IBAMAG.COM ISSUE 3.03
DOING GOOD WHY IT PAYS TO INSURE NONPROFITS
THE GOOGLE AGE WHAT THE TECH GIANT'S FORAY INTO INSURANCE MEANS FOR PRODUCERS
BOOMTIMES THE RECOVERED HOUSING MARKET EQUALS E&O GROWTH
SUCCESSION
PLANNING Want to protect the legacy you've built? Then it's time to make a succession plan
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APRIL 2015
CONNECT WITH US Got a story, suggestion or just want to find out some more information?
CONTENTS
22
twitter.com/InsuranceBizUS facebook.com/InsuranceBusiness America
UPFRONT 04 Editorial
The benefits of going with a program administrator
FEATURES
32
PURPOSE BEFORE PROFIT
SUCCESSION
How to break into the challenging but rewarding nonprofit insurance market
PLANNING
38
You may not be thinking about retiring yet – but that doesn’t mean you don’t need to have a succession plan in place. Industry experts explain how to create one
FEATURES
PEOPLE
E&O FOR REALTORS
A rebounding housing market means more Realtors who need E&O coverage
Zurich general insurance CEO Michael Kerner reveals how the insurance giant plans to capture new customers
2
08 Head to head
Creating a dynamic private flood insurance market in the US
10 News analysis
Google’s insurance site has arrived … now what?
12 Intelligence
This month’s key corporate moves and new products Where wearable technology meets telematics
PLANNING FOR THE FUTURE
18
Can aviation insurance recover from a disastrous 2014?
14 Technology update
COVER STORY
INDUSTRY ICON
06 Statistics
16 Workers’ comp update
A look at how the Affordable Care Act has affected workers’ comp
FEATURES 30 The cat-prop market
Tips for tackling the soft cat-property market
36 Agency insight
‘
Haylor, Freyer & Coon
PEOPLE 47 Career path
Ron Abram’s trajectory from reluctant sales rep to agency owner
PEOPLE
42
PRODUCER PROFILE
Malena Farrell made her job as a producer even better by covering craft breweries
48 Other life
John Joseph’s alter ego – Goofer the clown
IBAMAG.COM CHECK IT OUT ONLINE
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When it’s grim, you need Great
‘
®
When a tornado is bearing down on your town, the last thing you should be worrying about is whether the carrier you recommended to your clients has less than stellar claims service. To process claims quickly and smoothly takes the expertise of specialists who know and understand how to turn grim to great. Great American’s strength of specialization gives us that rare ability. We’re able to see risks, write coverages, and handle claims in a way that gives your clients greater satisfaction.
www.GAIG.com
Don’t settle for less. Turn grim to great with Great American. Agriculture • Annuities • Environmental • Equine • Excess & Umbrella • Fidelity and Surety • Financial Institutions • Inland & Ocean Marine Non-Profits • Professional Liability • Transportation • Workers’ Compensation
Great American Insurance Company, 301 E. Fourth Street, Cincinnati, Ohio 45202. Coverage description is summarized. Refer to the actual policy for a full description of applicable terms, conditions, limits and exclusions. Great American Insurance Company owns the Great American Insurance Group eagle logo and the word marks Great American®, Great American Insurance Group® and When It’s Grim, You Need Great®. ©2015 Great American Insurance Company. All rights reserved.
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UPFRONT
EDITORIAL
Get with the program!
I
nsurance industry competition continues to heat up, and independent agents have largely dealt with it in one of two ways. Some have expanded their offerings to service as many businesses in the immediate area as possible. Others have chosen to adopt a niche and specialize their offerings. Both routes have helped fuel the growth of program insurance business. By grouping insurance customers with common operations, program administrators create risk-purchasing groups that can leverage their size for better rates with carriers. Whether independent agents use a program administrator or become one themselves, the advantages are manifold. And it’s driving more growth in the programs market than ever before. Commercial property/casualty insurance program administrators outperformed the overall property/casualty insurance market again in 2013, the most recently recorded year. Revenues for programs business increased by 9.8%, reaching more than $30 billion.
By grouping insurance customers with common operations, program administrators create risk-purchasing groups that can leverage their size for better rates with carriers That continued growth is attracting more interest from more carriers, backed by several sources of abundant capital. It is rightly celebrated, but ought to come with a warning – in a soft market environment with so many eager players, the focus shifts from quality underwriting to profitability. New and inexperienced programs administrators may find markets for business that would not exist, or that those programs administrators may not be able to access if money were not quite so abundant. Such inappropriate pricing can be dangerous when times get tougher, and many carriers may have to exit the market. So, when 87% of carriers polled by Target Markets say they plan to increase the amount of program business premium they write in the next three years, program administrators – and those who use them – need to be sure their business is placed with carriers with real staying power. The team at Insurance Business America
www.ibamag.com APRIL 2O15 EDITORIAL Senior Journalist Caitlin Bronson Journalists Ryan Smith Tim Garratt Donald Horne Jordan Maxwell Copy Editor Clare Alexander
CONTRIBUTORS
SALES & MARKETING Vice President Cathy Masek Media Sales Managers Chris Wills Chris Anderson Marketing and Communications Manager Lisa Narroway
CORPORATE
Samantha Wright
Chief Executive Officer Mike Shipley
ART & PRODUCTION
Chief Operating Officer George Walmsley
Design Manager Daniel Williams
Chief Information Officer Colin Chan
Designer Joenel Salvador
Human Resources Manager Julia Bookallil
Production Manager Alicia Salvati Traffic Manager Kay Valdez
EDITORIAL INQUIRIES caitlin.bronson@keymedia.com
SUBSCRIPTION INQUIRIES subscriptions@keymedia.com
ADVERTISING INQUIRIES
cathy.masek@keymedia.com chris.wills@keymedia.com chris.anderson@keymedia.com
Key Media 78O7 E. Peakview Ave., Suite 115 Centennial, CO 80111, USA tel: +1 720 316 0151 www.keymedia.com Offices in Denver, Toronto, Sydney, Auckland, Manila
Insurance Business America is part of an international family of B2B publications and websites for the insurance industry INSURANCE BUSINESS AUSTRALIA peter.smith@keymedia.com.au T +61 2 8437 47OO
INSURANCE BUSINESS CANADA john.mackenzie@kmimedia.ca T +1 416 644 874O
INSURANCE BUSINESS NZ peter.smith@keymedia.com.au T +61 2 8437 47OO Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as IB magazine can accept no responsibility for loss
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Beyond Security®
“We’re On The Hunt”
Nick Cortezi CEO, All Risks Hunter General Star Broker
“I’ve loved duck hunting since my father got me started as a kid. It requires skill, discipline and the ability to focus accurately on a moving target. “These fundamentals drive our partnership with General Star. With Berkshire Hathaway behind them, their strength and dependability are unrivaled. But it’s their skill in gauging distressed risks and unusual prospects – within their trademark disciplined approach – that impress me most. They can hit the moving target. “Together, we’re on the hunt for new opportunities to expand our reach and build our businesses. We’re aiming high, together.” To locate the General Star broker nearest you, visit our website at www.generalstar.com.
© 2015 General Star National Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. Insurance is placed with General Star National Insurance Company by licensed producers. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star Indemnity Company by licensed producers and, for risk that qualify, by licensed surplus lines brokers. Atlanta 404 239 6777
Chicago 312 267 8600
A.M. Best A++ XV
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Los Angeles 213 630 1930
S&P AA+
New York 212 859 3950
Stamford 203 328 5700
A Berkshire Hathaway Company
3/04/2015 5:57:12 AM
UPFRONT
STATISTICS
WATCHING THE SKIES
The aviation industry might have taken a hit last year, but projections indicate friendlier skies ahead IT HAS BEEN a difficult 12 months for aviation insurance – three tragic and highprofile crashes have dominated headlines around the world. The expected double-digit premium rise across the sector following a year of record losses failed to materialize, however, and Wells Fargo is projecting that the sector should remain relatively stable this year, thanks to over-capacity in the market.
Unmanned aerial vehicles (aka drones) could be one of the biggest growth markets in the commercial aviation insurance industry in the next decade, but FAA proposals announced in February have curtailed excitement. Industry experts expect exponential growth if government legislation allows, suggesting that the first three years of full commercial drone use could add $13.6 billion to the economy.
BIGGEST RISKS FACING AVIATION The aviation industry faces a plethora of risks in the future but terrorism and cyber attack remain a minimal risk.
DRONES TO BE BIG PLAYER IN AVIATION
35% Business interruption, supply chain risks (for example, damage to machinery) 35% Intensified competition 30% Market stagnation or decline 24% Changes in legislation and regulation 24% Natural hazards 20%
$82.1 billion Expected economic boost of commercial drones between 2015 and 2025
34,000
Number of manufacturing jobs drone useage will spur in the US
Political/social upheaval war 18% Commodity price increases 18% Technological innovation 12% Cyber attack 12% Fire explosion Source: Allianz Global Aviation Study 2014
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$13.6 billion
Projected economic boost in the first three years following the integration of commercial drones into American airspace
70,000
Projected number of new jobs created by the drone industry in the first three years of integration
103,776
Projected number of new jobs created by 2025 Source: Association For Unmanned Vehicle Systems International
CALIFORNIA, WASHINGTON TO REAP DRONE BENEFITS State
Economic Number of impact jobs created
California
$14.3 billion
18,161
Washington
$7.8 billion
9,967
Texas
$6.5 billion
8,256
Florida
$3.8 billion
4, 803
Arizona
$3.3 billion
4,260
Source: Association For Unmanned Vehicle Systems International
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2014: RECORD-BREAKING YEAR OF LOSSES? $6 billion
$2 billion
$800 million
$2 billion
$600– $700 million
$400 million
LOSS OF LIFE ON THE RISE The high-profile incidents of 2014 saw loss of life sky-rocket and the Germanwings disaster of early 2015 continues a worrying trend.
0
Fatality figures 1,000
$5.8 billion $60 million
Expected claims Amount of global Estimated hull war Hull war premium from airlines alone aviation premiums losses for 2014 – inincome thanks to the tragic cluding the MH370, events of 2014 MH17 tragedies and airport attacks in Karachi
LOSSES BELOW FIVE-YEAR AVERAGE As air disasters make more news than ever through 2014 and early 2015, it would seem that losses would have skyrocketed, but that hasn’t been the case across all lines.
500
Estimated hull and liability loss 2014 0
2014
2013
2012 Sources: JLT Plane Talking December 2014 issue
$1.52 billion
2013
$1.4 billion Five-year average - $1.54 billion Sources: JLT Plane Talking December 2014 issue
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UPFRONT
HEAD TO HEAD
Q:
GOT AN OPINION THAT COUNTS? Email iba@keymedia.com
What will it take to create a dynamic private flood insurance market in the US?
Dennis Ross
Patrick Murphy
Evan Hecht
US Representative FLORIDA’S 15TH CONGRESSIONAL DISTRICT
US Representative FLORIDA’S 18TH CONGRESSIONAL DISTRICT
CEO THE FLOOD INSURANCE AGENCY
“Hurricanes and other catastrophic weather events create uncertainty across my home state of Florida each year. However, the greatest impediment to a private flood market is not extreme weather. The greatest impediment to a thriving private flood insurance market is actually political, legislative and regulatory uncertainty. Allowing more consumer choice in the government-dominated flood insurance market creates competition and results in better policies and pricing that will benefit homeowners. To address this, I am finalizing legislation that would remove federal restrictions on coverage, eliminate confusion and return the full authority of approving private flood coverage to state regulators.”
“Right now, the competition, choice and innovation of the private market is frozen. A robust private flood insurance market requires Congress to empower state insurance regulators, who know best how to protect consumers and maintain the conditions for a dynamic market. Middle-class families should not be subject to such unaffordable increases, and I will continue to fight to give them a choice.”
“Premiums on at least 80% of existing FEMA policies need to increase. Through 2009, the average premium on actuarially rated highrisk AE and A1-A30 properties was only $.01 higher than low risk PRP properties – $251.28 and $251.27 respectively. Future flood insurance rates are determined by Congress. First, by legislating the maximum premium increases that FEMA is allowed to charge, and second, by determining which properties should be charged a rate lower than their known hazard. Congress is heavily influenced by public opinion, and the resulting public policy is inconsistent with standard insurance practices utilized to determine adequate rates.”
FLOOD DAMAGE COSTS GROWING The National Climatic Disaster Center estimates that floods in Michigan and the Northeast in August 2014 resulted in around $1 billion in losses. Further, the NCDC estimates those floods were just one of eight weather and climate disaster events across the US in the same year to cause losses exceeding the billion-dollar mark.
