Insurance Journal West 2023-02-20

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Note

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

Employee Engagement

This issue reveals data and compensation insights gathered from Insurance Journal’s annual Agency Salary Survey. For the first time in the survey’s 14-year history, salary averages reported were higher than any other years’ data. (See page 28 for the full report)

While that trend may be good for agency employees, agency owners may be struggling to keep pace with growing compensation demands and the industry’s ongoing talent crisis.

Competition is fierce for qualified talent in insurance agencies nationwide and salaries are rising as a result. Nearly 400,000 insurance industry employees are expected to retire from the insurance industry workforce within the next few years.

The talent crisis is impacting agency owners, says Al Diamond, president of the Agency Consulting Group Inc. based in Cherry Hill, New Jersey.

“Agency owners are folding to the demands of employees and the owners themselves are taking less benefit in a number of ways,” he told Insurance Journal. Owners may be taking less salary, taking less profit from the bottom line, or taking fewer perks that often come with ownership such as auto expense, travel and entertainment, or even cutting charitable contributions to raise compensation for employees, he said.

Maintaining competitive compensation packages is a critical step in attracting and retaining the best talent, so owners do what they need to do to make that happen. But also critical for any employer is maintaining a culture that engages its employees.

Engaged employees are involved in and enthusiastic about their work and workplace. However, actively disengaged employees are disgruntled and disloyal because most of their workplace needs are unmet.

Employee engagement is at risk in today’s workplace, according to Gallup, which found in a recent report that employee engagement in the U.S. saw its first annual decline in a decade — dropping from 36% engaged employees in 2020 to 34% in 2021.

Gallup says this pattern continued into 2022, as 32% of full- and part-time employees working for organizations are now engaged, while 18% are actively disengaged. Active disengagement increased by two percentage points from 2021 and four points from 2020.

The Gallup report found that the engagement elements that declined the most from the pre-pandemic record-high engagement ratio in 2019 to 2022 were:

• Clarity of expectations;

• Connection to the mission or purpose of the company;

• Opportunities to learn and grow;

• Opportunities to do what employees do best; and

• Feeling cared about at work.

What are you doing to keep your employees happy and engaged in today’s agency workplace? Can you do more?

Staff Accountant Sarah Kersbergen | skersbergen@wellsmedia.com

EDITORIAL

V.P. of Content Andrea Wells | awells@insurancejournal.com

Executive Editor Emeritus Andrew Simpson | asimpson@wellsmedia.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

Content Editor Allen Laman | alaman@wellsmedia.com

Assistant Editor Jahna Jacobson | jjacobson@insurancejournal.com

Columnists & Contributors Contributors: Lindsey DiGangi, Ifty Kerzner, Larry Moonan, Jonathan Stempel

Columnists: Chris Burand, Tony Caldwell, Bill Wilson

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

Andrea Wells Vice President, Content

‘Employee engagement is at risk in today’s workplace.’

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News & Markets

Allstate’s Plan to Return to Profit in Auto

By Chad Hemenway

Following a year of turbulence in its auto insurance business, Allstate Corp. outlined what CEO Tom Wilson called the company’s number one priority: improve margins.

Allstate ended 2022 with an unprofitable 110.1 combined ratio in auto — 112.6 for the fourth quarter when it recorded $974 million in underwriting losses.

Mario Rizzo, president of Allstate Property-Liability, told analysts and investors during a conference call on earnings that the leading auto insurer has a fourlegged approach to restoring profitability: continue raising rates, reduce expenses, stricter underwriting, and modifying claims practices to reduce costs.

“We expect to continue to pursue significant rate increases into 2023,” he said, adding that Allstate “temporarily reduced advertising spend to manage new business volume,” and has restricted underwriting in “locations or risk segments where we cannot achieve adequate prices for the risk.”

In addition, to keeping loss costs down, the segment leader said Allstate has partnerships with suppliers and repair

facilities, and is using predictive modeling to “optimize repair versus total-loss decisions and likelihood of injury and attorney representation.”

Rizzo said Allstate has “meaningfully reduced” pending bodily-injury claims by about 20% over the last year.

“[The claims approach] reduced risk of inflation impacting those claims that we’ve settled and remediated going forward,” Rizzo added, “and also reduces reserve uncertainty on those claims going forward. We’ve looked to de-risk the bodily-injury pending portfolio by leaning in and settling claims.”

On reserves, Allstate said it strengthened prior-year property-liability reserves by $1.7 billion, excluding catastrophes, in 2022. Allstate brand personal auto made up $1.1 billion of the total, related to bodily-injury claims.

Allstate has since late 2021 embarked on a plan to aggressively increase auto insurance rates and it estimates an annualized impact to of about $4.8 billion from implemented rate increases of nearly 20% over the last 15 months. However, Rizzo explained, there is a lag in earned premium. About 85% of the annualized written premium will be earned since

customers modify limits and deductibles. This nets about $4.1 billion in expected earned premium but only $1.2 billion has been earned through the fourth quarter 2022, Rizzo said.

“Of the remaining $2.9 billion of premium yet to be earned, roughly $2.6 billion will be earned in 2023,” with the balance coming in 2024 as additional rate increases are implemented in 2023, Rizzo added.

“We know that loss costs will increase, whether from severity or accident frequency, which would increase the combined ratio. So prospective rate increases and other margin improvement actions must meet or exceed loss cost increases to achieve historical returns. We continue to manage the auto insurance business with the expectation to achieve an auto insurance combined ratio target in the mid-90s,” he said.

Just three states — California, New York and New Jersey — made up about 25% of Allstate brand auto written premiums in 2022 but accounted for about 45% of the underwriting loss. Rate increases in these states were not enough, so Allstate will be filing for additional rate increases and taking other underwriting actions, as well as requiring more down payments.

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Figures

$2.9 Billion

The amount in reinsurance the Texas Windstorm Insurance Associated (TWIA) board of directors voted to authorize broker Gallagher Re to pursue for the 2023 storm season. The reinsurance, in addition to TWIA’s $2.28 billion in statutory funding, will give the association $5.2 billion in total funding 2023, enough to satisfy the association’s statutory funding obligations. The TWIA board also voted to establish $4.5 billion as the 1:100 probable maximum loss for this year’s storm season.

$5 Billion - $7 Billion

That’s how much Moody’s RMS estimates total economic losses are from the recent California flooding. Insured losses are anticipated to be between $500 million and $1.5 billion, including losses to the National Flood Insurance Program and the private flood market.

100,000

The estimated number of hens that died in a fire at a Connecticut farm owned by one of the country’s largest egg producers. The blaze was at the Hillandale Farms property in Bozrah, about 30 miles southeast of Hartford. The cause remains under investigation. No people were injured. On its website, the company says it raises more than 20 million chickens for eggs.

91,000

That’s the number of homeowner and dwelling policies that Slide Insurance will assume as part of an orderly runoff of struggling United Property & Casualty Insurance Co. in Florida. United was placed into a runoff late last year after heavy underwriting losses and litigation expenses.

$663,000

The amount a Michigan plastics manufacturer agreed to pay to the state following an investigation into hazardous substances known as “forever chemicals” at a former factory in Livingston County. Asahi Kasei Plastics North America will also pay more than $2 million in legal fees to lawyers hired by the state, according to the agreement. Asahi operated the site until 2000. State regulators say PFAS chemicals used in plastic compounding have turned up in soil and groundwater. Asahi is not admitting liability under the consent decree.

Declarations

Nevada Gigafactory

“We will be investing over $3.6 billion more to continue growing Gigafactory Nevada, adding 3,000 new team members and two new factories.”

— Tesla announced in late January its intent to expand its manufacturing capabilities in Nevada for production of electric semi-trucks and make enough cell batteries for 2 million light-duty vehicles annually.

Iowa Flood Mitigation

“That’ll save us a substantial amount of time, effort, labor, and money when we have those smaller-level floods specifically in that area.”

— Davenport, Iowa, Assistant Public Works Director Clay Merritt on the city’s $165 million flood mitigation plan which aims to address floodwaters that surge up from the ground because of backed up storm sewer systems. For decades, Davenport residents have resisted a floodwall, for concerns it would impede resident access to and views of the Mississippi River.

On Their Own

“Not one medicine, not one tablet, not one vitamin. Nobody gave these things to us. We were on our own.”

— Rosel Hernandez is one of 10 Filipino workers who are suing their former employer, offshore oil industry company Grand Isle Shipyard, alleging they were virtual prisoners at their bunkhouse and that the company abandoned them during Hurricane Ida in 2021. The plaintiffs allege they were illegally underpaid and that those among them who tested positive for COVID-19 were quarantined on vulnerable moored supply boats or other vessels, sometimes without adequate food or medicine. A 15-year employee of the company, Hernandez said there was little food when he arrived at the quarantine vessel.

No Deference

“We disagree the commission is entitled to any deference in this case … because there is no indication the commission actually exercised its discretion.”

— That was from a South Carolina Supreme Court opinion in January, in which the court criticized the state’s Workers’ Compensation Commission for not giving a reason when it dismissed an appeal. A claimants’ attorney had filed an appeal on his fees but missed the commission’s deadline for filing a brief. The commission dismissed his appeal and request for reinstatement by simply checking a box on a form and not giving a reasoned explanation, the high court noted.

Virginia School Shooting

“On that day, over the course of a few hours, three different times — three times — school administration was warned by concerned teachers and employees that the boy had a gun on him at the school and was threatening people. But the administration could not be bothered.”

— Diane Toscano, an attorney for Abigail Zwerner, a teacher in a Newport News, Virginia, elementary school who was shot by a 6-year-old student, says Zwerner plans to sue the school district. Toscano said despite being warned the boy had a gun, the administration didn’t call police, remove the boy from class or lock down the school.

Hyundai, Kia Thefts

“During the past year we’ve seen theft rates for certain Hyundai and Kia vehicles more than triple and in some markets these vehicles are almost 20 times more likely to be stolen than other vehicles. … Given that we price our policies based on the level of risk they represent, this explosive increase in thefts in many cases makes these vehicles extremely challenging for us to insure.”

— Progressive Insurance Co. said in an email regarding its decision to limit the number of car insurance policies it writes for 2015 through 2019 models of Kias and Hyundais. Insurer State Farm has similarly said it is increasing rates and limiting the sale of new insurance policies for the vehicles, which the insurers say are theft-prone. Both brands are owned by Hyundai Motor Group.

News & Markets

Rising Costs of Secondary Perils Force Reinsurers to Require Higher Attachment Points

By L.S. Howard

Economic and insured losses from secondary perils from natural catastrophes are accelerating and surpassing the loss totals from primary perils, leading reinsurers to require higher attachment points, according to Gallagher Re.

“The topic of primary versus secondary perils has taken on heightened significance in recent years as these so-called secondary perils — marked by higher-frequency/ lower-cost events — have shown accelerating loss growth and often aggregate to higher annual totals,” said the reinsurance broker in a report titled “Gallagher Re Natural Catastrophe Report of 2022 –January 2023.”

“Secondary perils were again the most expensive on an economic basis and exceeded those on the insured loss side,” the report noted.

Overall economic losses (which include both insured and non-insured losses) from natural disasters were estimated at US$360 billion in 2022, of which $149 billion (41%) came from primary perils and $211 billion (59%) came from secondary perils.

At the same time, total insured losses in 2022 were estimated at US$140 billion, of which $67 billion (48%) came from primary perils and $73 billion (52%) came from secondary perils, according to the report.

Secondary perils are generally defined as smaller to mid-sized events, or the secondary effects that follow a primary peril. Secondary effects of a primary peril could include hurricane-induced flooding, storm surges, hailstorms, tsunamis and fire following an earthquake. Other secondary perils are independent events, often not modeled and receive little monitoring from the insurance industry, said Swiss Re’s sigma, which has described these types of secondary perils, in part, as torrential rainfall, thunderstorms, drought and wildfire outbreaks.

The secondary perils’ loss experience

has led traditional reinsurance capital largely to move away “from providing coverage at the lower levels, rejecting 1:3-year–1:5-year event coverage and instead coming in around the 1:10 level,” said the Gallagher report. “It is a much simpler exercise to effectively underwrite yourself out of secondary perils by requiring higher attachment points.”

(Editor’s note: The report is referring to reinsurers’ rejection of coverage for onein-three-year/one-in-five-year events while accepting one-in-10-year events).

In a separate report, S&P Global Ratings also confirmed that many reinsurers preferred to write middle and upper layers during the January renewals, “thereby moving up on the attachment points, to limit their exposure to frequency losses and hedge against inflation.”

Reinsurers have notched up their attachment points and are “showing less or no intent to write lower layers …,” said S&P, noting that such structural changes, which took place during the January renewals, will be long lasting “because it will be hard for reinsurers to move back on their new attachment points.”

Gallagher Re’s estimates of economic and insured losses were higher than those reported in Aon’s recent natural

catastrophe report. Aon listed economic losses from natural disasters in 2022 of $313 billion, with an insurance price tag of approximately $132 billion, compared with Gallagher’s esimated of $360 billion and $140 billion, respectively.

Aon’s figures translate into a global protection gap of 58% — or the difference between total economic losses and what’s covered by insurance — while Gallagher Re estimates that 61% of global disaster losses were not insured.

“The financial cost of natural hazards continues to increase, and we are further recognizing that a consistently high global protection gap — 61% in 2022 — means that much more opportunity exists to help people prepare before and after a disaster occurs,” commented Steve Bowen, chief science officer at Gallagher Re.

“As catastrophe losses grow more expensive, we again look to the connected nature of climate change, exposure growth, and social inflation as important issues enhancing eventual loss costs. The increase in severity, and in some cases the frequency of ‘secondary’ peril events, presents re/insurers with a multi-faceted and complicated challenge when it comes to risk protection and mitigation,” Bowen added.

