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DIRECT SALES DROPPED Liberty Mutual Bets on Agents

START-UP STORIES New Agencies Defy Economy

PUBLIC RISK PRIORITIES Risk Managers’ Checklist


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Inside This Issue February 9, 2009 • Vol. 87, No. 3 • East Region

EAST COVERAGE 8

| Agency Startups Defy A Hard Economy and Soft Market New Agencies Are Cropping Up Across the Country

6

| Ex-Judge Wants Fraud Conviction Overturned Former Pennsylvania Judge Challenges Insurance Fraud Verdict

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N8 Special Report Top 100 Agency Profile Georgia-based J. Smith Lanier and Co. — EmployeePowered Excellence

NATIONAL COVERAGE N1 | SPECIAL REPORT: Small Business/BOPs 5 Business Owner Policy Gaps and Pitfalls Agents Should Watch Out For N4 | SPECIAL REPORT: Small Business Pros and Cons of Running an Agency Small Business Unit N8 | SPECIAL REPORT: Top 100 Agency Profile Georgia-based J. Smith Lanier and Co. — Employee-Powered Excellence N12 | Closer Look: Errors and Omissions How to Avoid Agency E&O Claims N16 | Closer Look: Non-Profits/Social Service Study Shows Need for Standardizing Nursing Home Social Workers’ Credentials N20 | Closer Look: Non-Profits/Social Service Agent Advice Can Help Human Service Agencies in Tough Economic Times

www.insurancejournal.com

8

| Investigation: New York Insurers Did Not ‘Steer’ Customers Insurance Department Says Body Shop Allegations are False

Agency Startups Defy A Hard Economy and Soft Market New Agencies Are Cropping Up Across the Country

36 | Liberty Mutual Drops Direct Sales to Middle Market Businesses Insurer Puts Faith in Independent Agents 6

| New Jersey Nonprofit Not Liable in Drunk-Driving Deaths Closely Watched Case Limits Liability for Social Club

42

IDEA EXCHANGE N22 | Minding Your Business Time Management: 10 Tricks of the Trade

PERI’s Mary Stewart 5 Risk Management Challenges for Public Entities

N24 | Carrier Watch Stocks Down 14%; Middle Market Carriers Active in Intermediary Acquisitions 38 | Managing an Agency in a Troubled Economy Andrade’s Priority 2: Systematic Sales Effort 42 | Closing Quote: PERI’s Mary Stewart 5 Risk Management Challenges for Public Entities

DEPARTMENTS 4 35 N18 40 42

| | | | |

Opening Note People MyNewMarkets Business Moves Closing Quote

70 Managing an Agency in a Troubled Economy Andrade’s Priority 2: Systematic Sales Effort

February 9, 2009 INSURANCE JOURNAL-EAST REGION | 3


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Idea Exchange Opening Note

Where Consumer, Once, Was King

Publisher Mark Wells Chief Executive Officer Mitch Dunford

EDITORIAL

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t’s puzzling to ponder the thought process of a former judge who decides it’s in the public’s best interest to mothball the courthouse and replace judges with defendants empowered to hear any cases against them. But such is the situation in Massachusetts where last month, over the repeated objection of the state’s trade group for insurance agents, Insurance Commissioner Nonnie Burnes finally killed off the long-standing program through which drivers could appeal insurance surcharges for accidents in which they were more than 50 percent at fault. That program was long considered a necessary component of the Bay State’s quirky, former auto insurance system in which the state set all insurance rates but companies assigned surcharges. It has been a move talked about since last year, when the Bay State launched its “managed competition” system, where companies set their own rates, albeit within a range established by regulators. Implicit in that switch was the understanding that – since rating is now the domain of insurers and consumers are free to leave if they dislike rates – there’s no need to maintain the system. Plus, the appeals process was legally nullified when managed competition was passed by lawmakers. There was a lot to criticize about the appeals system. It was a relic. (Massachusetts was the only state to have such a process.) It was costly both to the state and consumers. (Whether won or lost, an appeal cost $50.) It had a tremendous backlog. (At some points, a hearing required a two-year wait.) And those appealed still ended up paying much higher premiums Insurance com- who for a long time, although they could later get refunds if panies, when it their appeals were upheld. But there was a lot right, too. Chiefly, it was this: More came to overthan 50,000 appeals were reviewed each year, and more than 45 percent of consumers who appealed won. charging, were To put it another way: Insurance companies, when it wrong about came to overcharging customers, were wrong to do so about half the time. It’s difficult to find a better reason in favor of half the time. keeping the former system. And it’s something that insurance agents, who have a legal duty to their customers, should be deeply concerned about. A shell of that former system will remain, a “streamlined” appeals process where insurers, rather than the state, review disputed decisions. The new procedures will be free, and must be completed within 30 days or the Division of Insurance can take disciplinary actions against the company. But it begs the question: If insurers couldn’t be trusted to do this correctly in the past, why can they be trusted to do so now? The hallmark of Massachusetts new system is that dissatisfied consumers can walk away from an insurer they feel has mistreated them. However, the state has no right to walk away from the responsibility to ensure the system is fair. Hopefully, the former judge realizes this; above all, that’s what consumers really deserve and want.

Kenneth J. St. Onge East Editor kstonge@insurancejournal.com 4 | INSURANCE JOURNAL-EAST REGION February 9, 2009

Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content/ and Interim Midwest/Southeast Editor Andrew Simpson | asimpson@insurancejournal.com East Editor Kenneth J. St. Onge | kstonge@insurancejournal.com South Central Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Patricia-Anne Tom | ptom@insurancejournal.com MyNewMarkets Associate Editor Chris Boggs | cboggs@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Columnists LMC Capital LLC, Catherine Oak, Bill Schoeffler Contributing Writers David J. Firstenberg, Steven Plitt, Mary Stewart, Lori Widmer

SALES V.P., Sales & Marketing Julie Tinney (800) 897-9965 x148 jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 dkaplan@insurancejournal.com South Central Eric Jeter (281) 655-0234 ejeter@insurancejournal.com

Midwest Lauren Knapp (800) 897-9965 x161 lknapp@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 dmolchan@insurancejournal.com

MARKETING Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com (619) 584-1100 x120 New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classified and Ancillary Sales Manager Nicola Coghill | ncoghill@insurancejournal.com (619) 584-1100 x125 New Media Producer Chad Reese | creese@insurancejournal.com

DESIGN/WEB Vice President/Design Guy Boccia | gboccia@insurancejournal.com Vice President/Technology Joshua Carlson | jcarlson@insurancejournal.com Graphic Designer Jamie Bethell | jbethell@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com

A D M I N I ST R AT I O N Accounting Manager Megan Sinclair | msinclair@insurancejournal.com Admin./ Marketing Asst. Kristina Delavega | kdelavega@insurancejournal.com Cover designed by: Guy Boccia

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2009 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052 FOR QUESTIONS REGARDING SUBSCRIPTIONS: please call 856-380-4176 or email subscribe@insurancejournal.com. You may subscribe or change your address online at insurancejournal.com/subscribe. ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or rbrown@fostereprints.com. Visit insurancejournal.com/reprints for more information.


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East Coverage Snapshot Investigation: New York Insurers Did Not Steer Customers to Some Body Shops

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n investigation by the New York Insurance Department has found that auto insurers in the state did not engage in a widespread effort to steer consumers to certain auto body shops - a violation of state law. However, in some isolated incidents, insurance company representatives engaged in practices “that could be considered violations of the (law) or regulations by providing improper or inaccurate information,” the department said in a release.The announcement by Superintendent Eric Dinallo fol-

lows two-year-old allegations by a trade association for body shops that insurance companies were illegally steering customers to designated collision repair shops. Many auto insurers in New York - and elsewhere - have created networks of affiliated repair shops, although auto insurers cannot force customers to choose their network of body shops. “This very thorough investigation is reassuring in that it shows auto insurers are largely complying with the laws that preserve consumer choice,” Dinallo said. “But it

does raise some issues which the department is addressing directly with certain individual insurance companies. Consumers have the right to choose where they want their cars repaired after an accident.” New York law prohibits companies from recommending or suggesting to their insureds that repairs be done at a particular place or shop unless their insured expressly asks for a

New Jersey Nonprofit Not Liable in Drunk-Driving Deaths

A

New Jersey nonprofit group is not liable for providing alcohol at a party where four guests were later killed in a drunk-driving crash, the state Supreme Court has ruled. The court upheld a law that allows licensed alcohol servers to be held liable if visibly drunk patrons later get into an accident, even if the patrons pour their own drinks. In the unanimous opinion published last month, the court determined that the Happy Hour Social and Athletic Club was not liable for the death of the four guests. The Maple Shade group held its annual Pig Roast in August 2002 where a truck with beer kegs was provided; guests served themselves. According to the opinion, John Kinnerman, a 34-year-old attendee, left with three other guests in his car to head to a bar. He lost control and hit a van, killing himself and the three guests. Court records show Kinnerman’s blood alcohol con-

recommendation. That means a company cannot make a referral – to its preferred program or repair shop, for example - during the claims process unless and until their insured asks for one. While most companies were found to comply fully with the Insurance Law and related regulations, the department found isolated instances of noncompliance. IJ

Ex-Judge Wants Fraud Conviction Overturned

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tent was nearly twice the legal limit. A wrongful death lawsuit filed by the widow of one of the passengers tried to blame Happy Hour Social, among others, saying the nonprofit did not monitor the intoxicated man. But party witnesses said Kinnerman was not visibly drunk. A trial court ruled against the widow, Diane Mazzacano, as did an appeals court. The case “boiled down to one essential but disputed fact — whether Kinnerman was allowed to serve himself” while obviously drunk, Justice Barry Albin wrote for the Supreme Court. “No one

6 | INSURANCE JOURNAL-EAST REGION February 9, 2009

retired Pennsylvania Superior Court judge wants a federal judge to reverse his conviction for insurance fraud stemming from $440,000 he collected in an August 2001 traffic accident. Attorneys for former Judge Michael Joyce say there isn’t enough evidence to support his conviction in November on mail who observed Kinnerman during fraud and money laundering the picnic was of the opinion charges. He is free on bond awaitthat he met the definition of visi- ing sentencing March 10. bly intoxicated.” Several friends and judges have Mazzacano’s attorney, Kenneth testified Joyce was in pain after McPherson, said his client is “cer- the wreck. But prosecutors say tainly disappointed” by the Joyce continued to golf, inline Supreme Court’s ruling. “We skate and scuba dive after the respectfully disagree with the fender bender — despite telling court’s reasoning,” he said. insurers his life and career were Club officials could not be all but derailed by the injuries. reached for comment, but Bolan, He retired from the appellate the group’s attorney, said he was court in January 2008, a few pleased with the outcome. IJ months after he was indicted. IJ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. www.insurancejournal.com


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It Figures

Declarations

$25.2 Billion

The Price of Defeat

Amount U.S. property/casualty insurers expect to pay homeowners and businesses for 2008 property losses from 37 catastrophes — the fourth highest cost in a decade and the highest frequency in a decade, according to preliminary analysis by ISO’s Property Claim Services Unit. PCS estimates that insurers paid 3.9 million catastophe claims for damage in 40 states. About 2.7 million personal lines claims accounted for 64 percent of the $25.2 billion loss, 340,000 commercial lines claims accounted for 27 percent of the total loss, and 876,000 vehicle losses accounted for 9 percent.

“This type of public nuisance litigation is not cost free.” — Charles Moellenberg Jr., a lawyer for Sherwin-Williams, which was among the three paint companies last month to win a $242,000 judgment against the state of Rhode Island. The money is to reimburse the three for legal costs stemming from the companies’ successful bid to overturn a jury verdict that could have forced them to spend billions of dollars cleaning up homes contaminated by lead paint.

$2.9 Million

Cheaper, Faster, Better

Amount awarded by a jury to a Wilmington, Delaware contractor who was injured at a Home Depot store when a stack of 18 wooden doors fell from a shelf above him. Thirty-two-year-old Ronald Payne was injured in 2001 at the store in Christiana. Payne’s attorney, James Hall, says Payne needed two operations on his back but neither could fully repair the injuries and he still can’t work. Hall says Payne suffers from depression, has lost his home to foreclosure and is separated from his wife. The jury award was three times larger than the amount suggested by Payne’s attorney.

“A change to a single producer license will greatly benefit insurance producers by eliminating the administrative burden and costs of maintaining and renewing multiple licenses.” — Neal L. Sullivan, chairman of the Independent Insurance Agents & Brokers of New York, which is working with the state’s insurance department on legislation to streamline the process of licensing insurance agents.

78,000 Number of traffic tickets issued last year by state troopers in Connecticut last year – a 16 percent increase over 2007. The rise in tickets has put an additional $327,000 in the state’s dwindling coffers. Tickets carry $123 to $371 in fines, and can range even higher for truck drivers caught speeding, and for drivers speeding in school and construction zones.

10% Percentage of Delaware drivers who are uninsured – a number expected to rise. The Insurance Research Council blames the economic downturn for the already high number and predicts the number of uninsured drivers in Delaware and across the country may hit an all-time high as unemployment numbers rise. Maryland, at 12 percent, is the only other state in the region with a double-digit percentage of drivers without insurance. New Jersey’s figure is 8 percent, and Pennsylvania’s is 7 percent. Nationally, the state with the highest percentage of uninsured drivers is New Mexico, with 29 percent. Massachusetts has the lowest percentage, just 1 percent.

