Insurance Journal West 2022-02-21 by Insurance Journal

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February 21, 2022 • Vol. 100 No. 3

Contents News & Markets

Special Report

W.R. Berkley Optimism About 2022 Comes With Caution About Workers’ Compensation

10 Cyber Attacks in 2021 Cost $600M With 40,000 Businesses Put at Risk

Traffic Fatalities Continue on Record Pace But not in All States

Spotlight: Farm & Ranch Market: Evolving to Mitigate the Risks of Today

Crop Insurance Payouts Rise as Climate Change Worsens Droughts, Floods

Idea Exchange

Today’s Candidate Expectations and How to Compete

The Competitive Advantage: Agency Accounting

Special Report: Why Money Isn’t Everything to Agency Hires

The Wedge: 3 Reasons Why Agency Owners Fail to Grow Revenue (and What to Do About It)

Special Report: Salaries Roar but Satisfaction with Compensation Wanes

Construction Defect Insurance Claims

Insurance Industry Critic and ‘Conscience’ Hunter Retires From Consumer Federation Insurers Could Get Lower Rates on Liquidity with Bills in States

44 46

How Do You Know When It’s the Right Time to Partner With a Network?

Court Siding With Merck Over War Exclusion for Cyber Attack a Warning to Insurers

Closing Quote: Building Digital Relationships with Insurance Customers

How Autonomous Car Companies Are Outrunning U.S. Regulators And Lawmakers

New Auto Insurer Sensa’s Device Analyzes Accident, Triggers Emergency Services

How Car, Home Inflation Is Driving Up Loss Costs for Insurers

Departments

6 Opening Note

4 | INSURANCE JOURNAL | FEBRUARY 21, 2022

10 Figures

11 Declarations

16 Business Moves

18 People

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How Good Became Great At Great American, our yesterdays tell an important story about our tomorrow. From railways to highways, our specialized insurance solutions have helped protect those who have built our economy for the past 150 years. That’s an unwavering commitment you can count on.

Opening Note Write the Editor: awells@insurancejournal.com

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

ADMINISTRATION / CIRCULATION

Healthy, Happy Employees

his issue reveals data from Insurance Journal’s annual Agency Salary Survey. While maintaining competitive compensation packages is a critical step in attracting and retaining the best talent, employers must not forget about keeping their employees healthy and happy. One important trend found in this year’s Agency Salary Survey is that satisfaction with compensation declined even while average total pay rose. There are many reasons behind this trend but the pressures that workers have faced since the beginning of the pandemic cannot be overlooked. [For the survey’s full report, see page 28] New research from insurer The Hartford found that 42% of U.S. workers report declines in their mental health, while a similar percentage (43%) have delayed routine health care appointments since the COVID-19 pandemic began. The researchers said the delays in health care come as many also report declines in their social well-being (41%), financial security (32%) and physical health (29%), as well as in their mental health. Employee burnout doesn’t seem to be getting any better. The Hartford said workplace burnout levels among U.S. workers throughout the pandemic have remained high at 61% in January 2022 — that’s the same level reported in February and July of 2021. This burnout rate and declining health are reflected in the way many U.S. workers feel about their jobs. This could be why satisfaction over compensation dropped in IJ’s Agency Salary Survey despite rising pay on average. The Hartford noted that most respondents (63%) to their survey reported that their overall health/wellness impacts their productivity at work, while 30% noted they’re less engaged with their work. About 25% said they have trouble concentrating or focusing. “It is difficult to overcome the fear and fatigue we’re all experiencing amid the COVID-19 pandemic; however, it is important that people get back to prioritizing routine health visits and screenings to stay physically and mentally healthy,” said The Hartford’s Chief Medical Officer Dr. Adam Seidner. “Many health conditions, such as high blood pressure or diabetes, may not be noticeable or detected without routine screenings. These types of conditions, when they continue to develop undetected, can lead to more serious health problems.” To better engage with workers and promote their overall wellness, Seidner recommends employers: • Offer benefits and resources that address the overall well-being of their workforce — encompassing physical health, mental health, as well as financial resilience; • Communicate more often to employees to remind them of the benefits and services that are available; • Lead by example by making your own appointments a priority; and • Offer the flexibility employees need to make their appointments a priority.

‘Employee burnout doesn’t seem to be getting any better.’

The Hartford’s national omnibus online survey was conducted in the U.S. among approximately 2,000 adults aged 18+, including 1001 full-time and part-time employed respondents. The research was conducted Jan. 5-7, 2022. The margin of error is +/- 3% at a 95% confidence level. Editor-in-Chief

Andrea Wells

6 | INSURANCE JOURNAL | FEBRUARY 21, 2022

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 William Rabb | wrabb@insurancejournal.com South Central Editor/Midwest Editor Ezra Amacher | eamacher@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor L.S. Howard | lhoward@insurancejournal.com Columnists & Contributors Contributors: Chip Bacciocco, Elizabeth Blosfield, Jim Borders, David Coons, Leah Douglas, Chad Hemenway, Hyunjoo Jin, Joseph White, Jim Sams, David Shepardson, Granger Stuck, Paul Taylor Columnists: Chris Burand, Randy Schwantz

SALES / MARKETING

Chief Marketing Officer Julie Tinney | jtinney@insurancejournal.com West Sales Dena Kaplan | dkaplan@insurancejournal.com Romeo Valdez | rvaldez@insurancejournal.com Kelly DeLaMora | kdelamora@wellsmedia.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 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 Sales & Marketing Strategist Laura Roy | lroy@wellsmedia.com Marketing Administrator Gayle Wells | gwells@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com

DESIGN / WEB / VIDEO

V.P. of Design Guy Boccia | gboccia@insurancejournal.com V.P. of Web Josh Whitlow | jwhitlow@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Ryan Kleshinski | rkleshinski@wellsmedia.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop | awaldrop@insurancejournal.com

ACADEMY OF INSURANCE

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

SUBSCRIPTIONS:

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News & Markets W.R. Berkley Optimism About 2022 Comes With Caution About Workers’ Compensation

By Elizabeth Blosfield

xecutives for commercial lines insurer W.R. Berkley Corp. indicated in a fourth quarter and full year 2021 earnings call that while they are optimistic about 2022, they are exercising caution when it comes to workers’ compensation. “We do have sensitivity to the workers’ comp line,” President and CEO Rob Berkley said on the call. “We think there still are opportunities there, but one needs to be very cautious.” He said that while growth in that line is being driven by payroll growth across the W. Robert Berkley Jr. board, the company is making sure to “peel back a few layers” and understand what’s going on in the business from both a frequency and severity standpoint. “I would tell you that there is no doubt that severity continues to pick up at a notable rate,” he said. “As far as frequency goes, I think that the industry needs to be very careful that they do not lose sight of what the consequences were of COVID and how that created a pinch point in the legal system.” Although the pandemic may have contributed to a drop in frequency, he believes 8 | INSURANCE JOURNAL | FEBRUARY 21, 2022

that is likely a temporary phenomenon. He also cited action by state rating bureaus as another reason the company is watching workers’ compensation closely. “The action that state rating bureaus have been taking for what would be measured in years, I think, has been pretty heavy handed,” he said. “I think there are some people that may have lost sight of the one-time benefit around comp claims activity that occurred during COVID, perhaps, and we don’t think that people are paying an appropriate level of attention to a severity trend.” He said the company is seeing aggressiveness on pricing as well as raised commissions on the product line among both regional players and national carriers. While the company continues to like the line of business, according to Berkley, it is “watching very carefully” and pursuing exposures at rates that make sense. “The severity trend is one that we have and continue to have our eye very focused on,” he said. “Clearly, the frequency trend continues to be a trend for the industry, but that severity trend is not one that should be, in our opinion, ignored.” Richard Baio, executive vice president and chief financial officer, added that the

company’s underwriting side of the business saw strong growth in the fourth quarter through both rate and exposure that is expected to continue. Its operating income increased 64% over the prior year’s quarter to $284 million, or $1.53 per share on a full year basis. He said the key contributors are related to record underwriting results for the quarter and full year, as well as strong net investment income. This momentum in the business continued throughout the year with growth and quarterly gross premiums written of 24.5% to almost $2.8 billion, bringing the company to $10.7 billion for the full year, Baio said. Similarly, net premiums written grew 26.6% quarter over quarter to about $2.3 billion and a full year of approximately $8.9 billion. Total net premiums written saw an average increase of almost 26%. Berkley said that moving forward, the company will continue to focus on specialty lines. “Essentially, across the board, it’s all about specialty business these days,” he said. “We have the right people with the right expertise, whether it’s on the commercial lines side, admitted or non-admitted, whether it’s domestic or international, or certainly would not want to leave out our colleagues on the high net worth side. We are firing on basically all cylinders.” He added that the company plans to continue making meaningful investments in both talent and technology. INSURANCEJOURNAL.COM

Figures

$75,000

The amount a correctional facilities health services provider will have to pay to settle a religious discrimination suit brought by the U.S. Equal Employment Opportunity Commission. A nurse who is a practicing Apostolic Pentecostal Christian was hired by Wellpath to work in the GEO Central Texas Correctional Facility. Before reporting to work, the nurse told a human resources employee that her religious beliefs require her to dress modestly and to wear a scrub skirt instead of scrub pants while at work. In response, Wellpath denied the request for her religion-based accommodation and rescinded the nurse’s job offer in violation of Title VII of the Civil Rights Act of 1964.

$4.5 Billion

That’s the number of comments the Insurance Journal has received on an article about another large insurance company deciding to stop writing homeowner policies in the troubled Florida market. The large number of comments reflects the growing concern that, without more legislative actions, more and more property insurers will raise rates and disembark from the state, leaving Florida with much higher premiums and only a handful of carriers. 10 | INSURANCE JOURNAL | FEBRUARY 21, 2022

The current value of bitcoin seized by the U.S. Justice department in its biggest-ever cryptocurrency theft to date. Ilya “Dutch” Lichtenstein, 34, and his wife, Heather Morgan, 31, New Yorkers who were arrested in Manhattan on February 9, are accused of conspiring to launder 119,754 bitcoin stolen after a hacker broke into Bitfinex and initiated more than 2,000 unauthorized transactions. Justice Department officials said the transactions at the time were valued at $71 million in bitcoin, but with the rise in the currency’s value, the value now is over $4.5 billion. Lichtenstein and Morgan face charges of conspiring to commit money laundering as well as to defraud the United States. The case was filed in a federal court in Washington, D.C.

$43 Million That’s how much the Monroe, Washington, School District offered as a settlement to students and parents exposed to toxic chemicals on a public school campus.

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Declarations Space Junk

Safety Violations in Tragic Fire

Proof of Loss Deadline Nears

“We’ve been concerned with having these large numbers of satellites that interfere with astronomical observations … I think we need a little more experience with the several thousand operating satellites before we can ramp up to the tens of thousands.” — Harvard-Smithsonian astrophysicist Jonathan McDowell, part of the American Astronomical Society panel examining the impacts of satellites on astronomy, said in regards to SpaceX’s plan to deploy about 30,000 satellites for its Starlink. The National Aeronautics and Space Administration (NASA) has raised concerns with the “potential for a significant increase in the frequency of conjunction events and possible impacts to NASA’s science and human spaceflight missions.”

“These Black families who lost so much that seem to be marginalized not only before the tragic fire broke out, but even in the aftermath.” — Benjamin Crump, a high-profile civil rights attorney based in Florida, and the New York law firm Weitz & Luxenberg, said as he spoke on behalf of several families whose loved ones died or were critically injured while trying to escape a Bronx apartment building. Five lawsuits have been filed against the building’s owners, which allege safety violations that led to the wrongful deaths of 17 people, including eight children.

“Submitting detailed proof of loss is a key component of the claims process following a disaster.” — Louisiana Insurance Commissioner Jim Donelon encouraged policyholders seeking to file proof of loss for damage due to Hurricane Ida to act before Feb. 25, when a 180-day deadline for most residential and commercial property insurance policies expires. State law requires that when a catastrophic event occurs and civil officials declare a state of disaster or emergency pursuant to law, property owners within the declaration area have less than 180 days from the date of the event to submit proof of loss to their insurer.

Fraternity Failure

Camp Fire Research

Winds of Change in Georgia

“These are part of a pattern of unsafe and dangerous behavior that represents the traditions of the fraternity.” — Attorney David Bianchi said on behalf of the parents of a Minnesota man who allege in a lawsuit that their son has been unresponsive and requires constant medical care since being forced to drink a bottle of vodka at a fraternity at the University of Missouri. According to the lawsuit, 19-year old Daniel Santulli was found in cardiac arrest and had a blood alcohol content of 0.486%, more than six times the legal limit for driving in Missouri. The lawsuit names the national Phi Gamma Delta organization and individual members of the Missouri chapter.

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“The problem with those two approaches is no two communities are the same and no two fires are the same, so the lessons are useful but they’re not 100% transferable.” — Catrin Edgeley, a researcher, examined how the people of Paradise and the surrounding communities responded to the massive 2018 Camp Fire, and the lessons learned that could be applied to future fires.

“For the past 25 years, we’ve had Republican commissioners bought and paid for by the companies the office is supposed to regulate. The last elected commissioner was convicted of fraud and money laundering; his predecessor’s mismanagement forced hundreds of staff furloughs and layoffs; and the one before him is still under investigation for campaign finance corruption.” — Georgia State Rep. Matthew Wilson, a trial attorney who is running for state insurance commissioner’s office this year. If elected, Wilson would be the first openly gay commissioner. His opponent is an insurance agent who would be the first black woman to hold the post, which is now occupied by the first Hispanic statewide office holder in Georgia. Wilson made his remarks in answer to a questionnaire sent by Ballotpedia. FEBRUARY 21, 2022 INSURANCE JOURNAL | 11

News & Markets 10 Cyber Attacks in 2021 Cost $600M With 40,000 Businesses Put at Risk

n just 10 cyber incidents last year, over $600 million in cash was stolen or taken as ransom, tens of millions of citizen records stolen, 40,000 businesses’ IT operations put at risk, one billion airline passenger details compromised and at least one bank was effectively shut down for over a week, according to Tokio Marine HCC International’s (TMHCCI) second annual Cyber Incidents Report. The vast majority of the incidents listed in this year’s top 10 involved large institutions where cyber security plays an integral role in operations, but this did not prevent their sophisticated defense systems from coming under attack, confirmed the report, titled “Top 10 Cyber Incidents 2021.” Indeed, some of the most damaging attacks were experienced by the likes of Microsoft, Kaseya and SITA, organizations whose products and services feed directly into the systems of third parties. “We are noticing a drastic increase in both likelihood and severity of all 12 | INSURANCE JOURNAL | FEBRUARY 21, 2022

types of cyber attack. We have seen a marked increase in ransomware attacks, their complexity and in the appetite to target smaller organizations,” said Isaac Guasch, cyber security specialist at TMHCCI and author of the report.

