AUGUST 1, 2011 | VOL. 89, NO. 15
WEST REGION GM-MetLife Insurance Deal in Northwest How to Create Stories for Sales Surplus Lines Tax Confusion Insurance Clout and Californiaâ€™s Economy
Five reasons. www.leavitt.com/career | www.leavitt.com/affiliation
1. MARKET PRESENCE: We have the market presence to bring our producers and clients national resources. We support our sales force with access to sophisticated risk management solutions and high-impact sales tools. 2. CENTRALIZED RESOURCES AND SUPPORTING BUSINESSES: Fewer administrative hassles means agency staff have time to do what they do bestâ€”sell insurance. 3. LOCAL CO-OWNERS AND GEOGRAPHIC EXPERTISE: Each agency is managed by a local co-owner. With the autonomy that comes with local ownership, our producers can offer their clients appropriate solutions for their marketplace. 4. INTEGRITY: Each co-owner has deep roots in the communities they serve. Each is committed to build long-term relationships with employees and clients. Our core values are honesty, civility, open communication, and hard work. 5. PERPETUATION AND GROWTH BY ACQUISITION: We facilitate equity growth opportunities appropriate to each career stage and agency circumstance. We co-invest in sound agencies and producers. We are eager to explore opportunities. Visit us online or call Mark Leavitt at 435-865-2909.
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On The Cover
Inside This Issue
Special Report: Top 100 Independent P/C Agencies N8
August 1, 2011 • Vol. 89, No. 15 • West Region
N8 Special Report: Top 100 Independent P/C Agencies
8 Surplus Lines Law In Effect; Taxes Up in Air
30 3 Steps for Creating Stories That Attract Clients
N11 Special Report: Top 20 Banks in Insurance
10 NFL Case Draws Attention to Calif. Workers’ Comp Law
N1 The Competitive Advantage: Chris Burand
N12 Top Performing P/C Insurers: Q1
10 Hawaii Restores Coverage for Construction Defect Claims
N4 Essentials - Read the Policy: Steven Plitt
N14 Spotlight: Homeowners on the Coast
16 Insurance Clout in California’s Economy
N6 How Top 100 Firms Impact Business Risk
N16 Closer Look: Autos The Future in Auto Claim Prevention
20 Agents Question MetLife P&CGM Insurance Deal
N18 Closer Look: Autos Usage-based Insurance Programs Take Off N20 Sony Insurer, Zurich, Files Suit to Deny Data Breach Coverage N20 Who Is Paying News Corp. Legal Bills? – D&O Insurance N21 Insurance Keywords Add Big to Google Profits 4 | INSURANCE JOURNAL-WEST REGION August 1, 2011
N24 Closing Quote: David Sampson
22 Waffle House Serves Up Lessons in Risk Management 24 Little Leagues Improve Defense with Crime Insurance 26 Metro Areas Most Able to Withstand a Disaster
DEPARTMENTS 6 11 11 12 32 N21 N24
Opening Note Declarations Figures People Business Moves MyNewMarkets Closing Quote www.insurancejournal.com
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Opening Note Organic 100 I
t’s that time of year again, when the nation’s leading privately held independent insurance agencies are put in the spotlight. Welcome to Insurance Journal’s exclusive Top 100 Independent Property/Casualty Agencies list. These leading agencies have weathered the bad economy and the prolonged soft insurance market. Most have made considerable gains despite challenging conditions. And they have managed to grow in the soft market — the hard way! The vast majority (71 percent) of privately held independent agencies that compose the 2011 Top 100 managed to grow their total P/C premium written in 2010 compared to 2009. In fact, eight agencies on the 2011 Top 100 list even managed to grow premium volume by 20 percent or more in 2010 over 2009. Top gainers in terms of growth in total P/C premium written in 2010 over 2009 include: Bollinger Inc.; Confie Seguros; Barney & Barney LLC; Higginbotham & Associates; United Nearly one-fifth of the Valley Insurance Services Top 100 reported signifiInc.; Propel Insurance; AssureAlliance Inc.; and cant organic growth. TIS Insurance Services Inc. Some agencies that reported significant increases in premium volume in 2010 managed to do so by acquiring other agencies. That’s not unusual. But surprisingly nearly one-fifth of all agencies in the Top 100, or 19 percent of this year’s Top 100, reported significant gains based mostly on organic growth. These 19 agencies reported that 76 percent to 100 percent of their agency P/C premium volume growth in 2010 was due to organic growth, and not growth through acquisitions. That’s not an easy task in even the best of markets but it’s especially difficult given the continuing soft pricing in most lines of P/C insurance. The 19 agencies that managed to increase P/C premium volume mostly through organic growth in 2010 included: Lockton Cos.; Leavitt Group Enterprises; The IMA Financial Group; GreatFlorida Insurance; Smart Choice; Houchens Insurance Group; EPIC Insurance Brokers; McQueary Henry Bowles Troy; Sterling & Sterling Inc.; United Agencies Inc.; Gowrie Group; Brightway Insurance; North Florida Agents Network; Insgroup Inc.; Oklahoma Agents Alliance; Schiff, Kreidler-Shell Inc.; SAN of Florida / Comegys Insurance Agency; TIS Insurance Services Inc.; and Cook, Hall & Hyde Inc. For too many agencies, the growth strategy of the past few years has been to either grow through acquisition or just sit and wait until the next hard market comes along — if that can even be called a growth strategy. These Top 100 growers remind us that there is another way to grow, a way that depends on working hard and smart to make things better, while others are just wait- Andrea Ortega-Wells Editor-in-Chief ing for things to get better.
Publisher Mark Wells Chief Executive Officer Mitch Dunford
EDITORIAL Editor-in-Chief/Interim West Editor Andrea Ortega-Wells | awells@insurancejournal V.P. Content/Southeast Editor/Interim East Editor Andrew Simpson | firstname.lastname@example.org South Central Editor/Interim Midwest Editor Stephanie K. Jones | email@example.com Director of Education Chris Boggs | firstname.lastname@example.org MyNewMarkets Associate Editor Amy O’Connor | email@example.com International Editor Charles E. Boyle | firstname.lastname@example.org Columnists Steven Plitt Contributing Writers C.R. Ekern, Bill Gatewood, Douglas Powell, Chris Rizo, David Sampson, Kasey Vaughn, Michael White, Bill Whitley
SALES V.P., Sales & Marketing Julie Tinney (800) 897-9965 x148 email@example.com West Dena Kaplan (800) 897-9965 x115 firstname.lastname@example.org South Central Julie Tinney (800) 897-9965 x148 email@example.com Midwest Lauren Knapp (800) 897-9965 x161 firstname.lastname@example.org Southeast Howard Simkin (800) 897-9965 x162 email@example.com East Dave Molchan (800) 897-9965 x145 firstname.lastname@example.org New Markets Sales Manager Kristine Honey | email@example.com Classified Advertising Administrator Heather Frantz | firstname.lastname@example.org (800) 897-9965 x125
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6 | INSURANCE JOURNAL-WEST REGION August 1, 2011
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News&Markets Surplus Lines Law Leads to Tax Uncertainty By Andrea Wells
he implementation deadline for the Non-admitted and Reinsurance Reform Act arrived on July 21. States have been scrambling over the past year to update their surplus lines laws to conform to NRRA requirements, while agents and brokers have tried to prepare for how they will process surplus lines accounts after that date. Some in the industry say many players are still not ready. “Most are way behind the curve,” says
Richard Brown, a San Francisco based attorney who represents surplus lines brokers, insurers, and industry organizations in regulatory matters. The NRRA mandates that beginning July 21, 2011 the insured’s home state will be the only state with jurisdiction over multi-state surplus lines transactions and the only state that can require a tax be paid by the broker. The law also implements
California Surplus Lines Bill Signed Into Law
ov. Jerry Brown has signed legislation (Assembly Bill 315) that brings California in line with provisions in the new federal surplus lines insurance law, the Non-admitted and Reinsurance Reform Act of 2010 (NRRA), which became effective on July 21. Under AB 315, only the “insured’s home state” may tax surplus lines premium and regulate surplus lines transactions. Surplus line brokers in California will now be responsible for determining whether an applicant for nonadmitted insurance is a California home state insured. Surplus lines brokers must consider whether the insured’s principal place of business resides in California, and may rely on information provided by the insured to determine the home state provision. However, if none of the insured “risk” is located in the state where the insured maintains its principal place of business, the home state can be determined based on the state in which the insured has the greatest percentage of taxable surplus lines premium. Surplus lines brokers must now maintain documentation showing how they determined the insured’s home state and any tax allocation, as well as how they determined whether a large commercial insured is exempt from the diligent search requirement. Under the new law, California state tax applies to 100 percent of surplus lines premium and the stamping fee applies to the full premium. However, California has yet to join with other states on any tax allocation agreement. The new law also changes existing insurer eligibility requirements for California home state placements. All surplus line insurers listed on the LESLI (List of Eligible Surplus Line Insurers) are automatically grandfathered on LASLI (List of Approved Surplus Line Insurers) through expiration of all policies in effect as of July 21, 2011. Brokers who wish to use an ineligible company will need to either file on behalf of the company or have the nonadmitted insurer file directly with the department of insurance. AB 315 allows for a transition period as well. Surplus lines policies issued or renewed prior to July 21, 2011, will be governed by the law in effect prior to July 21. The transition rule expires Oct. 18, 2012.
8 | INSURANCE JOURNAL-WEST REGION August 1, 2011
criteria that allow larger commercial purchasers to be exempt from the diligent search requirement. Overall, 43 states passed legislation in the last year to bring their laws into compliance with the NRRA. Of the 43 states, three states (Delaware, Oregon and New Jersey) have approved legislation but the governors have not taken action on the bills. Three states (Iowa, Illinois and Colorado) adjourned without taking action and four states (Michigan, Wisconsin, Massachusetts and South Carolina) and the District of Columbia have not passed any legislation related to NRRA. Phil Ballinger, executive director of the Texas Surplus Lines Stamping Office, says his office has tried to update agents and brokers on what to do post-July 21. Despite these efforts, confusion remains, he says. “Agents have been calling us for a number of weeks panicked-stricken, looking for advice on what to do. And frankly we are not able to tell them what to do in much detail because it’s such a moving target.” That moving target has to do with whether states will support a tax sharing allocation agreement to handle the allocation of surplus line premium taxes in the future. As of the July 21 deadline, no such compact or tax sharing agreement was in place. But two proposals — Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT) legislation, supported by the National Conference of Insurance Legislators (NCOIL) and several industry groups, and another supported by the National Association of Insurance Commissioners called continued on page 28 www.insurancejournal.com
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NFL Case Draws Attention to Unique Calif. Workers’ Comp Law By Chris Rizo
A Left Lane Law
Forty-three percent of drivers in Washington State do not know that it is illegal to impede the flow of traffic in the left lane of a highway, according to a survey by Pemco Mutual Insurance Co., Seattle. “Camping out” in the left lane in front of cars that want to go faster probably contributes significantly to traffic congestion on highways, Pemco said. Washington State law says that vehicles should be driven in the right lanes except when overtaking or passing another vehicle proceeding in the same direction or when traveling faster than the traffic flow. The survey also found that 47 percent of respondents agreed that persons driving slowly in the lefthand lane should be ticketed if impeding traffic. Most respondents were more willing to tattle on others than themselves. Nine out of ten respondents reported regularly seeing people creeping along in the left lane with cars piling up behind. But, nine of 10 respondents also said they had never blocked a left lane.
California statute that affords protections to employees on temporary work assignment in the state has attracted attention after St. Paul Fire and Marine Insurance sued the Denver Broncos of the National Football League (NFL) over workers’ compensation claims filed in California by nine former Denver players. Experts say hundreds of out-of-state claims are pending. The claims are allowed under Section 3600.5(b) of the California Labor Code. A leading California Republican said he would push to change the law. Curt Hagman, the ranking Republican on the Assembly Committee on Insurance, told Insurance Journal it is “outrageous” that the state allows retired professional athletes with no significant nexus to California to file claims for long-term injuries in the state. “It’s ridiculous and there definitely needs to be an investigation,” said Hagman, R-Chino Hills, a member of the Assembly Republican leadership.
Saul Allweiss, a California worker’s compensation defense attorney, said the ambiguity in Section 3600 often draws frustration. “This is not a football player issue; it has to do with jurisdictional questions in general,” said Allweiss. St. Paul’s complaint for declaratory judgment seeks an end to a long-running coverage dispute it has with the football club. St. Paul is not challenging the legality of any part of California’s workers’ compensation framework. Rather, in its filing in U.S. District Court in Denver, the insurer is seeking resolution of the claims dispute, involving five, decades-old policies. The oldest policy took effect Feb. 1, 1974; the last policy expired Oct. 10, 1977. St. Paul said none of the policies ever afforded coverage for worker injuries. The Broncos former owner, Rocky Mountain Empire Sports (RMES), purchased the policies on an “if any” basis
for non-player employees the franchise had in New Mexico, the complaint alleges. Because they were “if-only” policies, St. Paul said the identities of employees covered were never provided to the insurer. “No payroll was provided by RMES to St. Paul to identify any employees to be covered by the policies,” the complaint says. As a result, RMES was charged only a minimum premium from $70 to $158 per year. If St. Paul prevails with a declaratory ruling, it could mean legal trouble for the Broncos franchise, especially if the players had no workers’ compensation coverage, said California plaintiffs’ attorney Michael Gerson, a partner with Boxer & Gerson LLP in Oakland. “If they have no coverage, the players could sue the Broncos for civil remedy as opposed to limiting their liability through workers’ compensation,” Gerson told Insurance Journal.
Hawaii Restores Coverage for Construction Defect Claims By Denise Johnson
awaii Gov. Neil Abercrombie has signed legislation its supporters hope will restore coverage for construction defect claims under a commercial general liability (CGL) policy that was called into question by a 2010 court ruling. However, an attorney specializing in insurance coverage warns that the new law (H.B. 924) could create new legal issues for insurers because state law on construction defects is still not clear. The new law was written to address the uncertainty for the construction industry caused by the 2010 decision in the Group Builders v. Admiral Insurance Co. case by the Hawaii Intermediate Court of Appeal. The ICA ruled that construction defects did not arise from an occurrence and therefore allegations arising from either a breach of contract or tort were not covered under a CGL policy. The new law states that “occurrence” in a liability policy “shall be construed in accordance with the law as it existed at the time that the insurance policy was issued.” The law applies to all liability policies in effect at the time the bill was signed into law. But, according to attorney Tred Eyerly, an associate with the law firm of Damon Key Leong Kupchak Hastert, the new law creates its own uncertainty. The problem is that it’s not clear what the state’s prevailing law on construction defects has been or is. He said insurers and insureds are likely to rely upon conflicting precedents to support their views. Eyerly said that because the issue remains murky, it will be expensive to litigate and difficult to establish what the state of the law was at the time. In addition, he said, courts will have to address the retroactivity of the bill. “There are very few opinions from the high courts in Hawaii addressing construction defect,” he said.
10 | INSURANCE JOURNAL-WEST REGION August 1, 2011
Declarations 100 Agents “We’ve got a lot coming out in 2012.” Jon Beckham, chief marketing officer at South Carolina-based Accident Insurance Co., who said the company is looking to add 100 agents in the 100 days through Oct. 12. AIC hopes to find new agents in Alabama, Arkansas, Arizona, Georgia, Indiana, Illinois, Kentucky, Mississippi, Missouri, Oklahoma and Virginia.