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▶ Third consecutive year signing more than 500 member agencies

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Root Sues Former CMO Over at Least $9.4M in Unauthorized Payments

By Chad Hemenway

Root Inc., the parent company of Root Insurance, has followed up its investigation into almost $10 million of unauthorized payments with a lawsuit against its former chief marketing officer.

According to the suit, filed in U.S. District Court for the Southern District of Ohio, Root is accusing Brinson Caleb “BC” Silver and others of a “brazen and sophisticated scheme to defraud Root of at least $9.4 million.”

Silver was insurtech Root’s CMO from Nov. 8, 2021, to Nov. 9, 2022, when he was let go as part of company-wide layoffs.

The lawsuit alleges Silver (formerly known as Brinson Bernard McDaniel, according to the lawsuit) contacted another man, William Campbell, the CEO of advertising agency Quantasy, “within days of starting his job at Root.” At Silver’s

direction, Root paid Quantasy about $1.2 million for services. However, Silver and Campbell, through texts using WhatsApp, “set up a scheme by which Quantasy would transfer funds to Silver’s company, Collateral Damage,” Root alleges.

Columbus, Ohio-based Root said it had no knowledge of Collateral Damage or that it was Silver’s business. The lawsuit outlines text messages between Silver and Campbell, as well as a series of invoices and payments between the two men.

Following the first contract, Root said Silver “caused Root” in April 2022 to enter into a second contract with Quantasy valued at $14.7 million. Then Campbell and Silver exchanged emails to start putting together another agreement between Quantasy and Collateral Damage, Root alleges. Quantasy allegedly transferred $9.1 million to Silver’s Collateral Damage.

“At no point did Silver disclose his affiliation with Collateral Damage — or Collateral

Damage’s existence, much less any work Collateral Damage was purportedly doing for Root or Quantasy — to other members of Root management,” Root said in the lawsuit.

Silver used the money to make various purchases, including expensive residential properties in Miami and Venice, California, and bought a limited liability company called Eclipse that is also controlled by Silver, Root alleged.

Root said its finance department last year began noticing some “unplanned spending from the marketing department” and started to investigate. Silver and Campbell “issued a series of change orders in an attempt to cover their tracks.”

In July 2022, Quantasy agreed to return $1.2 million to Root, but never disclosed its relationship with Silver or Collateral Damage or that “the $14.7 million was actually not held by Quantasy at all, but had been transferred to Silver’s company months earlier and then spent by Silver on his luxury coastal homes,” according to court documents. When Root’s finance department questioned Campbell about the work it had done for the insurtech, Campbell allegedly continue to lie, said Root.

Root said Silver was sending Campbell text messages related to the company’s communications and audit findings which, at the time, had not uncovered the alleged fraud. Silver wrote to Campbell, “We literally are good. I just need for you to trust me and hold the line.”

Root said it continues to investigate Silver, and that more fraud may exist between Silver and at least one other vendor that transferred funds Root paid it to Collateral Damage.

FedEx Loses Bid to Undo $366M Racial Bias Verdict, Files Appeal

By Jonathan Stempel

AU.S. judge rejected FedEx Corp’s request to throw out or reduce a jury’s $366 million damages award to a Black former employee who said the package delivery company fired her after she complained about racial discrimination.

FedEx appealed the final judgment entered on February 3 by U.S. District Judge Kenneth Hoyt in Houston in favor of the plaintiff Jennifer Harris, who spent more than 12 years at FedEx before her January 2020 termination.

Harris said she had been a “rising star” who FedEx promoted six times and made a district manager, before her white

supervisor asked her in March 2019 to take a demotion.

The plaintiff said she reported discrimination three days later, prompting the supervisor to complain about her work and issue a written warning, and culminating in her firing after a “sham” investigation.

and was fired because of her “unsatisfactory performance over a period of many months.”

FedEx also said punitive damages should not have exceeded the compensatory damages awarded.

The Memphis, Tennessee-based company has said it believed insurance would cover up to $75 million of any payout, subject to a $10 million retention.

FedEx appealed the verdict to the 5th U.S. Circuit Court of Appeals in New Orleans.

Jurors on Oct. 25 awarded Harris $1.16 million in compensatory damages and $365 million in punitive damages.

In seeking to overturn the verdict, FedEx said Harris did not substantiate her claims,

The company and Harris’ lawyer did not immediately respond to requests for comment.

Copyright 2023 Reuters.

Global Commercial Insurance Rates Rise 4% in Q4, Continuing Moderating Trend: Marsh

Global commercial insurance prices increased 4% in the fourth quarter of 2022, down from a 6% increase in Q3 and a 9% increase in Q2, which is a continuation of a trend of moderating increases that began in Q1 2021, according to Marsh’s Global Insurance Market Index.

While this is the 21st consecutive quarter of increases, pricing increases moderated in most regions with the exception of financial and professional lines, which decreased for only the second time since Q3 2017.

The quarter’s pricing moderation was driven largely by a 6% decrease in financial and professional lines and the continued moderation in cyber pricing, Marsh said.

In the U.S., composite pricing increased by 3% (down from 5% in Q3 of 2022) while rates in the UK were up by 4% (down from a 7% increase in

Q3), Marsh said. Rates increased in the Pacific region by 5%, in Asia by 2%, and in Continental Europe by 6% (all level to the previous quarter). In Latin America and the Caribbean prices rose by 7%, a rise on the 5% increase recorded in Q3.

Other findings from the report include: Global property insurance pricing was up 7% on average in the fourth quarter of 2022, compared to a 6% increase in the previous quarter; casualty pricing was up 3% on average, compared to 4% in Q3. For the second consecutive quarter, overall pricing in financial and professional lines fell. Driven by further rate reductions in the U.S., UK and Australia average pricing declined by 6% in Q4, compared to a 1% decrease in Q3.

Globally, cyber insurance pricing increased 28% in Q4 2022, compared to a 53% increase in Q3. In the largest cyber insurance markets, the rate of increase continued to moderate significantly with

prices rising by 28% in the U.S. and 34% in the UK, compared to 48% and 66%, respectively, in the prior quarter.

Concerns about the impact of inflation on asset values and claims costs continued to be a focal point for insurers at renewal in most regions.

“After a challenging 2022, our clients will continue to face a tough operating environment in 2023. With a slowdown in the global economy, in addition to ongoing inflation and geopolitical tensions, many clients face significant headwinds,” commented Lucy Clarke, president, Marsh Specialty and Global Placement, Marsh.

“Pricing for property risks continues to be impacted by the high level of losses in 2022, especially resulting from Hurricane Ian,” Clarke continued.

Marsh said that all references to pricing and pricing movements in its report are averages.

Business Moves

casualty insurance agency Union Bay Risk Advisors, and acquires small insurance agencies in the Northeast and Midwest.

Highstreet, Davis Insurance Agency, Michael Pigott Agency

Michigan-based independent insurance agency Highstreet Insurance Partners has acquired two Pennsylvania insurance agencies: Lock Haven-based Davis Insurance Agency and Bensalem-based Michael Pigott Agency.

National Curi, Constellation

Curi Holdings Inc. and Constellation Inc., two national providers of medical professional liability insurance, signed an agreement to merge.

Curi CEO Jason Sandner will remain CEO of Curi Holdings. Constellation President and CEO Ryan Crawford will serve as CEO of the merged insurance business.

The 10 directors serving on each company’s board at closing will come together in equal representation to govern the merged organization.

Combined, the two organizations will build on their legacies of mutual ownership, client service, and innovation while creating a national brand that seamlessly delivers the products, services, and valued advice that healthcare providers need to thrive in a rapidly evolving landscape, according to the merger announcement.

The merger is expected to close in the second half of 2023.

Following the merger, the insurance company subsidiaries of Curi and Constellation will continue to operate under the consolidated mutual holding company, such that the policies held by their insureds will remain in force.

The merged company will serve more than 50,000 physicians, healthcare providers, and organizations across the U.S.

Westfield, Lloyd’s of London Syndicate 1200

Westfield Center, Ohio-based Westfield, a 175-year-old U.S.-based property/casualty

insurance company, has completed the acquisition of Lloyd’s of London Syndicate 1200 from Argo Group International Holdings Ltd.

The deal was first announced in September 2022.

Westfield said the acquisition establishes the company as a global franchise, accelerates Westfield Specialty’s growth after a strong first 18 months in the U.S. market, and puts the overall Westfield Specialty portfolio in excess of $1 billion in premium.

Westfield Specialty President Jack Kuhn has a wealth of experience leading global, multi-billion-dollar businesses, the company said. Together with Graham Evans, Westfield Specialty executive vice president and head of International Insurance, they will build on the existing strength of Syndicate 1200 and create an underwriting-focused, market-leading Lloyd’s business as a core part of Westfield Specialty, according to the company.

Kuhn and Evans have a long-established professional relationship spanning more than 20 years in the global specialty market.

East

Union Bay, Franchino Agency

Princeton, New Jersey-based Union Bay Acquisition, an aggregator of insurance agencies, has acquired Franchino Agency, Inc. in Hillsborough, New Jersey.

Franchino Agency, headed by Gabe Frangione, president, offers personal and commercial lines policies.

Union Bay Acquisition owns property/

Both firms will join Highstreet’s Northeast Region and will report to James Hutchinson, chief marketing officer and president, Northeast region.

Davis has locations in Lock Haven, Williamsport, Northumberland, Hanover, Dushore, Tunkhannock, Warren, Brookville, and Huntingdon. Established in 1973, the agency sells personal and commercial lines insurance and also offers insurance programs including ones for car dealerships, truckers and habitational.

The family-owned Michael Pigott Agency sells personal and commercial lines. It serves Bensalem and the surrounding communities including Cornwells Heights, Andalusa, Croydon, Langhorne, Levittown, Penndel, Bristol, Yardley, Newtown, Philadelphia, Trevose, Feasterville, Southampton and Warminster. It is also licensed in New Jersey, Delaware and Indiana.

Highstreet was founded in 2018.

Midwest

Davies, MVP Advisory Group

Davies announced the acquisition of MVP Advisory Group LLC, the consulting business specializing in advisory and transformation projects for the property/ casualty and life and health insurance markets.

With headquarters in Chicago, MVP’s insurance and technology specialists manage projects in all areas of insurance including underwriting, policy administration, claims management, client experience, finance, compliance, data warehousing, data, analytics, human resources, and information technology.

Davies has established and expanded its

operations in the U.S. through a combination of strong organic and M&A growth in recent years.

The firm now offers a full range of TPA and loss adjusting products and services across all 50 states, as well as captive management, auditing, actuarial, subrogation, excess claims management and risk and inspection solutions.

A global organization, Davies has operations in Bermuda, Canada, India, Ireland, Spain, Switzerland, the UK, and the U.S. Valley Insurance Agency Alliance, Miller Mid-America

Springfield, Illinois-based Miller MidAmerica Insurance Agency recently joined Valley Insurance Agency Alliance, a cohesive family of more than 160 independent insurance agencies in Missouri and Illinois.

Founded in 2022, the veteran-owned and operated Miller Mid-America Insurance Agency was created by owner Shawn Miller. Miller Mid-America Insurance agency specializes in auto, home, commercial, and life insurance.

Prior to working in the insurance industry, Shawn Miller served as a special agent and investigator before retiring from the Air Force after 23 years.

Founded in 2006, Valley Insurance Agency Alliance is the regional founding member for the Strategic Insurance Agency Alliance.

DOXA Insurance Holdings, Bradshaw Insurance Group

DOXA Insurance Holdings, headquartered in Fort Wayne, Indiana, has acquired Bradshaw Insurance Group Inc. (BIG), a sixth-generation insurance organization.

BIG is a Delphi, Indiana-based managing general agent offering a full suite of services specializing in niche transportation insurance products, including a driver’s association, claims administration and a brokerage division.

Stacy Bradshaw will continue leading Bradshaw Insurance Group as president and will continue Bradshaw’s track record of providing differentiated products and services to its insureds and carrying out BIG’s next stage of strategic growth.

DOXA Insurance Holdings acquires

specialty niche-focused insurance distribution companies such as managing general agencies, wholesale brokers, and program administrators.

South Central

Inzone, Austin Insurance

Inszone Insurance Services has acquired Austin Insurance.

Established in 2005 by Cole Austin, Austin Insurance has provided insurance services in Grand Prairie, Texas, for more than a decade.

Operations for Austin Insurance will continue under Inszone Insurance’s Dallas location. Customers will continue to receive the same services under the Inszone Insurance brand.

Arthur J. Gallagher & Co., Remco

Arthur J. Gallagher & Co. subsidiary Risk Placement Services Inc. acquired Austin, Texas-based Remco Insurance Agencies Inc.

With roots going back to 1987, Remco Insurance is a retail non-standard auto insurance agency serving clients throughout Texas.

Rahim Peerbhai and his associates will remain in their current locations under the direction of Jorge Barcena, president of RPS Pronto.

PCF Insurance Services, Oak Point Risk Advisors

Lehi, Utah-based PCF Insurance Services (PCF) acquired Oak Point Risk Advisors, a niche risk management and insurance agency focusing on commercial insurance for the maritime, oil and gas, and construction industries.

The terms of the deal were not disclosed.

Led by President Ronny Sternfels and based in Louisiana, Oak Point Risk Advisors is an insurance and risk management services company that works closely with businesses along and on the Gulf of Mexico.

PCF Insurance Services is a full-service consultant and insurance brokerage firm offering an array of commercial, life and health, employee benefits, and workers'

compensation products and services.

Southeast Risk Strategies, Tanenbaum-Harber

Risk Strategies, a national insurance brokerage, has acquired Florida’s TanenbaumHarber, a risk management and insurance advisor.

Based in Miramar, Florida, TanenbaumHarber traces its beginnings to 1860. It is considered one of the largest independent property/casualty agencies in South Florida, the companies said.

The terms of the deal also included Tanenbaum-Harber of California, headquartered in San Diego.

