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Opening Note
Trust Matters
When it comes to small business owners and their insurance providers, trust matters. So do personalized relationships. Even in an environment of rising rates in which 36% of small business owners have experienced premium increases during the past year, overall customer satisfaction, loyalty and brand advocacy stay strong when customers trust their commercial insurance providers.
That’s according to the J.D. Power 2024 U.S. Small Commercial Insurance Study, which found that small businesses with the highest levels of trust in their insurers stick around. The study showed that 81% of small businesses will “definitely” renew with their same carrier and 79% say they “definitely will” recommend their carrier.
J.D. Power noted that overall trust levels do vary widely by insurer.
“Trust is the single most important variable in the customer relationship with commercial insurance providers,” said Stephen Crewdson, senior director of global insurance intelligence at J.D. Power. “Across virtually every business metric that matters to insurers — customer loyalty, advocacy, premium retention, share of wallet — small business owners who trust their insurers represent significantly higher value. While some insurers are doing a great job cultivating that trust, others have a lot of work to do.”
Overall small business customer satisfaction with commercial insurers is 697 (on a 1,000-point scale). Among customers who have the highest levels of trust in their insurance providers, overall satisfaction jumps 180 points to 877.
The study found a 77-point gap separates the insurer with the highest overall trust score from the insurer with the lowest trust score. Insurers that achieve the highest levels of trust perform well on helping their customers understand policy coverage, understand their business needs and personalize products to their specific business needs.
Overall, 36% of small businesses experienced a premium increase this year, up from 34% in 2023. Of those, 51% of increases were initiated by the insurer, 16% were the result of changing business needs and 13% were due to a change the customer made to their policy.
‘Trust is the single most important variable in the customer relationship with commercial insurance providers.’
However, the study noted that when customers completely understand the reasons for a premium increase, trust is 142 points higher than when they do not understand. Notifying customers in advance, particularly via phone and/ or in person, and proactively discussing ways to reduce the increase will help customers understand the reasons and build trust, J.D. Powers noted in the study.
Lastly, don’t forget to get personal. Personalization is a key driver of commercial insurance customer satisfaction, but nearly half of customers are not receiving it, the results show. Overall, 55% of commercial customers say they’ve received insurance information personalized to their business, which in turn drives an average overall trust score of 761. Overall trust is 106 points lower (655) among the 45% of firms for which information is not personalized.
Andrea Wells V.P. of Content
Chairman of the Board Mark Wells | mwells@wellsmedia.com
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Find the right provider for your clients’ hard-to-place
Properties Built Pre-2000 | Frame Construction | Exterior Corridors
Franchise or Non-Franchise | Non-Sprinklered | Other Hard-To-Place Risks
Enhancements We Include:
• $500M blanket limit per occurrence
• No co-insurance required
• $10M flood sublimit in non-critical flood zones
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• Sprinkler leakage (EQSL)
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• Malicious property attack
• Ordinance or law
• Optional equipment breakdown
• Optional terrorism coverage
Making lemonade out of today’s hotel property insurance market.
Ask any hotelier: Carriers have soured on the hotel insurance market in recent years. While the hotel property market is showing small signs of improvement, regional and national package carriers are still exiting the market in many areas. Why? It comes down to four factors: attritional claims, CAT claims and weather patterns, hotel size and capacity, and package market availability. is means things like skyrocketing replacement costs, increasingly severe weather, and expensive-to-insure amenities are driving carriers from hotel property insurance.
Carriers, agents, and hotels are getting squeezed. Increasingly, agents are reaching out with books of hotels that have been successfully placed for years—only to face targeted non-renewals or complete pullouts from traditional carriers. So when these properties do obtain coverage, it’s o en more expensive. According to CBRE, the world’s largest real estate investment rm, insurance accounted for the greatest increase in hotel expenses during 2023. Exactly how much more expensive? Je Donnelly, the CFO of DiamondRock Hospitality, a REIT that owns 36 hotels and resorts throughout the U.S., told Hotel Investment Today premiums went up 50% year-over-year. In the same article, Raymond Martz, the CFO of Pebblebrook Hotel Trust said he knew owners who’d shouldered cost increases of 100% or more.
Last year, Joseph Indig, Vice President of Sales at Amalgamated Insurance Underwriters told Insurance Journal, “Markets are dropping like ies in the hotel and motel world.” While this places additional stress on the agencies that
“Markets are dropping like ies in the hotel and motel world.”
remain, there are signs of improvement for agents who’ve worked tirelessly to insure their loyal hotel clients. One factor bringing costs back to earth is that the pace of mandated value increases have slowed to be closely in line with in ation. Another is an improved reinsurance environment in 2024, spurred by now balanced and adequate rates. is means the hotel insurance market is ripe for opportunity—if you know where to look.
A fresh outlook pays o . Long-term, the pressures on hotel insurance aren’t going away. Weather patterns have changed from the historical norms. In addition to reinsurance factors, guests will continue to expect complex, costly amenities that work with the latest technology advancements thereby adding to replacement costs. And that’s just the tip of the iceberg. As a result, the agents who win their clients’ trust will need to understand how to thrive—not just survive in this new reality. eir secret ingredient to success? Niche products and insurance programs tailored speci cally for the hospitality market.
By nding niche carriers and learning their appetites for risk, agents can achieve signi cant success. While many agents frustrate clients by sticking to traditional insurance markets with limited success, those who tap into these niche markets can become their clients’ heroes.
Companies like Amalgamated
Insurance
Underwriters empower agents to do what might have previously seemed impossible for their clients. By understanding what ts and what doesn’t, agents can continue binding businesses and placing broad coverages in the E&S market.
Of course, understanding the right t takes e ort. AIU works as a partner on risk mitigation to ensure its clients’ properties are insurable. Some carriers would rather drop policies, whereas AIU takes a collaborative approach to risk. Inspectors visit sites personally and make recommendations. ey look for re hazards, plumbing and ood risks, electrical re risks, and roof deterioration, all with the goal of insurability. ey also work quickly—because no client wants to be in insurance limbo. AIU can typically review submissions and bind coverages within 24 hours. While AIU operates via economies of scale to provide hotels with better rates, it’s never an insurance partner that treats clients like a number.
A refreshing reality.
Despite carriers leaving many markets, hospitality-focused agents can rest easy knowing AIU is there to help realize opportunity where others don’t see it. at’s a refreshing reality for agents, agencies, and hotels facing unprecedented market pressures.
The first half of 2024 set a 15-year low for insurance carrier mergers and acquisitions, according to Clyde & Co’s latest Mid-Year Growth Report. The number of insurance carrier M&A transactions completed in the first six months of this year dropped to 103 — a 40% decrease from the 171 made in the first half of 2023.
abounds. Potential acquirers are more selective, keen to avoid buyer’s remorse by ensuring cultural and strategic fit, while sellers are holding out for better prices in more favorable circumstances.”
increasing premium required for tech system integration as innovation widens the gap with outdated platforms are contributing to the slowdown, and deal dynamics are also changing with a greater emphasis placed on securing talent.
pressures abating, could provide further deal stimulus.
Clyde & Co said the first half number in 2024 was “significantly lower” than the previous low point of 162 during the first half of 2023. “The combination of high interest rates, stubborn inflation, high borrowing costs and geopolitical uncertainty has seen 2024 continue very much in the same vein as 2023,” the report stated. “From a global perspective, caution
Per a press release, deal volumes declined throughout 2023 in response to a surge in inflation and interest rate cuts. In the first half of 2024, “cash-rich carriers, which would traditionally have been active in the market, have been retaining capital while interest rates are high,” the release said.
Clyde & Co reported that high pricing expectations and
While the U.S. and Canada saw the highest number of insurance underwriting deals of any region in the first half of 2024 with a total of 40 transactions closed, by its own standards M&A activity in North America “remains muted,” the report said. It noted that the November U.S. election will be a “watershed moment” and after it passes, “deal flow may resume again.” Clyde & Co also noted that a more settled economic picture, with interest rate and inflation
“Insurance M&A, for the remainder of 2024 and into 2025, will likely be driven by larger scale transactions,” said Eva-Maria Barbosa, a partner at Clyde & Co. “While the total number may not increase dramatically, we are increasingly likely to see deals that span a number of jurisdictions with some of the major carriers now looking to take on books or businesses which span 8-10 countries in one swoop.”
Peter Hodgins, also a partner at Clyde & Co, added that interest rates are broadly tracking downwards, and while acquirers are “likely to become more bullish, sellers may be running out of road,” and businesses that have relied on financing will look to divest non-core businesses or underperforming operations.
Broker WTW said commercial lines insurance rates increased overall by an average of 5.9% during the second quarter of 2024. Quarterly price increases have been around 6% since the end of the global pandemic, WTW reported in its Commercial Lines Insurance Pricing Survey (CLIPS). Survey results showed rates went up 6.3% in the first three months of 2024. Rates were up 6.1% in the second quarter a year ago.
The most change in Q2 2024, according to WTW’s survey, was a “significant reduction” in commercial property insurance rates, suggesting the line has “reached its peak and is
beginning to stabilize.”
“The decline in commercial property prices this quarter underscores a notable change in market conditions.” said Yi Jing, senior director, Insurance Consulting and Technology (ICT) at WTW, in a statement. “Although some sectors, such as commercial auto and excess umbrella, continue to face upward pressure, many other lines are demonstrating stability. These results highlight the shifting dynamics within the commercial insurance market.”
WTW said directors and officers liability saw another quarter of price decrease but, again, less than the prior quarter. Excess/umbrella liability and commercial auto
both saw price increases above double digits, according to respondents. Starting early last year, cyber started to show rate decreases, which have continued in Q2 2024.
As Traffic Deaths Remain High, US Awards $1 Billion for Road Safety Projects
By David Shepardson
The U.S. Transportation Department said it is awarding $1 billion for a series of projects aimed at reducing traffic crashes, as road deaths remain sharply higher than pre-pandemic levels.
The department separately estimated that 18,720 people died in motor vehicle traffic crashes in the first six months of 2024, down 3.2% over 19,330 deaths in the first half of 2023.
While traffic fatalities have declined for nine straight quarters, they remain sharply higher than prepandemic levels, when just over 17,000 people were killed in the first half of 2019.
Among the 350 new awards
that are part of a $5 billion, fiveyear program funded by the $1 trillion 2021 infrastructure law is $29.8 million for Los Angeles to implement safety improvements at 77 intersections, mostly near schools and commercial areas.
Many projects are aimed at making it safer for pedestrians and bicyclists including $10 million for Savannah, Georgia, to upgrade 15 intersections including dedicated left turns, sidewalks, crosswalks and extended bicycle lanes. A further $20 million is earmarked for Chicago to boost safety efforts in the North Avenue corridor.
Traffic deaths spiked after the start of COVID-19 and remain elevated. The fatality
rate in early 2024 fell but still was higher for the three-month period in any pre-pandemic year since 2008. As U.S. roads became less crowded during the COVID-19 pandemic, some motorists perceived police as less likely to issue tickets, experts said, resulting in riskier behavior on the roads.
U.S. traffic deaths jumped
AM Best: Unfavorable Operating Performance Key Driver of Downgrades
Deteriorating market conditions and rising loss costs led to a 60 % increase in rating downgrades of AM Best-rated U.S.-based insurers in 2023 compared with two years earlier, according to a new report. The latest Best’s Special Report indicates that in addition to catastrophe risk, secondary perils continue to reshape geographic risk, with companies writing business in six states or less accounting for 60% of rating downgrades in 2023.
California, Florida and Texas-domiciled companies accounted for more than a quarter (27% of downgrades over the past three years, driven largely by personal
lines carriers, according to the report. The report also notes that while rating upgrades and downgrades are dependent on the individual circumstances of each rated company, the wider trajectory of rating movements can reflect marketplace dynamics.
“Some of the factors driving these rating actions are cyclical in nature, while others reflect a more permanent shift in operating conditions,” said David Lopes, senior industry analyst, AM Best. “Worsening economic and social inflation as well as rising operating and loss costs are also among the factors at play.”
mainly in the personal lines segment, which AM Best has had a negative outlook on since September 2022.
Rising interest rates have increased investment income for all insurance segments; higher rates also helped bolster premium growth for life/annuity insurers due to attractive crediting rates, the report noted.
Overall, Long-Term Issuer Credit Rating (Long-Term ICR) downgrades were driven primarily by declines in capitalization and deteriorating operating performance. Balance sheet and operating performance improvements primarily influenced upgrades, as did insurers being added
10.5% in 2021 to 42,915, the highest number killed on American roads in a single year since 2005.
In 2022, the number of pedestrians killed rose 0.7% to 7,522, the most since 1981. The number of cyclists killed rose 13% to 1,105 in 2022, the most since at least 1980.
Copyright 2024 Reuters.
to different rating units or related to lift from parent organizations. The report also notes that personal lines carriers accounted for 43% of Long-Term ICR downgrades over the past three years.
In the commercial lines segment, the report found that upgrades continued to outnumber downgrades. The segment accounted for the largest share of upgrades over the last three years, although the number fell in 2023. Commercial lines carriers also accounted for nearly a quarter of downgrades the past three years, the report found.
This article was first published by Carrier Management, www. carriermanagement.com.
News & Markets
Report: Over 250,000 US Properties Have Repeated NFIP Claims
By Ezra Amacher
More than a quarter million U.S. properties have repeated claims for federal flood insurance, costing the National Flood Insurance Program billions of dollars in claims, according to new federal data compiled by the National Resources Defense Council.
Four states account for more than half of repetitive loss properties (RLPs), led by Louisiana with more than 43,000. Texas has the next highest with over 41,000, followed by Florida (26,700) and New York (20,400).
Information on properties with repeated claims for federal flood insurance was hard to come until this year, when FEMA published data on properties with two or more National Flood Insurance Program (NFIP) claims.
NRDC, an environmental advocacy, used FEMA’s data to create a new mapping dashboard, Flooded Again, which provides data visualization of RLPs. While all 50 states have properties with repeated federal flood insurance claims, the bulk of RLPs are located in states along the East
Coast and Gulf Coast.
Anna Weber, a senior policy analyst at NRDC, said more homes are being damaged by floods because of climate change combined with risky development and out-of-date infrastructure.
“Stronger hurricanes, more intense rainstorms and rising seas are all enacting a toll on people’s lives. We need changes at all levels of government to make communities safer,” Weber said.
without, flood insurance:
Fewer than one in four RLPs have had risk mitigation action, like building elevation or floodproofing the first floor, NRDC said.
Only 13% of single-family homes are covered by federal flood insurance, according to estimates by the Society of Actuaries.
