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AUGUST 20, 2012 | Vol. 90, No. 16

SATIRE issue

Plaintiff Attorneys: The Hard Market Saviors Real Truths Behind ‘Historic’ Events Zombies, Nudes and More!

You’ve Got to Be Really Good at Underwriting to Get Away with Dressing Like This. We have fun with our ads, but our service is no joke. Our court of experienced underwriters is at your command, ready to provide you with quality insurance markets and unsurpassed service. At Monarch E&S, you’ll get the royal treatment.

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One Who Serves Derek Borisoff, President / CEO


End of Road for Auto Insurance

Inside Dis Issue

Special Report

August 20, 2012 • Vol. 90, No. 16 • National Satire Issue


NATIONAL COVERAGE 8 Disaster Plan for Flood Insurance 8 Predictive Modelers’ Offices Ruined by Surprise Hurricane 8 CPCU to Shut Down to New Members 12 Real Truths Behind ‘Historic’ Events Retired ISO-Type Blows Whistle on Liability ‘Crisis’ and More 16 End of Road for Car Insurance Story of What Happens When Profit Takes a Back Seat to Tech and Safety 20 Demand for Zombie Protection Rises 32 Mayan Exclusion May Be Too Late




The Competitive Disadvantage: Chris Burand Plaintiff Attorneys: The Hard Market Saviors

25 Double Speak: Chris Boggs 7 Terms You Shouldn’t Use in Insurance 26

Reader Contributions: Stranger Than Truth Cigar Fires, Love Damages, Cat Surcharge and More

28 Slowing Your P/C Agency: Alan Shulman An Guide to Obtaining Insurance Referrals 30 E&O Uncertainties: Curtis M. Pearsall 10 Ways to Experience an E&O Claim 34 Closing Misquote: Peter van Aartrijk Top 10 Ways to Brand Your Agency

10 Texas Policyholders Revolting 10 Vermont to Host Nude Insurance Convention 10 FEMA Buys Last Home in Mississippi County 10 Florida Cuts Workers’ Comp Costs

4 | INSURANCE JOURNAL August 20, 2012


This is Insurance Journal’s Satire Issue. The content herein is fake. Honestly. This isn’t real news. Fortunately. Even the names are made up. Totally. We hope you have fun. Seriously. If you have complaints, please send them to Confidentially.



EXTRA EXTRA Agents Remain Captives President Refuses to Negotiate with Carriers PURR Launches Romney Home Coverage Property Underwriting for Romney Residences Court OKs Workers’ Comp for Tweeting Oregon Regulators Return $4 to Consumers Senior Bikers in Conn. Admit to Texting Michigan Customer Thanks Agency Next Issue: D&O for Lemonade Stand Execs; Kidnap & Ransom Refusal Coverage; FEMA Trailer Coverage; Shopping Cart Property Coverage; Diet Insurance; Celebrity Sandwich Naming Protection and more. And Special Report: Alternative Markets: How to Tell If Your Carrier Is Gay

DEPARTMENTS 6 Opening Note 9 Sports 14 People 11 Declarations 11 Figures 23 MyNewMarkets 24 Business Moves 45 Lottery Winners 52 Insolvencies 58 Comics 61 Traffic 66 Singles Dating 67 Crossword Puzzle 88 Weather 89 Deaths 90 Videos

Successful companies typically find 1 or 2 things and do them very well. We found 5.

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national COVERAGE

Opening Note Chip Shot


iven the death of the auto insurance industry, most expected a somber mood at the convention of the American Independent Insurance Agents Association Inc. dba The Big “A” in Washington, D.C. But that wasn’t the case at the five-hour welcoming cocktail reception, the Monte Carlo night or the other events on the educational agenda that included: Chopped — Carriers gave agents a picnic basket of policies and agents had to sell $1 million of each within a day or they faced termination. America’s Got Talent — Agents chose their favorite insurance company CEO in a talent contest involving tap dancing, magic tricks and comedy. Amazing Race — Teams of two CSRs from 10 agencies raced around the convention hotel translating state regulations. The first-place team won lifetime continuing education credits. Who Wants To Be a Millionaire? — Some of the industry’ favorite elected representatives from Capitol Hill competed in a trivia contest to win campaign contributions. The meeting was also a remindRobot agents have er of how important technology never had an E&O claim. has become to the agency system. Cogna Chip, the robot owner of Chip Insurance Agency in Freehold, N.J., became the first automaton elected president of the Big “A.” Chip, who was born in China, is also the first Asian and only the second female to head the association in its 200-year history. “I am honored to become the first automaton programmed for insurance distribution to lead the organization,” the tiny business owner chirped. Robots have been gaining in agency ranks. An estimated 32 percent of independent agencies are now owned and operated by robots. In her inaugural remarks, Chip said insurance is still about relationships and there is a lot robots can teach other agents about creating and maintaining them. “We know everything about our clients and never forget a detail about them. We never miss an opportunity or appointment,” she said. She said she is proud that robot agents work 24/7 for their clients and have never had an errors and omissions claim. Chip railed against unfair competition from the giant direct writing Watson Insurance owned by the conglomerate IBMW. “Buyers will always prefer the personal and warm touch of independent robots,” she said. Chip’s election is proof that the automation that some independent agents once feared now represents the future of distribution. However, even Chip acknowledges that robots aren’t perfect, yet. “We’re still lousy at golf,” she said. Disclaimer: This is Insurance Journal’s Satire Issue. The content herein is fake. Honestly. This isn’t real news. Fortunately. Even the names are made up. Totally. We hope you have fun. Seriously. If you have complaints, please send them to Juan Twothree Editor-in-Thief Confidentially.


Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content Andrew Simpson | East Editor Young Ha | Southeast Editor Michael Adams | South Central Editor/Midwest Editor Stephanie K. Jones | West Editor Don Jergler | International Editor Charles E. Boyle | Editor Denise Johnson | Associate Editor Amy O’Connor | Columnists Catherine Oak, Curtis Pearsall, Bill Schoeffler Contributing Writers Motley Crudely, Felonius Flarch, Felonius Filch, Felonius Flunch, Barbara O’Bleary, Comodius Thunderpart, Juan Twothree, Ursula Undergood, Ima Underwriter


V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 West Dena Kaplan (800) 897-9965 x115 South Central Mindy Trammell (800) 897-9965 x149 Midwest Lauren Knapp (800) 897-9965 x161 Southeast Howard Simkin (800) 897-9965 x162 East Dave Molchan (800) 897-9965 x145 New Markets Sales Manager Kristine Honey | Classified Advertising (800) 897-9965 x125


Marketing Administrator Gayle Wells | Advertising Coordinator Erin Burns | (619) 584-1100 x120 New Media Producer Bobbie Dodge | Videographer/Editor Matt Tolk |


Vice President/Design Guy Boccia | Vice President/Technology Joshua Carlson | Design and Marketing Executive Derence Walk | Art Director Jamie Bethell | Web Developer Jeff Cardrant | Web Developer Chris Thompson |


Director of Education Christopher J. Boggs | Online Training Coordinator Barbara Dooley |


Chairman Mark Wells Chief Executive Officer Mitch Dunford Accounting Manager Megan Sinclair |

FOR QUESTIONS REGARDING SUBSCRIPTIONS: Call: 856-380-4176 or You may subscribe or change your address online at 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 August 20, 2012

ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or Visit insurancejournal. com/reprints for more information.



