MARCH 19, 2012 | VOL. 90, NO. 6
OCEAN MARINE CONSTRUCTION ENERGY PRIMARY CASUALTY EXCESS CASUALTY & UMBRELLA E&S PROPERTY
RAILROAD D&O / FIDELITY / EPLI KIDNAP, RANSOM & EXTORTION PROFESSIONAL LIABILITY PROGRAMS PRODUCT RECALL PRODUCT CONTAMINATION
THERE ARE SOME RISKS ONLY A SPECIALIST CAN HANDLE. We’re LIU, the global specialty lines division of Liberty Mutual Insurance. To meet our underwriters and learn more about how they can help you and your clients handle unique risks, visit www.LIU-USA.com. Boston | New York | Chicago | Atlanta | Dallas | Houston | Denver | Los Angeles | Seattle | San Francisco | Miami | Baltimore | London | Europe | Asia | Australia | Canada | Latin America | Middle East Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. © 2012 Liberty Mutual Insurance
N16 On The Cover Special Report: Hot Markets in 2012
Inside This Issue March 19, 2012 • Vol. 90, No. 6 • West Region
NATIONAL COVERAGE 25 Advertising Special: 2012 Corporate Profiles N16 Special Report: Hot Markets in 2012 N20 Closer Look: 2011 M&A News Report N22 E&O Insights: Pearsall on M&As N24 Spotlight: Catastrophe Risk Management N26 Wealthy Americans Fear Costly Lawsuits
8 Colorado Revisits Marijuana DUI Standard
22 Breathing Life into a P/C Agency
14 Low-Cost Online Commercial Lines Quoting Tool for P/C Agents Launched
N10 Growing Your Property Casualty Agency: Shulman
16 Report: Arizona P/C Insurers See Premiums Written Fall, Losses Rise
N15 The Competitive Advantage: Burand N28 Closing Quote: Surplus Lines Tax Allocations
18 Lawyer Claims Highest Known Workers’ Comp Settlement in California History 21 Investigative Unit to Target California’s Serial Labor Law Violators
DEPARTMENTS 6 9 9 10 12 N12
4 | INSURANCE JOURNAL-WEST REGION March 19, 2012
Opening Note Declarations Figures Business Moves People MyNewMarkets
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Opening Note Need for El Nido
o non-Spanish speakers, El Nido may sound like it translates to “the need.” While “need” is just about right when it applies to the ideology behind a program to help victims of domestic violence in San Diego, Calif., the phrase actually means “the nest.” The program is part of the Interfaith Shelter Network in San Diego, a collaborative effort by congregations, human services and government agencies to provide shelter and resources to the homeless. IICF board members Bryan A. Anderson, Zenith Insurance Co., El Nido, through the and Mitch Dunford, CEO Wells Publishing Inc., presented a donation for domestic violence to Rosemary Johnston (middle), executive Interfaith Shelter, was director of the Interfaith Shelter Network of San Diego. a target of insurance industry charitable giving recently when the Insurance Industry Charitable Foundation gave $5,000 to El Nido through the shelter. The money was raised by IICF’s annual bowling tournament in San Diego in October. The donation was presented to Rosemary Johnston, executive director of San Diego’s Interfaith Shelter program. Almost as important as helping domestic violence victims, is raising awareness of ways that the insurance industry can give back to the community, said Bryan A. Anderson, an IICF board member and senior vice president and regional manager of Zenith Insurance Co. “We do a number of things around town to try and raise the awareness of IICF,” Anderson said. Anderson said El Nido, a 12- to 18-month transitional living program, was picked as the recipient of the donation because it provides battered women things like a place to live, as well as their children, job training, home finance assistance and other help getting back on their feet. “It helps them start over again,” Anderson added. IICF is funded and directed by insurance industry professionals, including reinsurers, agents and brokers, property/casualty companies, health/life companies, advertising and public relations firms, law firms, accountants, IT and other companies that work with the insurance industry. In 2010 alone, the U.S. Property/Casualty industry contributed more than $500 million to charity, according to a recent report from McKinsey & Co. To be part of the next IICF Bowling Fundraiser, or to find out more about giving or working with IICF, visit www.IICF.org and click on “Events” in the menu bar.
Don Jergler West Editor
EDITORIAL Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content Andrew Simpson | firstname.lastname@example.org East Editor Young Ha | email@example.com Southeast Editor Michael Adams | firstname.lastname@example.org South Central Editor/Midwest Editor Stephanie K. Jones | email@example.com West Editor Don Jergler | firstname.lastname@example.org International Editor Charles E. Boyle | email@example.com ClaimsJournal.com Editor Denise Johnson | firstname.lastname@example.org MyNewMarkets.com Associate Editor Amy O’Connor | email@example.com Columnists Chris Burand, Curtis Pearsall, Alan Shulman Contributing Writers Richard Brown, Karen Clark
SALES V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 firstname.lastname@example.org West Dena Kaplan (800) 897-9965 x115 email@example.com South Central Mindy Trammell (800) 897-9965 x149 firstname.lastname@example.org Midwest Lauren Knapp (800) 897-9965 x161 email@example.com Southeast Howard Simkin (800) 897-9965 x162 firstname.lastname@example.org East Dave Molchan (800) 897-9965 x145 email@example.com New Markets Sales Manager Kristine Honey | firstname.lastname@example.org Classified Advertising (800) 897-9965 x125 email@example.com
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IJ ACADEMY OF INSURANCE Director of Education Christopher J. Boggs | firstname.lastname@example.org Online Training Coordinator Barbara Dooley | email@example.com
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insurancejournal.com/subscribe Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semimonthly by Wells Publishing, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2012 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052
6 | INSURANCE JOURNAL-WEST REGION March 19, 2012
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News & Markets Utah Justices: Doctors Should Consider Impact on Family
Immigrant Files $1M Claim Against Arizona Sheriff A Mexican immigrant who had a romantic relationship with an Arizona sheriff has filed a $1 million notice of claim against the sheriff and the county. Pinal County Sheriff’s officials say the precursor to a lawsuit was received by their office, but they declined further comment. Last month, Sheriff Paul Babeu announced that he’s gay and once had a relationship with Jose Orozco while the immigrant was a campaign volunteer. Orozco has accused Babeu of threatening to deport him if he revealed their relationship. Babeu has denied any wrongdoing and has asked for an independent investigation into the matter. The Arizona Republic newspaper says Orozco’s claim creates new complexities for Babeu, who’s completing his first term as sheriff and is running for a congressional seat in Arizona’s conservative 4th District. AP
tah’s Supreme Court has ruled that lawyers can pursue a lawsuit seeking to hold doctors responsible for the actions of a man who fatally shot his wife while under their care. The justices said medical providers need to consider the consequences of the drugs they prescribe and the broader impact a patient’s treatment may have on a family. The ruling overturned a lower court decision and allows a lawsuit by the children of Kristy and David Ragsdale to proceed against the medical providers who prescribed antidepressants to the children’s father. Kristy Ragsdale, 30, was gunned down by her husband outside a Lehi church in 2008 in front of the two children, ages 4 and 19 months at the time. David Ragsdale pleaded guilty to the murder and is serving a life sentence. He claimed he would not have shot his wife if The children’s conservator sued their father’s medical prohe hadn’t been taking a mixture of psychotropic drugs. viders, but a state judge threw out the case in January 2010. Justice Thomas Lee, who wrote the court’s opinion, said The appeal was argued before justices in November. considering the dangers of a prescription or treatment should Copyright 2011 Associated Press. All rights reserved. be part of a doctor’s analysis.