‘We are noticing a drastic increase in both likelihood and severity of all types of cyber attack. We have seen a marked increase in ransomware attacks, their complexity and in the appetite to target smaller organizations.’ “But whether you are a small independent business or a large, international organization, the increasingly interconnected nature of the businesses that form our economies, is a key threat,” he added. “Even if you are confident that your cyber security measures are up to date,

those of your partners may not be, so you may need to constantly redefine your perimeter.” Ranking the top 10 global cyber incidents by impact shows that targets of attacks operate in a range of business sectors including IT, airport security, banking, energy, software component providers and government databases, said TMHCCI in its analysis of the data. “It’s clear that organizations of all shapes and sizes need to understand that wherever they are and whatever they are engaged in, their business is at risk,” said Xavier Marguinaud, head of Cyber at TMHCCI. “But by gathering, analyzing and understanding the nature of these incidents, TMHCCI is able to better understand threat trends, attacker motivation and modus operandi. This insight allows us to provide effective insurance solutions that include tailored pre- and post-incident services to ensure your organization is best prepared for any cyber threats,” Marguinaud continued. The TMHCCI report identified the INSURANCEJOURNAL.COM

top 10 cyber incidents in 2021 as: • Kaseya. Kaseya is a managed service provider (MSP) that provides IT solutions to more than 40,000 companies worldwide. In July 2021, Kaseya’s incident response team reported a potential security incident involving software that would potentially affect both on-premises and SaaS clients. • Microsoft Exchange. On March 3, 2021, cybersecurity and infrastructure security (CISA) partners observed active exploitation of vulnerabilities in Microsoft Exchange Server products. • SITA. On March 4, 2021, data stored on the SITA Passenger Service System (US) Inc. servers affected multiple airlines, including Star Alliance members (formed by Air Canada, SWISS, Lufthansa, Turkish Airlines, Singapore Airlines, among others), KrisFlyer and hundreds of thousands of passengers. • Colonial Pipeline. On May 7, 2021, America’s largest refined products

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pipeline went offline after a hacking group called Darkside infiltrated it with ransomware, which led to fuel shortages across the East Coast. • Banco Pichincha. In early October 2021, Ecuador’s largest private bank, Banco Pichincha, confirmed it had suffered a cyber attack, which disrupted operations and took its ATM and online banking portal offline. • Belarusian. On Nov. 8, 2021, in light of the international tension against Belarus’ authoritarian regime, the hacking group Belarusian Cyber-Partisans claimed to access the full database of those crossing the country’s borders, including alleged movements of KGB officers and President Alexander Lukashenko himself. • Poly Network. Poly Network facilitates exchange between several blockchains as users trade one cryptocurrency for another, such as trading Bitcoin for Ether. On Aug. 10, 2021, Poly Network

suffered an anonymous attack in which over $610 million in cryptocurrencies was stolen. • RENAPER. Records of potentially 45 million Argentinian citizens were stolen in this Oct. 9, 2021, hack of RENAPER, Argentina’s National Registry of Persons, which issued national ID cards. Personal data is now being sold in private circles. • Apache Log4j. On Dec. 9, 2021, a Log4j software component vulnerability was released, which has had an incalculable systemic risk due to the widespread use of Log4j library in millions of products or app components. • Volkswagen USA. A data breach affecting more than 3.3 million customers from United States and Canada included information gathered for sales and marketing purposes from 2014 to 2019. On March 10, 2021, Audi and Volkswagen were alerted to the fact that an unauthorized third party may have obtained certain customer information.

FEBRUARY 21, 2022 INSURANCE JOURNAL | 13

News & Markets

Traffic Fatalities Continue on Record Pace But not in All States By Hope Yen

he number of U.S. traffic deaths surged in the first nine months of 2021 to 31,720, keeping up a record pace of increased dangerous driving during the coronavirus pandemic, the U.S. government reported. The estimated figure of people dying in motor vehicle crashes from January to September 2021 was 12% higher than the same period in 2020. That represents the highest percentage increase over a ninemonth period since the Transportation Department began recording fatal crash data in 1975. The tally of 31,720 deaths was the highest nine-month figure since 2006. Federal data from the department’s National Highway Traffic Safety Administration showed that traffic fatalities increased during the nine-month period in 38 states, led by those in the West and South such as Idaho, Nevada and Texas, and was flat in two states. The numbers declined in 10 states and the District of Columbia. Transportation Secretary Pete Buttigieg has pledged help and has released a new national strategy aimed at reversing the trend, which

14 | INSURANCE JOURNAL | FEBRUARY 21, 2022

he calls a crisis. He told The Associated Press that his department over the next two years will provide federal guidance, as well as billions in grants under President Joe Biden’s new infrastructure law to spur states and localities to lower speed limits and embrace safer road design such as dedicated bike and bus lanes, better lighting and crosswalks. The strategy also urges the use of speed cameras, which the department says could provide more equitable enforcement than police traffic stops. Buttigieg also cited safety benefits under the infrastructure law by building out alternative modes of travel to cars such as rail and public transit, “if only because

every other mode of transportation is safer.” NHTSA also plans to move forward on rulemaking to require automatic emergency braking in all new passenger vehicles, and set new standards on car safety performance by emphasizing crash-avoidance features such as lane-keeping assistance, though no firm deadlines were set for action. Traffic deaths began to spike in 2019. NHTSA has blamed reckless driving behavior for increases during the pandemic, citing behavioral research showing that speeding and traveling without a seat belt have been higher. Before 2019, the number of fatalities had fallen for three straight years. Traffic deaths for the first nine months of 2021 are up almost 33% over the past decade as auto safety advocates urge action by NHTSA to implement safety rules ordered by Congress, such as rear seat belt reminders, that are years overdue. Nearly 7,800 more people died from January through September in 2021 compared with figures from 2011, according to government estimates. “People make mistakes, but human mistakes don’t always have to be lethal. In a well-designed system, safety measures INSURANCEJOURNAL.COM

make sure that human fallibility does not lead to human fatalities,” Buttigieg said in a statement. “That’s what we will be doing for America’s roads with the National Roadway Safety Strategy and the safe system approach that it embraces.” Jonathan Adkins, executive director of the Governors Highway Safety Association,

which represents state safety offices, described the latest figures as a “nightmare” but said the Biden administration appears to be taking the right approach on broad safety fixes. “We’ve got to do more of what works. Traffic enforcement has got to be part of the solution,” he said. “But we’ve got to

look at how we build roads. We’ve got to look at the whole system.”

Insurance Industry Critic and ‘Conscience’ Hunter Retires From Consumer Federation

he man who served as the director of insurance for the Consumer Federation of America for nearly three decades is retiring. The official statement from the CFA describes J. Robert “Bob” Hunter as the “father of insurance consumer advocacy” in announcing Hunter’s retirement after 27 years in the position. While Hunter will continue to serve in an advisory role as insurance director emeritus, CFA’s insurance advocate, Doug Heller, moves into Hunter’s former role. “For the past 40 years, the insurance industry has always had to ask themselves ‘what’s Bob going to say?’ whenever a consumer issue was on the table,” Heller said in a statement. “It is impossible to quantify fully the impact Bob Hunter has had on the insurance market, its regulation, and its public policy.” Hunter is an actuary who “used the principles of actuarial science to ground every one of his analyses — analyses that he pulls together regularly to do good for society and to make industry participants think,” according to a fellow actuary, Suzanne Sclafane, executive editor of Carrier Management. Hunter was hired by the U.S. Department of Housing and Urban Development in 1971 as chief actuary of the Federal Insurance Administration, an agency he would lead under Presidents Gerald Ford and Jimmy Carter. CFA said Hunter, over the course of his career led efforts to eliminate unfair and discriminatory pricing in the insurance.

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It listed some of what it said were Hunter’s many roles and accomplishments: • Was instrumental in achieving the flood insurance program’s early goals; creating the Liability Risk Retention Act and making insurance available in the inner cities through the implementation of Robert Hunter the Riot Reinsurance Program and the Federal Crime Insurance Program. • Served as Texas Insurance Commissioner. • In 1980, founded and led the National Insurance Consumer Organization for 13 years. • In the 1980s, pushed for a significant change to insurance ratemaking — getting insurers to include their projected investment income in ratemaking. • In 1986, under contract with the California Legislature, wrote a seminal paper on California’s insurance market, which served as the basis for 1988’s “Voter Revolt” that enacted Proposition 103. • In 1992, when Hurricane Andrew devastated Florida, proposed the moratorium on cancellations and rate hikes. • In the early 2010s, uncovered the practice of price optimization, which bases premiums on the maximum amount that a consumer is expected to be willing to pay rather than calculating premiums based on projected costs, such as claims, overhead

and profit. • During the pandemic, called for insurance refunds to auto insurance customers who weren’t driving during COVID lockdowns. In 2002, at another publication, Sclafane asked Hunter to write an article on his view that an explosion in lawsuits was not to blame for spikes in medical malpractice premiums at the time. He complied, providing multiple charts explaining that an insurance cycle, and in particular, “an explosion in premiums charged by mismanaged insurers,” was at the root of the problem. Hunter then responded with an analysis of alternative data provided by the critic. Hunter’s work on price optimization in the 2010s prompted another article in which he dove into what he views as the actuarial root of the problem with price optimization. Sclafane notes that representatives of industry trade groups have often responded to Hunter’s data dives into industry practices with remarks like, “Bob Hunter is at it again,” accusing him of “trying to make the data fit what he believes.” That was, she writes, the opening sentence of a letter to the editor she received in response to Hunter’s medical liability article. An article published in the Auto Insurance Report referred to Hunter as the “world’s most obstreperous actuary”— a description that Sclafane says Hunter really liked. Sclafane has her own description on Hunter and his career: “Conscience of the industry.”

FEBRUARY 21, 2022 INSURANCE JOURNAL | 15

Business Moves insurance products. IBI provides market access and growth opportunities for insurance agencies and is licensed in Indiana, Illinois, Ohio, Michigan, Pennsylvania, Tennessee, Missouri, Iowa, and Colorado. The company was founded in 1974 and is now led by Glen Pomeroy offering specialty insurance throughout the Midwest and surrounding states. IBI will become part of the XPT Specialty’s Binding and Small Commercial Brokerage division headed by Kyle Stevens.

East

Truist Insurance, Kensington Vanguard

Charlotte, North Carolina-based Insurance broker Truist Insurance Holdings Inc. agreed to acquire the national title insurance agency Kensington Vanguard National Land Services. The transaction expands Truist’s presence in the title insurance market. Truist’s existing title operation, BridgeTrust Title, will be integrated into the Kensington Vanguard platform. Kensington, headquartered in New York City, has offices in Arizona, Florida, New Jersey, Virginia and Texas. Founded in 2002, Kensington Vanguard provides commercial and residential title insurance, settlement, escrow and 1031 exchange services. The transaction is expected to close later in the first quarter. Truist Insurance Holdings, a subsidiary of Truist Financial Corp., operates more than 240 offices through its subsidiaries: McGriff Insurance Services; CRC Insurance Services; Crump Life Insurance Services; AmRisc; and its premium finance companies AFCO Credit, Prime Rate Premium Finance and CAFO.

World Insurance, J.K. Olivieri Agency

Broker World Insurance Associates has acquired J.K. Olivieri Insurance Agency Inc. of Middleboro, Massachusetts. J.K. Olivieri Insurance Agency was founded in 1979 in Brockton by John K. Olivieri. In 1986 the agency opened an office in Lakeville, which was moved

16 | INSURANCE JOURNAL | FEBRUARY 21, 2022

to Middleboro in 2004 as the agency expanded. In 2003, John Olivieri Jr. and Ken Olivieri were named partners in the agency. Their father, J.K. Olivieri, serves in an advisory role. The agency provides auto and home insurance to individuals, as well as commercial insurance. Ken Olivieri said that as part of World, the agency will offer its clients additional products and services.

Hilb, Malvaso Agency

The Hilb Group acquired the Mark E. Malvaso Agency, building upon the company’s presence throughout New York state. Based in Elbridge, New York, the Mark E. Malvaso Agency specializes in full personal, business and agriculture services. Agency principal Mark Malvaso will join the Hilb Group’s Tri-State regional operations as a producer. The Hilb Group is a property/casualty and employee benefits insurance brokerage and advisory firm headquartered in Richmond, Virginia.

Midwest

XPT Specialty, Insurance Brokers Incorporated

XPT Specialty acquired Insurance Brokers Incorporated, headquartered in Indianapolis, Indiana, in a move that continues a series of acquisitions for the company. IBI is a wholesale insurance broker and general agency that offers agents a broad range of personal, commercial, and E&S

South Central

Texan Insurance, Texans Insurance & Financial Group

Texan Insurance acquired Texans Insurance & Financial Group Inc. in an all-cash transaction effective Dec. 30, 2021. Founded in 1991 in Sugarland, Texas, Texans Insurance & Financial Group (TIFG) is an independent, full-service insurance agency that specializes in personal and commercial insurance needs. TIFG staff will join the Texan Insurance team at their headquarters in Houston, bringing the total number of employees to over 70. Texan Insurance is a full-service, family-owned and operated insurance agency serving the greater Houston area since 1985.

Jencap, Delta General Agency

Jencap Group LLC acquired the assets of Delta General Agency Corp., a full-service specialty wholesale brokerage and managing general agency based in Houston. Delta will operate under the auspices of the Jencap Insurance Services division. Delta General Agency Corp. was formed in 1959 to provide Texas retail producers access to specialized insurance facilities. Delta is a wholesale intermediary for approximately 50 admitted and non-admitted special risk carriers.

Southeast

Marine N-Surance, First Light

Marine N-Surance Brokers, a wholesaler and managing general agency in Longwood, Florida, has been acquired by INSURANCEJOURNAL.COM

First Light Program Managers. Marine was founded in 2002 by Paul Greenaway and specializes in wholesale marine liability, marine packages, hull and property coverage throughout the country. First Light Program Managers is a managing general agency that offers specialty insurance products for various industries, through its network of insurance agencies around the United States.

Relation, Hodge Ethridge

Relation Insurance Services has purchased South Carolina-based Hodge Ethridge Insurance and Financial Services. Hodge Ethridge was previously part of the Nationwide Mutual Insurance exclusive distribution model. Headquartered in Florence, South Carolina, Hodge Ethridge provides personal and commercial lines for clients around the state. Relation has been ranked by the Insurance Journal in the top 30 largest agencies in the U.S., and has some 1,100 employees.

Alera, Cate-Russell

Alera Group acquired Cate-Russell Insurance, an independent insurance agency in Maryville, Tennessee. Cates-Russell, which offers business, personal and benefits products, is an affiliate of Alera Group’s Propel Insurance. Alera Group is an independent, national insurance and wealth services firm offering employee benefits, property/ casualty, retirement plan services and wealth services.

J.M. Insurance, Higganbotham

Higginbotham Insurance has added J.M. Insurance Agency to its group of agencies in Tennessee. J.M. is an independent broker of commercial and personal P/C insurance, bonds and employee benefits. The broker, which has grown significantly with acquisitions in the last decade, is headed by President Beau Massengille. Higginbotham named Massengille a managing director. He will continue overseeing J.M.’s team and Lebanon, Tennessee, operations. Higginbotham, which provides business, INSURANCEJOURNAL.COM

personal and captive insurance services, along with benefits plans, entered the Tennessee market in 2020 when it joined forces with Lipscomb & Pitts Insurance, based in Memphis.

Oakbridge, Jenkins

Oakbridge Insurance Agency, a large regional independent agency, has acquired Jenkins, Skipworth & Associates in Alpharetta, Georgia. JSA, an independent insurance agency in the Atlanta suburbs, will now have access to Oakbridge training and proprietary risk management programs. Oakbridge was founded in 2020 and has grown rapidly through the acquisition of several agencies in the Southeast.

National Security Group

A holding company formed by the owner of the Sacramento Kings basketball team has agreed to purchase National Security Group Inc. an Alabama-based specialty underwriter of property, casualty and life insurance, for $41 million. VR Insurance Holdings Inc., said in a news release it had agreed to acquire outstanding common shares of NSG for $16.35 a share, a 77% premium over the Jan. 25 closing price. VR Holdings is a recently formed holding company founded by Vivek Ranadive, a founder of Bow Capital Management and owner of the Kings NBA team since 2013. The agreement requires approval by holders of the majority of NSG’s outstanding common shares, but is expected to close by the end of the second quarter of 2022. National Security, founded in Elba, Alabama, in 1947, operates National Security Insurance Co. and National Security Fire & Casualty Co. NSG Chief Financial Officer Brian McLeod will serve as chief operating officer of the insurance subsidiaries, as well as VR Holdings’ CFO. NSG will now be a private company. Ranadive, who also was vice president of the Golden State Warriors basketball team, made his mark in the 1980s when he developed software for financial trading floors. He then spun out TibCo, a widely

used software system.

NFP, East Coast, Blue Ridge

NFP, a global insurance broker and consultant, acquired East Coast Underwriters and Blue Ridge Captive Solutions. East Coast Underwriters is a managing general agent based in Spartanburg, South Carolina, and provides medical stop-loss to mid-sized self insured employers. Blue Ridge is a captive program underwritten by East Coast. Aaron Wilkie is president of both companies. Wilkie will join NFP as a managing director. NFP provides specialized property and casualty products, corporate benefits, retirement, and individual coverage through licensed subsidiaries and affiliates. It has some 6,600 employees around the world.

West

Hub, AVI Commercial Insurance

Hub International Ltd. acquired the assets of AVI Commercial Insurance Marketing Inc. in San Clemente, California. Doug Krumpols, president, and the AVI team will join Hub’s Los Angeles and Orange County operations. AVI provides insurance services for the hospitality industry, including sports bars, nightclubs, taverns and restaurants. Chicago, Illinois-based Hub is an insurance broker and financial services firm providing risk management, insurance, employee benefits, retirement and wealth management products and services.