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News & Markets Congress OKs Disaster Plan for Flood Insurance Program


ongress has finally authorized the National Flood Insurance Program (NFIP) for an extended period of six months, or until the next unscheduled primary, whichever occurs first. As part of the compromise worked out between Republicans, who claimed floods are a hoax and sought to privatize the program, and Democrats who wanted to mandate the coverage and tax its premiums, the Postal Service will take over running the program from FEMA. In addition to the long-term reauthorization, the final legislation — the Bigger Waters Reform Act of 2012 — includes changes that will affect coastal homeowners making more than $250,000 a year, insurance

agents with revenues above $2.5 million a year and lawmakers with political contributions totaling more than $25 million a year. “This bill shows that when Republicans and Democrats put aside partisan politics and work in a bipartisan fashion for the good of the country, the results are useless,” said President Obama upon signing the bill. At the signing, Rep. June Bigger, R.-Ill., who has been working on this measure since 1976, said she was pleased to have gotten a fresh pastry and a presidential pen but doesn’t much care any longer what is in the bill. “I moved to New Mexico about 10 years ago,” she said. The NFIP has been under water by millions of dollars since Hurricane Katrina. The legislation seeks to restore financial stability by funneling the contributions of real estate developers, mortgage lenders, insurers, environmental groups and restoration firms into undisclosed bank accounts. Among its key features: Savings: Turns over management of all flood plains to private developers in Texas, saving the government $500 million. Multifamilies: Offers premiums discounts to families with multiple homes (three or more)

Predictive Modeling Firms Wiped Out by Surprise Storms


wo of the industry’s predictive modeling firms were shuttered last week after being caught off-guard by natural disasters. California-based MRS said it was putting out a press release when the cleaning lady looked out the window and saw cars being swallowed up by the earth. “She saved us,” said Ed “Hurricane” Ali, chief actuary. “She’s got quite a job ahead of her cleaning up though.” ARI, based in Boston, was tracking the California earthquake when the receptionist got a call about driving rains coming up from Cape Cod. “This storm was not supposed to arrive for another 99 years,” said Karly Clarkson, founder. 8 | INSURANCE JOURNAL August 20, 2012

regardless of where the homes are. Financing: Authorizes NFIP to borrow funds directly from China. Actuarial Rates: Ends premium subsidies except for a handful of selected properties including Sen. Richard Shelby’s waterfront home at Orange Beach and Rep. Barney Frank’s seaside cottage on Cape Cod. Consumer Protection: Caps annual premium increases at 200 percent for those with good credit scores. Environmental: Discourages unwanted coastal development by increasing premiums up to 500 percent for properties valued at less than $5 million and completely excluding second homes valued under $10 million. Coverages: Expands coverages to include business interruption, additional living expenses, workers’ comp, cars, boats, jet skis, planes and pets. Streamlining: Reshapes the Write This! Facility (WTF) program by reducing the number of carriers from 80 to three, which will be chosen after the election. Agents: Borrowing an idea from the crop insurance program for farmers, guarantees insurance agents a minimum income from the sale of flood policies every year.

CPCU to Shut Down to New Members


nsurance professionals who don’t yet have their Chartered Property Casualty Underwriter (CPCU) designation have just one month to finish the exams. The CPCU Society said it is closing its doors to new members after that. The move is a bid to boost the value of the CPCU designation by making it more exclusive. The CPCU designation has been losing some of its luster in recent years as new insurance designations have come into vogue. These challengers have included the Professional Golf Agent (PGA), Social Media Organization Risk Exam (SMORE) and the Champion Underwriter and Property Casualty Actuarial Knowledge Expert (CUPCAKE). nsurance Journal is the first “Our hope is that by making the CPCU Society insurance publication that can a totally exclusive experience, our current desig- be read on iPool, the new Apple nation holders will be able to demand more saldevice that brings text and imagary and finally cash in on all those lonely nights es to the surface of swimming with textbooks and other insurance nerds,” said pools, toilet bowls and water CPCU President Oliver Testaker, PGA. bubblers across the world. C. Boggs

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News & Markets Texas Policyholders Revolting; Forming New Wind Mutual

Vermont to Host First Nude Insurance Convention


ed up with the inability of Texas to reform its insurance company of last resort, policyholders have left the insurer en masse to create a new, mutually owned company to cover damage to properties along the Texas Gulf Coast. Led by state lawmakers, former policyholders of the Texas Windstorm Insurance Association have formed the Windstorm/Hurricane Insurance Plan in Texas (WHIPIT). Most TWIA insureds canceled their policies, with many saying they wanted to WHIPIT good. TWIA top administrators are crying “foul,” saying that there’s not enough money in the company’s coffers to return all of the former policyholders’ premiums, most of which went to fight claims following Hurricane Ike.   Insurance companies complain that the new entity’s rates are too low and that there’s no way the private market can compete. WHIPIT managers say they have not taken any public money and that they are able to keep premium rates low by maintaining “reasonable” salaries for company executives. Gov. Nick Perry made his position clear on this latest development. “Whatever,” Perry said in a statement from by his office.


FEMA Buys Last Single-Family Home in Mississippi County

Ban on Workers’ Medical Care Cuts Down Florida Comp Costs



overnment officials closed last week on the purchase of the last single-family home in Jackson County, Mississippi, a house that belonged to former Sen. Lent Trott, who now lives in Canada. The sale was part of the county’s participation in a federal buyout program designed to give relief to residents in repeatedly flooded homes. Jackson County supervisors have approved payments totaling of $2.9 billion for more than 37,000 homes. The buyouts have been in the Pecan, Cumbest Bluff, Helena, Escatawpa and St. Martin communities. “We’ve handled all of the single family residential homes that are occupied,” said county planning director Michael Soaks. “The next group for us to go after includes about 9,000 rental houses.” The program is voluntary. “I’m just happy I don’t have to pay those flood insurance premiums any longer,” said Mary Knotaclew, whose house was bought last month.

10 | INSURANCE JOURNAL August 20, 2012

nsurance professionals who do not like it when customers go bare are about to get even. The National Insurance Professionals (NIP) announced it would hold its 2013 annual convention in Brattleboro, Vermont. The convention’s theme is “The Naked Truth About Insurance.” Brattleboro made news several years ago for its acceptance of public nudity and regular reports of naked people walking, biking and jogging downtown. NIP President Hugh Mungus said members are excited. “We are really looking forward to hanging out with our peers,” he said. The seminar topics include a Guide to Northern Exposures, Wardrobe Malfunctions from Top to Bottom, Weighing the Effects of Obesity and E&O for Exotic Dancers. For its opening ceremony, the group has planned an “Underwriters in Their Underwear” march along the right bank of Brattleboro’s Progressive Lake. “The point we hope to make is that going bare is not pretty, either in insurance or life,” said Mungus.

new study from the Workers Competition Research Institute (WCRI) says that medical care costs for injured workers in Florida have dropped 75 percent since 2010. The study attributes the drop to legislative reforms that banned medical care for certain workers and capped medical payments for the 100 most common workplace injuries. In addition to banning all medical care for obese, foreign, male or disabled workers, the reforms placed a $10 cap on all medical services for sprains, strains, stress, amputations, burns, respiratory conditions and other claims. Florida’s medical payments per claim are now lower than the median of 46 states in the study. “This is a miracle cure for our state’s businesses,” said Gov. Brick Spott, who may be looking for a new job himself after reportedly failing the new mandatory drug test for state employees.



