaries required for the new producer(s). There is so much additional complexity at this level that many agencies never rise above this threshold. The key to doing so is to begin preparing — from the very foundation of the agency — with excellent operating procedures, strong marketing and the discipline of retaining profits to build a strong balance sheet. This enables the agency to afford what’s needed for growth above a half a million dollars.

Three: Past the Million Mark

Not surprisingly, the next level where agency owners must make operational pivots to continue their growth typically occurs somewhere between $1 million and $1.5 million of agency revenue. When the agency grows to this size, it often has five to 10 employees and represents as many as a dozen insurance companies. It is usually involved in five or more niche markets and is often selling and servicing personal insurance, small business and sometimes middle market commercial accounts. At this point, the accounting requirements of the agency also have moved beyond purely direct billing into the more comINSURANCEJOURNAL.COM

plicated agency bill accounting process while human resources, administration, accounting, sales management, book management, business planning and cash flow management have all become more time consuming. These increasingly complex requirements need an increased level of sophistication to do well. The entrepreneurial agency owner is now faced with a number of challenges and usually needs at least one person to be devoted exclusively to managing the agency. In order to prepare the agency for continued growth beyond the $1.5 million revenue level, it is generally required to make an additional capital investment and experience a reduction in profits so the human capital needs of the newly complex business can be met. It can be frustrating for the owner to see the top line is growing while the bottom line is shrinking to some degree. However, as long as these investments are well thought out and intentional, the fact that the bottom line is shrinking to fund temporarily new investments should be encouraging. Over two decades ago, insurance agency coach Michael Jans coined the term, “The Law of the Short Reverse” to describe the phenomenon where it is necessary to go backwards for a short period of time to accelerate forward. He likens this business requirement to a lion crouching before springing on its prey or a basketball player crouching before taking a shot. When this is anticipated, it can actually be welcome news that the agency is prepared, and preparing, to take its next leap forward.

Four: Sustaining Growth

Agency owners who have sustained strong and consistent growth over several decades and built their agencies well beyond the $1.5 million revenue level all acknowledge that the challenges of consistent and continual growth never cease. They almost always relate that growing the agency after this revenue level actually becomes easier. That’s simply because with more revenue and more people, the agency has the natural ability to encourage specialization. It can afford professionals who are very talented in its area of work,

rather than being required to wear many hats. The final keys to growth are focusing on maintaining strong profits, cash flow and a robust balance sheet. It is a relatively simple matter to grow an agency by double digits in the early years. But sustaining that kind of growth over time requires not only careful planning, but also the ability to recognize when past strategies are creating diminishing returns and require revamping and a willingness to continually invest in the business. Wherever an agency owner is in their development, recognizing the changes that are coming and when they are likely to occur can only help the owner be better prepared to meet them when they actually arise. Tony Caldwell is an author, speaker and mentor who has helped independent agents create over 250 independent insurance agencies. Learn more by visiting www.tonycaldwell.net or contacting him at tonyc@oneagentsalliance.net.

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OCTOBER 19, 2020 INSURANCE JOURNAL | 49

Closing Quote Year of Challenges Brings Growth, Innovation and Change

espite a year of challenges, uncertainty and a halting global economic recovery, the insurance industry remains strong and stable. Though below pre-COVID forecasts, major indicators point to positive rates of growth and a positive return on equity for 2020, which will By Dr. Robert Hartwig be welcomed by an industry that has grappled with exposures related to COVID-19, hurricanes, wildfires and outbreaks of civil unrest across the country. COVID-19 has had material impacts throughout the property and casualty side of the business, resulting in a deceleration in premium growth. It has also produced a sharp decline in the industry’s capacity on a global scale. Certain types of insurance were hit harder than others. Workers' compensation experienced a sharp decrease in payroll exposure — resulting directly from the loss of 22 million jobs as businesses were forced to shut down. Personal and commercial auto also experienced reduced exposure because people and businesses were driving less and transporting fewer goods, while aviation and marine insurance saw reduced exposures due to travel restrictions and the economic slowdown. At the same time, aggressive actions by the Federal Reserve Board have pushed down interest rates and will have a long-term

effect on the industry’s ability to generate material growth in investment earnings. Despite shrinking by more than one-third during the first and second quarters of 2020, the global economy is making a strong comeback. In the end, the relatively short duration of the 2020 recession will leave the economy in considerably better shape than the financial crisis of 2008 and 2009 and leave the insurance industry on solid financial ground with new learnings setting us on a course toward innovation and change.

A Pandemic, Natural Disasters and Civil Unrest

By mid-2021, we can expect the industry to work through most of the immediate economic and financial impacts of COVID-19. That said, there will be ongoing litigation issues arising from business interruption coverage disputes that could last for years. While early court decisions have generally been decided in favor of insurers, there are roughly 1,100 outstanding COVIDrelated lawsuits. We are halfway through the 2020 hurricane season, and we are certain to surpass the insur-

50 | INSURANCE JOURNAL | OCTOBER 19, 2020

ance CAT losses of 2019. With the continuing wildfires in the West and significant claims arising from civil unrest, these losses will likely reach several billion dollars. Storms and wildfires will calm as the seasons change, and a vaccine will eventually come for COVID-19. But, there is no season or vaccine for civil unrest. Political uncertainty lies ahead of us, and that’s a wild card in terms of future civil unrest.

What Does It All Mean for the Industry?

With a contentious presidential election looming, many may be wondering what a change in the White House could mean for the insurance industry. According to my research examining the past 70 years, there is no correlation between return on equity (ROE) for the P/C insurance industry and the political party of the president — primarily because hurricanes, earthquakes, wildfires and tornadoes don’t care who is in the White House. These changes do, however, present opportunities for learning and innovation. Once the COVID-related litigation, legislation and

regulatory changes are resolved, we will see a burst of innovation. Just look back to the Terrorism Risk Insurance Act (TRIA) passed after 9/11; insurers were spurred to develop terrorism-related solutions for businesses. Beyond the changes we will see in terms of new products and innovation, we’ll also see changes to the makeup of the insurance workforce. We are seeing efforts in many companies and organizations like the Insurance Industry Charitable Foundation to build a diverse workforce. From my perspective at the University of South Carolina, I see universities actively working to increase minority enrollment across the industry. At USC, which has one of the country’s largest risk management and insurance programs, African-American freshman enrollment is projected to grow by 28 percent over last year, and it has more than doubled since 2016. Hispanic freshman enrollment is up 55% since 2016. As a result, insurers seeking to recruit talent will have access to a diverse pool. Despite the challenges of 2020, the industry should enter 2021 financially strong. Time and again, when we are hit by large scale events, we emerge with our financial strength intact and will for years to come. Dr. Hartwig is Clinical Associate Professor of Risk Management, Insurance and Finance in the Darla Moore School of Business at the University of South Carolina and Director of the school’s Center for Risk and Uncertainty Management. INSURANCEJOURNAL.COM

Expect big things in workers’ compensation. Most classes approved, nationwide. It pays to get a quote from Applied.® For information call (877) 234-4450 or visit auw.com. Follow us at bigdoghq.com.