Risk Strategies has more than 100 offices around the country.

Alera Group, John Hackney Agency Alera Group, an independent insurance and wealth management firm, has acquired the John Hackney Agency in North Carolina.

Hackney, with offices in Wilson, in the eastern part of the state, was founded in 1895 by the Hackney brothers’ great-grandfather. The company offers all lines of insurance.

The agency will now be part of TriSure, an Alera Group company headquartered in Raleigh, North Carolina.

Alera, headquartered in Deerfield, Illinois, has more than 4,000 people in 180 offices around the country.

West

Alera Group, Collective:ChoiceInsurance Solutions

Alera Group acquired Collective:Choice Insurance Solutions in Westminster, California. The Collective:Choice team will continue serving clients in their existing roles.

Collective:Choice was created in 2006 to provide a way to shop for and enroll in the Affordable Care Act plans. It is in the Covered California Certified Agent program.

The firm also offers additional insurance for accident, critical illness and hospital confinement.

People

National Marsh McLennan named Pat Tomlinson CEO of U.S. and Canada.

He, along with Flavio Piccolomini, who was appointed International CEO, will report to Mercer President and CEO Martine Ferland and Marsh President and CEO Martin South as they lead operations across Marsh McLennan’s Marsh, Mercer, Guy Carpenter and Oliver Wyman business.

Tomlinson has more than 25 years of experience in professional services. He joined Mercer in 2014. Most recently he served as Mercer’s president of U.S. and Canada. Prior to Mercer, Tomlinson was with Aon for 17 years.

Piccolomini was most recently president of Marsh’s International Division and brings 30-plus years of experience in insurance brokerage and risk advisory.

HDI Global, headquartered in Hanover, Germany, appointed Jason Tyng to the newly created role of lead of U.S. captive solutions. He is based in Chicago.

Tyng brings more than 15 years of sales and leadership experience across the commercial insurance industry. He joins HDI Global from Amazon, where he served as head of construction risk, handling placements of both international and domestic programs.

Marshall & Sterling Enterprises Inc. appointed Eric Diamond as chief executive officer.

Prior to joining Marshall & Sterling in 2009, Diamond was president of JS Diamond Group Inc. He most recently served as president of Marshall & Sterling’s employee benefits for 12 years. Diamond also serves on Marshall & Sterling Enterprises board of directors.

Jim Dahoney, currently the company’s senior vice president and chief information officer, has been promoted to the role of chief operating officer. Dahoney has been with Marshall & Sterling for 32 years.

Marshall & Sterling is headquartered in Poughkeepsie, New York, with offices in New York, California, Michigan, Florida, Virginia and the U.S. Virgin Islands.

Specialty managing general agent Nexus Underwriting appointed Justin Darlea as assistant vice president, product recall, in its specialty casualty business. The company is headquartered in Morristown, New Jersey.

Darlea joins Nexus Underwriting U.S. from Starr Insurance Companies. Prior to this, Darlea was a product recall broker at Marsh & McLennan Companies and an underwriting assistant at Morstan General Agency. He began his insurance career at Munich Re America.

East Insurtech Send Technology Solutions Ltd. appointed New York-based Charlie Riley as vice president of marketing, North America. This is the company’s first dedicated North American hire, part of

a planned North American expansion to support property/casualty underwriters.

Riley has 20 years of experience, including four years leading the marketing and sales operations for independent broker Lawley Insurance and as vice president of growth for cybersecurity insurance business Havoc Shield.

Send is headquartered in London, England.

Global insurance broker NFP hired Kelly Smith as senior vice president, employee benefits. Smith will work across the Hudson Valley and upstate New York, focusing on business expansion and client retention.

Smith comes to New York, New York-based NFP from MVP Healthcare, where she served most recently as senior vice president, chief of sales.

The Hartford appointed Hank Dominioni head of sales and underwriting for its middle and large commercial businesses’ northeast division.

Dominioni will lead sales and underwriting operations for the company’s independent agents, brokers and customers across seven northeastern states from Maine to New York.

He has been with The

Hartford, based in Hartford, Connecticut, for over 20 years, most recently serving as head of northern and southern New England.

Plymouth Rock Home Assurance Corp. in Woodbridge, New Jersey, appointed Rachel Switchenko as vice president of customer solutions.

Switchenko previously directed customer care for Plymouth Rock’s independent agent auto business. Prior to joining Plymouth Rock, Switchenko spent 11 years at Liberty Mutual Insurance.

Midwest

Holmes Murphy appointed key leaders to several major roles throughout the Holmes Murphy enterprise.

Jay Freiermuth, Stephani Manning, and Lauren Roth have been appointed to Holmes Murphy’s board of managers.

Freiermuth has been with Holmes Murphy since 1997, most recently serving as a senior vice president in the surety space. Manning and Roth both have over a decade of experience at Holmes Murphy.

Columbia Insurance Group, headquartered in Columbia, Missouri, named Lisa Wharton vice president and chief information officer.

She is an accomplished technology leader with over 20 years of experience.

Before joining Columbia, Wharton was vice president of application development at Grange Insurance and served

Pat Tomlinson

Jason Tyng

Lisa Wharton

Charlie Riley

Kelly Smith

Hank Dominioni

as vice president of systems transformation at Motorists Insurance Group.

Global Marine Insurance, a division of Specialty Program Group LLC, hired Jason Cochran as a commercial marine specialist. Cochran will provide strategic risk guidance to marine businesses in the Midwest.

Cochran comes to Global Marine Insurance from the Brunswick Corporation in Mettawa, Illinois, where he served for 15 years in several positions with increasing responsibility.

Merrill, Wisconsin-based Church Mutual Insurance Co., S.I. 1, promoted Alan S. Ogilvie to president of the company. Rich Poirier, current president and CEO, will remain as CEO.

Ogilvie also will join Church Mutual’s board of directors. He will assume the additional role of CEO on Jan. 1, 2024, when Poirier transitions to senior advisor.

Ogilvie held positions at Wausau Insurance Companies, Caliber One Indemnity, Godfrey & Kahn S.C. and Capitol Insurance Companies before joining Church Mutual in 2015.

Cedar Rapids, Iowa-based United Fire Group Inc. (UFG) appointed Julie Stephenson executive vice president and chief operating

officer. She succeeds the company’s longtime COO, Michael Wilkins, who has retired.

Stephenson has over 25 years of experience in the insurance industry, most recently serving as global head of casualty reinsurance at Swiss Re.

South Central

NFP, a New York, New Yorkbased property/broker, benefits consultant, wealth manager, and retirement advisor, hired Aaron Hawley as a senior vice president in its Surety practice. Hawley is based in Houston.

He joins NFP from Catto and Catto, where he was surety director. Prior to this, he spent more than 15 years as an underwriter for various companies, including The Hartford, Zurich International and Liberty Mutual.

Mike Myers joined Alliant Insurance Services as vice president within its employee benefits group. He is based in Dallas.

Myers joins Alliant with nearly 30 years of healthcare and benefits industry experience. Before joining Alliant, Myers was vice president/ senior benefit consultant at a risk management and benefits consulting firm working with clients across various industries and disciplines.

Goosehead Insurance Inc., an independent personal lines insurance franchise operation, promoted Mark Jones Jr. to the executive team as chief financial officer.

Jones joined Goosehead, in 2016 as controller and was

promoted in 2020 to vice president of finance. Prior to joining Goosehead, Jones worked in Ernst & Young’s Audit practice.

Goosehead is headquartered in Westlake, Texas.

Steve Kinion has been appointed as captive director at the Oklahoma Insurance Department. Kinion previously served 13 years as the captive director for the Delaware Insurance Department.

He joined the Oklahoma Insurance Department in 1995 as counsel to the Oklahoma State Board for Property and Casualty Rates and as an assistant general counsel.

Southeast Mark Fowler has been appointed commissioner at the Alabama Department of Insurance. Fowler joined the department in 2013 and was named acting commissioner in July 2022, after longtime Commissioner Jim Ridling retired.

Before joining the department, Fowler had a 28-year career in government, public affairs and association management, the department said. He also served as a legislative assistant to the late U.S. Sen. Howell Heflin.

At the DOI, Fowler has worked as government relations manager, chief of staff and deputy commissioner.

West California Insurance Commissioner Ricardo Lara appointed Carolyn Wysinger as the newest member to the California Automobile Assigned Risk Plan Advisory Committee, and April Savoy, Patrick Wong and Peter Guastamachio as members

on the California Insurance Guarantee Association board of governors.

The CAARP Advisory Committee provides policy advice to the insurance commissioner on matters affecting the operation of its programs.

LP Insurance Services LLC in Reno, Nevada, added Doug Richesin and DLR Insurance Solutions. He provides services and guidance to employee benefits clientele.

Richesin joins LP Insurance as a member/ owner and will continue serving clients throughout the Fresno, California, area and beyond.

Buckner in Salt Lake City, Utah, appointed Arsen Mkrtchyan as chief growth officer of employee benefits and Mike Gulick as vice president of business development.

Mkrtchyan has held various leadership positions with Grant Private Wealth Management, NOMI Health, Health Equity and Cambia Health.

Gulick, who joined Buckner from EMC Insurance Companies in Boise, Idaho, has served the insurance industry in various capacities, including business development, underwriting, and marketing.

Alan S. Ogilvie

Julie Stephenson

Aaron Hawley

Doug Richesin

Arsen Mkrtchyan

Mike Gulick

‘A Tale of Two Halves’ for Insurance Mergers, Acquisitions in 2022

Last year was a tale of two halves for insurance mergers and acquisitions.

OPTIS Partners reports 987 agency mergers and acquisitions were announced in 2022 — down 8% from 2021. A significant rise in interest rates and economic uncertainty may be forcing a few buyers to pull back and causing nearly all buyers to proceed more cautiously, the firm said. Deals in the second half of last year were up 16% over the first half — but down 25% over the second half of 2021. The 282 deals during the fourth quarter of 2022 were 14% higher than the third quarter of 2022, yet 30% lower than the same period in 2021. That year-over-year decline most likely reflects rising interest rates and economic uncertainty.

“2022 was a tale of two halves,” said Steve Germundson, partner at OPTIS, an investment banking and financial consulting firm specializing in the insurance industry. “The robust first half was driven by a built-up inventory of deals yet to be completed and still favorable economic conditions. The buying spree continued as there were 23% more deals done than in the same period in the prior year.

“However, as soon as the third quarter began and deal inventories fell, the impact of rising costs of capital was felt and the flow slowed. Interestingly, the deal count in each of the first six months of 2022 was

higher than the same month in the previous year, and each of the last six months was lower.”

The OPTIS Partners’ tally was expanded in 2022 to include agencies solely focused on life insurance, investment or financial management, consulting and other business connected to insurance distribution. When the newly admitted categories of sellers are excluded, the decline is even more dramatic at 17% compared to 2021. Still, deal activity in 2022 was greater than the previous 5-year average.

Top Buyers

Acrisure continued to lead all buyers with 107 transactions in 2022 — down 12% over its 2021 totals, yet 3% higher than its previous five-year average. PCF Insurance followed with 71 completed transactions. Other top buyers were Hub International with 70 acquisitions and High Street Partners with 44. Inszone Insurance Services followed with 42 deals. Another group of active buyers recorded between 30 and 40 transactions in 2022: World Insurance Associates, BroadStreet Partners, Liberty Company Insurance Brokers, Assured Partners and Alera. Of the 17 firms that did more than 20 deals in 2022 only Hub, Inszone, Liberty Company, and Keystone Agency Partners did more deals than in the prior year.

Property/casualty sellers accounted for 557 of the total 978 transactions (56%) — similar to their percentage of the totals in recent years.

Private Equity Buyers Dominate

Private equity-backed/hybrid group of buyers continued to dominate the volume of transactions at approximately 75% of the total. Acquisitions completed by privately held firms increased slightly to nearly 17%, while publicly traded companies dropped slightly to 4% of all deals, respectively.

The most active privately-owned buyers in 2022 were Liberty Company Insurance Brokers at 33 (up from 10), Westland Insurance Group at 15 (up from 9), and TrueNorth Companies at 10 (up from 4).

‘Turned on a Dime’

“The industry seemingly turned on a dime starting July 1st,” said Tim Cunningham, managing partner of OPTIS Partners. “Deal counts are down, underwriting scrutiny is higher, and valuations for most, except the A-tier sellers, are down some.”

He continued: “We are likely at the beginning of a transition period that brings us back to historical norms. Interest rates are higher than they have been in recent memory but are still at or below long-term historical averages. Valuations for all but the best may have moderated, but they are still well above values from just a few years ago. And while deal count has slowed materially, the second half of 2022 was still 19% higher than the previous 5-year average.”

Activity by Buyer and Seller Types

OPTIS Partners tracks buyers by four groups — private equity-backed/hybrid brokers, privately held brokers, publicly held brokers, and all others. Sellers are classified as U.S. and Canadian P/C and employee benefits brokerages, third-party administrators, and related managing general agent operations. As mentioned above, the tally grew in 2022 to include other types of agencies and businesses.

Young Voices Reflect on Industry Talent Crisis

By Allen Laman

It’s no mystery: The insurance industry is experiencing a monumental shift.

A 2021 report from the U.S. Chamber of Commerce forecasted that nearly 400,000 insurance industry employees were expected to retire from the insurance industry workforce within the next few years. In 2012, The Institutes found that eight out of 10 millennials reported having limited knowl-

edge and understanding of the employment opportunities available within the insurance industry.

A talent crisis has emerged. One insurance expert envisions the phenomenon as more of a “talent cliff.”

“I use the term cliff to emphasize the severity of this problem,” said Dr. Brenda Wells, a distinguished risk management and insurance program director and professor at the University of Eastern Carolina. “Because we are

just not replacing people fast enough.”

