Insurance Journal West 2024-03-18

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Hard Market Adaptation

Agents and brokers are “going the extra mile” to prioritize client communication, retention, technology, and team morale as the hard market lingers on.

According to a recent survey by Trusted Choice, the national consumer brand representing the members of the Independent Insurance Agents & Brokers of America (the Big I), independent agents are stepping up efforts in a few key areas to combat challenges presented by the marketplace. Overall, agencies are re-sharpening skills that may have fallen off in softer markets and using technology to give them an edge in everything from communications and marketing to management.

“To work through challenging market conditions, independent insurance agents are innovating and going the extra mile to best serve and provide value to their clients,” said Charles Symington, Big I president and CEO.

“In this difficult market, the agents who are setting themselves apart are those who are adapting and improving communication, customer retention, technology, and the morale of their teams,” Symington said. “And no one is better positioned than independent agents to do all of that and assist their clients through these market cycles successfully.”

The recently released report, Navigating the Hard Market: How Independent Agencies Are Reacting, listed a few areas agents are focusing on to navigate the current market.

Agents are prioritizing communication and investing in educating clients. 65% of agencies have increased their communication to policyholders, 85% of those through email and 77% by phone. 21% are increasing paid advertising spends, and 47% are putting more effort toward community involvement. 75% are offering more educational content to clients. While 27% of agencies put more resources into marketing, some 18% cut their marketing spend, saying they are using other ways to reach clients and prospects.

‘To work through challenging market conditions, independent insurance agents are innovating and going the extra mile to best serve and provide value to their clients.’

Attention has shifted from acquisition to retention. 39% have prioritized clients by the largest premium impact to the client, with smaller percentages of member agencies refocusing their teams by size of account (8%) and complexity of account (7%). The survey also found that agencies are working on renewals farther in advance.

Agents reported implementing more technology across the board: 32% of small agencies (sized 1-10 staff) and 45% of large agencies (25+ staff) have added technology recently. 18% of respondents said they added new technology systems or applications specifically to address the demand of this market. 13% have added tech to help with automation, 10% have added tech for agency management and 10% have dedicated resources to website upgrades.

Independent insurance agents have also increased internal communication and beefed up perks such as company-paid lunches and extra time off to help bolster morale. Where budgets allow, agencies are springing for raises or bonuses. More than half of the agencies responding have implemented new training initiatives to address the challenges of the market.

Chairman of the Board

Mark Wells | mwells@wellsmedia.com

Chief Executive Officer

Joshua Carlson | jcarlson@insurancejournal.com

ADMINISTRATION / CIRCULATION

Chief Financial Officer

Terry Freeburg | tfreeburg@wellsmedia.com

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: Jack Calabrese, Josh Giordano, Geoff Keast

Columnists: Chris Burand, Mary Newgard, Catherine Oak, Bill Schoeffler, Lee Shavel, 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

Digital Content Manager

Ashley Cochrane | acochrane@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

News & Markets

Skeptical AM Best Tags US D&O Segment With Negative Outlook

By Chad Hemenway

Rating agency AM Best has assigned a negative outlook to the U.S. directors and officers liability insurance segment as more market entrants increase capacity and drive down pricing in the face of some troubling potential risk exposures.

“The current pricing environment may prove unsustainable based on developing losses and how those losses affect company underwriting results prospectively,” said Elizabeth Blamble, senior financial analyst, in a statement.

AM Best said underwriting “is becoming more lax” with some insurers offering broad coverage with low retentions as claims losses from prior years are still developing or currently being settled mainly due to remnants of shutdowns or slowdowns in the court system from the pandemic. Meanwhile, new entrants without legacy claims keep growing their books.

Currently, “supply outweighs demand, especially for risks with favorable loss history,” AM Best said in a separate market segment report.

Premium declines — down nearly 20% from a 2021 peak — follow a period of increases to catch up with underpricing and an increasingly litigious environment

that led to unfavorable prior year reserve development. However, the courtroom slowdown and declines in demand for transactional risk and initial public offerings drove premiums down. D&O direct premiums written declined to an estimated $12 billion in 2023 from a peak of

nearly $15 billion in 2021.

AM Best appears concerned that “pricing may have swung too quickly.” Moderate premium increases in 2022 didn’t keep up with economic inflation and, taking into account the added impact of social inflation and litigation funding, D&O insurers may see adverse reserve development on prior accident years.

Add to this the development of environment, social and governance (ESG) risk, leading to larger exposures.

AM Best said ESG cases have more than doubled in the last decade and the trend is “not expected to decline.”

Furthermore, the emergence of artificial intelligence-related risk adds exposure by way of regulatory frameworks and misuse.

“So far this year, a few prominent public companies have noted in their fourth-quarter earnings calls that they have experienced adverse development on certain casualty lines of business,” said Christopher Graham, senior industry analyst.

Dear Reader:

Every business has a unique narrative, often intertwined with the personal experiences of its founders. Insurance Journal has had the privilege of encountering and appreciating countless captivating stories within the industry. Over time, we have observed the growth and transformation of the companies belonging to our readers and advertisers.

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Figures $80 Million

44,450

The approximate number of motor vehicle fatalities in the United States in 2023 — down from 2022 but still very high — according to a preliminary analysis released by the National Safety Council (NSC).

Fatalities were down 4% from 2022 but still up 13.6% when compared to 2019. Speeding, distracted driving and impaired driving are factors in the preventable crashes and death, according to the NSC.

The amount Southern California Edison agreed to pay the United States to cover costs and damages incurred by the U.S. Forest Service from the 2017 Thomas Wildfire in California’s Los Padres National Forecast, the Department of Justice said. The accord with the unit of Edison International is the federal government’s largest wildfire settlement in the Central District of California, which includes Los Angeles, and resolves a lawsuit that began in 2020. Southern California Edison did not admit wrongdoing.

7

The number of years in federal prison Daniel M. Rosenbaum, owner and operator of Alexander & Rosenbaum Financial Group LLC, a suburban Chicago insurance agency, has been sentenced to for swindling more than $1 million from clients by collecting annuity premiums for policies that he never purchased, according to the U.S. Attorney’s Office, Northern District of Illinois.

6

The number of people who have been have been indicted in connection with the alleged filing of fraudulent insurance claims through their auto body repair business in Everett, Massachusetts. The alleged insurance fraud is said to have bilked insurance carriers out of more than $1 million. Authorities say the defendants allegedly submitted fraudulent insurance claims for customers that included descriptions of automobile collisions that never occurred, inflated damages, or damage that was inflicted by the shop and was not the result of a collision.

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Declarations

‘Foundational Change’ Required

“Boeing must commit to real and profound improvements. … Making foundational change will require a sustained effort from Boeing’s leadership, and we are going to hold them accountable every step of the way, with mutually understood milestones and expectations.”

— Administrator Mike Whitaker said in a statement after the U.S. Federal Aviation Administration determined Boeing must develop a comprehensive action plan to address “systemic quality-control issues” within 90 days. A door panel detached on a Boeing 737 MAX 9 during a Jan. 5 Alaska Airlines flight, forcing pilots to make an emergency landing while passengers were exposed to a gaping hole 16,000 feet above the ground.

‘Corruption and Greed’

“In New York, you cannot get away with corruption and greed, no matter how powerful or influential you think you may be. … Everyone, even the NRA and Wayne LaPierre, must play by the same rules.”

— Said New York Attorney General Letitia James in a post on X after a jury found longtime head of the National Rifle Association, Wayne LaPierre, misspent millions of dollars of the organization’s money, using the funds to pay for an extravagant lifestyle that included exotic getaways and trips on private planes and superyachts. LaPierre must repay almost $4.4 million to the gun rights group.

‘No Justice Without Accountability’

“There is no justice without accountability.

… From the unprecedented poor air quality that we experienced last summer to the basement floodings that our residents on the West Side experienced, the consequences of this crisis are severe, as are the costs of surviving them. That is why we are seeking to hold these Defendants accountable.”

— Chicago Mayor Brandon Johnson said in a statement regarding Chicago’s suit against six oil and gas corporations and their largest trade association for deceiving Chicago consumers about the climate change dangers associated with their products. Among other things, the city’s complaint seeks compensatory and loss-of-use damages, penalties and fines for statutory violations, disgorgement of profits, and to keep the defendants from engaging in the deceptive and unfair acts and practices alleged in the lawsuit.

Insanitary Conditions

“Companies distributing and selling food, drugs, medical devices, and cosmetics must ensure that these products are being held in safe and sanitary conditions.”

— Said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the U.S. Justice Department’s Civil Division after Family Dollar agreed to pay $41.7 million for holding food, drugs, medical devices and cosmetics under insanitary conditions at company’s West Memphis, Arkansas, distribution center. The company, a subsidiary of Dollar Tree Inc., entered into a plea agreement that constitutes the largest-ever monetary criminal penalty in a food safety case, federal authorities said.

Florida Condo Woes

“The average cost of homeowners insurance across Florida increased by about 40% in 2023 alone, according to reports, and homeowners association (HOA) fees are multiplying for many condo buildings In addition to slowing demand, the rising cost of insurance and fees are pushing prices down.”

States a report by Redfin, a U.S. real estate and tracking service, showing that condominium sales and prices in Miami, Jacksonville and Tampa, as well as other parts of Florida have dropped over the past year, largely due to the cost of property insurance and association fees.

Air Pollution Settlement

“The ozone levels are rising, and you know, I think this is that moment where we have to hold up the mirror to industry and say, ‘If you don’t like what you see, it’s a reflection of your own effort.’”

— New Mexico Environment Secretary James Kenney said after Apache Corporation reached a settlement with New Mexico and the federal government to address air pollution in the largest oil and gas producing region in the United States. Under the agreement, the company must pay $4 million in penalties and spend more than $5 million on preventative measures to reduce emissions at its wells in the Permian Basin.

People

National

AXA XL named Michelle Chia as chief underwriting officer for cyber in the Americas.

Based in New York, Chia joins AXA XL from Zurich North America, where she most recently served as head of professional liability and cyber. She has over 15 years of experience managing professional liability and cyber insurance portfolios.

Chubb, headquartered in Whitehouse Station, N.J., promoted Seth Gillston to executive vice president, head of North America industry practices. Gillston has 28 years of industry experience. He joined Chubb in 2000 and has held several leadership roles.

Based in New York, N.Y., he will continue to serve as private equity industry practice leader.

Alera Group, headquartered in Deerfield, Illinois, appointed Sarah Sheckells as chief human resources officer.

Sheckells brings over 27 years of financial services and insurance experience to her new role, most recently serving as senior director, human resources for Alera Group’s Northeast and Mid-Atlantic regions.

DUAL North America, headquartered in San Diego, named Mike Sherry head of its transactional risk division.

Sherry previously served as senior vice president in Alliant’s mergers and acquisitions group as a senior transactional risk broker. He will split his time between San Francisco and New York.

JM Wilson, headquartered in Portage, Michigan, made

several new hires and promotions in offices across the country.

Katie Priester

Bird joined the company as a property/ casualty underwriter. She is responsible for various new and renewal commercial risks in Michigan, Minnesota and Texas.

and Texas.

Tim Guinn joined as a transportation underwriter. Guinn joins JM Wilson with nine years of experience in the insurance industry, focusing on fleet and non-fleet transportation for seven years.

Samantha Mitchell joins as an accounting and finance specialist. Mitchell’s responsibilities include a variety of accounting duties, including invoice processing, collections, cash management, month-end closing and customer support for all JM Wilson offices. She joins JM Wilson with over five years in the insurance industry working for an agency.

assistant fleet transportation underwriter. Before joining JM Wilson, he was a carrier sales representative.

Zeb

Cornwell joins as an assistant fleet transportation underwriter.

Matthew Peterson was promoted to transportation underwriter. His responsibilities include underwriting new and renewal commercial transportation risks and nurturing relationships with carrier underwriters and independent insurance agents in Indiana and Kentucky.

Adam Phelps joins as a sales and agency relations specialist. Phelps is the primary resource and liaison for independent insurance agents in Georgia and South Carolina. He joins JM Wilson with 23 years in the insurance industry.

The Liberty Company Insurance Brokers named Rick Donatini and Tim Collins to vice president positions, and Jules Gootrad as a business development specialist.

Donatini joined the firm as vice president, employee benefits. Donatini has more than 30 years of industry experience.

Collins joined the firm as vice president, employee benefits producer. He has 15 years of experience in benefits and insurance.

Gootrad joined the firm as a business development specialist, benefits. Gootrad has over two decades of experience in business development and client relationship management within the HR and benefits industry.

Devan Dodd was promoted to senior property/ casualty underwriter. He is responsible for underwriting a wide variety of new and renewal commercial risks and strengthening relationships with carrier underwriters and independent insurance agents in Michigan

Laura Manner joins as the Ohio branch manager. Manner has over 18 years of experience in the insurance industry, writing multiline commercial business, focusing on technical underwriting and sales strategy.

Laura Cole was promoted to fleet transportation underwriter. Cole joined JM Wilson in 2020 as an assistant fleet transportation underwriter.

Brendan Hagan joins as an

Donatini will work out of Liberty’s Irvine, California, office. Gootrad is working out of the Ontario, California, location, and Collins is located in Centennial, Colorado.

