Insurance Business America issue 3.01

IBAMAG.COM ISSUE 3.01

N O S R E C U D O R S P K R O

W T NE

k r o w t ne a g ce r n i u n i o o s j r e h t he t m e h o r f w Learn ou - straight ry o f t h g i is r

TEMPORARY WORKERS TAP INTO THIS GROWING INSURANCE MARKET

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LIGHTS, CAMERA, ACTION THE ADVENTURES OF INSURING THE FILM INDUSTRY

ENVIRONMENTAL COVERAGE DO YOUR CLIENTS NEED IT?

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FEBRUARY 2O15

UPFRONT 06 Statistics What are the biggest risks in 2015?

CONTENTS

08 Head to head Forecasting the effects of NARAB II

10 News analysis How producers can capitalize on the growing E&S market

12 Intelligence This month’s big movers and shakers

FEATURE

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ENVIRONMENTAL EYE-OPENER Environmental insurance coverage isn’t just for companies that handle hazardous materials. Do your clients need it?

COVER STORY

22

PRODUCERS ON NETWORKS

We asked producers to weigh in on what matters most to them in a network – and how well networks are meeting these objectives

14 Technology update Is Google getting into the insurance game?

16 Workers’ comp update Insuring against terrorism and the risks of home health care

PEOPLE 47 Career path A chance opportunity led Michael Pilla of Technical Risk Underwriters to insurance

48 Favorite things

STRATEGY

44

Richard Hutchinson of Hagerty

DRIVING CHANGE When is the right time to bring employees onboard with strategic intiatives?

PRODUCER PROFILE

THE IMAGINARIUM OF GUYLAINE DÉCHAINE

Insuring film productions has taken broker Guylaine Déchaine on an incredible career adventure

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STRATEGY

STAFFING SOLUTION

Temporary staffing is a growing market – one that most brokers have yet to capitalize on

IBAMAG.COM CHECK IT OUT ONLINE

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CASUALTY IS OUR SPECIALTY

Specialty casualty insurance | acegroup.com/us-westchester-specialty-casualty

Our ACE Westchester Specialty Casualty team delivers a broad range of primary and excess insurance products for the construction, public entity, energy, manufacturing, hospitality and transportation industries.

As one of the strongest insurers in the world, ACE has the financial strength and underwriting expertise to deliver tailored, creative solutions for complex risks.

息 2015 ACE Group. Coverages underwritten by one or more companies of ACE Group. Not all coverages available in all jurisdictions. ACE速, ACE logo速, and ACE insured.速 are trademarks of ACE Limited.

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EDITORIAL

www.ibamag.com FEBRUARY 2O15

Networking for the future During the first decade of the 2000s, something significant happened in the community of US property/casualty insurers. Advertising spending among these companies increased – a lot. From $1.7 billion spent in 2002 to $5.9 billion in 2011, insurers amped up their competitive edge by shelling out 347% more in just 10 years. The goal?

To reach the end user.

The ‘direct channel’ trend is largely concentrated in the personal lines domain, swaying the smallest of independent agencies to begin selling commercial insurance to local businesses where commissions are higher and competition from carriers is still mostly dormant. The trouble, of course, is that meeting the quotas of large and niche carriers can be difficult for small agencies.

Enter the rise of the independent insurance agency network: groups that band small agencies together to gain access to markets and avoid minimum premium thresholds imposed by carriers. With unique commission- and profit-sharing models, these groups offer a way for small agencies to thrive while maintaining ownership of their businesses. Over time, networks have evolved to offer other benefits, like education, training and assistance in recruiting fresh talent.

The attractions of these groups have not gone unnoticed by independents. Networks around the country report consistent, double-digit organic growth that has allowed them to expand to new geographic regions and offer more discounts and benefits.

However, networks are not without their detractors. Some agency principals protest unreasonable time commitment requirements, a loss of true independence and increased competition from other agencies as a result of joining a network.

With all these considerations in mind, Insurance Business America took a deeper look at independent agents’ relationship with networks and alliances: their motivations for joining, their priorities in choosing a specific group and their take on how well these groups are delivering on important benefits. Hundreds of agents across the country, belonging to several different networks – and even some who have resisted the trend to band together – answered our survey. Together, they provide a unique and insightful glimpse into what agents most value in a network and where these groups may be coming up short.

We hope the results of this survey will help independent agents make more educated decisions about whether they join a network and what to consider if they do. The results also should send a message to the networks about agents’ priorities and concerns. Such a two-way dialogue will surely benefit the industry and the future of the independent agent.

The IBA Team 4

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EDITORIAL Senior Journalist Caitlin Bronson Journalists Ryan Smith Tim Garratt Donald Horne Copy Editor Clare Alexander

CONTRIBUTORS Allison Landa Samantha Wright Gordon Tredgold Alexandra Tselios

ART & PRODUCTION Design Manager Daniel Williams Designer Joenel Salvador

SALES & MARKETING Vice President Cathy Masek Media Sales Manager Molly Hummel Marketing and Communications Manager Lisa Narroway

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Publisher Richard Curzon Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

Traffic Manager Kay Valdez

EDITORIAL INQUIRIES caitlin.bronson@keymedia.com

SUBSCRIPTION INQUIRIES subscriptions@keymedia.com

ADVERTISING INQUIRIES

cathy.masek@keymedia.com molly.hummel@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

Retraction

In issue 2.06 of IBA, Michael Van Gilder, former president of Van Gilder Insurance Corp, was listed within the ‘Hot 100’ cover story. Van Gilder should never have made it through our vetting process.

USI purchased Denver-based Van Gilder Insurance Corp in December 2013 and the company was renamed USI Colorado; Van Gilder did not become a USI employee.

6/02/2015 9:13:20 AM

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1/19/15 11:18 6/02/2015 9:13:29 AMAM

UPFRONT

STATISTICS

The year ahead As the calendar turns to 2015, we look at some of the biggest risks and rewards facing the insurance industry While the major risks to businesses remain much the same as in 2014, their relative importance reveals much about the ways the world is changing. All-too-frequent breaches of consumer data have catapulted threats like cyber crime to the top of the list, and worldwide disasters like last year’s Ebola outbreak have put the potential for business interruption top of mind. Tellingly, the aging workforce made the Allianz Risk Barometer for the first time this year, debuting at number 7.

What does this mean for the insurance industry? The market is ripe for new products and channels that address these growing threats.

TOP 10 BUSINESS RISKS FOR THE US (% of respondents who identified risk)

1 Business interruption and supply chain 58%

2 Natural catastrophes 36%

3 Cyber crime, IT failures, espionage, data breaches

Growing and diminishing risks Cyber crime +5% 2015 rank: 3 2014 rank: 8

Changes in legislation +4% 2015 rank: 5 2014 rank: 9

26%

4 Fire/explosion 26%

5 Changes in legislation and regulation

Talent shortage/aging workforce

+9%

2015 rank: 7 2014 rank: None

30%

Percentage of insurers and reinsurers surveyed

by Guy Carpenter who noted undisciplined and unprofitable underwriting as the biggest threat to business growth in 2015

14%

6 Loss of reputation or brand value (e.g., from social media) 14%

7 Talent shortage/aging workforce

Loss of reputation -3% 2015 rank: 6 2014 rank: 4

11%

8 Commodity price increases 10%

9 Intensified competition 10%

10 Quality deficiencies and serial defects

Fire/explosion -2% 2015 rank: 4 2014 rank: 3

Intensified competition -2% 2015 rank: 9 2014 rank: 9

9% Source: Allianz Risk Barometer: Top Business Risks for 2015 Source: Allianz Risk Barometer: Top Business Risks for 2015

6

$4 billion

The insurance losses caused by fire globally in 2013, accounting for eight of the 20 largest non-natural catastrophe claims

Loss of reputation The biggest cause of economic loss from cyber attacks, according to 61% of businesses.

Sources: Allianz Risk Barometer: Top Business Risks for 2015 and Guy Carpenter Top Emerging Risks of 2015

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Which risks are business least prepared for?

Cyber risk

39%

Business interruption

18%

Natural catastrophes

16%

Biggest emerging risks of 2015 Political social upheaval

7%

Cyber attacks

Climate change

Terrorism

40%

31%

29%

Terrorism

6%

Biggest growth opportunities

Most likely global risks of the next decade

40%

NEW PRODUCTS

> Interstate conflict

23%

NEW GEOGRAPHIC MARKETS

> Extreme weather events

17%

NEW DISTRIBUTION CHANNELS

> Failure of national governments

14%

MERGERS AND ACQUISITIONS 0

10

> State collapse or crisis 20

30

40

50

Source: Guy Carpenter Top Emerging Risks of 2015

> Unemployment and underemployment Source: World Economic Forum: Global Risks 2015

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UPFRONT

HEAD TO HEAD

Q

How will the January passage of NARAB II affect the market?

Juli McNeely

Tim Owen

Theodore Pappas

President NATIONAL ASSOCIATION OF INSURANCE AND FINANCIAL ADVISORS

VP of product management VERTAFORE

President THE MCLAUGHLIN COMPANY

NARAB will mean much-needed reciprocity in producer licensing. It will reduce red tape and improve efficiencies for our members who are licensed in multiple states. The legislation will benefit consumers as well by allowing them to maintain their preferred insurance agent or broker should they move to a different state.

We are particularly gratified to see such strong support in both the Senate and House of Representatives for the bill. This is a win-win situation for insurance professionals and their clients.

A more uniform and reciprocal nonresident licensing process will facilitate an increased number of non-resident agencies and agents. Larger regional and national agencies will add the most new non-resident licensed agents, but even regional and medium-sized agencies near borders will likely increase their non-resident licensed agents. The smaller, local agency will consequently see increased competition. These main street agencies need to leverage technology and revise their business processes to drive efficiency and improved customer service levels to compete, and they should consider non-resident state expansion themselves.

On paper, NARAB II is a great victory.

My problems are not my individual licenses, nor for that matter the corporate licenses. Once you jump through the hoops to obtain them, renewals are easy. I am concerned about the state corporate filings; these are the time-consuming and expensive part of the licensing. They are filed with the Secretary of State, and they require contracting with a resident agent service and require an annual tax filing. IIABA has assured us that these issues are with the state insurance commissioners and will be eliminated. I see none of that in the creation of NARAB.

WHAT IS NARAB? The National Association of Registered Agents and Brokers [NARAB] is an independent licensing board for American insurance producers. Participation in NARAB is optional for producers, but is intended to streamline the licensing and registration process for agencies and individual agents doing business outside their home state. Currently, producers spend about 29 hours a year and $225 in licensing fees to meet state requirements, a NAIFA survey found.

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30131 NAPSLO IBA Fullpg_Ins Bus America 6/12/14 12:53 PM Page 1

Insurance is risky if you don’t know the ropes

>

NAPSLO members know the ropes NAPSLO members are specialists who create innovative solutions for nonstandard insurance risk. Count on them to deliver custom, cost-effective solutions that are expertly tailored to meet your specific insurance needs.

NAPSLO members...where complex risk meets innovative solutions.

National Association of Professional Surplus Lines Offices

www.napslo.org

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UPFRONT

NEWS ANALYSIS

Surplus growth: E&S in 2015 Despite the challenges of a softening market and potentially shrinking profit margins, the excess and surplus lines market is expected to continue its impressive growth this year – with a key role for producers THE EMERGENT excess and surplus lines industry again outpaced growth in the standard property/casualty insurance market in 2013, bringing in an 8.4% increase over the previous year in direct premiums written, compared with 4.3% growth in the standard market.

