Insurance Journal West 2023-05-22

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

Work and Mental Health

May is Mental Health Awareness Month — a time for all of us to think about and bring awareness to the well-being of those we live and work with every day.

Employee mental health has been a huge issue for employers for several years, but especially since the COVID-19 pandemic. According to the National Alliance on Mental Illness (NAMI), one in five adults experiences a diagnosable mental health condition in any given year, and 10 million adults in America live with a serious mental illness.

The pandemic’s effects on worker well-being continues to disrupt the workplace. According to the 2022 Gallup World Poll, stress among workers worldwide is at an all-time high. In the most recent Gallup poll, 44% of workers reported that they experienced significant stress the previous day and more than one-fifth experienced significant anger or sadness the previous day, according to data collected from more than 160 countries throughout 2021.

Reports of anxiety, depression and substance abuse in the workplace have been on the rise over the last several years, as well, and the pandemic played a large part in exposing the impact work can have on individuals’ overall well-being.

“Employees in certain industries are at a higher risk for mental health issues due to the workplace, such as healthcare workers and those in the hospitality industry,” said AmTrust Financial, one of the nation’s largest writers of all types of commercial insurance for small businesses. “These industries can be challenging due to the fast pace and stressful situations workers often experience.”

For Mental Health Month this year, the Mental Health America (MHA) is encouraging individuals to look around and look within. “From your neighborhood to genetics, many factors come into play when it comes to mental health conditions.” Encourage everyone — especially your employees and coworkers — to consider how the world around them affects their mental health.

Here are a few things that the MHA recommends for employers to do to help improve employee mental health at the workplace:

Ensure supervisors understand how to support employees emotionally. When employees feel they can discuss stressful situations with their supervisors, the workplace becomes a healthier environment.

Provide resources for mental health support. A safe workplace is strongly associated with resources offered for emotional support, such as accessing insurance benefits.

Take a closer look at workplace culture. Is leadership considering employee feedback on issues? Identify areas that could use improvement within the company culture, which should reflect the organization’s mission and values.

Watch for employee burnout. Employers should understand the signs of burnout and offer flexibility as needed.

Remove the stigma of mental illness. No one should feel alone when struggling with mental health conditions. Employers should assess their mental health practices and work to create a welcoming environment for all employees.

Andrea Wells Vice President, Content

Circulation Manager Elizabeth Duffy | eduffy@wellsmedia.com

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

Copy Editor Stephanie Jones | sjones@insurancejournal.com

Columnists & Contributors

Contributors: Amborish Baruah, Matt Engle, Frederick Fisher, Dianne Greene, Denise Johnson, Deepti Kalra and Rahul Nawab, Jim Sams, Steve Tombarelli

Columnists: Chris Burand, 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

the stigma of mental illness.

PHLY’s vehicle telematics program has been a game-changer.”

With more than one billion miles traveled since 2016, PHLYTrac is a proven GPS tracking system that helps organizations correct dangerous driving and lower costs. See real-time updates on driver behavior and eet conditions. Reduce driver risks like hard braking, hard acceleration, speeding, and more, all while reducing losses by nearly 20%. Get started with PHLYTrac and experience the PHLY di erence.

Ann D’Amicantonio EVP/Chief Integration O cer Odell Studner

Chubb’s Greenberg: Start Questioning the Societal Benefits of Litigation Funding

By Chad Hemenway

Chubb CEO Evan Greenberg says society and the business community need to start asking questions regarding the purpose of third-party litigation funding, a major contributor to increases in frequency and severity within casualty insurance lines.

“What social purpose does litigation funding really serve?” Greenberg proposed during a keynote speech at RiskWorld, the Risk & Insurance Management Society’s annual conference in Atlanta in early May.

While acknowledging that litigation funding does help plaintiffs who cannot afford to represent themselves, Greenberg said the “vast majority — where [litigation funding] is an asset class for investment — I think is against society’s interest.”

Asked by a risk management student whether insurers should invest in litigation funding as well, Greenberg said, “It sounds sort of like eating your own seed corn. I

don’t think that’s the way to hedge — to start an arms race.”

Instead, Greenberg called for legislation, starting with disclosure laws. “The plaintiff should have to disclose who’s funding the lawsuit,” he said, adding that the jury would have more clarity regarding “who’s interests are being served.” However, headwinds against such laws exist because the trial bar is well funded, as is its war chest for political campaigns. A campaign against the practice “requires the war chest of the American business community to press back against it,” Greenberg said.

A report early this year from litigation finance advisory firm Westfleet Advisors said there was a 16% increase in capital committed to new U.S. litigation funding deals in 2022. Litigation funders invested $3.2 billion last year.

During his keynote, Greenberg said

casualty rates in most classes will need to continue to rise to keep up with loss costs, driven in part by an “aggressive trial bar … turbo-charged by litigation funding” and set against a “backdrop of societal attitudes around social justice, anti-corporate sentiment, and juries sympathetic to victims.”

He cited data from the U.S. Chamber of Commerce Institute for Legal Reform that the total cost and compensation paid in the tort system was $443 billion in 2022 — about 2.1% of the country’s gross domestic product — and only 53 cents of each dollar goes to plaintiffs.

“Excessive litigation is a tax on the economy, and the business community as a whole must take the lead if we’re to bring this back to a more rational place,” Greenberg said. “Innovation and progress are impacted by an excessively litigious society.”

Evan Greenberg

News & Markets

N.J. Appeals Court Rules War Exclusion Doesn’t Apply to NotPetya Attack

By Jim Sams

Insurers may not use a war exclusion to deny coverage to Merck & Co. for a 2017 cyberattack blamed on the Russian military, a panel of the New Jersey Appellate Division ruled.

The panel affirmed a decision by the Union County Superior Court that a “Hostile/Warlike Action” exclusion in the pharmaceutical giant’s property insurance policies does not apply to the NotPetya ransomware attack that damaged Merck’s computers. The ruling allows Merck to proceed with its claim against eight insurance carriers for $699,475,000 in disputed coverage.

“Coverage could only be excluded here if we stretched the meaning of ‘hostile’ to its outer limit in an attempt to apply it to a cyberattack on a noncombatant firm that provided accounting software updates to various noncombatant customers, all wholly outside the context of any armed conflict or military objective,” the Appellate Division’s opinion says. “But that approach would conflict with our basic construction principles requiring a court to narrowly construe an insurance policy exclusion.”

Peter Halprin, an insurance recovery attorney with the Pasich law firm in New York, said the decision shows that insurers have a duty to draft clear and unambiguous exclusions, and courts will not rewrite exclusionary language.

“The Court reiterated key insurance policy interpretation principles, including the importance of all risk coverage, the breadth of coverage provisions, and the narrow construction of exclusion-

ary language,” he said in an email.

Merck and other companies that did business in Ukraine used a third-party application called M.E. Doc to transmit tax and financial information to the Ukrainian government. Hackers used a backdoor within the software to implant the NotPetya malware, which encrypted data within Merck’s computer network and demanded a ransom payment.

The virus rapidly infected 40,000 computers within Merck’s network, reaching 64 countries. A cyber consultant for insurers, Kroll Cyber Security, reported that the attack was likely orchestrated by the Russian Federation.

Merck sent a notice of loss to the 26 carriers in its insurance tower. It filed suit after most responded with reservation of rights letters that noted the hostile and warlike acts exclusion.

Merck’s insurers appealed after the Union County court ruled that the war exclusion does not apply. Merck settled with many of its carriers, but eight holdouts remained by the time the

Appellate Division ruled on the appeal. Ace American, Allianz, Liberty Mutual and Lloyd’s syndicates were among those that kept up the fight.

The American Property and Casualty Insurance Association stepped into the fray with an amicus brief supporting the insurers, while policyholder advocates filed their own friend-of-the-court briefs in support of Merck.

The insurers argued that the exclusion was clear and ambiguous: No coverage exists for damage caused by hostile or warlike acts by a sovereign power, in this case the Russian Federation.

The appellate panel, however, said the exclusion does not apply unless there is some military action.

“The exclusion does not state the policy precluded coverage for damages arising out of a government action motivated by ill will,” the opinion says.

Sams is the editor of Claims Journal, a Wells Media Group publication. Email: jsams@ claimsjournal.com.

The percentage of people in the U.S. earning money from an online gig platform, according to a 2021 Pew Research Center poll. That poll also found that 35% of them have felt unsafe while doing those jobs, including 19% who said they had experienced unwanted sexual advances.

Figures

$3.1 Million

The amount of a tentative settlement a Louisiana energy company reached with the federal government over a 2017 Gulf of Mexico oil leak. The settlement said the company does not admit to liability in connection with the leak of about 16,000 barrels of crude oil from a site about 40 miles southeast of Venice, Louisiana. The government’s suit against Covington, Louisianabased LLOG Exploration sought compensation for costs incurred by the National Oceanic and Atmospheric Administration in assessing the damage.

$39,330

The number of parking garages in New York City that were ordered to shut down after city building officials investigated dozens of parking garages following the deadly collapse of a parking structure in lower Manhattan in mid-April. The four garages were told to close because of structural defects that were deemed to pose a public safety threat. City officials directed the owners of the parking facilities to make immediate repairs to corroded concrete and other damage.

The amount a Jasper County, Iowa, man and woman received in insurance benefits after submitting fabricated receipts to an insurer while they were displaced from their home due to storm damage. Jarod Hribar, age 44, and Latisha Hribar, age 42, both of Kellogg, pleaded guilty after an Iowa Insurance Division investigation found that they fabricated and submitted 34 receipts to an insurer purporting to be from a bed and breakfast that did not exist and to which no payments were made.

Declarations

Riskworld Safety

“I wanted to bring this update to let everyone know that everyone at Riskworld is safe and sound. … We’ve unfortunately had to cancel the closing finale session simply out of an abundance of caution. Everybody in the convention center and in our hotels are all safe.”

— RIMS CEO Gary LaBranche, in a video statement announced the early closing of RIMS’ Riskworld annual conference on May 3 following a fatal shooting that occurred at a medical facility on West Peachtree Street in Atlanta’s midtown neighborhood, about two and a half miles from the Georgia World Congress Center where the annual RIMS Riskworld conference was being held. One person was killed and four were injured in the shooting incident.

Virginia Teacher’s Lawsuit

“Plaintiff was clearly injured while at work, at her place of employment, by a student in the classroom where she was a teacher, and during the school day. Teaching and supervising students in her first grade class was a core function of Plaintiff’s employment. Thus, Plaintiff’s injuries arose out of and in the course of her employment and fall under Virginia’s Workers’ Compensation Act unless an exclusion applies.”

— The Newport News (Virginia) public school board asserted in a reply to the $40 million lawsuit filed against it by teacher Abigail Zwerner who was shot by a six-year-old student on Jan. 6 that the suit is barred by the state’s workers’ compensation law, which is the exclusive remedy for workplace injuries.

‘Unusual Circumstances’

“They were very unusual circumstances. Certainly dust storms happen, but it is not something that happens every day here in this part of Illinois or any part of Illinois.”

— Illinois State Police Director Brendan Kelly said at a news conference after a wall of dust from farm fields that engulfed a stretch of busy interstate highway caused a series of deadly crashes that involved 40 to 60 cars, along with tractor-trailers, two of which caught fire. Almost 40 people were injured and six people were killed as a result of accidents caused by the May 1 dust storm.

MMA Fined

“The illegal insurance scheme perpetrated by McClenny Moseley & Associates is frankly one of the most egregious cases that has ever come through this department. … The $2 million in fines should put all bad actors on notice that fraudulent behavior will not be tolerated in Louisiana.”

— Louisiana Insurance Commissioner James Donelon said in a statement after issuing $2 million in fines against the law firm McClenny Moseley & Associates and three of its partners. Donelon issued $500,000 fines each against MMA founding partners James McClenny and John Zachary Moses, New Orleans office managing partner William Huye III, and the law firm itself. MMA has been accused of attempting to defraud Louisiana insurers.

‘The Best Job’

“Now, it’s time for someone else to step forward and carry on this agency’s important consumer protection work. I know that my successor will be in good hands with all of you helping to lead the way.”

— Washington Insurance Commissioner Mike Kreidler said in an email to agency staff on May 1 confirming he will not seek reelection. Kreidler, the nation’s longest currently serving insurance commissioner, was first elected to the post in 2000. “Serving alongside you as Insurance Commissioner for Washington state has been, and continues to be, the greatest honor of my life. … I’ve always said it was the best job I’ve ever had, and I still feel that way today,” he said.

‘Insufficient Support’

“GSA’s initial evaluations indicate that the immediate failure was due to insufficient support beneath the third floor of a section of the building, and not the result of systemic structural issues. … A full investigation of the building is still ongoing.”

— The General Services Administration said in a statement regarding the collapse of a floor during the the $75 million renovation project of the Tomochichi Federal Building and U.S. Courthouse in Savannah, Georgia, on April 11. Three construction workers were injured when a section of the courthouse’s third floor gave out, causing them to fall to the floor below.

News & Markets

FEMA Releases New Flood Insurance Rates by ZIP Code. Brace for Impact.

By William Rabb

When the Federal Emergency Management Agency unveiled its new Risk Rating 2.0 methodology for calculating flood insurance, advocates and critics alike warned that it would mean higher premiums for thousands of property owners, especially in low-elevation coastal areas.

Now, the full impact of the sticker shock is becoming clear, thanks to new data released by FEMA that shows price increases — and decreases — by county and by ZIP codes. For some parts of Florida, including the appropriately named Hell Gate on the East Coast, flood insurance will spike an average of 342%, according to the Miami Herald, which analyzed some of the data.

The most expensive ZIP codes in Florida include the Miami area’s Key Biscayne, which will eventually see flood rates as high as $7,000 annually, on average, the Herald reported.

Most ZIP codes across the Southeastern U.S. will see some increase, the data show. In parts of Pensacola, in the northwestern part of Florida, the average flood premium will double, from $639 annually to $1,293. In Houma, Louisiana, southwest of New Orleans, the average premium will jump from $982 per year to $3,511.

Some seemingly flood-prone areas may face smaller price hikes than might be expected, due to a number of factors in the new rating system.

In two Houston, Texas, ZIP codes that were hardest hit by flooding in Hurricane Harvey in 2017, the average premium will rise by about 50% to 60%. In ZIP code 77028, on Houston’s northeast shoulder, the average annual cost will go from $13 to $1,166, the database shows.

And it’s not just coastal areas. Albany, Kentucky, ZIP code 42602, which has seen historic flooding in recent years, will see prices soar — from $741 to $4,597, on average, the FEMA data show.