Don’t Know


“I don’t know. I really, really don’t know. I’ve never known. I just find another person and we play rock, paper, scissors and then we announce the rates, so please stop asking me.” • North Carolina Insurance Department personal lines rating actuary.

Disaster Plan

“I can’t believe Congress did what we said. They have never done that before.” • Bill Melater, former senior VP of the Association of Federal Insurance Lobbyists, after Congress cut all federal programs having to do with insurance, interviewed outside his state’s unemployment office.

Separation of Powers

“Insurance regulation should be done by insurance executives and banking regulation by banking executives.” • Financial Services Round Table

Hole Truth

“We ran out of names.” • Florida Gov. Brick Spott explaining why the state is ending its program that named sinkholes after famous Floridians.


“Please bind the ‘sunset clause’ option. My insured (contractor) doesn’t work after sundown!!” • An agent’s response from an agent to an insurer offering a contractor’s policy with a sunset clause that restricts the number of years a claim can be filed. Submitted by Mike Stith.


“They make things.” • Agent’s response to a commercial lines application question asking for a description of the applicant’s operations. Submitted by Ron Young.

Cell Shocked

“We have to be a bit cautious about blaming it all on climate change.” • Henry Heddinsand, Global Weather Centre, noting that last year’s floods in Thailand that triggered $45 billion in damage were caused by too many people losing their cell phones in rivers rather than by climate change.


“Increased regulatory, shareholder and media scrutiny combined with volatility in the global economy means that serving in the bedroom has never been so risky.” • Williies Group in its latest report, “Bedroom Guide to Executive Risk.”

Street Cents

“Putting separate, automated walkways alongside regular sidewalks just makes sense.” • Ed Enjoorie, a pedestrian injured while texting, testifying before Congress on how to prevent texting injuries.

Faster Sales

“New policy sales and renewals go much faster when an agency eliminates the use of coverage checklist practices.” • Agency consultant Chris Brand applauding agencies for abandoning the archaic practice of checklists.

The number of items found in a Google query with terms “insurance” and “too damn expensive.”


The number of consecutive quarters that rates for lemonade stands have inched up, prompting MarketSprout to declare that the hard lemonade market is absolutely, positively, almost definitely probably kind of near an end.


The number of insurance agencies with drivethrough windows.


The rise in traffic deaths in the first quarter, largely attributable to recent bans on cell phone and texting that are forcing more drivers to use Facebook instead.


The number of people who will read this and think it’s funny.

1.4 Million

The amount (in gallons) of coffee consumed at insurance industry conferences each year.

5.2 Million

The amount (in gallons) of liquor consumed at insurance industry conferences each year.


The percentage of respondents to a recent Insurance Journal poll asking whether they think agents could sell more policies if they wore their pants Hip Hop style.


The amount that the Missouri Department of Insurance helped consumers retrieve from their insurers last year.


The percentage of tenants who say they can’t afford renters insurance and drive BMWs.


The number of downloads of IJ Academy’s new webinar, “How to Escape Continuing Education Requirements.”


Percentage of American workers projected to not be obese in 2025.


Percentage of insurance agencies that also sell lottery tickets.

August 20, 2012 INSURANCE JOURNAL | 11


News & Markets Industry Whistleblower Reveals Truths Behind ‘Historic’ Events


nsurance is Fun! has conducted an investigation into the true story behind several key events in insurance history. The source is referred to only as Deep Form. While the full interview will not be released until next month, Insurance Journal was given an edited excerpt: Why step forward now? Why not years ago? Deep Form: Let’s just say the old memory ain’t what it used to be. Figured if I can’t remember why I’m standing in the bathroom, I better get this out. Maybe it’s just time for the cover-up to end.

Cover-up is a strong word. An example? DF: You’ve heard of the Montrose liability case, right? The one that we claimed required a comBy Chas Van Am plete rewrite of the first page of the standard CGL Petchrijk forms? Made up the whole thing, then planted the false details in court records. If you can fake an entire court case as a way to make otherwise unnecessary changes that favor carriers in a standard liability form, what else could you do? DF: Oh, pretty much whatever we wanted. Most state regulators pay no attention to the fine print in our filings anyway, so it became kind of fun to see just how much we could get away with. For example, remember that magazine article you wrote after ISO made all those strange golf cart changes in the homeowners forms, where you laughingly blamed it all on an actuary’s retired mom who lives in a Florida condo? That was meant to be a satire. DF: Hah! It was his aunt, not mom. We had to endure an entire internal investigation over who leaked that one. Then there was the fake tort liability crisis and that incredible fire class rate manual that singe-handedly laid the foundation and justification for nearly the entire package policy movement. Ah, the 80s…good times! Fake crisis? DF: Oh, come on. We testified in every state that if something radical wasn’t done pronto about tort reform, the entire liability insurance industry was going to collapse. Coverage would be unavailable at any price. Businesses would close, contractors fail, and economies collapse unless we got major tort reform! And what did we get for all our trouble? Bupkis! And what happened? Nothing! The liability market skies amazingly cleared, and we went on to one of the great economic resurgences in history. It was our biggest failure. 12 | INSURANCE JOURNAL August 20, 2012

And the fire class rate manual? Based on a faulty algorithm some actuary dreamed up while on a Timothy Leary trip. Why hasn’t any of this come out? DF: As Peter Lewis might say, “What have you been smoking?” Need I mention Wall Street? Banks? Claims-made liability forms for the standard market? Folks want to believe more intelligent people must be in charge somewhere? As any con man knows, just keep acting like you know what you are doing and when questioned, simply expand the lie to the point no one can possibly believe you would make it up? Need I mention Bernie Madoff?”

Geico, Aflac and Give us one example of Allstate are fronts for “expanding the lie.” DF: Geico, Aflac and Allstate a reinsurance facility. — they don’t exist. They are all fronts for a reinsurance facility located in the Marshall Islands. Used to be real companies, but went under years ago. All three are now actually kept on life support by an advertising firm looking to salvage work for three rejected college mascots. I mean, seriously: a duck, a lizard and a guy named mayhem? Those don’t just scream “three martini lunch?” Oh, and “invisible glass?” Always been my favorite. Think on it: How do you know you have it, how do you really know it’s broken, and how do you know the carrier replaced it? It’s the “Emperor has no clothes” with an insurance premium attached. And people buy it! Ya’ gotta’ love this business! Visit for more fun stuff.