The data, presented in A.M. Best’s annual report on the state of E&S in the US, has bolstered industry leaders’ optimism in the performance of the market for the year ahead. Despite some ongoing struggles in market conditions and the regulatory environment, they see blue skies ahead – both for those who operate in the E&S space and the producers who utilize them.

A softening market While not a traditionally soft market, the impact of alternative capital and low cat losses in recent months has created some downward pressure

on pricing – particularly in property. Swiss Re, for example, reported worldwide property losses of just $21 billion in the first six months of 2014, down $4 billion from the same period in 2013.

The result has been a 5% to 15% decrease in property rates, says Danny Kaufman, corporate vice president at Kaufman Financial Group and managing director of the Burns & Wilcox Chicago office. And while a soft market has historically meant greater appetite in the standard market – and corresponding diminished demand for surplus lines offerings – he is not concerned.

“I think that softening will carry forward into the next year, but there is no cause for alarm,” Kaufman says. “E&S is definitely strong and growing, and the reason for that doesn’t have to do with rates – it’s because the market overall is growing. While rates are declining, the actual

“I think that softening will carry forward into the next year, but there is no cause for alarm” Danny Kaufman, Kaufman Financial Group

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THE TOP 25 GROUPS IN US SURPLUS LINES Together, the top 25 groups in US surplus lines wrote $28 billion in direct premiums in 2013 and represented 74.4% of total market share 1. Lloyd’s 2. American International Group 3. Nationwide Group 4. WR Berkley Group 5. Zurich Financial Services NA Group 6. Markel Corporation Group 7. ACE INA Group 8. Fairfax Financial (USA) Group 9. CNA Insurance Companies 10. QBE Americas Group 11. Alleghany Insurance Holdings 12. Ironshore Insurance Group 13. XL America Group 14. Berkshire Hathaway 15. AXIS Insurance Group 16. Arch Insurance Group 17. Argo Group 18. Allied World Group 19. Liberty Mutual Insurance Companies 20. Chubb Group of Insurance Companies 21. Great American P&C Group 22. Catlin US Pool 23. HCC Insurance Group 24. Travelers Group 25. Swiss Reinsurance Group Source: AM Best

appetite for what we’re writing is growing.”

Brady Kelly, executive director of NAPSLO, added that emerging issues and exposures “demand creative insurance solutions,” a pressure that may outweigh pricing concerns and lead to greater prominence for the surplus lines market.

Regulatory challenges continue Another source of focus in the year ahead is the ongoing shift in national and state-level regulatory environments. While January’s extension of the Terrorism Risk Insurance Act did much to stabilize the P/C sector, surplus lines insurers remain concerned over a number of issues.

Nationally, market advocates continue to push for the Flood Insurance Reform Act, believing it will create opportunity for E&S insurers to offer private solutions for the flood market,

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25 years of surplus lines market growth Direct premiums written by excess and surplus lines players in the US continue to grow – annual growth now eclipses that of the admitted market

DIRECT PREMIUMS (THOUSAND $)

which has long been dominated by the National Flood Insurance Program.

Some state issues involving taxation have also come to the forefront, says Kelly.

“We are seeking legislation in a number of states this session to eliminate tax-sharing provisions and guide reform in states that continue to require multi-state allocation and taxation for multi-state risks,” he says, pointing to North Dakota’s House Bill 1146 as a model of an ideal home state tax approach outlined by the Nonadmitted and Reinsurance Reform Act of 2010.

And as for election results a year from now?

“Obviously we’re all keeping our eye on the upcoming election, but the industry has been here for a long time, and we’re sustainable,” Kaufman says. “The administration or political makeup doesn’t make a long-term difference.”

33,301

Producers and surplus lines insurers Retail producers represent an important distribution channel for surplus lines insurers Wholesale agent/ broker without binding authority

Direct

0.5%

42.7%

Program manager

9.5%

Retail agent/ broker

17.7%

Wholesale agent/ broker with binding authority

29.6%

Share of premium by distributor Source: AM Best, “US Surplus Lines: 20 Year Retrospective”

32,952

32,799

31,140

15,813 10,615

9,245

9,419

8,540 6,924 6,123 1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

Source: AM Best

Lines of growth Appetite is particularly rampant in certain lines.

Cyber liability, which has long been a buzzword among insurance professionals, is finally starting to enjoy significant take-up rates among businesses – and not just large companies with a risk management team in place. “[Security and privacy] is a risk that is experiencing broad visibility, from public policy arenas to corporate boardrooms to our own internal underwriting community,” says Bryan

37,719

36,637

“We are seeking legislation in a number of states this session to eliminate tax-sharing provisions and guide reform ...”

Brady Kelly, NAPSLO Salvatore, president of specialty products at Zurich North America. “Zurich is seeing double-digit growth in this area.”

Thanks to a wave of aging and retiring Baby Boomers, long-term care is also enjoying growth, and major E&S players are increasing their appetite.

“The market is stable [with] not many new entrants,” says David Bresnahan of Berkshire Hathaway. “In the healthcare continuum, it is the segment that will be the largest and fastestgrowing.”

Construction – and builders’ risk in particular – is also growing after a very long lag, spurred by the Great Recession. Kaufman warns, however, that the upswing in construction has meant standard markets are taking on risks that traditionally belong to the E&S sector.

“Every few years, admitted carriers come in and take accounts that belong in E&S,” he says.

“They’re writing habitational risks for standard rates, which is not sustainable in the long run.”

The future of producer involvement Producers have a place in the growth of the E&S market. While wholesale brokers without binding authority continue to dominate the distribution of surplus lines products, Kelly says retail producers will be key in helping the market expand.

“We believe the value of wholesale distribution system, and the ability of retail agents and insurance buyers to rely on NAPSLO members to deliver expert, innovative and cost-effective solutions for clients, will further expand this presence.”

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UPFRONT

INTELLIGENCE CORPORATE MOVES Acquirer

Target

Comments

Victor O. Schinnerer & Company

SeaFire Insurance Services LLC

Schinnerer expands its presence in program administration for the auto dealer and repair facility marketplace

Marsh

Trade Insure N.V.

The combined entity will serve small and medium enterprise and multinational clients in key Belgian cities

Texas Security General Insurance Agency

Hall-Wright General Agency

The Brown & Brown subsidiary expands its presence in Texas and Louisiana and adds $1.6 million in revenue

Ironshore International

Visionary Underwriting Agency

Ironshore continues to expand its global distribution platform with the acquisition of the Dubai-based agency

Arthur J. Gallagher & Co.

e3 Financial

Gallagher grows its presence in the employee benefits space

Hiscox Ltd.

R&Q Marine Services

The insurer acquires an MGA specializing in yachts with a 2014 gross written premium of $25.7 million

Fosun International

Meadowbrook Insurance Group

The acquisition by China’s Fosun has sent shares of Meadowbrook skyrocketing nearly 20%

ACE

Fireman’s Fund

The sale of the US personal liens business of Fireman’s Fund marks the end of a more than 150-year-old brand name

AIG

Ageas Group

AIG expands its presence in the UK market with a $293 million payout

Catlin acquisition positions XL Group as global player With the roughly $4.2 billion acquisition of London-based Catlin Group, XL Group stands to position itself as a key player in specialty insurance and rank among the top 10 players in the global reinsurance market. “We are delighted to announce this compelling combination, which positions us strongly to provide more – and even better – answers for the world’s most complex risks while enhancing our opportunities to create value for shareholders and better serve clients and brokers,” said XL Group CEO Mike McGavick. The acqui­sition is expected to be scheduled in the second quarter, and the deal complete by mid-2015.

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PRODUCT NEWS

>> BURNS & WILCOX BROKERAGE and Lockton Insurance Brokers have combined with the National Thoroughbred Racing Association [NTRA] to offer a new jockey accident program for racetracks. The NTRA recommends racetracks maintain a minimum of $1 million worth of accident medical expense coverage per incident for all jockeys. The new program is open to all brokers and offers competitive pricing. >> PEERS became one of the first companies to tackle the tricky problem of insuring participants in the so-called ‘sharing economy.’ In December, the organization introduced two programs for this group: home liability insurance for those who rent out their homes and car-replacement insurance for those who drive other people or do deliveries for money. The products are expected to address the infamous ‘insurance gap’ for workers with marketplace startups like Uber, Lyft, Airbnb and VRBO. >> BEAZLEY SYNDICATE is leading a consortium of a dozen international risk management experts and insurance companies to launch Hostile Environment Liability Protection [HELP]. The risk mitigation, crisis response and insurance program is designed to guide and cover a company’s operations in hostile or complex environments, and is particularly recommended for organizations in the security, logistics, engineering and construction sectors, as well as non-governmental organizations, charities and media companies.

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For more industry news as it happens, visit www.mpamag.com

MOVERS & SHAKERS Name

>> LOCKTON AND BURNS & WILCOX joined together to launch Protection Against Income Disruption [PAID], an insurance program that protects companies from income losses and increased costs incurred without physical damage to property. The product, developed as a response to such threats as an Ebola outbreak, addresses a gap in standard business interruption policies, which require property damage to trigger coverage. >> USI INSURANCE SERVICES has launched a new terrorism insurance product that covers property risks not limited to acts of terrorism certified by the US government, underwritten by Lloyd’s of London. The product uses a risk management analysis to identify terrorism exposures – including political, religious, and ideologically motivated attacks – and features a limit of up to $200 million.

Leaving

Joining

New position

Michael Andler

Aon

Lockton

Executive vice president and head of US property insurance practice

Eric Boyum

N/A

Aon

Technology and telecommunications national practice leader

Leslie Bomford

Commonwealth Insurance Company

Ironshore International

Senior vice president of upstream energy

Mark Zettl

MMZ Associates

Luke Savage

Lloyd’s

Martin Brauner

Lexington Insurance Co.

Aspen Insurance Holdings

Senior vice president and product line leader of excess auto liability

Chuck Hasselback

Lexington Insurance Co.

Berkshire Hathaway Specialty Insurance

Head of the environmental group

Dan Daniel

N/A

Andrew Glisson

Upstream Insurance Brokers

JLT Specialty Insurance Services

Vice president

Christopher Swift

N/A

The Hartford Financial Services Group

Chairman

Allyson Martin

Aon

Beecher Carlson

Bruce Dymtrow

N/A

CNA Financial

Anne Talluto

Towers Watson

Gregory Bangs

Chubb & Son

Hub International

Vice president of Hub Northeast

Standard Life

Chief financial officer

Crawford & Co.

Vice president of catastrophe services

Managing director Vice president of underwriting for aging services and national programs

Mercer

Partner and senior client manager

XL Group

Chief underwriting officer, crime underwriting

TWO NEW DEPARTMENT DIRECTORS AT LLOYD’S The departure of Luke Savage, Lloyd’s director of finance and operations for 10 years, left the international insurance market with two slots to fill. Former Catlin executive Shirine Khoury-Haq will take over as director of operations, while John Parry (pictured), currently head of finance at Lloyd’s, will fill the role of director of finance. Parry had been acting director of finance since July and was awarded the permanent role after a competitive appointment process.

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UPFRONT

TECHNOLOGY UPDATE NEWS BRIEFS drone they intend to use to speed up the claims handling process. Only a handful of companies operating the US have been given permission to operate drones commercially.

Big data application for producers expanded Technology giants join together for insurance app Apple and IBM have released their first collaboration – an app called Retention that insurance producers can use to streamline their business. The app provides access to customer profiles and history, including analytics-driven retention and risk scores, smart alerts, reminders and recommendations on next steps. Retention also facilitates transactions like the collection of e-signatures and premiums.

According to Apple, the app will allow agents to “take quick action on priority situations, including unpaid premiums, missing information in applications, and updates on claims and life events.”