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ACE_IB
A RECALL CAN BE EXPENSIVE, A RECALL POLICY DOES NOT HAVE TO BE ACE Recall Plus for Small Business | acewestchester.com
Product recalls are complex and costly, especially for a small business. This is why ACE Westchester ® created ACE Recall Plus
SM
for your clients, an affordable suite of product recall insurance coverage.
Designed for companies with sales of up to $25MM, ACE Recall Plus can provide your clients with protection from financial loss and a tarnished brand name. With coverage limits ranging from $50,000 to $1MM, products can be custom tailored to the specific needs of your client’s business. Backed by ACE Westchester’s team of expert underwriters, best-in-class service, and a solid balance sheet, ACE Recall Plus is a unique comprehensive product recall insurance coverage for your small business clients. For more information please contact Florian Beerli at (203) 747-3406 or visit acewestchester.com
© 2015 ACE Group. The above is a product summary only. The insurance policy actually issued contains the terms and conditions of the contract. All products may not be available in all states and surplus lines products can only be offered through licensed surplus lines producers. ACE Westchester is the U.S.-based excess and surplus property and casualty operations of the ACE Group of Companies, headed by ACE Limited (NYSE: ACE). The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients around the world. Additional information can be found at www.acewestchester.com. ACE®, ACE logo®, and ACE insured.® are registered trademarks of ACE Limited.
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UPFRONT
NEWS ANALYSIS
The Google factor The multinational company’s March entry into the insurance industry has left independents searching for their own future in an increasingly automated world
THE CHANGING INSURANCE CONSUMER How insurance consumers begin and end their purchasing processes has changed to reflect the growing reliance on Internet research and automation
70%
of consumers use the Internet to research insurance purchases
40%
of consumers use mobile devices like smartphones and tablets at least part of the time when researching insurance
50%
of policyholders under 35 relied on a personal referral to purchase insurance
27%
of policyholders under 35 used an online search engine like Google
1 month
is the minimum amount of time most consumers spend in the research stage of insurance shopping
35%
of younger consumers purchased insurance online
37%
of younger consumers purchased insurance through an agent Source: IIABA, Nielsen Analytics, Applied Systems
10
A DEAFENING SILENCE followed by hushed, urgent conversation filled the room at the Valen Analytics Executive Summit in midMarch when Compare.com CEO Andrew Rose announced that his firm had entered into a partnership with Google. Just a few weeks earlier, Google raised speculation that it was planning a foray into the insurance industry by acquiring licenses to sell insurance in more than half of US states. By March 5, Google had confirmed its intentions
in this room full of senior executives on what it meant for them and their organizations.” Given Google’s mass appeal, access to large amounts of consumer data, and newly founded partnerships with comparison sites Compare. com and CoverHound, the company stands to generate a lot of traffic – and business – for its associated insurance carriers. For independent agents, the news of this novel distribution channel has meant another round of doomsday predictions. No one has hit harder than Forrester Research analyst Ellen Carney, who warns that Google’s entrance into the market could easily decrease the need for independent insurance advisors and force those who are left to cater to more specialized markets. “There are 40,000 agencies in the US, and you could absolutely imagine them shrinking by a quarter,” Carney said in an interview with the New York Times. “The ones that are left will deal with more complicated needs and more affluent customers.” It is difficult not to argue that the insurance game has changed. A 2014 Accenture survey put the number of current auto insurance policy holders who would consider purchasing insurance products from Google at nearly 70%; its Compare.com partnership means the company will be able to deliver quotes from more than 40 insurance carriers.
“It is incredibly reasonable to assume the renters and homeowners markets are next, and small commercial won’t be far behind” Dax Craig, Valen Analytics with the California launch of Google Compare, a feature that allows shoppers to compare auto insurance quotes from multiple carriers. Additional moves are expected shortly in Illinois, Pennsylvania and Texas. The subsequent announcement – albeit expected – from Rose hit like a lightning rod. “The best way to describe it was ‘shock and awe,’” says Dax Craig, president and CEO of Valen Analytics. “You could see a lot of contemplation
Admittedly, Google’s carriers hardly represent a ‘who’s who’ lineup of insurance companies – there is no Allstate, GEICO, Travelers or The Hartford on the list, for example – but it is never theless a considerable starting point for a brand that already touches the lives of most Americans each day. And though most industry leaders don’t expect Google to become a fully fledged underwriter, they do see the company expand outside the auto insurance market in the near future.
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“Given the technological infrastructure involved, it is incredibly reasonable to assume the renters and homeowners markets are next, and small commercial won’t be far behind,” Craig says. “It makes a lot of sense, and business will follow quickly.” Independent agents, however, remain unruffled by Google’s entrance into the market. John Tiene, CEO of the Agency Network Exchange, says concerns over Google and similar services are often heard and are just as often ill-founded. “The reality is this isn’t anything new,” Tiene says. “What we’re seeing on the front lines as a network of independent agents is that yes, people are using the Internet as a tool to become better educated, but we’re not seeing this flight to the direct market.” Tiene’s attitude is backed by statistics. A recently released market study from the Big “I” reveals that independents wrote nearly 57% of all insurance premiums in 2013 and have managed to grow market share, even in the heavily commoditized personal auto insurance space. And when it comes to consumer behavior,
the Internet does not yet dominate as a method of purchase. Although roughly 70% of insurance shoppers begin their research on the web, the vast majority still end up in front of an agent. This is even true for tech-savvy millennials. According to an Applied Systems survey, approximately a third of insurance shoppers
explore options from smaller carriers that don’t dominate the public consciousness, Rose says, comparison sites give agents a chance to earn commission through an online channel, provided the shopper chooses to purchase through an agent. “Our model is something that gives agents
“There are 40,000 agencies in the US, and you could absolutely imagine that number shrinking by a quarter” Ellen Carney, Forrester Research born after 1980 purchase their auto policies from an agent. Those working with Google are eager to emphasize that online comparison services are not out to eliminate the independent agent Compare.com’s Rose believes sites like his may actually help agents. By allowing consumers to
consideration where they wouldn’t have it otherwise. We have a shot in competing against GEICO and other big advertisers,” he says. “You may have to sacrifice a bit of commission up front to get our skin in the game, but it will allow you to take the personal relationships you offer and put it out on the multi-product market.”
GOOGLE ENTERS NEW TERRITORY Google Compare is currently live in California, with expected launches to follow in Illinois, Pennsylvania and Texas. The company is also licensed to do business in more than half of US states.
Washington
Oregon
Minnesota Idaho
Wyoming
New Hampshire Wisconsin
Illinois California Missouri
Ohio
Indiana
Pennsylvania
West Virginia
New Jersey Delaware
Arkansas
Arizona
Massachusetts
New York
Tennessee Oklahoma North Carolina
Alaska South Carolina
Texas Louisiana
Florida
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UPFRONT
INTELLIGENCE CORPORATE Acquirer
PRODUCTS
Target
Comments
Alliant Insurance Services
Kassa Insurance Services
Acquisition of Washington-based insurance agency represents a strategic regional advancement
AmTrust Financial Services
ARI Mutual Insurance
AmTrust acquires one of the top 10 commercial auto insurance writers in New Jersey and other Mid-Atlantic states
Arthur J Gallagher
NationAir Aviation Insurance
Gallagher acquires West Chicago retail agency specializing in aviation risk management
Arthur J Gallagher
Excel Insurance Services and Metcom
The two New Jersey agencies represent Gallagher’s expansion into hospitality, real estate, construction and auto
First American Title Insurance Company
TitleVest
The title insurance underwriter will deepen its footprints in the New York region
Higginbotham
Aycock & Fowler
The merger of two independent agencies marks Higginbotham’s first venture in the Lubbock market
Spencer Capital Holdings
SouthWest Dealer Services
Spencer will gain 250 employees and 550 active dealers across 14 states in the Southwest and Midwest
>> PROGRESSIVE ENTERS RIDESHARING MARKET Progressive has joined GEICO and other insurance companies in offering insurance coverage for drivers working for ridesharing companies. The new auto policy covering Lyft drivers rolled out in Pennsylvania this March. The policy will replace the driver’s existing personal auto coverage – an important distinction, as many state departments have struggled to determine when coverage from a personal auto policy stops and commercial coverage begins.
Vanbridge
Alan Gray
Acquisition will help Vanbridge develop insurance and reinsurance products in all markets
>> K&K ISSUES LOWER RATES
Hub International
Integro
Assets of Laubacher Insurance Agency Design Insurance Agency
Agencies in Ventura, Santa Barbara and San Luis Obispo will become part of Hub’s California operations, focusing on farm and ranch insurance Integro will gain a deeper hold in the specialty professional liability insurance market
AIG expands its presence in specialty lines market American International Group announced plans to expand its presence in the lucrative specialty lines market in March with the purchase of a controlling stake in NSM Insurance Group. The Conshohocken, Penn.-based commercial property and casualty insurance firm brings in more than $500 million in annual premiums, specializing in industries like aviation, sports and fitness, microbreweries, and professional liability for lawyers, dentists, architects and engineers. NSM, which employees 300 people worldwide, said the acquisition represented an investment that will allow it to pursue new avenues of growth while retaining its entrepreneurial organizational culture. The move is the latest in a series of acquisitions for AIG, as the firm furthers its goal of diversifying offerings with unique products.
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FOR PRIVATE SCHOOL ACCIDENT COVERAGE
K&K Insurance Group has announced it will lower rates for its student accident coverage for private non-boarding K-12 schools. The private school student accident program provides coverage for students participating in activities under the supervision of the school, including travel. Optional coverage for overnight field trips and interscholastic sports is also available. Coverage is excess of existing healthcare insurance, and the maximum coverage limit per injury per individual student is $25,000. The program is available in all states except New York. >> ACE ENHANCES POLLUTION LIABILITY
COVERAGES
ACE Group has made new coverages available under its premises pollution liability and premises pollution liability portfolio insurance policies. The newly expanded products were redesigned to accommodate industryspecific endorsements that provide coverage for the healthcare, public and education industries.
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PEOPLE Name
The ACE USA Environmental Risk Premises Pollution Liability policies serve stakeholders in residential, commercial, retail and industrial facilities. Coverage is provided with limits of up to $50 million; the minimum premium is $10,000. >> TUMI LAUNCHES AUTO
LIABILITY AND TRANSPORTATION PROGRAMS
Georgia-based Trinity Underwriting Managers Inc. has kicked off its new designation as an approved Lloyd’s coverholder by launching programs for auto liability and transportations. Among others, available coverages include motor truck cargo, auto physical damage, nontrucking liability and trucker’s general liability. TUMI also is underwriting industry-specific programs for towing and recovery, auto repossession and intermodal trucking through an ‘A’ rated carrier and an ‘A++’ rated reinsurer. Coverages include auto liability, general liability, cargo, physical damage and trailer interchange.
Leaving
Joining
New Position
Jerry Ascolese
R-T Specialty
Burns & Wilcox
Casualty brokerage
Tom Carstens
Engle Martin & Associates
Crawford & Co
Senior VP, Crawford Global Technical Services
Danielle Chayot
Marsh & McLennan
Lockton
VP and producer, habitational and commercial real estate
David Deitz
Liberty Mutual
MedRisk
Medical advisor
Cecille Feliciano
Heffernan Group
Crystal & Company
Managing director and employee benefits services team regional leader
Barry Haring
Zurich
York Risk Services
VP of sales, Northeast
Tom Herndon
Mitchell International
Medata
President
Jim Linden
Patriot Coal
Lockton
Assistant VP, senior claims consultant
Michael Marino
RSA and GCAN Insurance Company
Ironshore International
Senior VP, energy
Kelly Peterson
Hays Companies of California
Crystal & Company
Executive director
Miguel Roure
ReActive Legal Services
Goldberg
Partner
SENIOR WILLIS EXECUTIVE ANNOUNCES SURPRISE DEPARTURE In a surprise move, senior Willis executive Les Boughner left his post with the broker’s North American captive and consulting practice in early March. Willis said Boughner left the company to “pursue new ventures.” Boughner, a well-known figure in the captive insurance market, began his career with Toronto-based Arkwright Mutual Insurance Company. He later joined American International Group in New York, where he presided over foreign captive programs. Before joining Willis, Boughner worked in management with Arch Insurance and Zurich Insurance in Chicago.
>> CFC INTRODUCES NEW CONTINGENCY
INSURANCE PRODUCTS
Specialist underwriting agency CFC Underwriting has introduced two new contingency insurance products: prize indemnity and over-redemption. The prize indemnity product covers a variety of sports skill competitions, including hole-in-one competitions, conditional rebates and lotteries. The over-redemption policy covers promotions both on pack and in store, as well as electronic and paper coupons and loyalty schemes. Both policies offer up to $30 million, and are provided by Lloyd’s of London. The announcement follows the establishment of CFC’s contingency team.