The insurance industry — like a lot of industries — is desperate for good, hard-working talent. College students don’t initially look to insurance, though, when charting their career paths. And the industry has long been marred by a negative image that Wells said hadn’t been taken seriously until recently.

“In the time that I’ve been in the industry, I’ve never seen it like it is now,” said Wells,

who has 35 years of experience in insurance academia. “I have never seen employers so desperate for good talent.”

Younger Generation

But what about the young folks who are part of the industry? What brought them to insurance — and perhaps more importantly, why have they stuck around? Could their experiences and perspectives hold the answer to talent attraction and retention?

Lacey Garrison Strom, EVP

and director of private client practice at Heffernan Insurance Brokers in California, took a job as a State Farm receptionist in 2001 at 18. She was required to meet her agent when she signed her first auto insurance policy. She was not required to work for the company while she studied to be an artist. But she did, and that job led to what has become a nearly 22-year insurance career.

“I just really enjoyed the human interaction,” Strom, 39, reflected. “The human element of it.”

Six months into her time at State Farm, she was licensed and began selling insurance. In the two decades since, Strom has worked at Personal Lines Insurance Brokers Inc., and Heffernan. Her work is gratifying, and she loves the appreciation she receives from her clients.

“There’s so much human element to it,” Strom said. “And insurance does seem very bland on the outside. But when you really start digging into it, you realize how critical it is to our communities, our country (and) our economy. There’s all kinds of different avenues you can take with insurance.”

Wells is all too familiar with this misconception by industry outsiders. Most everyone who works in insurance understands the industry is inextricably tied to protecting against risk and nurturing people and communities. But those on the outside don’t always see it that way.

“Our industry does a horrible job of public relations,” Wells explained. “Most of the insurance commercials that you see on TV make fun of us.”

Many of her colleagues believe those commercials hurt

efforts to bring students into the industry. Wells admitted that while some of the industry’s TV advertisements may be cute, “nobody is emphasizing what we do to help people in terms of a career,” she noted.

“And this generation wants fulfilling work,” she continued. “My generation wanted $60,000 a year and a BMW. And I see these students now, they want to give back to the community. They want to be involved in community service. They want to have the meaning to their work. And insurance definitely provides that. But we’re not doing a good job of telling our story.”

Working in the industry has taught Strom patience, empathy and active listening skills. She believes as the industry moves forward, it will be important to listen to more than just clients. Listening to the youngest members of the insurance workforce will be important, too.

“I think it’s really important that we hear this next generation,” Strom explained. “And also ask them what they need. I think, so frequently, we like to tell people what they need. But to my point about listening to our clients — we need to listen to this next generation. And hear what they’re looking for. Maybe we can’t give them exactly what they’re looking

for. But we can certainly make tweaks to make this a more desirable industry for them.”

Lifestyle Choices

Mike Federspiel’s journey to his desk at Energy Insurance in Kentucky followed a unique path. His father sold health and life insurance, and the younger Federspiel worked for three years in the industry before pursuing a career in law enforcement. He was good at his job — ascending through the ranks to a detective position. But his priorities in life began to change. He married and began thinking about his future. The demands of the police schedule and everything that comes with that world didn’t align with his family goals. So, he walked away from law enforcement, and he has worked as a personal lines agent at Energy Insurance for nearly two years.

be there for Christmas. I want to be able to go on vacations with them. I want to be able to do all that. So, I started thinking about what I wanted with my family long-term. And insurance is kind of what I could see … would provide that lifestyle for me.”

Many outsiders are familiar with insurance companies’ slogans and promises of quickness. Federspiel’s love for his work is tied to relationship building, helping clients fill gaps in coverage and educating them along the way. As he’s grown, he has appreciated being able to be a calming voice for people on their worst days.

“It was, ‘Hey, I want to be able to go out and make the money that I want to make by the effort that I put into it,’” Federspiel, 31, recalled. “‘And I also want to be able to be there for my family. I want to

“I think being able to get out to younger people that, hey, you can control your career, you can still go after things that you enjoy, but you just become a specialist in it,” Federspiel said. “It’s not limited to just home and auto and just the generic quick things you see on the internet or on TV. You’ve got to think broadly. Architects need insurance. Construction companies need insurance. So, just being able to find your market and be able to really focus on that area.”

Opportunity

Bridget Brundige, an account executive at LP Insurance, believes that if more younger continued on page 24

‘I have never seen employers so desperate for good talent.’

Bridget Brundige Lacey Garrison Strom Mike Federspiel

Special Report: Talent

continued from page 23

people knew about the variety of the work — and insurance industry work in general — they would be more likely to pursue a career in the industry. Graduates often home-in on the tech industry because it is cool. Insurance, on the other hand, doesn’t carry that same connotation.

She recognizes that most of the time people use their benefits it’s because something bad has happened to them. She sees the value in being able to be the resource to help them understand complex information. She also sees the importance of helping employers save money and retain talent. This mix keeps her work enjoyable.

“There’s all kinds of opportunities within the industry, I think,” she said. “It’s just, how do you get that message out?”

Courtney Pino, a 33-year-old employee benefits consultant at LP, pointed to the value of highlighting the modernization of the benefits process with technology. Twenty-five-yearold Brianna Budd, a benefits consultant at Energy Insurance, spoke of the importance of insurance education for all ages. Jared Rossi, a 38-year-old commercial lines broker at LP, sees the importance of showing the relationship-building aspects of the industry to young people.

Wells isn’t sure what the answer is to the crisis. She has seen promising ingenuity from organizations, including big signing bonuses and offering pet insurance or repaying student loans. That is a change from the past, according to Wells, who said the insurance industry has not been as generous with offering such

employee benefits in the past. “I’m seeing a lot of creativity coming out of the insurance business, which I like,” she said.

She also believes producing better industry recruiting materials is necessary. Showing students what they will get out of a career in insurance is important. And while the industry has made strides to increase diversity, the insurance workforce is still primarily white and male, according to Wells.

According to The U.S. Bureau of Labor Statistics (BLS), about 50% of all classified insurance agents are women; 11.8% of insurance agents are Black or African-American, 4.1% are Asian, and 16.5% are Hispanic.

On average, gender equality is better across the insurance industry than in other fields in North America but racial diversity is less prevalent in

higher level positions such as the vice president and C-suite level, according to a 2022 study by McKinsey & Company. Only one in 25 direct reports to CEOs in insurance is a woman of color, the study showed.

“When people look at an industry, they want to see themselves in it,” Wells said. “And we’re improving in that front. We have a lot more diversity in the industry than we did when I got out of school. And the industry is to be commended for that. But we’re still not showing these young people what we offer them and why they should choose us.”

Many industries had baby boomers who aged in place over the past couple of decades and are now retiring en masse. That had a lot to do with the COVID-19 pandemic but the industry’s talent crunch was already an issue even prior to 2020, according to

Bob Hartwig, director of the University of South Carolina’s Darla Moore School of Business’ Center for Risk and Uncertainty Management.

The acceleration of retirements and early retirements due to the pandemic, however, has exacerbated the problem for the industry.

“The competition for the talent that insurers and brokers and agents want is actually more intense than they realize,” Hartwig explained. “With much of the competition coming from not their competitors, but from other industries entirely. And so that means making yourself … familiar early and often to students. And you want to be in the right place at the right time, so that when they’re making that critical decision about their career, that you’re able to be there and make an attractive offer to them.”

Spotlight: Risk Management

When Mother Nature Strikes

Working Together to Mitigate Natural Catastrophe Risk: AM Best Webinar

By Jahna Jacobson

Climate change is contributing to increasingly intense natural catastrophes that leave larger and larger losses in their wake. What steps can the insurance industry take to prevent losses, protect clients, and ultimately create a safer world in the eye of a growing storm?

AM Best’s webinar “Working Together to Mitigate Nat Cat Risk in Challenging Climate Times,” sponsored by Munich Re, asked a panel of experts to speculate about the future of natural catastrophe preparation and recovery in the face of increased impacts from climate change. The goal: save lives and lower losses.

Exposure and Preparation

“There’s a common thread

when we talk about the exposure to property and lives, and that’s really our preparation for it,” said panelist Maurice Marvi, property loss control expert at Munich Re Specialty Insurance. “We have building codes in place, and in some places, they have been shown to work very well, but they only work as well as they are enforced.”

While the science and engineering are available to create more resilient structures, people have been reluctant to embrace the changes even

when the threats are apparent and ongoing, said panelist Anne Cope, chief engineer at Insurance Institute for Business & Home Safety. “We need to evaluate where we are building, what we should expect, and have the awareness of the vulnerability.”

Unfortunately, some of the more vulnerable places for buildings, such as beaches and barrier islands, are the most desirable places to live, Marvi said. As the last few hurricane seasons have shown, properties

built in Florida after its 2002 building code revisions show a greater ability to stand up to catastrophes — for now.

“You’re going to have to build to withstand the hazards that can be expected, not just the hazards that we expect today,” Marvi said. “We’re going to have to take a look into the future and say, what we’re building today, is that going to meet the hazards that we are going to see down the road?”

But not all locations can be adequately defended against natural hazards. Some loss can be managed with measures such as flood walls or hurricane protective windows or building at higher elevations, Marvi said, “But probably the best way is not to build in these areas in the first place.”

continued on page 26

Anne Cope

John Riggs

Spotlight: Risk Management

continued from page 25

Technology

From networked sensors in homes and businesses to more precise mapping, technology will play a critical role in helping to build stronger and smarter buildings, the panelists said.

By collecting data from everything from freezing pipes to flood plains to fire hazard conditions, insurers can predict the scope and frequency of claims. More data means more accurate estimates of coverage needs and attainable measures to prevent losses.

“When I first started in loss control, natural catastrophe was something we reacted to,” Marvi said. “Generally, the loss control engineers and representatives were brought in to assist with claims or something like that, taking our technical knowledge and taking a look at things after the fact.”

Mapping vulnerable areas for more accurate risk assessment is one field in which technology has vastly improved over the last few decades.

“The flood maps were very rudimentary. I remember having an entire room of paper flood maps so I could take a look at the flood. And sometimes they were very old.” He added that resources such as wind maps and earthquake maps represented the entire U.S. on a single 8-by-11-inch sheet of paper. “You couldn’t tell anything, then.

“Loss control now has access to maps down to 10-meter resolution as to what your actual exposure is,” Marvi said. “So we get a lot more information that tells us where to start when it comes to taking a look at hazards, taking a look at the built environment, seeing

what kind of mitigation can be done in order to reduce any type of aftermath in any type of natural catastrophe.”

The trend of catastrophic events increasing in both frequency and intensity is forcing carriers to look for ways to mitigate losses through technology.

Effective deployment of sensors, for example, can yield valuable information about power grids, building systems and other components.

“We’re attacking the challenge of climate change, going into our engineering legacy, through engineering and technology,” said John B. Riggs, chief technology officer & senior vice president of Applied Technology Solutions, HSB. Those measures include resilience management plans, response plans for equipment, and driving sensor deployment and power monitoring.

The company is using loss history and active sensor data to develop more effective ways to minimize and prevent loss, Riggs said. For example, he said that freeze sensors can alert insured and building owners of rapid temperature drops during the front edge of a freeze event. The sensors can signal that it’s time to take steps to prevent property damage before the full force of the event impacts the structure.

“Just that slightest bit of an advantage can make all the

difference,” Riggs said. IoT Sensor technology will continue to evolve and improve, ongoing, he said. “I think the more important question is that of adoption … I think we’re right at the tipping point of early adopters and early majority.

“In terms of the future and the insurance industry, IoT sensors and related tech, we’re exploring the frontier — the new areas of predicting and preventing loss,” Riggs said. “The true value of that confluence between technology and insurance, the true value has yet to be realized.”

Wildfire

Wildfires present unique challenges when it comes to loss prevention, said Cope. One challenge is that fires often spread by casting embers that can travel for miles before igniting a spot fire.

“I can mitigate against the wind ... strengthen the building from the inside and bake the stuff into it,” said Cope, who is a wind engineer. “Wildfires are interesting because many of the things that cause wildfire to create havoc in the built environment are those embers that go for miles.”

Property owners in fireprone areas should follow recommended guidelines to prevent spot fires from spreading, such as fire-proof landscaping around structures, the panelist advised.

“Wildfire defense needs to be a systems-based approach,” Pope said. “Every link in the chain has to be strong enough. Embers are going to find the weak link and try to get in the landscaping, roof, vents — you have to have a full system.”

Another challenge is that in

a built environment — manmade structures in the fire’s path — change the fire’s nature. The very things it destroys make it harder to fight, she said.

“Wildfire absolutely changes and evolves and becomes more dangerous when it consumes the built environment, which makes it harder to model,” Cope said.

Catastrophes

People often shy away from conversations about disaster damages, past and future, out of concerns for property values or salability. But the priority should be preserving properties, lives and communities, said Cope.

“Let’s be upfront about the wildfire risk or the hurricane risk or the flood risk,” Cope said. “Let’s declare what we already know … mother nature is doing, and then let’s embrace the adaptation that is going to be needed.

“We should adapt our built environment to deal with the threats at hand according to the acceptable level of risk,” she added.

“Those repeatable things that Mother Nature is doing need to be part of our resilient communities, and that takes all the stakeholders, the diverse group — builders, insurers, policymakers, homeowners, business owners — everyone has to come together to think about, what piece do I have in this pie? How am I going to contribute? Because I need a thriving community to be there after Mother Nature comes by.”

The AM Best video is available at: http://www.ambest.com/ webinars/catastrophes2022/ index.html.

Maurice Marvi

News & Markets

2 Big Cannabis Insurance Providers Say Losses from California Storms Not as Bad as Feared

By Don Jergler

Just how big an impact the recent historic California storms had on the state’s cannabis industry is still coming into focus, and while two of the biggest players in California’s cannabis insurance market are starting to see upticks in claims, both operators say the figures are so far much lower than feared.