Hub, Kornerstone

HUB International Ltd. acquired the assets of Kornerstone Inc. in Chico, California. Eric Blofsky, pesident, and the Kornerstone team will join Hub Central & Northern California. Kornerstone provides individuals and corporations with financial plans and investment advisory services. Kornerstone has 150 clients with assets of more than $560 million, as of Dec. 31, 2021. Hub is a global insurance broker and financial services firm based in Chicago services. FEBRUARY 21, 2022 INSURANCE JOURNAL | 17

People National

Great American Insurance Group has promoted Jason M. Cohen to senior vice president and Julie F. Kadnar to divisional group president within its Property & Casualty Group. In 2006, Cohen joined the company as divisional vice president within Corporate Claims. In 2008, he transitioned to Strategic Comp, a business unit focused on workers’ compensation insurance. Cohen has served as divisional president of Strategic Comp since 2017 and as a divisional reporting officer since October 2020. He now assumes additional reporting responsibilities for the Specialty Human Services Division and Great American’s Loss Control department. Kadnar joined the company in 1988 as an auditor. In 1991, she transitioned to the Product Data Compliance department of the company, where she served as divisional senior vice president. In 2004, Kadnar joined the Property & Inland Marine Division and has held various leadership roles of increasing responsibility. She was promoted to divisional president in 2017 and will continue to serve in this role, with the additional responsibilities of overseeing the Ocean Marine Division and the Dempsey & Siders Insurance Agency.

Markel International hired Ben Wakeham as senior war

and terrorism underwriter and head of terrorism, North America. The new arrival marks Markel International’s entry into the U.S. war and terrorism

market. Wakeham will be responsible for leading a team in the U.S., which will allow the organization to serve clients locally. Reporting to Ed Winter, senior underwriter and head of terrorism at Markel International, Wakeham will be based at Markel’s London office for 12 months, before moving to the U.S. next year. Previously, Wakeham was employed as assistant vice president and head of property and terrorism at Hiscox USA, Los Angeles, where he managed the terrorism portfolio. He also provided leadership and mentoring to Hiscox’s national team of underwriters.

East

Brace Underwriting Limited

appointed

Glenn Dorr

as head of Glenn Dorr distribution, North America. Based in Boston, Dorr will report to Adam Holberry, co-founder and chief underwriting officer. Dorr brings more than two decades of experience to Brace and joins from Hiscox, where since 2017 he held the role of head of business development and broker relations, North America. Prior to joining Hiscox, Dorr held a number of senior positions including regional director of northeast U.S. for Lloyd’s of London and senior vice president of HCC Specialty. Brace Underwriting is part of the London-based Beat Group, which includes Beat Syndicate 4242, a Lloyd’s of London syndicate.

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Wholesale broker Brown & Riding added Jeffrey Jamison

to its national casualty practice in New York. Jamison specializes in construction, real estate, manufacturing and environmental business, with a specialization in the New York Jeffrey Jamison construction sector. He joins Brown & Riding as senior vice president and broker. Jamison joins Brown & Riding from wholesaler AmWINS Group which he joined in 2015. Prior to that, he was a broker with the startup Wholesale Trading Insurance Services, now JenCap. He also has served as an underwriter and underwriting analyst at AIG in Boston and New York. National wholesale broker Brown & Riding was founded in northern California in 1980.

The Vermont Captive Insurance Association chose Kevin Mead as president,

effective Feb. 22. Mead replaces Richard Smith, who led the organization for 12 years. Mead brings association management experience, having engineered a merger of three global independent accounting associations and forming PrimeGlobal, which represented 2,000 partners. He also was vice president with Spokane County United Way and most recently was the executive director of a rare disease foundation. The VCIA, established in 1985, provides lobbying and education for its nearly 400 members.

Midwest

Ann Arbor, Michigan-based

Groundspeed, a provider of

SaaS-delivered smart submission and analytics solutions to the property/casualty insurance industry, recently hired three key executives — Vishal Srivastava, Devon Watts and Danielle Hurley. Srivastava joins Groundspeed as vice president of Engineering, where he’ll lead the company’s engineering, data science, enablement, and automation efforts. Prior to Groundspeed, Srivastava worked for Marcus — the consumer division of Goldman Sachs — as vice president. As vice president of Marketing, Watts will be responsible for positioning Groundspeed as the thought and market leader for smart submission and analytics in property/casualty insurance. Watts previously led marketing teams at Asana, Carta, and most recently RollWorks. Transitioning from a similar role at her previous employer, Hurley comes to Groundspeed as the new vice president of Sales. At her last position, Hurley built out Feedzai’s forecasting, revenue reporting, and SDR process in addition to tripling the company pipeline. Prior to Feedzai, Hurley worked in financial sales and began her career in investment banking with Goldman Sachs.

Alera Group appointed Tracy Reyes as associate general counsel, M&A. As associate general counsel, Reyes will support the organization’s strategic growth initiatives, managing the legal activities related to all national merger and acquisition transactions. Prior to joining Deerfield,

INSURANCEJOURNAL.COM

Illinois-based Alera Group, Reyes served as an associate at Kirkland & Ellis, where she led deal teams for significant transactions. Reyes is based in Chicago.

Alera Group also

appointed

Tina Santelli

as vice president Tina Santelli of Worksite Specialty Solutions and Services. In this role, Santelli will grow Alera Group’s national specialty benefits solutions, enhancing offerings, education and services for clients of all sizes. Santelli previously served as vice president, Carrier Partner Management at Alera Group. Before joining Alera Group, Santelli’s previous experience includes serving as vice president of Specialty Benefits with GCG Financial, where she provided clients with ancillary solutions. Before her time with GCG, she worked with Unum for 13 years on the sales and service side. Deerfield, Illinois-based Alera Group an independent, national insurance and wealth management firm with more than $850 million in annual revenue, offering comprehensive employee benefits, property/casualty insurance, retirement plan services and wealth services solutions to clients nationwide.

POWERS Insurance & Risk Management hired Kari Hohn

as a surety underwriting Kari Hohn executive. In this position, she will INSURANCEJOURNAL.COM

collect and assess client information to best determine credit quality and underwriting acceptability. Hohn will be responsible for developing and managing a book of business, as well as providing risk analysis and technical expertise to new and existing clients. Hohn brings more than 15 years of experience to her position. Prior to joining POWERS, Hohn served as a surety underwriting executive at a Kansas City insurance agency. She previously worked as an operations manager/CFO for an electrical contractor based in Kansas. Based in St. Louis, Missouri, POWERS Insurance & Risk Management provides personal and business insurance, surety, and risk management.

Southeast

Alabama-based Palomar Insurance has named Justin Smitherman chief technology

officer, charged with tech strategies and management. Smitherman started with Palomar in 2011 and was promoted to information technology director in 2013. Palomar Insurance, which writes commercial and personal property and casualty insurance, was founded in 1954 and has offices in Montgomery, Alabama, as well as in Georgia and Tennessee.

Insurance Office of America

added three people to its franchised dealership program. Chip Sellas previously owned an insurance agency and worked with one of the largest property/casualty insurers in the country, specializing in auto, truck, motorcycle, agriculture and heavy equipment dealerships.

Paul Elliott has two decades of experience in auto and truck rentals, dealerships and captives. Mat Pope has represented franchised auto, truck and equipment dealerships and is a certified risk manager. IoA, founded in 1988, said it is the fourth-largest privately held insurance brokerage in the country. It is headquartered in Longwood, Florida, and has 1,300 associates in 60 offices in the U.S. and the United Kingdom. Century Risk Advisors, an independent insurance and risk management firm based in Boca Raton, named Jose Gonzalez managing director of Century Benefits, a division of the company. Gonzalez, of Miami, has more than 20 years’ experience in employee benefits. Founded in 2013, Century Risk Advisors is licensed to write insurance in all 50 states.

West

The J. Morey Company Inc. Insurance Agents & Brokers

in Cypress, California, named

Brian Chu to the sales team as a

senior vice president. Chu will be responsible for new business development and serve as an advisor to clients on risk mitigation strategies. The J. Morey Company also named Jeff Breskin senior vice president of risk management. Breskin will be responsible for overseeing the expansion of the risk management department. He has more than 35 years of experience in claims management, risk control and safety. The J. Morey Company is a California-based insurance

agency providing clients with insurance and financial products. The J. Morey Company operates four California offices in Cypress, Downtown Los Angeles, San Jose and Torrance.

LP Insurance Services LLC

named Adam Heuer and the Heuer Insurance Agency to the LP Insurance Adam Heuer Services team. Heuer joins LP Insurance as a member/owner and will continue serving clients throughout the Sparks, Nevada, community and beyond. Heuer has nearly 20 years of experience specifically within the personal lines and commercial insurance space. Reno, Nevada-based LP Insurance is a risk management and insurance brokerage firm specializing in property/ casualty, surety, workers’ compensation, employee benefits, personal and risk management services.

Woodruff Sawyer promoted Ryan Meissner to vice pres-

ident leader of the Southern California employee benefits practice. Meissner previously served four years as the vice president of data analytics for Woodruff Sawyer. Before Woodruff Sawyer, he held underwriting positions at Burnham Benefits and UnitedHealth Group. San Francisco, Californiabased Woodruff provides property/casualty, management liability, cyber liability, employee benefits, and personal wealth management services.

FEBRUARY 21, 2022 INSURANCE JOURNAL | 19

News & Markets Insurers Could Get Lower Rates on Liquidity with Bills in States By William Rabb

any in the insurance industry may think of the Federal Home Loan Bank as an agency that facilitates affordable mortgages for homes. The system, founded in the waning days of the Herbert Hoover administration to support community investment, is that. But it also lends to member insurance companies that may need help with liquidity or can’t find such low rates in the commercial lending market. More than 500 U.S. insurers now participate in the program — more than double the number of just a decade ago, the FHLB has reported. If bills now pending in several state legislatures become law, more insurers are likely to consider becoming members and enjoy even better terms on commercial loans. FHLB officials this year have been quietly going state-to-state, urging lawmakers to approve measures that would guarantee that the Home Loan Banks would have first priority on collateral pledged by insurers.

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With that, the FHLB system would no longer have to require that member insurers pay a premium charge on loans, potentially saving the carriers considerable amounts, explained Melissa Dallas, first vice president and corporate counsel for the Home Loan Bank of Cincinnati, one of 11 regional banks in the system. Kentucky’s House of Representatives in January became the first chamber this year to approve the FHLB-backed bill. Some 21 other states have adopted similar measures in recent years. “This bill will allow Kentucky-domiciled insurance companies to borrow from the Federal Home Loan Bank on the same terms as Kentucky banks and credit unions do,” Rep. Joe Fischer, R-Fort Thomas, said at a Jan. 19 meeting of the House Banking and Insurance Committee. Those rates can be as low 1.6% on three-year notes, according to the FHLB. The nuts and bolts of HB 171 read: “A federal home loan bank shall not be stayed or otherwise prohibited by a court from exercising its rights regarding collateral pledged by an insurer member

for more than 10 days following the date a temporary restraining order, preliminary injunction, or permanent injunction is issued by the court …” The FHL bank must take action on collateral within seven days of receiving a redemption request from an insurer, and may repurchase any of the insurer’s outstanding capital in excess of the amount the insurer must hold as a minimum investment. In cases of receivership, the bank should establish procedures for the release of collateral, and shall provide options for restructuring the loan, the bill notes. At the committee meeting, Kentucky Rep. Susan Westrom, D-Lexington, asked Fischer if the legislation had been recommended by the National Council of Insurance Legislators. He said it had not. “Well, you’re brilliant, then,” Westrom said. The full Kentucky House approved the bill by a vote of 89-0. It now awaits action in the state Senate. Similar measures are pending in at least four other states where lawmakers are now in session, including

INSURANCEJOURNAL.COM

Florida, New Jersey, New York and Virginia. Dallas, the Cincinnati bank vice president, said that liquidation is rare among member insurers in the threestate Cincinnati region, which includes Kentucky, Tennessee and Ohio. Florida, though, where a number of property/ casualty insurers have gone insolvent in the last two years and several more may soon be in need of low-cost capital, may be one of the states in which the legislation could have a bigger impact. But Florida Senate Bill 1888 and its twin, House Bill 1405, have seen little movement in the 2022 session, which began Jan. 11 and concludes in mid-March. Only eight Florida-based insurers, all property/casualty carriers, are members of the FHLB system. A lobbyist for one of those companies said the bills were not on the carrier’s radar this year. A spokesman for the Florida Department of Financial Services, which houses the state Office of Insurance Regulation, Rep. Joe Fischer said only that the department is monitoring the bills. It’s unclear exactly how the state-level effort to put insurers on equal footing with banks began. Dallas said a state regulator had pointed out to the FHLB in recent years that banks are federally regulated and backed, at least to some degree, which automatically gives the Home Loan Banks first priority on collateral when banks run into trouble. Insurers are mostly regulated by states, so the FHLB, governed by the Federal Housing Finance Agency (FHFA), hit upon the state-by-state approach to remedy the discrepancy. The push likely has something to do with the federal law that governs the Home Loan Banks, explained Cornelius Hurley, an adjunct law professor at Boston University and a former director of the FHLB’s New England regional bank. INSURANCEJOURNAL.COM

Lending to member insurers by the Federal Home Loan Banks. Source: FHLB The law prohibits discrimination against members, but allows discretion based on the credit worthiness and collateral that is pledged. Hurley noted the move to lobby legislatures raises questions, however, about whether states have the authority to pass laws that regulate a federal system. He wondered why the FHLB itself had not publicized the effort. No mention of the state bills can be found on the FHLB website and a spokeswoman said no information had been published about Cornelius Hurley the bills. Hurley argued that the Kentucky-type legislation should be only a starting point for the FHLB, which now is at a critical juncture in its history. He said that the FHLB has lost relevance and borrowers to commercial lenders during the recent era of ultra-low interest rates, and has been hamstrung by allowing only mortgages or mortgage-backed securities as collateral. While the number of insurer members has risen steadily in the last decade, the amount of lending to insurers dropped sharply last year. Lending to insurer members topped $130 billion in 2020 but plunged to $116 billion in 2021, an FHLB

report shows. FHLB should be finding ways to provide credit to more insurers with different types of collateral, Hurley said. “A lot of insurance companies don’t have mortgage-backed collateral,” he said. The system also should join the modern age and rapidly open the door to other types of members, including fintech companies and other types of organizations that now make loans and can impact communities. In a recent piece in American Banker magazine, Hurley wrote: “With regard to the system’s mission, why not expand it beyond housing finance to include financing initiatives in the arenas of climate change, infrastructure development and economic equity?” This new focus on the FHLB and its member insurers could be well-timed: The U.S. Senate is now considering the nomination of Sandra Thompson as President Biden’s pick to head the Federal Housing Finance Agency, overseer of the Home Loan Banks. She has pledged to undertake a number of reforms. In an open letter to Thompson posted Jan. 31, Hurley and a former chair of the Federal Deposit Insurance Corp. urged her to launch a strategic review of the system and consider repurposing the FHLB “to meet the needs of the modern era.” FEBRUARY 21, 2022 INSURANCE JOURNAL | 21

News & Markets Court Siding With Merck Over War Exclusion for Cyber Attack a Warning to Insurers By Chad Hemenway

n January, the Superior Court of New Jersey ruled insurers cannot use a policy exclusion to avoid covering about $1.4 billion in damages Merck & Co. said it suffered from a spring 2017 cyber attack known as NotPetya. The court “unhesitatingly” found that the nearly identical war exclusions contained within Merck’s all-risk property policies worth about $1.75 billion do not apply, according to a decision made public January 13. The insurers had tried to use the exclusions to avoid paying out, citing the fact the NotPetya malware was attributed

