Insurance Journal West 2022-08-15 by Insurance Journal

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August 15, 2022 • Vol. 100 No. 15

Contents News & Markets

Global Commercial Insurance Rates Rise 9%, Continuing Moderating Trend: Marsh

Agents Expects Big Jump in Online Commercial Insurance Shopping: Survey Reports

U.S. Crop Writers Post Record Premium Growth: AM Best

Idea Exchange

Special Report

A 12 Step Program for Exploding Agency Growth

Spotlight:

How Should the Cyber Industry Should Be Thinking About Digital Privacy Post-Roe v. Wade?

The Case of the Chipped Diamond

Spotlight:

Auto Claimants Waiting Longer for Collision Repairs

The Competitive Advantage:

The Continued Importance of Trust Monies, Correct Accounting, and Doing Business with Stable Insurance Companies

Special Report:

101 Sales, Marketing & Agency Management Ideas

How the Supply Chain Crisis Is Heightening Risk Exposures in Commercial Lines

Closer Look:

Potential Pitfalls for Nonprofit Organizations

Closing Quote:

Solving Climate Change Starts with C-Suite Leadership

Departments 6 Opening Note 18 Business Moves 4 | INSURANCE JOURNAL | AUGUST 15, 2022

20 Figures

21 Declarations

24 People

27 My New Markets

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Opening Note Write the Editor: awells@insurancejournal.com

Chairman of the Board Mark Wells | mwells@wellsmedia.com Chief Executive Officer Joshua Carlson | jcarlson@insurancejournal.com

ADMINISTRATION / CIRCULATION

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

EDITORIAL

Agents Win in Commercial Lines

ndependent agents once again show they continue to command the commercial insurance market. The independent agency channel placed 62% of all property/casualty insurance written in the U.S., according to the recently released Big “I” 2022 Market Share Report, which compiles and analyzes property and casualty premium data from AM Best and provides insights for agencies and carriers on current market shares by distribution types. While independent agencies are the clear leaders in commercial lines, there is plenty of opportunity for growth within the personal lines sector. The report revealed that independent agencies place just 37% of all personal lines premium in the nation. The other property/casualty insurance distributors pale in comparison to independent agencies: exclusive captives represent just 21% of the total P/C premium while direct channels represent 16%. Other distribution accounts for 1.% of the market. “The demise of the independent agency channel has been predicted by various sources for many years, but the Market Share Report affirms the reality that independent agents have and continue to place the majority of all P&C business,” says Chris Boggs, Big “I” vice president of agent development, education and research. “In particular, independent agents continue to prove their dominance in commercial lines.” Of the $765 billion in total premium written in the U.S., personal lines accounted for about 50% of the total premiums, just over 38% comes from commercial lines, and the remaining 12% is “unclassified” coverage that cannot be easily categorized as either personal or commercial lines. Independent agents place approximately 85% of this “unclassified” business. Within the top 10 lines written by independent agents, workers’ compensation was the only line that did not see at least some growth in the percentage written by the independent agency channel over the five years ending in 2021. All other lines saw the percentage written by independent agents remain steady or grow.

'The demise of the independent agency channel has been predicted by various sources for many years, but the Market Share Report affirms the reality that independent agents have and continue to place the majority of all P&C business.'

Editor-in-Chief Andrea Wells | awells@insurancejournal.com National Editor Chad Hemenway | chemenway@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: Elizabeth Blosfield, Angelique Brelsford, Erica Gage, Jim Sams, Brynn Ochoa and John Papa, Seth Rachlin Columnists: Chris Burand, Tony Caldwell

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 Sr. Sales & Marketing Coordinator Laura Roy | lroy@insurancejournal.com Marketing Administrator Alberto Vazquez | avazquez@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com

DESIGN / WEB / VIDEO

V.P. of Design Guy Boccia | gboccia@insurancejournal.com Web Team Lead Josh Whitlow | jwhitlow@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Jason Chipp | jchipp@wellsmedia.com V.P. of New Media 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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Andrea Wells Editor-in-Chief 6 | INSURANCE JOURNAL | AUGUST 15, 2022

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published 22 times annually by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 100, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 202 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Dept, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: Contact (800) 897-9965 x125 or visit insurancejournal.com/reprints

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News & Markets Global Commercial Insurance Rates Rise 9%, Continuing Moderating Trend: Marsh

lobal commercial insurance prices increased 9% in the second quarter of 2022 (down from an 11% increase in Q1), continuing a trend of moderating rate increases that began in Q1 2021, according to the Global Insurance Market Index released by insurance broker Marsh. Average price hikes across most regions moderated due to slower rates of increase, and some decreases, in certain financial and professional lines, Marsh said. Cyber insurance pricing continued to rise significantly, although the pace of increase slowed in the quarter, to 79% in the U.S. and 68% in the UK, compared to 110% and 102%, respectively, in the prior quarter. The UK, with a composite pricing increase of 11% (down from 20% in Q1 of 2022), experienced the largest decline in average price increases.

8 | INSURANCE JOURNAL | AUGUST 15, 2022

In the U.S., prices increased by 10% (down from 12% in Q1 2022), in Pacific by 7% (down from 10%), in Latin America and the Caribbean by 5% (down from 6%), in Asia by 3%, and by 6% in Continental Europe (both the same as the previous quarter). Among other findings, the Marsh survey noted: • Global property insurance pricing was up 6% on average in the second quarter of 2022, down from a 7% increase in Q1 2022. • Casualty pricing was up 6% on average, compared to 4% in the previous quarter. • Overall pricing in financial and professional lines, driven by cyber, again had the highest rate of increase across the major insurance product categories, at 16%. However, this was down from 26% in the previous quarter. • Rates for directors and officers insurance

declined in the U.S., UK and Pacific. • The adequacy of valuations for insured or replacement values has become a focal point for insurers, driven by concerns about inflation, supply chains, and labor shortages, as well as claims inflation in cases where adjusted loss amounts exceed reported values. • In the U.S., clients with significant losses or exposure to secondary catastrophe perils – including wildfire, convective storm, and pluvial flood – typically experienced above average increases. “At a time of global business uncertainty ... We are also seeing the impact of rising inflation on insured values and exposure growth, which has the potential to impact pricing and insurer appetite,” commented Lucy Clarke, president, Marsh Specialty and Global Placement, Marsh, in a statement. INSURANCEJOURNAL.COM

City of Hope’s National Insurance Industry Council

SPIRIT of ® LIFE GALA SPIRIT SPIRIT SPIRIT of of of

City City City of of Hope’s of Hope’s Hope’s National National National Insurance Insurance Insurance Industry Industry Industry Council Council Council

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HARD HARD HARD ROCK ROCK ROCK HOTEL, HOTEL, HOTEL, SAN SAN DIEGO, SAN DIEGO, DIEGO, CALIFORNIA CALIFORNIA CALIFORNIA

Honoring Honoring Honoring Joel Joel Joel Cavaness Cavaness Cavaness

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PRESIDENT, PRESIDENT, PRESIDENT, PRESIDENT, RISK RISK PLACEMENT RISK RISK PLACEMENT PLACEMENT PLACEMENT SERVICES SERVICES SERVICES SERVICES INCINC INC INC

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Visit cityofhope.org/niicspiritoflife or email bkapanpour@coh.org for registration and sponsorship info.

Since 1997, Joel D. Cavaness has served as President of Risk Since Since Since Since 1997, 1997, 1997, 1997, Joel Joel Joel D. Joel D. Cavaness D. D. Cavaness Cavaness Cavaness hashas served has has served served served as as President as as President President President of of Risk of of Risk Risk Risk Placement Services, Inc. (RPS). After cofounding RPS as a scratch

News & Markets Agents Expects Big Jump in Online Commercial Insurance Shopping: Survey Reports

majority of independent insurance agents (53%) are expecting a significant increase in online commercial insurance buyers over the next three years, according to a survey from Semsee, a platform for small-commercial quoting, and TrustedChoice.com, a digital marketing platform for independent agents and brokers. The new study of independent agents focused on the ways agents find and win new commercial insurance business. Overall, 42% of agents surveyed say they are seeing an increase in commercial opportunities since the start of the pandemic in early 2020. And while the survey found that agents are generally pleased with the marketing and sales technologies they’re using today, many recognize they need to make significant improvements to become even more digital. Search Engine Optimization (SEO), new and faster ways to assess insurer appetite, and efficiently obtaining quotes from multiple carriers were all cited as areas needing the most improvement. “The survey shows that agents have clearly become more digital in the last two years, especially in terms of leveraging virtual communications technologies like videoconferencing and e-signature tools, which is a testament to the adaptability of the IA channel,” said Chip Bacciocco, CEO, TrustedChoice.com. “And when it comes to sales and marketing, there are still opportunities to expand what they’re doing, both in terms of finding new business opportunities and efficiently closing those deals.” Winning and placing new business is a particular challenge for agencies that offer commercial lines insurance, according to Philip Charles-Pierre, CEO, Semsee. “Business leaders have told us that they want to see multiple policy options from agents,” Charles-Pierre said. Yet finding markets and getting quotes can be a time-consuming process for agents. “Three-quarters of agents told us they’re using online portals to get this infor10 | INSURANCE JOURNAL | AUGUST 15, 2022

mation, meaning they’re entering data multiple times,” he said. “Many agents said they also rely on experience with specific carriers to place business today, a process that is not likely to work well in the future as insurance products change and they target new markets.”

Room for Improvement

More than half — 60% — of agents rate their digital customer-facing capabilities as “good” or “excellent” today, the survey revealed. But agents are slightly less enthusiastic when it comes to carriers’ agent-facing technologies, with 47% rating them “good,” 35% “average,” and just 6% “excellent.” Agents cite lack of consistency from

portal to portal, limited interaction with underwriters, and no up-front indications about whether or not the carriers will accept new business as the biggest concerns. One opportunity for finding new business is SEO. The survey found that 49% currently use SEO but agencies’ SEO understanding and lack of time for planning remain challenging. The majority of respondents don’t have an SEO strategy or are not sure whether they have one. When it comes to winning and placing insurance business, 56% of agents say they are challenged to find a market that matches the need, and 52% explain that getting quotes from carriers, MGAs and wholesalers is a barrier for new business. INSURANCEJOURNAL.COM

Dear Reader:

very business has a story to tell. For many corporations, small and large, that story ties closely to the personal lives of their founders. Throughout Insurance Journal’s history, we have come to know and a ppreciate many of the unique stories in our industry. And year after year, we have watched as our advertisers’ and readers’ companies have grown and changed.

As a leading industry news and information source, we are not able to profile all of the corporations that cross our path. Our position as journalists sometimes makes it difficult as well. Consequently, we have created this special supplement to allow our clients, and some of the corporations you may work with on a daily basis, to tell their story ... in their own words. We hope you find this supplement interesting and informative. Best wishes from all of us at Insurance Journal.

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AUGUST 15, 2022 INSURANCE JOURNAL | 11

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Business Moves firm. Hilb Group has grown through acquisitions, having completed more than 135 acquisitions with over 100 offices in 22 states. Hilb Group is rated as a Top 100 P/C Independent Agency by Insurance Journal.

Hub, Stop Loss Brokers

National

Lemonade, Metromile

Digital insurer Lemonade said it has closed of the acquisition of pay-per-mile car insurance provider Metromile in an all-stock transaction. Metromile shareholders received 7.3 million Lemonade shares, while Lemonade received a business with over $155 million in cash, over $110 million in premiums, an insurance entity licensed in 49 states, and a team it said is “unsurpassed in harnessing precision data for auto insurance.” Lemonade announced the planned deal in November 2021, just a week after launching Lemonade Car in Illinois. The AI-powered insurance company includes renters, home, pet, life and auto in its product suite. In a letter to shareholders early this year, Lemonade executives said to expect peak losses in 2022. However, the forecast did not include the impact of Metromile acquisition. Lemonade said most Metromile employees will transition to roles at Lemonade, and Metromile CEO Dan Preston has assumed the role of senior vice president of strategic initiatives. The Metromile app and brand will continue in-market until all customers can be seamlessly transitioned to the Lemonade app and brand. Metromile common stock will cease trading on NASDAQ.

East

World Insurance, Coverage Specialists Insurance brokerage World Insurance

18 | INSURANCE JOURNAL | AUGUST 15, 2022

Associates reports that it has acquired Coverage Specialists, Inc. of Pompton Plains, New Jersey. Coverage Specialists is a 35-year-old family-owned agency founded in 2010 that provides property/casualty insurance with a focus on the trucking and transportation industry. World Insurance Associates is headquartered in Iselin, New Jersey. Since its founding in 2011, World has completed 153 acquisitions and has more than 250 offices across the country.

