A MONTHLY PUBLICATION OF THE INDEPENDENT INSURANCE AGENTS & BROKERS OF LOUISIANA
LOUISIANAAGENT NOVEMBER 2023
FEATURES: IIABL Asks SafeCo to Mitigate Commission Reductions
IIABL Challenges Kemper Reduction of Commissions to 1%
Governor-Elect Landry Appoints Insurance Crisis Council
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IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com (225) 236-1366
Benjamin Albright Vice-President of Strategic Initiatives balbright@iiabl.com (225) 236-1357
Karen Kuylen Director of Accounting & Finance kkuylen@iiabl.com (225) 236-1353
Jamie Newchurch Director of Insurance Programs jnewchurch@iiabl.com (225) 236-1350
Kathleen O'Regan Director of Communications & Events koregan@iiabl.com (225) 236-1360
Brandi Van Pelt Insurance Programs Administrator bvanpelt@iiabl.com (225) 236-1358
Dustin Wambsgans Agency Consultant dwambsgans@iiabl.com (225) 236-1361
Karson Roberts Communications & Event Administrator kroberts@iiabl.com (225) 236-1351
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CONTENTS TABLE OF CONTENTS & FEATURED STORIES
12 Elections Cause for Cautious Optimisim 14 IIABA Washington Update 18 Going Beyond 2023: Max Gruenig 20 5 Areas to Research to Identify the Right Agency to Acquire 26 2023 P&C Combined Ratio Forecasted to Deteriorate to 103.8
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IIABL ASKS SAFECO TO MITIGATE COMMISSION REDUCTIONS
29 2023 Agency Growth Study: Agencies Anticipate Ownership Changes 31 How to Decide Whether your Business should have a Mobile App 35 How Agents can Adapt to Challenging Times 39 Advertiser Index 41 IMS
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IIABL CHALLENGES KEMPER REDCUTION OF COMISSIONS TO 1%
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GOVERNOR-ELECT LANDRY APPOINTS INSURANCE CRISIS COUNCIL
42 Upcoming Events 43 2023 Industry Partners 44 Board of Directors & Officers
18153 E. Petroleum Drive Baton Rouge, LA 70809 Ph: (225) 819-8007 www.iiabl.com
Jeff Albright November 2023
On behalf of our member Safeco agents, IIABL expressed our strong objection to the potential commission reductions related to new business requirements for 24 new policies while Safeco has effectively stopped writing new business and is terminating a large number of agency contracts to reduce exposures in Louisiana. It makes no sense to terminate agencies and tighten underwriting to shut off new business and reduce exposures in Louisiana, and then punish the remaining Safeco agencies by cutting commissions for failure to write 24 new policies to meet growth goals. Under these difficult circumstances, IIABL has requested that Safeco waive the new policy growth requirements and related commission reductions. IIABL has asked to meet with the appropriate Safeco executives to discuss this important issue. Safeco has taken our request under advisement and has promised to get back to IIABL with an appropriate response.
Jeff Albright November 2023 IIABL received numerous complaints from member agents about Kemper Personal Insurance reducing agent commissions to 1%. IIABL filed A complaint with the Louisiana Department of Insurance challenging the reduction in commissions. IIABL asked Commissioner Donelon to review the commission reduction to evaluate whether or not it was actuarially justified, whether it was properly filed and approved by LDI, and whether it resulted in reduced premiums for policyholders or increased profits for Kemper. Commissioner Donelon investigated the commission reduction and asked Kemper to respond to LDI inquiries. In their response, Kemper Personal Insurance detailed the reasons behind their decision to reduce the base commission rate for sales agents in Louisiana from 10% to 1%. The reduction is part of Kemper's broader strategy to exit the Private Passenger Auto and Homeowners insurance markets nationwide, not just in Louisiana. Their exit involves approximately 1,953 policies in Louisiana, with no new policies being written and existing policies being non-renewed.
Kemper asserts that this reduction in commission rates is a part of their nationwide strategy, and since the company is withdrawing from the state, nonrenewing all existing policies, and will not write any new policies to which the new commission structure will apply, they do not anticipate any financial savings from this change in commission rates. Kemper also emphasized their compliance with the state's premium rate approval process, stating that there was no intent to circumvent it.
Louisiana Governor-Elect Jeff Landry has established a transition council to address the state's insurance crisis. The Insurance Crisis Council is co-chaired by Tim Temple, Commissioner of Insurance-Elect, and Ross Laris, owner of Laris Insurance Agency, Tim Temple's role as the Commissioner of Insurance-Elect offers insights from a regulatory perspective. Meanwhile, Ross Laris, with his extensive background as an insurance agency owner, contributes a practical understanding of the industry's challenges and opportunities. This combination of regulatory and industry experience positions the council to identify underlying causes of the Louisiana insurance crisis and help develop comprehensive, practical public policy strategies to address the crisis. The Insurance Crisis Council includes 22 volunteers with diverse backgrounds including business owners, policyholders, plaintiff and defense lawyers, and the insurance industry, including IIABL CEO Jeff Albright. Governor-elect Landry charged the Insurance Crisis Council with identifying the underlying causes of the crisis and developing recommendations for executive orders, legislative proposals, and other actions that will improve the availability and affordability of insurance and provide relief for Louisiana policyholders.
Governor-Elect Landry has created 14 transition councils which cover a wide array of areas crucial to the state's wellbeing and future development. These include Agriculture, Fisheries & Land Management, Coast & Environment, Constitutional Reform, Crime & Public Safety, Economic Development & Fiscal Policy, Energy, Chemical, & Maritime Industry, Healthcare & Hospitals, Infrastructure, Insurance Crisis, and K-12 Education.