How Autonomous Car Companies Are Outrunning U.S. Regulators And Lawmakers By Joseph White, Hyunjoo Jin and David Shepardson

elf-driving vehicle companies from Tesla Inc. to General Motors Co.’s Cruise are racing to start making money with their technology, outrunning efforts by regulators and Congress to write rules of the road for robot-driven vehicles. Cruise said that SoftBank Group Corp. will invest another $1.35 billion in anticipation of Cruise launching commercial robotaxi operations. Cruise needs one permit, from California’s Public Utilities Commission, to start charging for rides around San Francisco in vehicles with no human driver. Cruise, Tesla, Alphabet Inc.’s Waymo 22 | INSURANCE JOURNAL | FEBRUARY 21, 2022

to Russia and was meant to be deployed to disrupt and destabilize Ukraine. The malware wound up affecting thousands of companies worldwide. Judge Thomas J. Walsh said Merck and its insurers were aware “cyber attacks of various forms, sometimes from private sources and sometimes from nation-states, have become more common,” but the insurers “did nothing to change the language of the exemption to reasonably put this insured on notice that it intended to exclude cyber attacks.” “Certainly [insurers] had the ability to do so,” Walsh added. Therefore, Merck’s expectation that the exclusion only applied to “traditional forms of warfare”

was justified. “We are not going to be coy about this — we think the decision is wrong,” wrote Joshua Mooney and Judy Selby, partners at law firm Kennedys. The pair took exception with the court’s use of “traditional” while it ignored the meaning of hostile acts. “The decision relies upon case law rendered before the internet existed and before ‘cyber’ was a word,” Mooney and Selby continued. “The reasoning of this decision looks backward to a century past, and we believe it will not age well.” While the verdict is specific to New Jersey law and subject to appeal, it is for now a win for policyholders. In the mean-

and Aurora Innovation Inc. are among many companies aiming to deploy fully autonomous vehicle technology in the United States within the next two to three years, whether or not federal regulators give them a clear legal framework for doing so. Autonomous vehicle (AV) startups and automakers are under pressure to start generating revenue from billions of dollars of engineering investment over the past decade. Proposed legislation to create a national framework of rules to govern autonomous vehicles remains stalled in Congress, despite the industry’s lobbying. That has left autonomous vehicle companies free to deploy robotaxis or self-driving trucks in some states, such as Arizona and Texas, but not in others. Waymo has provided thousands of rides in driverless robotaxis in Phoenix, though the service remains limited. “Providing guard rails is helpful, at the federal level,” said Chris Urmson, chief executive of automated vehicle technology company Aurora Innovation. “Today we have different regulations across the 50 states.” Aurora is testing its Aurora Driver in

Class 8 trucks , but so far cannot operate those trucks in California without human drivers. That cuts off a potentially rich market for autonomous truck companies hauling loads from Southern California to distribution hubs to the east. “We look at the Port of Los Angeles … and the supply-chain challenges we see. There’s a real urgency for this technology” to address the shortage of truck drivers, Urmson said to an audience at the Washington Auto Show in January. AV industry lobbyist Ariel Wolf told a U.S. House of Representatives panel that autonomous trucks “will not lead to mass layoffs.” Instead, he said, auton-

time, the ruling “highlights the risk for P/C insurers and reinsurers of cyber coverage embedded in traditional P/C policies,” Moody’s Investor Service said. Indeed, the New Jersey court’s interpretation of the war exclusion is a warning against not including “cyber” within it, experts have said. The insurance industry since NotPetya has been seeking clarity, making efforts to shore up policy language in order avoid any perception of ambiguity by adding cyber-specific exclusions to property and liability contracts. The cyber attack also attracted the attention of regulatory scrutiny of so-called “silent cyber” exposure in all policies. Moody’s said reinsurers have “broadly included cyber exclusions on

omous trucks driving long-haul routes will allow human drivers to “spend more nights in their own beds instead of in the sleeper berth of a truck.”

Protecting Jobs

Unions, however, urged Congress to be skeptical. “We are at risk … of losing hundreds of thousands of manufacturing and frontline transportation jobs if Congress fails to act decisively and the AV industry is left completely unregulated,” Transport Workers Union president John Samuelsen told the House panel. Unions and trial lawyers also want autonomous vehicle companies to disclose more data about accidents and other aspects of their systems. “All workers deserve to know that an autonomous vehicle or bot traveling next to them is safe enough to share the same road or worksite,” said Teamsters official Doug Bloch. In the absence of new laws tailored to automated vehicles, the National Highway Traffic

property treaties to ensure that cyber risk is not inadvertently included.” Late last year, the Lloyd’s Market Association released four model war and

Safety Administration, which oversees vehicle safety in the United States, has put forward voluntary guidelines and last year required companies to report accidents involving automated driving systems. But the agency has not issued comprehensive standards for robot-driven cars or trucks. The U.S. Federal Aviation Administration has the power to review new technology before it is used in aircraft. But motor vehicle manufacturers are free to certify for themselves that a feature is safe. The NHTSA steps in if new features turn out to be a safety hazard. NHTSA officials have intensified scrutiny of Tesla’s automated driving systems over the past year. The agency said it had pressed Tesla to change a feature of its Full Self Driving, or FSD, automated driving system that allowed vehicles to keep moving through stop signs rather than come to a complete halt. So-called rolling stops are illegal. In December, NHTSA opened a review of a feature that allowed Tesla models to play videos over dashboard screens, and in August 2021 opened a formal investigation of the Autopilot driver assistance systems in 765,000 U.S. vehicles after

cyber war exclusions. Vincent Vitkowsky, partner at law firm Gfeller Laurie, said the exclusions are “not perfect” and there is some room for dispute of some terminology. But, he added, the exclusions “reflect a well-reasoned, serious attempt to reduce some of the uncertainties over the scope of coverage for state and state-sponsored attacks.” Meanwhile, another similar case in the Illinois court system is also testing policy war exclusions as Mondelez International is seeking summary judgment against Zurich Insurance. Mondelez, one of the largest snack companies in the world, was also a victim of the NotPetya cyber attack and is seeking $100 million in coverage it has been denied.

a series of incidents in which Teslas collided with emergency vehicles. Still, Tesla Chief Executive Elon Musk made no mention of regulatory concerns during an investor call on Jan. 26 when he said the company could soon use an over-the-air software download to enable its vehicles to drive themselves and be used to offer autonomous ride services. “I would be shocked if we do not achieve full self-driving safer than a human this year,” Musk said. When Tesla enables its vehicles to drive autonomously via an over-the-air software download, Musk said, vehicle owners could offer rides that would “cost less than the subsidized value of a bus ticket.” One potential path for the industry and safety advocates involves voluntary agreements on standards, said David Harkey, president of the Insurance Institute for Highway Safety, a vehicle safety research organization backed by the insurance industry. Harkey said the IIHS could be part of such an effort. “We have to get to the point where it’s not the Wild West,” he said.

Spotlight: Farm & Ranch Farm & Ranch Market: Evolving to Mitigate the Risks of Today

By Andrea Wells

hile the farm and ranch insurance space faces different risks than other property lines, many challenges of insuring those risks are often the same. Namely, extreme weather and natural catastrophes, which have tightened conditions in farm and ranch in some of the toughest states. “The entire marketplace sentiment is also echoed in the farm and ranch markets,” said Chris Moore, president of EPIC’s farm and ranch division. “As carriers are seeing their reinsurance costs go up, they’re looking to mitigate either their current exposures or reduce their risk in cat prone states.” Long story short, everyone wants to write business in Indiana, Ohio, Michigan, where natural catastrophe risk is less, while reducing their exposures in high cat states like Florida,

Louisiana, Texas, California and Oklahoma, he said. The extremes that seem to come with weather related claims for the crop insurance sector in recent years are an increasing concern for insurers, says Mark Mossman, senior vice president, claims, at NAU Country Insurance, part of QBE North America. “From a claims standpoint, drought and excessive moisture and isolated [weather-related] incidents, I would say are the biggest concerns for us,” Mossman said. And it’s not just drought or heavy rain. “It’s anything we would view as extreme weather behavior,” he said. “If we get a drought, it seems like it’s an extreme drought. If we get excess moisture, it seems like it’s extreme moisture.” Droughts are a more frequent concern for some parts of the country, while more frequent and extreme precipitation is a

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rising concern in other areas. Both are expected to get worse in coming decades. Insurance payments to U.S. farmers for crops lost to droughts and flooding have risen more than threefold over the past 25 years. While mitigating extreme weather-related risks seems an unlikely scenario in the farming world, it’s not, says Mossman. “There’s a lot of different farming, cultural practices that farmers follow to help maintain soil moisture in a drought,” he said. “For example, no-till farming is probably on the increase, and with minimal till, it's a newer practice that has become mainstream by planting a cover crop,” he said. A cover crop means there’s more of a grassytype of crop planted, and that helps to conserve moisture, Mossman explained. It also helps to put nutrients back in the soil. “I would say in the

last five years, that’s becoming much more mainstream than in the past.” Technology, like in other industries, is helping to mitigate risks including drought and other extreme weather exposures, he added. “On the technology side, one area making a difference is in the seed technology. The seed technology that we have today is so resilient to extreme weather conditions.” Other risk mitigation areas include underground drip irrigation and systems that push precision agriculture. Mossman said there are many elements of farming technology that fall under precision agriculture but all have the intent of helping the farmer to combat weather-related risks. Moore says finding ways to reduce carbon emissions is of growing concern to the farming sector as well. “Another very large INSURANCEJOURNAL.COM

movement is green energy production on farms,” Moore said. “Farms showing how they’re reducing their carbon footprint.” For example, dairy farms are turning to methane digesters to reduce their carbon footprint. Digesters take cow manure and convert it into energy while also eliminating manure odor. Energy is the primary economic benefit of a digester because a dairy farmer is then able to use the electricity or gas generated from the digester to fuel the energy needs of the farm. But Moore says that some farmers are adding on to this process for additional revenue. “Now what we’re also seeing is an added step to where there’s a biogas converter put in on these methane digesters,” Moore said. “So now the methane is captured by the digester and then it’s scrubbed and cleaned and processed by the biogas converter, which now turns it into natural gas that can then be injected directly into the pipeline.” This is a growing trend, he says. “In my book of business alone, over the next 18 months, I’ll probably see eight to 10 of these biogas converters being built on farms.” Moore also says farmers are adapting by diversifying revenue streams in other areas. “American agriculture is innovative and as creative as any industry that we have in this country, when it comes to trying to do things better, be more sustainable, be more environmentally conscious and utilize the natural resources that they’re using on the farm to maximize the benefits while minimizing the use of that natural resource,” Mossman said. INSURANCEJOURNAL.COM

Crop Insurance Payouts Rise as Climate Change Worsens Droughts, Floods By Leah Douglas

nsurance payments to U.S. farmers for crops lost to droughts and flooding have risen more than threefold over the past 25 years, according to an analysis of federal data by the Environmental Working Group (EWG). The report reinforces concerns that insuring the nation’s crops will get more expensive for insurance companies, farmers and taxpayers as climate change drives more erratic weather events that disrupt agriculture. The federal government pays about 60% of the nation’s crop insurance premiums through taxpayer subsidies, according to the Congressional Budget Office, and those premiums tend to rise as insurance payouts grow. Insurance payments to farmers due to drought

rose more than 400% between 1995 and 2020 to $1.65 billion, while payments due to excess moisture — like floods — rose nearly 300% to $2.61 billion, according to the nonprofit environmental group, which examined publicly available data from the U.S. Department of Agriculture. Reuters reviewed the data, which showed a steady upward trend in insurance payouts over the period. During the period analyzed by EWG, the number of insured acres grew just 84.5%, according to the data from the department’s Risk Management Agency, which administers the federal crop insurance program. “As extreme weather has become more frequent, the climate crisis has already increased insurance payments and premium subsidies. These costs are expected to go up even more, as climate change causes even more unpredictable weather conditions,” EWG

said in the report. The report did not detail average increases in premiums since 1995. The cost of insuring crops, however, could increase between 3.5% and 22% by 2080 due to climate change, even if farmers adapted what and where they plant, according to a 2019 USDA report. The most commonly insured crops include corn, soybeans, wheat and cotton. The federal crop insurance program requires farmers to meet minimal conservation standards, like not planting on land highly vulnerable to erosion. Anne Weir Schechinger, the Midwest director of EWG, said those standards should be tougher. “The program needs to be reformed so it encourages farmers to be resilient to extreme weather events that we know are ahead,” she said.

Most crop insurance indemnities between 1995 and 2020 were paid for weather-related causes of loss. The table below, provides the five causes of loss with the most payments. Among them, drought and excess moisture, precipitation and rain stand out, making up more than 61% of all crop insurance payments during that period.

Cause of loss for crop insurance payment

Total indemnities

Drought

$48,633,395,480

Excess moisture/precipitation/rain

$38,984,412,139

Hail

$9,704,733,932

GRP/GRIP/ARPI/SCO/STAX/MP/HIP WI crops only *

$8,156,944,228

Decline in price

$7,770,562,653

Source: EWG, from USDA Risk Management Agency, Cause of Loss Historical Data Files *Types of insurance policies; details on the RMA website. Indemnities for GRP/GRIP crops between 1995-2013; indemnities for ARPI, SCO, STAX, MP, HIP, WI crops 2014-2020.

FEBRUARY 21, 2022 INSURANCE JOURNAL | 25

News & Markets New Auto Insurer Sensa’s Device Analyzes Accident, Triggers Emergency Services

new auto insurer is turning the tables on car manufacturers that offer insurance with their roadside and emergency services by including these accident services with its auto insurance policy. Austin, Texas-based Sensa is calling itself the “first proactive insurance company” as it begins to roll out its auto insurance offering that includes real-time help with every policy. Sensa’s U.S. launch kicks off in Illinois, with Texas, Indiana and Ohio scheduled for the coming weeks, and rollout to the rest of the country to follow, according to the company. Sensa is currently licensed in Ohio and Illinois. According to the insurer, its solar battery powered sensor attaches to the windshield and automatically detects an accident and analyzes damages and injuries, ensuring the right assistance such as emergency medical transport, tow truck, rental car or other services can be dispatched quickly to the scene. The sensor can detect the exact time and location of the accident, as well as predict the severity of injuries and auto damage sustained. The sensor sends the data to the cloud for analysis, which prompts a representative to call the driver. The Sensa emergency specialist will first try to reach the insured by phone. If there is no answer, the specialist will call the policyholder’s emergency contacts. If they are also not available, Sensa personnel will then communicate directly with the emergency services team that will dispatch the first responders or medical personnel to the scene of the accident so they can determine the best course of action. The company says its technology also speeds up the claims process. The person who calls with emergency services also handles the claim and the system pre-fills claims forms with the information from the scene of the accident. The service recalls General Motors Co.’s subscriptions for its Onstar Guardian location and emergency notification service that it plans to offer as part of 26 | INSURANCE JOURNAL | FEBRUARY 21, 2022

an auto insurance bundle. GM, along with Tesla and Ford, is also testing telematics-based insurance offerings that track driver behavior. Sensa’s product does not track driver behavior. The sensor, which is stuck on the windshield by the policyholder, is only activated when there is a collision. There is no app or telematics device. The cost of the sensor is built into the policy and is not a separate charge.

Company Background

Itay Bengad, MD, is Sensa chief executive officer and co-founder. The emergency room doctor came up with the idea for the company after a friend was brought in on a stretcher unconscious after a car accident. Doctors needed time to identify his friend’s many injuries. Bengad realized that the medical team did not have critical information needed to determine the best course of treatment. Bengad says that experience left him determined to find a better way to treat victims of car accidents. He assembled a team of experts in mechanics and machine learning to supplement his medical knowledge and they created Sensa’s parent technology company, MDgo, in 2018. “Every minute counts and every diagnostic detail makes a difference at the scene of a crash,” said Bengad. “After even

a minor accident, people are at their most vulnerable and should never feel alone.” He said Sensa shifts the “moment of truth” for insurance companies from the first notice of loss to the loss event itself. “True disruption of the insurance industry requires an insurance offering that goes the extra mile for policyholders and addresses the pain points of insurers,” said Bengad. “The scene of an accident is the only time when the interests of both policyholders and insurance companies are completely aligned. The policyholder wants to resolve the situation with the least amount of hassle, and the insurer wants the situation resolved according to its preferred distributors. With the knowledge and power to make a difference, insurers can provide policyholders with medical and logistical help — and reduce claim severity.” According to the company, insurers in Europe are already offering the MDgo sensors as part of their motor insurance policies. Sensa said it will be introducing additional “proactive insurance” offerings, with home insurance scheduled to launch later this year. The insurer is looking to sign independent agents to represent it. Sensa is backed by investors including Bessemer Venture Partners, Target Global, Volvo, Hyundai Motors and Nationwide. INSURANCEJOURNAL.COM

News & Markets Washington Businesses Fined After 250 Workers Contract Virus in Same Warehouse

hree Washington businesses were fined after workers housed in Thurston County hotels and employed at a Lewis County distribution center got sick with COVID-19, and then walked to the hospital for help and feared they could lose their jobs if they went home sick. At least one worker was allegedly told to report to work because they had not tested positive for COVID-19 when in fact they had. And, initially no one reportedly notified workers that they’d been exposed to COVID-19 in the workplace. The Washington Department of Labor & Industries opened several inspections after the agency received a referral from the Thurston County Health Department. As a result, three businesses with employees working at that location — United Natural

Foods Inc., Capstone Logistics LLC, and Prime 360 — are facing more than $285,000 in overall fines for knowingly putting their workers at risk of exposure to COVID-19. Six other businesses in the warehouse were cited for less serious violations including not having COVID-19 plans and not keeping proper records. At the three companies facing significant fines, inspections reportedly revealed a lack of basic safety procedures to limit the spread of COVID-19. L&I also reportedly found a disregard for the rights of workers to information about their health and exposure to infection. Roughly one-in-four employees working in the warehouse between July 7 and Oct. 5, 2021 reportedly tested positive for

COVID-19. Of the 253 workers who tested positive, five were hospitalized. Capstone and Prime 360 have appealed the citations and fines. Money from fines is placed in the workers’ compensation supplemental pension fund, helping injured workers and families of those who have died on the job.