1 Number of lit candles that sparked a blaze that eventually displaced a dozen people and caused $900,000 of damage to a condo complex in Silver Spring Maryland last month. Investigators believe a resident knocked over the candle while hanging up a coat. www.insurancejournal.com

Bottom-Line Blues “Simply put, in this environment, companies cannot afford to overpay for insurance coverage.” — Bill Bruno of Greenwich Associates, commenting on a new study by his company that suggests middle-market companies are reassessing their relationships with insurance brokers and adopting a more bottom-line approach toward securing insurance coverage.

License Postponement “What is the purported benefit of three months?’’ — Maryland lawmaker Anthony O’Donnell (R), commenting on a proposal by Governor Martin O’Malley to raise by three months the age which teens could get a learner’s permit and a driver’s license.

Car Claim Kidnapping “It’s just a very tragic thing that’s eroded her sense of trust; these were friends of hers. As of now, she still doesn’t have any feeling in her toes, and they’re still trying to do all kinds of therapies and injections to improve that.” — Albert Wunsch, lawyer for a 19-year-old New Jersey woman who was left outside for more than an hour on a snowlined road. Police say she was driven to and then abandoned there by three women who were upset with the victim over a car insurance claim. Police have not identified the woman, but said she was left wearing only a dress, a thin jacket and one shoe; the temperature outside was eight degrees. February 9, 2009 INSURANCE JOURNAL-EAST REGION | 7


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East Coverage News & Markets

Agency Startups Defy A Hard Economy and Soft Market Long-Term Growth Seen as a Boon for Big and Small Alike By Andrew G. Simpson

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were founded after 2004, and about 4 percent as recently as 2007 and 2008. The new agencies appear to

he independent insurance agency system is enjoying a bit of resurgence. For years, the number of agencies in the country had been declining but that trend, while not reversed, has been halted. The number in 2008 was 37,500 — the same as in 2006. That number is Florida’s Kevin VanDyke and Andy Norman from the 2008 Future One Agency Universe be concentrated in Florida, Study sponsored by the Louisiana, Texas and other Independent Insurance Agents states where coastal concerns and Brokers of America, have prompted some long-estabTrusted Choice and several carlished insurers to reduce writriers. The study attributes the ings, creating opportunities for stabilization to two key trends: other carriers to wade in and fewer mergers among larger appoint agencies. Also, some agencies and more start-up agents acquired years ago may agencies. Eleven percent of the be re-entering the fray as their agencies involved in the study non-competes expire.

Profile of New Agencies 11% founded since 2004 4% founded in 2007 and 2008 33% in South Atlantic states 20% in West South Central states 11% in Mountain region states 10% in East North Central states 10% in West North central states 48% of revenues from personal lines commissions 41% from commercial lines commissions 80% grew between 2006 and 2007 at an average of 55 percent 47 is average age of principal (compared to 52 for all agencies) Source: 2008 Future One Agency Universe Study sponsored by the Independent Insurance Agents and Brokers of America, Trusted Choice and several carriers. 8 | INSURANCE JOURNAL-EAST REGION February 9, 2009

Not surprisingly, most new ventures are small; few if any have the resources of, for instance, a giant like Marsh, which is behind one of the new agencies. But the new agency entrepreneurs are not small in ambition. Insurance Journal interviews across the country reveal these agency entrepreneurs have big plans and, in some instances, are showing promising early results. Eyes on Marsh In the Northeast, many eyes in the industry remain focused on one startup in particular: the

soon-to-launch retail agency arm of New York-based mega-brokerage Marsh. In October, the company said it would set up a separate retail agency to go after a share of the $80 billion in premium paid by smaller and emerging growth companies. That entity – Marsh & McLennan Agency LLC – is scheduled to start hiring producers as it opens in select cities across the country in the first quarter of 2009. Jack Butcher, president and CEO of the new venture, said the retail agency will conduct business separately from Marsh’s brokerage operations, although the launch is part of continued on page 8

Starting a Business? Go Rural, Think Small Question: How many people does it take to support an insurance agency? Answer: At least 1,089. One to run the agency and 1,088 townspeople.

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he population required to support different businesses varies greatly but insurance agencies have one of the lowest thresholds at 1,088, according to researchers at South Dakota State University. Only churches and full-service restaurants have lower thresholds. Businesses like home centers, floor covering stores and household appliance stores have high population thresholds. The researchers say that threshold levels help identify the businesses most likely to flourish, or at least survive, in rural towns. For example, a sporting goods store, with a threshold level of 23,027, will probably be more successful if it is located along a highly traveled interstate highway. On the other hand, a fullservice restaurant, with a threshold of 953, can succeed in a town with a population below 1,000. Retail businesses and services with threshold levels below 3,000 are generally more easily supported by rural communities. Threshold levels show that insurance agencies and brokerages, gasoline station/convenience stores, and grocery stores are some of the businesses that are most likely to succeed in rural communities. continued on page 9 www.insurancejournal.com


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East Coverage News & Markets Agency Startups, continued from page 8

Starting a Small Business, continued from page 8

Marsh’s overall growth strategy. cies, but also through acquiring Butcher said Marsh will purcommercial books or agencies. sue client-firms with revenue VanDyke, a former president from $50 million to $75 million. and CFO of a $130-million Marsh lacks a large customer wholesale nursery, said the base in this range, and some of insurance and risk management its brokerage division customers issues he faced in that job, in this size range could end up piqued his interest in owning becoming customers of the an agency. “I always felt like I agency in the future. could offer people help based Butcher declined to say on my experience buying it,” he which cities the new retail said. operation will launch. “When His business partner, we do go live, this will be a Norman, was a producer with a national agency,” local independhe said. “I do ent agency, Some agents expect to have a Thompson Baker may be refootprint that Agency. His will be attracfather had been entering the tive to carriers a partner there fray as their who are looking before selling to for an effective younger owners. non-competes distribution Those owners expire. model.” made Norman a He said job offer right Marsh will “almost certainly” after he graduated from college look to hire producers to staff in 2002 and he signed on as a these locations, as well as use producer. As he gained more current employees. It will also sales and experience, he grew look to acquire agencies. Marsh impatient for the next phase in has named as chairman of the his insurance career. “I wanted new agency, David L. Eslick, to be an agency owner,” he said. who most recently headed USI “My previous employers kind of Holdings, where he negotiated thought that, too, and they more than 50 acquisitions over encouraged it but they weren’t five years. on the same timeline that I Marsh’s strategy – injecting was,” said the 30-year-old new blood into an established Norman. system – is also being played They met through a mutual out on an industry-wide scale business contact, and used across the country, as newly their own cash to bootstrap launched agencies look to 2009 their new agency venture. as the prime time to make their It’s a common story. Many of mark. the faces behind new agencies are, like Norman, insurance Long-Term Outlook agency employees looking to In Florida, for instance, Kevin take the jump into ownership. VanDyke and Andy Norman For many who do, the possibiliopened their agency, VanDyke ty of a viable long-term busiNorman, around Thanksgiving ness is the prime motivator. last year. They’re already think“When I started thinking ing big for 2009. The two plan about what I wanted to do I to grow their Jacksonville-area knew I wanted to build someagency by outselling other agen- thing, bring my kids into it,

Some of businesses with the lowest population threshold levels: Religious organizations 750 Full-service restaurant 953 Insurance agency 1,088 Gas station/conv. store 1,454 Supermarket 1,552 Bar/tavern 1,749 Hotel/motel/B&B 1,771 Lawyer 2,342 Auto repair 2,382

10 | INSURANCE JOURNAL-EAST REGION February 9, 2009

Some of the business with the highest population threshold levels: Heating oil dealer 17,270 Gift/novelty store 19,737 Sporting goods store 23,027 Home Pet/pet supply store 46,054 The researchers acknowledge the limitations of using population threshold alone in deciding on where and whether to start a business. Clearly, other factors contribute to the success and failure of businesses, including business size differences, access to a highway, demographics differences, economic variety, a community’s age structure and residents’ disposable income. But they say that in rural South Dakota, retail threshold levels can be useful in determining which businesses are likely to survive, and which should be merged to maintain services in towns and counties with long-term population decline. Threshold levels can also be useful for deciding if a new enterprise has a good chance by itself, or if it might be beneficial to include a secondary enterprise. Source: Threshold Levels for Selected Rural South Dakota Retail and Service Businesses, by Saileza Khatiwada, Michael McCurry and Trevor Brooks, Rural Life and Census Data Center, South Dakota State University, College of Agriculture and Biological Sciences, December 2008. something for our future,” said John Witty, who in September opened Chattanooga Insurance Agency in Tennessee. “I realized having the income stream is nice but it’s nothing like owning your own business,” he said. Witty had been both a captive agent and a producer in an independent insurance agency, but it’s not his first time owning a business. Prior to his insurance career, he worked for a department store. When the owner sold

that business, Witty opened his own retail store. “I’ve always had an entrepreneurial bend and I’ve always known that no matter what I do, at some point I would do it on my own,” he said. “The rewards if you are successful far outweigh the risks in my opinion.” Witty has already lined up five carriers, and said that – if he can sign two more personal lines and commercial lines carriers, he’d “be set for the next 10 years.” IJ www.insurancejournal.com


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Special Report Small Business/BOPs

5 Business Owner Policy Gaps and Pitfalls Agents Should Watch Out For

By Chris Boggs

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usiness owner policies, traditionally referred to simply as BOPs, were introduced in 1976 and significantly revised in 1987. The BOP evolved gradually since the 1987 revisions to include risk classification and sizes not contemplated in the original or revised editions of the form. Additionally, many insurance carriers have built upon the Insurance Services Office’s (ISO) version to develop proprietary forms. BOP policies have long been viewed as the easy way to protect the client with the greatest amount of coverage, and to a great extent they are. BOP policies were designed to simplify the risk management process by packaging property and liability coverages into one form while including several coverage extensions that traditionally necessitated endorsements. However, reliance on the breadth of coverage automatically provided by the BOP may have blinded some to the form’s coverage gaps. BOP Business Income Limitations Business income protection provided by the BOP is relationally broad — there is no coinsurance with which the agent or insured need be concerned and the loss of income is “fully” covered for 12 months. But even in its breadth three weaknesses exist: 1. Ordinary payroll is limited to 60 days; 2. Coverage is limited to 12 months of www.insurancejournal.com

Many factors directly affect the “period of restoration” and the time it takes a particular entity to return to its pre-loss “operational capability.” Among the relevant factors: time for the adjustment process; time for building plans to be drawn and approved; finding and hiring a contractor; obtaining building permits; time to rebuild; and any building code-related issues. The insured may require more than 12 months to return to “operational capability” depending on the loss severity and problems in accomplishing all the necessary “period of restoration” factors. The BOP offers no way for the insured to increase the protection beyond 12 months. “Operational capability” as it relates to business income is an entity’s ability to operate at or near pre-loss production or sales capacity. This is a non-policy-defined business income term describing the point at which an insured can operate with the same level of inventory, protection; and equipment and efficiency as before the opera3. Extended business income is limited to 30 tional-closing loss. days. To clarify, “operational capability” is not synOrdinary payroll is not limited in the stanonymous with a return to pre-loss income levdard business income policies unless done so els, which may take much longer to accomby endorsement. The BOP is exactly opposite plish. “Operational capability” is merely the — unless endorsed otherwise, coverage for entity’s ability to produce goods and provide ordinary payroll is limited to just 60 days. service at the same level, efficiency and speed Should the insured desire to extend payroll to “ordinary” employees beyond these 60 days, the as before the loss (i.e., the ability to conduct “operations” at pre-loss levels). This highlights policy must be endorsed by notation on the the third limitation of declaration page, indicating the BOP’s business the number of days of coverBOP policies have long income coverage — the age desired, and payment of been viewed as the easy 30-day limit on the an additional premium way to protect the client extended period of must be made. indemnity. “Ordinary” employees are with the greatest amount Once the business has all employees other than of coverage. However, reopened and returned officers, executives, departreliance on the BOP may to full operational capament managers, employees have blinded some to the bility, returning to preunder contract or any other form’s coverage gaps. loss cash flows and employees specifically listed income levels may take a as being necessary, non-ordinary employees (done by name or job classifica- while. The unendorsed/unaltered BOP provides only 30 days of additional protection foltion). Payroll for these non-ordinary employees is covered for the entire period of restoration or lowing the period of restoration to return to pre-loss profit levels. If the insured feels this is 12 months, whichever comes first. inadequate coverage (which it probably is), the The insured has no remedy should the “period of restoration” extend beyond the 12 months period of extended business income coverage can be extended by a notation on the declaraof coverage provided by the BOP’s business tion page and the payment of an additional income protection. Business income lost after the 12-month period of indemnity is paid out of premium. the insured’s pocket. continued on page N2 February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N1


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Special Report Small Business/BOPs BOPs, continued from page N1