Misclassified “The case has significant implications because these group of employees that worked at insurance brokerage companies were misclassified, and there are a lot of companies that have people just like this
doing similar work that are also being misclassified. We believe this has a very important result in this industry.” Attorney Louis Marlin after a Los Angeles Superior Court judge approved a $10.5 million class action settlement involving Aon Insurance Services. The plaintiffs alleged that California Account Specialists had been misclassified by the defendant as exempt administrative employees and as a result weren’t paid the additional amount when they worked overtime. Thus, they fought to recover unpaid overtime compensation. There were 534 members in the class action.
“There’s a reason white-collar attorneys make so much. It’s because insurance pays them.” University of Pennsylvania Law School Professor Tom Baker in a story on directors and officers (D&O) coverage for News Corp. executives facing a hacking scandal.
Surplus Change “Some 90-95 percent of surplus lines risks probably are single state risks and are not going to change under NRRA.” Richard Bouhan, executive director of the National Association of Surplus Lines Offices, calming agent and broker concerns over the implementation of the new federal surplus lines law.
The estimated number of claims filed after Mother Nature wreaked havoc along the Front Range and southeastern Wyoming last month. Insured damage to cars and homes in Colorado from the hailstorms was $164.8 million as a result of 29,800 claims. Cheyenne’s hailstorm cost $120 million from 19,800 claims, according to the Rocky Mountain Insurance Information Association.
The amount a Northern California family has been ordered to pay for starting a wildfire that destroyed papers written by Albert Einstein. The suit was filed by a San Jose State chemistry professor whose father had inherited papers written by the Nobel Prize-winning physicist, which were destroyed in the 2007 wildfire that burned four homes. Authorities said the fire erupted when the family left a metal barrel unattended while illegally burning paper plates. www.insurancejournal.com
The total loss and expense payments by California workers’ compensation insurers in calendar year 2010, according to the California Workers’ Compensation Institute. Direct earned premium was estimated at $9.677 billion last year, an increase from 2009Ðs $9.136 billion.
That’s how much less the state of Washington pays for prescription drugs in its workers’ compensation system compared with 17 other states, according to a study by Workers Compensation Research Institute (WCRI).
The decline in auto property damage liability claims attributable to new collision avoidance technology in cars, according to the insurance industry’s Highway Loss Data Institute. August 1, 2011 INSURANCE JOURNAL-WEST REGION | 11
People Joe Waked
Joseph Waked was named CEO of Buena Park, Calif.based Freeway Insurance, a subsidiary of New York-based Confie Seguros. He will have responsibility for California, Texas and Arizona. Waked replaces Freeway’s former CEO John Klaeb, who has been named chairman. Klaeb will focus on strategic planning, including merger and acquisition activity. Founded in California in 1987, Freeway Insurance has more than 190 locations and 1,200 employees in Arizona, California and Texas, with related companies in New York, New Jersey, Washington and Oregon. In 2008, Klaeb and Waked partnered with private equity firm Genstar Capital to create Confie Seguros, a national provider of personal lines insurance with an emphasis on serving Hispanic consumers. Freeway Insurance, formerly Westline, served as an operating platform for Genstar and the Westline team to build out the California region for Confie Seguros. Klaeb was founder and CEO of Westline. Waked, a former attorney, served as Freeway Insurance’s COO. He is responsible for leading the company’s sales and operations functions. In recent years, his focus has been on raising capital, as well as spearheading acquisition efforts and subsequent integrations. Tony McIntosh joined Swett & Crawford as a California senior workers’ compensation broker. McIntosh comes to Swett with 25 years of specialty experience. He will be headquartered in California’s East Bay area. McIntosh previously was sales vice president for the San Francisco Bay Area territory at Networked Insurance Agents. Prior to that, he was underwriting director for Everest National, where he managed worker’s compensation programs for the company. Earlier in his career, he held marketing and field underwriting positions with Discover Re, Wexford/Aon and Berkshire Hathaway. Additionally, Robert Aquino rejoined Swett & Crawford as a broker in Fresno, Calif., after a long hiatus. He will report to Curt Biersch, Swett & Crawford executive vice president and West Coast Division leader.
12 | INSURANCE JOURNAL-WEST REGION August 1, 2011
Aquino returns to Swett from American E&S Insurance/ RT Specialty, where he served as a vice president. In his 13-year tenure there, Aquino worked on coverages including directors and officers liability, professional liability and employment practices liability insurance. Prior to that, Aquino held positions at Crump E&S Insurance Services and at retailer Winthrop Insurance Plans. Brett Rustand joined Tucson, Ariz-based Crest Insurance Group as a commercial property/casualty agent. He specializes in risk management for mid- and large-sized commercial clients. Prior to joining Crest, Rustand was a commercial lines agent in Tucson with CBIZ. He served 10 years in the U.S. Army flying Blackhawk helicopters. Montana Gov. Brian Schweitzer made three appointments to the State Compensation Insurance Fund Board. Elizabeth Best of Great Falls was named chairwoman. She is an attorney in private practice. She has served as a trustee for the Centerville School Board. Best previously served on the Board of Labor Appeals. Joe Brenneman of Kalispell, Mont., served as a county commissioner for Flathead County and owns and operates a dairy. He also served on the board of Cenex Harvest States and is active in Rotary. Wayne Dykstra of Billings, Mont., is president and CEO of Liquid Engineering Corp., an engineering and marine construction company. He’s been certified as a paramedic, and held an Arizona teaching certificate in emergency medicine. The Association of California Insurance Companies (ACIC) named Armand Feliciano vice president. Additionally, members of the association nominated and appointed a new chair, vice chair, and board of directors to continued on page 14
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serve for a two-year term. Feliciano has 17 years of legal, regulatory and legislative advocacy experience in California. He will be responsible for government affairs outreach on personal lines issues and regulatory efforts in California. Prior to joining ACIC, he managed regulatory advocacy efforts on managed care and quality issues as the associate director of medical and regulatory policy for the California Medical Association. Kathleen Bissell, assistant vice president of Liberty Mutual Insurance Co., completed her two-year term as chairwoman. Gregory Parini, vice president of CSE Insurance Group, will move from vice chair to become board chair. Alice Bisno, senior vice president of Automobile Club of Southern California, was appointed vice chair. Board of directors are: Kathleen Bissell, assistant vice president of Liberty Mutual Insurance Co.; Cary Cheldin, president of Crusader Insurance Co.; Cathy Crail, vice president of Western Mutual Insurance Co.;
Eric DuPont, assistant vice president & government relations counsel for MetLife Auto & Home; Hank Edmiston, vice president for Fairfax Financial; John Fitts, deputy general counsel for Progressive Insurance Co.; John Hernandez, vice president marketing for Majestic Insurance Co.; Mike Mattoch, assistant vice president and senior legislative counsel for USAA; Robert Oâ€™Hollearn, regional vice president for Allied Insurance Co.; Steve Patterson, vice president and general counsel for Oregon Mutual Insurance; Richard Shrader, senior manager government affairs for AAA Northern California, Nevada and Utah Insurance Exchange; Jim Sevey, executive vice president and general counsel for California Casualty; Cinda Smith, senior counsel for GEICO; Robert Suglia, senior vice president and general counsel for Amica Mutual Group; Jim Werbeckes, vice president, government relations manager for Employers Insurance Group; and Kevin Wilson, president of Century National
Insurance Co. ACIC is an affiliate of the Property Casualty Insurers Association of America and represents 300 property/casualty insurance companies doing business in California. One Risk Group LLC, a property/casualty insurance brokerage headquartered in the San Francisco Bay Area, hired Tad Brockie as senior vice president and director-life science practice. He brings 38 years of client advocacy and risk advisory experience to the company. Brockie joins One Risk from Lockton Cos. in San Francisco, where he served as executive vice president. Other notable experience includes more than 17 years at Aon Risk Services as a senior vice president, and a stint at Woodruff Sawyer as an account executive. He has served on the Chartis/ AIG Producer Council since 2004. He also has served on various committees for the Bay Area Council, including cyber security, healthcare, transportation and water.
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News&Markets Insurance Industry’s Economic Clout in California
he overall insurance industry accounts said Brad Wenger, ACLHIC president for more than 234,000 jobs in California California is the largest insurance marwith a payroll of $16.8 billion, a new report ket in the United States with 784 licensed finds. property/casualty companies offering auto, Also, property/casualty insurers paid a homeowners, commercial liability and worktotal of $50.2 billion in claims and expenses ers’ compensation insurance and 456 licensed in 2009, while life, health, disability and companies providing life, disability, longlong-term insurers paid out $43.5 billion in term care and health insurance coverage. In benefit payments that year, the industry addition to tallying the payroll and claims report notes. payments, the report The report, the highlights the investThe industry supports 2011 Insurance and taxes paid 234,000 jobs in California ments Industry’s Impact on by the industry. with a payroll of $16.8 California’s Economy, In 1996, insurers colbillion. was compiled by laborated with state the Association regulators and lawof California Life and Health Insurance makers to create the California Organized Companies (ACLHIC), the Personal Investment Network (COIN) to encourage Insurance Federation of California (PIFC), investment in California’s moderate and lowthe American Insurance Association (AIA), income communities. By 2007, insurers had the American Council of Life Insurers (ACLI) made 5,964 separate investments in qualiand the Association of California Insurance fied California Community Development Companies (ACIC). Investments since COIN was created in 1996. “This biannual report tells the story of These investments infused $19 billion into how much economic power insurance injects community development projects throughinto California’s economy and job market,” out California.
16 | INSURANCE JOURNAL-WEST REGION August 1, 2011
Insurance companies are among the largest investors in municipal bonds issued by state and local governments. A.M. Best data shows that insurers held $45.4 billion in California state and local bonds in 2009. “The billions of dollars that insurers invest in municipal bonds enable communities to undertake critical projects including building schools, community colleges, health care facilities, roads and bridges. Insurers help fund pensions, urban development and public works projects,” said Marjorie Berte, AIA vice president, Western region. According to the state, insurers will pay $1.9 billion in premium taxes, making the insurance premium tax the fourth largest source of General Fund revenue for the state of California. Insurance companies pay these premium taxes in addition to the fees and assessments needed to fund operations of the California Department of Insurance. While most California corporations pay taxes based on their net income, insurers pay a gross tax on the insurance premiums they collect each year. Insurers take no deductions and pay premium taxes whether they are profitable or not. Thus, the insurance premium tax has been a highly predictable and steadily growing source of revenue for California, according to the report. “Insurers doing business in California pay an effective state tax rate that is significantly higher than the rate paid by other financial institutions and corporations. California charges insurers the highest tax rate among the 10 largest insurance states,” said John Mangan, ACLI regional vice president. www.insurancejournal.com
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Web Exchange Gunning for Business
selling guns in a small space inside his insurance agency in the Phoenix suburb. A year ago, he had enough business to open a storefront, Merchant Firearms.
100 Agents in 100 Days
Reader comments included: Isn’t protection of self/loved ones and property what insurance is all about? As a side note, it is also fun, relaxing and a great family sport. Great story.
Does anybody else remember companies growing at breakneck speed…then after a year pulling out just as fast, or faster? Hopefully companies and agents have a date or two that develops into a serious long-term relationship … not many things happen that fast and last, don’t you agree?
Maybe in Arizona it IS good PR. On July 6, InsurnaceJournal. com ran a story about Aaron Merchant, a Farmers Insurance agent in Ahwatukee, Ariz., who in 2008, turned his firearms hobby into a small business,
Intoxicating Retrial Bid On July 19, InsuranceJournal. com ran a story about a repeat drunken driver in Alaska who was convicted of consuming at least a dozen drinks and causing a deadly head-on crash but is now seeking a new trial because of a public service announcement that aired over 1,400 times during her trial. Former oil company executive Lori Phillips was to have been sentenced in March, but her lawyer is seeking a new trial because a public service announcement discouraging drunken driving was broadcast at the same time the trial was under way for more than two weeks in 2010. Prosecutor Clint Campion said the judge was aware of the PSA and instructed jurors to avoid watching it. Butler’s request for a new trial came after it became known how many times the PSA aired on network television and 59 cable stations. The judge now will have to decide whether Phillips deserves a new trial.
Not a good PR move by this Farmers agent. I would be surprised if Farmers is OK with this type of venture that was once operated out of their insurance office.
This story generated lots of comments, including these: You drink, you drive, you loose. What part of that doesn’t this repeat offender understand? You have GOT to be kidding me! The audacity of this woman and her lawyer is unbelievable! She’s a former oil exec–a lack of accountability and personal responsibility seem to be job pre-requisites… Good to see another professional victim representing the neo-prohibitionist MADD organization is able to intimidate the judicial system. Guess who funded the campaign used to convict this woman? Your tax dollars to the tune of 35m+ annually. It’s time for MADD to stop using my tax dollars to push their anti-alcohol agenda.
18 | INSURANCE JOURNAL-WEST REGION August 1, 2011
risk in mind and have good underwriting discipline, they’re not CAT exposed and they’ll avoid writing garbage. They just want a wider channel to get their type of risk in the door.