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News & Markets School District in Washington Offers $34M in Toxic Exposure Case

he Monroe, Washington, School District offered a $34 million settlement to students and parents exposed to toxic chemicals on a public school campus. The district proposed the settlement in November under court seal, preventing the public from seeing the offer, but the $34 million figure appears in a separate court document obtained the newspaper. In publicly available court documents, the school district doesn’t accept responsibility for hazardous conditions on the Sky Valley Education Center campus, which were detailed in a recent investigation by The Seattle Times and ProPublica. Instead, the district defended its cleanup efforts on campus, saying it acted appropriately to remove toxicants and inform parents. Records show the school district was slow to clear out toxic material from the Monroe campus, even as pressure from parents and staff escalated and dozens reported illnesses.

As early as 2014, Monroe School District officials found a mixture of harmful conditions, including poor air ventilation and the presence of polychlorinated biphenyls, or PCBs, a banned, human-made chemical that the Environmental Protection Agency has linked to some cancers and other illnesses. More than 200 parents, teachers and students filed a series of lawsuits against Monsanto, the chemical manufacturer of PCBs, for exposure to the toxicant at Sky Valley. Children and staff claim they became severely ill, reporting cancers, brain damage, hormonal problems and skin conditions. Monsanto, which is now owned by Bayer, has gone to trial in two of the lawsuits, in which juries awarded 11 people a collective $247 million. Several others are awaiting trial.

The $34 million offer is the maximum allowed under the school district’s insurance policy “in order to protect (the Monroe School District’s) finances and its ability to continue operating,” according to a statement the district provided to the Seattle newspaper. The district called the settlement a “prudent action under the circumstances.” The Monroe School District, which serves about 6,000 children, has an annual budget of $93 million. Copyright 2022 Associated Press. All rights reserved.

Bill Introduced to Offer All California Homeowners Insurance, Fund Home Hardening

ssemblyman Marc Levine, D-Marin County, introduced legislation to require mandatory issuance of homeowners’ insurance and establish a grant program to harden residential properties in areas prone to wildfires. Assembly Bill 1755 would require an insurance provider licensed in the state to issue an insurance policy to a homeowner that has taken “science-based actions “to harden their property from wildfire risk. The requirement is set to begin in 2025. Levine’s bill would also create the Wildfire Protection Grant Program under the California Department of Insurance to administer grants to residential property owners of up to $10,000 to help pay for costs associated with home hardening and wildfire mitigation. W4 | INSURANCE JOURNAL | FEBRUARY 21, 2022

Levine’s bill is designed to address insurance policy cancellations of homeowners who live in areas at risk for wildfires. “It is time to stand up for California homeowners and tell insurance companies to stop exploiting the climate crisis for profit,” Levine said in a statement. “We have seen an unprecedented number of families across California lose their homeowners’ insurance at a time they need this protection the most. For families that do the right thing and take action to reduce their home’s risk to wildfire loss, there is no reason to deny them insurance coverage.” He continued: “The climate crisis is forcing us to rethink how and where we live and grow. Meeting this crisis will require insurance companies to do their part to protect homeowners and ensure that every California family has access to affordable, comprehensive insurance.” The American Property Casualty

Insurance Association provided the following comment on behalf of Mark Sektnan, APCIA vice president for state government relations: “APCIA is reviewing the bill but we are opposed to any bill that mandates insurance companies provide insurance without adequate rates and without science-based verification the risk has been reduced.” Sektnan noted that organizations like the Insurance Institute for Business & Home Safety are leading efforts to “develop science-based mitigation standards that actually reduce risk.” “The bill also ignores the need for community hardening efforts,” he said. “In the absence of community hardening, home hardening can be far less effective. Embers travel miles, igniting homes randomly. We must have a comprehensive community and individual mitigation effort along with a verifiable risk reduction process.” AB 1755 is expected to be considered by the Assembly in Spring. INSURANCEJOURNAL.COM

News & Markets How Car, Home Inflation Is Driving Up Loss Costs for Insurers By Jim Sams

he two possessions that most concern insurers — homes and motor vehicles — happen to be the largest contributors to the historic 7.5% inflation rate. Perhaps that should be no surprise. “It’s the things that we all spend the most money on,” said CCC Intelligent Solutions analyst Susanna Gotsch during an interview. Gotsch posts periodic analyses of issues that impact auto insurance claims. Her February trends report is dedicated solely to inflation. CCC released the report a few days before the U.S. Labor Department reported the greatest annual inflation rate since 1982, but the government has been tracking surging consumer prices month after month all year long. CCC said that used car prices have increased 45.2% from June 2020 to June 2021. New car prices increased 12.2% in 2021, according to Labor Department data. The government reported a 40.5% used car price increase from January 2021 to January 2022. Shelter increased at an unadjusted 4.4% rate over the past year. Although that was a lower inflation rate than most other goods, FannieMae, the government-backed mortgage provider, calculated that increased costs for shelter contributed 1.5% of the overall inflation rate because it makes up such a large share of overall spending. Gotsch said rising prices are driving up auto insurer loss costs. Rising replacement costs for vehicles increases the amount that can be considered a total loss, requiring insurers to pay for more expensive repairs. Some used cars are selling for more than their owners paid when the vehicles were brand new. Iseecars, a used-car sales website, posted a list of 15 car models that are now more expensive than their original price: The Mercedes-Benz G-Class sold for $62,705 more than its original price, a 35.6% increase. The list wasn’t limited to luxury cars. INSURANCEJOURNAL.COM

The Ford Bronco Sport sold for 16.4% more than its average price new. The Toyota Tacoma sold for 12.2% more than new. The Hyundai Accent sold for 11.2% more than new, according to Iseecars.com. Gotsch said much of the inflationary pressure can be traced to supply chain shortages caused by COVID-19 — for autos, that means computer chips. Shortages led to 11.3 million vehicles being trimmed from production in 2021, her report says. Gotsch said the crimped supply of chips causes auto manufacturers to use the parts that they can obtain on their most profitable models, which reduces supply and of course increases prices. Gotsch said historically, the used vehicle market has been refreshed with a steady supply of vehicles turned in by owners whose leases expired. She said more motorists are holding onto their leased cars because they cannot afford the price of an upgrade. The National Auto Dealers Association reported that the average new car price surpassed $45,000 in January. Gotsch said those rising prices are putting new cars out of reach for many consumers, creating demand that has pushed up used car prices even more. The average used car price climbed to nearly $30,000, according to Gotsch’s report. She said cars more than

seven years old saw the largest percentage price increase, increasing 30.2%. Gotsch said most analysts predict that supply disruptions, including supplies of computer chips, will eventually ease and reduce inflationary pressure, but that will take some time. She said for the rest of year, auto insurers can expect to continue seeing the greatest increase in used car values since Superstorm Sandy in 2012. Property insurers are facing similar inflationary pressures. The National Association of Home Builders reported in November that prices of goods used in residential construction climbed 0.8% in October, after declining in the two previous months. Building material prices had increased 12.2% year to date, after increasing 4.5% during the same period in 2020. Prices have also been erratic. Lumber prices reached a peak of about $1,500 per 1,000 board feet in June, dropped to $400 in September and jumped to $1,200 as of Feb. 4, according to the NAHB report. Rising prices are already driving premium increases. CRC Group reported that in December, property insurance renewal costs increased 16% year-over-year. The wholesale and specialty brokerage said 84% of policyholders saw a premium increase.

FEBRUARY 21, 2022 INSURANCE JOURNAL | 27

Special Report: Agency Salary Survey

28 | INSURANCE JOURNAL | FEBRUARY 21, 2022

INSURANCEJOURNAL.COM

Average Agency Salary Adjustment By Andrea Wells

alaries and total compensation rose in 2021 for all levels of empoloyees reporting in the Insurance Journal Agency Salary Survey. But while insurance agency personnel on average made more money last year, their satisfaction with compensation overall declined despite the higher salaries and total compensation. (See page 37) As they face continued competition to find and retain the best talent, agency owners also face heightened demand not only for better pay but also for a better working environment. “Compensation is certainly important, but there are many other factors a potential employee will consider when evaluating an offer and a current employee will consider when deciding whether or not to stick around,” Tyler Asher, president of Independent Agent Distribution at Liberty Mutual and Safeco Insurance, told Insurance Journal. “Non-monetary benefits like flexibility, autonomy and career development are a great way to make an agency more attractive to employees.” Perhaps more important than offering specific benefits is understanding the unique values of an individual, according to Asher. A new graduate, for example, is going to have very different wants and needs than a parent or an employee nearing retirement. “While there’s always going to be a need to offer a blanket set of benefits like health insurance or retirement contributions, there’s also an opportunity to customize the employee experience for the individual.”

continued on page 30 INSURANCEJOURNAL.COM

Management/Agency Owner/Agency Principal Producer/Sales Support Staff/CSR/Account Executive

2021

2020

2021

2020

4.6% 6.1% 4.4%

3.1% 3.3% 2.1%

2019

3.8% 4.5% 3.0%

2018

3.8% 4.2% 3.1%

Average Agency Total Income Change* Management/Agency Owner/Agency Principal Producer/Sales Support Staff/CSR/Account Executive

2019

2018

7.5% 17.9% 3.9%

5.0% 8.4% 2.3%

6.0% 5.9% 3.6%

5.5% 6.0% 2.9%

2021

2020

2019

2018

*Includes all income changes in year

Agency Compensation Satisfaction Index* Management/Agency Owner/Agency Principal 3.8 3.88 3.63 Producer/Sales 3.31 3.47 3.24 Support Staff/CSR/Account Executive 3.13 3.25 3.02 *5 = Most Satisfied; 1 = Least Satisfied

3.67 3.31 3.12

How Agencies Base Compensation Incentive Plans 2021

Agency profits Productivity Revenue growth Contingent commissions Individual performance No incentive plan

37.6% 28.4% 31.9% 15.6% 45.1% 23.0%

2020

34.3% 29.2% 28.2% 17.9% 42.6% 22.6%

Average Agency Salaries by Experience Less than 3 years 3-5 years 6-10 years 11-20 years 21-30 years More than 30 years

2019

34.3% 29.2% 28.2% 17.9% 42.6% 22.6%

2018

38.4% 26.7% 30.1% 17.4% 40.8% 22.9%

Staff

Manager/Owner

$147,000 $134,750 $103,056 $137,959 $169,154 $150,639

Producers

$50,000 $88,440 $80,600 $101,689 $81,441 $145,910

$31,250 $56,656 $61,422 $67,385 $66,908 $74,854

Producers $85,789 $138,922 $48,556 $88,328 $64,719

Staff $73,493 $76,638 $59,975 $56,957 $65,169

Account Exec/ Commercial Lines CSR

Account Exec/ Personal lines CSR

Average Agency Salaries by Region East Midwest South Central Southeast West

Average CSR Salaries by Region Average CSR Salaries by Region East Midwest South Central Southeast West

Manager/Owner $185,276 $129,916 $150,243 $124,177 $146,889

$79,960 $82,721 $61,063 $62,801 $70,811

$56,029 $53,250 $49,375 $46,054 $50,563

FEBRUARY 21, 2022 INSURANCE JOURNAL | 29

Special Report: Agency Salary Survey continued from page 29

Average CSR Salaries Account Exec/Commercial Lines CSR Account Exec/Personal Lines CSR Support Staff

$73,067 $50,103 $63,313

What Strategies Agencies Implemented 2021

Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

2020

2.26% 6.33% 16.29% 2.71% 19.46% 13.57% 38.46% 57.01%

0.9% 5% 11% 7% 41% 29% 25% 32%

What Strategies Agencies Plan to Implement in 2022 2022

Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

What Benefits Agencies Offer Group health insurance Health Savings Account Dental Group life/disability 401(k) Profit Sharing IRAs Pension Plan ESOP Stock Options Flexible Savings Account Education reimbursement Childcare/Daycare Paid Family Leave Pet Insurance No Benefits Provided

2021

0.84% 4.22% 13.50% 2.53% 8.86% 6.33% 58.65% 59.07%

2021

80.6% 44.6% 61.0% 60.5% 68.8% 19.8% 13.8% 3.8% 3.4% 6.7% 30.0% 30.2% 3.4% 30.6% 7.2% 7.8%

2020

78.6% 42.3% 60.5% 57.4% 66.1% 21.2% 10.8% 4.8% 3.5% 6.3% 26.8% 31.4% 4.5% 29.6% 5.5% 6.4%

1.3% 4.3% 9.0% 3.0% 21.0% 14.6% 53.7% 41.6%

2019

2018

79.0% 42.8% 61.7% 57.3% 66.8% 17.5% 11.1% 4.0% 2.9% 7.0% 28.1% 26.2% 3.4% 25.5% 5.4% 9.5%

79.5% 45.1% 60.6% 60.7% 69.2% 20.6% 11.5% 4.9% 4.4% 6.7% 31.2% 30.6% 5.3% 25.6% 6.7% 8.7%

2017

75.4% 36.5% 56.7% 54.4% 61.4% 19.4% 10.5% 5.3% 4.8% 4.9% 26.7% 28.2% 3.2% NA NA 12.1%

Changes to Health Insurance Plan Increased employee contribution Increased deductible limits Implement higher co-pays for participants Reduced drug benefit Reduced other benefits 30 | INSURANCE JOURNAL | FEBRUARY 21, 2022

2022

48.7% 53.8% 32.0% 8.6% 8.1%

2021

40.2% 52.9% 34.4% 6.2% 5.7%

2020 28.0% 40.8% 26.1% 5.6% 4.4%

Alicia Kiser, vice president of human resources at Wauwatosa, Wisconsin-based M3 Insurance, agrees that customizing an employee’s career path and personal development is important. “I really think we’re kind of into this war for talent and I think at some point that’ll fizzle out,” she said. But what will remain in the future is what employees now expect of their employers. That has changed permanently, she said. “I think that expectations of workers, whether it be in our industry or not, have changed,” Kiser said. Some have referred to the pandemic as the great reset, she added. “I think employees have pushed the reset button in a lot of ways. Whether that be around their expectations of an employer from a compensation perspective, from a benefits perspective, or from a flexibility perspective,” she said. Agencies should also be aware that employees are evaluating their employers in other areas such as their stance on inclusion and diversity, Kiser added. “You think about what’s all gone on over the last couple of years … that stuff is not going away,” she said. “So there’s the short-term war for talent, but also expectations are changing, and those types of changes will stick around.” The war for talent in the agency ranks is not new, but it has been exacerbated by the pandemic, according to Tony Caldwell, an author, speaker and co-founder, chairman and CEO of the OAA, a member of SIAA based in Oklahoma City, Oklahoma. “We’ve all been talking INSURANCEJOURNAL.COM

about talent and availability of talent for a long time but clearly COVID has moved a lot of people to the sidelines permanently,” he said. “I think we just accelerated retirements by five years in 2020 and 2021, which increased the leverage that the remaining people have, but also the workloads and everything else.” Another competitive pressure to compensation is inflation. “We’re seeing people moving around a bunch because of inflation,” Caldwell said. But also he sees agency staff moving to new jobs in 2022, even more than last year, because of quality of life and quality of work issues. There’s ongoing pressure for continuing remote work, he said. “I think we’re seeing a lot of agencies offering two days a week, and some full-time remote. Some people are getting employees hired away by agencies three states over and so that is dramatically increasing the competition, which isn’t really just solvable by giving somebody a 5% raise,” Caldwell said. Caldwell says agencies must now be more flexible with work arrangements, such as work-from-home options, and also must consider ramping up other benefits, such as the number of personal time off

days. “I think agencies generally offer a pretty good benefit cafeteria because we’re in the business. But we’re seeing in smaller agencies, maybe that didn’t do that in the past, having to step up and provide benefits that they hadn’t been forced to do up until now.”