Business Personal Property – Seasonal Increase Limitation One often touted benefit of the BOP is the automatic 25 percent seasonal increase for business personal property. This is appropriate for those insureds subject to periods of foreseeable or even unforeseen increases in business personal property. However, this extension of coverage comes with a caveat — the business personal property limit must equal 100 percent of the average monthly values on hand for the 12 months (or the length the insured has been in business, whichever is less) immediately preceding the loss. This means that the value used for the current year has to include the seasonally increased values of the year prior. If the insured averaged $100,000 for nine of the previous 12 months and $120,000 for the remaining three (within the 25 percent), what limit must they carry to assure the availability of the seasonal increase protection? The insured’s average monthly value is $105,000 [(($120,000 x 3) + ($100,000 x 9))/12]. To qualify

Breakdown, Boiler and Artificial Electrical Damage Limitations Limitation may not be the correct term for System Breakdown, Boiler and Artificial Electrical Damage losses — exclusion is more appropriate. Loss caused by a systems breakdown, steam boiler or artificial electrical damage is specifically excluded in ISO’s BOP coverage form. To pick up coverage for these exposures requires an endorsement be attached. The BP 04 59 “Equipment Breakdown Protection Coverage,” adds back the necessary protection.

intended goal, providing a wide scope of coverage without the need of much agent/policy interaction. However, relying too heavily on the BOP without knowledge of its finer details can leave the client lacking at the time of a loss. This article discusses five limitations or exclusions that may adversely affect clients, but there are others. And the BOP program offers additional endorsements to personalize the policy to fit each client’s need. Even though the BOP looks like a full package of protection, proper time must be devoted to assure the insured is protected. Writer’s Note: This article has focused solely on ISO’s BOP form. Many carriers have developed their own forms. Non-ISO forms must also be carefully analyzed to find their own weaknesses and gaps. A BOP is not a “onceand-done” form — it must be monitored like any other. IJ

ISO BOP BOP policies accomplish much of their

Boggs is the associate editor of MyNewMarkets.com. E-mail: cboggs@mynewmarkets.com. Phone: 619-584-1100 ext. 137.

for the seasonal increase, the insured must carry $105,000 — not the $100,000 that is the most common amount on hand. Many agents fail to account for this policy provision, which potentially leaves their client without the proper protection should a loss occur during the time of a seasonal increase.

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REVIEW YOUR RISK

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SPECIAL REPORT Small Business

Pros and Cons of Running a Small Business Unit Agencies Say SBUs Take Dedication, Technology But Offer Profitability that would enable the firm to handle a large flow of potential clients and insureds. oing for the big fish may bring in Heffernan Group has operated a small busibig returns but some agencies ness unit since it opened its doors in 1988, but think having a strategic plan to go about nine years ago the firm invested to make after all those little fish is just as the unit a little bigger. Then about two years important. Three of the largest agencies in the ago, the firm again invested capital to make country say having small business units (SBUs) the SBU what it is today — 26 small business as in integral part of their agency is simply a producers generating about $4.2 million in revmust. enue. That’s up from $1.8 million in revenue just two years ago, Heffernan said. “I just can’t imagine not doing it,” says Tim Heffernan says that Templeton, president and while its SBU generates chief operating officer of ‘Not only is it just 4 percent of the North Carolina-based Senn Dunn. “For us it turned out serving the small agency’s total revenue, the unit and the people who that the client was getting clients but it’s run it are an integral part served better by having a of the company’s plan. small accounts unit. And it helping the rest He says there’s a big turned out that our producers of the company market in the small busiwho were very tenured, very ness arena that few other experienced, were really able grow. agencies target. “A lot of to work on more larger and carriers have done very more complicated accounts well in that arena and a lot of brokers really which then helped the agency grow a lot.” do not concentrate on it,” he said. “We saw a Senn Dunn, an Insurance Journal Top 100 lot of brokers, our competitors, not aggressiveagency with $22 million in revenue, brings in ly pursuing small business and almost letting just $500,000 in revenue through its small accounts unit, but Templeton says the benefits it go. So to me there was opportunity there for of having it go beyond that. “I think it has also us to give the independent agent touch to clients who might not have been getting it helped us grow the larger clients,” he says. “Not only is it serving the small clients but it’s from their current broker or on a direct basis.” helping the rest of the company grow.” For Steven Grossberg, president of The NIA Target Market For Senn Dunn and The NIA Group, the Group in New Jersey, also an IJ Top 100 success of their SBUs has depended upon findagency, having a small business unit is just ing the right target small business market. part of having an agency that writes all facets If the small business account fits with a of accounts — benefits, life, property/casualty standard market, or stock carriers, a lot can or personal lines. “We like to cross-sell small be done to make the operation very efficient, accounts,” he says. “We find it to be very effecsays NIA Group’s Grossberg. However, he tive. … What may be a small property/casualadded, the efficiencies just aren’t there when ty case could be a large group benefits case,” writing a small account through an alternate he added. market. For another IJ Top 100 agency, CaliforniaLinda Coleman, executive vice president for based Heffernan Group, targeting small busiThe NIA Group, who supervises the agency’s ness was always in the cards, according to small business division, says risk appetites for Mike Heffernan, founder, president and CEO. insurance companies are not very broad when “One of my goals was always to build a small dealing with small business clients, which can business unit and have it be more like personal lines,” he said. Heffernan envisioned an SBU be a challenge. “That leads you to go into the that used technology, procedures and systems continued on page N6 By Andrea Wells

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N4 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009

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SPECIAL REPORT Small Business Small Business Unit, continued from page N4

alternative markets and that requires a lot more involvement in the underwriting process,” she added. “You’ve got to be able to pick something up, answer it and put it back down,” Senn Dunn’s Templeton said. “The volume is a challenge. There’s a lot of renewals every

month. There’s a lot of activity going on every month.” According to Templeton, in order for Senn Dunn’s SBU to be effective, it had to decide what type of small business account to focus on. “We have to focus on things we can control, focus on things that are rela-

tively straightforward,” he said. “We get a call from a small contractor, we know exactly where to go, what carrier to use, we know how to get it done, we can turn a quote around very quickly,” he said. “But if we had somebody call with a really unique exposure, say a ship’s hull inspector that would take a lot of work and we really don’t have that expertise.” Templeton said, “sure there’s a market out there ‘We like to crossfor Mr. Hull sell small Inspector,” but the time spent accounts. … What chasing specialty may be a small coverages might have been better property/casualspent writing ty case could be a three retail locations. large group “As we benefits case.’ became more focused on the right carrier and right type of client our service improved,” he said. “Once we got the discipline to do that then we really had more time and more capability to handle those good Main Street businesses.” For Heffernan Group, much of its small business has gone to monoline workers’ comp carriers in California and to the surplus lines market, but Heffernan expects to do more in the future with standard carriers. “The Hartfords and the Travelers of the world definitely enjoy the fact that we have a dedicated unit that kind of mirrors their own corporate structure,” he said. “They are able to allocate the resources that they have for that unit directly.” Even though small business growth has been good with standard carriers, Heffernan envisions it being even better in the future. “One of our goals for this year is to try to take advantage of the fact that they are giving us resources. And we just want to have better results with them.” Phil Runge of Travelers’ Select Accounts division likes that Heffernan’s business model focuses on lower exposures and smaller premium based accounts. “Their business model fits in quite well with our business model,” he said. continued on page N14

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Employee

INSURANCE JOURNAL

TOP100 AGENCIES D. Gaines Lanier Chairman and CEO


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-Powered Excellence

With a Conservative View on Growth and Employees as Owners, J. Smith Lanier & Co. Has Risen to the Top Even in the Toughest Market Imaginable By Lori Widmer

F

or J. Smith Lanier & Co., 1981 was a big year. That’s when the people into the business and let them have an equity play in it; particWest Point, Ga.-headquartered insurance firm decided to ipate in the financial gain of the business. His shares grew at the same switch from what was a long history of rate.” being family-owned and operated to an Therein lies the beauty. If employees share the Insurance Journal employee-owned business model. wealth, in J. Smith’s estimation, they have a vested Top 100 Agency Profile interest in the health and management of the comNot that the old model wasn’t working. In fact, RANKING: No. 9 pany. In turn, everyone wins. In 1993, the ESOP the company had been operating as a family-owned Agency Name: was born. enterprise since its inception in 1868. That’s right J. Smith Lanier & Co. Today’s J. Smith Lanier & Co. employee is win— 1868. Started just after the Civil War by Ward Headquarters: West Point, Ga. ning big time. Since 1993, the company has quadruCrocket and Lafayette Lanier, the company was Year Founded: 1868 first part of a dual operation — a bank and an Additional Locations: Alabama - pled in value and has managed to outpace even its own expectations in terms of success. Each insurance company — that the founding brothers Huntsville, Birmingham, Opelika; employee receives equity — Gaines estimates that established in order to help their community Florida - Tallahassee; Kentucky a staffer making $40,000 can bring in an additional rebuild after the war. Today it’s one of the top Lexington; Tennessee $160,000 to $180,000 in equity. While it’s true ranked independent brokerage firms in the country, Chattanooga, Knoxville, employees are not the majority shareholders — yet it still maintains its regional location; the comMurfreesboro; Georgia - Albany, they comprise 20 percent of the shareholder interpany’s main headquarters is in West Point, Ga., with Atlanta, Augusta, Carrollton, 19 offices throughout Georgia, Tennessee, Alabama, Columbus, Loganville, Manchester, est with an additional 70 shareholders making up the remaining interest — they are very much Kentucky and Florida. Newnan, Thomasville, Waycross, invested in the well being of the company. Presently at the helm is D. Gaines Lanier, CEO West Point. Gaines says there are no regrets going employeeand a descendant of the founders. In fact, the 2007 Premium Volume owned. At the outset, the changes were difficult to Lanier family has headed the company since its Property/Casualty: see, but within just a few short years, employees inception, passing ownership from one Lanier to $655.1 million were seeing a positive change on their year-end another four times in the 140 years the company has Other than statements. “They could see the value that’s been existed. Gaines Lanier, who came on board in 1976 Property/Casualty: created. It has an impact on longevity, the work and was appointed CEO in 1999, has been with the $433.3 million (benefits) ethic and loyalty to the company.” company through some of its key transitions, the % Commercial: 65% Not to mention an impact on employee involvemost important being the establishment of the % Personal: 10% ment and awareness of business as usual. employee ownership model. % Benefits: 25% “Employees are conscious of cost-cutting and Principals: D. Gaines Lanier, Sharing the Wealth CEO; Gary Ivey, COO; Frank Plan, expenses and client retention. They have engaged as being owners. They have seen over these 15 years The company’s third CEO, J. Smith Lanier II (and chief financial officer. what that value means to them financially.” And Gaines’ grandfather), is the mastermind of employMergers/Acquisitions: that, he says, makes for a stronger business foundaee ownership in the company. As Gaines puts it, Insuramerica Aviation (Loganville, tion. the elder Lanier was a leader who understood the Ga.) Associated General Agency Treating employees right by allowing them to importance of securing the buy-in of the employees. (Chattanooga, Tenn.) participate in the growth and success of the com“One of the traits that Smith Lanier brought was his Number of Employees: 576 business savvy to spread the wealth. He brought continued on page N10

www.insurancejournal.com

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are much more engaged in the culture of the organization than the pany, as well as giving them control over decisions that affect their financials. Our first meetings are always about the people — we operating success, has created a welcome cost-saver — employee never talk about the money. We look for people who are culturally retention. Employees have a strong presence on steering committees, like us — conservative, honest, of high integrity, similar value sysusually 20 producers and a smattering of management teaming to tem and sales oriented. If they’re willing to grow the business and determine necessary resources and business methods that help be part of a business. There is a difference between someone who increase their success rates. Gaines believes this additional layer of wants to own the business and someone who wants to share ownerinvolvement has created not only the company’s exponential profit ship. I have every desire to be on top of the mountain; I just have no growth, but also has allowed them to hang on to key talent. “We lose very few produc‘One of the traits that Smith Lanier brought was his business savvy to spread the ers. wealth. He brought people into the business and let them have an equity play in it …’ When they get desire to be there alone.” here and after 10 or 15 years they have a half million to a million or His goal is to maintain the cooperative attitude that is pervasive in better in value, they’re not looking to leave if we treat everyone the organization. “If a producer in Atlanta writes a nice account, a right.” producer in Albany celebrates with him — we as an organization The company also has a highly-tuned resource distinction — a are successful. We have a competitive nature with our competition, stable of claims staff, loss control professionals, alternative risk perbut we don’t have to compete with ourselves. It’s part of our strucsonnel, errors and omissions, and directors and officers liability speture that we’re stronger together than we are by ourselves.” cialists, large casualty specialists, and large property specialists. Each J. Smith Lanier & Co. producer has plenty of resources to bring Conservative Business Equals Growth in to the client as needed. “We’ve had a great deal of success over the Another factor Gaines attributes to the company’s success is its last few years in forming captives and alternative risk mechanisms conservatism in both business and personal endeavors. “We’re a confor clients. Our claims advocacy group is, in our minds, where the servative people. We’ve never leveraged the company hard. We make client really sees us create value when he has a very difficult claim. good business decisions. We put money back into the company every We assist instead of standing back and handing it over to the insuryear. It started in 1980 when we really started running the business er.” like a business and not like a family company.” That’s not to say the family ideals have been abandoned. To the Choosing Wisely contrary, in explaining his belief that each employee from manageOne thing J. Smith Lanier & Co. does well is evaluate opportuniment to mail room has the same responsibility to the health of the ties and let the opportunities find them, not the other way around. collective, Gaines speaks of the family atmosphere. “In our world “Opportunities arise, but not on our schedule. We stay in a position there’s a responsibility of the family member to the family. You ask to capitalize on the opportunities.” the family to help when he can, but every member needs to underAs for a perfect fit, Gaines says it’s not what one would think. “We stand he has to bring his value back to the family or he doesn’t stay part of the family. Most people say the family takes care of you, but in our world it works both ways.”