People Ediot Spinster

Charlie Sheen

Mel Gibson

Alec Baldwin

Ediot Spinster has joined the Russian insurance broker Smash. The former sheriff of Wall Street who once investigated the compensation practices of high-paid hookers in Washington, D.C., will specialize in coverage for the adult entertainment industry with Smash. “We are looking forward to the hefty contingent fees Ediot will generate for our firm,” said Smash CEO Reggie Putin. Spinster will operate from the Cincinnati office and report to Lawrence Flynn. “Actors” Charlie Sheen, Mel Gibson, Alec Baldwin and David Hasselhoff have entered the insurance business, forming an agency specializing in reputational risks for highnet worth, high-maintenance, wrong-thinking people and businesses. The agency, SGBH Inc., will be based in Malibu, Calif. Drawing on their own experiences, the celebrities will not only help insure against damages incurred by self-incriminating thoughtless actions and far-fetched misstatements, but they will also offer pre- and post-crisis response services to help steer clients away from mistakes and deal with the financial and emotional fallout. Dino Kaplanski, long-time advertising salesperson for Wells Mania and Insurance Gerbil, celebrated her 100th year with the company last month. Marx Willis, president, and Ditch Mumford, CEO, presented Kaplanski with a custom golden walker with backup beep technology in honor of her years of service. Kaplanski began with the company when the news was printed on stone tablets, and continued when the news went to paper, then on the web. Now, even though the news is no longer published anywhere, she continues to convince advertisers to buy ads. Los Angeles, Calif.-based Mercurial General named Consumer Pit Bull founder Harry Rosenblog as its industry

ASTISH15197.indd ASTISH5333.indd 11 14 |ASTISH14873.indd INSURANCE JOURNAL August 20, 2012

liaison. Rosenblog’s job will be to reach out to the public on behalf of the insurance industry, as well as to serve as a welcoming host at all insurance industry conventions across the nation. Monty Carlo, CEO of USExcess, and his dance partner, Pamela Anderson, wowed the judges on last week’s “Dancing with the Stars” episode, beating out Olympian Michael Phelps and Alaskan Bristol Palin to advance to the final round. Carlo told Entertainment Tonight that he and Anderson came up with the winning Rumba number at last year’s NAPSLO convention in between meetings with carriers. “I am all about taking risks that others won’t,” said Carlo. “Fortunately I found a partner who also isn’t afraid of exposure.” Two of the industry’s best-known Gold Olympians were seen together out on the town recently celebrating their London triumphs. Gymnast Mo “Hunk” Redberg, CEO of Starstruck P&C, and his former sidekick, triathlete Jay “ExLex” Killey, now at Ironman Excess, were seen at Manhattan’s health and fitness hangout, Club Re, whipping up some veggie and fruit smoothies. “It’s the same feeling I get when we launch a new political risk coverage,” said Redberg when asked to compare the thrill of winning at the Olympics with his day job. The National Association of Insurance Commissioners (NAIC) recently honored North Dakota Insurance Commissioner Adang Hammer, for revoking the most insurance agent licenses per capita of any state insurance regulator in 2011. Hammer yanked the licenses of 39 out of every 100 agents in his state last year — mostly for pocketing customers’ insurance premiums — leaving only 61 licensed insurance agents in North Dakota.

1/27/11 9:42 AM 6/11/11 9/6/11 2:54 8:30 PM

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Personal Lines The End of the Road for Auto Insurance How Profit Took a Back Seat and Technology Drove the Business Off a Cliff By Liam Attaloss


he auto insurance industry is dead. The last non-renewal notice has been sent, the last credit score has been calculated, and the last tee time made by a personal lines marketing rep has been moved up. It wasn’t just one thing. It was a steady parade of hi-tech gadgets and gimmicks, an ironic turn for an industry banned from whiteboard sessions. The collapse of the once-proud $100 billion industry is being felt in the city,

16 | INSURANCE JOURNAL August 20, 2012

Hartford, where Stragglers Insurance began it all back in 1897 by writing the first auto policy for an Ohio driver. “Hartford is the new Detroit,” said Mayor Pedro Seguro on Fox News. While for years economic and social forces have been putting dents in the industry, technology is what finally caused the engine to seize. “When technology got behind the wheel, insurance underwriters were relegated not just to the back seat but to the trunk,” said Clive Anwell, Giant Auto Group of America (GAGA). “The industry was taken for a ride by tech and safety geeks.”

First came seat belts, which reduced deaths by 50 percent. Then came air bags, which lopped off another 20 percent from mortality statistics. Make-up mirror windshields and built-in beer coolers with freshness expiration alerts further contributed to the reduction in accidents and insurance sales. But even though deaths were on the decline, insurers were buoyed by the fact that there were still accidents. They believed that drivers would still buy coverage for repairs and injuries, especially to their pets. Then along came the one technology that is most responsible for putting the

nail in the tire of the insurance industry: the driverless car. That’s right, cars that drive like teens and seniors have been doing for years. No hands, no eyes, no clue. But these real driverless cars never hit anything. They are, in fact, guaranteed not to be in accidents. When the first robot-made self-driving cars rolled off the Giggle/GM/GE (3G) assembly line in Flint, Michigan in 2012, Motor Friend named every self-driving model its Car of the Year and other auto trade press agreed. “With their cute engineering and huge marketing budgets, the driverless car is biggest thing since the Yugo,” said Mindy Mork, editor of Car and Drivel. Sales were helped by endorsements from Blind American Drivers and Today 80 percent of the cars on America’s roads are original self-driving cars or cars that have been re-engineered with chips to be self-driving. The other 20 percent are 30-year old Toyokias with 5 million miles on them on average. Now 3G is just one of a dozen manufacturers of selfdriving cars including Hondai, Toyokia, Fordisney, IBMW, and Volksapple. Just a few years after the bankruptcies of General Motors and Chrysler, the driverless car industry has put America back on top again in auto manufacturing. “They didn’t build this new industry; tax breaks did,” proclaimed President Ryan Paul. Safety and consumer advocates joined forces to put the brakes on the insurance business. Ralph

Nader Ginsberg declared the vehicles “safe at Only Giggle wasn’t really offering insurance to car owners, it just gave people every imaginable speed” and vowed to write replacement parts and cars. a book about them as part of his next presi After Gecko fell, it wasn’t long before dential campaign. Ahstate, Impressive, State Barn, Hartworm “Even a dummy can drive one of these,” and others began said crash engineers realizing how little at the Insurance When premiums reached they could charge Institute for Highway pennies, the insurance customers whose Robbery. industry just ran out of gas. premiums were now State and fedindividualized, detereral transportation mined by credit score, shoe size, nose hair departments stopped keeping records of car length and their own driving habits. crashes because the incidences became too Hartworm was the last to go, kept on few and far between to justify the effort. life support by its senior citizens insurance They have, however, continued to report a program that insured the Baby Boomers who rise in deer-on-deer crashes. were still prone to getting into accidents. With accidents virtually eliminated, and But as these customers died off, there were premiums down to pennies, the insurance industry just ran out of gas. Running on Empty A 2013 report by the Latin American singing sensation and think tank Celena found that auto premiums accounted for 39 percent of the total premium for U.S. property/ casualty insurers in 2011 but by 2013 this had dropped to three percent. Celena found that auto liability premiums fell from 25 percent of total industry premium to one percent and auto physical damage from 14 percent to -20 percent, meaning insurers owed consumers money. Warner Buffer saw the tank was nearing empty before others did. That’s why he sold Gecko Insurance several years ago. But even he is surprised at how quickly the entire car insurance business crashed and burned. “Because I am in Nebraska, I missed how fast it was happening,” said Buffer. “I thought it would take a decade or more before it really caught on but I guess with social media word travels super fast nowadays.” His Gecko was the first to falter. As technology became faster, Gecko’s promise that 15 minutes would save customers 10 percent, became 12 minutes will save 25 percent, then 5 minutes will save 50 percent. When it got down to one minute, Gecko, now owned by Giggle, began offering “car insurance” for free with the purchase of a self-driving Giggle vehicle.