Hilb Group, King and Cushman Agency

The Hilb Group has acquired Massachusetts-based King and Cushman Agency, further expanding the company’s presence throughout New England. Based in Northampton, King and Cushman has served the area for nearly 100 years, offering personal and commercial property/casualty insurance. Agency Principal Scott King and his team will join Hilb Group’s New England regional operations. In 1926, the Franklin King Jr. Insurance Agency was opened in Haydenville, Massachusetts. In 1932, the office moved to Northampton. In 1947, King teamed with Albert Cushman, then president of Northampton National Bank, to form what is known today as King & Cushman Inc., which has been a family run business. King & Cushman acquired the Francis P. Lyons Insurance Agency in 1986. The Hilb Group, headquartered in Richmond, Virginia, is a portfolio company of The Carlyle Group, a global investment

Global insurance broker HUB International Ltd. reported that it has acquired the assets of Stop Loss Insurance Brokers, Inc. and Berkeley Insurance Brokers, Inc. Located in Boston, Massachusetts, Stop Loss Insurance Brokers is an independent broker for medical stop loss for the self-funded municipal market and businesses throughout Massachusetts and New England. Shawn McLaughlin, president of Hub New England, said that Denise Doyle, president of Stop Loss Insurance Brokers, and the firm’s team will join Hub’s benefits practice. Headquartered in Chicago, Illinois, Hub International has more than 14,000 employees in offices located throughout North America.

Midwest

PCF Insurance Services, Zinc Insurance

PCF Insurance Services acquired Zinc Insurance in Solon, Ohio. Zinc specializes in insurance and risk management services for the trucking, construction, contracting, and motorsports industries. Lehi, Utah-based PCF Insurance Services is a consultant and insurance brokerage firm offering an array of commercial, life and health, employee benefits, and workers’ compensation services.

West

EIS, Metromile

EIS, a system and digital insurance platform provider, has acquired San Francisco, California-based Metromile's Enterprise Business Solutions, a SaaS-based claims automation and fraud detection system from Lemonade. The company expects the acquisition of the EBS assets to expedite EIS' entry into new markets. INSURANCEJOURNAL.COM

News & Markets U.S. Crop Writers Post Record Premium Growth: AM Best

remiums in the federal multi-peril crop insurance (MPCI) program surged in 2021 to a record high of $14.9 billion, an increase of nearly 40% over the previous year, according to an AM Best report. The new Best’s Market Segment Report, titled, “U.S. Crop Writers Benefit From Rising Commodity Prices and Innovation,” said private crop insurers also experienced a record-high jump in premium as well, to $1.3 billion from $1.1 billion in 2020. Private crop products largely consist of crop hail insurance and other covers that are not government-subsidized, and can be combined with MPCI or other protections to reduce deductibles and increase coverage up to the actual cash value of the crop. The MPCI program covered more than 444 million acres in 2021, with an estimated value of more than $150 billion. “Commodity prices have risen significantly since 2019, driving MPCI rate INSURANCEJOURNAL.COM

increases and solid premium growth,” said Connor Brach, senior financial analyst, AM Best. “Losses stabilized due to more favorable growing conditions as well as rising prices.” Revenue policies make up the bulk of the premium for the MPCI program, according to the report, so the loss ratio for revenue products has the most significant impact on the overall results of the program. In 2019, the loss ratio for revenue policies peaked at 106.7 amid unprecedented prevented planting claims, but has been much lower the past two years, dropping to 58.6 in 2021. The combined ratio of MPCI writers was 94.9 in 2021, down from a peak of 108.6 in 2019, while private crop insurers recorded a combined ratio of 122.0, a 24.9 percentage-point improvement from the previous year. Despite the improved segment performance, challenging market and macroeconomic conditions, including

inflation and rising costs for fertilizer, diesel, herbicides, labor and other inputs, are pressuring farmers’ returns. “Higher diesel prices have had a particularly significant impact on farmers, as they rely heavily on diesel for food harvesting and transport,” said David Blades, associate director, industry research and analytics, AM Best. “Supply chain bottlenecks also has limited the availability of new machinery, as well as parts to maintain older equipment, while higher interest rates are raising borrowing costs for expanding or reinvesting in a farm.” Innovative technology, such as drone and robotic tools, has enhanced farming efficiency and productivity, diminishing the industry’s sensitivity to weather extremes and natural biological threats, to the benefit of crop insurers. Irrigation drones can adapt to variables such as altitude, types of plants being grown and weather conditions. AUGUST 15, 2022 INSURANCE JOURNAL | 19

Figures

$67.49 Million That’s how much Under Armour has agreed to pay to resolve a lawsuit filed two years ago against Under Armour in U.S. District Court in Los Angeles for breach of contract. The settlement was reached in late May and approved by the University of California’s Board of Regents.

$13.1 Billion

190

The million dollar amount in cryptocurrency stolen from U.S. crypto firm Nomad in early August, researchers say. Crypto analytics firm PeckShield told Reuters $190 million worth of users’ cryptocurrencies were stolen, including ether and the stablecoin USDC. Other blockchain researchers put the figure at over $150 million. In March, hackers stole around $615 million worth of cryptocurrency from Ronin Bridge, used to transfer crypto in and out of the game Axie Infinity. 20 | INSURANCE JOURNAL | AUGUST 15, 2022

The amount Louisiana insurers have paid or reserved to pay on Hurricane Ida claims through June 30, 2022, according to the Louisiana Department of Insurance. Policyholders filed 460,709 claims of all types from Hurricane Ida as of the end of June. Of those, 299,440, or 65%, were closed with payment amounting to $9.8 billion. Paid losses for property claims were $6,217,684,225, the most of any category. Jefferson Parish reported the highest number of claims (105,135), followed by Orleans (78,115), Terrebonne (44,701) and St. Tammany (41,845).

Billion That’s the amount that Florida’s domestic property insurers spent on legal defense and cost containment in 2021, according to a market stability report published in June by the state Office of Insurance Regulation. The figure is double what insurers spent the year before.

INSURANCEJOURNAL.COM

Declarations

California Wildfires

“Homeowners should not have to scramble to find fire insurance while suffering the effects of a wildfire.” — California Insurance Commissioner Ricardo Lara, explaining his order to insurers to preserve residential insurance coverage for the county of Mariposa following Gov. Gavin Newsom’s emergency declaration for wildfires in the area.

ACV Calculations Complaint

“By depreciating labor costs from its ACV calculations throughout Alabama, State Farm has engaged, and continues to engage, in a systematic and unlawful pattern of underpayment of insurance claims.” — Part of the complaint in a class-action lawsuit filed by Alabama policyholders against State Farm Insurance. The carrier settled the suit for an undisclosed amount in July.

INSURANCEJOURNAL.COM

Conservative Values

Victory for Workers

“We felt the conservative customer was slowly being kicked to the side. … There are insurance companies that support and contribute to causes that we wouldn’t necessarily support or give to.” — Tony Lani, CEO, co-founder and spokesman for insurance agency America First Insurance Group, which claims it is the country’s first conservative insurance group. Lani, a second-generation insurance agent with over 25 years’ experience in the industry, told Insurance Journal that Dallas-based AFIG is “unapologetically conservative” and will serve conservatives’ needs and values.

“This was a tremendous victory for Maryland workers. When the boss tells workers to do something, even outside of their regular duties, they are working, and now they will get paid.” — Brian Markovitz, a principal at the Joseph, Greenwald & Laake law firm, who represented workers seeking unpaid and overtime wages under the Maryland wage and hour law, said of a 7-0 decision by the Maryland Court of Appeals. The court ruled Maryland’s wage and hour law may extend beyond the time an employee spends at a prescribed workspace to include time spent getting to the work site using transportation required by the employer.

Kickback Suit Hits Impasse

Hurricane Protection

“The government never had any evidence that the alleged kickbacks influenced his decisions.” — James G. Martin, attorney for Dr. Sonjay Fonn, said the Missouri orthopedic surgeon stood to pay $5.5 million in a kickback lawsuit until a federal appellate court overturned the jury verdict. Fonn is accused in a whistleblower lawsuit of taking kickbacks from a spinal implant distributor owned by his fiancée. An 8th Circuit Court of Appeals panel ruled that improper instructions were given to the jury that found Fonn of Cape Girardeau and distributor Deborah Seeger liable for violations of the federal False Claims Act. The panel said the jury should have been told that the government must show not only that Fonn accepted kickbacks, but also that the payments influenced his decision to use those particular implants.

“The more land I have between me, wherever I’m standing, and the Gulf of Mexico as a hurricane is approaching, the better I feel, the better off we are.” — Bren Haase, executive director of the Louisiana Coastal Preservation and Restoration Authority, which recently oversaw the completion of one of the biggest coastal restoration projects in the state’s history. The authority announced completion of the addition 1,000 acres of habitat to sites in the Terrebonne Basin and about 256 acres of beach and dune and 143 acres of marsh on West Grand Terre Island. Barrier islands and marshes slow storm surge, so the work protects people and buildings on shore while providing habitat for plants and animals.

AUGUST 15, 2022 INSURANCE JOURNAL | 21

Spotlight: Cyber How Should the Cyber Industry Should Be Thinking About Digital Privacy Post-Roe v. Wade? By Elizabeth Blosfield

he U.S. Supreme Court’s June overturning of the 1973 Roe v. Wade decision protecting women’s constitutional right to an abortion has brought with it reports of growing digital privacy concerns. Most of the concerns center on individuals’ collected data due to things like location tracking, text messages, search histories and emails, as well as period and ovulation-tracking apps. But concerns have also been raised around how big tech and insurance companies, including insurance tech providers, are safeguarding personal data and rethinking their own cybersecurity in the process. “If you are a person who works with abortion providers right now in the United States, then you are aware that their data is under attack,” said Eva Galperin, director of cybersecurity for nonprofit The Electronic Frontier Foundation, on a recent episode of The Insuring Cyber Podcast. “So,

To listen to the Insuring Cyber Podcast, visit: https://www.insurancejournal.tv/ videos/20800/

the threat to them is extremely real, and they have been taking it seriously for a very long time. And I don’t expect that threat is going to be lessened anytime soon. In fact, I think it’s much more likely that things are about to get much, much worse.” Dan Burke, national cyber practice leader at insurance brokerage and consulting firm Woodruff Sawyer, said earlier in the episode that although an increase in cyber threats against healthcare facilities and insurers has not yet been seen, public attention regarding the overturning of Roe v. Wade could incentivize attackers. “It’s very easy to see it is generating a lot of attention and a lot of headlines,” he said. “And when that happens, we tend to see an increase in attacks on companies that are caught up in that media narrative.” Galperin said that with this in mind, it’s important

22 | INSURANCE JOURNAL | AUGUST 15, 2022

for companies — whether it’s healthcare providers, insurers or tech companies — to be thinking several steps ahead about their cybersecurity. “The reason for that is because companies are a big ship, and turning the ship around is a slow process,” she said. “You cannot change everything about the way that your platform works or your product works tomorrow in response to new restrictions or new demands for user data. What you need to do is you need to look at the existing law and you need to look at what kind of laws are being proposed right now.” Burke added that renewed concerns around digital privacy will likely give insurers more opportunities to consider the potential for penalties associated with data privacy law non-compliance. “It certainly is an opportunity,” he said. “I do think it is another example of this wave

of privacy regulation really impacting what’s going to happen in cyber insurance in the future.” Although the future of the cyber insurance industry remains to be seen, he said the steps cyber insurers have taken in the past to advocate for digital privacy are paying off. “I think that’s one of the things where cyber insurance has played a really big role over the last couple of years, is helping people understand where they’re falling short on cybersecurity measures that can protect data like this sensitive healthcare data,” he said. “Cyber insurance carriers have gotten really strong at helping [companies] understand the technology shortcomings they have in protecting access to their network and protecting their employees and protecting all the data that they hold.” However, Burke believes cyber insurance underwriting around digital privacy risk still INSURANCEJOURNAL.COM

has a long way to go. “So much of cyber insurance underwriting today is focused on security controls and the ways in which companies can improve their security posture to prevent an attack from ever happening, and yet little underwriting is truly dedicated to what I think are some of these very significant digital privacy concerns,” he said. “The carriers in my mind have over-indexed toward security controls because it’s tangible. It’s something they can easily judge companies on.” He said underwriting digital privacy requires a different lens, through which insurers differentiate strong controls versus weak controls and use that as a method to risk select

INSURANCEJOURNAL.COM

which companies are better controlled than others. “I’m not sure all cyber insurance carriers have really gotten their arms around that yet,” he said. Although the cyber insurance industry has been advocating for the importance of things like multifactor authentication, endpoint detection and response tools, and strong backup policies and procedures, he added it’s important that insurers practice what they preach. “It’s not lost on me that insurance companies don’t always take the medicine that they’re prescribing to others, so there are a number of things where I think the insurance companies could be better,”

Burke said. “Certainly for healthcare insurance companies, they do have a lot of that data. It is very sensitive. A lot of health insurers are really consumer-facing companies, and the biggest risk for any consumer-facing company when it comes to a cyberattack is the reputational damage that they’re going to be subject to as a result.” That said, Galperin challenged the insurance industry to go a step further and think beyond the reputational harm that could result from cyber threats or data privacy law non-compliance and prioritize minimizing risk for consumers first. “It is not uncommon for insurance to essentially err on

the side of caution, and in this particular case, I would like them to rethink what caution looks like — whose risk you’re trying to minimize. Because very often, the insurance industry is trying to minimize the risk to the insurer. I would really like for them to reframe it as minimizing risk to their clients,” she said. “I think that insurance companies and the makers of these platforms and apps are probably under incredible, tremendous pressure to protect themselves first and foremost, and I think that is profoundly misguided,” Galperin said. Blosfield is deputy editor of Carrier Management, the sister publication to Insurance Journal.