Colorado Revisits Marijuana DUI Standard
Study: California Cell Phone Restrictions Reduce Deaths
divisive driving-while-high bill is back before the Colorado Legislature as senators revisit a measure to say how much marijuana can legally be in a driver’s system. A marijuana DUI bill was defeated last year amid heated opposition from pot activists and members of both parties. The legislation being considered would say drivers are too impaired to drive if they test positive for 5 nanograms or more of THC, the psychoactive ingredient in marijuana. Current Colorado law says drivers can’t be impaired by drugs but does not set a THC limit. Pot activists say impairment and THC levels aren’t directly related. The Republican sponsor of this year’s bill says law enforcement needs a standard to measure impairment.
study from the University of California, Berkeley says a nearly 4-year-old ban on drivers using hand-held cellphones is saving lives. The study finds that overall traffic deaths dropped 22 percent in that time while deaths blamed on drivers using handheld cellphones are down 47 percent. Deaths among drivers who use hands-free phones dropped at a similar rate. The university’s Safe Transportation Research and Education Center examined deaths for two years before and two years after the cellphone ban took effect in July 2008. It found a similar drop in injuries attributed to drivers’ cellphone use. The California Office of Traffic Safety released the study. The office says deaths and injuries are declining in part because of an overall decrease in drivers using cellphones.
Copyright 2011 Associated Press. All rights reserved.
Copyright 2011 Associated Press. All rights reserved.
8 | INSURANCE JOURNAL-WEST REGION March 19, 2012
Declarations Shell Suit
Su Seeks Serial Violators
Memory Like a Hurricane
“Shell probably would not have filed this case if they did not have real fear about whether the spill plan would survive legal scrutiny.” — Attorney Brendan Cummings of the Center for Biological Diversity said a pre-emptive lawsuit by Shell Oil Co. against environmental groups that have put legal roadblocks in the company’s path to offshore drilling in the Arctic Ocean is unlikely to succeed.
“We will enforce all of the laws that are on the books to protect the honest employers who are really struggling to compete against the underground economy and to protect working people and to make sure they are paid the wages they earned.” — California Labor Commissioner Julie A. Su said in speaking about the creation of the Department of Industrial Relations Criminal Investigative Unit, which will be focusing on serial violators, a large number of which tend to be workers’ comp violators.
“The biggest challenge is to crack the denial. If you haven’t cracked the ‘it won’t happen to me thought process’ you can do everything else right and they are going to say it won’t happen to me and not do it. If you can get past the denial, the rest of it is not as difficult as you think.” — National Hurricane Center Director Bill Read, who said that science will improve to the point where forecasters can reliably issue forecasts showing where a hurricane will be a week ahead of time. But, he said, better forecasts won’t help the public if they ignore them.
iPhone Throttling “I need the money, but for me, this case is not about money at all. You don’t tell somebody ‘you have unlimited’ and then cut them off.” — Matt Spaccarelli, an unemployed truck driver and student, took AT&T to small claims court and won $850 for purposely slowing down, or throttling back, his iPhone.
The total for which thousands of newspaper carriers have settled their class-action lawsuit against the Orange County Register. The carriers alleged that the Southern California newspaper’s parent company classified them as independent contractors and not employees, denying them overtime pay and mileage.
That number signifies a drop in written premiums in Arizona for 2010 from a year earlier, according to a report from the Arizona Insurance Council. The report shows P/C premiums written by Arizona insurers have fallen steadily in the past four years. www.insurancejournal.com
Is how much Pacific Gas & Electric Co. proposed for its customers to pay the lion’s share of a plan to boost safety on its gas lines in the wake of the deadly San Bruno, Calif. explosion.
of tsunami debris could reach the West Coast, according to scientists, who believe ocean currents are carrying some of the lumber, refrigerators, fishing boats and other objects from the tsunamis generated by the magnitude-9 earthquake in Japan last March across the Pacific toward the United States.
March 19, 2012 INSURANCE JOURNAL-WEST REGION | 9
Business Moves Alleghany offers property/casualty and surety insurance. It provides specialty insurance coverages in the property, umbrella/excess, general liability, directors and officers liability, professional liability lines of business, and homeowners insurance. Transatlantic, based in New York, offers reinsurance for property/casualty, including general liability, medical malpractice, architects’ and engineers’ liability, automobile liability, and surety lines.