Jeff Albright November, 2023
Much has been reported and written about the Republican clean sweep of statewide elected offices and the establishment of Republican super-majorities in both the Senate and the House. But what does that mean for the Louisiana insurance industry and the insurance crisis facing our state? As IIABL visited legislators and candidates, the insurance crisis was among the top issues in every meeting. On the campaign trail, candidates heard loud and clear from the public that the legislature MUST address the crisis of insurance availability and affordability. As we discussed our analysis of the causes of the Louisiana insurance crisis and our suggestions for solutions, candidates were eager to learn and anxious to implement solutions.
Jeff Albright November 2023
Reducing insurance loss costs in Louisiana and attracting new insurers to our state will not be easy. But crisis motivates people to make changes. We are cautiously optimistic that our new governor, insurance commissioner, and legislature is motivated to address the long standing problems in the Louisiana insurance marketplace in a way that they have never been motivated before. IIABL has a specific list of suggestions to address the crisis. We are sharing those suggestions with anyone who is willing to listen. Next year, we will make a monumental effort to bring positive changes to the Louisiana insurance market. We hope you will be part of that process.
Jeff Albright November, 2023
Government Funding & the NFIP On September 30, Congress overwhelmingly passed a continuing resolution (CR) to keep the federal government funded at fiscal year 2023 levels through November 17, and in doing so reauthorized the NFIP for that same period. The CR was passed to give the House and Senate more time to complete their work on twelve appropriations bills that must be passed to fully fund the federal government. To date, the House has passed six of these bills, and the Senate has passed three. With the November 17 deadline quickly approaching, both sides agree that another CR is likely needed to avoid a partial shutdown of the federal government. Assuming it can get done, that CR will likely go to mid-December (the Senate preference) or January 15 (the House preference). Either way, it would provide another short term reauthorization of the NFIP for that same period. The Farm Bill Speaker Johnson has publicly stated that he would like to pass a new five-year Farm Bill after the House wraps up its appropriations work. House and Senate Agriculture Committee leaders acknowledge that an extension of the current Farm Bill will be necessary, with passage of the new Farm Bill in 2024. We anticipate several bills to be introduced in the coming month(s) that aim to harm the Federal Crop Insurance Program (FCIP). When that happens we will be activating our grassroots to defeat those bills, as we have done in the past. It’s important to note that the new House Speaker has been supportive of the FCIP in the past.
Hearing on Insurance Market Crisis Yesterday the U.S. House Financial Services Subcommittee on Housing and Insurance held a hearing entitled “The Factors Influencing the High Cost of Insurance for Consumers.” The hearing, which was originally scheduled for October 24, focused on insurance markets, particularly recent developments that have led to higher costs and lower availability for property and casualty insurance. The Big “I” submitted written testimony that can be viewed here. The testimony highlights a variety of issues and concerns from an agent perspective and offers some potential solutions to alleviate pressure on the market. Those include fostering productive state regulatory environments, cracking down on lawsuit abuse, increasing risk mitigation efforts, considering a narrow federal reinsurance backstop, and increasing consumer transparency. One of the main themes during the hearing was the importance of the state based regulatory system and affirming support for the McCarran-Ferguson Act. Several members of Congress voiced concerns about the Federal Insurance Office (FIO) and its attempt to become more activist under the current Administration. That activism was clearly on display this week as FIO announced it will move forward with a proposal to collect data from property insurers on climate risks. The hearing also examined H.R. 5535, the Insurance Data Protection Act, which would restrict the ability of FIO and other financial regulators from collecting data directly from insurance companies via subpoena.
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WASHINGTONUPDATE Proposed Fiduciary Rule On October 31, the Department of Labor (DOL) released a proposed rule defining who investment advice fiduciaries are for purposes of the ERISA. It also released proposed amendments to class prohibited transaction exemptions (PTEs) for investment advice fiduciaries. The rule is yet to be published in the federal register, but DOL did release a fact sheet on the proposals. Once published there will be a 60-day public comment period. The Big “I” will be working with other interested parties to delay this comment period, and subsequently voice concerns with the proposals. During the Obama Administration a similar fiduciary standard effort was undertaken by DOL, which issued a final rule in April of 2016. The implementation of that rule was subsequently delayed, and eventually vacated by the U.S. Fifth Circuit of Appeals, effectively killing the rule.
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Corporate Transparency Act (CTA) We have heard from a number of agents, asking for more information on the CTA and what, if anything is required for them to be compliant when it goes into effect on January 1, 2024. Many small businesses in the United States will have to report information about their beneficial owners, essentially the individuals who ultimately own or control the business. They will have to report the information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. As originally crafted, insurance agents were included in this reporting requirement. However, the Big “I" was successful in securing an exemption for independent agents and brokers by successfully arguing that insurance producers already provide this beneficial ownership information to state regulators and that the additional burden of providing it to the federal government would be duplicative and unnecessary.
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WASHINGTONUPDATE The Big “I" was the only producer group that advocated on behalf of agents and brokers to exclude them from this new onerous requirement. When FinCEN released their final rule, they adopted the insurance-producer exemption, and specifically noted that they were persuaded by the argument that the Big “I” made. Tax Reform Quick update on the Main Street Tax Certainty Act, which would make permanent the 20% small business tax deduction, also known as section 199A of the tax code, before it expires at the end of 2025. The Big “I” has been working hard to increase the number of cosponsors in both chambers of Congress. To date, we are up to 150 cosponsors in the House and 28 cosponsors in the Senate. Very few bills in Congress have more than 100 cosponsors so this is a testament to the momentum that is building to address this issue. New York Finalizes Revisions to Its Cybersecurity Regulation After many months of work and several drafts, the New York Department of Financial Services has amended the controversial Cybersecurity Regulation that was first promulgated in 2017. A copy of the amended rule and additional information (including opportunities to register for upcoming DFS training webinars) are available online. The updated rule was released yesterday, and IIABA is reviewing it and will be providing more details about the revisions in the future. In the meantime, however, we wanted to highlight two items: Many of the requirements in the existing regulation apply to every licensee in New York, but there are a series of heightened requirements that also apply to a smaller universe of larger entities. The amended regulation revises the scope of the limited exemption so that it now applies to licensees with (1) fewer than 20 employees and independent contractors,
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(2) less than $7.5 million in gross annual revenue in the last three fiscal years from its operations in any location and the operations of its affiliates in New York, and (3) less than $15 million in year-end total assets. While some entities may no longer qualify for the limited exemption, it is expected that a broader universe of small and midsized insurance agencies and other financial firms will now be exempt from many aspects of the regulation. ·The amendment also establishes a range of new requirements for both entities that qualify for the limited exemption and those that do not. The revisions, for example, will require all licensees (including those who qualify for the updated limited exemption) to adopt multifactor authentication in certain instances and provide at least annual cybersecurity awareness training to all personnel by November 1, 2024.