From July 12 through Oct. 12, South Carolina-based Accident Insurance Co. will be looking to sign up new independent agents in 11 states in which it writes. AIC hopes to find new agency partners in Alabama, Arkansas, Arizona, Georgia, Indiana, Illinois, Kentucky, Mississippi, Missouri, Oklahoma and Virginia. The story ran on July 13 at http://www.insurancejournal.com/news/national/2011/07/13/206193.htm Jon Beckham, chief marketing officer at AIC, explains in this Insurance Journal TV podcast: http://www.insurancejournal.tv/videos/5675/ There were multiple comments from readers, including: Dear Insurer: Please come to Florida. You will sign 100 agents up in 10 minutes! Accident’s a good company. I think some of us are getting the wrong idea about the 100 agents in 100 days. I’m sure Accident does want to grow fast, but their appetite is not a ‘snatch and grab’ like we saw over the last couple decades in Florida. They have a specific type of
Insurance Charity Backs 10 More Groups The Insurance Industry Charitable Foundation (IICF) Western Division has awarded $52,415 in community grants to 10 non-profit organizations. This is the second round of grant funding for 2011 and increase the IICF Western Division’s yearly grant contributions to $232,915, touching 36 separate non-profit organizations in California. Through the second round, the IICF is supporting the following agencies: • Building Opportunities for Self-Sufficiency • CALICO • Camp Stevens • Holy Cross Medical Clinic • Kids First, Orange County • North Bay Children’s Center • Grossmont College • The Salvation Army of Fresno • The ARC of Alameda County • The Red Cross of Northeastern California The IICF ‘s Web site is www.iicf.org. www.insurancejournal.com
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News&Markets Agents Question GM Free Car Insurance Deal With MetLife Auto By Chris Rizo
ndependent insurance agents are raising concerns over a General Motors promotion that offers car buyers in the Pacific Northwest a year of free liability and damage insurance
from MetLife Auto & Home. Hoping to put more drivers in Oregon and Washington behind the wheels of its late model cars, General Motors announced that drivers in these states who take delivery of a new 2010, 2011 or 2012 GM car, truck or crossover before Sept. 6 will receive a year’s coverage from MetLife Auto & Home, a company which does business through independent agents. This departure by the insurer from the agency distribution system has some agents concerned. Bob Rusbuldt, Independent Insurance Agents & Brokers of America (IIABA) president and chief executive officer, said the marketing campaign presents a bevy of legal issues, which his group has outlined to the insurer. “We have raised licensing and regulatory concerns, along with important consumer issues,” Rusbuldt said. “MetLife Auto & Home has been open to our concerns and is seriously reviewing them.” John Timm, president of the Independent Agents and Brokers of Oregon, said GM’s promotion under MetLife’s In the Car program raises “a lot of questions” for consumers. 20 | INSURANCE JOURNAL-WEST REGION August 1, 2011
“There are a lot of unknowns; it’s a very vague offer,” said Timm, president of Timmco Insurance Inc. of Portland. “It’s doubtful that consumers will be well served.” The promotion was green-lighted by the two states’ insurance regulators. “We looked at the product thoroughly, and it’s our determination that this product is allowed by law,” spokesman Rich Roesler of the Washington insurance department said. Some producers, he added, have raised concerns that GM is acting as an insurance agent and asked if the program violates the state law against rebating. “In our determination, this is a group policy with GM holding the master policy,” Roesler said. In Oregon, approval came from the Insurance Administrator Teresa Miller. Spokeswoman Cheryl Martinis said the insurance department, in March, “took a close look at it and in the end, we found it was OK.” The MetLife Auto coverage comes with the purchase of new GM models from the Chevrolet, Buick, GMC or Cadillac lineups. The policies cover liability and physical damage, above the states’ required minimum standard, according to GM. The policy also covers anyone who drives the car with the owner’s permission, as long as the original purchaser continues to own or lease the vehicle. Policies have separate $500 deductibles for collision and non-collision coverage. GM’s offer is not available on cars used for commercial or fleet The coverage will be issued to “all eligible purchasers of qualifying automobiles who are licensed residents of Oregon or Washington,” GM’s terms state. Rates under the program are based on the vehicle’s make, value, horsepower and other factors, said Cece Newell, the Oregon Insurance Division’s prop-
erty/ casualty analyst. “It’s contrary to standard rating practice,” she said. Under the MetLife policy, if a new car is damaged beyond repair within the car’s first year or first 15,000 miles, whichever comes first, the company will repair or replace the vehicle with a new vehicle, without deducting for depreciation. Offered through Sept. 6, the coverage “at no additional cost” is part of a GM marketing test in two states where the Detroit-based automaker said it has not met its goals for market-share growth. MetLife proposed the program in a regulatory filing in February, Newell said, noting that the GM-MetLife program is like no other insurance program she has seen. “There were some serious considerations,” she said. “What we have to work with is what the law says, and there is nothing in the law to keep people from being innovative.” Met Life Defends Program Despite the questions by some agents, the insurer told Insurance Journal it is sticking with the GM deal for now. MetLife Auto & Home says it sees its direct marketing arrangement with GM as a way to increase its brand recognition, which it says should also help its independent agency distribution force. “Almost since its founding, MetLife Auto & Home has been known as a company utilizing multi-channel sales, so that we can sell policies to prospective customers in the way they want to buy them, and we remain committed to all our sales partners, both agents and employee benefit sales,” said company spokesman David Hammarström. “Increased brand recognition for MetLife Auto & Home is a positive for our company and our salesforce, as further customer awareness of the company and its value proposition will continue to drive sales through all distribution channels.” www.insurancejournal.com
In loving memory of
Bob Borisoff On the Anniversary of his passing.
1928-2003 â€œHe was my mentor in insurance and my teacher in life. I watched him turn clients into friends, friends into family and family into guarded treasures. A true gentleman of the industry. Always making people feel good about themselves. He was my hero and my Dad.â€? Derek Borisoff CEO
News&Markets Waffle House Serves Up Lessons in Risk Management
hat can Waffle House teach about disaster preparedness and risk management, especially in the wake of this spring’s devastating tornadoes? Plenty, says a supply chain expert at Olin Business School, Washington University in St. Louis. “The companies that are most frequently exposed to supply-chain disruption are the ones that have the
best risk management plans,” says Panos Kouvelis, PhD, the Emerson Distinguished Professor of Operations and Manufacturing Management and director of the Olin’s Boeing Center for Technology, Information, and Manufacturing. Natural disasters, such as hurricanes and the series of tornadoes that caused severe damage across the United States this spring, can have drastic effects on business operations. Kouvelis, who is also senior associate dean and director of executive programs at Olin, is a renowned expert on supply chain management. He teaches his students about the “Top Four” companies — Lowe’s Companies Inc., The Home Depot Inc., Walmart Stores Inc., and Waffle House Inc. — that are role models when it comes to disaster preparedness. “These companies have many stores in the southern part of the United States that are frequently exposed to hurricanes,” Kouvelis says. “They have good risk management plans in place 22 | INSURANCE JOURNAL-WEST REGION August 1, 2011
executives from around the country and are great examples of how their in courses ranging from supply chain supply chains get affected in two difbasics to understanding how technolferent ways. ogy affects supply chains. “On the one hand, your own supply Three years ago, a new course in chain is exposed. At the same time, the Master of Science in Supply Chain your stores are supposed to be the first Management program, titled “Supply to react and provide the basic supplies. Chain Risk Management,” was created Your supply goes down, while your to help executives deal with managing demand goes up.” all aspects of risk, including natuKouvelis teaches his students about ral disasters, commodity prices and the “Waffle House Index,” first coined exchange rates. by Federal Emergency Management “We put students in simulations Agency Director W. Craig Fugate in the where they have to make decisions in wake of the Joplin, Mo., tornado May the presence of disasters, and suddenly 22. The index, based on the extent of operations and service at the restaurant they realize how their thinking is different when faced with a worst-case following a storm, indicates how prescenario versus the everyday operation pared a business is in case of a natural of a business,” Kouvelis says. disaster. The earthquake and resulting tsu“If the Waffle House is open and nami in Japan this past March proserving food and has a full menu, then vided Kouvelis with several teachable the index is green,” Kouvelis says. “If it moments in relation to supply chain is open but has a limited menu, it’s yelmanagement. low. Numerous major supply chains, from “If it isn’t open, that’s red,” Kouvelis silicon wafers to flash memory to autosays. mobiles, were affected by the disaster. It’s rare to see the Waffle House “The Japanese car companies, even index hit code red and close, he says. though most of their assembly factories Waffle House is very well prepared are to the south of Japan, and of course in the event of a disaster. The Joplin have much capacity outside of Japan, Waffle House survived the tornado and definitely were affected by the earthremained open. quake,” Kouvelis “They know says. immediately Lowe’s, Home Depot, Even though which stores Walmart and Waffle companies are are going to be House are role models for exposed to natural affected and disaster preparedness. disaster, their they call their ability to handle employees to those scenarios will either put them at know who can show up and who cana disadvantage or ahead of the game, not,” he says. “They have temporary Kouvelis says. warehouses where they can store food “Disaster management and risk manand most importantly, they know they agement in global supply chains can can operate without a full menu. This actually be a competitive advantage,” is a great example of a company that he says. “It’s not pure risk minimizahas learned from the past and develtion. You have to think of it as an oped an excellent emergency plan.” opportunity to get ahead of the game Kouvelis teaches risk management by being better prepared.” and supply chain management to top www.insurancejournal.com
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News&Markets Little Leagues Improve Defense with Crime Insurance
new lock, a thick door and a steel bar across the shuttered front counter of the Canyon Lake Little League concession stand still couldn’t prevent the youth baseball league from taking a hit. The president of the Rapid City, S.D., league said vandals recently pounded the lock off to break in and make off with a cooler full of food and a small amount of money. And that’s small change when it comes to crimes against local Little Leagues. The volunteer-run organizations have long been the target of theft or embezzlement schemes. The issue raised enough eyebrows that Little League International sent a letter in 2009 to all local leagues offering tips to safeguard against financial problems after noticing an uptick in stories about missing funds at local nonprofits. Guidelines include having the international parent organization perform criminal background checks on adults. Little League’s insurance provider (Lexington Insurance) also offers a “crime insurance” policy for leagues to purchase, also in response to reports about criminal activity, Little League International president Stephen Keener said. The policy protects local leagues against “monetary loss caused by dishonesty, disappearance of money, securities or other property, and destruction of money or securities,” reads a description of the policy from Little League. “These are good people in communities trying to run a healthy, fun program for kids,” Keener said at a recent function at Little League headquarters. “(The policy) was in response to try to put some protections in place. Obviously, nobody can afford 24-hour security.” Officials at Little League
24 | INSURANCE JOURNAL-WEST REGION August 1, 2011
International in South Williamsport — where the World Series for 11- to 13-year-olds is played each August — note that the vast majority of leagues don’t have such problems. They also say they don’t necessarily hear about every instance of theft, since the national office has no direct oversight of local finances. No matter how big or small, each break-in, report of stolen equipment or forged check charge generates headlines, given the crimes are set against the backdrops of the innocent scenes of boys and girls swinging for the sandlot fences. “Ultimately, it affects the kids in the league,” said Canyon Lake president Rich Hegre said. Any money lost seeps out of a budget that relies on fundraisers, donations and fees forked over by parents to pay for items such as uniforms or new bats and catcher’s gear. In Honolulu, parents of players in the Makakilo Kapolei Honokai Hale league had a firsthand lesson in having to rebuild after a former treasurer, Paulo Salas-Selem, pleaded guilty in September to forgery and theft. Funds from registration fees and fundraising totaling $11,500 between December 2007 and April 2008 were deposited into a personal bank account and used to pay mortgage, credit cards and other expenses, prosecutors said. Salas-Selem was sentenced in January to five years of probation, more than $14,000 in restitution and community service, Hawaii Supervising Deputy Attorney General Christopher Young said. Pamela Witty-Oakland, a former Makakilo league treasurer, said she was asked to return to the board and audit
the books after the allegations surfaced. The league couldn’t buy new equipment the next year, and some parents grew distrustful, she said. One parent and former league board member told the Star-Advertiser of Honolulu last year that the league at one point dropped to about 100 players from a peak of 600 to 700. Witty-Oakland’s second stint on the board lasted a couple years, but she left confident the league was in much better shape and growing. The league is located in a part of Oahu that has been targeted by planners for growth, while the league itself has expanded into girls softball. “With that, we had to re-establish credibility and re-grow the league,” she said. “It’s been a real effort to get back to those numbers.” In Pennsylvania, accountant William McKernan was sentenced earlier this month to 11 1/2 to 23 months in prison for embezzling money to finance a lifestyle that included vacations, private schools and strip club visits. Prosecutors said McKernan swindled $57,000 from the Lower Gwynedd Little League, part of a larger scheme involving clients totaling $1.75 million. He has repaid much of the money and apologized at his sentencing hearing. Local league president Jay Gelman said the case didn’t have much of a financial impact this season. They also had insurance to recover anything that wasn’t returned. Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. www.insurancejournal.com
Study: U.S. Metro Areas Most Able to Withstand a Disaster
The Power of Independence The Strength of Unity UÊ ,iÌ>ÊÞÕÀÊiÝÃÌ}Ê `iÌÌÞÊ>`ÊVÀ«À>ÌiÊ >}iÀÞ UÊ 9ÕÊÜÊ£ää¯ÊvÊÞÕÀÊ >}iVÞ]ÊÞÕÀÊLÊvÊ LÕÃiÃÃÊ>`Êii«Ê£ää¯Ê vÊÞÕÀÊVÃÃÃ UÊ ÀiVÌÊ>VViÃÃÊÌÊ «ÀiviÀÀi`ÊÃÕÀ>ViÊ V>ÀÀiÀÃÊ>`ÊiÝVÕÃÛiÊ «À}À>Ã UÊ >ÀiÌÊVÕÌÊvÀ ÛiÀÊ£Ê Ê >ÀÃÊÊ ÜÀÌÌiÊ«ÀiÕÃÊ>`Ê ÞÕÊ«>ÀÌV«>ÌiÊÊ«ÀvÌÊ Ã >À}ÊÜÌ ÊÊÛÕi ÀiµÕÀiiÌ
26 | INSURANCE JOURNAL-WEST REGION August 1, 2011
hich U.S. metro region is most likely to come out of the next economic recession, natural disaster or other regional “shock” relatively unscathed? According to new research at the University at Buffalo, Washington, D.C, is a very good place to be. Other major cities like Baltimore, Philadelphia, Boston, Seattle and Pittsburgh also fare well on the list, but Los Angeles, Miami and Las Vegas do not. However, Rochester, Minn., actually tops the list, while College Station-Bryan, Texas, would not be so lucky. These two regions are ranked first and last, respectively, by a new online tool measuring more than 360 U.S. metros for their “regional resilience,” or capacity to weather acute and chronic stresses ranging from gradual economic decline to rapid population gains to earthquakes and floods. The Resilience Capacity Index (RCI), developed by Kathryn A. Foster, director of the Regional Institute, a research and public policy center of the University at Buffalo, the State University of New York, produces a single statistic for each region based on its performance across 12 economic, sociodemographic and community connectivity indicators, ranging from income equality and business environment to voter participation and the population of health-insured. As a gauge for how well a region is positioned to adapt to stress, the index can help regional leaders identify strengths and weaknesses and target related policy changes toward building their resilience capacity. “Conceiving of regions as capable of adapting and transforming in response to challenges allows researchers and practitioners to understand the conditions and interventions that may make one place more or less resilient and why,” said Foster, also a professor of urban and regional planning with the University at Buffalo’s School of Architecture and Planning. Foster developed the index as part of Building Resilient Regions, a national network of experts on metropolitan regions
funded by the John D. and Catherine T. MacArthur Foundation and administered by the University of California, Berkeley. The index, available online, features maps revealing geographic patterns in resilience capacity, detailed data profiles for each metro and a “compare metros” tool. Overall, Northeastern and Midwestern regions tend to be more resilient than those in the South or West, largely because these regions earn high scores for affordability, the size of their health-insured population, rates of homeownership and metropolitan stability, as measured by recent population change. Metropolitan areas with populations over 1 million vary widely in their resilience capacity. According to Foster, a region’s RCI score is not necessarily a sentence for success or failure in the face of the next population boom, economic recession or industry shutdown. “What it does tell us is that some regions are structurally more prepared than others, and thus have greater capacity to bounce back in the wake of stress,” she said. “Still, regions with a high capacity for resilience can squander their strengths just as those ranked low can rise to the occasion and perform above expectations.” Additional research efforts, a number of which are highlighted on the Building Resilient Regions site, are under way to measure how regions actually respond to stress. Future studies will explore which resilience capacity measures matter most for different kinds of stresses as well as the significance of key governance and environmental factors not captured by the RCI. www.insurancejournal.com
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Dakota, Utah and Wyoming) have signed an agreement to be part of the NIMA and nine states have passed SLIMPACT. According to Ballinger, there’s great difficulty for agents and brokers right now trying to program their systems for tax reporting and policy reporting because of the differ-
the Non-admitted Insurance Multi-State Agreement (NIMA) — are creating confusion for agents and brokers when it comes to NRRA compliance. Ten states and one territory (Connecticut, Florida, Hawaii, Mississippi, Nebraska, Nevada, Puerto Rico, Louisiana, South
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ences in NIMA and SLIMPACT. “So much for simplicity and uniformity,” he says. “If you write a multi-state risk, the home state will determine how you report the premium. But if that home state has elected to join SLIMPACT, but two other states have elected to join NIMA that are on the same risk, it starts becoming something that is almost impossible to program,” Ballinger says. “I feel very sorry for the agents and the brokers. In their best efforts to comply at least for the foreseeable future, it’s going to be chaotic.” Richard Bouhan, executive director of the National Association of Surplus Lines Offices (NAPSLO), says he believes the transition will be smoother than some anticipate. “Change is always difficult,” Bouhan says. “Brokers have been working for quite some time on policies that will be effective on July 21 or after, and so have already been operating under the new NRRA rules.” Bouhan notes that most surplus lines brokers won’t even be affected by the NRRA because most risks are not multi-state risks. “Some 90 to 95 percent of surplus lines risks probably are single state risks and are not going to change” under NRRA, he says. For surplus lines brokers, the new rules will make regulation and taxes for multi-state risks much simpler, according to Bouhan. “The brokers pay now the tax that is due to one home state and only have to comply with that state’s placement laws for surplus lines. … That’s a lot clearer and better than we had,” he says. Bouhan says he doesn’t anticipate many problems under NRRA. “I don’t think it’s going to be all that big of a problem.” Brown advises agents and brokers to understand their own state’s NRRA legislation, and that of any state in which the agency writes multi-state risks. “Familiarize yourself with the state legislations,” Brown says. “Get your hands on your own state’s legislation. Download that thing and flip through it; you are looking for the four issues: home state, exempt commercial purchaser, data reporting and insurer eligibility.” Most important, Brown says, is that agents and brokers understand their state’s definition of home state. www.insurancejournal.com
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a smart guy. One day he was driving home from work and it started to rain. He pulled up to a stoplight to make a right on red. He looked left to check on traffic. When he made the right turn, there was a guy running across the intersection to get out of the rain…and my customer didn’t see him…and hit him with his car…$900,000 later, the last medical bill was paid. “Fortunately, one year before the accident, this customer bought a $1 million personal umbrella policy from me. There’s not a time that I see him that he doesn’t thank me for selling him that policy. ... but because he bought the policy, there was almost no financial impact. So like I said, it’s my job to understand your situation and then help you get the most complete coverage for the least amount of money. Would you like me to do that for you?” What a powerful story. Every time a person hears that story, they are reminded of the need for proper insurance and they are motivated The best stories are to buy. Equally important, the ‘everyman’ stories… agent or team member that tells that could easily that story begins to shift from happen to everyone. being viewed as a “quoter” to a much more valuable “advisor.” If you would like to develop of the best examples came from an agent named Mike Williamson, your unique client attraction who answered by saying, “It’s my story, follow these simple steps. job to understand your unique Find the Right Story situation and then help you get The best stories have two key the most complete coverage for characteristics. First, they are the least amount of money.” what I call “everyman” stories. In He paused for a second, and other words, they are stories that then continued, “For example, I could easily happen to everyone. have a customer who’s a college Try to avoid bizarre situations professor. He’s a nice guy. He’s
f I asked you or one of your staff members why I should do business with your agency, how would you respond? If you and your staff can’t answer that question well, you are squandering one of By Bill Whitley your best development opportunities. When I ask agents that question, I hear responses like, “It’s our people,” or “We have great service,” or “We have over 110 years of experience.” These broad claims fail to demonstrate your value or differentiate you from the competition. Fortunately, there is a much more powerful way to answer this question. It’s called a client attraction story. Once it’s mastered, it will become your most powerful differentiator and business development tool. I recently had the opportunity to interview top producing property/casualty agents. I asked each agent if they could give me an example of a time when their advice or insight helped a client avoid a financial challenge. One
30 | INSURANCE JOURNAL-WEST REGION August 1, 2011
that are not likely to happen to your prospect. Second, good stories have an advice component. Based on your advice or insight, the client avoided difficulty or achieved a goal. Here are five questions that will help you find the right story: 1. Which piece of advice or insight did I share with a client that made the biggest impact? 2. Do I know anyone personally that benefited from having the right insurance? (or suffered financial loss because they didn’t have the right insurance?) 3. Who is my happiest client? ( or thanks me the most?) 4. Which client had the best result? 5. Which client had the biggest challenge?