Pictured standing left to right in back: Board members Scott Crawford, executive vice president; Gary Ivey, president and COO; Frank Plan, CFO. Seated left to right in front: Sloan Howard, senior vice president and steering committee representative to the board; Board members D. Gaines Lanier, chairman and CEO, and Robert Culpepper, executive vice president. N10 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009

Decisions, Decisions Not every decision made in the company has been a good one. Gaines laughs about some of the not-so-successful decisions, of which he says there were more than enough out there. Of the successes, he says, “We’re very fortunate. We’ve made some mistakes — no question about it, and some I would obviously not do again. Fortunately, none have been that big in magnitude that it created a real problem for us. Our real success has been finding those people who culturally fit us.” He cites the recent acquisitions in Lexington and Tallahassee. “These people believed in our culture more than anything else. That’s why they’re here. It’s not necessarily the economics of every transaction — they enjoy working in this environment.” One not-so-successful decision involved a merger attempt with two groups in 1980, one which Gaines is reluctant to talk about. “We realized shortly after that it was a bad merger and we split it back out in 1981.” www.insurancejournal.com


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INSURANCE JOURNAL

TOP100 AGENCIES But even the bad decisions can be catalysts for positive change. When the company decided to leave behind the merger, Gaines became an owner, as did William Parr Jr., who is the company’s current vice-chairman emeritus. They also brought on board the company’s current Chief Operating Officer Gary Ivey, who is also a major shareholder. Maintaining in a Tough Market At present, Gaines says the company is looking at a flat growth year for 2008 as well as 2009. Thank the current recession and volatile market conditions, which are testing (and in some cases sinking) competitors and many large financial institutions. Still, Gaines maintains a positive outlook. Business as usual must go on. “It’s not necessarily that we aren’t writing new clients, we’re not growing or we’re not competing to bring on new talent. We are. It’s just that you cannot go through the economic downturn and the rate reductions of the competitive market we’ve been in and it not have an effect on growth, but we’re not going negative.” He attributes that back to the company’s conservative approach. The company, he says, makes a good return, but doesn’t over-leverage and try to outdo the competition in deal making. “We’re conscious of who we are. We’re not going to overpay for a deal just to make a deal. We’ve probably lost some opportunities from maybe even better than a double-digit growth. We have not done that because we’re not going to go out and overpay for transactions.”

D. Gaines Lanier and J. Smith Lanier II

think it’s going to change us. We’re not going to change this company a great deal by that. We’re going to be conservative in our expansion. Fortunately, we have a very strong capital base. We’ve been diligent in building retained earnings. We may all tighten our belts, and I really think we are. But we’re not going to go out of business.” What about coverage availability? In Gaines’ estimation, it will be Recession and Opportunities there and the market will be competing heavily for business. “Carriers Gaines’ outlook in a recessionary era could well be fueled by a do have capital, and they’re going to want to continue to grow the long history of conservative, smart decision making. How does the business.” It takes no crystal ball, in his opinion. “We all should’ve current economic situation affect the industry and how J. Smith known this was coming. Nothing stays great forever.” His only concern Lanier & Co. will be conducting business? “I think they are going to — maintaining caution and not overstaffing until revenue comes back. That’s going to be tough, as he points out, ‘We’ve had a great deal of success over the last few years in because of the influx of talent that he expects is already flooding the market. forming captives and alternative risk mechanisms for clients.’ be very parallel to each other for this reason — we have seen over the last several years rate decreases coming from carriers where rates have actually gone down. Couple that with exposure increases that we’re going to see because of the economic downturn. Payrolls are going to be lower, sales are going to be lower, and you’re not going to see the expansion in businesses. All that’s going to come through in premium. That’s going to affect all of us. The carrier is going to be faced with the same problem — so are we as brokers. We’re going to see return premium audits, in my estimation, much heavier in ’09 and ’10. “I think the next two years are going to be the toughest years that this industry’s faced in the last 10 (years). In the market we’re in now, rates are going down, exposure base is going down, competition’s still there, so obviously everyone’s going to earn less. In the last several months the real business climate is changing. We’ve seen the demise of businesses, bankruptcies, and everything else increase. We think that’s going to continue. That’s going to have a major impact on our world and on the industry.” But as for how it will affect operations, Gaines is positive. “I don’t www.insurancejournal.com

Family Attitude, Employee Involvement For now the company plans to continue its current way of doing things, which is to work together and to reach into the surrounding communities in order to make a difference. J. Smith Lanier & Co. employees are very much part of the communities in which they work, donating not only time but money to various organizations and community projects. The company itself is very involved in the Fuller Center for Housing, and Lanier employees have built six Habitat for Humanity houses. The company also sponsors the Brain Tumor Foundation for Children charity event, which raised an estimated $225,000 in 2007. Additionally, each office gets $5,000 to donate to local charities at Christmas, worth about $50,000 to the company annually. Gaines believes it’s the focus on the whole that distinguishes his company from its competitors. “We’re real people who happen to be in the insurance business. We’re grounded.” IJ Widmer is a Philadelphia-based freelance writer who specializes in insurance and risk management topics. February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N11


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Closer Look Errors and Omissions

How to Avoid Agency Errors and Omissions Claims Advising Clients on Specific Dollar Values of Coverages They Need to Consider May Create Unnecessary Exposures Plitt

By Steven Plitt

T

here have been an increasing number of lawsuits brought against agents in situations where the client/policyholder does not have sufficient liability coverage limits to pay for the liability exposure caused by an accident. Typically, in these types of situations the client/policyholder sues the insurance agent alleging that the agent should have recommended the purchase of higher policy limits. This situation also arises frequently with uninsured and underinsured motorist (UM/UIM) claims as well. In most states, insurance agents are not required to recommend a specific amount of coverage. Also in most states, insurance agents are only required to provide to the client the appropriate insurance products to protect against the client’s risks. This recommendation does not include the limits of coverage which should be purchased, however.

At the time of the insurance purchase the amount of insurance coverage necessary to protect the insured is purely speculative. Irrespective of the client’s financial status, if an insurance agent were to recommend large limits and no accident occurred then the client would have, in hindsight, overpaid for the amount of risk coverage needed. On the other hand, when an accident does occur which produces substantial injury or liability exposures — that realized exposure— in hindsight demonstrates that larger limits should have been purchased and that the purchase of higher limits was a prudent decision. The point to this is that the agent, at the time of the policy sale, cannot predict with any accuracy the amount of coverage that the insured should purchase. Any recommendation will cut both ways depending on hindsight.

N12 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009

Assessing the Amount of Liability In order to assess the appropriate amount of liability and UM/UIM coverage that the client should purchase would require the agent to have substantial access to the insured’s financial investments and properties. With respect to UM/UIM coverage, the amount of health insurance can be relevant. Even with this information, an agent cannot accurately assess the insured’s risk which is expressed through the dollar amount of the policy’s limits. Perhaps one of the most comprehensive discussions of the public policy for judicial refusal to declare that insurance agents owe a duty to recommend specific amounts of insurance can be seen in the Maryland case of Sadler v. Loomis Co., 139 Md.App. 374, 776 A.2d 25 (Md. App. 2001). In Sadler, the Maryland Court of Special Appeals found that a lawsuit brought by an insured against her insurance agent for “woefully underinsuring” her was not a legally recognizable claim. The court in Sadler noted that the majority of states refused to hold agents liable for failing to recommend a sufficient amount of insurance because it is the insured who is “in the best position to assess the value of his or her assets, and the extent of potential loss in the event that a risk materializes, whether by adverse judgment, business interruption, fire, theft, or the like.” (139 Md.App. at 400, 776 A.2d at 40) Additionally, the court observed that it is the “insured [who] is generally considered best able to balance the factors relating to potential economic loss against the expenses of purchasing additional insurance, the likelihood that a particular risk will materialize, and the insured’s own comfort level with the risk versus the cost of greater protection.” The court expressed concern that requiring agents to advise policyholders of the www.insurancejournal.com


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amount of coverage they should purchase would “readily encourage an insured who suffers a loss to fabricate that he or she would have bought more insurance had it been recommended.” In essence, the creation of such an obligation to advise insureds on the amount of coverage they should purchase would indirectly afford insureds the opportunity to insure after the loss by merely asserting that they would have bought the additional coverage had it been offered.

believes is adequate to protect against the possibility of risk exposure. The letter can tell the client that the agent may make a recommendation, generally, that it is the client who must choose the amount of coverage purchased. As an example, the agent could recommend an umbrella or excess policy as a type of product and then

explain the coverage requirements that are a condition precedent to the availability of that product. IJ Plitt is a national legal expert on insurance law and insurance agent issues. He is the current author of the national treatise COUCH ON INSURANCE 3D. E-mail: sp@kunzlegal.com. Web site: www.kunzlegal.com.

Minimizing Risk of Litigation Where does this leave the insurance agent? It is appropriate and required that insurance agents assist their clients with the selection of the right products to protect their clients. Oftentimes agents will recommend that an umbrella or excess policy be purchased above the primary There have been an limits because of the client’s increasing number general financial of lawsuits brought condition or the against agents in size of the busisituations where the ness being client/policyholder insured. This does not have sufficient type of advice liability coverage limits falls under the category of the to pay for the liability agent’s obligaexposure caused by tion to present an accident. the right products for the client’s needs. Specific dollar values are not directly recommended, although they are independently obvious, i.e., a $1 million umbrella. By recommending an umbrella or excess policy, the agent is recommending coverage in excess of the threshold attachment point. With respect to UM and UIM coverage, agents will often tell their clients that they should consider insuring themselves as much and as fully as they insure themselves against the prospect of a lawsuit against the insured. This type of general advice does not rise to the level of a specific recommendation for coverage limits. In order to minimize the risk of litigation, the prudent insurance agent should prepare a letter which is sent to every insured indicating that the insured must determine how much coverage he or she www.insurancejournal.com

February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N13


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SPECIAL REPORT Small Business Small Business Unit, continued from page N6

Technology SBUs rely heavily on technology to create greater efficiencies, including in-house automation tools and carrier resources that enable producers and service staff working with small accounts to move quickly.

John Pritchard, Heffernan’s senior vice president and manager of special accounts, or small business, says to be successful an SBU has to have to a lot of volume and has to track that volume constantly. “We have invested in technology

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THE SALES & MARKETING PUBLICATION FOR P&C PROFESSION ALS PAGE TWO

CSR SELLING Upsell / Cross-S ell Tip Sheet for Commercial CSRs.

These self-pu blished documents permit you substitute for the traditi to put your insura onal nce offer coverage in the best checklist where possible light. insureds sign new Accordingly don’t limit on to or off , yourself to coverage of each comparing and limit. just the core After all, document’s coverages. primary functi this Also feature any special packa to help you on is close the that are part ges sale, not protect you of your quote All insurance against E&O instance, . For proposals if the home claims. built upon The charts are owners the pillars policy that supplement of price, you propo summarize protection, and se includes your regula an endorsemen PAGE FOUR and servic r proposal e. On document. the surfac e, it is extrem Pre-fil limited deduc t package with ADVERTISING ely as many covera l and compare simple for tible windo potential replacemen w ges and servic buyers to t, refrigerated glass as space and compare Solicit Contrac es cost. They spoilage, judgment food tors with just have and dama allows. Then sit down Target-Specific to examine ge from backed up two Marketing. with the prosp sewers — and help what do these numbers. But ect disclose him or her them all. dollars actual to complete Their practi the other buy? That’s cal value side of each stands out where protec ly PAGE FIVE form, itemsince they by-item. This and servic tion are e fill in the of the custom not part joint exerci picture. se is one of the Competing ary contra Q&A keys ct. quotes are Furthermore never actively involv to sales success, identical, CSRs and Custom , when you as limits, covera include multip ing the buyer er Skills. proposal endorsemen ges, le policy types in the Managing New presen the same ts, and seller on Commercial chart, such when an in-per tation. However, services vary as auto, HO, and umbre Lines Producers. from offer son meeti lla, you promo physically ng is to offer. So, when impossible 51% or more Post a “Want idea of the te the or resisted, List “to Gain prospect of these the charts variations moving their Desired Sales can be emaile are to your entire accou Appointments advantage, d as PDF files and nt to you, it’s wise to . instead point them of just a single filled in with Tips for Design out. prospect policy. This To help you ing Your over the phone the format encou to presen Next Agency . Still, with all of rages both differences, t the Logo. their advan of you to discuss we have develo tages, these and quote tools aren’t two comp ped multiple for everyo arison charts policies at ne. the same [see page 7] and Larger comm PAGE SIX time, even when posted them there are require simila ercial accounts PRODUCER SALE online Subscr in our disparate expiration r comparativ ibers-Only S dates. information, Area. e The first one but just not compares The first chart Inject Fun into the this forma in integral and Commercial also serves t. So, use limited summ optional covera as a Lines Insuran this chart structure aspects of ary ce Proposals. ge mainly your propo useful in itemiz of discussions, 7 Ways to Pep sal to personal lines to encourage prospect’s ing the pre-sa Up a Small existing policie the coverages and small le and limits Business Present business prospects the secon s; that you to interact d compares initially propo ation. with you, servic and to ensure Modify and sed that you menti — and noting output custom es. that the major distinctions versions of oned non-c ized of your offer items such each using overed as flood insura Word. clearly under are However, stood. Let nce. it is not a today’s harsh us vs. viable them menta lity work to your sales advantage.