Max Gruenig, agent with AssuredPartners, was named the agent winner of the 2023 Scotty McIntyre Jr. Go Beyond Award. The Go Beyond award honors the legacy of former UFG leader (and son of our company’s founder) Scotty McIntyre Jr., who engrained within our corporate culture the importance of giving back. In that spirit, UFG is honored to make a $5,000 contribution to the Lakeview Boosters Club in recognition of Max’s aboveand-beyond service to others. Max Gruenig, Agency Sales Team Leader at AssuredPartners, has a friend who says, “gratitude changes everything” and he could not agree more. He has come to realize that the volunteer and community service events he participates in have allowed him to experience gratitude at a level that he believes you can’t experience otherwise. Volunteerism and community service have always been a part of Max’s life. He credits his mom’s dedication to her students in the public school system, his dad’s humble upbringing and his Catholic education as laying the groundwork for his commitment to service and meeting people where they are at. Though, today, Max credits his wife and kids for giving him the support he needs to continue giving back. Examples of Max’s current volunteerism include providing enrichment opportunities for local children as a board member of the Lakeview Boosters Club, helping motivate disadvantaged youth to become successful in college and beyond with Boys Hope Girls Hope and serving food to local families after Hurricane Ida devastated Southern Louisiana. He also participates in an annual Sleep Out fundraiser for Covenant House of New Orleans, where he sleeps outside the facility on a cardboard box to show those in shelters that they are not alone.
“The main reason I give back is to connect with people that are different from me. It keeps me grounded to know that my everyday burdens are nowhere near what others have experienced,” says Max. One of the most memorable ways Max has given back was for The Good Shephard School, which is a free Catholic elementary school that serves to give underprivileged children a quality education. It’s an extended day and an extended year to keep kids off the street and in the classroom. He won their “Dancing with the Stars” fundraiser — an event which raised almost $400,000.
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MEMBERSPOTLIGHT When asked to share a moment he realized he was making a real difference for others, Max explains that he once owned a restaurant which partnered with local schools to do a Thanksgiving Day basket. He recalls a mother picking up a basket and beginning to cry as she was overcome by generosity. “The real gift is seeing where people are, participating in their life and listening,” Max shares. Max’s colleague and his Go Beyond Award nominator, Karen Scioneaux, calls him a local hero and is impressed by his dedication. “He brings a positive attitude and high energy when chairing, participating and working for the good of others,” Karen explains. “Max is one of those people who you never forget once you meet him.”
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Whether you’re a seasoned producer with an itch to do things your way or the next generation in a family-owned business, acquiring an insurance agency through a purchase or perpetuation could well be in your future. Four in 10 independent agencies anticipate some form of ownership change within the next five years, according to the 2022 Agency Universe Study. One-sixth (17%) of principals are age 66 and older. On top of that, agency growth and profitability have improved markedly in the last few years. In fact, Reagan Consulting’s most recent Growth & Profitability Survey re-corded the highest agency growth results in the survey’s 15-year history. It’s no wonder there are more agencies now than when the pandemic started. It all bodes well for budding agency owners.
Jay Morris Senior Associate at Insurance Marketing-Communications firm Aartijk
Yet, buying a firm isn’t something you do every day. Aside from purchasing a home, it’s the single largest investment most agents will make. If they haven’t done their due diligence, even smart agents can do some not-so-smart things when buying a firm. They may not fully understand how agencies are valued, how to negotiate a buy-sell agreement or the best way to finance a purchase. Here are five areas first-time buyers and existing principals need to research when eyeing an acquisition or merger:
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INSURANCEAGENCY 1) Due Diligence and Pricing Too often, prospective buyers don’t focus enough on an agency’s financials and book of business. It’s generally well worth the cost of retaining an outside expert to help you determine the value of a firm. You’ll also benefit from talking to a certified public accountant (CPA), attorney or lender that’s handled these types of transactions before. Ensure your go-to experts are familiar with independent agency transactions. Agencies have unique cash flow, reporting and financing challenges. Work with professionals who understand how income is generated and reported, and how agencies are priced. Determine all the income sources for the firm you’d like to acquire, notes Scott Freiday, senior vice president and division director of InsurBanc. “Not all agencies do a good job of managing and tracking premium and commission income,” he says. “As a buyer, you should expect to see up-to-date financial data and reports.”
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At the same time, “You’ll want to kick the tires of the agency to be sure everything is in working order,” Freiday says. “If the agency has an antiquated agency management system, an old telephone system or computers, or doesn’t have a strong customer service team, it’s an indication that the firm may not be worth as much as the seller says.” Remember, as the buyer, your job is to determine a fair price for the firm “as is”—not what the seller thinks it’s potentially worth. Complicating the issue: Agency sale prices have soared in the last decade, fueled by privateequity (PE) firms and other competitive and economic forces. That can make it tougher for smaller players to get into the game. That’s why Donovan Dunn, president of Roger Keith & Sons Insurance in Brockton, Massachusetts, is selective.
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Dunn has bought eight nearby agencies in the last 12 years but “walked away from two or three opportunities because the price didn’t work for me,” he says. “The seller was able to get a higher multiple from a PE source. [PE firms] usually outbid me. Some of the lower-revenue agencies fly below the PE radar, so we can pay a reasonable price for those.”