a little background. In a client attraction story, the client is the hero. Introduce us to the client and let us know a little bit about his/her situation. 2. The client begins the journey. In a client attraction story, the journey is the goal the client wants to achieve. 3. The client runs into an obstacle. No matter how hard he/ she tries, something holds him/ her back. 4. With your help, the client overcomes the obstacle. This is the most important part of the story. What steps did you and your client take to overcome the obstacle? 5.Results. Thanks to the options you helped the client implement, life for the client has changed for the better. Practice Your Story Write your story exactly the way you would tell it. If possible, share the story with your client, the real life hero of the story, and document the dialogue. Edit your story and include the dialogue. Strive to recreate part of the dialogue you had with the cli-
Write the Story There are five classic parts of a well-developed story. You have known these five elements since you were a child and heard your first good bedtime story. It sounded something like this: 1. Once upon a time, there was a hero, 2. Who had reason to go on a journey, 3. Where he/she/it met a huge challenge, 4. To which there was a hero-inspired way out, 5. And he/she/it returned home safely. Keep these five parts in mind as you develop your client attraction story. 1. Introduce the hero and give
ent. Practice telling it out loud to yourself at least 10 times. Share with your sales team and share with prospects. Take 10 minutes and write your best story. Make sure it contains the insight or advice you shared that helped a client avoid financial difficulty or achieve a financial goal. Practice it, get good at sharing it and have fun attracting clients. Whitley is the author of “Eight Secrets of the Top Performing Agents” and is a speaker at insurance sales conferences. Phone: 704-9962800. E-mail: firstname.lastname@example.org www.insurancejournal.com
Business Moves based provider of auto, home, boat, life, and umbrella insurance. Its products are sold by community agents throughout the region and through PEMCO offices. Beecher Carlson, DW Harper Atlanta-based insurance broker Beecher Carlson has acquired Santa Ana, Calif.-based DW Harper Group, a medical malpractice broker. DW Harper Group, which writes $20 million in business a year, was founded in 2006 by David Harper, who will remain with Beecher Carlson. PEMCO Insurance PEMCO Insurance is offering home and automobile insurance coverage in Oregon. The Northwest company said it initially will focus its marketing efforts on the greater Portland area, but other Oregon residents can receive home and auto insurance quotes and buy policies through a range of purchase channels. The company said it would like to expand its network of Portland-area agents to offer coverage. PEMCO is a Seattle-
United Valley United Valley Insurance Services Inc. formed a new operating division named United Valley Risk Management Solutions to provide risk management services for large accounts. The managing director of the new unit will be Mark Smith. United Valley Insurance Services Inc. is a diversified insurance distributor with locations and affiliated insurance agencies throughout California.
R.J. Kiln, WNC Holdings Lloydâ€™s insurer R.J. Kiln, a member of the Tokio Marine Group, bought a 49 percent share in California-based WNC Holdings. Kiln said it was the largest investment it has made since it was founded nearly 50 years ago,â€? but it did not release figures for the acquisition. WNC, a managing general agent, provides flood, wind, hazard and auto insurance as well as policies for portfolios of second mortgages, home equity and condominium loans to financial institutions. It reported a net written premium in excess of $100 million in 2010. Kiln said it has worked in partnership with WNC since 1986. The companies said WNC would retain its existing brand and management structure. WNC management will retain the remaining 51 percent majority share of the business. McKenna Insurance, BasePoint Bonita, Calif.-based McKenna Insurance continued on page 34
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Business Moves continued from page 32
Services changed its name to BasePoint Insurance Services. BasePoint Insurance Services is an independent agency headquartered in San Diego County and specializes in auto, home and SR-22 insurance products. Fidelity National Title insurer Fidelity National Financial Inc. has sold its flood insurance operations to WRM America Holdings LLC. Under the agreement, WRM America of Uniondale, N.Y., will acquire 100 percent of the equity interests of Fidelity National Indemnity Insurance Co. and Fidelity National Insurance Services for $210 million. The closing of the transaction is subject to customary closing conditions and is expected during the fourth quarter of 2011. The sale is expected to result in approximately a $154 million pre-tax gain for FNF. FNF Chairman William P. Foley II said the company has been the nation’s largest flood insurance provider and the business has been “very profitable and consistent” for nearly 10
years but the sale represented an opportunity to realize the value of the business and redeploy the capital into other uses. WRM Holdings was formed in 2008 by Wright Risk Management, and Aquiline Capital Partners to serve the education market, with plans to grow into the not-forprofit and municipal markets nationally. . Aon, Ward Financial Aon Corp. has acquired Westfield Financial Corp. and its subsidiary, the Ward Financial Group, from Ohio Farmers Insurance Co. Aon said that Ward would be integrated with Aon’s McLagan Partners, its own consulting and benchmarking firm for the financial services industry. Terms of the deal were not disclosed. Ward provides benchmarking and best practices research studies for insurance companies in North America. It is known for its Ward’s 50, for which it identifies the top performing insurers in various industry segments. Jeff Rieder, current president
of Ward, will continue to lead the group, reporting to Michael Burke, president of McLagan Partners and Ward’s employees will join McLagan and remain in Cincinnati, Ohio, Ward’s current headquarters. Direct-Link Acquires Coachella Valley Insurance Services Direct-Link Holding Group LLC has acquired Coachella Valley Insurance Services Inc. (CVIS) of La Quinta, Calif. The transaction marks the 41st acquisition for Direct-Link Holding Group. CVIS has been a joint venture between Cumbre Inc. and the Molina family, and will now be 100 percent owned by Direct-Link Holding Group. Coachella Valley Insurance Services will continue to operate under its existing name, and President Bill Molina and his team of agents and account managers will continue to serve CVIS customers. Founded in 1999, DirectLink Holding Group specializes in acquiring insurance portfolios and stand-alone insurance agencies.
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34 | INSURANCE JOURNAL-WEST REGION August 1, 2011
The Competitive Advantage Denialism: It’s a Win-Win Situation
ithin confines, people can succeed without accepting reality. The Western church succeeded in building itself into a hugely successful entity while denying the world was round for 1,000 or so years. Many banks and bankers denied making bad loans, first to themselves and later to shareholders, regulators, newspapers, and anyone else they thought might listen. So denying reality does sometimes work. These people firmly abide by the belief that ignorance really is bliss. Of course, while holding to the ignorance is bliss theory, collateral damage cannot be considered because the damage is usually long-term (denying reality works best when only the short-term is considered, not the long-term). This means success has to be measured narrowly. The banker who made $50 million by denying reality is successful. The investors, jobless employees, taxpayers, and homeowners are not successful. When building a long-lasting business that benefits many stakeholders, doesn’t it make sense to start by identifying reality, even if reality conflicts with the owner’s desired reality? Many agencies have faltered and failed because the owners would not accept reality. They definitely observed Michael Spector’s first law of denialism: “The truth is not going to get in the way of people who are moved by faith, greed, fear, or desire to deny what they see.” Irrational Optimism Irrational optimism is a form of denying reality that runs rampant in this industry. Given the nature of the insurance industry, irrational optimism is a necessary www.insurancejournal.com
survival skill, according to some. I honestly agree with this in many circumstances such as individual sales and dealing one-on-one with carriers, their marketing reps and underwriters. In these small scale interactions, irrational optimism is valuable. But I vehemently disagree when it comes to actually running a business called an independent insurance agency. Big picture success requires more rational thought. It is impossible to build a truly strong (strong, not big) business in today’s fast moving, economically troubled world with a distorted vision. Clear vision is essential. Clear vision is often hard to get even with outside help. This industry is full of attorneys, accountants, consultants, business brokers and investment bankers who will take advantage of a business owner’s distorted vision. Many live for the opportunity to take advantage of people moved by faith, greed, fear or the desire to deny reality. These people are relatively easy shills for a sale. Sometimes, it’s like seeing a happy cow as it is led to slaughter. On the other hand, some good advisors have just given up. It is so tiring to get clients to see a reality they do not want to see. So they just go with the flow. They lead the horse to water, but since they cannot make them drink, they eventually quit even trying to lead them. All humans deny reality to some degree in some facet of their lives. Middle-aged men like to deny they are not attractive to 22-yearold women. Middle-aged women like to deny they are middle-aged. Americans in general like to deny they need to save money.
Some denial is humorous. Some is sad. Some denial leads to serious consequences. Alcoholics like to deny they have a serious problem. Agency owners like to deny their producers are not really producers. Cheated Opportunities This last point is a huge problem with serious consequences. When agency owners deny the reality that their producers cannot sell, they cheat themselves of opportunities, growth and value. They cheat themselves by giving producers house business to build their books and to justify the producers’ positions as producers. They cheat themselves out of hiring better people because good producers want to be treated better than “producers” who have been given all their business. They cheat themselves out of growth because by denying their producers cannot produce, they are telling everyone that growth and sales are not necessary. Then they exacerbate the situation by overtly pushing sales yet giving away accounts or setting expectations extremely low. Their actions speak louder than their words. Quite similar are the agency owners who constantly complain about the producers they hire only to discover five years later that these hires cannot produce.
By Chris Burand
continued on page N2 August 1, 2011 INSURANCE JOURNAL-NATIONAL REGION | N1
The Competitive Advantage Situation, continued from page N1
They blame the failure on the producers, but really this is denying complete management failure. If an agency cannot get new producers to generate at least a minimal book of business within five years, management has failed. It failed in its hiring process. It failed in adequately tracking the producers’ activi-
ties. It failed in offering adequate training, development, mentoring and/or leadership. Management denial in just these two categories cost agencies millions annually. “With much wisdom comes much sorrow; the more knowledge the more grief.” (Ecclesiastes) Accepting reality creates much grief.
With the pain of wisdom comes much opportunity. What great opportunities exist for those who do see reality? Agencies that are mired in deception are not going to hold onto their best accounts forever. They are not going to hold onto their good employees forever either. The agency that sees reality and runs an independent insurance agency business can pick those accounts and those employees. It may take a while to get the accounts, but they’ll eventually be won. It may take a while to get the employees too, but sooner or later those employees will get tired of working for extremely nice people that have no future. Eventually, they’ll choose economic security over extremely nice. Even the companies most loyal to their agencies are For many agency tired of agencies that will owners, it is time to not produce. take a good, hard Maybe you look in the mirror. have lusted after a competitor’s key company and you know their producers cannot really produce. Begin working on that company. They are more ready to listen today than ever before. Many wondered why a high profile company began planting with so many new agencies a few years ago, often planting with new agencies across the street from longtime “partners.” The company knew some agencies have no producers and therefore can’t generate new growth. They also knew that because those agencies cannot produce, their ability to move their business is limited (although they probably did not count on the market remaining soft for so long). For many agency owners, it is time to take a good, hard look in the mirror. What do you see? Are you in denial? The opportunities are fantastic for those that are not in denial. Those that are in denial won’t feel the pain for a long time because ignorance is bliss. It really is a win-win situation because both parties can be happy simultaneously, even if one is winning and one is losing. That is the price (or opportunity) of denialism. Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: email@example.com.