East Arthur Hall Insurance in West Chester, Pennsylvania, named Mike Schaninger its small business

continued on page 22

Katie Bird

Tim Guinn

Matthew Peterson

Devan Dodd

Samantha Mitchell

Adam Phelps

Laura Manner

Laura Cole

Brendan Hagan

Zeb Cornwell

Mike Schaninger

People

continued from page 21

unit (SBU) team lead and account manager. Schaninger previously served as an adjunct professor at Widener University, as medtech sales manager at Inogen, and select commercial producer at USI.

based Burns & Wilcox with nearly 20 years of industry experience.

ShoreOne Insurance Co., headquartered in Boston, appointed Brendan Voss chief claims officer.

the Midwest, overseeing technology, errors and omissions, cyber, management liability, miscellaneous professional liability, allied healthcare, architects and engineers, casualty, terrorism and kidnap and ransom.

Dennis Gulling was promoted to senior claims adjuster. In addition, Troy Bardell joined RMIC as a claims representative.

Starkweather & Shepley Insurance Brokerage Inc., headquartered in Providence, Rhode Island, named Andrew Fotopulos chairman and Peter Plumb chief executive officer. The two will assume their roles in June upon the retirement of Larry Keefe, current chairman and chief executive officer.

Fotopulos and Plumb each have 15 years of experience working with Starkweather & Shepley. Fotopulos currently serves as executive vice president and trustee on the board of directors for Starkweather & Shepley Insurance Brokerage Inc. and as president of Starkweather & Shepley Insurance Corp. of Massachusetts. Plumb currently serves as chief operating officer and executive vice president.

Burns & Wilcox named  Peter Kestenbaum managing director of its new Boston office.

Kestenbaum joins Farmington Hills, Michigan-

Voss has over 25 years of experience in claims process management, strategy development, and resource optimization. Before joining ShoreOne, Voss served as the chief claims officer at Narragansett Bay Insurance Co. and vice president of claims at Homesite Insurance.

Centri Business Consulting, headquartered in Philadelphia, hired John Swanick as senior director and Joe Hayes as managing director to lead its insurance practice.

Swanick and Hayes bring over 70 years of combined insurance and financial services experience. Both join Centri from Grant Thornton.

Ryan Specialty, headquartered in Chicago, promoted Lana Jankovic to chief audit and Sarbanes-Oxley (SOX) officer.

Jankovic has over 25 years of insurance industry experience in audit, SOX compliance, information technology, risk management and process improvement and has been with Ryan Specialty for nearly three years.

Grange Insurance Company, headquartered in Columbus, Ohio, named Kyle Welch vice president of commercial lines underwriting for the East region covering Georgia, Indiana, Kentucky, Ohio, Pennsylvania, Tennessee and Virginia.

Welch has 17 years of experience in the P/C insurance industry and eight years with Grange.

Connor McCarthy has joined Alliant Insurance Services, headquartered in Irvine, California, as vice president within the Alliant Americas division. He is based in Chicago.

South Central

Hotchkiss Insurance, an independent insurance agency in Texas, promoted Gary D. Lindsey to vice president of sales.

Lindsey, a partner at Hotchkiss, first joined the firm as a commercial insurance specialist. He holds the Certified Insurance Counselor (CIC) and Certified Risk Manager (CRM) designations.

Marsh, a business of Marsh

Midwest Burns & Wilcox hired Andy Wood as vice president and practice group leader, professional liability. He is based in Chicago.

Most recently, Wood, whose career spans nearly three decades, led Hiscox across

Before joining Alliant, McCarthy worked in risk advisory services, U.S. real estate practice group at Gallagher and risk advisory services, real estate and hospitality practice group at Risk Consulting Partners LLC.

Rockford Mutual Insurance Company, headquartered in Rockford, Illinois, has promoted several team members.

Jerald Carpenter was promoted to casualty specialist; Paige Summins was promoted to claims manager; Michelle Christiansen was promoted to manager of marketing; and

McLennan headquartered in New York, added Susan Gonzales as its Houston energy hub and office leader.

In this dual role, Gonzales will lead a team of more than 70 specialists in Houston who focus exclusively on helping Marsh energy clients identify their risk exposures and achieve financial stability.

Andrew Fotopulos

Peter Plumb

Peter Kestenbaum

John Swanick

Joe Hayes

Andy Wood

Connor McCarthy

Kyle Welch

Susan Gonzales

Gonzales joins Marsh from AIG, where she most recently served as U.S. head of energy casualty.

Alliant Insurance Services named Gary Hysell vice president within its employee benefits group.

Based in Austin, Texas, Hysell joins Alliant with over 25 years of industry experience.

Before joining Alliant, Hysell was area vice president of client services at Arthur J. Gallagher and a benefit plan administrator at the City of San Antonio.

A group of five experienced individuals have joined the new Bridge Specialty Insurance Brokerage (BSIB) –Dallas office.

Janie Williams, broker, brings more than 30 years’ experience to BSIB Dallas. Her career spans both the retail and wholesale sides of the commercial insurance industry.

Deborah Garner joins BSIB Dallas as a broker. She began her insurance career with Liberty Insurance and Chubb in Detroit.

Robin Page joins BSIB as a vice president and broker. Page’s experience is in larger property and builders’ risk segments. He began his insurance career with Chubb.

Chris Contreras, broker, joins BSIB Dallas from its sister company, Texas Security General.

Emily Rhine joined Bridge Specialty Insurance Brokerage Dallas as an associate broker. She began her career in claims, and over a five-year period she transitioned to account management then took on the role of marketing broker.

Southeast Palomar Insurance Corp., based in Montgomery, Alabama, added Shon Messer in the company’s Birmingham office as vice president.

Messer, who spent 16 years at DSD Insurance, an Acrisure agency partner, and 11 years with Allstate before that, will help oversee commercial and personal lines for the Palomar agency.

Residential property insurer, Florida Peninsula Insurance Co., headquartered in Boca Raton, named attorney Nancy Staff director of corporate compliance.

Previously, Staff was director of ethics and compliance for Citizens Property Insurance Corp. Before that, she was ethics officer for the Florida Department of Revenue.

West

The California Workers’ Compensation Institute named Gideon L. Baum chief operating officer. Baum most recently served as vice president of policy at the California Hospital Association.

Tyler Banks joined Alliant Insurance Services as executive vice president, Alliant Private Client. Banks previously served as North America practice leader, president and CEO, personal lines at WTW.

Glenn Pomeroy, former CEO of the California Earthquake Authority (CEA), joined GeoVera as executive vice president of marketing and regulatory affairs.

Pomeroy has over 30 years of industry experience, including eight years as North Dakota insurance commissioner and

over 15 years as CEA CEO. Pomeroy also has served as president of the National Association of Insurance Commissioners.

GeoVera is headquartered in Fairfield, California.

Woodruff Sawyer named Alex Pazooki regional growth leader for Northern California.

Previously, Pazooki served as western zone leader, business development for Coalition and as technology sales executive, Northwest region at Travelers.

Woodruff Sawyer is headquartered in San Francisco.

Venbrook Group LLC, based in Woodland Hills, California, named Brooke Norton Lais chief marketing officer.

Lais has more than 20 years of marketing and CMO experience, including roles at Green Dot Corporation, Procter & Gamble and Welcome Tech.

Falvey Insurance Group named Jason Olsen as vice president, marine cargo. Olsen, based in Seattle, Washington, focuses on a California-based underwriting portfolio.

Olsen previously served as vice president at North Kingstown, Rhode Islandbased Falvey from 2014 to 2016.

He since served as senior vice president at Marsh, CEO at TreeHawk Farms and, most recently, ocean marine underwriter at Great American Insurance Group.

PCF Insurance Services (PCF), headquartered in Lehi,

Utah, appointed several new members to its leadership team.

Brooke DeWyze joined as chief development officer. Before joining PCF Insurance, DeWyze was chief operating officer of Moreton & Company.

Adam Reed joined as general counsel. Reed comes from Reed Law Offices plc, a law firm he founded and served as managing principal. Reed previously was executive vice president, chief legal officer and corporate secretary at Acrisure and spent two decades as in-house counsel at AIG as general counsel of the personal insurance business.

Leslie Greve joined PCF Insurance as vice president of marketing, leading the company’s marketing strategy. Greve most recently served as chief marketing officer at BGZ brands.

Jeff Hutchins was promoted to chief people officer following his tenure as senior vice president of human resources.

Rocky Steele was named senior vice president of operations after leading the company’s legal and compliance function for the past year.

Ryan Stradling was named senior vice president of finance and chief of staff, having served as vice president of finance and shared services since joining the company in 2021.

Brandon Gray has been promoted to senior vice president and treasurer from vice president of treasury, continuing to lead and expand the company’s investment strategies, financing activities, management of debt compliance, arrangement of funding, and driving treasury compliance.

Alex Pazooki

Business Moves

East

King Insurance Partners, Mehta Insurance Agency

Florida-based King Insurance Partners acquired Mehta Insurance Agency, located in Absecon, New Jersey.

Mehta Insurance Agency’s offerings include business, flood and life insurance.

Sunil Mehta said integrating with King will allow the agency to continue serving the insurance needs of its New Jersey clients with “even greater resources and dedication.”

Terms of the deal were not disclosed.

In addition to 15 offices in Florida, King Insurance has locations in Alabama, Connecticut, Florida, Georgia, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia.

Midwest

Union Bay Acquisition,

Skar Insurance Group

Union Bay Acquisition LLC, an aggregator of insurance agencies based in Lansdale, Pennsylvania, has acquired Skar Insurance Group of Rockford, Michigan.

Terms were not disclosed.

Skar Insurance specializes in trucking insurance with presence in Illinois, Indiana, Michigan, Mississippi, Ohio and Georgia.

Union Bay Acquisition LLC owns property/casualty insurance agent Union Bay Risk Advisors LLC and acquires small insurance

agencies in the Northeast and Midwest.

South Central

Marsh McLennan Agency, Querbes & Nelson, Louisiana Companies

Marsh McLennan Agency (MMA), a subsidiary of Marsh, signed agreements to acquire two Louisiana-based middle-market agencies, Querbes & Nelson (Q&N) and Louisiana Companies, doubling the firm’s presence in the state.

Based in Shreveport, Q&N was founded in 1914 and offers business insurance, employee benefits, and alternative risk financing consulting to a variety of businesses with specific expertise in energy services, commercial contractors, and transportation.

Based in Baton Rouge, Louisiana Companies was founded in 1890 and provides business and personal lines insurance to businesses and individuals with specific expertise serving the construction, manufacturing, distributor, healthcare and hospitality industries.

Upon closing, Louisiana Companies and Q&N’s employees, including George Nelson, managing director and co-owner of Louisiana Companies and Q&N, Mike Belanger, president, chief operating officer (COO) and co-owner of Q&N, and Ryan Allen, chief sales officer of Louisiana Companies, will join MMA and continue to operate out of their four offices across the state. Kevin Briggs, currently president and COO of Louisiana Companies, will become CEO of both agencies and Nelson will become a senior advisor.

Resilience, BreachQuest

Resilience, a risk management firm, has strategically expanded its capabilities through the acquisition of BreachQuest, an incident response technology solution. This move is set against the backdrop of an evolving digital workspace and cloudbased productivity applications, highlighting the critical challenge of securing these environments amidst escalating risks.

The integration aims to bolster incident response mechanisms against Business Email Compromise (BEC) attacks, a rapidly growing concern within the digital domain.

Dallas, Texas-based BreachQuest’s platform integrates into cloud office systems, providing a look back for incident forensics and helping speed incident response efforts, reduce containment time, and lower incident costs. The addition of BreachQuest’s capabilities will also support Resilience’s claims management team as they proactively address cyber incidents with greater efficacy.

Signers National,

Affiliated Insurance Agents

Signers National, a group of insurance companies dedicated to servicing key client segments across the United States, has acquired Affiliated Insurance Agents, based in Houston.

Affiliated Insurance Agents is an independent agency focused on comprehensive, competitive insurance coverage for religious and nonprofit organizations. Affiliated Insurance Agents is owned and operated by Tim Tanner, who will serve as a managing client executive after the deal. The Affiliated Insurance Agents staff will join the Lamb Insurance Services team.

Signers said it will be continuing its aggressive acquisition approach throughout 2024, in particular targeting agencies servicing niche markets such as the human service and religious spaces.

Southeast Higginbotham; Fountain, Parker, Harbarger & Associates

Higginbotham has acquired Alabamabased Fountain, Parker, Harbarger &

Associates, a 103-year-old agency.

FPH&A was founded in 1921 and has been with some carriers for almost as long. The agency, based in Huntsville in north Alabama, provides commercial and personal insurance throughout the Southeast.

Principal and administrative manager, Mark Harbarger, said that as Huntsville continues to grow, the agency leaders felt it needed a partner with national scope.

Higginbotham is headquartered in Fort Worth, Texas.

Signers National, Ballantyne Insurance Group

Signers National, the New York-based parent of several insurance companies, has acquired Ballantyne Insurance Group in Charlotte, North Carolina.

Ballantyne specializes in coverage for human service organizations. It is owned by William Bradley, who will stay on as managing client executive.