The National Resources Defense Council recommends FEMA should enact the following steps to protect those with, and
• Update the NFIP’s national floodplain development standards to account for worsening floods and put the brakes on risky development;
• Ensure that flood-risk maps are up to date and account for climate change;
• Be granted authority to make flood insurance more affordable for low- and middle-income households;
• Ensure that home buyers and renters understand and have the right to know their new home’s flood risk.
You’re Invited
Wednesday, December 4, 2024
Cipriani 42nd Street, New York City
6:00 PM Reception, 7:00 PM Dinner and Program
Honoring
Accepted by Christine Williams Northeast Region
Leader
Special
Guest Eli Manning
Your support provides significant help for our neighbors in need through the IICF Community Grants Program. The Insurance Industry Charitable Foundation Northeast Division has awarded over 400 grants totaling more than $13 million to charitable organizations throughout the Northeast.
Figures
43
The number of empty coal train cars that were derailed in North Dakota by tornadic winds in a storm system that spurred reports of five tornadoes across the Dakotas. BNSF Railway spokesperson Kendall Sloan said a train was stopped due to a tornado warning near the town of Steele, North Dakota, when high winds caused the empty coal cars to derail. No one was hurt, and no hazardous materials were in the cars, Sloan said in an email.
74%
The percentage decrease in catalytic converter theft claims for the first half of 2024 compared to the same period in 2023, according to State Farm. The insurance company’s auto claims data shows 3,800 claims in the first half of this year, down from the same time last year when State Farm received more than 14,800 catalytic converter theft claims. The claims from the first half of 2024 totaled about $11.2 million, which paid for repairs and replacement of stolen parts. The average claim in the first half of 2024 was nearly $2,900.
$725 Million
The amount of a jury verdict against ExxonMobil that has been upheld by the Philadelphia Court of Common Pleas in a case involving cancer linked to exposure to benzene, an ingredient in gasoline. The court denied ExxonMobil’s post-trial motions and added more than $90 million in delay damages, bringing the total award to almost $816 million. The suit was filed by Paul Gil, who worked as a Mobil service station mechanic from 1974 to 1979 and later developed leukemia and colon cancer. ExxonMobil was found liable by the jury for failing to warn Gill about the risk of benzene in Mobil’s gasoline. 15%
The percent increase in direct written premiums (DWP) experienced by excess and surplus insurers in 2023. The increase in DWP last year brought the E&S share of the total property/ casualty market to 9%, according to a report from Fitch Ratings. It was the sixth straight year in which the E&S sector in the U.S. saw double-digit growth.
Declarations
‘Changing of the Guard’
“Those of us who have watched Berkshire Hathaway for a long time have suspected there may be a changing of the guard in insurance operations. … My sense is that he may be moving on, and I suspect that is behind his stock sales.”
— Said Cathy Seifert, a CFRA Research analyst who rates Berkshire a “buy,” regarding Ajit Jain, the longtime top insurance executive at Warren Buffett’s Berkshire Hathaway, who recently sold more than half of his Class A shares in the conglomerate, according to a Reuters report. Seifert said Jain’s selling may reflect personal circumstances rather than his view of Berkshire’s prospects.
‘Contact Your Insurer’
“If you need to file a claim, contact your insurer first. … Make sure you hire reputable contractors during the recovery process and be wary of anyone you did not contact offering to do work on your home.”
— Advised Louisiana Insurance
Commissioner Tim Temple in a statement warning Louisiana residents to be aware of contractor fraud following Hurricane Francine, which hit Southwest Louisiana early on September 11. Large storms events such as hurricanes provide an opening for dishonest services providers to take advantage of homeowners, Temple said.
Vermont Mitigation Plan
“The growing frequency and power of extreme weather events makes it clear Vermont needs to do more to proactively ready our communities to reduce the danger to Vermonters’ lives and property,” — Vermont state auditor Doug Hoffer said in a statement about the findings of a report from his office showing that Vermont has failed to complete many actions in its fiveyear hazard mitigation plan developed by Vermont Emergency Management aimed at reducing the risk from natural disasters such as flooding. Just a third of the 96 actions, and half of the priority actions in the 2018 plan, had been completed by last year, according to the audit.
EPIC and the Dolphins
“For large sports organizations like the Miami Dolphins and state-of-the-art venues like Hard Rock Stadium, effective risk management is essential to safeguarding both operations and enterprise value.”
— Tod Swanson, entertainment and sports practice leader for EPIC Insurance Brokers & Consultants, said in a news release announcing that San Francisco-based EPIC is now the official provider of risk management services for the Miami Dolphins football team and Hard Rock Stadium. The deal will produce some visibility for EPIC at Dolphins’ charity gatherings, including the Dolphins Fins Weekend, a fishing event in June, and the Dolphins Cancer Challenge, a fundraiser.
Satisfying Settlement
“It is deeply satisfying that this community overwhelmingly supports this settlement. … This result would not have been possible without their resolve and determination to hold Norfolk Southern accountable.”
— Plaintiffs’ lawyers in a class-action suit against Norfolk Southern over the February 2023 East Palestine, Ohio, train derailment, noting that few people eligible to participate in a $600 million class action settlement have opted out of the deal. The lawyers who negotiated on behalf of everyone affected by the derailment said only 370 households and 47 businesses in the 20-mile radius around the derailment had opted out. Altogether, 54,925 claims had been filed as of early September.
‘Egregious Offenses’
“My motivation in pursuing this lawsuit was to ensure that others do not have to endure the same egregious offenses that I experienced.”
— Said Christina Cardenas, the wife of an inmate at a correctional facility in Tehachapi, California. Cardenas filed a lawsuit after being sexually violated during a strip search when she tried to visit her husband in prison, according to her attorneys. She will receive a $5.6 million settlement, of which the California Department of Corrections and Rehabilitation will pay $3.6 million. The rest will be paid by the other defendants, which include two correctional officers, a doctor, and the Adventist Health Tehachapi Valley hospital.
Business Moves
East
RCM&D, MillenGroup
Maryland-based insurance, benefits and risk management firm RCM&D has acquired MillenGroup, a Richmond, Virginia-based benefits advisory firm.
Laura Millen, founder and senior managing partner, and John Millen, co-founder and managing partner, will join RCM&D’s employee benefits leadership team in Richmond.
RCM&D is a company of Unison Risk Advisors, which was formed with the 2020 merger of RCM&D and Oswald Companies. In 2023, Unison added NSI Insurance Group as its third partner.
Massachusetts-based Schrager Hampson Aviation Insurance Group has acquired Northeast Aviation & Marine Insurance Brokers of Schenectady, New York.
Northeast Aviation & Marine handles aviation, including international cargo, warehousing, passenger/excursion vessels, commercial fishing vessels, tugs, barges, private yachts, marinas, boat dealers and personal watercraft.
The move is aviation specialist Schrager Hampson’s fifth aviation insurance acquisition.
Northeast Aviation & Marine was a subsidiary of Sykes-Mallia Associates Inc., a commercial and personal lines agency.
Jack Mallia, whose father founded the family’s agency, has now joined Schrager
Hampson Aviation Insurance Group. Mallia’s experience with aviation risks extends to renter’s policies and Cessna 150s to owner-flown jets, warbirds, antique aircraft, charter operators, flight schools, aircraft management, quota share programs and weather balloons.
Headquartered in Bedford, Massachusetts, Schrager Hampson has additional offices in New Hampshire and Connecticut. Licensed in all 50 states, it offers insurance for private, corporate, and commercial aircraft and aviation operations, airports and unmanned aircraft and drones.
Midwest
First MainStreet, Pederson Insurance
First MainStreet Insurance has added three new agencies to its platform.
Pederson Insurance located in Nevada, Iowa, joined FMSI on July 1. The agency offers auto, commercial, farm, financial, home and powersports products. Jarod Pederson has owned the agency for 20 years.
In mid-July, StateWide Insurance, located in Brookings, South Dakota, joined FMSI as its second agency location in South Dakota. Jeff Jacobson joins as a local owner. Statewide’s products include crop, livestock and PRF rainfall insurance.
Joining August 1 was McCartan Insurance Group located in West Des Moines, Iowa. Joel McCartan joins as a new partner. McCartan offers auto, business, commercial auto, cyber liability and general liability, among other products.
Based in Cedar Rapids, Iowa, First MainStreet Insurance L.C. is an affiliate of TrueNorth Companies L.C.
South Central
Inszone Insurance Services, Keith Williams Insurance Agency
Inszone Insurance Services, a provider of commercial, personal and benefits insurance, acquired Keith Williams Insurance Agency Inc. (KWI), a Victoria, Texas-based agency serving individuals and businesses throughout Texas.
KWI offers business, home, auto, farm and ranch and life insurance.
Southeast
Emerald Bay Risk, Mainsail Insurance
One year after it was approved for the Florida market, Mainsail Insurance Co. has been sold to Emerald Bay Risk Solutions, an underwriter and fronting carrier that was launched earlier this year.
The move will help expand business in the national admitted markets, according to an announcement from Emerald Bay, a New Jersey-based startup that was formed by industry veterans who previously led Spinnaker Insurance, the former parent company of Mainsail.
Dave Ingrey is chief executive officer at Emerald Bay and Ken Ingrey is head of business development. Miles Allkins, the former chief underwriting officer of Spinnaker, is chief risk officer.
Spinnaker launched in 2015 as a “value-added” program fronting company and grew rapidly. In 2020, it was acquired by insurtech Hippo Insurance Services, one of its MGAs.
Spinnaker created Mainsail in 2023 and it was approved by the Florida Office of Insurance Regulation last summer. It has corporate offices in New Jersey and offers auto, property and commercial coverage.
Mainsail will now be a subsidiary of Emerald Bay Specialty Insurance Co.
Atlanta-based Titan Aerospace Insurance, one of the larger aviation
insurance brokers, acquired Plimsoll Specialty Markets, a boutique aviation and aerospace brokerage house also based in Atlanta.
Michael Clark, president of Plimsoll, is now president of Titan Specialty Markets. Before Plimsoll, Clark was head of aviation and aerospace at QBE Insurance Group. Prior to that, he was at Old Republic Aerospace insurance.
Titan said it has clients around the world and has offices in five Southeast states and in Denver. Its sister company, Titan Aviation Fuels, has some 600 branded locations in the United States.
OneDigital, Elite Insurance Solutions
OneDigital, an insurance brokerage, financial services and human resources firm based in Atlanta, has acquired Elite Insurance Solutions, a property/casualty insurance agency in Franklin, Tennessee. Elite was founded in 2008 by Mike Stansbury and Randy Hulett. It has 29 associates and offers commercial and personal lines coverage to more than 3,500 clients, according to the transaction announcement.
The acquisition expands OneDigital’s presence in Tennessee, which now includes offices in Nashville, Knoxville, Franklin, Gallatin and Murfreesboro. OneDigital said it was founded in 2000 and has offices in major U.S. cities.
FCBI, MidSouth Insurance
FCBI, a self-insurance fund founded 45 years ago to provide workers’ compensation plans to Florida citrus growers, has acquired MidSouth Mutual Insurance Co. in Tennessee.
MidSouth has been demutualized and renamed MidSouth Insurance, FCBI said. FCBI, once known as the Florida Citrus Business & Industries Fund, has expanded beyond citrus growers over the last four decades and now provides workers’ comp insurance to construction-related employers.
MidSouth, headquartered in Brentwood, Tennessee, also has specialized in workers’ comp for contractors and others in construction. Launched in the 1990s, MidSouth now offers coverage in 16 states
Relation Insurance Services acquired Carolina Heritage Insurance in South Carolina.
Carolina Heritage, based in Hilton Head Island, specializes in high-net-worth individuals, offering personal lines coverage.
John Alagna is owner and Cara Crouch is junior partner. Both will continue managing the office as part of the Relation relationship.
Relation, based in Walnut Creek, California, said it has some 1,350 employees in 137 locales nationwide.
PCF Insurance Services, Kentucky Health Solutions
PCF Insurance Services, a U.S. brokerage handling commercial and personal lines, life and health, workers’ compensation and employee benefits, has acquired the insurance business of Kentucky Health Solutions.
It’s the 14th acquisition so far this year for Utah-based PCF, the company said.
Kentucky Health Solutions, which has offers life and health plans and Medicare advisory services, will now become part of PCF’s Maverick Insurance Group, based in Louisville.
West
Crest Insurance Group, Dan Weinstein and Associates, Winren Inc.
Crest Insurance Group acquired Dan Weinstein and Associates in Scottsdale, Arizona.
DWA principal Dan Weinstein, who has more than 20 years of industry experience in the group benefits space, will join Crest along with the DWA staff.
DWA is an insurance agency specializing in group benefit insurance.
Crest Insurance Group also acquired Winren Inc. in Scottsdale, Arizona.
Winren is an insurance agency specializing in group benefits insurance. Winren CEO Blaise Byrne has been in the industry since 1984.
Crest is an insurance brokerage firm that
provides property/casualty and employee benefits insurance services nationwide. Headquartered in Tucson, Arizona, Crest has offices across Arizona, California, Colorado, Nevada and Wyoming.
Highstreet Insurance Partners acquired Wingert Insurance Agency in Mill Creek, Washington.
Wingert President Jason Wingert and Agency Vice President Shelley Wingert will continue leading their team at Wingert’s current location.
Wingert provides employee benefits and property/casualty services to clients across their local Washington area.
Highstreet Insurance Partners is an independent insurance agency based in Traverse City, Michigan, that provides business insurance, employee benefits, personal insurance, retirement services and specialty risk services.
LTC Global Inc., Michael L. Fitzgerald Insurance Services
LTC Global Inc. acquired Michael L. Fitzgerald Insurance Services Inc. in Walnut Creek, California.
Michael Fitzgerald will continue to manage the business, which operates across Northern California.
Michael L. Fitzgerald Insurance Services is a Capitas Financial Inc. partner. Fitzgerald Insurance Services joins other LTC Global group and Capitas Financial member agencies: Pacific Southwest Financial and Insurance Services Inc.; The Smith Cos.; NorthCoast Brokerage Agency Inc.; Pittsburgh Brokerage Services Inc.; and The Blair Agency.
Michael L. Fitzgerald Services operates a life and health insurance agency serving brokers and clients throughout Northern California.
Capitas Financial is a member-owned independent brokerage.
Fort Myers, Florida-based LTC Global provides capital to insurance agents and agencies through lead and marketing finance programs, commission advance programs and renewal commission purchases.
People
National
Zurich North America, headquartered in Schaumburg, Illinois, promoted Chris Nolan to head of surety in U.S. national accounts.
Nolan, who is based in New Jersey, succeeds Bob Murray, who retired in June. Nolan now oversees both contract and commercial surety. He previously was head of large contract surety at Zurich.
Everest Insurance, the insurance division of Everest Group Ltd., headquartered in Warren, New Jersey, named Brian Zink senior vice president and head of Everest Specialty Underwriters (ESU) and U.S. Financial Lines.