N2 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
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Agency Management Essentials: Read the Policy By Steven Plitt
he insurance agent told his client to “read the policy.” It was simple but important advice. More likely than not, the client did not heed the advice. When the insurance policy was received it was probably tossed in a drawer or file cabinet without even a glancing review of its provisions and coverage amounts. Surprisingly, policyholders generally have no legal obligation to read the insurance policy they purchased. Not in Mississippi, however. The Mississippi courts have adopted two important doctrines regarding
the policyholders’ choice to read or not read the insurance policy: (1) the duty to read doctrine and (2) the implied knowledge doctrine. Under Mississippi law, an insured is charged with the knowledge of the terms of the policy upon which he or she relies for protection. Atlas Roofing Mfg. Co., Inc. v. Robinson & Julienne, Inc., 279 So.2d 625, 629 (Miss. 1973). Under Mississippi law, the “knowledge of an insurance policy is imputed to an insured regardless of whether they read the policy.” Oaks v. Sellers, 953 So.2d 1077, 1083-84 (Miss. 2007). See also, Stephens v. Equitable Life Assur. Soc’y of the United States, 850 So.2d 78, 82 (Miss. 2003) (“insureds are bound as a matter of law by the knowledge of the contents of a contract in which they entered notwithstanding whether they
actually read the policy”); Cherry v. Anthony, Gibbs, Sage, 501 So.2d 416, 419 (Miss. 1987) (“even if [the insureds] had not [read the subject insurance policy], knowledge of its contents would be imputed to them as a matter of law”). Thus, the doctrines of “duty to read” and “imputed knowledge” are firmly rooted in Mississippi law. Where the insured does not read the policy, the insured cannot bring a negligence, negligent-misrepresentation, and failure to procure the requested coverage claims against the insurance agent. Mladineo v. Schmidt, 52 So.3d 1154 (Miss. 2010). The basis for this automatic bar against negligence is that the insured was required to read the insurance policy and, if the insured had read the insurance policy, any mistakes could have been cured. In those cases where the insured does not read the policy, and remains silent, the insured’s silence becomes a bar to suing the agent because that silence was the proximate cause of the ultimate loss which could have been avoided. Stephens v. Equitable Life Assurance Soc’y of the United States, 850 So.2d 78, 83 (Miss. 2003) (the insured “will not as a general rule be heard to complain of an oral misrepresentation the error of which would have been disclosed by reading the contract.”). There are competing public policy considerations involved with the imposition of a so-called duty to read or imputed knowledge doctrine. On the one hand, it can be argued that application of the duty to read and imputed knowledge doctrines as an automatic prohibition against claims brought against the agent and the insurance company might induce consumers to purchase policies through misrepresentation. Insurance companies and their agents may induce custom-
N4 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
ers to purchase policies through misrepresentation and face no liability for such behavior by simply delivering to the consumers a policy with different terms after the transaction is complete. On the other hand, prohibiting the duty to read defense would allow insureds knowingly to underinsure themselves and then complain that they did not get the coverage they requested after sustaining an uncovered loss. Certainly these are theoretical concerns. As a practical matter, neither insureds nor insurance agents and their insurers are motivated to manipulate the transaction in the foregoing manners. Unfortunately, Mississippi jurisprudence is an anomaly and in most states insureds fail to read their own insurance policy and then after an uncovered loss has occurred, complain that the coverage they actually received was not the coverage requested from the agent. Frequently these types of lawsuits are successful. One solution is to have a simple one-page statement stating the insured knows the insurance policy is an important document and in order to understand its terms and conditions it must be read. The statement can say that the insured will read the policy when received to make sure the policy contains the coverages requested and further agrees to notify the agent if the policy has any mistakes in coverages and limits. Most insureds will sign that statement because, without the cares of a given day before them it is an obvious self truth the policy should be read in order to make sure no mistakes have been made. However, where admissible into evidence in a malpractice case, it serves to remind jurors of the obvious — that we all should read our insurance policy and it is simply too late to claim that the policy was issued with incorrect coverages after a loss has occurred. Plitt is a licensed insurance agent and an attorney with the Phoenix law firm of Kunz Plitt Hyland Demlong & Kleifield practicing in the field of insurance law. Phone: 602-331-4600. www.insurancejournal.com
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Agency Management How Top 100 Firms Impact Business Risk
any members of the Insurance Journal Top 100 have at least one business objective in common. They all understand the importance of impacting their client’s business risks. These include not just the hazard risk but also financial, strategic, operational and human capital risks a business of any size faces. Our firm developed the idea By C. R. Ekern of Business Risk based upon the concept of Enterprise Risk which many of you have read a great deal about. The issue with Enterprise Risk is the fact that it does not translate effectively to accounts of all sizes as it contains risk financing and risk shifting tools that are not available to most upper middle market accounts (i.e., derivatives, high self funding or internal cost allocations). It is important to note that while the risk shifting tools are not available to these accounts; their Business Risk is still very real. In order to understand Business Risk it is critical that you first recognize the key risks that your clients face. In these instances the definition of “risk” takes on a whole new meaning. It goes well beyond the idea of hazard risks. In fact, when asking a chief financial officer about risk you are likely to
hear about investment opportunities, hiring reduction of indirect loss costs. These indiexpansion, equipment purchases or profit rect loss costs in many cases involve people, erosions. None of these items are addressed time and expense. primarily by hazard risk (i.e., insurance As I mentioned, many Insurance Journal transactions). Top 100 have adopted the ability to impact Here is the key to Business Risk; the abilBusiness Risk as a key part of their growth ity for your firm to mitigate or fund these and retention strategy. Here are some key risks, not remove them. Using the ability of issues concerning the successful execution of impacting a client’s Total Cost of Risk, an Business Risk mitigation and funding: astute broker is able to demonstrate how 1. Their producers understand a client’s their firm improves business. While many a client’s profitabilbrokers talk about Top 100 firms look to the ity, productivity, a cliapplication of Business Risk understanding competitiveness ent’s business, most mitigation and funding as a are simply talking and human capital key element of growth and about how the insurexpenditures. retention. So, how does a ance policy applies forward thinking itself. These producInsurance Journal Top 100 firm consistently ers are well versed in a client’s business chalimpact a client’s Business Risk and create lenges, cost structures and future goals. They a quantifiable value proposition? They use apply their value proposition as the vehicle specific resource capabilities that reduce a to help solve these client issues. client’s costs. 2. The firms have invested in resource For instance, let’s say a firm has reduced capabilities. It is through the application of a client’s costs by $100,000 through the resources such as claims management, risk application of resource capabilities. What control, specialty resources and industry spehave they really achieved on behalf of their cific resources that a Top 100 firm is able to client? actually create an outcome for a client. Financial Risk – They have improved a cli3. They create quantifiable value. Through ent’s profits by $100,000. the delivery of a quantifiable Stewardship Operational Risk – They have provided Report, these successful firms demonstrate the client with their impact on Business Risk and how they $100,000 of investhave improved a client’s business model. ment capital that This becomes the benefit to the buyer. improves productivMany members of the Insurance Journal Top ity. 100 look to the application of Business Risk Strategic Risk – At mitigation and funding as a key element of a 10 percent profit growth and retention. They understand that ratio, they have produe to the changing nature of business and vided the client with their key risks, it is important to stay relthe equivalent of $1 evant to clients. By addressing and funding million which allows business risks they are able to assure themthem to be more comselves a relevancy for many years that is not petitive against their dependent on the whims of the insurance own competitors. marketplace. Human Capital Risk – In most cases Ekern is president of C. R. Ekern & Co. His firm has the cost savings are worked with more than 25 percent of the Insurance Journal generated through the Top 100 firms. E-mail: email@example.com.
N6 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
Top 100 Agencies
About This Report: Despite lingering economic challenges and the ongoing soft insurance market, the nation’s leading independent insurance agencies fared much better in 2010 than in 2009. Property/casualty premiums written in 2010 fell for 28 percent of the privatelyowned agencies and brokerages on Insurance Journal’s Top 100 Property/Casualty Independent Agencies list. That’s up from the 37 percent of agencies that showed declines in total P/C premium in 2009. Even better, the majority (70 percent) of agencies in this year’s Top 100 showed yearover-year increases in total P/C premium for 2010 over 2009, compared to less than half (42 percent) of the agencies in last year’s list.
And eight agencies saw their P/C premium volume increase by 20 percent or more. Notable mentions include Confie Seguros and United Valley Insurance Services Inc., each of which posted increases in P/C premium of 30 percent or more. This year’s list also includes 12 newcomers, including: Cook, Hall & Hyde Inc.; SIA of the Great Lakes; Oklahoma Agents Alliance; Sterling & Sterling Inc.; Risk Transfer; Brightway Insurance; Cobbs, Allen & Hall; PacWest Alliance Insurance Services Inc.; Ascension Insurance Inc.; Parker Smith and Feek Inc.; M&T Insurance Agency Inc.; and RCM&D Inc. Insurance Journal wishes to thank all of those agencies and brokerages that were
N8 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
willing to share their information for the Top 100 report. The result is a glimpse at some of the nation’s top privately held independent insurance agencies and brokerages whose business volume is primarily retail, not wholesale. The more cooperation IJ receives, the more comprehensive this listing can be. All information has been garnered from voluntary online submissions from agencies, brokerages and best estimates based on other public information sources. There may be agencies eligible for listing but for which no information was received or located. Also, submitted data was not independently verified. For more information, contact Andrea Wells at firstname.lastname@example.org. www.insurancejournal.com
Top 100 Privately Held Property/Casualty Agencies Ranked by Total 2010 P/C Premium Written 2011 Rank
1 Lockton Cos. 2 HUB International Ltd.* 3 USI Holdings Corp. Alliant Insurance Services 4 Inc. 5 Keystone Insurers Group* 6 ISU Group* 7 Leavitt Group Enterprises Insurance Oﬃce of 8 America Inc. 9 Beecher Carlson 10 The IMA Financial Group 11 Hylant Group 12 J. Smith Lanier & Co. 13 Bollinger Inc. Heffernan Insurance 14 Brokers INSURICA Insurance 15 Management Network Combined Agents of 16 America LLC* Satellite Agency Network 17 Group Inc. (SAN Group)* Mesirow Insurance 18 Services Inc. Renaissance Alliance 19 Insurance Services LLC* 20 Iroquois Group Inc.* 21 Confie Seguros 22 Woodruff-Sawyer & Co. 23 Barney & Barney LLC 24 Neace Lukens Capacity Coverage Co. of 25 New Jersey Inc. Higginbotham & 26 Associates United Valley Insurance 27 Services Inc.* 28 Frenkel & Co. NEW 29 RCM&D Inc. 30 GreatFlorida Insurance* 31 Smart Choice* M&T Insurance Agency NEW 32 Inc. Houchens Insurance 33 Group 34 EPIC Insurance Brokers
2010 Total 2010 2011 2009 Total % Premium 2010 Total No. of P/C Premium Other than P/C Rank by Main Ofﬁce P/C Premium Change P/C Revenue Employees Written Premium Revenue $9,089,178,800 $8,737,040,000 4.03% $7,594,288,000 $633,480,000 2 4,107 Kansas City, Mo. $4,777,000,000 $4,309,982,110 10.84% $2,608,640,485 $645,000,000 1 4,900 Chicago, Ill. $2,786,000,000 $2,480,000,000 12.34% $5,503,000,000 $294,000,000 3 2,792 Briarcliff Manor, N.Y. $1,712,358,000
Web site www.lockton.com www.hubinternational.com www.usi.biz
Newport Beach, Calif. www.alliantinsurance.com
$1,667,597,801 $1,425,825,204 $1,280,000,000 $1,200,000,000 $1,089,156,000 $1,168,000,000
16.96% 6.67% -6.75%
$250,279,764 $223,000,000 $840,089,000
$200,111,736 $172,000,000 $128,951,000
5 6 7
2,220 1,180 1,400
Northumberland, Pa. San Francisco, Calif. Cedar City, Utah
35 Propel Insurance 36 Assurance Agency Marshall & Sterling 37 Enterprises Inc. 38 Insurors Group LLC* McQueary Henry Bowles 39 Troy 40 Moreton & Co. 41 SullivanCurtisMonroe 42 The Horton Group InterWest Insurance 43 Services Inc. 44 The Graham Co. Turner Surety and 45 Insurance Brokerage Inc. Parker Smith and NEW 46 Feek Inc. 47 The Mahoney Group NEW 48 Sterling & Sterling Inc. 49 Acrisure LLC Starkweather & Shepley 50 Insurance Brokerage Inc. The Insurance Alliance of 51 Central Pa. Inc.* 52 United Agencies Inc.*
www.keystoneinsgrp.com www.joinisu.com www.leavitt.com
$672,335,000 $660,000,000 $615,036,000 $575,000,000 $550,000,000
$714,623,000 $635,360,000 $662,355,000 $582,995,797 $455,000,000
-5.92% 3.88% -7.14% -1.37% 20.88%
$114,726,000 $360,000,000 $554,456,000 $400,000,000 $450,000,000
$74,348,365 $65,306,898 $66,230,000 $74,420,000 $65,026,494
11 14 13 10 15
413 438 605 540 445
Atlanta, Ga. Wichita, Kan. Toledo, Ohio West Point, Ga. Short Hills, N.J.
www.beechercarlson.com www.imacorp.com www.hylant.com www.jsmithlanier.com www.bollingerinsurance.com
Walnut Creek, Calif.
Oklahoma City, Okla. www.insurica.com
$404,000,000 $380,000,000 $368,400,000 $360,000,000 $359,574,213
$356,000,000 $275,000,000 $342,800,000 $277,000,000 $339,095,364
13.48% 38.18% 7.47% 29.96% 6.04%
$333,300,000 $1,123,000,000 $692,256,540
$62,373,861 $125,000,000 $47,200,000 $37,950,000 $63,805,991
18 8 25 30 16
50 1,175 288 393 516
Allegany, N.Y. New York, N.Y. San Francisco, Calif. San Diego, Calif. Louisville, Ky.
www.iroquoisgroup.com www.confieseguros.com www.wsandco.com www.barneyandbarney.com www.neacelukens.com
Fort Worth, Texas
$315,122,595 $304,127,572 $302,000,000 $297,362,671
$355,500,080 $68,980,425 $2,100,000 $1,523,620
$36,639,411 $33,304,996 $36,240,000 $38,789,745
31 36 32 29
240 258 250 43
New York, N.Y. Baltimore, Md. Stuart, Fla. High Point, N.C.
www.frenkel.com www.rcmd.com www.greatflorida.com www.smartchoiceagents.com
Bowling Green, Ky.
San Francisco, Calif.
College Station, Texas www.insurorsgroup.com
$250,000,000 $249,272,000 $245,862,166
$246,500,000 $238,000,000 $258,282,970
1.42% 4.74% -4.81%
$240,000,000 $349,978,000 $281,707,435
$22,000,000 $27,578,000 $29,284,849
58 47 43
180 163 292
Salt Lake City, Utah Irvine, Calif. Orland Park, Ill.
www.moreton.com www.sullicurt.com www.thehortongroup.com
Woodcliff Lake, N.J.
Mesa, Ariz. Woodbury, N.Y.
Grand Rapids, Mich.
East Providence, R.I.
Camp Hill, Pa.