West Inszone Insurance Services, Truman Van Dyke Co., Frank Vitale Insurance Agency

Inszone Insurance Services has acquired the entertainment insurance agency Truman Van Dyke Co., based in Los Angeles.

Truman Van Dyke was founded by Truman Van Dyke Sr. and Truman Van Dyke Jr. when Van Dyke Sr. transitioned from a silent film actor to an insurance agent, catering to the needs of entertainers, producers, directors and various film tradespeople.

Inszone also acquired Frank Vitale Insurance Agency in Soquel, California.

Frank Vitale Insurance Agency’s primary focus has been on insuring the construction industry, offering specialized coverage such as workers’ compensation, general liability insurance, general contractors insurance, and equipment insurance.

Sacramento, California-based Inszone Insurance Services is a brokerage firm that provides property/casualty insurance and employee benefits solutions. The firm has 56 locations across Arizona, California, Colorado, Idaho, Illinois, Kansas, Michigan, Missouri, Nevada, New Mexico, Oregon,

Texas, Utah and Washington.

ALKEME, Ferrante Insurance Services

ALKEME has acquired Ferrante Insurance Services in Concord, California. Ferrante Insurance Services specializes in providing commercial risk services to contractors throughout California including general liability, workers’ compensation, business auto and bonds.

ALKEME is an insurance agency providing businesses and individuals with commercial and personal insurance, employee and executive benefits, retirement and wealth management services.

FTP of California, Hinterland Insurance

FTP of California LLC has rebranded to Hinterland Insurance and moved its headquarters to the Denver Tech Center in Colorado.

The rebrand is part of a larger strategy to reflect the firm’s growing business in the

United States. The company also continues to develop its operations in San Diego and Chicago.

The plan is to continue strengthening their product offerings under the Hinterland name with a focus on small market enterprise and middle market business, in addition to adding programs of need for some of the displacement in California and Midwestern markets.

The company’s physical expansion now covers the west, midwest and mountain time zones.

Founded in 2019, Hinterland Insurance is an independently owned and operated insurance managing general agency and program administrator specializing in underwriting solutions for tough-to-place commercial insurance risks.

The company offers insurance programs nationwide, including commercial property/casualty, and excess and surplus lines.

News & Markets

Spike in Recent Ratings Downgrades Shows Challenges for US Insurers

Negative ratings actions and financial challenges are forcing carriers to explore reinsurance options offering needed capital, according to a report released in February by Gallagher Re’s Strategic and Financial Analytics team.

Downgrades of U.S. property/casualty (re)insurers jumped significantly in the first eight months of 2023, compared to the calendar year 2022, continuing an upward trend from 2021, according to Gallagher Re’s analysis of ratings actions by AM Best.

Negative rating actions (including outlook changes) outnumbered positive actions, “as AM Best placed more scrutiny on performance metrics, due to a number of factors, including an increase in costly secondary perils; inflation; and volatility in investment market,” the report noted.

Between January 2022 and the end of August 2023, there were 282 rating actions, with 109 carriers experiencing 60 rating downgrades and 64 negative outlook changes (15 experienced both), Gallagher Re’s analysis found. There were 77 carriers with a focus on personal lines, and 32 with a focus on commercial lines.

A number of factors have contributed to the uptick in carrier rating downgrades. An increase in the frequency of secondary perils leading to costs outpacing the rate of inflation, as well as social and economic inflationary pressures leading to higher claims costs and reserve increased.

“Net losses were exacerbated by changes in reinsurance availability, while volatility in investment markets further contributed to the pressure on insurers’ balance sheets,” the report added.

Common themes among the companies with negative ratings included a drop in surplus of over 20%, worsening underwriting performance and combined ratios on average rising to over 117% (deteriorating further to 120% in 2023).

The P/C sector experienced heightened weather-loss volatility and the effects of inflation, exacerbating loss costs. “This was especially true within personal lines, where there were higher attritional losses due to the costs of parts, materials, and labor remaining high,” the report noted.

Analyzing the 60 companies that experienced a ratings downgrade during the 20-month period, Gallagher Re found that 16 (27%) experienced a drop in surplus of over 40%, and 36 (60%) experienced a drop in surplus of over 20% as of Q2 2023.

Data revealed that of the 38 companies with a personal lines focus, 11 (29%) experienced a drop in surplus of over 40%, and 26 (68%) a drop over 20% as of Q2 2023. Of the 15 companies with a commercial lines focus, 4 (27%) experienced a drop in surplus over 40% as of Q2 2023, the analysis showed.

Most carriers reported an operating ratio greater than 100%, because investment income was not sufficient to offset underwriting losses, the report found.

Gallagher Re found that between January 2022 and August 2023, operating performance results were challenged by “the confluence of increased underwriting losses and volatility in investment results, increasing the probability of negative rating actions.”

Of the carriers

that experienced a negative downgrade, 45% also reported adverse claims development greater than 10%, a common contributor to negative ratings actions.

Adverse development was found to be more severe in commercial lines, likely due to rising loss cost severity as a result of litigation and economic inflation and the uncertainty over loss reserve adequacy, especially long tail casualty lines, the report stated.

Gallagher Re also analyzed ratings actions undertaken in the last four months of 2023.

An additional 13 companies were downgraded in this period, while 26 companies had their outlook worsened, the data showed.

On a positive note, 39 companies experienced improvements in their outlook. The favorable outlook changes are the result of positive actions taken by company management, rather than an improvement in market conditions, Gallagher Re’s analysis found.

AM Best plans to maintain a “negative” outlook for personal lines going into 2024 due to a deterioration in personal auto, impacting both underwriting results and surplus, ongoing rate adequacy challenges, elevated reinsurance costs and potential reinsurance capacity constraints, and increased claim severity and property claim settlement times.

Commercial lines have been given a stable outlook by A.M. Best, despite negative outlooks on commercial auto, general liability, professional liability and title markets.

Commercial property, private mortgage insurers, surety, medical professional liability, and workers’ compensation have stable outlooks, while only the excess and surplus lines market has a positive outlook.

To avoid negative rating actions, insurance carriers need to ensure “pricing adequately covers loss-cost trends and underwriting is not sacrificed for opportunistic premium growth,” Gallagher Re’s report stated.

News & Markets

Report Looks at Cumulative Trauma and Litigated Claims in California Workers’ Comp

ACalifornia Workers’ Compensation Institute study shows nearly half of all litigated claims in the Los Angeles Basin are cumulative trauma claims that involve physical or mental injuries from repetitive stress, motion, or exposures, rather than from a specific event or accident.

The CWCI study, based on a sample of 1.4 million California work injury claims with 2010 to 2022 carrier notice dates, examines the growth of CT claims as a

share of litigated claims in the California workers’ comp system and explores the claim characteristics most associated with CT claims.

The study found that statewide, CT claims rose from 29.4% to 37.5% of all litigated claims over the 13-year study period. Regional results showed that over that same period, CT claims’ share of all litigated claims was fairly stable in Northern California and the Central Valley, but increased in 2022, while in

Southern California Edison to Pay $80M to US Over 2017 Wildfire

By Jonathan Stempel

Southern California Edison agreed to pay the United States $80 million to cover costs and damages incurred by the U.S. Forest Service from the 2017 Thomas wildfire in California’s Los Padres National Forecast, the Department of Justice said.

The accord with the unit of Edison International is the federal government’s largest wildfire settlement in the Central District of California, which includes Los Angeles, and resolves a lawsuit that began in 2020.

Southern California Edison did not admit wrongdoing in agreeing to settle.

Copyright 2024 Reuters. All rights reserved.

Southern California CT claims’ share of the litigated claims increased steadily throughout the period.

The sharpest increase was in the Inland Empire/Orange County, where CT claims jumped from 30.2% of the litigated claims in 2010 to 40.6% in 2022, slightly more than the increase in Los Angeles County, where CT claims went from 38.6% to 48.7% of the litigated claims, and San Diego where CT claims increased from 25.0% of the litigated claims to 33.4%.

An analysis showed that the differences between the regions were only partially explained by differences in other underlying claim characteristics. Other key findings include:

• Other than regional factors, differences in tenure had the strongest impact on differential CT rates.

• A review of the CT rates across nine major industry sectors showed that CT claims were most prevalent in the manufacturing sector, where they accounted for nearly half (48.8%) of the litigated claims, which was almost twice the proportion noted in the construction sector.

• Workers under the age of 30 had a somewhat lower CT rate (28.3%) than workers who are over 30, whose CT rates ranged from 35.1% to 38.8%, though more than a third of all CT claims in the study involved injured workers who were under 40.

• CT rates were considerably higher for workers at the lower end of the wage scale, with CT rates of 40.0% for workers making less than $300 per week and 42.1% for those earning $300 to $599 per week. In contrast, workers making more than $900 per week all had similar CT rates, with CT claims representing between 30.0% and 31.7% of their litigated claims.

CWCI’s analysis of CT claims,

Cumulative Trauma and Litigated Claims in the California Workers’ Compensation System, is available to the public and is available to CWCI members and research subscribers who log in to the Research section of the website.

News & Markets

Teens at Washington Trampoline Park Didn’t Receive Breaks, Worked Too Many Hours

Teens working at Sky Zone trampoline park in Vancouver, Washington, did not receive meal breaks, and worked more hours than the law allows

during school times, an investigation by the Washington State Department of Labor & Industries shows.

L&I said it cited Sky Zone more than

$22,000, but the firm did not appeal or pay the fine by a Feb. 15 deadline, so the agency will work to collect the funds. The L&I investigation covered Feb. 15 to May 15, 2023.

In Washington, teens working more than five consecutive hours earn a meal break. However, on more than 250 occasions, 43 teens at Sky Zone didn’t receive that break, according to investigators. Additionally, about the same number of teens, all 16 to 17 years old, also worked beyond hours allowed under law on more than 350 occasions. According to state law, teens that age can only work up to four hours on a school day, and no more than 20 hours during a school week.

L&I’s investigation began with complaints from local high schools. Schools, parents, employers, and teens must all sign a parent/school authorization form before beginning employment. The form lists the hours the teen will work and other information.

Sky Zone describes itself as a franchised indoor trampoline park with a variety of attractions. There are roughly 200 parks nationwide.

My New Markets

Small Business - Admitted

Market Detail: FTP Inc. offers professional liability, general liability, business owner’s policy, and cyber insurance for hundreds of professions. Industries covered include allied health, architect and engineering, consulting, financial services, landscape/ janitorial, legal services, marketing/PR, medical and dental offices, miscellaneous, mobile food service, pet care services, printers and publishers, real estate, restaurant and food service, retail, small contractors, and technology. Has pen; appointment required.

Available Limits: Not disclosed.

Carrier: Hiscox Insurance Co.; admitted; rated A or higher by A.M. Best.

States: Available in most states plus District of Columbia. Not available in Alaska, Kentucky and West Virginia.

Contact: Ryan Curry; rcurry@ftpins.com; 732-765-6793.

Specialty Programs

Market Detail: Berkshire Hathaway GUARD, is a niche business, and the company says that it appreciates that certain groups of customers have special insurance needs — often due to the nature of their work. Berkshire Hathaway GUARD partners with some of the best program administrators from around the country to create a customized insurance solution for each of its program clients. Whether it’s an industry-specific hazard requiring a distinct insurance endorsement or an extension in coverage limits, the firm prides itself on great flexibility (where it makes sense). Some of Berkshire Hathaway's GUARD program clients (past and present) include: accountants, attorneys, auto dealers, chambers of commerce, hotel franchises, municipalities, pharmacies, restaurant chains, retail associations, security guards, social services, tow trucks, and others. Appointment required.

Available Limits: Not disclosed.

Carrier: Admitted.

States: Available in 50 states plus District of Columbia.

Contact: Customer Service; csr@guard. com; 570-825-9900.

Tattoo Shops & Artists

Market Detail: REInsurePro’s

InkShopGuard offers comprehensive insurance coverage designed to protect tattoo shops, artists, and piercers from everyday risk and potential lawsuits. Clients in this industry face unique challenges. For that reason, InkShopGuard eliminates insurance gaps, ensuring its clients receive the protection they deserve. Coverage is available nationwide. Eligible classes: tattoo, cosmetic tattoo, piercing, saline removal. Shop coverage includes: Property coverage — building and/or wallsin property coverage for leased spaces; business income/business interruption coverage; business personal property coverage — including body jewelry and artwork. Liability coverage — general liability limits of $1 million per occurrence/$2 million annual aggregate; professional liability; communicable disease sublimit; assault and battery sublimit; abuse and molestation sublimit. Independent contractor artist coverage includes: Liability coverage — general liability limits of $1 million per occurrence/$2 million annual aggregate; professional liability; communicable disease sublimit; assault and battery sublimit; abuse and molestation sublimit.

Appointment required.

Available Limits: General liability limits of $1 million per occurrence/$2 million annual aggregate.

Carrier: Not disclosed.

States: Available in 50 states plus District of Columbia.

Contact: Nate Szana; nate@inkshopguard. com; 833-770-4067.