In December, agency technology developer Applied Systems unveiled the latest version of Applied PerformanceManagement, a software program that aims to give agencies “data-driven business insights for analysis and tracking.” The program accesses information from a group’s agency management system and allows executives to manipulate the data to learn more about their client base, their carrier partners and their own employees. Specific updates include employee performance scorecards; upgraded summary, trend, geography and policy marketing dashboards; and a visual analysis of carrier performance.

Major insurer partners with telematics provider The ubiquity of user-based insurance continues – GM and OnStar announced a partnership with Progressive that will allow new car owners to opt into a service that tracks driving habits for 90 days. Drivers will receive feedback about their performance, after which they will have the option to send their driving habits to Progressive to potentially lower insurance costs. The service will be offered starting this summer on all 2016 model year GM vehicles, most 2015 models and select 2013 and 2014 models.

Drones may be the future of claims settlement Insurance company USAA recently filed a request with the Federal Aviation Administration, asking for permission to start testing unmanned aircraft to see how they could be used most effectively in natural disasters. Partnering with Precision Hawk, a provider of data collection and processing tools, USAA developed a five-pound

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40% of independents name online insurance sales as biggest threat The new tech-driven insurance shopping environment has many independent agents rattled, a new survey from Accenture reveals.

Nearly 40% of producers say they view direct online insurance sales by carriers as a “serious competitive threat” and labeled such sales as the biggest source of competition to the agent/ broker channel. More than three-quarters of survey respondents blamed lower prices for the shift to direct sales; 48% blame better brand recognition and more effective marketing. Erik Sandquist of Accenture commented that these new distribution models are “making a determined effort to entice customers away from agents.”

Are carriers moving on without producers?

IN EARLY JANUARY, moves by Google seemed to indicate that the multinational company was considering an entrance into the auto insurance space.

Google would hardly be the first. Wal-Mart made a splash last April and again in October when it announced it would offer auto and health insurance through its online platform, and Salt Lake City-based ‘e-tailer’ Overstock. com went one step further by rolling out offerings in auto, home and small business insurance.

Given the purchasing preferences of today’s consumer – more than two-thirds of current policyholders say they would consider purchasing insurance from alternate organizations – insurance agents and brokers may have reason to be worried.

Dax Craig, CEO of insurance data provider Valen Analytics, says while carriers are anxious to maintain good relationships with their producers, they are also looking toward a future in which major tech players like Overstock will play a meaningful role in the distribution of insurance products.

“Companies like Overstock are not a significant threat to insurance carriers themselves. The threat will be to carriers’ current distribution partners – agents and brokers,” Craig says. “Carriers value the broker channel, but I think they’re very curious about these new players and what they’ll mean to them.”

With an existing group of loyal customers, such players are poised to offer carriers a captive audience, and produc-

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ers may need to do some long-term planning in order to survive.

But the threat may not be real just yet. “I know these comparison shopping sites seem to be all the rage, but if you look at their production – the number of policies they’re actually issuing – it’s miniscule,” says Brian S. Cohen, operating partner at Altamont Capital Partners. “What’s happening is that individuals are visiting these sites to get a sense of a reasonable price, but they still want to go to a professional to figure out what’s best for them.”

Craig agrees there is still a place for producers in the insurance distribution platform of the

“The threat will be to carriers’ current distribution partners – agents and brokers” future, but stresses that strategic planning and adoption of data-driven technology will be key for any agency looking to survive. “If you’re an agent that’s small, I still think there’s a way for you to win,” he says. “Those who are adopting more technologically driven apparatuses to help them do business are going to be the ones most attractive to potential buyers.”

Q&A: Insurance comparison websites ANDREW ROSE CEO CompareNow.com

IBA: How are things looking for CompareNow.com at the start of 2015?

Andrew Rose: It’s an extraordinarily exciting time in our business. We have nearly three dozen carriers on board – we have eight of the top 20 carriers participating with us – and that’s the key thing you need before you have any other element of the conversation. So that’s very, very encouraging for us that we are having carriers contact us now, rather than us having to go out and pitch our wares.

IBA: Do you think a comparison site such as Compare Now.com is a threat to agents and brokers?

AR: It can be. If you sit on your hands, as an agent … and you do nothing in your business to reflect the changing shopping behaviors of consumers, I think your agency is at risk. We are not an advocate or a foe of agents. We are an advocate for the consumer, and if the consumer wants an agent as part of that process, we’re happy to involve them.

[Some people] say, ‘Insurance agents are going to go the way of travel agents.’ I think that’s flat-out wrong. I think Realtors are a better example for how insurance agents are going to have to adapt. When I bought my house a couple of years ago, we made the decision on the house we were going to buy without involving a Realtor. But then, we got ready to make that purchase decision … that’s when we got a Realtor. And I equate that to how a lot of consumers are going to be for insurance. They’re going to have picked out pretty much everything they want there, but then they want that last little bit of help. And as long as the agent can do that and add value, they’re going to remain part of the ecosystem for the foreseeable future.

IBA: Do you see insurance comparison websites in the US market expanding into commercial lines?

AR: Yes, but it’s going to be much slower. It will be for the simpler commercial lines. But when you talk about, ‘Hey, I need to insure my building, and I need to insure this for workers’ comp, I need to do this’ … all of a sudden, the needs are far more than a simple transaction. So I think that is going to be the impediment to complex commercial moving into a comparison-style environment.

IBA: What should agents and brokers should be doing in order to reinforce their value to clients?

AR: First of all, they’ve got to remain part of the consideration set. You can’t add value to clients you don’t have, and Geico and Progressive are out there advertising like behemoths. So the first thing you’ve got to do is you’ve got to make sure that your carriers are participating in avenues that generate new business for you as an agent. That’s where comparison sites can help, as long as they are open to having agents involved.

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UPFRONT

WORKERS’ COMP UPDATE

state’s workers’ compensation system and the so-called ‘grand bargain,’ in which injured employees gave up the ability to sue employers for negligence except in cases of intentional wrongdoing in exchange for the right to be compensated for injuries without having to prove fault.

US workers’ comp market stable after TRIA lapse

Two-thirds of workers’ comp claims traced to five injury types

The two-week lapse in the federal backstop did not produce any severe consequences in the workers’ comp market, though some questions linger

NEWS BRIEFS

Workers’ comp profitable for first time in 8 years Data from the National Council on Com­ pensation Insurance suggests that workers’ comp premiums grew 7% in 2014 to $39.3 billion, marking the first signs of profitability since 2006. Private comp carriers also have enjoyed success, with an aggregate combined ratio of 96% in 2014. That’s compared to a combined ratio for private comp insurers of 101% in 2013, falling slowly since peaking at 115% in 2010 and 2011. The year’s growth projections outstrip those of the last two years; workers’ comp premiums grew just 4.5% in 2012 and 2013.

Two in five Americans say claimants are lazy The nation’s perception of workers’ comp claimants could use some work. According to a survey of more than 2,000 adults from Summit Pharmacy and Harris Poll, nearly two in five Americans believe “most workers’ compensa­ tion claims are made by people who don’t want to work.” Dr. Joel Morton, president of Summit Pharmacy, believes these attitudes could potentially influence an employer’s premiums if employees push through a bad injury in order to avoid negative perceptions. He advises producers to more fully explain the purpose of workers’ comp to clients to avoid such scenarios.

Ruling could subvert Oklahoma workers’ comp law A Pottawatomie County district judge could dismantle Oklahoma’s workers’ compensation system with a January ruling that confirmed an injured tire worker can sue his employer for negligence because his injury was “foreseeable.”

The decision challenges the foundation of the

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Five types of workplace injuries accounted for 65% of workers’ compensation costs in 2012, a new study from Liberty Mutual Group reveals.

Overexertion was the top cause of workplace injury that year, representing more than 25% of the top 10 work hazards and costing US bus­inesses $15.1 billion. Other top injuries include falls on the same level, being struck by an object or equipment, falls to a lower level and other exertions or bodily reactions.

BTIS expands program nationwide Builders & Tradesmen’s Insurance Services expanded its Victory Workers’ Comp program into all but five US states in 2015. The program offers 10% commission; producers can access it by registering with BTIS on its website. The program has no membership or broker fees and can be rated and quoted online. Multiple payment options include monthly reporting and zero down with 12-month electronic funds transfers available.

THE SHOCK AND DISMAY that spread across the US property/casualty insurance industry after federal lawmakers failed to renew the Terrorism Risk Insurance Act [TRIA] last year was short-lived.

Almost immediately after the new Repub­ lican controlled Congress convened, a bill was passed that renewed the pivotal backstop program through 2020, amending its expiration date from the Dec. 31, 2014, drop-off iterated by the last congressional renewal.

Though it amended the particulars on some key provisions like program triggers, the bill managed to stabilize a confused and concerned marketplace.

For workers’ compensation insurers, the relief was particularly acute. Prior to the reauthorization, many industry experts warned that workers’ comp coverage could be forced into residual markets where insureds would face significant premium increases, particularly in urban areas. Some insurers prepared for the lapse by including specific policy language that would make renewal rates contingent on whether TRIA would be replaced.

“Because insurers cannot include terrorism-related losses and employers are required to buy it, the options available to buyers have

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t

been reduced, and rate increases have accelerated,” Marsh LLC wrote in a report.

While the renewal of the program has done much to quiet these fears, some questions still remain over the workers’ comp market’s dependence on TRIA. During the two weeks a federal backstop was not in place, rates did not measurably increase, carriers did not leave the market and insureds did not lose coverage – in short, the dire consequences predicted by industry advocates did not come to pass.

Does that lack of action detract from arguments for TRIA’s continued necessity in the workers’ comp marketplace? American Insurance Association senior vice president and general counsel J. Stephen Zielezienski says no.

“Policy changes take a while to become effective in the market, even without the reassurances from congressional leadership that TRIA would be passed quickly in 2015,” Zielezienksi said. “If this had gone on, I think you’d have seen impacts in the marketplace one, two, three months down the road. In this case, the sky takes a while to drop.”

Q&A: Home healthcare workers’ comp DAN CURRAN Vice president, underwriting officer WILLIS PROGRAMS

and even brokers underestimate the driving exposure from a workers’ comp perspective. Many employers overlook the driving exposure, as in most circumstances, company vehicles are not used; instead, home healthcare providers use their own vehicles in the course of their duties. However, when driving from one client’s to another, even in the employee’s own vehicle, an injury due to an auto accident would likely be covered by workers’ compensation.

A recent report from Risk Management Solutions identified the top five US cities most at risk for a terrorist attack, based on 35 terrorist plots and estimated damages from terrorism-modeling software that simulated attacks on 9,800 global targets NEW YORK CITY CHICAGO

LOS ANGELES

Workers must function in uncontrolled work environments. Unlike an office space or hospital, which is a controlled environment with oversight in regard to housekeeping and safety, home healthcare workers operate in the homes [of] their clients, which may or may not be safe and/or clean. From the employer’s perspective, the workers are also unsupervised, and ‘injuries’ may not be witnessed.

Driving from patient to patient is a risk most other healthcare workers do not face. Motor vehicle accidents generate some of the most severe injuries and workers’ compensation losses for this industry. Employees in this industry also face heavy lifting exposures while caring for patients. This lifting takes place in the client’s home, away from a typical healthcare setting, where other employees could help with a team lift, or lifting equipment would be available. Finally, safety training is difficult to provide and enforce given the remote nature of the workforce.

IBA: How widely appreciated or understood are those risks by the home healthcare industry?

DC: The lifting exposure is well understood. I think that many employers

5 US CITIES LEAD RISK FOR TERROR ATTACK

SAN FRANCISCO

IBA: What are the unique risks faced by employers in the home healthcare industry?