Perhaps some good news is that some

spots will see decreases under RR 2.0, which is based less on FEMA’s much-criticized flood maps and more on a multitude of factors, including rainfall levels, elevation, a home’s distance from water, and rebuilding costs. In one St. Petersburg ZIP code, for example, more than 80% of policies will see a decrease in premiums, the data show.

Existing property owners won’t feel the pain all at once. Federal law limits the rate increases to no more than 18% annually on renewals. For people buying new policies, though, the full impact will be painfully obvious. For the past year, FEMA has required new policies to be rated under RR 2.0.

Even before the FEMA data was broken down by ZIP code, some insurance agents have had a pretty good idea of the magnitude of the changes. For one policyholder in a flood zone in Palmetto Bay, Florida, his annual premium will eventually climb from just over $1,000 to almost $5,000,

said Clayton Fischer, an agent with Blue Marlin Insurance in Coral Gables.

For a modest slab home in Homestead, Florida, with 1,700 square feet and a replacement value of $271,207, a policy through Wright Flood Insurance will come to about $2,300.

“I have found private carriers to be not only competitive but, in some cases, more competitively priced than the NFIP RR2.0 policies,” Fischer said. He also noted that some prospective home buyers may not be aware of the soaring premiums. If the seller doesn’t explain about the new rating system, which grandfathers in existing owners, buyers could easily assume that their rates will remain the same.

Florida homeowners with Citizens Property Insurance Corp. also will see higher premiums this year. The Florida Legislature late last year required all Citizens policyholders to buy flood insurance, regardless of the property’s locale.

People try and save valuables in a Fort Lauderdale neighborhood after torrential rains in April (Joe Cavaretta/South Florida Sun-Sentinel via AP)

Risk-based Cost of Insurance Versus Current Cost of Insurance: State Summary

Notes

Cost of insurance is defined as all premiums, fees, assessments and surcharges for a policy. Risk based cost of insurance is what policyholders would pay if they were paying their full actuarial rate (a rate based on the expected costs of losses and associated programmatic expenses) as evaluated under the rates implemented October 1, 2021 (Risk Rating 2.0). Note that rates will be updated periodically to reflect changes in risk.

Current cost of insurance is what policyholders are paying today. Some policyholders are already paying a risk-based premium, while others are paying a statutorily discounted premium. When a policyholder’s current premium is below their risk based premium, their premium will increase gradually towards the full rate. By law, premium cannot increase by more than 18% per year for most policyholders.

This exhibit only includes Single-Family Home (SFH) policies that had transitioned to Risk Rating 2.0 by September 30, 2022. Any policies still rated under the legacy rating system at that point are not included in this exhibit.

For this exhibit, all polices are shown with a $25 Homeowner Flood Insurance Affordability Act (HFIAA) surcharge.

Source Data: NFIP PIVOT Analytics and Reporting Tool (PART); data was retrieved on December 15, 2022.

News & Markets

Rising Premiums Tighten Auto Insurance Market as Customers Shop Deals: J.D. Power Study

Saving money is the primary focus of consumers searching for auto insurance, according to the J.D. Power 2023 U.S. Insurance Shopping Study. Now in its 17th year, the report highlights the increasing focus on cost as customers shop around for the best deal when it comes to auto insurance policies.

The study is based on responses from 10,845 insurance customers who requested an auto insurance price quote from at least one competitive insurer in the previous nine months.

U.S. auto insurers are struggling to retain customers in light of inflation and rising premiums. As shoppers tighten their wallets, interest in usage-based insurance (UBI) options is growing. The option, which uses telematics software to monitor a customer’s driving style and assign rates based on safety and mileage metrics, was offered to 22% of insurance shoppers and is purchased 18% of the time, according to the report. That’s up from a 16% offer rate and a 12% purchase rate in 2020.

When a UBI option is offered, the report found that customer satisfaction increases by 6 points.

“Auto insurance customers are starting to shop for insurance like they shop for gas,” said Stephen Crewdson, senior director, insurance business intelligence at J.D. Power. “They are taking a much more active stance in seeking out plans that fit their needs and their budgets.”

Auto insurance accounts for a steadily increasing share of consumer discretionary spending, as prices increased 14.5% in February 2023, a little over twice the rate of inflation (6%). The

report found 44% of customers are price checking, while 42% say they are being spurred by a rate increase. Similarly, 41% of those shopping because of a rate increase reported their rate increased by 20% or more.

As shoppers consider their options, customer satisfaction has stagnated. The average overall satisfaction among auto insurance shoppers is 861 (on a 1,000-point scale), while shopping and switching rates increased, the consumer insight company found. The 30-day average shopping rate reached 13.1% in March 2023, the highest rate since June 2021 and well above the 2021 average of 11.4%. The 30-day average switch rate hit 4.1% in March 2023, which compares to an average of 3.4% for all of 2021.

Auto Insurer Rankings

Analysis of customer satisfaction among large auto insurance carriers indicates some reshuffling from last year’s findings. Progressive gained market share as GEICO slowed, largely due to significant rate hikes by the latter.

GEICO raised its rates significantly above industry average throughout much of the second half of 2022, while Progressive raised rates in the first quarter of 2022 and then registered lower-than-average increases during the second half of the year. During the same period, Progressive posted a notable market share gain, becoming the second-largest auto insurer in the United States, ahead of GEICO and behind State Farm.

State Farm ranked highest among large auto insurers in providing a satisfying purchase experience for a third consecutive year, with a score of 877. Liberty Mutual (865) ranked second and Nationwide (861) ranked third. The segment average is 861.

The Hartford ranked highest among midsize auto insurers for a second consecutive year, with a score of 887. Erie Insurance (878) ranked second and Automobile Club of Southern California (AAA) (870) ranked third, a spot previously held by Amica Mutual. The segment average is 863.

Large insurers have direct premiums written of $4.5 billion or more in personal lines auto, while midsize insurers have direct premiums written of $1 billion - $4.499 billion in personal lines auto.

The study was fielded from March 2022 through January 2023. More about the U.S. Insurance Shopping Study, can be found at https://www.jdpower.com/ business/resource/jd-power-us-insurance-shopping-study.

News & Markets

MGAs, Delegated Underwriting Authority Enterprises Sparked Double-Digit Growth in 2022 U.S. Premiums: AM Best

Direct premium written through the delegated underwriting authority enterprises (DUAE) market in the United States continued its significant growth rate in 2022, increasing by 13.8% to $67.6 billion, according to a new market segment report released by AM Best. More frequent weather-related events, along with a hardening market in commercial lines, drove the increase in the DUAE market in 2021 and 2022.

Considered an integral part of the insurance distribution model, AM Best defines DUAE as a third-party entity contracted by a reinsurer to perform underwriting, claims or other administrative functions on its behalf. According to the rating company, the blanket term encompasses managing general agents (MGAs), managing general underwriters, coverholders, program administrators, program underwriters, underwriting agencies, direct authorizations, and appointed representatives.

DUAEs played an increasing role matching secondary perils and evolving risks with insurers. The cyber and cannabis markets are examples where the specialized underwriting skills of MGAs and DUAEs prove beneficial. Many cyberfocused MGAs have emerged, capitalizing on their expertise and advanced technology. The cyber insurance market alone is expected to rise to $20 billion within the next five years, the report estimated.

MGAs and new surplus lines insurers, along with fronting and hybrid fronting companies aided the momentum.

The report found that as premium and number of MGAs has grown, the number of established carrier-MGA relationships giving rise to startups, like insurtechs, also grew. Many of them, privately funded, have stimulated the DUAE market.

“The newly formed entities have transformed the insurance industry, moving away from traditional ways of doing business while enhancing service for individual customers and businesses,” stated the AM Best report.

Agile technology and flexible business

models have made DUAEs more attractive to talent, the report noted. A variety of personnel, including underwriters, actuaries, and even data scientists and software developers are considering careers at MGAs and DUAEs.

Providing risk management, governance infrastructure, underwriting and pricing accuracy, DUAEs offer carriers a way to grow profits organically, directing their efforts on emerging and niche risks. The Best’s Market Segment Report contains an in-depth analysis of the U.S. DUAE market and shows these premium sources varying significantly by insurer.

Seven insurers wrote more than $1.0 billion in 2022 DPW through affiliated or unaffiliated MGAs. Philadelphia Indemnity generated the most DPW. The top 20 MGAs generated 32.5% of the $67.6 billion in 2022 direct premium written.

Significant losses have led to reduced reinsurance capacity in many lines of insurance, driving business to insurers that partner with DUAEs, due to their expertise

and access to desired risk classes. Startup fronting and hybrid fronting companies have been a key driver of growth for both DUAEs and MGAs, offering carriers a more efficient means of new business growth. Unhindered by bulky and complex operations, they match well with tech-driven MGAs. According to AM Best, MGAs offer the possibility of enhanced technology for policy and claims management, especially when it comes to quoting and binding new business.

Recent tightening of certain segments of the commercial lines market, specifically general liability, professional liability, umbrella and excess liability, and commercial auto coverage, drove higher premium growth, mainly the result of DUAEs.

The outlook remains positive for DUAEs in 2022, according to an AM Best rating issued for the global market. Continued growth in the increasingly popular insurance distribution model is expected, driven by advanced technology and specialty lines expertise.

People

National Insurance broker Lockton promoted five key leaders into global roles.

Troy Cook will continue in his role as chief financial officer and will also lead all finance and legal associates globally. After serving as an independent member on Lockton’s board of directors beginning in 2018, Cook joined Lockton as CFO in 2020.

Julie Gibson, Lockton’s chief marketing officer, will prioritize expanding the reach of Lockton’s brand. She will oversee marketing and communications initiatives across the globe. Gibson has been with Lockton since 2018.

Trey Humphrey, chief legal officer, joined Lockton in 2000, and as general counsel, he has played a crucial role in managing the company’s legal affairs.

Martyn Worsley has been appointed Lockton’s chief people officer. He previously led human resources across Lockton’s international business from London.

Byron Clymer, Lockton’s chief information officer, will direct Lockton’s strategy to develop global platforms that empower its people to deliver clients with industry-leading advice and insight and unparalleled service. Clymer joined Lockton in 2018.

Managing general agent CFC appointed Lori Marino as distribution leader, USA. Based in New York, Marino will be responsible for broker relationship management and CFC’s distribution strategy

across the U.S. market.

Marino joins CFC with over 20 years’ experience in senior leadership in insurance. Most recently, she was head of Carrier Relations and Revenue Growth at PCF Insurance Services.

AXA XL Insurance added Matthew Duke as head of Pricing, U.S. Middle Market Analytics.

Duke joins AXA XL from Xceedance, where he served as senior vice president and chief actuary, head of Global Actuarial Services. He holds credentials as an Associate of the Casualty Actuarial Society (ACAS), Associate in Reinsurance (ARe) and Member of the American Academy of Actuaries (MAAA).

QBE Insurance Group Limited appointed Serene Davis global head of cyber. Davis will work with QBE’s divisional cyber underwriting leaders to develop and drive a unified cyber strategy for risk assessment, pricing, claims, product and service offerings, and marketing. Davis is based in Southern California and has more than 20 years of industry expertise.

Markel Corp. added Amandeep Dhillon as managing director, global head of catastrophe and exposure management.

Dhillon has more than 15 years of experience in the insurance business, working in multiple areas including catastrophe risk management and ceded reinsurance. He is

based in Glen Allen, Virginia.

Chubb appointed Annmarie Camp as North America business development leader, part of the company’s North America field operations.

Camp has over two decades of insurance industry experience. Since joining Chubb in 2009, Camp has held various national and regional roles with a focus on sales and distribution, most recently serving as head of personal risk services for Chubb in Europe. She will relocate from London to the metro New York area.

East

Jaimie Hunter joined New York, New York-based Lockton Re as a senior broker supporting client development, with a focus on casualty business in North America.

Hunter is based in Lockton Re’s new Stamford, Connecticut, location. He previously spent more than 20 years at Guy Carpenter, most recently as a managing director in New York.

Risk Strategies appointed Rob Rosenzweig as New York regional leader.

Rosenzweig brings more than 15 years of insurance industry experience to his new role. He joined Boston-based Risk Strategies in 2014 through the acquisition of DeWitt Stern and has held several leadership positions.

Herbert H. Landy Insurance Agency hired Stephanie McNamara as national marketing and sales vice president.

McNamara brings over 30 years of experience in the insurance industry to the Needham, Massachusettsbased agency.

She started her career as manager of personal lines within the independent agency channel. McNamara has previously served as head of business development at Simply Business, small business sales director at CNA Insurance, assistant vice president of sales and marketing at Providence Mutual Insurance Co., and director of national accounts, field execution, sales events and operations at Travelers.

XPT:S&H Underwriters, based in East Montpelier, Vermont, added Michael G. March to its Northeast-based team’s commercial lines division.

March will be a senior broker/underwriter for a variety of commercial lines products, concentrating on habitational, contractors, restaurants/taverns, garage, retail/mercantile and miscellaneous professional liability. March has worked in the insurance industry for 23 years, serving most recently as commercial lines underwriter at XS Brokers Insurance Agency Inc.

XPT Specialty appointed Michele Martincich as property practice group leader.

Martincich joins New York, New York-based XPT Specialty with almost four decades of insurance experience, over 25 of which have been in various leadership roles within the wholesale industry.

Midwest Celina Insurance Group, headquartered in Celina, Ohio

Lori Marino

Matthew Duke

Jaimie Hunter

promoted Trisha Harlamert to vice president of underwriting and Scott Montgomery to vice president of distribution.

Harlamert has been with Celina for 27 years. She began her career with the company as a commercial lines underwriter before advancing to director of commercial lines.

Montgomery has held multiple positions in Celina’s underwriting and marketing departments since joining the company in 2014. He will continue to serve as assistant corporate secretary, a role he assumed in 2021.

Glen Carbon, Illinois-based AAdvantage Insurance Group hired Zac Bilyeu as a business development specialist.

Before joining the agency, Bilyeu worked for Colonial Life as a territory sales trainer.

Ryan Specialty Holdings Inc. named Katie Davies CEO of its Power.Energy.Risk’s (PERse) North American operations, the Chicago, Illinois-based company’s renewable energy managing general underwriter (MGU). Jeff Smith has been named president and chief underwriting officer at PERse. Davies previously served as president of AmWINS

special risk underwriters and as Midwest regional property manager for ACE Group. Davies continues as CEO of JEM underwriting managers and technical risk underwriters.

Smith is a founding member of PERse. He previously served as vice president at GCube Insurance Services Inc. Smith will retain his role as chief underwriting officer.

Valley Insurance Agency Alliance (VIAA), based in Clayton, Missouri, promoted Bill Kaatman to director of enterprise development.

Kaatman will also serve on the company’s development team.

He has 17 years of insurance industry experience.