Finally, make sure your family is comfortable with the financing arrangement, Freiday stresses. “It’s a decision that will impact their lives, too,” he says. “If you’re married, your spouse may need to sign as a guarantor. Or, maybe you need to adjust your personal lifestyle to afford the agency.”
2) Financing Options
Prior to the sale, it’s important to define the postsale roles of the buyer and seller. For example, will the seller have an advisory role? Perhaps the seller has agreed to mentor the buyer, who is transitioning into a management role. As the new owner of an agency, you might appreciate the counsel of an experienced owner who knows the ropes. On the other hand, you might find yourself butting heads with someone who is used to doing things their way. Set expectations and boundaries so you can maintain a healthy working relationship—if that is the arrangement you’ve decided on.
There are several ways to finance a sale, Freiday says. Sometimes the seller is looking for all cash at closing. Or the seller may be willing to provide a note to the buyer—either for the full amount, or a percentage with the remainder in cash or a bank loan. Many times, it’s a combination of bank, cash and seller financing. Often, the buyer doesn’t have the cash to buy the agency outright, so there is a seller-financed arrangement. Sometimes, a seller is seeking a staged exit, meaning they will sell part of the firm now and the rest later. Perhaps the seller isn’t ready to retire and wants to stay on for a few years. “Just be clear about the seller’s intentions, especially if they’re holding the note,” Freiday says. Dunn says he prefers to offer the seller a 100% cash deal, which he finances via InsurBanc. “The sellers are happier to have the full amount in their pocket up front,” he says. “That has given me an advantage.” In the case of an internal sale or partner buyout, the agency itself might hold a note. However, some bank financing may be necessary to avoid putting too much stress on the balance sheet. Often, an industry lender can provide better agency financing solutions than local banks, which may steer you to higher-priced or Small Business Administration-backed products.
3) Post-Sale Roles of Buyer and Seller
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INSURANCEAGENCY Sometimes, Dunn offers a “retention component” to incentivize selling principals to keep large commercial accounts on the books after a deal. He doesn’t like so-called “earn-outs,” or cash payments for retaining business. “I put them on payroll if they are staying on,” Dunn explains. “We agree to an initial annual salary and maybe after a year or two they go to more parttime, and then they retire. It’s easier to do if they’re on payroll.” Dunn bought a firm where the principal wasn’t quite ready to retire, “but wanted to shunt off the responsibility of running the agency,” he recalls. “We did a management relationship. We did a revenue split, where he continued to work and manage his customer base, and I took on the duties of running the agency and the infrastructure.” The deal called for a review in three years, where Dunn had the right of first refusal to buy the agency. “I wound up buying, and it worked out great,” he says. 4) Carrier Appointments Let’s say 25% of the business in the seller’s agency is with a certain carrier, but you don’t have an appointment with that carrier. Unless the carrier is accepting new appointments, you could have a problem. Make sure all the seller’s appointments will transition to the buyer. At the same time, you may be bringing new appointments to the agency. How you align books of business, determine which markets to pursue or let go, and position yourself for future growth are important points to think about when assessing a buying opportunity. “Sometimes you take on carriers you don’t really need,” Dunn says. “Sometimes you get a carrier you want.” After one purchase, he had to wean off three carriers with the seller. Two were B-rated, and his firm’s bylaws don’t permit them. The other duplicated products his other carriers already provided.
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Continued from page 22 5) Culture Ultimately, there is more than money involved in an agency merger. For example, will you change the name of the firm? If there are several locations, will you consolidate? How involved in the community will you be? Many agencies are very supportive of local civic organizations, sports teams and charities. Do you plan to continue to have that kind of presence? Also, be mindful of how the sale itself and your management style will impact the agency’s staff and business culture. Do you want to reorganize the firm? Hire a new producer? Plan meetings with staff early on to clearly define their roles and jobs. Open communication will be key to a smooth transition and retaining the people you need.
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INSURANCEAGENCY As you contemplate agency ownership, take the time to do your homework and talk with people who have experience evaluating firms. An agentfocused lender can help you review a firm’s cash flow and financials. It can suggest financing options you may not have considered. It also can advise you on the loan-to-value threshold you’ll need to meet and what you can realistically afford. There are many things to think about when buying an agency, but it’s best to do your homework and eliminate as many sticking points as possible before the deal. Easing Into the New Normal Other than notifying customers of the deal, agency principal Donovan Dunn avoids “rigid changes” in the first 90 to 180 days after he makes a purchase. He prefers to keep the name of the firms he’s purchased for an initial three to six-month period and then begin to co-brand with his firm. “It’s important to keep that prior agency name instead of just throwing my shingle up there,” Dunn says. “I think that’s when you would see a lot of disruption.”
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Continued from page 23 A recent example of signage: Finnerty Insurance Agency / Roger Keith & Sons. He tries to be respectful of the acquired firm’s staff. “They can walk out my door and get a job at another agency right away, so I don’t want to lose them,” he says. “We don’t want to frustrate them. We don’t want disruption.” “Unless something really needs to be done, we want to see how they work,” Dunn continues. “In some cases, we’re not making any changes to their workflow. They’re learning new carriers and a new agency management system.” “Most of my struggles have been post-purchase,” Dunn admits. “Some of it can be culture-based, certainly. There can be a challenge in getting acquired agencies’ employees on board with your policies and procedures—teaching them our new management system or acceptable limits of coverage. From an administrative standpoint we have struggled quite a bit with every agency purchase. It takes a while to integrate them right.”