DC: There are a number of exposures faced by workers in this business.

WASHINGTON, DC

IBA: How grave are the consequences of underinsurance for home healthcare employers?

DC: In most states, it would be against the law to operate without coverage for a company with sufficient employees to deem coverage necessary. Also, forgoing proper coverage for non-owned auto coverage or GL/PL also could put the business in jeopardy in the event of an accident.

IBA: What advice would you offer to brokers tasked with advising clients in the home healthcare industry?

DC: Be sure to help your client implement a rigorous employee screening and selection process. Properly evaluate the driving exposure of the operation, and make sure the employer implements best practices for safe driving. Recommend that uncontrolled work environments – client homes – be evaluated and screened by management before healthcare providing employees are dispatched to the client’s home.

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6/02/2015 9:17:21 AM

FEATURES

PRODUCER PROFILE

The Imaginarium of Guylaine Déchaine As a leading film and entertainment broker, Guylaine Déchaine insures against everything from high-flying stunts to lavish movie sets A DECADE OR TWO AGO, covering the kinds of special effects that erupted across the screen in the 2014 box office hit Pompeii – which, as one movie reviewer put it, saw Mount Vesuvius “raining down a shower of ash and fiery meteors that targeted unpleasant major characters like cruise missiles – would have posed some serious challenges for a film and entertainment insurance broker.

But thanks to the rise of computer-generated imagery (Pompeii featured millions of dollars of CGI exploding-volcano effects, a CGI crumbling Roman city, and thousands of itsy-bitsy CGI people), Guylaine Déchaine found that insuring the movie was a fairly straightforward endeavor.

Déchaine, BFL Canada’s leading film and entertainment broker, is well-versed in customizing coverage for American and Canadian film, television and theatrical productions.

In the beginning of her career, most special effects were done live. But these days, “It’s very seldom in the movie production business that they would actually blow up some stuff,” she says. “Now, they just do it on a computer. It’s much more cost-effective, and the exposure is a lot less.

There’s no risk – or very minor risk.”

Problems Déchaine solves on a daily basis can run the gamut from the surprisingly straightforward (CGI special effects) to minor bumps in the road (a film crew who ran over their own camera at the end of a long day of shooting) to tragic (her biggest claim ever was for Heath Ledger’s death during the filming of The Imaginarium of Dr. Parnassus).

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A big break When Déchaine first ventured into the insurance industry in her early 20s, she never dreamed that her career would evolve in such a fun and fascinating direction. She was more interested in administration.

“I love paper and organizing and structuring everything,” she explains.

She got her foot in the door as an intern with a group insurance company, and within a few years – thanks to her fluency in both French and English – she was leading the company’s customer service department for all of Canada.

Her next big break happened shortly after transitioning into commercial insurance at Richard Melling Insurance Brokers. When an agent in the commercial, film and entertainment division departed for maternity leave, Déchaine took over her position.

A few years later, in 1989, she and colleagues Ed Gathercole and Joanne Camacho jumped from Richard Melling to BFL, where they continued in commercial insurance while pursuing their dream of growing a film and entertainment portfolio. Pooling their considerable talent, the team was able to reach out to both the English- and French-speaking industry.

“And here we are, 26 years later, with a beautiful clientele that we adore that are very loyal to us,” Déchaine says.

Today, BFL’s Montreal office boasts a highly trained and experienced team of 10 film, media and entertainment brokers, headed by Déchaine. They provide comprehensive

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insurance protection and consulting services for productions in North America and internationally.

Clients range in size from documentary filmmakers, international festivals and concert tours, to major studios with film budgets exceeding $90 million.

As all-consuming as it can be, it’s clear that Déchaine loves her job. “A&E is a very beautiful niche, but extremely stressful and challenging,” she says.

Risk management

Copyright: Marcie Richstone

Much of what Déchaine and her colleagues do can be categorized as risk management.

On a film production, for example, they read the story scenarios, go through the script and highlight anything that has to do with stunts, special effects, shooting with helicopters, animals and the like.

“We consider if the main cast are going to be doing any high-risk activities. We really look at that script and address it line by line with the production company – ‘How are you going to do it? Are you going to have a stunt coordinator? Do you have any major cast stunt doubles?’” says Déchaine.

They then approach the handful of insurance companies that specialize in film and entertainment, help them to “appreciate” the scope of the project, “and get a comfort zone to be able to give us a premium on whatever type of production we get involved in,” Déchaine explains.

Each project is fraught with its own unique set of challenges. One of the current film projects with which Déchaine is involved, for example, is about the story behind the construction of the Chateau Versailles in France.

“It’s an exotic period piece, which is very complicated,” she said. “You have got to make sure you insure the shooting location properly. And the props are priceless.”

Déchaine has also recently insured the Resident Evil series, which has “a lot of action and stunts, a lot of weird things going on.”

Midnight Sun, a 2014 action/adventure film set amongst the ice fields of northern Canada, also presented unique challenges. The storyline follows a young boy who defies the dangerous elements of nature to reunite an abandoned polar bear cub with its mother.

Although Canada has plenty of its own resident bears,

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6/02/2015 9:25:46 AM

FEATURES

PRODUCER PROFILE

“We come in, and we never know if we will have heart attacks or Band-Aids.

We just know we are ready for anything”

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the bruins for Midnight Sun were flown in from other countries, and some had to go through quarantine.

“We hope that everything is going to be fine after the quarantine and that the animals will be able to perform and participate in the movie,” Déchaine says.

But if not – well, that’s what insurance is for.

Animal mortality, as it’s called, is one of the many specialized coverage needs that Déchaine’s clients sometimes have, sending a veritable menagerie of animals – including elephants, tigers and lions – parading through her career.

Déchaine describes her film and entertainment department as an emergency ward that runs 24/7. “We come in, and we never know if we will have heart attacks or BandAids,” she says. “We just know we are ready for anything.”

When tragedy strikes The overdose death of Heath Ledger on Jan. 22, 2008, represented by far the biggest challenge – not to mention the biggest claim – in Déchaine’s entire career – “and a very disturbing one,” she says. Ledger was in the midst of filming The Imaginarium of Dr. Parnassus, a $30 million production in which the Australian actor played the lead role.

BFL was the film’s broker. The minute Ledger’s death happened, senior representatives stepped in, along with BFL’s head of claims department and the adjuster, to huddle with other key players on the project to find a solution to the seemingly unsolvable problem.

For a while, Déchaine recalls, it felt like things were going from bad to worse. But ultimately, the producers rewrote the script in a way that enabled them to complete the production by casting three other actors (Johnny Depp, Jude Law and Colin Farrell) to portray transformations of Ledger’s character as he traveled through Dr. Parnassus’s dream world.

“This could have been abandonment, but it wasn’t,” Déchaine marvels. The insurance company that was covering the production “went ahead and paid what they had to pay, in accordance with the financial agreement that they had, because it was a covered loss.”

Many millions of dollars later, the production company was able to complete the movie, which went on to gross more than $60 million and earn two Academy Award nominations.

THE TRINITY OF FILM & ENTERTAINMENT COVERAGE According to Déchaine, there are three main insurance policies that every film or television production company needs:

1

Entertainment package insurance covers the physical aspect of a production. That includes cast, crew and animals (if they pass away, get sick or have an accident), shooting locations, equipment, prop sets, wardrobes, rented vehicles and everything else on the property side of a project, right down to the footage that is being shot. Each package is tailor-made for its particular production.

2

Comprehensive general liability covers the production company in case of negligence resulting in bodily injury or property damage to a third party. The errors and omissions policy is put in place prior to the airing of a TV series or release of a film project, and is designed to cover the production company in case of defamation or breach of rights.

3

When a production company is shooting in a remote, high-risk foreign country, they need additional insurance coverages. Depending on the scenario, these might include major medical (including kidnap and ransom), accidental theft and dismemberment, travel delay and political insurance. (War and terrorism are excluded.)

For Déchaine, the claim was a once-in-a-lifetime experience that she hopes never to endure again. But, she reflected, everyone walked away from it with some important lessons learned.

“I think the communication and creativity and expertise at the table is key,” she says. “In the case of Dr. Parnassus, everyone was around the same table, putting their heads together, in order to make sure they would find a solution.”

More than anything, the experience gave Déchaine a deeper appreciation for the value of the work she does.

“When everything is fantastic, it’s great,” she says. “But you know what? That’s where you really determine the expertise of a brokerage firm – when it goes really sour, really bad, and you have this huge claim. And when you come through with a conclusion, it’s a fantastic feeling.”

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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

6/02/2015 9:25:56 AM

FEATURES

PRODUCERS ON NETWORKS

E C U D O R P

W T E N

Z

t u o b a cers u d o r say p f o t o s d a d san ey h u h o t t h t a wh ked s s ’ a e r a e c eri k. H r m o A w s t ne nes a i s g u n i B n joi nce f a o r s u s n In d co n a s o the pr

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N O S R E C S

K R O W

ut say

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FEATURES

PRODUCERS ON NETWORKS THE ADVANTAGES of joining with other agencies are legion. Producers get more buying power and better rates, as well as access to more carriers, allowing them to remain local while offering the benefits of a larger agency. But are the advantages worth it? We surveyed thousands of producers to find out if joining a network or alliance benefitted their businesses. And the results showed that most producers seem to find real advantages from doing so.

In our survey, we organized the advantages offered by joining a network into nine broad categories, then asked producers to rate them by importance on a 1-10 scale, with 10 being most important. Those categories were: > Access to more companies and products > Commissions and profit share > Marketing > Training and education > Customer service support > Access to niche and nontraditional markets > Administrative support > Claims support > Recruitment of talent Respondents rated their performance on a 1-5 scale, with 1 being poor and 5 being excellent. Can you replace with Respondents rated their performance on a 1-10 scale, with 1 being poor and 10 being excellent.

The good news is that most respondents felt their carriers were doing well or excellent in all of those categories.

Here’s how they stacked up.

ACCESS TO MORE COMPANIES AND PRODUCTS

1st 2nd

Importance to producers Network performance

Survey respondents felt that the greatest advantage offered by networks and alliances was increased access to more insurance companies and their products, rating that category at 7.87 out of a possible 10. That access, according to one respondent, “makes you a larger fish in a very large pond.”

“We are able to write more business with more carriers, and less volume/ premium”

What do agents look for in a network?

ACCESS TO MORE COMPANIES AND PRODUCTS

7.87

COMMISSIONS AND PROFIT SHARE

7.79 6.21

BENEFIT

MARKETING

5.34

TRAINING AND EDUCATION

4.53

CUSTOMER SERVICE ACCESS TO NICHE AND NONTRADITIONAL MARKETS

4.28 3.50

ADMINISTRATIVE SUPPORT

3.44

CLAIMS SUPPORT

2.06

RECRUITMENT OF TALENT 0

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1

2

3

4

5

6

7

8

9

10

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How would you rate your network’s performance on these criteria?

EXCELLENT

FAIR

POOR COMMISSIONS AND PROFIT SHARE

ACCESS TO MORE COMPANIES AND PRODUCTS

ACCESS TO NICHE AND ADMINISTRATIVE SUPPORT NONTRADITIONAL MARKETS

TRAINING AND EDUCATION

CUSTOMER SERVICE SUPPORT

MARKETING

RECRUITMENT OF TALENT

CLAIMS SUPPORT

BENEFIT

“We are able to write more business with more carriers, and less volume/premium,” said another.

And most respondents felt their networks were excelling in that category; they rated networks and alliances at 8.86 out of a possible 10 for providing access to more companies and products.