Economic Implications of the Death of Auto Insurance • An estimated 1.2 million bill collectors, trial attorneys and lobbyists will be unemployed. • States will lose $8 billion in premium taxes and even more in corporate taxes but save enough overtime pay for highway patrols to make this a wash. • About half of the nation’s 40,000 body shops are expected to close, with the remaining shops moving into manicures and pedicures to make up lost revenue. • Beloved TV ad icons the perky clerk, the simple-minded caveman and the folksy professor are earning a lot less in their news jobs as an actual clerk, caveman and a professor. • Cleveland (Progressive), Seattle (Safeco) and Cincinnati (Great American) baseball stadiums have been shuttered. • The highly-successful Mothers Against Drunk Driving (MADD) franchises will close their doors. August 20, 2012 INSURANCE JOURNAL | 17


Personal Lines fewer seniors to take their place and Baby Boomers had used up all of the reserves for themselves anyway. In addition to technology, politics had some effect. When Congress repealed the health insurance mandate in 2013, it also set a timetable for states to repeal their state auto insurance requirements. Thus in a strange public policy twist, car insurance, which was no longer necessary, was no longer required either. Insurers also helped drive their own industry into a ditch. Insurers’ total reliance on predictive modeling led them to write only married teetotaling actuaries with credit scores above 780, thereby severely limiting their markets. The industry’s ballyhooing of black boxes also backfired. It turned out that most people really are excellent drivers and accidents are, in fact, almost always the other driver’s fault. As premiums reflected good driving behavior, they shrank to next to nothing. Also demographic changes have been a factor. Millennials never got the knack for driving for several reasons. Some teens say tougher teen driving laws took the fun out of driving for them. “What’s up with all the restrictions? I can’t drive with my friends, or at night, or with

my cell phone or a beer? Whatever,” said 17-year old Ken Barbie of Peoria, Ill. Also, up to their eyeballs in college debt, very few youngsters could get approved for a car loan. So they tend to walk, bike, hitchhike or take public transit or just stay home with their parents. “It’s not something I have ever felt a need for,” said 22-year old Sandy Slacker of Houston when asked if she had a driver’s license. “I mean, I have no intention of ever voting so what do I need a license for?” Finally, rising gas prices and the sharing economy have also played a part. No longer does every family have multiple cars; rather people share them like they used to share passing lanes. A dozen families may use a single Chevy Volt. End to Misery Some people are glad to see the industry go. Bobby Hunterman, former Texas commissioner who now works at the People’s Insurance of China, said the auto insurance industry deserved to die due to its “disparate treatment” of low-to moderate-income families and its refusal to provide them with

Grammar Scoring Advocates Proves Their Point


ew outsiders realize credit scoring was not the first actuarial option uncovered by computer analysis of past claims. What was the first? “Grammar scoring,” fumed veteran teacher Mary Aldred, amateur actuary and dean of the English Department at Autoview College. “It’s amazingly and uncannily accurate in its ability to predict individual driving experience. We showed clearly that students who were best able to properly stick to the rules of grammar also seemed to have the best driving records.” After research that involved pulling of motor vehicle records and matching them to term papers run through Grammatic, Aldred said her staff “confidently” submitted their findings to several leading insurance carriers: • Improper punctuation indicates a tendency to speed. • Dangling participial modifiers are clear indicators of collision losses. • Improper verb conjugation directly correlates to DUI frequency. Despite the “amazing predictive accuracy” of this approach, Aldred says industry officials basically ignored the research. “It’s those ridiculous business school backgrounds,” sniffed Aldred. “The only punctuation an MBA understands is a decimal point.” Chris Amrhein, Insurance is Fun! 18 | INSURANCE JOURNAL August 20, 2012

free insurance. “Let ‘em drive off into the sunset. Who cares?” he said. Insurance economist Dr. Robbit Hurtbig, a staunch defender of the industry, seemed surprisingly nonchalant about the demise. “It’s an industry that never really knew how to turn an underwriting profit,” Hurtbig said. “So maybe it’s just as well it is now out of its misery. RIP.” But in Hartford the pain is real. A march to mark the passing of the industry had to be canceled due to lack of insurance for the antique cars used in the ceremony. Mayor Seguro said positive-thinking residents in his city take some comfort in knowing that Detroit has enjoyed a resurgence thanks to the very forces that have now run over the Insurance City, so there may be a future for them down the road, too. “I believe Hartford’s future is in newspaper publishing,” the Mayor said. Former Gecko owner Buffer appeared nostalgic. “I do miss the little green guy and his funny accent,” he said. “Maybe he’ll catch on at Lloyd’s.” Meanwhile, as insurers scramble to find new markets, and some talk of a bailout, they are facing more unsettling news. Production of driverless boats and planes has begun and Congress has its eye on repealing the workers’ compensation mandate still in effect in most states. As lights were turned off at insurance companies across the country, famed poet Mayah Ungalue suggested that how America handles this loss would reveal much of its character. “I’ve learned that you can tell a lot about a country by the way it handles three things: a rainy day, no insurance and tangled Christmas tree lights,” she wrote.

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News & Markets

As Dec. 21 Nears, Demand for Zombie Protection Rises

By Dan Juggler


eter Kawalski would just as soon die than speak about the product he pushed for years as part of an agreement with the owner of his former agency. “I had to pitch it,” the 46-year-old tanned, well-groomed, Modesto, Calif.-man said. “Bob insisted. He was a visionary, but I just thought he was being a jerk at the time.” He was referring to Bob Stamp, who started Brooks and Associates Inc., a small central California agency, in 1976. Stamp demanded that his agents offer clients zombie coverage every chance they got. A superstitious man, Stamp launched the initiative during a morning sales meeting on Oct. 10, 2010. Several employees accused him of being in deep to an executive of one of the agency’s carriers, Apocalyptic Events and Occurrences Inc., dba Mayan Prophecy Protection Co., dba Nostradamus Was Right Inc., dba Galactic Alignment Recovery. 10817retired Insurance horz.pdf Stamp, now and Journal living out of the 1 country, declined to be interviewed.