Zink joins Everest from Zurich where he was head of financial lines for the company’s U.S. national accounts.
Rokstone, part of the Aventum Group, appointed Laurence (Larry) Burrows as head of a new U.S. Excess Casualty division.
Burrows has over 15 years of experience specializing in U.S. casualty.
Canopius, based in Chicago, appointed Steve Mills as head of casualty
in the United States.
Mills, based in Atlanta, has over 30 years of industry experience. He most recently served as president of excess and surplus (E&S) at MGA startup Ledgebrook.
Alliant Insurance Services, headquartered in Irvine, California, hired Peter Miraglia as executive vice president, Alliant Specialty, within the company’s mergers and acquisitions vertical.
Specialty Insurance Group Inc. named four new regional vice presidents and two new underwriters.
Skyward Specialty named Gregg Callahan regional vice president in its northeast region in New England. Callahan spent the last 27 years at Liberty Mutual Insurance, specializing in contract surety.
The company named Larry Mastalski as regional vice president in the Texas and Midwest territories. With over 33 years of specialized surety expertise, Mastalski joins from Markel, where he served as vice president branch manager.
Leung as senior vice president in its private equity practice.
Leung brings over two decades of private equity and mergers and acquisitions expertise. He previously served as head of analytics and as a project manager at Willis of New York.
Effective January 1, 2025, Falvey Insurance Group
CEO Mike Falvey will transition to executive chairman.
Based in New York, Miraglia brings over three decades of insurance industry experience with specialized expertise in private equity transactions.
Alliant also hired Mark Rusas as executive vice president and managing director of Alliant Specialty within the company’s mergers and acquisitions vertical. Rusas has over 30 years of industry experience. He is based in New York,
Hiscox appointed Mike Maletsky vice president, practice leader – technology E&O and cyber.
Maletsky brings over 18 years of industry experience to his role, most recently serving as assistant vice president, digital products, at Embroker.
Houston-based Skyward
Sam Allison joined Skyward Specialty as assistant regional vice president in Texas. Allison has 21 years of experience in the Texas surety market, most recently serving as regional bond manager for Main Street America Group.
Sean Fallows was hired as regional assistant vice president in the Pacific Northwest region. Fallows has over 18 years of specialized surety expertise, most recently serving as Pacific Northwest branch manager for Intact Insurance Specialty Solutions.
Joe Waynauskas, a 22-year surety veteran, joins Skyward Specialty as senior underwriter in the North Central region.
Joe Michalewsky joins the Northeast region as an underwriter, following two years of surety experience at Sompo International.
East
Risk Strategies, headquartered in Boston, appointed Bradford
Falvey founded the North Kingstown, Rhode Islandbased company in 1995 with just two employees.
Moving into the CEO position will be Jack Falvey, who is currently the group’s chief operating officer.
Lawley, headquartered in Buffalo, New York, named Phil Scaffidi as employee benefits consultant in Buffalo; Joe Moran as an insurance advisor in Florham Park, New Jersey; and Carl Belizaire as insurance advisor in Buffalo.
Before Lawley, Scaffidi served as senior enterprise account manager at Kangarootime software company and operations manager at Modern Disposal Services Inc.
With nearly a decade of experience, Moran most
Brian Zink
Laurence Burrorws
Steve Mills
Peter Miraglia
Mark Rusas
Mike Maletsky
Bradford Leung
Mike Falvey
Phil Scaffidi
Joe Moran
recently served as vice president of property/casualty at USI Insurance Services.
Belizaire will transition from a Lawley surety specialist to an insurance advisor serving the Buffalo community. Before joining Lawley, Belizaire was an adjunct mathematics professor at Baruch College.
recently served as chief underwriting officer of reinsurer SCOR’s U.S. operations.
Aguirre to lead its newly launched Alliant Commercial Surety group.
Alliant Insurance Services, headquartered in Irvine, California, hired Anthony DiPhilippo as vice president, employee benefits, health and welfare consultant within its employee benefits group, serving the Northeast.
DiPhilippo most recently served as an employee benefits account executive at Cross Insurance and previously worked in financial services at Prudential Financial.
Alliant also hired Todd Cormier as senior vice president within the Alliant Americas division.
Based in Boston, Cormier has spent more than two decades in the industry, most recently serving as vice president at HUB International.
Midwest
Aon plc named Nick Nudo as senior managing director of reinsurance for Chicago.
Based in Chicago, Nudo most
Powers Insurance & Risk Management, headquartered in St. Louis, promoted Rachel Winkelmann to commercial lines account executive and trainer.
Winkelmann previously served as a commercial lines account manager at Powers.
Property/casualty insurer NI Holdings Inc., headquartered in Fargo, North Dakota, named Cindy L. Launer as interim CEO.
Michael J. Alexander has stepped down from his role as president and CEO, and board member of the company.
Launer has served as an independent non-executive director on NI Holdings’ board since November 2019 and brings 18 years of experience in the insurance industry.
South Central
FTI Consulting Inc., headquartered in Washington, appointed Thomas Thompson as a senior managing director in Houston.
Thompson has more than three decades of experience in the construction and engineering industries. Before joining FTI, he was a managing director at Ankura.
Alliant Insurance Services named Alliant Specialty Senior Vice President Orlando
Based in Houston, Aguirre joined Alliant as senior vice president in 2021 and has experience in the energy, healthcare and commercial surety industries.
Paula Cooley joined Graham-Rogers Insurance, headquartered in Bartlesville, Oklahoma, as a transportation new business underwriter.
Cooley has over 40 years of property/casualty experience, most recently serving as senior transportation/garage underwriter at Risk Placement Services Inc.
Graham-Rogers Insurance is a member of Bridge Specialty Group and a division of Brown & Brown Insurance.
Southeast Hub
International Ltd., the global insurance broker, named Tim Smith president and CEO of its operations in the Carolinas.
Smith was previously the chief sales officer at Hub International Carolinas and was a Charlotte-area market leader.
West
Embroker, headquartered in San Francisco, appointed Andrew (Andy) Lea chief insurance officer and promoted Kristy Malm to chief operating officer.
Lea has more than two decades of insurance experience. He most recently served as chief underwriting officer at Vantage Risk.
Malm previously served as vice president of operations at Embroker. She also has served as COO at HearMe, COO and chief financial officer at Ennabl, and national director of operations at Marsh & McLennan Agency.
Ryan Specialty, headquartered in Chicago, promoted Jason Lentz to president of RT Specialty High Net Worth, RT Specialty’s national high net worth personal lines practice.
Lentz is based in Las Vegas, Nevada. He has nearly two decades of experience in the insurance industry and most recently served as Ryan’s national practice leader, private client group, and as senior vice president of personal lines.
The Liberty Company named Erin Gaston managing director, entertainment and Alex Johnson vice president and producer.
Gaston, who is based in California, previously served as managing director at Momentous Insurance Brokerage, a Marsh & McLennan Agency LLC.
Based in California, Johnson previously served as senior advisor, commercial risk at Burnham WGB Insurance Solutions.
The Liberty Company is headquartered in Gainesville, Florida.
Anthony DiPhilippo
Todd Cormier Nick Nudo
Rachel Winkelmann
Thomas Thompson
Tim Smith
Andrew Lea
Kristy Malm
Erin Gaston
News & Markets
US Nuclear Verdicts Break Records and Drive Social Inflation to 7% in 2023: Report
By L.S. Howard
Nuclear verdicts in the United States are breaking records with 27 court cases each awarding compensation of more than $100 million during 2023, according to Swiss Re executives.
Social inflation in the U.S. rose to 7% in 2023 — a 20-year high — a situation that is being driven by litigation costs from mega-jury awards, said Dr. Jérôme Jean Haegeli, group chief economist, for Swiss Re, who spoke during a press briefing at the reinsurance Rendez-Vous de Septembre in Monaco.
Joining Haegeli at the briefing to discuss a Swiss Re report on social inflation and litigation trends was Gianfranco Lot, chief underwriting officer, property/casualty reinsurance.
“Social inflation is super costly for consumers, corporations and insurance companies as well,” Haegeli said, noting that social inflation — which Swiss Re defines as the increasing severity of liability claims beyond that explained by economic factors — now exceeds economic inflation as the main casualty claims driver, leading to underwriting losses, higher premiums and reduced insurance capacity.
“US commercial casualty insurance losses grew by an average annual rate of 11% over the last five years, reaching US$143 billion in 2023,” said Swiss Re’s sigma report, titled “Litigation costs drive claims inflation: indexing liability loss trends.”
To put this number into context, the U.S. casualty claims total was 33% more than last year’s global insured losses from natural catastrophes of $108 billion in 2023, the report said, noting that the current cycle of social inflation has existed in the U.S. since around 2015. (Other social inflation cycles have occurred in the mid-1980s and the late 1990s. See graphic.)
Source: S&P Capital IQ, Swiss Re Institute. Note: A&E refers to asbestos and environmental. Claims severity proxy is on a calendar year basis.
When insurers and reinsurers began incurring losses and saw these negative trends during the current cycle, they started to re-underwrite their books and cut limits, which has had an impact on the supply of insurance and reinsurance, Lot explained during the press briefing.
The report noted median limits purchased for liability towers (or stacked liability insurance programs) declined by an average of nearly 25% in nominal terms and 46% in inflation-adjusted terms between 2014 and 2023, which was a period of increasing loss costs.
Lot pointed to industry sectors that have seen casualty limits drop precipitously over the past decade, such as the construction industry, which has seen limits drop by approximately 60%, manufacturing by 39% and the chemical industry by 50%. In addition, the number of insurance panel participants has risen by 25% over the past 10 years.
“The reason for the increase [in panelists] is that social inflation is leading to reduced capacity in the insurance market,” a Swiss Re representative explained in an emailed statement. “The rate environment has not kept up with loss trends, which means that insurance companies need to find ways of reducing exposure. One way is to limit the shares that insurers are willing to sign in the programs. The need for insurance is still there, so to be able to place the risk in insurance programs, more
panelists are needed.”
At the same time, insurers responded by raising premiums. “[B]y the first half of 2024, US liability premium rate increases had re-accelerated to 7% year-on-year, from 3–5% in the preceding six quarters, defying a broader deceleration of commercial insurance rates,” Swiss Re said in the report.
“Insurance rate increases have not compensated for rising loss costs, raising combined ratios for bodily injury-exposed liability lines and delivering cumulative underwriting losses of US$43 billion between 2019-2023,” said Haegeli and Lot in their presentation.
The report explained that the five-year average (2019–2023) direct combined ratios (via exposure to bodily injury claims) have been 105% for other liability occurrence, 109% for commercial auto liability, and 106% for medical malpractice, with
cumulative underwriting losses for these three lines over the same period totaling $43 billion.
Haegeli noted the 7% rise in social inflation in the U.S. in 2023 is “double the size of what has been seen in the last 10 years, but it’s not reflected if you look at the insurance rates.”
The report cautioned that social inflation ultimately can lead to insolvency for insurers, reinsurers and their customers.
“Persistent and underpriced social inflation can ultimately affect the insurance industry’s ability to provide risk transfer, the lack of which causes significant disruption at local and national level,” the authors said. “For example, one of the main causes of the collapse of Australian insurer HIH in 2001 was persistent under-reserving of long-tail lines, specifically on account of an under-estimation of the effects of social inflation.”
Pressure on Trucking Industry
Haegeli said the trucking industry is one of the sectors most affected by mega verdicts and, as a result, could be at risk of insolvency if they can’t buy adequate insurance coverage.
“If you don’t have the capacity for the right price to provide to the insureds, then the real economy is always going to continued on page 22
Source: Chubb Liability Limit Benchmark Report, Swiss Re Institute
Dr. Jérôme Jean Haegeli
News & Markets
continued from page 21
be exposed more to bankruptcies,” he said during the press briefing. “So it’s not just the cost of insurance which matters here. If [insurance is] less available because the price is not right, then you are exposing companies to more insolvencies, so corporate America is also exposed.”
The report noted some trucking companies are reducing excess coverage to manage costs, as these covers are seeing rate increases of more than 75%.
“According to a 2023 report by the US Chamber for Commerce Institute for Legal Reform, there are fewer insurers in the trucking market today, and many of the ones left now offer reduced coverage,” the report added.
“This means trucking companies are finding it increasingly difficult to secure adequate insurance cover, and are being forced to assume more risk than they have in the past.”
Drivers of Social Inflation
The Swiss Re report attributed the outsized jury awards in the United States principally to bodily injury cases, which can generate outsized awards.
“Driving factors include the trial bar’s use of psychology-based strategies and litigation funding, as well as jurors’
attitudes to issues like social injustice and negative sentiment toward corporations,” it states.
While the U.S. is the epicenter of social inflation — and it is a predominantly U.S. phenomenon — other countries such as Australia, UK and Canada show signs of social inflation and share some of the driving forces such as the expansion of mass tort, but these countries are “not as exposed to runaway awards,” said the report.
“Tort law in continental Europe differs significantly from the US, primarily due to the absence of juries and the influence of civil law traditions. In most European countries, tort cases are adjudicated by professional judges rather than juries,” the report said, acknowledging, however, that class actions and litigation funding are growing rapidly in Europe.
‘Litigation funders back claims in many areas relevant to insurers such as trucking accidents, product liability mass tort, and bodily injury and medical liability claims.’
The report went on to discuss the impact of third-party litigation funding (TPLF) — a process through which commercial or consumer litigants and law firms finance their case and other legal costs with the help of third-party investors.
“Litigation funders back claims in many
areas relevant to insurers such as trucking accidents, product liability mass tort, and bodily injury and medical liability claims. TPLF is correlated with higher awards, longer cases and greater legal expense. Litigation funding is also inefficient as more than half of the awards remain within the professional litigation industry,” the report said.
“We expect social inflation in the US to continue for the foreseeable future, and that it will remain mostly a US phenomenon,” said Swiss Re in a commentary accompanying the report. “While economic inflation is abating, there are no signs of a let up in social inflation pressures. And in our view, the current rate of increase is unsustainable: We estimate the impact on casualty business in the US will outweigh the earnings benefit of higher interest rates within one to two years.”
Possible Solutions?
The Swiss Re report cited several steps that could help resolve the growing problem of social inflation, such as “tort reform, regulation of the use of third-party litigation funding, in particular around disclosure rules, risk mitigation at the corporate level and, in the insurance industry, use of new technology and data analytics to improve underwriting discipline and claims management, and more proactive preparation of defense cases insurance.”
The first significant wave (cycle) of runaway social inflation occurred during the U.S. liability crisis of the 1980s when changes to legislation and case law significantly expanded the scope of tort liability, Swiss Re noted.
“Corporations and their insurers were retroactively held liable for environmental damage and huge asbestos-related claims,” the report explained.