Dennis Winfree, vice president of Wood Insurance in Richmond, Va., says the market access provided by his network, the Iroquois Group, was a vital boost to get his business going.

“It goes back about 15 years for me. I was starting my own business from scratch after about 25 years in the industry – and that’s hard to do in this day and age,” he says. “Market access – that’s the number-one reason to join a network.”

MARKETING

“Being part Importance to producers 3rd of a network Network performance 7th can make Producers also felt that the marketing advantages offered by networks were at least somewhat important, you eligible rating them at 6.21 out of 10. Several respondents commented that the marketing assistance they got from for bonuses their networks was invaluable. “(Our) number of marketing meetings is cut by half,” most small wrote one survey respondent. “This way we can spend our agencies just time selling instead of meeting.”

While marketing assistance wasn’t the biggest concern don’t write for most network members, they did feel that networks performed well in that area, rating them at 7.42 out of 10. enough COMMISSIONS AND PROFIT SHARE TRAINING AND EDUCATION premium to Importance to producers 2nd 4th qualify for” Network performance 1st Importance to producers Commissions and profit share rated a close second in importance to producers, coming in at 7.79 out of a possible 10. And that’s another area where networks and alliances are excelling; respondents rated their networks at 8.96 out of 10, the highest rating they gave to any category.

“You’re going to give a percentage of your commission back to the network,” Winfree says. “But that’s more than made up for by the profit-sharing. And being a part of a network can make you eligible for bonuses most small agencies just don’t write enough premium to qualify for.

With some carriers, you don’t get a bonus until you hit $1 million in premium. With my network, that number can go down to $150,000.”

Network performance

5th

Most respondents weren’t too worried about what kind of training and education programs were offered by their networks – that category’s importance was rated just 5.34 out of 10.

The level of training and education you receive depends entirely on the network you join, says Andrew Caldwell of Smart Choice.

“Different groups do different levels of training,” he says. “If you’re going with an agency that’s more hightouch, you’ll probably get more of that. With other agencies you’ll get less.”

That doesn’t mean education is entirely unimportant to producers; some respondents said they appreciated

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h Minimum volume requirements h No up-front or monthly fees h No long-term contracts h Complete and full disclosure of all financial details from day one – no surprises h Access to major carriers h Access to nonstandard and excess/surplus markets h Personal and commercial lines h Agent owns the business h Competitive commission share ratio – but never on agency’s own direct appointments h Ability to earn 100% commission h Ability to earn bonuses & contingency payments h Training and business coaching h Agency perpetuation and/or exit planning & support h Team of 40+ staff members and 90+ territory managers – and growing – to support you

T

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:38:08 PM

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Turn your visions of Commercial lines success into a reality with Smart Choice®. To help sustain your commercial lines business, we have partnered with national underwriting carriers to develop opportunity for all agents to write commercial lines business quickly, efficiently and without appointments.

We’re the only agency network of our kind to offer: • No start-up or monthly fees • Bonus and contingency sharing • Ability to write business NOW without a lengthy appointment process • Ability to earn 100% commissions • Online agency business center • Ownership of 100% of your book of business • Earn additional compensation through aggregation

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FEATURES

PRODUCERS ON NETWORKS “The network membership opens the full international business support needed, for a relatively small contribution” the more informal educational opportunities networks provided. One respondent appreciated the “community access to ask questions [and] share ideas with other brokers,” while another looked forward to the “educational emails from the [network] president.”

Producers felt that networks that provided training and education were doing fairly well; network performance in the category was 7.6 out of 10.

CUSTOMER SERVICE SUPPORT

Importance to producers Network performance

5th 6th

While customer service support wasn’t unimportant to producers, they didn’t feel it was as vital as benefits like commission and profit share or access to products. Respondents rated its importance at just 4.53 out of 10. But most felt their networks handled

WHAT IS A NETWORK? Networks and alliances can take many different forms, but they usually boil down to a number of agencies under one master agency code. Most carriers now recognize networks and alliances, and give additional subcodes to member agencies. Because of its size, the network or alliance gives its individual agencies access to more companies and products, increasing their potential to do business. Larger networks also can often negotiate with carriers for higher commissions and better profit-sharing deals. In return, agencies share profits with the network or alliance in the form of percentages of commissions, monthly fees or a combination of both.

Beyond providing access to markets, networks’ offerings can vary widely. Some may just offer the bare bones – increased market access and profit-sharing. Others may also provide members with perks like an agency management system, training opportunities and marketing assistance.

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customer service well; network performance was rated at 7.5 out of 10.

Ultimately, many feel that good customer service lies with the individual producer.

ACCESS TO NICHE AND NON-TRADITIONAL MARKETS

Importance to producers Network performance

6th 3rd

Access to niche and nontraditional markets was another selling point for networks and alliances, although not as important to producers as some other factors. Survey respondents ranked its importance at 4.28 out of 10.

Several respondents did highlight the category’s importance to them, however. “Only market availability and price matter to me,” said one.

“The network membership opens the full international business support needed, for a relatively small contribution,” another noted.

Getting that access gives agencies the opportunity to bring in business they otherwise couldn’t, Caldwell notes.

“They’re going to have the occasional customer that comes into the office who doesn’t fit their typical clientele or the kind of risk they usually write,” he says. “Going through a network allows them the avenue to that carrier [for customers] who come in once or twice a month.”

Networks are particularly good at providing that access. Survey respondents rated their networks at 8.1 out of 10 in the category.

ADMINISTRATIVE AND CLAIMS SUPPORT

Importance to producers

7th (admin) and 8th (claims) Network performance

4th (admin) and 9th (claims) While most producers who responded to the survey thought their networks did a good job with adminis-

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trative and claims support – networks scored 7.62 and 7.06 out of 10, respectively – most didn’t feel these were the most important benefits offered by network membership. Claims support scored just 3.44 out of 10 in importance, while administrative support was considered only slightly more important at 3.5.

Respondents’ annual premium volume Under $1 million 9.8 %

RECRUITMENT OF TALENT

Importance to producers Network performance

9th 8th

Recruitment was considered the least vital benefit of joining a network. Producers who responded to the survey rated it at just 2.06 out of 10 in importance.

However, most felt that networks were doing well in the category; network performance in talent recruitment was 7.14 out of 10.

But while recruitment may not be the main reason to join a network, Caldwell says network membership can look attractive to producers looking to join a firm.

“In the independent insurance world, there’s a lot of turnover,” he says. “There’s a value placed on the agency when you’re able to show reports that aren’t just run or audited by an individual agency owner.

You’ve got a large organization that says, ‘Yes, this is

WHICH NETWORK? So you’re convinced – a network is right for you.

But which do you choose, and how do you go about joining?

Check out your options. Research the networks and alliances operating in your state. Find out what markets they’ll open to you, what profit-sharing arrangements they have and what their requirements for membership are.

Talk to members. Ask them about their experiences as members of the network. Let them know they should be frank about their experiences – good and bad – with the network.

Be prepared. Most networks are going to have an application process. Many of them will want to look at your books or run a credit report. No network or alliance wants to partner with a failing agency.

$1 million– $10 million

More than $10 million 28.1%

62.1 %

what they produced, and we as an organization are financially stable.’ It just looks better, especially to a producer who may be getting paid on commission.”

WHY NOT JOIN A NETWORK? So with all the benefits of joining a network, and the general consensus that networks are performing well, what’s keeping some producers from joining?

We asked producers who weren’t network members to tell us why they were hesitant to join. The overwhelming majority – 63.64% – said they thought joining a network would involve too great a commitment of their time. A substantial minority of about 36% felt they didn’t meet the requirements to join, and 27% feared they’d lose their independence. Just 9% cited loss of commissions or the sharing of clients as reasons to stay away.

Winfree, however, says time commitment isn’t as big a factor as some worry.

“With my network, there really is no time commitment,” he says. “I know agents who are members of another network, and that network asks them to attend meetings, but overall, time commitment isn’t a big concern.”

Winfree also maintains that, far from sacrificing independence, small agents can actually preserve their autonomy by joining a network.

“I think the network gives agents the opportunity to be successful independent agents, despite the way the mega-companies use high-premium volumes that would run us out of the market as smaller agents,” Winfree says.

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WHY JOIN A NETWORK? So you’re an independent agent who’s quite happy with your situation. Why join a network?

In a word: access. Network membership can get independent agencies access to carriers and products they simply wouldn’t have otherwise, says Andrew Caldwell, president of Smart Choice, a network of more than 4,000 independent agents.

“What typically happens in an independent insurance agent’s office is, to get a carrier appointment, the carrier is going to want $250,000 or $300,000 in premium from an independent agency in a given year,” Caldwell says. “It’s easy for a large agency to hit that with multiple carriers, but typically a smaller agency isn’t going to be able generate the volume to get five or six of these larger carriers to come in. What happens when you go through a network is that you’re allowed to hit that at a lower rate. You don’t have to hit that $250,000 marker. It allows an agency that typically would only be able to qualify for two or three appointments to gain access to the full range of what the network provides.”

“It’s a godsend to small agencies to be able to compete with larger agencies. Unless you’ve got about a million dollars in premium ... a network is the only way to go” “The networks override this idea that’s happened in the 21st century with these high-premium volumes.”

It is true that many producers may not meet the requirements to join a network. The best networks will be choosy about which agencies they bring on.

“They’re going to want to see a business plan, and as much experience as you can produce on a résumé,” Winfree says. “They love for somebody to have a book of business.

Iroquois doesn’t put any minimum criteria rules about how much business you’re going to have before you come through their door, but that’s different for every network.”

But just because networks are choosy doesn’t mean independent agents shouldn’t be. Caldwell says it’s important to consider

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your options before joining any network.

“Shop around. Do your research. Ask agents in your state. Look at forums; review contracts with your lawyer. Make sure you’re doing your due diligence, because no matter what organization you go with, you’re signing a contract.

I think, so often, agencies rush into the first thing to come along, and they get sold on the potential benefits. There’s this honeymoon period – but then they find themselves stuck in a contract. Agents need to look at the pros and cons: What am I getting by joining this network? What am I getting in terms of additional markets, additional commissions, protection? Those things need to be considered before you sing on that dotted line with anyone.”

But finding the right network can make a big difference to smaller agencies.

“It’s a godsend to small agencies to be able to compete with larger agencies,” Winfree says.

“Unless you’ve got about a million dollars in premium – which nobody has starting out – a network is the only way to go.”

“Networks have their place, and they are going to be a big part of the future of independent agents,” Caldwell adds. “The way we’re compared is to travel agencies. Things are going online now. There aren’t that many travel agencies left in the world, but the ones that are, are larger and more streamlined. That’s what networks do – they allow smaller agencies to operate like larger ones. And that’s what it’s going to take to survive.”

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FEATURES

ENVIRONMENTAL INSURANCE

ENVIRONMENTAL EYE-OPENER Pollution exposure translates into big opportunities for producers who are looking to capitalize on traditional and emerging environmental sectors

By Samantha Wright

“Out of that lack of coverage and growing demand grew a need to insure those risks for businesses that wanted to be proactive about it”

MAJOR PRODUCTS OFFERED > Abestos abatement liability and containment > Cleanup cost cap > Contractor operations and professional services > Contractors pollution liability (CPL) > Environmental and general liability exposures

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> Environmental protection program closure/post closure > Errors and omissions > Lead abatement contractors liability > Owner controlled environmental insurance program > Owner’s protective professional and environmental liability

> Owner’s spill liability > Pollution legal liability > Secured creditor/creditor reimbursement for environmental damages > Storage tank pollution insurance > Supplemental environmental auto liability

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A 12-INCH STEEL PIPELINE ruptured on Saturday morning, Jan. 17, near Glendive, Mont., spilling 50,000 gallons of light crude oil into the pristine Yellowstone River.