AUGUST 15, 2022 INSURANCE JOURNAL | 23

People National

Distinguished Programs,

a national insurance program manager, promoted Donna Percival and Erick Schmitt to the newly created position of regional vice president of sales. Percival will oversee sales initiatives in the West and Midwest U.S., while Schmitt will manage the Central and Eastern territories. Percival joined Distinguished as a regional sales executive in 2020. Previously, she served as a business development manager at Westchester, a Chubb Company, where she grew the company’s broker relationships in Northern California and the Pacific Northwest. Schmitt also joined Distinguished in 2020. Prior to this, he worked at Markel Specialty as a senior sales manager, where he worked directly with retail agents to place workers’ compensation accounts. Property/casualty insurance broker NFP, hired Seth Michaelson in the Energy practice within NFP’s specialty business. Michaelson holds the title of vice president, Energy and Marine, and supports the ongoing growth of NFP’s specialty practice. Michaelson brings more than 13 years of experience, serving most recently as managing director at Catto & Catto, a division of HUB International of Texas Inc. Prior to this, he held a variety of brokerage, risk management and business development roles with several organizations, including Wortham Insurance and WTW. Insurance broker WTW appointed five new industry leaders within its North

American natural resources business. They are based in Houston. Bill Helander, the new head of Natural Resources North America, Houston Corporate Risk & Broking, and managing director, joins WTW from Marsh, where he served as the specialty leader for the Natural Resources sector. WTW appointed Matt Gelotti as growth leader, Natural Resources, North America, and managing director. He is a former business development leader with Aon’s Houston office. Joining WTW as managing director and head of Client Management, Natural Resources, North America is Chris Mulvey. He formerly as enterprise client leader for the Natural Resources space in Aon’s Houston office. WTW appointed Clayton Corbett as senior director and global client advocate, Natural Resources, North America. He previously served as senior vice president and client executive with Marsh’s Specialty practice. William Hoke joined WTW as senior director and producer, Natural Resources, North America. Hoke joins WTW from USI, where he served as a producer in Natural Resources.

Acrisure Re, the reinsurance division of global insurance broker and fintech platform Acrisure, appointed Chuck Furlong as senior vice president and broker. In his new role, Furlong will focus on expanding Acrisure Re’s reinsurance capabilities in its North American property/ casualty classes of business. He will also work with internal and external stakeholders to ensure quality solutions and service is provided to all its reinsurance clients. Furlong has more than 25 years of industry experience and has held various management level roles. He joins Acrisure Re from Guy Carpenter, where he was most recently head of U.S. casualty facultative reinsurance.

Markel Corp. appointed Tim Pasik managing director,

AXA XL promoted Christopher Lee to lead its

Commercial Casualty Product Lines leader for Markel Specialty’s insurance operations. In his new role, Pasik will provide Tim Pasik oversight for Markel Specialty’s commercial primary and excess — retail and whole-

24 | INSURANCE JOURNAL | AUGUST 15, 2022

sale — product lines. Pasik joined Markel in 2014 and most recently served as managing director, Commercial Excess Casualty, Wholesale. He has nearly 40 years of insurance industry experience and has successfully developed underwriting guidelines, established rating parameters, and set authorities for field underwriters. Pasik is based in Markel’s New York City office.

excess and surplus property insurance business. Based in New York, Lee assumes underwriting management responsibility of AXA XL’s book of E&S property business. He joined AXA XL in 2013 as an equipment breakdown and commercial property underwriter before moving into E&S underwriting in 2018. Lee

began his insurance career as an EB underwriter with Zurich North America. AXA XL also appointed Matthew Waters as head of U.S. Middle Market to lead an initiative to expand its reach in the U.S. commercial insurance market. He is based in Boston. Waters joins AXA XL from Liberty Mutual, bringing more than 20 years of middle-market underwriting management experience and demonstrated leadership across various and diverse property/casualty segments including Construction and Energy. He most recently served as EVP, general manager for Liberty’s Middle Market business. In addition to his management responsibilities, he also served as an executive sponsor for several employee resource groups, including Men as Allies.

Aon appointed Rachel Perry to chief innovation officer for commercial risk in North America. In this new role, Perry will use her proven leadership skills and expertise to work across commercial risk to accelerate innovation and better address unmet client needs. Perry has more than 25 years of insurance experience and has been part of Aon since 2012. She currently serves as market leader for Atlanta, responsible for strategy, financial performance, growth, client retention, and delivering client solutions across Commercial Risk, Health, Wealth and Human Capital Solutions. She is passionate about talent development and a strong champion of diversity, equity and inclusion within the insurance industry. INSURANCEJOURNAL.COM

East

Virginia insurance agency

Choice Financial Group

appointed insurance veteran Robert J. Hilb as chief executive officer following the retirement of J. Richard Braun, founder and president of Choice. Prior to his appointment as CEO, Hilb was serving as a member of the board of directors and head of mergers and acquisitions at Choice. Hilb has more than 35 years of insurance industry experience, including founding and serving as CEO of Hilb Group. Choice is headquartered in Virginia Beach and has 18 offices in eight states. The firm is backed by Northlane Capital Partners, a middle-market private equity firm.

Crum & Forster’s credit division appointed Drew M. Kovalsky as vice president and credit underwriter. Kovalsky is responsible for the research, evaluation and underwriting of Crum & Forster’s credit insurance and alternative risk finance products for North American customers and other select jurisdictions, including single situation credit and multi-buyer trade credit insurance, as well as alternative risk finance. Kovalsky has nearly 20 years’ experience as a credit analyst. His expertise focuses on origination and underwriting of transactional credit solutions for varied asset classes, underwriting structured finance, project finance, infrastructure-related credits and municipal enterprises. Most recently, Kovalsky was vice president and credit analyst with Assured Guaranty. He is based in New York. INSURANCEJOURNAL.COM

Midwest

Canopius Group hired Roberta Sweeper as lead busi-

ness systems analyst for its new US application support team. Sweeper Roberta Sweeper joined Canopius in May 2022, bringing extensive system administration and software development project management experience in the insurance domain. Most recently, she served as the senior business systems analyst at CNO Financial Group. Prior to CNO Financial Group, Sweeper held program management, business analyst and quality assurance engineer roles for DTZ, CNA Insurance, Derivatech, the Chicago Stock Exchange, and T.M. Floyd.

Ryan Specialty announced Michael Blackshear, chief

compliance and privacy officer, will assume additional responsibilities as the head of diversity, equity and inclusion (DEI). In this newly created function, Blackshear will lead Ryan Specialty’s DEI efforts in its ongoing efforts to promote DEI at Ryan Specialty, in addition to building strong alliances within the insurance industry. Blackshear has more than 30 years of financial service and executive experience in the areas of compliance and risk management. Prior to joining Chicagobased Ryan Specialty, he was the North America chief compliance officer for Chubb Insurance Group, responsible for developing and maintaining their North American compliance program.

South Central

Houston, Texas-based RSL Insurance added Ryan Colville as an insurance advisor on the commercial business team. Colville will serve the insurance needs of business owners in the West Texas region. He previously worked in the agriculture business as an agronomy consultant and chemical, fertilizer and seed broker. RSL Insurance is an affiliate of Leavitt Group, a privately held insurance brokerage.

FIRST Insurance Funding

named Ryan Riolo as a relationship manager in Austin, Texas. Riolo has nine years of experience in developing relationships with independent agents, brokers and general agents. Prior to joining FIRST, Riolo worked at Bank Direct Capital Finance as vice president of sales. FIRST is a premium finance company with more than $10 billion in loans financed annually.

Southeast

Florida Gov. Ron DeSantis reappointed venture capitalist Erin Knight to the Citizens Erin Knight Property Insurance Corp. board of governors. Knight, of Coral Gables, was appointed a year ago and is one of three people DeSantis has named to the nine-member board. She is president of Monument Capital Management, an A-Rod Corp. company, and is part of the leadership team for

A-Rod Corp., a venture capital investment firm led by former major league baseball player Alex Rodriquez, according to Florida Politics news site. Knight previously served in executive positions at Stonegate Bank and Regions Bank.

West

Risk Strategies named Patrick Roth senior vice

president, growth leader for the Central and West regions. He is located in Colorado. Roth will be responsible for developing a sales culture, managing all levels of producers, driving organic growth strategies, and recruiting and onboarding new producers. He was most recently chief growth officer and executive vice president at Lockton. Prior to Lockton, Roth was resident sales director and senior vice president at Aon. Risk Strategies is a national specialty insurance brokerage and risk management firm.

Celia Dietrich was named to the board of directors for Pinnacol Assurance in Colorado by Gov. Jared Polis. Her appointment is contingent upon approval by the Colorado Senate once it reconvenes in 2023. Dietrich will serve in the seat designated for an individual experienced in finance or investments whose workers’ compensation liability is not covered by Pinnacol. She takes over the seat from Barbara Mellman Davis, who has retired. Dietrich is the founder of Dietrich Partners, a business consulting firm. Pinnacol is Colorado’s workers’ comp insurer.

AUGUST 15, 2022 INSURANCE JOURNAL | 25

Spotlight: Claims Auto Claimants Waiting Longer for Collision Repairs By Jim Sams

uto claimants are waiting longer for collision repairs — 4.5 days longer this spring compared to the same period last year, according to a report released by Enterprise Rent-a-Car. Enterprise extrapolated repair times by tracking the average length of collision-replacement rentals made on behalf of auto policyholders. The average was 17.7 days during the second quarter of 2022, compared to 18.2 days for the second quarter last year. While the length of rental times ranged from a low of 13.1 days in Hawaii to 22.1 days in Alaska, every region of the country saw longer wait times for repairs. Enterprise said only Hawaii, Iowa and Nebraska had increases of less than three days from the average times last year. The report says multiple factors are leading to longer repair times, including parts availability and delays, staffing, backlogs and processes. CCC Intelligent Solutions, a claims technology provider, noted a similar trend in a report updated on July 18. CCC said the average repair time for insurer direct repair programs was 15.5 days for the first six months of this year, compared to 11.3 days for the same period last year and 9.5 days for the first half of 2020. The CCC report shows the share of repairs by direct repair program shops costing more than $5,000 reached 20% in 2020, up from about 17% in 2017. “As repair costs climb, repair times grow, so the industry overall has seen an increase in repair cycle times not only

‘New OEM parts availability is still driving many delays, but the good news is there are fewer brands showing big delays,’

due to some of the delays outlined in the Enterprise report, but also because more repairs are falling within the higher dollar repair brackets where repair times are longer,” Susanna Gotsch, a senior director and industry analyst for CCC, said in an email. The CCC data shows the average wait time for repairs costing more than $10,000 was 37 days in 2021, compared to 30.3 days in 2020. Even repairs costing less than $500 took longer: 3.2 days in 2021 compared to 2.9 days in 2020. Gotsch said because of supply-chain issues, repair shops have been focusing on ensuring they have all the parts they believe are needed for repairs before they ask the customer to bring the vehicle to the shop. She said that is especially true for drivable vehicles, because if there is a parts delay after a teardown has started, the repair process essentially turns a drivable vehicle into a

26 | INSURANCE JOURNAL | AUGUST 15, 2022

non-drivable vehicle. “For non-drivable vehicles, many are towed into shops, so rental starts much sooner — and with less congested roads and higher used vehicle prices, there has been an increase in non-drivables,” Gotsch said. “Non-drivable vehicles have much longer repair times, so an increase in non-drives will drive up repair times across the board.” According to the Enterprise report, Enlyte’s Mitchell International observed that a greater percentage of collision repairs were performed on luxury vehicles, 12.9% in the second quarter of 2022 compared to 10.3% in the same period last year. Also battery-electric vehicles increased to 0.83% of vehicles from 0.63% last year, reported Ryan Mandell, director of claims performance for Mitchell. “BEVs on average have 1.3 days longer keys-tokeys cycle times.