South Central

Drew Atkins joined XPT Specialty ’s Texas-based operations as vice president and wholesale casualty broker.

Atkins started his career as a financial analyst at PwC and Halcon Resources Corporation before pivoting to insurance. Most recently, Atkins served as vice president at U.S. Risk LLC in its Houston office.

NavSav Insurance, based in Beaumont, Texas, appointed Matt James as senior vice president of sales for both personal and commercial lines of business.

James has over 15 years of leadership experience in insurance and financial services.

Southeast Summit Consulting, a manager of five workers’ compensation insurance companies in the Southeast, named Robert Darin Grimm senior vice president of claims.

Grimm joined Summit in 2003. He has worked in sales and marketing and was most recently vice president of medical claims.

Summit is based in Lakeland, Florida, and is part of Great American Insurance Group.

W.R. Berkley Corp. named Jay Weber president of its Berkley Southeast Insurance Group. He succeeds Dennis Barger, who was named chairman.

Weber has more than 30 years of experience in commercial P/C insurance and was recently North American business development leader for a global insurance group.

CAC Specialty named Karmanee Governor senior account executive.

Governor has experience in all lines of insurance, including healthcare professionals’ liability and excess liability programs for health systems, senior living centers, surgery centers and physician groups.

Recently, Governor served as senior vice president for Willis Towers Watson.

The Mallory Agency, a P/C insurance broker based in La Grange, Georgia, and Atlanta, named Cassandra George vice president of operations.

George has more than 10 years’ experience at First Light Program Managers, including her recent role as operations manager.

Leane Rafalko, who spent eight years with the North

Carolina Department of Insurance as chief captive analyst, has been named director of captive management for Knoxville, Tennesee-based CIC Services.

After leaving DOI, Rafalko joined Hylant Global Captive Solutions as senior captive consultant.

West

Santa Barbara, Californiabased Pensionmark named Jonathan Curley as global head of compliance.

Curley’s industry experience spans more than four decades. He most recently served as senior advisor to ButcherJoseph & Co and president of Sable Capital.

Pensionmark is a World Insurance Associates LLC company.

Crest Insurance Group, headquartered in Tucson, Arizona, hired Bob Howard as vice president, director of sales, and named Chester Henderson director of risk services.

Howard has previously served as resident sales director at Aon, senior vice president at Marsh and principal owner at Intelligent Risk LLC.

Henderson served in the U.S. Navy and was a Navy Seal. While in the Navy, Henderson held numerous leadership positions, including directing the work of risk management teams.

Trisha Harlamert

Scott Montgomery

Zac Bilyeu

Bob Howard

Robert Darin Grimm Leane Rafalko

Business Moves

JIS is an independent, full-service agency offering personal insurance and life, commercial property/casualty, and group employee benefits insurance products and services to protect individuals and businesses since 1985. With 133 associates statewide, the agency is one of the top 10 largest independent insurance agencies in Wisconsin.

Under the terms of the purchase and assumption agreement, Risk Strategies will acquire the agency as a whole. Upon closing, JIS will be Risk Strategies’ first acquisition of a Wisconsin-based agency.

National American Financial Group, Crop Risk Services

American Financial Group Inc. and American International Group entered into a definitive agreement whereby AFG will purchase Crop Risk Services (CRS) from AIG.

Under the terms of the transaction, AFG will pay AIG $240 million in cash at closing, subject to certain closing adjustments. The parties anticipate the closing to take place during the third quarter of 2023, subject to obtaining required regulatory approvals and the satisfaction of other customary closing conditions.

CRS is a primary crop insurance general agent based in Decatur, Illinois, with 2022 gross written premiums of approximately $1.2 billion. It is the seventh largest provider of multi-peril crop insurance in the U.S., based on 2022 premiums.

American Financial Group’s Great American Insurance Group has been providing crop-hail coverage since 1915 and began writing multi-peril crop insurance in 1980 after Congress authorized the program.

As part of the AFG organization, CRS will continue to do business in all 37 states in which it currently operates.

East Risk Strategies, JW Surety Bonds

Boston-based specialty insurance broker Risk Strategies acquired JW Surety Bonds, a large volume bond producer, along with

sister companies Bryant Surety Bonds Inc. and Lance Surety Bonds Associates Inc.

Headquartered in Pipersville, Pennsylvania, JW Surety Bonds was founded in 2003 and operates across all 50 states. The firm places a variety of bonds including license and permit bonds, contractor bonds, court bonds and fidelity bonds. The company specializes in freight broker, auto dealer and mortgage broker bonds.

Terms of the deal were not announced.

Hub International, Brady Risk Management

Global insurance broker Hub International Ltd. has acquired the assets of Brady Risk Management Inc. of Huntington, New York.

Brady Risk is a risk management, risk transfer and insurance firm that serves key industry segments, including restaurant and hospitality.

Sean Brady, president, and the Brady Risk team of 15 will join Hub Northeast.

In addition to its New York headquarters, Brady Risk Management maintains offices in Washington, D.C., and Portland, Maine (Brady Risk New England).

Terms of the transaction were not disclosed.

Midwest Risk Strategies, Johnson Insurance Services

Risk Strategies said it is purchasing the assets of Johnson Insurance Services, a subsidiary of Johnson Financial Group.

World Insurance Associates, World Insurance Associates

World Insurance Associates LLC has acquired the business of World Insurance Associates LLC (Iron Gates) of Haven, Kansas, and Anthony, Kansas.

Iron Gates has been serving their community for over 15 years. The firm provides property/casualty insurance, as well as crop and hail insurance to individuals and businesses across Kansas.

Terms of the transaction were not disclosed.

South Central

Oakbridge Insurance Agency, Wes Sullivan

Oakbridge Insurance Agency announced a new partnership with Wes Sullivan and his team of Arkansas-based insurance professionals specializing in commercial trucking insurance for large fleets.

The partnership supports Oakbridge’s continued expansion throughout the Southeast and marks its first presence in Arkansas.

In addition to Arkansas, Oakbridge will extend its presence to Oklahoma, Mississippi, and Texas — states where Sullivan writes insurance — and expand services in Tennessee. Sullivan will retain an office in Arkansas.

Southeast

Oakbridge Insurance Agency, Hunnicutt Insurance, Wilson Insurance Oakbridge Insurance Agency expanded

into Florida with the addition of Hunnicutt Insurance in Fort Walton Beach.

Hunnicutt has been in business since 1969, specializing in coverage for condominiums, townhomes and homeowner associations, plus liability insurance for medical professionals, contractors, marine and more. The agency will maintain its office in the Florida Panhandle.

Oakbridge also acquired Wilson Insurance in Waycross, Georgia. Wilson Insurance, founded in 1956, specializes in personal and commercial property/ casualty, surety, and group life and health in southeast Georgia and northeast Florida.

Leavitt Elite Insurance Advisors, Simmons Insurance Agency

Leavitt Elite Insurance Advisors, part of the Leavitt Group, has merged with Simmons Insurance Agency in North Carolina. Simmons, with offices in Pilot Mountain and Mount Airy, was founded in 1973 and has been managed by Pam

Morgan since 2001. Morgan and staff will join Leavitt and will eventually adopt the Leavitt name.

The latest move gives the Utah-based Leavitt Group 15 offices in North Carolina.

West Arthur J. Gallagher, Leavitt Insurance Services of Los Angeles

Arthur J. Gallagher & Co. acquired Woodland Hills, California-based Leavitt Insurance Services of Los Angeles.

Teri Frankel, Kenneth Blaich and their team will remain in their current location under the direction of Scott Firestone, head of Gallagher’s Southwest region retail P/C brokerage operations, and Charlie Isaacs, head of Gallagher’s West region employee benefits consulting operations.

Leavitt offers commercial P/C insurance, as well as employee benefits consulting to clients in the Southwest U.S.

Arthur J. Gallagher & Co. is headquar-

tered in Rolling Meadows, Illinois.

Hub International, The Wooditch Company

Chicago-based insurance broker and financial services firm Hub International Ltd. acquired the assets of The Wooditch Company Insurance Services Inc. in Irvine, California. The Wooditch Company team will join Hub LAOC.

The Wooditch Company is a privately held commercial insurance, risk management and employee benefits services firm advising clients in various industries, including construction.

Pensionmark, Xponential Growth Solutions

Pensionmark acquired Xponential Growth Solutions, a retirement benefits consultant based in San Diego.

Terms of the deal were not disclosed.

Pensionmark, an investment adviser, is a World Insurance Associates LLC firm.

D&O Prices Plummeting: Record-Level Q1 Drop for Decade

By Susanne Sclafane

The year-over-year decline in directors and officers (D&O) insurance prices for the first quarter of 2023 is greater than any prior drop over a comparable period in more than a decade, historical information presented in a new Aon report reveals.

Aon’s Quarterly D&O Pricing Index fell 24.9% to 1.84 in first-quarter 2023 from 2.45 in first-quarter 2022, Aon’s Financial Services Group reported. The pricing index captures the average price per million dollars of D&O coverage, tracking premium changes relative to the base year of 2001.

Aon’s D&O Pricing Index from Q1 2019-Q1 2023

A graph of the quarterly index figures in the report stretching back to Q1 2012, when the index fell 7.0% to 0.9, shows no other year-over-year decline of more than 20%.

Second-quarter 2022 came close at 19.9%, with first-quarter 2022 and third-quarter 2022 both near 15%. Before that, you would have to look back to second-quarter 2016 for a similar drop of 16.5%.

Carrier Management, a sister publication to Insurance Journal, compiled a history of Aon’s quarterly year-over-year price change figures for all the first-quarter points shown in the report.

For carriers, the latest drops have not erased extreme price gains ranging from 65% (fourth-quarter 2019) to more than 100% (first-quarter 2020) racked up for several consecutive quarters starting in late 2019.

Those price index changes, however, include the impacts of changes in the clients renewing during each quarter and renewal program changes, such as changes in limits purchased. Offering a more apples-to-apples comparison, the Aon report presents price changes for primary policies renewing with the same limit and deductible. For

Economic and Cyber Risks Lead Global D&O Concerns: Survey

By Denise Johnson

At the top of increasing concerns for directors and officers around the globe are economic, geopolitical and cyber risks, according to the latest Directors and Officers Liability 2023 Survey released by Willis Towers Watson (WTW) and Clyde & Co., a global law firm.

“With companies and their leaders operating in an almost unprecedented climate of uncertainty, this year’s survey provides timely and valuable insights into the evolving risk landscape,” said James Cooper, partner, head of insurance, Clyde & Co. “We asked directors about 28 risks overall; the results are very consistent with last year, with cyber risks ranking significantly above other risks. There have been developments, however, with notable new risks includ-

ing systems and controls, sufficient cyber expertise at board level, and employee crime and cyber crime as a subset of crime risks.”

The report highlights key risks for directors across the world (including the UK, Europe, Asia, Australasia, Latin America and North America), offering responses from 40 countries. Responses varied by country, with the greatest number coming from Europe at 37%, followed by Great Britain at 24%, and Latin American at 13%. Africa posted the lowest responses at 1%.

Economic risk topped risk concerns for businesses by 63% of global directors, closely followed by cyber risk on 62%. Geopolitical risk moved up the ranks of concern, placing 4th on the list, up from the 6th spot last year.

“With a volatile business environment resulting from the current geopolitical uncertainty, it is no surprise that geopo-

litical risk is rising on the list of directors’ concerns,” said Jeremy Wall, head of global FINEX, WTW. “The advent of technology ensures that cyber will continue to be of major concern and we are certainly seeing more demand for cyber insurance as a result.”

This year’s survey results are consistent with 2022, with cyber, data loss and cyber extortion dominating the highest ranks of risks for directors. In percentage terms, cyber attacks and data loss are still the most significant with 62% of directors concerned. While COVID-19 and Brexit concerns remain in the top five, D&O responses indicate the two risks continue to decrease in importance.

Response analysis was then broken up by industry, region and revenue, and for the first time, the survey also broke down economic risk into three perils — inflation, recession and the job market — with most

D&O primary insurance price changes for policies renewing at same limit and deductible. Year-over-year changes by quarter for successive first-quarters

first-quarter 2023, that refined calculation shows buyers enjoying a 7.9% price drop for the same amount of primary coverage. There are no prior first-quarter primary price drops of a comparable magnitude dating back to 2012, the first year shown in the graphs included in the Aon report. Just three years ago, in first-quarter 2020, carriers were raising D&O pricing on

global directors citing inflation as the biggest economic risk (69%), closely followed by recession (67%).

Focusing on the finance and insurance industry, the top risk concerns of directors and officers in 2023 are:

1.Cyber attack

2.Data loss

3.Cyber crime

4.Cyber extortion

5.Bribery and corruption

6. Regulatory breach

7. Breach of sanctions

Geopolitical risk ranks highly for businesses in Europe, Asia and Latin America.

A fluctuating concern is climate change; it ranked as the No. 1 risk concern for directors in the energy and utilities sector, while it made it in the top five risk concerns for directors in Great Britain (where it is the No. 1 risk) and Australasia (where it is No.

4).

By region, top D&O concerns within

D&O primary insurance price changes for policies renewing at same limit and deductible. All quarters from Q1 2019-Q1 2023 shown. The Aon report also includes Q1 2012-Q4 2018.

primary policies by 26.2%.

According to the report, 80% of primary policies renewing with the same limit and deductible in first-quarter 2023 experienced a price decrease. Only 9% had a price hike.

More than three-quarters of primary policies — 77.5% — renewed with the same limit and deductible, and 94.4% renewed

with the same primary carrier. In 2020, when prices soared, only about 50% of buyers renewed at the same limit and deductible.

Sclafane is the executive editor of Carrier Management, a Wells Media Group Inc. publication. Email: ssclafane@carriermanagement.com.

the top three, and sometimes, more lists for all revenue categories. Additional interesting takeaways include the finding that 19% of respondents were not aware of the extent of their indemnification and a significant number of respondents indicated insurance premiums had increased from the previous year.

North American companies in 2023 are:

1.Cyber attack

2.Data loss

3.Cyber extortion

4.Cyber crime

5.Sufficient cyber expertise at board level

6. Regulatory breach

7. Systems and control

Risk concerns stayed relatively consistent across revenue categories, the report found. Cyber-related concerns round out

“While the survey highlights geographical variations, it also sheds light on marked differences between how directors and risk managers at small companies are rating risk compared to those at large enterprises,” said Cooper. “But regardless of business size, successfully navigating risk has never been more difficult. Directors need a forward-looking view to anticipate threats and challenges.”

Johnson is an assistant editor at Carrier Management.