The market eventually returned to balance when tort reform measures slowed rapidly rising liability costs, while insurers and reinsurers moved to re-underwrite their asbestos and environmental risks.
“A subsequent focus on insurability and alternative risk transfer restored market balance,” the report said.
Gianfranco Lot
Spotlight: Enviromental
Underwriters Wary of PFAS Amid ‘Superstorm’ of Litigation, Regulation
By Allen Laman
As litigation and regulation increase around per- and polyfluoroalkyl substances (PFAS), insurance underwriting is tightening across lines. Insurance professionals who specialize in PFAS say insurers are mandating coverage exclusions and, in some cases, declining to write liability policies at all in PFASexposed industries.
Robin Kelliher, environmental solutions group counsel at USI, described the current insurance landscape as being hit by a “superstorm” of factors related to PFAS.
“The insurance underwriters are just seeing lawsuits,
lawsuits, lawsuits,” she said, and they don’t know how those lawsuits are going to play out.
Industrial manufacturing company 3M reached a $10-plus billion settlement in June 2023 with a collection of U.S. public water systems to resolve PFAS water pollution claims. Around the same time, Dupont reached an estimated $1.19 billion settlement with a collection of U.S. public drinking water systems.
A new EPA rule and recent Insurance Services Office changes are also shaping how underwriters view the risk. Just a few months ago, the EPA set a limit on how much PFAS can be in drinking water. And, last year, ISO published endorse-
ments broadly excluding PFASrelated claims for insurers to use in CGL policies.
“It touches everything,” Kelliher said of PFAS. “And the carriers are seeing the lawsuits. Their insureds are being sued, and they’re submitting them as claims. That’s why the carriers are reacting the way they are. Because it’s coming from all different avenues.”
The EPA reports that PFAS are widely used, long-lasting chemicals, the components of which break down very slowly over time. Studies have shown that exposure to the chemicals may be linked to harmful effects in humans and animals.
PFAS can be found in drinking water, fire extinguishing
Related articles found on Carrier Management:
• Why Insurers Should Develop Strategies for Estimating PFAS Loss Reserves (carriermanagement.com)
• PFAS by the Numbers: $165B Ground-Up* Litigation Losses Possible (carriermanagement.com)
• The Next PFAS? What Liability Insurance Underwriters Should Know About Microplastics (carriermanagement. com)
foam, food, personal care products and more. Per the EPA, it can be found in the air and soil. On its website, the EPA said current peer-reviewed studies link certain levels of exposure to reproductive and developmental effects, as well as an increased risk of some cancers and reduced immune system ability.
Lisa Williams, global head of casualty at Zurich Insurance Group, explained that PFAS exposure predominantly tends to fall in two major categories: premises exposure and products liability exposure.
A recent USI report said litigation is prompting the reassessment of approaches to PFAS underwriting, coverage, risk management and claim handling. The report says that most insurers are mandating exclusions on general liability and products liability policies on all renewal accounts, regardless of industry or exposure to loss, but especially manufacturing, hospitality, continued on page 24
Spotlight: Enviromental
continued from page 23
retail and owners of real estate.
USI anticipates that finding PFAS coverage in the environmental insurance marketplace will be more difficult for product exposure, including supply chain and distribution risks and site-specific risks.
Kelliher said PFAS surfaced on pollution liability underwriters’ radar around 2018 — and as state regulations on the coasts began to surface, carriers began to pay attention. Underwriters used to be more willing to write the exposure, she said, but that has changed
in the past year because of the liability that stems from the Comprehensive Environmental Response, Compensation, and Liability Act.
“When the EPA started talking about adding PFAS as a hazardous substance under CERCLA, then, all of a sudden, the underwriting scrutiny became tenfold more,” Kelliher said. “And we started seeing PFAS exclusions being added to our pollution policies.” Increased litigation is also creating what she described as a “reactive” market.
Kelliher has seen exclusions extend beyond the pollution liability line and into contracting operations, product liability and more. She sees a connection between this and ISO’s approval of PFAS-specific exclusions for commercial general liability and umbrella policies.
“So, this year, all of our clients are starting to see, on their standard lines of business like their GL policies, a PFAS exclusion,” she said. That “is really causing a lot more havoc in the marketplace.”
Kelliher said she doesn’t know if carriers are adding PFAS exclusions carte blanche to standard policies, “but if you’re a manufacturer, you’re seeing a PFAS exclusion. And it’s for your products, so that becomes really problematic for our insureds.”
This story is an excerpt from an article first published in Carrier Management, Insurance Journal’s sister publication. To read the full story, visit: https:// www.carriermanagement.com/ features/2024/08/27/265767.htm.
Specialized protection serves complex needs.
The world is evolving faster than ever, calling us to keep modernizing how we protect businesses and individuals. Nationwide® was born from the idea of meeting the specialized needs of clients. After nearly a century, we’re finding even more ways to deliver expertise, customer-centric coverage, and innovative risk prevention so you can better serve your clients with confidence.
Spotlight: Workers’ Compensation
NCCI Unveils New, More Precise Workers’ Comp Medical Price Index
By William Rabb
In recent years, workers’ compensation insurers have struggled to accurately gauge the precise trends in medical costs, and have had to rely on indexes that weren’t quite on-point: The U.S. Consumer Price Index is geared toward what patients pay and does not include Medicare’s reimbursement rates, which so many states now tie their workers’ comp fee schedules to.
And the Producer Price Index looks only at the paid prices of medical services, but not durable medical equipment, which makes up 15% of workers’ comp medical spending, nor prescription drug prices. What’s known as the Personal Health Care Index (PHC) gets closest to comp costs, but it is produced only once a year, with a nine-month lag time.
Comes now the National Council on Compensation Insurance with a new measuring stick, the Workers’ Compensation Weighted Medical Price Index. It was unveiled recently and has received favorable feedback from carriers, Stephen Cooper, NCCI’s executive director and senior economist, said in a webinar.
“By taking the PHC and its construction, we’ve gone and re-created a similar index using similar methodology,” Cooper said.
Adding bits and pieces from the other price indexes, along with information from NCCI’s own data calls with insurers, allows it to build a more accu-
rate measure, and it is available quarterly. The data call is key because it includes all reported medical transactions in workers’ comp across 38 NCCI member states.
“We can see exactly where all of those dollars are flowing,” Cooper said.
The data is weighted toward workers’ comp medical treatments, unlike other indexes. The Consumer Price Index, for example, is not a good reflection of comp costs because it is skewed by huge expenses that the general patient population sees, such as cancer treatments or lengthy hospital stays.
Workers’ compensation medical, on the other hand, is made up mostly of short-term treatment of relatively minor conditions, as well as doctor
visits (40% of comp medical costs) and hospital outpatient services (27%). The NCCI also has thrown in long-term care costs, including home health services, hospice care and skilled nursing, Cooper explained.
‘We can see exactly where all of those dollars are flowing.’
The new window should provide a more precision tool for insurers. The change was necessitated in part by the COVID-19 pandemic.
Historically, actuaries could look at the CPI and simply add a couple of percentage points to get a good idea of medical inflation, Cooper said.
Rusty Reid, CEO and chairman
But when the pandemic hit, everything changed. General inflation skyrocketed nationwide, but medical inflation rose only slightly in 2021 and 2022, Cooper said. That has required a new model to help insurers plan for loss costs and rates.
Although NCCI will compile its data on a monthly basis, it will be published quarterly.
“We don’t want to be too reactive to one month’s data,” he said.
The index cannot be broken down to show inflation in individual states. But carriers can utilize a spreadsheet to help build their own database with monthly updates. The new index is available to NCCI members on the council’s website, along with more reports about medical inflation.
My New Markets
Multi-Family Commercial Property Program
Market Detail: Amalgamated Insurance Underwriters offers a commercial property program for hard to place multi-family habitational/commercial properties. This program is a fit for older risks made of frame, JM, or MNC construction that can’t find adequate placement in the admitted marketplace. Program appetite includes all construction classes of well-managed habitational properties, as well as other conventional commercial property risks. The program provides adequate capacity, therefore, allowing the consideration of larger per-location risks and property schedules. Highlights: all perils; broad risk appetite; exclusive market; expedited underwriting and quoting process; $500 million blanket limit; no co-insurance; $50 million flood sublimit in non-critical flood zones; $50 million earthquake sublimit excluding California, Alaska, Hawaii, Pacific Northwest and New Madrid seismic zones; EQSL in all states; ordinance or law: coverage A $500 million, coverage B & C - $15 million for each line; $100 million terrorism sublimit; $100 million boiler and machinery sublimit. Appetite: minimum TIV $5 million; older and newer well-managed frame multi-family apartment complexes; updated within 20 years; high-rise MNC multi-family apartment buildings; HOAs and condo associations; LROs, office buildings, and other commercial risks. Has pen; appointment required.
Available Limits: $500 million blanket limit; $50 million flood sublimit in non-critical flood zones; $50 million earthquake sublimit excluding California, Alaska, Hawaii, Pacific Northwest and New Madrid seismic zones; ordinance or law: coverage A $500 million, coverage B & C - $15 million for each line; $100 million terrorism sublimit; $100 million boiler and machinery sublimit.
Carrier: Several “A” rated domestic and London based carriers; non-admitted; rated A.
States: Available in Arizona, California, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming. Contact: Joseph Indig; hello@aiu-usa.com; 845-4260400.
Insurance Agents/Brokers E&O and Cyber
Market Detail: eSpecialty Insurance offers insurance agents and brokers E&O and cyber insurance. Highlights: expertise to evaluate your exposures; multiple proposals from top competitive insurers; guidance to choose the best combination of coverage and price; personalized service tailored to your needs. We serve a wide range of insurance entities, including insurance agents/brokers, TPAs, risk management consultants, wholesale/ MGAs/program administrators, insurtechs, and many more. Special situations: hardto-place risks; startups/new operations; unique products and services; claims; technology-driven organizations. Why choose us: expertise in specialty insurance products and markets; access to underwriters; reliable solutions for complex insurance exposures. Let us find the right coverage for your unique needs. Available Limits: Not disclosed. Carrier: Not disclosed. States: Available in District of Columbia and in all states except Alaska.
Market Detail: Drawing on decades of experience, School Bus Insurance Solutions (SBIS) from NSM Insurance Group offers best-in-class coverages and risk management services that are tailored to meet the unique needs of risks in this niche.*Our commitment to serving and growing in this market means you and your clients can count on us for
consistency, stability and offerings that are ahead of the curve.* Eligible risks: school bus contractors; fleets of 10-100 vehicles. Coverages/limits: general liability – limits up to $1 million / $3 million; abuse and molestation – limits up to $1 million / $2 million; auto liability; automobile; auto physical damage; property and inland marine; crime. Highlights: underwriting team with decades of commercial auto experience; best-in-class coverages and risk management services; competitive pricing; in-house claims team; superior service; installment plans available (for accounts that generate $2,000+ in premium). Has pen; appointment required.
Available Limits: General liability – limits up to $1 million / $3 million; abuse and molestation – limits up to $1 million / $2 million.
Carrier: Admitted; rated A++ by AM Best. States: Available in all states excluding Florida, Louisiana, Michigan, Nevada and New York. Also available in District of Columbia.
Silver Energy Insurance Agency in Lexington, Kentucky
Bronze Brightway, Jacksonville, Florida
WEST
Gold Morris & Garritano, San Luis Obispo, California
Silver CMR Risk & Insurance Services Inc., San Diego, California
Bronze Heritage Insurance Agency, Chico, California
The votes are in for the 2024 Best Independent Insurance Agency to Work For survey by Insurance Journal.
Employees in 2024 highlighted the importance of competitive salaries, employee benefits, training and education, resources, and other employee perks as drivers of satisfaction in the workplace. But it’s not all about compensation and benefits. Happiness in the workplace has a lot to do with people, relationships and the agency’s culture. Employees of the winning agencies cite high personal job satisfaction; rate their relationships with their immediate boss or supervisor as positive; and express a high opinion of their agency’s owner or principals and their agency’s reputation in the community.
Many employees are grateful the best agency owners
support local charities and the community in which they live. Employees are grateful for the opportunities their agencies provide for them to participate in community service. Employees take pride in working for agencies that are respected and hold strong values and ethics.
Employees appreciate the generosity of their agency owners in sharing revenues in the form of bonuses and trips.
The best agencies also provide ways to help their employees grow — by giving them the tools and technology they need, and supporting them with education, training, annual and performance reviews and, in some cases, mentors.
The survey results clearly show employees value this support.
As expected, the winning
agencies score high for overall employee benefits including wellness programs and for working conditions including remote work options, flextime and other alternative schedules that allow employees to embrace work-life balance.
The best agencies to work for also provide employees with a strong sense of purpose in their profession and deliver a workplace environment where employees feel supported wholeheartedly by management and their peers. Many of the employees say they feel like family in their agencies.
Insurance Journal wishes to thank the thousands of customer service representatives, account managers, producers, managers and other agency staff who took the time to nominate their independent insurance agency in this year’s survey.
Special Report: Best Agency to Work For
Overall
It’s All in the Family at Higginbotham
By Chad Hemenway
There’s a certain “something” about Rusty Reid that makes it clear why folks might like to work for him as chief executive and chairman of Higginbotham.
He feels like a buddy, a big brother, maybe an uncle. It takes a while to get over the small talk with Reid, but that’s not a problem at all. In fact, it’s downright comfortable. And it may be, at least in part, why so many of Higginbotham’s employees feel as if they belong to a family.
Fort Worth, Texas-based Higginbotham is the overall Gold winner in Insurance Journal’s annual recognition of Best Agencies to Work For, and if a word cloud was derived from employee responses to IJ’s Best Agencies survey, “family” would most certainly be prominent.
“Higginbotham treats their employees like family,” one employee wrote. “Details like performance reviews and your salary become a formality when you are simply fulfilled at work, however, they handle them great too.”
Another employee typed, “Higginbotham is a family, and their entire business structure is built on family values. They truly care about their employees, communities, business partners and clients.”
“It’s a people business. You hear it a lot about our industry, but we think it needs to start from within,” said Reid, who joined Higginbotham in late 1986 and became CEO in 1989.
Higginbotham Fort Worth, Texas
Reid, CEO & Chairman, Higginbotham
Reid spent some time in the industry before he landed at Higginbotham and found a mentor in Bill Stroud, the nephew of Paul C. Higginbotham, who opened the insurance agency in 1948. Stroud purchased the agency in 1962 and ran it for the next 27 years.
“During that short stint in the insurance-carrier community (prior to Higginbotham), I saw that when people didn’t get equity, they left,” Reid recalled. “They packed up their bags and become a competitor. Good people — executives to support staff — walking out the door.”