That is surprising considering the severity of the storms that wreaked havoc on the state in December and January.

Golden Bear Insurance Co., the first admitted carrier in the state approved to sell cannabis policies, insures more than 100 greenhouses in California – some with limits of $20 to $30 million– dozens of dispensaries, and properties on numerous agricultural facilities up and down the coast.

So far, the carrier has only seen a few hundred thousand dollars in claims, Michael Hall, head of Golden Bear’s cannabis operation, said.

Managing general agent CannGen Insurance Services, a large national cannabis insurance provider with a significant footprint in California, has so far seen claims into the “millions of dollars,” a figure that is still much lower than expected, according to Chief Marketing Officer Charles Pyfrom.

Moody’s RMS earlier this week said total economic losses from the recent California flooding are estimated to be between $5 billion and $7 billion, and insured losses are anticipated to be between $500 million and $1.5 billion, including losses in the National Flood Insurance Program and the private flood market.

A series of extratropical cyclones starting in late December struck the West Coast, resulting in heavy rainfall, flash flooding, mudslides, downed trees, debris flow and wind damage.

Exacerbating the storms was a band of high atmospheric water vapor, or an “atmospheric river,” according to Moody’s. Several locations in central California

saw record rainfall, with some locations reaching their annual average rainfall totals in less than a month.

Infrastructure damage was extensive, with state highways and local roads closed or damaged due to a combination of flooding and mudslides. Droughtstressed trees were uprooted, and heavy winds caused damage to power networks, as well as to cars and properties, Moody’s reported.

The historic storms also impacted California cannabis operators, disrupting operations and supplies. Some cannabis companies temporarily closed operations. Several businesses told MJBizDaily their operations were flooded, and others reported product losses as heavy rains damaged crops.

Federal aid was sent, but a national catastrophe was not declared, making it difficult to aggregate loss data. That’s one reason why CannGen is still compiling claims data from the storms.

“We saw an uptick of losses, but we are not able to say those are all directly due to the storms,” Pyfrom said. “It would be safe to say we have millions of dollars in claims given our market share in California.”

Their ultimate loss figures from the storms are likely to be somewhat tempered because CannGen helps insure only indoor grow facilities and not the more risk-prone outdoor operations.

“So, we probably dodged a bullet on that,” said Pyfrom, adding that CannGen continues to work with their carrier and third-party provider partners to get their insureds back to normal operations.

Hall is surprised by the lack of claims from greenhouses and the low overall claims figures he has seen to date.

“If I had to guess, I’d say our losses are in the low 100s-of-thousands,” he said. “And none of those greenhouses have put in claims yet.”

He chalked up the lack of greenhouse losses to strict underwriting practices –largely.

“It’s just luck and good underwriting, I guess,” Hall said.

He said the carrier has also seen losses to buildings reported by outdoor growers who are also hoping to find flood coverage for crops, which is unlikely to be there. Getting flood coverage is problematic for these businesses because cannabis is still federally illegal, meaning the NFIP cannot cover cannabis operations.

“We’ve had a lot of claims that have been turned in where there’s not going to be coverage for them,” Hall said, adding that the carrier has been able to pay for losses like roof damage and other damage to buildings.

Golden Bear has also seen roughly a dozen flood claims from dispensaries. “They’re kind of grasping at straws to find coverage for it,” he said.

Michael Hall, vice president of Golden Bear’s cannabis department.

Charles Pyfrom, chief marketing officer for CannGen Insurance Services.

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News & Markets

California Earthquake False Alarm Offers a Lesson for Crisis Communicators

By Don Jergler

An earthquake false alarm nearly four years ago can teach disaster and emergency planners – and any crisis communicators, including insurers –a thing or two about communicating to the public during and following a crisis.

In May 2019, an alert message was sent to the residents in Ridgecrest, California, warning them of a possible earthquake. It turned out to be a false alarm, which had a negative impact on people living in an active earthquake area that was struck by a series of quakes 10 months earlier.

The false alert, which came from the ShakeAlert early warning system that operates along the West Coast, was caused by a mislocated system test message. The alert was followed by another message: “USGS ShakeAlert message cancelled. Investigating. If you protected yourself, well done.”

The false alarm was bad enough, especially for those who had previously gone through the recent quakes. However, it was the second message that a team of social scientists found fascinating enough to study. They sought to find out what people who saw the message understood about the threat and their safety, and what actions they believed they should take as a result.

The researchers conducted individual interviews with Ridgecrest residents who got the alerts, as well a series of focus groups in Southern California. The study showed people were confused about content in the follow-up message and they found it to be largely ineffective.

People were confused about just what was being “canceled” in the follow-up message. They were unclear whether it was the message that was canceled, or if the earthquake had already occurred or if it was not going to occur. That it was “canceled” also left it unclear whether people

should be worried about earthquakes later on, and what they should do to be safe going forward throughout the day.

Recipients in the study were also confused by the word “investigating.” Was it a statement that something went wrong? And if so, what went wrong? Some study participants surmised that the investigation might focus on why the earthquake did not happen, others figured it pertained to what consequences the sender of the false message faced.

So, what did those people who received the message want instead?

They simply wanted an explicit statement about their safety. The researchers found that what people need most following an emergency or lack thereof is information that affirms their current level of safety so they can return to normal.

It appears some people, beside the researchers, are thinking about the aftermath of an errant alert. The earthquake message study notes that the United States Geological Survey has created post-alert messages in advance, and other organizations are encouraged to develop these messages ahead of time.

Jeannette Sutton, a University of Albany professor and the corresponding author of the study, has a bottom-line message for those organizations.

“They just need to know that they’re safe,” she said.

Sutton says communicators need to consider what people need to know and what they should be doing – not just before and during, but after an event like an earthquake, hurricane, or a wildfire.

“In general, we can do a better job when

an event is over,” Sutton said. “How do people know the threat has passed and it’s safe for people to come out, or return, or that it’s safe for them? That would be a takeaway for all hazards.”

Such advice isn’t just important for people’s peace of mind and maintaining their trust in the alerting organization, but it is essential considering that in the absence of good, clear information, people tend to turn to less credible sources to find things out as soon as possible.

That, unfortunately, for many people means going on the misinformation swamp of social media to find out from others what has happened and what to do.

“If you don’t tell people it’s safe, they’re left to do their own information seeking to figure it out,” Sutton said.

She described what is known as convergence behavior, in which people tend to converge at the scene of a disaster, or when they have a need for information or help and they are driven by informational convergence to a source.

The study’s take-home message for crisis communicators, including insurers reaching out to insureds during and after a disaster is: consider providing information people need clearly, and consider having a framework for these messages already in place.

Sutton suggested an idea communication may take the form of a simple text message with a phone number of who to call along with a link to basic, necessary information compiled on one webpage, so people can save that on their phone and carry it around until it’s needed.

“Communicating clearly and giving people quick access to the information points that they need would be tremendously useful,” she said. “That’s an ongoing crisis communication issue, helping people to navigate afterwards.”

‘Communicating clearly and giving people quick access to the information points that they need would be tremendously useful.’

My New Markets

Shock Loss/ Distress Trucking Insurance Market Available

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Submission requirements: Complete application — email for specific; 10 or more units; three or more complete years in business; three to five years of loss runs depending on age of operation — not older than 60 days; driver list with dates of hire, DOB, state license — excel format; MVRs not older than 60 days; equipment list with VINS, ages, and values — excel format; four quarters IFTA for interstate; for five or more losses and/or greater than $5,0000 — detail in excel format. We can provide a sample. Exclusions: No international drivers; no hazmat; no rolled steel coils. Drivers — no more than six points, no major violations in last four years. Cameras are required. Discount available if client already in use with approved vendor Available Limits: Not disclosed.

Carrier: Admitted, rated A-.

States: Available in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa Kansas, Kentucky, Maine, Maryland, 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, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

Contact: Darren Yancy; dy@astr1.com; 817-447-9046.

Product Liability — Cannabis Industry

Market Detail: Blitz Insurance offers robust liability protection for accident and injury related to the consumption and use of cannabis products. The product liabil-

ity products are designed to address the unique needs of the specialty areas covered by Blitz. Blitz’s broker partners get access to instant quotes or indications, flexible tiered coverage options, more accurate risk pricing leading to more approvals, and the option to bundle with other coverages for a simpler, smarter, faster experience. Product liability coverage highlights: Products and completed operations; occurrence or claims made and reported coverage; product withdrawal; extended reporting period. Appetite for retail cannabis and CBD stores or dispensaries, including non-storefront delivery; lessors of buildings with cannabis or CBD occupants; only licensed operations are eligible for coverage; covers cannabis products other than minor or synthetic cannabinoids like Delta-8, spice, or similar products. Has pen; appointment required.

Available Limits: Not disclosed.

Carrier: Summit Specialty Insurance Co., non-admitted, rated A XIII by AM Best. States: Available in Arizona, Arkansas, Colorado, Delaware, District of Columbia, Illinois, Nevada, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington.

Contact: Donnie Simpson; donnie@ blitzinsurance.com.

Flow Flood Marketplace — Residential Online Rater

Market Detail: Flow Flood, an Industry leader, has been helping agents write more flood in less time. We provide four to six private flood quotes and the NFIP rate. All quotes are bindable, endorsable and renewable on its platform. Has pen; appointment required.

Available Limits: Not disclosed.

Carrier: Multiple carriers, non-admitted, rated A by AM Best.

States: Available in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, 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, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

Contact: Abbe Sultan; abbe@flowinsurance.com; 855-368-5502.

Nationwide Physical Damage Coverage

Market Detail: Innovative Risk Insurance Services LLC will write hard to place risks and new ventures. Admitted and non-admitted available. Has pen; appointment required; $255 maximum premium; $255 minimum premium.

Available Limits: Not disclosed.

Carrier: Multiple carriers available, admitted and non-admitted, rated A+ by AM Best.

States: Available in 49 states; not available in Alaska and District of Columbia.

Contact: Jarrod Huff; info@innovativerisks.com; 877-243-9951.

Staffing Companies Startup & Experienced

Market Detail: Parsons Insurance Services

LLC’s new ProStaff program includes GL/ PL on an occurrence form, EBL, EPLI, auto, hired and non-owned, property, pmployee dishonesty and workers’ compensation. The ProStaff Program is an underwriting and risk management option for staffing firms throughout the country. Has pen, appointment required.

Available Limits: Not disclosed.

Carrier: Admitted and non-admitted.

States: Available in 50 states plus District of Columbia.

Contact: Jared Parsons; jared@goparsons. com; 972-727-7667.

www.mynewmarkets.com

Special Report: Agency Salary Survey

Employee Pay Spikes As Agency Talent Pool Shrinks

Shortage of Trained Pros, Rising Costs, Remote Work, Geography Shape Compensation Picture

By Andrea Wells

On the heels of the lowest U.S. unemployment rate in 53 years, insurance agency employees across the nation reported the highest salary and compensation percentage increases in the history of Insurance Journal’s annual Agency Salary Survey.

Agency employees who responded to the confidential survey — which has been collecting insurance agency salary data and compensation trends since 2008 — revealed that average salary adjustments jumped higher in 2022 than any other year during the past 14 years.

Average total income

adjustments — which comprise all income changes for the year, including salary and incentive-based compensation and bonuses — also rose higher in 2022 than any other previous year for both management/ agency owners/principals and support staff/CSRs/account executives.

Producers/sales employees

reported an average total income change of 13.6% overall in 2022 — while that figure is down from a record 17.9% total income change in 2021, it remained the highest overall percentage change among the three categories in the survey.

Competition is fierce for qualified talent in insurance agencies nationwide and

salaries are rising as a result, according to industry insiders.

Nearly every position in the agency needs new talent, says Mary Newgard, partner at Capstone Insurance Recruiters, a national recruiting firm based in Iowa. Client service teams are the most pressed for new hires, she says.

“I don’t think there’s a single agency that I could talk to right now that wouldn’t say they have at least one, if not multiple needs, in their client service team,” Newgard said. “It’s really dominating the focus for recruiting.”

Al Diamond, president of the Agency Consulting Group Inc. based in Cherry Hill, New Jersey, agrees, adding that urban, smaller agencies are feeling the heat most when it comes to hiring service team positions.

“When you’re in major metropolitan area and you have a $1 million agency, which isn’t terribly small, but still on the smaller end, and you’re competing against $10 million, $15 million and $20 million shops around you, and they’re paying their people $100,000 a year to be a customer service rep, that’s very tough to match,” he said.

Smaller agencies in more rural areas can still compete, according to Diamond, because they have the service and products those communities want. “The rural communities, the South, the Midwest, even the rural West, are completely different marketplaces than the urban and suburban communities and they don’t react the same way,” he said.

But in most metropolitan markets, to be a contender in this competitive landscape, continued on page 30

Average

Salaries by Region

Special Report: Agency Salary Survey

continued from page 29

What Strategies Agencies Implemented

What Strategies Agencies Plan to Implement in 2023

What Benefits Agencies Offer

Changes to Health Insurance Plan

agencies often need to rethink their offers, according to Art Betancourt, founder and CEO of AEBetancourt, a national professional placement and executive recruiting firm for the industry based in Grand Rapids, Michigan. The reasons good talent leave employment have changed significantly in the past two years, he said.

A 2022 McKinsey study found that 40% of U.S. workers reported they may leave their jobs in the near future and many of those would exit their current industry during that move. McKinsey reported that of those who made a move out of the finance and insurance sectors, 68% found jobs in other industries.

It used to be that people moved for a better culture and job fulfillment, Betancourt said. Millennials cared about doing good and sought jobs where culture and purpose meant more to them. But in today’s recruiting environment, Betancourt says that motivation has changed. There’s been a major shift in what motivates workers to move, he says.

“The number one reason why people move today is for compensation; not for culture and that kind of thing,” he stressed.

The number two reason people move is flexibility in their work schedule, he added.