Spotlight: Cyber & Security

Cybersecurity Fail: Top 10 Passwords Used by the Insurance Industry

Despite cybersecurity experts’ repeated warnings, the insurance sector, along with other industries, is not doing a great job when it comes to creating secure passwords, says new research by password manager NordPass. Though employees are repeatedly warned to take better care of corporate accounts, passwords such as “password” and “123456” still score high on the insurance industry’s list.

Below are the 10 most used passwords in the insurance sector:

1.password

2.123456

3.company’s email domain.com*

4.aaron431

5.company name’s abbreviation123*

6. company name745*

7. part of the company’s name*

8. company’s email domain.com*

9. mail2007

10. company name*

*This password is directly referencing a company. NordPass is not naming the exact business. It notes the format in which this password was used, for example, the abbreviation of the company’s name, part of the name, or the name combined with other words or symbols.

Although the password management company reviews changes in internet users’ password habits year-round, this year, the company specifically investigated passwords that employees of the world’s biggest companies from 31

countries use to secure business accounts. The researchers compiled 20 industry-specific password lists.

“On one hand, it is a paradox that the wealthiest companies on the planet with financial resources to invest in cybersecurity fall into the poor password trap. On the other hand, it is only natural because internet users have deep-rooted, unhealthy password habits. This research once again proves that we should all speed up in transitioning to alternative online authentication solutions,” said Jonas Karklys, CEO of NordPass.

‘Ashley’ and Other Questionable Passwords

The passwords “password” and “123456,” which shared the top two spots in last year’s list of the world’s most common passwords, are also popular among the largest companies’ employees, the study found. Across all 20 analyzed industries, both of these passwords were found to be among the seven most commonly used passwords. The word “password” was the No. 1 most trending pick among the insurance sector’s employees, and “123456” ranked second.

Insurance company personnel were also found to use names for their passwords, with “aaron431” and “ashley” among the most popular picks. Other industries were also creative, the report found. The password “dummies” ranks sixth among consumer goods sector employees, “sexy4sho” is 16th among real estate employees, and “snowman” is 11th in the energy field.

Common Inspirations

Just like with regular internet users, dictionary words, names of people and countries, and simple combinations of numbers, letters and symbols make up most passwords presented in the research. However, the remaining 32% indicate another interesting trend. The world’s wealthiest companies’ employees love passwords that directly reference or hint at the name of a specific company. The full company name, the company’s email domain, part of the company’s name, an abbreviation of the company name, and the company product or subsidiary name are common sources of inspiration.

“These types of passwords are both poor and dangerous to use. When breaking into company accounts, hackers try all the password combinations referencing a company because

they are aware of how common they are. Employees often avoid creating complicated passwords, especially for shared accounts. Therefore, they end up choosing something as basic as the company’s name,” Karklys said.

A Wide Representation

The analysis of the world’s wealthiest companies’ passwords was conducted in partnership with independent third-party researchers specializing in research on cybersecurity incidents. They looked into the world’s 500 largest companies by their market capitalization, which represented 31 countries and 20 industries.

The United States (46.2%), China (9.6%), Japan (5.8%), India (4.2%), the United Kingdom (4.0%), France (3.8%) and Canada (3.6%) are the countries most represented in this research. Also, most of the companies analyzed fell under the finance, technology and IT, and healthcare sectors.

The study complements a series of password-related research projects the password manager has delivered throughout the years. In 2021, the company looked into the passwords that Fortune 500 companies use, and in 2022, investigated the password habits of top-level business executives. It also presents the “Top 200 most common passwords” study annually, which broadly covers the password trends of internet users.

“While password trends slightly vary each year across different audiences, the general take is that people continuously fail with their password management, and the world desperately needs to switch to new online authentication solutions such as passkeys,” Karklys said.

Various progressive businesses such as Google, Microsoft, Apple, PayPal, KAYAK and eBay already have adopted passkey technology and are offering their users password-less login.

Tips for Securing Business Accounts

According to an IBM report, in 2022, stolen or compromised credentials remained the most common cause of a data breach in companies, accounting for 19%.

Karklys said that by implementing a few cybersecurity measures, businesses could avoid many cybersecurity incidents.

1. Ensure company passwords are strong. They should consist of random combinations of at least 20 upper- and lower-case letters, numbers and special characters.

2. Enable multi-factor authentication or single signon. While the MFA set up on another device, connected with email or SMS codes guarantees an additional layer of security, single sign-on functionality helps reduce the number of passwords people have to manage.

3. Critically evaluate who gets account credentials. Access privileges should be removed from people leaving the company and passed on only to those who need certain access.

4. Deploy a password manager. With a business solution, companies can safely store all their passwords in one place, share them within the organization, ensure their strength, and effectively manage access privileges.

The poor passwords list was compiled in partnership with a third-party company specializing in cybersecurity incident research.

‘On one hand, it is a paradox that the wealthiest companies on the planet with financial resources to invest in cyber-security fall into the poor password trap. On the other hand, it is only natural because internet users have deep-rooted, unhealthy password habits.’

Special Report: Cyber & Security

Lloyd’s Cyber War Exclusions: Confusing, Disruptive, but Necessary?

By L.S. Howard

The rollout of the Lloyd’s Market Association’s (LMA) cyber war exclusions received considerable criticism for the chaos and confusion they caused leading up to their effective date on March 31.

But here are some certainties about the new regime: A compliant cyber war exclusion must be included in policies purchased through Lloyd’s — it’s not voluntary. The most commonly used exclusion — LMA5567A/B — does not exclude state-sponsored cyberattacks, unless certain thresholds are met — the most notable of which is that the insured digital assets must be located in a state that has suffered a “major detrimental impact.”

Another important fact to keep in mind is that the LMA’s exclusions can be revised, provided they adhere to Lloyd’s requirements listed in LMA Market Bulletin Y5381. Of course, the devil is in the detail — and some market practitioners say that the legal profession could be a major beneficiary, when and if future disputes arise.

While Lloyd’s executives admit the market has faced and will continue to face some disruption, they support the need for exclusions. Burkhard Keese, Lloyd’s CFO, admitted the exclusions have received a lot of criticism, but are “needed to provide contractual certainty around uninsurable losses.” During a media briefing in March to discuss the market’s 2022 financial results, he said: “Our stakeholders expect Lloyd’s to provide leadership in these difficult decisions, and I believe we are happy to take and to accept that leadership.”

Lloyd’s CEO John Neal admitted during the same briefing that the cyber war exclusion could cost the market some income. (Some market participants have suggested that it will be the U.S. market that benefits from the rollout of the exclusion, although it remains to be seen how the market will evolve once people get used to the new regime.)

“You’ve got to define what limits you’re giving, what exposure you’ve got. It’s

obvious. It may take others a little while to get there, but it’s the right answer,” Neal said.

“We cannot leave ourselves in a similar situation that we found ourselves in, for example, with business interruption claims where we’re debating the cover at the point of loss. So, we’ve made the right decision, short term. Do I think that could cost us some income? Yes, I think it could, but cyber is still our fastest growing insur-

ance product anyway,” Neal confirmed.

Keese’s and Neal’s concerns about clear wordings appear to be justified, given the recent decision in the appellate division of New Jersey Superior Court, which upheld a state trial court opinion that the war exclusion in drugmaker Merck & Co.’s all-risk property insurance policy does not apply in the case of the cyberattack the company suffered in 2017. (Notably, this was not a cyber policy). The court ruled that insurers

could not use the policy exclusion to avoid covering about $1.4 billion in damages Merck said it suffered from the NotPetya cyberattack of spring 2017.

Nevertheless, there is an agreement that the LMA cyber war exclusions may be a good start for discussions — but further refining probably will be required. While many Lloyd’s syndicates and non-Lloyd’s insurers have adopted the LMA exclusions, other insurers (such as Beazley) are providing their own acceptable adaptations of the exclusions. Brokers, including Marsh (in conjunction with Munich Re) and WTW, also have prepared adaptations in response to consultations with cyber insurance buyers.

Deeply Unhelpful

But the rollout wasn’t an easy one — in part because of communication failures — from the press and even the LMA itself. Lessons have been learned.

Misreporting about the LMA exclusions

— specifically that Lloyd’s war exclusions do not cover state-sponsored cyberattacks — has been “deeply unhelpful,” said Andrew Hill, global head of cyber coverage and innovation at WTW, who moderated a panel on the LMA cyber war exclusions at the Zywave Cyber Risk Insights London Conference 2023.

While one of the exclusions does exclude all state-sponsored attacks — that’s LMA5564 and its iterations — Hill said that exclusion is not being used anyway. The most commonly used exclusion is LMA5567, which does not blanket exclude nation-state attacks. “In fact, on the contrary, it covers nation state cyberattacks unless certain thresholds have been met,” he added.

Hill suggested the manner in which Lloyd’s rolled out its cyber war exclusions had shaken buyers’ confidence in the London market and the communications surrounding the publication of the LMA exclusions could have been handled better.

“I’m sure brokers all share experiences of clients having some reticence to buy into the LMA war exclusions.”

For example, Hill noted that over the past year, clients have had to face the prospect of five, six or seven different war exclusions in one tower of insurance because there is a lack of market consensus on appropriate war exclusions, which has not been helpful. In an emailed interview after the meeting, Hill said the sheer number of war exclusions hitting the market in recent months has naturally led to some confusion among insurance buyers.

“Whilst I’m not necessarily recognizing that there has been tangible damage to the perception of the London market, I can see that there’s been a lot of very unhelpful publicity, and I think that’s based on a misunderstanding of how these clauses actually operate,” said Helga Munger, senior cyber claims manager, Munich continued on page 26

Special Report: Cyber & Security

continued from page 25

Re, who spoke on the panel and also worked on developing the exclusions.

Patrick Davison, underwriting director for the LMA, admitted that the rollout hadn’t gone according to plan.

“What we probably didn’t do very well and with hindsight could have done better, was engage a bit more broadly around some of the principles of what we were doing.”

He recalled that there was a long debate over three years to develop the exclusions and the initial publication in 2021 was met relatively quietly, but with the re-publication of the clauses last year, the volume of debate increased significantly.

“Now had we had some earlier conversations about principle and intent, would those discussions have been less emotive and more constructive? Quite possibly, I think, is the answer. So, there are some lessons for us as an organization.” Davison said the model clauses are designed to stimulate debate “and we’ve certainly achieved that.”

The LMA has published four exclusions for “war, cyber war and cyber operation”: LMA5564, LMA5565, LMA5566, and LMA5567. (In January, the LMA issued revised versions — the “A” clauses — with LMA5567A proving to be the most popular. A Marsh-Munich Re exclusion is also available to the market.)

With the benefit of hindsight, Hill asked the Zywave panel, if it was possible that a war exclusion spread over a page and a half, which deals with multi-layered issues of war, nation-state attacks and infrastructure issues, was perhaps too ambitious to be “socialized with clients who perhaps don’t have that amount of time to invest in understanding all of those layered issues?”

Munger acknowledged that the first iteration of the LMA5567 clause was complex but it has since been revised, with input from Munich Re, Marsh and Aon.

“We have a clause, which LMA published this year, which is much simpler, much shorter, much more concise and very understandable,” she said. “So, I think

we’ve recognized that the complexity of the language was an impediment, but the function of the clause is basically the same. What we are trying to exclude is those catastrophic events that insurance cannot possibly sustainably cover.”

Questions Remain

Hill questioned the decision not to define what is meant by “major detrimental impact.” (The trigger for the exclusion would be an attack that has “a major detrimental impact” on a state’s “ability to function”). He acknowledged, however, that a one-size-fits-all definition applicable to the functions of every nation state would not be without its challenges. Hill recalled a conversation with a representative of a leading global insurer, which is still using a NMA464-type exclusion and expressed concern that LMA5567 just kicks the issues of interpretation further down the road.

“The argument is that, while the LMA exclusions succeed in clarifying what’s meant by ‘war’ and what’s meant by a ‘nation-state attack,’ we still have this concept of ‘major detrimental impact,’ which would require interpretation in the event of the exclusion’s application,” Hill said.

Hill expressed concern that there are signs in the international cyber insurance market of a trans-Atlantic dichotomy.

On the one hand, there is the influential U.S. market, which is still hanging its hat on war exclusions based on the NMA464type exclusion drafted as far back as 1938. On the other hand, he said, there is the Lloyds’ market, which together with Munich Re and a few other companies are putting their weight behind the LMA exclusions. (The NMA, or the Lloyd’s NonMarine Association, is the predecessor of the LMA).

In response, Munger speculated that some U.S. markets may be hesitant to change until the outcome of the Merck case. (The Zywave meeting was held before the recent Merck decision).

“I would say that the debate that we have sparked is actually beneficial for people, whether or not the clauses themselves are the final answer — but I suspect they’re not,” she said.

Davison said the definition of “major detrimental impact” was not included because “the complexity of defining that term would mean that you would probably end up with a list of types of things that would happen, which at the time we felt was not the correct way of proceeding.”

The aim was to give the utmost transparency, according to Munger.

“So we’ve given those additional explanations of what war means or what is a cyber operation as a part of war. When it comes to the additional concepts of ‘major detrimental impact to the functioning of the state,’ we do have references that we used for that [which] were discussed right at the beginning in the LMA discussions. And they relate to, for example, the UK critical national infrastructure guidelines, which references just what a high bar that major detrimental impact is,” she said.

Davison emphasized that the LMA is open to suggestions about how to improve the exclusions. “I think our view was that there wasn’t an easier or clearer way of doing it the current time.”

‘I’m sure brokers all share experiences of clients having some reticence to buy into the LMA war exclusions.’

(Left to Right) Patrick Davison, Helga Munger, and Andrew Hill at the Zywave Cyber Risk Insights London Conference 2023.

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Contact: Stephen van Wert; hello@ ptprocover.com; 859-327-5594.

High Risk/High Hazard Workers’ Comp

Market Detail: HR & PEO Consultants offers workers’ compensation programs that provide an alternative solution for clients with high risk/high hazard exposures and high experience modifiers. Aggressive pricing provided through various deductible programs and very reasonable collateral requirements on the deductible programs. All types of accounts will be considered: high mod; cancellations/non-renewals; lapse or gaps in coverage; new business; no prior; height exposure over two stories and more. PEO Programs are designed to write the following types of risks: bus companies; cell tower work; garbage haulers; heavy construction; building operations; janitorial; landscaping; tree trimming; logging; roofing (commercial and residential); staffing operations; trucking, furniture movers, long haul and short haul, parcel; USL&H; manufacturing; bakeries and more. Loss control programs and safety programs are put in place to combine with the client in an effort to reduce exposure of potential claims and creating a safer work environment.

Available Limits: Not disclosed.

Carrier: Multiple carriers; rated A.

States: Available in 50 states plus District of Columbia.

Contact: Lisa DeNoto; ldenoto@hrpeoconsult.com; 561-866-8674.