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INSURANCEAGENCY In particular, he says, technology has been a challenge. Merging customer data is complex, and running two management systems simultaneously gets expensive after a while. When Dunn initially talks with the staff of a firm he’s bought, he tells them, “We can learn as much from you guys as you hopefully can learn from us.” And: “We always call it a ‘merger’ versus a ‘sale,’” he says. 2 Key Lessons Independent agency owner Donovan Dunn learned two important lessons in buying other firms over the last decade. First, “don’t bite off more than you can chew,” he says. “The worst experience we had over the last decade was when we acquired multiple agencies at once. The agency staff and I just didn’t have the bandwidth.” Now, he says, “We really take our time and make sure we are transitioning the agency at a reasonable pace.” Second, “make sure to develop relationships with the acquired agencies’ key accounts,” Dunn adds. “The principals are selling because they are leaving the business. They won’t be there forever, so if you don’t have a personal connection, accounts are more apt to leave once the principal is gone.”
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2023 P&C Combined Ratio Forecasted to Deteriorate to 103.8 Will Jones IA Editor-in-Chief
The 2023 net combined ratio for the property & casualty industry is forecast to be 103.8, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman. The projection is worse than the 102.2 combined ratio predicted earlier this year, which is, in part, due to severe convective storm losses being the highest in decades, the report said. Also, hard markets continue with 2023 net written premium growth forecast at 8.3%. The projections were announced in a quarterly report, “Insurance Economics and Underwriting Objections: A Forward View," and the findings were presented in a webinar. Michel Léonard, chief economist and data scientist at Triple-I, discussed key macroeconomic trends impacting the p&c industry results, including inflation, increasing interest rates and overall economic underlying growth. He identified the top risk scenarios for 2024 as geopolitics, weakening employment and gross domestic product (GDP) contraction. “The Fed may also keep increasing rates into 2025, pushing down home and auto insurance underlying economic growth," he said.
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RATIOPREDICITION Another area of concern, Léonard said, is p&c replacement costs. Between 2020 and 2023, replacement costs increased an average of 45%, while inflation for the overall U.S. economy increased 15% within that same period. “Increases in p&c replacement costs should continue to slow down faster than overall inflation over the next three years," he said. “However, it will take 10 years of normal inflation for insurance replacement costs to process pandemic-related increases." Meanwhile, Dale Porfilio, chief insurance officer at Triple-I, discussed the overall p&c industry underwriting projections. “We forecast personal lines to improve each year from 2023 through 2025, but still lag behind strong underwriting profitability in commercial lines," he said. In personal auto, Porfilio forecasts premium growth of 11% in 2023 as rate increases start to exceed loss trends, allowing the 2023 net combined ratio to improve incrementally to 110.5 from 112.2 in 2022.
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Continued from page 26 “Costlier replacement parts and low inventories are contributing to current and future loss pressures," he said, adding, “Unless replacement cost begins to decrease materially, we project personal auto to remain at an underwriting loss through 2025." For homeowners, Porfilio noted that catastrophe losses in the first half of 2023 were elevated and that approximately 70% of those losses were in the homeowners line. “For 2023, the net combined ratio is forecast at 110.9, 6.2 pts worse than 2022." Lastly, Jason B. Kurtz, a principal and consulting actuary at Milliman, said that commercial property, general liability, and workers compensation continued to be bright spots for the industry, while commercial auto continues to be troubled. For commercial property, the 2023 net combined ratio is forecast at 91.6, nearly identical to 2022. “Hard market conditions continue into 2023, most notably in catastrophe-prone regions," Kurtz said. “We expect premium growth to moderate through 2025." But for commercial auto, underwriting losses continue.
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RATIOPREDICITION Direct incurred loss ratios in the first half of 2023 were at the highest in at least 15 years. “There will be a continued need for rate to improve the combined ratio results," Kurtz said. “We are forecasting the 2023 combined ratio at 106.7, 2024 at 103.4 and 2025 at 102.7." However, Kurtz noted that the general liability 2023 net combined ratio forecast of 96.9 falls between 2021 and 2022 actual results. He also said that premium growth is forecast to moderate in 2023-2025 as a result of the recent improved underwriting performance and lower GDP growth expectations. Turning to workers comp, Kurtz noted that the 2023 net combined ratio forecast of 90.6 continues the string of underwriting profits. “Favorable results are forecast to continue through 2025, with premium growth 2.7% for 2023, 1.9% for 2024 and 1.9% for 2025," he said.
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Olivia Overman: IA Content Editor November, 2023
Half of agencies will experience a major change of ownership in the next 10 years, according to the “2023 Agency Growth Study" from Liberty Mutual, Safeco and State Auto Insurance, which found that 40% of the agency principals surveyed are older than 60 years old and 20% are older than 65 years old. The study surveyed more than 1,100 independent insurance agency team members, including more than 450 agency principals and owners, posing the important question: What will happen to your insurance agency when the principal retires or can no longer run the agency? Perpetuation planning is a pressing issue as many agency principals near retirement age. While there are many different options for selling or perpetuating an independent insurance agency, there are two main methods— internal perpetuation or an external sale. However, agencies are encountering obstacles during both methods, the study says. Internal perpetuation is the most popular plan among agency owners, according to the study, with 42% of principals who expect an ownership change in the next five years planning for a family member to take over.
A further challenge identified as facing agencies in their perpetuation planning is the shortage of available talent in the insurance industry in general. On the one hand, more than half of agency principals surveyed identified finding and recruiting talent as their biggest management challenge and a top obstacle to the future of their agency ownership. On the other hand, the current uncertain economic outlook is forcing some corporations to pull back on hiring, as well as forcing large-scale layoffs that are putting experienced employees back into the job market that could benefit the insurance industry, the study said. Meanwhile, external perpetuation may have been an attractive option over the past number of years, the number of merger and acquisition deals declined 27% in the third quarter of 2023. While this trend opens the door for agencies seeking to grow through acquisition, agency owners need to be cognizant of the ever-changing M&A market and the options available to sell an agency, especially those who own small property & casualty agencies Further, perpetuation plans differ for different sized agencies, according to the study. Agencies with more than seven employees are most likely to plan for other principals to buy out a departing owner or principal's interest, while those agencies with fewer than seven employees are more likely to plan for other principals to buy out a departing owner or principal's interest, while those agencies with fewer than seven employees are more likely to consider selling to an outside party.