Golden Bear Stockton, Caif.-based Golden Bear Insurance Co. has opened its first office in the Pacific Northwest. The new office is in Edmonds, Wash. It was opened by Golden Bear Vice President Carl Heckman and his team, and Sarah Cress and Kim Seljestad. The Washington office will be responsible for the Pacific Northwest and certain Rocky Mountain states concentrating on difference in conditions insurance. Alleghany, Transatlantic Global specialty insurer Alleghany Corp. and reinsurer Transatlantic Holdings announced the completion of their previously announced merger. With the closing of the transaction, Transatlantic is now an independent stand-alone subsidiary of Alleghany. The cash-and-stock deal, which was first announced on Nov. 20, 2011, is valued at around $3.4 billion. The merger puts to an end months-long takeover talks involving Transatlantic. Last September, Transatlantic and Switzerland-based Allied World Assurance called off their previously announced merger deal. Several other suitors including Validus Holdings and National Indemnity had also expressed interest in acquiring Transatlantic. Headquartered in New York, 10 | INSURANCE JOURNAL-WEST REGION March 19, 2012
AIG, Blackstone Bailed-out insurer American International Group Inc. recently sold its entire $500 million stake in private equity firm Blackstone Group LP, according to a source familiar with the situation. AIG, which became majority owned by the U.S. government after it was bailed out during the financial crisis of 2008, had acquired the stake before Blackstone went public in 2007, the source said. The sale is part of AIG’s ongoing effort to monetize non-core assets, reduce risk and deleverage, another source said. AIG and Blackstone declined to comment. Navigators Navigators Management Co. Inc. (NMC) has launched a new operating unit that will focus on working exclusively with wholesale brokers in the United States. The unit will be called Navigators Specialty. Jeff L. Saunders will serve as president of the unit. He was previously president of the Excess Casualty Division. Other members of the executive management team for the unit will consist of Mark J. Richards, president of Primary Casualty and Don W. Roberts, chief underwriting officer. Noel Higgitt and Henry A. Lopez, both formerly regional vice presidents of NMC, will
also join the team. The New York-based NMC is part of The Navigators Group Inc., an international specialty insurance holding company. XL Group XL Group plc’s North America Construction is establishing a west coast underwriting operation in San Francisco, Calif. XL is setting up its west coast presence with Michael Simone, currently executive underwriter of construction primary casualty, and Markus Bachmann, vice president of builder’s risk. The two are relocating from New York to XL’s San Francisco office. XL Group plc, through its subsidiaries, is a global insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises. Confie Seguros, Power Auto New York, N.Y.-based Confie Seguros, a national provider of personal lines insurance focused on Hispanic consumers, acquired Power Auto Insurance, a privately-owned Cerritos, Calif.-based firm specializing in auto insurance. The purchase increases Confie’s retail presence and expands its California footprint to 160 offices. Power Auto Insurance was founded in 2007. The company offers auto insurance, as well as motorcycle, commercial and homeowners insurance. Confie has a national portfolio of regional auto insurance brokerages. It generates annual revenues in excess of $180 million. The company was founded in partnership by Genstar Capital, a private equity investment firm focused on accelerating growth and profitability of portfolio companies, and insurance industry executives. www.insurancejournal.com
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Edgewood Partners Insurance Center, a retail property, casualty and employee benefits insurance brokerage, named Hilton Brown to oversee client claims and advocacy in the company’s California offices in Los Angeles and Irvine. Brown will also provide claims support for EPIC’s sister company PowerGuard Insurance Services in Irvine. Brown, who has 22 years in claims management and client advocacy, will oversee client care and service, claims management, claims review and audits, negotiation and client advocacy. Before EPIC, Brown spent nine years with Marsh Inc. in Los Angeles, starting as an associate consultant and moving to vice president.
since 2008. Prior to Marsh & McLennan, she was CFO and executive vice president of Adelphia Communications Corp. from 2003 to 2007. She also served as CFO of 360networks, and has held positions with Microsoft, Metricom Inc. and Morgan Stanley. San Diego, Calif.-based Arrowhead Wholesale Insurance Services named Tony McIntosh assistant vice president of its workers’ compensation practice in Northern California. McIntosh, who will be based in Bencia, Calif., has more than 25 years of experience in workers’ compensation and has held positions in on both the carrier and agency side of the business, including field underwriting, program development and management and wholesale brokering. He will be responsible for primary and excess workers’ compensation brokering along with agency development for AWIS.
Concord, Calif.-based Jenkins Insurance Group, a Leavitt Group firm, has hired Chuck Somers as vice president of business insurance. With more than 28 years’ experience, Somers will specialize in construction, food processing and manufacturing. Somers first worked with California Casualty in San Mateo, Calif., specializing in personal lines, including homeowners and auto insurance. He later joined Andreini and Co. and worked as a producer in its agriculture and construction divisions, and worked for Arthur J. Gallagher. Jenkins provides risk management, property/casualty insurance and employee benefits programs to clients.
Dotson Louie has joined Tustin, Calif -based managing general agent Yates in its Walnut Creek, Calif., office. Louie spent the past 11 years at a national wholesale MGA. Louie, who has a broad background in commercial property/casualty as well as professional lines, brings over 20 years of underwriting and wholesale brokering experience to Yates.
Marsh & McLennan Companies announced that Vanessa Wittman, the company’s executive vice president and chief financial officer, is resigning for a senior role at Google Inc. Wittman will assist the company in the transition of her responsibilities until later this month before joining the Internet search giant. Mike Bischoff, vice president of corporate finance, will assume the role of chief financial officer on an interim basis while the company conducts a search for a permanent CFO. Wittman has been serving as Marsh & McLennan’s CFO
Stephanie Roush joined Agoura Hills based B & B Premier Insurance Solutions Inc. as an account executive. Roush, who specializes in workers’ compensation and business insurance, joined B & B after relocating to California from Colorado. Her expertise is in restaurants, nonprofits, professionals and the real estate industry. B & B provides coverage in the areas of property/ casualty, personal insurance and business/commercial insurance.
12 | INSURANCE JOURNAL-WEST REGION March 19, 2012
News & Markets Low-Cost Online Commercial Lines Quoting Tool for P/C Agents Launched By Don Jergler
he launch of a real-time commercial lines rater that gives agents access to a handful of large carriers was announced recently by a division of Networked Insurance Agents. MyNTrack, a division of Grass Valley, Calif.-based Networked, integrates with the technology of seven carriers through the use of cloud computing to produce single-entry, multiline bindable quotes in more than 4,000 classes, according Paula Joudrey, vice president of MyNTrack. MyNTrack allows licensed and insured agents online access for a $59 signup and a monthly fee of $39, according to the company, which launched the product without fanfare in late February before making an official announcement.