Mandell also noted that comprehensive claims involving a catalytic converter increased to 3.5% collision repairs in the second quarter of 2022 from 1.9% in the same period last year. “Thefts of catalytic converters are being driven primarily by the increase in rare earth metal prices, which have only been exacerbated by the Ukraine-Russia conflict,” he said. Greg Horn, chief innovation officer for PartsTrader, told Enterprise that parts delivery time from original equipment manufacturers actually improved in the second quarter of 2022 from the first quarter. “New OEM parts availability is still driving many delays, but the good news is there are fewer brands showing big delays,” Horn said in the report. The Enterprise reports that average rental times dropped from 18.2 days in the first quarter of 2022 to 17.7 days in the second quarter. INSURANCEJOURNAL.COM

We are here to

Serve You MonarchExcess.com Markets For: General & Artisan Contractors, Builders Risk, Apartments, Contractors Equipment, Garage Service Risks, Cannabis Risks, Environmental / Pollution, Wholesalers / Distributors & Products Manufacturers Burbank 818-249-0100 / Fresno 559-226-0200 / Rancho Mirage 760-779-5555 / San Diego 619-521-2170 / Simi Valley 805-577-6800 San Marcos 760-891-2811 / Arizona 877-406-8026 / Hawaii 818-425-9847 / Miami, FL 305-569-6734 / Lic. #0L09546

News & Markets California Insurance Commissioner: Mercury Steered ‘Good Drivers’ Toward Higher-Priced

alifornia Insurance Commissioner Ricardo Lara announced a legal action in early August against Mercury Insurance for reportedly violating consumer protection laws, including selling Mercury’s highest-priced policy to “good drivers” instead of the lowest-priced policy for which they qualify. Lara’s action follows a California Department of Insurance investigation that reportedly found numerous areas where Mercury’s business practices harmed policyholders across its private passenger auto, homeowners, commercial auto and commercial multi-policy lines of insurance. Proposition 103 passed in 1988 by California voters mandated a 20% “good driver discount” for consumers who maintain a safe driving record. The CDI’s investigation reportedly found that Mercury attempted to evade the requirements of Prop 103 by steering good drivers into a higher-priced plan. Mercury maintains two insurers in California: Mercury Insurance Co., which charges lower rates for good drivers, and California Automobile Insurance Co., which charges higher rates and insures all

drivers. The investigation reportedly found Mercury illegally “steered” drivers to its company with the higher-priced plan, including: • Directing agents to provide quotes in its higher-priced plan using artificially low mileage, giving the appearance of lower rates. • Directing its agents to refuse to sell a lower-priced policy if a good driver had been cancelled for non-payment of premium or had an accident for which the driver was not at fault, neither of which is allowed under law. • Only offering a monthly payment option in the higher-priced plan. • Dissuading good drivers from switching to the lower-priced plan with misleading language for the nearly identical plans. The CDI also alleges Mercury overcharged businesses and homeowners in other lines of insurance through a variety of illegal practices that resulted in unfairly discriminatory rates. Mercury in an emailed response to a request for comment said the company

has been working with the CDI to address the concerns, and despite Mercury’s belief that it has not violated any laws, it has implemented operational changes at the request of the CDI. “Mercury Insurance strongly disagrees with the allegations presented in the August 1, 2022, California Department of Insurance (CDI) press release announcing an administrative enforcement action (a “Notice of Non-Compliance”) against Mercury Insurance,” the statement reads. “Mercury Insurance will continue to work with the DOI in order to resolve any outstanding issues and settle the matter, but if that is not possible it will defend itself through the judicial process.”

Pipeline Company to Pay Nearly $1M for California Oil Spill

he owner of an underwater oil pipeline that spilled some 25,000 gallons of crude into the ocean off Southern California last year will pay nearly $1 million in cleanup costs. The Orange County Board of Supervisors agreed to accept a proposed claim settlement with Amplify Energy Corp. over the costs of dealing with last October’s spill off of Huntington Beach. The ruptured pipeline spilled the oil, equal to about 94,600 liters, about 4 miles W2 | INSURANCE JOURNAL | AUGUST 15, 2022

offshore. While less severe than initially feared, the spill shuttered beaches for a week and fisheries for more than a month, oiled birds and threatened wetlands that Orange County communities have been striving to restore. Investigators believe the San Pedro Bay Pipeline that ferried crude from offshore oil platforms to the coast was weakened when a cargo ship’s anchor snagged it in high winds in January 2021, months before it ultimately ruptured Oct. 1 Houston-based Amplify Energy sued two container ship operators and an orga-

nization that helps oversee marine traffic, saying they failed to prevent the spill. The suit alleges that in January 2021 two ships dragged their anchors across the pipeline. The $956,352 settlement with Orange County includes about $238,000 for the county Public Works Department, which built sand berms and placed booms to prevent oil from polluting sensitive wetlands. Money also will go to the county’s health agency, the Sheriff’s Department that operates the Harbor Patrol, and reimburse the county for legal costs and the hiring of contractors and environmental consultants. Copyright 2022 Associated Press. All rights reserved. INSURANCEJOURNAL.COM

My New Markets Habitational Insurance Program Market Detail: Minglewood Risk has a

habitational insurance program with exclusive access to HabPro from NSM. It offers a commission level of 10% and a 72-hour turnaround time. Appointment required; $5,000 minimum premium; $100,000 maximum premium. Available Limits: Not disclosed Carrier: Arch Specialty Insurance, non-admitted, rated A+ by AM Best States: All states plus District of Columbia, except Alaska, Florida and Hawaii Contact: Jim Lelii, JimL@ MinglewoodRisk.com, 215-798-7744

Roofing & Framing Workers’ Compensation

Market Details: Insurtech Foresight

offers workers’ compensation coverage for the hard-to-place middle market and has a strong appetite for roofing with no height restrictions. Core industries include construction, manufacturing, agriculture, commercial and janitorial. Minimum premium of $25; appointment required. Available Limits: Not disclosed Carrier: Foresight Commercial Insurance, admitted, rated A- VIII by AM Best States: Arizona, Arkansas, California, Louisiana, Nevada, New Mexico, Oklahoma, Texas Contact: Christine Garza, hello@getforesight.com, 800-965-3012

Businessowners Program

Market Details: American European

Insurance Group Inc. offers comprehensive policies designed especially for owners of small to medium size businesses. The AEIG Businessowners Program (BOP) can be customized to protect businesses against losses to buildings, business property and income, as well as claims alleging bodily injury, property damage or personal/advertising injury resulting from business operations. It can also be customized to include optional coverages. BOP insurance policies written by AEIG provide some automatic coverages, which include replacement cost, no coinsurance, seasonal increase (25%); personal property off premises and in transit ($10,000); newly acquired or constructed property (BPP)

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25% up to $100,000; interior glass (included in BPP limit). Available Limits: Personal property off premises and in transit ($10,000); newly acquired or constructed property (BPP) 25% up to $100,000; some other property coverages are subject to separate limits Carrier: Falls Lake, admitted, rated A by A.M. Best States: Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island Contact: Carol Cole, ccole@aeiginsurance. com, 609-781-1242

Garage Liability / Automotive Aftermarket

Market Details: The Pearl AutoShield Plus

program through AmTrust North America is exclusive to Pearl Insurance. Preferred risks would be any type of automotive aftermarket risk, such as general repair, collision/body shops, brake, transmission, tire, glass, etc. Will also consider some heavy truck repair and dealer risks depending on account characteristics. $500 minimum premium; $500K maximum premium; appointment required. Available Limits: Not disclosed Carrier: AmTrust North America Admitted Rated A by AM Best States: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming. Contact: Jake Pearl, jake.pearl@pearlinsurance.com, 309-679-0564

Compass Marine Programs

Market Details: National Trust Insurance Services LLC offers Compass Marine Programs (CMP), a wholesale brokerage

program designed to accurately and efficiently meet the needs of clients by providing a direct approach to identifying risk and properly covering them from top to bottom for their full insurance necessities. Appointment required. Available Limits: Not disclosed Carrier: Not disclosed States: All 50 states plus District of Columbia Contact: Austin Devnew, adevnew@compassmarineprograms.com, 443-308-3003

Surety Bonds, Fidelity Bonds, E&O, D&O

Market Details: Worldwide Insurance

Specialist is a surety bond company that writes for 10 different carriers. The broad range of markets allows the company to place difficult risks and renewals with a minimal amount of additional information. Worldwide handles all bonds except bail bonds. Available Limits: Not disclosed Carrier: Great American and others, admitted States: All 50 states plus District of Columbia Contact: Wayne Gutches, wayne@ wwisinc.com, 602-749-0702

This section brought to you by Insurance Journal's sister website:

www.mynewmarkets.com

Need a Market? Find It. FAST AUGUST 15, 2022 INSURANCE JOURNAL | 27

Special Report: Sales & Marketing

Be Kind. No matter how educated, talented, or rich you are, how you treat people ultimately tells all. - Jonathan

Friedland, Universal Property & Casualty Insurance Company

2. Be happy! Be happy with who you are! Be happy to represent your company! Be happy to help an agent/client with their needs! Life is too short to be stressed and unhappy. Work with a smile — it translates in your voice and in emails. – Debbie Simpson, QEO insurance Group 3.

Be Creative. Creativity is a sales and

marketing professional’s biggest asset. The more you can use it, the less effort you will need. - Carli Ackerstein, Marquee Insurance

Group 4. Scientific Method. Selling insurance is too important to do with any method not based on science. – Frank Pennachio,

ReSource Pro 5.

Customer Focused. Prioritize custom-

er service with 24/7/365 access. Offering 24/7/365 customer access can improve agency profits and value, as well as reduce expenses – all while easing the talent crunch on agency staffing. – Tony Caldwell,

One Agents Alliance 6. Recruiting Is Sales. Brand Identity +

A Strategic Plan = Successful Recruiting. What makes your agency unique? What makes your opening different? What is the candidate’s long term opportunity? These answers build your brand identity. – Mary

Newgard, Capstone Search Group 7.

Remember the Fundamentals.

Amidst all the new tools and tech, it can be easy to overthink. Remember the fundamentals and stay true to your plan. Know your customer, your desired geog-

raphy, how you want to show up in the market, and use data to track, learn, and adjust. Then become intentional about how you enable marketing efforts to meet your customers when, where, and how they want. – Chris

Cline, Independent Insurance Agents & Brokers of America. 8. Get Paid. Account managers/CSRs

are on the front line with clients every day. They should be paid for new business account rounding and presenting leads to other departments, if the new coverage is written. In personal lines we recommend a flat dollar amount per policy. In commercial lines or benefits, a percentage of the new coverage written, such as 10%-20% of the commission first year only, the amount paid depending on whether they do it alone or get help from a producer. –

Catherine Oak, Oak & Associates 9. Riches in the Niches. Focusing some

marketing efforts on a niche might seem like it will limit your potential prospects. In reality, specializing in a niche can make you a subject matter expert and the go-to insurance person for that niche, and it won’t exclude you from writing clients outside your niche. – Sam Nudelman,

Firefly Agency 10. Building Trust. Customer trust starts

at the very beginning. More insurance shoppers begin the buying process online and agencies need to build trust at the customer’s first click. Make sure your website is well-designed, easy to navigate and has clear contact information. When a customer reaches out via email or message, be responsive even if it’s just an acknowledgement of the request. – Robert

Holt, National Association of Professional Insurance Agents (PIA)

11. Website Review. Remember that your agency website is not a “set it and forget it” proposition. Review it regularly for content, updated contact information, etc. Review it for overall look and feel at least annually, if not semi-annually. Once your agency’s website starts to look stale, that’s how your agency will be perceived overall by site visitors. – Doug Coombs, SIAA

12. Get Reviewed. 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. – Chip Bacciocco,

TrustedChoice.com 13. Stop Fighting Social Media. Finally

admit that social media is a non-negotiable and it’s more than a brand-builder, it’s a sales tool. - Nola Morris, Denim Social

continued on page 30

Special Report: Sales & Marketing continued from page 29 14. Re-Purpose Your Customer Testimonials Any Chance You Get. As

the famous copywriter Gary Bencivenga said, “Nobody buys without belief.” Customer testimonials are one of the best proof elements in an agency’s marketing arsenal. Make sure you re-purpose them any chance you get in emails, websites, brochures, etc. And don’t bury them on the bottom. Move them to the top, so your prospects keep reading! – Paul Ptashnick,

copywriter & marketing consultant 15. Get Referrals. Every time agents

have a win, such as a new sale, claim paid, exemplary service performed, a referral should be asked for. That is their hour of need and when clients are most likely to give you a referral or tell others how great you and your agency is. – Catherine Oak,

Oak & Associates 16. Use Social. Utilize free social media

marketing as much as possible. Taking advantage of platforms such as Facebook, LinkedIn, and Instagram can help expand growth easily and for little to no cost. –

Brittany Shue, Burns & Wilcox 17. Be the Best. If you are going to do

something, you should be the best at it!! We identify the strengths in our staff and put them in the position that will let them shine! Insurance is much more than sales and service. There’s technology

and automation needs, training and operations, data quality control, ongoing client contact projects, legal and political, the list goes on and on! - Kristin Thelen,

Bitonti Insurance Group 18. Embrace Today. “We need

to write more easy main street business.” STOP! They don’t exist anymore ... at least enough to have the size book of business you want. It’s a complex world, embrace it. The last few years have made the workplace, relationships, politics, the world, a more complex place. It’s not changing. Embrace it. – Greg Barcomb, Ten

Eyck Group

21. Answer It. Pick up your phone

when someone calls. Sure, it could be a scammer, but it could also be your next sale! - J.D. Babuder, RT Specialty

22. Be the Expert. If you have knowledge

19. Offer Flood Insurance. Flood is the

and expertise, use it, make recommendations, and when not followed, document it and confirm with the client accordingly in writing. I believe E&O claims can be avoided by being concerned with the customers' financial security and trying to cover them to the extent one can — if they refuse or decline, fine. Just document it. – Frederick

Poulton, CEO, Poulton Associates LLC, owner of CATcoverage.com

Fisher, Fisher Consulting Group

most common natural disaster in the U.S. and too many structures are not adequately protected against this peril. Forward looking agents not only talk to all of their policyholders about flood insurance, they also understand the options available when it comes to flood insurance. – Craig

20. Claims Opportunity. The best time to ask for referrals is at the time you deliver good claims service, a visit, a check, whatever. This is the purpose of insurance and it shows that the policy they purchased, did what it was supposed to in their hour of need. If the client is commercial, like an auto dealer, ask for the name of a few of their key competitors and ask if you can use their name. If a homeowner, get the name of a few neighbors, friends or family to refer you

30 | INSURANCE JOURNAL | AUGUST 15, 2022

to. – Catherine Oak, Oak & Associates

23. Audit Your Marketing Content.

Audit your website, social media posts, advertising and outbound marketing for a 2:1 ratio. Two thirds of your content/promotion should be about them, one third about you. Highlight each in different colors. You might be shocked or pleased. – Marsha

Egan, The Egan Group 24. Go Postal. Don’t be afraid

to go postal with your marketing. In the world of so much of our marketing going digital, it can get lost in a sea of other digital marketing advertising

INSURANCEJOURNAL.COM

and with many sites getting more in-depth with their privacy rules, your message may not be seen. With postcards, or other “old school mailings,” your target market is holding your information/message in their hand! Not only is it in their hands, it sparks something inside their brain rather than just another digital marketing effort. -

signage that says: “In sales, NO doesn’t mean never! Is it NOt the Right Approach? Is there NO Budget? Is there NO Time to Implement? NO can just mean NOt Now. It’s up to YOU to figure out what your client’s NO means. – Denise Dederich,

niche and harness the power of the resources they provide like risk management know-how and vast claims handling experience. Visit prospects with these proven specialists to get familiar with operations and gain influence within your chosen niche. Growing your business in an industry you have a vested interest in can be rewarding both personally and professionally. – Larry

Wisconsin Financial Group Inc.