PAGE THREE

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Use Compariso n Charts to Highlight the Advantages of Your New Bu siness Propo sal

that allows us to track activity for each producer, which is very, very important. We’ve also, to the extent possible, taken advantage of as much technology as we could from our carriers, using their online rating systems, and the like.â€? “Every producer is extremely accountable for activity,â€? Heffernan said. “We cannot allow someone to not constantly prospect. In the larger commercial, we monitor it but it’s not that hands on.â€? Small commercial prospecting has to be tracked daily, Pritchard added. “We actually track it real-time, daily. I’m tracking activity on a day-to-day basis for everybody to make sure they have a consistent flow of activity on a daily basis.â€? Heffernan says, most importantly, for an SBU to be successful it has to have quality leadership and management support. “Someone has to lead it. There’s a lot of people, there’s a lot of moving parts, you have to have the passion and understand the insurance business. You have to have the knowledge about pretty much every product available because we are selling to manufacturers, to contractors, to non profits ‌ you have to have broad-based knowledge and you have to be a good leader. It doesn’t work ‘I think you have without that kind of indito have a belief vidual.â€? in it. You can’t Heffernan also believes a belittle it. You successful can’t make it SBU must have support seem like it’s just from the top small business.’ down. “I think you have to have a belief in it. You can’t belittle it,â€? he adds. “You can’t make it seem like it’s just small business.â€? Dedication to the SBU is a must for success, Heffernan says. “It’s taken us two years and believe me it’s a capital investment. You don’t start making money right off the bat. I think if you want to do it, you have to be dedicated and spend at least three years to see if it works.â€? IJ www.insurancejournal.com


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We insure the printing industry from A to Z. Not to mention C, M, Y and K. Technology in the printing industry is constantly evolving. And so are the risks your clients face. From the breakdown of sophisticated equipment to errors and omissions in a customer’s order, the economic implications can be huge. That’s why Travelers has developed insightful insurance solutions that stay in-synch with printers’ needs, including a product that addresses the expense of replacing or recreating a customer’s lost files. Which is something we think you will find is well worth the paper it’s printed on. To find out more information, contact your local Travelers Commercial Accounts Representative. ©2009 The Travelers Companies, Inc. All rights reserved. The Travelers Indemnity Company and its property casualty affiliates. One Tower Square, Hartford, CT 06183

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Closer Look Non-Profits/Social Services

Study Shows Need for Standardizing Nursing Home Social Workers’ Credentials Only Half of Nursing Homes Surveyed Employ Social Workers with Degrees in Social Work

S

ocial workers play a vital role in improving the quality of nursing home residents’ lives. But qualifications of nursing home social workers vary wildly in part because of low federal standards and inconsistent state laws, the first national study on nursing home social workers reveals. Only half of nursing home social workers have a degree in social work, and 20 percent do not have a four-year degree, a University of Iowa survey of 1,071 nursing home social service directors shows. Despite their desire to learn, two-thirds of nursing home social workers report they do not belong to a professional organization that helps to keep them up-to-date on nursing home social work issues, and only 38 percent are licensed in

social work. For-profit nursing homes are 31 percent less likely to hire a degreed social worker. The numbers are concerning, given the important responsibilities nursing home social workers have, said Mercedes Bern-Klug, the assistant professor of social work in the UI College of Liberal Arts and Sciences who led the study. Nursing home social workers advocate for residents and watch for signs of stress and depression. They connect residents and families with resources in and outside the nursing home and facilitate transitions such as hospice, a hospital stay or a return to independence. They guide families, residents and care providers through difficult conversations or conflicts. “Nursing home social workers handle very

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serious emotional issues affecting residents, family members and other staff members, and they deserve to be educated on how to handle these issues,” Bern-Klug said. “Everyone benefits when nursing homes hire qualified social workers.” Older adults struggle with dementia, and the highest rates of suicide are among older adults. Some are victims of physical, emotional or financial abuse. “Still, many people in charge of social work in nursing homes aren’t social workers, and the federal government doesn’t require that they be social workers,” Bern-Klug said. Homes with more than 120 beds are required by federal law to employ a full-time social worker, but anyone with a bachelor’s degree in any human service field — not necessarily social work — and one year of supervised experience in the field is considered qualified. Seventy percent of nursing homes have less than 120 beds, and therefore are not required by federal law to employ a social worker. Most homes do employ one — but typically only one — which means devoting adequate time to each client is difficult, Bern-Klug said. Many times social workers’ jobs involve other duties like marketing or activity planning. “I asked 1,000 social workers, ‘How many residents can you handle? Federal guidelines say you can do 120,’” Bern-Klug said. “An overwhelming majority said fewer than 60. “We need legislation to demand well-prepared social workers and to set reasonable social worker-to-resident ratios, but unless families demand changes, it will be difficult to get them,” Bern-Klug said. “Decades of research has documented the negative consequences of having too few nurses in a nursing home, and still we don’t have strong laws demanding a realistic nursing ratio.” Bern-Klug examined state laws and found that 10 states don’t address qualifications for nursing home social workers, and seven state codes do not appear to comply with federal standards. Twenty-one states require www.insurancejournal.com


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a social work degree, and most others require a four-year degree, but not in social work. Iowa’s guidelines for social services in nursing homes with more than 120 beds are identical to the federal guidelines. Iowa code does not address the social service credentials of the majority of its nursing homes, which have fewer than 120 beds. The research also uncovered loopholes in state laws. In Colorado, for-profit nursing homes in rural areas don’t have to hire a qualified social worker if they advertise for a week in a local paper and don’t find one. In Indiana, social services can be provided by a member of the clergy who completes a 48-hour course and consults with a social worker. “We need to standardize nursing home social worker qualifications, regardless of the number of beds, and nursing homes need to make sure their social workers have access to the training they deserve in order to do their jobs well,” Bern-Klug said. Nursing homes need to support existing social workers by providing educational and professional development opportunities, along with decent salaries and benefits, she said. Full-time salaries in some regions are as low as $15,000 per year, while others exceed $60,000, the study showed. “Nursing homes tend to focus on physical care — the risk of falling, the risk of bed sores or skin ‘We need legislation wounds — which are very serious to demand wellissues,” Bern-Klug prepared social said. “But people workers and to set need more than good physical care reasonable social to thrive, and physworker-to-resident ical conditions have ratios, but unless emotional consequences that social families demand workers can help changes, it will be address. As individdifficult to get uals and families them.’ compare nursing home options, they should ask about the qualifications of the social worker and the number of residents under his or her care.” The analysis of laws on nursing home social worker qualifications was published in the fall issue of the Journal of Gerontological Social Work. Results of the national survey will be published in the Journal of American Medical Directors Association. IJ www.insurancejournal.com

U N S H A K A B L E

SM

Through markets hard and soft, Markel Insurance Company remains your unshakable source for specialty insurance. We write property & casualty and accident & health coverage for: • Amateur/youth sports

• Health/swim/racquet clubs

• Arts organizations

• Horse & farm programs

• B&Bs, inns

• Museums and historic homes

• Boys & Girls Clubs, Scouts

• Outdoor sporting programs

• Camps

• Schools – private K-12,

• Child care centers, preschools

trade, specialty

• Child welfare agencies

• Senior centers

• Community programs

• Sheltered/handicapped

• Counseling services

and hotlines

workshops • Shelters

• Group homes

• Social Services/nonprofits

• Gymnastics and

• Substance abuse recovery

cheerleading schools • Head Start programs

facilities and many more…



MARKEL IS: Admitted Rated “A Excellent” by A.M. Best

www.markelinsurance.com 800-496-1184 ®

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New Markets The following markets were selected from the MyNewMarkets database of 25,000 coverages and programs. To find additional markets, or to submit markets, go to www.MyNewMarkets.com. High-Value Homeowners’ Protection Market Detail: Irwin Siegel Agency Inc. (www.isapcg.com) brings agents access to AIG’s Private Client Group program. Private Client Group is a comprehensive package program for high net worth individuals seeking to protect their valuable assets and benefit from flexible coverages, innovative products, extraordinary services and competitive pricing. A high-deductible option is available to allow targeted high net worth clients effectively control costs. Agents are not subject to production minimums. Available Limits: As needed. Carriers: American International Group. “A” rated by A.M. Best. Admitted. States: All. Contact: Mark Madsen at 800-622-8272 or e-mail mark.madsen@SiegelAgency.com.

General Liability for Roofers Market Detail: MarketScout (www.marketscout.com) gives agents access to a general liability market for roofers. Residential, repair and commercial roofers are welcome. No exclusions for hot tar or heights. New entities are also welcome. The carrier can provide blanket additional insureds and blanket waivers of subrogation endorsements. Minimum premiums begin at $10,000 and the minimum deductible is $5,000. Available Limits: $1 million to $5 million. Carriers: Unable to disclose. “A” rated by A.M. Best. Non-admitted. States: All. Contact: John Gaskill at 972-934-4212 or e-mail jgaskill@marketscout.com.

Specialty Equipment Rental General Liability Program Market Detail: Trade Group Insurance Specialties Inc. (www.tradegroupins.com) created and is the exclusive underwriter for the FLOW Rental Program. FLOW provides general liability protection for specialty rental trades such as traffic control/barricades, portable toilet, temporary power and fencing,

and water pump/flow diversion. Minimum premiums begin at $10,000. Available Limits: As needed. Carriers: Unable to disclose. “A” rated by A.M. Best. Non-admitted. States: All except New York. Contact: Michael Bell at 866-366-7938 or e-mail mbell@tradegroupins.com.

TeleRadiology Professional Liability Market Detail: Founders Professional LLC (www.founderspro.com) offers medical mal-

Bringing Market Seekers and Market Providers Together • Find markets in our database • Promote your markets on our site • Join our community forums • Membership is free! practice/professional liability protection to TeleRadiology practices serving hospitals, imaging centers, ASCs and physician groups. Coverage is provided on a claims-made basis with available prior acts protection. Minimum premiums begin at $25,000 and deductibles begin at $5,000. Available Limits: $1 million to $10 million. Carriers: Unable to disclose. “A” rated by A.M. Best. Non-admitted. States: All. Contact: Robert C. Hall at 813-769-1290 or e-mail robert@founderspro.com.

Vacant Property Market Detail: American Management Corp. (www.amcinsurance.com) offers property protection to owners of residential and com-

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mercial vacant property in 45 states and the District of Columbia. Minimum premiums begin at $750. Available Limits: Up to $2 million. Carriers: Various carriers. “A” rated by A.M. Best. Non-admitted. States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., D.C., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Maine, Md., Mich., Minn., Miss., Mo., Mont., Neb., Nev., N.H., N.J., N.M., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., W. Va., Wis. and Wyo. Contact: Stephen Strange Jr. at 800-233-2398 or e-mail stevejr@amcins.com.

Large Commercial Umbrella Market Detail: Northern Star Insurance Agency LLC (www.northernstarins.com) can offer certain classes of commercial insureds umbrella and excess coverage with limits up to $100 million. Northern Star specializes in community associations, real estate, hospitality, public entities, restaurants, museums and cultural centers, auto dealers, contractors, distributors, manufacturers, retailers, service organizations and many other market segments. Minimum premiums begin at $500. Available Limits: $1 million to $100 million. Carriers: Unable to disclose. “A-” or better as rated by A.M. Best. Admitted and non-admitted. States: Ala., Alaska, Ariz., Ark., Calif., Colo., Conn., Del., Ga., Ill., Ind., Md., Miss., Mo., Neb., Nev., N.J., N.M., N.Y., N.C., Ore., Pa., R.I., S.C., Tenn., Texas, Utah, Va. and Wis. Contact: Eric Magee at 714-938-0015 or e-mail emagee@northernstarins.com.