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AGENCYGROWTH And while many agency owners want to keep their agency in the family, family members aren't the only option for internal perpetuation. Hiring externally and investing in leadership development can give agency owners more options for internal perpetuation. More than half of millennial and Generation Z agency employees—those under 41 years old— and about a third of Generation X employees— between 42-57 years old— aspire to lead an agency one day, the study found, with 62% listing “inspiring leadership to provide mentorship and career guidance" as the top characteristic they look for in an ideal employment situation. However, only 42% of younger employees say their manager is actively developing them for leadership.
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Continued from page 29 And only 38% of women working in frontline roles saying their manager is developing them for leadership, compared with 55% of men in the same age group. Agency owners may be overlooking promising female employees who could be great candidates for succession, the report says. As more than half of the agencies that plan to perpetuate in the next five years have had the current leadership in place for more than 20 years, the wealth of industry knowledge held by agency owners is immense, the study says. Taking a long-term view toward mentoring future generations, as well as investing in technology, are best practices that can help owners identify their goals for the perpetuation process, maximize the value of the agency and develop future agency leaders.
HOW TO DECIDE WHETHER YOUR BUSINESS SHOULD HAVE A MOBILE APP .....
Matt Aaron Co-Founder of Insurance Agent App
It's no secret that more and more people are glued to their phones. Americans, on average, log 4 hours and 25 minutes daily on their mobile phones, according to a 2023 survey by Reviews.org. That adds up to two months, or 65 days, in a year. As we increasingly rely on our mobile devices, independent insurance agents must adjust their marketing strategies and optimize their offerings for mobile consumption. In a world driven by technology and convenience, customers expect to access all types of services through their phones. And consumers with insurance policies are no exception. A mobile app for your insurance agency can provide numerous benefits to both your agency and customers. Here's why your agency should consider a mobile app and which features should be at the top of your list: 1) Increased brand awareness enhances customer engagement. Creating a userfriendly, streamlined interface can lead to increased customer satisfaction, which, in turn, can lead to higher policy retention rates. This is because clients who have a positive experience with your app are more likely to continue using it and recommend it to others.
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MOBILEAPP A branded mobile app with a custom agency icon also offers brand exposure. It's essential to have a branded icon that stands out and creates an unspoken connection. This helps increase brand awareness and enables customers to recognize your app amongst a sea of other apps very quickly. Additionally, a branded app creates an image of professionalism and reliability, which enhances customer confidence and trust in your services. Another consideration is having an app that is compatible with voice commands. This can be a game-changer for customer engagement. With the help of smart assistants like Alexa, your customers can quickly open your app and access your services without physically interacting with their phones. This feature can save your customers valuable time and effort and make your app a go-to solution for emergencies like car accidents. 2) Customer access to self-service solutions saves you time. As an insurance agent, you understand the importance of building client relationships, but determining which services build lasting relationships ensures you devote your time to the right place.
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Continued from page 31 One of the main benefits of having a mobile app for your insurance agency is the option for policyholders to complete basic but essential customer service functions. This not only keeps your agency's relationship with the client front and center, but the mobile app also helps ensure your clients are happy and satisfied with your services by providing selfservice solutions that your clients can access anytime and anywhere. Further, clients don't have to wait on the phone during busy hours to complete basic tasks they can take care of themselves. 3) Software integration can streamline your workflow. Many insurance agents struggle with siloed data, forcing them to interact with numerous software interfaces. Efficiency is crucial in any business, but it's imperative in the insurance industry. Successful agencies can quickly and effectively respond to customer inquiries, process claims and handle policy updates through one central system: the agency management system (AMS). If you choose wisely, a policyholder-facing mobile app can automate documentation tasks, reduce paperwork, and streamline communication between team members and clients.
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MOBILEAPP I. Selecting a software solution that integrates seamlessly with your existing AMS with application programming interface (API) integration is key to incorporating a mobile app that benefits your agency and your clients. Choosing a mobile app with integration in mind will help avoid the staff tech frustration of managing multiple software interfaces and will increase the return on investment of your technology. 4) Improved customer experience increases retention. The right mobile app can also help you attract new customers because can be a competitive advantage over insurance agencies that do not have one. A mobile app helps establish your brand as modern and tech-savvy, which can be particularly attractive to younger customers who value convenience and digital experiences. These elements can result in higher customer lifetime value and increased revenue over time. Which App is Best for Your Agency? Not all mobile apps are created equal. Before you start searching for policyholder-facing mobile app solutions, it is crucial to understand the basics of app architecture, APIs, webhooks, website scraping, and other related terms. By better understanding app terminology and methods, you'll be able to make better tech recommendations and decisions for your agency. Here are six steps to help pick an agency app: 1) Identify the pain points to solve. When looking for the right mobile app solution for your agency, you must first figure out your client engagement pain points and how you hope a mobile app can address those issues. This will determine which mobile solutions you value or will find worthless. For instance, if your agency sells products from smaller carriers that do not offer consumer-facing websites, would mobile app technology solutions utilizing website scraping be the best option? Maybe not.
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Continued from page 32 2) Verify your AMS and other systems can integrate with an app. Check with your AMS provider to verify whether your AMS is capable of integrating with a mobile app solution. Based on those factors, your AMS provider may recommend one app architecture over another —if they have done their homework. Other systems, such as customer relationship management (CRM) systems and payment gateways could also integrate with the mobile app solution, leading to even more operational efficiencies for your agency. 3) Identify any prerequisites required to implement the app. Some mobile apps may require the use of other applications to work correctly. For example, if a mobile app solution involves the use of a specific API or webhook, it's essential to ensure that the necessary component is available.