Miscellaneous Professional Liability E&O

Market Detail: Indigo Specialty Underwriters provides service-oriented,

technology-enabled solutions to meet the needs of a broad range of professional liability risks. Our team of industry experts will provide tailored professional liability coverage solutions for each client’s unique professional offering. Coverage: primary and excess; non-admitted; customized coverage. Capacity: $5 million (revenue under $50 million); $3 million (revenue over $50 million). Sample classes: advertising service; arbitrators/mediators; auctioneers; benefit consultants; billing services; bookkeepers; business brokers; claims adjusters; commercial real estate; customs brokers; document service; editing service; educational services; event service; employment agencies; energy consultants; environmental consultants; freight forwarders; healthcare consultants; hotel management; human resource consultants; insurance agents and brokers; litigation consultants; management consultants; marketing consultants; printers/product promotions; property managers; public relations firms; real estate agent/broker; regional franchisors; risk management consultants; staffing firms; tax preparers; testing labs; third party administrators; title agents; travel agents; trustees.

Available Limits: $5 million (revenue under $50 million); $3 million (revenue over $50 million).

Carrier: Non-admitted.

States: Available in 50 states plus District of Columbia.

Contact: Roberta Loura; rloura@indigouw. com; 860-306-6242.

Drone Agricultural Use

Market Detail: STRAVA Specialty is an MGA providing best-in-class solutions for the contracting and consulting industries, including agricultural risks. We have the expertise and products to provide pollution and professional liability for drone usage in agricultural solid/liquid application (herbicides, pesticides, seeding, dust control, etc). Premiums and retentions start at $1,000.

Available Limits: Not disclosed.

Carrier: Accelerant Specialty Insurance Co.; non-admitted; rated A- IX.

States: Available in 50 states plus District of Columbia.

Contact: Jen Staiber; submissions@ stravains.com; 623-473-6261.

Luxury, Mega & Elite Yacht Coverage

Market Detail: JSM Brokerage Insurance and Risk Management offers luxury yacht, mega-yacht, and elite yacht policies for high valued vessels. These policies provide a superior level of protection and policy terms along with exceptional service that luxury and elite yacht owners have come to expect.

Available Limits: Not disclosed.

Carrier: Admitted; non-admitted.

States: Available in 50 states plus District of Columbia.

Contact: Mike Mecurio; JSMMarineIns@ gmail.com; 954-427-1228.

Restaurants, Bars & Taverns, Dining

Market Detail: From single-independently-owned locations to corporate-chained establishments, Granada Indemnity Co. offers specialized insurance coverages including commercial package policy (CPP), property, general liability, liquor liability (NY, NJ, CT only) and spoilage for a variety of restaurant risks: bars and taverns; dine in; take out; family style; cafes; sushi/ hibachi; food trucks; bakeries; delis; pizzerias; fast food and off-premises catering; and more. New ventures and 24-hour exposures acceptable. Marketed through independent brokers. Direct appointments available; has pen.

Available Limits: Not disclosed.

Carrier: Granada Indemnity Co.; admitted; rated A- by AM Best.

States: Available in Connecticut, New Jersey, New York, Pennsylvania.

Contact: Tim Cotugno; tcotugno@granadainsurance.com; 516-431-9191 x3236.

By Ezra Amacher

As theater shows and live events return to full force this year coming off pent-up demand, underwriters are placing extra scrutiny on safety, resulting in increased rates and tightly worded policies.

Specialists in the entertainment insurance industry say that coverage for venues, performers and promoters is attainable, but parties must demonstrate adherence to safety measures protecting performers and spectators alike.

In the past few years, underwriters and brokers have become more strict with underwriting guidelines, and requests for risk services and risk management, said Carol Bressi-Cilona, vice president of entertainment and sports new business marketing at HUB.

Underwriters demand that everything be detailed on applications and in writing, and they want to know venue owners’ plans for catastrophe scenarios.

“It’s like we’re starting all over again in insurance, in a new life, a new world of technology, a new world of risks to consider, and the likes we’ve never seen before regarding active shootings, terrorism, weather catastrophes and more,” said Bressi-Cilona.

Event organizers seeking general liability coverage should expect to pay 5% to 10% more in 2023, according to HUB International’s 2023 Outlook for Entertainment & Sports. Umbrella and excess liability coverage could increase by 10% to 20% as “carriers continue to reduce capacity due to social inflation and nuclear verdicts

that exceed primary limits,” HUB said.

Not the Same Old Song and Dance

As theater productions grow in complexity, so do the risks underwriters take into account when determining coverage. A drama or comedy play is typically easier to attain coverage for, as there are few moving parts. Musicals with lots of song and dance or artistic shows where participants fly in place or perform repetitive motions typically draw more inspection, said Michael Furtschegger, global head of entertainment at Allianz.

“It’s similar to filming. If you have a drama at the studio or an action movie, the nature of the risk would certainly be different,” said Furtschegger.

Underwriters take into consideration the number of performers involved in a production, what the stage looks like, how many shows are performed consecutively and whether there is enough time in between for rest and travel.

Claims due to injuries for cast and crew are usually covered by workers’ compensation, and rates are highest in states with the most concentration of performers: New York and California. For dance and ballet companies, some carriers are pulling back from offering workers’ compensation because they can’t handle the claims situation, said Bressi-Cilona.

In New York, workers’ compensation rates for theatrical productions are either based on non-musical or non-dance plays or they’re based on musicals with dance. The rates for musicals with dance are sometimes four times higher

than the non-musical/nondance rate for cast and crew.

“New York presents most of the Broadway and OffBroadway types of theatrical productions which engage many shows with large numbers of cast and crew, so if it’s a musical with dancing and acrobatic movement, there is a higher risk that promotes much more of a chance of physical claims,” said Bressi-Cilona.

Underwriters also want to know whether a production uses any stunts or hazardous activities such as pyrotechnics, or if there is audience involvement.

“You had a show like Spider-Man a few years back that had a lot of elements of the production that were over the audience and obviously that brings a whole other set of exposures with it,” said Peter Shoemaker, managing director at Risk Strategies. “Or you have the chandelier in Phantom of the Opera that swings out over the audience.”

Another item underwriters must now account for in some productions is the use of drones. They’ll want to make sure that whomever is operating the drone is experienced and whether the drone is flying out above the stage area or over the audience.

“There’s a lot of different types of questions that will come up depending on the specific attributes of the show itself,” said Shoemaker.

Spectator Safety

The use of drones and pyrotechnics in theater productions are a sampling of spectator safety risks that underwriters consider when determining coverage for live entertainment venues. The COVID-19

pandemic led event organizers to seek protection against communicable diseases.

While COVID is no longer top of mind for event venues, the return of full capacity crowds puts the spotlight on crowd control risk management.

At live music venues, claims primarily arise from slip-andfall accidents to assault and battery between patron-onpatron or security-on-patron, said Paul Bassman, practice leader for the sports and entertainment division at Higginbotham. For theatrical productions, underwriters will want to know whether any elements of the show are going to extend off stage into the audience.

Venue owners and event organizers face more pressure to display security measures in light of recent tragedies like the 2021 fatal crowd crush at the Astroworld Festival in Houston, or the Illinois theater roof collapse following an April tornado. Underwriters will ask for information on event safety, such as the number of evacuation routes and whether they’re well-lit.

Some insureds may be asked to provide metal detectors in light of increased exposure to active shootings. With firearms, laws can vary from one state to another as to whether somebody is allowed to carry. An underwriter may feel better about writing coverage in a state that has laws against carrying guns in public versus a state that doesn’t, according to Shoemaker.

Rates for liability coverage have leveled off since the pandemic, Shoemaker said, but carriers are less inclined to provide higher limits.

continued on page 30

Special Report: Entertainment

continued from page 29

“In the past maybe where an underwriter would say, ‘We’ll put up $10 million of liability coverage on this risk, they may say, we’re going to cut that back to $5 million or $1 million,’” said Shoemaker. “An insured has to go out to other insurance carriers and build up a tower of excess limits above the quote that you have.”

Return of Festivals and Touring

Live outdoor festivals and touring productions are expected to make a major comeback this summer, bringing their own types of exposures.

For outdoor shows, weather-related coverage can play a factor in driving up pricing, entertainment specialists say.

“Though these festivals are rated on either the total gross revenue or total costs and expenses, the variance in policy pricing is based mainly on the time of year and the location of the festival — for obvious reasons,” said Bassman. “A festival during hurricane season on the east coast will be considerably more expensive than a festival in the spring on the west coast.”

Other underwriting components that go into insuring live outdoor events include capacity of the venue, security protocols and alcohol controls, said Ryan Jones, broker, Insurance Office of America, specialty

and entertainment division.

“If you have an at-capacity, packed event with understaffed security and inexpensive alcohol, that's a problem to an underwriter,” said Jones. “All precautionary measures must run together congruently to ensure that everything is being done appropriately for the protection and safety of the guests.”

Touring shows, whether concert or theatrical, add increased exposure for damage, lost items or maintenance issues during transit. Productions may experience property break down from travel or during construction and reconstruction.

If a touring production is traveling during the winter months, for example, weather and travel risks are different than in summer, and Allianz will look at the insured’s itinerary very closely to identify where they are going and how they are traveling.

“In the Midwest in the winter time it can be very harsh,” said Furtschegger. “Maybe you have an issue on arriving on time with equipment and you run into risks that you are not even able to stage the show on time because your travel has an issue.”

Touring acts that travel to California or the West Coast face exposure to earthquakes. Similarly, productions traveling

along the East Coast or in the South have a greater risk of windstorm damage. In either case, an insured could experience a business interruption loss if it is not able to perform at a venue.

No-Show

As long as there have been live entertainment productions, carriers have provided forms of event cancellation coverage, often under contingency or non-appearance. Contingency coverage offers financial protection to productions when an event can’t go on as scheduled, while non-appearance covers a star performer when they’re sick or injured.

Prior to the pandemic, carriers offered a theatrical broad performance disruption option on their theatrical floater program that did not exclude COVID in most circumstances, causing the carriers to get crushed, entertainment specialists said.

Bressi-Cilona recalled a performance disruption form from a couple of carriers which had no COVID exclusion and covered anything after a two-performance deductible.

“Evidently, they had more than two performances being lost,” Bressi-Cilona said. “For example, if the show carried a $10 million limit under the performance

disruption coverage, the producers of that show were most likely paid dearly by the carrier.”

Post pandemic, those performance disruption forms are now gone, though lately some carriers have introduced some new variations of performance disruption and more of a business interruption type form.

“After the pandemic some carriers have removed coverage for civil commotion, civil authority, riot, war-like behavior and the extra expense paid and associated with these coverage enhancements, which pre-COVID were automatically included,” said Bressi-Cilona. “The current market is not so much about higher rate fluctuation and changes but about reduced or removal of certain coverage of what used to be provided.”

Venue owners, entertainers and promoters should act quickly to obtain non-appearance and event cancellation coverage, according to Jones. What each

party needs to be aware of is that all three groups are probably buying the same insurance on the same risk at the same time, but for their own interests.

“The artists are getting non-appearance coverage for themselves because if they are suddenly unable to perform due to medical or logistical reasons, they lose out on the revenue,” said Jones. “If you’re a venue owner and your show is cancelled due to the artist’s non-appearance, you lose, too. And if you’re a promoter, the same loss occurs. So under any of these circumstances, multiple people are hoping to be covered at the same time.”

Inflation Hides Backstage

If 2022 was the year that theaters and concert venues turned the lights back on, 2023 marks a return to pre-pandemic levels of demand for live entertainment. Every major touring entertainer capable of touring has toured or is going on tour, said Jones.

The return of touring acts and Broadway acts is occurring amidst an inflationary environment that cuts into the wallet of show-goers. Inflation and a faltering economy are among the top risks to profitability for live entertainment, HUB said.

Reduced discretionary spending and increased ticket prices will force entertainers to work harder to attract audiences. Simultaneously, entertainers must account for inflation in acquiring insurance.

“In the live entertainment space, your budget and admissions are underwriting figures that go into the calculation of your premiums,” said Jones. “It costs much more to put on a show than it did even three years ago, and because of that, all other expenses, including the charges for insurance, have risen.”

Entertainment specialists agree that for now, performers, promoters and venues are willing to pay the price for necessary coverage. After all, the show must go on.

Challenges, Opportunities for Brokers in the Music Events Space

By Allen Laman

As musicians prepare for a star-studded summer of live events, the demand for performances is huge. At the same time, entertainment carriers are adjusting their appetites and underwriting parameters.

Catastrophic losses at music festivals and concerts have led to more thorough and stringent underwriting reviews. Because of restricted underwriting and overall capacity, umbrella/ excess coverage has steadily increased the premium minimums they charge per million of coverage. In prior years, it would cost approximately $1,000 - $1,500 per million

but in this new landscape, it is not uncommon to see the first layers of excess in the $4,000$7,500 range depending on the risk.

“What we’re starting to see right now, is a lot of carriers that were playing in this space for live events and for festivals and touring bands themselves — a lot of those carriers have pulled back in the space,” said Keli Tomack, managing principal at EPIC Insurance Brokers & Consultants.

Recent History of Live Events and Markets

According to an Insurance Journal story published in May 2022, Piecing Together Coverage in Live Events,

conditions in the market “for mid-size and large events were extremely challenging before the pandemic began and with little to no event business for carriers to write and a slew of claims to pay, the market’s hardening” had accelerated.

In December 2022, Risk Strategies reported that the market’s reluctance to cover event liability, combined with outsized claims and skyrocketing defense costs, “has created a hard market with increasing premiums, stringent and rigid underwriting, and reduced capacity.”

Risk Strategies pointed to the risk of talent contracting COVID-19, adverse weather events, mass casualty events

and social inflation as market drivers. At the same time, however, live music events are rebounding from widespread cancellations that shut down the industry three years ago.

Concert management group Live Nation reported record earnings in both 2021 and 2022. Last year, the group hosted 44,000 events that drew in more than 121 million attendees. Attendance increased 24% from 2019 — even though many international markets had yet to reopen.

“That demand shows no signs of slowing,” Live Nation wrote in its 2022 annual report. “In 2023, we have an even broader pipeline of artists touring more locations and

playing more shows. And fans continue to prioritize live events over other discretionary activities and increase their on-site spend as they enhance their experience.”

Pollstar reports confirm that stadium and amphitheater attendance boomed last year, and ticket revenue at the top 200 clubs saw a 5% boost. Arenas didn’t fare as well, though, with grosses at the top 200 arenas down 1% from 2019.

“We’ve heard throughout the year of an uneven recovery, especially at the mid-size venue levels,” Pollstar noted in a 2022 year-end report. “With the perfect storm of inflation, labor shortages, supply chain, gas prices and a glut of tours, many venues — and artists — are still very much struggling to make ends meet.”