August 1, 2011 INSURANCE JOURNAL-NATIONAL REGION | N9
Top 100 Agencies 2011 Rank 53 NEW 54 55 56 57 58 59 60 61 62 63 64 65 NEW 66 67 68 NEW 69 70 71 NEW 72 NEW 73 74 75
Agency Name Robertson Ryan & Associates Inc. Ascension Insurance Inc. Advanced Insurance Underwriters LLC Professional Insurance Associates Inc. Lawley Insurance Bainswest Inc. Bowen, Miclette & Britt Inc. SIA Group Inc.* Bouchard Insurance Lovitt-Touche Inc. Seitlin & Co. Haylor, Freyer & Coon Inc. Gowrie Group PacWest Alliance Insurance Services Inc.* TWFG Insurance Services Dawson Cos. Cobbs, Allen & Hall Sihle Insurance Group Inc. TrueNorth Brightway Insurance Risk Transfer TWIW Insurance Services LLC HNI
76 Ag States Group 77 78 79 80 81 82 83 84 85 86 NEW 87 88 89 90 91 92 93 NEW 94 95 96 97 NEW 98 99 100
2010 Total 2010 2011 2009 Total % Premium 2010 Total No. of P/C Premium Other than P/C Rank by P/C Premium Change P/C Revenue Employees Written Premium Revenue $192,000,000
Kansas City, Mo.
San Carlos, Calif.
Buffalo, N.Y. Tulsa, Okla.
$176,811,530 $170,000,000 $166,212,607 $163,850,000
$184,178,681 $165,000,000 $179,573,524 $162,000,000
-4.00% 3.03% -7.44% 1.14%
$17,793,320 $160,000,000 $142,898,968 $217,000,000
$23,366,174 $21,513,422 $15,307,000 $14,984,875
55 59 82 83
95 187 185 130
Jacksonville, N.C. Clearwater, Fla. Tempe, Ariz. Miami, Fla.
www.siagroup.net www.bouchardinsurance.com www.lovitt-touche.com www.seitlin.com
$159,000,000 $155,491,315 $154,954,237
$7,000,000 $104,707,492 $33,581,390
$20,000,000 $15,996,216 $20,740,248
66 79 62
55 177 133
www.twfg.com www.dawsoncompanies.com www.cahins.com
$150,619,765 $150,000,000 $149,105,578
$17,123,202 $18,500,000 $12,175,419
73 69 97
147 350 46
The Woodlands, Texas Rocky River, Ohio Birmingham, Ala. Altamonte Springs, Fla. Cedar Rapids, Iowa Jacksonville, Fla. Orlando, Fla.
www.sihle.com www.truenorthcompanies.com www.brightway.com www.risktransfer.com
New Berlin, Wis. Inver Grove Heights, Minn.
Van Nuys, Calif.
Spartanburg, S.C. Omaha, Neb. Hasbrouck Heights, N.J.
Momentous Insurance $133,000,000 Brokerage Inc. Millennium Corporate $125,000,000 Solutions AssureAlliance Inc.* $120,000,000 SilverStone Group Inc. $118,839,000 Scirocco Group & $117,000,000 Aﬃliated Cos. The Daniel and $116,832,000 Henry Co. North Florida Agents $115,652,116 Network* Insgroup Inc. $112,500,000 M3 Insurance $112,200,000 Solutions Inc. MJ Insurance Inc. $112,154,974 Oklahoma Agents $111,446,855 Alliance* Schiff, Kreidler-Shell Inc. $109,396,019 SAN of Florida / Comegys $108,387,156 Insurance Agency* Eustis Insurance & $107,705,812 Benefits TIS Insurance $106,290,317 Services Inc. John M. Glover Agency $104,259,000 Brower Insurance $104,000,000 Agency LLC SIA of the Great Lakes* $100,249,516 Harden $99,846,686 Senn Dunn Insurance $96,050,868 Celedinas Insurance $95,818,392 Group Cook, Hall & Hyde Inc. $95,150,000 The Advantage $94,200,000 Group LLC* Agents Helping $94,000,000 Agents Inc.*
St. Louis, Mo.
Oklahoma City, Okla. www.oaaonline.net
St. Petersburg, Fla.
New Orleans, La.
$16,000,000 $10,619,478 $11,855,866
$1,200,000 $252,049,249 $120,215,000
30 122 133
www.siagl.com www.hardeninsight.com www.senndunn.com
Green Bay, Wis. Jacksonville, Fla. Greensboro, N.C. Palm Beach Gardens, Fla. East Hampton, N.Y.
* = Indentified as having an affiliation with an independent network or cluster group. Employee count for these groups does not necessarily include all affiliates responsible for total premium written.
N10 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
Top 20 Banks In Insurance Brokerage Fee Income (2010/Nationally) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
2010 Insurance Brokerage Fee Income $930,372,000 $743,000,000 $139,131,000 $100,377,000 $82,602,000 $55,427,000 $50,253,000 $50,228,000 $42,132,000 $41,662,000 $41,000,000 $35,638,000 $34,175,000 $30,005,000 $27,691,000 $26,272,000 $24,976,000 $24,310,000 $20,000,000 $18,953,000
Bank Name Branch Banking and Trust Co. Citibank, N.A. Discover Bank Bank of America, N.A. BancorpSouth Bank Eastern Bank TD Bank, N.A. First Niagara Bank, N.A. Compass Bank Associated Bank, N.A. Wells Fargo Bank, N.A. Manufacturers and Traders Trust Co. The Frost National Bank Bank of the West Trustmark National Bank PNC Bank, N.A. Barclays Bank Delaware Towne Bank JPMorgan Chase Bank N.A. Fifth Third Bank
City, State Winston Salem, N.C. Las Vegas, Nev. Greenwood, Del. Charlotte, N.C. Tupelo, Miss. Boston, Mass. Wilmington, Del. Buffalo, N.Y. Birmingham, Ala. Green Bay, Wis. Sioux Falls, S.D. Buffalo, N.Y. San Antonio, Texas San Francisco, Calif. Jackson, Miss. Pittsburgh, Pa. Wilmington, Del. Portsmouth, Va. Columbus, Ohio Cincinnati, Ohio
Web site www.bbt.com www.citibank.com www.discovercard.com www.bankofamerica.com www.bancorpsouth.com www.easternbank.com www.tdbanknorth.com www.fnfg.com www.compassbank.com www.associatedbank.com www.wellsfargo.com www.mtb.com www.frostbank.com www.bankofthewest.com www.trustmark.com www.pnc.com www.barclaycardus.com www.townebank.com www.jpmorganchase.com www.53.com
Note about this report: These rankings include only commercial banks and FDIC-supervised savings banks which are required by the FDIC to report line item income like insurance brokerage. They do not include savings associations (SAs) regulated by the Office of Thrift Supervision (OTS), because SAs are not so required. Source: Michael White-Prudential Bank Insurance Fee Income Report - 2011 Edition
Top 20 Bank Holding Companies in Insurance Brokerage Fee Income (2010/Nationally) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
2010 Insurance Brokerage Fee Income $1,862,000,000 $1,780,000,000 $933,349,000 $298,000,000 $196,899,000 $139,131,000 $131,000,000 $110,000,000 $107,920,000 $88,000,000 $82,602,000 $74,057,000 $66,116,000 $55,427,000 $50,253,000 $50,227,000 $42,769,000 $41,551,000 $38,678,000 $38,501,000
Bank Holding Company Name
Citigroup Inc.. Wells Fargo & Co. BB&T Corp. Morgan Stanley American Express Co. Discover Financial Services Goldman Sachs Group Inc., The Ally Financial Inc. Regions Financial Corp. JPMorgran Chase & Co. BancorpSouth Inc. Huntington Bancshares Inc. HSBC North America Holdings Inc.. Eastern Bank Corp. TD Bank US Holding Co. First Niagara Financial Group Inc. Associated Banc-Corp BBVA USA BancShares Inc. Fifth Third Bancorp Stifel Financial Corp.
New York, N.Y. San Francisco, Calif. Winston-Salem, N.C. New York, N.Y. New York, N.Y. Riverwoods, Ill. New York, N.Y. Detroit, Mich. Birmingham, Ala. New York, N.Y. Tupelo, Miss. Columbus, Ohio McClean, Va. Boston, Mass. Portland, Maine Buffalo, N.Y. Green Bay, Wis. Houston, Texas Cincinnati, Ohio St. Louis, Mo.
www.citigroup.com www.wellsfargo.com www.bbt.com www.morganstanley.com www.americanexpress.com www.discovercard.com www2.goldmansachs.com www.ally.com www.regions.com www.jpmorganchase.com www.bancorpsouthonline.com www.huntington.com www.us.hsbc.com www.easternbank.com www.tdbanknorth.com www.fnfg.com www.associatedbank.com www.bbvacompass.com www.53.com www.stifelbank.com
Note about this report: With few exceptions, the Federal Reserve Board requires only what it defines as â€œlargeâ€? bank holding companies (i.e., BHCs with consolidated assets in excess of $500 million) to file line item fee income like insurance brokerage. Ranking excludes MetLife Inc., which is a traditional life insurer that does not engage in significant banking activities. Source: Michael White-Prudential Bank Insurance Fee Income Report - 2011 Edition
August 1, 2011 INSURANCE JOURNAL-NATIONAL REGION | N11
Top Performing P/C Insurers Top 25 Carriers’ Premium Growth Jumps 11.4% Q1 2011 vs Q1 2010 By Douglas A. Powell
roperty/casualty insurance companies have faced tough economic decisions over the last few years. Experts and analysts have expressed concern over soft pricing exhibited in the underwriting cycle. To avoid the consequences of inaction, many insurance companies appear to have responded with price increases in the first quarter of 2011. Unfortunately, many consumers do not understand the nature of these price increases and are voicing frustration over what they deem as unnecessary premium hikes. For the quarter ending March 31, 2011, the Top 25 writers of P/C insurance in terms of direct premium growth leveraged their experience and, despite a difficult marketplace, increased their direct premium written (DPW) approximately 11.4 percent over the quarter ending March 31, 2010, an increase of approximately $2.7 billion in
premium. In contrast, the more than 2,500 insurers that comprise the remainder of the industry did not fare as well, as their first quarter to first quarter DPW increased a mere 0.2 percent, or $209 million. In total, DPW for the industry was up more than $2.9 billion. See chart for details. In an impressive display of growth, financial stability and the leveraging of experience, the Top 25 carriers wrote over 22 percent of the P/C insurance industry’s DPW in the first quarter of 2011. Consistent with prior periods, less than 1 percent of the company count wrote over 20 percent of the industry’s DPW. The growth in DPW period-over-period for the first quarter is not a result of price increases due to the recent flurry of disasters. The January through March results were reported well before the catastrophes of April, May and June. Although companies increased their rates prior to these disasters, it should be anticipated that
DPW will increase period-over-period for subsequent reporting periods as a result of further price increases relating to the recent catastrophic weather events. If further price increases associated from these storms reach the consumer, it seems likely that even more consumer scrutiny will occur. All companies are faced with the reality that consumers have a desire for decreasing costs. Companies focused on their financial stability cannot succumb to this pressure. The premium growth exhibited by the Top 25 could be an indicator that the softest part of the cycle is behind us. If this is correct, the pricing cycle should have reached its bottom and firmer prices should assist the P/C insurance industry in period-to-period premium growth. Powell is a senior financial analyst with Demotech Inc., a Columbus, Ohio-based financial analysis firm. Web site: www.demotech.com.
Top 25 Property/Casualty Companies Based Upon Dollar Amount of Direct Premium Written (DPW) Growth Quarter Ending March 31, 2011 versus March 31, 2010 DPW Growth Rank
DPW $ Change
DPW % Change
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
National Union Fire Insurance Co. of Pittsburgh 2,946,619,280 2,268,136,502 678,482,778 29.91% State Farm Mutual Auto Insurance Co. 7,714,670,177 7,534,998,828 179,671,349 2.38% Liberty Mutual Insurance Co. 1,052,683,566 884,425,302 168,258,264 19.02% American Agri Business Insurance Co. 503,013,074 344,410,638 158,602,436 46.05% Allstate Fire and Casualty Insurance Co. 983,240,478 850,324,705 132,915,773 15.63% Travelers Property Casualty Co. 1,020,033,844 894,347,234 125,686,610 14.05% GEICO General Insurance Co. 1,575,414,634 1,460,464,696 114,949,938 7.87% Travelers Home & Marine Insurance Co. 620,711,531 512,234,664 108,476,867 21.18% Liberty Insurance Corp. 527,371,195 421,875,881 105,495,314 25.01% American Home Assurance Co. 388,424,038 297,600,172 90,823,866 30.52% Starr Indemnity & Liability Co. 162,313,634 77,491,405 84,822,229 109.46% Commerce & Industry Insurance Co. 274,585,432 198,480,711 76,104,721 38.34% Lexington Insurance Co. 1,067,230,630 992,943,421 74,287,209 7.48% GEICO Indemnity Co. 1,053,314,155 994,173,589 59,140,566 5.95% Continental Casualty Co. 1,035,450,229 977,480,567 57,969,662 5.93% 21st Century Centennial Insurance Co. 133,487,032 76,366,707 57,120,325 74.80% Garrison Property and Casualty Insurance Co. 168,419,878 113,227,111 55,192,767 48.75% USAA General Indemnity Co. 242,228,576 191,361,718 50,866,858 26.58% AGCS Marine Insurance Co. 128,466,409 78,583,958 49,882,451 63.48% Travelers Casualty Insurance Co. of America 188,814,140 138,937,960 49,876,180 35.90% Government Employees Insurance Co. 1,126,162,512 1,076,958,889 49,203,623 4.57% Erie Insurance Exchange 824,716,746 778,747,229 45,969,517 5.90% United Service Automobile Association 1,432,560,523 1,386,916,259 45,644,264 3.29% Zurich American Insurance Co. 1,130,641,080 1,086,621,141 44,019,939 4.05% American Zurich Insurance Co. 232,468,663 189,218,070 43,250,593 22.86% Top 25 26,533,041,456 23,826,327,357 2,706,714,099 11.36% All Others 94,002,988,639 93,794,409,154 208,579,485 0.22% Total 120,536,030,095 117,620,736,511 2,915,293,584 2.48% Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from a Highline Data Product. The NAIC and Highline Data do not endorse any analysis or conclusion based on the use of its data. N12 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
Homeowners Considerations for Homeowners on the Coast A
s we make our way toward the midway point of the annual hurricane season, consumer questions regarding coastal properties are on the rise. Hurricanes make great TV. When you get past the hype that the media can bring to storm season, they actually provide a valuable service to the insurance industry. They get people calling to By Kasey Vaughn check on their coverage. There is no better opportunity for an insurance professional than when the public calls, seeking advice and answers. To better prepare you for those opportunities; it seems appropriate do a quick refresher on major considerations for and Bill Gatewood writing coastal property. Wind Coverage Obviously the biggest issue is wind coverage. It may be that a homeowner has wind coverage included on their primary policy, perhaps they are part of a wind pool or maybe the homeowner has standalone coverage. However if a customer is asking if they have wind coverage, then they are asking the wrong question. Having wind coverage is one thing, understanding how it works is quite another. As the homeowner’s trusted advisor, your job is to help your customers understand how coverage applies when the wind blows. Some key points to discuss are: Deductible. Does the homeowner have a percentage or stated policy deductible? If a percentage, is the percentage based on TIV or Coverage A? Is there a named storm deductible? Homeowners need to understand how all these issues apply at the time of a loss. You don’t want to explain a percentage deductible after a loss. Is the wind coverage enough to cover the full replacement cost of the home? If not, an excess wind policy should be considered. Know what you’re selling. There can
be big differences in wind coverage from one carrier to another. If you don’t write a lot of coastal business, take some time to review the forms before you make recommendations. Appetites, rates and guidelines can change much faster in the coastal market than the standard market. Insurance to Value, Building Codes ITV can be a frustrating issue for agents and consumers in any part of the country. Discussions around replacement cost and market value only get worse in today’s struggling market. However, accurate ITV becomes much more important in coastal communities for a number of reasons. To avoid problems, be sure you have a recent replacement cost estimator for each of your coastal homes. Is the home written to full replacement cost? Do you know the value differences in the particular area you are insuring? Even if only a few miles apart, there can be significant differences between coastal and inland homes. Does your client’s coastal policy have a coinsurance clause? If so, are they properly insured to avoid a penalty? Another potential pitfall can be building code changes that leave your customer uninsured or underinsured at the time of a loss. Building codes in coastal areas can change frequently and dramatically. To be certain that your clients have the money needed to stay current with ever changing regulations, consider these two points. Does your client’s policy contain building ordinance and law coverage? If so, do they have enough coverage for a total or near total loss? Another good reason to have an updated inspection! Can your clients purchase additional ordi-
N14 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
nance and law limits? If so, are they aware of this option? Choose the Right Partner Choosing the right partner to make good on that promise in coastal areas is a decision you should not take lightly. The stakes are higher in coastal areas. You not only need a carrier with the financial wherewithal to pay the claims, but they must also possess the experience and expertise to handle a widespread, catastrophic event. Know the rating of your partner. Ratings can vary in this market segment. Make sure your partner can withstand the financial impact of a major loss.