Chasin, PAK Programs

26. Consider the Value in Doing Good.

28. Plan for the Future. It’s never too ear-

Emmalee Sundet, Town & Country Insurance 25. Meaning of NO! I created motivational

Build your reputation as a company that gives back to its community through charitable giving, leadership and volunteerism. You’ll attract new clients and appeal to prospective employees. Ensure prospective and existing agency employees understand the benefit of working for an agency and an industry rooted in protecting others and promoting social good. – Bill Ross,

Insurance Industry Charitable Foundation 27. Passion Is Power. As you look

to build out your book of business, follow your passions to find new niches. Consider expanding your business and your expertise in an area that interests you. Work with a specialty insurer in that

ly to start perpetuation planning: Selling, merging, passing on to a partner or family member: there are more options than ever when it comes to agency perpetuation. Agents should start their perpetuation planning as soon as possible to develop roadmaps for every scenario. This ensures the business achieves maximum value.

— Mike Becker, National Association of Professional Insurance Agents (PIA) 29. Use Sales Calls as a Content Creation Tool. One of the easiest ways for marketers to create content is to attend sales calls. During these calls, you’ll learn all about customer pain points, customer objections, hot topics, and much more. Marketers can use this information to write blog posts or LinkedIn articles addressing these issues to position your agency as a thought leader.

– Paul Ptashnick, copywriter & marketing consultant 30. Renewal and Retention.

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. – Chip

Bacciocco, TrustedChoice.com 31. Do What You Love. Invest in your

staff, get to know them, and lay the foundation for them to succeed at the highest level. Allow them to do what they love instead of putting them in a position that you need to have filled. - Kristin Thelen,

Bitonti Insurance Group 32. Work Smarter Not Harder. Being true

to your brand while staying up-to-date on all the latest trends can be detrimental to you in the long run. Work on new creative ways to spread your message while staying true to who your brand is and what you can offer.

33. Call Centers. Utilizing call

service centers can save on agency customer service expenses, promote better support to clients with client retention benefits, reduce the need for hard-to-find quality full-time employees, and lighten the workload of

continued on page 32

Special Report: Sales & Marketing continued from page 31 existing staff members. - Tony Caldwell, One Agents Alliance 34. Multiple Visits. When I visit with an existing client, whether it’s a renewal or some follow up, I always try to visit one or two other businesses in the same area. I can generally use my existing client as a reference and I’m already in the area so it saves time and gas to try to pick up another client in the same area. – Steve

Wilson, Steve Wilson Insurance Agency 35. Use CE. Continuing education is a

powerful tool for referrals. You are the expert. You have a wealth of useful, relevant information about the insurance industry that can assist real estate agents in helping their clients. You can seek help to implement a CE program by finding a company that will manage it. This can save you the time you need to teach and build relationships with agents. - Megan

Stevenson, Preferred Systems Inc. 36. Personalize It. Personalization is the

future of insurance marketing. Customers who are matched to their individual needs are more likely to purchase, upsell, and cross-sell. Research from Accenture shows that 41% of consumers in the U.S. switch brands due to a lack of personalization or trust. Consumers are looking for brands that understand them and their needs through exciting new technologies that allow companies to provide better products and services. –

Alice Shi, Finaeo 37. Mondays with Mia. Mia is

a one-year-old mini poodle and comes to work with us every day. Each Monday we share a funny picture of Mia, which is our highest reached post each week. Our customers love to see Mia. – Rylan White, Star City

Insurance Agency LLC 38. Simplify It. Insurance

lingo is useful shorthand for

the team, but prospects and customers don’t appreciate it. In your firm’s style guide, write simple explanations of your most commonly used terms such as limits, umbrella, blanket, endorsement or comprehensive. With this reference, your team won’t have to reinvent the wheel when communicating, and your customers will be grateful for real-world language. -

Ronimarie Acord, Aartrijk 39. NFIP v. Private Flood. When quoting

a National Flood Insurance Program policy, be sure to offer a quote for a private flood policy as well. Not only can you offer your customers broader coverage, but you can often offer significant savings over the competition. – Craig

Poulton, CEO, Poulton Associates LLC, owner of CATcoverage.com 40. Demographics. You can use

demographics to create personalized experiences. – Alice Shi, Finaeo

41. Outsource. Outsourcing customer

access will also benefit those agencies that over or understaffed, while boosting efficiency, profitability and customer satisfaction. – Tony Caldwell, One Agents

Alliance

42. Explore Niches. If you want to

explore marketing to a niche, try finding Facebook groups related to your niche, genuinely connect and engage with group members, and create educational content for group members. - Sam Nudelman,

Firefly Agency 43. Be a Social Seller. Do what you do

best in insurance — build relationships. Social selling is using social media to sell a product or service and it hinges on relationships. Expand your network, humanize your brand and modernize your relationships on social media with a social selling strategy. - Nola Morris, Denim Social

44. Work Hard. Work harder to

understand your insureds and prospects operations and then work hard to hone your craft in explaining the exposure properly to your company partners so they can get on board. – Greg Barcomb, Ten Eyck

Group 45. Customization Requires Choices. We

can have 300 cable television channels, 100+ channels through satellite radio, and subscription services with targeted news content. So, how is it that consumers are OK with going to an insurance agent that offers a single company’s products? Part of the reason can be attributed to messaging that is typically focused on a single characteristic such as price. Saving money does resonate, particularly during inflationary times. But studies show more than ever that financial security is critically important. So be sure that your messaging points out that true customization requires having choices and that is what you provide as an independent agent. Don’t assume that they know the difference!

Dave Evans, Aartrijk 46. Individual Behaviors. You

can segment your clients by observing their general behaviors. – Alice Shi, Finaeo

47. Sell Your People. Agents should

spend at least as much effort and money to market their employee brands as they do their insurance coverages. On your website and in social media, express an authentic story (with video and photos) of what it’s like to work at your firm. Need ideas on what to say? Ask yourselves: Why should people work at your agency? Is it just for a paycheck? Or is there something else great going on that encourages people to stay? What do your people care most about? Happy employees will refer other happy employees — and great customers as well. Virginia Beach-based Prosper Insurance is an excellent example of a firm that gets this. Peter van Aartrijk, Aartrijk

48. Complex Risks. The successful

businesses moving the world forward are complex risks and are looking for risk advisors who are up for the challenge. If you want simple and easy — find another career. – Greg Barcomb, Ten Eyck Group

49. Purchase/Sale History. By learning

client sales history, you can more strategically cross-sell products. – Alice Shi, Finaeo

50. Distinguish Your Agency. Build your

agency’s reputation by presenting your thought leadership in your key service areas. This can be done by relying on the expertise of your experienced agents. Regularly posting articles and content on social media, in particular LinkedIn, and commenting on relevant posts from fellow industry leaders, highlights the insights and expertise of your agency and its agents. – Rod Hughes, Kimball Hughes Public

Relations 51. Raise Your Chances of “Going Viral!”

Getting your content to go viral can transform your business overnight, but it’s kind of like lightning — you can’t really control where it will strike. There are things you can do to raise your chances: Know your audience, bring them in on the fun (create a piece of content and ask others to do their own version or participate in some way), make your content useful, and get the timing right (consider what’s happening in the news and other happenings that INSURANCEJOURNAL.COM

your audience will be aware of). – Kristen Nevins, Direct Connection Advertising & Marketing

52. Accuracy. Streamline your flow

and work more efficiently with clients. Brokers can get to know their clients better and meet their needs faster and more efficiently through personalization. – Alice

Shi, Finaeo 53. Communication Moves Business Forward. The ability

to connect via technology is awesome and much needed, but face-to-face communication can be highly beneficial to developing a mutual understanding and a new relationship. - J.D. Babuder, RT Specialty

54. Be More than an Order Taker.

Ask questions, delve deeper — covered insureds don’t sue. If you subscribe to the order taker standard and only get what’s ordered, you may not be liable, but you will be sued. What’s better, winning a lawsuit or not having one at all? Too often, insureds don’t know of code ordinance limitations, sewer backup limitations, etc. They find out when a claim is denied and that’s not when one wants surprises. I’ve always said, “I provide financial security. I let my competition sell some insurance.” –

Frederick Fisher, Fisher Consulting Group 55. Consider a Specialty. Consider

building out a specialty to diversify your books and grow your business. In addition to the industry based in your geographic area, look to your own industry expertise and passions, as well as those of your staff, when choosing a specialty market to explore. Developing a specialty can be

a lucrative business decision for agency owners, but to be truly successful, be sure to partner with a specialty insurer who knows the niche, including its nuances, claims history, frequency, severity and more. – Lindsey DiGangi, Pennsylvania

Lumbermens Mutual Insurance Company 56. Warm the Tummy. Send prospects

a box of cereal, a pizza or a box of cookies. Tell them you’d like to meet for breakfast, lunch or a break sometime.

57. Get Involved. Volunteer

for Little League, soccer, Girl Scouts and Boy Scouts, school band, school theater, or other youth activities. Get to know families in your community. At a minimum, you’ll have fun.

58. Emergency Response. Volunteer for

local emergency response planning and lend your expertise.

59. Fly High. Hire an aerial advertising firm to fly a banner over a large local event. Rates run from $500 to $3,000.

60. Play Dress Up. Hire costumed char-

acter(s) to enact scenes from local history, literature, movies or theatre. Provide surprise entertainment in parks, downtown streets, at events. Film the sessions and post. Cost is from $150 - $200 an hour per character. Budget for more than once. Imagine lions, tigers and bears, oh my production.

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Special Report: Sales & Marketing continued from page 33

time you met with them.

61. What’s So Funny? Separate yourself

66. Be Prepared. Have your own

from the slew of TV ads that try to joke about auto insurance. Market your agency as serious and not joking around about getting customers the right insurance.

62. Disaster Planning. Coordinate and

sponsor local disaster planning and response seminars for your community. Bring in experts. Provide materials for families, small businesses and nonprofits.

63. Little Libraries. Sponsor a dozen or

more little free libraries throughout your community.

64. Get Educated. Get your Certified Property Casualty Underwriters (CPCU) designation or Certified Insurance Counselor designation. Become a certified risk management, professional liability and/or cybersecurity professional. 65. Do Your Homework. Don’t go calling

on a business client without having an idea of who they are, what they do, their history, and how you might be able to help them. This goes for existing clients also. Know what has happened and how things and personnel have changed since last

detailed disaster recovery and business continuity plan. Reassure your customers that if there is a local event, you have the plan, backup and resources in place to remain accessible and help them in their time of need.

67. Google Alerts. Put a Google alert on your best prospects (and competitors). This will help you see what’s important to them. With prospects, it may give you a reason to reach out. With competitors, it’ll help you see what they’re up to.

68. Don’t Stop. I’ve found that many stop when they hear the word, No. They don’t really ask follow-up questions to find out why their client said no. Do they not have the time or money to deal with a new purchase now? Did you present the cost but not the value? I’ve found this approach works for sales and interpersonal relationships. – Denise Dederich, Wisconsin Financial Group Inc. 69. Support What Matters.

Supporting those who matter — your partners, clients, employees, and your community — helps to establish who and what you value, and promotes ongoing success for your agency. Countless surveys and studies have demonstrated that the next generation is seeking rewarding work to make a difference in 34 | INSURANCE JOURNAL | AUGUST 15, 2022

their communities while consumers want to do business with companies that care.