Small-to-Medium-Sized

Commercial Business

Market Detail: Atlas General Insurance Services underwrites commercial insurance for small to medium sized businesses throughout the United States. Atlas General Insurance is a wholesale distributor as well as a program administrator with exclusive authority to make underwriting decisions and customize coverage options for its clients. Available in all 50 states with over 600 class codes for hard-to-place risks. Has pen; appointment required.

Available Limits: Not disclosed.

Carrier: Various; non-admitted.

States: Available in 50 states plus District of Columbia.

Contact: Sarah Sloan; sarah.sloan@atlas. us.com; 858-724-5103.

Workers’ Compensation

Market Detail: Precision Underwriters Inc. offers a complete solution for hard to place small-to-medium-sized workers’ compensation accounts. White glove service. Precision Underwriters isn’t just about providing a market. The firm offers hands-free service that makes clients a part of the team. Want to write more business but don’t have the time or ability to handle more? We get the basic information and close the deal. Top commissions with minimal effort. Some of the workers’ comp markets available: roofing, towing, marine — USL&H, framing, carpentry, demolition, mold remediation, night clubs/restaurants, offices, artisan contractors.

Available Limits: Not disclosed.

Carrier: Not disclosed.

States: Available in 50 states plus District of Columbia.

Contact: Nicholas Mladucky; nic@precisionunderwriters.com; 239-414-4704.

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

Special Report: Restaurants and Bars

By Andrea Wells

The food services industry is anticipating record sales for 2024. But insurance specialists serving the restaurant and bar sector

say that forecast isn’t all good news. With higher sales come higher costs all around.

Restaurants are being squeezed from all sides — higher food, labor and insurance costs. Add in outside forces

such regulatory moves to cut “tip credits” in some jurisdictions and a federal push to alter joint employer status for franchise workers, restaurant owners face tough challenges this year along with anticipated

higher sales.

The National Restaurant Associations’ State of the Restaurant Industry report forecasts that restaurant sales will top $1 trillion for the first time ever in 2024 but also

found some 38% of restaurants reported generating no profit at all in 2023.

David DeLorenzo, CEO and owner of Ambassador Group Insurance and Bar and Restaurant Insurance, who has owned and operated 13 restaurants throughout his career, says restaurants are lucky to generate a modest 10% profit after all expenses have been paid.

The restaurant failure rate is difficult to track nationwide, but the National Restaurant Association estimates a 20% success rate for all restaurants, and 80% fail within five years of opening.

Paul P. DiBenedetto, senior vice president, Franchise/ Hospitality Segment leader, HUB International Limited, says restaurants of all sizes are struggling to make a profit today. For the smaller, independent restaurant operators, cost pressures are especially tight. “We’re definitely seeing the smaller operators more willing to go ‘bare’ on certain lines of coverage just because of the cost,” DiBenedetto said. “2024 is going to end up being the highest sales probably in restaurant history, but that will also be coupled with the highest costs in the restaurant industry,” he added.

More sales equals more insurance costs, as well, he added. As restaurant sales receipts rise, so do general liability and other lines that base rate on sales, he said.

Added restaurant sales will also add pressure to find enough staff to meet the growing demand. The restaurant industry workforce is projected to grow by 200,000 jobs, for total industry employment of 15.7 million by the end of 2024.

However, 45% of operators say they need to hire more employees to meet customer demand and almost all (98%) of operators say higher labor costs are a concern for their restaurant, according to the State of the Industry report released in February.

Restaurants are struggling because the rising costs to operate today — including food, supplies, labor and insurance — are squeezing profits more and more, according to DeLorenzo.

Restaurant owners and staff are overworked, tired, and are dealing with customers that are unappreciative especially when that $15 burger is now $17, DeLorenzo said. “You’re seeing people work longer hours, work harder, and they are more stressed out, so while sales might be up, profitability is going down.”

Insurance Market Challenges

Insurance companies serving the restaurant and bar sector come and go, says Tim Smith, senior vice president, National Hospitality Practice director at IMA Financial Group Inc.

that two large national carrier exited the restaurant business over the past 12 months. Other markets have retracted from certain lines of coverage but not withdrawn entirely from insuring restaurants and bars, he added.

Most carriers only want the same kind of restaurant risk, says DiBenedetto.

“Everybody wants fine dining, and liquor percentage under 30% of check averages,” he said. “Everybody wants comp right now because comp’s obviously very hot in the restaurant space, so that’s probably the easiest line.”

But liquor’s getting very hard, and full bars are tough. Any facility with high volume liquor sales ends up with regional carriers or in the surplus lines market, he added. “The nationals aren’t touching those at all,” he said.

“They’re just making it more and more strict and the appetite more and more strict because everybody’s attacking kind of the same kind of facility.”

awards for liquor liability have led to a difficult market in some states, he said.

DeLorenzo agrees liquor liability can be tough. “I’ve seen very reputable carriers that have been in business for a long time that are now charging double if not triple, for liquor liability, and they’re taking sub-limits on things like assault and battery, or just pulling coverage completely off,” he said. “They have to do it in order for them to stay focused and to stay in business.”

There is often a “snowball effect” that happens when claims go to trial even when the claim doesn’t result in a bodily injury claim, Smith added. “We had some kind of cocaine packet that was found in a hot dog. … It wasn’t ingested but it became a big claim because of the potential,” Smith said. “That’s why I say it ‘snowballs’ because insurance companies get more concerned about things going to trial, and so they settle more quickly.”

Carrier turnover is common in this business, but 2023 was probably the most difficult market, he said.

“Carriers want to be in the restaurant segment, then lose their shirts over time, and then they get out, so we’re in a constant search for new entrants,” Smith added, noting

“Liquor liability is now on a whole new level,” Smith said. While certain lines of liability coverage show that frequency trends are down, severity trends are up and that trend doesn’t seem to be slowing down. “I think that’s the biggest challenge in the business,” he said. “More liberal jury verdicts and a more litigious environment is lending itself to more catastrophic verdicts.” Billion-dollar jury

Claims that might have been pushed to trial 10 or 15 years ago would end with a “satisfactory outcome” for the insurer. Today that scenario is far less likely, Smith said. Going to trial could “come back to haunt them. It’s frustrating for the consumer, the buyer, the insurer, and ourselves, because companies settle frivolous claims more often today than ever to avoid what could be a bit of a lottery” scenario if the claim were to go to trial.

In addition to the uncertainty around high dollar verdicts, ongoing natural catastrophe claims in the property market are also driving the retraction from some carriers in the restaurant space, Smith said. continued on page 30

Special Report: Restaurants and Bars

continued from page 29

The increasing frequency and unpredictability of extreme weather events and the resulting losses are impacting insurance costs at an unprecedented level, particularly as it relates to commercial property.

According to a recent NEXT Insurance survey, which polled 1,000 restaurants nationwide, many restaurant owners may not be adequately prepared or protected for catastrophic weather.

Nearly half (48%) of restaurant owners surveyed reported experiencing weather-related damage to their small businesses during the winter months, from November 2023 to the first week of February 2024.

Asked if they felt adequately insured for weather-related damages such as snow damage, water damage, fallen trees, flooding and more, 42% of respondents said they felt very prepared for severe weather compared to 34% that did not feel prepared and 24% that felt somewhat prepared.

“This data underscores that many businesses may be underinsured, leaving them vulnerable to damages and business disruptions,” said Alon Shiran, vice president

product and design, NEXT.

Weather events not only cause damage to business property and inventory, but often require businesses to shut down for repairs leading to further loss of income, Shiran added. “Business interruption coverage is critical to cover loss of income due to closure related to covered events, allowing businesses to recuperate losses and even continue to cover salaries and operating expenses when their business is closed,” he said.

“Restaurants notoriously face tight operating conditions and are susceptible to a range of risk exposures like customer and workplace injuries, professional mistakes, damages to someone’s personal property, accidents related to intoxication, among others,” he said. “Recent market challenges including, skyrocketing food prices, labor shortages, supply chain issues on top of environmental factors like the increasing occurrence of extreme weather are changing coverage needs and costs.”

DeLorenzo noted that in his 20 years of specializing exclusively in insuring restaurants and bars there have been many carriers to come and go. While there’s always a new market

willing to pick up the business when a carrier exits, sometimes for a cheaper premium, he cautions his clients about moving to just for price. “These newer markets, I’ve had it happen, they’ll jump into a market for a year or two, do not understand the laws or the different types of exposures in those states, and they’ll get out after a year or two,” he said.

While moving might be beneficial to the restaurant owner now, it may not be beneficial in the long term. “What ends up happening is these carriers come in, they buy rate, and then they get out or they just cut their coverages in half, which doesn’t protect anybody.”

That’s a big reason why some specialists like IMA choose to work more in the program space to insure restaurants today, says Smith. “Part of the reason we develop programs is so we can have something we can control that is more proprietary,” he said. But even so it remains challenging to find a group of carriers that want to quote some restaurant and bar risks.

Smith says it’s better to work with one carrier when it comes to creating a program in the restaurant space. “Ideally, the more you can put with one carrier, the better, because you get multi-line support. So, if something goes bad on the liability side, then maybe property supports it, or work comp.”

But in today’s hard market that is not always an option. “Today, we find ourselves with a lot more carrier partners, depending on the particular line or region,” he said.

For example, for restaurants located in the Sunbelt states,

carriers won’t write property due to the difficult wind and hail exposures there. “But maybe they’re willing to do the liability and umbrella, so we now find ourselves bifurcating placements between multiple carriers.”

DiBenedetto agrees that restaurant insurance specialists need to be thinking “out of the box” when putting together insurance programs because of changing carrier appetites. Also, brokers and clients need to think long term. “I don’t want to place somebody with a carrier that we got a discount this year for a really good program who’s also going to change their appetite the following year,” he advises.

Today’s challenging insurance market calls for extra attention when it comes to educating clients. “We have to educate our clients a lot on the weather (trends), so they understand why the rates continue to go up,” Smith added.

The good news is that clients are now more willing to elevate deductibles for wind tail. “And that’s helping to insulate the insurance marketplace,” he said. “I think in 2024, we’re seeing some light at the end of the tunnel.”

Every time DeLorenzo gets a new risk, or reviews a current client’s evolving risk profile, he has to think about finding the proper market to insure all their exposures in black and white, with no gray areas.

“And what I mean by that is you may have a tap house, you don’t think of it as that big of a deal, but then all of a sudden, the tap house is open until one or 2:00 AM,” he said. “And now they’ve put a stage in the back because they want to have the local little country

guy play music, which is then considered ‘entertainment,’ or they put up a dartboard, and then all of a sudden it falls out of that direct carrier’s (appetite) with the cheaper rate.” So their premium now doubles because of these three additional items all because the facility wanted to bring in entertainment.

“Actuaries have predicted that entertainment establishments, and rightfully so, have more of a chance of a claim because if you’re open later and you have some form of entertainment” there’s additional risk.

piece that’s going to impact a lot of businesses because now you’re potentially making a vendor liable for vending,”

DiBenedetto explained.

For franchised restaurants this could be a huge hurdle, DiBenedetto said. “It makes the franchisor responsible for all the franchisees’ employees.”

DeLorenzo then must have the hard discussion with that facility that the cost to insure such added risks may not make sense. “This place is only doing $500,000 in receipts, maybe, and yet they’re going to get charged $40,000 for insurance?” he says. “It’s gotten really weird out there.”

Outside Factors

Two important issues for restaurant owners on the horizon are pending new joint employer regulations and a push to end employer “tip credits” in some jurisdictions. Both could impact growth and opportunity in the restaurant sector, says DiBenedetto

On October 26, 2023, the National Labor Relations Board (NLRB) issued the final rule redefining what constitutes joint employer status under the National Labor Relations Act (NLRA). The final rule upends existing employment policy and creates concerns for independent and franchise restaurant operators alike.

“That’s a very important

In late February, U.S. District Judge J. Campbell Barker in Tyler, Texas, issued a brief order pushing back the rule’s effective date from February 26 to March 11, delaying implementation of the NLRB rule as he weighs a bid by major business groups to strike it down. (A s of press time no further action had been taken.)

Another concern facing restaurants in some parts of the country is regulation that would end “tip credits” for restaurant employers. Currently, employers of covered employees in occupations that customarily earn tips may take a credit against the standard minimum wage rate if those workers earn enough in gratuities to bring them up to the hourly minimum wage.

With passage of legislation in California, Washington D.C., and most recently a city ordinance in Chicago, the tip credit for these employers will come to an end.

DiBenedetto says this change will hurt restaurant employers and their employees. Tip-earning employees often oppose these measures because they typically earn far more in tips than they would if compensated at the standard hourly minimum wage.

“For example, in Chicago, the average server, bartender,

hostess makes between $28 to $45 an hour,” he said. “And with this tip credit going away, you’re taking away the advantage from the employer to get this tax credit back to them.”

Estimates show that some 30% to 40% of restaurants could close as a result of the new rule in Chicago, he added.

Opposing the measure, the Illinois Restaurant Association (IRA) cautioned that, by eliminating the subminimum wage, the city is “fundamentally changing the business model of every restaurant in the city” and will result in job cuts and restaurant closures.