Remote work and compensation go together in today’s competitive hiring environment. Whether it’s offering fully remote positions or some form of hybrid work, if agencies aren’t willing to be flexible and allow some form of work from home, it’s much more difficult to fill roles,

Betancourt said.

Add to that the graying of lines between various geographies and the competition for top talent becomes even more fierce, he said. Agencies are no longer just competing with the wages in their local market — they have started competing with wages pretty much anywhere in the country, he added.

“We know people get paid more in New York and Miami; those agencies there, especially the more sophisticated ones, maybe some private equity backed, they’ve said, well, it’ll be a lot easier to find talent if we pay an LA [Los Angeles] wage in Grand Rapids, and have them work from home,” he said. That might mean hiring someone in a different geography but then giving them a 40% raise in pay. “How do you say no to that?”

Betancourt said that for agencies to be “in the game” they have to offer competitive pay along with flexible work options. But that doesn’t mean offering above the going rate for talent. “You don’t have to be way above or way below, but you at least have to be orthodox, or average, of what everybody else pays to compete,” he said.

Diamond says that trend is a bit different in rural agencies.

“You won’t find many of those rural, smaller agencies allowing a lot of remote workers,” he added.

But Betancourt agrees that agencies’ biggest needs in hiring today are for service level positions and that trend will not change anytime soon. “It’s been our biggest growth area in the last year and a half,” he said. “It’s exploded, there’s such a huge need right now.”

Costs Per Employee

The rising cost of living and high inflation have put added pressure on pay scales, Newgard says.

“People want more so there’s a constant rightsizing for comp,” she said. “Candidates, job seekers, insurance professionals are definitely going into the market right now asking continued on page 32

Average CSR Salaries by Gender

Special Report: Agency Salary Survey

continued from page 31

that question without any sense of shame whatsoever … ‘Would my job search reveal to me that I’m being underpaid?’ And you know, I think that’s a fair question.”

Newgard says that to retain the best talent agencies need to have consistent conversations with their employees about compensation. That means making sure formal review systems are in place so that employees stick around. The easiest motivator for someone to make a career transition is pain, she said. “And certainly,

pain in your pocketbook is one reason people move,” she said.

It’s not the only reason but if employees see they are underpaid or not being paid to their skill level, that is good reason to make a change, according to Newgard. And when agencies lose an employee and then need to fill that vacancy, they may end up with a replacement that has half the experience but wants the same money, she said. That’s why retaining key talent is critical.

“This need to constantly be asking the question — and you ask it of your people and you

Employee Benefits Satisfaction Index*

ask it of other people through the interview process — what are you making, is the best barometer agencies can use to determine if they’re in a safe spot, or if they need to do some rightsizing with their current staff and their salary bandwidths,” Newgard said.

Training

Finding quality talent and retaining talent are not new dilemmas for agencies, says Christopher Boggs, vice president, agent development, research and education, for the Independent Insurance Agents

and Brokers of America. That’s always been a challenge — service staff rotating from agency to agency for higher pay within their geographical area. But the challenge gets tougher when remote work opportunities are added to the mix.

“What we’re doing is we’re stealing from each other, only now it’s even worse because someone in New York could hire somebody from North Carolina and pay them New York wages,” he said. “Well, nobody in North Carolina can afford New York wages.”

The solution, Boggs says, is training. Training new people from outside the industry to come in and training current employees to move up. But that’s not always easy for independent agencies to do, he said. Agencies are unwilling, or perhaps, unable to do so, he said.

Training takes a lot of time. Also, the agency side of the business can be complicated, he said. “You need to understand coverage, you need to understand carrier appetites, you need to understand that company A fits this client where company B doesn’t,” Boggs said.

Then there’s training for technology, accounting, and

Average Salary and Total Compensation Adjustments by Region

everything else that goes on inside an agency. “Our members don’t really take the time to train somebody new to the industry and so they all end up looking at talent that exists in the same bucket.”

Training lacks both at the agency level and at the carrier level, Boggs says. “Historically, up until about 25 years ago, carriers had training programs.” It would be six or eight months of training before underwriters tackled the job of underwriting. “Now you come in, spend 10 days in training and they have you underwriting. You can’t learn anything about this business in 10 days,” he said.

Agencies also don’t have anywhere to go to for the training they need. There is no one place where agencies can turn to get all the training they may need for new-tothe-industry employees, Boggs said.

Training programs are available, but they are fragmented. “So, for a small 20-person agency to hire somebody with no insurance experience and train them up, while it would be far more beneficial for them to do so in the long run, they just don’t feel like they have the time, and largely they don’t,” he said.

As Salaries Skyrocketed, Satisfaction Improved in 2022

By Andrea Wells

Insurance agency personnel on average made more money in 2022 and

continued on page 34

Special Report: Agency Salary Survey

continued from page 33

employees reported higher satisfaction with their compensation in 2022 than in 2021, a year when satisfaction fell, according to the latest Agency

Salary Survey, published annually by Insurance Journal.

Changes in overall salary and total income skyrocketed in all categories in 2022. Producers/

sales saw a large increase in total income change, while management and support staff both saw significant positive total income changes.

Satisfaction with compensation held steady for the most part. While the 2021 Agency Compensation Satisfaction Index reflected slight drops in overall scores, this year’s Agency Compensation Satisfaction Index showed overall increases in satisfaction levels.

Satisfaction with compensation rose to an average of 3.61 overall in 2022 up from 3.41 overall in 2021, based on a scale of 1-to-5 where “5” equals “most satisfied.” (See Agency Compensation Satisfaction Index chart.)

• Management/agency owners/agency principals reported a compensation satisfaction score of 3.85 in 2022, up slightly from 3.80 in 2021.

• Producers/sales reported satisfaction of 3.39 in 2022, up from 3.31 in 2021.

• Support staff/CSR/account executives reported a satisfaction score of just 3.11 in 2022, down from 3.13 in 2021.

The score for overall satisfaction was higher when agencies offered employee benefits, both hard benefits (such has group health, life/disability, dental, profit sharing, 401(k) plans, IRAs and flexible savings accounts) and soft benefits (such as childcare/day care, education reimbursement and paid family leave). (See Employee Benefit Satisfaction Index.)

Employee benefit satisfaction ranked highest when agencies offered added benefits such as profit sharing (3.85), stock options (3.89), Employee Stock Ownership Plans (4.00), and childcare/daycare (4.00).

The survey found that in all employee benefit categories

queried, employees showed more satisfaction with overall compensation when those benefits were offered.

As noted, the survey revealed an upward trend in total compensation for all agency positions. Producers reported the highest increases in total compensation, according to this year’s survey, as well as last year’s survey.

The 2023 Agency Salary Survey, based on about 650 responses nationwide, showed total income changes, which includes salary plus additional compensation such as profit sharing, bonuses and other income, were:

• Agency owners, principals and management reported an increase in total income for 2022, which revealed an 8.0% increase in total income, compared to a 7.5% increase in total income for 2021.

• Producers/sales total income increased the most with a 13.6% increase for 2022, compared to a 17.9% increase in 2021.

• Agency support staff total income showed 5.0% increase for 2022, compared to a 3.9% increase for 2021.

Salaries only (excluding bonus and incentive income), rose again in 2022 and at a higher rate than the previous year, according to this year’s survey results:

• Salaries for agency owners, principals and management rose 5.3% in 2022 compared to 4.6% in 2021.

• Producers/sales reported average increases in salary of 9.3% in 2022 compared to 6.1% in 2021.

• Salaries for agency support staff rose 5.6% in 2022 compared to 4.4% in 2021.

Insurance Journal’s Agency Salary Survey collected nearly 650 responses from agency owners and employees nationwide

via an online survey in January 2023. Demotech Inc., Insurance Journal’s official research partner, assisted with analysis

of this year’s survey results. For more information, contact Andrea Wells at: awells@ insurancejournal.com.

Want Used When Determining

What

Pay

How

Spotlight: Farm & Ranch

Livestock Operations Grow as Demand Rises

Nationwide’s Cumings Sees Direct-to-Consumer Models Adding Additional Liability Risk

By Allen Laman

Specialization is critical in the cattle business and increased consumer demand for protein is driving new trends, including niche farms that offer direct-to-consumer strategies.

In today’s evolving and growing livestock landscape, deep knowledge of market conditions and specialization is key to success, according to Erin Cumings, a senior consultant with Nationwide’s sponsor relation team who has years of agribusiness underwriting expertise. But for those agents willing to develop that expertise, she sees opportunities for agents in this changing and dynamic market.

According to Allied Market Research, the global livestock insurance market will soon double in value. A recent report reviewed that the worldwide market was valued at $2.79

billion in 2021 but is estimated to reach $5.77 billion by 2031. Those estimates show the market growing at a compound annual growth rate of 7.9% from 2022 to 2031.

“I think it’s all about protein demand,” Cumings said. “And as we see more demand for our products that we produce in the U.S. around protein, that’s more opportunity for hopefully less market volatility and more profitability for farmers.”

Coverage

The three main livestock policy types are broad peril, livestock mortality and livestock risk insurance. Broad, named peril coverage is generally included in farm and ranch property and casualty policies, while livestock mortality policies are life insurance policies usually purchased for high-value livestock. Risk insurance is administered through the USDA.

Broad peril coverage dominates, according to Cumings. “And as we see the industry evolve, I think that will continue to evolve,” she said.

Cumings said as the number of livestock production contracts increases integrators and producers — and all parts of the agrifood value chain — more liability coverage is needed. Insurers can read these evolving contracts and match insurance coverage to them. [Editor’s note: An integrator is a type of livestock operation where the owner of the livestock (integrator) pays the farmer as a contract grower. The farmer does not own the livestock.]

She noted that rate increases driven by weather related incidents have affected the livestock market in recent years. While availability has largely remained the same, some carriers have reduced capacity for livestock in

confined spaces — specifically on risks that have weather exposure.

At the same time, more and more livestock operations are growing, and large operations bring their own amount of risk. Cumings said the industry is also seeing an increase in “niche operations” — specifically those who implement direct-to-consumer strategies. These bring “a lot more general liability exposure,” she said.

Anyone working with these farms needs to understand what safeguards are in place, how risk management fits in and then what insurance products could be added to better protect the farmer, she added.

“That is really important,” she added, “and something that I think not all agents may think about. But to be that expert in the industry, (those are) some things that would really come in handy.”

Weather Woes

The two main challenges cattle producers face are market volatility and weather. Cumings owns a family farm with a spring calving herd, and she has seen firsthand “significant weather changes,” she said, that are forcing reassessments of the operation’s timing and system.

Scientists point to more frequent and disruptive weather events as current-day impacts of climate change. Cumings predicts these events will prompt a shift in geography — and endorsements will be used in places they haven’t been before.

“I think it’s a great opportunity for agents to understand what’s available in the market,” Cumings said, “so as they see these impacts and things impacting their farmers and ranchers, they can offer coverages that maybe they didn’t think about in the past — but

would be really useful.”

Livestock risk protection through the USDA covers market volatility. Weather-related livestock loss, however, can be covered by traditional property and casualty products, as can livestock related structures that could be lost during storms or wildfires.

Cumings also noted that confined livestock hold a lot of exposure to risk due to malfunction of ventilation systems. More pressure on the grid or through weather in general could bring more exposure to those systems — increasing importance of coverage.

Specialization

Agents specializing in the livestock insurance space will stand out in the livestock market as more opportunities for growth emerge.

“Just the diversity and the excitement in the operators, from very niche, small

operations that might be doing direct-to-consumer, to large-scale, vertically-integrated operations — it’s a great variety,” Cumings shared. “It’s a great clientele that really relies on an agent for advice and counsel.”

She foresees more specialists — and more agents within agencies who specialize in segments of livestock insurance — entering the mix because they have the power to piece together coverage that may not be offered through general P/C carriers.

“And I think we’ll see a trend in higher-valued livestock, too,” she predicted. “As reproductive technologies advance in livestock, we’re going to have some pretty extremely valuable animals, and the need for very specific, top-notch coverage for those animals is going to be very, very important.”

Cumings emphasized that industry knowledge is neces-

sary to break into the livestock insurance market. Knowing producers and products is key, and now, understanding direct-to-consumer and livestock contract trends is especially valuable.

She recommended agents connect with local trade associations and industry groups. Cumings also encouraged anyone in the insurance industry to look at the Agribusiness and Farm Insurance Specialist designation.

Cumings says that the livestock sector of the agricultural industry is an exciting space, but she understands the risks can be a little overwhelming. Putting together an insurance package and understanding the three separate product offerings can be complicated, she added. Add in today’s challenging weather exposures and rising premium environment can make it even more difficult.

Idea Exchange: Artificial Intelligence

Marketing Data Can Reduce AI Bias in the Insurance Industry

relevant marketing data and thoughtfully integrating it into AI processes can the insurance industry reduce the bias that currently exists in many of their algorithms — otherwise, they run the risk of getting bogged down by historical biases that do a disservice to themselves and their clients.

AI Bias in Insurance

AI does not generate bias on its own — only through flawed development or input does it result in skewed outputs. To address such AI bias, therefore, one must turn to the source: the collection of actuarial data and the way employees interact with it.

By Ifty Kerzner

Just a decade ago, the idea that artificial intelligence (AI) might play a role in everyday insurance practices may have sounded far-fetched. As a legacy industry with longstanding ways of doing things, many insurers kept to traditional practices even as digitization grew up around it — by 2017, only 1.33% of insurance companies were investing in AI capabilities.

Though the winds of change have blown from many directions, two major events helped pave the way for AI in insurance: the insurtech boom and the pandemic.

The former brought much needed digital-disruption and fresh-faced competition to this legacy industry, while the latter catalyzed a global trend towards digital processes and remote functionality. The result is that AI plays an increasingly larger role in the insurance toolkit — for identifying prospective customers, improving the claims experience, determining premiums that more accurately reflect individual needs, and more.