– Bill Ross, Insurance Industry Charitable Foundation 70. Next Gen. Attract the next

generation of talent — show them how your agency makes an impact: Give real examples and share stories about how you helped customers recover from an incident. Show the ways insurance helps people with the rebuilding process. The next generation of employees want to work for organizations that have an impact. — Mike Becker, National

Association of Professional Insurance Agents (PIA) 71. Increased Revenue. Drive more

effective sales. More insight into clients’ behavior and preferences can help brokers improve their targeted marketing and sales efforts. – Alice Shi, Finaeo

72. Reach Out to the Insurance Media.

The insurance trade media runs on sources from within the industry. Reach out to an insurance trade publication about what you know, whether with a phone call, an email message, a social post, a news release, or a story pitch. That will let the editor know about your perspective, and if they use you as a source, you’ll make the insurance industry more informed. Charles

Wasilewski, Aartrijk

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73. Get Entertaining. Engage customers by entertaining them: Humor helps build a rapport and increases relatability. It also helps cut through the clutter and enables your agency to stand out. Find ways to inject fun ideas into your websites, brochures, presentation decks. One idea — instead of using all stock photos, see if there are any funny cartoons or amusing animal pictures that make your point. — Mike Becker, National Association of Professional Insurance Agents (PIA) 74. In Email, Style Equals Substance.

In email communications, make sure the design is clean and the subject line is attention grabbing. In fact, the subject line is the most important part of your email, spend time crafting it. Use your agency’s colors and logo. You want to make sure the recipient doesn’t mistake your message for spam. – Robert Holt, National Association of

Professional Insurance Agents 75. Email Testing. Consider using

well-known marketing automation software to increase your chances of bypassing the spam folder. Don’t be afraid to A/B test two versions of an email and see which one gets a better response. And always proofread. Nothing diminishes your credibility like an email with grammar and spelling errors. – Robert

Holt, National Association of Professional Insurance Agents (PIA) 76. Say No to Politics. Consider the

wisdom of expressing your political views on your agency’s social media feeds (or anywhere online). Is there relevance to the success of your business by posting political opinions? Once you express an opinion, to the right or to the left, you may just alienate half of your prospective clients (not to mention your existing clients). – Doug

Coombs, SIAA INSURANCEJOURNAL.COM

77. Client Experience.

Improve client satisfaction. Customers feel more special, valued, and appreciated with personalized insurance and service. – Alice Shi, Finaeo

78. Sales Training. Invest in sales training for your sales team, including the veterans and high-performers.

79. Target Markets. Invest in education for your sales team into your target markets and specialty accounts. 80. Quality Sales Managers.

Invest in a quality sales manager who knows how to motivate and guide members to their goals.

81. Right Coverages. Talk clients into

buying the coverages they actually need rather than settling for what you think they will buy. That is what a good salesperson does. – Chris Burand,

Burand and Associates 82. Hit Ratio. Measure your

marketing success by your hit ratio rather than your clicks.

– Chris Burand, Burand and Associates

83. What’s Your Purpose? Include stories

of the meaning and purpose behind your agency in your marketing. According to research from Liberty Mutual and Safeco Insurance, one in four recent agency hires was from Gen Z. Younger generations want to work with companies whose values match their own, and many say they would take a pay cut to do more meaningful work. Showcasing the deeper meaning behind what your agency does can help you attract the next generation of talent. This will be increasingly important as the next generation’s influence in the workforce grows and agencies need to increasingly compete for Gen Z hires more and more. – Dargan Thompson, Liberty

Mutual and Safeco Insurance 84. Gaming. Make a game for prospective

and existing clients — BINGO or digital prize wheel when they go your website. Games boost engagement and will also show who your top fans are.

85. Digital Tools. Make leveraging data

more accessible. With the data analysis tools necessary for personalizing insurance, brokers can easily access reports on their performances and activities that will keep them informed and help them improve. – Alice Shi, Finaeo

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Special Report: Sales & Marketing continued from page 35 86. Embrace Technology. Think about how you use digital tools as a consumer, then review how you might incorporate some of those approaches at your agency. Don’t stop there — consider how you might also implement digital tools to make your agency more efficient overall. If you don’t have an agency management system or customer relationship management (CRM) system, it’s time to learn how they can help you optimize your business. – Doug Coombs, SIAA 87. Guide Your Company. Your firm

needs an editorial style guide. Why? Inconsistency erodes credibility. Document the correct formal and casual names for your company, phone number and address formats along with other company preferences. Does the firm name use “and” or an ampersand? Do you use “adviser,” which is correct, or “advisor,” which is popular?

Ronimarie Acord, Aartrijk 88. Improve Hybrid Work with Collaboration.

Create joint working sessions; the benefits can be very important when people are in separate locations. Use video conference for co-workers to complete tasks together. As you work on the projects, you can easily stop and ask questions and get feedback when stuck. – Robert

Holt, National Association of Professional Insurance Agents (PIA) 89. To Know You Is to Trust You.

Independent agents know a lot. They can use that knowledge to build familiarity and trust. One way to share that knowledge for the greater good is with a website blog. Potential customers who read what you know might be more likely to turn to you with a risk management or insurance question. Charles Wasilewski, Aartrijk

90. Automate Your Marketing. Maybe

(just maybe) you don’t have the time to stay consistent with social media, craft the perfect newsletter each month, and follow up on every lead. You can save significant time and get better results by automating your marketing. The sky’s the limit, but three great places to start, include email marketing, social media scheduling and customer service. – Erin Dwyer, Direct

Connection Advertising & Marketing 91. Boost Email Engagement.

A few tips for improving your email response: segment your list (then keep it clean!); strengthen the design and visual elements of your emails; keep your messaging focused (craft easily-understood messages that are targeted to your freshly-segmented list of contacts); and structure your content so it’s easy for a reader to scan. –

Kristen Nevins, Direct Connection Advertising & Marketing 92.

Write Right. Those

who use bad grammar or syntax are almost always unaware of it, but poor communication skills can quietly close doors. Online grammar checkers can help with simple constructions but are unequal to the complexities of English. Invest in your team with an online business writing course

36 | INSURANCE JOURNAL | AUGUST 15, 2022

and keep those doors open. Ronimarie

Acord, Aartrijk 93. Invest in Your Communities. Invest

some of your marketing budget into community events. Make a commitment to a local nonprofit to sponsor an upcoming fundraiser where your agency will be featured. If you’re already doing sponsorships, brainstorm creative new ways you can support them to expand public awareness for the nonprofit’s mission and your commitment to community. Attending and supporting community events is great for networking, and your agency’s presence will last in the hearts of your current and future clients. – Alexis Holzer, Liberty Mutual

and Safeco Insurance 94. Consistent Marketing is Key!

Economic slowdowns happen, and we are facing the next one now. It’s important to remember that reducing efforts to generate new revenue only exacerbates the effects of a recession — and ultimately, the effect on your business. A few reasons to maintain your marketing budget (even during a downturn): you’ll send the message that your business is stable (while increasing brand recognition); you’ll avoid the dangerous feast-or-famine cycle; and INSURANCEJOURNAL.COM

and external resources need to be utilized differently to hire an account manager, a producer and a leader. – Mary Newgard,

Capstone Search Group 96. Clean Up Your Branding Guide — and Use It! A well-designed, consistent

branding effort can boost your company’s recognition exponentially. Do you have a branding guide (and do you follow it)? It’s a great time to create one (or update the guidelines you already have) to ensure that all marketing collateral follows a cohesive message. This will help convey stability, reliability, and dependability. - Erin Dwyer,

Direct Connection Advertising & Marketing 97. Work with Insurance Media. The best

slow periods can be a great time to rebrand or introduce new products. – Brad Nevins,

Direct Connection Advertising & Marketing 95. Intend to Be Intentional. Too often

agencies view the “race” to recruit top talent as a marathon with 10,000 entrants. It’s overwhelming and you will be lost in the shuffle. The best approach is to break down hiring needs into subgroups. Internal

way to amplify your expertise beyond social media is to work with trade and industry media to publish contributed articles (where possible). You should also seek out opportunities to participate in media interviews on major industry trends and topics. Let journalists know about your background and what topics they cover that you may be available to comment on. This will showcase your

agency’s knowledge and understanding of those matters. – Rod Hughes, Kimball

Hughes Public Relations 98. Don’t Forget Local Media. Beyond

trade and industry media, connect with local media. You may be able to contribute guidance and advice to your community on how they can best manage their risks and secure the right policy for their needs. Taking these steps will showcase how your unique insights and expertise can best meet the needs of current and future clients. – Rod Hughes, Kimball Hughes Public

Relations 99. Vendor Help. Choose your vendor

partners strategically. Vendors can be game changers for your agency. Before you leap, though, be very clear about the resources you’ll need to get the most out any service, along with the metrics you’ll use to ensure it’s a positive — and financially rewarding — relationship. – Dale

Steinke, Liberty Mutual and Safeco Insurance 100. Take a Poll. Put a pop-up

poll on your own and/or the local newspaper’s web site with one simple question about your community. The newspaper may even work with you to publish the results. Examples: What is your favorite local park? How often do you shop downtown rather than at the mall? What is the worst intersection in the city? What is the best outdoor public space for kids to play? What movie(s) or TV shows were filmed here? Which business has the best-looking outdoor sign?

101. Be a PR Expert. Put press releases and announcements on your website. Especially those about accomplishments of your people. It’s great for morale. Create a list of local media and send those releases to them as well. Tip: If your agency does charitable work, write a press release and upload it to: https://www.insurancejournal. com/charity/ INSURANCEJOURNAL.COM

AUGUST 15, 2022 INSURANCE JOURNAL | 37

Closer Look: Nonprofits Potential Pitfalls for Nonprofit Organizations

onprofit organizations and not-for-profit organizations have similar insurance needs to other commercial entities, but they also have By Patrick Wraight some insurance needs that are more complicated than other commercial entities because of the nature of their exposures and the ways that they operate. Most businesses have a primary goal of making a profit for someone, usually an owner. In today’s business world, the owner of a business might be an individual, a family, a mass of stockholders, the employees, another company, or any combination of these. But there are commercial entities that are businesses, but not in that sense. They don’t exist to make a profit, but to bring some

other benefit to society, rather than the owners. These are nonprofits and not-for-profit organizations.

What Is a Nonprofit?

According to Investopedia, a nonprofit organization is “is business that has been granted tax-exempt status by the [IRS] … A nonprofit designation and tax-exempt status are given only to organizations that further religious, scientific, charitable, educational, literary, public safety or cruelty-prevention causes or purposes.” A not-for-profit is treated differently under the tax code such that donations, gifts, and fees paid to a not-for-profit are not generally tax deductible. Here, we will stick to the formal definition of a nonprofit and try not to muddy the waters any more than necessary.

What Can Go Wrong With a Nonprofit?

As someone who has worked

with a few nonprofits, let me tell you what can go wrong. Everything. A large issue that nonprofits face is turnover of the board of directors. In many nonprofits, the board of directors serves for a minimum of one year. Some boards limit terms to only one while others allow board members to serve consecutive terms until they choose not to serve. Some boards allow for certain members to overlap terms so that a board doesn’t fully turn over every year, or at least they seek to limit that possibility. There are many reasons this could be an issue, but consider the loss of institutional knowledge that can happen when an entire board rolls over after the big organizational business meeting. The whole new board potentially steps in and only knows what each member knows about the internal operation of the organization. Maybe it’s not that

extreme, but what if one board member rolls off the board and they happen to be the person that handled the books and no one knows the financials of the organization, and by the time they figure it all out, the former treasurer has a new name and a new address in Bermuda. To help manage this risk, many nonprofit organizations have an employee whose role might be the executive director. Their biggest job is to know everything that the next board might need to know to maintain the institutional knowledge so that things don’t go slipping through the cracks or so the board doesn’t have to relearn everything every year. A board has certain duties, including the duty to follow the by-laws of the organization, be a fiduciary of the organization’s assets, and continue the perpetuation of the organization. These duties (in fact, the existence of the

board) creates certain directors and officers exposures, which means the board needs a D&O policy in place. The D&O policy is not there to protect the board of directors or the officers of the organization. While the members of the board are going to be insured by the policy, the policy needs to be put in place to protect the organization from claims against the board. That’s exactly what it sounds like. It’s insurance to protect the group from the people in charge of it. Don’t overthink this one. Just let it be. Here’s some policy language from an example D&O policy to illustrate the point.

If during the Policy Period or the Discovery Period any Claim is INSURANCEJOURNAL.COM

first made against any Insured Persons for a Wrongful Act, the Insurer shall pay on behalf of the Insured Persons, Loss and Costs of Defense resulting from such Claim, except for any Loss and Costs of Defense which the Organization or any Subsidiary actually pays as indemnification. Short version: The policy covers claims and defense costs related to wrongful acts that are covered by the policy, as long as the claim is made during the policy period or discovery period. Right. This is a claims-made policy, which is common in this line. What that means to the insured and to the policy is a topic for another day, but we do have to deal with the idea of a wrongful act. Here’s how the

policy defines that term.