Medical Property Protection Market Detail: RPS of New York (www.rpsins.com) offers agents a property protection program designed specifically for the health care industry equipment. The medical diagnostic equipment coverage form is crafted to provide protection for: MRIs, CAT scanners, X-Ray equipment and other portable diagnostic equipment. Power units www.insurancejournal.com


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and specialized trailers part of mobile units can also be covered. Blanket limits of $250,000 are also available on items such as accounts receivable, EDP (including extra expense), extra expense, food spoilage and contamination, loss data preparation costs, personal property of patients and valuable papers and records. Minimum premiums and deductibles begin at $5,000. Available Limits: $1 million to $100 million. Carriers: Unable to disclose. “A” rated by A.M. Best. Admitted. States: All. Contact: Robert Hecht at 631-969-1900 or e-mail bob_hecht@rpsins.com.

insurance, language, modeling, music, photography, public speaking, real estate, tailor, theater, tutoring instruction and more. General liability is available as part of a package or on a monoline basis. Professional liability and abuse/molestation coverage are also offered. Available Limits: As needed. Carriers: Various carriers. “A++” rated by A.M. Best. Admitted and non-admitted. States: Ariz., Calif., Colo., Md., Neb., Nev., N.M., Ore., Pa., Tenn., Texas, Utah, Va. and Wash. Contact: Elizabeth Gaida at 619-593-2059 or e-mail elizabeth@agostinisurplus.com.

Artisan Contractors Package Training Schools Package Market Detail: Agostini Wholesale Insurance (www.agostinisurplus.com) offers agents a program focused on specialty training schools including: art, athletic, bartending, beauty, business, computer, cooking craft, dance,

Market Detail: Chopra Insurance Brokerage Inc. (www.choprainsurance.com) offers an artisan and trade contractors insurance program using some hard-to-find coverage – the 11/85 edition of the CG 20 10. Coverage is provided using Insurance Services Office’s (ISO’s)

occurrence policy form. Other often requested coverages include: waiver of subrogation language, “primary” wording, blanket additional insured and a per-project aggregate. Coverage is also available for residential repair and remodeling contractors. Minimum premiums begin at $5,000 and deductibles start at $1,000. Available Limits: $1 million to $2 million. Carriers: Unable to disclose. “A +” rated by A.M. Best. Non-admitted. States: Ala., Ariz., Calif., Colo., Del., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Maine, Md., Mass., Mich., Minn., Miss., Mo., Mont., Neb., Nev., N.H., N.M., N.C., Ohio, Okla., S.C., S.D., Tenn., Utah, Vt., Va., Wash., W. Va. and Wis. Contact: John Upchurch at 818-551-4588 or e-mail Jupchurch@choprainsurance.com. IJ Submit your company’s property/casualty markets to the industry’s leading searchable database at www.mynewmarkets.com.

There’s a better way to find Markets. Searching for a Particular Market? Find it here. From Dude Ranches to Pizza Delivery, we have markets covered. Stop Searching and Start Finding. Our database of over 25,000 markets makes it quick and easy to find that obscure market you are searching for. Best of all the service is FREE! So sign up today!

www.insurancejournal.com

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Spotlight Non-Profits/Social Service

Human Services Agencies Can Benefit from Agent Advice, Especially in Challenging Economic Times Custom Coverages and Loss Control Can Help Non-Profits Survive By David J. Firstenberg

W

hile today’s economic environment presents some challenges for many companies large and small, independent agents who understand and embrace those challenges can help solve problems for their clients and even create new opportunities. This is especially true for agents with not-for-profit, human services organizations as customers, because they are being uniquely impacted by the country’s financial landscape. Fortunately, with the expert advice of independent agents, these organizations can protect themselves against many risks, helping to ensure their stability and even success into the future.

Firstenberg

Human Services Landscape Unlike other businesses, human services organizations are experiencing an increase in the demand for services tied to economicrelated issues. And, at the same time, longreliable sources of funding, including state and local governments and charitable foundations, are being compromised. Because most of these non-profits are small or mid-sized local agencies with budgets of under $1 million — they are precisely the kind of organization that stand to benefit from the skill and knowledge of local independent agents. The Importance of Agent Advice Independent agents — who, generally, are

N20 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009

well-known to be personally vested and involved in their local communities — can enhance the ability of local non-profit organizations to operate with greater efficiency and effectiveness. Through their expertise and valuable advice, agents can be a major asset to customers in this highly specialized, unique market, helping them to thrive and be more successful to carry on their mission, in spite of the prevailing economic environment. First, by extending important baseline coverages to small to mid-sized non-profit and human services agencies — including professional liability, general liability, physical and sexual abuse, management liability (including employment practices liability), umbrella and commercial auto — independent agents can

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provide these critically important organizations with protection against further financial strain resulting from accidents, lawsuits and more. Additionally, agents can provide guidance on new types of coverages that are designed to help protect non-profits against existing and emerging risks, which are especially relevant during the current fiscal climate. For instance, coverage for unpaid donations and pledges — a growing problem in challenging economic times — will pay out when a donor is unable to fulfill a written pledge due to bankruptcy or unemployment. For organizations that place patients who are aging or have mental or physical disabilities, some carriers also are offering protection for residential room reserve. Such coverage will replace state reimbursement income to human service agencies when a client is temporarily discharged to the hospital because of accident or illness, protecting nonprofits against the sudden loss of budgeted revenues. Additionally, some carriers are extending protection provided by the property form to also cover property and vehicle damage caused by a client placed by the insured not-for-profit organization. This type of protection would cover foster care agencies placing a child in the residence of a home health care provider. Later this year, The Hanover Insurance Group, which has a long and proud history of supporting local non-profit organizations through charitable donations and the valuable contributions of employee volunteers, will introduce Human Service Advantage, an expanded package of coverages strategically created for a broad range of not-for-profit organizations. Human Service Advantage expands existing offerings for not-for-profit organizations and will enable agent partners to offer an important safety net for those organizations that do so much to help others. Loss Control Besides advising non-profits on specific coverages to protect against their unique exposures, independent agents can deliver significant value to human services agencies through www.insurancejournal.com

counseling on loss control issues. Agents know that the only thing their customers want more than fast, efficient claims services, is to not have any claims at all. Working closely with loss control experts from their most experienced carriers, agents can provide a wide variety of valuable loss control services that will help reduce the likelihood of incidents that might result in a claim and, in this way, provide added financial protection for their customer. Appropriate loss control services may include seminars on exposures unique to human services organizations, such as helping clients employee effective de-escalation techniques to diffuse tense situations, reducing the need to use manual restraints which can lead to severe injuries and even death; risk transfer programs, to protect organizations from paying the price for someone else’s error or carelessness; discounted staff screening services (especially important in an industry that provides personal services and where there is a relatively high turnover rate). Together, these services can help organizations save money, and eliminate the need for claims before they even happen. Agents can work with their partner carriers, to offer loss control services unique to specialized organizations, like not-for-profits. A Unique Way to Help While insurance may not be the first thing that comes to mind when people consider how they can help local non-profits survive a severely strained economy, it can make a meaningful difference. In partnership with strong carriers, independent agents can help these organizations to take a more pro-active approach to understand and effectively manage their risks, while reducing costs and operating more efficiently, so they can continue to meet the needs of the most vulnerable members of the community. IJ Firstenberg is the commercial lines president for The Hanover Insurance Group.

“How can I

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nonprofi t X[m`jfi To the competitor in you—NIF Nonprofit Advisor is our investment in your business. NIF Nonprofit Advisor is the leading source for nonprofit intelligence and solutions for brokers, advisors and carriers operating in any segment of the nonprofit arena. From helping your nonprofit clients with funding issues to forming the appropriate insurance programs, NIF Nonprofit Advisor is dedicated to helping you deliver leading edge solutions.

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Marketing Strategy | Business Development Campaigns | Prospecting | Sales Support Industry & Client Benchmarking Competitive Benchmarking Research & Product Development Copyright © 2009, NIF Nonprofit Advisor, All Rights Reserved

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Idea Exchange Minding Your Business

Time Management 10 Tricks of the Trade

By Catherine Oak & Bill Schoeffler

T

ime is the only resource we cannot recreate and we all have the same amount. How can you optimize your life by being “in control of time” rather than being “controlled by it?” Here are 10 tips to help you be time efficient.

1. Determine Your Time Wasters What are your biggest time wasters? Is it surfing the net? Email? Phone calls (on your cell phone of course)? Reading or sorting junk mail? Why is it we find these things essential when they did not exist for most of humanity? Trim down or eliminate the “time wasters” in your life. Make time for the truly important things — the big rocks — in your life (major work projects, family, personal time, etc.). Allocate only an hour a day on the “time wasters.”

2. Prioritize and Delegate Determine the key things to accomplish each day. Write them on a white board or in your day planner. Create a task list of secondary important items to do in between the scheduled primary important items. If possible, get through your big items first and you will feel better because you have finished the most important things each day. Delegate “large time — small gain” items. For example, yard work, which does not need your expertise, train or hire someone else to handle it.

3. Limit Tasks Most people put too much on their “to do” lists. For some people it is hard to say no, or they just want to be a “superhero.” Be realistic. Only schedule what is possible to accomplish on a given day and “double buffer” the time allocated. If you take on too much, you will feel let down at the end of the day because of all the things you did not accomplish. It is better to do less and be grateful for the things you actually did get done.

Oak

Schoeffler

4. Paper - Only Handle it Once One of the biggest “time killers” is how paper is mishandled. Someone a while back came up with a system for handling each piece of paper. There are only five options to handling each piece of paper when received. Decide to: 1) Toss it; 2) File it; 3) Read it; 4) Delegate it; or 5) Act on it. If possible, go paperless and get rid of the clutter. Start fresh and get rid of the old paper. Remember: O.H.I.O. — Only Handle it Once!

5. Improve the Hit Ratio Don’t practice quote. We don’t need the practice, nor do the underwriters. Track your “quote-to-write” or hit ratio. The closer the ratio is to 1.0 the better. The key is to pre-screen each prospect to see if they fit your program or book of business. Spend a few minutes pre-qualifying them so that there is a high likelihood of you writing the business.

6. Schedule Time for New Business Most salespersons don’t have much time to write new business because of daily pressures from existing accounts, such as service issues or account renewals. Time must be scheduled each day for producers to work on new business. Otherwise, they will not take the time to prospect and handle new accounts.

7. Streamline the Renewal Process In order for producers to focus on new sales, the renewal process needs to be streamlined and handled mostly by the service staff. Producers and CSRs should go over the list of renewals at least 90 to 120 days in advance to discuss the strategy for each account. From there, the CSRs or account executives should gather renewal information, submit for renewal or re-market the account and deliver the renewals to the client or to the producer for final review. Producers should work only on those accounts that need their expertise or relationship.

8. Staff Stratification Whenever possible, all persons in the agency should delegate tasks to the least costly, qualified employee who can handle that work. With automation, however, most service staff are doing it all themselves, including claims. But certain projects can be batched up, such as faxing, scanning, filing, all of

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which can be handled by a clerical person. Consider outsourcing work, such as certificates, which can be handled online or outsourced to third parties.

9. Plan Your Day Set up daily or weekly calendars on your desk that can be visible to you at all times. Plan when to make calls and appointments and fill the time in between the secondary tasks. Remember to make some time for your “time waster” as well. When out of the office optimize the time by scheduling more than one client or prospect in the same area. Plan the order of the visits based on the proximity to each other and the office. Try not to let new prospects or even existing clients, change your scheduled day. Changes will waste time and can cause you a lot of other problems.

10. Take Care of Yourself If you are one of those people that never get to the gym, or take the time to read, think or meditate, you need to make sure it is scheduled every day. The best thing for the body and the

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ficult because people tend to do too much, too mind is sleep. A good night’s sleep will leave fast. Change is accomplished by taking one you refreshed and feeling like you are ready to take on the day. And don’t forget to eat right, as step at a time. Just like building muscles, it can be challenging at first, but with small increwell. mental changes over time it gets easier. Invest some time for personal growth. Read Choose one thing you want to change and books that enrich one’s life, such as motivationmake one small adjustal tapes, biographies, histoment, today. Add one more ry, etc. Utilize open time to Discover how your step each day. As small as open your mind. Sign up life can be enhanced these changes may seem, for a (non-insurance) semiyou will see big results. nar, preferably in resort and made much Soon, when you look back, locations. Personal growth more enjoyable by the change will be notably cannot only be painless, making simple drastic. but also a pleasure. Listen adjustments. Start Oak & Associates is here to audio books (CDs, tapes to help guide your agency or iPods), while driving for now to design your to reach its full potential. maximum use of your time. use of time, now and We are offering agency in the future. owners and managers a Summary free half-hour consultation Discover how your life on issues impacting you and your agency. Give can be enhanced and made much more enjoyus a call today for your success for tomorrow! IJ able by making the simple adjustments outlined in this article. Don’t worry about the past because it’s gone. Start now to design your use Schoeffler and Oak are partners at the consulting firm of Oak of time, now and in the future. & Associates. Phone: 707-935-6565, E-mail: bill@oakand Change to one’s habit or behavior is often dif- associates.com. Web site: www.oakandassociates.com.