Where We Are Today

EPIC’s Tomack has worked in the entertainment marketplace for decades. The number of carriers has always been limited, and markets that want to handle certain things like equipment rental houses, film production and touring bands are “still somewhat intact,” she said.

“But in the live event space, those markets are rapidly tightening their underwriting requirements,” Tomack continued. “And in a lot of cases, we’re down to like just one or two markets that will handle any of those large

camping events.”

Still, the demand is there — and has even increased in the past year, according to Tomack. And she thinks “we’ll see a few more people throw their hat in the ring.” Historically, she said, any time premiums rise in the space another player enters.

“So far, we don’t really get totally declined too often on risks,” Tomack said, adding that today, coverage can still be placed in almost all cases thanks to non-admitted carriers that operate in the entertainment space.

Common Claims

The most common claims in EPIC’s book of live music

insurance are equipment related, such as lost and damaged equipment. Auto claims related to rental cars are common, too, and from a liability standpoint, the largest amount of claims stems from a concert staple — tossed objects.

“Any time something leaves the stage and is thrown into the crowd, one of two things can happen,” Tomack said. “One: It can hit someone and that’s a claim. Or two, everybody wants to get that particular item, and some scuffles ensue, and people get hurt.”

Or: Artists may toss themselves off the stage and prompt large claims.

Need-to-Know Coverages

Tomack said event cancellation and non-appearance coverage is important for artists, promoters and producers alike. She has seen “a very large uptick in this over the past couple years,” she said, pointing to travel delays, weather incidents and non-COVID-19 illnesses as exposures that might present problems.

“This non-appearance coverage is something that is just becoming so dominant in the space,” she said, adding that, “when these promoters are putting up large sums of money for artists, a lot of them are requiring this coverage now to protect the advances. Almost like a bond, if you will.”

Cancellation coverage can safeguard more than in-person events. It can cover virtual music events, too, in the event of transmission and broadcast failure, for instance.

Advice to Brokers

To succeed in this niche space, Tomack believes brokers must set up their practice in a way that makes them a true risk management partner with their clients.

“Brokers really have to do their homework to get these things covered,” Tomack said. “They have to do a deep dive into the risk management practice of these clients,” she said. They have to do a deep dive into the risk transfer that’s happening inside of the contracts.”

When pyrotechnics, aerial dancers and special effects are used at these events, ensuring those risks are transferred properly is key.

In the case of a drone show, for example, brokers need to make sure not only that coverage does not have a drone show exclusion — but also that the drone show provider has appropriate limits based on the level of their show and named the contracting party as additional insured.

Carriers prefer to see waivers of subrogation in their favor, too.

“There’s always some new idea of what we can do to make the show more unique and more spectacular than the show before it,” Tomack said. “And the key to all of it is … knowing the roles of each party inside of the event or the performance and knowing what your clients are getting themselves into.”

She continued: “And then just being a good partner in helping them get through the assessment of what potential exposure they’re bringing to themselves by making these decisions to put on these great shows.”

Spotlight: Restaurants

Frequency Declines But Lost Time Claims Costs Rise in Restaurant Workers’ Comp: Marsh

By Jahna Jacobson

Ashortage of workers in the restaurant industry is leading to more expensive and complex claims in workers’ compensation even as claim frequency declines, according to a recent report and webinar.

Marsh recently released its Restaurant Industry Practice 2022 Report and held a companion webinar, 2022 Restaurant Industry Loss Cost Trends. The report and webinar analyze survey responses from 47 participating restaurant companies and detailed workers’ compensation and general liability loss data from 21 participating restaurant companies representing 30 brands. The report was designed with cooperation from industry veterans to ensure front-line, hands-on usefulness to food service employers.

Overview

The average overall severity of a food service workers’ compensation claim in 2021 was $4,474, while the lost time average severity was $18,345.

“Closure rates have dropped for the entire pool in workers’ compensation by 10% (from 75% to 65%) going from 2020 to 2021,” said Adrienne Harrell, principal, Oliver Wyman Actuarial Consulting, property and casualty practice.

“This is driven partially by a drop in the number of medical-only claims, which leads a mix more heavily weighted toward indemnity, which is more complex and harder to close,” she said. “However,

closure rates for indemnity claims, specifically, have remained relatively stable over the last five years (40%-45%).”

Harrell said that a trend to watch in workers’ compensation is the rising costs associated with lost time claims.

“While the frequency of all claims has dropped significantly, lost time claims, which are more expensive, have a fairly stable frequency and a rising cost associated, which will change the mix of claims to be more expensive and complex going forward,” she said.

The frequency of litigated general liability claims has decreased by 27% per year over the past five years, according to the study. However, the average incurred severity for a litigated claim has risen from an average of $18,000 to $20,000 in 2017-2019 to between $30,000 and $32,000 in 2020 and 2021, Marsh said.

The study found that most restaurants, about 92.7%, report their workers’ compensation claims within seven days of a loss. For general liability claims, that number drops to 82.8% reporting within seven days.

Both casual and quick dining categories are included in the study’s statistics, and that information is broken out in the full report.

The study noted that the suspension of non-essential court proceedings during the COVID-19 pandemic may have led to an overall lag in what is being reported versus actual events. According to Marsh’s

report, these delays have caused a false decline in the restaurant industry’s litigated claim frequency and a shift in risk profile to higher-dollar claims. Court proceedings for claims that occurred in 2020 and 2021 may still be in progress, the report noted.

Teen Workers vs. Experienced Peers

The restaurant industry employs large numbers of younger workers with high employee turnover rates, leaving it more vulnerable to workers’ compensation claims, the report said.

The study found that inexperience leads to workplace injuries, noting that workers with less than two years of experience represent 55.2% of incurred losses and 62.8% of claim costs over the last five years.

Teenage workers tend to show additional risk for injury in the restaurant setting, Marsh said. The percentage of incurred losses stemming from teenage claimants increased from 4% in 2017 to 10% in 2021. Similarly, the percentage of reported claims stemming from teenage claimants has increased from 11% in 2017 to 20% in 2021.

Staffing shortages in the hospitality sector, and in restaurants, have meant more teen workers and inexperienced workers are in the workforce. The report noted that teenage hiring trends are one cause of the sharp distributional

increases in 2021.

The staffing shortages pushed some organizations to change their hiring requirements, said Cindy Smail, senior vice president, Marsh Advisory, food & beverage leader, workforce strategies. For example, a company may lower the hiring age from 18 to 16 to open a new pool of job candidates.

“It could also be that you just have a bigger per-

centage of those workers that are teenagers in general, without even changing their standards,

because you’re really trying to exhaust that pool for every worker you can get,” she added.

But there’s also a difference in how younger workers, aged 34 and

under, tend to sustain claimable injuries on the job, Marsh noted.

In 2021, 26% of younger workers’ injuries were caused by cuts, punctures and scrapes, compared to just 10% of older workers’ injuries. For older workers, 22% of injuries were caused by falls, slips and trips, compared to 15% of younger workers’ injuries, the report revealed.

Employers can use these statistics to plan how to

emphasize aspects of training and assignments based on age, Marsh recommended. It’s also a base for planning ergonomic measures that will protect workers not only by task but by their age group.

Employers should ensure that younger workers with less work experience get the onboarding and training they need to succeed safely, Marsh said. Mentorship, pairing a younger worker with an older worker with a good safety record, can also help them assimilate more quickly and with better results.

General Liability

While overall loss rates have decreased by 2% per year, a sharp divergence existed between the study’s “leading”

and “lagging” participant groups.

While claims are inevitable, employers can mitigate injuries before they happen and improve claims results by acting with speed and compassion for an injured employee.

Common general liability concerns include slip and fall claims and, increasingly, aggressive behavior and violence in the workplace or onsite.

Marsh recommends that for risk management for slips and falls, restaurants should include policies that work to prevent injuries such as mopping floors on a set schedule that takes advantage of low traffic. When it comes to handling aggressive coworkers or customers, providing management and employee training for de-escalation procedures is key.

Another important thing to consider when managing claims is how the employer

reacts post-claim, the study noted. “Avoidance of litigation is something that we all want to achieve,” said Brian J. Gannon, vice president, Marsh Advisory, claims consulting practice. “One of the best ways to do that is to keep injured workers involved in what’s going on.”

He said that employers who provide injured employees with meaningful and productive work within their capabilities while injured reinforces a sense of community for the injured worker. This engagement, coupled with a fast-moving claim, will see better results than a claim that drags on, making an employee hostile or resentful toward their employer.

To view the full webinar, 2022 Restaurant Industry Loss Cost Trends, visit https://www. marsh.com/us/industries/ retail-wholesale/insights/2023restaurant-industry-loss-costtrends-webinar.html.

‘While the frequency of all claims has dropped significantly, lost time claims, which are more expensive, have a fairly stable frequency and a rising cost associated, which will change the mix of claims to be more expensive and complex going forward.’

Idea Exchange: Data Analytics

Optimizing Agency Relationships A Data-Driven Approach to Premium Growth

By Amborish Baruah, Deepti Kalra and Rahul Nawab

The reported demise of the independent insurance agency as a sales and distribution channel has been greatly exaggerated. Over the course of a decade or more of predictions about the growth of the direct-to-consumer models, independent agents continue to thrive and generate the lion’s share of revenue in life and annuities (L/A) and the property/casualty (P/C) space. In fact, the independent agency still places 50% of L/A policies and 62% of all P/C insurance in the United States, according to data from the Insurance Information Institute and the Big “I” Market Share Report.

While the resilience of the agency model in insurance shouldn’t surprise industry stalwarts, the legacy relationship-driven agent/carrier business model does present operational challenges for carriers aspiring to modernize. Among these is developing a more predictive, data-led approach to relationship management.

Within their confines, carriers have started breaking down data silos and looking across the organization to identify emerging growth opportunities and mitigate underperforming assets — whether it’s integrating insights from aerial imaging technologies or using telematics and smart home technologies to improve underwriting accuracy, or extracting intelligence from customer service interactions, or tracking patterns of sales activity to optimize customer experience.

Nowadays, insurers are getting increasingly sophisticated about data-led transformation. Once the aperture is expanded to include the wildly unstructured world of local agency networks, things tend to get a little less precise.

Transforming the Legacy Carrier/Agency Relationship

In most cases, the agency relationship

management model is very static, i.e., once a sales partnership is formed and a specific agent, or team of agents, is assigned to the carrier, nothing really changes. Carriers may have a rough idea of who their top producers are, but they may also have dozens of contracts with agencies that generate very little value and remain vastly underutilized. That’s a costly strategic knowledge

gap that may exist. On average, a top performing independent agent can generate $500,000 or more per year in sales for a carrier. Compound that across a universe of roughly 2.2 million agents across the U.S., and it becomes clear why finding a better way to proactively manage agency relationships should be a priority.

The good news is that data-led transformation no longer needs to stop at the carrier walls.

With today’s cloud-enabled analytic capabilities, it is possible for carriers to truly gain a granular, 360-degree view of their agent relationships and those agents’ relationships with their customers, and use that intelligence to proactively manage the strategic relationships.

Creating a Data-Driven Golden Profile

For example, in a recent digital transformation project that EXL developed

with one of the nation’s largest life and annuity carriers, we were able to create a golden profile of all agency relationships, including individual agents and clients with regional demographic and economic information, that can be monitored, and enriched over time. By applying this consistent, rules-based framework, that tracks agent volumes, types of volume, client profiles and market penetration, we’ve been able to help the carrier identify segments of agents most likely to produce, which are falling short of their potential, and those at risk.

The newly developed advisor intelligence — enables the carrier to personalize and nurture key relationships, reignite those that have been underperforming, and optimize resourcing on the dormant accounts.

Most importantly, this capability allows clients to explore ROI maximizing opportunities through better targeting

and marketing personalization. In the long-term, the client expects the data driven capabilities to drive economic benefits and customer experience and increase the Net Promoter Score by 2% to 3%.

Insurance is one of those rare global and hyperlocal industries requiring a comprehensive, enterprise-wide view of key metrics and a highly personalized, customer-centric view of Main Street. Until recently, connecting those dots in a centralized manner to better anticipate how a single-customer event can ripple across the larger organization was just not feasible. Today, it is the key to unlocking new growth from old sources.

“Great publication to keep me informed & on top of my game.”

Stephen Peters - Producer at Hamrick Insurance Services & Satisfied Insurance Journal Subscriber

Amborish Baruah is a vice president at Prudential Financial, Deepti Kalra is vice president at EXL and Rahul Nawab is a senior vice president at EXL, a multinational data analytics and digital operations and solutions company.

Idea Exchange: Extended Reporting Provision

It’s Just a Name Change and Other ‘ERPS’

Claims made insurance policies have existed for a long time. For specialty line insurance policies, such as directors and officers liability, professional liability, cyber liability etc., they are the most common type of policy issued. They are complex, and depending on the definition of claim, as well as whether or not it’s a claims made and reported form, the policies can be extremely dangerous.

By Frederick Fisher

What follows is the first installment of a three-part series on the complexities involved in securing extended reporting coverage in conjunction with claims made policies. I have written numerous articles on claims made trigger problems, prior act problems, prior pending claim exclusions, etc. These only make the problems more dangerous for insureds and for insurance producers. However, and unfortunately, one important aspect of the policy that I’ve somewhat been lax to review in depth is the complexity of the extended reporting provision (ERP) and the ability to buy optional extended reporting period coverage, also known as runoff coverage and/or retirement coverage. Even my own article, The Dangers that May Lurk in All Claims Made Policies, raises extended reporting provisions, but not in depth.

Many policies guarantee one year, but may not offer more. It does not mean that an underwriter might not be willing to quote additional years should the insured be a clean risk. However, if there have been claims it is unlikely. Equally true is the fact that the trigger for an ERP is not limited to cancellation or non-renewal. A sale of assets, stock, or an acquisition can too, yet often that provision is found in another condition in the policy.

Contributing to the problem are the implications that selling or buying a company or its assets present, and dealing with the existing insurance portfolio is typically

overlooked, except as to the need to buy an extended reporting term. All too often, insurance brokers are the last to know about any such events and thus cannot advise as to what options may exist. There often is little time to implement approaches and solutions that follow.

Initial Concerns

Consider a “name change.” Producers are often faced with the common problem of “it’s just a name change.” As a wholesale producer, we would often get requests from producers for an endorsement because it is simply a “name change.” Sometimes it turned out to be true, and sometimes it didn’t.