With Dec. 21, 2012, approaching and with it the twelfth hour for the predictions that hold that date as the end of the world, Kawalski has become the “go-to guy” for zombie insurance. He sells more than 10 policies a day and declines to speak to anyone who wants a policy under $1 million. For his brisk business, he has to thank all 8/6/12times 3:43 those hePMreluctantly but dutifully mentioned the zombie product to clients. Now

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they are giving him so many referrals that zombie insurance — or apocalyptic insurance as some inaccurately refer to it — is all that Kawalski now sells. “It’s off the hook,” said Kawalski, who had a falling out with Stamp three months ago and took his book of business with him to start Kawalski & Co. “I got companies willing to lay down serious cash to get a policy in hand.” Kawalski says demand for all types of EOW (end of world) protection products is growing. It’s not just businesses. Requests by personal lines customers are up, too, according to brokers. “What happens if you’re entertaining guests and a zombie herd crashes through the front of your home?” asks Barbara Fenton, who sells homeowners’ insurance for ARG. “Is that covered in a standard policy? Are your guests protected? And what if they themselves turn into zombies and wreak havoc in the home you invited them, unundead at the time, into?” Now insurance executives and state commissioners are asking similar questions. “We don’t see why a traditional homeowners’ policy should exclude damage caused by a zombie attack. We think damage would be covered as vandalism,” said one source who works for an insurance commissioner in a western state. “Or say a zombie jumping from a tree into your window could be covered as a falling object.” Regulators are warning the public that zombie insurance isn’t guaranteed protection against an outright, world-wide zombie outbreak. Existing zombie programs will only cover isolated cases, before the “walkers” are done in by samurai sword-shotgun wielding citizenry, experts say. Most policies have a $10 million limit. Rooters News

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Competitive Disadvantage Plaintiff Attorneys: The Hard-Market Saviors


ttorneys have been suffering a lot during this recession. One of the biggest law firms in the country failed a few months ago. Others across the country have been forced to merge just to survive. They cannot afford nearly as many square feet in their offices or their homes as they could a decade ago. Similarly, the property/ By Chris Burand casualty insurance industry is just now partially realizing material rate increases for the first time in many, many years. Yet the lines most correlated with lawsuits remain the softest, casualty in general and medical malpractice in particular. The key then to increasing rates in these ad 0812.pdf 1 8/7/12 2:32 PM lines is to IJ help plaintiff attorneys sue more people. I see a win-win situation here: insur-

ers get rates increase and plaintiff attorneys get out of their slump. There are a few ways to achieve this joint goal. First, agencies and insurers could offer webinars on how attorneys could sue them more successfully. Suits could be settled faster and for more money. The process would be significantly more efficient. The result will be more profit for attorneys because they will spend less pursuing the suits and the settlements will be larger. With the extra profit, they can bring even more suits. Rates will then increase even faster. It’s a self-perpetuating model. Second, agencies and companies could raise money for plaintiff attorneys — kind of a welfare program. After all, our government is doing its best to create attorney welfare-to-work programs through all the new regulations it is publishing that no one

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reads except out-of-work attorneys. If everyone paid the attorneys a stipend to just keep practicing law, more lawsuits would be filed. Theoretically, some would be won and then the stipends could cease. Government programs could then cease and we could prove private charity works. What a great publicity opportunity! Third, agencies and companies could lobby Congress to publish even more laws. I estimate that for every page of law, there are between 40 and 100 pages of regulations. The opportunities to unknowingly violate at least a dozen different laws and regulations are fantastic. Since many laws and suits are now cojoined (for example, if one The key to violates a privacy law, one higher rates is may be prosecuted and more lawsuits. civilly persecuted simultaneously), the continued eruption of volumes of rules would greatly enhance attorney business opportunities. A fourth opportunity is to accept reality that a price can’t be put on loss. The reason is that everyone’s loss is different. One of the ways to improve the public perception of the industry is for it to no longer supports caps. It wants everyone to get everything and anything they deserve. This new attitude may help some politicians see the industry in a better light, too. The result would be rates skyrocketing quickly. Claims would follow later. Risk management has maybe worked too well in suppressing large and frequent suits. Maybe it’s time to loosen up and leave that stodgy insurance culture behind! Burand is the founder, owner and chief wit of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail:


MyNewMarkets Lazy Adult Children Market Detail: Empty Nest Underwriters ( has a program for parents with children ages 26-45 who won’t leave home. Empty Nest has specialized in dealing with this class for 30 years. The program has been proven to get the “child” out of the house in 30 days or less. Coverage includes: intervention by a team of crisis experts; on-the-job training program for child; cooking classes; and video game/computer addiction rehabilitation. Risk management for parents to prevent them from taking their former houseguests back is also provided. Available limits: As needed Carrier: EZ Living Agency States: All States Contact: Charles Childless at 555-999-9999 or at charles.

Olympic Games Workers’ Comp Market Detail: The Olympics only happen every four years, but their financial effects can be felt by companies for years later. Darwyn Award Assurance Co. (www.olympic protects companies against losses from employees replicating Olympic events. The coverage is for claims arising from employee chair races, garbage

can hockey, recycle bin basketball, balcony diving, parking lot relays, stairwell sprints, and swimming with the sharks. Darwyn also offers techniques for company management on holding supervised office Olympics and how to prevent injury during such events. Available limits: Minimum $10, maximum $500 million Carrier: Office Olympic Underwriters States: All States Contact: Oliver Olympian at

Superhero Protection Plan Market Detail: Protecting the Planet Agency (www. knows that saving the world is a messy business. So it offers the Superhero Protection Plan. Covers superheroes’ destruction of property when the good guys “take care” of the bad guys. Product features include broken windows, crushed cars, damaged iconic landmarks and the rebuilding of knocked down skyscrapers. Coverage not available in the following big cities: New York, Los Angeles, Chicago or Miami. Available limits: Maximum $10,000 Carrier: Allied Avenger Underwriters States: All states Contact: Customer Service at 555-Superheroes

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Business Moves & Mergers Marsh, Marlowe Giant insurance broker Marsh is expanding its risk management unit with the acquisition of London-based Marlowe Risk Services Ltd. Christopher Marlowe Jr., founder, will join Marsh under its new name Marsh Marlowe. Arthurs, Gallaghers The world’s third biggest insurance broker is trying to catapult over Marsh and Aon to become the world’s largest. Arthur J. Gallagher of Illinois is buying William Gallagher of Mass., Gallagher & Associates of New Jersey, Gallagher Insurance of Maine, Arthur Insurance in Illinois, and Arthur Insurance Agency in New Mexico. The firm will expand its name to Arthur, Arthur & Arthur Gallagher, Gallagher & Gallagher.

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Madison, Menomee Madison, Wis.-based Madison Insurance Group has acquired Menomonee Insurance. The combined agency will be known as MadisonMenomonee Insurors Inc., or Mad Men. In related news, Ron Raider, former creative revenue director for Madison, will head a new division focused on agency acquisitions. The unit has already closed on five agencies: Sterling Insurance Agency; The Cooper Insurance Group; an Allstate agency in Illinois headed by Don Draper, and Barry Pryce Agency of Texas. The new unit will operate under the name Sterling Cooper Draper Pryce. HSBC, Expialidocious The recent sale by Hang Seng Bank Corp. (HSBC) of various insurance businesses to a pair of buyers for $914 million has a spurned bidder. Florida

underwriter Expialidocious is said to be angered by the agreement, calling it “too supercalifragilistic to be true.” The insurer, part of the Disney conglomerate, said HSBC never responded to its undisclosed offer. But HSBC had its reason. “The offer was quite atrocious,” CEO Mary Popinz said in a statement.