14 | INSURANCE JOURNAL-WEST REGION March 19, 2012
There is no commitment to length Chartis, Hartford, Main Street America of membership, no minimum written and Progressive Corp. business and agents are not required to The lines it offers are standard prebe members of Networked, a wholesale ferred markets: business owner’s poliaggregator that provides product to cies, workers’ compensation, business small- and mid-sized auto, general ‘We’ve leveraged our agents, according to liability and existing technology, so umbrella. Joudrey, who is also vice president of marAnd we don’t have a huge keting for Networked. nut to crack to recover.’ it’s for preMyNTrack is availdominantly able in 45 states, not including the small businesses, so depending on the states of Alaska, California, Florida or risk, policies can go up to $40,000 or Hawaii, which may be added later, $50,000, Joudrey said, adding, “It is according to Joudrey. She said technidefined as a small business insurance cians on both coasts split online chat play.” duties so agents in all U.S. time zones Commissions vary by line of busican be assisted during business hours. ness and by carrier. Right now MyNTrack has only three For example, BOP policies earn 15 employees, but “we’ll gear up and grow percent on both new and renewal along with the business,” Joudrey said. business. For workers’ comp, new poliThere are no fees per transaction, cies are 10 percent and it’s 7 percent nor other hidden fees, for renewals. Business auto, general according to Joudrey. liability and umbrella are all 13 percent According to for new and 12 percent for renewals. Joudrey, MyNTrack Agent members of MyNTrack own 100 keeps its rates low percent of their books. by relying on preThe founders of MyNTrack think existing technical and they are filling a need of smaller agenpersonnel infrastruccies. ture. “Anyone out there who has a similar “We’ve leveraged offering would be competition, but our existing technolfrankly we’re not seeing anybody out ogy, so we don’t have there who has an offering like this,” a huge nut to crack Joudrey said. “I think it was a logical to recover,” she said. place to go with this. There was a need “Our touch is very for a smaller agent who didn’t need light. It’s an inexfull-scale placement, and who would pensive, online selflike to have access to markets at an service model.” affordable rate. It’s pretty clear there The insurance was a market need.” companies MyNTrack The MyNTrack quoting tool progives agents access duces quotes online in about eight minto are: Sequoia utes, according to the company. Insurance, Liberty More information can be found at Mutual, CNA, www.MyNTrack.com. www.insurancejournal.com
News & Markets Report: Arizona P/C Insurers See Premiums Written Fall, Losses Rise the past four years: 2009 ($7.6 billion), 2008 ($8.1 billion), 2007 ($8.4 report on Arizona’s property/casualty billion). Written premiums were insurers issued recently shows a drop $8.2 billion in 2006. in written premiums to $7.4 billion, and a “It has been a trend of slightly large increase in losses incurred to $6.4 bildecreasing written premiums,” said lion for 2010. Ron Williams, executive director of The report, from the Arizona Insurance AIC. Council, shows these and other economic Williams attributes that downimpacts of the P/C insurance industry, ward trend to largely strong comwhich covers competition and the ‘It has been a trend remaining impacts mercial, home and auto of slightly decreasing of the prolonged risks; 2010 is the most recent year for data. written premiums.’ economic recession. The yearly compila“During recessionary tion of data by AIC comes from numertimes people are looking to cut back on ous sources, including insurers and the expenses whenever they can,” Williams said. Insurance Information Institute. As a sort of double whammy on the The report shows P/C premiums written state’s P/C industry, 2010 was also bad year by Arizona insurers have fallen steadily in because of intense storms, many of which
By Don Jergler
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caused “significant hail damage,” he said, adding that rising costs of parts and labor to repair those claims for commercial, home, property and auto were also contributors to the increase in losses incurred. The $6.4 billion in losses for Arizona insurers in 2010 dwarf the last five years on record. They were up from $4.6 billion in 2009 and $5 billion in 2008. Losses were $4.8 billion in 2007 and $4.3 billion in 2006. But Williams couldn’t say whether falling premiums and rising losses would be enough to start to turn the market in Arizona. “I don’t think anybody can really anticipate that,” he said. “There are so many factors involved between soft markets and hard markets. I don’t think anyone can really anticipate that.” The report also shows the 950 insurers operating in Arizona have a significant economic impact on the state. In terms of employment, in 2010 there were more than 28,000 P/C insurance professionals residing in the state, and insurance companies paid in excess of $153 million in state premium taxes. More than $9 billion of P/C insurers’ assets were invested in Arizona municipal bonds, according to the report. Insurers invest in a variety of public projects including airport, street, highway and water utility construction, as well as education-related bonds, and insurers also purchase general obligation bonds that finance ongoing government operations, the report shows. www.insurancejournal.com
THE RE’S A WA Y. Wh ere the re’s a
Get the latest on risk at www.lex.tv
At Lexington Insurance Company, we believe that while you can’t outrun risk, you can outsmart it. For over 40 years we’ve helped our brokers and clients do just that, with cutting-edge solutions to some of the world’s most complex risks. Today, we are the leading U.S.-based surplus lines insurer and a property and casualty market leader. And now, there’s LexTV—ongoing updates and news on today’s rapidly changing risk landscape. Watch at www.lex.tv
Lexington Insurance Company, a Chartis company, is the leading U.S.-based surplus lines insurer. Chartis is the marketing name for the worldwide property-casualty and general insurance operations of Chartis Inc. For additional information, please visit www.chartisinsurance.com. All products are written by insurance company subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. 2012 © Chartis Inc. All rights reserved.