WARREN BUFFETT HINTS AT HIS SUCCESSOR A new future for Berkshire Hathaway and its insurance interests may be announced shortly. Company head Warren Buffett revealed to shareholders in late February that he and the company board had found a successor for Buffett, and Berkshire vice-chairman Charlie Munger confirmed that Ajit Jain and Greg Abel are the front-runners for the position. Jain has been head of National Indemnity’s reinsurance operations since 1986, while Abel heads Berkshire Hathaway Energy. Munger stressed that Abel and Jain are both loyal to Berkshire; neither are likely to abandon ship for new opportunities in the near future.
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UPFRONT
TECHNOLOGY UPDATE NEWS BRIEFS
Developer launches loss-analysis app for brokers A new loss-analysis web application from Vantage Agora hopes to assist insurance brokers in marketing/remarketing accounts and negotiating premiums for clients and prospects. The SaaS app combines claims loss data from sources such as a broker’s management system, as well as carriers and thirdparty administrators. It is also intended to service program administrators and managing general agents with a “big-picture view of a book of business.”
LexisNexis captures 1 billion miles of telematics LexisNexis’ UK-based Wunelli has gathered more than 1 billion miles of data on driving behavior. The endeavor is one of the only wide-scale telematics programs to incorporate analytics provided by smartphones. “We’re the only provider who uses smartphone data to actually change insurance premiums,” said David Lukens, LexisNexis director of vertical marketing. Feedback has been so positive that the initiative that LexisNexis will soon expand into the US and Canada.
The future of mobile advertising New research indicates that mobile advertising is critical, but an effective strategy requires agencies to view smartphones and tablets as
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one part of the larger consumer experience. An analysis of 1 million phone calls by Marchex found that many demographics are using mobile for the purposes of ‘click to call,’ or connecting the online world to the offline one. Up to 25% of calls, however, result in hang-ups due to long hold times, indicating a need for better processes.
Google enters insurance market Google is partnering with Compare.com and CoverHound to allow shoppers an easier way to compare rates by various providers. The service will initially be offered to residents of California, but the tech giant plans to expand nationwide. Google says providers cannot pay to rank highly in search results, but do have the option of describing their unique offerings. Many major insurance companies, such as Progressive, Allstate and GEICO, refuse to collaborate with Google, stating that Google Compare doesn’t convey comprehensive enough side-by-side comparisons (see p. 10).
RAM Technologies recognized for tech solutions Ram Technologies has been named the Most Promising Insurance Technology Solution Provider by CIO Review. Its suite of products provides an administrative platform flexible enough to adapt with the healthcare environment, and the company works with each client individually to ensure ROI. CIO Review was particularly impressed by HEALTHsuite Mercato, which automates all facets of enrollment, eligibility, benefits administration and customer service.
Is wearable tech a game changer? The new Apple Watch, unveiled on March 9 in San Francisco, offers such distinctive features as the ability to navigate iTunes, operate as a remote control for Apple TV and even display boarding passes for travelers boarding a flight. This watch, as well as other emerging pieces of wearable technology, may also serve another purpose: insurance telematics. Since the smartwatch will be able to track users’ calorie expenditures, exercise habits and time spent engaging in non-sedentary activities, analysts predict that it’s only a matter of time before this information is used strategically by healthcare providers nationwide.
Analysts predict it’s only a matter of time before this information is used strategically by healthcare providers nationwide Oil and gas giant BP is currently experimenting with this idea. In 2013, the company made waves when it provided 14,000 employees with a free FitBit under the condition that BP could monitor their footsteps. If they reached one million, they could obtain a lower insurance premium. The auto industry is also developing wearable technology for telematics purposes. In 2013, Japanese automaker Nissan put forth a concept of a smartwatch designed for its Nismo line of sports cars. These watches would connect with the car to monitor real-time performance data, such as speed and fuel usage. This information could be invaluable when cal-
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culating insurance rates. Google Glass also presents a new array of options for insurers. Information Age hypothesizes a future where drivers using the device are able to continually record video footage of their auto commutes. In the event of a collision, this video would serve as reliable evidence of what happened, and could aid in determining claims. In addition, wearable tech could provide life-saving information to medical practitioners about the impact of the collision on participants’ bodies, as they will inform emergency medics on the scene about health stats instantaneously. Finally, devices may benefit another area of employment: workers’ compensation. Organizations such as Cognizant are beginning research on devices that can track injured employees’ progress and assist with rehabilitative efforts. This information could then be used in a Return To Work plan, and possibly bring a recuperated employee back to the workplace sooner. While wearables have not yet seen widespread implementation, over time, their ability to gather data could be invaluable for insurance agents, and may even become the primary component when calculating rates, quotes and claims.
HOW CORE WEARABLE CAPABILITIES COULD APPLY TO TELEMATICS
Near the user Devices such as Google Glass could evolve to record all driving data, providing valuable footage in the event of a collision
About the user Smartwatches and fitness trackers such as FitBit may track activity and glucose levels, allowing health insurers to adjust premiums on a day-to-day basis
To the user Smartwatches such as Nissan’s concept watch could connect with cars to tell drivers about performance, speed and fuel usage Source: Tom Benton, Principal, Novarica
Q&A: Tech and insurance careers GUY WEISMANTEL Vice president of marketing Vertafore
Guy Weismantel elaborates on what Vertafore’s Young Professionals Survey revealed about millennials in insurance IBA: What were the chief aims of the 2014 Young Professionals Survey? Guy Weismantel: As a technology provider, we’re always trying to understand the business challenges that our customers have and how they can utilize technology to solve those challenges. The survey was really borne to get some of that insight [so] we can make sure that we capture the changing ways in which technology is used, [in order] to help them run their businesses better.
IBA: What did those surveyed have to say about the importance of technology when it comes to working in insurance? GW: Barely a majority of them said that technology was the major factor that was keeping them in the industry, and it makes sense when you think about the independent insurance agent channel … [it’s] very, very relationship-focused and relationship-driven, and the reason why lots of people prefer to use an independent agent [is] because they want to know the person. They don’t just want to talk to them over the phone or online. They value having someone in their community who knows their business, who knows their family, who’s involved with the different associations that are a part of the community in which they live, and so the use of technology for this channel in the insurance industry actually is a few clicks lower on the scale versus if you were talking to an online insurance broker, where it’s only technology that you’re interacting with. But the next level down, which I think was the really interesting part … [they] told us that technology’s so ingrained in how [millennials] conduct their lives that they don’t view it as really important. They view it as kind of table stakes to be able to operate in their business today.
IBA: How can technology can assist with job satisfaction? GW: [The findings] tell us the service aspect of the insurance industry is a place where technology is playing an increasingly huge role. [Technology] doesn’t replace the personal relationship that they value, but … it allows them to give an extra level of service that previously they didn’t have. I think we all think of the typical insurance agent showing up with the briefcase full of papers. Now, if you’re able to send these things electronically, after you’ve had the meaningful discussion on how they can help your business or your family and close that loop really quickly, that’s a really value-added part that technology can bring.
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UPFRONT
WORKERS’ COMP UPDATE
Which states are most expensive for workers’ comp?
Under $1.50 $1.50-$1.99 $2.00-$2.49 $2.50-$2.99 $3.00-$3.49
A STUDY by the Oregon Department of Consumer and Business Services on workers’ compensation premium rates issued has revealed the most expensive states for workers’ comp in the nation. The biennial study ranks all 50 states and Washington, DC, based on rates in effect at the beginning of 2014. Despite extensive reforms designed to lower
NEWS BRIEFS
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costs, California now has the most expensive rates, followed by Connecticut. North Dakota had the least expensive rates. “A record 21 states are within plus or minus 10% of the 2014 study median,” says Mike Manley, one of the survey’s co-authors. “This makes the rank values more volatile from one study to the next.
Humana exits workers’ comp market Humana announced this month that it plans to sell Concentra Inc., its occupational health and physical therapy unit, to M.J. Acquisition Corp. for $1.06 billion. M.J. Acquisition will split ownership of Concerta between Select Medical Holdings Corp. and private equity firm Welsh, Carson, Anderson & Stowe. The move, which marks Humana’s departure from the workers’ compensation field, bucks current industry trends toward combining healthcare providers and insurers – an integration that has been criticized for driving up the cost of premiums without necessarily improving care.
I would recommend that states look also to their ‘percent of study median’ figure for comparisons over time.” The researchers also compared each state’s rates to the national median (midpoint) rate of $1.85 per $100 of payroll. Kentucky and Wisconsin both had major drops in premium – Kentucky moved from 22nd highest in the nation to 40th, while Wisconsin moved down 11 spots, from 12th highest to 23rd. Neither state is considered to have had major reforms over the last few years. For a couple of the states undergoing dramatic reforms – Oklahoma and Tennessee – it is too early to tell, as they are just implementing changes this year. Others, however, including California and Kansas, saw premium costs rise despite reforms intended to do otherwise. Those living in New Mexico, Hawaii, Missouri and Delaware might be thinking of what changes should be in order, since they had dramatic negative movement on the scale this year.
“California now has the most expensive rates, followed by Connecticut” WCRI: ACA will cause case shifting to workers’ comp The Affordable Care Act’s creation of accountable care organizations [ACOs] creates a financial incentive to shift cases to workers’ comp – and subsequently raise industry premiums – according to a new study from the Workers Compensation Research Institute. In a speech at the 2015 WCRI Conference, president and CEO Richard Victor suggested that because workers’ comp typically pays higher rates than group health, providers would have a powerful financial incentive to shift cases – especially soft tissue injuries like sprains and strains – to the workers’ comp umbrella.
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Q&A: The ACA and its effects on workers’ comp SAM FRIEDMAN Insurance research leader, Center for Financial Services Deloitte Services LP
IBA: What are your thoughts on positive impacts of ACA on workers’ comp?
IBA: Do you foresee costs shifting from health insurance to worker’s comp because of the ACA?
Sam Friedman: [If] you have millions more people with coverage, those people are going to behave differently. If you have people getting healthcare more quickly, more preventative care, and taking care of problems before they become chronic or critical, it’s going to be a healthier population on the whole, and it’s going to be a healthier workforce ... If you have people [who] have hurt their back doing work around the house or gardening or playing basketball ... they may aggravate it on the job. The workplace may not have caused the injury, but it ends up paying for it if it’s exacerbated or discovered while the person’s working. And this is particularly the case when you have people who are uninsured for health because what happens is there tends to be a greater proclivity toward fraud. If people have health insurance to fall back on, that’s less of a likelihood. There are also some components in the ACA that encourage employers to put into effect wellness programs ... so that could help, too. Another positive impact is there are supposed to be studies under ACA, looking at effectiveness of treatment which options may work better than others - and while it’s not geared towards workers’ comp insurers, I don’t see why they couldn’t piggyback on this and gain some valuable insights and alter their treatment protocols accordingly ... and perhaps improve their own effectiveness in getting people treated and back to work.
SF: I think there’s actually less of a chance of cost shifting if
Despite reforms, California still has highest rates Despite extensive reforms designed to lower costs, California has eclipsed Alaska and Connecticut to claim the title of the country’s most expensive workers’ compensation rates. At $3.48 per $100 of payroll, California’s comp rates are almost twice the median rate of the country. Representatives with California’s State Division of Workers’ Compensation point out, however, than the majority of regulations designed to ease costs did not go into effect until January 2014 – the year the study took place.
more people have health insurance. There’s still some temptation maybe to shift because you get a better deal through workers’ comp ... but it is still a matter of fraud, and not everyone’s dishonest. I think there’s less likelihood of cost shifting if people have health insurance to fall back on. If you have no other recourse to get medical treatment other than your bank account, workers’ comp starts to look a lot more attractive.
IBA: Are there other negative impacts you see the ACA having on workers’ comp? SF: I thought there might be a rush to get service, especially for people who hadn’t had medical care – perhaps they’d been postponing it for a long time. With millions more flooding into the system, it might create a bottleneck that would delay care for people who are in physical therapy or medical diagnostic care or checkups under workers’ comp. And we know that, with workers’ comp, time is of the essence. If the workers’ comp insurer gets stuck at the back of a lengthening line, it could raise indemnity costs for them. I haven’t seen any manifestation of that yet. It’s too early in the process. But ... if the system survives, you still have 30 or 40 million people without health insurance, and that amount of people [being] integrated into the system. Eventually, you would hope the market would respond, and there’d be more supply to meet the increase in demand.
Workers’ comp industry leader will retire in 2016 The National Council on Compen sation Insurance announced in February that CEO Stephen J. Klingel will retire from the organization after serving what will be a near 14-year term. Klingel, who was named CEO in late 2002, says he plans to retire in February 2016. He will be the third longest-serving CEO in the NCCI’s more than 90-year history. The NCCI is currently forming a search committee to replace Klingel in the coming months while he continues to oversee the organization.