Average Management Salaries President/CEO Agency Owner/Principal Commercial Lines Manager Personal Lines Manager Office Manager Marketing Manager Accounting Manager Financial Officer

Moving People, Moving Wages

Agency owners and managers (51.4%) responding to this year’s Agency Salary Survey reported an increased demand for higher pay in 2021 but a large majority (76.8%) said they didn’t see a higher number of resignations in 2021. One agency owner wrote in the survey: “There is a demand for higher salaries, sometimes by 20% or more.” Another manager noted that demands for higher pay are

Average Salary (2021) $189,063 $151,707 $116,250 $107,940 $89,892 $115,786 $86,000 $127,150

Salary (2020)

$197,570 $161,338 $160,786 $87,833 $84,193 $67,800 $88,875 $157,250

Average Producer Salaries by Line Commercial Producers Personal Producers

$97,908 $68,876

Average Producer Salaries by Region East Midwest South Central Southeast West

continued on page 32

Personal Lines Producers

$93,400 $94,833 $32,500 $44,363 $60,175

Commercial Lines Producers $79,077 $160,967 $61,400 $123,500 $66,950

Average CSR Salaries by Gender Account Exec/ Commercial Lines CSR

Female Male

$71,151 $93,409

Account Exec/ Personal lines CSR $48,948 $73,500

Support Staff $68,444 $34,375

Average Salaries by Gender Female Male Difference Pay Gap

Managers/Owners

$101,241 $172,427 $71,186 70%

Producers

Staff $64,816 $84,122 $19,306 30%

$65,631 $107,349 $41,718 64%

Industry Average by Gender $79,079 $155,890 $76,811 97%

Average Management Salaries by Gender

President/CEO Agency Owner/Principal Financial Officer Commercial Lines Manager Personal Lines Manager Office Manager Accounting Manager Marketing Manager INSURANCEJOURNAL.COM

Female

Male

$113,364 $100,739 $117,500 $106,750 $111,003 $83,117 $86,000 $103,100

$201,804 $163,835 $122,167 $132,000 $86,500 $104,000 N/A $147,500

Men Make this % More than Women

78% 63% 4% 24% N/A 25% N/A 43%

Women Occupy this Position this % of the Time

14% 22% 33% 50% 89% 71% 100% 71%

FEBRUARY 21, 2022 INSURANCE JOURNAL | 31

Special Report: Agency Salary Survey continued from page 31 much higher for new hires who are looking to start at higher comp levels. “This is driven by marketplace pressures,” they said. “Higher compensation levels will continue to be the trend,” Jeff Holmes, COO of SIAA, told Insurance Journal. “As a result, the need for a solid hiring strategy comes into play more than ever.” Job history, cultural fit and verifiable patterns of success all become extremely relevant in today’s competitive landscape, according to Holmes. “Top

talent can be a game changer in any organization,” he said. “Don’t be caught off guard by failing to recognize the difference between top talent and those simply seizing a market opportunity.” While it might appear that higher salaries are the only option, that’s not necessarily true, says Mary Newgard, partner at Capstone Insurance Recruiters, which released its Insurance Agency Compensation Report 2021 in January. It showed perception isn’t always reality when it comes to rising salaries.

“With the exception of a few roles, most salaries [at the support staff levels] show minimal variance year after year,” states the report, which examined information from the companies and individuals Capstone has worked with in recent years, including examining the salaries of job candidates placed by Capstone Recruiters. Newgard said the study examined one-year changes in compensation but also reviewed changes over a fiveyear period. While the survey showed increases in salaries,

Employee Benefits Satisfaction Index*

Profit Sharing Pension Plan Education reimbursement Group life/disability 401(k) IRAs Group health insurance Health Savings Account Stock Options ESOP Dental Flexible Savings Account Child care/Day care Paid Family Leave Pet Insurance None Provided

Satisfaction When Offered

Satisfaction Index When Not Offered

3.88 3.5 3.56 3.58 3.81 3.47 3.73 3.35 3.71 3.3 3.64 3.56 3.68 3.14 3.72 3.46 3.56 3.58 3.88 3.63 3.7 3.39 3.69 3.53 3.95 3.56 3.81 3.48 3.61 3.57 N/A 2.8 *5 = Most Satisfied; 1 = Least Satisfied

salaries didn’t rise or change as much as was expected, especially when reviewing changes over a five-year period, she said. For example, the fiveyear change for CSR, account assistant/associate tech was up +3.38%, but the five-year change for the P/C account manager was up +10.28%. “Our report showed things don’t fluctuate as much as we all feel they do except in isolated pockets where certain market trends put pressure on a particular type of position.” That includes areas where service staff specialize in certain classes of business. According to Newgard, one of those pockets is in the area of high-net worth clientele. Last year, demands for higher salaries for private client/high net worth account managers were up significantly, she said. “Those personal lines account managers that are working on higher value clients, are in demand,” she said. “This was the group out of every group that was getting 25% increases to stay or to go.” That trend is not the case for all account manager positions in the agency. But there are certainly pockets experience increasing demands on compensation, she added.

Average Salary and Total Compensation Adjustments by Region Average Total Compensation Raise - Staff Average Total Compensation Raise Producer Average Total Compensation Raise Management Average Agency Salary Adjustment Average Agency Total Compensation Adjustment Average No. of Agency Employees

32 | INSURANCE JOURNAL | FEBRUARY 21, 2022

EAST

MIDWEST

SOUTH CENTRAL

SOUTHEAST

WEST

6.9%

7.3%

7.9%

7.7%

5.4%

5.2% 8.9%

3.7% 11.0%

4.8% 7.6%

5.4% 5.8%

4.7% 4.7%

89.2

84.3

109.1

98.3

68.5

4.2% 24.8%

3.6% 42.1%

5.5% 9.5%

3.1% 3.9%

3.5% 2.7%

INSURANCEJOURNAL.COM

Newgard says it’s important to shine light on what motivates an experienced insurance agency professional to move to a new agency. “If an agency calls me and says that they have an opening for an account manager, they want an experienced person, which means they would like to hire somebody from another agency who’s already an account manager,” she said. “When we go into the market and talk with people, I would say it’s pretty evenly divided when it comes to their ‘search motivation.’” According to Newgard, a portion of that search motivation can be attributed to dissatisfaction over their compensation. “They’ll say things like, ‘I’m not getting salary increases because my company doesn’t do annual reviews,’ or ‘I was unhappy by the bonus I received last year, even though I know that my company performed well.’ To me, that’s probably about 20% to 30% of the time,” Newgard said. But for 70% to 80% of the time, the search motivation lies around employees’ feelings of missed opportunities, she noted. They might say, “I don’t feel like I have an opportunity for career advancement or development.” That’s a significant portion of job search motivation, Newgard said. “A lot of that is remote work, the workplace flexibility, benefits, and how their boss treats them.” This is one reason Asher and others say customization is so important in today’s employee INSURANCEJOURNAL.COM

Agency Salary Survey Demographics Owner/Manager Incentive Comp in Addition to Salary

Position 58.3%

58.3%

Yes No

Management/Agency Owner Agency Principal

22.9%

Producer/Sales Support Staff/CSR/ Account Executive

62.6%

14.5%

How Sales Manager Incentive Comp Is Determined 2.8%

11.8% % of new business 34.4% 10.1% % of agency premium % of growth 7.9% 20.8% % of sales goal % of salary Do not offer incentives for sales managers

Gender Male Female 48.5%

51.5%

How Owner/Partner Salary Is Determined Book of business New business development % of ownership in business Management duties

38.8% 36.5%

58.4% 20.8%

Age

Producer Bonus for Exceeding Sales Goal

32.1% 67.9%

6.7%

21 to 30 years old 31 to 40 years old 41 to 50 years old 51 to 60 years old 61 to 70 years old Older than 70 years old

3.3% 15.9%

22.2% 20.2% 31.7%

Yes No

Ethnicity

Owners Thinking About Selling the Agency

9.6% 4.4%

Yes No Not applicable

85.9%

3.4% How Often Agencies Review 3.1%4.3% Compensation Structures 8.9% Every year Every two years Every three years As needed but not within the last three years Never reviews

experience. “One employee might want more flexibility for when and where they work,

80.3%

American Indian or Alaskan Native Asian/Pacific Islander Black or African American Hispanic White/Caucasian Multiple ethnicity/Other

17.5% 0.6% 0.8% 1.6% 3.0%

76.5%

Education Graduated from high school Some college completed Graduated from college Some graduate school completed Completed graduate school

10.7%

0.4% 7.1%

24.8%

49.8%

continued on page 34 FEBRUARY 21, 2022 INSURANCE JOURNAL | 33

Special Report: Agency Salary Survey continued from page 33

Asher said. “Agencies may not have the resources to invest in all things for all employees, but they should be able to invest at the individual level.”

another might want to attend a professional conference, and a third might want more leadership opportunities,”

Changes to Employee Benefits Due to Pandemic

2.4% 39.9%

57.7%

Yes No Not Sure

[NEW] Pandemic’s Affect on Agency Business Yes No Not Sure

Yes No Not Sure

Agency Gives Year End Bonus

[NEW] No. of Resignations Higher in 2021

7.6% 43.5%

48.9%

24.5% 72.6%

What Employees Receive Year End Bonus

Agencies’ Plans to Change Payroll Expense in 2022 Reduce payroll expense Increase payroll expense Keep the same Not sure

Agency Salary Increases in 2021 Higher than 2020 Lower than 2020 Same in 2021 compared to 2020

6.2% 28.9%

39.2%

14.8%

5.2%

43.4%

Increase Decrease Stay the same

51.4%

1.8%

Yes No Not Sure

Anticipated Agency Staff Size in 2022

2.9%

19.4% All agency staff Management and sales producers only 10.3% 8.0% Management, plus all support staff 4.4% (CSRs) Other Options N/A

Yes No Not Sure

39.3%

45.9%

[NEW] Increased Demand for Higher Pay in 2021 47.6%

42.6%

Yes No Not Sure

Agency Staff Size in 2021 Increase Decrease Stayed the same

9.8%

Agency Annual Cost of Living Increase

Employees are not the same in a post-pandemic world, he added. “You know that employee you thought you knew before the pandemic?

21.3%

76.8%

44.8%

53.1%

2.1%

Producer Commissions in 2021 57.9%

1.8% 63.1%

Increase Decrease Stayed the same in 2021 compared to 2020

Agencies’ Plans to Change Commission Structure Changed in 2021 Will change in 2022 No changes

Producer Compensation and Fees 54.9%

6.1%

34 | INSURANCE JOURNAL | FEBRUARY 21, 2022

Producer receives % of fee Producer receives all of fee Producer doesn’t receive fee

41.2%

50.5% 8.3%

5.2%

7.1%

87.7%

40.6% 1.0%

58.3%

Their unique experiences over the last two years have also likely changed what they value from work, so it’s important to consistently revisit an employee’s wants and needs over the course of their career,” Asher told Insurance Journal. Remote and hybrid work is an area more agencies have an opportunity to explore, Asher said. Yet, according to an agency growth study yet to be released by Liberty Mutual and Safeco, nearly two-thirds of agencies are unwilling to hire a remote employee and more than half plan to keep staff in the office full time in 2022. The Liberty Mutual/ Safeco survey, which polled 738 independent agency employees, including a mix of personal lines and small commercial agencies, found that 56% of agencies plan to have employees work full time in the office in 2022, while the other agencies plan to have employees work from home an average of two days a week. Of those that do work at least partially remote: 57% believe they have better work-life balance, 52% have more personal happiness and 47% are more productive when working from home. “In a post-COVID hiring market, flexibility is going to be the expectation,” Asher said. “And an agency’s ability to attract and retain top talent is almost certainly going hinge on how willing they are to provide at least some flexibility in remote work.” Culture building is another area where many agencies need to get more strategic and intentional, he added. “Culture is in everything you do, big and small: How you recognize an employee’s accomplishments, INSURANCEJOURNAL.COM

Own Com to S

Ye No

How Com

% % % % % Do

How Det

Bo Ne % Ma

Prod Exce

Yes No

Own the

Yes No No

How Com

Eve Eve Eve As n Nev

the time of day you make calls and send emails; the words you use to describe customers; the types of technology employees have access to. The list goes on.” Asher says there’s often a disconnect between what agency leaders think about their culture and how employees experience it. For example, in agencies that employ seven or more people, nearly 70% of agency principals and managers believe their team can bring their authentic selves to work, yet just 46% of frontline staff agree with that statement. “Closing the gap between perception and employee experience will be one of the most effective ways to keep talent in 2022,” Asher said. M3 Insurance’s Kiser, agrees career development, purpose, and feeling valued as an employee are critical in a competitive talent landscape. “Recognize and help employees feel like they’re making progress in their career journey and find ways to compensate them for those things that they’re taking on creatively,” she said. Not every employee wants to work remotely all the time, she said. “What we’re starting to see is people who were working 100% from home, they’re kind of getting sick of it, or it’s not as great as they thought it would be because they’re missing out on the culture, the apprenticeship, the full experience,” she said. “And so it’s about striking the right balance so that you’re providing flexibility, but still helping with that same employee experience and cultural vibe.” SIAA’s Holmes urges agencies to start with an honest evaluation of what the agency INSURANCEJOURNAL.COM

needs. “Evaluate the needs of the business first, and hire for positions that primarily drive meaningful revenue,” he said.

Holmes also encourages agencies to consider technology and how it plays a role in streamlining agency operations.

Non-Owner Producer Compensation 15.4%

Salary Only

37.7%

Salary plus commission

23.8%

Commission only

8.0% 10.5% 4.6%

Draw against commission Other N/A

“Virtual assistants and service centers are underutilized in most agencies business plans,” he said. “Investments in producer talent, and outsourcing service could better position your agency to thrive in the years to come.”

continued from page 37

Agency Revenues in 2021 Compared to 2020 0.6% -31% or more 2.5% -11% to -30%

How Agencies Determine Fees

14.8% -1 to -10% 5.5% 0%

30.2% As a % of Premium

49.1% +1 to +10%

72.1% Flat fee based on account type

24.1% +11% to 30% 3.4% +31% or more

How Agencies Charge Fees 62.0% Fees are charged in addition to commissions 38.0% Fees are charged in lieu of commissions

How Incentive Compensation for CSRs is Determined 9.4% No. of policies sold 30.7% New business commissions 12.9% Renewal commissions

Incentives for Non-Owner Producers

41.8% Do not offer incentive comp

29.4% No Incentive

16.8% Other

9.7% Set dollar amount

15.4% Trips 20.5% Contests 8.5% Club memberships 37.2% Education 54.6% Cash/year-end bonuses 8.9% Car

How Bonus for Producer is Determined

[NEW] CSR Education Reimbursement 75.2% Yes 24.8% No

Workload in 2020 Compared to 5 Years Ago 41.2% Higher today than ever before

35.6% Discretionary

31.5% Steadily increasing

12.3% Retention

11.9% Increases only slightly each year

15.4% Profit

4.6% Steadily decreasing

28.1% Net book growth

4.8% Less today than ever before

27.1% Personal production

6.1% Same today compared to 5 years ago

FEBRUARY 21, 2022 INSURANCE JOURNAL | 35

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Special Report: Agency Salary Survey continued from page 35

Salaries Roar but Satisfaction with Compensation Wanes By Andrea Wells

nsurance agency personnel on average made more money in 2021 but satisfaction with compensation overall declined despite higher salaries and total compensation. Satisfaction with compensation dropped slightly across the board, according to the 2022 Agency Salary Survey, published annually by Insurance Journal. While last year’s annual Agency Compensation Satisfaction Index reported the highest overall scores in more than five years, the 2022 Agency Compensation Satisfaction Index showed overall decreased satisfaction levels even though salaries were up. Changes in overall salary and total income rose in all categories this year. Producers/sales saw a large increase in total income change, while management and support staff saw steady total income changes.