The real question is, what name change are we talking about? Often, it was more than a name change. It’s one thing to be Joe Smith, and then become Joe Smith DBA “Make Money with Us.” That would be a name change. However, if it was Joe Smith, and now it’s “Make Money with Us Inc.” or “Make Money with Us LLC” — that’s not a name change. It’s a new entity

and therefore an organizational change. To simply get an endorsement with a name change would mean you cover an entity that does not exist, while not covering the entity that does.

The key to determining whether it is the name change, is whether the FEIN number has changed. For instance, a sole proprietor could use their Social Security number for all business issues, or could apply for and obtain an FEIN number to distinguish between personal and business pursuits.

However, if one incorporates, or forms an LLC, or any other organizational entity, they must get an FEIN number to do so. How to insure the entity becomes a quandary because it is a new one, even though it may conduct the same operations as before. Sometimes the policy will remain in the name of the proprietorship, and an endorsement will be added to pick up the new entity so all prior act dates of the proprietorship are protected, as well as go-forward coverage for the entity that could not have committed a wrongful

act before inception. That way, all prior acts are preserved as the policy continues in the name of the proprietorship, even though all business is now being conducted by the additional named insured entity.

Another danger, however, is equally ever present and involves “extended reporting periods.” Some policies provide neither a pre-set extended reporting time nor what the premium might be. Such provisions simply state that an underwriter will consider how many years may be granted together with the premium based on “underwriting and pricing guidelines in effect at that point in time.”

That could place an insured in a dangerous position should they have serious problems with the business, in which case an underwriter may not be inclined to give more than one year and not at the usual “clean account” pricing. I’ve seen situations where the pricing was 800% of the expiring premium!

This is something to be avoided,

as many policies come with language that automatically grants one year and others up to three years at a specific price. However, this is not always true. In addition, an underwriter may also have the option to quote more than what is stated in the policy, especially if the risk is low and has had a good “track record” as to profitability and claims history. The obvious point being the fact an underwriter can always endorse a policy beyond what the form provides as to any provision, let alone the extended reporting provision(s).

tion or nonrenewal of the policy.

Usually that provision is bilateral, yet some policies still may limit the cancellation or nonrenewal as to when the insurance company cancels or non-renews. Such a cancellation or nonrenewal often arises due to claims experience, or a significant change in the members of the board and/or corporate officers. These changes signal something is wrong with the company, either its direction, profitability or other difficulties that could significantly and adversely change the risk and hazards. Thus, the insurer could decide to non-renew the coverage. The insured might also consider going “public” or the reverse, considering going “private,” both of which could adversely change the probability of future claims taking place.

Common Events That Trigger the ERP

The most common trigger of an extended reporting provision, a.k.a. runoff provision or “tail” provision, is a cancella-

The foregoing follows a concept I’ve espoused for years. A claims made policy insures only one risk, which is the probability of a claim being first made during

continued on page 40

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Find a WSIA member at wsia.org/findamember

JUST BAD DECISIONS.

‘The key to determining whether it is the name change, is whether the FEIN number has changed.’

Idea Exchange: Extended Reporting Provision

continued from page 39

the policy term. The hazard(s) insured are a different matter and may or may not inherently affect the “risk.”

Another provision is commonly called a change of control provision. This is where either the insured acquires another entity, or the insured has either sold many of its assets (usually over 50%), or over 50% of the stock of the company is sold to a new buyer. This also triggers the ERP. Typically, the policy, as of the transaction, automatically goes into “runoff mode” until the normal anniversary/expiration date of the policy. For instance, if the policy has been in force only six months, and then there is a change in control by the sale of assets, of the sale of the stock of the company, the policy mutely goes into “runoff,” but the policy does not expire for another six months.

Thus, only those claims first made during the remaining six months of the policy term will be covered if the wrongful acts as alleged took place before the date of the “triggering” transaction. In addition, when the policy expires on its anniversary date, the insured may still purchase an ERP based on what the policy states is available. Often, this may be limited to one year, but many policies offer one-, three-, five-year options with pre-set pricing for each option, etc. Usually, the premium

itself is also so stated. Yet there is always that dangerous provision where the insurance company will determine what terms they will offer based on their underwriting guidelines as they exist at that point.

There are additional complexities, as well, because an ERP traditionally has been triggered by either cancellation or nonrenewal or a change in control of assets, operations, or sale of the stock of the company.

There are inherent dangers when a com-

pany is acquired, not only for the selling company but for the acquiring company, as well. It is not uncommon for the buyer to require the seller to purchase several years of ERP coverage. This is because the buyer, when either acquiring the assets or the stock transaction, wants no exposure to any known or unknown liabilities created by activities that occurred before the acquisition. The buyer will only want to be protected on a go-forward basis, whether the acquisition is asset-based or stock-based. There is an inherent problem with this traditional thinking, but more on that follows in subsequent articles on this subject.

Note: The above is the first article in a three-part series on problems that may arise with claims made policies involving extended reporting provision (ERP) coverages.

Fisher J.D., is currently the president of Fisher Consulting Group Inc. and was the founder of E.L.M. Insurance Brokers, a wholesale and managing general agency facility specializing in professional liability and specialty line risks. He is a member of the editorial board for Agents of America; a faculty member of the Claims College, and member of the Executive Council, School of Professional Lines sponsored by the Claims & Litigation Management Association and an instructor for the Academy of Insurance, an Insurance Journal company.

Idea Exchange: Is It Covered?

Logic & Language and Forms & Facts A Dozen Ways You Can Be TOO Good at Your Job

Most agent errors and omissions (E&O) policies cover claims that arise from “professional services.” This term is usually defined in the E&O policy to be something like “activities as an insurance agent or insurance broker” or “services rendered as a managing general insurance agent, general insurance agent, insurance agent, or insurance broker.”

doing so, an agency staff member may go beyond the call of duty or expertise and, as a result, beyond the coverage of the agency’s E&O policy.

By Bill Wilson

Some E&O policies may include coverage within the policy or by endorsement for related services such as teaching an insurance course, providing notary public services, insurance consulting and expert witnessing, agency advertising activities, claims adjusting services, etc.

Note the use of the word “insurance.” In general, E&O policies cover activities that are reasonable and customary for individuals selling or servicing insurance policies. For example, “professional services” likely does not include the provision of legal advice beyond a discussion of insurance contracts, which is one reason why agents must be very careful in responding to questions and issuing certificates of insurance that warrant compliance with noninsurance contracts.

Likewise, while mistakes in property valuation or law or ordinance coverage are errors common in insuring property, providing advice about compliance with building codes or laws unrelated to insurance is quite possibly an activity not covered by most E&O policies.

So, why is this an issue? One of the earmarks of a good customer service representative (CSR), or producer for that matter, is a desire and commitment to providing excellent service to prospects and customers. The problem is that, in

Over the years, I’ve received hundreds, maybe thousands, of inquiries from agency personnel about whether something they have been asked to do is appropriate. The same is true of David Thompson, CPCU, AAI, API, CRIS, insurance educator and consultant. Together, we came up with 12 real examples of situations that might possibly result in an uncovered E&O claim.

12 'TOO Good' Scenarios to Consider

• An agency customer visited the agency to discuss something with her CSR. The customer was renting a cabin for a week and, given that her CSR was “so smart and helpful,” she asked her to review the rental agreement, not from an insurance coverage perspective, but just from the standpoint of whether it was a good idea for her to sign it.

• An agency insured a condo association. One of the unit owners hired a general contractor to remodel the unit. The general contractor hired a plumber to repair a leaky pipe in the unit. The plumber sent an invoice to the condo association and they paid it. The general contractor then

sent an invoice to the condo association for his 15% “supervisory” fee. The condo association contacted their insurance agent and asked whether they should pay the invoice.

• An agency insured a customer’s golf cart on a recreational vehicle policy. The customer contacted their agency CSR to

inquire about whether it was legal for them to operate the golf cart on public roads and, if so, did the vehicle have to be licensed. The CSR contacted David Thompson and asked him to confirm the information she had researched so she could provide it to the customer.

• A homeowners association asked their agent if the community swimming pool must comply with the Americans With Disabilities Act.

• A commercial lines customer was buying a building and wanted his agent to tell him if building or fire codes required him to install a fire sprinkler system.

• A customer contacted her agency CSR

about cancelling her personal umbrella policy after someone told her that her wages could not be garnished if she was sued. She asked the CSR whether her wages could or could not be garnished, and the CSR contacted her state agent association for their answer.

• A business owner whose personal and commercial lines accounts were written by the agency owned a car that he wanted to lease to his business and insure on his business auto policy, a reasonable coverage question. However, the actual question to the agent was if he had a sample lease the customer could use.

• An agent contacted his insurance

trade association to obtain a sample hold harmless agreement he could give his general contractor customer for use with his subcontractors.

• A condo association contacted their agent and asked whether the cost to tear out dry wall in a unit to repair a deteriorating, but not yet leaking, water pipe should be paid by the association or the unit owner. There was no insurance claim of any kind.

Sometimes it’s difficult to say ‘no’ but it’s necessary.

• A personal lines customer’s 19-year-old son lived at home with his parents. He wanted to transfer the title to a vehicle owned by the parents and insured on their personal auto policy to the son and place it and the son on a low-limit auto policy. The father wasn’t asking if this was a good idea from an insurance standpoint … the question was whether the parents could be sued if the kid injured someone.

• A prospective customer was starting a business with a friend and asked the agent if they should operate as a partnership, LLC, or corporation.

• Finally, a personal lines customer called his agency CSR to ask, if he was sued, could the plaintiff access his IRA and the cash value from his life insurance policy. The agent contacted his agent trade association for the answer. Neither the agent nor his trade association should be answering a question like this.

Sometimes it’s difficult to say “no” but it’s necessary. Failing to do so may create an E&O exposure that didn’t exist until the question was asked and create problems for customers. In a 1933 lecture, Albert Einstein, paraphrased, said something to the effect that, “Everything should be made as simple as possible, but no simpler.” Similarly, from an E&O perspective, agency staff should be as helpful as possible, but not too helpful.

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.”

Email: at Bill@InsuranceCommentary.com.

Idea Exchange: The Competitive Advantage

How To Correctly Design Insurance Coverage AND Make More Sales

By Chris Burand

Years ago, Chris Boggs authored a phenomenal white paper titled “How to Read an Insurance Policy.” Everyone selling insurance, adjusting claims, and underwriting should read it, especially people new to the industry. It is a must read.

I share this recommendation because what follows is meant to complement his paper. Once you know how to read a policy, you need to know how to apply that knowledge. Begin with this thought process: Your job is to design the coverage your client needs rather than just sell them a policy you have on hand. Instead of quoting three companies’ BOPs and offering the price differences with a summary of the major coverage differences, or in

other words selling the policies you have in your system, design the coverages your client needs. Designing coverage is far more valuable to a client and more rewarding for those agents who want to make the world a little better by protecting their clients.

When designing coverage, begin with the most essential point. Who has an insurable interest? In other words, if property is stolen or burned, who has an insurable interest in that property? With only a few exceptions (see cyber), insurance cannot be issued to cover property when the insured lacks an insurable interest in that property.

For example, a person buys an engagement ring. Does that person have an insurable interest in the ring? Yes. It is their loss if the ring is lost. However, assuming the ring is fully paid for, do they still have an insurable interest after they give the ring to their fiancée? No. They do not incur a loss

if the ring is lost or stolen because they no longer have any ownership interest in the ring. The financial loss related to losing the ring is the fiancée’s because the betrothedto-be was the owner of the ring at the time of loss. (If the ring-giver still owes money to a finance company, then the issue is completely different, including whether they can legally transfer ownership of the ring if it is collateral to a loan).

That being said, what happens when a marriage contract is signed? Does the insurable interest in the ring change to joint ownership? That would depend upon the terms of the marriage contract and prenuptial agreement.

As a sidenote, claims related to the loss of engagement and wedding rings are some of the most interesting claims I have ever seen. It is amazing how many times people feel the need to leave rings in vehicles before entering bars or leave their

rings in bathrooms when re-entering bars, and somehow cannot find their ring upon returning.

The key point is if a person does not own something, they cannot insure it unless they otherwise have an insurable interest. A bank has an insurable interest in a home that is collateral for a mortgage. Rather than paying for their own insurance policy, the bank insists on being listed as an additional insured on the homeowner’s property and casualty policy. If the homeowner does not carry insurance, the bank will likely place “forced place” insurance upon the homeowner and add it to the mortgage.

Identify Parties with Insurable Interest

When designing an insurance policy, begin by identifying all of the parties who have an insurable interest in the property. In a family, how are the vehicles actually titled? If a 25-year-old son owns the title to a car, can his mother insure his vehicle? No, because she has no insurable interest.

Lots and lots of agents screw these situations all to heck and some agents are known to mispresent this point so they can continue to earn commissions even though the policy they have sold provides no known coverage.

What happens when a buddy has four rental properties and each has a different LLC as the owner? Each LLC has its own insurable interest. With some carriers it is possible to write these four rentals on one policy but it takes care and knowledge to do it correctly. Otherwise, four different policies are required. Over and over I have seen agents botch these situations up all while having no clue they did anything to harm their client’s coverage.

How about a business that has five separate companies that are at least partially vertically integrated? How about a situation where three shareholders own each of the businesses, but the percentage of ownership varies in each business? Or, when you have a situation where most of the shareholders are the same in each entity, but here and there an additional shareholder exists?

Lots and lots of amateur agents who only care about the sale are selling policies

off the shelf, and do not take the time to design the correct insurance coverage for their clients.

A professional will focus first on the alignment of the insurable interests and who should be considered as an insured. I know agents who have made a good living focusing on their competitors’ mistakes on this point alone. They identify the mismatch and then advise, “You know, you don’t likely have coverage on these policies because the named insured is wrong. What would you like to do?”

easily exceed the 10% throw-in coverage. Virtually no one takes the time to explain to insureds how much Ordinance coverage they need. In some areas of the country, 50% or more is required.

Designing coverages customer by customer will simultaneously teach an agent how to write coverage well. Taking orders from insureds regarding which coverages the insureds think they need is akin to a patient telling a doctor how to perform a surgery. Most insureds do not know what they need. I recently saw a claim where the insured was extremely well educated with decades of business experience. She told her new agent to match her existing coverage because she had “good insurance.” Based on my review it was clear she did not have good insurance coverage. She was severely lacking in key coverages but also lacked the insurance knowledge required to know what truly “good” coverage is.

Design Specifics

Writing coverage correctly, i.e., protecting your clients well, means an agent must always design coverage specific to the insured and their needs. This means asking questions and having conversations with your clients.

For those agents who might say that their clients will not give them the time to have these conversations, do you have the right insureds? Think about it. This means the insured does not have adequate coverage. When they have a loss, where is your documentation that they would not give you the time to discuss adequate coverage? I usually find that most agents who say they have such clients do not really have such clients. The situation is that they are too intimidated to request their clients’ time.