Tennessee’s move to allow workers’ comp opt-out stalls A bill that would allow private employers in Tennessee to opt out of the state-mandated workers’ compensation program by setting up their own plans stalled this month after the Tennessee Advisory Council on Workers’ Compensation decided not to recommend the bill. The council voted unanimously against recommending the legislation, saying proposed benefit level standards in private plans are not on par with what is offered under the state law. The Senate Commerce and Labor Committee will vote on the bill later this month.
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PEOPLE
INDUSTRY ICON
GLOBAL THINKING
Michael Kerner, CEO of general insurance for Zurich Insurance Group, talks about preparing for the unexpected, and taking insurance solutions to more customers than ever before THERE’S ONE DAY in Michael Kerner’s three-decade career in insurance that stands out among the rest – September 11, 2001. He was working in Zurich’s offices in downtown Manhattan, across the street from the World Trade Center. “In addition to the personal impact that kind of an event has on you, being that close to it … it reinforced to me, frankly, that you always have to expect the unexpected,” he says. “The things that you can’t even imagine could happen, actually could happen. And that’s actually why we’re here as an insurance industry – to help people through those times – and we need to be prepared to respond. I think that’s very much ingrained in the way I think about risk management for an insurance company.”
In the beginning Kerner’s first foray into the industry was via a summer internship back in 1986 with Insurance Services Office, an organization providing actuarial and other services to insurance companies in New York. “It was a great experience,” he says. “When I graduated from university, I wanted to work for the company.” He secured a full-time role with Insurance Services Office and worked there for three and a half years before deciding to move on. “[I] decided that I’d like to work for a real insurance company that was actually selling insurance policies,” he says. Kerner went to Continental Insurance Company, and then on to Zurich. His rise through the ranks at Zurich has seen him achieve much while learning valuable lessons about the business. When Hurricane Katrina hit the Gulf Coast in 2005, Kerner was Zurich’s head of ceded reinsurance in North America. “Essentially, my responsibility was to make sure we had a reinsurance program in place that protected the North America balance sheet.
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When you have a responsibility like that, you plan for adverse things to happen, but you hope you never get tested as to whether it really is going to work or not. “In the end,” he continues, “the reinsurance we had in place protected the balance sheet and did exactly what it was supposed to do, and the company came out of it the other side in reasonably good shape, and it was my team that had put that all together. We were very proud of the result we were able to deliver for the company.” Aside from the success, there was a crucial takeaway Katrina offered for Kerner. “We had analytics; we had models; we had a way of thinking about things. But, of course, the models were not exactly correct, and I think even as we move forward with big data …we always have to
“I think probably that was … the transformational step of getting outside of being a nearbased insurance professional to more of a global insurance professional.”
The global perspective Thinking globally is vital at Zurich, which works to create multinational insurance products. “It is still and will continue to be important for us to continue to consider risks both locally and regionally,” Kerner says. “There are differences around the world in terms of work environments, customer behavior, building codes, the local standard around loss control and engineering … and it’s important that we have teams of people based locally who actually understand those things and help us understand customers’ risks.”
“We always have to remember that models are actually not facts. It may be useful and help you make some judgments and decisions, but it’s not necessarily 100% accurate” remember that models are actually not facts. When you get the result of a model, it isn’t exactly the truth. It may be useful and help you make some judgments and decisions, but it’s not necessarily 100% accurate.” At the end of the same year, Kerner packed up his family and headed to Europe to run Zurich’s group reinsurance – in Zurich. “This was a very, very different kind of experience, and I really learned quite a lot about how to work with people with different backgrounds, different cultures, different communication styles, different approaches to different things, and still be successful in that environment.
But he adds that the key is being able to take that local knowledge and bundle it together to assist customers to have true global enterprise risk management. “I think the focus we have on global risks really is a matter of following our customers. We see the economy expanding a lot more in terms of customers who are doing business internationally.” He says customers starting out in building global businesses will buy a number of local insurance policies, only to discover inconsistencies between policies, program gaps and that their policies won’t perform as expected. “They begin to realize that more of a global enterprise
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“Being that close [to 9/11] ... reinforced to me that you always have to expect the unexpected”
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PEOPLE
INDUSTRY ICON approach is the right approach to take for their risk management, and driving that kind of an approach generates more consistency, better standards in terms of the risk management program ...” As to global challenges, Kerner sees regulation, particularly around consumer protection, as a major pressure for the industry in times ahead. “I think the regulatory environment will continue to evolve, and that will be a challenge as we have to adapt our business models to comply with those regulatory challenges,” he says. “I think regulators are very much focused on making sure the consumer is protected, and that makes a lot of sense. But often, it can go a bit too far. Often, as well, one jurisdiction’s regulation conflicts with a regulation from another jurisdiction, and as a global company, it’s very challenging for us to deal with conflicting regulations.” Kerner also cites the new capacity coming into the market, and the pressure it will place on margins, as another key challenge for insurance.
New markets He also sees great opportunities for the industry, especially in emerging markets in Latin America and Asia. “As the middle class grows, people accumulate assets, those assets wind up needing insurance, and we are in a position where we can provide that insurance. It’s the same products, but just for different people and different geographies.” According to Kerner, there are also plenty of opportunities arising from the increasing occurrences of extreme weather events. “While it’s a challenge for the industry to be able to deal with those … events, it also creates a lot of demand for insurance, and as an industry, if we can deal with those challenges and provide a product that’s valuable, clearly we would expect to see revenues go up from that kind of product.” One opportunity Zurich has taken up, about which Kerner is particularly excited, is the microinsurance venture incubator project (MVI), announced at January’s World Economic Forum in Davos. “I think it’s a real example of how the industry can step up and do something that’s transformational and really innovative around this particular issue of microinsurance,” he says.
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The Bermuda-based MVI entity was formed for the purpose of delivering insurance solutions to very low-income individuals in developing countries. Zurich is one of nine companies involved in the MVI. “We think it’s pretty critical that more and more people have the opportunity to participate in the financial services industry. Often, those who are most exposed to losses that really would impact their lives on a very detrimental basis are those who are least able to access the protection mechanisms that are in place in society, that those kind of financial services would provide.” Providing these offerings will present many logistical challenges, and Kerner sees the partnership between these organizations as key to being able to create the necessary innovations. “We’re going to work together to really try to
“The focus we have on global risks really is a matter of following our customers” develop the right innovations to make this something that works more holistically for that part of the population that’s really exposed to adverse events.” Kerner expects that Africa, emerging Latin America and emerging Asia will be the prime areas of activity for the MVI. He reinforces that the MVI is not a charitable endeavour, but a business. “Charities get cut when budgets get cut. Businesses that make money get continued, whether there’s a soft market, a hard market … so it’s not a charity. It’s a business.” He’s also buoyed by the impact it will have on Zurich employees, both current and future. “We will help the MVI with seconded resources; we’ll give employees opportunities to rotate through that organization … so it’s not just those who are getting access to the financial services that benefit. It’s our employees who get to contribute to something that they feel is really meaningful from a social responsibility perspective.”
MICHAEL KERNER’S CAREER TIMELINE
1986
Enters insurance industry working for Insurance Services Office
1990
Joins Continental Insurance Company as a pricing actuary in the speciality lines area
1992
Joins Zurich as a pricing actuary in the speciality lines business
1999
Becomes COO for Zurich North America Specialties
2002–2005
Serves as head of ceded reinsurance for Zurich North America
2006
Becomes global head of group reinsurance
2007
Becomes global chief underwriting officer for general insurance and head of group strategy in Zurich
2009
Begins tenure as CEO for Zurich Global Corporate in North America
2012
Becomes a member of the Zurich Group executive committee and CEO of general insurance
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FEATURES
COVER STORY: SUCCESSION PLANNING
PLANNING FOR THE FUTURE What’s going to happen to your agency after you leave? A good succession plan can help ensure it endures for the long haul
WE LIKE to think we’re immortal. It’s easy for the owner of an independent agency to coast on current success, assuming that the agency will simply continue to exist forever. But of course that’s not the case – without a detailed succession plan in place, your agency could find itself in real trouble down the line. The fact is that the insurance industry is aging: The typical independent agency owner turned 53 in 2012, while the average employee was around 48, according to a recent study by MarshBerry, an insurance management consulting firm. And as unpleasant as it may be, it’s just good business for agency owners to plan for a future when they won’t be running things. “Not everybody wants to think about that phase of
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their life,” says Rick Dennan, founder, president and CEO of Oak Street Funding. “It’s a huge emotional event. But for the ones who have it planned out, it’s not as emotional as for those who haven’t planned, and all of a sudden they have a heart attack or some life event and realize, ‘I can’t do this all my life.’” Succession planning doesn’t have to be terrifying – done right, it can give owners and employees peace of mind, and even increase the value of a business. But it does have to be taken seriously, and it’s not something to be put off until tomorrow. A vital piece of the business A succession plan isn’t just something that’s nice to have
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“Not everybody wants to think about that phase of their life. But for the ones who have it planned out, it’s not as emotional ...” in place. According to Phil Trem, senior vice president at MarshBerry, it’s a vital part of any good business. “When you talk about succession, you can think of it in a couple of different ways. You can think about succession from a stock owner perspective, from a leadership perspective, and you can look at it within the insurance business as the ability to transition books of business,” he says. “Most independent insurance agency owners are not only the majority shareholders, but they’re also the top executives in the firm and in many cases have the largest books of business. Succession really is kind of a three-legged stool. It’s important from a valuation perspective, because if any one of those three legs isn’t secure, the organization is susceptible.”
A good succession plan can boost an agency’s stability and overall value, because employees and customers know the firm’s future is secure. “Whether someone decides to implement a succession to the next generation of owners or sell, having succession in place – having the next generation of leadership, of producers and potentially of minority shareholders – increases the stability of the firm, which ultimately increases the overall valuation of the firm,” Trem says. “The other piece is optics. At the end of the day, whether it’s a rational concern or not, there is a stigma to selling externally. Roughly 75% of the agencies that want to perpetuate or have succession end up selling anyway, and that’s often
Rick Dennan, Oak Street Funding
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FEATURES
COVER STORY: SUCCESSION PLANNING
because they can’t get the pieces in place [for internal succession]. Having a kind of documented succession plan is important to the staff. If you’re a 65- or 70-yearold owner and you have no succession plan in place, people get concerned for their jobs.” And there’s good reason for employees to be concerned. About 70% of family-owned businesses don’t survive the transition from founder to second generation – usually for avoidable reasons like an unexpected tax burden or familial spats. Those problems can be sidestepped by having a good succession plan in place – and making sure that the plan is a ‘living document’ that’s continually updated to reflect the evolution of the business. The key, says Trem, is to view succession as an ongo-
WHO WILL SUCCEED YOU? There are several options when you’re deciding who should take over your firm, including: Aggregators Private equity A carrier A competitor Your employees A family member Your succession plan should clearly outline who will take over the firm, and you’ll need to make adjustments to that plan depending on which person or company you plan to sell to. For example, selling to an employee or family member may mean that a professional valuation isn’t quite as vital; someone who’s been with the firm a long time probably has a good idea of what it’s worth. If you’re planning on selling to an aggregator, however, it’s doubtful the buyer will take your word on the value of the business. You’ll want to invest in a thorough valuation from an expert in order to demonstrate that your business would be a sound purchase. Source: Rick Dennan
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ing process rather than an event. “That’s part of the reason why most of them don’t succeed – because people view it as an event and not something they need to plan for years ahead,” he says. “The planning aspect doesn’t mean you have to go through with it – it just means you’re positioned to have a choice. Firms that don’t plan for it and view it as an event in many cases aren’t able to have a succession plan in place. That’s why most firms sell. If you do annual planning, having a succession plan should be an integrated part of that, not a stand-alone event that’s out on the horizon.” “Whether you’re planning on selling to existing people in the agency or are planning to sell to a third party … it’s a matter of positioning it right,” Dennan adds. “You
“That’s part of the reason why most [plans] don’t succeed – people view it as an event and not as something they need to plan for years ahead. The planning aspect doesn’t mean you have to go through with it – it just means you’re positioned to have a choice” Phil Trem, MarshBerry want to maximize, to get all the arrows pointed in the right direction. The best ones start getting a plan in place two or three years in advance, getting their people prepared and their processes in place. They’re making sure carrier relationships, vendor relationships and such are all in sync.” So how do you put together a good succession plan? The first steps are to know the value of your business and make sure you’ve already got a good team of producers and managers on board.