But AI is only as good as the data that informs it, and pairing future-forward processes with outdated actuarial data can come with serious implications — first and foremost, magnifying biases that unintentionally disadvantage certain groups of people. Only by pursuing cutting edge,

Actuarial data sets are compiled over years, so the biases therein become deeply rooted, making them difficult to spot in real time. Additionally, the humans who input this data can create yet another layer of bias through their selection or rejection of specific data sets. For individual agencies, carriers may use the data they are inputting on their clients, however, the potential for bias to creep in becomes much larger if there isn’t a clearly centralized method for collecting data. This means different regions could present different biases from their data collection and input methods. AI algorithms input whatever data they are given, biases and all, thus amplifying these trends.

However, it is not enough for insurers just to “keep an eye out for bias” while collating data. The prevalence of bias in AI has become so ingrained that according to estimates, about 38% of all “facts” used by AI have bias within them. In insurance specifically, AI has perpetuated biases that generate discrimination based on class, race and gender. For example, minorities are much more likely to be denied conventional mortgages and in some cases, women wound up paying about $100 more on average than men for auto insurance.

A Marketing Data Makeover

For an industry like insurance, with its deep roots in commerce and vast stores of

historical data, it is no easy task to mitigate and ultimately eliminate these biases. But though the problem persists, a promising solution is rising in its wake.

Though it may be more convenient to fall back on historical data, it will ultimately benefit insurers in the long-term to collect real-time, firsthand data from customers. This data should span everything from customer acquisition information to email correspondence with the company; from web behavior to purchase intent; transaction history, claims data, and more. This also extends to the data that is collected by individual insurance agencies, with the possibility to leverage regional-specific data and additional insights that they may have on their customers that major carriers may not keep track of.

One of the biggest advantages of using marketing side data is the ability to generate a large amount of data in a relatively short time. As claims data (and other deep

performance metrics) may take years to compile, conversion and purchase data can be generated immediately.

Not only will the amount of up-to-date data quickly surpass traditional actuarial data, it also will yield insights more relevant to the needs of the insurance industry and customers alike. In doing so, insurers will eventually be able to phase out their old, biased data sets altogether.

‘AI is only as good as the data that informs it …’

Additionally, first-party data equips insurers with the tools and customer insights needed to generate targeted marketing campaigns in order to attract new policyholders, while also giving existing policyholders a far more personalized experience. The increased flexibility of this marketing data also allows insurers to

provide algorithms that actively account for and correct AI biases, allowing for data parameters that ultimately reduce discrimination without compromising accuracy or relevance.

Insuring a Better World

The inherent bias in current AI algorithms can lead to real life consequences for groups historically affected by discriminating policies or pricing. By embracing improved marketing practices, leveraging real-time data collection, and ultimately phasing out outdated, bias-ridden data sets, the industry can create a more equal playing field for policyholders.

Everyone deserves an equal chance to feel safe and secure — it’s the job of the insurance industry to create a future where that is unequivocally true.

Some

You need a partner who can help you create the right solution for your client’s risk, while minimizing yours. Choose a WSIA member to craft cost-effective solutions for complex risks. In fact, it’s so cost-effective that a recent analysis by Conning, Inc. concludes that wholesale distribution does not increase the cost to the insured. That’s a good decision!

Find a WSIA member at wsia.org/findamember

Kerzner is executive director and co-founder of Kissterra.

Idea Exchange: The Competitive Advantage

Surplus Lines Risk Factors

mishap, agents cannot place business with that carrier until that carrier is back on the list. Check your White List regularly.

markets are extremely frustrated by agents requesting quotes everyone knows the carrier will reject.

By Chris Burand

Ageneration has passed since the last hard market and a substantial proportion of the people employed in agencies today have never experienced one. This means they have never dealt with surplus lines in such large volumes as we see today. Premiums placed through surplus markets have soared over the last two years. Beyond simply being a market willing to write accounts admitted markets no longer want to write, many surplus lines markets have introduced innovative products to further expand their sales.

I find that many people who are new to the industry are treating surplus lines placements as if no difference exists between surplus lines rules and admitted market rules. In fact, I have had producers and account managers say: “There’s a difference?” To help reintroduce some industry-wide knowledge, here are a few points that everyone working in agencies must know when placing business with non-admitted markets.

1. E&S (excess and surplus), surplus, and non-admitted markets are all generically different names for the same kind of carriers. For simplicity, I will use the term “surplus.”

2. Surplus markets do not operate under the same regulations and statutes as admitted markets. Admitted markets are far, far more regulated than surplus markets. Surplus markets can do pretty much what they want, which is a major reason agents should take extra steps and precautions when placing business with them.

3. Not all surplus markets can operate in any given state. Surplus markets must be listed (i.e., pay the correct fees/taxes) in each state and appear on what is colloquially known as the “White List.” The White List has different names in different states, but if a surplus lines carrier is not on the list, even if it is due to a temporary paper

4. Surplus lines carriers do not pay the same fees and taxes as admitted markets (including not being required to make form filings). As a result, clients placed with surplus lines carriers generally receive zero protection if the carrier goes insolvent. State guaranty funds do not protect consumers in these situations. Agents should notify their client/prospect, in writing, at the time of a proposal/quote with a surplus market, that the quote is with a surplus market and does not qualify for the state’s guaranty fund. Do not wait until the policy is issued to provide this notification.

5. Because guaranty funds do not backstop surplus markets, agents might want to verify that any surplus lines carriers they use have higher A.M. Best ratings than would usually be their minimum for an admitted carrier. For example, if an agency does not place business with any admitted carrier possessing less than a B+ rating, consider not placing any business with surplus lines carriers with a rating less than an A-.

An interesting side note is that surplus lines markets have a better record relative to insolvency than admitted markets.

6. In the past, in most states an agent had to obtain three rejections from admitted carriers before they could place a client in surplus markets. Some states have relaxed this rule and most other states completely fail to enforce it. The rule’s purpose is well-intended but rather pointless, especially in a hard market where admitted

The rule is also pointless because some of the surplus lines market products are far better and no alternatives exist. An exception often exists in many state’s regulations for this situation. Do follow your state’s rules. If something goes wrong, you will have more protection if you have followed the rules.

7. Things often go wrong in surplus lines from an agency’s perspective. E&O

exposures are greater with surplus lines and therefore, agencies need specific procedures for surplus lines business.

From my non-attorney perspective and without any consideration of various state laws and regulations, just a commonsense perspective, there are duties that must be fulfilled when a retail agent places business with a surplus market. Some will argue that retail agents have no duty to provide these notifications and it is the insured’s responsibility, only, to review their own policies — but if that is the case, then the

insured does not need you to act as their agent. Some such duties and procedures include addressing the following with your client:

a. Surplus lines markets generally do not need to deliver a policy that matches their proposal. Therefore, the agent must carefully check whether the proposal and what they promised the client matches the actual policy.

b. Surplus lines markets in general can delete coverages at renewal without notifying anyone. I have seen several

million-dollar claims where agents missed a deletion. Retail agents need to check renewals and notify clients when coverages are deleted or reduced.

c. Do not wait until the policy is delivered to communicate with the insured. Coverage begins on the effective date, not the delivery date. Therefore, if coverage is missing and you are aware of it, communicate with your client ASAP. Additionally, if you are not going to communicate reductions in coverage to your client and the policy is not delivered until after the effective date, then the entire argument that it is a client’s duty to read their own policy is moot, pointless, and wrong-footed. If you know prior to the expiration date that there are reductions in coverage in the renewal and the insured will otherwise only discover the reduction 30 days after the effective date when the policy is actually delivered, you have a responsibility to advise the insured of that fact. Otherwise, again, they absolutely do not need you as their agent.

d. Read your forms. Surplus markets do not need to file their forms or follow industry standard formats. If you are used to selling generic admitted carrier forms and take for granted that surplus lines forms will read similarly, you are mistaken. Read each form carefully and ask questions if you do not understand something.

These are just a few of the important characteristics everyone selling surplus lines policies needs to know and it is by no means an exhaustive list. Hopefully though, these recommendations will cause agents who are inadequately familiar with surplus lines, which at this point includes most people in the industry, to stop and think things through rather than taking something for granted. Taking anything for granted in the surplus lines market is probably the worst mistake anyone can make.

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com.

Idea Exchange: Is It Covered?

Logic & Language and Forms & Facts Insurance Advertising and Regulators

insurer’s “racing” exclusion and their interpretation of that language.

Anyone who has read this column for the past four years, or earlier articles of mine, knows that I am passionate about my disdain for the proliferation of price-focused industry advertising. I believe it creates or fuels the perception in the minds of consumers that insurance is a commodity differentiated solely by price, where coverage is pretty much the same from one policy and insurer to another.

covered based on policy language but arguably covered based on misleading advertising an insured allegedly relied on when purchasing the product? Should insurance regulators proactively take issue with advertisements that appear to suggest coverage equivalency that may not exist under that carrier’s policies?

To illustrate, the ISO Personal Auto Policy excludes losses arising from racing inside a racing facility. Some non-ISO policies exclude racing losses that take place anywhere if prearranged. Other non-ISO policies exclude racing losses that take place regardless of location or prearrangement. In this latter instance, street racing is excluded but not under an ISO standard PAP form.

Courts

By Bill Wilson

In last month’s column, I wrote about being encouraged by what appears to be an increasing number of industry television ads focused more on coverage than price. That being said, I lamented that all too often it appears that the claim examples provided in the commercials don’t actually appear to be covered by that insurer’s, or most insurers’, policies.

At the end of that column, I posed several questions, including: Would a court find coverage for a claim clearly not

To illustrate, one carrier’s auto insurance advertising pitch has included statements such as “SAME COVERAGE, Better Price” and “You get the SAME COVERAGE, often for less.” But does their policy provide the “same” coverage as a policy you currently have? Almost certainly not, depending on the unique circumstances of a claim and the fact that coverage is based on the insurance contract and claims practices.

Two insurers may interpret the exact same policy language differently.

For example, every personal auto policy I’ve seen has a “racing” exclusion. So, does that mean that all policies provide the same coverage (or lack of coverage) because they have a “racing” exclusion? No. What coverage is or isn’t available depends on the exact wording of each

So, if you were persuaded to change insurers on the premise that you’d be buying the “same” coverage when, as we just saw, you wouldn’t be buying the same coverage, would a court uphold a lawsuit on that basis if your claim was denied by the carrier you switched to but it would have been covered by your prior insurer? Probably not, for a couple of reasons.

First, most courts look for coverage within the “four corners” of the policy. Unless something is demonstrably ambiguous or clearly against public policy, courts pretty consistently abide by the clear and unambiguous language of the insurance contract.

However, there are some exceptions. For example, in American Standard Ins. Co. v. Allstate Ins. Co., 210 Ill. App. 3d 443, 155 Ill. Dec. 162, 569 N.E.2d 162, (App. Ct. 1st Dist.,1991), the insurer denied a motorcycle policy claim involving the death of a passenger. The court found coverage, even though injury to passengers on motorcycles was clearly excluded by the policy language, because an illustration on the policy jacket showed a motorcycle with a driver and passenger, thus creating an ambiguity, in the eyes of the court, between the illustration and the conflicting policy language. Based on the illustration, the court ruled that the insured had a “reasonable expectation” of coverage.

Second, courts tend to give entities significant leeway when it comes to advertising claims. Exaggerated advertising or false meritorious claims are considered by many courts to constitute “puffery.” For example, in Pizza Hut, Inc. v. Papa John’s International, Inc., 227 F.3d 489 (5th Cir.

2000), the court referenced the Lanham Act (15 U.S.C. § 1125) and held that the alleged inflated claims of product superiority did not rise to the level of a prima facie case of false advertising under Section 43(a) of the Act. I have my doubts if this reasoning would apply to the purchase of insurance products, but to my knowledge this has not been tested.

Regulators

Turning our attention to insurance regulatory agencies, what about potential regulatory issues with “inaccurate” industry advertising? Well, there’s the old reliable “twisting” and “churning” that involves inducing someone into buying a policy represented as equivalent or superior to an existing policy that, in reality, actually isn’t. If such a statute or regulation applies to non-life products, its application is possible, but likely difficult in that even an overall inferior policy might have some

provisions that are superior to the policy being replaced.

A more likely and broader regulatory candidate is the Unfair Trade Practices laws found in all states. For example, the NAIC Model Act says [emphasis added]:

to be made, published disseminated, circulated, or placed before the public … an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance … that is untrue, deceptive or misleading …

Misrepresentations and False

Advertising of Insurance Policies. Making, issuing, circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement, sales presentation, omission or comparison that …

• Misrepresents the benefits, advantages, conditions or terms of any policy …

• Uses any name or title of any policy or class of policies misrepresenting the true nature of the policy or class of policies …

False Information and Advertising Generally. Making, publishing, disseminating, circulating or placing before the public, or causing, directly or indirectly

Do claims by an insurer that their policy provides “the same coverage” as a consumer’s existing policy (which they’ve never seen) constitute an unfair trade practice? You can probably guess what my opinion is, but what is yours? We’re always interested in civil dialogue among readers of this column, so feel free to offer your opinions.

Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of six books, including “When Words Collide…Resolving Insurance Coverage and Claims Disputes.” He can be reached at Bill@InsuranceCommentary.com.

Idea Exchange: Agency Management

3 Steps to Driving Sales Growth During a Recession

As 2023 moves into the second quarter, intense speculation surrounds us as to how the economy will perform for the rest of this year and into next. Many economists predict that the Federal Reserve’s dramatically tightened monetary policy — i.e., interest rate increases — make a recession inevitable.

selling strategies in independent insurance agencies.

The differences in this recession, if we have one, will be that it will feature higher-than-normal inflation, higher-than-normal employment, and a tight insurance market as a consequence of carriers’ inabilities to keep up with exposures and rates over the last two years.