By the time the Bridger Pipeline Company shut down the line – part of its system that crosses from the Canadian border through eastern Montana – the oil had oozed downstream as far as the confluence with the Missouri River, 60 miles away in North Dakota.

The governor of Montana declared a state of emergency for two counties, and health officials warned people not to use their tap water after water treatment plant operators discovered traces of benzene from the leak.

From oil spills in eastern Montana to chemical spills in West Virginia, stories like these make the national headlines with disturbing frequency and serve as the unhappy poster children of the booming environmental insurance industry.

But the fact is, you don’t need to handle nuclear waste or haul hazardous materials to need environmental coverage. Most businesses – from Fortune 500 companies to small business enterprises – have some sort of environmental risk stemming from pollution exposures, which, if ignored, could result in expensive, complicated, potentially uncovered claims.

These risks translate into big opportunities for savvy independent agents who are looking to capitalize on traditional and emerging environmental sectors.

“Most independent agents don’t realize that almost any business can have some sort of environmental liability exposure,” says Michael Hill, co-founder and past president of Freberg Environmental Inc. [FEI], a Denver-based insurance program manager offering a comprehensive, flexible and responsive market for brokers serving environmental and other niche markets.

By combining environmental education and risk management, agents can help contractors, property owners and financial institutions understand the value environmental insurance adds to their business model by giving them the ability to transfer the risk of environmental exposures.

What is environmental insurance?

Environmental insurance provides coverage to address pollution conditions that include cleanup costs, or simply liabilities such as property damage or bodily injury. The market segment has grown in response to the need for specialty coverage for contamination risks due either to actions that involve environmental processes or through inadvertent errors that happen at a job site.

The environmental insurance industry dates back to the 1970s, when asbestos lawsuits peaked in the US and insurance carriers began a mass movement to exclude pollution from general liability policies over concerns about the gravity of exposure to these carcinogenic materials.

Meanwhile, through the growth of environmental regulations in the US such as the Clean Water Act, the Clean Air Act, the Toxic Substance Control Act, and the more recently enacted Oil Pollution Act, the government has encouraged broader liability on businesses in the name of protecting the environment.

“Out of that lack of coverage and growing demand grew a need to insure those risks for businesses that wanted to be proactive about it,” says Bill Pritchard, president and CEO of Beacon Hill Associates, a national wholesale broker and industry expert specializing exclusively in commercial environmental insurance solutions.

Beginning in the ‘80s, a few carriers created specialty products that would cover pollution, cleanup and the liability associated with impacting the environment.

From there, the amounts and types of coverages in the marketplace grew dramatically, fueled by trends like environmental regulatory cleanup programs, mergers and acquisitions, utility deregulation, reuse of military bases in the private sector, and commercial real estate transfers and brownfield redevelopment.

By 2000, environmental products had become a significant component of most types of business transactions. There was approximately $1.2 billion of premium in the market, with most of the major markets offering $100 million per loss, and some offering $200 million or more in the aggregate, according to

ENVIRONMENTAL INSURANCE TRENDS Top trends in the environmental marketplace, identified by analyst Glynis Priester in the Wells Fargo Insurance 2014 Market Outlook, include:

There are more annuity policies covering operational risks for a wide variety of companies.

There’s not as heavy of an emphasis on 10-year terms, except where important for transactions.

Growing regulatory action and litigation, particularly over vapor intrusion risks (think indoor air quality contaminated from the neighborhood gas station or dry cleaner), is driving more real estate deals. Also, more buyers are protecting against pollution that might migrate onto their property.

A company may have indemnity for environmental risks from a third party but has concern about the long-term solvency of the indemnitor. There are now more solutions in the market for environmental indemnity wraps to cover the risks of insolvency or failure of the counterparty to indemnify as agreed.

Superstorm Sandy, like other hurricanes before, has helped increase demand for environmental insurance. As with any hurricane, releases of fuels/ chemicals or mold damage almost always occurs.

Oil/gas well owners, drilling companies and specialty contractors keep up the demand for environmental insurance with rapid growth in this booming industry.

Lenders are driving more borrowers to purchase environmental coverage.

Refinancing is way up, and lenders are more often requiring environmental insurance or lender liability policies.

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FEI-I/B F

FEATURES

ENVIRONMENTAL INSURANCE

MAJOR CLIENT GROUPS

Grading and site prep contractors

Marsh analyst John Hannah in his 2000 article, “The US Environmental Liability Insurance Market Reaching New Frontiers.”

Over the past 15 years, the market has continued to grow robustly, today encompassing close to 50 carriers offering specialty environmental products.

Pritchard attributes the growth to “a perfect storm of increased regulatory pressure from the government, an increased awareness on the public’s part about exposure to the environment and a desire to hold people accountable.”

Roofing contractors

Coverage types

So who needs environmental insurance?

The first category of clients encompasses contractors who are actually involved in environmental operations – anybody who handles hazardous materials as part of what they do.

The other client category is those who are not in the environmental business, but who have pollution exposures. Given the breadth of the GL pollution exclusion, all of the following have an environmental exposure:

Plumbers HVAC and other mechanicals Window installers General contracting Electricians Facility-based exposures Warehouses Contractor yards Manufacturers Hotels Doctor’s offices Retail Developers Apartment buildings Hospitals Source: Beacon Hill Associates

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Environmental insurance comes in two broad categories. Contractor’s pollution liability addresses pollution conditions arising from contractors’ work at a job site for a third party – think of a plumbing subcontractor who installs a valve incorrectly on a toilet in an apartment complex, causing leaks and mold.

That’s a pollution claim on most policies.

Fixed site coverage for environmental impairment liability addresses pollution at the insured’s own locations. As its name suggests, it is location- or premises-specific, providing coverage for pollution that might emanate from a specific piece of property.

It’s not uncommon for an insured to have both operational and fixed site risk exposures.

That translates into two different opportunities for agents and brokers to talk about additional coverage with their clients.

Sometimes the coverages are sold as standalone products. “But we can frequently package environmental insurance products with other types of insurance such as general liability or professional liability,” says David Brereton of Denver-based FEI. Other products that can be brought into the environmental mix include auto liability plus pollution coverage (addressing the upset and overturn of autos carrying hazardous materials), and cost cap, which addresses cost overruns for a particular cleanup project.

Once very much a niche product, there is now growing evidence that the requirement for environmental coverage is becoming standardized.

Pritchard has seen a huge uptick in business over the last 10 years, largely stemming from contractual requirements. “You start seeing big, big companies require anybody who works for them to carry contractor’s coverage,” he says. “Or, lenders require anybody who borrows money from them to have a pollution policy on that property before they will loan them money.

“That then trickles down. You start seeing contractors going out and bidding jobs and realizing that if they don’t have pollution coverage, they don’t qualify for half the jobs they are bidding for, so they have to go out and buy coverage.”

Starting the conversation It’s likely that every client you have, and every prospect you are interested in, has an environmental exposure. The question is, is it significant enough to transfer that risk through insurance?

The only way to find out is to have a conversation with your client.

“If your insured is part of an industry that

RISING CLAIMS The number and frequency of environmental claims is on the rise, a trend analysts expect to continue in coming years. “In addition to traditional pollution losses related to former potentially contaminative use of land, material handling and storage, nontraditional loss scenarios, such as severe weather events, continue to have the potential for significant loss,” noted Chris Smy, managing director and global practice leader for Marsh’s Environmental practice, in his analysis for the 2014 Marsh Insurance Market Report.

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F E

FEI-I/B FEB 2015.qxp_Layout 1 1/23/15 11:32 AM Page 1

A&E Architects & Engineers

EIL Environmental Impairment Liability

HMA Hazardous Materials Trucking

O&G Oil & Gas

FFX Follow Form Excess

LEL Lender Environmental Liability

PPL Products Pollution Liability

EIL

ECC Engineers Consultants & Contractors

Environmental Impairment Liability

Freberg Environmental Need environmental coverage?

At Freberg Environmental all you have to do is pick your program. From Architects & Engineers, to Environmental Contractors, to Lender Liability and Products Pollution, we have the environmental insurance program you need.

With nearly 25 years of environmental expertise, we are not the new kid on the block. Freberg underwriters are among the best in the business and they get things done. Quickly.

Over the years, Freberg Environmental has become the “go-to” environmental market for innovative solutions to all kinds of environmental risk. We have earned our reputation by providing the fast, friendly and knowledgeable service you have come to expect.

Pick your program.

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Call Freberg Environmental.

Freberg Environmental Insurance 2000 South Colorado Boulevard Tower II • Suite 800 • Denver, CO 80222 Toll Free: 800.377.4152 • Fax: 303/623-8101 FEIinsurance.com In CA dba: FEI, Insurance Services

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Access tools to help you sell

FEATURES

E NVIRONMENTAL C OVERAGE “If your insured is part of an industry that has some potential to pollute, it’s worth having that conversation”

Visit Beacon Hill’s website for claim scenarios, exposure summaries, educational podcasts, and other environmental insurance resources.

www.b-h-a.com ♦ GL & Pollution Liability ♦ Professional Liability ♦ Site Pollution Liability ♦ Auto & Pollution Liability ♦ And many other lines

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has some potential to pollute, it’s worth having that conversation,” Brereton says.

“It’s fairly easily obtainable to get a quote for environmental.”

But it is not always an easy conversation to have. Talking about pollution “can be very awkward for people,” Pritchard says, emphasizing that it’s often more useful to frame the conversation around operational risk.

He recalls a time when he accompanied an agent to an insured’s office for an early morning visit. “He was a street and road contractor, and the gentleman very nicely said, ‘I appreciate your coming in, and I just have to tell ya, I’m not interested in what you are here to tell me about.’”

Pritchard and the agent talked the contractor into grabbing a cup of coffee; they ended up spending more than two hours talking about what environmental policies do for people in the street and road contracting business, and the client gradually came to realize that he did need environmental coverage.

Sure, it was a little awkward. But in the end, the contractor “was really comfortable that his agent understood the exposures that he had, and that there was a solution to address those significant gaps in coverage,”

COVERAGE DETAILS Contractor’s pollution liability

> Minimum premiums as low as $2,500 > Limits from 500k and up > Offered on either claims made or occurrence forms > Retentions start at $2,500 Fixed site liability

> Minimum premiums as low as $1,000, but generally $2,500 to $3,000 > Limits 500K and up > Offered claims made > Retentions start at $5,000 Source: Beacon Hill Associates

Pritchard says. “I think it can be a painful process. But the agents who go through it at the end are seen as much more professional, much better agents than those who sort of push that stuff to the background.”

Falling through the gap One of the things Pritchard emphasizes in his continuing education classes is the fact that environmental insurance really stems out of the pollution exclusion in the GL policy.

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PREMIUM AND RATE TRENDS “Rates tend to be pretty flat right now because it’s competitive and there are so many new entrants to the market. And there’s not a whole lot of growth in premium right now” David Brereton, FEI

“Most companies I deal with are holding the line on rate. They are not reducing premiums. There is a lot of competition, but finding a good partnership between an insurance company and an insured is a really valuable thing to do, and we work with a lot of agents who understand that. When they find a good, responsive company, they are not jumping around for a few dollars. They are staying with the people who have been taking care of them” Bill Pritchard, Beacon Hill Associates

“It’s not what you and I would think is pollution,” he says. “If you think of types of accounts that would have a contamination exposure, or pollution exposure, you tend to think of hazardous chemicals and radioactive waste. That’s not really what pollution insurance is. Pollution insurance is providing coverage that responds to the exclusion in the GL form.”