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Determining value One of the key steps in any succession plan is determining the value of your business. Many agency owners try to do this on their own. Dennan says that might be acceptable for small agencies that are slated to pass into the hands of family members or employees – but owners should think twice about doing their own valuations if they’re selling to an aggregator or a carrier. “If it’s someone who has a $500,000 revenue book on personal-line stuff, that’s not as hard to value as a $20 million or $30 million shop,” he says. “Ultimately it’s going to come down to who the buyer is. If it’s a thirdparty buyer who doesn’t know the agency, chances are they’re going to want to do a valuation of the business. If it’s a son buying from the father, or an employee who’s worked there who are buying out one owner, they know the value of the business.”
THREE KEY QUESTIONS The first step in making a viable succession plan is to ask yourself three questions:
• What are your goals?
• What will happen to your employees and customers?
• Who should succeed you – a family member, an employee, or an outsider? Source: Rick Dennan
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FEATURES
COVER STORY: SUCCESSION PLANNING
Trem, meanwhile, suggests hiring a professional in any case. “I think at the purest level, my perspective is that you absolutely should have a professional valuation done,” he says. “It takes out the emotion because it’s a third party. It leaves a lot less to question, and ultimately, it’s a foundation for the organization to know what the overall valuation is. It’s cleaner and, honestly, more accurate based on current market conditions if you use a professional valuation firm to do that. We do see some firms rely on a formulaic approach to it, and I guess our perspective is that a formula is better than nothing. But the best is having a professional valuation completed.” In fact, he says, you really shouldn’t wait until you’re selling your agency to do a thorough valuation. “It’s really something that should happen every year,” he says. “As your business grows and revenue grows, understanding the impact of overall value is important.”
ethical standards, you’re kind of making your business less valuable. If you’re trying to grow a business, it’s so much easier to have high-quality, high-talent people sitting beside you than it is to try to do it on your own.” Even the average age of your employees can be a selling point. Most firms are aging, and a stable of younger producers can be attractive to buyers, who might feel that younger people will stay with the agency longer. “Age of ownership, age of production and even age of service staff continues to trend upwards,” Trem says. “What we’ve found is that organizations that have a significant amount of production in 30- to 40-years-olds are unusual – and they drive a market premium. That’s not to say that if you’re in your 50s and 60s you’re not valuable – there are just questions about your time left with the firm. Everyone would love to have every producer continue to drive six-figure new-business numbers into their 80s, but it just doesn’t happen that often.”
“[Valuation] is really something that should happen every year. As your business grows and revenue grows, understanding the impact of overall value is important” Phil Trem, MarshBerry A winning team A key part of the value of an agency is in its employees – both managers and producers. An agency owner who plans on passing the firm on to an employee or family member needs to make sure that person is capable of running the business – and an owner who wants to sell to a third party won’t attract a good price if the firm’s team isn’t effective. That’s why hiring good people – and retaining them – is just as important when you’re selling an agency as it is when you’re starting one. “I think the hardest thing to do in our industry is grow,” Trem says. “Growing in and out of market cycles is imperative, and the only way to do that is to continually write new business. The best firms are those that have hired and trained – and been able to retain – producers who are able to drive growth in the top line regardless of market conditions. It’s incredibly important.” “These businesses all come down to people,” Dennan agrees. “If you don’t have high-quality people, and you as a leader aren’t leading with the highest character and
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Keeping employees in the loop One key component of a succession plan is deciding how much – or how little – to share with employees about how the business will change after you leave. Many agency owners fear that announcing a plan to sell the firm might lead to a mass exodus of producers. But that really depends on what kind of company culture is already in place. “If you’ve got a 30-person shop, and you’re selling it to two people internally, no one’s going to worry about that,” Dennan says. “If you’re very private and haven’t shared anything, people aren’t held accountable, some of them are non-performers, and all of a sudden there’s an announcement that you’re selling to one of the aggregators, there’s going to be a huge overreaction. People are going to jump and try to sell their books, because they don’t like change. It really comes down to the culture – how people have interacted with their staff in the past.” “Communication almost becomes like a measuring
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Growth VALUATION When making a succession plan, you may want to invest in a professional valuation of your business. This lets potential buyers know that the business is a sound investment – and it gives you an idea of what you can expect to be paid for it. A good valuation will take into account a lot more than just gross revenue; it will consider everything from past growth to the average age of the leadership team. Here are some factors you can expect a good valuation to consider: FUTURE CASH FLOW Does your company’s past performance indicate a good potential for future earnings? MANAGEMENT TEAM How effective is the management team already in place? Are many of the key players nearing retirement age? GROWTH TRENDS Can the firm be expected to continue to grow? Quality and consistency of underwriting results: Does the firm have a demonstrable track record of solid underwriting? PREDICTABILITY OF RESULTS Does the firm’s track record allow confidence in future success? SYSTEM/INFRASTRUCTURE Does the firm already have effective processes in place to run efficiently? Source: Rick Dennan
stick to leadership,” Trem says. “If [agency leaders] make the commitment, they’re going to have to follow through, because if they don’t follow through they’re going to lose their good people. If they make a plan, they’d better be prepared to execute on it.” “Nobody wants to buy a business and shut it down. You’re going to buy it and want to grow it and make it a good investment,” Dennan adds. “If people understand that, and they’re not worried about their jobs – and you’ve had a history of transparency in your company – there typically isn’t an overreaction.” Communicating your plan to your employees is also important to prepare them for the eventual transition
Many agencies would like to purchase their “competitor down the street.” Never having purchased an agency before, how do you start? Any proposed acquisition should enhance agency value. Agency principals need to consider their agency’s financial health, conduct proper due diligence on a viable target agency and use knowledgeable consultants - including your banker. There are many “moving parts” to even the most “basic” acquisition. Review your agency’s financing needs with InsurBanc – the only financial institution dedicated to serving America’s independent insurance agencies. We’re uniquely positioned to provide agency principals with financial insights for enhancing agency value. Acquisition & Perpetuation Loans • Working Capital • Equipment Leasing Cash Management • Online Banking
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FEATURES
COVER STORY: SUCCESSION PLANNING
SET A TIMELINE You should really have a good succession plan in place at all times, updating it as necessary. If you don’t, however, you should start taking steps to prepare at least three years prior to selling the firm. Here are a few steps you should take when making your succession plan: Three years prior to selling: • Secure a team of advisors • Get your house in order – make sure the business is running smoothly • Evaluate your management team
Two years prior: • Maintain/improve profitability • Reduce debt • Exhibit growth • Secure management team
One year prior: • Secure sale advisory team • Know fair market value of your agency • Advertise/seek a buyer Source: Rick Dennan
“Your clients want to know that at some point there’s going to be someone to backfill for you if something happens to you” Phil Trem, MarshBerry – especially if that transition involves handing over control of the company to some of those employees. “It’s not just that one day you flip a switch, and ‘I’m no longer in charge, and all of a sudden you are,’” Trem says. “It’s a process of bringing them up to speed with certain functions; it’s a gradual transition, so people in line for potential ownership see those opportunities and stay with the agency. People like that move on when ownership continually promises opportunities to lead, opportunities to buy stock, and never follows through with the commitments that they’re making.” Never too early You should start preparing a succession plan a minimum of three years before you intend to pass the agency on, Dennan says. But having one already in place – and keeping it up to date – will hedge against unexpected events. Health issues, a death in the family, or any one of countless other events could put you in a position where you have to sell the firm before you intended – and lacking an established plan can mean taking a hit at the bargaining table.
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“When you’ve got those events, you’re probably going to get less liquidity than you would if you’ve planned properly and have that plan in place,” Dennan says. Succession planning is also important to your clients’ peace of mind, Trem says. “Your clients want to know that at some point there’s going to be someone to backfill for you if something happens to you. You’re at risk of losing clients as your owners and producers continue to age, because they don’t want to hang on if the ‘what-if ’ happens and deal with the ramifications of that.” And in order to deal with the ‘what-if ’ in the most efficient way possible, Trem suggests consulting a professional when making a succession plan. A good plan will have enough moving parts that it pays to have an expert’s help in crafting it. “Work with someone who knows how to help you,” he says. “A lot of owners want to do this on their own because they either don’t want to spend the money, or they don’t think it’s complicated. The reality is that this is not an easy plan to put in place. Oftentimes it’s valuable to have a third party come in and be the project manager.” But whether you craft the plan yourself or hire a consultant, you need to have one – and keep it current. “If you don’t have one, you should create one – and it shouldn’t be something you put in a drawer and never look at it again,” Trem says. “To successfully perpetuate your firm, it needs to be kind of a living document. It needs to be part of your annual planning. If you have a succession plan that you implement, and there’s a new generation of ownership that comes in, they should immediately work on their succession plan and have that in place. It’s never too early – and tomorrow’s probably too late.”
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EXCLUSIVE FEATURE
CAT-PROP INSURANCE
TIME TO TACKLE THE CAT-PROP MARKET Small to medium-sized brokers are developing a niche in soft market with the help of specialty players such as James River Insurance Co. IT’S A QUANDARY a growing number of small to medium-sized retail agents are faced with – how are catastrophe-exposed and larger property placements to be layered and what role, if any, is there for them to play? Really large accounts tend to be brokered by equally large retail agents, but there is business flowing directly to smaller agents embracing opportunities in the cat-exposed market. “Fortunately, there are many insureds with small to middle market sized risks that need knowledgeable retailers and wholesalers to assist in their property placements,” says Tony Owens,
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division manager of property for James River Insurance Company. “There are many small business owners with apartments, retail centers, office complexes and light manufacturing operations, for example – not to mention the numerous condominium owners associations that also need assistance and guidance in their property insurance placements.” Owens says James River is pointing its broker partners in the direction of this opportunity at the same time it’s providing commercial customers with solution for their excess property insurance limit needs.
“Smaller retail agents rely more heavily on the expertise of specialty markets such as James River and wholesale brokers than the larger retail agents,” says Suzanne Brandt, managing director for Ryan Specialty Group. “The accounts regional agents handle may be smaller and more local in exposure, but they can also be just as complex in nature as those handled by the larger retailers, thus requiring the expertise and niche market access provided by specialty markets and wholesalers.” All indications are that agents have the opportunity to capitalize on the record-setting surplus in the insurance industry combined with many companies’ increased appetite for cat-property. “The state of the market shows that there is a lot of pressure on rates and coverage terms right now because there’s a lot of available capacity,” Owens says. “The condominium market has changed dramatically. Citizens in Florida has the smallest amount of policies since they started, which is a different take than they’ve had in the past where they were focused on being the market of first resort as opposed to their initial focus on being the market of last resort.” The backdrop of the US going nearly 10 years without a major hurricane making landfall, along with forecasters predicting a significant uptick in the number and strength of storms, has created one of the ironies in today’s marketplace. Property rates are falling, while the various catastrophe models have been updated to generate greater losses. “The storms in 2005 from Katrina, Rita and Wilma were industry-changing events in a number of respects,” Owens says. “The industry was depending on modeling software to determine the impact of storm events upon their portfolios. Many companies experienced losses greater than they expected. “One of the biggest changes was the increased recognition of the impact of storm surge. It changed the industry dramatically,” he continues. “Underwriters are looking to price business factoring in the account’s performance from a modeling standpoint. The modeling loss results have been trending up and counter to the pricing direction of the marketplace. Except for Hurricanes Ike and Sandy, El Nino and other factors have kept the storms off the coast, says Owens. “There really hasn’t been a lot of storm activity with landfalling hurricanes,
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so the loss activity of hurricanes has been relatively low in the US.” Financial security in the reinsurance market in the US has never been higher – the price of traditional reinsurance, particularly related to cat-property, has been falling. In part, that’s because of a lack of storms and their resulting claims, but it’s also been driven by the introduction of so-called ‘alternative capital.’ According to Brandt, this surge in capital is contributing to the softening market seen in the US. It’s is also fueling new markets to enter the cat property space, promoting further competition. Small to medium-sized insurance companies need to respond quickly with a competitive product and align themselves with the right distribution partners to remain relevant. Proficiency, consistency and security have consistently led James River to profits over the last 12 years. Driving that success has been its relationships with wholesale brokers, Owens says. “The wholesale broker is the linchpin in the placement because they pull together different markets to make the placements happen”, says John Clarke, senior VP of marketing at James River. “Retail brokers not only need access to the world’s best property insurers, but they need the skill of an experienced wholesale broker to piece together the carriers needed build up the limits and structures needed for their particular clients’ situation. No two deals are ever quite the same, and the wholesale broker conducts the whole orchestra when it comes to getting deals done.” James River is looks for wholesalers that have experience with cat placement,” says Owens. “Our philosophy is to encourage shared and layered property placements.” Shared and layered placements consist of utilizing several companies to provide limits for an insured. “For example, one company may write the primary policy,” Owens says. “Another company may write a buffer excess layer limit above the primary policy. Then the remainder of the excess limits above the buffer excess may be written by another company or two. Shared and layered placements protect the insured by bringing the surplus strength of several companies together on the account. Retailers and wholesaler brokers are also protected with shared and layered placements by having several companies committed to an account. This commitment is especially critical in hard markets when available capacity
James River Insurance Company is headquartered in Richmond, Va., and underwrites a wide variety of specialty P&C and professional risks on an E&S basis in all 50 states. Founded in 2003, James River is rated A- (Excellent) by AM Best Co. with a financial size rating of IX ($250 million - $500 million). Website: www. jamesriverins.com. Parent: James River Group Holdings, Ltd. (NASDAQ: JRVR).