February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N23


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Idea Exchange Carrier Watch

Insurers’ Stocks Down 14%; Middle Market Carriers Active in Intermediary Acquisitions Stock Price: Commercial lines stocks mirrored those of major indices in 2008, trading down 14 percent. Mergers & Acquisitions: Middle market carriers continue to be major players in the acquisition market as they look to wholesalers and managing general agencies (MGA) to add scale and distribution during the soft market. ProAssurance Corp. (NYSE:PRA) agreed to acquire Houston-based Mid-Continent General Agency Inc., an MGA that produces approximately $25 million a year in premiums from ancillary health care providers and other professional liability coverages. HCC Insurance Holdings Inc. (NYSE:HCC) also made two MGA/wholesaler acquisitions, picking up specialty divisions from Arrowhead General Insurance Agency and U.S. Risk Insurance Group Inc. Likewise, FCCI Mutual acquired Mississippi Insurance Managers. FCCI Mutual and Mississippi Insurance Managers jointly owned Brierfield Insurance Co. and as part of the transaction, FCCI acquired the remaining 20 percent of Brierfield. Also active in the carrier sector, the above mentioned HCC acquired Californiabased Surety Co. of the Pacific. HCC expects the acquisition to add $20 million of premium in 2009. ProAssurance Corp. also announced two carrier acquisitions during the quarter. The PICA Group will become part of ProAssurance through an all cash, sponsored demutualization. A provider of professional liability to doctors of podiatric medicine, the PICA Group insures approximately 9,800 podiatric physicians in 47 states and the District of Columbia. PICA also insures other health care professionals and provides errors and omissions liability insurance for a small, but growing, number of independent insurance agents through its PACO subsidiary. PICA wrote $99 million in premium in 2007, has $284 million in total assets, and has maintained an A.M. Best rating of “A-” (excellent) for the past 13 years. Earlier in the quarter ProAssurance announced it is expanding its legal profession-

al liability business by purchasing the Georgia Lawyers Insurance Co. ProAssurance is also establishing new relationships with agencies that produce legal professional liability business in 11 additional jurisdictions in the MidAtlantic and the West. These moves complement its existing $10 million book of legal professional liability business in the Midwest. GLIC insures approximately 2,700 lawyers in Georgia and had direct written premium of approximately $5.5 million in 2007. The fifth workers’ compensation transaction of 2008 was announced in October. Companion Property & Casualty Insurance Group announced that it has acquired all of the insurance and insurance-related service operations of AmFed Holding Co. Inc., the largest workers’ comp insurance and self-insurance administration company in Mississippi. The acquisition includes AmFed National Insurance Co. and AmFed Casualty Insurance Co., along with operating entities AmFed Cos. LLC and AmFed Insurance Services LLC. AmFed administers more than $75 million in annual premiums in Mississippi. In November, State Automobile Mutual

N24 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009

Insurance Co. agreed to acquire Rockhill Insurance Group of Kansas City, Mo. With approximately $122 million in capital and surplus, Rockhill writes approximately $135 million in specialty property/casualty direct written premium through four insurance company subsidiaries. Key business segments include commercial property, general liability for residential construction, commercial umbrella and surety; a monoline workers’ compensation company, RTW; and Absentia, a third party administrator providing workers’ compensation claim and loss control services. Rockhill writes business on a non-admitted basis in 49 states and the District of Columbia and is licensed on an admitted basis in 42 states and the District of Columbia. Rockhill was started in November 2005 with $145 million in capital from private equity investors. IJ LMC Capital LLC is a national investment banking firm focused exclusively on the insurance industry. Services include qualified, industry-specific advisory relating to mergers and acquisitions, capital raises and valuations. Phone: 704-943-2600. E-mail Info@LMCCapital.com. Web site: www.LMCCapital.com. www.insurancejournal.com


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East Coverage People Westminster American Insurance Co. of Maryland has named Craig Heuman as marketing director. Heuman has over 30 years of experience as a production underwriter for Harford Mutual Insurance Co. He is responsible for developing business in Maryland, Pennsylvania and Washington, D.C. Craig Heuman

Jania Stout

Michael Toner

Kevin Coffey

Southborough, Massachusetts-based insurance consulting firm Pinnacle Financial Group has named Kevin R. Coffey as director of operations. Coffey will oversee all of Pinnacle’s operations, including its finance and technology functions. Coffey brings over 20 years of professional experience to the role, including significant experience supporting and managing infrastructure for organizations during times of growth or change. He most recently served as vice president of finance and administration and chief financial officer for the Great Providence YMCA. His prior experience also includes senior roles at Kewill Solutions, Genzyme Transgenics. Privately held insurance broker The Lockton Cos. has named Jania Stout as vice president in Washington, D.C. The Baltimore native brings to Lockton a successful track record of business development and relationship management in retirement services with mid-market companies in the Washington, D.C., Maryland, Virginia and Pennsylvania region. Prior to joining Lockton, Stout was a senior account executive for Fidelity Investments. She was a leader in their sales division and focused on middle market clients. She began her career at ADP Retirement Services where she spent over 10 years. In another move, Lockton has expanded its Northeast operations by adding turnaround expert Michael Toner to its newly created Boston office. Toner is a leading expert on the insurance issues faced by companies in turnaround and restructuring. He works closely with turnaround consultants, law firms, lenders, accounting professionals and companies facing financial challenges. Toner is also an experienced property and casualty insurance advisor to professional services firms, financial institutions, retailers, and companies in metals distribution, food and beverage, entertainment, and transportation. Toner previously was with Aon for 16 years.

Juan Andrade

Gregory C. Case

Juan Andrade and Jonathan Bennett have been named as interim co-leads of the Property and Casualty Operations of The Hartford. Their appointment to those interim positions follows the departure of Neil Wolin, president and chief operating officer of the The Hartford’s Property and Casualty Operations, who has accepted a position in the White House as Deputy Counsel to the President for Economic Policy and Deputy Assistant to the President. Andrade is currently executive vice president of sales and distribution for Property and Casualty. He joined The

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Hartford in 2006 when he assumed leadership of the P/C claims organization. Prior to joining The Hartford, Andrade held several leadership positions with The Progressive Corp., and also held management positions with American International Group. Bennett is currently executive vice president of personal lines and small business insurance. Bennett joined The Hartford in 1999 as staff assistant to Ayer. He has since served in several leadership roles at the company, including vice president of corporate development, head of the eBusiness Ventures Team, and senior vice president of product management for the personal lines division. He was promoted to his current role in 2005. Aon Corp. President and Chief Executive Officer Gregory C. Case has been named “2008 Insurance Leader of the Year” by St. John’s University School of Risk Management. The award, which has been presented annually since 1995, recognizes the outstanding contributions of individuals whose leadership in the worldwide insurance and financial services industry sets them apart from their peers. Last year’s recipient was James J. Schiro, chief executive officer of Zurich Financial Services Richmond, Virginia-based Markel Corp. has promoted Britt Glisson to chief administrative officer. In this role, he will be responsible for assuring efficient, cost effective operations for Markel Corp. in North America. Glisson joined Markel in1990, first as chief financial officer and later as president and chief operating officer of Essex Insurance Co. In 1996, he became president and chief operating officer of Markel Insurance Co., the positions he held just prior to his promotion. Markel also named Mike Crowley as president of Markel Corp.’s Specialty Division. In his new position, Crowley will be responsible for specialty insurance business, which includes Markel Insurance Co. and Markel American Insurance Co. Prior to joining Markel, Crowley was president of Willis HRH North America, and has previously held senior positions with Johnson & Higgins and Palmer Cay. Kathleen Haskell and Christopher Smyth have joined Venture Insurance Programs’ Preferred Club Program’s team of underwriters. The two will write new business and renewals and sell Preferred Club products and services. Haskell most recently served as a senior underwriter for AIG Specialty Excess. She and has also held previous positions with Patriot Underwriting Managers, Commonwealth Risk Services and Marsh & McLennan Inc. Smyth most recently served as underwriter at C&R Insurance Services where he generated new business with a focus on lawyers’ professional liability. February 9, 2009 INSURANCE JOURNAL-EAST REGION | 35


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East Coverage News & Markets

Liberty Mutual Drops Direct Sales to Middle Market Businesses; Insurer Puts Faith in Independent Agents By Andrew G. Simpson

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iberty Mutual Group is throwing in the towel on direct distribution of insurance to middle market businesses. Since it couldn’t beat independent agents and brokers – who dominate sales in this segment – Liberty Mutual has decided to join them. The Boston-based company, which sells insurance both direct and through independent agents, is discontinuing direct distribution to mid-sized businesses and now plans to distribute its commercial property/casualty insurance products in the middle market exclusively through independent agents and brokers. Liberty Mutual defines the middle market as businesses with total account premium ranging from a low of about $150,000 up to about $1.5 million. Liberty Mutual has written about $2.5 billion in this segment. The insurer, which ranks as the sixth largest property/casualty insurer in the U.S., is selling off the renewals on these direct middle market

accounts to several large brokers: Arthur J. Gallagher & Co., Hub International (Hub) and USI Holdings Corp. (USI). It is also creating a new commercial business unit, Liberty Mutual Middle Market, which will accept and serve middle market business only from agents and brokers. Products available will remain workers’ compensation, general liability, commercial automobile, property, crime and umbrella. The insurer said each of the brokerage firms has extended offers of employment to many of the Liberty Mutual Group professionals supporting the transferred policies. The transactions are expected to close on or around March 1, 2009. The new Middle Market unit will be organized into three divisions, with headquarters in Boston (Eastern Division), Chicago (Central Division), and Dallas (Western Division). Agents and brokers will be aligned with dedicated distribution and underwriting resources. As part of the move, the company is retiring the Wausau brand, which has been part of its middle market operation.

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36 | INSURANCE JOURNAL-EAST REGION February 9, 2009

The moves recognize that about 95 percent of middle market business insurance is sold by independent agents and brokers, not through direct distribution. The company acknowledged that by limiting itself to direct distribution in the middle market, it was missing out on opportunities to grow. “This truly is a strategic move not a financial move. The data [on independent agents’ market share] is pretty compelling,” said J. Paul Condrin, Liberty Mutual’s president of Commercial Market. The change is a response to requests from the company’s agents and the preferences of customers, he added. Condrin said that since middle market customers very often do not have risk managers, they rely on the advice and service of agents and brokers for their insurance needs; whereas larger, complex businesses usually have internal expertise that makes going direct to a carrier more of an option. Liberty Mutual will continue to write large commercial risks through its direct channel. Liberty Mutual also writes large national account business through brokers and small commercial business through independent agents. Mark A. Butler has been appointed chief operating officer of the new Middle Market business unit. Butler was previously executive vice president and general manager of field operations for Liberty Mutual’s National Market commercial insurance operations, which caters to large business accounts. Liberty Mutual said its new Middle Market unit plans to expand its network of appointed agents and brokers. Condrin said the new unit would be available to agents currently writing with its regional personal lines and small business companies known as Liberty Mutual Agency Markets. Wausau Insurance Co., a wholly owned subsidiary of Liberty Mutual since 1999, has also written middle market business directly and through agents and brokers. Wausau Insurance comprises the operations of Employers Insurance Co. of Wausau, Wausau General Insurance Co., Wausau Business Insurance Co. and Wausau Underwriters Insurance Co. Wausau direct representatives will now have www.insurancejournal.com


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tionships with agents and brokers who have an opportunity to work with the large brokerearned outstanding reputations among middle ages buying the renewal rights, officials said. market buyers.” Agents and brokers who have been placing Illinois-based broker Arthur J. Gallagher & business with Wausau will now have access to Co. is acquiring renewal rights from Liberty the new Middle Markets unit. Mutual’s middle market business located in “So while the Wausau brand will be retired, the Midwest and Southeast the Wausau agents, brokers regions. and policyholders are vital The moves recognize Gallagher is also acquiring to our future success,” said that about 95 percent substantially all of the policy Condrin. renewal rights and hiring the The company said it of middle market national producer group remains committed to the business insurance is from Wausau Signature overall commercial lines sold by independent Agency, Liberty Mutual’s market and believes agents agents and brokers, commercial property/casualand brokers can help it betty and employee benefits ter compete in the middle not through direct insurance agency headquarof this arena. distribution. tered in Wausau, Wisconsin. “Today’s announcement The Gallagher agreement reinforces our commitment includes an initial payment in cash and stock to being a leader in commercial insurance,” of approximately $44 million and additional said Edmund F. Kelly, Liberty Mutual Group payments in cash or stock of up to $120 milchairman, president and chief executive offilion, based on certain revenue goals. cer. “The agreements with Gallagher, Hub and Chicago-based brokerage Hub International USI speak to the quality of our business and Limited (Hub) gets the renewal rights to desire to form strong, mutually beneficial rela-

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Liberty Mutual’s middle market business in Ariz., Ark., Calif., Col., Hawaii, Kan, La., Neb., Okla., Utah and Texas. Terms of this transaction were not disclosed. Hub said the business would be integrated into its regional operations: Hub International of California, Hub International Gulf South, Hub International Texas and Hub International Southwest. Roy H. Taylor, President of Hub’s West Region, will oversee the management of this group. USI Holdings Corp., based in Briarcliff Manor, New York, is the third buyer of renewal rights on Liberty Mutual accounts. It is grabbing the renewal rights – and it said some 44 Liberty Mutual sales professionals – in the Northeast region, which includes New York, New Jersey, Connecticut and Massachusetts. Further details of the USI transaction were not immediately available but Edward J. Bowler, senior vice president for corporate development at USI, told Insurance Journal his firm is “delighted” with the deal and considers Liberty Mutual sales people to be among the best in the business. IJ

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Idea Exchange Managing an Agency in a Troubled Economy

Systematic Sales Strategy Should Be Priority No. 2 for Agency Managers Andrade

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n this hard economy coupled with the soft market, most agencies expect sales and revenues to go down. Even the best performers feel the downward trends in premiums. According to Juan Andrade, executive vice-president for sales and distribution at The Hartford, who oversees his company’s agency management consulting arm, Business Management Group, customer retention should be an agency’s first priority when managing in a troubled economy (see Jan. 26, 2009 issue). As critical as it is, customer retention alone may not be enough. That’s why Andrade’s priority number 2 for managing an agency in these troubled times is following a systematic sales strategy. While agencies may find it is difficult to maintain positive growth these days, they are most likely to grow if they are dedicated and disciplined about sales. Insurance Journal’s Andrew Simpson asked Andrade if his team has any advice that agencies might follow that would lead to growth even in today’s troubled economy.