Have some understanding of their claims process. Do they have a history of paying catastrophe claims? Do they have the staff to handle a large influx of claims? Does the carrier have a disaster plan? How quickly can the carrier respond after a loss? There are many things to consider when writing property insurance on the coast. With some advanced work on your part, you can help ensure that if your coastal clients can’t stand up to the storm, they will be able to stand again after the storm. Vaughn is the branch manager of Burns & Wilcox’ Morehead City, N.C., office. E-mail: email@example.com. Gatewood is the personal lines director of product and sales at Burns & Wilcox. E-mail: wrgatewood@ burns-wilcox.com. www.insurancejournal.com
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Autos The Future in Auto Claim Prevention Vehicle Technology Tools, Red Light Cameras, Better Roads and More Give Way to Reduction in Claims By Denise Johnson
here has been a reduction in auto insurance property damage and injury claims within the past 50 years through the introduction of safety belts, graduated licensing programs and laws against driving while intoxicated, according to the Insurance Institute for Highway Safety (IIHS). Intelligent vehicles, driver assistance systems, improved
road design and traffic controls, and continued driver safety campaigns promise an even greater reduction of accident-related claims in the future. Technology Helps While cell phones and text messaging have added to driver distractions, other technology aims to curtail the problem through enhanced electronics like navigation, forward and backward collision warning devices, and adaptive headlamps. In a 2010 report on the potential safety benefits of vehicleto-vehicle communications, the National Highway Traffic Safety Administration (NHTSA) estimates intelligent vehicles could
help in as many as 4.3 million crashes annually. “Intelligent vehicles are the next frontier of collision avoidance innovations that could revolutionize the driving experience and hold the potential of helping reduce many crashes,” said Sue Cischke, group vice president, Ford Sustainability, Environment and Safety Engineering. Ford is conducting research using so-called intelligent vehi-
cles that use Wi-Fi and GPS to wirelessly talk to each other and to detect dangerous situations. “Intelligent vehicles could help warn drivers of numerous potential dangers such as a car running a red light but blocked from the view of a driver properly entering the intersection,” said Paul Mascarenas, chief technical officer and vice president, Ford Research and Innovation. Ford’s plan is to work on an advanced wireless globally standardized platform that will allow vehicle to vehicle communication to reduce crashes. Though intelligent vehicles are a thing of the future, driver assistance technology utilizing forward looking radar, lane depar-
N16 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
ture warning systems, and blind spot detection currently available in cars today have already been shown to reduce crashes. “There’s just a lot of technology like that where automakers are trying to use advanced sensors and electronics to give drivers information about the dangers they may be getting into and alert them to the fact they may need to make some changes,” says Adrian Lund, president of the IIHS. A new study by the Highway Loss Data Institute (HLDI) found that crash avoidance technology in Volvo XC60 SUVs prevented one out four rear end crashes. The technology, called City Safety, uses an infrared laser sensor embedded in the windshield to monitor the area in front of the vehicle during speeds of 2 to 19 miles per hour. It will automatically brake to avoid front to rear crashes. The findings suggest significant savings to insurers is on the horizon, considering the estimated 1.7 million rear end collisions in 2010 reported by the NHTSA. “It’s showing a 27 percent reduction in property damage liability claims which means that people with that system or cars with that system are filing 27 percent fewer such claims. That’s a big deal to the insurance industry,” says Lund. Red Light Cameras The IIHS reports that red light running killed 676 people and injured an estimated 113,000 in 2009. In a 2010 telephone survey by the AAA Foundation for Traffic
Safety, 93 percent of drivers said it’s unacceptable to go through a red light, though one-third reported doing so in the past 30 days. Despite conflicting views on red light cameras, research suggests their use results in fewer crashes. IIHS researchers found that in the 14 cities that had cameras during 2004-2008, the combined per capita rate of fatal red light running crashes declined 35 percent, compared to previous years. “Red light cameras are basically making sure that red light runners are the ones paying for the enforcement,” Lund says. Roundabouts and Safety Though roundabouts tend to frustrate the drivers who navigate them, the U.S. Department of Transportation suggests the installation of roundabouts at intersections improves safety by decreasing vehicle speed and by eliminating right angle and left turn head-on impacts. In addition, multi-lane hazards are avoided and pedestrian crossings are shorter. As a result, there is a reduction in crashes and crash severity. “We are seeing … an increase in the use of roundabouts”, says Lund. “From an insurance perspective we know this is going to cut down on crashes. Mainly, what roundabouts prevent are the very serious crashes, where somebody gets t-boned in the side.” Driver inattention is also a factor in more than 1 million crashes in the nation annually causing injury, deaths, and damwww.insurancejournal.com
be the single most crucial issue related to auto accidents today, age remains a factor as well. In 2009, there were 33 million licensed U.S. drivers ages 65 and older. With aging comes the potential for medical issues, dementia, and a reduction in reaction time. Addressing the issue, some ‘For the first time we have technology that may actually states like New Hampshire and enable us to protect people have from the kinds of errors that Illinois instituted manwe know they are going to datory tests for make.’ elderly drivers and Pennsylvania has a deficit reporting law that year — or 1.3 million — involve requires doctors to report medidrivers talking or texting on cell cal issues that affect driving abilphones. ity. Distractions can be physical, Those in their golden years mental, or both. aren’t the only age group being While driver distraction may age costing nearly $40 billion a year according to the AAA Foundation. “90 percent of crashes have driver error involved in them,” says Lund. The National Safety Council (NSC) estimates 23 percent of all motor vehicle crashes each
scrutinized. Though drivers between the ages of 15-24 represent only 14 percent of the U.S. population, they account for 30 percent ($19 billion) of the total costs of motor vehicle injuries among males and 28 percent ($7 billion) of the total costs of motor vehicle injuries among females, reports the Center for Disease Control. According to the AAA Foundation for Traffic Safety, for every mile driven teens are four times more likely to be involved in a crash. The increased risk is due to obvious reasons like teens having other teen passengers, newly licensed drivers, underestimation of dangerous situations, inability to recognize hazardous situations, and the higher likelihood of speeding. Graduated driver licensing
(GDL) systems designed to delay full licensure while allowing teens to get their initial driving experience under low-risk conditions, and parent-controlled GPS trackers are ways states and parents are working to combat teen crashes. While driver safety campaigns have been around a long time, Lund doesn’t think they are effective. He sees vehicle technology as having the most promise in accident reduction. “Teens, older drivers and distractions have always been a problem,” Lund says. “That’s why we’re so excited about this new crash avoidance technology, because for the first time we have technology that may actually enable us to protect people from the kinds of errors that we know they are going to make.”
August 1, 2011 INSURANCE JOURNAL-NATIONAL REGION | N17
Autos Safe Driving Habits Pay Off for Consumers with Usage-Based Insurance Programs and Towers Watson providing insurers with access to the technology they need to track this information. he driving habits of personal auto con“I can’t get through a week without havsumers are shaping the way carriers price ing two or three more insurers asking to get coverage today. Those carriers providing more info about usage-based insurance in usage-based insurance (UBI) options, includgeneral or [our program] ing telematic systems Drive Ability,” says or devices to monitor Usage-based auto Robin Harbage, Towers an insured’s driving and programs are changing Watson. “It is the hottest mileage habits, are findthe personal auto thing going on in auto ing increased interest insurance market. insurance and everybody from consumers thanks is realizing how it is to driver discounts for changing insurance.” customers willing to participate. UBI Programs Growing Nationwide UBI programs have become more popular Harbage says at least 60 percent of auto recently as big auto insurance carriers like insurers have a UBI system in place in at Progressive and Safeco launch new product least one state, and that number is growoptions. Storing, analyzing and monitoring, which is why agents should learn about ing the data has also become a big business these programs. with companies like Hughes Telematics By Amy O’Connor
“It is unlikely that agents won’t see at least one carrier use this in their state,” he says. “It will go from a novelty, to clients coming in and asking agents about it. We are seeing more and more of this as time goes on.” Agents that understand UBI and the programs available can serve as a marketing advantage for interested clients. “The argument from some consumers is this is to their advantage,” says Richard Hutchinson, usage-based insurance manager for Progressive in Mayfield, Ohio. “Customers that don’t use their car often but are in an expensive area say, ‘I’d like a more customized model.’ We do market to people in high priced insurance markets.” Carriers are also benefitting from using UBI programs. “Most carriers that launch these programs see their actual loss costs decrease because
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insureds learn to drive better,” Harbage says. “If that continues, we could see a huge adjustment in driving in general. Wouldn’t you like to be an agent saying that you are not just saving money but saving clients?” Harbage says telematics and UBI programs are definitely not going away. “The supply of telematics devices will become ubiquitous, making the launch of usage-based insurance easier and easier,” he says. Towers Watson launched DriveAbility in June, which provides analytical support for insurers that translates to an individual score for each vehicle. Towers Watson posts the systems insurers need to collect the data on vehicle usage and supplies insurers with scores as a way to rate customers and encourage safer driving habits. The firm also works with insurers and the telematics device manufacturer to store the data in a database so the insured access it. Harbage says starting a UBI program is complicated, and storing and analyzing the massive amount of data could be overwhelming for an insurer. “Getting into the market can be a bit daunting,” says Harbage. “More clients are coming to us for help.” Hughes Telematics works with insurers to provide data through its In-Drive product, which helps carriers craft a UBI program. In-Drive provides the telematics device and data, and carriers are able to use a portion of the data collected to offer customer discounts. “We are not in the risk calculation business but in the data business,” says Erik Berkeman, acting general manager for the In-Drive Division of Hughes Telematics. “The insurance carrier can fine tune products and procedures to go back to the consumer and offer the discount that is appropriate.” In-Drive takes its telematics data a step further as well by monitoring how the vehicle is operating for the customer. The service does have a monthly fee because it incorporates this diagnostic data, as well as the usage-based information. Current Market The reasons why carriers develop usagebased programs are similar — discounts, better driving habits, more accurate ratings, etc. — but how each company chooses to utilize www.insurancejournal.com
the products and data varies widely. Progressive’s program, SnapShot, provides a device that is installed in the insured vehicle. It accesses the car’s computer and tracks how much the insured drives, how they drive and what time of day they drive, and collects other information such as the vehicle identification number (VIN) and the odometer reading. The insured receives a discount for signing up and after 30 days the device collects enough data for the insured to establish an individual, customized discount, typically in the range of zero to 30 percent. “At the end of the day, it is a far better model for establishing individual risk than using historical predictive models that are based on prior data from insurance models,” says Hutchinson. “In this case, it is not up to how accurate the model is — this is actually how you drive.” Insureds have the option to terminate the program at any time. It is currently available in 37 states and Progressive plans to be in at least 40 states by the end of the year. Hutchinson says advances in technology over the last few years have reduced the cost, enabling the carrier to offer the program without requiring an additional premium from insureds for the device or the program. The current marketplace has also helped motivate insureds to look into programs like this. “A lot of consumers have been having a rough time over the last several years, more so than normal, and this is a product that allows them to pay even less,” Hutchinson says. Safeco has a UBI program that is available in most states called “Low Mileage Discount.” It offers a discount of up to 20 percent for insureds that drive less than 8,000 miles per year. The insured lets their agent know how many miles they drive and a discount is determined by that. There is no device to monitor mileage, but Safeco has a proprietary system to verify the mileage on occasion.
James Holston, product manager in Safeco’s National Product Development Group in Seattle, Wash., says that vehicles that drive less than 8,000 miles a year account for about a quarter of all vehicles in the country, which has made this a very popular program. “In a tight economy with high gas prices, customers are looking to save money,” says Holston. “This discount is for those cars that are low mileage.” Safeco’s Teen Safe Driver Discount is not a usage-based program but utilizes a device to track a teen’s driving habits and provides personalized feedback on how the teen is
driving through a weekly report. There is a discount just for enrolling in the program, but the insurance rate is not impacted by how the vehicle is driven. Another Safeco program, Rewind, provides instant forgiveness for an at-fault accident, ticket or other minor violation for the first policy term. The way the insured drives determines if Safeco will waive the violation permanently. Both the Rewind and Teen Safe programs use a small device from Octo Telematics that a customer can install in their vehicle to monitor the insured’s driving habits. Shawn Anderson, a Seattle-based innovation architect supporting Safeco Insurance, says the focus of these programs is not the technology device, but rather providing savings to insureds for participating and for driving safer. “Safeco is not selling technology, but encouraging safer and more responsible driving behavior,” he says. “Customers want to be recognized with insurance discounts and savings.”
August 1, 2011 INSURANCE JOURNAL-NATIONAL REGION | N19
News&Markets Sony Insurer, Zurich, Files Suit to Deny Data Breach Coverage
ne of Sony Corp’s insurers has asked a court to declare that it does not have to pay to defend the media and electronics conglomerate from mounting legal claims related to a massive data breach earlier this year. Zurich American Insurance Co. asked a New York state court, in documents filed in late July, to rule it does not have to defend or indemnify Sony against any claims “asserted in the class-action lawsuits, miscellaneous claims, or potential future actions instituted by any state attorney general.” Zurich American, a unit of Zurich Financial Services, also sued units of Mitsui Sumitomo Insurance, AIG and ACE Ltd, asking the court to clarify their responsibilities under various insurance policies they had written for Sony. “Zurich doesn’t think there’s coverage, but to the extent there may be a duty to defend it wants to make sure all of the insurers with a potential duty to defend are contributing,” said Richard Bortnick, an attorney at Cozen O’Connor and publisher of the digital law blog CyberInquirer. Bortnick, who is not involved in the case, said Zurich is likely to argue that the sort of general liability insurance it wrote for Sony was never intended to cover digital attacks. Sony could not immediately be reached for comment. AIG
declined to comment, and Mitsui Sumitomo could not immediately be reached. In April, hackers accessed personal data for more than 100 million users of Sony’s online video games. Sony said it could not rule out that some 12.3 million credit card numbers had been obtained during the hacking. In May, Sony said it was looking to its insurers to help pay for its massive data breach. Zurich American, in court papers, said 55 purported classaction complaints have been filed in the United States against Sony. The insurer also said Sony has been subject to investigations by state and federal regulators since the breach. Zurich American has received claims for coverage from Sony under a commercial general liability policy written for Sony Computer Entertainment of America. The insurer said it does not have any obligation to defend any other Sony unit under that policy, since it only applies to the specific business in question. Zurich American said its policy only covers the Sony unit for “bodily injury, property damage or personal and advertising injury.” It said no such claims have been made in any of the class-action lawsuits. . The case is Zurich American Insurance Co and Zurich Insurance Co Ltd vs. Sony Corp of America et. al., Supreme Court of the State of New York, No. 651982/2011. Copyright 2011 Reuters.