The IRA said estaurants likely will adopt automatic service charges to offset the financial impact, a practice adopted by many restaurants in Washington, D.C., after the tip credit was eliminated there. They also warn that restaurants may respond by eliminating servers altogether (moving to a self-serve, counter model) or relocating to nearby municipalities outside the city.

Efforts to eliminate the tip credit have increased in recent years, with varied success. Federal legislation that would have eliminated the $2.13 subminimum hourly wage for tipped workers failed in the 2021-22 session. However, more than a dozen states have legislation pending to eliminate tip credits all together.

These outside factors impacting restaurant profits on top of a tough insurance market are making it difficult for some restaurants to survive. These issues can affect employment practices liability, workers’ compensation, employee benefits and will continue to impact restaurant growth nationwide, according

to HUB’s DiBenedetto. Outlook

Despite the challenges facing restaurants today the outlook for growth and opportunity in the restaurant and bar space looks good, says DiBenedetto. “I think it’ll be pretty strong year because I think there’s still enough momentum in the economy to keep pushing growth,” he said.

He adds that restaurant operators are gritty and don’t easily give up. DiBenedetto knows firsthand the grit of a restaurant entrepreneur. He spent the first half of his career opening and consulting with more than 40 restaurants. Then he found insurance because he hated buying insurance and wanted to help others through the buying process.

“Restaurant owners are hardworking, they’re stubborn, and they’re willing to put the hours in.” Some restaurant owners he knows will spend 90 hours a week working hard to “not make a profit that month,” he said. “So, they can handle adversity well, but it doesn’t always mean they’re making money.” They will keep getting squeezed on profits in 2024, he predicts. “I think if we keep squeezing and squeezing them for every dollar in 2024, 2025 is going to be a disaster.”

At some point, a normal consumer can’t pay $30 for a burger anymore. “You’re starting to see tip fatigue nationally. You’re starting to see alcohol beverages go down because people might go eat, but now they might not have that bottle of wine. Some of that stuff is going to come to a head.”

“There’s a lot to figure out the restaurant space,” he added.

A Look at the Liquor Liability Landscape

By Allen Laman and William Rabb

Liquor liability availability and pricing have put small business owners in the alcohol-related sector in some states in a bind. While securing coverage is easy in some areas, premiums have skyrocketed and carriers have pulled out of others.

“Every state has different laws,” explained Randy Velin, a senior producer at RPS who writes liquor liability insurance policies in Wisconsin, Minnesota, the Dakotas and Montana. “The states that don’t have dram laws are easy to write in. The states that have tough laws are hard to write in.”

The Hartford reports that liquor liability insurance is a type of business insurance that protects operations that sell, serve and distribute alcohol. If sued, it covers legal costs, settlements or judgments, repair costs to fix property damage, as well as medical bills to treat injuries. Liquor liabili-

ty also covers claims of assault and battery, drunk driving and property damage.

Focusing on South Carolina

South Carolina’s challenging market has been well-documented.

In 2017, a state law change upped liquor liability coverage requirements to at least $1 million following a high-profile auto accident that killed two people and severely injured a police officer. Carl Sobocinski, owner or founder of at least seven popular restaurants in South Carolina, recently told a joint legislative committee that his premium had jumped from $62,000 a year to more than $115,000.

“With just an 86% increase, I feel like one of the lucky ones,” Sobocinski said.

According to a recent report from the South Carolina Department of Insurance, between 2017 and 2022, insurers lost about $1.77 for every $1 of premium earned on liquor liability policies. In the worst of those years, carriers lost as much as

$2.60 for every $1 of premium earned, even though earned premium more than doubled in that time.

“Combined ratios for the industry make it clear that this sub-line of insurance is being written at massive underwriting losses,” reads the DOI report, released in January. “The data seem to confirm the anecdotal assertions, made by both insurance companies and small businesses, of a very troubled and challenged marketplace.”

The state’s lawmakers are now considering a bill that would bring an insurer of last resort approach to liquor liability insurance for bars and restaurants. House Bill 5066, sponsored in part by Rep. Jason Elliott, R-Greenville, is titled the Fair Access to Insurance Requirements, or FAIR Act. It would create a liquor liability fund financed by part of the revenue from an excise tax on drinks. The fund would be able to contract with a private insurance company to administer the program.

Minnesota provides an assigned risk pool option through the Minnesota Joint Underwriting Association. Even though the limits may be low, “at least you can get” coverage,” Velin said. “In other states like South Dakota, or North Dakota, or Wisconsin, they don’t have an assigned risk pool. So, if you can’t get coverage, you’re out of business.”

Other States

In a recent CRC Insurance Services report, the wholesaler said Vermont bars, nightclubs and other establishments that serve alcohol also often struggle to find a company to provide coverage.

‘The states that don’t have dram laws are easy to write in. The states that have tough laws are hard to write in.’

CRC reported that placing liquor liability for establishments in Texas or the District of Columbia is also “extremely challenging,” especially for smaller operations. The report also noted that three markets had exited the liquor liability space in Kentucky in the previous two years.

In their own writeup on the hospitality market, RPS Insurance brokers Velin and James Ward shared their insights on the changing landscape. Velin wrote that he’s seeing carriers pull out of Texas, and that Minnesota has few standard markets available.

Forty-two states have dram shop liability laws; Delaware, Kansas, Louisiana, Maryland, Nebraska, Nevada, South Dakota and Virginia are the eight states that don’t have legislation enforcing dram shop liability in place. The laws in these states shift liability from bars to drivers, meaning liquor policies are cheaper and more available.

“You don’t get sued,” Velin explained. “And there’s no liability on the bar.”

He explained in the RPS report that in Minnesota, some standard carriers won’t write accounts with more than 75% in liquor receipts unless their general liability policies have assault and battery limits

equal to the liquor liability limits. The higher the percentage of alcohol receipts, the higher the rate, he said.

Advice to Agents

In the RPS writeup, Ward encouraged agents to speak to their clients about reviewing their websites, social media platforms and Yelp reviews to see if what is

being presented reflects their operation.

In its report, CRC said agents may help with the affordability of liquor liability coverage by encouraging establishments to review business hours and menu options, and establish rigorous risk management policies. Gathering current information and producing low-touch submissions that tell a story are also key.

Spotlight: Boats & Marinas

How to Sell Yacht Insurance Amidst a Rising Tide

The market for yacht insurance has hardened in recent years, due to the frequency and severity of catastrophic (CAT) claims.

By Josh Giordano

Widespread losses incurred along the West Coast of Florida and the Atlantic Coast from Hurricane Ian in 2022, for example, resulted in more than $112 billion in damages. Because of catastrophes such as Ian, many watercraft insurance carriers — both admitted and non admitted — have pulled out of the market in coastal areas.

For carriers that continue to provide coverage in hurricane-prone states, premium

costs have doubled or tripled.

The increased coverage costs and the difficulty in securing boat coverage has deterred some from purchasing them — but not all. Brokers today are challenged with securing coverage for their high-net-worth clients even in high-risk areas.

In this market segment, there are three tiers of coverage for high-end boats, based on cost and size of the boat:

• Top tier boats have values of $2 million or greater, are at least 65-feet long or larger and must have a full-time captain.

• Middle tier boats are valued between $350,000 and $2 million and are between 35-feet and 65-feet long and the owner-operator is typically the full-time captain.

• First tier boats cost up to $350,000 and are 15-feet to 35-feet long.

Incidentally, middle tier boats are the most difficult to secure coverage for, due to the number of high claims filed and the types of boats covered within this tier. Premiums can run comparatively higher than other tiers as a result.

What can brokers do to help their insureds?

Much of your focus when searching for yacht coverage for clients should begin with a discussion on the age of the craft.

Advise your clients that older boats — especially those 10 years and older — are more costly to cover and are harder to insure.

Here are six tips to help guide brokers as they advise boat-owning clients on how to mitigate risk and secure coverage.

1. Don’t jump ship.

Sometimes the purchase of a larger or more expensive boat can make obtaining coverage difficult.

If a client considers upgrading from a 25-foot craft to a 40-foot one, for example, it’s prudent for you to let them know that they will need a captain’s sign off and premium costs will increase. That is, if the carrier accepts the risk in the first place.

2. Be proactive about obtaining insurance.

Advise clients to start looking for insurance the day they begin shopping for a boat. Other than first-tier purchases, same day quote-and-bind processes are a thing of the past. Securing coverage for middle- and top-tier crafts can now take up to a week.

In addition, inform boat owners that many insurers require them to hire a captain for 50 hours of training if piloting a craft larger than 10 feet to 12 feet in size, or depending on the size of the boat, they may have to hire a full-time captain to place coverage.

3. Have a hurricane plan in place.

Most carriers require boat owners have a plan should a hurricane occur. Advise owners they may have to move their boats inland or to a facility that’s rated to withstand hurricanes. If domiciled in a hurricane-prone state, owners may have to store their boats in a CAT-4 or CAT-5 rated facility when not in use.

4. Don’t be an absentee owner.

Advise clients about the perils associated with absentee ownership. Clients who live in a state other than where the boat is stored are considered absentee owners. In the current market, this significantly limits the number of carriers that will actually extend coverage to out-of-state boat owners.

5. Stay mindful of wind coverages and exclusions.

In the past year or so, carriers have begun to exclude some wind coverage; an exclusion that applies to named hurricanes or tropical storms. In the case of routine storms, wind coverage does apply. Marine coverage is not needed for those without bank loans. However, financing boat purchases will require owners to carry wind coverage and proof of such protection before closing.

6. Maintenance matters more than ever.

Inform clients that regular maintenance is imperative for reducing risk and should be considered a part of their insurance strategy. Scheduled oil changes are vital but inboard motors require a closer inspection of parts such as impellers.

A worn impeller can cause overheating and a failure to follow scheduled maintenance requirements can result in a denied claim. Along similar lines, fire and safety equipment should be evaluated to ensure those systems are in proper working order.

Giordano is a yacht insurance specialist and advisor for HUB Private Client.

A North/South Approach

Renting or buying a boat and keeping it in a storage facility in states like Florida is pricey, adding up to a few thousand dollars in monthly rent, sometimes equaling the cost of a high-end boat itself.

For those boat owners who travel outside of Florida for the summer months, a North/South strategy can help mitigate risk and potentially save thousands of dollars in premium costs.

Here’s how it works: Owners bring the boat north of Florida with them during hurricane season, from June 1 through November 1, to avoid the need for windstorm coverage. These two factors must be adhered to for this strategy to work:

1. If the boat is in Florida when a hurricane occurs, there won’t be any coverage in place.

2. Boats can be used in Florida between November 1 and May 31.

The North/South strategy won’t work for owners who do not want to limit the use of their boats, preferring to keep them close to their homes for year-round access. When that’s the case, advise owners to adhere to the tips noted in the accompanying article.

Supreme Court Opinion on Maritime Law Solidifies Insurer’s Choice-of-Law Clause

By Chad Hemenway

Adispute between an insurer and a yacht owner that went all the way to the U.S. Supreme Court resulted in a decision — the first of its kind on marine insurance in about 70 years — to clarify federal maritime law and state insurance law.

The highest court recently released a unanimous opinion that choice-of-law provisions in maritime contracts, governed by federal maritime law, are enforceable over state law. Maritime contracts include marine insurance policies.

The case at hand, Great Lakes Insurance v.

Raiders Retreat Realty, goes back to 2019 when a yacht ran aground in Florida, sustaining hundreds of thousands of dollars in damage. Munich Re’s Great Lakes denied the claim and sued Raiders Retreat in Pennsylvania federal court after an investigation found

that fire extinguishers on the boat did not meet required standards. Raiders Retreat then countersued, alleging breach of contract under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. The insurer continued on page 36

Spotlight: Boats & Marinas

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won in U.S. District Court for the Eastern District of Pennsylvania — which found that federal choice-of-law provisions in the policy could be enforced.

Raiders appealed and, while the U.S. Court of Appeals recognized choice-of-law provisions in maritime contracts, it sent the case back to the district court to consider whether applying New York law would violate Pennsylvania’s policy regarding insurance. Insurers typical include choice-of-law provisions in contracts and declare that New York law applies when there is no federal precedent.

The American Institute of Marine Underwriters said the Supreme Court’s decision clarified the insurer’s choice-oflaw clause in a policy and said it cannot be disregarded due to another state’s laws. There are narrow exceptions but none applied to this case, the court said.

“The ruling adheres to the principles of uniformity and certainty in maritime law,” the AIMU said. Great Lakes was represented by AIMU member, The Goldman Maritime Law Group, and an amicus brief, cited several times in the opinion delivered by Justice Brett M. Kavanaugh, was written by member Wiggin and Dana on behalf of AIMU.

“As well stated in the court’s opinion, this decision will enable marine insurers to better assess risk,” said John Miklus, president of AIMU, in a statement. “By enforcing an insurance policy’s choiceof-law provisions in jurisdictions that are well developed, known, and regarded, the court recognizes that insurers can lower the price and expand the availability of marine insurance.”

Kavanaugh wrote that the presumption of enforceability of the provisions “facilitates maritime commerce by reducing uncertainty and lowering costs for maritime actors.”

“Maritime commerce traverses interstate and international boundaries, so when a maritime accident or dispute occurs, time-consuming and difficult questions can arise about while law governs,” he continued. “By identifying the governing law in advance, choice-of-law provisions allow parties to avoid later disputes — as

well as ensuing litigation and it attendant costs.”