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MOBILEAPP 4) Evaluate options for a well-designed user interface. User experience matters because it determines how easily users and agencies can achieve their goals by using your app. A welldesigned user interface will make it easy for clients to perform these tasks without encountering errors, confusion, or frustration. 5) Consider how flexible and maintenanceheavy an app is. When choosing a solution, you should consider stability, scalability, security and performance factors. Consider how frequently updates, upgrades and changes to the user interface need to be made. 6) Pick the right vendor. When looking for a solution provider that offers a mobile app, look at their experience in the insurance industry. Vendors focusing on the insurance sphere are more likely to align with how your end user wants to interact with an insurance app. They have looked at how an average user behaves, what type of security is expected, and what a typical insurance consumer needs from an app. Additionally, look for a solution provider offering marketing assets to help improve customer app download, engagement and best-use practices.
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Continued from page 33
Winning In A Hard Market: How Agents Can Adapt To Challenging Times Anamaria Cifuentes Marketing Manager at ePayPolicy October 25, 2023
Insurance companies need to remain resilient and proactive to succeed in a hardening market The rise in natural disasters has put immense pressure on insurance companies Carriers are reassessing their exposure and price strategies Insurance companies in certain states are facing increasingly stringent regulations and standards There has been a rapid surge in reinsurance costs due to escalating expenses from global disasters With traditional carriers exiting high-risk markets, E&S lines have become a crucial component of the insurance landscape Agencies lacking the infrastructure for agency billing may face greater operational challenges Change is accelerating all around us, possibly at a faster pace than in any period in history. Climate change, rising interest rates, and effects from the covid pandemic are propelling companies to transform their business models and offerings. The insurance sector is no exception. In reality, these factors might serve as the catalyst that triggers a reinvention of how the industry operates and the role it plays in the broader societal context.
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HARDMARKET For the third consecutive year, the non-life insurance industry continues to enhance its topline growth by implementing above-average rate hikes across virtually all segments of business. Despite these efforts, increasing loss costs are proving to be a substantial obstacle, rendering bottom-line profitability a challenging pursuit for carriers and the industry as a whole. Insurance companies need to remain resilient in the coming months and year to succeed in a hardening market. In this blog, we’ll delve into the ongoing changes to the industry and explore how companies can and are adapting. Increasing Catastrophic Events The increasing occurrence and seriousness of global risks, from climate change to cybercrime, are heightening the scrutiny on the insurance sector’s ability to serve as society’s financial safety nets. Insurers are looking for ways to prevent losses from happening in the first place; but when losses seem unpreventable and severely risky financially, insurers might opt to exit out of markets entirely.
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Continued from page 35 The rise in natural disasters, from hurricanes to wildfires, has put immense pressure on insurance companies. Payouts for these events have escalated, straining their financial reserves. These events have caused carriers to reassess their exposure and price strategies. Earlier this year, State Farm and Allstate, the topranked and fourth-ranked property and casualty insurance companies in the nation, announced their decision to cease issuing new home insurance policies in California. Other major insurance companies have also withdrawn from providing coverage in Florida. Hurricane- and flood-prone states are accustomed to getting these news. However, it does not make it any much easier for policyholders and insurers alike. Regulatory Changes If it is becoming more expensive to cover payouts, why don’t insurance companies just increase their prices? Insurance companies in certain states are facing increasingly stringent regulations and standards, like constraints on premium hikes and prohibiting policy cancellations.
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HARDMARKET Insurance companies are trying to find a delicate balance between ensuring financial stability and providing affordable coverage to policyholders. Some companies are investing in advanced risk assessment and pricing models, leveraging technology to more accurately underwrite policies Additionally, many are expanding their product offerings or entering new markets to mitigate the impact of stringent regulations. Collaboration with regulatory authorities and industry associations is also common, as insurers aim to influence policy development and advocate for adjustments that maintain a fair market while allowing for sustainable profitability. In California, the departure of major insurers might increase the urgency to loosen consumer-minded regulations that have maintained low insurance rates in the state for an extended period. While regulations have been acknowledged for delivering substantial savings to consumers, the insurance industry contends that it imposes limitations on precise risk assessment and pricing.
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Continued from page 36 Escalating Costs For those that are still able to increase prices, they seem to struggle to raise them fast enough to cover record growth in expenses. According to Deloitte, the price of single-family residential home construction materials soared 33.9% since the start of the pandemic while contractor services are up 27%. “The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires,” Allstate said to ABC News. Many insurance companies are opting for reinsurance as their own form of protection against risky scenarios. However, recent years have witnessed a rapid surge in reinsurance costs due to escalating expenses from global disasters. When these prices become prohibitively high, and insurers can no longer effectively transfer excessive risk, they find themselves “holding the risk.” These financial pressures can either force insurers out of business or compel them to exit specific regions, as exemplified in the cases of California, Louisiana, and Florida.
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HARDMARKET One area in which the industry could face a disruption is the opportunities in embedded insurance. There has been a substantial growth in insurance premiums integrated into various thirdparty transactions, circumventing traditional intermediaries like insurance agents and potentially sidelining legacy carriers. These carriers should proactively explore partnership opportunities before they face the risk of not having an embedded partner. Alternatively, they need to devise strategies for competing against those who do join forces with product or service providers. The Prominence Of Excess And Surplus (E&S) Lines The U.S. excess and surplus (E&S) insurance market is anticipated to achieve a second consecutive year of direct underwriting profits in 2023. With traditional carriers exiting high-risk markets, E&S lines have become a crucial component of the insurance landscape. Recent growth can be attributed to admitted markets offloading business that falls beyond their risk tolerance to the E&S market, like in homeowners’ business in states like Florida and California. E&S insurance offers greater flexibility in tailoring policies to specific needs.