News & Markets Lawyer Claims Highest Known Workers’ Comp Settlement in California History By Don Jergler
ttorney Christopher Asvar believes he has secured the highest known workers’ compensation insurance settlement in California history, totaling $8.9 million on behalf of a Antonio Enriquez, who suffered a traumatic brain injury in 2004 at the age of 18 after falling from a scaffold. Asvar said he’s talked to “structured settlement folks up and down the state,” and with those negotiating the settlement on behalf of California’s State Fund, and everyone he’s spoken with agrees this is the highest known workers’ comp settlement in California. Workers’ comp settlements in California are not tracked by size, and what those involved with the case wouldn’t know about would be confidential settlements, or cases where the “usual players” were not involved, Asvar said. According to State Fund, this may very well be one of the largest settlements that California’s biggest provider of workers’ comp insurance has been involved with. “It’s pretty darned large,” said State Fund spokeswoman Emily Gorin. “I think it would be safe to say that this ‘It’s pretty darned is among our biggest large. I think it cases.” would be safe to say Gorin, who said research is being conthat this is among ducted to see if this our biggest cases.’ is State Fund’s largest settlement, noted that State Fund has a lot of high risk businesses, and insures a large number of big employers. Gorin said the settlement was so large due to the nature of Enriquez’ injuries, because he’s so young and that 18 | INSURANCE JOURNAL-WEST REGION March 19, 2012
intense care is likely to be required for the rest of this life. “He had a catastrophic injury as a young man,” Gorin said. “When somebody has an injury like that he’s going to need help the rest of his life. Settlements like this can get awfully large, given the extent of his injuries and his age. He’s going to need a lifetime of medical treatment.” Three years ago, Asvar who specializes in workplace and civil brain injury litigation, took Enriquez’ case. Enriquez had five years earlier fallen 20-foot from a scaffold while employed as a painter. He suffered from depression, cognitive deficits, anxiety, psychosis, selfmutilation and a psychiatric diagnosis of multiple personality disorder, Asvar said. “I think the challenge was showing how settling would save a great deal of money for the carrier, as opposed to proceeding forward,” he said. “This is a young man who will need care for many years to come.” Enriquez was at first in a day-time rehab facility, but over time his father, the primary care giver, struggled to keep his own job and deal with his son. So to assist the father, his son was placed in a rehab facility day and night, Asvar said. “It could have been double over his lifetime,” he said of the settlement amount. “I think if left to their own devices, the father would have been run down and the son would have
been abandoned.” But as to the question whether the workers’ comp settlement is the highest ever in California? “It’s huge. Is it the biggest ever? I don’t know,” said workers’ comp attorney Don Barthel, with Bradford and Barthel LLP in Sacramento. Barthel, who has argued several landmark worker’s comp cases in California, said he’s seen settlements of $5, $6 and $7 million, but “my firm guess is that is not the highest.” He added, “$8.9 million is pretty high.” The settlement, signed Jan. 25, became final on Feb. 25 but it wasn’t made public until March. The structured settlement will be paid monthly over the extent of Enriquez’ life. www.insurancejournal.com
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News & Markets Commercial Lines Prices Up for 4th Straight Quarter: Survey
ommercial insurance prices increased all of 2010. Prices for commercial property an aggregate 3 percent during the increased for the third consecutive quarter. fourth quarter of 2011, the fourth consecu“While modest, aggregate increases in tive quarter during which prices for all prices continued, and more importantly, standard commercial lines rose. these increases ‘We are now at a Additionally, earned price accelerated in point where we can each quarter of increases are beginning to offset portions of reported claim cost ‘call the pricing turn’ 2011,” said Thomas inflation levels, according to the Hettinger, propin the market.’ most recent Commercial Lines erty/casualty Insurance Pricing Survey from Towers sales and practice leader for the Americas Watson. at Towers Watson. “We are now at a point CLIPS data reveal that, once again, prices where we can ‘call the pricing turn’ in the for workers’ compensation and commermarket.” cial property showed the largest quarterly CLIPS data also show that specialty lines increases — in the mid- to high-single digas a whole were relatively flat, as directors its — followed closely by general/products and officers (D&O) liability pricing finally liability. showed signs of stabilizing. During the fourth quarter of 2011, workPrice increases were observed across all ers’ compensation pricing continued to account sizes for the standard commercial exhibit the increasing trend observed lines, with the largest increases observed in earlier in the year, after flat pricing during mid-market accounts.
20 | INSURANCE JOURNAL-WEST REGION March 19, 2012
Historical loss cost information reported by participating carriers points to a 3 percent deterioration in loss ratios in accidentyear 2011 relative to 2010. This indication is more favorable than the estimated level of 5 percent deterioration for the accident-year 2010 loss ratio over 2009, as earned price increases are beginning to offset portions of reported claim cost inflation. CLIPS data are based on new and renewal business figures from carriers underwriting the business. This survey compared prices charged on policies underwritten during the fourth quarter of 2011 with the prices charged for the same coverage during the same quarter in 2010. For the most recent survey, data were contributed by 41 participating insurers representing roughly 20 percent of the commercial insurance market (excluding state workers’ compensation funds).
News & Markets Investigative Unit to Target California’s Serial Labor Law Violators By Don Jergler
alifornia Labor Commissioner Julie A. Su’s aim is to send a message to the state’s underground economy. The message is that the principals of companies with shady employment practices, such as those who try to cut costs by underreporting employees or employee wages to save on workers’ compensation premiums, may face jail time. And Su is backing up her message through the creation of the Criminal Investigative Unit. The unit, an arm of the Department of Industrial Relations, will be focusing on serial violators, and a large number of those violators tend to be workers’ comp violators, Su told Insurance Journal. “We will enforce all of the laws that are on the books to protect the honest employers who are really struggling to compete against the underground economy and to protect working people and to make sure they are paid the wages they earned.” According to her, the unit will “level the playing field for California” by targeting employers who try to scam the system by “underpaying, underbidding and underreporting.” DIR’s field enforcement already goes out the workplace to check on and identify red flags being thrown up by lawbreakers, but the investigative unit gives DIR the firepower to step up the punishment for these violations and ferret out those whose violations extend beyond just one or two, Su said.