Satisfaction with compensation dropped to 3.41 overall in 2021 from 3.53 overall in 2020, based on a scale of 1-to-5 where “5” equaled “most satisfied.” • Management/agency owners/agency principals reported a compensation satisfaction score of 3.80 in the 2022 survey down slightly from 3.88 in the 2021 survey. • Producers/sales reported satisfaction of 3.31 in the 2022 survey, down from 3.47 in the 2021 survey. • Support staff/CSR/account executives reported a satisfaction score of just 3.13 in the 2022 survey, down from 3.25 in the 2021 survey. The score for overall satisfaction was higher when agencies offered employee benefits, both hard benefits (such has group health, life/disability, dental, profit sharing, 401(k) plans, IRAs and flexible savings accounts) and soft benefits (such as childcare/day care, education reimbursement and paid family leave). Employee benefit satisfaction ranked highest in the

Agency Accommodations Due to COVID-19 Pandemic Work from home Safety precautions in office setting (partitions, masks, extra cleaning and sanitization) Flex time or paid leave Additional wellness programs Virtual in-house events (social or professional) Additional tools to help communicate with agency clients Employee Assistance Programs

82.2% 53.3% 28.6% 7.1% 23.5% 28.4% 9.0%

survey when agencies offered added benefits such as education reimbursement (3.81), profit sharing (3.81), Employee Stock Ownership Plans (3.88), and childcare/daycare (3.95). The survey found that in all but two employee benefit categories queried, employees showed more satisfaction with overall compensation when those benefits were offered. As noted, the survey revealed an upward trend in total compensation for all agency positions. Producers reported the highest increases, in total compensation, according to this year's survey results. • Agency owners, principals and management reported an increase in total income for 2021 — a 7.5% increase in total income, compared to a 5.0% increase in total income for 2020. • Producers/sales total income increased the most with a 17.9% increase for 2021, compared to an 8.4% increase in 2020. • Agency support staff total income showed 3.9% increase

for 2021, compared to a 2.3% increase for 2020. Salaries only (excluding bonus and incentive income), rose again in 2021 and at a higher rate than the previous year, according to this year’s survey results: • Salaries for agency owners, principals and management rose 4.6% in 2021 compared to 3.1% in 2020. • Producers/sales reported average increases in salary of 6.1% in 2021 compared to 3.3% in 2020. • Salaries for agency support staff rose 4.4% in 2021 compared to 2.1% in 2020.

Insurance Journal’s Agency Salary Survey collected nearly 700 responses from agency owners and employees nationwide via an online survey in January and early February 2022. Demotech Inc., Insurance Journal’s official research partner, assisted with analysis of this year’s survey results. For more information, contact Andrea Wells at: awells@insurancejournal.com.

Satisfaction Index for Agency COVID Policy* Work from home Safety precautions in office setting (partitions, masks, extra cleaning and sanitization) Flex time or paid leave Additional wellness programs Virtual in-house events (social or professional) Additional tools to help communicate with agency clients Employee Assistance Programs

When Offered

Not Offered

3.76

3.45

3.77 4.09 3.87

3.52 3.55 3.51

3.91

3.49

3.79

3.56

3.63

3.49

* 5 = Most Satisfied, 1 = Least Satisfied

INSURANCEJOURNAL.COM

FEBRUARY 21, 2022 INSURANCE JOURNAL | 37

Idea Exchange: Talent Today’s Candidate Expectations and How to Compete

he recruiting climate has undergone numerous shifts in just two years. From nearing a complete halt in early 2020 to the Great Reshuffle By David E. Coons we’re now experiencing, insurance organizations have had to adjust how they approach recruiting to stay competitive. Now, as organizations act on their 2022 talent plans, it’s important for hiring managers and recruiters to consider how their open roles and recruiting tactics will stand up against the larger talent landscape. Candidate expectations are continuing to evolve, in some cases seeming almost unrealistic. However, top talent is being pursued even more aggressively than in the past, giving professionals the opportunity to increase their asks and take advantage of competing offers,

38 | INSURANCE JOURNAL | FEBRUARY 21, 2022

including counter offers from their current employers. At its essence, there’s a higher demand for talent than there is supply. More seasoned employees are retiring at high rates and, often, there are not enough individuals in the middle ranks to backfill those positions left vacant. This war for talent is compounded by fewer young professionals launching careers in insurance and filling entry-level roles. Wages are increasing across many industries, meaning insurers are competing with areas they may not have in the past, such as service industry positions. Candidates have the upper hand in today’s market and are driving up costs for insurers in terms of total compensation. From a monetary standpoint, individuals are expecting higher salaries than even a year ago, which often misaligns with what hiring managers anticipate or organizations can provide. At the same time, many of the incentives previously offered

as perks, such as working from home or having flexible hours, are now considered table stakes among professionals. How can employers effectively compete in this challenging landscape?

Recognize all individuals have different motivators. Early in the interview

process, aim to uncover why a candidate is considering a new role and pinpoint their motivators. Then, use this knowledge to communicate how you can meet their needs throughout the interview process. Drilling down into a candidate’s motivators can also provide insight into the sincerity of their job search and whether they’d be willing to accept a new role if you meet their requirements. This can help rule out candidates who aren’t serious about a position, enabling you to focus your time on more viable long-term hires. Uncover what drives a candidate. In many cases, the tables have turned during the interview process. Rather than sharing

INSURANCEJOURNAL.COM

sion-making to increased communication, the recruiting process looks very different today than it did even a year ago. It’s important to acknowledge that you may lose a candidate if you don’t move quickly. In the past, it’s been possible to take a few days to think through whether a particular candidate is right for the position or to interview multiple individuals and weigh

tiation. There’s a high chance candidates will receive and be quick to accept stronger offers from your competitors. If you’ve put in the work on the front end to understand their motivation for considering a new role, your next step is to determine the best you can offer in that area, adjusting the rest of their total rewards package as necessary. As the labor market continues to shift, understanding changing candidate expectations is key to producing compelling and competitive total rewards packages. By uncovering what is most important to candidates, adjusting your own expectations and recruiting timelines, and producing strong starting offers, you’ll be best positioned to attract talented and capable individuals. Coons is senior vice president of The Jacobson Group, the leading provider of talent to the insurance industry. Phone: 800-466-1578 or email: dcoons@ jacobsononline.com.

MEDIUM IG

RISK

THERE ARE NO BAD IDEAS, JUST BAD DECISIONS.

Adjust your own expectations of the recruiting process. From accelerated deci-

who is the best choice. These luxuries can’t be afforded in the current market. If you find a candidate who will perform well in the role, don’t hesitate to make an offer — and a strong one. Seek out transferable skills. Especially for early career roles, focus on interpersonal skills and other qualities that transcend industries and departments. Often, individuals can learn industry nuances on the job or with training. However, more innate skills such as strong communication, leadership abilities, empathy and a growth mindset are difficult to teach. In addition to expanding your candidate pool, recruiting for skills will create a more adaptable workforce that is primed to tackle future challenges and step into new roles as needs arise. Be thoughtful with your offer. Expect that candidates are being pursued and interviewed by multiple companies. Keeping this in mind, don’t present a mediocre offer as a starting point for nego-

their potential impact on a company or the value they’ll bring to a role, many professionals are less concerned about gaining an edge and are more focused on what employers can do for them. Along with more money, this may also include title changes and advancement opportunities, or being guaranteed permanent remote work. The value of each of these areas is dependent on the individual. Be as generous as possible when working these driving factors into a total rewards package.

MANAGE YOUR RISK BY CHOOSING A WSIA MEMBER.

Some decisions are too precarious to take on alone. You need a partner who can help you create the right solution for your client’s risk, while minimizing yours. Choose a WSIA member to craft cost-effective solutions for complex risks. In fact, it’s so cost-effective that a recent analysis by Conning, Inc. concludes that wholesale distribution does not increase the cost to the insured. That’s a good decision! Find a WSIA member at wsia.org/findamember

WSIA MEMBERS ARE INSURANCE PROFESSIONALS DEDICATED TO THE WHOLESALE DISTRIBUTION SYSTEM. Insurance Journal - half page.indd 2

INSURANCEJOURNAL.COM

7/12/21 10:01 AM

FEBRUARY 21, 2022 INSURANCE JOURNAL | 39

Idea Exchange: The Competitive Advantage

Agency Accounting

t is a fact that most agency owners did not especially like accounting classes — if they even took accounting classes in college — or they By Chris Burand probably would be accountants rather than insurance agency owners. Unfortunately, independent insurance agency accounting is far more complex than most small business accounting. Agency owners do not know and almost 100% of their accountants do not know 40 | INSURANCE JOURNAL | FEBRUARY 21, 2022

this truth, with the result that most independent insurance agencies’ accounting books are materially inadequate. The problem is compounded by agency management systems and these systems’ inadequacies. Starting with QuickBooks, in the hands of 99.99% of agency owners, it is entirely incapable to correctly account for premiums, especially agency bill premiums. A number of the smaller agency management systems cannot process agency bill accounting correctly either, even though these systems are designed specifically for insurance agencies. Even the large systems have issues

because, in my experience working with very large to very small agencies across the United States and Canada, the initial training is almost always significantly inadequate. As one simple example, the trainers do not explain at all, or at least inadequately, the importance of choosing accounting settings that match how the agency is actually going to process their premiums and commissions. This is one reason that a common descriptive of these systems vocalized by agency owners is “hate,” as in, “I hate ABC system with a passion, and I’ll never buy their system again even if it’s INSURANCEJOURNAL.COM

to my own detriment.” The passion with which so many people hate these systems astonishes me at times. These emotions have opened the door for new systems but even these new systems are generally not formulating the accounting and/or financial statements and/or operational data correctly. I really feel for agency owners, especially small agency owners, who are caught in this situation. The agencies’ accountants typically do not know what they are reviewing when they see the resulting financials. One of the biggest problems occurs when an agency tries to get a loan or sell. Their accountants INSURANCEJOURNAL.COM

are too lazy, ignorant, or blasé. I had an accountant tell me recently that it does not matter whether the balance sheet is correct because the sale is an internal sale. The problem with his ignorant position is that if an agency is out of trust, in most circumstances the seller has no title to the expirations per their carrier contracts. Is the accountant advocating selling assets the seller does not own? That particular accountant — and I have heard this from others, too — said that it does not matter because no one will ever know. Besides the fact that the agency’s value, the price paid by the buyer, should have been significantly reduced, would anyone say that it does not matter that the person selling you stolen jewelry does not own it and then pay them anyway? A balance sheet and an income statement are business report cards. This is how one knows the score. If for no other reason, an accurate score should be kept. I feel for agencies that have accountants who do not take the time to do their jobs correctly. Almost all accountants tell me, “I only do the taxes and these issues don’t affect the tax returns.” They have a point. Agency owners do need to explicitly ask their accountant for additional advice and services rather than assume the accountant will provide them unasked. However, when asked, the accountant should provide high quality advice rather than be dismissive that simply because the accounting is for internal purposes, it does not matter if it is all that accurate. Fire those accountants. An added complexity is ASC 606. It actually does apply to agencies. I have spoken to many accountants who are not providing any advice or recommendations to their agency clients. They simply do not want to deal with it. For people who do not especially like accounting, having to deal with software that does not work for their specific needs and accountants that are a black hole relative to their accounting needs, is painful. Many agency owners just go along because they simply do not want to deal with it. I see this all the time when I do agency valuations. The problem occurs when the

agency cannot get a loan, or cannot be sold, or will be sold at a discount, or the agency may even need to pay for audited statements. It is too late then. Agency owners have limited options regarding their agency management systems. When choosing an agency management system, be sure to truly understand what the system’s capabilities are. When the salesperson says the accounting system is a full system, verify with proof that it actually does agency bill accounting correctly, as one example. If the system cannot do agency bill accounting correctly, but you still want that system, you must build some solution because proper balance sheet accounting can only be ignored at your eventual peril. Changing accountants is easier. Insurance agency accounting is far more complex than normal small business accounting and few accountants have any proper experience doing it. What you are looking for in an accountant is someone who is trainable in the unique requirements of independent agency accounting. I have trained a number of CPAs on agency accounting. If they are trainable, not too egotistical, and smart enough, the training is fast and easy. The really good CPAs figure it out in about 45 minutes, usually. Also, you must explain to the accountant that you want good accounting for business purposes, not advice solely on how to reduce your taxes. Running a business to minimize taxes rather than to build a business is not a strategically good decision. However, so many accountants just conclude, without even asking their clients, that minimizing taxes is a client’s only goal. Make it clear this is not your only goal. Small agencies have the toughest situations. I really feel for all of you. With limited resources, hiring a high-quality CPA is probably even more important because a high-quality CPA, if they will learn agency accounting, can help make up for some of the shortcomings of limited agency management systems. Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com. FEBRUARY 21, 2022 INSURANCE JOURNAL | 41

Idea Exchange: The Wedge 3 Reasons Why Agency Owners Fail to Grow Revenue (and What to Do About It)

hat happens when you put a self-directed team in the game against a well-coached team? If the talent By Randy Schwantz is similar, then the well-coached team will win eight out of 10 times. But why is that? If the coach is doing their job, they will manage the resources more strategically. They will motivate players and match up their strengths to gain the advantage. They will pull players out when they get tired and give them a rest — and change the defense to stop a dominant player on their team. They are the ones who set up offensive plays to gain a scoring advantage. In most cases, a self-directed team will not do that predictably. If there is no coach, two-thirds of the players will be screwing around, while a couple of people are out busting their butts. When there is no coach, there is usually no playbook for offense or defense. And if 42 | INSURANCE JOURNAL | FEBRUARY 21, 2022

that’s the case, a few dominant players will hog the ball on offense, doing their “shake and bake” routine while drill-darting to the basket. But ultimately, they’re throwing up low-percentage shots and on defense, they’re sloppy getting back on a fast-break to prevent easy scores. Although talented, this kind of team would probably get crushed by a well-coached team. Sports teams need leadership just like sales teams do if they are to reach their full potential. But leading a sales team usually becomes a problem for the agency owner and here are three reasons why.

Problem 1: You Have an Agency to Run.

As an owner, you are the one responsible for running the business. If you’re fortunate, you’ve got a great management team to handle all the day-to-day activities of running your agency. If you’re not so fortunate, you’ll soon feel like you’ve been drawn, quartered and burnt-out as an agency owner. Between all the responsibilities such as underwriter, carrier and shareholder meet-

ings, personnel decisions, planning, and meeting with your clients — you probably don’t have time to coach your sales team, too. The bottom line is that a substantial part of your day is roped, harnessed and ridden into the sunset — a huge chunk that you will never get back.

Problem 2: You Have Your Own Accounts.

A lot of your personal income is derived from your own personal production (unless you are running a major league agency and are the majority stockholder). That clearly means one thing: Your book is your lifeline, and as such, you must make it top priority. You have to handle renewals, get involved in nasty claim messes, engage with underwriters, fight off competitors, write new business and grow your book. It is the easiest and fastest route to greater personal income. Agency owners generally fall into one of these buckets. Either you’re a born seller, love meeting with clients and building your book because it’s just fun. Or you love the mechanics of the business — the operINSURANCEJOURNAL.COM

ations. Getting your fingers in the overall planning and execution is the place where you derive a lot of work satisfaction. Either way, you make a lot of your money from managing your book of business and that leaves a big gap on the sales frontier.

Problem 3: No Time to Develop the Team. You run sales meetings and wish they were better, but you don’t have a lot of time to plan for them. You’re always willing to help a producer strategize on difficult accounts if asked. You conduct an annual goal setting and planning session with your producers. You are involved with your sales team, but it’s like being a player-coach much more than a head coach. You don’t have much time to devote to it and don’t have systems in place to support it where you can train others to help you … so the burden stays on your shoulders. Now it’s time to get real about it. Do you have a self-directed sales team because

you are too busy? If so, play that video tape out for the next five years. What will be different if you don’t step in and step up to being their coach? You might have a producer problem, but even more so, you might have a leadership problem. If you invested a little time and money in developing your ability to grow and develop your producers, they will grow and develop. It’s that simple. But if you leave it up to them and their own devices, most of them will do what people naturally do and that’s take the easy road. If you want to get excited about the potential for growth or your agency, play three what-if games. Get your partners in the boardroom and using the whiteboard, map out these scenarios. The first game is pretty simple — assume nothing really changes. Project how big each producer’s book will be in five years based upon their current and past performance. Will you be happy with that? If yes, go have a beer!