Who Is Paying News Corp. Legal Bills? – D&O Coverage Heavily Involved
ith executives from News Corp., the media giant owned by Rupert Murdoch, and some of its subsidiaries heading for the exits, legal bills from the phone-hacking scandal rocking the company are no doubt stacking up. But depending on the companies’ directors and officers insurance coverage, News Corp. and its divisions aren’t likely to be responsible for paying the lawyers’ fees — at least for now. The D&O insurance policies at companies like News Corp. cover the legal fees for executives and board members. But if schisms between company leaders arise, and insurers clash, things could fall apart. Independent board members could turn on internal members and former executives could blame each other for wrongdoing — all of which could throw the policies into disarray. Big corporations such as News Corp., which has 51,000 employees and had $32.8 billion in revenue last year, usually buy at least $100 million in directors and officers insurance, legal experts said. In most cases, the coverage includes defending criminal charges for current and former executives. Former News International division CEO Rebekah N20 | INSURANCE JOURNAL-NATIONAL REGION August 1, 2011
Brooks, former Dow Jones CEO Les Hinton and others who may end up defending allegations, in theory, will have their legal bills covered by insurance. “There’s a reason white-collar attorneys make so much,” said University of Pennsylvania Law School Professor Tom Baker. “It’s because insurance pays them.” Fights could arise about the point at which coverage kicks in, and whether a policy should cover the fees at all, said a UK-based executive with experience in directors and officers insurance. He Rupert Murdoch requested anonymity because he was not REUTERS/Lucas Jackson authorized to discuss sensitive market matters publicly. Investigations generally aren’t covered, and a “claiming event” usually is required to trigger coverage, such as an arrest or an indictment, the source said. Copyright 2011 Reuters. www.insurancejournal.com
Medical Distributor Program Market Detail: Westrope’s (www.westrope. com) new medical distributor program is exclusively for its retail partners. The program allows the distributor or independent sales representative of medical products and services to certify they have the products and professional coverage required to sell and demonstrate within medical facilities. Benefits include: Occurrence form for general and professional liability for all product classes. Additional lines of coverage can be added independently (i.e., property, worker’s compensation, etc). Program is written through an admitted carrier with defense outside the limits. Eligible classes include: permanently implanted products, invasive surgical equipment, diagnostic tests and laboratory equipment, pharmaceuticals and vaccines, respiratory devices, DME and supplies, orthopedic devices and braces. Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Sandie Mullen at 816-412-7556
Kidney Dialysis Clinics Market Detail: 5Star Healthcare (www.5starsp.com) offers professional and general liability insurance for kidney dialysis clinics of any size. Offered through an A XI rated carrier, this program is exclusive to 5Star Healthcare and is available nationwide. Premium is calculated based on the annual number of clinic visits, instead of revenue. Available limits: As needed Carrier: Hiscox States: All states Contact: Customer Service at 877-247-9772
for special artisan trade contractors; convenience food stores, grocery store and supermarkets - for select retail convenience, grocery and supermarket stores that may be engaged in gasoline sales with or without restaurant operations; motels - or select independently operated or franchised motel/hotel risks that were built in the last 30 years ; office - professional services to clients and whose buildings do not exceed six stories in height; processing/service risks - designed for the wide variety of processing and service risks. Offers liability options for barbers and beauticians, funeral directors, optical and hearing aid establishments, pharmacist liability, printers’ errors and omissions and veterinarians; restaurants-for limited cooking, fast food, casual dining and fine dining food service establishments; retail/mercantile-offerings specific to the needs of assorted retailers; self-storage facilities-for the secure public storage risks; and wholesalers/distributors. Available limits: As needed Carrier: Unable to disclose States: Ariz., Idaho, Minn., Mont., Ore., S.D., Utah, Wash. and Wisc. Contact: Stacy Olson at 763-657-8647 or e-mail: firstname.lastname@example.org
Social Media, Sharing Sites Market Detail:CCBsure (www.ccbsure.com) can provide comprehensive protection for social media companies. Coverage’s include: advertising & personal injury; intellectual property rights of infringement; breach of contract; invasion of privacy; blanket professional liability; commercial general liability; property & business interruption, including cyber perils. This coverage can be obtained for a wide range of social media companies: from social networking websites, online gaming companies, web publishers/bloggers and music or video sharing Websites. Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Customer service at 800-336-5659
Car Wash Program Market Detail: Glatfelter Insurance Group (www.glatfelters.com) has developed a program tailored specifically for self-serve, exterior and full-serve car wash businesses. The Insurancenter car wash program is active in 46 states. Available limits: As needed Carrier: Unable to disclose, admitted States: All states except Ariz., D.C. Hawaii and N.D. Contact: Customer service at 800-233-1957
Businessowners Program Market Detail: Austin Mutual Insurance Co. (www.austinmutual.com) has expanded class eligibility and embedded coverage that covers equipment breakdowns, employment practices liability and automatic coverage extensions. The Austin businessowners program provides protection for the following business segments: Apartment-specifically designed for select apartment risks that were built in the last 30 years; condominium-for condo building owners. Offers a directors and officers liability option; contractors/ artisans-offers coverage specifically designed www.insurancejournal.com
August 1, 2011 INSURANCE JOURNAL-NATIONAL REGION | N21
News&Markets Insurance Keywords Add Big to Google Profits By Andrea Wells
nsurance is adding big bucks to Google’s profitability, according to new research. After Google posted impressive profits for the second quarter 2011, almost $7 billion, Word Stream, a Boston, Mass.-based provider of search marketing software, embarked on a study to find out what keyword categories fetched the highest costs-per-click in Google AdWords pay-per-click advertising (PPC). And the keyword “insurance” took the top spot, by a large margin. “Insurance was the winner by a landslide,” said Larry Kim, founder and chief technology officer of Word Stream. He said 24 percent of the most expensive keywords were related to the word insurance. That includes any word that people search containing the word insurance. It’s these high cost-per-click keywords that make Google the majority of its profits,
Kim says. Word Stream’s findings show that 97 percent of Google’s revenue comes from advertising on Google sites. In the last four quarters alone, Google made $32.2 billion in total advertising revenue. According to Word Stream, the top five keyword categories that demand the highest costsper-click, thereby netting Google the most money, are: 1. Insurance (example keywords in this category include “auto insurance price quotes” and “buy car insurance online”) 2. Loans (example keywords include “consolidate graduate student loans” and “cheapest homeowner loans”) 3. Mortgage (example keywords include “refinanced second mortgages” and “remortgage with bad credit”) 4. Attorney (example keywords include “personal injury attorney” and “dui defense
attorney”) 5. Credit (example keywords include “home equity line of credit” and “bad credit home buyer”) Google AdWords is a marketplace where advertisers bid on keywords to compete for top ad placement. The minimum bid per keyword is 5 cents, but Word Stream research shows that in highly competitive categories, such as “insurance,” Google can make up to $50 per click. Kim’s research shows that the term “insurance” can fetch up to $54.91 as a top cost-perclick bid. Kim says the keyword categories with the highest volumes and costs represent businesses with very high lifetime customer value — in other words, industries like the insurance industry can afford to pay a lot to acquire a new customer.
Advertisers Index E: East, M: Midwest, N: National, SC: South Central, SE: Southest, W: West Agency Ideas www.agencyideas.com N21 Agent Support Network of America www.asnoa.com W3, M3 Alliance of Insurance Agents & Brokers www.agentsalliance.com W31 Applied Underwriters www.applieduw.com W60, E44, M44, SE48, SC48 Arrowhead General Insurance Agency www.arrowheadgrp.com W33 Astonish Results www.astonishresults.com N5, W12, E12, M12, SE12, SC12 Blue Cross- Colorado Insert- CO Blue Cross- Nevada Insert- NV Blue Cross- New York Insert- NY Burns & Wilcox Ltd www.burnsandwilcox.com W9, E9, M11, SE9, SC11 California Earthquake Authority www.calquake.com W25 CDS Business Mapping www.riskmeter.com N18 Century National http://cnico.com W28 Charity First Insurance Services, Inc. www.charityfirst.com W14, E16, M16, SE17, SC14
Crump Insurance Services www.crumpins.com N3 Demotech www.demotech.com N7 Encompass Insurance www.encompassinsurance.com N13 Foremost Insurance Group www.foremoststar.com W15, SC3 Gateway Specialty Insurance www.gatewayspecialty.com W16, E1, M17, SE16, SC20 GeoVera Insurance Company www.geovera.com SE19, SC19 Gorst Company, The www.gorst.com W27 Great American Corporate www.greatamericaninsurance.com W13, E13, M13, SE13, SC13 Great AmericanSpecialty Human Services Division www.specialtyhumanservices.com W17 IIAB of Arizona www.iiabaz.com W28 Insurbanc www.insurbanc.com N15 ISU Group www.joinisu.com W26, E8, M14, SE18, SC16
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Leavitt Group Enterprises, Inc www.leavitt.com W2, E2, M2, SE2, SC2 MarketScout www.einsurancesymposium.com N17 McGowan & Company, Inc. www.mcgowaninsurance.com W19, E3, M15, SE3, SC15 Monarch E & S Insurance Services www.monarchexcess.com W29, W21 PersonalUmbrella.Com www.personalumbrella.com W5, E5, M5, SE5, SC5 RSI International www.rsimga.com SC21 SIAA www.siaa.net W7, E7, M7, SE7, SC7 St. James Insurance Group www.stjamesinsurance.com Insert- FL St. Johns Insurance Company www.stjohnsinsurance.com Insert- FL, SC United Insurance Holdings (UPC Insurance) www.upcic.com Insert- SC Universal North America www.uihna.com W23, SE15, SC17 Vertafore, Inc. www.vertafore.com N2 Zurich Insurance Company www.zurichna.com W59, E43, M43, SE47, SC47
Insurance Journalâ€™s Satire Issue is Coming Up Next Be excited! The August 15th issue will be packed with hilarious reader-submitted stories, incredible photos from IJ fans and wacky ads from our partners. Letâ€™s have some fun with this!
Dodd-Frank Anniversary: What About Insurance?
By David Sampson
he Dodd-Frank Wall Street Reform and Consumer Protection Act rewrote the landscape of the financial markets and it has permeated all sectors of the global economy. A year after the Dodd-Frank Act was signed, there continues to be uncertainty over how the legislation will ultimately be implemented and that is affecting investment and hiring. Federal and state regulators are trying to work through an enormous number of required new rules. Regulatory mission creep and the extent to which insurers are swept into the regulation of banks will directly impact insurance job creation and consumer costs. Congress appropriately distinguished insurers as very different from banks in the Dodd-Frank Act. Lawmakers correctly acknowledged the strong state-based insurance regulatory system that already exists, providing consumer protections and strict solvency standards. However, the signing of the DoddFrank Act one year ago only marked the first half of the overall financial overhaul process. As such, the Property Casualty Insurers Association of America (PCI) is now heavily engaged in the rule development stage and systemic risk designation process, which are equally as important for identifying and addressing overly broad regulation. Our top federal priority is preventing non-insurance regulators from imposing new standards for insurance activities. Financial Stability Oversight Council The Financial Stability Oversight Council (FSOC) is comprised of the nationâ€™s top financial regulators and will monitor systemic risk in the financial services sectors. Three insurance representatives sit on the FSOC, including: Missouri Insurance
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Director John Huff as the representative of National Association of Insurance Commissioners as a non-voting member; Michael McRaith, the new Federal Insurance Office (FIO) director as a non-voting member; and former Kentucky insurance regulator Roy Woodall was nominated by Treasury to serve as the voting insurance expert, but still awaits confirmation by the Senate. On one-year anniversary of the Dodd-Frank Act, we still do not have an insurance expert who is able to vote on critical regulatory decisions such as whether special rules for systemically important financial institutions will be imposed on any property/casualty insurers. P/C insurance companies by nature are not systemically risky. Home, auto and business insurance companies remained strong and stable throughout the financial crisis due to our unique regulatory structure that enforces strict solvency standards and consumer protections. P/C insurers are not highly leveraged or interconnected and have a fundamentally different business model than banks, a fact that warrants different regulatory treatment. Federal and Global Regulation Last month, Illinois Director of Insurance Michael McRaith took the lead of the newly created Federal Insurance Office (FIO) in Washington, which will play an important role in leading international negotiations on insurance issues. The FIO was created in the Dodd-Frank Act and will operate from within the U.S. Department of Treasury. FIO will be required to monitor the insurance industry, advise Congress on insurance issues, help lead U.S. efforts on international insurance issues, and advise various federal entities on insurersâ€™ systemic risk exposure. The new insurance office does not have regulatory power. Congress explicitly protected the state insurance regulatory system, which is different from other sectors of the financial services industry, and determined that the FIO will not serve as a duplicative federal insurance regulator. As an outgrowth of the financial crisis and the Dodd-Frank Act, international regulatory initiatives have gained momentum as well and are beginning to shape the agenda for U.S. regulators at both the state and federal levels. Itâ€™s especially significant for insurers when considering the U.S. writes almost 40 percent of the global insurance market. International issues continue to take on greater prominence for insurers as international regulatory bodies and forums develop new standards following the 2008 financial crisis. These international standards can affect all insurers in the U.S., regardless of size or the number of states in which they do business. PCI will continue to actively engage to produce a more effective and efficient regulatory system and avoid duplicative regulatory authority and unnecessary burdens on U.S. companies and their customers. Sampson is the president and CEO of the Property Casualty Insurers Association of America (PCI). www.insurancejournal.com
“94 million barrels of tankage capacity. 8,417 miles of pipeline. 90 terminal and storage facilities globally. 3 reﬁneries. 1 Zurich energy insurance policy.” Ron Walton, Executive Director, Risk Management NuStar Energy L.P.
Delivering the energy expertise you need to help meet your emerging insurance needs. NuStar Energy, one of the largest oil and gas pipeline and storage companies, needed a single, scalable insurance solution to meet its current and future growth needs. Zurich tailored a solution that streamlined claims reporting, reduced coverage gaps, and combined worldwide energy and marine – all under one policy. It’s an example of how Zurich HelpPoint delivers the help businesses need when it matters most. Watch the video to learn more. www.zurichna.com/stories8
In the United States, insurance coverages are underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company. Certain coverages are not available in all states. Some coverages may be written on a non-admitted basis through licensed surplus lines brokers. Prior results do not guarantee a similar outcome. Risk engineering services are provided by Zurich Services Corporation.
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