‘The largest percentage of citations that my office issues is for failure to secure workers’ compensation as required.’ “It makes it more costly to violate the law,” she said, noting the cost will be above the normal citations, and that “these provisions provide for jail time.” She added, “We just want the message to be very strong: the good guys and working people who are playing by the rules to make www.insurancejournal.com
a living — we are out there to protect them.” The unit will look at several workplace violations, most notably wage violations and workers’ comp fraud, Su said. “The largest percentage of citations that my office issues is for failure to secure workers’ compensation as required,” she said. Under the state’s labor code it’s a misdemeanor for failure to obtain workers’ comp punishable by a fine and up to a year in county jail. The California Professional Association of Specialty Contractors applauded the creation of the unit. “What we’ve been concerned about regarding flagrant violations for those of us in construction is that they don’t get caught quickly enough,” said Brad Diede, executive director of CALPASC. “It takes a long time for state agencies to be able to catch them and convict them and publish the conviction. What we think this is going to help is to convict these criminals, these bad actors, more quickly.” The violators Diede is talking about often are able to under-bid legitimate contractors on jobs, and that puts those who are abiding by the law at a disadvantage, he said. “The cost of compliance has fixed costs to it,” he said, adding that legitimate con-
tractors pay things like payroll taxes, and ensure appropriate funding for workers’ comp premiums and funding for safety programs. “Cheating contractors don’t add those costs to the bids,” he said. “Legitimate contractors lose the work. In this economy particularly, legitimate contractors need to get the work.” A report issued late last year from University of California Berkeley’s Center for the Study of Social Insurance, “Measuring the Impact of the Underground Economy on Employers & Anticipating the Effects of Health Reform,” states an estimated average of $15 to $68 billion of California wages each year went unreported from 1997 to 2005. This amounted to 4 percent to 12 percent of total wages in California, and many more dollars may have been misreported into lowpremium rate class codes, the report states. For Su, it’s all about the serial violators, who not only repeatedly flaunt California labor laws, but who operate so brazenly as to factor in the cost of citations into their bottom lines. “I do think they’re definitely a priority for me,” she said of serial violators. “They have operated under the radar for far too long. We’re trying to change that calculus.” March 19, 2012 INSURANCE JOURNAL-WEST REGION | 21
Marketing Breathing Life into a P/C Agency By Matt Martin
f someone were to hand you a blank check to enhance your bottom line, would you let it sit on your desk and collect dust? Or, would you fill in a number ending with a few zeroes and take some extra cash for doing no extra work. For most business owners, that’s the ultimate no brainer. Even so, it’s surprising that many property/casualty agents are content with leaving money on the table. Although they have a life insurance license, they fail to capitalize on the opportunity for extra commissions and improved client retention. At the top of just about any list of reasons why P/C agents are reluctant to sell life insurance is prolonged underwriting. They are used to relatively quick turnaround with auto, home, and liability insurance, while a life insurance app seems to hang in limbo forever. Such a complaint has not fallen on deaf ears. Carriers are recognizing the problem and many have developed express underwriting processes, particularly for term life products. There are also policies that don’t require a physical. While the cost can be slightly higher than fully underwritten plans, some agents and clients prefer the convenience. Additionally, P/C agents that work with a life brokerage agency discover that the process is as painless as possible. Simply submit
22 | INSURANCE JOURNAL-WEST REGION March 19, 2012
the application and deliver the policy, while the brokerage handles everything else. Benefits of Selling Life Insurance Beyond the obvious benefit of additional income by adding life insurance to your product menu, there are others to consider. As any good fisherman knows, the more hooks you have in a fish, the less likely it will get away. The same concept holds true for your clients. Already insuring their car and home is a great start, but adding life insurance can keep them from leaving. Let’s say Bob, a life insurance agent in town, gets referred to your clients for life
Insuring a client’s car and home is a great start, but adding life insurance can keep clients from leaving. insurance. Bob sells the newly married couple two basic 20-year term-life insurance policies. At first glance, this may not seem to be a particular threat to your business. However, there’s more to the story. Bob has a relationship with Sally, a local P/C agent, and recommends that the couple have her quote their auto and home insurance. Whether they leave or not isn’t important, for this example. But what’s significant is the fact that you are now forced to work
harder to beat anything Sally presents to your clients. The big question is how you go about cutting Sally out of the picture before she even meets your client. You do it by selling life insurance and making it well known to your clients that you offer more than just auto and home coverage. Let’s use this same example, but take it a step further. Let’s say Sally contacts your clients through a referral from a different source. Even if she can beat your current auto and homeowners rates, the clients may opt to stick with you for convenience. Many individuals, families and business owners prefer to keep all of their insurance in one place. If you offer life insurance and another agent doesn’t, it can only help you gain and retain more clients. Growing Life Insurance Sales There are two popular strategies you can use to increase your life insurance sales and bring more money into your agency. Many P/C agents are already life licensed and passively sell life insurance. The two strategies can take your current life insurance sales and increase them significantly. The first strategy is partnering with a life insurance agent. There are many life insurance agents looking for a P/C agency to work beside. Life insurance agents are happy to give you up to continued on page 24
Insurance Journal West • 3570 Camino del Rio North, Ste. 200 • San Diego, CA 92108-1747 Fax: 619/584-1200 • Phone: 800/897-9965 x125 • classiﬁeds@insurancejournal.com For Ad Rate and Information
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March 19, 2012 INSURANCE JOURNAL-WEST REGION | 23
Marketing P/C Agency, continued from page 22
60 percent of the commission on anything they sell to your clients. There are a few important things to remember when selecting a partner: • Be sure your personalities work well together. • Have a detailed and clear working arrangement. You want to be sure the life agent works with your clients on your terms. • Prescreen any proposed marketing material that’s to be sent on your behalf. With the right combination, the addi-
tional sales that are generated will provide consistent agency income. The feedback from these partnerships has always been positive. The P/C owners are quite happy taking a cut of the life sales because even 50 percent of something is more than 100 percent of nothing. The life agent couldn’t be happier taking the other 50 percent of the commission since it comes from a new client that came from a referral. It doesn’t get better than that. Even if you’re making some life insurance sales currently, this approach could dramatically increase your revenue. Life specialists are experienced in finding larger sales and even more of the smaller sales you haven’t tapped into yet. There is another hidden benefit in using this strategy. Experienced life producers can easily identify large-case opportunities using advanced concepts such as buy-sell solutions, estate planning, and charitable gift strategies. The life insurance agent is also accustomed to asking for referrals from each and every client, whether or not a sale is made. This will undoubtedly generate more busi-
ness not only for the life agent, but also for you as a P/C agent as well. For example, your life insurance partner, Joe, is meeting with the Smiths. He doesn’t get a life insurance sale, but asks them for referrals. The Smiths refer him to their friends, the Jones family, who recently had a baby and live in the next town over. Not only does Joe sell the Jones life insurance, but he also asks if they would like a free, no obligation quote on their homeowners and auto insurance. All of a sudden, you are collecting life commissions and receiving free leads, just because you partnered with a life insurance specialist. Using Resources Another effective strategy is to use the resources of a life brokerage agency, one that represents a broad range of life insurance companies. This gives you access to extensive marketing support opportunities, so you can send out company specific marketing pieces to generate more life insurance interest. To make it even better, the brokerage firm takes care of everything in between the application and policy delivery. Let’s assume you decide to try increasing your sales by working with a brokerage agency without bringing in a life specialist. If you do run into a case where there is an advanced concept opportunity, you won’t be alone. You will have access to advanced sales specialists within the brokerage, as well as from the life carriers. Whether you need a quick review or someone to join you in meeting with the client, everything is made as convenient as possible. If, after taking the time to read this, you’re still not convinced that breathing life into your P/C practice is a step you want to take, there’s no need to worry. No one can force you to cash that blank check sitting on your desk. However, you just may be missing out on an additional revenue stream that could take your practice to the next level. Don’t worry. Your competition may not hesitate at the chance to make that extra money. Martin, a life insurance agent, is an Illustration Specialist at First American Insurance Underwriters Inc. in Needham, Mass. Phone: 781-449-6800. Email: email@example.com.