That exclusion applies to anything that could meet the definition of a pollutant, be it solid, liquid, gaseous or a thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste (including materials to be recycled, reconditioned or reclaimed).

“What you are getting is a very broad definition of things that don’t belong where they are. And that, effectively, makes them a pollutant,” Pritchard says. “We saw one case years ago where dust drifted onto a woman’s house near a job site, and she filed a claim against the insurance company and demanded they clean up her house.”

The carrier denied the claim as a pollution loss, because dirt meets the standard of an airborne irritant – part of the definition of a pollutant.

Another claim Pritchard saw a few years ago involved a construction site for a new home. After a large thunderstorm, mud ran down the hill from the site into a neighbor’s ornamental koi pond. The $700,000 claim was deemed a pollution loss by the GL carrier for the contractor, and excluded under their policy.

Brereton, meanwhile, recalls one covered loss a few years ago that involved a large-scale winery. A misguided truck hit a valve, “and all this wine came pouring out and into the storm drain,” he says. “It was an emergency response situation where they needed to prevent it from going from the storm drain into the creek.”

In essence, the message agents need to hammer home to their clients is not “‘If I don’t touch toxic materials, I’m okay,’” Pritchard says. “It’s, ‘Do I do anything that could fall through the gap created by the pollution exclusion?’ And that’s why you buy the policy.”

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BUSINESS STRATEGY

DIPLOMATIC LEADER

The diplomatic leader How to agree to disagree There’s a myth that disagreements are to be avoided at all costs. As business consultant Alexandra Tselios explains, if you avoid them entirely, you may never achieve truly effective business outcomes ONE OF THE BIGGEST misconceptions that is detrimental to our society, in my opinion, is that a disagreement has a negative connotation.

Too often, I hear people describing a discussion they had at work that was regarded as a disagreement, and they are upset and disillusioned by the event. Quite simply, a healthy team in a company moving forward is going to face disagreements. It is the only way conversations will be effective, outcomes can be achieved, and targets can be met.

Beware a leader who avoids conflict, or any sort of disagreement, because the most effective leaders are the ones who are able to agree to disagree diplomatically.

Basic leadership communication skills suggest that a productive conversation has the ability to compare perspectives and make a decision. But what happens if a conversation becomes emotional, or worse, an all-out argument? The key is to have the ability to separate yourself and look at the situation from a holistic point of view. How has this conversation derailed? What are all participants trying to achieve? Part of leading effectively is to have the ability to identify strengths in others that you lack, and navigate social nuances.

One particular type of person that senior managers often surround themselves with is the ‘Yes Man.’ This person consistently pats their manager on the back, never questions any decisions and generally flees when their CEO faces a huge legal dispute or failure. While these Yes Men can be fantastic motivators when the chips are down, their inability to provide an alternate opinion is ultimately their downfall. It’s crucial to feel a sense of team unity and have a defined goal, but it’s equally important for a manager to encourage diplomatic disagreements with effective outcomes, something that’s not possible with a Yes Man. A business is built on its employees, and every staff member is selected for their specialist skill set and experience. A diplomatic leader is one who considers a variety of different perspectives and analyzes this information when making their final decision. Understanding how the delivery of information can impact those around you is crucial to ensuring that a disagreement doesn’t result in a negative blow to productivity. Who wants to deal with a situation where the guy from accounts refuses to speak to the guy from sales, over a conflict that wasn’t even personal? Sometimes you can’t in-

More often than not, disagreements occur because someone can see something that you can’t 38

fluence office politics, and people won’t always get along, but how that affects a discussion is up to the diplomatic leader. The crux of disagreeing effectively is ensuring that all participants in a discussion feel as though they have been understood and validated, even if their suggestions aren’t adopted in the resolution.

The art of disagreeing There is a fine art to disagreeing with employees without seeming combative or stubborn, and all too often managers get caught up in the fact that “they know the business better” or “they’ve been in the business longer.” With differing opinions there must come detachment.

Don’t make it about being right or wrong, but have the overall goal of finding the best outcome for the business. Managers should make quality decisions based on data and facts, and this can only be done if they are able to disagree diplomatically when required. Because every staff member comes with their own filter for how they view and behave in a conflict, a manager needs to have a tight rein on his or her own personal reaction to disagreements.

Before engaging in any disagreement, whether it’s between colleagues, companies or competition, it’s essential to leave ego at the door and identify why a disagreement is occurring. Sometimes it’s simply a clash of personalities, but more often than not, it’s because someone can see something you can’t. Consider the fact that this colleague or client may be provid-

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ing you with the opportunity to gain a fresh perspective that you didn’t have the latitude to scope. This is why a top-tier manager should be able to value the differences of those around them, rather than employ a strict autocratic leadership model.

Negotiate and compromise Negotiation skills and a willingness to compromise are key characteristics of a diplomatic leader, and the best managers are able to negotiate in such a way that they receive the outcome they desire without the other parties realizing that they’ve compromised on their original position. Leadership is about surrounding yourself with a group of advisors, and if you build a reputation of being unmovable, you can quickly find yourself alone.

Ultimately, by creating a company culture conducive to discussion and feedback, you are facilitating a change around the myth that disagreements are a negative thing. The right way to disagree with others is only possible after you have listened to all perspectives while considering the impact on whatever decision is finally made. Whether you agree or not isn’t the point; the point is what resolution is best for the company, the team and the clients. Until you respect the opinions of others, they are unlikely to respect yours, but once a culture of discussion and appreciation is fostered, it will be far easier to make a decision that will be adhered to by even your strongest opponents.

This is why it’s important to have a healthy balance of personality types on your team who are capable of both encouraging and challenging. I have often heard the meekest of voices challenge me in a meeting, but once they realize it is absolutely welcomed, they gain confidence, and a discussion can truly start to form. This is not the time to assert your leadership position or flaunt your dominance; this is the time to show your employees that you value their strengths and want them to contribute fully.

One of the strongest qualities of a good leader is their ability to say no to something without this causing tension or a loss of

THE 6 STYLES OF LEADERSHIP • DIRECTIVE A coercive style that demands compliance and can contaminate everyone’s mood and drive talent away. To be used sparingly – in a crisis or to kick-start an urgent turnaround • VISIONARY Inspires and is able to explain how and why people’s efforts contribute to the ‘vision.’

Moves people toward shared outcomes through empathy and clarity • AFFILIATIVE Creates harmony that boosts morale and solves conflict, a useful style for healing rifts in a team or for motivating during stressful times • PARTICIPATIVE Superb listener, team worker, collaborator and influencer. Values people’s input and gets commitment through participation • PACE-SETTING Strong drive to achieve through their own efforts; has high personal standards and initiative. Can be impatient and prone to micromanaging and leading only through example • COACHING Listens and helps people identify their own strengths and weaknesses. Encourages, delegates and improves performance by building their people’s long-term capabilities Source: Hays Group

There is a fine art to disagreeing with employees without seeming combative or stubborn, and all too often managers get caught up in the fact that “they know the business better” employee morale. Use each disagreement as an opportunity for greater understanding. If a staff member offers a suggestion that isn’t in line with company procedure or standards, take the time and brainstorm together the reasons it won’t work, and what an alternative could be, instead of belittling or disregarding the individual.

The core of a diplomatic leader comes down to respecting and valuing the strengths in those around them. This has nothing to do with personality differences or clashes, and everything to do with the ability to listen, respond and validate. If it is second nature to avoid conflict, you simply need to get over it because, quite frankly,

conflict can be a productive and important part of analyzing data and reaching decisions.

Diplomatic leaders have to be comfortable that they are responsible for decisions that drive the company to success, as well as for the decisions that don’t work as well as planned; they need to be at ease with their own leadership abilities, and clear on the gaps that require personal investment.

Alexandra Tselios is a business consultant and publisher of The Big Smoke. She has a diverse background in corporate, public and creative fields and is an expert business consultant. Visit www.thebigsmoke.com.au.

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FEATURES

STAFFING

Staffing solution

The ongoing economic recovery has led to a boom in the temporary staffing industry – and a vast untapped market for insurance brokers

By Allison Landa 40

A TRUE PROFESSIONAL not only knows how to adapt to a changing economy, he or she is savvy enough to thrive upon it. To wit, the rise of temporary staffing in the US provides an opportunity for brokers to capitalize on growing insurance needs in what has heretofore been a lesser-known category.

“Since the economic recovery began in July 2009, the staffing industry has created more new jobs than any other industry, largely due to economic uncertainty,” says Steve Berchem, COO of the American Staffing Association, a major professional association for the staffing industry. “Businesses wanted flexibility to adjust their workforces to meet potential changes in demand. More recently, as the economy has

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COURAGE..

“You need someone who’s educated in doing it, an expert in recruiting, a sort of neutral third party who can go out and source talent for an organization” [smaller markets],” he says. “They sell boat, life or car insurance and have a staffing firm as a client. They have little experience with the needs and nuances of the staffing industry. Any broker who can show they know the staffing industry, loss control and where the insurance industry is going will have a huge advantage.”

Economic drivers

firmed, businesses are increasingly turning to staffing firms to help them gain access to talent and fill a growing number of permanent jobs.”

As these businesses continue to rely on staffing firms, they are finding that their insurance requirements are changing as well. With temporary employment such a burgeoning factor in today’s economic recovery, it’s surprising how few insurance brokers are engaged in underwriting this sector. As vice president of staffing insurance provider World Wide Specialty Programs, Robert Thompson sees firsthand how lucrative this industry can be – and how few take advantage of it.

“Of the 1,000 brokers we deal with, more than 80% of them are brokers who work in

In its September 2014 industry forecast, Staffing Industry Analysts, a global advisor on contingent work, projected that the US temporary staffing industry will expand by 6% this year to reach a size of $115 billion.

Additionally, SIA projects that the US placeand-search industry will grow by 10% this year as the economy continues to improve.

“Combining temporary staffing and placeand-search, we forecast that the total US staffing industry will … reach a size of $132.1 billion,” senior research analyst Timothy Landhuis wrote in the report. The strongest predicted job categories are industrial, medical, engineering, clinical/scientific, marketing/creative and education staffing, while the weakest are office/clerical, nursing, finance/ accounting, legal, direct hire and retained search.

What this means, says SIA president Barry Asin, is that activity within the temporary

..CREATING SOLUTIONS WHEN OTHERS CAN’T

THE STAFFING INSURANCE SOURCE

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World Wide Specialty Programs, Inc. · World Wide New York Insurance Services, Inc. - CA, NH, TX

631-390-0900 · 800-245-9653 · fax 631-390-0922 · wwspi.com

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FEATURES

STAFFING

COVERAGE TYPES The following is a list of coverages provided by World Wide Specialty Programs, which has more than 50 years of experience insuring the temporary staffing industry:

Professional liability General liability Abusive acts Employee benefits liability Employment practices liability employment sector may be seen as a leading indicator of economic progress. “[It moves] with the economy,” he says.

“Given how late we are in the cycle [over the last few years], we’ve seen more growth in temp work than we would normally expect. … Part of that is driven by the fact that we’ve just been through the Great Recession. There’s just a lot of uncertainty in the labor market, and that’s led to companies looking more and more for these flexible solutions.”

According to Asin, temporary work currently boasts the highest penetration rate ever in terms of a share of the US economy, clocking in at more than 2%. This is reflective, he says, not only of companies’ need for help finding employees, but also a more overall uncertainty as well as a growing acceptance of a more flexible workplace.

“That’s not just true for employers, but there’s a growing number of people who see that as a viable way to work for themselves,” he says, noting that many workers prefer to remain in a contract or freelance capacity rather than seek permanent employment.