“The state of the market shows that there is a lot of pressure on rates and coverage terms right now because there’s a lot of available capacity” may be shrinking.” Whether working with small, medium or large retail agents, Brandt says, the role of a broker is to understand the marketplace and carrier appetite in order to structure the most comprehensive and competitive program for his or her client. “We structure deals around client need by coordinating competitive markets, whether they be large or small carriers, to solve client issues in the most comprehensive manner,” she says. “Utilizing several carriers within a layered property program ensures a more stable program should a carrier change appetite or the overall market suddenly change as it did after several major natural catastrophe events and 9/11 when capital fled the marketplace overnight. Spreading risk among multiple carriers following one common coverage form and co-ordinating adjuster ensures a more stable program in the long run.”
Guy Rawlins, SVP with Brown and Riding, says there have been a number of changes in the market over the last several years, which have altered the way small to medium-sized insurers are participating in a market flush with capital in terms of supply but also marked by stagnant demand. The net effect has been lower pricing for commercial clients. “Significant discounts that were obtained on Fortune 500 accounts in the last couple of years have now trickled down to the middle market area, with TIV’s in the $25 million to $500 million range,” Rawlins says. “Improvement in pricing, deductibles, and terms and conditions are readily available. A ready supply of competitive market capacity implies further price softening will continue.” Bill Fleischhacker, an executive managing director at Aon Benfield in Atlanta, has led the property reinsurance placement on behalf of James River since its inception in 2003. “The increased level of capital is fueled by two main sources,” he says. “One source is retained earnings. The other source, which is more impactful and gaining significant market share, flows from nontraditional sources such as hedge funds and pension funds that have or are establishing reinsurance as an asset class in which to invest for the long term. We always want to make sure our customers look at all their options.” Owens expects growth to continue in 2015, as James River works closely with its key wholesale brokers on more opportunities. “Supply is large, and demand isn’t growing at the same rate, so there’s downward pressure being put on prices and rates,” Owens says. “The key is to find the right opportunities. We’re still nimble, so we can move around and pick our opportunities carefully.” Bottom line: Now is a good time to be a buyer in the cat-exposed property marketplace.
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FEATURES
NONPROFIT INSURANCE
Purpose before profit Insuring organizations that help people can be a rewarding endeavor – but it’s not without its own set of challenges THEY STOCK food pantries, serve meals to the hungry and provide shelter to battered women and the homeless. They save abandoned animals, teach job skills to the developmentally disabled and help alcoholics and drug addicts overcome their addictions. They brighten and enrich the lives of children, and provide free healthcare to people who otherwise could not afford it. Thanks in part to the recovering economy and the growing ease of online giving, the nonprofit sector is growing like crazy, and along with it, the need to mitigate associated risk exposures. Those who work in the curious world of nonprofit insurance find it a challenging, uplifting experience. “We insure those who are in the
business of helping others,” says Dan Mogelnicki, president of underwriting facilities for NIF Group, a privately held national program manager and regional wholesale broker. And the stakes are high – every dollar spent on an uncovered loss is a dollar taken away from fulfilling that nonprofit organization’s mission – whatever it might be. What is nonprofit insurance? The market is made up of customers who have filed with the Internal Revenue Service as nonprofits. Nationally, there are about 1.5 million of them, about two-thirds of which are of the 501(c) (3) type. These organizations are exempt from federal income tax, and have purposes that are
CUSTOMER STORY: HANDLING A HIGH-RISK ACCOUNT Matt Kletzli, senior vice president and leader of Victor O. Schinnerer’s management liability practice, shared this story about how he helped guide a client through a tough transition period: “A renewal account was in financial difficulty. They provided services that were important to the community, and due to fiscal and operating challenges, found that they needed a new leader who could turn them around. I met with their new president during this transition period and explained my concerns and that the account was very high-risk. He confirmed that without the coverage, he couldn’t
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keep his board or officers and asked me to find a way to renew the policy. With some adjustments to the program, we were able to provide them with the coverage they needed to keep their trustees and leaders from resigning. Year after year we met; at first they stabilized and then slowly they improved to become financially and operationally exemplary. I look back on that, and it confirms that we make a difference for organizations. Usually it’s subtle, but once in a while you get customer stories like this one, and it makes underwriting coverage for nonprofit organizations that much more rewarding.”
– by IRS definition – charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition or preventing cruelty to children or animals. They can look like anything from a tiny, lowbudget office operation to a multinational company serving individuals throughout the world, like the Bill and Melinda Gates Foundation. Nonprofit organizations generally are run by an executive director, fueled by volunteer power and overseen by a board of directors (who are most likely volunteers themselves). “When looking at the nonprofit sector, what we are generally doing is insuring the decisions of the board and executives running the company,” says Matt Kletzli, senior vice president and leader of Victor O. Schinnerer’s management liability practice, which includes a program specifically for nonprofits. “It’s different than the public or private sector; there are more protections afforded to nonprofits because of the nature of their operations. And there are also more challenges.” These challenges can include limited budgets that rise and fall based on the fortunes of the country at large, and volunteer boards
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FIVE TRENDS WITHIN THE NONPROFIT SECTOR Senior care: The population is aging, and there is a growing need for services for the elderly, ranging from medical clinics to transportation services to small group housing that is an alternative to assisted care facilities. Affordable housing: This can look like anything from a single-family dwelling to a large multi-unit apartment complex. Subsidized apartment complexes in the nonprofit sector can have unique exposures stemming from clients who may be developmentally disabled or mentally ill. It is important to pay attention to who the clients are, and have appropriate controls in place.
“Insurance is often needed to protect nonprofits from exposure stemming from misappropriation of funds” Vince Terlaje, NIF Group hailing from all walks of life, who may not be familiar with the obligations of being a board member (thus opening themselves and their organizations up to risk exposure). Since nonprofits have some unique exposures and coverage needs, “many carriers do not entertain them or do not feel comfortable with them,” said Riley Binford, executive vice president at Charity First Insurance Services, a San Fransisco-based program manager for Travelers Insurance. “It is important for insurance agents and brokers to go with a market that truly understands nonprofits.” Key risk exposures The way that nonprofits do their financials and manage their volunteers can be as different from
nonprofit to nonprofit as their mission statements, but most organizations have a similar set of risk exposures. Some of these exposures are common in the for-profit sector as well – such as property, automobile and general liability. Others are fairly unique to nonprofits. Sexual abuse molestation is perhaps the most notorious exposure in the sector. Services provided by some 501(c)(3)s can lead to direct interaction with children and developmentally disabled adults, a situation that is “definitely ripe for a sexual misconduct situation,” says Vince Terlaje, president of the Pacific leg of NIF Group. It may be unpleasant to think about, but “from a liability standpoint, you need to address that exposure,” he says.
Cyber liability: This is a super-hot coverage in the nonprofit sector at the moment, says Kletzli. Nonprofits are just as exposed to cyber attacks as big businesses due to the prevalence of online giving, frequently paired with the medical information they possess about their clients. Insurance agents should make sure their insureds have appropriate controls in place. Crime coverage: Any organization that doesn’t have very clear strong internal controls around funds or proprietary assets is vulnerable to theft of funds. Statistically, one in 10 people take a job in order to steal from a company, or they will if circumstances change. As Kletzli puts it, “While an organization is altruistic, maybe not all of the employees are.” Medical facilities: NIF Group has seen a big increase in medical-related facilities such as clinics and primary care medical facilities over the past year. Due to the Affordable Care Act, the company predicts that this trend will continue into the future, as 40 million more people come into the insured healthcare arena.
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FEATURES
NONPROFIT INSURANCE
THE TOP 10 LEGAL RISKS FACING NONPROFIT BOARDS 1 Exposures from social media use, misuse and naivete 2 Unhappy staff and volunteers 3 IRS Form 990 and federal tax-exempt status 4 Copyrights and trademarks 5 Lobbying and political activity compliance 6 Third-party sexual harassment 7 Failure to limit contracting authority and other common mistakes in contracting 8 Lack of synchronicity in board policy and practice 9 Failure to understand and manage conflicts of interest 10 Reliance on the goodwill, good nature, and insurance coverage of others From the January-February 2011 edition of Board Member, a publication of Board Source
Nonprofits also have considerable fiduciary liability. “If someone has donated money to go to a specific cause, the nonprofit needs to make sure it is directed in the appropriate way,” Terlaje says. “Insurance is often needed to protect nonprofits from exposure stemming from misappropriation of funds.” Other exposures in the sector include social workers professional liability, directors’ & officers’ liability, employment practices liability (a type of liability insurance covering wrongful acts arising from the employment process), management liability, Workman’s Comp, health (providing medical, dental, death and dismember-
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ment coverage for volunteers and participants), and special event coverage for significant fundraising events such as concerts, galas, silent auctions or triathlons. Big market, big opportunities Nonprofits in general are growing. In 2015, 50% of nonprofits responding to a survey by the organization Nonprofit HR said they plan on hiring additional employees. This is compared to only 36% of for-profit businesses in a similar survey by Career Builders. And according to the National Center for Charitable Statistics, there are now over 1.5 million nonprofits in the US, accounting for 9.2% of all salaries and wages paid. “From a premium standpoint, it’s obviously a big premium number representing the total universe, possibly north of $3 billion,” Binford says. “Of course, not all nonprofits are active, and many nonprofits elect not to buy insurance; however, it still offers a large niche for an agent or broker looking to get into it.” Over the past two decades, there has been
ished ability for these organizations to raise funds from private sources. When times are tough, nonprofits rely more on government grants to keep running. But as government funding continues to decrease (a trend that started in the economic downturn of 2008), nonprofits sometimes consider expanding the types of services they offer in order to get additional funding. “In many cases, nonprofits are considering expanding into services that are far beyond their original mission and in some cases far beyond their abilities,” Binford says. Kletzli has observed in his work at Schinnerer that members of a nonprofit’s board of directors are often altruistic, but frequently lack understanding of some of the regulations surrounding the nonprofit sector. Eugene Fram, a professor emeritus at the Saunders College of Business at the Rochester Institute of Technology, wrote about this phenomenon in a recent LinkedIn article. “Every week, several nonprofit case stories surface, related to inadequate oversight by nonprofit
“It’s obviously a big premium number ... it offers a large niche for an agent or broker looking to get into it” Riley Binford, Charity First Insurance Services
significant growth in the number of markets willing to look at nonprofits. The sector now has well over 30 carriers providing coverage, making for a highly competitive marketplace. Philadelphia is the largest writer of nonprofit insurance in the nation. Other big players nationally are Travelers, USLI, Great American, Riverport, Hannover, Selective and ARCH. Challenges within the sector One of the ironies of the nonprofit world is that when the economy is bad, there is a higher degree of need for the services provided by nonprofit organizations, often accompanied by a dimin-
boards of directors,” he observed. “Many of the cases result in huge losses to the nonprofits.” Fram suggests that at least half of a nonprofit’s board of directors should be able to analyze monthly or quarterly financial statements, and that the board chair needs to be alert to ‘teachable moments’ during board meetings when a complex financial or board-related legal issue arises. He also recommends that an external audit be conducted at least every two years. How to sell it Insurance agents looking to expand their business in the nonprofit sector should start with
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REGIONAL HOTSPOTS California has a tenth of all the nonprofits in the country – twice as many as the next two states (New York and Texas) combined. Conversely, nonprofit organizations on the East Coast tend to be much larger than facilities on the West Coast. This difference is reflected in the average policy premium, which is consistently four times larger on the East Coast than in the West. the nonprofit clients they already have, and check in with them about buying more coverage, Kletzli advises. “Help them understand what they may be missing in terms of the aspect of risk,” he suggests.
“Make sure you can relate to your customers in a way that shows you share an interest in their cause ...” Dan Mogelnicki, NIF Group Many agents breaking into the nonprofit sector have found success by leading with workers’ compensation. “WC can often be a pain point, and if an agent can solve a nonprofit’s WC issues, oftentimes they are invited in to look at the rest of the coverages,” Binford says. Above all, agents should educate themselves about the nonprofit sector. “Make sure you can
relate to your customers in a way that shows you share an interest in their cause, whatever it is,” Mogelnicki advises. “The people you will be dealing with are driven by a high degree of a sense of purpose to help society in a meaningful way. As an insurance producer, if you can relate to that, it will benefit your relationship with a potential client.”