24 | INSURANCE JOURNAL-WEST REGION March 19, 2012
agents and brokers Solid Carriers Our carrier lineup is like the Who’s Who of insurance. With more than 20 “A” rated or higher insurance companies, you can rest easy knowing you’re offering nothing but the best to your policyholders.
Formula for Success Cross-selling is the key to building long lasting relationships with your policyholders and retaining your book of business. As you learn more about their growing insurance needs, whether for personal or business, our variety of programs will ensure you make the sale.
Your Lab: ArrowheadExchange.com Arrowhead provides a quick and easy way for you to submit new business and manage policies. ArrowheadExchange.com is your online portal to quote, bind, make payments, change policies, view reports and more.
Responsive Chemical Bonds Helpful service is our goal. We provide you with dedicated marketing representatives and customer service teams who respond quickly to your questions.
GRAViTY PULLiNG YOU TOWARD US? Sign up for Arrowhead’s products at ArrowheadGrp.com/BecomeAProducer
insurance carriers Specialized Expertise Saying we live and breathe insurance is an understatement. Most of our team has spent half their insurance careers at Arrowhead and the other half at insurance companies. Our expertise is integral as we build marketable programs together. We’ve been perfecting this synergy since 1983, which is how we grew our written premium to $654 million in 2011.
Scalable Technology for Speed to Market We geek out when it comes to building the latest and greatest in systems, data reporting and policy management. Our systems are modular and ready to plug and play so there’s no need to spend your company’s time or money integrating your technology or starting from scratch.
Carrier-Caliber Infrastructure We like to brag we’re as big as an insurance company. Check out our infrastructure: Legal and Compliance
Finance and Accounting
Information Technology and Systems
Underwriting and Customer Service
Marketing and Communications
Research and Development
Market Chemistry For 29 years we’ve been growing our diverse program lineup of personal and commercial lines SURGXFWV+DYLQJVXFKDEURDGSURGXFWRIIHULQJLVDKXJHEHQHÀWZKHQWKHPDUNHWVKLIWV1RWWR mention we work with more than 20 “A” rated carriers adding to our stability and longevity. We’re a À[WXUHLQWKHLQVXUDQFHLQGXVWU\DQGZH·UHJURZLQJ
Distribution Delivered Think big when looking at new revenue opportunities with us by tapping into our established group of 3,200 independent agencies in 6,000 locations across the U.S.
Successful Business Equation Our elements of program management equates to carrier time and money saved so products get to market quickly. If you’d like to set up a meeting to learn more about program development, email us at Markets@ArrowheadGrp.com.
Visit arrowheadgrp.com/science to play in our lab >>
GROW with us
CA License #0699809
Most of us know the executive ball clicker as DIXQWR\VLWWLQJRQVRPHRQHÂˇVRIĂ€FHGHVN%XW 1HZWRQÂˇV &UDGOH QDPHG DIWHU WKH JUHDW VFLHQWLVW6LU,VDDF1HZWRQLVDSHUIHFWH[DPSOH of how we work as a program manager. This clever device uses a series of pendulums to demonstrate the law of conservation of momentum and energy. When one ball is released, the force travels through the solid center and passes that energy along to the other ends. At Arrowhead General Insurance Agency, Inc., we are a channel for insurance energy. We thrive on the synergy of our two different sets of clientele, our independent agents and brokers and our insurance carriers. Without you we would not be in such a sturdy position to continue providing opportunities so that we can all feel the momentum together.
<<<< open here to get the ball moving
Built on the pioneering spirit of its founder in 1952, K&K Insurance has grown from its original focus on motorsports to become one of the largest and most respected providers of insurance services to the sports, leisure and entertainment industries. Every year, K&K offers coverage for exciting events and organizations from fairs and festivals to sports teams and tournaments. Join over 5,000 agents who choose the sports and recreation expert for their clientsâ€”K&K Insurance. Visit our website to view a three-minute video about working with K&K Insurance, or click on our program pages for underwriting guidelines and applications.
K&K E-Commerce Websites Apply, quote, bind, and receive proof of coverage immediately!