Pamela A. Palmer of the Clark Hill law firm said the high court opinion will help to “eliminate any confusion in the industry that marine insurance contracts are somehow different than or held to a different standard than general maritime contracts.”

‘By enforcing an insurance policy’s choice-of-law provisions in jurisdictions that are well developed, known, and regarded, the court recognizes that insurers can lower the price and expand the availability of marine insurance.’

“What strikes me in the decision is the court’s acknowledgment that choice-of-law provisions are important to reduce uncertainty and to lower costs for maritime entities but, more importantly in the context of marine insurers, knowing what law applies enables marine insurers to better assess risk and to price policies,” Palmer said. “This is a huge consideration

for the marine insurance industry and had the court held otherwise the price and availability of insurance would be severely impacted — considerations that ironically would have harmed policyholders in the long run despite what would have felt like a short-term policyholder win in this case.”

Onlookers also waited to see if the Supreme Court would address a 1955 decision in Wilburn Boat Co. v. Fireman’s Insurance Co., another maritime insurance case in which the court ruled a court could apply state law if there is no established maritime law. However, Kavanaugh concluded Wilburn Boat did not need to be considered because it did not involve choice-of-law provisions.

“While it would have been an additional victory for proponents of maritime uniformity for the court to have overruled Wilburn Boat, Justice Kavanaugh did not take that additional step,” wrote Charlie McCammon, president of marine risk consulting, in a blog for WTW.

In a concurring opinion, Justice Clarence Thomas wrote separately about Wilburn Boat, saying it is “at odds with the fundamental precept of admiralty law.”

“Wilburn Boat’s rationale is deeply flawed,” he added.

Idea Exchange: Sales & Marketing

Why Millennials and Gen Z Just Aren’t Loving Insurance

How Organizations Can Win the Next Generations of Insurance Consumers.

The insurance industry has been on a transformative journey, adapting to the evolving needs of the market and advancing technologies that drive business, commerce and everyday life.

By Geoff Keast

However, according to the Department of Health and Human Services, 10,000 people turn 60-years-old every day. This segment of the population has likely met most of their insurance needs. But the preferences and expectations of younger consumers, specifically Millennials (born between 1981 and 1996) and Generation Z (born between 1997 and 2012) have been mere discussion points within parts of the industry until recent years.

This dynamic demographic duo possesses significant purchasing power and represents nearly 142 million Americans or about 42% of the current U.S. population, making them a prime target for insurance organizations looking to expand their business opportunities. To effectively engage with Millennials and Gen Z, organizations

need to implement innovative tactics and best practices that resonate with these tech-savvy, value motivated and socially conscious generations to impress upon them the innate value of, and need for, insurance products.

Simplicity and Transparency

One of the easiest solutions to engage younger consumers — and one of the biggest barriers to insurance adoption — is overcoming the complexity that has been inherent in the industry’s positioning.

Millennials and Gen Z remember their parents agonizing over insurance — and not just the costs. The terminology, the volume of paper and, in some cases, the shock of finding out something they thought was covered was not, have all left younger consumers with the impression that insurance is both complex and unapproachable. These are the point-andclick generations of consumers. They don’t want to have to invest hours of reading and back and forth with an agent simply to purchase an insurance product. They want the process to be simple, straightforward and frictionless.

Removing the complexity, simplifying

language and creating a clear and transparent guide to what is and is not covered is paramount. Doing so in a digital environment also demonstrates to these potential, emerging insurance consumers, that the industry understands them and is acting to meet them where they are, which is often online and on their mobile devices.

Embedded Insurance

Ride-sharing platforms like Uber and Lyft offer embedded insurance to protect drivers and passengers. Younger consumers appreciate this approach because it eliminates the need for separate insurance transactions and makes insurance more accessible and relevant. This goes beyond telematics to include digital recordings of each ride, thus enhancing rider safety.

By collaborating with various industries, such as travel, e-commerce or the gig economy, insurance organizations can create tailor-made insurance solutions that cater to Millennials’ and Gen Z’s specific needs and lifestyles. Put simply, they don’t want to have to think about insurance when purchasing goods or services, but they want to know it is there to protect

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Idea Exchange: Sales & Marketing

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them all the same at the point of purchase. This also reduces barriers to insurance services which have inhibited younger consumers’ early adoption of insurance products historically.

Personalized Insurance Products

Millennials and Gen Z appreciate tailored experiences and are willing to share data in exchange for an improved customer experience. This includes their experiences as insurance consumers to achieve relevant coverage and pricing.

Insurance organizations are better positioned today to utilize artificial intelligence and big data analytics to create customized insurance packages that meet individual needs. A prime example is the rise of on-demand or micro-insurance platforms like travel insurance for a weekend trip. Micro-insurance can also be employed to insure crops or livestock, along with a host of other specific needs. These tailor-made insurance policies help individuals and organizations prepare for specific risks while offering flexibility and customization options that are highly attractive to insureds of any age seeking short-term coverage for their unique circumstances.

Telematics

In the auto insurance market, telematics has been a game-changer. The data collected by these devices offers opportunities to better manage spending. This applies to personal lines as well as commercial where young entrepreneurs with commercial auto needs are looking for ways to control costs and improve worker safety within the companies they manage and own.

Younger generations, particularly Gen Z, are keen on technology that can save them money. Telematics-based auto insurance appeals to their desire for transparency and fairness in pricing.

Enhancing Customer Experience

Technology and tailored insurance products will only go so far in shaping the views and adoption of insurance by younger consumers. The customer experience must be prioritized if these consumers are to be won over to the inherent value of

insurance. Some of the ways the industry can move to improve the customer experience include:

Improving Transparency: Younger consumers value transparency. Insurance organizations should provide clear and concise information about coverage, pricing and policy terms while avoiding industry jargon that can be both confusing and a turn-off for savvy younger consumers. These consumers will not hesitate to shop around for both a better deal and a more inviting sales experience.

Educating Consumers: Creating informative and engaging content about insurance products, risks and financial planning is a winning strategy to engage young consumers. Building this content — in written form and video — helps bridge the gap in consumer education that has left many Millennials and Gen Z lacking sufficient knowledge about the broad use and benefit of insurance.

Streamlined Digital Platforms: Insurance organizations that have not yet invested in user-friendly, mobile-responsive websites and apps are significantly behind the times and likely out of the reach of Millennial and Gen Z consumers. These platforms not only allow for easy policy management, claims processing, and communication with customer support, but they are — by default — the assumed means of use among younger consumers. As has too often been said, there is an app for everything, and insurance should not be excluded from this thinking.

Employing Chatbots and Virtual Assistants: Implementing AI-powered chatbots and virtual assistants can provide quick answers to customer queries, streamline the buying process and enhance overall customer satisfaction.

Focus on Outcomes and Engagement

If Millennials and Gen Z truly are the future of insurance, organizations must shift their focus from selling products to delivering consumer outcomes. This means aligning insurance offerings with what matters most to these generations, such as financial security, convenience and social impact. For example, insurance

organizations can design products that combine savings and protection elements, addressing these consumers’ financial concerns while providing peace of mind.

Furthermore, insurance organizations can tie insurance policies to social and environmental causes, demonstrating commitment to corporate social responsibility, which resonates with the inherent sensibilities and priorities of these generations. A June 2023 study by Deloitte found more than half of Millennials (54%) and Gen Zs (55%) say they research a company’s environmental impact and policies before accepting a job from those companies. No doubt, as consumers, they follow a similar approach. And businesses have taken notice. According to the annual Gartner CEO and Senior Business Executive Survey conducted in late 2021 and released in May 2022, CEOs ranked environmental sustainability at number eight among their top 10 strategic business priorities — the first time this priority ranked in the top 10 in the history of the survey. The insurance industry would be well served to focus on and amplify its environmental sustainability efforts.

Engaging Millennials and Gen Z requires the insurance industry to embrace innovation, leverage technology, and prioritize customer-centricity. By offering personalized, tech-driven solutions, embedded insurance partnerships, and enhanced customer experiences, insurance organizations can tap into the vast potential of these generations. Moreover, aligning insurance products with consumer outcomes while also better educating insurance consumers will not only boost engagement, but also will foster long-term trust and loyalty among today’s younger consumers who will be tomorrow’s business, industry and nonprofit leaders.

As the insurance landscape evolves, adapting to the preferences and sensibilities of Millennials and Gen Z is not just a strategic choice, but one of necessity for the continued, successful evolution of the industry.

Keast is vice president of sales for INSTANDA, a global provider of no-code insurance platform technology. Email: Geoff.Keast@INSTANDA.com.

Idea Exchange: Ask the Insurance Recruiter

Compensation Trends Reshaping Client Service Salaries

Within Insurance Agencies

After numerous requests for insurance industry compensation information, our team at Capstone started to track and analyze compensation data derived from our recruiting activities. Our most recent report came out in February 2024 with a seven-year look back on compensation trends (2017-2023). Our goal is to illuminate trends and provide clarity for insurance agencies as they evaluate compensation structures, gauge employee engagement, and address the pivotal question of competitiveness.

While our data analysis spans all agency disciplines — sales, service and leadership — this article zeroes in on our findings for client service compensation. With roles such as CSR, account manager and account executive constituting over 60% of agency hires, it’s imperative that customer service salaries are the centerpiece of compensation review. Following are key insights and surprising findings from Capstone Search Group’s 2024 Insurance Agency Compensation Report.

Specialization impacts property/casualty service salaries. Below are the 2023 salary ranges by level of service. Agencies consistently paid at the top end of the spectrum to commercial lines account managers with vertical specialization and large account, risk management experience as well as personal lines

account managers who are skilled client engagement leaders with high net worth/ private clientele.

• CSR: $48,000-$71,000

• Account Manager: $65,200-$100,000

• Account Executive: $105,000-$300,000

P/C account managers’ salaries continue to rise. The average account manager salary surpassed $80,000 in 2023. Two major factors contributed to this increase. First, agencies used generous compensation packages to attract new hires. Second, agencies revised their internal salary brackets to retain experienced staff.

• 7-Year Change (2017-2023): +19.05%

• 5-Year Salary High (2019-2023): $100,000

• 5-Year Salary Low (2019-2023): $57,000

$71,000 is the new top-end P/C CSR salary. In 2023 insurance agencies faced significant challenges hiring semi-entry level roles like commercial lines CSRs, which led to considerable salary hikes.

• Between 2017-2021, the average CSR salary was just under $50,000.

• In 2022, the average increased $55,384.

• In 2023, the highest CSR salary reached $71,000.

If $70,000-plus salaries become the norm then agencies need to rethink CSR compensation bandwidths to be competitive.

A sizable disparity between benefits and P/C service compensation remains. A seven-year lookback on our compensation data offers no indication that the gap between property/casualty and benefits compensation will narrow. Insurance agencies consistently pay higher average salaries across all benefits service levels, showcasing the most

significant contrast in entry-level analyst and top-level account executive roles. Case in point:

By Mary Newgard

• Employee benefits account manager compensation skyrockets. The average employee benefits account manager salary was $90,625, a 22% increase compared to the average salary just two years prior.

• Entry-level benefits analysts are well compensated. In 2023, the average employee benefits analyst salary rose to $63,000, a 5.8% increase from 2022. They also earned considerably more (13.75%) than their P/C CSR counterparts whose average salary in 2023 was only $55,384.

• Benefits account executives continue to command higher salaries. In 2023 the average employee benefits account executive salary was $139,640, 16% higher compared to the average P/C account executive salary of $120,226. Another notable trend is the rise in salary ranges. Between 2022 and 2023 the low employee benefits account executive salary increased from $108,000 to $111,000 and the high went from $170,000 to $205,000.

To ensure hiring success in 2024, it’s imperative that your insurance agency establish a robust talent acquisition strategy centered around competitive compensation. By doing this, you can concentrate on recruiting new talent, refining your onboarding procedures, and securing the loyalty of your current employees.

Are you interested in the full report?

Email Mary at asktherecruiter@csgrecruiting.com to request your free copy.

Newgard is partner and senior search consultant for Capstone Search Group, a national recruiting firm dedicated to the insurance industry.

Email: asktherecruiter@ csgrecruiting.com.

Idea Exchange: Emerging Risk

3 Emerging Risks:

AI-Driven Civil Unrest, Heavy EVs, Solar Panel Safety

Technology is poised to take over traditional markets and is rapidly creating new ones. For example, this trend is evidenced by the adoption of electric vehicles, demand for solar energy, and the blistering pace of generative AI adoption. Yet these innovations also present challenges for governments and society, and potential risks for insurers as their usage grows.

By Lee Shavel

An Artificial Enhancement to Cybercrime and Civil Unrest

Over the past year, generative AI tools have experienced explosive growth. Recent surveys have found that one-third of enterprises regularly use the technology in their business functions. While the technology is helping insurers enhance productivity and profitability, there are tangential risks.

Generative AI (GenAI) played a larger and more harmful role in cybercrime in 2023, notably in the application of ransomware and phishing attacks. For example, its capacity to produce convincing email copy — as with the popular WormGPT language model — in a variety of languages has made phishing attempts appear more genuine, making it harder for employees to identify fraudulent communications. These tools are also increasingly capable of mimicking voices, potentially posing a serious threat to security systems that rely on voice authentication.