Higginbotham became an employee stock ownership plan (ESOP) when Stroud sold the company and Reid was named CEO. But he doesn’t hoard the credit. Reid name drops constantly when remembering how Higginbotham constructed its values — from Jim Hubbard, who co-founded Higginbotham’s financial services division in 1989 (“He’d say, ‘If you can’t have Thanksgiving dinner with someone, why would you want them as a partner?’”), to
friend Mike Williams, who led the University of North Texas Health Science Center with the same values, to COO Mikey Shepard, who as chief people officer encouraged the agency to “put pen to paper on this.”
“Let’s not talk about it in the abstract anymore. Let’s really bring it down to tangible things,” Reid said. “A lot of people got interviewed and we really collectively built our values and the first one was, ‘Family to our employees.’”
It’s no more elegant, Reid explained, than, “Treat people with respect. Lift them up.”
Employee turnover is very low even though the agency has been acquisitive. “But we are very much a high-growth
firm in and around organic growth, and that’s a function of new business and great retention,” Reid added. “One of the elements to our secret sauce for retention is we keep people. We reward them above and beyond a paycheck (as an ESOP).”
Higginbotham extends the same family feel to its communities with service and monetary donations. It’s another company value employees pointed out. “We have a Higginbotham Community Fund that is funded by employee donations, payroll deductions, etc. to grant donations to nonprofit organizations,” one wrote. “The grant recipients do not even have to be a client of Higg. So many nonprofits have received grants from us who are not even a prospect of ours. I don’t know any other agencies willing to put others first like Higginbotham.”
Higginbotham team supports SPCA.
Rusty
Special Report: Best Agency to Work For
New York
At Mackoul Risk Solutions, ‘Employees Come First’
By Allen Laman
Instead of becoming a major league umpire, Ed Mackoul chose to help his father build an insurance empire. Ed wasn’t sure how his life would turn out before joining Mackoul & Associates in 1995. College didn’t give him an answer. So, while he was working as a bartender, he had decided to travel south to Florida to become a professional baseball official.
Before Ed could be placed in the minor league umpire development program, though, his father, Robert, approached him with an offer. “Why don’t you just join the business with me, and we’ll build an empire?” Robert asked.
54 employees praised the agency for fostering a supportive work environment that emphasizes recognition and appreciation.
Many respondents said they feel valued and are given professional growth opportunities. “This agency genuinely cares about the employees,” one wrote. “Ed once said, ‘The customer doesn’t come first to me, you all do.’ I will never forget that. Management really has our back.”
Helping people and competing within the industry hooked Ed on insurance when he began working at the agency. The overwhelming majority of the agency’s book is focused on insuring co-ops and condos. Staff also works with clients to secure homeowner, auto and business insurance.
workstations available in the main Long Island office should employees choose to return to the office for a day or more. Productivity is up, employees are happier and the agency’s hiring pool increased.
‘Management really has our back.’
“We never really saw a reason to come back,” Ed Mackoul said. He described his employees as “very loyal,” and he trusted them to work remotely.
ed that working remotely “has not impaired management’s ability to foster a family style work environment, which makes daily communication effortless and the workflow stronger.”
Ed said “yes,” and that independent insurance agency’s book of business has since grown to $125 million in premium across three locations. After holding the president title and serving as partner alongside his father, Ed became CEO and changed the name to Mackoul Risk Solutions in 2018.
Not everything has changed. Mackoul’s leader still believes in treating his employees right. That philosophy has led the Long Beach, New York-based agency to secure the 2024 Gold Award for the East region as a result of Insurance Journal’s 2024 Best Insurance Agencies to Work For survey. In their anonymous responses to the survey, a selection of Mackoul’s
Ed credited Robert with instilling in him a drive to prioritize employee well-being.
“Our culture came from my father,” Ed explained. “[He] really instituted a lot of the things we still do today, although some things have changed as we’ve added. He is the absolute reason why our employees come first.”
Mackoul Risk Associates operated on a hybrid work basis before COVID-19 surfaced in early 2020. Since then, the staff has had the option to work fully remote, with 10
In their survey responses, one employee said that “although we work remotely, Mackoul Risk Solutions still feels like a family.” Another said that the remote work “is incredible and only helps us all be happier in our roles and to permit us to have a fantastic work/life balance.” A third add-
When he heard that his agency was nominated for this award, Ed Mackoul said he felt ecstatic. Mackoul Risk Solutions has won several awards over the years, including a Top 100 Independent Agencies nod from Insurance Journal in August. “This one means way more,” Mackoul said of the Best Agencies to Work For honor. “Because we are nominated by our staff, which means that they are happy. And in the long run, that makes me very, very happy.”
Mackoul Risk Solutions Long Beach,
Mackoul staff
Ed Mackoul CEO, Mackoul & Associates
Special Report: Best Agency to Work For
Midwest
Robertson Ryan Insurance Mikwaukee, Wisconsin
Flexibility, Employee Engagement Rule at Robertson Ryan Insurance
By Jahna Jacobson
What makes Robertson Ryan Insurance a great place to work?
The freedom to do the job, do it well and still have the time and energy for the life you want to lead, according to folks who work for the agency.
“Robertson Ryan is a great agency to work for. They are very flexible, and there is no micromanagement that takes place in this agency,” said one employee responding Insurance Journal's annual Best Agencies to Work For survey. “The agency is all about family and health and taking care of you.”
Robertson Ryan has been selected as IJ’s 2024 Gold Best Agency to Work For in the Midwest based on employee submissions to the survey.
Headquartered in Milwaukee, Wisconsin, the agency employs approximately 390 people who work in the office, from home or as hybrid workers. The agency adopted the flexible work model long before the COVID-19 pandemic forced businesses to expand their work definitions, said CEO Chris Illman.
“The company has 140 brokers/agents, and our uniqueness is that they all own their own book of business,” he said. “They care so much about their clients, they are forward-thinking and entrepreneurial.”
Employees cite this flexibility and dedication to work/life balance as a top reason the agency is a great place to work.
Investing in the right people is also a critical factor.
“We have a phenomenal HR department, and they are viewed as employee engagement,” Illman said. “They are truly viewed as a partner to the employee, to make their job easier. Our HR has taken on a great people leadership role versus traditional HR.”
The company sees less than 3% annual turnover, and that includes retirement, Illman said. And RRI’s renowned culture makes it easy to fill openings with top talent.
“Attracting talent starts with knowing we are flexible,” Illman said. “You have to be able to fit into what a really good new hire wants. We’ll adapt to what that employee wants and needs and get them into the right role.”
RRI’s remote work opportunity is one of the best, said one nominating employee.
“With plenty of the industry’s workforce being forced into and then out of remote work due to COVID, RRI continues to see the value in finding the right people to hire for their remote positions,” they said. “Their training, set-up, and support for their remote workforce is what makes them far better than other remote arrangements I’ve worked for in the past. Despite being a remote worker, I still have all of the same opportunities as those in-house employees.”
Employee engagement is designed to support growth and success, they added. “Regular company-wide virtual conferences that have nothing to do with insurance have been extremely successful, fun and much needed in this hard market. There has never been a time where I didn’t feel valued or respected as an employee with Robertson Ryan.”
make sure they keep getting better year after year.”
With employees working remotely, hybrid and in the office, it can be a challenging balancing act, Illman said. “It’s not easy — there are different needs and wants with each of those groups,” he said.
“You’ve got to roll up your sleeves and do the tough things,” he added. “They know they are empowered, that they work independently, that we’re open and flexible, pay the right wages, offer great benefits and
Employees are proud that the agency has garnered other awards for its work culture, as well. “Winning Top Workplace by the Milwaukee Journal Sentinel for 2023 and 2024 says it all,” said one employee. “Winning a top spot like this not once, but twice, proves the positive culture at RRI isn’t a flash in the pan; rather, it is a philosophy that is embedded in the company’s fabric and influences the way RRI operates internally with employees and externally with customers.”
It was the relationship side of the business that drew Illman to insurance, he said.
“I love that it is relationship-focused — clients, employees, carriers. I think it’s one of the greatest industries in the world.”
Building the right team and company culture just makes it that much better. “Treat people the way you want to be treated, give them the right tools, let them know they are valued,” he said. “It’s somewhat a cliché, but if you are committed to taking care of your employees, they will take care of the clients. You’ve got to walk your talk.”
Robertson Ryan CEO Chris Illman
Special Report: Best Agency to Work For
South Central
CoVerica Insurance Dallas, Texas
Employee-Owned CoVerica Goes the Extra Mile
By Ezra Amacher
Earlier this year CoVerica Insurance rolled out an employee-owned stock program, giving the agency’s staff an opportunity to become part-owners of the organization.
That decision to become an employee-owned company gave CoVerica members an opportunity to buy into the company’s success and feel empowered to think and act as business owners.
“What really sets us apart is that we’re a company that’s dedicated to perpetuating the future of our employees,” said Eric Hurt, CoVerica sales director, personal lines. “When you’re here, everything you do matters.”
CoVerica’s investment in its employees has made the Dallas agency a regular presence on Insurance Journal’s Best
Agencies to Work For survey, and this year is no exception. CoVerica is the South Central Gold winner.
“To me it just demonstrates that the culture our founder and the leaders of our agency over the last 40 years have worked really hard to cultivate is really resonating with the staff and the employees,” said Rhonda Cox, CEO and president of CoVerica.
The agency’s culture is built around four precepts: Die to self (i.e., set aside your pride, biases, prejudices and personal history); Actions sought to support the best interests of all involved; Do the right things for the right reasons; and Conduct open and honest dialogue.
“Because of the simplicity of the four precepts, we really focus in on those day in and day out,” Cox said.
The fourth precept — open
and honest dialogue — comes through in weekly team meetings and quarterly company meetings, where CoVerica leaders focus an hour on being very transparent about the company’s financials, roadmaps and goals for the future.
CoVerica employees appreciate the transparency and feel like their thoughts or questions are recognized, multiple team members said in comments submitted to IJ’s Best Agencies to Work For survey.
“They’re open and honest with what happens in every aspect of the company,” one employee wrote. “They listen to our concerns and bring up how they are working on them and/or give us the opportunity to change things.”
CoVerica’s open and honest dialogue can be felt in how the company communicates with clients and business partners.
An employee added that the company’s decisions always have in mind what is best for the staff, what is best for the agency and what is best for partner carriers.
“Decisions are made in the best interests of all concerned. The culture is incredible and the culture is ultimately responsible for the team being the best that I have ever worked with in a 40+ year career,” the employee wrote.
One of the advantages of working at CoVerica, according
to employees, is the company’s emphasis on mentorship, training and education.
About a decade ago, CoVerica intentionally designated itself as a training agency with a focus on attracting new employees into the insurance industry. Over the last four years, CoVerica has created an internship program that has attracted more than 30 interns from Texas and neighboring states, with several becoming full-time employees.
If sales is not what an intern is cut out to do, they’re introduced to other areas throughout the organization like client service, technology and accounting.
“CoVerica has been the only company that has given me the opportunity to explore my talents and expand on them,” an employee wrote.
The average age at CoVerica has gone from approximately 50 to 37 years old.
Now that CoVerica is employee-owned, new employees are taught that every little thing they do is based on their investment in themselves and each other, said Hurt. “It’s not just coming to a company you work for. Employees can see how their contribution affects the bottom line and also how they can benefit as owners in CoVerica to empower them to go that extra mile.”
The team at CoVerica
Special Report: Best Agency to Work For
Southeast
Prestige Trucking Insurance Tamarac, Florida
Employee Well-Being Is a Priority at Prestige
By William Rabb
Finding insurance coverage for trucking firms could be considered a high-stress occupation. With the rise of nuclear lawsuit verdicts and “big-truck attorneys,” escalating premiums, and new state laws and regulations, it’s a lot to think about. But the challenges have not kept Prestige Trucking Insurance in Tamarac, Florida, from keeping its focus on the drivers behind the wheel — and on its employees.
“We prioritize our employee’s well-being by offering flexible work arrangements that cater to individual needs,” said agency owner Christina Downs. “We also renovated our office to include amenities that benefit our mental and physical health, which is very important to us all.”
The agency’s 67 employees seem to appreciate its priorities — so much so that Prestige was named Insurance Journal’s 2024 Gold winner for Best Agency to Work For in the Southeast. The company
received multiple, favorable comments from staff members and scored highly in the categories of working conditions and benefits.
“Prestige is an excellent company to work for. The work environment along with the people are all great,” one agency employee wrote in comments submitted in IJ’s Best Agencies to Work For survey. “Our leadership is dedicated to transparent communication and provides ample opportunities for career advancement. Employees are encouraged to pursue their passions and develop new skills through frequent trainings.”
Said another: “We are not the typical agency; we are a family.”
“I have worked for several insurance agencies,” another staffer noted. “All of these were strictly focused on the number of policies an agent would bind. These agencies did not have the knowledge, talent and departmentalization like Prestige Trucking. The owner places a premium on the well-being of its staff and producers. The amenities provided to the employees are unsurpassed, from birthdays to work anniversary recognitions and celebrations, this agency wants its employees and clients alike to feel special.” Downs founded
Prestige a decade ago — September 2024 marked its 10th anniversary.
“The best advice I would give is to prioritize your employees,” Downs said. “Build trust, have open communication and transparency. Create an environment where your employees look forward to coming in every day, and offer flexibility.”
Downs and Missy Fernandez, director of finance for the agency, said that focus on a healthy, happy workforce has translated directly into professional service for clients. Prestige believes strongly in providing the “Disney experience” for policyholders — exceptional customer service that accommodates clients’ changing needs — that was explained in “The Experience,” a book written by Bruce Loeffler and Brian Church.
Downs said it all began for
her at an early age, when she worked at a dealership.
“I quickly fell in love with helping people and explaining coverages,” Downs said. “I now sell commercial trucking insurance and enjoy it so much because I love helping and getting to know our truckers and assisting them to grow their business.”
Going forward, Downs said trucking insurance brokers and agents face some challenges, but the team is ready.
“I would say some of the challenges are the rising insurance costs, the regulatory changes, talent acquisition and retention,” the owner noted. “We meet these challenges by building strong relationships with our MGAs and finance companies, which grants our agency leverage to negotiate competitive rates and APRs. We do our best to keep our clients educated on risk management strategies that ultimately minimize their chance of a claim.”
Members of the Prestige Trucking Insurance team
Special Report: Best Agency to Work For
West
Morris & Garritano San Luis Obispo, California
Treating Employees Like Clients Is the Golden Rule at Morris & Garritano
M&G Employees
“open-door policy” from leaders, as well as their dedication to professional development.
By Don Jergler
Want a simple, yet effective agency management tip for making your employees happy? Treat them like customers. That mindset stood out among comments from employees who nominated Morris & Garritano in Insurance Journal’s 2024 Best Agency to Work For survey. M&G took home Gold — Best Agency West.