Wrongful Act shall mean: any of the following by the Organization, … and/or any Insured Persons acting in their capacity with the Organization or a Subsidiary: actual or alleged error, misstatement, misleading statement, act or omission, neglect or breach of duty; … There’s more to the definition, but again it’s more than what we need to deal with here. The point is that the policy uses a few simple words to speak to the directors’ and officers' liability coverage and exposure. The coverage includes errors, misstatements, acts, omissions, breaches of duty. Can you imagine the errors, misstatements, etc. that

can happen when a board rolls over and doesn’t have access to all the history of the board? Let’s move on to another exposure the board might have that also comes back to the D&O exposure.

What Could the Cyber Exposures Be?

Let’s broaden our discussion a little by addressing another exposure that nonprofits face that is similar to just about every other business out there — the cyber exposure. Just think about how you keep the records of your customers. You have some kind of customer relationship management system that you use. Behind the interface and within its confines, is a data-

continued on page 40

AUGUST 15, 2022 INSURANCE JOURNAL | 39

Closer Look: Nonprofits continued from page 39 base with all of the information your office knows about all of your customers. A customer relationship management system, agency management system, excel spreadsheet (if you still manage your customers like this, we really can’t have a conversation about that), or whatever you’re doing to keep track of your customers usually holds more information than you often think about. Now think about it from a nonprofit’s standpoint. A nonprofit likely has a kind of membership management system. This is in place so the organization can keep an up-todate list of active members, prospective members, donors, child organizations, and more.

It may also create a members’ area of the organization’s website where members can perform certain actions. This might be where they pay for their membership, make a donation, buy swag, and more. So, it’s a place online where the organization might store and maintain information about their members. It’s also a place where the organization might receive payment information from their members. It seems that it would be important to have a cyber policy in place that at least covers accidental release of information, security breaches, and hacking at a minimum. But there’s one more item to consider.

40 | INSURANCE JOURNAL | AUGUST 15, 2022

How Can Cyber Exposures Create a D&O Exposure?

Failure to procure the appropriate insurance coverage could be an error or an omission. Imagine a large nonprofit has a breach and their donor list gets published, even the super-secret ultra-high dollar donor list. Now imagine that they don’t have any cyber coverage in place. They have to spend the organization’s money to handle the breach, as well as the reputational hit that comes along with it. They also have to assure their donors that the breach has been fixed and it won’t happen again. Meanwhile, once someone determines they could have bought cyber coverage and didn’t, there’s another

problem. There was an error, an omission, or (maybe) a misstatement. They could have bought coverage but didn’t. Someone on the board told a big donor that they had the coverage, and they didn’t. A donor talks to the insurance agent, who says here’s the signed declination form that tells you, Mrs. Donor, that I tried to sell them cyber coverage, but they were too cheap to buy it. That’s how cyber insurance could be a D&O issue for a nonprofit that didn’t see the claim possibility coming. Wraight, CIC, CRM, AU, is director of Insurance Journal’s Academy of Insurance. He can be reached at pwraight@ ijacademy.com.

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Idea Exchange: Agency Management A 12 Step Program for Exploding Agency Growth

e all want to grow smarter, stronger and faster, whether in life or in work. Agency owners are no different. Tony Caldwell Every agency owner I have ever spoken with is growth oriented. So, why is it most insurance agencies only grow at the rate of inflation? While growing at the rate of inflation in the current inflationary environment may look more impressive, outpacing the average should always be the goal — and that requires something extra. Agencies with extraordinary growth have not necessarily toiled day in and day out to reinvent the business. Instead, they often take small, but effective actions to INSURANCEJOURNAL.COM

supercharge their results. Here are 12 steps anyone can implement that will encourage the kind of growth that leaves even today’s rate of inflation in the dust.

1. Seek out efficiencies.

Comb through your financial statements and operations looking for every efficiency you can find. While this may not grow your top line it will grow the bottom, which is where you should focus. Years ago, I was boasting to a friend about our agency’s top line growth. He said, “I don’t care about top line growth, I only care about growing the bottom and everything I do is focused on that.” That was an eye opener. Break out the benchmarks and use them to stimulate your thinking. Compare each part of your marketing spend to ensure you are getting real results. Strip

out every expense that doesn’t make your business grow profitability.

2. Survey and analyze your competitors.

What are they doing that works? Copy their winning strategies. It’s a lot easier to adopt and adapt a successful strategy than it is to create one from scratch.

3. Examine your prospecting and marketing activities.

Determine where each of your customers came from and learn how to do more of whatever it was that brought them to you. Stop doing what’s not working. Take the time, energy and investment saved in halting those tactics, and invest it in what works.

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Idea Exchange: Agency Management continued from page 41 4. Coordinate strategic alliances.

Brainstorm strategic alliances with businesses that also sell to your customers. Ask yourself how you can improve your customers’ lives and businesses by collaborating with their communities. Many agents do this with mortgage brokers, car dealers and realtors, but the potential possibilities for partnerships are endless.

5. Keep an eye on capital.

Analyze how much cash and credit you have available and build a plan to grow it. Do you have a line of credit at a local bank? If not, get one. If you do have a line, consider increasing it. Do you have a good amount of retained capital? If so, save more of your profits. Now, go use those resources to hire a new producer or buy another agency or book of business. There are literally thousands for sale of all sizes. It is much easier to grow by acquisition than organically for most organizations.

6. Boost your marketing efforts.

Build a content marketing machine to attract the new customers you want. Most content that I see agents using is not effective. That’s because it’s generic, trite or the same carrier-produced content a dozen others in your market are using. Instead, think about the situation your clients are in, the problems they face and potential unique products or services you offer or to which you can introduce them. Develop your content with that in mind because those are the things your prospects want. Now, only post where they’ll find it. Do not post all over the place. Practice “narrow casting” instead of “broadcasting.” You’ll spend less and your ROI will go up. If you don’t think you have the capabilities in house, outsource. Look for a three-to-one return on your investment. Rinse and repeat.

7. Expand your geographic reach.

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raphies. You don’t need new local offices or employees to handle this business. Modern video communications make this unnecessary.

8. Reinvest in your business.

Most agencies are “lifestyle” businesses where the owner’s personal needs really come first. That approach never leaves enough money to invest in growth. Stop and recenter. Reinvest at least 50% of your profits (and there will be more profit if you’ve done a good job at step one above) in the agency. Look for a three-to-one return on your additional investment. Your lifestyle will actually get a lot better!

Agencies with extraordinary growth have not necessarily toiled day in and day out to reinvent the business. 9. Set BIG goals for growth and profit.

Have you ever wondered why some people seem to do better than others even though they don’t have more talent, ability, investment capital or hours in the day than anyone else? It’s because they set bigger goals. John Bowen, a successful business coach in the wealth management industry calls this being “successful on purpose.”

10. Review culture and compensation.

Develop a company culture and compensation program that makes every employee an owner. Do you want more account rounding? Pay commissions to CSRs. Do you want your business to get written with your most lucrative carriers? Pay more for that and less when the business is placed somewhere else. Do you want lower expenses? Ask your people for suggestions and reward them for their ideas. Do you want a bigger bottom line? Institute profit sharing. Do all of these things and you’ll get an additional bonus — your agency will self-recruit and your

turnover will drop. This will drive revenue and lower expenses.

11. Invest in yourself as a leader.

Take some of the increase in profits you’re now generating and invest it in yourself. Join one or more mastermind groups. Hire a business coach or join an entrepreneurial coaching program. You are the determinant of your own success as a business owner. Is there any better place to invest than in increasing your own capabilities? A corollary to this is simply to read more. It’s well established that successful people are readers — because they are insatiable learners. According to hive.com, Warren Buffet reads eight hours a day and Mark Cuban reads more than three. How much time do you invest in reading?

12. Take time off.

Related to step 11, increase the amount of time you spend not working. Many agency owners are on call 24/7, work every evening and every weekend, take few vacations, and always keep their cell phones with them and turned on. This just means they never get true rest where their attention isn’t at least partially on their business. This creates chronic fatigue, crisis management and clobbers creativity. Start managing your time with real limits, time off that has zero business distractions and where your availability to clients is controlled. You’ll be better rested, more creative and people will respect and value your time. The ultimate result will be faster growth and more money. When I started to take time to rest, my income doubled in two years and has grown by at least a third on average every year since. Are there more ideas for exploding your growth? Absolutely. I’ve got a lot more and that’s just me. I’ll bet you have many you’ve thought of, too. Maybe you just haven’t implemented any of them. Well, now is the time to start! Caldwell is an author, speaker and mentor who has helped independent agents create over 250 independent insurance agencies. Learn more by visiting www.tonycaldwell.net or contacting him at tonyc@ oneagentsalliance.net. INSURANCEJOURNAL.COM

Idea Exchange: High Net Worth The Case of the Chipped Diamond

By Angelique Brelsford

iamonds are one of the most coveted gemstones in the world. They symbolize love and commitment, embody strength, and have been represented in ancient and modern lore, poetry and fiction. While every diamond is unique, there were no terms or factors for diamond quality until the 1940s, when the Gemological Institute of America (GIA) developed a grading system for color,

clarity and eventually cut. Along with carat weight, the “4Cs” of color, clarity and cut became part of the diamond industry vernacular, and with the help of marketing by De Beers, became part of the language for consumers and jewelers alike. Each of the 4Cs is important to determine the value of a diamond. Color is determined on a scale of colorless (D) to light yellow, brown or gray (Z). Clarity is determined on a scale of Flawless, meaning no imperfections within or on

the surface of the stone, to Included, the lowest being graded an I3. With each higher grade of diamond color or clarity, the overall per-carat value rises, as well. Cut is the culmination of the overall look of the diamond: the fire and brilliance of the stone, as well as the proportions of the gem. The scale for cut is assessed from Excellent, where the brilliance and proportions of the diamond are the best possible, to Poor. Carat weight is the unit of measurement for the physical weight of a diamond. The diamond trade refers to specific carat weight “magic sizes” where the overall price per carat rises, most notably at each half- and full-carat weight. A diamond weighing 0.99 carats does not look noticeably different from a diamond weighing 1.00 carat, but the price difference in per-carat weight rises substantially. When combined, the 4Cs represent the most important value drivers for a diamond. While a diamond is the hardest mineral on earth, they can still occasionally break when hit in certain directions or become scratched or abraded due to normal wear and tear. If a diamond happens to become

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Idea Exchange: High Net Worth continued from page 43

damaged in some way and needs to be recut or repolished to remove any chips, scratches, or abrasions, a stone can be sent to a master cutter. The master cutter will assess the damage, then recut or repolish the diamond to remove the chips and repolish the entire stone as necessary in order to bring balance back to the proportions of the diamond. This is important to the stone, as you want the gem to look as good or better than prior to the damage, and not show any odd angles or off-center facets.

The Situation

We received a claim for a damaged center diamond set within a high-end designer mounting. The original stone was a GIA certified round brilliant cut diamond weighing 2.73 carats exhibiting an F color and VS2 clarity. The chipped diamond had originally graded Excellent in cut.

Cracking the Case

The diamond was sent to the high-end designer’s in-house master cutter. Through their assessment and eventual recutting and repolishing, the repaired diamond lost 0.30 carat of its total weight. This resulted in a final post-repair carat weight of 2.43 carats, which brought the gem down under the “magic” 2.50 carat size mark. However, the skill of the master cutter resulted in the diamond increasing in color to an E and clarity to a VS1 — each of these grades one higher than the original quality of the stone. While not often viable, the high skill of a master cutter can result in a better quality diamond. Usually, color or clarity is sacrificed to some degree in order to obtain a larger carat weight. When the master cutter repaired the diamond, they removed some imperfections, which increased the grade of both the clarity as well as the color. In addition, the master cutter was able to maintain an Excellent grade for the cut.

The Result

We were requested to determine the diminution of value based on the loss of carat weight from the original diamond (2.73 carat) to the repaired diamond (2.43 carat). While the diamond lost 0.30 carat, the increase in color and clarity for the finished diamond had a greater impact on the value of the resulting stone. Based on the diamond market at the time of our assessment, the diamond increased in value by $4,270. While it is unfortunate that the damage was initially sustained, recutting the damaged gem was the best thing that could have happened in terms of the diamond’s overall value. Brelsford serves as a fine jewelry and wristwatch appraiser for Enservio Select. She is a Diamond Graduate and AJP of the Gemological Institute of America, and has a passion for performing investigative work on potentially fraudulent claims.