Additionally, some experts are warning that GenAI tools may make it easier to produce and distribute realistic-looking disinformation, which could heighten the

risk of civil unrest. For example, GenAI tools, like chatbots, can craft compelling text or email messages or automate voice calls that impersonate real political figures or celebrities. GenAI tools may also be able to automate social media campaigns replete with disinformation, targeting specific groups or individuals with content that appears genuine.

Research by Verisk Maplecroft found that the United States faces an elevated risk of experiencing outbreaks of damaging unrest in the year ahead, according to its new Strikes, Riot and Civil Commotion (SRCC) predictive model, particularly in major cities such as New York, Washington, D.C., and Chicago — where law enforcement is already on high alert ahead of the August Democratic National Convention.

Understanding the cyber as well as social and political risks involved with generative AI will be critical for insurers and corporations in the year ahead.

EVs and Infrastructure—A Weighty Issue

Global electric vehicle (EV) sales surpassed 10 million units in 2022, and the

International Energy Agency (IEA) projects that by 2030, 20% of all vehicles sold in the United States will be electric. But the push to go electric has raised some concerns — namely, the public infrastructure’s ability to handle these vehicles.

‘Generative AI (GenAI) played a larger and more harmful role in cybercrime in 2023, notably in the application of ransomware and phishing attacks.’

A 2023 survey found that 53% of respondents lacked confidence in the federal government’s ability to build out the charging stations and ancillary infrastructure to support a growing EV market. And while the surge in electric vehicle sales has been accompanied by an expansion of the nation’s public charging infrastructure, consumer concerns over where exactly rubber will meet the road remain.

EVs pose another threat to America’s public infrastructure: their weight. The

damage a vehicle can inflict on roads and infrastructure increases geometrically with weight, and according to the American Society of Civil Engineers (ASCE), 43 % of the nation’s roads stand in “poor” or “mediocre” condition. The increasing heft of America’s vehicle fleet long predates the emergence of electric vehicles, driven instead by our taste for ever-more-massive pickups and SUVs.

Electric vehicles are continuing this trend, if not exacerbating it. Electric vehicles can weigh hundreds to thousands of pounds more than their conventional counterparts, thanks to their batteries and related housings. As automakers begin to electrify their pickups and SUVs, the nation’s vehicle fleet looks to get heavier still. Compounding these weighty worries is the potential toll on structures initially designed for far lighter vehicles, such as parking garages, which have already seen an increase in failure and collapse in recent years due in part to excessive loading.

Seeking Answers on Solar Panel Safety

Do solar panels significantly increase the risk of fire on a property? It’s a straightforward question that doesn’t quite lend itself to a straightforward answer, especially as prices for solar power systems continue to decline and the U.S. continues to build its solar-generating capacity in residential and commercial spaces.

There doesn’t appear to have been a correlating increase in the number of residential fires alongside growth in residential solar installations, according to government data. The number of residential fires decreased by 5% over the past 10 years (2012-2021) while the installed base of residential solar systems grew.

Data gleaned from other countries may prove useful, as well. In Germany, for example, a survey conducted by the U.S. Energy Department found that solar panels contributed to approximately 0.016% of fires in 2013. Furthermore, a comparison conducted by Verisk’s

Emerging Issues team of total installations in the United Kingdom through 2023 to the number of fires attributed to solar panels in the same year showed a fire rate of roughly 0.005 % of all units, based on UK government data.

According to available research, the list of potential causes for solar panel fires includes faulty installation, the presence of flammable vegetation, component failures, and the use of panels as architectural components.

While consumers and businesses continue to adopt and invest in GenAI, EVs and solar panels, insurers need to understand the scope of each of these risks and the potential impact on their operations and book of business.

Shavel is president and chief executive officer of Verisk, a data analytics and technology partner to the global insurance industry. He brings nearly 30 years of experience advising and leading publicly traded companies to Verisk.

Idea Exchange: Is It Covered?

Logic & Language and Forms & Facts How Do You Know If It’s an ISO Policy Form?

Since its official inception in 1971, Insurance Services Office Inc. (ISO) has been the national insurance industry standard setter for policy form language. Many insurers use pure ISO forms, usually along with proprietary endorsements of their own. Even insurers who don’t subscribe to ISO forms often use language very close, even identical, to that in ISO forms.

By Bill Wilson

ISO was formed via the consolidation of dozens of state and regional inspection, rating and actuarial bureaus into one national advisory organization. There are advantages to some degree of standardization of thousands of insurance policy forms, while still allowing, in most states, for non-ISO endorsements that may broaden or restrict coverage.

Most industry education and reference materials focus on ISO forms and many businesses that establish minimum coverage requirements for their business partners do so by requesting that coverage be provided by specific ISO forms “or their equivalent.” The issue for agents trying to assist their customers in meeting these requirements is, how do you know if a form provided by an insurer is a pure ISO form, a modified version, or a proprietary form?

If it’s a pure ISO form, then you pretty much know what you have or you can find out using annotated form reference materials such as those provided by firms like the International Risk Management Institute (IRMI).

If it’s not ISO, then the agent and insured are often tasked with the responsibility of determining whether the form in question is “equivalent” to the ISO form being requested.

So, how can you tell if a policy form is an ISO standard form? There are at least three tests.

The first test is the format of the policy form number. For their coverage forms, ISO uses a 10-digit numbering system. Take, for example, the CG 00 01 04 13 form.

The first two digits are letters that indicate the line of insurance. In this example, “CG” is the abbreviation for Commercial General Liability. A form beginning with “HO” would be a HomeOwners form, “CA” would be Commercial Auto, and “PP” would be Private Passenger Auto.

The next two digits tell you the broad type of form. For example, “00” indicates a primary coverage form, as opposed to

a modifying endorsement. A form that begins with “CG 20” means it’s a CGL form that deals with additional insureds (the “20” series) in some way. A form that starts with “CP 11” is a commercial property builders risk category endorsement.

Most industry education and reference materials focus on ISO forms …

If, as an agent, you’re reviewing a multiform CGL policy that an insurer has put together for a customer and you see one or

more endorsements whose form numbers begin with “CG 21,” you should pay special attention, since that category is reserved for exclusionary endorsements. On the other hand, form numbers beginning with “CG 24” are usually coverage broadening endorsements.

ISO’s commercial lines manual includes a listing of these categories. So, if you come across a form that begins with “CG 70,” you immediately know it’s not an ISO form because ISO reserves the “70” category for insurer proprietary forms. This lets you know that you probably need to inquire from the carrier as to what this form does and why it’s being used.

The second test involves the final four digits of the coverage form. These digits are the edition date of the form in the format “MM YY.” For example, for ISO’s homeowners program, the countrywide edition dates would be within the years 1984, 1991, 2000, 2011, or 2022. If I got a question from someone about “the 2008” ISO HO 00 03, I’d know it’s not the countrywide edition of that form because ISO had no 2008 countrywide filing for primary coverage forms in that line of insurance.

The third test, and probably most foolproof 99.99% of the time, is the copyright notice at the bottom of the form. Any insurer subscribing for the use

of ISO form language must include a copyright notice on the forms they use. This notice usually takes one of two formats:

• “© Insurance Services Office, Inc. 20__” or “© ISO Properties, Inc., 20__”; or

• “Includes Copyrighted material of Insurance Services Office, Inc. with its permission.”

The first category above should mean that the form is verbatim, an unmodified ISO form. The second category that begins with the word “Includes” means that the form contains ISO language but also additional wording that can dramatically alter the coverage from what ISO intended. Such forms may be 99% ISO language or 1% ISO language. Caveat emptor.

All of this being said, on a rare occasion, especially in the surplus lines marketplace, you may come across a form with the “right” ISO form number and copyright notice that is not a pure ISO form. I can probably count on one hand the number of times I’ve encountered such forms, but they are out there in the marketplace, so be careful.

Finally, be particularly careful when your customer enters into a contract with insurance requirements that call for a specific ISO form number “or its equivalent.” If you have a carrier with a form that is not that exact form number but you’re assured that it does the same thing, again, caveat emptor.

If the language is not identical, there’s a reasonable chance the form is not equivalent to the ISO form.

To summarize, there are three basic tests to determine if a policy form is an ISO form:

• The form number structure.

• The form edition date.

• The form copyright notice.

Once again, caveat emptor, and always remember to RTFP!

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: Bill@InsuranceCommentary.com.

Idea Exchange: The Competitive Advantage

What Is Insurance?

Based on the last 126 insurance commercials I’ve watched, I wouldn’t have a clue.

By Chris Burand

I saw one insurance commercial the other night that did not even include the word “insurance” in the script other than the carrier’s name.

Most people buying insurance don’t really understand what they are buying, especially based on these commercials. So, I began to wonder what services/products I buy where I am ignorant of what I’m buying.

When I buy gasoline, I really haven’t a clue what the difference is from one brand to another. I don’t have a clue what the difference is in the bottled water I drink. But in both cases, I know what I’m buying. I just don’t know the difference between brands.

What do you buy that you really don’t have a clue what it is that you are actually buying? The poor quality of some attorney’s contracts comes to mind as an example of what I see agencies buying without knowing what they really need to be buying. Some of the agency management systems fall into the same category. Agencies do not realize they’re buying a system that only provides for their needs

on the surface and immediate purposes, but not their long-term betterment.

These are important investments and yet mistakes are made.

So, it’s easy to understand how and why people buy insurance without really understanding what insurance is. I have met with and interviewed thousands of producers and account managers and agency owners. A large proportion of people selling and servicing insurance do not have a clue what they are actually selling, which only exacerbates the situation. When I ask what insurance does, I get all kinds of answers other than the correct one, which is that it transfers risk. The benefits of this transfer, among

many, is that the transfer greatly expands consumers’ and businesses’ balance sheets so that they are able to purchase homes, autos, materials and so forth with much less capital. Otherwise, they would have to increase their down payments to probably at least 50%. Also, if a loss happens, they get their life more or less restored.

Insurance is truly one of the greatest and oldest financial inventions ever! It brings so much good, but only if the policy is a solid policy rather than, “I haven’t a clue what it is I’m buying from a company that advertises without advertising what it is actually selling.”

And the situation is made worse with — I’ll be blunt — the questionable products, advertising and sales pitches I

am seeing. I am seeing more outright fraud and questionable insurance companies/ products than I’ve seen in 30 years. It is not just big companies doing this. One producer, one that would likely qualify in the top 1% of all producers relative to their sales, recently advised that his success is partially due to all the untruths he tells. When confronted, he replied, “But it works doesn’t it?” Such cavalier attitudes are not uncommon and I’m seeing more people enter the industry with these attitudes, summarized well by a person who told me that by the time the regulators figure out what is happening they’ll be rich.

But does it matter? Few consumers and small business owners have a clue what they are actually buying. All insurance is

the same and they are not going to spend the time to learn the differences. They need more advice than big companies, but the legal standard of care for those selling insurance is so low that all the burden is on the buyer. This legal reality is a complete mismatch with human reality.

I cannot blame the marketing companies, either. The advertising companies have a job to do and some of their advertising campaigns are beyond brilliant. I completely admire what they have achieved, but then I liked the old-fashioned cigarette commercials, too.

The key insights the advertising firms identified long ago are that consumers and small business owners do not have a clue what they are buying, they have no interest in distinguishing the quality factors between insurance products, the quality factors between insurance distributors, the financial stability difference, or any differentiators other than price, and the really brilliant insight of trustworthiness established by cartoon characters. (Whether portrayed by animation or real humans dressed in costumes, the common denominator is these are all cartoon characters that generate more trust than advertisements using solid characters and advice.)

What an insight into the human brain, something for humans selling insurance to think through!

Standard of Care

This reality brings me back to the standard of care agents owe their clients because differentiation is the key to success. You must show that you are better, which means differentiation. Consumers do not have a clue between a captive agent and an independent agent, or often even the difference between an insurance company and the agent. (A test: What is the difference in the standard of care between a captive agent and going direct through a carrier?)

This lack of distinction is the absolutely perfect recipe for low-quality players to dominate, per the theory of mediocrity described by the economist Carl Shapiro. He described how, because consumers continued on page 46

Idea Exchange: The Competitive Advantage

continued from page 45

don’t know the difference between a high-quality product and a marginal product, the producer of the marginal product will undercut the price of the high-quality product and win every time, unless the provider of the high-quality product causes the consumer to recognize the difference.

The only way around this reality is to create and then advertise a higher standard in the insurance world. I don’t know if advertising a higher quality product will work, but advertising a higher standard of care might. A larger percentage of producers, agents and carriers benefit today by pretending they are something they are not, which is that they are providing the coverage clients need when through a combination of their own ignorance, and being lazy by not taking the time to determine their clients’ coverage needs, they are failing their clients. But their clients may not know this until they have a tough claim situation.