Video

This is second installment in an Insurance Journal Interview with The Hartford’s Juan Andrade. View the entire Insurance Journal video series, Managing an Agency in a Troubled Economy, at www.insurancejournal.tv.

Insurance Journal: Shouldn’t agencies expect that sales and revenues might go down in this time?

Andrade: Yes, and I think most of the agencies that we deal with do see that. You know as I travel around the country and meet with our 10,000-plus producers, I think the best ones, the luckier ones, maybe not lucky but the savvier ones, if you will, have probably been able to maintain some single digit growth rates in this economy, but I think even some of our best partners out there have suffered from basically just a downward trend in premiums. So part of what we deal with in the soft market is that people are lowering rates on renewals, on new business and that will have an impact on the company and on the agency and on the revenue that you bring at the same time. I would say being in the single digits these days is probably not a bad place to be, but it also depends on the line of business. Right? While for some of the commercial lines it is going to be a lot harder to maintain those positive growth rates, it might be easier in some of the other lines. So it really does vary depending on the mix of business that you have within the agency. Insurance Journal: You advise agencies to take a systematic approach to sales. What do you mean by that? What does that entail? Andrade: I think this is a strategy that ... works for both the hard market as well as the soft market. And you know at the end of the day we are all sales people.

38 | INSURANCE JOURNAL-EAST REGION February 9, 2009

What we’ve got to keep our focus on really is number one, on the pipeline; number one on ensuring that we have the right people within our organization, bringing in accounts, building that pipeline et cetera, executing on that vision. This is not a strategy that we can afford to employ only in a hard market or a soft cycle. I think this is something that we’ve got to continue doing at all times within our market cycles and within the economy basically. I’d say the focus on the pipeline is very critical, the focus on working accounts that you already have, working on cross-sell. By that what I mean is really getting leads from accounts that you already own within the agency. So if you are thinking about going into a particular industry vertical or a particular segment that you may not have been in, for example healthcare, and you may already have a couple of accounts in that area, go talk to your contacts, to your relationships in these areas and find out who else they would recommend, what other areas might be that we are not looking at, etcetera. I think the whole science of selling becomes very important and that discipline is critical, particularly to surviving a soft cycle. Insurance Journal: Is this a good time for agents to consider entering new markets, new states perhaps or adding products to their portfolio? Andrade: I think it is a wonderful time to be looking at diversification, particularly given that the cycle has really impacted, particularly more of the commercial lines of insurance than anything else. Certainly, you wouldn’t want to minimize it and personalize it; we are seeing www.insurancejournal.com


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that across the board. But I think if you are cific area of the country you happen to be in. I would say from what I have seen in my a commercial- specific, quality agent you experience, health care, energy, those are have been particularly affected by this. I think diversifying is wise to do anyway. We very good places to be looking at right now. are seeing a lot of our agents and brokers do that. We are looking at different indusInsurance Journal: What do you think try verticals, different niches of the econois a realistic goal for new sales in this my. There are pockets there. There are economy for an agency? infinities. There are difAndrade: That’s a tough ferent programs that we This is a wonderful question because I think it can be involved in. As a really does depend on whole, it does make time to be looking where you are geographisense to be able to diverat diversification cally in the country in the sify. segments that you’re in. I There are still say if I were owning Insurance Journal: areas that are very would an agency these days, from Are there any pockets vibrant. Healthcare a revenue perspective I of the economy that would feel probably OK you think are worth is one. Energy is about being flat with total an agent looking at another one. written premium at this now, some that may point in time, with a big be stronger than othfocus on retention in trying to grow new ers given this economy where they business in whatever areas I could. might be able to make some inroads? I think if I was in the mid-single digits I Andrade: Absolutely. Even though we are would be feeling pretty good about myself. living in unprecedented times, we are seeIf you, obviously, have reached the double ing things in the economy that we never digits, you would feel real good about it. It thought we would see in our lifetimes. all depends, too, on where you are. Some There are still areas that are very vibrant. I would say healthcare is one. Energy is another one, particularly as you start looking at green energy, alternative energy areas. I think these are areas where you are starting to see smaller businesses make a lot more investment, and they are still growing. So, I think those would be places that I would be looking at. Areas like construction, depending on what part of the country you’re in, are probably either good or bad, depending also on what part of the economic cycle you happen to be in. agencies have had more of a focus on retenBut nevertheless there is such a substantion than new business. I would say flat to tial amount of our GDP in the economy single digits probably could be a good place that is tied to construction. That’s still an to be, given market conditions. IJ area to look, depending, again, on the spewww.insurancejournal.com

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Ad Index

East Coverage Business Moves

National Agency Ideas

N14

www.agencyideas.com Applied Underwriters

44

www.applieduw.com Astonish Results

N6

CDS Business Mapping

N4

www.riskmeter.com Charity First Insurance Services, Inc.

N14

www.charityfirst.com Great American Insurance Company

N23

www.greatamericaneld.com Great American- Specialty Human Services Division

N16

www.hsd.gaic.com Insight Insurance Services, Inc

N13

www.insightinsurance.com Iroquois Group

39

Markel Insurance Company

N17

McGowan & Co, Inc.

N5

www.mcgowaninsurance.com NAS Insurance Services, Inc.

N2

www.nasinsurance.com Negley Associates

N20

NIF Group

N21

www.nifgroup.com Progressive Insurance

N7

www.ProgressiveCommercial.com Rockwood Programs

5

www.rockwoodinsurance.com Travelers Insurance

N3, N15

Travelers Insurance

2

West Agency Intermediaries, Inc.

36

Connecticut Underwriters, Inc.

9

www.ctunderwriters.com Guard Insurance Group

37

www.guard.com Massachusetts Association of Insurance Agents 43 www.massagent.com

Eastern Insurance, Rosemary Walker Natick, Massachusetts-based Eastern Insurance Group, the insurance agency subsidiary of Eastern Bank, has acquired Rosemary Walker Insurance Agency in Danvers. Terms of the deal were not disclosed. Rosemary Walker was founded in 1970. Eastern said the acquisition will increase its customer base north of Boston, where it already has eight locations. In the last year, Eastern has added four new locations in Danvers, Northborough, Norwell and Warwick, R.I. In all, Natick-based Eastern Insurance has 27 locations in eastern and central Massachusetts and parts of Connecticut, New Hampshire and Rhode Island making it New England’s largest independent insurance agency. Tower Group, CastlePoint Stockholders of New York-based insurer Tower Group, Inc. approved the buyout of Bermuda-based reinsurer CastlePoint Holdings Ltd., a deal expected to close this month. The $490 million merger, which was announced in August 2008, makes CastlePoint a wholly owned subsidiary of Tower. Tower offers property and casualty insurance products and services through its operating subsidiaries. Tower’s insurance services subsidiaries provide underwriting, claims and reinsurance brokerage services to other insurance companies. CastlePoint, through its subsidiaries, provides property and casualty insurance and reinsurance business solutions, products and services to small insurance companies and program underwriting agents in the U.S. Bradley & Parker, Profile Coverage Syosset, New York-based insurance agency Bradley & Parker has acquired Profile Coverage Corp. and its affiliated companies, located in Ronkonkoma. Founded in 1964, Profile Coverage Corp. is an all lines insurance agency offering risk management, commercial, personal property/casualty and all other insurance lines to its clients on Long Island and in the metropolitan New York area.

40 | INSURANCE JOURNAL-EAST REGION February 9, 2009

Profile Coverage Corp. will continue to operate in its current Ronkonkoma location and will become Bradley & Parker’s Suffolk County office. In connection with the deal, Steve Fuoco will be vice president and branch manager and Lou Pellegrino, former president of Profile Coverage Corp. will remain as an executive consultant to Bradley & Parker. Ironshore National Branch Ironshore Inc. has created a new U.S. property/casualty underwriting operation called Ironshore National Branch, which will be based in St. Louis. Missouri. Ironshore National Branch will build out a national distribution platform for Ironshore products utilizing primarily a wholesale brokerage distribution strategy. Several former AIG executives have been tasked with managing the new subsidiary. Steven England, former president of AIG Landmark, has been named executive vice president for Ironshore National Branch, and Jordan Gantz and Jim Dowdy – who also served in senior executive roles at AIG Landmark – have joined the group. The Main Street America Group Jacksonville, Florida-based insurer The Main Street America Group has introduced Main Street Station for Personal Lines — a new quoting and policy issuance system for its independent insurance agents in Maine, Virginia and Georgia. Agents will be able to use the new system to quote, endorse or cancel policies for customers who have policies written with one of Main Street America’s operating companies, including NGM Insurance Co., Old Dominion Insurance Co. and Main Street America Assurance Co. In Maine and Virginia, agents are using the system for homeowners and private passenger automobile insurance. In Georgia, it is just being used for private passenger auto but homeowners will follow soon. The system will enable quicker notification of underwriting decisions and interface with a number of agency managements systems – eliminating the need for duplicate data entry. IJ www.insurancejournal.com


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Idea Exchange Closing Quote

5 Risk Management Challenges for Public Entities in Today’s Economy By Mary Stewart

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ocal governments increased their commitment to risk management over the past decade, as they met the challenges posed by several major natural disaster and terrorism events. Better local government loss prevention, crisis management and risk communication resulted. We now face a more prolonged, national disaster: a major economic downturn. This latest disaster threatens to erode, rather than strengthen, local government risk management. Risk management must demonstrate its centrality to the government’s mission and find ways to succeed with fewer resources. A key attribute of a strong risk management program is vision; the ability to anticipate and address emerging risk prior to a critical event. The following are a few difficult risk issues that the public sector should think about in the coming year:

1. Increased Demand for Services. One predictable outcome of an economic downturn is increased criminal activity. Another is an increased need for social services. The government must evaluate whether it has sufficient capacity to handle the increased responsibility. Are the courts able to handle an increase Public risk in their case load? managers Will sheriffs and police officers become more involved in non-core activities, such as have faced foreclosures/evictions or increased domestic disasters; disturbances? now they Can the jails accommodate an increase in population? face another Will non-sworn personnel (police aides, one: a major volunteers) be used to enforce codes/laws? Will unmarked cars be used to transport economic arrested persons and on other official busidownturn. ness, due to a lack of marked police cruisers? Do social services agencies have the resources to provide added assistance to families in trouble? 2. Privacy Concerns. As local law enforcement agencies work with Homeland Security to protect against terrorist attacks, there may be more claims alleging breach of privacy. Have law enforcement policies been updated to reflect privacy issues under federal/state laws? Has the agency created spe42 | INSURANCE JOURNAL-EAST REGION February 9, 2009

Stewart

cial units to handle cyber crimes and to protect information related to those crimes? 3. Using Technology to Address Risk Issues. Technology is an important tool for addressing many societal risk issues, including disasters, dwindling natural resources, and homeland security. But it must be used with care to avoid negative consequences. Will government be liable if the technology fails to achieve its purpose or causes damage? Will technology providers require liability protection in exchange for participation in efforts to manage societal risk? (Examples are telecommunications and vaccine providers.) 4. Public Health Emergencies. Local governments are closely involved in managing public health emergencies, such as pandemic illness or bioterrorism. They must know in advance the extent of their legal authority to quarantine individuals, close schools and public gathering places, shut down transportation, and take other steps to reduce the spread of communicable illness. To the extent possible, plans should be shared in advance with all government employees. Will mandatory quarantines or business closures result in lawsuits? How will emergency responders be protected from infection? Will the government be responsible for the safety and actions of volunteers who assist with care of the ill? How will the jail manage a pandemic that threatens the incarcerated population? 5. Benchmarking and Performance Measurement. Benchmarking and performance measurement help risk management demonstrate its value by providing quantitative evidence to support its priorities, decisions, programs and results. Share documents, procedures and ideas with other governments to promote better performance. Use cost/benefit analysis and measurements to identify areas with high frequencies or severe claims. Maintain regular communication with a group of governments (peer group) that are similar to your organization. Join PERI’s Data Exchange to gain state/ national comparison. Stewart is director of research and development, Public Entity Risk Institute (PERI), Fairfax, Virginia, www.peri.org. www.insurancejournal.com


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Terry Salinger, Former Apprentice. Now Business Owner. Considers his work something of an art. Expects the same approach from his workers’ compensation provider.

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