Landhuis wrote in the SIA report that the temporary penetration rate has doubled since

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1990, offering “a striking indication of the increased acceptance and adoption of temporary agency workers in the US workforce.”

Particularly robust is the place-and-search industry, which revolves around recruitment of employees to act as core talent players.

“Place-and-search will start to heat up later in the cycle,” Asin says. “That’s what’s going on now – people need skilled talent … [and] can’t find these people on their own. You need someone who’s educated in doing it, an expert in recruiting, a sort of neutral third party who can go out and source talent for an organization.”

According to Berchem, more and more businesses are turning to staffing and recruiting firms who specialize in finding and placing talent. “Businesses increasingly see the value in turning to experts who can help more quickly fill vacancies,” he says.

Coverage needs Thompson asserts that a major driver of change in insurance needs for temporary staffing is technology, which has revolutionized how firms seek and vet out potential employees.

“When you think about your classic or temporary placement agency, [things have

Hired and non-owned auto Owned auto Stop gap liability Umbrella liability Crime Property and inland marine Workers’ compensation D&O Fiduciary Cyber liability changed],” he says. “Today, you can be sitting in a Starbucks in Long Island, Skyping with a candidate in Chicago and placing them in Los

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STRENGTH..

“Today, you can be sitting in a Starbucks in Long Island, Skyping with a candidate in Chicago and placing them in Los Angeles. It’s not your old Kelly Girls anymore. The last five years have seen an incredible increase in technology; new staffing firms are coming into the market every day and getting up to speed easily as long as they understand the technology” Angeles. It’s not your old Kelly Girls anymore.

The last five years have seen an incredible increase in technology; new staffing firms are coming into the market every day and getting up to speed easily as long as they understand the technology.”

One major consideration for temporary staffing insurance underwriters is, simply put, the temporary nature of the employment being covered. Thompson cites the example of a longterm employee as opposed to a temporary

employee: “The employee who comes in every day knows the lay of the land; the long-term employees know where the potholes are. The temp workers need to learn the new environment and be trained. When we write insurance for a staffing firm, we are writing in an industry where we know the hazards that can potentially happen every day, we have the most experience and claims data.

“Temporary help workers tend to have more injuries than a full-time worker because of the lack of training,” Thompson continues.

“Because of that, they need a broker who comes in who understands the difference.

Someone who knows claims and understands the coverages will have a great advantage over many of the brokers in the industry.”

If a particular broker is well versed in the standard coverages, Thompson says, they will find the temporary staffing industry a lucrative market. “We have general liability, professional liability, EPLI, property, cyber, D&O auto and workers’ comp … we have all the coverages that other markets have, so it will be less of a barrier for a broker in a different market to get familiar with the staffing industry.”

TEMPORARY TO PERMANENT WORKERS News of declining unemployment rates might seem to offer some positive news, but Berchem posited in a 2014 article that the reason for this may be because some jobseekers are simply giving up. Those who continue to seek permanent jobs, Berchem told Insurance Business America, may find them through the intermediary of temporary work.

“Staffing companies provide a bridge,” he said. “Most staffing employees who want permanent jobs succeed in achieving that goal. For others, flexibility is a priority, and staffing companies offer that too.”

..STRONG ENOUGH TO DELIVER SOLUTIONS, WHEN OTHERS CAN’T THE STAFFING INSURANCE SOURCE

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World Wide Specialty Programs, Inc. · World Wide New York Insurance Services, Inc. - CA, NH, TX

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BUSINESS STRATEGY

LEADERSHIP

DRIVING CHANGE:

when to involve the troops Leadership is always a delicate balance, and knowing when to involve your staff in an important initiative is just one of these balancing acts – and the timing needs to be just right. In this extract from his book, Leadership: It’s a Marathon, Not a Sprint, Gordon Tredgold shares the perfect time to bring in support When you’re fighting a battle, how long do you have to fight it alone? What’s a duel, and what’s a war? When should you call for reinforcements? When can you expect to find an army at your back? Someone asked me the question: At what point do we need to involve more people – like experts – when we’re shooting for those big goals?

This is an interesting and difficult question to answer. I see it as a very tough balancing act that we have to get right. If you involve too many people too early, then your goals run the risk of becoming tem-

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pered and watered down. On the other hand, if you involve too few people or involve them too late, people might feel excluded and this can then lead to resistance, tension and lack of commitment. That can be a huge source of conflict. In my opinion, the team defining the objectives and the goals needs to be small. And by small, I mean perhaps one to two people.

I’ll explain why I’m so conservative with that number. The more people you have involved in defining the goal, the more reasons they’ll provide you as to why you cannot hit your target. (It’s more ‘natural’ to think ini-

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“If you involve too many people too early, then your goals run the risk of becoming tempered and watered down. On the other hand, if you involve too few people or involve them too late, people might feel excluded, and this can then lead to resistance, tension and lack of commitment”

sulted with a larger group, I am sure we would have tempered the goal and probably set it at 60%; 80% wouldn’t have even been considered, much less reached.

In my opinion, keep the team to a minimum when you’re at the first step of defining success and setting the goals for a change.

So then, the second step. You have to define the why behind the what: why this goal is important, what the benefits are, the reasons behind it and so forth. The more inspirational the goal, the more convincing your why – and the bigger the buy-in.

This is when more people begin to show up.

As soon as what and why have been defined, you can begin gathering an army to tackle how. Remember this: The goal is non-negotiable now. There will be those who will try to deter you from it. There will be those who won’t be able to fathom the big picture. But the team’s focus should be on brainstorming and mapping out the road to success. The vision of success has already been taken care of. All the energy must now be channelled to discovering how to achieve the bold goals – not how to temper or reset them.

The three key principles to driving change are: tially of what could go wrong. Remember when someone turned up late for a date or a meeting? A dozen bad scenarios probably ran through your head – from he doesn’t like me anymore to maybe he got into a car crash. Turned out, he’d just stopped to fill up with petrol.) If there are too many people involved, your goal will be watered down from big, bold and beautiful to small and not-so-impressive. It’s nobody’s fault, per se; it’s just the way of people, for there are as many opinions as there are voices. In the end, it’s your decision, and your voice has to make the choice.

We need to be dedicated and fearless when setting big and ambitious goals, and this is more easily done if we only have to deal with (or convince) a small group.

Large groups tend to be more cautious, argumentative and often lean toward the safe side – not what you need when setting big, bold goals. You need healthy doses of risk, ambition and creativity, and those characteristics can get trampled by the masses.

I’ve experienced this in the workplace time and time again, like that time when I set one company’s goal for an on-time delivery increase to 80% (as compared to our old average performance of 35%). If I had con-

• Define the problem (the goal) with as few people as possible • Create an important and inspiring reason that people can buy into • Define the solution (the strategy for success while involving and welcoming more people – the troops) There will always be some resistance, of course. You need to see beyond that now. The Chinese have a popular proverb: It is better to light the candle than to curse the darkness.

Problems exist to be solved. Your vision must be powerful enough, and your focus must be just as keen.

Don’t ask your team: Why shouldn’t we do this?

Instead, ask your team: Tell me what you need to make this happen. If you can attain the balance, your larger group will not feel excluded. Instead, those people will feel involved. They will take up the challenge and work with you to define the solution. After all, the resulting solution will be their brainchild, too, and involvement breeds commitment. Thus do we set big, bold, challenging goals, while inspiring people and ensuring their commitment.

Gordon Tredgold is a specialist in transformational leadership, operational performance improvement, organizational development, creating business value, and program and change management.

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M

PEOPLE

CAREER PATH

Risk and reward An opportunity at a summer job led Technical Risk Underwriters CEO Michael Pilla to a 40-year career in the insurance industry When Pilla took a summer job in the mailroom of an insurance company, he had no idea it would lead to a career. But Fred Kiernan, the manager of an underwriting department, asked if he wanted to become an underwriting trainee.

“I was 17 years old. I had no intentions of having an insurance career but, quite frankly, it’s a business I’ve loved ever since.”

Early on, Pilla set a goal for himself – to make $25,000 by the time he turned 25. Eight years into his

career, he achieved it.

“Back then, money was a little different than it is nowadays. I could’ve jumped over the moon when that happened.”

2014

FACES TOUGHEST YEAR

2010

DEVELOPS NEW UNDERWRITING PLATFORM Pilla credits Fred Kiernan with setting him on the right path during his first few years in insurance.

“He really enforced ... honesty, integrity and knowledge, making those a part of what you do every day and making them kind of who you are.

Fred is the guy who inspired me to try to fulfil my full potential.”

1975

1975

Pilla says most of the items on his ‘bucket list’ now revolve around spending more time with his 11-year-old daughter.

“This year, I took her skiing for the first time. We went and skied together for a couple of days from the time they opened the lifts until the time they closed them, and we just had a ball.”

1983

REACHES PERSONAL GOAL

LEARNS THE BUSINESS

GETS HIS BIG BREAK

2015

LOOKS TO THE FUTURE

In 2010, Pilla founded Technical Risk Underwriters, a firm he heads to this day. One of his biggest accomplishments with the company was developing an analytics-based underwriting platform. “[The system has] been a gamechanger, I would say, for our business. If I was going to pull one positive experience out of that whole 40 years, it might come down to that.”

Pilla counts 2014 as one of the most difficult years of his career.

“We’ve had a couple of very large fire losses in our construction business … and then we had one of our carriers have a rating downgrade. I would say 2014 was a particularly challenging year for me and my team overall.”

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PEOPLE

FAVORITE THINGS

RICHARD HUTCHINSON President, Hagerty

The head of the world’s largest provider of classic car insurance reflects on road trips, industry pioneers and his dream car

Favorite classic car I would love to have a Jaguar SS100 from the late 1930s. It was the first car to sport the Jaguar name, and it set the stage for the beauty and performance that so many Jaguars through the 1960s are known for.

Favorite indulgence Some cold oysters with some cold beer

Favorite music I am a ‘70s child all the way. Give me the Rolling Stones, Dire Straits, Steely Dan, Supertramp, Fleetwood Mac, Allan Parsons…

Favorite road trip My favorite road trip is from San Francisco to Los Angeles along US 1. It has to be some of the most spectacular scenery in the world, combined with good eats from fish tacos, artichokes and abalone to In-N-Out burgers. Now, if I could do it in one of the classic cars!

Favorite innovation in insurance My favorite innovation is the development of the Snapshot tele­matics program at Progressive. It is the marriage of in-vehicle technology and insurance, which allows for customized individual rating, and is a transformative change that signals the future of personal lines insurance.

Best day in insurance Each day spent during an entire week at the Scottsdale Collector Car Auctions in Arizona. It really opened my eyes to the classic car world and the amount of passion and dedication car enthusiasts share with each other. I have never seen that many beautiful cars in one place.

Weirdest claim Early on in my career, I was in truck insurance. We had a truck driver who hit a deer somewhere in the Midwest and decided, “Well, I might as well at least get dinner out of this.” He put the deer in the truck, only to find out that he had only stunned it – not killed it – and it came around while in the truck. He turned in a claim for the interior of his truck.

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We built our company anticipating the

NEW NORMAL AND BEYOND.

In the new normal, rain gets measured in feet. When property damage occurs, it’s imperative that claims are processed efficiently. Our production and claims experts work together when they first review your policy so they can focus on solving problems more than just selling products. This is part of the reason why 94% of our clients gave us a high rating for claims service in 2014. After all, isn’t that why you buy insurance in the first place? www.ironshore.com

The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service.

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©2015 Ironshore

6/02/2015 9:11:46 AM

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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