Insurance Journal

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CONSUMER VOICES Credit Scoring and More

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STIMULUS FOR AGENTS Energy Projects and More

WILLIS TOWER On Top in Chicago

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Inside This Issue

March 23, 2009 • Vol. 87, No. 6 • Midwest Region

MIDWEST COVERAGE 6

47 5 Reasons Agents Should Heed Stimulus Package Business Opportunities in New Projects and Priorities

| As Credit Scores Fall, Criticism of Credit Scoring Rises Consumer Advocates Worry How Insurers Treat Buyers in Today’s Economy 6 | Michigan’s Auto Rate Denials Reignite Credit Scoring Fight Insurers Upset State Acted While Issue Is Before High Court 8 | Chicago’s Famed Sears Tower Is Now Willis Tower Insurance Broker Becomes Tenant and Takes Over name 8 | Japanese Officials Learn From Michigan Regulator Foreign Officials Hear About State’s Auto Insurance System 8 | North Dakota Workers Comp Agency Gets New Chief Governor Picks Highway Patrol Chief Klipfel 47 | 5 Reasons Agents Should Heed Stimulus Package Business Opportunities in New Priorities

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Michigan’s Auto Rate Denials Reignite Credit Scoring Fight

NATIONAL COVERAGE N1 | N1 Commercial Lines Pricing Drops 3% Towers Perrin Survey Finds Price Stabilization N1 | General Liability Losses, Expenses to Rise Rapidly Profitable Underwriting Not Likely N1 | National Flood Insurance Program Gets Short-Term Extension Expires September 2009; Industry Hopes for Reform Measures N2 | Special Report: HOT Markets and Programs Hot Prospects, and Markets, Come in Unusual Packages N6 | International Report Sports Terrorism, ‘Names,’ Tongues and Mergers N7 | Special Report: GREEN Risks Hybrid Boats and Coverage for the GreenMinded Customer N7 | Special Report: GREEN Risks Greener Opportunities: Insurers Compete for a Growing Green Industry N16 | Special Report: HOT Markets and Programs Fastest Growing Industries to Focus On

IDEA EXCHANGE N19 | Spotlight: Corporate Profiles Advertorial Supplement: In Their Own Words 50 | Closing Quote: Mitch Dunford Say What You Mean

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As Credit Scores Fall, Criticism of Credit Scoring Rises

DEPARTMENTS 48 Business Moves 50 Closing Quote N10 MyNewMarkets 2 Opening Note 10 People

2 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

8

Chicago’s Sears Tower Is Now Willis Tower

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Idea Exchange Opening Note Publisher Mark Wells Chief Executive Officer Mitch Dunford

Looking Up

EDITORIAL

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midst all the gloom and doom, the fail ures and frustrations, the finger pointing and scapegoating, the drumbeat of negative economic news… we turn to two men wiser than ourselves for advice that lifts us up:

“Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.

Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21.5 percent prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15 percent and 25 percent for many years.

America has had no shortage of challenges.

Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials ‘America’s rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, best days if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It lie ahead.’ has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.”

Warren Buffett in his annual letter to Berkshire Hathaway shareholders.

“A government ‘stimulus’ package will not save us. A bailout of AIG or GM will not solve the underlying problem. Instead, the quiet personal resolve to act with character and integrity in everything we do, and to demand the same behavior in our leaders, will lead to long-lasting, positive change. There is still something noble in the American spirit. I believe in us. I believe in our character as Americans to dig deep and to dig out of any problem, to do the right thing, and to do the extraordinary.”

Mitch Dunford, CEO of Wells Publishing, in this issue’s Closing Quote.

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 Alan Shulman Contributing Writers Stephen Bushnell, Chantal Cyr, Mitch Dunford,

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

Andrew Simpson Southeast/Midwest Editor asimpson@insurancejournal.com

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio N orth, 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 cop y, $195 per y ear in the U .S., $295 per year all other co untries. DISCLAIMER: While the information in this p ublication is deriv ed from so urces 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. Cop yright 2009 W ells Publishing, Inc. All Rights R eserved. Content ma y not be photocopied, reproduced or redistrib uted without written permission. Insurance J ournal is a p ublication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052

4 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

FOR QUESTIONS REGARDING SUBSCRIPTIONS: please call 856-380-417 6 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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Midwest Coverage News & Markets

As Credit Scores Fall, Criticism of Insurers’ Credit Scoring Rises Consumer Advocates Focus on How Insurers Treat Insureds in Difficult Economic, Credit Climate

By Patricia-Anne Tom

W

ith consumers’ credit scores dropping as lenders tighten credit terms, insurance consumer advocates are stepping up their criticism of the use of credit scores by insurance companies.

They are also warning insurers that they could lose business and consumer confidence if they don’t treat consumers fairly in today’s economic climate.

“We have already seen credit scores having an impact on interest rates charged to consumers on their credit cards and loans. If

insurers continue to use credit scores in determining risk levels, premiums will increase and consumers may be forced to reduce the insurance carried to protect their financial assets,” according to Karroll Kitt, associate professor at the University of Texas at Austin.

Pamela J. Bolton, director of research for Texas Watch, thinks the credit crisis is taking its toll.

“The credit crisis has already lowered the credit scores of thousands. As lenders lower credit limits and increase rates, consumers are seeing their credit scores suffer through no fault of their own,”

Bolton said. She said the “grave” situation has been documented by the Wall Street Journal, Fox News, Bloomberg, and others.

Bolton, who supports a ban on credit scoring, has her doubs but hopes the insurance industry will take into account differences between changes in credit scores due to ta consumer’s own actions versus economic conditions or changes by lenders. “This crisis presents the industry with a very important choice: Will it choose to act in the best interests of its customers, rather than its bottom lines, by embracing fair

practices that don’t unfairly penalize policyholders, or will it be business as usual?” Bolton asked.

“Only time will tell.”

If insurers don’t somehow adjust, consumers and insurers both “will be worse off,” warned Brenda Cude, professor of housing and consumer economics at the University of Georgia in Athens.

“It is already very difficult to explain to consumers how their credit score could be related to their access to insurance and the price they pay,” she said. “It will be even more difficult to explain that continued on page 46

Michigan’s Auto Insurance Rate Denials Reignite Credit Scoring Fight

By Andrew G. Simpson

M

ichigan’s regulator has reignited a debate over credit scoring by denying auto insurance companies requested rate increases because their proposed rate schemes include discounts for good credit scores.

Commissioner Ken Ross said he has disapproved rate filings for seven insurers and will reject any future rate filings that incorporate credit scoring despite the fact the state Supreme Court has yet to rule whether credit scoring should be prohibited.

The seven insurers denied rate increases are Progressive, Frankenmuth Mutual, Michigan Millers, Farm Bureau General, Farm Bureau Mutual, Allied P&C and AMCO. Combined these insurers write about 12 percent of the auto insurance market in the state, according to the Office of Financial and Insurance Regulation (OFIR).

According to industry officials, it’s up to the individual carriers whether to appeal the decisions.

But they note that rates with credit scores have been approved for the past several years while the issue has been in the courts. Now Ross has stopped that.

The insurance industry thinks it is inappropriate for Ross to deny rates based on credit scoring while the issue is still before the state’s high court. “This is him [Ross] using another tool to make a broad-based decision that’s not his to make,” said David Snyder, vice president and assistant general counsel for the American Insurance Association (AIA).

In 2005, OFIR promulgated rules banning the use of credit scoring. The ndustry challenged the rules and the issue has been working its way through the legal system for the last four years.

Ross defended his action even though there has yet to be a final court ruling by saying he is not

6 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

enforcing a broad prohibition against credit scoring as the court enjoined him from doing but is instead ruling case-by-case on the base rates proposed by insurers.

According to Ross, insurance companies have inflated their base rates so that they can then offer discounts off of those rates to certain drivers with good credit scores. But, he said, the base rates are unfair.

Ross did not dispute industry contentions that credit scores are a reliable indicator of whether a driver is likely to file a claim, although he maintained there is a high error rate in credit reports.

Instead, Ross criticized credit scoring as bad public policy because it does not reflect driving records and experience and does nothing to encourage driving safe-

ty. “Credit scoring is a zero-sum game,” he said. “Credit scoring redistributes risk but does not reduce risk and does not reward drivers who take steps to reduce risk.”

However, the industry argues that a discount factor is not legally or actuarially required to be a risk mitigator, pointing to other discounts for good students and customers with multiple policies.

According to Jeffrey L. Junkas, director of Midwest public affairs for AIA, Michigan only allows carriers to discount down from an approved, higher base rate for any discount.

Also, Junkas said, the OFIR publishes a buyer’s guide that shows which insurers use credit scoring and so drivers who do not like credit scoring can choose. IJ www.insurancejournal.com

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Midwest Coverage Snapshot

Chicago’s Famed Sears Tower is Now Willis Tower

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nsurance broker Willis will become a new tenant of Sears Tower, and under an agreement with the building’s owners, the Chicago icon and tallest building in the Western Hemisphere will be renamed Willis Tower.

Willis said it plans to consolidate five Midwest area offices and move nearly 500 associates into Willis Tower, initially occupying more than 140,000 square feet on multiple floors. Willis said its move to the new space,

at $14.50 per square foot, will result in significant real estate cost savings, and that there is no additional cost to the company associated with renaming the building.

“Having our name associated with Chicago’s most iconic structure underscores our commitment to this great city, and recognizes Chicago’s importance as a major financial hub and international business center,” said Joseph J. Plumeri, chairman and chief executive officer, Willis

Highway Patrol Chief to Head North Dakota Workers’ Comp Agency

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ormer North Dakota Highway Patrol superintendent Bryan Klipfel has been named the state’s new workers compensation director by Gov. John Hoeven.

It’s the governor’s first hire since North Dakota voters decided last November the governor should have power to hire the director of Workforce Safety and Insurance.

Before, an appointed board of directors had the authority.

Klipfel succeeds interim direc-

tor Bruce Furness. The agency has not had a permanent director since Sandy Blunt was dismissed in December 2007.

While Hoeven said Klipfel has strong management and people skills, House Republican Majority, Leader Al Carlson said Hoeven should have chosen someone with a background in insurance or workers’ compensation or who has some knowledge of what the agency does. IJ

Illinois Homeowner Seeks Claim Information Behind Home Explosion

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n Illinois woman has filed a suit seeking information about why her home exploded last month. Laura Williams filed the suit after a Feb. 13 blast destroyed her Pontoon Beach home and damaged several others. No one was seriously injured.

Her suit asks the court to force Ameren and Madison Mutual Insurance Co. to turn over poten-

tial evidence about the blast, including documents, photos, video recordings and gas meter readings.

Fire officials have said the cause of the explosion is “suspicious.’’ IJ

Copyright 2009 Associated Press.

All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

8 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

Group Holdings (NYSE: WSH).

The building, first opened in 1973, is recognized worldwide as a center for business, and an architectural signature of Chicago’s skyline.

The majority of Willis HRH Associates moving to Willis Tower work in the company’s retail brokerage business, which includes specialists in construction, executive risk, healthcare, property, real estate and employee benefits.

The move is expected to be completed by late summer.

The company’s North American business is now known as Willis HRH following Willis’ October 2008 acquisition of insurance intermediary Hilb Rogal & Hobbs (HRH).

Chicago is the headquarters of Willis HRH’s Midwest Region. IJ

Japanese Officials Hear About Auto Insurance From Michigan Chief

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arlier this month, Michigan Insurance Commissioner Ken Ross met with Japanese officials to discuss how the agency regulates automobile insurance in Michigan.

The Michigan officials met with Kunio Nakajima, director of Government Compensation Office, Accidents Compensation Division, Road Transport Bureau and Yosuke Yamazaki, chief official of Accidents Compensation Division, Road Transport Bureau.

The Japanese officials were in Michigan conducting a comparative analysis of different injury compensation schemes

in the U.S. and were interested in understanding how Michigan’s unique unlimited automobile insurance system worked, according to Ross.

Michigan officials explained to the Japanese officials the mechanisms behind the state’s assigned claims facility, the Michigan Automobile Insurance Placement Facility and how Michigan drivers injured in serious accidents can access the tort system to recover for their injuries.

Ross serves on the National Association of Insurance Commissioners (NAIC) International Insurance Relations Committee. IJ www.insurancejournal.com

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Midwest Coverage Snapshot

It Figures

Declarations

$743 Million

Red River Floods

The latest damage estimate from last summer’s flooding at the University of Iowa – nearly triple the earlier estimate. University officials said it includes all building and content damage and the costs to relocate building complexes for theater and art. Part of the cost ($225 million) is for rebuilding two major arts complexes. Officials say the relocation is necessary because the damaged buildings were in a flood plain, and therefore cannot be co vered by insurance or the Federal Emergency Management Agency.

“The magnitude of the expected flooding has not been seen in several years.’’

— The National Weather Service as North Dakotans prepared for spring flooding along the Red River Basin. Officials in Fargo and Grand Forks began ordering pumps, topping off levees and planning dikes.

$10,000 This could be the new threshold for bringing a case to small claims court in North Dakota. North Dakota law defines a small-claims case as one where less than $5,000 in damages is at stake. The Legislature is considering a constitutional amendment to raise the threshold.

$7.5 Million The amount a federal jury awarded to an Iowa man who claimed his lungs were damaged by working with buttery flavoring used to make microwave popcorn. The verdict in favor of 69-year-old Ronald Kuiper came a day after the Sioux City man died of lung and heart failure.

13 The number of non-fatal injuries per 100 million miles traveled in crashes involving school buses, making them one of the safest w ays to travel, according to University of Iowa researchers. Compared with all vehicles, fatalities in bus crashes were more than three times less likely, and injuries were more than five times less likely.

328,000

99%

The original fine levied in 2005 against a South Dakota trucking firm, Action Carrier Inc., for operating without liability insurance. Now a federal judge has allowed the Sioux Falls company to keep its rigs on the road provided it carries insurance, against the wishes of U.S. Transportation officials who tried to keep the company from operating.

The percentage of swimming pools, spas and whirlpools in Monroe County that Indiana health officials say don’t comply with a new federal law requiring them to be fitted with special drain covers to prevent children from drowning or sustaining gruesome injuries. The federal law that took effect Dec. 19 requires all public pools, spas and whirlpools to have antientrapment covers over their main drains.

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First Step “It’s a necessary first step in that process of reb uilding public trust.’’

— Blue Cross Blue Shield of North Dakota Chairman Dennis Elbert after the firm fired its president and chief executive officer who was criticized for a Caribbean retreat attended by more than 30 sales employees and guests. The ousted CEO, Mike Unhjem, had been the Blues’ top executive since 1991.

Vital Flood Program “Allowing the program to expire would have very negative consequences for policyholders and also for the nation’s economy.

Most home buyers use federally backed mortgages to purchase property, and such mortgages are prohibited by law for homes in floodplains unless they have flood insurance. Therefore it is crucial to keep this vital program running.”

— David A. Sampson, president and CEO of the Property Casualty Insurers Association of America, after the U.S. Senate passed a measure extending the nation’s flood insurance program through September 2009. The House had previously passed an extension.

Board Protection “The liability exposure is not worth the money. Insurance may protect you against financial damage, but it can’t protect your time or reputation.”

— Richard Stein, a lawyer with Nixon Peabody LLP, discussing why more executives are finding that serving on corporate boards is not worth the risk. Lawyers expect an increase in class-action lawsuits against companies and, in some cases, individual dir ectors, potentially creating an additional headache for board members.

Green Opposition “Instead of increasing the liabilities of a program that is almost $20 billion in debt, Congress should focus its attention on making communities more resilient to storms b y investing in the protection and restoration of wetlands, floodplains, and barrier islands.”

— Rebecca Wodder, president of American Rivers, a nonprofit that works to protect waterways, in opposing a measure to make wind coverage available under the federal flood insurance program.

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Midwest Coverage People

Gov. Kathleen Sebelius

Kate Westover

Skip Schrayer

Brian Deitz

Kansas Gov. Kathleen Sebelius is President Barack Obama’s choice for secretary of health and human services.

Sebelius, 60, is seen as a solid choice to hea d HHS because as a governor responsible for the Medicaid program in Kansas, she faced the pressure of rising health care costs directl y, and saw how hard it is to expand coverage, particularly in bad economic times.

She is also familiar with the insurance industry. Before becoming governor, she served as insurance commissioner, and her fellow state commissioners selected her to be national president of their association.

The Kansas governor was an early Obama supporter and a finalist for Obama’s ticket before he picked Joe Biden for vice president. Her name had been floated for several Cabinet posts, but she removed herself from consideration in December, citing Kansas’ budget problems that needed her attention.

Kate Westover, vice president of Alternative Risk Financing at Innovative Captive Strategies, has received the 2009 Distinguished Service Award from the Captive Insurance Companies Association (CICA). Based in Colchester, Vermont, Westover has 20 years experience in the captive insurance industry and has published two books on the subject. At ICS, she consults on captive structuring for clients, brokers and reinsurers. Innovative Captive Strategies, based in West Des Moines, Iowa, specializes in captive insurance and alternative risk management programs.

Associated Agencies Inc. based in Rolling Meadow, Illinois, named Max “Skip” Schrayer as president. Schrayer also serves as president of Auto and Home Insurance Agency in Downers Grove.

As president of these two companies, he oversees every aspect of commercial and personal insurance for individuals and businesses — small and large, for-profit and non-profit — nationwide.

Associated Agencies Inc. has been in business for nearly 120 years and now serves y 15,000 clients nationwide. Its affiliate, Auto and Home Insurance Agency, is the largest privately-owned personal lines insurance agency in Illinois.

Brian Deitz has been named partner at the industry advisor Reagan Consulting, announced CEO Robert Reagan.

Deitz joined the Atlanta-based insurance agency consulting firm in 2006 and has focused on agency/broker mergers, acquisitions and valuations. Prior to joining Reagan, Deitz spent four years working in mergers and acquisitions for The Home Depot, leading valuation exercises and due diligence processes. Prior to that position, he worked in investment banking for Deutsche Banc Alex. Brown in Baltimore.

Former North Dakota Highway Patrol superintendent Bryan Klipfel has been named the state’s new workers compensation director by Gov. John Hoeven.

10 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

It’s the governor’s first hire since North Dakota voters decided last November the governor should have power to hire the director of Workforce Safety and Insurance. Before, an appointed board of directors had the authority.

Klipfel succeeds interim director Bruce Furness. The agency has not had a permanent director since Sandy Blunt was dismissed in December 2007.

USG Insurance Services Inc., a national wholesale broker of commercial insurance headquartered in Tampa, Fla., has promoted Andy Jones to senior underwriter at its Michigan branch. Jones was a manager for four years with Enterprise Rent-A-Car and began as an underwriter with USG Insurance in 2005. Jones said he is focused on developing 12 to 15 core agents and writing all types of accounts regardless of premium size. He is striving for at least $100,000 in new business per month. The Michigan branch is one of 11 USG offices.

Hiscox is now offering inland marine insurance to the U.S. market and has hired Steve Silverman to lead this initiative.

Hiscox said it will be underwriting both individual risks inland marine risks and programs.

Silverman, vice president, joined Hiscox from American International Group’s Lexington Insurance, where he was most recently assistant vice president and product line manager for Inland Marine and Specialty Property business in the U.S. and Canada. Prior to joining Lexington, Silverman spent most of his career with Aetna Casualty & Surety.

He is joined by Randi Glazer, assistant vice president, who joins Hiscox from the Fireman’s Fund Insurance Co., where she was the Inland Marine manager for the New York region. During the course of her career Glazer has held positions with CNA, Chubb, Swiss Re America and the Catlin Group.

Willis HRH, the North American business of Willis Group Holdings, reported that David Finnis has been named executive vice president and national property practice leader, effective immediately. Finnis, who joins Willis HRH from Integro Insurance Brokers, will report to Leslie Nylund, chief placement officer for North America and a national partner for Willis HRH. He will be based in A tlanta.

Finnis will lead the company’s property practice in North America, including its property placement operations in London and Bermuda.

Finnis has 25 years of experience in the design, marketing and servicing of complex property insurance programs for Fortune 1000 clients. Prior to joining Willis HRH, he was managing principal at Integro, sharing responsibility for the broker’s U.S. property practice. He joined Integro in 2005 after serving as director, Southeast Property, for Aon in Atlanta from 1996. Earlier, he held leadership roles in the property brokerage units at Johnson & Higgins and Marsh & McLennan, both in New York. IJ www.insurancejournal.com

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National Coverage News & Markets

Survey: Commercial Lines Pricing Drops 3% in Q4 T he commercial lines insurFourth quarter CLIPS findings ance market showed more indicate that product lines and signs of price stabilization in the market segments experiencing the last quarter of greatest reduc2008. tions in pricing ‘The underlying Commercial over the last deterioration in insurance prices few years — underwriting saw just a slight most notably results, coupled with workers’ comdecline of 3 percent during the pensation, unprecedented fourth quarter of property and investment losses, 2008 compared to are contributing to a large accounts a year ago — rep— may have slowing of pricing resenting the begun to stabideclines.’ smallest reduclize. tion in the past The survey eight quarters — according to also revealed that pricing reducTowers Perrin’s commercial lines tions in those areas are now generinsurance pricing and profitability ally in line with activity in other trends survey (CLIPS). commercial lines, with the excep-

tion of specialty lines, where, consistent with recent quarters, price changes remained fairly flat.

The survey also show that accident-year 2007 loss ratios deteriorated 7 percent relative to 2006, and that accident-year 2008 loss ratios rose an additional 12 percent versus 2007. The deterioration is a continuation of a five-year trend as, overall, prices have eased 11 percent since 2004, despite ongoing increases in loss inflation.

“The underlying deterioration in underwriting results, coupled with unprecedented investment losses, are contributing to a slowing of pricing declines,” said Jeanne Hollister, Towers Perrin managing principal and proper-

ty/casualty insurance practice leader for the Americas region.

“Although the property and casualty industry remains strongly capitalized in the aggregate, we expect that the surplus declines in 2008 will result in increased conservatism in companies’ risk appetite. We believe that this, in turn, will lead to a gradual, general firming of prices throughout the balance of 2009.”

Towers Perrin’s CLIPS data are based on both new and renewal business figures obtained directly from carriers underwriting the business. The survey track the differing trends in pricing across region, line of business, and account size on a quarterly basis. IJ

General Liability Losses, Expenses Likely to Rise Rapidly

National Flood Insurance Program Gets Short-Term Extension

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C

he general liability line of insurance has produced industry-wide combined ratios below 100 percent for the past two years, but this profitable underwriting performance is unlikely to continue, analysts say.

General liability losses and expenses are expected to increase faster than premium increases in the next couple of years, according to a new study by Conning Research and Consulting, “We project that the next couple of years will see a moderating in general liability premium reduction, gradually leading to a modest increase by 2010,” said Mark Jablonowski, analyst at Conning Research & Consulting.

However, losses and expenses are forecast to grow more quickly, analysts say, with a resulting rise in combined ratios reaching 107 percent by 2010.

“In the longer run, the future of www.insurancejournal.com

the general liability insurance market will play itself out between the cumulative effects of small to moderate losses and the rising prospect of mega-risks,” Jablonowski said.

The Conning Research study, “General Liability: Staying Relevant (and Profitable) in the New World of Risk,” identifies the issues facing the market.

“History has shown us a cyclical increase in general liability losses in periods following recessions,” said Stephan Christiansen, director of insurance research at Conning. At the same time, longer term secular trends point to an increase in both smaller claims and larger mega risks. “Longer term, the best prospects for general liability insurers may come from expanding the model of specialization in risk that has already proven to be a successful differentiator among companies.” IJ

ongress passed a measure extending the National Flood Insurance Program through Sept. 30, 2009, under the omnibus appropriations bill.

The NFIP extension was set to expire at 11:59 p.m. on March 6, but Congress passed a continuing resolution to extend funding to federal programs under the omnibus bill, including the NFIP through March 11. Then on March 11, Congress passed the omnibus bill, which ensures a temporary extension of the NFIP until further reform can be debated.

If the NFIP had expired, agents and brokers would have no longer been able to write, renew or endorse NFIP policies.

“Allowing the program to expire would have very negative consequences for policyholders and also for the nation’s econo-

my,” said David A. Sampson, president and CEO of the Property Casualty Insurers Association of America.

Insurers and other industry groups hope that more work will be done to provide a longterm solution to problems that have plagued the NFIP for years.

“We will work closely with the House and Senate to advocate a long-term extension that preserves the program’s viability and does not needlessly expand its scope into other areas, such as windstorm insurance, where coverage is already available through private industry or state programs,” Sampson said. IJ

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Special Report HOT Markets and Programs

HOT Prospects Come in Unusual Packages MyNewMarkets.com’s Top 10 Oddest Market Searches and Requests

By Christopher Boggs

A

“hot” risk from an agent’s view is the one sitting on his or her desk demanding immediate attention. Sometimes those hot prospects aren’t business owner policy or even standard-carrier-eligible; in fact they can be pretty darn strange.

MyNewMarkets.com, Insurance Journal’s Web site designed to bring agents and brokers/wholesalers together, sees its share of odd risk types and req uests. A review of the market request forum at any given time will produce some very “unique” risks. Remember, unique is code for bizarre, weird or just unbelievable. But no matter how unique the risk, there is usually a market willing to supply the needed protection.

Insurance Journal’s editorial staff reviewed the forum posts for the past se veral months and selected the 10 most unusual market requests/searches applying highly scientific methodology — if it ma de us shake our collective head, it made the list.

From 10 to one, here are the strang est market requests from the past few months: 10. Timberland 9. Halfway House Operation 8. Air Traffic Control School 7. Tourist Trolley Operator 6. Snow Machine Rentals 5. Dating Service Operation

4. Sand Rail (Dune Buggy) Operation 3. Tailgate Party Bus Operation 2. Circus Arts Instructor Liability 1. Exotic Snake and Reptile Breeding Operation

and underwriting guidelines for a few of the listed risks. For example, Risk Placement Services Inc.’s Vice President of Property Bob Hecht stated that both ACE and Axis have a lumber industry-related risk specialist, making them good markets Stump the Market for the strangest risk number 10 — timIn an attempt to stump the mark et, the berland. list above was sent to several brokers Questions about coverage availability for across the country. The insight provided halfway house operations (#9), air traffic by the respondents was enlightening, and control schools (#8) and dating service the coverage availability for even the operations (#5) produced valuable understrangest risk was intriguing. writing information in addition to marketZach Mather, a broker in CRC’s related data. Halfway houses were broken Alabama office, said, “We into two categories prior can always find a market.” ‘Unique’ is code for to the discussion of covThis seems to be true. The erage availability; the bizarre, weird or combined panel successdiscussion of air traffic fully provided markets for just unbelievable — control schools focused nine of the risks presenton the professional liabut no matter how bility exposures; and the ed, although no single broker/wholesaler claimed ‘unique’ the risk, unusual sexual assault to be able to find coverage exposure faced by datthere is usually a for all 10. The sand rail ing services were dis(dune buggy) operation cussed. market willing to was the only market none Placement for halfway supply the needed houses depends on the of the five respondents said they could or would type of operation, protection. place. according to Ken Beyond a simple “yes, we will write the Kukral, president and CEO of coverage,” or “no, not something we want;” International Excess Companies in each of the brokers provided more Richmond Heights., Ohio. Kukral stated, detailed information regarding markets continued on page N4

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Her expertise is protecting the environment. And your clients.

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Of all the reasons Liberty International Underwriters has become a leading specialty lines insurer, what truly sets us apart is our instinct to do the right thing. We meet your needs quickly, consistently, and responsibly. Together, we can provide the best products for your clients. We don’t just value our relationship with you. We work at it.

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Special Report HOT Markets and Programs HOT Prospects , continued from page N2

Managers and also one of Lloyds’ “General Star and HCC Insurance Co. have errors and omissions programs. a detention facility program that could do Dating service operations presearly release halfway houses. If it is a drug ent a unique professional liability and alcohol halfway house or a homeless challenge, Parrish said, noting, “I’ve shelter/halfway house, we could go to seen several dating services in the Evanston Insurance Co, Lloyd’s or Red past five years or so, and never Mountain Insurance Co.” found one that anyone was willing Joshua J. Parrish of Arrowhead Wholesale to cover due to the possibility of Insurance Services’ executive and professexual assault exposional risk division in San Diego, said he can proPremium may not sure and lack of background screenvide professional liability ing.” for a halfway house oper- be the only mini“For the most ation providing substance mum required by part we have a marabuse recovery, but not ket; it is just a matfor a convict early release the underwriter. ter of if it is large house. “I would write a Some markets enough to meet the halfway house with Midrequire a miniminimum premium Continent GA, a wholethreshold,” stated sale servicing (no retailer mum of units in Walt Sams, a marapplications) MGA that the operation. keting representawrites for ProNational/ tive with ProAssurance.”

Appalachian Underwriters Inc. His Kukral and Parrish also zeroed in on the point is well-taken; because of the professional liability markets that would unusual nature of those and other and could entertain an air traffic control like risks, underwriters generally school. Parrish said, “If they’re looking for expect a minimum premium to take on educators’ liability, my favorite market for such unusual risks. that is United National.” Kukral reported Premium may not be the only minimum that he would approach Aviation Insurance

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required by the underwriter. Sams reported that in order for a tailgate operation (#3) to gain coverage, his markets require the insured to have a minimum of three units in operation.

Snake and Reptiles But what of the No. 1 strangest risk; who will write an exotic snake and reptile breeding operation? Kukral led Insurance Journal to Lester Kalmanson Agency Inc. A review of this specialty agency’s Web site is a walk through weird — it says so on the site. The home page contains pictures of alligators, zebras and a rhinoceros — what better place to find coverage for snake and reptile breeding.

The old adage, “One man’s trash is another man’s treasure,” can be rewritten for use in the insurance world too.

“One agent’s weird is another agent’s livelihood.” Even the bizarre have a home — somewhere. IJ Boggs is associate editor of MyNewMarkets.com. Phone: 619584-1100 ext. 137 Email: cboggs@mynewmarkets.com. www.insurancejournal.com

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International Coverage News & Markets

Sports Terrorism, ‘Names,’ Tongues and Mergers

By Charles E. Boyle

A

re professional sports the next terrorist targets? The terrorist attack on Sri Lanka’s cricket team in Lahore [Pakistan] “highlights the vulnerability of sporting events to terrorist disruption,” warned Dr. Gordon Woo, terrorism risk expert at Risk Management Solutions (www.rms.com). “A characteristic of terrorist behavior is learning from success elsewhere.”

Woo stressed that “with concern rising over copycat attacks on other major sporting events,” their insurance coverage is liable to become increasingly expensive, including the 2012 Olympic games in London.

Arsene Wenger, the French manager of the Arsenal Football [Soccer] Team, added his concerns. He noted that sports, especially international competitions such as the Football World Cup, are high-profile events. His own team has received threats, but hasn’t publicized them.

As a result, sports make tempting targets for “extremists.”

Woo noted, however, that the “terrorism insurance market has softened considerably since 2003, when FIFA securitized the risk of the 2006 Football World Cup being cancelled.”

The end of more than 20 years of litigation may be in sight, following a recent UK Appeals Court ruling in favor of Lloyd’s against claims of fraud by former individual ‘names.’

As Lloyd’s [www.lloyds.com] explained, the latest judgment upheld a July 2008 ruling that struck down “a claim brought by 50 names against Lloyd’s alleging that the description of reinsurance to close (RITC) in Lloyd’s brochures and its verification forms back in the 1980s was fraudulent.”

In that decision, Justice David Steel, found that Lloyd’s had not made any false representations with regard to RITC and that there was no evidence that Lloyd’s had acted dishonestly.

He also held that the claim was “unquestionably an abuse of process.”

However, the Court of Appeal found that the names’ application to appeal was “totally without merit” and was “just part of the continuing abuse of process of the court by dissat-

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isfied names who are perpetually trying to find new ways of accusing Lloyd’s of fraud.”

Lord Justice Longmore made the decision even more emphatic, stating that the litigation pursued by names “must now come to an end.”

He held that extended civil restraint orders against the 50 names, preventing them from pursuing fresh litigation, must remain in place.

Lloyd’s General Counsel Sean McGovern called the decision a “complete vindication of Lloyd’s position through a decade of litigation,” adding that it “marks the end of perpetual litigation trying to reopen matters that have been definitively laid to rest by the Court on a number of occasions.”

Lloyd’s not only won its court case, it also insured a coffee taster’s tongue for £10 million ($13.78 million). The coverage on Gennaro Pelliccia, Costa Coffee’s Italian Master of Coffee, continued Lloyd’s centuries-old tradition of accepting unusual risks.

Pelliccia is glad to have the policy. He explained that his 18 years of experience enables him to distinguish between thousands of flavors, and to “search out any defects, which help guarantee Costa’s unique Mocha Italia blend.”

Lloyd’s noted that the “average tongue has approximately 10,000 taste buds, which means Costa has in effect insured each of Pelliccia’s taste buds for £1,000 (approximately $1,400).

He’s not unique; over the years Lloyd’s has insured other tongues, notably for wine tasters and wine merchants. A Dutch wine maker, Ilja Gort, even insured his nose for £5 million ($6.32 million).

Sompo and NipponKoa, two major Japanese property/casualty insurers, have announced preliminary merger plans, as the trend toward consolidation continues. Japanese insurers are trying to reduce costs in order to cope with decreasing demand and an aging population.

The merger of the two would create a company with premium income of more than 2 trillion yen ($20.7 billion), putting it third in the Japanese non-life insurance industry with 25 percent market share. They would have a market value of about $10 billion. IJ www.insurancejournal.com

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Special Report Green Risks

Innovative Boats Need Innovative Agents Hybrid Boats Offer New Way to Sell Coverage to the Green-Minded Customer

By Chantal Cyr

H

ybrid boats are hitting the market and the growing popularity of hybrid and electric boats have directly impacted what boaters expect from their insurance. According to the NMMA boater registration report (Feb. 4, 2008) and U.S. Census Report (2006), one in 10 American families owns a boat.

Understanding new marine technology could help an independent agent land new boat and yacht customers and possibly grow the books of other personal insurance products.

Climate change, carbon footprint and biodiesel are all words and phrases that have become part of today’s lexicon as everyday Americans are constantly reminded about what they are putting into the environment.

As the new administration came into office, environmental issues have gained even more attention.

Increased focus on the environment, a slowing economy and record high fuel prices have all led the marine industry to develop new, innovative products. During the past few months, green boating has been grabbing headlines. Most of the news has surrounded electric boats, which use no fuel at all, and hybrids, which use an integrated propulsion system made up of fuel and electricity. Some hybrids even included solar Hybrid boats have panels like Island Pilot’s new DSe trawler. and yachts Boats from Frauscher will likely and Sea Ray have begun expand in implementing parallel hybrid systems powered popularity

by Steyr motors into one over the next of their models. These motors function much few years. like those found in hybrid cars. Eventually, it appears boat and yacht manufacturers will have a hybrid option in their lineup of vessels with the ability to both save on fuel and deliver the performance many boaters want.

What can an independent agent do to let www.insurancejournal.com

Cyr

customers know that they have what it takes to properly insure one of these innovative boats and yachts? There are four steps agents can take, with minimal investment, to gain the trust and loyalty from boaters interested in the newest technology on the market.

Talk to boaters about mechanical breakdown coverage. Early adopters are often the ones who want the newest gadget and the most innovative technology on the market. However, some of them might be anxious about the durability of new systems that are being used. Mechanical breakdown coverage that is included in some boat and yacht policies could ease the mind of an early adopter who is looking forward to

mixing water with electricity. Taking the time to find a carrier that includes this coverage can build trust with a customer through a shared understanding of what matters most — being able to get the boat back in the water quickly should something break without a major out of pocket expense.

Understand which carriers know boats and yachts the best.

Matching customers with insurance carriers that have highlevel claim service will build loyalty with that customer should the unfortunate event of a claim occur. If an auto or home adjuster who is not a boat expert visits a boater that has a claim, are they going to believe that carrier or agent has any idea continued on page N8

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Special Report Green Risks Innovatice Boats, continued from page N7

what’s best for their watercraft? Probably not.

This factor is even more important with boaters who are more sophisticated and have made the investment in new, more complex technology. Partnering with carriers that have a good understanding of the innerworkings of the various applications of “hybrid” technology will help deliver a positive experience for the customer.

Provide tips and information focusing on customers’ environmental interests. Someone buying a hybrid boat may not only be an early adopter of new technologies, but they may be paying serious attention to how they can reduce their environmental impact. Connecting with customers about two of their passions, boating and the environment, could help to develop a loyal relationship with that person. This also creates an opportunity to inform customers about new environmentally friendly behaviors for boating, home maintenance or car care to include in their life and the insurance implications of doing so.

Get out of the of fice and attend a local boat show, if possible. Some of the best feedback heard from agents is how they have made connections in the marine industry and are regularly updated on some of the latest trends at local sho ws. Meeting boat dealers at shows will let them know the insurance agent is committed to the marine industry and is a name that the dealer’s customers can trust. Dealers appreciate this because they can then set a customer up with an agent they know ensuring the customer has a good boat-buying experience.

Hybrid boats and yachts will likely expand in popularity over the next few years. Instead of waiting to learn about them after they have flooded the market, use this time to take a leadership position in understanding these vessels. Doing so now could help to provide a competitive advantage for an agency by delivering knowledgeable service to the consumers who are buying them. IJ Cyr is vice president of the boat and y acht division for Travelers. She joined Travelers in 1986 and has more than 13 years of experience in the marine industry.

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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.

Misc. Medical Malpractice Market Detail: NAS Insurance Services

Inc. (www.nasinsurance.com) gives agents the ability to provide stand-alone medical

malpractice coverage. Coverage can also be provided packaged with general liability, and excess liability up to $5 million is also available. Special features include incident reporting and full prior acts coverage. The policy can be endorsed to make defense in addition to the limits of protection and to extend coverage for sexual abuse and molestation up to the full limits of lia bility. Punitive damages are automatically included where insurable by law. Surgery centers, MRI facilities and dialysis centers are also eligible. Minimum premiums begin at $2,000 and deductibles start at $1,000.

Available Limits: $1 million to $3 million (with the availability of excess coverage).

Carriers: HCC and HCS. “A” rated by A.M. Best. Non-admitted.

States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., D.C., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Maine, Md., Mass., Mich., Minn., Miss., Mo., Mont., Neb., Nev., N.H., N.J., N.M., N.Y., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., Wis. and Wyo. Contact: David Leventhal at 818-808-4464 or e-mail dleventhal@nasinsurance.com.

Golf Courses and Country Clubs Market Detail: Fairway Underwriters Inc. (www.fairwayunderwriters.com) allows agents access to an insurance program for daily fee golf courses and country clubs.

Fairway’s Club Champion CMP policy can now be extended the same coverage to selected distressed courses which are for sale, in foreclosure or in receivership.

Program highlights include: tee to green property coverage, herbicide/pesticide pollution liability, non-reporting equipment coverage, rating based on rounds played, along with many other coverages. Workers’ compensation, umbrella liability and directors’ and officers’ coverage are also available.

Some coastal courses are eligible for wind coverage. Minimum premiums begin at $2,500.

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Available Limits: As needed.

Carriers: QBE. “A� rated by A.M. Best.

Admitted.

States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., D.C., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., La., Maine, Md., Mass., Mich., Minn., Miss., Mo., Mont., Neb., N.H., N.J., N.M., N.Y., 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: Fran Coulter at 800-662-2141 or e-mail fcoulter@fairwayunderwriters.com.

Private Money Lenders REO/FP Market Detail: Innovative Risk Solutions Inc. (www.irs-incorporated.com) offers agents a source for their private lending clients in need of an REO and “forced placed� coverage market.

Private, non-bank lenders need a market for property protection when/if the mortgagor fails to secure the correct property protection. In this program, rehab property and vacant property are acceptable. Policies can be administered online and the insured has instant access to an Evidence of Insurance. Monthly billing is available. Deductibles begin at $2,500.

Available Limits: Up to $100 million.

Carriers: Lloyd’s. “A� rated by A.M. Best. Nonadmitted.

States: All. Contact: John Watt at 954-931-4795 or e-mail jwatt@irs-incorporated.com.

Mortgage Broker/Banker Professional Liability Market Detail: Gresham & Associates (www.greshaminc.com) has facilities for mortgage broker/banker professional liability which includes sub-prime loans and prior acts coverage. Investor required errors and omissions coverage is also available through a Special Mortgage Bankers Bond naming the investor as the loss payee. Minimum premiums begin at $2,500.

Available Limits: $1 million to $5 million.

Carriers: Unable to disclose. “A� rated by A.M. Best. Non-admitted.

States: All. Contact: Art Hays at 888-473-7444 or e-mail ahays@greshaminc.com. IJ

Submit your company’s property/casualty markets to the industry’s leading searchable database at www.mynewmarkets.com. www.insurancejournal.com

Miscellaneous Professional Liability 24 Hour Gas / Convenience Stores Commercial Property Lessor’s Risks Commercial Umbrella Non-profit Director’s & Officer’s Liability

Fast – Competitive Questions? info@braishfield.com

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Special Report Green Risks

Greener Insurers Compete for a Growing Green Industry

By Andrea Ortega-Wells

J

im Henson’s famous Kermit the Frog said it the best, “it’s not easy being green.” Today’s property owners and insurers understand that while it’s not easy, being green can be profitable.

The green building market is steadfastly growing even in tough economic times.

“The green building movement is alive and well despite current economic conditions,” says Fireman’s Fund’s Steve Bushnell, the first property/casualty insurer to create insurance coverages specifically for green buildings.

While Fireman’s Fund Insurance Co. released the industry’s first green commercial building insurance product endorsement in October 2006, the insurer is no longer alone on this front as a number of other insurers have since developed green insurance products in both personal lines and commercial lines.

Marsh’s “Green Built Environment in the United States” report updated in December 2008 says there’s a growing interest among insurance companies in green building.

Insurance companies such as AIG, Zurich, CNA, Travelers, Liberty Mutual and Chubb — to name just some — already have green insurance coverages on the market.

“The U.S. Green Built Marketplace continues to grow at a rapid pace,” the Marsh report concludes. “There is increasing interest by the insurance marketplace in understanding the risks and benefits of building green.”

Christine Alderman, new products and services manager for Chubb Personal Insurance, agrees and believes as the green industry conN12 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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Opportunities tinues to evolve so will the insurance industry and its product offerings for the green sector.

“I think that we will see more of a market for green and green rebuilding products as well as insurance,” Alderman said.

Growing Green Market By 2013, the overall green building market (both residential and non-residential) is expected to more than double, which could offer opportunities for insurance companies and their agents.

Today the green building industry is estimated to be 10 percent to 12 percent of the current commercial and institutional building market, or about $36 billion to $49 billion. But McGrawHill estimates the industry will grow to represent 20 percent to 25 percent of new commercial and institutional construction starts, or from about $96 billion to $140 billion in size.

And these estimates could perhaps be on the low end, the U.S. Green Building Council (USGBC) says.

Even in a dismal U.S. economy, recent studies and reports point to green building as one of the bright spots. The USGBC reported that in 2008, the numbers of both Leadership in Energy and Environmental Design (LEED)-registered and LEED-certified projects doubled — from about 10,000 registered projects at the end of 2007 to more than 20,000 by the end of January 2009.

Some 75 percent of commercial real estate executives — including developers, rental building owners, brokers, architects, engineers and others — say the credit crunch will not discourage them from building green, according to Turner Construction Co.’s “Green Building Barometer.” In fact, 83 percent said they would be “extremely” or “very” likely to seek LEED certification for buildings they are planning to build within the next three years.

While in years past, the majority of green commercial buildings could be found in federal or state office buildings, that’s no longer the case, says Fireman’s Fund Bushnell.

Green building has “spread to the private www.insurancejournal.com

sector and office buildings …. hotels, multifamily, hospitals, public and private schools,” Bushnell says. “We’re seeing that the green building movement has become well entrenched and has spread to nearly everyone who owns a building.”

The greening of existing buildings is one of the fastest growing areas in the green building movement as well.

Studies indicate commercial property owners have an interest in updating their existing stock of buildings in many green ways. More than 80 percent of commercial building owners have allocated funds to green initiatives, according to “2008 Green Survey: Existing Buildings,” a survey jointly funded by Incisive Media’s Real Estate Forum and GlobeSt.com, the Building Owners and Managers Association International and the USGBC. And 45 percent of commercial building owners say they plan to increase sustainability investments this year.

Homeowners also are looking to buy green properties or green their current properties as a way to save money and protect the environment, studies suggest. Some 70 percent of homebuyers are more or much more inclined to buy a green home over a conventional home in a down housing market, according to McGraw-Hill Construction’s 2008 SmartMarket Report, “The Green Home Consumer.” That number is 78 percent for those earning less than $50,000 a year, the report claims. The report also notes that 56 percent of respondents who bought green homes in 2008 earn less than $75,000 per year; 29 percent earn less than $50,000.

“Homeowners are increasingly conscious of the need to preserve natural resources and protect the environment,” said Alderman of Chubb, which introduced its Masterpiece GreenWise Upgrade coverage option in February 2009. This product will pay the difference between rebuilding the house as it was

and rebuilding green. “Homeowners are increasing recognizing the economic value of going green, as it can save them thousands or tens of thousands of dollars over the long haul,” she said.

Green Commercial Markets In the commercial property insurance sector, in particular, Marsh notes that more carriers have entered the marketplace with increased capacity and varying products.

One insurer to recently enter the green market is CNA Insurance.

In early March, CNA introduced its EcoCare commercial property upgrade extension endorsement, which will allow policyholders to repair or replace damaged property using environmentally responsible and resource efficient materials and processes.

“The green initiative is all around us,” said Katie Wilson, who helped develop CNA’s new EcoCare property endorsement. She said the insurer decided to create the endorsement because of customer demand.

Today’s customers are searching for more green alternatives in the event that they have a loss, she said.

While the EcoCare product is the first green product to come from CNA, Wilson says more green coverages are in the works. “The building product is really our first launch,” she said, noting the coverage applies to any property coverage across the enterprise. “But I think what you’ll see from us is probably more green products tailored for industry groups and maybe even some different customer groups,” she said.

Determining proper values to avoid being underinsured at the time of a loss or to a void being charged too much premium is a critical aspect in the process of obtaining green cover-

‘The green building movement is alive and well despite current economic conditions.’

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age, Marsh wrote in its “Green Built” report.

Examples include valuing the cost of vegetative roofs and alternative water and energy systems, which can be difficult to value because they often involve new materials and technologies, the broker wrote.

Liberty Mutual’s Ann Butterworth, lead underwriter for the insurer’s commercial property green building coverage, agrees and advises agents to consider the possibility of coverages gaps for green upgrades after a loss. This is more important considering today’s trend of commercial property owners that want to go green in the future.

“Most of the normal commercial insurance policies are written on a replacement cost basis,” Butterworth says. “That policy is only going to replace that product that they currently have. It’s not going to upgrade them for the additional costs that it might be to go green.”

Another thing agents should consider is changing state or federal building codes, especially in states like California. “We know that those [codes] are changing,” she said, adding that some codes require or will require customers to rebuild green after a loss. “And if they don’t have the correct coverage on their insurance policy, they will end up absorbing that cost themselves,” Butterworth said.

Liberty Mutual introduced its commercial property coverage for green buildings just a year ago and Butterworth says the product has been “attracting attention.”

However, she’s surprised that more businesses are not buying it, especially given the changing regulatory land-

scape. “We’ve definitely had some great success with a number of prospects and our old clients, but we haven’t sold as much as you might have expected, given the fact that every day in the press you keep hearing about all this new green building,” she said.

Butterworth advises agents to help their insureds understand the cost differential between typical run-of-the-mill building products and green products.

While some say that cost differential is leveling off, most green products will still cost more, as high as 25 percent more in some instances, Butterworth said.

This might make the case for why they need to purchase the green coverage, she says.

‘We will see more of a market for green and green rebuilding products as well as insurance.’

First to the Market As a number of insurers have jumped into green insurance products in the past year, the first to launch green coverage was Fireman’s Fund.

Today Fireman’s Fund offers green coverages for both personal lines and commercial lines, including products to insure green homes and endorsements to upgrade green after a loss, green coverages for commercial buildings and manufacturers, and coverages for green cars, both personal auto and commercial auto.

According to Bushnell, the green coverage product that has displayed the most success thus far has been its green upgrade product, which provides coverage for upgrading with green materials or green products following a commercial property loss.

“That product has been very popular in the marketplace,” Bushnell said. “We launched in 2006 and the premium associated with the accounts that purchased it at that time was about $5 million through 2006. At the end of 2007, the premium was $20 million. We expect that the premium when we have all of our yearend numbers for 2008 will be $100 million.”

Bushnell said when the insurer first launched the initial green property coverage endorsement in 2006 he believed green properties would be a better risk than those that were comparable non-green risks. So far, that’s proven to be true, he said.

“We’re probably smarter on risk elements of

N14 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

green buildings than we were when we launched the product,” he said, “but overall, we do believe that green buildings are better physical risks than traditional buildings.”

So far, the loss experience on green properties has backed up Bushnell’s belief. “We’ve had just a handful of losses with all the accounts that have purchased the coverage and most of them have been relatively easy to adjust and settle,” he said.

Whether a green risk is a better risk remains to be seen, said Charlie Kingdollar of Gen Re at the Golden Gate CPCU All Industry Day. Kingdollar, who was a participant on a CPCU panel discussing green risks, says he knows of 14 insurers with green property coverage endorsements today and some are giving away the coverage or offering huge premium discounts because they believe green properties are better risks. But Kingdollar is not convinced that green risks are better insurance risks.

“No one really knows at this stage,” he said.

“For instance, for insulation, people are using denim that has a fire retardant on it. W ell how long does the fire retardant last? Is it eq uivalent to fiberglass insulation?” he asked.

Overall, he believes green products are here to stay, but he thinks the jury is still out on whether they’re better risks, and he questions whether they’re worth the huge premium discounts — some as high as 40 percent — that some carriers are offering.

“It is such a new field that I think the one thing that we have learned most clearly is that we have to stay on top of this,” Liberty Mutual’s Butterworth said. “It is an evolving market and it requires a lot of attention.”

Right now, all indications are that green risks are better but most of the evidence is anecdotal, Butterworth adds. There are not enough green buildings and there hasn’t been enough time to study their exposures, she said.

“But over time we will be able to do more studies and the USGBCs of the world will be able to prove that a green risk is better,” Butterworth explained. IJ www.insurancejournal.com

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Special Report HOT Markets and Program

Fastest Growing Industries to Focus On Top 7 High-Growth Industries’ Risks and Unique Exposures

By Chris Boggs

P

lanning for the “upside” must Management, Scientific and be closely monitored; begin now. The soft insurance Technical Consulting Services (5416) • If the employee works from home, one market will end, and the rebo und Entities in need of professional a dvice of two specific homeowners’ policy from the financial bottom will and assistance seek the help of pra ctitionendorsements may be required; and happen. But don’t try to predict when, just ers from this industry. The most common • Consulting firms, especially smaller get out in front and plan for it. clients for these consultants are b usiness ones, will require an agent who can walk or manufacturing operations, and municithem through contractual risk transfer The U.S. Bureau of Labor Statistics (BLS) issues. lists those industries Management, Scientific and Technical Consulting Individual and Family Services (6241) expected to Services As America ages, more and more people experience This industry is expected to grow by around 22 percent by will seek and require the assistance of an the fastest 2016. Source: U.S. Bureau of Labor Statistics individual or family non-residential servgrowth ice professional. However, services offered between now pal and governmental by this industry are not limited to older and 2016. entities. Scientific and people; nonresidential social assistance is Because of technical consultants proalso available to children, those diagnosed the nature of vide more specialized with mental retardation or persons with those indusexpertise than managedisabilities. Counseling, day care, advocacy tries, the curment consultants. Specific and recovery help are some of the services rent financial knowledge, experience this industry offers. The BLS expects the crisis will do and/or training are number of workers employed in this field little to temrequired of these consultto increase between 25 percent and 30 perper growth, ants. Growth in this cent — mostly in the government sector. and some may even be pushed ahead faster industry is expected to be aro und 22 perWith municipal outsourcing on the rise, by the state of the economy. cent. Approximately one out of every four many private individual and family service Seven of the fastest growing industries professional consultants is self-employed, operations are likely to open to meet the are: 1) management, scientific and techniand 75 percent of consulting firms are onegrowing demand. Some insurance and risk cal consulting services; 2) individual and or two-person operations. Insurance covermanagement exposures agents and brokers family services; 3) home health care servicages and risk management needs for this should consider for non-governmental es; 4) securities, commodity contracts and industry include: entities providing these services are: other financial investments and related • Professional liability or errors and omis• Professional liability (for counseling and activities; 5) facilities support services; 6) sions protection (differs based on consultother professional services); residential care facilities; and 7) independing specialty); • Employment ent artists, writers and performers. practices liabiliEach of those seven presents unique Individual and Family Services ty protection to insurance and risk management exposures Workers employed in this industry will increase include thirdbeyond just the “vanilla” property and genbetween 25 percent and 30 percent b y 2016. party coverage; eral liability coverages.

Source: U.S. Bureau of Labor Statistics • Fiduciary liaAfter a brief description of ea ch indusbility (if helping try (taken from North American Industry • Kidnap and ransom coverage if workwith finances or Classification System - NAICS), the following internationally; managing proping paragraphs list the unusual insurance • Employment practices liability insurerty); and risk management needs faced by each ance providing third-party protection; • Coverage for of the seven industries. NAICS codes are • Fiduciary liability if advising on or sexual abuse and sexual harassment; parenthetically provided for reference. handling money; • Accident and health protection for This information will allow agents to plan • Due to the number of self-employed those being cared for and any volunteers for the upside pursuit of these growth consultants and small consulting firms, that may be hurt; markets. workers’ compensation requirements must N16 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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• Directors and officers coverage; and • The insured should be fully licensed and trained as per state and/or federal guidelines.

Home Health Care Service (621610) Individuals requiring in-home skilled nursing services will search out these entities. The range of services offered by a home health care operation includes: per-

sidered work-related and an exception to workers’ compensation’s “coming and going” rule. This needs to be discussed with the client; and • Some type of licensing of the b usiness may be required.

Securities, Commodity Contracts and Other Financial Investments and Related Activities (523) This classification encomHome Health Care Service passes a wide The number of employees in this field is expected to grow by between 23 percent and array of finan28 percent. Source: U.S. Bureau of Labor Statistics cial services including investment banking, commodities brokers, sonal care serv- trust officers and portfolio managers. The ices; homemak- economic downturn is not permanent, so er and compan- this will likely soon return to a gro wth profession. The BLS anticipates 25 percent ion services; to 30 percent growth in the number of physical therapy; medical social services; these professionals in the next seven years. medication administration; medical equipFinancial advisors in this class work under ment and supplies training; counseling; 24relatively high stress. About one-in-three of hour home care; occupation and vocational these financial advisors are self-employed. therapy; dietary and nutritional services; Some of the special insurance coverages speech therapy; audiology; and high-tech and risk management issues to be explored care such as intravenous therapy. The numinclude: ber of employees in this field is expected • Professional liability; to grow by between 23 percent and 28 per• Fiduciary liability and/or a dishonesty cent; and about one-third of these employbond; ees work part-time, according to the BLS. • Workers’ compensation needs must be Insurance and risk management considclosely analyzed. A high percentage of erations include: workers in this industry are self-employed.

• Medical malpractice coverage; Depending on the legal structure and the • Sexual assault and harassment coverage; subject statute, • Crime and/or even one-man fiduciary coverage Securities, shops may (depending on the Commodity Contracts, require protecservices being Financial Investment tion; and offered); Activities •Another work• Workers’ com- The industry will grow ers’ compensapensation cover- by 25 percent to 30 pertion issue is age — especially cent in the next seven occupational critical if the years. Source: U.S. Bureau stress. Because home health of Labor Statistics these profesagency pays the sionals work under high stress, any stresshealth care providers as independent conrelated injury or illness may be considered tractors; they may still be employees for compensable. workers’ compensation purposes. Lifting injuries may be prevalent; Facilities Support Services (561210) • If the health care professional works for Many businesses contract out their mainmore than one patient in any given day, the travel between patients will likely be concontinued on page N18 www.insurancejournal.com

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Special Report HOT Markets and Programs Fastest Growing Industries, continued from page N17

products and/or making speeches or public provide residential care and personal care tenance and other services such as janitoriappearances for which they receive a fee. services to facility-housed patients sufferal; general maintenance; trash disposal; The BLS anticipates 10 percent and 12 pering from many physical and mental issues, guard and security services; mail ro uting; cent growth in the number of individuals including those who: live with mental reception; laundry; and other related servengaged in these activities. About 30 perretardation; require on-going medical care ices. BLS anticipates a 20 percent gro wth cent of writers and 62 percent of a ctors are in this particular area. Employees working self-employed. in this industry may be unskilled or uneduA few of the unique insurance issues cated, or working it as a second job. Those faced by these free spirits includes: providing guard and security services may • Workers’ compensation coverage (a require special licensure. This industry majority are self-employed and need the tends to provide low pay and few, if any, protection); benefits. Special insurance considerations • Media professional liability protection; include: • Inland marine coverage for an artist • Fiduciary liabil- Facilities Support Services whose work is in a gallery or otherwise on ity/dishonesty This sector expects to grow by 20 percent by display; bonds; 2016. Source: U.S. Bureau of Labor Statistics • Disability income coverage; and • Professional (any age); suffer from a mental health issue; • Although not a property/casualty coverliability (i.e. law enforcement liability for age, health insurance is also a ma jor expoor are elderly and desire group living but guard services); sure for these individuals. do not require continuous medical treat• Bailee’s coverage; ment (retirement home). Also included in • Because many workers are working in Completing the Top 10 this broad classification are employees of this industry as a second job, attention Rounding out the BLS’s top 10 growth children’s homes, “boot camp” facilities, must be paid to the benefits offered under industries are: 8) computer systems design half-way homes and orphanages. BLS anticworkers’ compensation in relation to the and related services operations; 9) museipates a 22 percent growth in this area. loss of wages from the primary job (if the ums, historical sites and similar instituSpecial insurance coverages and risk employee is unable to work it). This extentions; and 10) child day care service management issues include: providers. Each • Professional liability (for medical, counof these creates seling or other professional services); • Employment practices liability insurance its own unique exposure and with third-party coverage included; has individual • Fiduciary liability (if helping with risk managefinances or managing property); ment needs.

• Coverage for sexual abuse and sexual harassment; • Accident and Residential Care Facilities health coverage for This industry group is expected to increase those being cared by 22 percent through 2016. for and volunteers; Source: U.S. Bureau of Labor Statistics Independent Artists, Writers and and Performers Planning for the post-crisis boom? If not, • Directors and officers coverage.

The number of individuals working in this let this information provide some ideas on sector is anticipated to grow by 10 percent to the up and coming hot markets.

Independent Artists, Writers and 12 percent. Source: U.S. Bureau of Labor Statistics Once an agent looks beyond the usual Performers (711510) coverages, the highlighted industries are The NAICS description of this code sion generally only exists in states with a interesting and unique. Becoming wellstates that this industry is comprised of second injury fund; and not all of these versed and knowledgeable in these indusindependent/freelance individuals engaged states provide this additional protection. in performing in artistic productions; creat- tries can give any independent property/casualty insurance agent a head ing artistic and cultural works or producResidential Care Facilities (6232, start toward growth. IJ tions; or in providing technical expertise 6233, 6239) A wide range of operations is anticipated necessary for these productions. This industry also includes athletes and other by this particular classification. Facilities Boggs is associate editor of MyNewMarkets.com. Phone: 619celebrities exclusively engaged in endorsing 584-1100 ext 137. E-mail: cboggs@mynewmarkets.com. and employees working in this industry N18 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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Dear Reader: Every business has a stor y to tell. For many corporations, small and large, that story ties closely to the personal lives of their founders. Throughout Insurance Journal’s history, we have come to know and appreciate many of the unique stories in our industr y.

And year after year, we have watched as our advertisers’ and readers’ companies have grown and changed.

As a leading industry news and information source, we are not able to profile all of the corporations that cross our path. Our position as journalists sometimes mak es it difficult as well. Consequently, we have created this special supplement to allow our clients, and some of the corpor ations you may work with on a daily basis, to tell their story ... in their own words.

We hope you find this supplement interesting and informative.

Best wishes from all of us at Insurance Journal.

Mitch Dunford CEO Insurance Journal mdunford@insurancejournal.com

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When it comes to insuring educational institutions, knowledge is power. That’s why Travelers has underwriters who specialize in insuring schools, from the grounds to the staff. It’s our IndustryEdge approach, which provides experts from the field and industry-specific coverages, such as Educator’s E&O Liability and global coverage for students studying abroad. For insurance that’s in-synch with educational institutions, contact your local Travelers Commercial Accounts Representative.

3/18/09 9:17 AM

Š2008 The Travelers Companies, Inc. All rights reserved. The Travelers Indemnity Company and its property casualty afďŹ liates. One Tower Square, Hartford, CT 06183

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Announcing the formation

After nearly a century of providing for the workers’ compensation needs of America’s small businesses, EMPLOYERS® is venturing into new territories once again. Our successful acquisition of AmCOMP has forged two great companies into a single unit that has made us stronger, deeper and more fully prepared to advance our vision of being the workers’ compensation insurance leader for America’s leading small businesses.

Here are just a few of the many benefits of being appointed with EMPLOYERS t Financial Strength—As many insurers face the erosion of their financial strength in this difficult economy, EMPLOYERS’ long-time commitment to conservative investment practices, and sound business strategies, have enabled us to remain a well-funded, steadfast partner to agents and policyholders. This strength is reflected by the A- (Excellent) rating awarded by the A.M. Best Company to all our operating subsidiaries. t Stability & Dependability—EMPLOYERS has never left a market it has entered. t Effective Loss Control Programs—EMPLOYERS offers free loss control and OSHA seminars to help agents achieve their continuing education goals. t Expanded Operating Area—Through this acquisition, EMPLOYERS now serves the workers’ compensation needs of your clients in 30 states.

Copyright © 2009 EMPLOYERS. All rights reserved. Workers’ compensation insurance and services are offered through Employers Compensation Insurance Company, Employers Insurance Company of Nevada, Employers Preferred Insurance Company and Employers Assurance Company (also known as AmCOMP Preferred Insurance Company and AmCOMP Assurance Corporation, respectively). Not all insurers do business in all jurisdictions.

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of a more perfect union.

The History of EMPLOYERS® The Fund transformed into a private mutual insurance company.

Expanded operations into Texas and Arizona.

Converted to a stock company and completed an IPO. Listed on the New York Stock Exchange as EIG.

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Doubled premium, increased policy count nearly 20% and converted to a mutual holding company.

Acquired AmCOMP, EMPLOYERS operates in 30 states.

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Expanded into Florida, Illinois and Oregon.

LEARN MORE ABOUT EMPLOYERS AT www.employers.com OR CALL 888-682-6671.

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Midwest Coverage News & Markets Credit Score continued from page 6

when the drop in the credit score is d ue to, for example, their credit card company lowering their credit limit when the consumer’s behavior hasn’t changed in any way.”

Insurers taking advantage of insureds’ credit plight could pay a price. “One outcome will likely be a continued erosion of consumers’ faith in financial institutions,” Cude said.

Cude and other consumer advocates will be watching how the economic recession affects consumers’ buying habits.

“The question is how many consumers and which ones will drop insurance coverage and which coverage? And, if consumers have lost confidence in financial institutions, the impact will be greater,” Cude said.

“The problem is compounded by the fact that, I believe, consumers already don’t understand what they’re buying when they buy insurance and how rates are set. If that’s true, they don’t know what they’re giving up when they drop their insurance coverage,” said Cude.

Kitt said that consumers are trying to do the best with what they have and want to trust providers. “Consumers are experiencing fear regarding their money and how to protect what money they currently have,” said Kitt.

They are guarded in spending their money and want to feel confident that they can trust who is selling a product. This is reflected in purchasing less and only what is felt to be essential, foregoing luxury items.”

Cude thinks some consumers who have to make hard choices about which bills to pay will choose other items over insurance.

“There’s already an indication that this is happening — there’s a Safe Auto ad in which the major point is that if you miss a few payments, SafeAuto will take you back. The ad doesn’t say whether you come back at the same rate as before, however.”

Bolton, too, has concerns about how insurers will treat consumers in the current economy.

“Insurers have the vast majority of their funds in the bond market, which has been much less affected than the stock market,” Bolton said.

“Despite this, I think insurance companies are likely to use the economic crisis as an excuse to increase rates.”

Cude, Bolton and Kitt are in a position to have their views on credit scoring and other consumer issues heard. They are three of the 17 consumer liaisons to the National Association

of Insurance Commissioners (NAIC) for this year. The NAIC has announced it will begin public hearings to review credit scoring.

Insurance Journal spoke with some of the NAIC liaisons and found that in addition to credit scoring, their issue lists include Internet sales of insurance; the effectiveness of current insurance regulation; insurance fraud and agent compensation and disclosure.

Internet Sales Consumer advisors see pros and cons to shopping for insurance on the Internet.

“The Internet is a great option for many consumers in the purchase of many products. It has the potential to vastly increase the transparency of the insurance marketplace,” Cude said.

Yet there is a downside.

“Unfortunately, many consumers probably use it simply to find the lowest price — which does not always mean they have found the best insurance product to meet their needs.”

Cude said she wants to work with regulators to improve consumer information about insurance products. “I will do this through revisions to NAIC buyer’s guides as well as other opportunities that may arise to communicate with consumers, including through state insurance department Web sites,” Cude said.

Independent Agent Value Some consumer liaisons believe that independent insurance agents play an important role in insurance. Because they sell products representing multiple insurers, “consumers can benefit from having more choice in their insurance protection, that is several policies to review for their insurance needs,” Kitt said.

“A trustworthy, ethical and truly independent agent who offers unbiased advice and guidance is an invaluable tool for consumers in our increasingly complex insurance marketplace,” Bolton said.

But Daniel Schwarcz, associate professor of law at the University of Minnesota Law School, is concerned that contingent commissions can compromise the value of independent agents.

“When it comes to contingent commissions and any sort of differential compensation paid to an agent I think is independent, I think there needs to be closer regulatory scrutiny to that,” he said.

46 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

Schwarcz thinks the problem is deeper than many recognize and that simple disclosure is not a solution.

State Vs. Federal Regulation Birny Birnbaum, executive director for the Center for Economic Justice, said his group is interested in the debate over state versus federal regulation with an eye to seeing where consumers can get the best regulatory treatment.

“Right now, the federal proposals are very anticonsumer,” he said.

While state-based regulation has its problems, Birnbaum said “consumers still have better protection [with state-based regulation] than with any hypothetical federal approach that we’ve seen.”

There is a way to design a national regulatory scheme that is better than what consumers get now with the state-based treatment, according to Birnbuam. “But that doesn’t seem to be on the table just yet.”

Amy Bach, executive director for United Policyholders, is not afraid to take a side on the state versus federal question. “At NAIC, we’ll lend our support to commissioners that want to preserve the state regulations system,” she said. “We think the optional federal charter will be a huge mess.”

Bach suggested that disaster programs show that a state or regional perspective has advantages over a national perspective. Her organization works closely with the California Earthquake Authority and she hopes to share some of the best practices learned in California with the NAIC. “We want to help export our success to other states as best we can, and brainstorm how to resolve failures,” Bach said.

Howard Goldblatt, director of government affairs for the Coalition Against Insurance Fraud, is in a unique position among the NAIC consumer representatives since his group is industry-supported. But anti-fraud efforts benefit consumers as well as insurers since everyone shares in insurance fraud costs.

“Having someone on the liaison committee with a background that understands insurance fraud issues and how it impacts consumers is a benefit when [the NAIC] discusses issues,” Goldblatt said. IJ Insurance Journal editors Stephanie Jones and Andrew Simpson contributed to this story. www.insurancejournal.com

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Idea Exchange Stimulus Package

Five Reasons Agents Should Pay Attention to the Stimulus Package Bushnell

By Stephen G Bushnell

T

he American Recovery and Reinvestment Act of 2009, or the Stimulus Package, is the largest infusion of government funds into the private sector in history. Even though it does not include direct benefits to the insurance industry it includes provisions that will impact insurance customers in fundamental ways.

The package is the first step in defining the priorities of the new administraForward looking tion, setting a direction that will have a financial agents can and and risk management impact on will recognize all Americans.

Forward looking the opportuniagents can and will recognize the ties and new opportunities and ways of thinking new ways of thinking about risk that this new about risk that direction offers.

There are five sigthis new nificant areas — direction offers. five reasons to pay attention: Investment in Energy Retrofits Nearly $16 billion will flow to energy retrofit projects. Energy Secretary Steven Chu is on record saying he wants this money to be spent in the next 18 months. Not only will retrofits stimulate the home improvement industry, they also will affect energy use. It is chea per to conserve than to build new plants. Some insurance companies are ahead of this curve, having launched green building insurance products and consulting services. Many agents have already recognized that energy costs are a financial risk that can be managed through the right insurance program. Reduced energy costs translate quickly to a stronger bottom www.insurancejournal.com

line for business and more disposable income for citizens. Agents who help their customers find insurance solutions to energy efficiency dramatically change the total cost of risk.

Valley has re-tooled to manufacture solar panels. The U.S. is full of unused manufacturing facilities, and the green jobs fever is just catching on. Consider how quickly American indus-

Investment in Alternative Energy Again, nearly $16 billion will be used to incent investment in wind and solar, spur research and development (R&D) for new forms of alternative energy (biomass, biofuels, lithium ion batteries) and research carbon sequestration technologies. This investment will impact multi-scale manufacturing, construction and operation of alternative energy facilities, mostly in the private sector. New projects and new technologies create new risks that the insurance industry must understand. Trusted advisors who devlop expertise and help their customers manage these new risks will be big winners.

Investment in the Grid Today’s electrical grid is a mess. It is essentially a patchwork of different systems that exposes Americans to significant financial risk.

The Electric Power Research Institute estimates that power outages cost more than $100 billion per year. Most are uninsured. The Insurance Information Institute estimates that 85 percent to 90 percent of U.S. businesses are not insured against power failure. The $11 billion in the stimulus package for smart meters is probably just the down payment. Dr. Daniel Kamman of Lawrence Berkeley National Labs, and an Obama advisor, estimates the final cost to modernize the grid could exceed $400 billion. In their role as risk managers, agents need to advocate for a reliable grid.

Private Investment Will Follow We are already seeing venture capital flowing to energy-related investments. The long term returns are attractive. T. Bone Pickens and a group of Minnesota investors are planning a major new facility to produce better, stronger blades for wind turbines. Silicon

try retrofitted itself to make tanks and bombers in the early 1940s. The risk challenges and insurance opportunities are already here.

For the past several years, state and local governments have carried the ball when it comes to these investments in energy and energy efficiency. Western and New England states have implemented carbon cap and trade legislation. California and at least 10 other states allow local government to finance energy retrofits through property tax loans and liens. Most major cities have enacted building codes that require construction to conform to LEED (Leadership in Energy and Environmental Design) standards. Some insurance companies and many agents have already recognized these developments.

The train is about ready to leave the station.

Agents with an eye to the risks and opportunities of the future are on board. Are y ou?

Bushnell is senior director of Emerging Industries, Commercial Insurance for Fireman’s Fund Insurance Co. based in Novato, Calif.

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Midwest Coverage Business Moves Auto Club Insurance, MEEMIC Auto Club Insurance Association, a Dearborn, Michigan-based insurer, reported it has agreed to acquire MEEMIC Insurance Co. and its insurance agency affiliate, MEEMIC Insurance Services Corp.

ACIA is the second largest provider of auto insurance in Michigan based on net premiums written. It offers personal lines insurance products through 725 captive agents and about 1,000 independent agents located throughout the Midwest. ACIA is an affiliate of AAA Auto Club Group, which provides membership, travel, and financial services to 4 million members in eight Midwest states.

Formerly known as Michigan Educational Employees Mutual Insurance Co., MEEMIC is headquartered in Auburn Hills, Michigan and provides personal and umbrella insurance to employees of educational institutions. It is owned by GMAC Financial Services.

MEEMIC’s workforce includes 70 captive agents in Michigan.

Following the closing, MEEMIC will operate as a wholly-owned subsidiary of ACIA. It will be managed separately from ACIA’s existing insurance operations and continue to operate under the MEEMIC name. The transaction is expected to close early in the second quarter.

BrickStreet Mutual Workers’ compensation insurer BrickStreet Mutual Insurance Co. wants to expand into Kentucky, Virginia, Alabama, Pennsylvania and Illinois.

President and Chief Executive Officer Greg Burton says the West Virginia-based company plans to apply in those states over the next couple of months to offer workers’ compensation coverage. He says the coverage initially would be for West Virginia-based energy companies that operate in those states.

BrickStreet was spun off from a state agency in 2006 and had a monopoly on workers’ compensation in West Virginia until July 2008.

Zurich Integrated Products Zurich North America Commercial will begin accepting new business in 11 South Central and Southeastern states through its new Zurich Integrated Products unit, which services commercial customers in between the small-tomiddle market segments.

Agents and brokers can submit new business from Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.

Zurich launched the Zurich Integrated

Products unit in fall 2008 for businesses generating between $5 million and $25 million in annual revenues.

Zurich Integrated Products initially launched in the Midwest and North Central regions of the country last fall. The unit will continue to expand its reach until it is accessible nationwide in the third quarter of 2009.

Ascension, Bartlett Agency Kansas City-headquartered Ascension Insurance, Inc. has acquired Dennis Bartlett agency of Fort Lauderdale, Florida.

The Bartlett agency specializes in medical malpractice coverage and will join Employers Mutual, Inc., a member of the Ascension gro up of companies based in Stuart, Florida.

Ascension offers insurance and employee benefits products and programs, as well as brokerage and risk management services to middle-market companies nationwide. Ascension is led by president and CEO Leonard P. Kline, Jr. The Ascension insurance agency has 20 locations nationwide. Together with its private equity partners, Parthenon Capital and Century Capital Management, Ascension said it expects to grow to $200 million in revenue over the next four years.

AmWINS Charlotte, North Carolina-based insurance wholesale brokerage AmWINS Group, Inc. has acquired three medical stop loss wholesalers.

The firms acquired are American Stop Loss Insurance of Worcester, Mass.; Brokerage Services, Health Benefit Solutions of Benicia, Calif.; and Insurance and National Insurance Wholesalers of Houston, Texas.

The acquisitions create the nation’s largest wholesale broker of medical stop loss insurance, according to AmWINS. Terms were not disclosed.

The current management teams will continue to lead day-to-day activities for their companies - Gerry Gates and Walter Coolidge for ASL, Rebecca Bocek for HBS and Elizabeth Ogletree for NIW. Mark McGuire, the founder of NIW, will lead the combined operations.

Guy Carpenter, Collins Guy Carpenter Co., a leading risk and reinsurance specialist, has agreed to acquire John B. Collins Associates, Inc., a privately-held company and the seventh largest reinsurance intermediary in the world. IJ

48 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

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Idea Exchange Closing Quote

Say What You Mean Agents Should Act With Character and Integrity in Everything That They Do

By Mitch Dunford “I meant what I said, and said what I meant …”

A

lthough that quote was written in 1954 by Dr. Seuss in his book “Horton Hears a Who, ” it is a powerful reminder today to act with character and integrity.

“Horton Hears a Who” tells the story of Horton the Elephant, who hears a small speck of dust talking to him. It turns out the speck is a tiny planet, home to a city called Whoville that is inhabited by microscopic-sized people known as Whos. The Whos ask Horton (who cannot see them but can hear them) to protect them from harm, w hich Horton promises to do — despite opposition from the other jungle animals who believe Horton has lost his mind. As it becomes more difficult to protect the Whos, Horton is enco uraged to leave the Whos to fend for themselves. Yet Horton stands behind his promise, declaring, “I meant what I said, and I said what I meant, an elephant is faithful 100 percent.”

Horton’s motto is a good reminder for all of us. There is little debate on where we find our country economically. The auto industry is in crisis; financial markets are a mess; the unemployment rate is growing daily; banks are closing; foreclosures are at an all-time high; and ba d economic news continues. Despite the constant diet of ba d news and stark economic realities we are left to deal with, if y ou look at the situation through the clear lens of truth, you’d find that what led us here was not a crisis of cash, b ut a crisis of character.

Decades of dishonesty, greed and the notion that chara cter doesn’t matter have caught up to us. As business leaders, politicians and others in positions of trust have relied upon the crazy notion that competency is everything and personal integrity is expendable, we find ourselves reaping the fruits of that ideology — and it’s not good.

Integrity and trust are fundamental principles of leadership and power, and are the foundation of a strong economy.

Our unique economic system is tied to freedom, and freedom is tied to responsible and ethical behavior. When we allow in ourselves and in our leaders a pattern of irresponsible behavior, we give up our freedoms in an effort to repair the damage. And as our freedoms erode, so does our unique economy.

You have chosen to work in the insurance

50 | INSURANCE JOURNAL-MIDWEST REGION March 23, 2009

Dunford

industry. While others seek to minimize risk y ou embrace it.

You study it, you calculate it, you even profit from it. You are now, and have been for hundreds of years, our economy’s last line of defense. You make it possible for businesses to open and grow, for loans to be made, for new inventions to come to market, and for young peo‘The insurance ple to buy their first car or their first home. Without you and your indusindustry is one of try, the way of life we have grown the most lucrative accustomed to would come to a professions in the grinding halt. world. But with that Inside the insurance industry, there opportunity comes is tremendous potential for growth, a responsibility.’ both personal and financial. The industry is one of the most lucrative professions in the world. But with that opportunity comes a responsibility: to act with integrity and with character in how you do business. Our economy cannot afford to lose confidence in our industry.

To close a sale, there may be temptation to not fully explain a policy’s new conditions or exclusions. There may be temptation to suggest coverage exists that really doesn’t, and then to blame someone else for the error when the claim is denied.

Our industry must resist temptations to deceive.

It starts with a personal decision in ea ch of us to do the right thing: to value our character, reputation and the important role our industry plays in the health of our economy more than money. To say in our quiet moments, “I meant what I said, and I said what I meant.”

There is astonishing power when a single person makes a single, honest decision. It can be contagio us. As dishonesty breeds mistrust, honesty gives rise to trust, and trust provides the foundation for more honesty. It starts with one, each one of us doing the right thing for the right reason.

A government “stimulus” package will not save us. A bailout of AIG or GM will not solve the underlying problem. Instead, the quiet personal resolve to act with character and integrity in everything we do, and to demand the same behavior in our leaders, will lead to long-lasting, positive change. There is still something noble in the American spirit. I believe in us. I believe in our character as Americans to dig deep and to dig out of any problem, to do the right thing, and to do the extraordinary. IJ Dunford is CEO for Insurance Journal’s parent company, Wells Publishing Inc. E-mail him comments at mitch@insurancejournal.com. www.insurancejournal.com

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