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Double Speak 7 Terms You Can’t Say in Insurance But Use Them Anyway By Chris “CPCU, ARM, XYZ, RIP” Boggs


nsurance is an exacting language. Buyers and especially the courts have an annoying tendency to assign real meaning to the words used by insurance professionals. Accordingly, there are at least seven terms that insurance pros should absolutely throw in whenever they are discussing insurance. 1. All risk: Judges have ruled that “all risk” actually means that whatever happens to the property is covered under the insurance policy. But don’t worry about it — insureds know what it’s really all about, right?

Judges have had the same problem with “comprehensive” as they did with “all risk.” To guarantee you are seen as an expert by clients and peers, be sure to pepper your

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2. Absolute pollution exclusion: Some people think this term should not be used simply because the exclusion is, in fact, not absolute. The problem is that the industry actually believes it is what it claims it is — absolute. 3. Risk manager: Agents like to use this term a lot, as in, “We want to act as your risk manager.” No, you really don’t. But it will sound impressive to a client. 4. Enterprise Risk Management: ERM sounds big and impressive. It doesn’t matter that it’s impossible to accomplish. Everyone is using the term so go ahead. 5. Workman’s compensation: The politically correct crowd gets really upset over this one. The exclusion of women in this term really causes angst — like women ever get hurt on the job. 6. Guaranteed replacement cost: Customers love guarantees. It appears to mean that no matter what happens to a house or building, the insured will get a whole new building — regardless of how much it costs to rebuild. No problem here. 7. Comprehensive general liability: It ain’t been that in years, even though the request can still be found in contracts.

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Stranger Than Truth Cigar Fires, Love Damages, Cat Surcharge, Pump Plan and More The following were submitted by Insurance Journal readers: the judge found that the policy warranted that the cigars were insurable. The insurer also guaranteed that it would insure the cigars against fire, without defining an unacceptable fire. Thus, the insurer paid $15,000 for his loss of the cigars. After the plaintiff cashed the check, the insurance company had him arrested on 24 counts of arson. — Ede Edang

Love and Stupidity

Where There’s Smoke A North Carolina lawyer who purchased a box of rare and expensive cigars and smoked them all won a claim against his insurer

because he had insured the cigars against, among other things, fire. He said the cigars were lost “in a series of small fires.” The judge agreed with the insurance company that the claim was frivolous. However,

Two insureds were having a drunken fight, a common occurrence. The woman locked her husband out of the house. He broke down the door. They were wrestling on the floor when the neighbors and cops broke it up. A few days later, when the insureds loved each other again, they called to see if the door damage would be covered under their homeowners’ policy. The agent’s reply: “Stupidity was not a covered peril.” — Submitted to IJ’s Facebook page.

Cat Surcharge A client called very upset. He was being charged extra on his condo owners policy for having a cat but his cat had passed away. I was scratching my head trying to figure out what he was talking about. “Do you mean the CAT surcharge?” I asked. He said yes. I then explained what the Florida Catastrophe Fund surcharge was for. — Beth Sanders

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A new prospect was discussing policy options with his agent. The agent asked if the prospect had homeowners’ insurance, auto insurance, flood and umbrella coverage. The prospect said: “What good would an umbrella be in a flood?” — Jean O’Neil

Pay at the Pump Insurance Makes a Comeback The Administration boldly announced that the days of uninsured drivers are numbered and high gasoline prices are at an end. An executive order, to be effective Jan. 1, 2013, resurrects and puts into effect the “Pay at the Pump” insurance plan. This plan was originally designed to eliminate all uninsured drivers by adding a small liability insurance premium for each gallon of gas a private citizen or business purchases. The order effectively places the regulation of gasoline prices under state control via the McCarren Ferguson act. All gasoline price increases will be reviewed by the respective State Commerce or Insurance Departments where the fuel is actually sold. Gasoline increases will be subject to public hearings and actuarial review with final rate determination tempered by the consideration of the social welfare of the citizenry. All states have suspended their “deemer”

clauses on rate increases during this transition period. Many departments are already requesting cat models showing the effects of end of the world rumors that have constantly plagued the price consumers pay for gasoline. In a related story, all major oil companies announced they would cease selling gasoline in California, Texas, and Florida in January 2013. Consumers there must obtain non-resident gasoline usage licenses in order to purchase gas in bordering states. — Bob Griffin

Tech Merger Vertafore and Applied Systems have merged into Vertaplied. “Agents couldn’t tell the difference between us anyway so we decided to become one,” said the firms. They said they will pool their resources to bring better technology to all agents. Later in the day, Vertaplied announced support fees would be raised by a “modest” amount. — R. Keighron

• I shot the breeze with air conditioning contractors, but got the cold shoulder. • I went down the drain calling plumbing contractors. • Hardwood flooring contractors walked all over me. I did a little better calling carpeting contractors, but a few were a little tacky. • Landscapers and tree trimmers left me out on a limb. I switched to trucking companies but couldn’t stay with it for the long haul. • I thought I would do better calling local couriers, but I got the runaround. • I switched to woodworkers, but couldn’t make the cut. • Cabinet makers left me hanging. I called window manufacturers but I was always on the outside looking in. Allan Pilger

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Slowing Your P/C Agency A Guide to Obtaining Insurance Referrals


eferrals are the ultimate sales leads. Unlike unadorned names culled from the Internet, they come with the benefit of something extra: the public backing of someone who likes your agency. Yet, referrals seldom just happen. They are sporadic at best unless you assertively and systematically seek them out. There are myriad ways to accomplish this. Winning methods include fill-in-the-blank referral web forms (complete with memory joggers),

aggressive in-person and online networking, personal entreaties to insureds, social marketing referral contests with big-ticket prizes, and other self-aggrandizing promotions. Here are tips for managing common sources of referrals. Common Referral Sources Attorneys. In the past, having a lead generating arrangement with a lawyer was golden. Real estate and business attorneys could send you endless leads. But, in today’s economy, many of these professionals are scratching for a buck, just like everyone else. Still, in bad times at least one segment of the legal profession is doing pretty well — and that’s criminal lawyers. Maybe they could refer a few of their not-guilty clients your way. Or better yet, some larceny victims. They’ve already suffered a theft. What are the odds of it happening to them again right away? CPAs. They understand the dollar value of the insurance leads you request from them. They have more than enough education to multiply the estimated premiums times commission to arrive at your projected revenue per successful referral. Over time, they’ll do the math and stop pretending to appreciate that bottle of nonbrand booze you give them after you close a sale. So, ask, just don’t overdo it. Friends and Family. Asking a friend, sibling, cousin, or in-law to suggest people and businesses that might benefit from your insurance services is tantamount to giving up

28 | INSURANCE JOURNAL August 20, 2012

your weekends. They may smile broadly and happily scratch out a few names because they know they’ll get something better in return. If you value your time, don’t ask them for anything. X-Spouses. When you were married, your husband or wife likely never provided you with decent referrals. That’s because they expected you to know everyone they did. However now that you’re apart, you might be thinking of asking your ex for a few leads. Beware. If the divorce was acrimonious, they might supply you with the names of some accident-prone drivers and potential arsonists just for kicks. X-Insureds. Asking quality insureds for referrals is a good move. But asking former policyholders isn’t a smart move. These guys fired you, and if they similarly know more folks like themselves, then any referrals you obtain are worthless anyway. X-Men. These mutants are not real, even though they’ve starred in five major motion pictures. So forget about asking them for super-powered referrals, unless you watch way too many movies and have trouble telling fiction from reality. Shulman, CPCU, is the publisher of Agency Ideas, a subscription-only sales and marketing newsletter. He is also the author of the many tools posted on the Agency Ideas Instant Download Store. Phone: 800-724-1435. Email: Website:

August 20, 2012 INSURANCE JOURNAL | 29


E&O Uncertainties Want to Experience an E&O Claim? Here’s How


ave you ever wanted to find out just what it is like to be struck with an errors and omissions (E&O) claim? Well, here’s how:

10. Just document it in the agency management system. This was actually the “old school” philosophy. There is often a misunderstanding By Curtis M Pearsall between what the customer said (or thought they said) and what you heard. The agency staff should document back to the customer the essence of the conversation. Advise them that if your understanding is not correct, they should promptly contact the agency. 9. There’s no need to go to an E&O seminar — your agency must be good because you’ve never had a claim. Are you good or just lucky? 8. Don’t worry about what you tell the client — landing the account is what’s really important. Be careful with words. Using “expert” or “specialist” has the potential to raise the standard of legal liability. Being “an advisor” instead of “an order taker” could hold you to a special relationship. 7. Binding guidelines — nobody really pays any attention to them. Virtually every carrier has taken the time to develop

30 | INSURANCE JOURNAL August 20, 2012

underwriting/binding guidelines. If your agency bound a carrier to a risk outside of these guidelines and the risk suffers a loss, chances are the carrier will not be too happy with you. A carrier suing one of their agents — yes, it is happening and with greater frequency. 6. Let your customers provide you with confidential information via social media — what’s the big deal? Specific risk information/confidential information should not be sent via social media. It should either be delivered in person or sent via an encrypted message. 5. Denying a claim in the agency — it’s not covered, so why would you submit it? Denying a claim should be the carrier’s responsibility. Even if you are 100 percent positive it is not covered, let the carrier make that decision. 4. Blanket additional insured — that means everyone is covered, right? Nope. Most, if not all, blanket additional insured forms require that a written contract must

be in place between the insured and the party seeking additional insured status. There is no coverage without this. 3. You pick and choose who to follow-up with on direct bill non-pay notices. If your agency chooses to perform this duty you should not discriminate between your different customers. 2. Why check carrier-issued policies to see if they’re correct? If they made a mistake, that’s their problem. But the longer an error goes undiscovered, the greater the agency’s liability. 1. Insureds just want the lowest price. They don’t care if the coverage is less. All coverage reductions must be brought to the client’s attention. Document these discussions with the client — not only in your system, but also in writing. Pearsall, CPCU, ARM, is president of Pearsall Associates Inc., a risk management consulting firm specializing helping agents protect themselves. He is also a special consultant to the Utica National Agents E&O program. Phone: 315-768- 1534. E-mail: Blog:

The Mayan Exclusion May Be Too Late Dec. 21, 2012! That’s the date the Mayan calendar predicts the world will end. How could they predict the end of the world when they didn’t see their own demise coming? The insurance industry is taking the Mayan doomsday prediction seriously. The two main coverage form-generating entities are planning to release new exclusion forms centered around Dec. 21, 2012. The “Mayan Exclusions,” as these endorsements are being called, exclude all damage resulting from the reversal of the earth’s magnetic field and any other planetary catastrophe occurring on Dec. 21. “Think of them as the Y2K endorsements on steroids,” said one property lines analyst. There is one major obstacle: many states require 120 days to approve new forms. Several states contacted by Insurance Journal indicated they were not inclined to accelerate their processes. They are also not all sold on the need for the exclusion. One insurance department actuary asked, “Is anyone going to be here to file claims anyway?”

Advertisers Index Readers, browse, contact, or do product searches on any of our full page advertisers at: American Agents Alliance N29 Anderson & Murison, Inc. N22 Applied Underwriters N7, N36 Astonish Results N14 Atlas Financial Holdings N24 Burns & Wilcox Ltd N9 California Earthquake Authority N2 Catlin US N13 Century National N21 ELM N23 ExamFX N20

Fujitsu N19 Great American Insurance Group N26 IICF N33 ISU Group N15 Monarch E&S Insurance Services N3 National Alliance for Insurance Education & Research N27 PersonalUmbrella.Com N5 N25 United Contractors Insurance Agency N30

C. Boggs, Academy of Insurance

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Closing Misquote No client contact. Goodness, who has time to talk with existing customers? The annual bill should be enough communication — and the job is even easier when the carriers send them direct to your customers on plain white paper with friendly CAPITAL The annual bill LETTERS in that slick 1970s font. should be enough And you save postage.


Testing isn’t useful. Don’t waste time on asking customers if your messages or materials make any sense before you bet the farm (or the country club dues) on a big campaign. Fire, aim, ready — launch that puppy! Unify schmunify. Spread all your brand touch points (capabilities pieces, business cards, sell sheets, etc.) out on a table and ask if they appear to be from the same firm. They don’t? No worries! Let colors and fonts change with the seasons.

10 Tips for Branding Your Agency


ndependent agents and brokers: Of course you’re solid insurance technicians as well as sales and service professionals. But who says you also can’t be smart at customer and prospect marketing, with a little effort? Here’s how:

By Peter van Aartrijk

Planning is all hype. Hey, really important stuff comes up during the year — why not make up your agency communication plan as you go along? Send postcards one month, renew those snazzy Yellow Pages ads the next month, another fun new agency logo the next, jump on — and off — Facebook the next … the fun never stops. Go for it! Budget? We don’t need no stinkin’ budget. Leave it all to chance. Pay the bills and see what’s left to grow your agency. Those canny principals who spend 3 percent of revenues on advertising and promotion are overthinking this stuff. Who needs a social media person? And the website? That was done in 1998, and it’s fine. You grow 100 percent by referrals anyway, and most of them search for you online and spot that cutting-edge site and just can’t wait to call you!


Do-it-yourself design. Who cares if insurance experts and design experts are rarely the same people? Have at it yourself and save some big coin by bypassing those highpriced creative consultants — what’s the worse that could happen? Things, not people. Come on, already: People don’t buy from people. They buy from shiny big buildings and faceless entities such as agencies with acronyms for their names. And who needs client testimonials? Personality is overrated. Inconsistency is less demanding. Try a social media effort for just one week? Sure, you can call that a full campaign; why not, the attention span of the average customer is 38 seconds max. Spray and pray. The breathless radio ad rep calls touting a special: “200 ads for 200 bucks.” That’s a heckuva deal — especially when the ads run on Sunday at 2 a.m. so you can reach the drunks who need high-premium car insurance. That is your key target, right? Metrics are for bean counters. Just wing it without looking at Google analytics or other measurements. Just check the seat of your pants to gauge your results monthly or quarterly. Van Aartrijk ( is CEO of insurance branding firm Aartrijk when he’s not being chief fun officer (CFO) and cooking the books for Insurance is Fun (

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Expect big things in workers’ compensation. Expect to save a third of your clients 30% or more. Expect broad acceptance and few class limitations nationwide. Expect competitive commissions. For information call (877) 234-4450 or visit

Š2012 Applied Underwriters, Inc. A Berkshire Hathaway company. Rated A by A.M. Best.

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