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FEATURES
AGENCY INSIGHT
HAYLOR, FREYER & COON CEO Jim Freyer, Jr. talks about the importance of specialization, and what makes HF&C stand out IBA: How important do you think it is for an agency to have a commitment to specialization? Why does it matter? Jim Freyer: Specialization is critical and really required for agencies that want to grow. Our customers come to us for their Risk Management needs because they value our expertise and understand that we offer them a specialized service. We work hard at differentiating ourselves, to drive strategic advantage and really to become a trusted advisor for our clients.
IBA: How have you been able to build up your various specializations? How have you built this into your culture? JF: When you talk about specialization, it’s not just coverage or placement of insurance. We do a good job of having product champions – Business Unit Leaders (BULs) – who not only understand the insurance needs of a particular industry, but are very understanding of the challenges and threats within that industry. The BUL’s responsibility is to drive the sales with our producers. They also have responsibilities to the client services operations. It’s their responsibility to know the client’s risk management needs, and whether they will need any special coverages for that industry, and really work with our carrier partners to grow the revenue sales and client base. Many times we hire people from the industry and then surround those individuals with a team of risk management professionals to teach them insurance, because we think it’s important to know the industries for which we are providing risk management services.
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IBA: What are you doing to attract and grow your talent? JF: This is probably the number one challenge for every business owner today. As long as the business has a vision to grow and perpetuate within, you have to attract young talent. We look for young talent for all positions within our agency. We have developed a program over the past two to three years in which we have hired millennials with several years of work experience in some industry that helps them now decide, ‘I want to make a career in insurance.’ We do a profile test and offer a training program, and we look to place these individuals within 12-18 months in some part of our agency. It doesn’t necessarily have to be sales. It can be account services, account management, marketing. They have opportunities large enough to provide a career path, and show them that there is a career in insurance, and specifically
with our agency. I think it’s been successful. We have hired 11 millennials in last two years, and have eight or nine still with us. In 2014, we were voted one of the best companies to work for in New York state. It’s a nice
How has your agency given back to your local communities? One of our core values is to support the communities we serve. This comes with financial support, but just as important is how do we get people involved in the volunteering side? We set up opportunities where people can volunteer their time in an environment with other employees. We serve breakfast at a Samaritan Center on a monthly basis. We also pick a community service project every year. In 2014 we went into an inner-city Boys and Girls Club in Syracuse, N.Y., and brightened the environment – painted, cleaned, built new storage shelves – to help make it a better place for children. It was a big project, with close to 100 employees involved. We are up for a volunteer service award with United Way. We are seeing recognition for the work that we do. In addition, we have established what we call a Relationship Cup – a charity golf tournament involving ourselves, a law firm, an accounting firm and a bank – four very strong, active organizations within our community. It allows us to interact with other professional service firms, with a community focus. The winning team gives $7,500 to their designated charity. All four organizations present the winning check.
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FAST FACTS
Top 5 specialty commercial lines Construction Manufactured housing Transportation (including a niche market in milk haulers’ insurance) Public entity (public and private K-12 schools, municipalities and townships) Property management companies
“We work hard at providing a career path and a work environment that people enjoy” third-party recognition, but more importantly, it’s a recognition from our own employees. We work hard at really providing a career path and a work environment that people enjoy.
IBA: What do you think makes you stand out as an agency? JF: • Longevity – We have been around for 87 years. We are a thriving agency. We grew from a two-person agency to more than 200 in that time period. We have a vision of where we are going and how we are going to get there. • Employee ownership – We have had an Employee Stock Ownership Plan for 18 years. The employees own 44 percent of HF&C. So everyone has skin in the game. Everyone is a stakeholder in helping make Haylor the best and also providing excellent client services. Those businesses that are ESOP have a better rate of return, and lower employee turnover.
• Quality control – We have also been ISO 9001-certified for more than 20 years. So when we say we provide distinctive and exceptional service, we have an independent party on an annual basis come in and do an audit of our quality. It’s very unique. I don’t know of many other agencies that have that. Our quality system is a living document. It changes weekly. It’s function-focused. And it’s customerfocused. • Experienced, full-service staff – We attract younger talent, but we also have a very experienced staff; 75% of our people have been with us for more than five years. Our turnover is very low. We have a good leadership perpetuation plan and training, and we are a full-service agency. While we provide a lot of insurance specializations, when you look under our hood, we do a lot of main street business very well.
Year founded: 1928 Number of brokers and employees: 200-plus employee-owners, including 38 producers Location of headquarters: Syracuse, N.Y. 2014 revenue: $33 million in commissioned revenue, and more than $300 million in premiums (placing it among the top 100 independent agencies in the US) Number of clients: 25,000 Other corporate highlights: • 2014 New York State Best Place to Work Award • Employee-Owned (ESOP) • ISO 9001 Certified, Committed to Quality • Member of Assurex Global, the largest privately held risk management and international brokerage group in the world
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FEATURES
E&O
E&O: HOUSING BOOM GOOD NEWS Homebuilders aren’t the only ones cashing in the construction boom – Realtors have also returned to a market that was left for dead after the 2008 recession, and those good times have also translated into potential clients in need of E&O insurance THE REBOUND in the home market has brought with it an explosion of new and returning real estate and mortgage agents – and they all need errors and omissions coverage. “Things are starting to look up,” says Kristye DeStout, underwriter team leader with Norman-Spencer Agency. “After several years of a slow or nonexistent market, we’re starting to see new homes going up, and national investors coming back to the forefront. They are investing in California, Florida, Texas – the larger states.” Norman-Spencer focuses on the real estate sector of E&O coverage, and there are
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TWO-THIRDS OF PRIVATE COMPANIES DON’T HAVE E&O Despite an increasing in awareness of potential errors & omissions lawsuits, Chubb Insurance Corporation found only a third of private companies hold E&O insurance. According to the insurer’s Private Company Risk Survey, the reason these companies don’t purchase the necessary insurance is because they believe they are already covered through their commercial general liability policies. In fact, more than 50% of private companies surveyed told Chubb they chose not to purchase directors &
officers liability, EPLI, errors & omissions liability and fiduciary liability insurance because they felt they were already covered through their CGL policy. Another 39% felt they were adequately insured against cyber liability without additional coverage. While a full 55% of companies said they were contractually required to carry the coverage, only half had purchased it. Regardless of whether a company is required to carry E&O, any company performing a professional service for others can be sued. This could be a top selling point for producers, said Chubb.
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ODDS OF AN E&O CLAIM One in seven insurance professionals will be named in some type of E&O claim at some point in their insurance careers. The average claim is in excess of $22,000, and this figure does not include the cost of legal representation From the National Association of Professional Agents
niche policies out there specific to mortgage brokers or real estate agents, DeStout says, mostly due to the costs involved in the very different coverages. “It is easier to split of their coverages,” DeStout says, “and have a policy that handles their main professional services, like real estate sales, leasing, property management, and a separate policy that may cover mortgage broker activities and agent activities.” Housing prices are also on the increase nationwide, on an average of 5%. However, E&O coverage can prove its worth for real estate agents who are handling rehabilitated or abandoned properties that are a legacy of the 2008 recession that banks are leery to touch. “If the real estate firms are interested in assisting the banks in listing those properties,” DeStout says, “the bank’s asset management companies would not let you do any listings for them unless you had E&O coverage.”
“It comes down to: Would you rather pay $2,500 or $5,000 to satisfy a deductible requirement in your policy, or end up incurring $50,000, $60,000 or $100,000 in fees?” Kristye DeStout, Norman-Spencer
In the case of Norman-Spencer’s E&O program offer, coverages now include environmental hazards, discrimination defense, subpoena assistance – and some items that never existed 10 or 15 years ago, but are very popular now. “Public relations, crisis/event coverage, those types of things,” says DeStout. “Ten or 15 years ago, that was nonexistent. I think you are beginning to see a lot of cyber coverage becoming popular these days.” That type of E&O cyber coverage would come into play for something as simple as a real estate agent leaving his or her laptop behind in a show home or car – and along with it, a treasure trove of client banking information. “I think real estate agents are getting more educated in that area,” DeStout says. “The more and more electronic we go, the problem is only going to get worse.” The greatest benefit of having E&O coverage comes from a cautionary tale that one client shared with DeStout. “We had a client reach out to us six months ago, and they’d been established about 23 years in the industry – never carried E&O insurance; the brokerage and agents had never had a claim – but unfortunately they were named in a frivolous lawsuit,” she says. “The owner ended up paying more than $60,000 in legal costs to defend themselves, and were ultimately dismissed from the claim.” They had no wrongdoing in the claim, but still ended up paying the money out of pocket just to make it go away.
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FEATURES
E&O
WHEN CLIENTS SUE – WHAT DO YOU DO? Many agents view E&O disputes as something that only happens to someone else. In reality, the odds of incurring a claim or lawsuit are quite high, with insurer statistics suggesting that as many as one in seven agents experience a claim at some point in their careers. For this reason, it’s important to accept this fact and prepare yourself for handling a client dispute, should it occur. To help you manage an E&O incident, here are some do’s and don’ts that will prevent further problems, as well as help your E&O insurer work effectively on your behalf: THINGS TO DO DURING AN INCIDENT
Do manage your emotions. Never lash out in anger or frustration at a client who is taking action against you. Try not to take the situation personally. By staying calm, you will be better equipped to cooperate with your E&O insurer and attorney to put the matter behind you. Do file your E&O claim promptly. Check your policy to see your carrier’s filing requirements. And be sure to submit all necessary claim forms and supporting documents in order to initiate the claim. Do report both actual and possible claims. Failing to report the latter may lead to your carrier failing to cover claims from this incident that arise in the future. Do provide full background on the dispute to your E&O claims rep. To collect this information, tap the collective brainpower of all relevant employees and collect all material documents. Then develop and submit a chronological narrative that takes your claim rep through the entire incident. THINGS NOT TO DO DURING AN INCIDENT
Don’t admit that you did anything wrong when speaking with your customer. And continue to treat the person with professionalism and respect. Also, don’t try to be your own attorney or turn over documents to the customer in order to make a point.
Don’t try to remediate the situation by fixing mistakes or plugging holes in the client file. This will make it appear as if you really are guilty. Don’t volunteer that you have E&O insurance. However, don’t deny it if the customer asks you directly. In either case, refrain from providing E&O policy language to the customer or to the plaintiff’s attorney. Refer such requests to your insurance company claims professional or defense lawyer. Don’t offer to pay for the the claim yourself. This holds true even if the out-of-pocket expense is nominal. Plus, don’t get into settlement discussions directly with the claimant. Always bring your insurer and attorney in on these conversations. Don’t agree to make a written or recorded statement to the opposing counsel or carrier without the involvement of your attorney. Don’t try to do your E&O claims adjuster’s job. Let your rep put his or her specialized knowledge and expertise to work for you. This will ultimately speed speed claims handling to a timely resolution. Don’t discuss the dispute with anyone other than your claims rep, defense attorney or people on your team. As the old saying goes, “Loose lips sink ships.” Source: EOforLess.com, sponsored by the National Ethics Association
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“That’s when you recognize how important E&O coverage is,” says DeStout. “It comes down to: Would you rather pay $2,500 or $5,000 to satisfy a deductible requirement in your policy, or end up incurring $50,000, $60,000 or $100,000 in fees you have to pay out of pocket? And a lot of these companies are small, and sometimes end up having to shut their doors.” The pricing schedule at Norman-Spencer is revenue-based, and takes into the consideration the professional services the real estate agent or company are performing. A policy can start as low as $500 for an agent, says DeStout.