Independent agents should see opportunities in the challenges these economic patterns and a possible recession could uncover.

By Tony Caldwell

Though these increases — designed to cool the highest level of inflation in 40 years — are having an impact on some consumer spending, unemployment hit a 50-year low of 3.5% in January. As we know, consumer spending drives the U.S. economy and unemployment is a solid indicator of a pending or actual recession. So, will we have a recession this year or not?

I don’t know the answer to that question but I do know that if we do, it will be different than those we’ve experienced in recent years. In turn, that should impact our operating and

These differences, coupled with the traditional conservatism and risk aversion that business owners and consumers exhibit when the economy cools, will create opportunities for agents to grow their books of business. Though a potential recession may look different than what we are accustomed to, our clients’ and prospects’ reactions will be the same as always — save me money!

3 Steps to Better Sales Independent agents should see opportunities in the challenges these economic patterns and a possible recession could

uncover. To seize those opportunities, agents should consider the following:

1. Get creative. Be flexible. The first lever agent marketers and sales people pull when prospecting is

the opportunity to save the policyholder money through shopping the account. Though that approach will likely work in this potential recession, it will likely present a different kind of savings. Instead of lowering premiums for a prospect, the best an agent may be able to do is control the rate of increase. As a result, setting realistic expectations in the selling process is even more important than it usually is.

If the prospect is a commercial account that is suffering from lower sales and payroll problems, a controlled rate of increase may help. But, with inflationary impacts on sales prices of a variety of goods and inflation pushing up wages an average of 15% over the last year, many business

owners may see profitability squeezed and revenue and head count changed, while not actually seeing their rate decline. They will still need to “save,” but how that is defined will likely be different.

For agents seeking to acquire new accounts in this kind of environment, a renewed commitment to technical creativity could set them apart from the competition.

Most business owners, and consumers, are accustomed to buying insurance with the same deductibles, limits, coinsurance and so forth. This is particularly true if they don’t regularly shop coverage with other agents and is especially true in the small commercial marketplace as agents don’t often change coverage schemes.

For them, often doing so is either too expensive or they are too complacent. As a result, considerable opportunity awaits in the recession we may experience for those agents who are willing to change things up.

Helping the prospect understand that flexibility and creativity in their risk management needs,

coupled with your creativity and technical expertise is not only different than many prospects have experienced, it also is a sales tactic that will resonate strongly in the economic environment I anticipate.

2. Up your communication game. While it is particularly true with small commercial and consumer accounts, my experience is that a large number of agencies do not proactively keep clients informed about how the insurance market is likely to respond to different economic environments. That creates surprised customers when they are confronted with increased premiums due to rate and particularly exposure increases (property replacement costs). Surprised customers often translate to frustrated, and sometimes angry customers.

Certainly, you’ll want impacts on insurance related to the looming recession in your sales presentations in the coming months. But you need to have an antidote to offer in terms of a “program” of regular, relevant communication that explains how the economy is affecting insurance, as well as what you are proactively doing to prepare and protect your clients. This is a great time to enhance your website, increase your emails, devote attention to these matters in your newsletter and see your clients more frequently. If possible, point out when the incumbent agent is failing to do these things. These actions will resonate more powerfully with customers than they have in a long time.

3. Increase your marketing and sales efforts. This is the time to do more marketing. This is the time to increase sales activities. This is the time to focus on organic account growth rather than top line revenue growth (many agencies

tend to ignore PIF and client growth while allowing top line growth to mask their true new business results — don’t do that).

Measure your sales velocity, which is last year’s written new business divided by last year’s commissions and fees. The average agency’s score is 15%, but the score of the top 25% of agencies is close to 24% according to the IIABA’s Best Practices Study. That’s a 62% difference. What’s your agency’s score? Whatever it is, raise the bar for 2023 and build your sales plan to hit it.

A recession is the time to invest more, not less, in marketing. When the world shifts more conservatively, agency managers tend to follow suit. That’s a mistake if you want to grow sales.

Dan Sullivan, founder of The Strategic Coach entrepreneurial coaching program says that “the eyes only see and the ears only hear what the mind is looking for.”

As an example, have you noticed that the appliance store is always having a sale when your washer, dryer or refrigerator breaks? That’s because they continuously have sales, but you don’t notice because you don’t have a current need and your mind isn’t looking for a solution. When the economy heads south, business owners and consumers look for solutions to their cost issues with insurance. As a result, your marketing will reach an audience with open ears and naturally experience greater results. This is the time to invest in it.

As I said in the beginning, I don’t know if we’ll have a recession this year or not. But I do think that even if we don’t, these strategies will be key. Renew your commitment to creative selling solutions, not price. Renew your commitment to investing in and driving communications and marketing. And, finally, renew your commitment to managing sales teams for results not activity. These strategies will result in sales growth. Really, growing sales in a recession isn’t all that different than growing them any other time!

Caldwell is an author, speaker and mentor who has helped independent agents create more than 250 independent insurance agencies. Learn more by visiting www.tonycaldwell.net or contacting him at tonyc@oneagentsalliance.net.

Idea Exchange: Professional Liability

How Social Inflation Is Impacting the Architects, Engineers Market

Social inflation has been a hot topic across the insurance industry over the last few years as claims frequency and severity continue to increase across nearly every line of business.

By Larry Moonan

While some lines, such as commercial auto and general liability (GL), have been more regularly discussed in the context of social inflationary trends, professional liability (PL) carriers are also seeing a substantial increase in claims costs.

Industry segments that were once considered “safe” for high-limit policies, like architects and engineers (A&E), are now an attractive target of the plaintiffs’ bar looking for deep pockets to pay inflated claims.

According to the Insurance Information Institute (I.I.I.), social inflation “encapsulates how insurers’ claims costs can rise above general economic inflation, and it also includes the shifts in societal preferences over who is best placed to absorb risk.” A number of factors influence social inflation, as noted by I.I.I., including third-party litigation funding, nuclear verdicts from sympathetic juries and the proliferation of class-action lawsuits.

In general, the public is becoming increasingly distrustful of large companies, with a recent Gallup poll finding 53%

of Americans now view “big business” negatively, the highest percentage in more than a decade. This negative viewpoint is having a significant effect on jury awards, with the average size award increasing by 1,000% between 2010 and 2018, according to Verisk.

continued on page 48

Idea Exchange: Professional Liability

continued on page 32

Insurers are feeling the brunt of the costs and now have little choice but to pull back on capacity and raise rates. According to Ames & Gough’s 2022 architects and engineers professional liability insurance market report, 63% of A&E insurers saw an increase in claims severity in 2021.

Here are several evolving claims and litigation trends related to social inflation that are currently affecting design firms.

Broad claim allegations that include multiple parties. The plaintiffs’ bar is pursuing everyone involved in a project to draw in as many parties as possible, not just those at fault. The strategy is to pull everyone to the table and compel them to pay to get out of the claim. Plaintiffs’ lawyers are also becoming very creative in how they word lawsuits in an attempt to access a design professionals’ professional liability policy and increase the claims payout.

Exposures related to lack of documentation. It is becoming increasingly difficult to defend or extract design firms involved in claims when there is no clear documentation stating their roles and responsibilities. To create a defensible position for the claim, design firms must have documentation supporting their activities.

Project owners escalating claims payouts through betterment costs. Over the last five years, some unscrupulous project owners have been significantly increasing betterment costs to increase claims values.

Lawsuits against design firms that bid on projects. There have been sizeable losses against design firms that bid unsuccessfully on a project but may have been involved in an ancillary matter and ended up involved in the claim or had to participate in the global settlement. These firms are typically involved in an ancillary

matter related to the project and get drawn into the lawsuit or claim.

An increase in bodily injury and property damage claims leading to higher payouts on PL policies. The increase in claim payouts thanks to social inflation is exhausting GL limits, and design firm PL carriers are increasingly being brought in to settle claims.

These social inflationary trends are putting pressure on the architects and engineers segment, with firms having to pay higher rates for less coverage. Capacity is tightening across the board. According to the Ames & Gough report, 56% of insurers reported “modest rate increases of up to 5%” in 2021. However, 44% of insurers hiked rates by 6% or more, “including 13% with rates that rose by more than 10%.”

Berkley Design Professionals, like other providers in this space, is currently seeing more claims and is also experiencing an increase in settlement values as compared to the amounts similar claims were worth only a few years earlier.

Mostly larger design firms are being targeted. But small to medium-sized firms with under $30 million in annual revenue are feeling the impact of higher rates. And as social inflation continues to accelerate, smaller firms with low policy limits are a growing target, even if they have only a minor role on a project.

The industry needs to raise awareness by educating our clients on social inflation. We need to invite clients into the conversation and help them understand why the problem is growing. Agents and brokers should work closely with carriers to share information and resources with clients. Carriers must commit to having

Industry segments that were once considered ‘safe’ for high-limit policies, like architects and engineers (A&E), are now an attractive target of the plaintiffs’ bar looking for deep pockets to pay inflated claims.

policyholders’ backs, including defending them against nuisance litigation.

There are other opportunities for the industry to make a difference as well, such as engaging with policymakers and lawmakers on litigation reform and exploring syndicated placement options where insurers can spread around the risk for design firms that need large limits.

We know the risk of social inflation isn’t going away anytime soon. Participants in the insurance industry — carriers, agents and brokers, and policyholders can work

February 20, 2023

AmFed National Insurance Company

1020 Highland Colony Parkway, Suite 700/702 Ridgeland, MS 39157

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.

February 20, 2023

Vantage Risk Assurance Company 123 North Wacker Drive, Suite 1300 Chicago, IL 60606

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

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

together to curb its impact on the A&E market. This collaboration will allow us to continue to offer a strong product to design firm clients for the foreseeable future.

Moonan is executive vice president and chief operating officer of Berkley Design Professional. He has more than 30 years of experience in the professional liability insurance field. Moonan oversees the business’s underwriting, marketing, distribution, product development and risk management initiatives. Email: lmoonan@berkleydp.com.

February 20, 2023

Stonewood Insurance Company 6131 Falls of Neuse, Suite 306 Raleigh, NC 27609

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.

February 20, 2023

AmFed Casualty Insurance Company 1020 Highland Colony Parkway, Suite 700/702 Ridgeland, MS 39157

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.

February 20, 2023

Freedom Specialty Insurance Company

One West Nationwide Blvd. Columbus, OH 43215-2220

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

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

February 20, 2023

AmFed Advantage Insurance Company 1020 Highland Colony Parkway, Suite 700/702 Ridgeland, MS 39157

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.

Closing Quote

Why a Focus on Development Is Critical to Retaining Talent

more efficiently managing costs through reskilling as opposed to recruiting new talent.

Sampling Different Roles

By Lindsey DiGangi

The insurance industry’s talent problems are no longer looming, they are here. While it may take many components to find a potential solution to this problem, one area that should get our immediate focus is employee development.

According to the U.S. Bureau of Labor Statistics, an estimated 50% of the current industry workforce will retire over the next 15 years, creating a gap of nearly 400,000 open positions. For nearly a decade, insurance professionals have discussed this talent gap and brainstormed potential solutions to make our workforce younger, more diverse and more innovative. The industry has made strides in getting the next generation to sample a career in insurance through apprenticeships, internships and more, but retaining talent remains a challenge.

Now, leaders within our industry should take time to reflect on what’s working and what solutions we may not have explored enough, particularly those related to enhancing the career development of employees. Through strong continuing education programs, as well as opportunities that allow employees to explore other areas of the business, we may be able to counter this issue — while also

Recruiting new talent is often time consuming and expensive. Per McKinsey, replacing an employee may cost more than 100% of an annual salary. Reskilling and continued education may be a solution, as the same McKinsey study found that successful reskilling can cost less than 10% of a role’s salary.

Exposing early career insurance professionals to a broader array of career options within a company can be a powerful way to help them find their passion in the industry. This was how I found my path.

I began my career nearly 10 years ago as an intern working on our transition team coordinating a corporate affiliation. As my first experience in a business environment, it quickly taught me the importance of understanding how departments and roles work together to meet goals. The experience was fascinating and energizing and made me eager to learn more. From there, I was given the opportunity to get my feet wet as an underwriter, where I also supported a new product launch. After gaining critical insurance knowledge, I was able to work within our IT department, where I took experience from my previous roles to help develop and roll out our company intranet and upgrade our customer relationship management database.

Throughout these years, I was afforded the opportunity

to support and eventually lead PLM through four additional renewal rights deals. While building my skills in a variety of roles and projects, my growing context helped me understand what I value in the industry and where my skills could make the greatest impact. My most recent stop has landed me in the marketing department, where I have been able to make an even stronger connection with the industry, the company, and my teams.

These experiences allowed me to find my best fit. We should take this same approach with the next generation. Recent graduates don’t always know where they want to take their careers. Even when they do have an idea, they are often so set on one role that they don’t take the time to see other opportunities that may actually be a better fit for their skillset. Opportunities to sample different career paths, however, can help them see where their skillsets best align.

Continuing Education

Continuing education incentives can also assist in boosting team morale, interest in their jobs, and ultimately retention. Over the years, we’ve heard

from employees leaving the industry, complaining they were not challenged in their positions or didn’t have opportunities to grow professionally. At PLM, we pay for continuing education programs for those who want to further their studies in general business or insurance. We encourage our team to pursue industry designations, fully funding those efforts and rewarding them financially, as well.

Business leaders should consider companywide policies on regular continuing education and establish plans for managers to work with employees so they feel their career success and development is a core priority for the business.

While the talent gap may not have an immediate fix, as an industry we can continue to take steps to mitigate its impact. Through reshaping our approach to talent development, we can help early career professionals find their passion in insurance, cultivate this passion, and ultimately find their home in the industry.

DiGangi is assistant vice president of marketing at Pennsylvania Lumbermens Mutual Insurance Co. Email: ldigangi@plmins.com.