The San Luis Obispo, California-based agency employs 153 people, and it anticipates revenue for 2024 will hit $31.6 million, up from $29.3 million a year ago. The firm’s specialties include con-
struction, wine and agriculture, hospitality and food service, real estate/rental/lending, social services and healthcare, manufacturing, and retail and wholesale.
“Our agency stands out as one of the best places to work because of its deep commitment to both its employees and clients,” wrote one employee. “As one of California’s largest privately held insurance firms, we prioritize a culture of collaboration, innovation, and continuous growth. Employees are empowered with the resources and support needed to excel in their roles, fostering a strong sense of ownership and pride in their work.”
The employee described an
“We treat our employees like we treat clients,” said Kerry Morris, M&G’s chief operating officer. “We make their learning, their development a priority. Engagement’s a big deal. We try to understand what drives people, what brings people into work is different for everybody. They want different things. We make our employees feel as if they are our clients.”
She said the firm invests a lot of its resources on learning and development, and leaders regularly sit down with employees to do “career-pathing” to find out where they’re headed and where they want to go. “We try to make sure our employees have the resources that they need, that they’re learning,” she said.
Brendan Morris, who joined M&G in 1994, working alongside his dad, Greg Morris, explained the firm’s five core values: Do the right thing, love what you do, always be improving, go the extra mile and build collaborative relationships. “We also embrace flexibility, offering remote work options and flexible schedules to help our employees balance their professional and personal lives,” he added.
“M&G cares about its people — from the business side and the personal side,” one employee wrote. “They put a focus on career development and are constantly encouraging
people to learn and grow in a direction that fits both the agency and the employee. It is common to promote from within for roles within the agency, myself included. I started as a receptionist and now lead our marketing and communications teams. They provide opportunities for training and advancement, a forum to voice an opinion or recommendation and are truly committed to my professional growth.”
Being part of a “family” was another common theme. “M&G is the only employer that I’ve worked for in my 20-plus years in the industry who actually cares about their employees,” an employee wrote. “Their commitment to excellence is unrivaled, and they truly believe that all of us at M&G are what makes the company successful. The owners know you by name, and make you feel comfortable and welcomed no matter what the occasion. We are a family here at M&G and it’s truly an amazing place to work.”
Said another long-time insurance professional: “I’ve worked for many agencies during my 30-year career in insurance. ... This is by far the best agency I’ve worked for. The leaders in our company are invested in their employees and clients. I have learned so much from them and continue to be inspired by them daily.”
Kerry Morris, COO, and Brendan Morris, CEO, accepting Grand Opening Certificate from the Greater Irvine Chamber of Commerce.
Closer Look: Hotels & Motels
Insuring the Unique Risks of a Bed & Breakfast
Big brand hotels give the customer the exact experience that they expect. When you go to one in Florida, it’s essentially the same as going to one in Ohio. Boutique hotels are normally a bit more unique and offer an experience that is customized to that hotel in that area. Of course, many of those are being purchased by larger organizations and are becoming more of
a brand extension.
By Patrick Wraight
The bed and breakfast (B&B) is another kind of lodging altogether. It harkens back to hospitality in the past when inn owners lived at their inn and essentially welcomed people into their homes and gave them a nice place to stay for however long they stayed. It doesn’t take us all the way back because inns in 1780s America only sometimes offered private rooms or private beds for travelers. At least today, the only thing we might share is a bathroom.
The bed and breakfast offers accommodations that are as much experience as they are
a place to stay and because of that, they also have their share of different risk exposures. They have all of the same exposures as conventional hotels and motels. They have guests coming and going. They serve food. Many have an evening wine and cheese (or cocktails) service in the evening. But there are other risks that bB&Bs experience and they need help handling those risks.
One of them is not home sharing (sorry, Airbnb). We are dealing with a traditional bed and breakfast, not home-sharing risks, like Airbnb, VRBO, or any of the other types of services. They bring their own
risks to the party and that’s beyond what we want to deal with here.
People who engage in that activity have to deal with the intersection of their homeowners’ insurance and the company’s insurance policies, which may or may not cover all of their exposures, but we will deal with that risk another time.
Market Volatility
Every business must deal with the problem of market volatility. Prices never stay the same. Customer appetites and attitudes change. The economy gets stronger and weaker. Then
you might have the random world-level event that cancels people’s travel plans for a year or more. These risks can be more susceptible to market shifts because of the nature of the bed and breakfast risk.
The B&B patron tends to be looking for a stay that is not the traditional hotel or motel. They are also looking for something other than what can be found on home-sharing sites. They’re often looking for a particular experience that comes along with a bed and breakfast stay. This is due largely to the types of buildings that become a bed and breakfast and the type of people who operate them. The bed and breakfast innkeeper is the sort who gets into the business in part because they enjoy the interactions with the customers.
This market volatility can create some troubles for the innkeeper and their risk management strategies (including insurance purchases). Unless the bed and breakfast enjoys a constant or predictable flow of bookings, and therefore cash flow, there can be lean months.
This is something that many businesses deal with and must plan for. But consider how this issue can be compounded if a loss occurs during the lean months. Canceled and refunded bookings coupled with taking the property out of circulation for an indeterminable time all mean that the bed and breakfast needs a strategy to deal with this possibility. This is more than an insurance consideration. The management of this risk includes ensuring that they have access to capital to bridge that gap. The best method of handling this is with retained earnings, but when you consider that most small businesses operate on tight budgets, that gets difficult.
Neighbors
Many bed and breakfasts are in neighborhoods.
If you’re a traveler, you know that many cities and towns have a particular area where you can find most of the good hotels. There they are, all in a nice, neat row, and across the street are the complementary
businesses, like restaurants, gas stations, and other stores. That makes the journey a little easier for the traveler to know that there is access to stuff nearby.
Bed and breakfasts are different. They are often in homes in a neighborhood. This often adds to the vibe of going there. You drive along a lovely tree-lined street with people walking their dogs and children playing in the front yard and then you pull into the drive at this lovely and quaint bed and breakfast. It’s Rockwellesque.
Then you realize that because it’s a big house on a city lot there might be a parking problem. Not every bed and breakfast has ample parking. Some have limited street parking out front, and it’s first come, first served.
Then you have that irritated neighbor who is sick of people he doesn’t know parking in front of his house. Then there’s the possibility of an ordinance that limits street parking from time to time.
An innkeeper should be aware of the potential parking issues and inform guests
accordingly to avoid any nasty moments, like towed or booted vehicles. That won’t help the Yelp reviews.
Locating a B&B in a neighborhood isn’t necessarily a bad thing. In many ways, it helps to create the charm and enjoyment of the stay, but it is something that the innkeeper needs to consider and make part of the risk management plan.
Many bed and breakfasts are in older homes.
Part of the charm of many bed and breakfasts is the fact that many of them are in homes that take us back to an earlier time. Many are Colonial, Victorian, and even Gothic styles. There are multiple problems with this.
Older homes have been upgraded over time, but that doesn’t mean that they are ready for today’s lifestyle. The key building systems will be under a different load than originally designed. If the building was built 100 years ago, that family’s electrical use and needs would be very different than 21st-century travelers are. We are certain that the electrical system has been upgraded and updated within the last 50 years, but that still doesn’t mean that there aren’t risks associated with the electrical system and how it’s being used today.
The plumbing system will be under a heavier load than was originally intended. Again, many of these buildings were originally single-family dwellings, and even if they had two or three bathrooms and a kitchen, many modern bed and breakfasts have a bathroom for every room that they are renting out and the owner’s continued on page 38
Closer Look: Hotels & Motels
continued from page 37
bathroom and a kitchen. This isn’t just going to tax the sewer system, but it can create issues for the water supply lines.
One last issue to consider when it comes to insuring these older buildings — if it were to burn down, would the insured rebuild that exact building? Would they want to rebuild this gem of architectural days gone by? Maybe the answer is yes until they get the quote for the replacement cost coverage needed to build this building back to look just like it does now, or at least reasonably close to the way it looks now.
It’s more likely that they will want to be able to match the look and feel of the place in the event of a partial loss, but if there’s a total loss, they might do something different. Here’s where we begin to talk about policy wording and endorsements and the endorsement that we are thinking about is ISO CP 04 38 09 17 Functional Building Valuation.
This endorsement provides the ability for the insured to select a limit of insurance that is lower than the replacement cost of the building, but it will be plenty to replace the function of the building. So that when it’s rebuilt, it won’t be the 100-year-old bed and breakfast building, but it can serve as a B&B.
But there are two other major things that the endorsement does.
The next thing that this endorsement does for the insured is to provide ordinance or law coverage. If the building is not a total loss, but must be dealt with as a total loss (the municipality declares that the building must be torn down), there is cost for the undamaged
part of the building, so this coverage would provide increased cost of construction for code upgrades for the new building, as well as the cost to demolish and remove the debris from the undamaged portion of the building.
There’s one other thing the endorsement will do for the insured. If the building is a partial loss, the endorsement provides that repairs will be made to match the architectural style of the building using modern building materials and methods. When you take that into account, you understand that using this endorsement allows the innkeeper to keep the interesting kind of building that they had unless there’s a total loss.
Just one last note about this endorsement. It also takes the coinsurance condition out of the equation because we are intentionally not insuring the building to its full replacement cost.
Lots of Kitschy Stuff
If you’ve ever been in a bed and breakfast, you know that there is no end to the interesting items that find a home in different places in the common areas and the rooms. My family and I visited one several years ago. There was a chair that had dozens of wires with connections on the end. No one wanted to sit in that chair because we couldn’t figure out what it was.
That brings a final point. Most property policies, commercial and personal, have coverage for personal property. Personal property is loosely defined as the items within the building. There’s more to it than that, but let’s just keep going. The stuff that
finds its way into many bed and breakfasts is unusual, like the chair that looked like an electric chair that we didn’t want to sit in.
If we look at the ISO CP 00 10 10 12 Building and Business Personal Property Coverage Form, we find the replacement cost optional coverage. The details about that coverage are beyond our scope here, but paragraph “b” of that coverage is interesting and applicable here.
This Optional Coverage does not apply to: … Contents of a residence; Works of art, antiques or rare articles, including etchings, pictures, statuary, marbles, bronzes, porcelains and bric-a-brac; …
These are the sorts of items that we find in bed and breakfasts and which are going to require special handling so that the insured can be properly indemnified if there is a loss. These are all going to be items that the innkeeper may have picked up at antique stores, estate sales, or covered in dust in the basement and they all have value because they are all property.
That’s why some other manner of covering that property is important. Whether it’s through the use of a personal property policy, which is a lot
like a personal lines inland marine policy, or an inland marine policy.
Getting them covered at agreed value would also be helpful so that the insured is happier if something happens to their bric-a-brac (a word here, which means knickknacks according to the Oxford Dictionary online).
In the end, these risks, like many that we insure, require particular handling. There’s more to consider than we have space to handle and these insureds need to have the help of someone who understands risk in general and their risk in particular.
This is not to say that every agent or broker needs to be an expert on a particular class of risk to serve them, but the more you know about your clients, the more they will trust you to serve their risk needs.
Oh, and if you’re curious, that chair was an old electric permanent wave machine circa 1920s. Look it up. It looks scary and I wouldn’t write the liability insurance on anyone using it.
Wraight, CIC, CRM, AU, is director of Insurance Journal’s Academy of Insurance. He can be reached at pwraight@ ijacademy.com.
Spotlight: Claims
Using AI to Provide a More Human Claims Experience
The robots are coming — and in some cases, they’re here.
Advancements in generative artificial intelligence are enhancing claims processes in many ways, from improving First Notices of Loss (FNOLs) to analyzing videos and images to assessing damage quickly.
experiencing a catastrophic event. And with catastrophic events getting more frequent and severe — empathy is at a premium.
By Marc Rothchild
With all of these changes, some may ask: How long until GenAI replaces adjustors and other claims professionals?
The short answer is: It won’t be anytime soon.
Those who think claims professionals can be replaced with GenAI are not considering the critical role people play in delivering an empathetic claims experience, which is what customers require after
According to Swiss Re Institute, global insured losses from natural catastrophes in 2023 exceeded US$100 billion for the fourth consecutive year. The institute also estimates that insured losses could double within the next 10 years as temperatures rise and extreme weather events become more frequent and intense. This season, we have seen Hurricane Beryl become the earliest category 5 hurricane and Hurricane Debby brought record rainfall.
And the season is ramping up. The National Oceanic and Atmospheric Administration issued in August its mid-season hurricane outlook, which predicted 17 to 24 named storms, of which eight to 13 could become hurricanes.
While empathy is vital during the claims experience
after catastrophic events, claims teams’ abilities to respond quickly with empathy are often strained due to the volume of submissions and the amount of communications from claimants. After Hurricane Debby, Florida insurers received nearly 12,000 claims, according to data from the State Office of Insurance Regulation.
But by utilizing GenAI tools, claims professionals can boost their capacity for empathy. These solutions can alleviate workloads, enabling claims teams to spend the extra time answering claimant questions and reassuring them they will come out on the other side. They can help bridge the talent gap as claims professionals often have large workloads and not enough adjustor talent.
Claims teams should not see AI solutions as threats to their jobs but as enablers of providing human connection.
Finding the Right Balance
One of the best opportunities for AI automation relates to processes that don’t interface directly with claimants. For example, automated claims triaging tools can ingest data from FNOLs, photos and reports, review submissions for severity and complexity, and route them to the right adjustors. This not only enables the insurer to make sure adjustors are prioritizing the most severe damage, but it allows the company to balance the adjustor’s workload so they have enough bandwidth to provide the appropriate level of service to their claimants. continued on page 40
Spotlight: Claims
When insurers look to incorporate AI solutions into customer facing processes, they need to be cognizant of claimants’ receptivity to interacting with AI and where they would prefer to deal with a human.
Chatbots and AI voice assistants can be great tools for managing inbound calls following a catastrophic event, providing insureds with basic information such as policy and coverage information. This can eliminate long wait times for simple questions. But insureds with more complex issues want to speak with a human. By utilizing chatbots and AI voice assistants for routine tasks, insurers can alleviate the call volume and minimize wait times for those who need to speak with a claims professional.
Managing the Day to Day
Communicating with claimants is an important role for claims adjustors. But managing these communications is a time intensive activity that can take
away from other important tasks. Claims management systems with AI and machine learning capabilities can help adjustors balance communications workloads. These platforms can automatically respond to routine emails. They can summarize adjustors’ notes and send this information to claimants. With these systems, automatic emails can easily be customized, so claimants do not feel like they are receiving a generic response or an automated reply.