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Continued from page 37 “Excess and surplus lines also operate under a distinct regulatory framework, providing more flexibility to insurers and consumers. It enables carriers to take on higher-risk clients without adhering to the same regulations that apply to standard insurance. The Time Has Come To Adopt Agency Billing In an attempt to control risk, carriers are relying more heavily on MGAs and wholesalers to take on previously placed policies. In many cases, these MGAs may require agents to manage billing, thereby transferring any payment-related risks. Agencies lacking the infrastructure for agency billing may face greater operational challenges, both in terms of handling payments and reconciling accounts effectively. “It is imperative for agents and brokers to adapt and find effective solutions to manage client payments, automate payment reconciliation, and integrate premium financing into their workflows,” says Dan Maloney, Head of Enterprise Sales at ePayPolicy. “Agents that position themselves to help clients navigate these challenges will come out the winners.”
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ADVERTISER INDEX COMPANY
Accident Fund Ins Company of America Agile Premium Finance Amerisafe AmTrust North America AmWINS Access Insurance Services, LLC Aspera Insurance Services Berkshire Hathaway GUARD Ins Cos Burns & Wilcox, Ltd. Commercial Sector Insurance Brokers EMC Insurance Companies FCCI Insurance Group Forest Insurance Facilities Homebuilders SIF Imperial PFS Iroquois South, Inc. LA Workers Compensation Corporation
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34 32 7 19 5 40 25 30 16 40 24 34 23 11 28 2
COMPANY
Lane & Associates, Inc. LCI Workers' Comp Louisiana Restaurant Association (WC) LUBA Workers' Comp National General, An Allstate Company Progressive RISCOM RLI RPS/Risk Placement Services Safepoint Insurance Company Selective Insurance Stonetrust Commercial Insurance Co. Summit Consulting, Inc. The Gray Insurance Company UFG Insurance Wright Flood
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42 21 33 37 25 13 38 27 22 9 17 15 28 36 39 42
A Thanksgiving Message to Our Valued Members As the spirit of gratitude fills the air, we wish to extend a heartfelt thanks to our members. You are the cornerstone of our success, and we are deeply appreciative of your unwavering support. This Thanksgiving, we are especially grateful for your continued support and patronage of Independent Market Solutions (IMS). Our goal with IMS is to empower independent agents by providing them with flexible appointment terms and a diverse range of competitive insurance products. We believe that fair and easy market access enables independent agents to better serve their customers and expand the reach of their agency. The growth of IMS is a testament to the value it provides to agents. As our production expands, we are able to achieve greater scale and efficiency, which only benefits participating agents. We are grateful for the opportunity to work with you and help achieve your business goals..
As we look ahead to the coming year, we are committed to continuing to improve IMS and creating more ways to make it easier for you to do business with us. We are always looking for ways to better serve our member agents and value your feedback. On behalf of everyone at IIABL, we wish you a happy and healthy Thanksgiving! To learn more about IMS and the carriers we can help you connect with, click here.
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UPCOMINGEVENTS Event
Date & Time
Location
Registration
IIABL Young Agents Adopt a Family Fundraiser
Dec. 6 9:00 am - 1:00 pm
IIABL Office
Online Registration
IIAGNO Past Presidents Christmas Luncheon
Dec. 8 11:30 am - 1:00 pm
Metairie Country Club
Online Registration
IIABR Installation luncheon
Jan. 18 11:30 am - 1:30 pm
Baton Rouge Country Club
Online Registration
IIAGNO Installation Luncheon
Jan. 19 11:30 am - 1:30 pm
Broussard’s Restaurant & Courtyard
Online Registration
IIABL Women In Insurance Conference
April 4-5
The Southern Hotel
Online Registration
IIABL Young Agent Cornhole Tournament
May 2 4:00 pm - 6:00 pm
Tin Roof
Online Registration
IIABL Annual Convention
June 18-24
Hilton Sandestin
Online Registration
IIABL & IIAM Young Agents Conference
August 22-24
New Orleans
Online Registration
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IIABL 2023-2024
BOARD OF DIRECTORS & OFFICERS PRESIDENT, ARMOND K. SCHWING Schwing Insurance Agency, Inc. - New Iberia PRESIDENT-ELECT, BRET HUGHES Hughes Insurance Services, Inc - Gonzales SECRETARY-TREASURER, ROSS HENRY Henry Insurance Service, Inc. - Baton Rouge NATIONAL DIRECTOR, JOHNNY BECKMANN, III Assured Partners - Metairie PAST PRESIDENT, MICHAEL SCRIBER Scriber Insurance - Ruston YOUNG AGENT REP, KRISTIN SWANSON SCOTT Swanson & Associates - New Orleans ANN BODKIN-SMITH Thomson Smith & Leach Insurance Group - Lafayette MATTHEW DEBLANC Continental Insurance Services - Marrero CHRISTY DESOTO 1st Insurance of Marksville - Marksville DOMINIQUE DICARLO CROUCH Riverlands Insurance Agency - LaPlace ROB W. EPPERS Risk Services of Louisiana - Alexandria MATT GRAHAM Lincoln Agency - Ruston CHRISTOPHER S. HAIK Higginbotham Insurance - Lafayette STUART HARRIS McClure, Bomar & Harris, LLC - Shreveport BEAU HEAROD Jeff Davis Insurance - Jennings CHARLES H. LEBLANC Bourg Insurance Agency, Inc. - Donaldsonville CRAIG MARTEL Insurance Unlimited of LA, LLC - Lake Charles LYDIA MCMORRIS Alliant Insurance Services - Baton Rouge A. EUGENE MONTGOMERY, III Community Financial Insurance Center, LLC - Monroe JOE KING MONTGOMERY McGriff Insurance Services - Monroe HARTWIG "ROBBY" MOSS, IV Hartwig Moss Insurance - New Orleans ROBERT LOUIS PALMER, JR. Insurance Underwriters, Ltd. - Metairie RANDY PERISE Blumberg and Associates - Ponchatoula ROBERT STONE Stone Insurance, Inc. - Metairie