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Idea Exchange: The Competitive Advantage The Continued Importance of Trust Monies, Correct Accounting, and Doing Business with Stable Insurance Companies

here was some recent news that the Florida Department of Insurance (DOI) is requiring all agencies to return to the state By Chris Burand all of their unearned commissions if they did business with a particular carrier that the DOI had to take over. This order to return all unearned commissions for that carrier is a great reminder about how to run an agency. The carrier mentioned above was primarily a homeowners insurance company, but until this last year or so, the number one kind of carrier to go insolvent or become impaired over the past 10 years has been health insurance carriers — particularly the new carriers organized

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under the ACA guidelines. Chalk that up to another thing the federal government does not do well, which now includes setting up guidelines for a new insurance company’s capital requirements. Nevertheless, the lesson above applies to all types of carriers. Let me make some simple assumptions. Let’s say there is a fairly successful personal lines agency with 1,000 customers who are insured by a specific carrier. Homeowners premiums in Florida tend to be remarkably high and let’s further assume the homes that are insured are middle class homes with around $500,000 in Coverage A. A decent guess for coastal Florida would be calculated by averaging the home values of the northern and southern parts of the state. The average premium is $5,000 for a basic HO-3 homeowners policy. A 12% commission, which

is $600, multiplied by 1,000 customers equals $600,000 in commissions. Let’s further assume the policies have expiration dates that fall equally around the calendar. Also, let’s assume this is all direct bill business and the carrier pays upfront, a quite common reality. That means $300,000 of the commissions are unearned and must be returned by the agency. Would you have $300,000 in the bank to return to the state?

Don’t Do Business With Weak Carriers

The first lesson is to not do business with weak carriers. The property/casualty industry has become more robust over the last 25 years, and a substantial portion of the people in the industry today have no working knowledge of insolvencies and

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Idea Exchange: The Competitive Advantage continued from page 45

weak carriers. They do not remember the fiascos from the ‘90s where some sizeable P/C carriers went insolvent overnight. Insurance companies, regulators and rating companies all became more serious at that point relative to carrier financials. The unbelievably low interest rates and hot stock market have enabled carriers that would likely have failed to be sold early. The net result is the industry has lost institutional knowledge and has become complacent. This combination has resulted in agencies not paying as much attention to whether or not the carriers they write with are unstable, even if they have a decent rating. (By stable, I am not suggesting they do not have the correct financial wherewithal per the regulatory and rating parameters relative to claims paying abilities — but for so many carriers to go out of business recently in short order, one should look a little closer). I currently find that many people have zero knowledge of what happens when an insurance carrier insolvency occurs and they do not even know that state guaranty funds exist, much less what they cover or how they process claims. Many people trust the government agencies to take care of it. Keep your fingers crossed so that you can continue to not think through the problems that an insufficiently staffed, much less insufficiently funded guarantee fund can cause an agency.

I would also be cautious about assuming the state DOI can simply assess enough money and collect enough money to quickly solve the shortfall. I am not sure how the DOI can assess carriers that are already broke or nearly broke and actually claim receipts. I saw one do that recently though. And then of course, the DOI may want you to repay your unearned commissions.

Maintain Accounts Correctly

The second lesson is to maintain your accounts correctly so that if something like this happens, you have the current numbers so you can manage your cash properly. I have written extensively about the magnitude to which agents and advisors misunderstand trust laws.

Two sets of laws exist. The set most familiar to agents and some advisors is the commingling of funds laws and regulations. These rules prohibit agencies from commingling their operating monies and their trust monies. Only about 14 states have commingling laws.

Unearned commissions are a form of fiduciary monies. The carrier has paid a commission upfront in the expectation that the agency will perform its duties throughout the year. Agents and advisors in the other states then proclaim, “We’re not a trust state so we don’t have to worry about trust monies!” That conclusion is seriously wrong. All 50 states and the federal government have trust laws. A trust law is not the same thing as a commingling law. What those states do not have is a commingling law, but they do have trust laws. A trust law stipulates that an agency cannot spend money it is holding on a fiduciary basis. Agency bill business is a good example whereby the agency collects money upfront but does not immediately submit that money to the carrier. While it is holding the money, it is acting in a fiduciary capacity and is responsible for not spending

that money. An agency that is “out of trust” is an agency that has spent fiduciary monies. This is why the trust ratio is THE MOST IMPORTANT balance sheet ratio applicable to insurance distributors. Failure to be in trust may automatically trigger a clause contained in most carrier contracts that stipulates that if the agency is out of trust, the carrier immediately gains ownership of the agency’s expirations. No notification. The fact that you paid your premiums on time is a moot point. Fiduciary monies also include money held on behalf of carriers, audit returns, and sometimes commissions that are unearned. A relatively new accounting rule, ASC 606, applies to insurance agencies and brokers. Agencies and brokers are now supposed to account for all commissions on an accrual basis. While the purpose of the rule was not to support proper trust accounting, it does so anyway.

Your accountant needs to understand the importance of insurance distribution accounting and how it differs materially from other types of businesses’ accounting requirements. Unearned commissions are a form of fiduciary monies. The carrier has paid a commission upfront in the expectation that the agency will perform its duties throughout the year. In an insolvency, that carrier is often taken over by the state. The state may demand, as Florida recently did, the return of those unearned commissions. Failure to return the unearned commissions may then result in the loss of ownership of the agency’s expirations. What do you do if you have no choice but to represent weaker carriers? First, truly assess whether you have no choice. I have clients writing in the same cities where one declares they have no choice and the other determines they do have a choice. The former is usually only interested in making sales, sales and more sales. In

their minds, they have no choice because to continue to make order taker level sales, they need any and every carrier available because order takers and peddlers sell price. If the situation is more extreme and the agency truly has no choice, be sure you are effectually notifying your clients of the carriers’ ratings, do your accounting correctly, and LEAVE EXTRA CASH in the agency. Do not take all the cash out even if your accountant advises differently. The accountant needs a better understanding of the situation and should not be making recommendations purely on the basis of taxes. You will not have to worry about taxes if you go out of business. Protect your agency and leave a little extra cash in it, especially if you are writing with carriers you think might be weak. Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com.

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Idea Exchange: Commercial Lines How the Supply Chain Crisis Is Heightening Risk Exposures in Commercial Lines By Erica Gage, Brynn Ochoa and John Papa

liability, among other lines of business.

he supply chain crisis has seared itself into popular imagination through empty shelves where toilet paper once stood and a desperate shortage of baby formula. But the ripple effects that emanate from globally disrupted supply chains wash over far more than consumer packaged goods. For commercial insurers, the supply chain crisis is a systemic event that can amplify risk exposures across commercial property, commercial auto and general

Public Enemy #1: Inflation

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Inflation is on many minds of late and one culprit behind climbing costs is the supply chain crisis. Across a range of finished goods and raw materials, constrained supply and soaring demand have converged to drive prices skyward. For commercial property insurers, lumber and material shortages plus rising labor expenses have helped drive up reconstruction costs by 13.5% from April 2021 to April 2022. Components

and commodities used for vehicle repairs (semiconductors, aluminum, steel, etc.) have increased in price, which could have the downstream effect of increasing the cost to settle both first-party physical damage and third-party property damage liability claims in commercial auto. Loss reserves carried by insurers intended to pay future claims can also be impacted by the rate of inflation. If the inflation rate is higher than the rate built into the reserves, insurers may need to draw down reserves faster than anticipated. This dynamic may also pose an acute

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August 15, 2022

challenge for long-tail lines of insurance such as general liability, where losses can be paid out over a longer time period.

Downstream Bottlenecks; Dangers of Delays

When supplies of anything are tight, wait times for said supplies tend to increase. Across residential and commercial construction, builders are waiting for critical supplies. Auto repair shops are similarly in the slow lane when it comes to restocking needed gear. These longer wait times aren’t simply an inconvenience — they can add up to additional lost income for insureds, who can’t begin operations in a new building or access a vehicle for business use. This, in turn, could lead to potential business interruption claims for insurers. If garage and auto repair shops experience significant delays for new or replacement vehicle parts, it may also mean that vehicles are sitting in garages, shops, or lots for what could be days-to-weeks on end. Each day a vehicle lingers in a lot is another day where the shop or dealer may have a liability exposure from said vehicle. Delays in sourcing spare parts for vehicles can also ripple into the rental market. Insurers that cover rental vehicles and rental vehicle agencies may see an uptick in claims and costs as more businesses turned to rentals while they wait for repairs. This increase in use could lead to more loss of use claims by the rental agencies themselves for vehicles that are damaged or totaled by renters.

The Costs of Compensating for Supply Chain Disruption

The supply chain disruption does not just manifest itself as a lack of supply. It can also lead to stockpiling, as retailers fearful of empty shelves or manufacturers worried about component shortages buy more than they need. This excess inventory must be stored somewhere, either on site or off (sometimes in the same containers it was shipped in). This pile of inventory can be a tempting target for thieves, heightening property theft exposures. Storage risks may also impact builders, INSURANCEJOURNAL.COM

many of whom are pre-ordering lumber to avoid delaying projects. Increased wood storage could mean steeper property losses in the event of a fire. Supply shortages can also lead to creative solutions, or the use of alternate materials. This creates the risk that the replacement parts may not function as well as the original, amplifying the risk of potential defects after a job is finished or a product is sold.

These longer wait times aren’t simply an inconvenience — they can add up to additional lost income for insureds, who can’t begin operations in a new building or access a vehicle for business use. Some builders are simplifying designs and trying to cut costs by relying on panelized houses — that is, homes that are partially constructed in an off-site facility, moved to the final location, and then finished. If sections of a building are constructed offsite, the insured could be at risk that local construction laws or ordinances weren’t followed for the offsite build.

From ‘Just in Time’ to ‘Just in Case’

The modern insurance industry was born to protect trans-oceanic supply chains. Today, while the global “just in time” supply chain buckles under the strain of the pandemic, insurers have the opportunity to work closely with their clients to help them understand how supply chain disruptions — and efforts to mitigate them — may be impacting their risk exposures. Gage is product specialist, commercial property coverage products at Verisk. Gage can be reached at Erica.Gage@Verisk.com. Ochoa is business analyst, general liability coverage products at Verisk. Ochoa can be reached at Brynn.Ochoa@Verisk.com. Papa is product development specialist, commercial auto products at Verisk. Papa can be reached at John. Papa@Verisk.com.

National Trust Insurance Company 9025 River Road Suite 300 Indianapolis, IN 46240 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. 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.

August 15, 2022 ZPIC Insurance Company 6100 4th Ave S. Seattle, WA 98108 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. 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.

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Closing Quote Solving Climate Change Starts with C-Suite Leadership

F By Seth Rachlin

Within the insurance sector, climate change is a business imperative — perhaps the most urgent challenge the industry faces.

rom a global pandemic to unprecedented racial, social and political turmoil, to sustainability and climate change, senior executives across industries have been forced to deal with a range of issues that have not historically been considered central to the business. Within the insurance sector, climate change is a business imperative — perhaps the most urgent challenge the industry faces. The associated economic losses — up by 250% in the last three decades, with natural catastrophes producing a 3.6x increase in insured losses and 2x increase in non-insured — are certainly cause for alarm. But climate change presents not just a huge financial threat. Insurers that develop new protections and risk prevention solutions for consumers, companies and communities will simultaneously mitigate risks, increase their relevance and position for growth. Yet recent research from Capgemini and Efma confirms that few insurers are seizing the moment. Based on surveys of 5,000 insurance customers and 275 insurance industry executives, we found that only 8% of insurers are on course to achieve climate resiliency. We think that number is shockingly low and represents a wake-up call for the industry to accelerate its climate change strategies. Making the industry carbon-neutral is just the beginning. Unless more insurers rethink their product lines and recalibrate their investment portfolios, more regions may face an insurability crisis.

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Our research identified resilience champions within insurance as those firms best positioned to help customers protect themselves and to facilitate the shift to a greener economy. What makes resilience champions different? First and foremost they have advanced data analysis capabilities focused on risk-prevention. For instance, nearly 60% deploy pricing models based on machine learning, via sophisticated scenario analysis and stochastic modeling, compared to only 35% of average insurers. They also use more data — typically, seven or more new data sources (e.g., satellite and geo data, feeds from remote sensors and social media) — to gain real-time risk visibility. These capabilities pay off for customers in multiple ways. Automated notifications give policyholders time to take protective measures before disaster strikes. Faster, more personalized experiences for catastrophe claims are another benefit. Given the negative press the industry has received in the wake of recent events, enhancing the claims process is critical.

Change Starts in the C-Suite

Resilience champions are also notable for senior-level leadership and advocacy; 80% have already named a chief sustainability officer or equivalent. To be clear, only C-suite leaders and boards can provide the long-term vision and operational focus needed to become resilience champions. Launching new products, recalibrating investment portfolios,

reimagining underwriting strategies — these actions must be led and coordinated from the top of the organization and throughout what will be a long journey. Our research defined three other essential steps for leaders to take:

1. Embed climate resiliency into the corporate strategy with clear actions assigned to C-suite executives to ensure ownership and accountability; long-term ambitions should be translated into short-term actions and realistic ROI estimates.

2. Rework innovation strategies to build resilience across the insurance value chain and engage with ecosystem partners to prompt innovative solutions.

3. Redesign technology strategies around product

innovation, customer experience and corporate citizenship with stronger analytical capabilities in risk prevention and underwriting. Now is the time for insurers to step up and help society address its most significant challenge. Their risk management expertise has never been more valuable. But this isn’t a matter of altruism; firms that can enact the necessary transformation can generate deeper customer trust and boost their relevance and profitability. In this sense, what’s good for the insurance industry is also good for companies, citizens and communities everywhere. Rachlin is the global insurance industry leader at the international consulting firm Capgemini. INSURANCEJOURNAL.COM

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