‘Those who think claims professionals can be replaced with GenAI are not considering the critical role people play in delivering an empathetic claims experience …’
GenAI powered sentiment analysis solutions can review customer communications to detect tone and urgency and recommend next steps
the adjustor needs to take. Sentiment analysis can also help prioritize communications that may look like regular requests but need special handling. Consider a simple status update request an adjustor receives. Sentiment analysis might detect an elevated level of concern and frustration in the consumer’s note. Rather than an automated note, the analysis could trigger a call from the adjustor.
Claims processing tools with AI capabilities can also help adjustors speed up document processing by ingesting documents, images, videos and other data and quickly analyzing and summarizing them. These tools also enable adjustors to be more organized, tracking assessments and decisions.
Human Touch Doesn’t Need to Be in-Person
While claimants want the ability to interact with their claims teams, it doesn’t have to be in person. Many insureds are open to working with technology, as long as they
know they have the option to speak to a person.
Virtual adjusting solutions can expedite the claims process significantly. Instead of waiting for an adjustor to visit a property, claimants can use their own phones to capture the damage through videos and images. The information is then submitted to the claims team. Virtual adjusting solutions can do an initial assessment of the damage, which is then share with the adjustor to complete the estimate.
When incorporating AI solutions into their claims processes, it’s important for insurers to have support from the top. Good leaders communicate with their claims teams, alleviate any misgivings they have about AI, and reiterate how it will enable them to give a better human experience to their customers.
It may seem counter-intuitive. Using technology can provide a more human, and personal, experience for insureds during the claims process. GenAI solutions can make it easier for claims professionals to provide human interaction.
Technology automates simple and routines tasks, reducing claims workloads giving them more time to personally interact with claimants. And technology also enables quick and customized responses, setting the claims teams, insurers and customers up for success.
Rothchild is senior vice president, head of Claims at Xceedance. He leads the claims business at Xceedance, and has 20 years of operations and technology leadership experience across the insurance, software and supply chain distribution industries. continued from page 39
Idea Exchange: Technology
How Insurance Industry Can Use AI Safely and Ethically
Several types of artificial intelligence are already being adopted by various parts of the insurance industry and they have the potential to deliver extraordinary efficiency savings, opening the door for even more profitability, innovation, and complex problem solving.
By Doug Marquis
While the use cases for AI-based large language models, such as those used in ChatGPT, in the insurance industry are evolving, at present examples of how it is being used include summarizing and generating documents, carrying out data analytics, and acquiring data for risk assessment and underwriting. As an insurtech company, we are also looking at how AI can help us write software in an automated way and exchange data between two entities across the insurance ecosystem.
AI Risks
There are, however, multiple risks that can arise when using AI — primarily because it can easily generate errors. For example, AI can ingest statute information
from one U.S. state and posit that it applies to all states, which is not necessarily the case. AI can also hallucinate – make up facts – by taking a factual piece of information and extrapolating the wrong answer.
AI also can be biased if it uses data that could be inherently prejudiced and creates algorithms that discriminate against a group of people based on, for example, ethnicity or gender. This could result in the AI recognizing that one racial or ethnic group has higher mortality rates, and then inferring that they should be charged more for life coverage.
AI bias also presents a danger when it comes to recruitment, potentially discriminating against people who are from certain regions or socio-economic backgrounds. For these reasons, there is still a critical need for human oversight of AI decisions to ensure inclusivity, fairness and equal opportunity.
New AI Regulations
AI technology has been moving so quickly over the last two years that regulation has been trailing far behind. Legislators are trying to catch up with the breakneck development of AI and the potential risks it might pose, which means insurers must be prepared for a raft of new
regulation.
Earlier this year, Colorado became the first state to pass comprehensive legislation to regulate developers and deployers of high-risk AI to protect the consumer. High-risk AI systems are those that have a substantial input into consequential decisions relating to education, employment, financial or lending services, essential government services, healthcare, housing, insurance, or legal services.
Avoiding Algorithmic Bias
The Colorado AI Act, which goes into effect on Feb. 1, 2026, insists developers and deployers of AI high-risk systems must use care to protect consumers from any known or reasonably foreseeable risks of algorithmic discrimination or bias. This means that developers have to share certain information with deployers, including harmful or inappropriate uses of the high-risk AI system, the types of data used to train the system, and risk mitigation measures taken. Developers must also publish information such as the types of high-risk AI systems they have released and how they manage risks of algorithmic discrimination.
In turn, AI users must adopt a risk mancontinued on page 42
Idea Exchange: Technology
continued from page 41
agement policy and program overseeing the use of high-risk AI systems, as well as complete an impact assessment of AI systems and any modifications they make to these systems.
‘Earlier
this year, Colorado became the first state to pass comprehensive legislation to regulate developers and deployers of high-risk AI to protect the consumer.’
Transparency Required
The Colorado legislation also has a basic transparency requirement, similar to the recent EU AI Act, the Utah Artificial Intelligence Policy Act, and chatbot laws in California and New Jersey. Consumers must be told when they are interacting with an AI system such as a chatbot, unless the interaction with the system is obvious. Deployers are also required to state on their website that they are using AI systems to inform consequential decisions concerning a customer.
Moving forward, it’s likely other states will begin adopting similar AI regulations to those in Colorado. However, it’s important to note that many governance measures, such as risk-ranking AI, control testing data, and data monitoring and auditing, are already covered by other laws and regulatory frameworks not only in
the U.S., but around the world. Given the expanding layers of legislation at every level, we can expect the AI landscape to only become more complex in the near future. For the time being, there are several actions companies can take to help ensure they are protected.
Five Practical Steps for Insurers
Transparency: With simple disclaimers, insurers can let customers know when they are using chatbots and disclose where AI is being used to inform decisions in certain systems, including recruitment. Intellectual property: It’s important for insurers to protect customers’ data ownership when dealing with AI vendors – and also protect sensitive personal data, such as medical information. At Zywave, for example, we’ve seen AI providers with contracts requesting to own the data or modeling they are providing. Companies must be more diligent than ever before when reviewing contracts to ensure confidentiality, IP ownership, and protecting trade secrets that may be placed into vendors systems.
The right data: When it comes to ensuring AI is basing decisions on accurate information, it’s the company’s responsibility to verify that it’s giving the AI system access to trusted data. For example, at Zywave, we use our own data repository, comprised of proprietary data, data purchased from a trusted third party, or from public, US government agency sites we have acquired and diligently vetted ourselves. The new
Colorado AI regulations state a company must be able to explain how it reached its hiring decision and be able to prove it’s not biased, which comes back to transparency and logging where the data originated from.
Documentation: As increasing numbers of AI products are being used in the insurance industry, it’s crucial to scrupulously document what data is being used, where it comes from, and who owns it. This enables companies to protect themselves from accusations of copyright infringement and intellectual property theft, as well as from AI making mistakes based on inaccurate data lifted from the internet.
Learning new skills: Insurance companies need to have a greater understanding of AI to ensure they are complying with regulations, which likely will be rolled out across the US and in other countries over the next two years. While new roles have already been created for prompt engineers to ensure AI systems are producing the best answers, they must still be overseen by other humans in case the information they are inputting is biased or presents a security risk.
Given the increased usage and advancement of AI over the past few years, it’s likely the technology is here to stay.
And although the extra administrative and oversight work required to ensure AI is used safely and ethically may seem daunting, the new technology offers tremendous business value with the potential automation drastically improving efficiency and profitability.
There’s no doubt the benefits outweigh the additional work of developing a robust AI protocol. By putting in place stringent guardrails, the insurance industry will reap the rewards of AI while remaining compliant within a quickly evolving regulatory landscape.
Marquis joined Zywave in 2018 as chief technology officer, leading the company’s R&D functions. Before joining Zywave, he honed his skills for a decade at Accenture, where he led technology initiatives for Global 1000 companies. He also served in executive roles at venture capital- and private equity-backed SaaS companies, such as SAVO, OpinionLab, Local Offer Network, and RiverGlass.
Idea Exchange: Ask the Insurance Recruiter
Strategies to Recruit Insurance Producers in Today’s Job Market
Asurprising question about recruiting emerged in 2024. Insurance agencies have consistently asked me, “What are you seeing in the market for insurance producers?” The fact that agencies are looking for producers doesn’t shock me. It’s the idea that they want to recruit them which is surprising.
Looking is passive, and plenty of agencies take the approach, “We’re always looking for good producers.” This is not recruiting, it’s more like hoping potential recruits fall from the sky into your lap.
Recruiting is intentional. It’s direct, active, and when companies say to me — “We want to hire producers. What will it take to get them?” — here is the guidance I provide insurance agencies to get started.
How Do Other Insurance Agencies Find Sales Candidates?
Producer recruiting is like a fork where each prong represents a sourcing strategy that works in conjunction with the other. I advise agencies to have multiple “prongs” to source producers with the most common being:
Direct Recruiting — Agencies network with industry centers of influence and directly solicit candidates (on their own or with help from an external recruiter) to identify sales talent from competitors.
Academic Alliances — The Des Moines area high school that my kids attend has a dual-credit college program sponsored by a large insurance broker. Programs like this,
high school or college, introduce insurance as a career to future employees, and as a sponsor, gives a company like yours an internship pipeline and a recruiting advantage.
Generational Connections — Plenty of seasoned insurance professionals call me asking for advice for their son, daughter, friend of a friend’s kid, and so forth who want to break into insurance. You know these same individuals. They are your underwriters, claims adjusters, etc. Never end a conversation with an industry contact without reminding them that you’re looking for good newbie sales talent. Ask them for referrals.
How Do We Determine What Experience Is Right for Us?
Producers fall into one of three categories — newbies, B2B converts, and experienced recruits. Unless you have a strong aversion to one of these categories, stick with the fork analogy and keep all three possibilities in play.
Your #1 priority should be recreating past success. It’s a powerful recruiting pitch to show candidates that someone with their background has thrived at your agency.
Your #2 priority is finding the right DNA. Lean into profile assessments. Use the results from your current producers to set a baseline. Remember to select different personalities from within your sales team to increase the potential for diverse hires.
Your #3 priority is letting the tools you provide a new producer determine the profile. For example:
• Will you seed them a book? Then you might want to target experienced candidates.
• Do you have great in-house training? A college grad
could be great.
By Mary Newgard
• Are mentors and awesome AEs with deep subject matter expertise at their disposal? Hire a B2B convert who is a natural door opener with a rolodex. They just need your help covering up their insurance knowledge deficiencies.
What Should We Tell Producers to Gain a Recruiting Advantage?
My May 2023 column, A Great Pitch Recruits Producers in a Competitive Job Market, talks all about how to position your recruiting message. Candidates are astute and can tell when you haven’t thought about it. For instance, a Top 100 broker recently told me the reason an experienced producer should want to join their firm is because, “We have great tenure, unlimited earning potential, and people who want to work hard and love working here.” That all might be true, but theoretically wouldn’t every agency say that?
You need a sales pitch that makes you stand out, and that sound bite must be personal. Examples of what sales candidates love to hear include:
• A lead generation engine
• Mentorship and team-based selling
• Deep in-house resources (marketing, claims, loss control, technology, etc.) that are available to them and will make a substantial impact on account retention
• Ownership, creation of wealth
• Leadership opportunities — i.e. planting a flag in a new region, building a team underneath them, or putting themselves in a position to be a future successor.
Newgard is partner and senior search consultant for Capstone Search Group, a national recruiting firm dedicated to the insurance industry. For questions and comments, email: asktherecruiter@csgrecruiting.com.
Idea Exchange: Minding Your Business
Owner Compensation Performance Based – Part One
The amount of money an owner makes is directly proportional to the perceived impor tance, or success, to the person takin money home. It is well known that there are factors that dilute this rule, but it still is a fair rule of thumb.
By Catherine Oak
Why else would two, three or four partners pay themselves the same? They are all equal, right? No one can be more important than the others.
Herein lies the rub. It is very rare when two people are of equal importance or value to a business. One person will most likely outperform his or her partners. The person might change from time to time, but usually there is some ranking of contributions each owner will make to the success of the business.
Owner compensation is a very sensitive subject, and it can often be the unspoken thorn in the sides of many business partners. Disputes arise when the original compensation plan is never revised, despite changes in the effort, contribution and the roles of the partners.
Compensation Plans
There are several common ways that agency owners compensate themselves, each with their own pros and cons.
For example, some business partners may choose to pay themselves the same salary. This is a simple solution that may foster teamwork in the beginning. Resentment might (will) eventually occur if one person slows down, yet still draws the same salary, as alluded to above.
Some agencies may pay the owners strictly for production. This method becomes unfair if one person is spending more time on management than the other owners and their production is impacted.
Performance-based compensation plans could help remedy this issue. The best plan has three components: a fee for management time, a production component
piece and a share in the net agency profits. Each agency should set aside a strategic management fee somewhere in the range from 4% to 8% of total revenues. To determine the correct percentage, think about what it would cost to hire an agency manager who would perform all the management duties that the owners currently perform.
The larger the firm, the smaller the percentage of revenue for the fee. Larger firms tend to have middle management to assist the owners with the strategic management of the firm. The owners of smaller firms need to be more active. This strategic management fee is then split up to pay the owners for their contribution to management. The management fee is split based on the typical or average amount of time spent managing the common management functions. Since each agency is unique, the specific categories and formula used should be tailored to match the efforts needed and expended for management.
The fees are for strategic management, not the day-to-day management of affairs. For example, the owner in charge of financial affairs does not handle the day-to-day accounting for the firm. Strategic management for financial affairs would include reviewing monthly financial statements and initiating the firm’s budget. Any major decisions still need to be approved by all owners. If that owner is actually doing the bookkeeping, then a separate fee should be allocated to the owner for that role, since that agency did not incur an expense for an employee bookkeeper.
The Production Piece
Almost all agency owners are involved in production. The second component of the compensation plan is based on each owner’s production. The formula is recommended to be the same as that for the non-owner producers in the firm. In a typical agency, the commission paid for production averages 40% for new business and 30% for renewal. This includes both commercial and employee benefits lines of business.
To encourage sales of larger, more profitable business. It is recommended that there should be no commission paid for personal lines or small commercial accounts, unless the producer/owner does the service for those accounts. An agency cannot afford to pay two people to do the work of one.
There are exceptions to this rule. In smaller agencies or firms in rural areas the producer/owner is often heavily involved with these accounts. In some firms,
Owner compensation is a very sensitive subject, and it can often be the unspoken thorn in the sides of many business partners.
the agency book of business might be mostly personal lines or small commercial accounts. In this case, the producer/owner should be compensated to handle these accounts.
Splitting up the Profits
When the first two components are incorporated and if the agency has average control over other expenses, the firm should post a fair net profit. The true profitability of a typical agency today is
usually between 15% and 30%. Any excessive perquisites that the owners receive (such as large auto and T&E allowances) will lower this net agency profit. However, owner perks are in a sense agency profits. To be fiscally prudent, the firm should retain some of the profits for capital investments. It also makes sense to reward those that work for the success of the agency and some profits should also go to bonuses to employees and perhaps pension plans. Owners can get a lion’s share of the money
in certain types of pension or 401(k) plans, which again is owner’s compensation.