For an example, I’ll use ordinance coverage. In my experience auditing agencies, around 95% of all policies sold are sold without a discussion of whether the insured needs increased ordinance coverage. The basic throw-in coverage is very inadequate for a large percentage of properties. Many building codes, especially the green building codes and also the flood-related building codes, have recently changed significantly. Increased ordinance is no longer just for older homes. When the fire burned nearly 1,000 homes in Boulder, Colorado, around two years ago, the local suburbs had to rescind their green building codes because otherwise, virtually not a single homeowner had adequate ordinance coverage to rebuild!

Insureds don’t know what they’re buying when they buy insurance, but they are thinking that if their house burns, they have coverage to rebuild without regard for more expensive building codes, and after a fire is a terrible time to learn this lesson.

If a higher standard of care applied to some class of agents, likely independent agents because they are the ones who already have more responsibilities to insureds than other distributors (who

have virtually no responsibility to advise insureds on anything), then it would be easy to distinguish and advertise a quality advantage over cartoons. Around 95% of independent agents seem to dislike this concept because they don’t want the E&O exposure.

The beauty of a higher standard of care as practiced by my real-world clients who don’t hide and don’t try to compete with the incompetents, is they make more money. They have less angst in their lives. They have earned a greater feeling of accomplishment. They sleep better knowing their clients have far better protection in

the event of a tragic claim than they would have if they bought insurance directly or from a producer telling untruths.

The sales process is also easier and less stressful because by applying a higher standard to your sales model, you distinguish yourself automatically. My goal with this article is to help all those insurance professionals who really care to see the solution, to beat mediocrity and deception.

You will need to be bold.

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: Minding Your Business

The Future of Insurance Agencies

There is a traditional proclamation made following the accession of a new monarch in various countries that simultaneously announces the death of the previous monarch and asserts continuity by saluting the new monarch.

“The king is dead; long live the king!”

This seemingly contradictory phrase can well apply to the independent insurance agency.

The demise of the independent agent has been predicted for well over 20 years, with the dawn of the internet. Fintech and

By Catherine Oak and

Bill Schoeffler

insurtech like to proclaim that they are disrupting the insurance industry. The reality is that insurance agencies evolve with changes to the marketplace (technology, business environment, society, etc.), and fintech and insurtech are mostly marketing campaigns. There are two camps for evolution — creepers and leapers — meaning slow incremental evolution (creepers) and rapid, significant changes (leapers). As we look to the horizon of the insurance industry, independent agencies will transition from creepers to leapers.

There are several key factors that are driving the need for major changes to the independent insurance agency model. The first and most obvious force is technology. Layered over the impact of technology is societal changes. Next, multi-faceted changes to the business environment will require insurance agencies to adapt or die.

Technology

Artificial intelligence (AI) will be the biggest change catalyst for insurance agencies. Automation, from rate quoting and application processing to risk evaluation and educational resources, has encroached on tasks traditionally performed by agents.

Predictive analytics and chatbots now enable self-service insurance shopping, especially for straightforward products like term life insurance and even personal lines, which are challenging agents’ roles.

When the internet was becoming popular, many thought that direct-to-consumer (DTC) sales would become standard; however, adults at that time were slow to adapt. Young adults today grew up with the internet and expect the ability to get everything directly on the internet. About two-thirds of personal lines sales are

continued on page 48

Idea Exchange: Minding Your Business

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now direct-to-consumer sales, whereas only a quarter of the more complicated commercial lines sales are DTC sales. Most likely, as Gen Z ages, these percentages will increase.

More pernicious for insurance agencies than the growth of DTC sales will be changes to the insurance industry that will have a cascading effect downstream. With the advent of self-driving cars and other internet of things (IoT) (physical objects embedded with sensors, software, and other technologies connected to the internet), risk and liability will shift from the consumer to the manufacturer.

Personal auto coverage for self-driving cars will have no or limited liability coverage. Smart devices in homes and businesses are providing real-time risk data that essentially creates individual risk assessment (versus pooled risk assessment).

AI and “big data” are changing how insurance companies do business, from distribution to underwriting and claims. The insurance buying process has become significantly quicker and more automated. AI now plays a key role in assessing risk profiles based on individual behavior, allowing for near-instant policy issuance in areas like auto and life insurance.

The use of telematics and IoT devices is streamlining this further. Additionally, blockchain technology facilitates instant financial transactions, simplifies contract processing, and slashes costs for insurers, paving the way for rapid commercial insurance quoting. All this will make it less likely for the consumer to use an insurance agent.

Usage-based insurance (UBI) is becoming increasingly prevalent, with customization according to individual behavior. Insurance models are shifting from traditional purchase and renewal to continuous coverage, dynamically aligning with users’ lifestyles. Micro coverage options for specific needs, like phone battery or flight delay insurance, allow for personalized policy bundles. With the rise of the sharing economy, UBI is adapting, offering pay-per-use models for shared assets like cars and homes. Many of these types of coverage will be offered by the

business selling the product or service and not an insurance agent.

The traditional methods of underwriting for most personal and small business insurance products are becoming obsolete.

Automation and artificial intelligence, including predictive models and deep learning, have expedited the underwriting process to mere seconds. This is achieved by integrating these technologies into the insurers’ tech stacks and utilizing internal and extensive external data through APIs and providers. The data, collected from various sources, including carriers, reinsurers, and distributors, proactively offers customers tailored insurance packages, with pricing reflecting their individual risk profiles. There is less and less need for an insurance agent to collect, review, summarize, and submit underwriting data.

Claims management, which is no longer a key role for most insurance agents, is increasingly handled by algorithms, diminishing human involvement.

Insurance Distribution Business Model

For most of the 20th century, the typical insurance agency was a local small business. Generally speaking, during that timeframe, only very large businesses had the need to seek out insurance brokers with specialized skills and services (like AON, Marsh McLennan, etc.).

Consolidation of insurance agencies started picking up steam in the 1990s. The national brokers started acquiring large premier agencies across the country. Regional brokers grew by acquiring small and mid-sized insurance agencies.

Mergers and acquisitions grew exponentially with the turn of the century. Acquisitions were the growth strategy for the national (publicly traded) brokers. Private equity (PE) money realized the insurance industry was lucrative and jumped in with both feet. Now most of the national brokers are or were backed by PE money.

Due to the M&A frenzy of the past 20-plus years, there are few large, privately

owned independent insurance agencies. More often than not, the local privately owned insurance agency is a firm with fewer than 10 employees. Consumers are presented with the binary of working with a national broker with deep resources or a local privately owned firm with limited resources. These small, privately owned firms face the pressure of competing against professionally managed competitors with a plethora of products and services that only a large firm can offer.

Despite the growing juggernaut of national brokers, it seems easier to start an insurance agency now compared to 50 years ago.

Obtaining the first carrier appointment was the largest hurdle to starting an agency. Networks, aggregators and franchises have been created to provide market access to the small agency, removing the largest hurdle and immediately making the new agency viable.

Clusters, networks, aggregators and franchises are becoming an incubator for new agencies. Agency franchises and some networks not only provide market access, but some also include back-office support, such as accounting and customer service staff. The branding, agency automation system, procedures, etc., are consistent.

Typically, the new franchisee will pay an initial franchise fee (often $25,000 or more), and then the commissions are paid to the franchisee at a lower rate to offset the support cost. Some

may just have a flat monthly fee. These options also have the benefit of operating a small agency while being part of a larger organization.

Societal Changes

The last of the baby boomers is slowly exiting the industry. The issue is a growing population gap since the generation in-between, Generation X is smaller than both the Baby Boomer and Millennial groups. So, people in their 60s will be replaced by people in their 20s because there is a lack of people in their 40s and 50s.

This will shift how agencies operate because young people think differently and have different values. This age gap also means an experience gap. The 20-plus year seasoned producer or manager will be replaced by someone with less than 10 years of experience. The efficiencies built by experience will be lost while the younger generation comes up to speed. On the other hand, the next trend might play well into the Millennials’ lack of experience with the current business model.

Consumers today expect a seamless experience across both digital and physical sales channels, with the ability to quickly get answers to simple inquiries, as well as conduct in-depth research. They want the convenience of purchasing straightforward products like car insurance without complications. Additionally, for more complex insurance products, there’s a desire for real-time interactions with agents through both digital and in-person means.

The pandemic revealed that many routine interactions, such as simple consultations and account maintenance, can occur without in-person contact. Digital platforms often provide a more suitable environment for activities like research.

Nevertheless, there remains a selective preference among customers for in-person engagements with agents for specialized advice and the final steps of service. With a significant reduction in in-person visits to agencies and a decrease in direct customer interactions, insurers are challenged to develop new strategies for lead generation.

The traditional insurance agent, reliant mainly on personal appeal and interpersonal skills, is becoming less

common. Their modern counterparts will need to be adept in various new skills and use digital resources. They are expected to engage with customers more often, primarily through digital means, and utilize AI-powered analytics to enhance service efficiency. Agencies that have not already adapted to the consumers’ expectations will not survive.

Conclusion

Independent insurance agencies are not going away. The human touch will remain crucial, especially when dealing with complex insurance products that require nuanced understanding and personal advice. Agencies must adapt to changing consumer behaviors and expectations, changes from new technology, and changes to insurance companies.

Everything is changing, and it is changing rapidly. To remain competitive, agencies must focus on agility, customer-centricity, and tech-savviness while maintaining the core strengths of personalized service and expertise. All this means that the agency of the future will be very different compared to agencies today.

Prepare for rapid changes.

Oak is the founder of the international consulting firm, Oak & Associates, based in Bend, Oregon and Sonoma, California. Schoeffler is an associate of the

firm. Oak & Associates specializes in financial and management consulting for national and international insurance agencies, including valuations, mergers and acquisitions, clusters, sales and marketing planning, as well as perpetuation planning. Phone: 707-935-6565. Email: catoak@gmail.com. Website: www.oakandassociates.com.

March 18, 2024

Greater Midwestern Indemnity Company 200 Madison Avenue, Third Floor New York, NY 10016

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

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

March 18, 2024

AmFirst Insurance Company 500 Steed Road Ridgeland, MS 39157

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

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

Closing Quote

Ready, Set, Grow How to Build an Independent Agency and Avoid Common Pitfalls.

By Jack Calabrese

You are a seasoned producer who is confident in your skillset. You have built a strong book of business and after a few years, you decide to go out on your own and open an independent agency. As your new business begins to come together, you have many new decisions to make. Fortunately, by following best practices and avoiding common pitfalls, agents can put themselves on a solid path for a future of success.

Start Off Strong

Before launching an independent agency, take a moment to really plan to help ensure you start off strong. Consider these best practices:

Secure cash reserves. Cash reserves are a crucial part of making sure an agency can withstand the first few years of business. Roughly 20% of small businesses fail in the first year, as reported by Fundera.

As agents begin to build a steady flow of income, client roster and prospect pipeline, cash reserves will ensure the business is afforded time to organically grow those relationships and facilitate long-term business.

A business plan will also help to guide agency operations, ensuring that agency team members remain organized

and working toward their goals.

P rioritize marketing. Marketing, particularly for those coming from the captive agent side where their organization provided marketing and technology support, must also be a priority. An independent agent will need to take an aggressive approach through marketing to reach new people and markets. A new independent agent should consider a proactive and longterm approach to marketing as the agency gets off the ground and begins to ramp up.

Consider an agent network. Independent agents, at any stage of their business, should consider aligning themselves with an agent network. Such organizations can provide unparalleled support in terms of developing a business plan, assisting with marketing, and introducing a new agent to peers who can function as mentors or experienced sounding boards.

Invest in your team. New agency owners may find themselves overwhelmed by their various responsibilities and in need of staff. Talent recruitment has proven difficult in recent years, so agents should view investments in their team members’ careers as investments in their business.

Take time to understand what potential hires are looking for in a job and how an agency can fill those needs. Foster an environment that offers training and growth opportunities, and explore ways to engage with your employees to make their days more enjoyable, as well as professionally rewarding.

Avoid Pitfalls

Along the way, agents will surely encounter challenges. Fortunately, there are a few common mistakes that new agents can learn from. As you set out to build your agency, be wary of these common pitfalls:

Placing all your eggs in one basket. New agency owners are going to be faced with challenges and they will need to shift their mindset to tackle those obstacles. Someone who began their career as a producer, for example, will need to suddenly think like a small business owner who also produces business. Marketing, technology, operations, and much more must be considered.

New agents who come from captive environments tend to place too much business in one or just a few limited carriers. As a result, they put their fate in the hands of a few carriers or one big loss. Working with many carriers can give your business breathing room in the event of a loss or changing carrier appetites.

Taking a narrow view of the business. When the whirlwind

of navigating a small business takes over, new agents may be tempted to fall back on what they know, whether that is producing, actuarial work or another aspect of the business. Balance is a key asset to any new business, and new agents must maintain a broad view of their business to ensure all aspects are nurtured and understood.

Failure to ask for help. No one expects a new agent to know how to do everything, and they should not expect that of themselves. They should not be afraid to tap into their contacts for help. Independent agents should leverage their networks, find ways to explore new ideas and take calculated risks that drive the agency forward.

It is a big undertaking, but agency ownership can be an incredibly lucrative business. So, take a step back, plan for the future, and utilize the resources at your disposal to ensure your agency’s success.

Calabrese is chief growth officer with SIAA. Email: jack.calabrese@siaa.com.