The second scenario is to assume that you can step-up and develop your middle 60% of producers on a faster growth path by training, coaching and holding them accountable to prospect (more appointments) and sell (write bigger accounts), retain (bump that rate by 1%). Where does that put you? The third game: Do what you did in the second game, while adding new producers successfully each year for the next five years and determine where that would put you. Would it be worth it? If you want to grow your agency revenue, you have to develop your producers, so they become better at prospecting, selling and retaining. And the only way to do that is to take the time to train, coach and develop them … just like head coaches. Schwantz is the CEO and founder of The Wedge Group. He’s also the author of the book Agency Growth Machine. Phone: 214-446-3209. Email: randy@thewedge.net.

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Idea Exchange: Claims Construction Defect Insurance Claims

onstruction defect claims and cases are scenarios wherein physical loss or damage is claimed to be related to defective By Granger Stuck building elements that will require repair or replacement. Typical defect claims and cases will involve exterior building enclosures or the building structure. However, it is importand Jim Borders ant to note they can also include other building systems such as electrical, mechanical or plumbing. This article will focus on exterior building enclosures. The cause of a defect can be related to design, use of incorrect or unapproved

materials, defective materials, improper techniques, improper installation or poor workmanship. In addition to repair or replacement of the defective building elements, the extent of the claim will likely involve repairs to other building elements that have been impacted by the defective elements or which will be impacted by the replacement or repairs.

Analysis of Construction Defect Claims

The proposed repairs to correct defective conditions can be extensive, including the replacement of the complete exterior enclosure system of the building (windows/glass, stucco, brick, etc.) and, in some cases, demolition and replacement of the entire building. In many cases, inspections and/or tests have been performed at representative locations to determine the extent, if any, of the defect and resultant damage. The claimed defect should be supported by detailed engi-

neering analysis as a basis for any failures related to the defects that have occurred. The construction defect claims typically also include a repair estimate, which should be supported by detailed quantities and unit prices. The basis for timing or age of the defect (or statute of limitations) can vary based on the location/state. Depending on the defect issue and the claimed extent of damage, construction defect claims can be quite broad and extensive, but the analysis of most defect claims will include an investigation of the defects and an analysis of the claimed costs.

Investigation

To properly review construction defect claims, there are several parts of the claim that require thorough investigation. These key parts of the investigation include: • Verification of engineering basis for claimed defect, including cause of the claimed defect and original construction documents (if available). The investigation should also be conducted with an understanding of the construction techniques and industry standards that were acceptable during the timeframe in which the building elements were installed. • Inspection of the physical conditions may be required to verify original construction materials and methods of construction when construction documents are not available or lack sufficient detail. • Determination of the extent of the defect. Is it limited in its scope or are the defects widespread? Can defective parts be traced to defective batches and isolated to specific locations in the building? This portion of the investigation may include non-destructive investigation, destructive investigations, in situ testing of materials, and testing of removed materials.

Cost Analysis

In order to perform an analysis of the estimated cost to mitigate the defect and damages, the following steps are typically performed: • Verify proposed repair scenarios, 44 | INSURANCE JOURNAL | FEBRUARY 21, 2022

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including potential code upgrades, betterments, or repairs to elements that were not investigated/tested. • Verify repair estimate quantities for each element of the repair scope of work. • Verify repair estimate unit prices, markups, and contingency (if applicable). • Verify possible alternative reasons for the condition of the claimed defective elements including poor workmanship or lack of (or improper) maintenance and allocate those costs accordingly.

Additional Considerations

In some cases, if the engineering verification of the claimed defect results in a different or abbreviated repair scope of work, an independent repair estimate may be required to reflect this alternate scope of repairs. If singular or multiple policy periods are related to the defect damage in question, an allocation of the repair costs

Depending on the defect issue and the claimed extent of damage, construction defect claims can be quite broad and extensive. Conclusion

related to the specific time period(s) may be required. In the cost analysis of the claim, it is also important to consider segregating (into individual “buckets”) the costs for repairing defects, resulting damages, repairs related to betterments, code upgrades, industry standard upgrades and repairs related to typical building maintenance. Consider replacing with like kind and quality where possible; however, newer methods may be more cost effective even though they may otherwise be considered betterments.

Construction defect insurance claims require investigative and design data to allow for proper estimating. The scope of repairs should be reviewed in detail to account for any betterments or upgrades in the proposed repair work. Detailed repair quantities should be developed in order to validate to amount of work for each repair element. Borders is a managing director in J.S. Held’s Builder’s Risk Practice. He can be reached at 206-895 9511 or email: jborders@jsheld.com. Stuck is an executive managing director and J.S. Held’s Builder’s Risk Practice lead. He can be reached at 206=895 9501 or email: gstuck@jsheld.com.

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Idea Exchange: Network Partnerships How Do You Know When It’s the Right Time to Partner With a Network?

Partnering with a network can bring benefits regardless of the stage you’re in.

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• • • •

Sales and marketing support; Low production requirements; Competitive commissions ; Strategic consulting on acquisitions and book rolls.

The Stage of Agency Growth Doesn’t Matter

orried about what could be next for your agency? It has been a chaotic couple of years — and many forward-thinkBy Paul Taylor ing businesses are focused on improving revenue, expanding their client base and future-proofing their strategies. It’s important because right now, insurance disruption is high, and competition is fierce. As a result, you might be wondering whether it’s the right time to partner with a network. It’s a good question, and one that should be considered carefully. Taking on a business partner is a big decision. The relationships you build can make or break the future success of your company, so it’s INSURANCEJOURNAL.COM

not a deal to enter lightly. For insurance agents, the decision to partner with a network can provide significant benefits. Nevertheless, you might be wondering whether the timing is right. Here’s a look at some of the factors you should consider when deciding whether it’s the right time to partner with a network, along with key insights from insurance agents who have made the decision for themselves.

A Network Can Bring Unique Value

Before delving into the question of timing, let’s look at the value that a network can bring. After all, without this value, a network partnership wouldn’t make sense at any time. Networks can provide: • Access to carriers and products; • Product training and guidance;

It’s easy to fall into the trap of thinking that a network partnership should happen at a certain stage of agency growth, but that’s not really the case. Partnering with a network can bring benefits regardless of the stage you’re in. A new startup might need network support to get a fast start and break into the business. An experienced agent might need the help of a network to make the transition from captive to independent. A successful agency could use network support to stay competitive and grow in a changing market, or to operate more efficiently. It really doesn’t matter whether your agency is new or established. So, what does matter? How can you decide when it’s the right time to partner with a network? It all comes down to understanding your current challenges and objectives. Below are a few of the most common goals that can be achieved by partnering with a network.

continued on page 48

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Idea Exchange: Network Partnerships continued from page 47 Goal #1: You Need Access to More Carriers

To help your clients find the best coverage fit for their unique exposures and budget, you need access to carriers. This isn’t always easy. Many carriers have production requirements that prevent smaller agencies from offering their products. For insurance agents who are building a startup agency from scratch, this is a common challenge. Take Pennsylvania agent, Gulraiz Sultan, for example. He had significant insurance industry experience as a claims adjuster, risk manager and insurance analyst, but after he earned his insurance license, he was denied his first carrier appointment. Fortunately, he found an alternative solution. He turned to a network that he says could “really help you get your foot in the door with carriers.” Thanks to this partnership, he was able to start getting appointments and eventually grow his book of business to more than $1 million annually. Agents who are transitioning from captive to independent can face similar struggles. Although they have the experience necessary, they may not have the relationships with carriers in place that they need, and they may need assistance learning the ins and outs of daily agency operation when going out on their own. “I want to be the change that I want to see. I don’t want to just wish it would happen,” says agency owner Jeremy Powers. He started out as a captive agent, but he later became an independent agent to better serve his customers. With a network, he was able to navigate the transition

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successfully and gain crucial appointments quickly, while also receiving mentorship from his network’s state representatives. At any level, a network can provide access to carriers that might otherwise be out of your reach. If you’re having trouble accessing the carriers you need so you can serve your clients and grow your company, it might be time to consider working with a network.

Goal #2: You Want to Leverage Profit Sharing Opportunities

Insurance agents face a lot of competition. They compete with other independent agents, and also with insurance companies that utilize captive agents and direct-to-consumer sales tactics. On top of all that, they need to strategically navigate mergers that result in their competitors getting bigger and bigger. Even experienced agents with established agencies can run into trouble when the market changes. Anytime you need to pivot, you may meet resistance. “It’s tough to get carrier appointments, especially if you’re in a town where there’s a lot of competition and those carriers have already appointed other agencies. It makes it even tougher to increase revenue,” says Bryan Clinkscales, owner of Boone-Ritter Insurance. When M&A activity increased, Clinkscales knew he had to start growing through acquisition or his agency could be at risk of being acquired. One of the companies he purchased was a network agency partner. He then realized that a network presented new opportunities to

boost his profitability. “We’ve got $2 million with just one carrier that we moved over,” Clinkscales says. “But we also had these small books with carriers that we were struggling to grow, to get to profit sharing level. Now we’ve reached profit sharing level just by moving those books over to the network, and those accounts add up to another $1 million in premiums. I can’t wait to see the year-end numbers!”

Goal #3: You Want the Flexibility to Keep More Clients

It’s hard to grow your business if you keep losing customers. But without support from a network, it can be difficult to keep certain accounts. That’s one reason Lee Ann Pridgeon, owner of AllCare Insurance Service, recommends partnering with a network. She purchased the agency she had worked at for 15 years and went on to acquire several more agencies. Most of these agencies were part of the same network. “I’ve encouraged several friends to join a network when they want to grow without dealing with volume commitments,” she says. “A network with an ‘agent-friendly contract’ allows me to write a policy for somebody, even if they’re the only one I’ll write. I’d rather write one policy with a company that I use rarely and not lose that customer than turn anyone away.”

Goal #4: You Plan to Buy or Sell

The stories shared by Lee Ann Pridgeon and Bryan Clinkscales demonstrate how important mergers and acquisitions can be when you’re trying to stay competitive. A network can help you connect with agency owners when you want to buy or sell. You can even leverage a network’s partnership with banks to finances your transactions. The Deloitte 2022 Insurance Industry Outlook says that the insurance industry is expected to experience accelerated growth in 2022. This is great news, but it doesn’t necessarily mean that everyone in the insurance industry is going to benefit. Insurance agents need to find a way to tap into this growth while anticipating and navigating risk. A network can help you INSURANCEJOURNAL.COM

do it. As an independent agent, it can be challenging to grow your business when you’re up against larger players, but a network can give you the tools you need to fuel growth.

The Bottom Line: A Network Can Help You Achieve Next-Level Goals

The insurance industry is changing rapidly. Whether you’re just starting out and need to get a foothold in the industry or you’re an experienced insurance professional who is trying to stay one step ahead of disruption, a network can help you grow your business. Ask yourself these questions: Could some additional support help you achieve your goals this year? Could you benefit from the carrier access, training, connections and strategic consulting that a network could provide? If you want to accelerate your success and take your business to its full potential, then now is the right time to consider partnering with a network. Taylor is executive vice president, Sales and Distribution, with Smart Choice.

Advertisers Index Academy of Insurance ijacademy.com 51 Applied Underwriters www.auw.com 2, 3, 52 Great American Insurance Group www.gaig.com 5 Guard Insurance Companies www.guard.com PLG5 James River Insurance Company www.jamesriverins.com PLG7 Lighthouse Property Insurance Corp. www.lighthousepropertyins.com SC3, S1 M.J. Hall & Company www.mjhallandcompany.com W1 Monarch E&S Insurance Services www.monarchexcess.com W3 Nationwide Mutual www.nationwide.com 36 PersonalUmbrella.com www.personalumbrella.com 13 Philadelphia Insurance Companies www.phly.com 7 PPIB - Professional Program Insurance Brokerage www.tattoo-ins.com PLG11 RPS - Risk Placement Services www.rpsins.com W2 SIAA www.siaa.net 9 Texas Mutual www.texasmutual.com SC1 Victor Insurance Managers, Inc. www.schinnerer.com PLG9 WSIA - Wholesale & Specialty Insurance Assoc. www.wsia.org 39

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February 21, 2022

Amerigroup Insurance Company 2505 N Hwy 360, Suite 300 Grand Prairie, TX 75050

Chiron Insurance Company 808 Hwy 18 W., P.O. Box 370 Algona, IA 50511

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

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

February 21, 2022

SUNZ Insurance Company 1301 6th Ave West Bradenton, FL 34205

MTAW Insurance Company 1209 Orange Street Wilmington, DE 19801

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

February 21, 2022

Greystone Insurance Company 300 First Stamford Place Stamford, CT 06902

Garrison Property and Casualty Insurance Company 9800 Fredericksburg Road San Antonio, TX 78288

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

FEBRUARY 21, 2022 INSURANCE JOURNAL | 49

Closing Quote Building Digital Relationships with Insurance Customers — A Good Website Is Not Enough

oes my

agent understand my particular risks? By Chip Bacciocco Will they make sure my coverage doesn’t lapse? Are they thinking about my account regularly, or only when it’s time to renew? These are common questions insurance customers think about. So it’s part of every agent’s job to demonstrate an appropriate level of personal attentiveness and diligence regularly. That’s where digital technologies can help. The central objective of any agent/client relationship: continuous worry-free insurance. Strong relationships are built on a level of trust. While most agents are accustomed to fostering strong customer connections through in-person interactions, building and growing digital relationships is a whole new world. More customers are taking their insurance shopping online. On TrustedChoice. com’s own platform we’re seeing a record number of consumers shopping for insurance online, and we doubled the number of agency recommendations we provided in 2021 compared to the year before. But too often, digital relationships have been whittled down to websites and online quote requests. Lasting online connections are more complex. From prospecting to buying to renewing insurance, embracing more creative forms of digital will enhance the

agent-client relationship.

Three Phases of a Digital Relationship

The digital relationship can be broken down into three phases: the customer acquisition phase; the customer nurturing phase; and the customer renewal and retention phase. The customer acquisition phase traditionally has been given a lot of attention. It is how agents attract new customers. To do so successfully online, agents need to have a strong digital footprint that includes search engine optimization (SEO), a well-designed interactive website, and online customer reviews. Agents also need to be responsive in internet time. This means that once a prospect contacts the agency, someone responds almost immediately letting the prospect know the request has been received and is being worked on. When a new customer finds the agency and engages with them, it’s a transaction, not a digital relationship — yet. Next comes the digital nurturing phase, a vital part of the process when trust is established. Nurturing involves personalized communications with the customer to show genuine understanding and ongoing custodial concern for the customer’s risk situation. Finally, there is the renewal and retention phase. After an agent establishes trust with a customer, they need to do more than

just reach out to that customer once a year with a renewal invoice. Agents need to check in regularly to make sure their client’s risks haven’t changed, to share relevant tips and best practices, and to provide updates on how the insurance portfolio is being managed.

Too often, digital relationships have been whittled down to websites and online quote requests. One-on-One Personal Interaction in Digital Form

To master each phase of the digital relationship, agents need to combine technology with the same one-on-one personal interaction that is the hallmark of the independent agent experience. A good website and Facebook page are not enough. These assets will help agents get found online, but once located they still need to talk with the client — via phone, text or email — and promptly respond to all requests. Agents should encourage customers to leave online reviews, which both help prospects get more

background on the agency and help boost an agency’s SEO. Strong digital relationships require phone communication — voice-to-voice or texting — and email. Being responsive and communicating with clients the way they prefer is a must. When the phone rings, make sure someone answers it and directs the customer to an available agent. Have a process so that online inquiries are responded to within minutes, not hours. Nurturing requires regular communication between the agent and customer. Outreach should be customized to meet the customer’s needs. This doesn’t mean that agents must reach out individually to each customer. Email automation platforms enable agents to program messages and have customization fields that can personalize messages for each customer. Progress during the customer nurturing phase will trickle down and improve the digital relationship during the renewal and retention phase. Insurance customers don’t want to hear from their agent only at the time of renewal. Ongoing communication and regular check-ins are opportunities for agents to demonstrate their value. A strong digital relationship focuses on building and reinforcing trust. It extends throughout the entire client lifecycle. Bacciocco is the CEO of TrustedChoice. com.

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