The balance of profit that is left over should then be allocated to the owners based on the contribution of each owner to the firm. The recommended split would be 25% for new production, 25% for size of the owner’s book of business, 25% for management time and 25% for the owners’ equity share.
This formula allows those who generate the profit to gain from their efforts. Nothing could be more discouraging to a young successful owner/producer that generates most of the new business to receive only 10% of the profit because that is their stock equity percentage.
Summary
The performance-based owners’ compensation is flexible and easier to implement in most cases. Owners that choose to slow down and not work on management will receive less compensation for that component. The owners that pick up the slack will be compensated for their additional effort. Owners who excel in production will be compensated accordingly. It is a simple and equitable methodology.
Owner compensation plans need to be flexible to allow for the natural change in owners’ contribution to the firm over time. The plan needs to also be fair yet rewarding to the major contributors. While compensation is often a sensitive subject to discuss, establishing a well thought out plan that can automatically adjust to the owner’s contribution will remove the potential for disputes or hard feelings between owners.
Oak is the founder of the international consulting firm, Oak & Associates, based in Bend, Oregon and Sonoma, California. 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.
Idea Exchange: Flood Risk
How Flood Risk Is Driving an Insurance Protection Gap in the US
It is likely that you have read recent headlines sounding the alarm over a potentially uninsurable future. The ongoing threat of more frequent and damaging extreme weather is making it increasingly difficult for homeowners to secure affordable insurance, highlighting a growing insurance protection gap. Perhaps nowhere is this gap more prevalent than in the US, where several insurance carriers have been forced to exit the market in recent years. Floods are a major driver of the increasing costs, exacerbated by low insurance coverage mostly through the public National Flood Insurance Program (NFIP). However, innovation in advanced flood modeling — at the individual property level — can enable private carriers to engage with affordable insurance offerings to households previously considered too risky.
By Helge Jørgensen
Joint Economic Committee estimates flooding costs the US economy between $180 billion and $496 billion annually from a combination of direct damages and business activity interruption.
Events like Hurricanes Ida, Beryl and Debby are pushing insurance companies to reassess their risk models as they start to understand the real implications and costs associated with urbanization and climate change, which at times will drive companies to simply opt out from highrisk areas.
As posited by The Financial Times: Are we facing an uninsurable world? In the past couple of years, more US homeowners are encountering difficulties to get flood insurance, because companies are either raising premiums or exiting the flood insurance market entirely. This is mainly tied to rising flood risks, economic strains, and outdated regulatory frameworks. Meaning that fewer options for flood insurance are leaving many homeowners vulnerable.
Climate Change and More
Frequent Flooding
Floods have become more frequent and severe largely due to climate change.
According to Moody’s RMS, the increased risk has made flooding “a peril that can affect every postal code in the United States.” A recent report by the Senate
While coastal areas have traditionally been seen as high-risk, recent events highlight that urban and inland areas are now facing huge increases in flood risks, which is becoming especially problematic as weather is proving to become more unpredictable. The torrential rains brought by Debby flooded towns like Westfield, Pennsylvania, where nearly all residents lacked flood insurance because they were told they weren’t in a flood plain. The storm damaged homes and destroyed personal possessions, highlighting how climate change is bringing more intense rainfall to areas previously considered safe from flooding.
The Federal Emergency Management Agency (FEMA)’s official flood maps don’t properly reflect these new risks in urban areas, because FEMA’s flood zones don’t account for the risk of heavy rainfall, which is why the actual number of homes at risk is more than double the estimate. As a result, many homeowners are caught off guard, thinking they’re safe from flooding. In fact, a large percentage of the properties flooded by Debby
were outside high-risk zones.
Economic Pressures on Insurers
Floods are happening more often, and the associated claims payouts have started to stress the reserves of NFIP, with private insurers also struggling. As credit rating agency AM Best reported, “The National Flood Insurance Program (NFIP) is more than $20.5 billion in debt as of 2022.”
In high-risk states like Florida, private insurers have reduced their offerings and general insurers have left it entirely due to the unsustainable economic risks.
AM Best, highlighted that “California has a larger share of flood DPW [direct premium written] in the private market than any other state,” and the recent storms there have served as a “good test of the private flood market.” The key question remains: Can private insurers maintain their financial stability to continue providing flood coverage in areas like, for example, California?
Among the main reasons why homeowners aren’t purchasing flood insurance is because a) many think that they don’t need it, or b) they are unaware of the fact that a typical homeowner’s insurance policy does not cover floods.
Another one — and perhaps the one that insurers are seeing the most lately — is the rising cost. In some cases, homeowners are expecting to see their flood insurance premiums increase nearly 500% in just a few years (although increases have a 18% yearly cap). This steep rise is a result of NFIP’s shift in 2023 to more accurately reflect the true risk of flooding with their Risk Rating 2.0 pricing model. However, the change has caused financial strain for some particularly low-income homeowners in high-risk areas.
Outdated Policies, Regulatory Challenges
One major issue that insurers are
facing is the reliance on FEMA’s flood maps, which are outdated and don’t accurately reflect current risk levels.
Many of these maps are decades old, leaving insurers blind to actual risks.
According to FEMA officials, the flood insurance maps need to be updated to account for the evolving landscape and changes in climate. This puts private insurers at a disadvantage, as they cannot properly price risk. This lack of granularity in maps and risk data is another issue as insurers have struggled to engage better quality data in their models.
This data gap makes it hard for insurers to predict where and how severe flooding will be, which is leading many to simply avoid offering flood insurance in general.
New Models May Help Close the Gap
New catastrophe models are improving insurers’ ability to assess risk, but the gap between public and private data is still significant.
In response, insurers are developing more advanced tools to quantify risk but lack consistency between public and private models. New models for flood risk help bridge this gap by offering real-time, property-level risk assessments. This allows insurers to offer coverage in areas where data is lacking or where FEMA/NFIP maps designate properties as high risk.
The Bottom Line
All these causes — climate change,
urbanization, economic strain, outdated regulations, and insufficient data — are driving some insurance companies to withdraw from flood coverage. Updated policies, including those for risk mitigation, education, affordability, better data, supporting and investing in innovation and technology, incentives, outreach programs, and more governmental support are key to tackling this problem.
Companies will continue to respond to climate crisis and provide coverage, but this might mean higher premiums or fewer options, leaving entire communities without affordable or accessible coverage in the US.
Jørgensen is the co-founder and CEO at 7Analytics, a technology company focused on developing sustainable solutions for cities through data integration and visualization. Previously, Jørgensen worked as a geologist and GIS-analyst at ABO Plan & Arkitektur, Pure E&P Norway, and at Schlumberger Information Solutions.
Idea Exchange: Talent
Redefining the Employee Experience for Today’s Workplace
ABy Corey Pinkham
n organization’s ability to provide an exceptional employee experience impacts its success in many ways, from driving profitability and growth to enhancing customer satisfaction. However, now that the majority of insurers have adopted long-term hybrid or fully remote environments, both managers and organizational leaders are having to adjust how they approach this essential area.
The employee experience encompasses all interactions an individual has with your
company, as well as their feelings around their role, well-being and environment. A strong employee experience provides opportunities for growth, a sense of connection and belonging, ongoing twoway communication, and a culture that is reflected in daily actions and decisions.
Regardless of whether your organization is fully remote, hybrid or in-person, how can you create an employee experience that has a positive impact on each individual?
Tailor Your Approach.
Not surprisingly, there’s no one-size-fitsall method to ensure a positive employee experience. It’s important to assess your
organization and situation, as well as your team members and leadership, to develop an overall framework and define parameters. This can serve as a guide for accommodating individuals’ unique needs as much as possible, while still being able to meet your departmental and organizational goals.
Aim to understand and embrace different communication styles and personality traits, while also respecting varied values and preferences. For instance, some employees may prioritize flex time and work at their highest level of performance during non-traditional hours. Others may prefer a structured nine-to-five schedule and have strict boundaries around their availability outside this timeframe.
In addition to asking about employees’ preferred work styles, make sure you also understand how they want to receive feedback, as well as how they’d ideally like to interact with you and their colleagues. Depending on their comfort level, encourage them to also share this information with others on the team to further promote an environment that respects each person’s unique needs.
Empower Managers.
Managers can make or break the employee experience, while also impacting your organization’s overall productivity and retention rate. It’s important to remember most individuals have had no formal training in virtual management or in adjusting their styles to be effective in today’s environment. Help set them up for success. Consider tools and resources that may be helpful to those who are new to managing remote employees or who could benefit from further skill development.
Recognize All Interactions From Recruitment to Exit.
The employee experience encompasses an individual’s entire relationship with your company. As they progress within their employment lifecycle, determine how you can increase their engagement and loyalty within each stage.
Recruiting and Hiring Process: An individual’s experience with your organization begins even before their first day of work. Recruiter interactions, the interview process and offer negotiations all shape their perception of the role, team and organization.
New Employees: During an employee’s first few weeks and months on the job, making them feel a part of the organization and creating a sense of connection to their role and team is essential. Start building employee loyalty early on by keeping new hires engaged and helping them visualize their futures with your organization.
In addition to a comprehensive and intentional onboarding process, determine how you can lay the groundwork to meet their longer-term goals. What professional challenges and career growth can you provide? How can you help them achieve their aspirations?
Seasoned Employees: Demonstrating a commitment to ongoing professional growth is also important for engaging more tenured individuals. How can you continue to give them new challenges and exposure to keep them engaged and energized?
These veteran employees also have a great capacity for giving back to the organization by mentoring newer team members and sharing their depths of
historical knowledge. As your organization’s environment shifts, be empathetic and understanding as they work through changes. Consider asking for their feedback as new processes, protocols and tools are rolled out, leveraging their input to ensure they feel heard and valued.
Reimagine Your Corporate Culture.
Even corporate cultures that were strong prior to the pandemic must be reaffirmed in the scope of today’s workplace.
Especially in hybrid and remote environments, it can be challenging to cultivate a unified culture and purpose among employees. Take time to reflect on how you can support the following actions:
• Encouraging relationship-building among employees
• Actively learning about individuals’ priorities and activities outside of work
• Setting expectations and leading by example
• Cultivating a sense of belonging
• Ensuring an inclusive workplace
• Demonstrating a prioritization of mental health and well-being Incorporating lost aspects of your pre-COVID culture
Focus On Collaboration.
Competing priorities and limited daily interactions have taken a toll on collaboration for many companies. Work with
other managers and leaders within your organization to identify ways to enhance and encourage ongoing collaboration and information sharing. This could include implementing standing monthly meetings, proactively pairing individuals on projects and providing tools for more fluid communication. The goal is for collaboration to eventually occur more organically and with less prompting as new habits develop among employees.
At the same time, help create a greater sense of purpose and meaning in individuals’ daily work by directly tying their actions to larger company objectives. Align employees on enterprise-wide goals and create interdepartmental projects focused on attaining them. Along with bringing individuals together to execute these tasks, communicate how other team and individual goals directly and indirectly make an impact on the organization’s success.
Providing an exceptional employee experience regardless of tenure, level and location should be an ongoing priority. The business landscape will continue to evolve and adapting your approach will lead to productive and fulfilled employees who can make the greatest impact on your organization.
Pinkham is president at The Jacobson Group, the leading provider of talent to the insurance industry. He can be reached at 800-466-1578 or cpinkham@ jacobsononline.com.
Closing Quote
A Better Customer Experience: What Agents Should Expect from Insurers
By Steven Crone and
In today’s competitive insurance environment, successful independent agencies have focused on building their agency’s brand. To that end, agents must focus on working with insurance companies whose service capabilities enhance their clients’ experience and their own.
A carrier’s service culture is critical to an agency’s success in recruiting and retaining customers. When insurers use technology along with “high
touch” service, it drives strong word-of-mouth referrals and favorable online reviews from existing customers, which reflects positively on the agency. With that in mind, what criteria should agents use to evaluate a carrier’s customer service capabilities?
Effective chatbot capabilities to reduce or eliminate wait times for human interaction. These chatbots will ensure that agents and carriers provide prompt responses and deliver solutions through concise answers. For example, carriers should now employ enhanced bots to shorten or eliminate customer wait times. This leads to better work environments for carrier and agency service teams, lowers internal stress and reduces customer frustration.
Cutting-edge, user-friendly technology resources. These are essential as policyholders prefer to interact in their desired way. Whether via email, text or social media, they want the ability to manage transactions and inquiries without having to
speak to their agent or carrier, if they choose. Features like online bill payment and access to policy documents are musthaves.
The communications need is heightened when there is a claim, and timely responsiveness and the ability to monitor the claim’s status are critical. When insureds are frustrated by “feeling out of the loop,” they will involve the agency, thus increasing the agency’s time commitment and an agency’s dissatisfaction with the carrier. To aid the agency’s operational efficiency, carriers should enable true integration into their systems, allowing agencies to track client data like claims or policy renewals in real-time.
Leveraging technology to improve underwriting. Artificial intelligence (AI) can enhance the underwriting process by leveraging satellite imagery, land record data and other third-party sources, leading to more accurate rating decisions.
For example, AI can detect hazards invisible to the human eye, such as hairline cracks in water lines, allowing for inexpensive repairs to prevent major future losses. Since consumers are often skeptical of opaque algorithms in underwriting and pricing, agents can now emphasize how AI technology proactively benefits customers by increasing transparency in the underwriting process.
Additional underwriting capabilities that benefit both agencies and customers include inspections, policy endorsements and facilitating
customer Q&As. Carriers should provide easy access to consumer portals, allowing agents to upload specific documents at any time.
Proactively working to enhance the agent-carrier relationship. As agencies assess their own online reviews and other customer feedback to improve continually, they should be able to discuss challenges or opportunities for their improvement with their carrier partners. Agencies need to invest to increase their service capabilities and maximize the tools that carriers provide. Agencies also need real-time business intelligence and sales management information to inform their sales and management tactics.
Additional capabilities offered by carriers are well received by consumers, especially those that facilitate transactions with third parties. For example, new homeowners appreciate carriers that can coordinate wire transfers from title companies and real estate agents, simplifying logistics such as movers and closing details.
Delivering exceptional customer service not only boosts efficiency across the insurance ecosystem, benefiting both customers and companies, but perhaps most importantly, builds trust with clients and ultimately drives long-term customer loyalty.
Crone is vice president of strategic partnerships and Dr. Qiu is vice president of marketing at Orion 180. Crone can be reached at scrone@orion180.com. Qui can be reached at yqiu@orion180.com.
Yiguang Qui
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