Homeowners insurance is one of the simpler, though not entirely simple, types of insurance. Failure to design correct coverage is a key reason it is estimated that at least 65% of insureds are materially under-insured. A basic example of the failure to design and failure to understand coverages involves Ordinance coverage. When building codes change, the increase in rebuilding costs can

Insurance is complex. What is being sold is a legal contract sold by someone who has probably never taken a law class. Your clients are usually not attorneys, so they do not understand the policy language, and many of your clients are not architects, engineers, or contractors so they don’t know the cost to rebuild. No reasonable expectation should exist on your part that they know which insurance coverages they need. It is a professional’s job to educate clients and design coverage specific to each client, and then convince them to purchase the coverages you believe they truly need. You want to design comprehensive coverage to show you are not like all the other agents. This extra effort is your competitive advantage.

Insurance is fun when a person can employ their creativity, too. Most young people look at insurance as the epitome of boring. It is if agents are selling straight off the shelf without any consideration of an individual’s needs. Designing insurance to suit individual clients allows for great and rewarding creativity, and by doing so, it is a win-win-win for all parties.

‘Designing coverage is far more valuable to a client and more rewarding for those agents who want to make the world a little better by protecting their clients.’

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: Diversity, Equity & Inclusion

Using Data to Create Sustainable DEI Change

How to build a strategy that won’t fall victim to burnout.

As someone who has worked in and has been a champion for diversity, equity and inclusion (DEI) for much of my career, I know on an instinctive level the incredible value that a diverse workplace brings. It creates a sense of psychological safety, inspires employees to be their authentic selves and enables companies to become magnets that attract and retain the best and brightest talent.

Data is irrefutable. It’s relevant. And when leaders use data to design a long-term DEI strategy, it has the greatest impact.

leads to fatigue and failure. In addition, without data, it is difficult to measure progress, or inform decisions about necessary pivots or adjustments.

By Dianne Greene

Good intentions and intuition, however, are not enough to create real change within any organization. The only way to do that successfully is through data.

The Value of DEI Data Change happens incrementally in the DEI space. It can take three to five years before real progress materializes. That’s why many well-intentioned companies see a level of DEI fatigue among their teams. It occurs when people inside the organization begin to grow skeptical and frustrated with a perceived lack of progress.

Without data, companies starting or in the depths of a DEI program, won’t know where to focus their efforts to drive maximum results. As a result, they may try to do too many things at once, which often

In contrast, companies that use data to measure their DEI efforts can see exactly where the organization is making progress and where it is lagging. Data helps leaders make deliberate, purposeful, and intentional decisions at every step of their journey. With data, they can identify wins, double-down on their successes, overcome DEI fatigue and move their strategies forward.

Data will also help gain management support and navigate pushback against DEI efforts. My response to any resistance has always been the same: Let’s look at the data and see what it shows. This lets me

replace subjective reasoning with factual, scientific information that I can use to articulate the bottom-line value DEI is creating.

Where to Begin with DEI Data

Some organizations may shy away from taking a data-driven approach because they may not know where to start, or which data points will bring the maximum benefit. Additionally, sometimes the data points you need don’t exist, which can add to the frustration.

How do you overcome these challenges? I recommend taking a three-pronged approach.

1. Start with what you have. Begin with as many people-related data points as you can find. No matter how many you have — whether it’s five or 500 — you’ll find areas of opportunity and risk within your existing data. Once you know the data points you have, you can create strategies to obtain additional data that will develop your DEI story further.

Ideally, your data should be internal and external, and qualitative and quantitative. Begin with voluntary, aggregated self-identification data, such as gender identity (male, female and nonbinary), ethnicity, sexual orientation, disability status and veteran status.

2. Look at the history. Review the past three to five years and identify trends. See where you’ve made improvements and where you’ve slid backward. This review will help you develop targeted DEI initiatives that have the greatest impact. For further granularity, match your diversity trends with your hiring practices. Discuss hiring practices with your human resources team so you know exactly what happens in your employees’ talent management and development journey.

3. Leverage different perspectives. You can then add other levels of qualitative data to the mix. For example, if you’re

just starting out with DEI, you can host employee focus groups to learn more about their perception of and potential engagement in DEI initiatives. If you already started your DEI journey, you can ask your Business Resource Groups (BRGs) to provide insight into what’s working with DEI and what needs refinement.

How to Benchmark DEI Data

Interpreting the data is just as important as collecting it. I recommend benchmarking your data against competitors, peer companies and vendors within the insurance industry and in the geographic regions where you conduct business.

You also should use external data as a benchmark. Both the U.S. Census and the U.S. Bureau of Labor Statistics offer objective community and industry-specific data sets. You can also find valid DEI data from business advisory groups and trusted sources such as McKinsey & Company, Gartner and the Harvard Business Review.

DEI teams must also commit to ongoing data tracking and assessment. Drive transparency by communicating your findings throughout your company regularly and use data to hold your teams accountable.

Best Practices for Working with DEI Data

If you’re already taking a data-driven approach, consider ways to expand and enrich the data you collect. For example,

at Verisk, we’ve identified DEI champions across the globe — Poland, India and the UK, to name a few — and asked them to help us bolster our strategy.

Corporate and industry groups can also add education and inspiration to your DEI efforts. The Insurance Industry Charitable Foundation, for example, plays a huge role in driving DEI initiatives forward in our industry through time, energy and charitable giving. IICF’s upcoming Inclusion in Insurance Global Conference is a key event that will help the insurance industry continue to take steps toward creating a more inclusive future.

Another excellent resource is CEO Action, a group of more than 2,400 CEOs who have pledged to advance DEI in their companies. The group’s website offers discussion guides, educational quizzes and a host of other resources to maintain your company’s DEI momentum.

See Where Data Can Take You

Many companies in the insurance industry may still be in the early stages of their DEI journey. I’m encouraged by the progress on gender diversity at the board, CEO and management levels. Other industries are at a more advanced level of maturity, and they’re starting to tackle next-level DEI topics such as supplier diversity, community investments, economic and education gaps.

Our industry will reach that next level, too. But there are no quick fixes. Taking a data-driven approach will help ensure that our DEI strategies receive the time, talent and funding they need to identify wins, celebrate successes and reap the many proven rewards that await diverse companies.

Greene is Global Head of Diversity and Inclusion for Verisk. She joined Verisk from ADP, where she developed a global five-year DEI strategy for the company and its 60,000 employees. She’s a renowned DEI thought leader and public speaker, and a member of the IICF IDEA Council. Email: dianne.greene@verisk.com.

Idea Exchange: Small Commercial

Small Commercial, Big Rewards Benefits of Diversifying an Independent Agency’s Book of Business

Weathering a hard insurance market isn’t for the faint of heart. As premiums increase and personal line capacity decreases, independent agents must seek creative solutions to expand their books of business.

Getting your agency to thrive during times of economic uncertainty is similar to investing in the markets. The best results will come to those who diversify their portfolios. For many independent agents, that means now is the time to dip their toe into small commercial lines.

By Steve Tombarelli

The appetite for writing small business remains strong among carriers. And while commercial premiums are rising (30% of small businesses reported rate increases in 2022, according to the J.D. Power U.S. Small Commercial Insurance Study), customer satisfaction in the space is soaring, too, nearly matching its pre-pandemic heights.

As a result, the small commercial market is an attractive growth segment for independent agents who deliver outstanding service and want to develop a well-balanced book of business.

Why Diversifying Creates Growth

Personal lines and commercial lines traditionally have different market cycles. This allows agencies in any geography to gain more stability by including both personal lines and commercial lines in their books of business. Small commercial lines should be especially attractive to insurers in Texas, California, Florida and other regions where personal lines have been hard hit by increasing climate-related property risks.

Profit-sharing on commercial lines tends to be more lucrative than with personal lines — agencies building small commercial books could see increased

revenue by year’s end. Carrying both lines also opens the door for fresh cross-selling opportunities. This may boost client retention, considering that it’s more difficult for a customer to move both their commercial and personal lines from an agency compared to moving just one or the other.

For these reasons, commercial lines offer independent agents the power to create significant growth. I’d estimate that agencies achieving a 50/50 split of commercial and property lines could grow by 15% or more depending on how much small commercial business they generate. Agencies that are more heavily weighted toward personal lines could grow by as much as 30% to 35% by adding small commercial accounts and cross-selling new personal line accounts.

4 Best Practices to Diversify Agents looking to enter the small commercial market should consider these four steps.

1. Form tight bonds with a carrier. It’s reckless for an agent to enter small commercial lines if they don’t have a carrier on board who has an appetite for that business. To avoid this pitfall, agents must understand their market fully and know which carriers are willing to write specific types of small commercial risks.

2. Put service first. Agencies that gain the most success in small commercial will be those that sell and service the business well. Develop a plan for how you’ll do so. Consider how to best deliver that service — virtual assistants, utilization of your

carriers’ service centers or a combination of both.

3. Market your new line. A well-constructed marketing plan will help introduce your small commercial lines to both existing and new clients. For best results, embrace a multichannel approach that includes your website and your social media channels. Another potential consideration: create video clips and/or video proposals that introduce your capabilities and explain why you’re the right agency — with the right carrier partners — for that class of business.

4. Tap into the right resources. Agents who have strong existing relationships with their carriers should rely on those carriers to help them learn more about commercial lines. Get their expertise on their policies, their inclusions and exclusions, and their overall risk appetite. Then, look for other ways to expand your knowledge of commercial lines. For example, SIAA’s Business Insurance Advantage Program — open to its members — offers virtual, instructor-led training on how to grow a small commercial book of business. SIAA also partners with carriers to provide education for agents on common commercial line products, such as business owner policies, workers’ compensation and commercial auto.

May 22, 2023

Federal Insurance Company

One America Square, 202 N Illinois St, Suite 2600 Indianapolis, IN 46282

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.

Should Agents Specialize?

Specializing in a specific small commercial niche — such as manufacturers, retailers or restaurants — may benefit some agencies. By focusing on one particular area, agents can become and show that they are expert in the unique risks of their niche.

Before developing a niche, agents must make sure there is ample market opportunity. For example, a specialization in small commercial hospitality lines may benefit agents located in a tourist hotspot but may not help agents located in a non-tourist area.

Don’t Become Complacent

When premiums rise, independent agents have two choices. They can get complacent or they can be proactive. Complacent agents will stick with what they know, raise premiums and fail to

actively discuss the reasons why, which will alienate clients and erode their books of business. Active agents will look for new opportunities. They’ll also explain premium increases thoroughly with their insureds as a way to enhance their client relationships.

Active agents will be best suited to weather the hard market. By adding the right small commercial lines to your book of business, you will position your agency well now and into the future.

Tombarelli is the senior vice president of Programs and Services with SIAA, where he oversees revenue-generating programs available to SIAA member agencies. He has 30 years of sales, sales management and leadership experience. Email: steve. tombarelli@siaa.com

May 22, 2023

Wisconsin Physicians Service Insurance Corporation 1717 W. Broadway Madison, WI 53713

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Health 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.

May 22, 2023

RGA Life and Annuity Insurance Company 16600 Swingley Ridge Road Chesterfield, MI 63017

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Life, Accident, and Health insurance and Variable Life or Variable Annuities 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.

‘The appetite for writing small business remains strong among carriers. And while commercial premiums are rising, customer satisfaction in the space is soaring, too, nearly matching its pre-pandemic heights.’

Closing Quote

New Trend: Cannabis Consumption Lounges

Cannabis Insurance Landscape

including smoking, vaping and ingesting edibles.

By Matt Engle

The cannabis industry continues to evolve, with 39 states and the District of Columbia having legalized cannabis on a medicinal level, and 21 states and D.C. allowing cannabis for recreational use. While the market has become increasingly saturated, this is not predicted to result in an industry slowdown. Additional states are expected to advance the U.S. market and pass some measure of cannabis reform by the end of 2023, according to Cannabis Business Times.

Looking into the near future, we know at least four states — Minnesota, Ohio, Oklahoma, and Pennsylvania — have a good chance of legalizing recreational cannabis this year.

As medicinal and recreational use of cannabis continues to become legalized throughout the U.S., more insurers are entering the market, making it easier for cannabis business owners to obtain coverage at an affordable rate.

Insurers that have served the cannabis industry for a long time have watched the market go from a limited line of insurance products for cannabis companies to a more competitive space — and this evolution will only continue. While this is good news for operators, agents need to keep a close eye on emerging industry trends so they can best advise their clients.

The Rise of Cannabis Consumption Lounges

A new trend to note is the development of cannabis consumption lounges. Also referred to as social consumption lounges, these up-and-coming retail spaces allow on-site cannabis use,

While some states may allow cannabis sales legally, there are a scarce number of public areas for people to go and legally use the products they’ve purchased.

Currently, cannabis consumption lounges are legal in California, Colorado, Illinois, Nevada, New Jersey and New York — some of these states still are giving out licenses to their recreational market or waiting for municipalities to approve consumption lounges.

Las Vegas is the most recent entity to approve regulations for consumption lounges. The city council chose to keep a 1,000-foot buffer between the lounges, but it included an option for businesses to receive a waiver allowing them to cluster near one another.

While cannabis consumption lounges continue to move through the legalization process, they must continue to follow the rules and regulations specific to their state and municipality. Although a great opportunity to compete in a high-demand market, cannabis operators should be aware that there are unique risks associated with these establishments.

What to Know

While a prime business opportunity for cannabis operators, agents need to help clients realize that consumption lounges come loaded with risks, including the potential for crime, drugged driving and health issues associated with cannabis smoke exposure. Just as dram shop laws protect businesses from civil liability

for serving or selling alcohol to minors or intoxicated people, the cannabis industry has “gram shop” laws that aim to provide the same protections for cannabis lounges. Gram shop laws also will prevent a cannabis consumption lounge from being liable if someone leaves and injures someone else after consuming cannabis.

Agents also should familiarize business owners with other liability risks that consumption lounges face. Exposure risks (such as product recalls), exclusions and limitations (health hazards or product withdrawal expenses), and loss control and mitigation are all examples of liability risks that cannabis businesses face. Assault and battery is another key coverage agents should recommend.

For example, if a patron is assaulted in the parking lot by unknown assailants, an injury claim can be brought against the consumption lounge.

As the industry continues to evolve, it’s crucial that agents keep up with emerging trends and legislation to best guide their cannabis business clients. Agents should start with talking through liability risks, assault and battery coverage, and the benefits of gram shop laws to best protect their clients.

With proper risk management solutions, agents can help business owners in the cannabis industry secure the right protection for whatever lies ahead.

Engle, a vice president and commercial lines producer at Insurance Office of America, is located in Las Vegas, Nevada.