THE CFPB CRACKDOWN
An increasing number of financial institutions are now finding themselves under the spotlight of the Consumer Financial Protection Bureau (CFPB) following the financial crisis of 2008, a new federal agency created by the Dodd-Frank Act and charged with protecting consumers from violations of federal consumer financial laws. The CFPB already has targeted a large number of mortgage lenders, credit card companies, auto lenders, student loan companies, banks and other financial institutions through investigations and enforcement actions. In doing so, the CFPB has settled a large number of claims through consent orders directing financial institutions to pay hundreds of millions of dollars. For example: • $37.5 million settlement with Flagstar Bank involving alleged unlawful activities in processing loan modification applications • $2 billion settlement with Ocwen Financial Corporation involving alleged misconduct in mortgage loan servicing • $727 million settlement with Bank of America in a case involving discriminatory credit card practices allegations
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Experience the Difference Steve Brockmeyer Bolton & Company
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PEOPLE
PRODUCER PROFILE
The perfect pairing When Malena Farrell of Cedar Risk Management found a way to marry her passion for insurance with her love of craft beer, she knew she’d found the perfect career CRAFT BEER has a way of pouring into a lot of Malena Farrell’s stories. Whenever she and her husband are vacationing, for example, they make sure to go to whatever craft breweries are close by. In some cases, they may not be close – but they’ll drive the extra hour to get there. Once, they were in Vermont, and they knew that the Magic Hat Brewery was not far away. “And it had just started snowing. It was the middle of winter. And I looked at him and I was like, ‘Let’s go!’ And he’s like, ‘OK!’” It took them two and a half hours of driving through a blizzard, “but we got there, and it was just like ‘This was so much fun!’” Farrell laughed. “Thankfully, he agrees with me.” The New Jersey-based insurance producer admits to having a big section of her heart set aside for Founder’s Brewing Co., the Michigan brewery known for its complex, in-your-face ales, with huge aromatics, big body and tons of flavor. “And Weyerbacher Brewing Co. [in
FARRELL’S TIPS FOR BREAKING INTO THE CRAFT BEER BIZ Know thy niche: “Make sure you really understand all the processes and steps of the manufacturing process,” Farrell advises. “As soon as you really get why they are doing what they are doing, you have a much, much better understanding of how to set up the policies, so in a worst-case scenario, if something happens and there is a claim, they can reopen, rebuild and get back on their feet.” Beat the box: It drives Farrell crazy when she comes across businesses without proper coverage in place. “Taking a one-size-fits-all policy off the shelf and handing it to the client is not doing them any good. It’s better for them to not have insurance at all than some of the policies I’ve seen,” she says.
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southeastern Pennsylvania] is not very far from us. It has my husband’s first and second all-time favorite beers in the whole world.” But Farrell’s heart has enough room in it for every single brewery she comes across. And when she comes across them – usually with her husband in tow – “we always pop in.” For a beer, of course. But by the time they pop out, she often finds herself with a new insurance client. The website for Farrell’s family-owned insurance agency, Cedar Risk Management (which she runs with her father Dick and brother Jarrett) says it all: “WE LOVE BEER. We love pouring it, sipping it, chugging it, ‘cheers’-ing it, cooking with it and sharing it with friends. We also love insuring it, or more specifically the people and businesses that brew it.”
Born to the business Farrell, 34, has spent the past decade or so of her career learning and understanding the craft beer trade, from the brewing process to the complexity that is the Federal Distillery License Bond. But her roots in the insurance business go back way before that. She started working for her dad, Dick Farrell, when she was just 16, and became an insurance producer at the tender age of 20. She and her father have had just one fight during all these years – when she told him she didn’t want to go to college. “He basically said, ‘That’s fantastic. You’re fired. Go to college,’” she recalls. Dick Farrell believed strongly in the value of a post-secondary education and full immersion in a college environment – preferably one that had nothing to do with the insurance industry. “He actually wanted me to find a school where I could get my degree in underwater basket-weaving,” Farrell jokes. Instead, she studied Shakespeare for four years
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at James Madison University and got her degree in Renaissance British Literature. But even while she was in college, her mind never strayed far from the insurance business. She set up a telecommuting arrangement with her father’s agency, and often received phone calls from clients who needed help with billing questions, auto renewals and other “simple little things.” Once she graduated, she plunged into the family business in earnest. It wasn’t long before she had her first aha! moment about how much she loved her chosen industry. “One day I was sitting at my desk and my brother, Jarrett Farrell, walked over and they handed me a parachute manufacturer, and 10 minutes later, I had a medical office. And I realized, ‘This is the coolest job ever. I’m never going to be bored doing this, as long as I find it fun, as long as things are always changing.’ I knew at 23 years old, ‘This is good. I love it.’”
Another aha! moment Farrell’s twin passions for craft beer and insurance found their perfect pairing a few years later after she had started working as a producer. A longtime client called one magic day, announcing, “I’m starting a brewery. I’m leaving the corporate world. This is what I’ve always wanted to do. Can you help me out?” It was the phone call that changed everything. “I
ABOUT CEDAR RISK MANAGEMENT • Founded in 1971 as Raritan Valley Insurance Services, an independent insurance agency • Rebranded in 2013 from Raritan Valley Insurance Services to Cedar Risk Management. “Raritan Valley was a little too geographically limiting,” Farrell says. “We had clients in California, Washington, Texas. I had always argued against having a company name based on a place.” • 25 employees • Headquarters and branch offices in New Jersey; contemplating expanding to other places • Just under $13 million in revenues in 2014
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PEOPLE
PRODUCER PROFILE
“This was the combination of so many things that I love, in one perfect little package. How could I go wrong?”
realized, I can help people doing what I love with insurance, and I can talk about beer, and I can discover all these craft breweries and distilleries. This was the culmination of so many things that I love, in one perfect little package. How could I go wrong?” To become more of an expert on the alcoholic beverages industry, Farrell visited as many breweries and distilleries as she could find, and did a lot of online research to get a full understanding of the industry’s insurance needs. Her timing was perfect. The craft brewery business was just on the verge of skyrocketing, with craft distilleries hot on their heels after many states started easing regulations. Today, business is booming. According to industry data released in March 2015, craft brewers reached 11% volume share in 2014 – the first time they’ve reached a double-digit share of the market. They produced 22.2 million barrels last year, representing an 18% increase in volume. They also saw a 22% rise in retail dollar value in 2014, coming in at an estimated $19.6 billion and accounting for 19.3% of the market. Distilleries are, by all accounts, the next big thing. And lately, there have been a couple of new entrants into the field – cideries and kombucha, a funky fermented drink made with tea, sugar, bacteria and yeast that aficionados believe to be a health elixir. Once relegated to hippies’ kitchens, the spoiled-vinegar-tasting brew is now available in many mainstream grocery stores. Farrell has dived this new brew with unfettered enthusiasm. “It’s kind of like beer and kind of like liquor, but once you start talking about mushrooms and fungus, people start getting a little squeamish,” she says. “It’s been a fun learning process for me and my insurance companies. We’ve done a lot of laughing to get through the process.”
Because coverage matters The motto of Cedar Risk Management is prominently displayed throughout the company’s Flemington, N.J. headquarters: “Because Coverage Matters.” It’s a motto that the Farrell family has impressed upon every single employee, and it drives the way they do business in every sector – including the alcoholic beverages niche. “Little brewers and distillers especially are putting their entire life savings into their businesses with support from their families and crowdfunded money,” Farrell says. “One claim that’s not properly covered destroys
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COVERING THE ALCOHOLIC BEVERAGE SECTOR As the brewing, distilling and cider industry continues to grow in scope and popularity, so do its risks and exposures. The Alcoholic Beverages sector requires a broad suite of products to protect property, contents, autos, employees and customers. All coverage should be tailored to meet the client’s unique needs. Special coverage endorsements that may be excluded on a GL policy may include: Processing water coverage Spoilage, leakage and contamination Production equipment and equipment breakdown Liquor and products liability Product recall Exhibitions, fairs and festivals Farm liability Stock in transit Tanks and barrels Limited pollution liability Tasting rooms, restaurants, catering, etc. Theft Some carriers now offer packages and coverages focused on local and regional craft breweries,microbreweries, brew pubs and homebrew start-ups. them – all of the their money and hard work is gone. That, to me, would be heartbreaking. I would never be able to live with myself.” So when she meets with new clients, she really takes time to sit down with them and get more than just the 10-minute tour of their facility. “I tell them, ‘Teach me as much as you can. What does that machine do? What happens with this? I ask hundreds of questions.” Matters of risk management do not come naturally to a lot of Farrell’s clients, who are leaving behind careers on Wall Street, for example, to open up a brewery or distillery, and have never owned a business before. “That seems to be the most important conversation to have with startups in the beginning,” Farrell says. “They are making a gigantic career change, and this is going to be their life. I’m taking them seriously and asking questions. I really consider helping them with risk management to be an important part of my job.”
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Leading you to outstanding solutions.
Today’s tough insurance environment challenges us to continually enhance and expand our competitive edge. By leveraging our knowledge base and strong relationships in the industry, we deliver stable, competitively priced programs and products. We understand you have a choice when looking for markets. As a national wholesale broker and managing general agent, we’re focused on providing you and your clients experience, creative solutions and flexibility—to ensure your advantage in the marketplace today and tomorrow. In a world of choices, we want you to choose us.
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Insurance Business America is the independent voice for the insurance industry, encompassing news analysis, expert opinion, exclusive interviews and business strategy advice for today’s sophisticated insurance brokers, agents and advice professionals.
KNOW ANYONE WHO SHOULD BE READING INSURANCE BUSINESS AMERICA? IBAMA G.COM
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about to and brokers is ates rance agents stig The world of insurm. Insurance Business inve ld g wor radically transfoto do to thrive in a changin d Casualty Property and what you nee
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PEOPLE
CAREER PATH
A DRIVE TO SUCCEED
Over three decades, Ron Abram has traveled far - both in his progression from sales rep to agency owner, and in his travels around the world in pursuit of extreme adventures 2015
TRAVELS TO MONGOLIA Abram has a healthy appetite for adventure. From jumping out of helicopters for snowboard rides to 500-mile bicycle treks through the jungles of Southeast Asia, Abram has ticked many items off his bucket list. Next up, he’ll venture to Mongolia, riding horseback across the plains once ruled by infamous emperor Genghis Khan.
1996
CREATES ABRAM INTERSTATE
When Abram became president and COO of Markel Insurance Company, he took the opportunity to buy the home and car he thought he “needed to have”.
“That was a big milestone and it was a big, ‘OK, I’ve finally arrived’ type of feeling”
About five years after becoming Markel’s president and COO, Abram realized he wanted something more. “I left corporate America and went from the corporate executive suite to a bedroom in my home, and I started the firm that we have here today. Over the last 18 or 19 years, we have continued to grow and learn, and continued to learn about what we need to do in order to be successful as a wholesaler doing business with the carriers…”
Abram was hired to transform a large wholesale operation, based in upstate New York, into a corporate insurance firm. The experience was one of his most challenging times in insurance. “We had to let go of many people, rehire and retrain many people. It was a very small town in which we were the largest employer. We were able to move that company and rehire all the staff that we required and actually finish the year with numbers that were more robust than the year prior to the move. So while it was super challenging … it was a well-executed plan that allowed us to move ahead.”
1991
BUYS DREAM CAR
1991
EXECUTES CHANGE
1987
RETURNS TO SCHOOL Abram cites Kirk Landon, former CEO of American Bankers Insurance Group, as the standout mentor of his career. He describes Landon as “a very shrewd businessman” who took him under his wing. “I was pretty good with the people side, but needed polish on the business side. He sent me back to get my MBA. That helped round out my business acumen.” After finishing college, Abram had no desire to work in insurance. But after nudges from a head hunter, he attended an interview and soon after accepted a role as a sales rep. “Over time, it quickly became apparent that … I could move in many different directions and exercise either my creativity, my sales skills or my analytic abilities to really craft a profession that I could stay a part of for the rest of my career.”
1986
BUILDS A TEAM
1979
RELUCTANTLY ENTERS INSURANCE
As national marketing manager, Abram played a key role in creating a team that went on to become the organization’s sales force of the year. He recalls it involved “taking a variety of people that were sort of ‘rag tag’ in the beginning and really working collectively with them,” leading them to success.
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PEOPLE
OTHER LIFE
TELL US ABOUT YOUR OTHER LIFE Email iba@keymedia.com
CLOWNING AROUND “I call it my escape from reality – a fun place to be and a way to make people who have bigger problems than you do smile” John “Jay Jay” Joseph has been in the business since 1976 and is now principal of Joseph Insurances in Arlington Heights, Ill. Outside of insurance, though, he’s a clown named Goofer. Having started as a ‘Shrine Clown’ – raising money for the Shrine Hospitals – he’s now won a number of awards on the clown circuit and is a regular speaker in clowning circles. His best clowning experience? Together with the people from Make a Wish, the Air Force and some active and retired flight attendants, escorting children on a simulated flight to the North Pole. They loaded the kids on to an Air Force transport aircraft, went down an active runway at O’Hare Field in Chicago and then taxied to a hangar that was decorated by the flight attendants, Make a Wish and the Air Force as the North Pole. “I was told many of the kids on that flight would probably not make it to the next Christmas,” Joseph says.
39
years as insurance producer
24
years as clown
5
number of clowning awards won
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We built our company anticipating the
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Expect big things in workers’ compensation. Expect to save a third of your clients 30% or more. Most classes approved, nationwide. For information call (877) 234-4450 or visit auw.com/us. Š2015 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.
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