In addition to the traditional application process for complex specialty risks, K&K provides agents with instant access to coverage online. Our growing collection of e-commerce websites allow agents to easily purchase coverage immediately for many programs that traditionally require less underwriting. Agents using our online application process earn commission without the hassle of completing paper applications and waiting for a response.
tele: 800-426-2889 email: firstname.lastname@example.org Amateur Sports Teams, Leagues and Associations Amateur Sports Tournaments and Events Sport Instructors
tele: 800-648-6406 email: email@example.com Dance Studios Dance Schools Dance Instructors
tele: 800-426-2889 email: firstname.lastname@example.org Youth (19 and under) Sport Camp and Clinics Youth (19 and under) Non-Sport Day Camps
tele: 800-648-6406 email: email@example.com Gymnastic Schools Gymnastic Clubs Cheer Gyms
tele: 800-328-2517 email: firstname.lastname@example.org Short Term Special Events Concessionaires, Vendors, and Exhibitors Entertainers & Performers
tele: 800-648-6406 email: email@example.com Martial Arts Schools Martial Art Instructors Self-Defense Instructors
tele: 866-648-6406 email: firstname.lastname@example.org Groups conducting youth or adult non-sport activities including art, bird watching, book clubs, collectors, computers, cooking, crafts, game or card clubs, gardening, genealogy, etc.
tele: 800-506-4856 email: info@ďŹ tnessinsurance-kk.com Small Fitness Facilities Fitness Instructors
Monarch Expands It’s ‘Royal Treatment’ into Hawaii Monarch E&S Insurance Services, one of California’s leading managing general agents and wholesalers, is expanding its ever-growing reach into paradise. “We’ve expanded to Hawaii,” says owner Derek Borisoff. “And the irony is the message in our ad campaign. We are servants to our agents who are deemed ‘royalty’ in our eyes.” Hawaii is our only state to have a history of royalty. Although, on Jan 17, 1893, the monarchy came to an end in Hawaii, Monarch’s expansion into Hawaii will restore the “Royal Treatment” to their retail agency customers. “We want to make sure that we are a good ﬁt before appointing an agency,” Borisoff says. “The mainland perceives Hawaii as a very laid back vacation paradise, but the reality is the Hawaiian agents are as sophisticated and focused on customer service as anyone.” To ensure they are a good ﬁt for the islands and for their customers, the MGA matches up underwriters from their mainland ofﬁces to the personality and culture of the ofﬁces in Hawaii. “Matching up our underwriters with the personalities of their ofﬁces helps facilitate good communication,” he says. “The ‘Aloha Spirit’ is alive and well on the Hawaiian Islands. It’s about how you treat people. Service that comess One Who Serves from the heart.” Monarch writes a broad range of coverages in n the state of Hawaii and has been successful in n developing speciﬁc programs for agents with h such a need. Borisoff makes the trip to the state once a month to make sure that all service and market expectations are being met and that everything runs smoothly.
Derek Borisoff, President / CEO email@example.com
â€œOur Hawaii agents expect and deserve superior service and we provide just that,â€? he said. â€œThe success of our company revolves around our people,â€? says Borisoff, who has been at the helm of Monarch since 1994. â€œWe have a good reputation for taking care of our people which means we donâ€™t lose people very often. As a result, our retail agent customers receive a knowledgeable, enthusiastic and engaging underwriter who is there to help them place their account.â€? Borisoff, who lives in Southern California and has a home on the Big Island, has a strong thorough knowledge of Hawaiian customs and expectations when it comes to insurance. He has been visiting Hawaii his entire life. â€œHawaii is a state that Iâ€™m very familiar with,â€? says Borisoff, who has several family members who live in Hawaii, and in fact, his grandfather, a famous cellist, was instrumental in starting the Hawaii Philharmonic. He adds, â€œHawaii is a great place to do business.â€? Monarch writes both personal and commercial lines in Hawaii, including marine business and professional liability. Monarchâ€™s commercial lines product list features property including full wind, general liability, professional liability, GKLL, and marine. Monarch delivers homeowners including ocean front and high protection class, jewelry and ďŹ ne art ďŹ‚oaters, and personal umbrellas. Monarch has the pen for most of the ďŹ ne carriers that it does business with. The 26-year-old independently owned Californiabased MGA has six California locations: La Crescenta (headquarters), San Diego, Rancho Mirage, Simi Valley, Novato and Fresno. Monarch also has an ofďŹ ce in Arizona.
Youâ€™ll Get the Royal Treatment
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The Kaufman Financial Group is a successful, international insurance organization poised for aggressive growth. With numerous insurance-related entities, the Kaufman Financial Group is looking to grow through acquisitions in a variety of areas. For successful ﬁrms and individuals in the businesses of wholesale insurance distribution, loss control, risk management, premium audit, premium ﬁnance and claims administration, the Kaufman Financial Group provides an outstanding platform for growth. How is the Kaufman Financial Group well-positioned for acquisitions? Financial Strength – With a strong, debt-free balance sheet and long track record of proﬁtable growth, we can fund a majority of acquisitions internally. Independent and Private – Our decisions are not driven by outside sources such as Wall Street or private equity. Rather, we make quick decisions based on the value an organization and its talent can bring to the Kaufman Financial Group. Flexible Approach – Kaufman Financial Group was built through strategic acquisitions with a thoughtful approach to ﬁt. We have no set formula or approach for acquisitions so we can be ﬂexible in meeting the needs of the seller. Entrepreneurial History and Culture – We value risk-taking and new ideas – it’s the foundation on which our company was built. We move decisively when we see a great opportunity. What can Kaufman Financial Group offer your business? In addition to partnering with a ﬁnancially strong organization, joining the Kaufman Financial Group’s network of insurance-related companies provides immediate access to an unparalleled array of resources. Our ﬁnancial strength provides us with the ability to make investments in people and technology that continually outpaces the competition. Specialty products and services enjoy immediate growth potential through our distribution network of 45 ofﬁces worldwide and more than 15,000 retail brokers and agents. Our clout in London and the ability to place international business gives your organization instant leverage in the world marketplace. Our corporate services support team – accounting, ﬁnance, human resources, information technology, marketing and advertising – allows your organization to focus on its core business. What is Kaufman Financial Group looking for in potential acquisitions? Any insurance professional or company that can add value to any of the Kaufman Financial Group companies is a potential ﬁt. We are looking for successful companies in the areas of wholesale brokerage, underwriting, loss control and risk management, premium audit and claims administration. Contact us today to discuss how we can beneﬁt each other.
If you’re looking to sign with a partner, sign with a leader. Whether you are an insurance organization or professional with the ambition to expand, we are an international enterprise with the distribution network, carrier access and capital that will enable you to realize your objectives. Kaufman Financial Group provided Burns & Wilcox the resources that allowed it to become a dominant force in the wholesale insurance industry. And we can do the same for you. Let Kaufman Financial Group establish a partnership that generously rewards your future value. Sign with the industry leader today and join an impressive roster: