DIRECTORS & OFFICERS Expect Stress From Washington
NEBRASKA HIGH COURT: D&O Exclusion Applies to Liquidator
THE SOFT MARKET What to Do Before It Hardens
Walter Curtis, Master Machinist. Known for his laser-like precision on the milling machine. Expects the same accuracy from his workers’ compensation provider.
Business owners shouldn’t have to be experts in everything. Applied Underwriters® gives them the ability to concentrate on what they know best: their business. We do this by integrating casualty coverages, payroll processing and risk reduction services, all from one provider. Combine this with insurance carriers that have earned an A.M. Best Rating of A (Excellent), it all equals a client retention rate of over 90%. For more information call (877) 234-4450 or visit www.auw.com.
©2007 Applied Underwriters, Inc. A Berkshire Hathaway Company.
Inside This Issue
April 6, 2009 • Vol. 87, No. 7 • Midwest Region
N24 | Special Report: Directors and Officers Rising Risk of Bankruptcies N26 | Special Report: Directors and Officers D&O Insurance for Early-Stage VentureBacked Firms
MIDWEST COVERAGE 9
N12 Special Report Top 100 Agency Profile Planning, People and Dedication Equal Success for Bollinger Insurance
NATIONAL COVERAGE N1 | Compensation Not Key Factor in Agency Satisfaction Study J.D. Power & Assoc. Says Satisfaction Linked to Business Sent to Insurers N2 | International Report Witch Hunt at AIG; Lloyd’s Sees ‘Flight to Quality’ N4 | Closer Look: Special Events/Entertainment/Sports What’s So Special About Special Event Insurance? N12 | Special Report: Top 100 Agency Profile Planning, People and Dedication Equal Success for Bollinger Insurance N20 | Special Report: Directors and Officers An Awakened Washington Promises More D&O Stress N20 | Special Report: Directors and Officers D&O Market Expects the Unexpected
Breaches Present Emerging Risks, Opportunities for Agents
| Nebraska Rules D&O Exclusion Applies to Liquidator Court Not Persuaded by Former Commissioner’s Opinion
43 | Workers’ Comp Group Trusts E&O Friend or Foe? 44 | Defending Data Breaches Present Emerging Risks, Opportunities for Agents
Don’t Cheap Out on the Training
N16 | Growing Your Property Casualty Agency Don’t Let F.U.D. Extinguish Your Marketing Efforts
And Other Lessons From High-Performing Agencies
46 | Don’t Cheap Out on the Training And Other Lessons From High-Performing Agencies 50 | Closing Quote: The Soft Market Steps to Take Before It Hardens
DEPARTMENTS 6 | 8 | 8 | 10 | N18 | 48 |
Opening Note It Figures Declarations People MyNewMarkets Business Moves
The Soft Market Steps to Take Before It Hardens
April 6, 2009 INSURANCE JOURNAL-MIDWEST REGION | 4
Who insures you doesnâ€™t matter.
Until it does.
Financial Strength and Exceptional Claim Service Property | Liability | Executive Protection | Workers Compensation | Marine | Surety Homeowners | Auto | Yacht | Jewelry | Antiques | Accident & Health Chubb Group of Insurance Companies ("Chubb") is the marketing name used to refer to the insurance subsidiaries of The Chubb Corporation. For a list of these subsidiaries, please visit our website at www.chubb.com. Actual coverage is subject to the language of the policies as issued. Chubb, Box 1615, Warren, NJ 07061-1615
Idea Exchange Opening Note
Flunking Gramm’s Test R
emember the good old days when customers knew their bankers and property owners knew who held their mortgages and the economy did just fine? Remember the good old days when banks were in banking and insurance companies were in insurance and investment firms were in investments? Main Street insurance agents tried their best to keep those old days from passing, fighting as long as they could in courtrooms and legislative halls across the country against big banks and investment firms and the forces of “progress.” But the well-heeled Wall Street forces— and their political donations — were just too big for Main Street and the insurance agents lobby. The U.S. Senate voted 90-8 on Nov. 4, 1999, to approve S. 900, the Gramm-Leach-Bliley Act, which repealed the Depression-era barriers that separated banking , insurance and securities. Sen. Phil Gramm, R.- Texas, who was chairman of the Senate Committee on Banking, Housing and Urban Affairs, expressed great pride in passage of the bill bearing his name. “This is a deregulatory bill. I belie ve that is going to be the wave of the future,” he said. He was right about the wave, but even he could not foresee what that wave would bring. To his credit, Gramm set out a test for determining whether his deregulation bill was a success or failure: “The test that I believe we should use — the test I will use, the test I hope people looking at this bill years in the future will use— is, ‘Did it prod uce a greater diversity of products and services for American consumers? Were those products better? And did they sell at a lower price?’ I think if the answ er to those three questions is yes, then this bill will have succeeded.” The answers are no, no and no, Senator Gramm. Your law has done wonders for those few at the top who created soulless global conglomerates too big to be regulated, too big to care and too big to fail. It has been harmful to just a bout everyone else. In 1999 a joyful Gramm continued: “Ultimately, the final judge of the bill is history. Ultimately, as you look at the bill, you have to ask yourself, ‘Will people in the future be trying to repeal it, as w e are here today trying to repeal — and hopefully repealing — Glass-Steagall?’ I think the answer will be no. I think it will be no beca use we are doing something very different from Glass-Steagall. Glass-Steagall, in the midst of the Great Depression, tho ught Government was the answer. In this period of economic gro wth and prosperity, we believe freedom is the answer.” There is a new reality. Gramm Leach Bliley has helped bring about the biggest economic collapse since the Great Depression. While Go vernment may not be the only answer, neither is unbridled freedom for giant corporations. Stop the forum shopping to find the least effective among weakened regulators. It’s time to revisit Gramm’s pride and joy.
Andrew Simpson Southeast/Midwest Editor firstname.lastname@example.org
Publisher Mark Wells Chief Executive Officer Mitch Dunford
Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content/ and Interim Midwest/Southeast Editor Andrew Simpson | email@example.com East Editor Kenneth J. St. Onge | firstname.lastname@example.org South Central Editor Stephanie K. Jones | email@example.com West Editor Patricia-Anne Tom | firstname.lastname@example.org MyNewMarkets Associate Editor Chris Boggs | email@example.com International Editor Charles E. Boyle | firstname.lastname@example.org Columnists Alan Shulman Contributing Writers Robert Baker, Stephen G. Bushnell, Scott Chang, Stuart Ganis, Rachael Owens, Curtis M. Pearsall,Mike Schwander, Brigitt Whitescarver
SALES V.P., Sales & Marketing Julie Tinney (800) 897-9965 x148 email@example.com West Dena Kaplan (800) 897-9965 x115 firstname.lastname@example.org South Central Eric Jeter (281) 655-0234 email@example.com
Midwest Lauren Knapp (800) 897-9965 x161 firstname.lastname@example.org Southeast Howard Simkin (800) 897-9965 x162 email@example.com East Dave Molchan (800) 897-9965 x145 firstname.lastname@example.org
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A D M I N I ST R AT I O N
Accounting Manager Megan Sinclair | email@example.com Admin./ Marketing Asst. Kristina Delavega | firstname.lastname@example.org Cover designed by: Jamie Bethell
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
6 | INSURANCE JOURNAL-MIDWEST REGION April 6, 2009
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thals py, R: to her ictoof 49, ur44 n.
Midwest Coverage Snapshot
Japanese Suicide The weight of a 61-year-old Bloomfield Hills, Mich., man who is suing his former employer, claiming he was fired from a $75,000-a-year salesman’s job because of his waistline. The employer says Patrick J. Ronayne was let go because of his performance, not his weight. Ronayne’s lawsuit seeks more than $25,000 from Winston Golf and Winston Manufacturing.
$8.4 Million The compensation paid to Glenn Renwick, chief executive of Ohio-based auto insurer Progressive Corp. in 2008, which is less than the year before mainly because he declined to accept a performancerelated bonus. Investment losses led to the company’s first annual loss in 26 years in 2008.
$600,000 The fines and restitution that an Indiana judg e ordered financier Marcus Schrenker to pay for violating state insurance rules. Investors have lost hundreds of thousands of dollars through annuities handled by Schrenker, who faked his death in a plane crash o ver Alabama to flee his problems. He also faces an insurer’s lawsuit in Indiana seeking $1.4 million in commissions and an Alabama judge’s order to pay $12 million over the sale of a plane.
300 The number of flood-damaged homes the Federal Emergency Management Agency has given Cedar Rapids, Iowa, approval to demolish. The agreement with FEMA specifies that homes that are demolished still qualify for buyouts at their values before last June’s flooding. Cedar Photo by Greg Henshall / FEMA Rapids officials estimate the city could eventually buy and demolish more than 1,300 homes.
“The first thing that would make me feel a little bit better toward them (is) if they’d follow the Japanese example and come before the American people and take that deep bow and say, I’m sorry, and then either do one of tw o things: resign or go commit suicide.” — U.S. Sen. Charles Grassley, R.-Iowa, the top Republican on the Senate Finance Committee, on Cedar Rapids radio station WMT speaking about AIG and other large firms in the middle of the economic crisis.
Record Flooding “We are looking at a situation with all the ingredients for near record flooding in the upper Midwest. Sudden snowpack melts due to warm temperatures or a heavy rain could further complicate the flooding on the northern plains.” — Jack Hayes, director of the National Weather Service the weekend before heavy flooding began in the upper Midwest. The threat in this area was so great that the National Weather Service created a new category — “High Risk” — to distinguish it from the existing “Above Average” category for flooding potential.
Drain Supply “The law passed just a year ago and is placing a huge strain on the industry. There are not a lot of companies making these drain covers but there are a lot of people w anting them.’’ — Rob Gilchrist, aquatics coordinator with the Bloomington, Ill., Parks and Recreation Department, who is frustrated by the short amount of time given for pools, spas and whirlpools to comply with a new federal law requiring them to be fitted with special dr ain covers to prevent children from drowning or sustaining gruesome injuries.
Assurance on AIG “State insurance regulators have been actively involved in the AIG situation to help ensure that consumers remain protected. Regardless of the failings at AIG’s holding-company level, its insurance subsidiaries have continued to fulfill their obligations to policyholders.” — Therese M. (Terri) Vaughan, chief executive of the National Association of Insurance Commissioners (NAIC), and former Iowa insurance commissioner, in response to media coverage of AIG.
The amount a Cedar Rapids corn milling company has said it has filed in claims while its insurers have paid only $20 million. Penford Products Co. is one of many Iowa businesses that suffered losses after massive flooding in eastern Iowa last June. The company is suing National Union Fire, a unit of AIG, and ACE American Insurance, accusing them of acting in bad faith for refusing to pay the full amount in flood insurance claims. The insurers are disp uting some of the claims.
“The fire professionals across the state of North Dakota are in full support of this bill.’’ — Sen. David Hogue, R-Minot, after the North Dakota Senate approved a measure that says North Dakota tobacco merchants may sell only “reduced ignition’’ cigarettes after August 2010. At least 38 states have already approved similar measures. North Dakota fire statistics indicate at least 30 fires were started each year by neglected cigarettes in 2005, 2006 and 2007; 11 people died in those fir es. The bill is HB 1368.
8 | INSURANCE JOURNAL-MIDWEST REGION April 6, 2009
Midwest Coverage News & Markets
Nebraksa Rules Insurance Exclusion Applies to Liquidator By Andrew G. Simpson
regulatory exclusion in a directors and officers liability insurance policy applies to an insurance regulator acting as liquidator, according to the Nebraska Supreme Court. The ruling is believed to be the first by any state Supreme Court upholding a regulatory exclusion as applied to insurance regulators. In the case, L. Tim Wagner, the former director of the Nebraska Department of Insurance, who died in 2007, had asked the court to invalidate a regulatory exclusion contained in a $5 million directors and officers liability insurance policy that United National Insurance Co. had issued to Amwest Surety Insurance Co., an insolvent insurer for which Wagner was liquidator. Wagner had argued that the exclusion, which precluded coverThe case tested age under the whether the role policy for a of liquidator is lawsuit he had legally separate brought from the role of against Amwest’s forcommissioner. mer directors and officers, did not apply to him when he was acting in the capacity as liquidator and that the exclusion was void as against public policy. The Nebraska Supreme Court affirmed a Lancaster County District Court’s ruling that found that the exclusion applied to the liquidator and that it was consistent with public policy. Amwest purchased a D&O insurance policy from National Union Fire Insurance Co. on Sept. 30, 1999. Amwest also purchased D&O policies from United National and GAINSCO. The United National policy was in excess to the National Union policy, and the GAINSCO policy was in excess to both policies. Each supplemental policy carried a limit of $5 million. In his suit against the directors and officers of Amwest, the liquidator alleged that www.insurancejournal.com
Amwest became insolvent through the wrongful conduct and breach of multiple fiduciary duties of its officers and directors. The liquidator requested that the district court invalidate the regulatory exclusions contained in both the United National and GAINSCO policies. The United National regulatory exclusion provided: “This Policy does not apply to any Claims brought by or on behalf of, any insurance regulatory agency or supervisory authority including but not limited to any state or local insurance department or Commission, or any state or local Insurance Guaranty or Insolvency Fund (any of the foregoing organizations hereafter referred to as an ‘Agency’), including any type of legal or equitable action which such Agency has the legal right to bring as receiver, conservator, liquidator or assignee of the insured, its security/ unit holders or its creditors, or otherwise; whether such action or proceeding is brought in the name of such Agency or by or on behalf of such Agency in the name of any other entity(ies) or solely in the name of any third entity(ies).” The liquidator argued that the position of liquidator could not be considered as an “‘agency, authority, department, fund, or organization’” under the regulatory exclusion. United National argued that because the
Director of Insurance is the liquidator, the liquidator is a “supervisory authority” under the regulatory exclusion. The liquidator claimed that the role of liquidator is legally separate from the role of Director of Insurance and that the liq uidator is an officer of the court and is under the authority of the court. For that reason, the liquidator claimed he couldn’t be considered as either an “agency” or an “authority.” The district court was not persuaded by Wagner’s argument and found that the regulatory exclusion applied to the liquidator and was not void as against public policy. It granted summary judgment to United National and GAINSCO. The case was appealed to Nebraska’s high court. Michael P. Comiskey and Hugh S. Balsam, partners based in the Chicago office of Locke Lord Bissell & Liddell, successfully represented Pennsylvania-based United National Insurance in the case. “This case is significant for United National and the insurance industry, both for its precedential value and because it was an all-or-nothing decision about whether the Insurance Director was entitled to the $5 million policy limits,” said Comiskey, who handled the case in the trial co urt. Balsam wrote the appellate brief and argued the case before the Nebraska Supreme Court. IJ
April 6, 2009 INSURANCE JOURNAL-MIDWEST REGION | 9
Midwest Coverage People
Ed Largent is now chief administrative officer and Stuart Rosenberg is chief technology officer at Westfield Group of Ohio. Largent assumes responsibility for corporate oversight of human resources, information technology, training, and the internal audit department, as well as Westfield Services, an agency-related financial services business, and the Ward Group, an insurance industry consulting and benchmarking business. Largent has been the chief technology officer since June 2005. He joined Westfield in 1986 as a systems programmer and has held a number of positions in the information technology area that have involved working with almost all Westfield business units over his 22-year career. As the new chief technology officer, Rosenberg is responsible for the insurer’s information technology direction, strategy, planning and execution. He also partners with senior business leadership to prioritize major IT strategic investments. Previously, Rosenberg was executive of Technology Portfolio Management since December 2005. He joined Westfield in 2002. Elizabeth Demaret, managing director of Arthur J. Gallagher, has been appointed chairwoman of the World Federation of Insurance Intermediaries (WFII), an international association representing intermediaries from around the world. Based in Chicago, Demaret is one of six WFII World Council members from North America and a member of The Council of Insurance Agents & Brokers. Demaret will serve a one-year term as chairwoman, and another year as outgoing chair. Demaret follows David Harari, director of IFEBO in France, as chair of the WFII. Risk Management Solutions has named Philippe Stephan as chief technology officer (CTO). Stephan has more than 20 years’ experience in software development and will apply his technology and leadership skills to the field of advanced analytic applications, driving the architectural design and development of RMS’ next generation of software. Before joining RMS, Stephan was the CTO and head of product development at Moody’s KMV, where he was responsible for the development of a suite of enterpriseclass portfolio credit risk modeling and risk manag ement products. Stephan will be based in RMS’ hea dquarters in Newark, Calif. Kelly Reisling is joining Motorists Mutual Insurance Co. as assistant vice president, Commercial Lines Division, responsible for the Ohio and Michigan territories. Reisling brings 20 years of experience to the position. Her tra ck record includes managing teams of underwriters and sales professionals in Pennsylvania and West Virginia. Brotherhood Mutual Insurance Co. in Fort Wayne,
10 | INSURANCE JOURNAL-MIDWEST REGION April 6, 2009
Ind., announced several changes to its board of directors including naming Mark Robison, president and CEO, as chairman of the board. James Blum, who retired from his role as company president in 2007, stepped down as chairman, but remains an active member. Robison joined Brotherhood Mutual in 1994 as assistant vice president finance. He was named vice president and treasurer in 1998 and president in 2007. He has served on the board since 1998. Blum joined the company in 1967. He became president in 1995 and chairman in 2000. He retired as the company’s president and CEO in April 2007. He has served on the board since 1982. Other changes to the board of directors include: Matthew Hirschy, vice president of Finance, was elected treasurer and joins the board as a ne w member. Hirschy joined Brotherhood Mutual in August 2008. Garrett Cooper, chief investment officer at Ambassador Family Enterprises, joined the board as a ne w member. Ron Habbegger, president of the Fellowship of Evangelical Churches, was appointed to the executive committee of the board. He’s been a member of the board of directors since 1994. Dale Ferrier stepped down from the executive committee and became an honorary director. He was a member of the executive committee since he joined the board in 197 6. Paul Steiner, former Brotherhood Mutual president, CEO, and chairman, is leaving the board after 41 years as a member. In other company news, Mitzi Thomas, formerly assistant vice president of corporate communications, has been named assistant vice president, Marketing and Communications. Thomas joined Brotherhood Mutual in 1995. Ohio-based Central Insurance Companies has named Tim Rauch as regional vice president for its So uthwest Regional Office in Dallas. He is responsible for all underwriting, marketing and claims functions serving independent agents in Texas, Arizona, New Mexico, Oklahoma and Colorado. Rauch is a 21-year veteran of the insurance industry. He previously managed commercial underwriting, marketing and regional operations for the Hartford insurance company. More recently, Rauch worked with the independent agency side as a regional sales manager for USI and as a producing vice president for Insurance Alliance. Wholesale insurance broker Westrope, headquartered in Kansas City, Mo., hired Christopher Morris to join its Southwest Team in Dallas. Morris, who joins Westrope as a vice president in casualty, produced and managed specialized risk management accounts with Aon Risk Services Inc. in Dallas for 10 years. He left Aon in 2007 for the wholesale side of the industry and specializes in construction and real estate development accounts. IJ www.insurancejournal.com
National Coverage News & Markets
Study: Agency Satisfaction Linked to Amount of Business Sent to Insurers By Andrea Ortega-Wells
hen it comes to an agency’s satisfaction with its personal lines insurance companies, commissions do not rank as tops. Nor do commissions rank second. In fact, out of six satisfaction factors, compensation from an insurer ranks dead last, according to a new industry study. Kara Steslicki, senior research manager for J.D. Power and Associates, who helped conduct the study, said the fact that compensation ranked last as a factor that determines agency satisfaction was a bit surprising. “We thought that compensation would be a little more important especially given the independent agency channel,” Steslicki said. “We thought that compensation might be a way that carriers could entice agents to send business their way.” But Steslicki says the survey revealed that what agencies are most interested in is satisfying their policyholders, especially in today’s tough economic times. Customers are looking at how much money they want to spend on insurance, and their agents are trying to help them by adjusting
their coverage in order to save money, she said. What the survey found is that what agents want most is a variety of policy offerings and continuous contact with their insurers, Steslicki said. The inaugural “Insurance Agency Satisfaction Study” measured the satisfaction of independent insurance agents and agency staff with the personal property/ casualty insurance companies they represent. Agent satisfaction was examined across six factors. In order of importance, they are: key carrier contacts (32 percent), policy offering (23 percent); claims (16 percent); technology (13 percent); price (10 percent); and compensation (5 percent). The study found that agent satisfaction typically increases the more often agents interact with the business contact from their insurance company. Agents prefer to receive business contacts via phone or email at least once or twice a month. However, satisfaction levels are particularly high when the business contact visits more than once per month. In 2009, fewer than 15 percent of agents report receiving such frequent visits.
“Agent satisfaction is very closely linked to the overall business growth of an insurer, as agents have tremendous influence over policyholders when it comes to switching providers,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “In fact, 60 percent of consumers report that they would follow their agent recommendation to switch to a new insurance company.” As agent satisfaction increases, the likelihood of agents increasing their premium business with an insurance company also rises, the study found. In 2009, nearly 70 percent of agents with satisfaction scores averaging more than 800 points on a 1,000-point scale indicate they intend to increase business with the insurance company. In contrast, only 28 percent of agents with scores averaging 600 points or less indicate the same, the study reported. “Agents are obviously really interested in working with insurers that are supporting them and that was a common theme throughout the entire study,” Steslicki said. Offering a marketing or advertising budget also greatly impacts agent satisfaction, according to the study. In 2009, nearly 60 percent of agents report that they did not receive any budget for local marketing or advertising. However, among those agents who received and used all of the
funds provided by the insurer for advertising and marketing purposes, satisfaction scores average 808, compared with an average of 692 among those agents who were offered no funds for such endeavors. “The more agencies use those dollars to promote their agency the more satisfied they are,” Steslicki said. Steslicki also said while few agencies reported their insurers gave them business leads, those that did had higher satisfaction rates. “About 20 percent of the agencies studied said that they did receive leads from their insurers and obviously the more qualified that those leads were the more satisfied that they were,” she said. “But even providing leads at all definitely impacted satisfaction.” The study also found that satisfaction declines considerably as the amount of time it takes for insurance companies to notify agents of a customer-filed claim increases. “Whatever the insurer can do to support the agency is definitely recognized,” Steslicki said. “Those agencies that are more satisfied are more likely to send their business to those types of insurers.” While this was J.D. Power & Associates’ inaugural “Insurance Agency Satisfaction Study,” Steslicki says they hope to do another study next year and plan to replicate the study for commercial lines insurers writing business owner policies. The “2009 Insurance Agency Satisfaction Study” is based on responses from 1,589 insurance agents evaluating more than 10 insurers across the industry, including AIG, Allied, Chubb, Erie Insurance, Farmers/Foremost, Fireman’s Fund, The Hartford, Liberty Mutual, Progressive and Travelers. The study was fielded in November 2008. IJ
April 6, 2009 INSURANCE JOURNAL-NATIONAL REGION | N1
International Coverage News & Markets
Witch Hunt at AIG; While Llo yd’s Sees ‘Flight to Quality ’ By Charles E. Boyle
would have been better off, if it ha d. Then it would have had to establish reserves and would have been subject to regulation. As a he witch hunt that has engulfed AIG result its wholehearted rush into risky investneeds to be toned down. If for no other ments might have been curtailed. reason than it’s making the problem worse, AIG, however, was a counterparty on innunot better. It also reduces the likelihood that merable risks. In very simple terms, it bought U.S. taxpayers will get back any of the money and sold contracts of one kind or another the government has put into it. (default swaps, CDO’s, notes) — it doesn’t matPeople from President Obama on down are ter. On the other side of those transa ctions perhaps properly outraged that a company, were the buyers and sellers — AIG’s counterwhich lost $58 billion in one quarter and has parties. been taken over by the government for $130 The simplest example is currency trading: billion, paid its executives, some of whom Bank A needs $1 million for some of its cuscaused the mess, $160 million in bonuses. However, the outrage over AIG paying off its tomers; Bank B needs an equivalent amount in Euros. They make a deal to provide the amounts on a certain date, thus becoming counterparties and undertaking to honor their contract. The financial instruments or contracts AIG entered into along with many banks is more complicated, but they remain essentially the same type of transaction. AIG Financial Products (AIGFP), its financial unit, bought and sold hundreds of thousands of financial instruments all over the world, using the parent company’s ‘AA’ rating to obtain better credit terms for the deals, which in turn A protestor holds up a sign resembling a check as he rallies outside the AIG building in Los made their cost subject to a ratings downgrade. Angeles March 19, 2009. REUTERS/Mario Anzuoni When the originators of those contracts couldn’t pay their obligations, it other obligations — notably to “foreign banks” created a domino effect. The sequential holdand Goldman Sachs — is a bit misplaced. As ers, like AIG, couldn’t honor their obligations. Chris Boggs, associate editor of The whole system began to collapse, threatenMyNewMarkets.com pointed out, credit default swaps worldwide total $58 trillion (See: ing the stability of the entire global financial system. www.insurancejournal.com /news/national/ Whether the financial counterparty is in 2009/03/25/99039.htm]. The government bailed Paris, Texas, or Paris, France, is immaterial. out AIG primarily so it could at least pay a Financial transactions — as the current crisis part of what it owed. proves in spades — are global. One only has to As a number of commentators have pointed look at the result of the failure to support out, AIG didn’t insure these contracts. It
N2 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
Lehman Brothers to gauge what effect on world finances a similar failure to support AIG could have had. Lack of liquidity/lack of credit are now strangling the economies of every country in the world. Fear has replaced trust to the extent that the world’s banks and other financial institutions are afraid to do business, even with sound commercial risks. Their reluctance to enter into counterparty transactions has to be eradicated, if the world is ever to emerge from the current crisis. Supporting AIG and the banks is a necessary, if somewhat unpalatable, step towards global recovery. Lloyd’s made a lot less money in 2008, than in 2007; still $2.78 billion is not a negligible sum, even if it’s only about half that of the prior record year. Luke Savage, Lloyd’s of London’s finance director is relatively sanguine about the decline. In a telephone interview he acknowledged that we’re in for a “very tough 2009,” but that Lloyd’s 2008 results weren’t all that bad compared to the rest of the market. He pointed out that the “insurance market is going through a period of uncertainty, and policy holders are hesitant about placing all of their business with one carrier.” The result is what Savage termed “a flight to quality.” With around £2.6 billion ($3.8 billion) in its Central Fund (the facility that assures claims’ payments), Lloyd’s is well positioned to offer just that type of security. In fact, Lloyd’s structure is tailor-made to solve the problem. “We’re a subscription market,” Savage explained. “A risk is typically shared by more than one Syndicate.” A “lead Syndicate” places the initial coverage. It has standing agreements with a number of other syndicates to take on a certain percentage of the risk and on what terms they will do so. The policyholder thereby automatically spreads the risk of non-payment of a claim among a number of syndicates, who are in turn backed by a selected number of carriers - all of whom have met Lloyd’s rigid financial standards. In the rare instances when a syndicate can’t pay a claim, the policyholder has recourse to the Central Fund. IJ Boyle is international editor for Insurance Journal. E-mail: email@example.com. www.insurancejournal.com
He takes protecting your client’s personal assets very personally. –Carl Pursiano, Senior Vice President LIU Management Liability
Yes, there’s a D&O insurer that’s as responsible as you are. 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. For specific information about the types of risk we write, visit liu-usa.com/d&o. Liberty Mutual is rated A by A.M. Best.
Responsibility. What’s your policy?
EXCESS CASUALTY & UMBRELLA • E&O • D&O • PRIMARY CASUALTY • FIDELITY • ENVIRONMENTAL • CONSTRUCTION • MARINE • ENERGY
All products written by member companies of Liberty Mutual Group. © 2009 Liberty Mutual Group.
Closer Look Special Events/Entertainment/Sports
What’s So Special About Special Event Insurance?
By Robert Baker and Brigitt Whitescarver
he pitfalls of not placing special-event coverage, when it’s truly needed and available, can result in catastrophic losses to your insured, and possibly even damage the credibility of your agency and errors and omissions coverage. You might think that an Insurance Services Office (ISO) commercial general liability (CGL) policy would do an excellent job of providing insurance protection to the sponsor or promoter of a private or public event. After all, a CGL policy comprehensively addresses the third-party
bodily injury, property damage and personal injury exposures of an event. Insurers who specifically write policies for events believe the CGL policy perhaps does the job all too well, and they’re unwilling to provide the CGL without additional limitations and definitions. Thus comes the impetus for special event insurance. What’s so special about it? It’s a special breed of CGL coverage, an insurance product that doesn’t come straight off the shelf. Agents and brokers who provide one-off event policies need to familiarize themselves with it,
learning what protection is and is not offered by the altered CGL. Agents should also learn where to find the broadest policy available, augment that coverage where needed, and be able to educate their clients about the exposures they must retain and need to manage. One further “special-ness” of special-event coverage stems from its very nature. The risks that occur at events involve varying numbers of people, often large, that participate in or watch activities such as sports, acts of daring, continued on page N6
SINCE 1992 WESTROPE HAS PLACED BILLIONS WITH MAJOR CARRIERS IN THE U . S . A N D G L O B A L M A R K E T S I N T H E B E L I E F T H AT T H E W O R L D N E E D S T H E B E S T W H O L E S A L E I N S U R A N C E S O LUTIONS. PROPERTY | CASUALTY | TRANSPORTATION | CONSTRUCTION | AGRIBUSINESS HEALTHCARE | EXECUTIVE & PROFESSIONAL LIABILITY | BINDING AUTHORITY WORKERS’ COMP | CLAIMS SERVICES | LIFE SCIENCES
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Closer Look Special Events/Entertainment/Sports Event Insurance, continued from page N4
all genres of musical performance and theater, amusements like rides and games, dancing, walking and rallies. Events challenge their organizers to work fast, often under pressures of schedule, weather and budget. They require complex orchestration of people, equipment and resources. Event holders have the responsibility of safety and security of guests, v olunteers and employees. Event insurers analyze what they can risk or take on as part of the CGL. They review trends in loss and claims experience and decide what they need to charge for the insurance provided. With the intent that exposures are managed at an event, insurers take into account controls that should be in place. Contracts play a major role in the transfer of event risk; the contract that carries a great deal of consequence for the promoter and the insurer is the premises lease contract. More often than not, an event holder enters into a lease agreement with a facility, city, county or parks department that owns or controls the site where the event will take place. This contract
will have an indemnification clause which transfers to the lessee (the event holder) most of the liability for the premises and all event operations. This contractual responsibility is often triggered in a loss, and if brought into a suit the event holder doesn’t want to be “bare” of insurance protection nor take on the liability of another responsible party. Special Event Endorsements Many of the limiting endorsements attached to the special-event CGL address specific event operations that are a part of the o verall event. Insurers exclude coverage for selected activities feeling that these operations would be better insured elsewhere and in addition priced accordingly. The event promoter will often hire independent service providers to perform operations and should be aware of the proper transfer of liability. Not all special event endorsements are included in each event insurer’s policy, and those discussed in this article are only a sample. Individual insurers may also have their own
manuscript form for a limiting endorsement, with language they feel best achieves their intended result. Besides endorsements that name the lessor as an additional insured, a few of the more common special event endorsements are discussed here. Exclusion - Collapse of Temporary Structure. This includes structures such as tents, stages, bleachers, barricades and temporary fencing. This exclusion is very common in event policies. The insured must be aware that insurance is not provided to them if they, their employees, contracted labor or volunteers erect a tent or other temporary structure and a loss occurs that causes bodily injury or property damage to a third-party. Tenting, staging and event rental companies can be hired to p ut up necessary structures, and in doing so, the event holder should verify that insurance is in place and that a proper risk avoidance and transfer has taken place. Exclusion - Seating, Fixtures and Glass. The ISO CGL provides third-party property continued on page N8
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Closer Look Special Events/Entertainment/Sports Event Insurance, continued from page N6
damage coverage to the property of the leased event premise if the lease period is seven days or less. This exclusion, however, if endorsed, removes coverage for those items shown. The seating, fixture and glass exclusion is often used for concerts and stems from facility property losses. This exposure is impossible to transfer to a subcontractor. If there’s a concern, it could be managed in the lease or through possible losscontrol methods. Exclusion - Liquor Liability Amendment. Liquor or dram shop liability is excluded in the ISO CGL if the insured is profiting in an y way from the distribution or sale of alcohol. If an insured is “hosting” alcohol the CGL is silent and the activity is not excluded by the standard ISO form. This coverage is known as “host” liquor liability. When the amendment is attached to a policy, it will “strip” even the host coverage and create an absolute liquor exclusion. Thus, if liquor is hosted at the event and the insured were brought into a third-party bodily injury suit, the insured would have no defense or coverage.
To avoid alcohol-related exposure, the event holder can hire a third-party vendor to serve alcohol. The holder can also buy a separate liquor liability policy. Because of the severity of liquor-related claims, it’s also recommended that, in addition to the vendor showing evidence of liquor liability, the vendor also name the insured/event holder as an additional insured on their liquor policy. Exclusion - Events with Live Performances of Rap/Hip Hop. This exposure is excluded by most special-event policies but can be mitigated differently by a variety of forms. Certainly coverage is available for these types of performances, but only with additional underwriting and usually at higher premium costs. A history related to battery and w eapon assaults has given this entire genre a bad reputation. Promoters now pay a premium to find coverage in a limited marketplace. Underwriting requirements have been heightened as well, such as requiring metal detectors and patdowns before entering the concert venue. Exclusions - Athletic or Sports
N8 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
Participants with Respect to the Insured Operations. Coverage will not apply to bodily injury to a person while practicing or participating in any sports or athletic contest or exhibition. This exclusion is present in all event policies unless a specific athletic event policy is purchased. There is little room for interpretation. Neither insurance coverage nor defense costs are provided if a suit is brought against the event holder by an injured athletic participant — think softball game. Activities such as dance performances or cheerleading are also often interpreted as athletic activities by an insurer. When in doubt, agents should clarify their carrier’s interpretation of this exclusion. Event insurers comfortable with athletic participant exposures will write a CGL policy without this exclusion, thus making the policy silent on this third-party class. Athletic participation also triggers additional underwriting. The insurer tailors premium pricing to the specific athletic exposure — the premiums to insure ski racers will be much higher than for continued on page N10
Closer Look Special Events/Entertainment/Sports Event Insurance, continued from page N8
marathon runners. Insurers will also usually require participant medical accident insurance to act as a buffer for possible litigation. Exclusions - Assault & Battery. This is another common exclusion. An assault and battery endorsement releases insurers from the duty to defend claims made by third parties for
this personal injury peril. Language varies among insurers. Producers should be familiar with how this endorsement may apply to their client’s operation. Event holders should reconsider using volunteers for “crowd control” and instead outsource this operation to a licensed and insured security company.
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Exclusions - Bodily Injury to Independent Contractors. This endorsement varies by carrier, but excludes bodily injuryrelated claims from hired 1099 labor and independent contractors and their employees. In a perfect world, bodily injury incurred by independent workers during an event should be covered by the independent contractor’s workers’ compensation insurance. But most hired labor or sub-contracted sole proprietors will not have workers’ comp in force. This exclusion removes all coverage and defense costs for their possible third-party suits. Event holders with this exclusion can try to protect themselves by requiring evidence of workers’ comp from all subcontractors, hiring labor from an agency that provides workers’ comp for their labor pool, or by making their 1099 labor at the event employees. A new insurance product targets this gap and sells workers’ comp to all event labor on a blanket basis if evidence is not shown. Without something like this, it’s best to remove this exclusion. Exclusions - Medical Payments. Although medical payment coverage is defined and shown in the ISO CGL, it is then excl uded by this endorsement. Because events involve the gathering of a large number of people, many insurers don’t wish to be contractually bound to pay claims regardless of their insured’s fault. Trips and falls are the most common loss occurrences at events. Full policy limits are still available for bodily injury-related claims when negligence is the trigger and the occurrence is covered by the policy. There are a number of special event coverage specialists in the insurance industry that can help. Plus, a number of insurance products and programs allow you to augment an event CGL. Additional insurance coverages to consider include event cancellation, inland marine property, crime insurance, and first party volunteer accident insurance. All these options should be considered by the event holder and their agent in providing insurance protection for the myriad of hazards and exposures when putting on a “special” event. IJ Baker, CPCU, is vice president and agency principal of Gales Creek Insurance Services. Whitescarver is the national program manager for Gales Creek Insurance Service’s online event program, wholesaling to agents countrywide. E-mail: Brigitt@ galescreek.com. Web site: www.galescreek.com. www.insurancejournal.com
Jack A. Windolf, chairman & CEO
Planning, People and Dedication Equal Success for Top 100 Agency Bollinger Insurance By Charles E. Boyle
hy do some independent insurance agencies stand out from others? As Insurance Journal’s “Top 100” series shows, good management, hard work, the right people, dedication and the satisfaction of performing valuable services well all seem to be part of the picture. Short Hills, N.J.-based Bollinger Insurance Inc. is an example of just ho w those precepts can build a successful agency.
their business further. They strip out the profits and show no incentive to grow.” He doesn’t really denigrate them; it’s just not his idea of how he wants his company to be run. “An ‘S’ corp.* is fine for some people, he continued; “if you set up a ‘C’ corp.*, you have to make sacrifices, but you have to make those sacrifices, if you are to achieve growth.” (*Taxation is the main difference between the two. A ‘C’ corp. is taxable at the corporate level, while an ‘S’ corp. can elect to “pass thro ugh” income to its shareholders.) Two Eras of Growth Windolf and his management team run Bollinger Charles W. Bollinger founded the agency in 1933 Top 100 Agency Profile along strict business lines — budgets, financial disin Newark. His brother James M. Bollinger joined Ranking No. 14 cipline, advance planning and, at the top of the list, him in 1942. Early on, the fledgling agency develAgency Name: “good employees.” This disciplined focus has prooped a specialist reputation with a focus on acciBollinger Insurance Inc. dent insurance for students and athletes. It has Headquarters: Short Hills, N.J. duced the desired result. In 1990, Bollinger’s annual premium volume was around $51 million. Premium since expanded across the country. Year Founded: 1933 John A. (Jack) Windolf, Jim Bollinger’s son-in-law, Additional Locations: Princeton, volume in 2008 was well over $800 million, with $1 billion in sight. The acquisition of other agencies joined the agency in 1963 after four years in the U.S. Moorestown, Vineland, N.J.; New accelerated. Prior to 1992, Bollinger had acquired Marine Corps and a stint at Wharton. Bolling er York City, N.Y.; Philadelphia, Pa.; just two — in 1976 and 1985. Since then it has then had seven employees and generated total comGreenwich, Conn. acquired 38 more — more than two a year, on avermission revenues of $200,000. Windolf eventually 2008 Premium Volume: age. In 2006, it acquired seven agencies and anothtook over Bollinger’s daily operations, and continues $830 million to serve as chairman and CEO. He and his wife, Property/Casualty: $470 million er four in 2007. “We made four more acquisitions in the fourth quarter of 2008,” said Windolf, and Muriel Bollinger Windolf, purchased full ownership Other than P/C: $360 million “we have others in the pipeline.” of Bollinger in 1969 and continued to b uild the % Commercial: 70% While Bollinger is very much a national agency agency, primarily through organic growth. Since %Personal: 30% for many of its lines, primarily commercial and 1963, Bollinger has on average doubled its top line 2007 Premium Volume: group coverage, it has kept geographical expanrevenues every five years. $840 million The pace of growth accelerated in 1992. “There Principals [management]: Jack sion pretty close to home. “Our key branch office locations are within a car ride from Short Hills, ” are really two eras [in Bollinger’s growth],” said A. Windolf, president/CEO; Matt Windolf. Until 1992, “almost all of our growth had Gardner, managing director; Doug said Windolf. “Although we have customers all over the country [golf and country clubs, schools, been organic.” Commission revenues had risen to Cook, managing director; Lori employee benefits] our retail and personal lines $6.54 million (2009 estimated commission revenues Windolf Crispo, senior executive business is localized.” The majority of Bollinger’s are around $110 million). “We owned 100 percent of vice president. offices are in New Jersey, with branch offices in the stock and we decided to expand.” Principal Ownership: New York City, Connecticut and Philadelphia. The plan called for augmenting organic growth Jack A. Windolf, Evercore Capital The expansion, combined with an acknowlwith mergers and acquisitions. Windolf’s first step Partners edged reputation as a leader in certain areas of was to set up an employee stock option plan Number of employees: 435 coverage, has put Bollinger in the top 20 of U.S. (ESOP) to enable key employees to obtain a stake in independent agents. While it looks towards future growth, it hasn’t the business. This was a sea change. “It created an atmosphere that moved away from past successes. ‘we’re all in this together,’ and we’re all pulling in the same direction.” Many agencies have well educated, experienced leaders who someA Schools and Sports Legacy times give their employees a stake in the business. What sets Bollinger Specializing in “niche products” is a two-way street. An agency gains apart is the unqualified enthusiasm of its CEO. “It’s a great business,” a reputation, but may find it hard to break into ne w fields. Bollinger Windolf said, and it’s evident that he means it. has avoided this trap. Its early school and sports coverage has been a Windolf explained that many agency owners seem content to pull in $200,000 to $300,000 a year, and “aren’t really interested in building continued on page N14
April 6, 2009 INSURANCE JOURNAL-NATIONAL REGION | N13
Bollinger, continued from page N13
shops on all kinds of topics, mainly to advise our sports clients on springboard for its success. how to ‘bullet proof’ themselves from liability.” “Our sports division goes back to the 1940s,” explained Lori She also indicated that the current economic situation may prompt Windolf Crispo, senior executive vice president - sports division. “We people to make more claims, “and they are more likely to see an attorwere first approached by the New Jersey State Interscholastic ney. It’s really important to minimize exposures.” Athletic Association about accident coverage for student athletes. These risk management services go beyond placing insurance covThere wasn’t much coverage in the ‘40s for this type of program.” As a erage. In the sports division, “it’s all done in house,” and “there’s no result, Bollinger developed the first catastrophic accident plan for charge for these services.” Bollinger helps sports clients set up their students in New Jersey with a cat limit of $10,000, and the firm has own safety committees and is constantly assessing the need for new remained a major player in the field. products to cover emerging risks. This hands-on approach has helped The program for educational institutions is also part of Bollinger’s the agency maintain and grow its leadership position in the field. group benefits division, which now writes coverage in 40 states. The sports program has expanded into other areas, as well, notably risk management. “Part of our ‘[Y]ou have to make sacrifices, but you have to make success comes from the fact that we don’t look at them [sports programs] as just another those sacrifices, if you are to achieve growth.’ property/casualty line,” said Crispo. “Our focus is on expertise, and to be as helpful as w e can Primacy on Commercial Lines be for our clients.” While Bollinger’s sports sector is a niche b usiness with deep roots, The coverage includes individuals, small groups and large groups commercial lines are the agency’s bread and butter, producing 70 per— “from the local Little League to the Ol ympics,” as Crispo put it. cent of top line revenues. The unit’s 165 employees “primarily operate She also explained that, while the types of accidents and liability covout of our seven main offices,” said Matt Gardner, managing director erage are fairly common to all sports and sporting v enues, there are commercial lines. “We cover from the upper middle-market down to additional issues that have to be considered. small Main Street type businesses.” “We issue Safety Bulletins, and we have a whole library on risk Gardner spent 14 years at Aon before joining Bollinger and the management best practices they should adopt,” she explained. strategies are different. Bollinger develops “a relatively small team of Providing that kind of advice has become increasingly complex, as highly qualified professionals,” who cultivate unique access to their the potential liabilities related to sports have grown exponentially clients. “It’s sort of a boutique approach. Clients are serviced by the over the years. “We’re now giving guidance on how to prevent sex same team that sold them originally. We bring them best in class abuse, what can go wrong with golf carts at sports tournaments, or services and resources at all times,” Gardner said. how club treasurers should properly handle funds. We give workBollinger has positioned its commercial presence firmly in the “second tier” of large brokers. “We really don’t compete with Aon or Marsh or Willis; we’re interested in the mid-market, rather than huge multinationals,” he explained. This sector typically has both a need for coverage and for a good deal of risk management. However, “they [Bollinger’s mid-market clients] don’t usually have a risk management staff, so they’re looking for someone who can help them do the job,” Gardner added. Some of Bollinger’s risk management services are performed “in house,” but Bollinger’s commercial lines business is spread over most of the U.S., so it maintains “a network of risk management consultants all over the U.S. and in other parts of the w orld too,” Gardner said.
Bollinger Executive Committee Seated L to R: Doug Cook — managing dir ector, benefits division, Lori Windolf Crispo — senior executive vice president, sports division, Jack Windolf — chairman & CEO Standing L to R: David Hatlem — senior executive vice pr esident, club programs division, G. Alex Crispo — chief administrative officer and general counsel, Chris Wetzel — chief financial officer, Rhonda Linnett Graber — managing director, personal lines, Matthew Gardner — managing director, commercial lines N14 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
The Technical Revolution While technology has created an efficiency revolution in the agency business, often the cost has been the loss of personal conta cts, which are a vital part of the insurance ind ustry. Bollinger faced the problem head on, but with a major caveat. As Gardner put it: “All the technology in the world can’t replace personal relationships.” By contrast Bollinger employees work in a “paperless environment.” Everything that “comes in the front end is scanned immediatel y, which gives all of our employees electronic access to all of the policy information and claims files. This speeds o ur service delivery to our www.insurancejournal.com
clients,” he said. Using this technology has created a “q uantum leap” in employee efficiency (measured by revenue per employee), but it has also given them more time to create value, both for their clients and for the 200 or so carriers with which Bollinger writes business. “The interaction with the carriers is unrecognizable to what it was five years ago,” Gardner said. “It has opened up the mark et and given us the possibility of doing business on a much wider scale.” It’s true, however, that in dealings with the carriers some of the “personal touch” has been lost. Bollinger has also resisted the trend to o utsourcing. “We’ve looked at it for a range of non-client-facing functions, but we decided against it,” Gardner said. One consideration is the “politically charged” nature of the practice. But Bollinger is also concerned with the effect o utsourcing could have on its highly valued employees. “We think the way we work should be protected, that’s how we retain customers. It cuts across the entire company, and I think it gives us a competitive advantage,” Gardner said. Basically, “we’ve got the ‘A’ team on call all the time.”
Craig Johnston, vice president — benefits division, Rhonda Linnett Graber — managing director, personal lines
The Benefits Boom That spirit carries over into another major sector for Bollinger — employee benefits. “Our division has about 20 percent of the employees,” said Doug Cook, managing director - benefits. “We also produce around 40 percent of the revenues and are responsible for about 50 percent of the
The Economy and a Bonus Payment A slowing U.S. economy has affected Bollinger’s commercial lines the most. Gardner explained that some client companies have gone out of business, while others were closing down operating sites, laying off employees and reducing operating expenses such as vehicle fleets. Crispo, meanwhile, said the economsituation may result in fewer ‘It’s sort of a boutique approach. C lients are serviced by the icsports teams, but she doesn’t think it same team that sold them originally. We bring them best in will be “as serious as it is on the commercial side.” The benefits business class services and resources at all times.’ is also less impacted. The slowdown seems only to have new business.” Group insurance plans are the main focus, with a reinforced Bollinger’s commitment to its core principles. As CEO and smaller life insurance operation, as well. Chairman Windolf indicated, “more acquisitions are in the pipeline.” “Our division is split between traditional group employee benefits For well capitalized agencies like Bollinger there may be some very and specialty group programs such as our K through 12 Student good opportunities. There are also a lot of highl y qualified people Accident Insurance program and our College Student Health looking for new positions. Insurance program, both of which are national programs where we Any new employees should consider themselves lucky. At a time act as managing general underwriters,” Cook explained. “On the when “bonus” has become a dirty word, Bollinger’s bonus payment to employee benefits side we also act as general agents for group health its employees deserves special mention. Last year Evercore Capital insurance and as managing general underwriters for group dental and Partners, a private equity fund, bought 51 percent of Bollinger’s shares. stand alone prescription drug card plans. The remaining 49 percent are owned by the employees. Bollinger’s employee benefit brokers frequently work from referAs part of that transaction, “a deferred payment of $500,000 was to rals, often from the P/C side of the ag ency. The carriers, many of be made to Jack Windolf in 2009,” as noted in a private e-mail from the whom Bollinger has worked with for years, supply policy forms company. Windolf insisted that a clause be inserted in the agreement approved by state regulators. Bollinger issues the policy, pays claims that he could direct that payment to Bollinger employees. On March from funds set up by the carriers, and performs the other a dminis17, he announced that the entire amount would be paid to them. trative functions inherent in managing any particular plan. The The reasons for that decision sum up his b usiness philosophy: “1) structure of any given plan varies from state to state, making local It would be appreciated by the employees; 2) The employees would contacts a necessity. spend the money to help the economy; 3) Employees are in a lower This holds true for Bollinger’s student accident coverage as well. tax bracket than Jack, and 4) It is the right thing to do. ” That ges“The farther away we get from our home base, the more we need local ture also pretty much sums up why Bollinger has achieved the sucbrokers,” Cook said. cess it has. IJ www.insurancejournal.com
April 6, 2009 INSURANCE JOURNAL-NATIONAL REGION | N15
Idea Exchange Growing Your Property Casualty Agency
Don’t Let F.U.D. Extinguish Your Marketing Efforts Overcome Fear, Uncertainty and Doubt in Agency Offices Shulman
By Alan Shulman
n a recession, it’s an easy decision to stop promoting your agency until the economy kicks back into gear. But is it the right one for your business? Marketing hibernation eliminates the effort, expense and risk of an unsuccessful agency promotion while theoretically preserving cash for salaries and bonuses. However by avoiding new business solicitations, you risk the wrath of Newton’s first law of motion that states that an object in motion stays in motion and an object at rest stays at rest. In other words, if you smartly market your agency, you’ll survive this economy; if you sit back and try to live off of your renewals the odds aren’t as good. Sales Inertia Combating P/C sales inertia is essential, regardless of the economy. In boom times, one successful effort happily drives the next, while in times like these, suspending most new account solicitations has consequences beyond a stagnant book. As should be anticipated in a
recession, your most desirable insureds will shop for better deals. Some will take off, leaving you with an overall lesser quality book and next to no new accounts to offset their departure. This classic case of adverse selection deteriorates your agency’s long term profitability. Furthermore, minimal marketing puts managers, producers and staffers in a non-sales
with you — but are too embarrassed to come back. So, invite back selected dead files with open arms and good humor. Don’t simply accept that once an account is cancelled that it is irretrievable. More clients will return than Everybody’s Shopping you think and at a greater percentage and lessWhen jobs are at a premium and virtually er cost than soliciting a brand new prospect. every business has declining revenues, insurFinally, smartly invest in targeted new busiance shopping becomes the new national pasness efforts. Be creative, different and timely. time. This means that agencies are getting to Focus on leads where you have the best chance look at personal and business accounts that of success. Carefully identify the prospect previously weren’t interested in comparison groups that you wish to write and match them quotes. So essentially, bad times are a good time against your carriers’ strengths. to market, at least in the agency certain that there are business. After all, virtually If you smartly Make enough salable leads within every adult and business in the market your each to make specialized soliciUnited States still needs to buy their insurance from someone. agency, you’ll tations worthwhile. There’s extra potential if you already Try for your share, while watchsurvive this insure accounts within a group ing how you go about it. economy ... and can develop viable referrals. Additionally, agents who Look Three Ways market for new policies are rewarded with less Invest your marketing time and dollars in competition, in virtually every medium, because three major directions: retention, recovery and so many advertisers are cutting back today. For new business. While most agencies routinely in-stance, if you opt for print ads, you can negowork to keep their largest accounts from jumptiate a great rate in almost any publication. ing ship, they tend to neglect the many profitable insureds who file no claims and require Market or Else virtually no service. Pay some attention to these P/C agencies exist for only one real purpose. guys, especially in this economy. Let them And that’s to continuously sell insurance. If new know that you don’t take their business for agency-generated sales slow down to an intolergranted. Communicate via letter, e-mail, able level, additional agency-only carriers will newsletter, or a blog. Suggest thoughtful ways consider going direct, at least to some extent. that they can save on their premiums with you. Like certain insurers today, they’ll become your Common auto examples include increasing polrivals as well as your suppliers. Independents icy deductibles, taking defensive driver courses, can minimize this scenario by using the state of changing classifications from drive to work to the economy as a marketing motivator instead pleasure use (if laid off) etc. The “let sleeping of an excuse to lay back. It’s really all up to dogs lie” approach doesn’t fly when people are you. IJ starting to panic. Desirable accounts may defect to other providers who give them more attention. Shulman, CPCU, is the publisher of Agency Ideas, a subscripNext, deal with the recently departed who tion-only sales and marketing newsletter. He is also the author left your office for a better deal. These greener of the Illustrative Insurance Sales Letter series and other P/C grass consumers and businesses may be sursales resources. Phone: 800-724-1435. E-mail: prised to discover that they were better off firstname.lastname@example.org. Web site: www.agencyideas.com. mode which, according to Newton’s law, isn’t exactly going to turn on a dime when times get better.
N16 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
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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. Child Welfare Organizations Market Detail: Markel Insurance Co. (www.markelcorp.com) offers agents access to a program for not-for-profit child welfare organizations such as boys and girls clubs, community programs, counseling services, family service agencies, group homes, residential care facilities, Head Start programs and shelters. Available coverage includes general liability, umbrella, sexual abuse/molestation, directors and officers, special events, professional liability, property, key employee replacement, auto, crime and business income. Minimum premiums and deductibles vary based on the risk. Available Limits: Based on risk. Carriers: Markel Insurance Co. “A” rated by A.M. Best. Admitted. States: All except Hawaii. Contact: Rhonda Sciortino at 804-339-0534 or e-mail email@example.com.
Roll Offs - Debris Removal Market Detail: Trinity Transportation Services LLC (www.trinitytransp.com) connects agents to a full line of auto coverages for this specialty niche - roll off operators. Auto liability, physical damage and property damage coverages are available. Minimum premiums begin at $150,000. Available Limits: $100,000 to $1 million. Carriers: QBE the Americas. “A” rated by A.M. Best. Admitted. States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Maine, Md., Minn., Miss., Mo., Mont., Nev., N.H., N.M., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wis. and Wyo. Contact: Patricia Busche at 904-272-7797 or e-mail firstname.lastname@example.org.
Garage Clients Market Detail: USX/S (www.USXS.net) offers a competitive garage program encompassing many risk classes. Eligibility includes new or used car dealerships, repair shops, N18 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
impound yards, accessory dealers, farm equipment sales or repair, motorcycle sales or repair, valet operations (including on-street exposures), auctions, emergency vehicle sales or repair, RV sales or repair and many other classes. Available Limits: Not provided. Carriers: Unable to disclose. “A-” rated by A.M. Best. Non-admitted. States: All. Contact: Sandy Hupcej at 440-888-7300 or e-mail SandyH@USXS.net.
Watercraft Programs Market Detail: Burns & Wilcox (www.burns-wilcox.com) offers agents access to a watercraft insurance program that provides specialized coverage for a broad range of yachts and motorized boats that includes: houseboats, airboats, sailboats, outboards/inboards, jet skis/wave runners, etc. Coverage is available to “problem operators” and replacement cost can be provided for boats new to three years old. Available Limits: Not provided. Carriers: Unable to disclose. “A++” rated by A.M. Best. Admitted and non-admitted. States: All. Contact: Donna Dodd 770-650-7511 ext. 2236 or e-mail email@example.com.
Nursing Homes/Assisted Living Market Detail: US Risk Brokers Inc.’s (www.usrisk.com) Houston office offers an exclusive in-house underwriting program designed specifically for nursing homes, assisted living facilities, independent living facilities and CCRC’s. US Risk also gives agents access to an exclusive miscellaneous medical malpractice program. Eligible classes include: home healthcare agencies, staffing agencies, and many more. Carriers: Underwriters at Lloyds. No rating provided. Non-admitted. States: All. Contact: Sheila Boatman at 281-249-4933 or e-mail firstname.lastname@example.org. IJ www.insurancejournal.com
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Special Report Directors & Officers
An Awakened Washington Promises More Stress for Directors & Of ficers Corporate Leaders Brace For Fallout From Heightened Regulation, Even Corrupt Foreign Practices By Andrew G. Simpson
orporations and their directors and officers are living in fear. Fear of the next financial scandal, the next stock market plunge, the next lawsuit. Fear of bankruptcy. Fear of angry policymakers inside Washington and angry citizens outside their homes. It’s no wonder that they’re asking about directors and officers liability insurance protection like never before. “The last year has been interesting because I think the entire business community, and maybe the world in general, has recognized how risk is so vital, and understanding risk is vital to o ur economy. And at the center of that are directors and officers. Now they’re looking at their coverage in a way that, perhaps, they never have before,” said Mike Smith, president of AIG Executive Liability, who knows a lot about D&O and about today’s headlines. “I think that in the past time, the y relied on lawyers and brokers and maybe carriers to provide them a product, but today they’re asking more questions, to ensure that they have the coverage that’s going be there when they need it,” Smith said. “A lot of money has been lost and that leads to a heightened awareness of what’s going on,” according to Michael Price, vice president, Hartford Financial Products.
D&O clients and their advisors are, of course, asking a lot of q uestions about their protection against securities litigation. They are also asking about the D&O risks they could face if their business were to go belly-up. And, increasingly, they are asking what risks they face when the federal government starts snooping around business a lot more as it is widely expected to do. Washington Risk D&O experts at the recent Professional
Liability Underwriting Society (PLUS) D&O Symposium in New York said they don’t expect Congress to pass any major legislation to change the shareholder rights climate. “Congress has other priorities,” said John Coffey, partner, New York law firm Bernstein Litowitz Berger & Grossmann LLP, capturing the consensus. President Barack Obama could bring about a “subtle shift” in the shareholders’ rights climate with his appointments to federal courts, according to plaintiffs attorney Sherrie R. Savett of Berger &
D&O Market Expects the Unexpected
he litigation climate is affecting directors and officers liability markets and pricing, most notably the financial D&O market. “Our data show that the D&O insurance market is clearly hardening for financial services companies, which have been at the center of the economic crisis, ” said Lauri Floresca, senior managing director and author of the latest Carpenter Moore D&O Benchmarking Report. In 2008, financial services companies paid an average premium of $147,187 for the first $5 million of coverage, up 24 percent from 2007, according to Carpenter Moore. Aon’s D&O Pricing Index showed that the average price for $1 million in co verage limits increased 3.15 percent in the fourth quarter last year over 2007. “In the short term, we expect to see D&O pricing for the financial sector continue to rise,” said Mike Rice, managing director of Aon’s Financial Services Group and an author of the Aon Quarterly D&O Pricing Index. Aon’s analysis found that rates for D&O liability insurance in non-financial sectors actually declined by 6.3 percent in Q4 2008 compared to Q4 2007 . Experts see the financial sector’s D&O woes spilling over into other sectors. “If the emerging executive liability insurance pricing trends continue, we can expect D&O rates to rise for other industries, especially if we see a reduction in insurer capacity due to consolidation or insolvency,” said Floresca. “After several straight years of declining premiums, many companies may not be prepared for cost increases. In this en vironment, companies will need to take a much more active role in their insurance renewal to get the best outcomes.” “It is possible … that a to ugh underwriting environment could emerge for all public companies as the economy continues to negatively impact both financial results and stock prices,” said Aon’s Rice. Ann Longmore, D&O, employment practices and fiduciary leader for Willis HRH Executive Risks Practice, writing in a recent Willis Marketplace Realities 2009 report, con-
N20 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
continued on page N22 www.insurancejournal.com
Montague in Philadelphia. But observers don’t expect Obama to lead a revolution in the judiciary. The D&O risk from Washington is not so much legislative or judicial in nature as it is regulatory. The Securities Exchange Commission (SEC) and other federal regulators are expected to step up their g ame, as former Vice President Dick Cheney would say, “big time.” All signs point to a far more aggressive regulatory approach and with that, higher costs. “You can absolutely take to the bank that the SEC will increase its a ctivity dramatically and quickly,” Randall Bodner, ‘You can partner, Ropes & Gray in Boston, absolutely told the PLUS take to the crowd during the bank that the “So, What’s Next? Emerging D&O SEC will Liability Trends” panel. increase Bodner thinks its activity there is “pent-up dramatically prosecutorial in and quickly.’ zeal” Washington after the Bush Administration. He doesn’t think it is as much “anti-business” as it is a desire to make up for missing the Ma doff, Stanford and other scandals. “I agree that there is a hug e risk of increased SEC enforcement actions, not to mention the Department of Justice bringing their own criminal suits,” Denise Amantea, a partner with the San Francisco insurance agency, Woodruff Sawyer Insurance, told Insurance Journal in an interview after the PLUS panel. “It’ll come in different areas. F or example, the SEC is going through a rough time right now because it has missed the Ponzi schemes that we read about in the papers, like Madoff and Stanford,” Amantea said. “The new [SEC] commissioner is going to make sure that these Ponzi schemes and any other fraud or corruption that’s bubbling up get caught before it’s an embarrassing predicament for them.” The SEC acknowledges that it’s a new day in Washington. “The commission’s enforcement program is in a critical transiwww.insurancejournal.com
tion period. Our new chairman, Mary Schapiro, joined the agency in January and has been taking a series of steps to bolster our enforcement efforts and restore investor confidence to our markets,” SEC Commissioner Elisse B. Walter told the House Committee on Financial Services in early March. Insurers see it coming. “I believe there
will be significant changes in the way government will be involved in business,” said Fred Cooper, executive vice president, AXIS Financial Insurance Solutions in Berkeley Heights, N.J. Cooper and others are concerned that this enhanced public oversight will mean “significantly” higher costs for D&O insur ers. continued on page N22
April 6, 2009 INSURANCE JOURNAL-NATIONAL REGION | N21
Special Report Directors & Officers Awakened Washington, continued from page N21
D&O Market, continued from page N20
The cost concern could explain why Amantea thinks that could be the case, Bailey said he already sees a significant too. â€œThere can be millions in attorne y fees increase in primary carriers negotiating setpile up long before there is e ven a trigger tlements or â€œcutting deals earlyâ€? in the of coverage,â€? she said. game to cut costs. â€œI would expect this to According to Bodner, SEC defense costs continue,â€? Bailey said. can be â€œonerousâ€? and it is difficult for insurers to push back against the governCorrupt Foreign Practices ment to control them the way they might One particular area of increased SEC be able to do in other cases. activity could come under An issue worth watchthe Foreign Corrupt Practices ing will be whether reguâ€˜In the short Act (FCPA), a 1977 law that latory penalties, payments and fines will be an offset term, we expect prohibits bribes to foreign officials to obtain business. for insurance payments, to see D&O The SEC has brought 38 according to Dan A. FCPA cases since January Bailey, an insurance attorpricing for the compared to just one a ney with Bailey Cavalieri financial sector 2006 year in the late 1990s. LLC in Columbus, Ohio. A few recent cases have What concerns Cooper continue to rise.â€™ been high profile. In is whether carriers have December, the SEC reached a landmark accounted for these higher costs. â€œCarriers $350 million settlement with Siemens AG, are generally willing to offer the coverage which it charged with a scheme involving but I donâ€™t think they are pricing for it in excess coverage,â€? he said. continued on page N24
tended that prices stabilized for most D&O buyers outside the financial sector toward the end of 2008 but then competition on some accounts picked up as the carriers themselves began to face financial distress. â€œWe do not, however, expect this to continue for long. The question for the D&O market in 2009 is a matter of w hen and not if competition will cease to be a stabilizing factor. We are in a period where the best advice may be to expect the unexpected,â€? Longmore wrote. There could be some unexpected developments in cases involving suits against firms that accept bailout monies, according to John Coffey, partner, New York law firm Bernstein Litowitz Berger & Grossmann LLP. He cautions that â€œthe government wonâ€™t be happy to see bailout fundsâ€? going to shareholders or lawyers in settlements. Even the best insurance professionals canâ€™t avoid every D&O problem or Madofflike scandal but it helps to be able to say no, according to Mike Smith, president of AIG Executive Liability. â€œ[I]tâ€™s like baseball. If you get a hit three out of 10 times, thatâ€™s a pretty good average. Iâ€™m not suggesting thatâ€™s a good average here. But you build your underwriting model, you use your judgment. Part of that judgment is when youâ€™ve been in an underwriting meeting and you come away with a feeling that youâ€™re not getting the full story. You have to pay attention to that feeling. So you want to have your process, be comfortable with your process, and also have the ability to say no,â€? Smith says. Longmore, in her report, ventures that todayâ€™s D&O turmoil could even alter D&O client relationships. â€œOne change may well be that directors and officers themselves will want to be part of the D&O insurance decision-making process, rather than leave this in the hands of their inhouse insurance professionals, as is usually the case now. After all, many directors view D&O insurance as a kind of personal coverage. Transparency, the mantra in the field of corporate governance, may therefore come to the D&O insurance purchasing decision. This can be seen as good news for professional risk managers who continually strive to improve decision-making processes and procedures.â€? IJ
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N22 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
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Special Report Directors & Officers Awakened Washington, continued from page N22
Rising Risk of Bankruptcies
enforcement action has resulted in bribes to government officials in Asia, increased sensitivity to FCPA concerns in Africa, Europe, the Middle East and the M&A transactions, as well as in common Americas, in violation of the FCPA. An commercial transactions and business relaFCPA deal involving Halliburton/KBR tionships,” says the report. made headlines in February. The SEC Bailey doesn’t think insurers have yet charged that a KBR subsidiary bribed Nigerian government officials over a 10-year been badly burned by FCPA cases in part because those caught bribing tend not to period in order to obtain construction conbe directors or officers. However, he does tracts. KBR and Halliburton agreed to pay worry about this exposure for any entity $177 million in disgorgement to settle the doing business internationally. SEC’s charges and $402 million to settle The Hartford’s parallel criminal Price suggested that charges brought by ‘We haven’t begun to see FCPA-related activithe U.S. Department ties could be anothof Justice. The sancthe bankruptcies yet.’ er catalyst for additions represented the tional class action suits. largest combined settlement ever paid by Amantea thinks the FCPA exposure U.S. companies since the FCPA’s inception. shouldn’t be ignored. She recommends that “They [SEC] are on a tear,” believes brokers obtain explicit D&O endorsements Amantea, referring to a “flurry of activity” that exempt FCPA activities from any proon FCPA cases over the past five years. hibition against SEC fines and penalties. “This could be a big exposure, and the FBI Interest exposure that worries me is not so much A new report by the law firm of the employees who are doing the bribing, Shearman & Sterling LLP (FCPA Digest of but the exposure to directors and officers, Cases and Review Releases Relating to who are not necessarily putting this as an Bribes to Foreign Officials Under the issue on their radar screen and supervising Foreign Corrupt Practices Act of 1977) it,” said Amantea. reports that the interest in FCPA cases “I would, if I were the broker, absolutely extends to the FBI and to non-U.S. enforcevet the policies to make sure there is that ment agencies as well. explicit coverage,” Amantea added. IJ “The increased risk of investigation or N24 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
total of 210 federal securities class actions were filed in 2008, a 19 percent increase over 2007, according to a report by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research. This trend has been particularly vexing for directors and officers of financial firms. The study shows that nearly a third of all large financial firms were named as a defendant in a securities class action in 2008. The concern in D&O circles is not just that securities litigation is rising and could continue to rise over the next few years. (Plaintiffs with stock drop charges can wait two years to file so some of these cases dating back to 2007 could still be brought.) But the added worry is that class actions are bound to spread beyond the financial sector. A main driver will be the coming flood of corporate bankruptcies. In 2008, bankruptcy filings by businesses were up 50 percent and, in February, they were up 47 percent compared to a year ago, according to Automated Access to Court Electronic Records in Oklahoma City. In September, Lehman Brothers became the largest Chapter 11 filing of all-time. That was followed by Washington Mutual, the biggest bank failure in U.S. history. But bankruptcies have not been confined to financial firms. Other well-known filings have included Circuit City, Linens-n-Things, Frontier Airlines and Mrs. Fields Cookies. “We haven’t begun to see the bankruptcies yet,” Randall Bodner, partner, Ropes & Gray in Boston, told an audience at the recent Professional Liability Underwriting Society (PLUS) D&O Symposium in New York. In March, Moody’s released a list called The Bottom Rung, which identified more than 280 companies it believes are at risk of corporate bankruptcy. The companies include Krispy Kreme, Blockbuster, Dole Food, Eddie Bauer and Rite Aid. “As bankruptcies increase, class actions will rise,” Samuel H. Rudman, a law partner with New York’s Coughlin Stoia Rudman Robbins, told the same PLUS crowd listening to the “So, What’s Next ? Emerging D&O Liability Trends” panel. Rudman could be right, too. According to Advisen, more than three-quarters of large pubwww.insurancejournal.com
lic companies that filed for bankruptcies were cited in class actions. “You’re certainly going to see bankruptcies because there are many troubled industries out there. The forefront would be the automotive industry, and the suppliers to it,” said Mike Smith, president of AIG Executive Liability. “But you’re going to see that there’s going to be a trickle down effect, and while it’s not nearly as difficult in those [D&O] markets as it is in financial institutions, it’s certainly difficult.” Fortunately for directors and officers, most companies today carry Side A D&O coverage which indemnifies them if the company can’t do it because it is bankrupt. But the worry over bankruptcies for directors and officers doesn’t necessarily end there. Denise Amantea, a partner with the San Francisco insurance agency, Woodruff Sawyer Insurance, points out that the trustee of a company in bankruptcy could refuse to pay for renewal of the Side A coverage. “So what do these directors and officers do? … Do they have to pay out of their own pocket? That’s going to be a big deal.” Amantea recommends that directors and officers seek legal counsel about how to protect themselves from the situation in which the bankruptcy trustee will not allow the purchase of their renewal. Amantea also advises individual board members to have their own counsel draw up a personalized indemnity agreement. It is not safe to rely on bylaws because the board can change those after a board member retires, she a dvises. “But if you have a written indemnity agreement, signed by the company, they can’t revoke that contract, and there are lots of bells and whistles that you can put into that indemnity agreement that makes it very favorable for the individual director or officer,” Amantea tells her clients. While bankruptcy typically is covered, brokers might want to make absolutely certain that the D&O policy under review clearly covers this risk. “Now is the time to make sure D&O policies are stress-tested for bankruptcy,” advises attorney Bodner. The concern, according to Bodner, is that the coverage might not be available later. IJ www.insurancejournal.com
April 6, 2009 INSURANCE JOURNAL-NATIONAL REGION | N25
Special Report Directors & Officers
D&O Insurance for Early-Stage Venture-Backed Firms: Carriers Scrutinizing More, But Hungry for Business Schwander
By Mike Schwander and Rachael Owens
ven for established companies increased assets, but we are now seeing with proven track records, the rate increases in cases where the employee current directors and officers count has increased significantly or where (D&O) insurance market is chalthere have been claims against a company. lenging. For early-stage companies, present Even if firms are lucky enough to underwriting practices for D&O insurance receive a flat renewal, terms may resemble (rather like the opening line of be more restrictive. For examDickens’ “A Tale of Two Cities”) “the best ple, there may be of times and the worst of times.” bankruptcy exclusions, higher In one sense, it’s the “worst of times” for deductibles, these small venture-backed companies because underwriters are looking to reduce specific event exclusions, or their exposure to “risky” firms. Early-stage exclusions for companies often have minimal cash non-active reserves. Many are engaged in research and investors or owndevelopment that burns through cash without any hope of generating revenues in ers. But there’s the near term. also the “best of As recently as six months ago, carriers times” aspect of seemed willing to overlook these risks, the situation. and obtaining D&O insurance for entreThe good preneurial companies was as easy as subnews is that, mitting cursory information and waiting a while underfew days or hours for a quote. Not anywriters may be more. For the first time in years, earlyputting companies seeking D&O stage companies are being underwritten coverage under a microscope of with a sharper pencil. More documentascrutiny, these same carriers are probation is being sought, and the length of bly grappling with overcapacitime from submission to ty in today’s weak economy. approval can now be weeks For the first Most of them genuinely need rather than days. the business, which means Underwriters now want time in years, that D&O coverage is availto see more supporting early-stage able to even the riskiest of financial information such companies — as year-end and interim companies are entrepreneurial but only if they’re willing to financial statements, cash being undertake the time required to on hand, funding sources and submit detailed — even, in one recent case, written with a gather information to carriers. the company’s most current sharper pencil. bank statements. Scrutiny Plus Carriers’ The increased review has Overcapacity translated into some pricing impact. Given these conflicting trends — Several years ago, underwriters would not tighter scrutiny plus carrier overcapacity have been able to price for increased expo— we’re advising our clients to budget for sures, like higher employee counts and N26 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
the worst — but work for the best. Smart CEOs and risk managers are learning that investing time to educate D&O underwriters about their company, its financial position and its future prospects will help minimize exclusions and rate increases at renewal. By far the most important consideration for underwriters is a company’s cash position. One company we know had only a three- to fourmonth cash reserve, versus the 12- to 18-month reserve that underwriters like to see. Carriers know that a company with such a weak cash position can be quite vulnerable to bankruptcy. And bankruptcies always mean claims and litigation — things underwriters understandably seek to avoid. In addition to its weak cash position, the aforementioned company also didn’t allow adequate time for its application to be processed in this new world of increased scrutiny. We scrambled to compile all the basic information, and then w e added explanatory paragraphs related to the company’s cash reserves, its anticipated sources of new capital and other relevant financial information. In the end, the company obtained a renewal and the rate wasn’t too bad, but the terms were more restrictive than previously. Another consideration is that earlywww.insurancejournal.com
Schwander is executive vice president and Owens is senior vice president of Lockton Denver’s Financial Services practice. Both are national experts on D&O insurance, IPOs, bankruptcies, funding mechanisms, multiyear structures, mergers and acquisitions, and evergreen clauses. E-mail: firstname.lastname@example.org; email@example.com.
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Be Creative The current climate means that more creativity may be both in Even if firms are required, initial approachlucky enough to es to carriers and in how financial receive a flat information is renewal, terms packaged to make it easy for may be more potential underrestrictive. writers to gain a “feel” for a company. Some tips for navigating the current climate: • Don’t judge D&O insurance on price alone. Adequate and favorable coverage is the most important objective. • Begin the renewal process at least three months in advance of the renewal. This will allow time to prepare the detailed financial information that underwriters now require. • Foster a personal relationship with the underwriter. Make an effort to speak personally with underwriters to educate them about the company and its prospects. Choose the most passionate company spokespersons to participate in the call. • Take the time to prepare a professional, complete submission that answers every possible question an underwriter may have about the company. • Compare D&O insurance policies from a number of underwriters to ensure the company receives the most complete coverage. If building greater than $5 million in limits, include several carriers in the D&O insurance program. This provides flexibility and adds up to more coverage overall. How will this modern-day Tale of Two Cities end? We believe that — at least
through the end of 2009 — the a bundance of carrier capacity will continue to offset the negatives that underwriters associate with D&O coverage for venture-backed companies. The process of creating, negotiating and acquiring D&O liability programs will remain time-consuming, confusing and frustrating. Teamwork between an experienced risk manager and a reputable broker
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stage companies can’t afford to be without insurance protecting their directors and officers in the event of lawsuits or other claims against the company. In the current climate, our best advice to clients is that they start this process early as well (at least 60 to 90 days in advance). Also, be prepared for the process to include some interaction between the insured parties and carriers, either in person or at least by phone.
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Welcome to Insurance Journal’s 2009 Employee Benefits Directory. We’ve assembled this directory as a reso urce for property/casualty independent agents who are looking for assistance in pro viding group benefits to their business clientele. This directory provides a listing of brokerages and/or insurance companies with benefit brokerage departments that are interested in w orking with P/C insurance agents to provide such products. The information published in this directory was submitted directly by the benefit providers and includes their contact information, coverages they offer, states they do business in as well as carriers they write coverage through. We hope you find IJ’s Employee Benefits Directory to be a useful tool when seeking group benefit providers. We will continue to expand this directory thro ughout the year and beyond. To comment on this directory, or any other IJ resource, e-mail: firstname.lastname@example.org. ActivaRx Inc. 4040 E. Camelback Rd., Ste. 158 Phoenix, AZ 85018 Contact: Olinda Vargas Phone: 602-468-9500 E-mail: email@example.com www.activarx.com States Available: All States Products Offered: Alternative Health Plans (chiropractic, alternative medicine, etc.) - Manage Standalone Rx Plans Affiliated Marketing Group 2925 Briarpark, Ste. 155 Houston, TX 77042 Contact: Dan Elliott; Larry Bartee Phone: 713-977-0611 E-mail: dan or larry @affiliatedmarketing.com www.affiliatedmarketing.com States Available: Texas Years Offering Products: 25 years Products Offered: National Group Health HMO or PPO; National Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: United HealthCare, PacifiCare, Blue Cross BlueShield of Texas, Reliance Standard, Delta Dental, Avesis American Brokerage Company Inc. 810 Dominican Dr. Nashville, TN 37228 Contact: Roy L. DePue Phone: 615-227-8292, ext. 302 E-mail: firstname.lastname@example.org www.abctn.com States Available: All States including Wash. DC Years Offering Products: Many Products Offered: Group Life; Group Long Term Care Carriers: More than 24 different companies for life insurance, long term care & annuities
AmeriFlex 700 E Gate Dr., Ste. 510 Mount Laurel, NJ 08054 Contact: Scott Mardis Phone: 888-868-FLEX (3539), Ext. 110 E-mail: email@example.com www.flex125.com States Available: All States including Wash. DC Years Offering Products: 10 years Products Offered: Technology-based, consumer-driven benefits solutions supported by an integrated FSA/HRA/ HSA/CRA debit card platform. Arnoff and Associates Inc. 7205 Chagrin Rd., Ste. 3 Bainbridge, OH 44023 Contact: Robert Arnoff Phone: 440-247-4511 E-mail: firstname.lastname@example.org www.arnoffandassociates.com States Available: MI, OH Years Offering Products: Since 1981 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: It varies per product line. Also it varies based on the clients demographics and needs Assurant Employee Benefits 2323 Grand Blvd. Kansas City, MO 64108 Contact: 35+ sales offices across the U.S. www.assurantemployeebenefits.com for more details States Available: All States including Wash. DC Products Offered: Group Dental; Group Disability; Group Life; Group Long and Short-term Disability; Term Life and AD&D; Dental Coverage on both employer-paid and employee-paid basis.
N28 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
BenCom 1175 Vickery Ln. Cordova, TN 38016 Contact: Sales Department Phone: 888-763-1285 E-mail: email@example.com www.bencomonline.com Years Offering Products: In business since 1998 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Any. Benefit Solutions 3353 Barrow Hill Trail Tallahassee, FL 31312 Contact: Jody Hill Phone: 850-907-0044 E-mail: firstname.lastname@example.org States Available: AL, CA, FL, GA, TX Years Offering Products: 20 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Vision Carriers: Colonial, Blue Cross Blue Shield, Unum, Assurant, Principal, Ameritas, CHP, United HealthCare, Vista Health Plan, Met Life, Ge Financial
2009 Employee Benefits Directory Benefit Strategies Inc. 921 E 86th St., Ste. 100 Indianapolis, IN 46240 Contact: Joseph E. Guzman, Jr. Phone: 317-466-1336 or 888-588-1336 E-mail: email@example.com www.bsi-indiana.com States Available: IL, IN, MI, MO, OH, PA Years Offering Products: 20 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Multiple and varying depending upon employer size, needs, demographics, etc. BenefitStrategies LLC 2776 Ridge Valley Rd., NW, Bldg 100, Ste. 150 Atlanta, GA 30327-1850 Contact: Carl C. Schuessler, Jr., DHP, DIA, GBDS Phone: 404-277-7852 E-mail: firstname.lastname@example.org States Available: AL, AR, AZ, CA, CO, CT, FL, GA, HI, IL, IN, KS, KY, MA, MD, MI, MN, MO, MS, MT, NC, NM, NY, OH, OR, PA, RI, SC, TN, TX, UT, VA, WI, WV Years Offering Products: 18 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Many BenefitsWorkshop P. O. Box 56828 Jacksonville, FL 32241 Contact: Larry Garrett Phone: 904-631-2629 E-mail: Larry.Garrett@BenefitsWorkshop.com www.benefitsworkshop.com States Available: All States Years Offering Products: 21 years Products Offered: Section 125 Plans, FSAs, HRAs, Cafeteria Plan, Commuter Benefits, COBRA administration and consulting BenefitVision Inc. 4522 RFD Long Grove, IL 60047 Contact: Virginia Eanes, VP - Marketing Phone: 800-810-2200 Ext. 1115 E-mail: email@example.com www.benefitvision.com Years Offering Products: 16 years Products Offered: Communication and enrollment for core benefits and manages data for large organizations with employees scattered coast to coast all year round. Tele-enrollment methodology gives full service, not self service, to every employee, without work disruption and regardless of location. Big Benefits Inc. 2063 N Main Centerville, UT 84014 Contact: Pete Peterson Phone: 801-292-0841 E-mail: firstname.lastname@example.org www.big-benefits.com States Available: AZ, CO, ID, UT Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Vision Carriers: Specialize in self-funded plans but write for all major carriers.
Century Benefits Consulting Inc. 1592 Union St., Ste. 344 San Francisco, CA 94123 Contact: Michele Jones Phone: 415-647-8144 E-mail: email@example.com www.benefits-shmenefits.com States Available: California Years Offering Products: 7 years Products Offered: Regional Group Health HMO or PPO; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine,etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Kaiser Permanente, Health Net, Blue Cross, Blue Shield, California Choice, KP Choice Solution, Aetna, PacifiCare, Genworth, Allianz Century Benefits Group Inc. 100 White Spruce Blvd., Ste. U304 Rochester, NY 14623 Contact: Michael King, CRSP Phone: 585-224-8138 E-mail: firstname.lastname@example.org www.aboutcentury.com States Available: NJ, NY Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna, Blue Cross, GHI, United Health Care Preferred Care, MVP, CDCHP, Oxford, CIGNA Chappelle Consulting and BenefitElect of Alabama 1747 Reese St., Ste. 215 Birmingham, AL 35209 Contact: Allan Chappelle Phone: 205-871-5900 E-mail: email@example.com www.chappellebenefits.com States Available: AL, CA, FL, GA, IA, IL, IN, KS, LA, MA, MS, NC, OH, OK, SC, TN, TX, VA, WI Years Offering Products: 21 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: MetLife, United Healthcare, BlueCross BlueShield of Alabama, AFLAC, AllState, Humana, etc. Child & Elder Care Insights Inc. 18500 Lake Rd., Ste. 200 Cleveland, Ohio 44116 Contact: Elisabeth A. Bryenton Phone: 440-356-2900 E-mail: InfoHQ@CareReports.com www.carereports.com States Available: All States Years Offering Products: Since 1986 Products Offered: National work / life benefits to large and small companies. The latter includes employee info assistance with child care, elder care, legal and financial services. Cleveland Financial Group 28601 Chagrin Blvd., Ste. 300 Cleveland, Ohio 44122 Phone: 216-765-7418 E-mail: tfarro@LNC.com States Available: Ohio Years Offering Products: 30 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: All major & regional insurance carriers & TPAs.
CobraHelp 1620 High St. Denver, CO 80218 Phone: 800-398-2946 E-mail: firstname.lastname@example.org www.mycobrahelp.com States Available: All States Years Offering Products: 20+ years Carriers: National COBRA Administrators since 1986 Colonial Supplemental Insurance 26 Gretchen Ln. Sopchoppy, FL 32358 Contact: Ernie Vance Phone: 850-962-2600 E-mail: email@example.com www.coloniallife.com/supplemental/default.asp States Available: AL, FL, GA Years Offering Products: 30 years Products Offered: Group Disability; Group Life Carriers: 1. State of Florida employees (State agencies) 2. Leon County Board of County Commissioners 3. Memorial Hospital and Manor (GA) 4. Coffee Health Group (Hospital in AL) CONCERN: EAP 1503 Grant Rd., Ste. 120 Mountain View, CA 94040 Contact: Paulette Hannah Phone: 888-533-6015 E-mail: firstname.lastname@example.org www.concern-eap.com States Available: All States Years Offering Products: 28 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; Alternative Health Plans (chiropractic, alternative medicine, etc.) Carriers: CONCERN Employee Assistance Program Coordinated Benefits Company 923 N Plum Grove Rd., Ste. C Schaumburg, IL 60173 Contact: Jim Patrician Phone: 847-605-8560 E-mail: email@example.com www.cbcco.com States Available: CO, IA, IL, IN, MI, MO, WI Years Offering Products: 25 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Blue Cross/Blue Sheild, Aetna, UHC, Humana, UniCare, Standard, Ameritas, Guardian, Delta Dental, MetLife, Reliance Standard, Lincoln National, Hartford, Unum, Mutual of Omaha Cornerstone Insurance & Financial Services Inc. P.O. Box 381625 Birmingham, AL 35238 Contact: Rick Radford Phone: 205-980-7411 www.cornerstoneins.com States Available: AL, AR, AZ, CA, CO, CT, DE, FL, GA, IL, IN, KS, KY, LA, MD, MI, MN, MS, NE, NJ, NM, NY, PA, TN, TX, VA, VT Years Offering Products: Many years Products Offered: Group Disability; Group Life; Group Long Term Care Carriers: More than 25 different companies for life insurance, long term care and annuities.
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2009 Employee Benefits Directory Cornerstone Preferred Resources P.O. Box 680185 Houston, TX 77268-0185 Contact: Kathy Sturm Chomout Phone: 281-580-6865 E-mail: firstname.lastname@example.org www.cprtpa.com States Available: LA, OK, TX Years Offering Products: 15 years Products Offered: National Group Health HMO or PPO; National Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine,etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision
GE Consumer Finance/Benefit Solutions 200 N Martingale Rd. Schaumburg, IL 60173 Phone: 888-788-9089 E-mail: Benefit.Solutions@GE.com www.benefitsolutionsbyge.com States Available: AK, AR, AZ, CA, CO, CT, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY Years Offering Products: 28 years Products Offered: Group Dental; Group Vision Carriers: Health Discount Solutions by GE Legal Solutions by GE Heritage Casualty Insurance Company
CorpCare Associates Inc. 7000 Peachtree Dunwoody Rd., Bldg 4, Ste. 300 Atlanta, GA 30328 Contact: George Martin Phone: 877-843-6036 E-mail: email@example.com www.corpcareeap.com States Available: All States Years Offering Products: 18 years Products Offered: Employee Assistance Programs
Group Benefit Consultants Inc. 33 SE 7 St., Ste. A Boca Raton, FL 33432 Contact: Gary R Chapman Phone: 561-338-5936 E-mail: firstname.lastname@example.org www.groupbenefitconsultants.com States Available: Florida Years Offering Products: 18 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Medical-Blue Cross, United, Humana, Aetna, Vista, Neighborhood Health, Avalon Healthcare Life, Disability and Dental- Aetna, Blue Cross, Assurant, Genworth, Guardian, Hartford, Jefferson Pilot, Met, Principal, Reliance, UNUM
CPS - Reliable Financial Group 9116 E Sprague, Ste. B202 Spokane, WA 99206 Contact: Frank Skaw Phone: 800-364-3110 E-mail: email@example.com www.relfingrp.com States Available: AZ, CA, CO, HI, ID, KS, MT, ND, NM, NV, OK, OR, SD, TX, UT, WA, WY Years Offering Products: 20 years Products Offered: Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision DR Administrative Services Inc. 88 Sunnyside Blvd., Ste. 203 Plainview, NY 11803 Contact: Robert Rosen Phone: 888-791-3737 E-mail: firstname.lastname@example.org www.drdpny.com Years Offering Products: 12 Years Products Offered: Group Dental; Group Vision - Plan is self-funded Direct Reimbursement Dental Plans Employee Benefit Specialists Inc. 5934 Gibraltar Dr., Ste. 206 Pleasanton, CA 94588 Contact: Larry Rhodes Phone: 925-469-5232 E-mail: Larry.Rhodes@ebsbenefits.com www.ebsbenefits.com States Available: AK, AL, AZ, CA, CT, FL, GA, IN, MN, NC, NJ, NV, NY, OK, SC, TN, TX, WA Years Offering Products: 22 years Products Offered: Voluntary Products Carriers: Allstate Workplace Division and ING Evolutions Healthcare Systems Inc. 7916 Evolutions Way New Port Richey, FL 34655 Contact: Sales Department Phone: 800-881-4474, Ext 2300 E-mail: email@example.com www.ehsppo.com States Available: AL, CA, FL, GA, IN, KS, KY, LA, MO, NC, OH, SC, TN, TX Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO Carriers: Carrier Class Network in Florida, over 400,000 providers nationally.
Health Benefit Solutions LLC 43 Church Ave. Cookeville, TN 38501 Contact: Jon A. Johnson Phone: 931-528-7232 E-mail: firstname.lastname@example.org www.healthbenefitsolutions.com States Available: KY, TN Years Offering Products: Since 1973 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna, Assurant, Blue Cross Blue Shield of Tennessee, Bluegrass Family Health, Humana, Principal, United Health Care, Guardian, Prudential, Met Life, and several third-party administrators. HSM Inc. 7805 Hudson Rd., Ste. 190 St. Paul, MN 55125 Contact: Jim Wieland Phone: 651-287-4732 E-mail: email@example.com www.hsminc.com States Available: All States including Wash. DC Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical Carriers: Several thousand contracted providers throughout the country
N30 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
Insurance Administrator of America Inc. The IAA Building, 1934 Olney Ave. Cherry Hill, NJ 08003 Contact: Paul Kelly Phone: 856-470-1200 Ext. 223 E-mail: firstname.lastname@example.org www.iaatpa.com States Available: CA, DE, FL, IL, IN, KY, MA, MD, ME, MI, NJ, NY, OH, PA, RI, TX, VA, WA, WI, WV Years Offering Products: Since 1985 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Vision; HRA; FSA; HSA (All with Debit Card options) Carriers: All the nationals and many regional Insurance Analysis & Planning P.O. Box 530795 Birmingham, AL 35253-0795 Contact: Henry W. Strong, CLU, RHU Phone: 205-879-0809 E-mail: email@example.com www.strongfinancialadvisors.com States Available: AL, GA, MS, OH, OR, TN, TX Years Offering Products: 30+ years Products Offered: National Group Health HMO or PPO; National Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Ameritas Life, Genworth Life Ins. Co., Guardian Insurance & Annuity, Hartford Life & Accident Ins. Co., Life Insurance Co. of The Southwest, Lincoln National Life Ins. Co., Metropolitan Life, National Life Ins. Co., National Union Fire Ins. Co. of Pittsburgh, Nationwide Life Ins. Co. of America, Principal Life Ins. Co., Protective Life Ins. Co., Provident Life & Accident, Prudential Ins. Co. of America, Reliance Standard Life Ins. Co., Reliastar Life, Standard Ins. Co., Sun Life & Health Ins. Co., Symetra Life Ins. Co., Unum Life Ins. Co. of America Jordan Benefit Services 4204 Gardendale, Ste. 100 San Antonio, TX 78229 Contact: Sara Jordan Phone: 210-421-8361 E-mail: firstname.lastname@example.org www.jordanbenefits.com States Available: Texas Years Offering Products: 23 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Vision Carriers: Aetna, Blue Cross, Humana, Pacificare, Principal Financial, United Healthcare, American National, Colonial, John Alden/Fortis, Pacific Life, Delta Dental, Dental Select, Reliance Standard, Humana Dental, United Healthcare, First Penn Life, Celtic, Fort Knowles Financial Advisors 3017 Ninth Ave. S Great Falls, MT 59405-3421 Contact: Randall Knowles, SPHR, CFP, ChFC Phone: 406-452-7250 E-mail: email@example.com States Available: MT, ND, SD, WY Years Offering Products: 30 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Most
2009 Employee Benefits Directory L.M.S. Associates P.O. Box 948094 Maitland, FL 32794-8094 Contact: Steven L. Beumer, RHU, REBC Phone: 407-629-4108 E-mail: LMSAssoc@aol.com States Available: AL, AR, CA, FL, GA, IL, IN, KY, LA, MA, MI, NH, NJ, NM, NY, NC, PA, SC, TN, TX, VA Years Offering Products: 25 + years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: AETNA, CIGNA, United HealthCare, Hartford, Sun Life, UniCare, EyeMed, AVESIS, American Spec. Health, Ameritas, Kaiser, among others. Louis Rich 1240 Keats St. Manhattan Beach, CA 90266 Contact: Louis Rich Phone: 310-318-1362 E-mail: Louis.Rich@gte.net www.louisrichinsurance.com States Available: California Years Offering Products: 18 years Products Offered: Regional Group Health HMO or PPO; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: All worksite carriers MAVUM Consulting 7160 Graham Rd. Indianapolis, IN 46250 Contact: Rod Reasen Phone: 317-913-3370 E-mail: firstname.lastname@example.org www.mavum.com States Available: CO, FL, GA, IA, IL, IN, KY, MI, NC, NV, OH, SC, TX Years Offering Products: 15 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Anthem, Aetna, AIG, Central Reserve Life, MetLife, Principal, Companion, Guardian, United HealthCare, Humana, Cigna, Great West, Jefferson Pilot, Advantage Health, M-Plan, Medical Mutual, Star HRG, Aflac, Colonial, Blue Cross Blue Shield, Many Others Medical Link 301 Madison Ave. New York, NY 10017 Contact: Mickey Lyons Phone: 212-490-8777, Ext. 104 E-mail: email@example.com www.medicallink.com States Available: CA, CT, FL, NJ, NY, PA Years Offering Products: 18 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna, United, Horizon, Empire, Oxford, Humana, American Medical, HIP, GHI, Guardian, Healthnet, AFLAC, Colonial, Met, Genworth, Hartford, First Reliance, and many more.
Meritain Health 300 Corporate Parkway Buffalo, NY 14226 Phone: 800-242-6226 E-mail: firstname.lastname@example.org www.meritain.com States Available: All States Years Offering Products: 30+ years Products Offered: Provider of services to self-funded health plans andconsumer-driven health plans. National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Midwest Business Group on Health 35 E Wacker Dr., Ste. 1500 Chicago, IL 60601 Contact: Larry Boress Phone: 312-372-9090, Ext. 101 E-mail: email@example.com www.mbgh.org States Available: Illinois Years Offering Products: Since 1998 Products Offered: Chicago HMOs, PBM, Incentive Program, Diabetes/Cardio Value-based Health Mgmt Program, Wellness/Health Mgmt Suite of Services Carriers: Disease Mgmt Svcs: Health Dialog, LifeMasters, Matria/CorSolutions *Pharmacy Services: Walgreens Health Inititatives (WHI) *Health Promotion Services: HPN Worldwide. *Chicago HMOs: HMO Illinois, Blue Advantage, Humana, UniCare, AUDIT Midwest Insurance Brokerage Service 54 W Seegers Rd. Arlington Heights, IL 60005 Contact: Tony Camodeca Phone: 847-631-6661 E-mail: firstname.lastname@example.org www.mibsusa.com States Available: AL, AZ, CA, CO, FL, GA, IL, IN, KS, KY, LA, MI, MO, NC, NV, OH, OK, SC, TN, TX, UT, VA, WI, WV Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life Carriers: Blue Cross Blue Shield of Illinois, AFLAC, Assurant, Ft. Dearborn Life, G.E. Financial Millennium Administrators Inc. 900 Ashbourne Way, Ste. B Schwenksville, PA 19473 Contact: Sara B. Picard Phone: 610-222-9400 E-mail: email@example.com www.millennium-tpa.com States Available: All States including Wash. DC Years Offering Products: 10 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Stand alone RX plan option from several different PBM’s. Carriers: Express Scripts, Health Trans, IPS, Benescripts, Wallgreens. myBenefitStatements 432 E Pearl St. Miamisburg, OH 45342 Contact: Larry Bissett Phone: 800-865-4485 E-mail: LarryB@myBenefitStatements.com www.mybenefitstatements.com States Available: All States Years Offering Products: 20 years Products Offered: Alternative Health Plans (chiropractic, alternative medicine, etc.) - Customized employee benefit statement services.
North Star Resouce Group 2701 University Ave. SE Minneapolis, MN 55414 Contact: Cheryl L. Marks, RHU REBC Phone: 612-617-6163 E-mail: firstname.lastname@example.org www.northstarfinancial.com States Available: AZ, IA, MN, ND, NM, OR, TX, WI Years Offering Products: 20 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Blue Cross, Medica, Humana, United HealthCare, Assurant, Guardian, Principal, Hartford, Standard, Delta Dental, UNUM, MetLife, Health Partners,Preferred One, Great West, Reliance Standard Pet Protect P.O. Box 11447 Naples, FL 34101 Contact: Rhona Sutter Phone: 239-403-4100 E-mail: email@example.com www.pethealthinsure.com States Available: AL, AK, AZ, CA, CO, CT, DE, FL, GA, IA, ID, IL, IN, KS, KY, MA, MD, ME, MI, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, VT, WI, WV, WY Years Offering Products: Since 1997 Products Offered: Pet Healthcare Ins. for Dogs & Cats Carriers: Insurance Corporation of Hannover Petersen International Underwriters 23929 Valencia Blvd., Ste. 215 Valencia, CA 91355 Contact: Mark Petersen Phone: 800-345-8816 E-mail: Mark@piu.org www.piu.org States Available: All States Years Offering Products: 30 years Products Offered: Group Disability Carriers: Lloyd’s of London PPO Dental Plus P.O. Box 953279 Lake Mary, FL 32795 Contact: Mark Gebhardt Phone: 407-324-3921 E-mail: firstname.lastname@example.org www.aigilis.com States Available: All States including Wash. DC Years Offering Products: 25 years Products Offered: Group Dental Carriers: Security Life and Symetra Preferred Vision Care P.O. Box 26025 Overland Park, KS 66225-6025 Contact: Evan J. Disser Phone: 913-451-1672, Ext. 404 E-mail: email@example.com www.preferredvisioncare.com States Available: All States including Wash. DC Years Offering Products: 35 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Vision
April 6, 2009 INSURANCE JOURNAL-NATIONAL REGION | N31
2009 Employee Benefits Directory Pritchard & Jerden Inc. 3565 Piedmont Rd., Bldg 3, Ste. 700 Atlanta, GA 30305 Contact: Jodie Braner Phone: 404-949-1059 E-mail: firstname.lastname@example.org www.pritchardjerden.com States Available: AL, FL, GA, KS, NC, PA, SC, TN Years Offering Products: 15 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna Life Ins Co, American United Life Ins, BCBS, Coventry, United HealthCare, Banner Life, Employers Health, Eyemed, Greater GA Life, General American, Guardian, Hartford, Humana, Jefferson Pilot, Lincoln National, Met Life, EyeMed, Principal, Guardian, Reliance Standard, Standard, Genworth, Kaiser, United Concordia, Cigna, Compbenefits, Sunlife, Symetra Resource Brokerage LLC 1501 E Woodfield Rd., Ste. 110E Schaumburg, IL 60173 Contact: Jane Kopecky or Blair Farwell Phone: 800-605-7566 E-mail: email@example.com www.resourcebrokerage.com States Available: IL, IN, MI, MO, WI Years Offering Products: The firm has been in group benefits for more than 27 years! Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; Group Dental; Group Disability; Group Life; Group Vision Carriers: BlueCross BlueShield of Illinois, Humana, UniCare, IAC, Starmark, Time, AIG, Fort Dearbon Life Roster Financial 1000 Voorhees Dr. Voorhees, NJ 08043 Contact: Patricia A Kilgore Phone: 800-933-6632, Ext. 1159 E-mail: firstname.lastname@example.org www.rosterfinancial.com States Available: All States Years Offering Products: 25 years Products Offered: Annuity; Life; Group Life; Group Long Term Care; Individual Long Term Care, Disability and Final Expense Carriers: Allianz, Allianz NY, Assurity, Mass Mutual, Met Life, John Hancock, Prudential, Penn Treaty, Med America Source One LLC 1970 Swarthmore Ave., Ste. 6 Lakewood, NJ 08701 Phone: 888-661-7297 www.abcpayroll.com States Available: New Jersey Years Offering Products: 20+ years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Many
Superior Benefit Plans 5775 Lower York Rd., Lahaska, PA 18931 P.O. Box 599, New Hope, PA 18938 Contact: Marybeth Snyder, CEBS, CLU Phone: 610-722-9900 E-mail: email@example.com States Available: DE, NJ, PA Years Offering Products: 26 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Vision; Individual Health; Voluntary Benefits Carriers: Aetna, Blue Cross/Blue Shield, 20 Regional and Ancillary Line Carriers, All Major Life and Disability Insurers, Self-funding TPAs. Supportive Solutions Inc. P.O. Box 52 Murrysville, PA 15668 Contact: Tonya Slawinksi Phone: 724-515-7354 E-mail: firstname.lastname@example.org www.supportive-solutions.com States Available: All States Years Offering Products: 4 years Products Offered: Specializing in crisis management, response and consultation. Carriers: Corporate companies and TPAs The Washington Insurance Group Inc. 1101 30th St., NW Washintgon, DC 20007 Contact: Martin G Meadows Phone: 202-728-1092 E-mail: email@example.com www.washingtoninsurance.com States Available: All States including Wash. DC, Outside USA/Canada Years Offering Products: 25 + years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: 25+ insurance & reinsurance carriers, TPAs & wholesale distributors including: Aetna, Anthem co’s, regional Blues, national Kaiser Permanente plans, Guardian Life, Prudential, Transamerica and United Healthcare co’s.
Way2SaveRX P.O. Box 953279 Lake Mary, FL 32795 Contact: Mark Gebhardt Phone: 407-324-3921 E-mail: firstname.lastname@example.org www.Way2SaveRX.com States Available: All States including Wash. DC Years Offering Products: 25 years Products Offered: National Prescription Drug Discount program. No cost to participants. For affinity & corporate groups, Associations and individuals enroll online. Westland Financial Services Inc 1717 Kettner Blvd., Ste. 200 San Diego, CA 92101 Contact: Gene A. Pastula, CFP Phone: 800-238-8144 E-mail: email@example.com www.westlandinc.com States Available: All States including Wash. DC Years Offering Products: 20+ years Products Offered: Group Long Term Care Carriers: Prudential Life, Metropolitan Life, John Hancock Life, Genworth Life, Allianz Woodruff - Sawyer & Co. 220 Bush St., 7th Fl San Francisco, CA 94104 Contact: Jennifer Walsh Phone: 415-399-6444 E-mail: firstname.lastname@example.org www.wsandco.com States Available: All States Years Offering Products: 31 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision
Transamerica Worksite Marketing 1400 Centerview Dr. Little Rock, AR 72211 Contact: Chuck McArthur Phone: 501-227-1260 www.transamericaworksite.com States Available: All States Years Offering Products: 40 years Products Offered: Group Dental; Group Disability; Group Life; Group Vision Carriers: Transamerica Worksite Marketing (administrative office), Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica Occidental Life Insurance Company, Vision:Spectera, Inc. (administrative office), United HealthCare
N32 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
Midwest Coverage News & Markets
Workers’ Compensation Group Trusts: E&O Friend or Foe? Agents Advised to Know How Trusts Differ From Typical Insurance Companies By Curtis M. Pearsall
the goal of the administrator is to manage these trusts like an insurance company. They collect o start off, what exactly is a the premiums, issue the policies workers’ compensation and pay claims. They produce group trust? Per the New York State Insurance Department Web financial statements on an ongoing basis. site, it is: While they may look like an “[A] group of employers who insurance company, there are perform related activities in an many differences that are imporindustry who agree to be jointly tant to note and these differand severally liable for the payences can create certain pitfalls ment of workers’ compensation when placing workers’ compenbenefits to the employees of the employer members by contribut- sation coverage with a trust. As hard as many insurance departing to a trust, the assets of which may exceed the liabilities, ments try, they oftentimes find themselves unable to truly evaluout of which benefits are paid. ate the quality The group deposits and financial with the Chair of well-being of the WC Board a Most agents’ these trusts. minimal deposit of E&O policies The financials securities or a sureof workers’ ty bond in an exclude the compensation amount set by the insolvency of trusts are Chair of WC Board.” somewhat difWorkers’ compentrusts. ferent than sation trusts have those of a typbeen in existence ical company financial. While for many years and have been carriers and trusts both carry a providing this coverage to busiline item for surplus (essentially nesses in many states. Although assets minus liabilities), with I do not have a count on the workers’ compensation trusts, it number of trusts in existence, it is not uncommon to find this is fair to say that it is substanline item at $0 or an a ctual tial. deficit. Agents dealing with cusAre they paying today’s claims tomers on their workers’ comout of today’s premium? This is a pensation coverage, have the very legitimate question. When option of placing their coverage in a variety of ways, among them workers’ compensation trusts encounter financial difficulty, the traditional insurance compathey have the option of assessing ny mechanism, another dealing each trust member an amount with these trusts. necessary to improve the bottom An administrator whose line. It is critical that agents who duties include, among other have placed accounts with a things, underwriting, loss contrust truly understand that this trol and claims typically manpotential exists. ages these trusts. It is common It appears that at this period for the administrator to handle in the marketplace, there are multiple trusts and, essentially,
many workers’ compensation trusts that are in significant financial difficulty. It is important to understand that like insurance companies, trusts have been declared insolvent from time to time. Another difference is that there is no state guaranty fund protection accounts placed in trusts so if one is declared insolvent, there is no state mechanism to bail them out. The recourse is that the members of the trust are assessed. The phrase “joint and several” is included in the definition of trusts. This is a legal obligation that the members assume where they may be liable for the payment of the total judgment (and costs) even if they are only partially responsible for losses inflicted. I am personally aware of a trust that has been declared
insolvent in the amount of $36 million and the insured has received an interim assessment of $529,000! The possibility for future assessments still exists. Most agents’ errors and missions policies exclude the insolvency of workers’ compensation trusts so it is important to understand that this is a responsibility for which an agency could be assuming. There are many well-run trusts. Taking the necessary steps to identify whether the trust that you are considering is among them is the key. IJ A former independent agent, Pearsall is vice president with Utica National Insurance Group, where he is Director of Special Programs and Director of the Utica Errors & Omissions operation. This is reprinted with permission from Utica’s E&O Communiqué.
Trust in Trusts? Things To Consider If you are the ag ent for a b usiness that has or is considering placing an account with a w orkers’ compensation trust, here are a number of items to consider: • How long has the trust been aro und? • Does the a dministrator have a solid tra ck record with managing these trusts? • Has the trust e ver assessed its members? • What do the current financials look lik e? • What type of loss control is in pla ce? • Does the state insurance department ha ve any knowledge of issues involving the trust? • Does the insured trul y understand what its responsibilities are by placing its workers’ compensation coverage in a trust? There is an agreement that the insured needs to sign; be certain the y totally understand it. April 6, 2009 INSURANCE JOURNAL-MIDWEST REGION | 43
Midwest Coverage News & Markets
Defending Data Data Security Breaches Present Emerging Risks and Opportunities for Agents By Patricia-Anne Tom
ata security represents both a new market opportunity to sell insurance coverage and a new risk — especially for independent insurance agencies that may not be compliant with data security laws or have plans to protect their own companies from data breaches. While data security is an evolving issue, failing to protect data can have a huge financial impact on a company. The average total per-incident cost of a data security brea ch was $6.65 million in 2008, according to the “U.S. Cost of Data Breach Study” conducted by data protection company PGP Corp. and information management research firm The Ponemon Institute. The PGP/Ponemon study indicated that data breach incidents cost U.S. companies $202 per compromised customer record and more than 84 percent of data brea ch cases in 2008 involved organizations that had more than one breach. Also, more than 88 percent of all cases in the study involved insider negligence. The cost of lost business was the most costly effect of a breach, averaging $4.59 million or $139 per record compromised. Understanding the Exposure There are many types of data security breaches. Over a five-year period, Kroll Inc., a risk consulting operating unit of Marsh & McLennan Companies Inc., found that in data security breaches, 4.8 percent occurred in disposal of documents on computers; 1.8 percent occurred with e-mail; 20.8 percent occurred because of hacking; 22.4 percent occurred because of lost, missing or stolen laptops; and 15.3 percent occurred via the Web. Oftentimes, the breaches are a result of not having the appropriate procedures in place to prevent employee mischief.
Web Resource: More information on state data breach laws is available from the National Conference of State Legislatures at www.ncsl.org/programs/lis/cip/priv/ breach.htm.
“Typically, we find that technology people Regulations in 44 states, the District of doing the work don’t have security backColumbia, Puerto Rico and the Virgin Islands ground checks but they’re given access to the require that individuals (customers, employsystems. So we find that a lot of security ees, citizens, students, alumni, etc.) be notibreaches are done by insiders,” said Thomas fied if their confidential or personal data has Katona, president, managing member of been lost, stolen or compromised. Apogee Insurance Group. “We don’t do back“Having a response plan in place can save a ground checks on IT people, but we give lot of money,” Sills said. them the keys to the castle.” “The costs can go off the wall in terms of One hurdle to ensuring remediation when there are data security is that many ‘Agents, in a soft secure data claims, and withcompanies don’t underout a contingency plan in market, should be stand the exposure, said place, quite often there is a paying attention Leslie Lamb, global risk knee-jerk reaction to how and insurance manager for to the emerging companies deal with claims, Cisco Systems Inc. “Cyber how they deal with notificacoverages. This liability is fairly new, and tions, how they stop the we’re all fairly vulnerable,” is one of those security breach, and how Lamb said. coverages, and one they remedy how much data Companies may not was breached,” Apogee that most of their have the right protocol in Insurance’s Katona said. place to prevent breaches, clients probably do “Most companies will have a and they might not have disaster recovery plan, and not have.’ clear guidelines to handle no contingency plan in place a breach if one occurs. for data security breaches. It Nevertheless, it’s important for business is imperative that they do.” owners to get up to speed about how to hanDespite the gravity of the issue, business dle a breach. owners have a false sense of security about “If a breach occurs, the ability to respond data breaches, according to a recent national must be timely,” said Shena Crowe, Infragard survey of more than 1,500 business leaders Coordinator for the Federal Bureau of conducted by Zogby International on behalf Investigation. “Companies only have about 30 of Identity Theft 911. In the study, most busidays or less.” ness owners indicated data breaches were “After a breach, a lot of companies don’t not the highest priority. Nearly two-fifths did know what to do,” said Adam Sills, undernot have an incident response plan or o utside writer for Darwin Professional Underwriters vendor management procedures in place. Inc. For instance, companies do not have to Another third did not encrypt customer and send out a notice to customers for every sort employee data that contains personally idenof breach — but if they do, that will incur tifiable information. costs. And although it may not be required Even if business owners are concerned by law, many consumers expect the company about the risks, they may not be aware of the that has had a data breach to offer them credinsurance coverages available to help protect it monitoring, which can be a huge additional their livelihoods. “It’s surprising how many expense for a business. don’t know the coverage exists, and that the Notification costs $1 to $2 per individual; CGL (commercial general liability policy) and credit monitoring costs $10 to $20 per person GL (general liability policy) don’t cover elecper year, said Nicholas Economidis, an undertronic data,” said Katona. writer for Beazley USA. When seeking coverage for data breaches,
44 | INSURANCE JOURNAL-MIDWEST REGION April 6, 2009
security and privacy insurance can help with liability defense costs and damages; notification costs; credit monitoring expenses; and first-party losses. Primary limits available go up to $25 million, and excess limits go up to $150 million or more. Sublimits often apply or notification credit monitoring, Katona said. Agents should advise customers to be careful about what coverages they purchase, Sills said. There is no standard application that ISO puts out, so insurers have different approaches to what risks they will insure. “Policies have changed in the past four to five years,” Sills added. The number of carriers offering coverage also has increased from a handful five years ago to about 25 to 30 carriers today. “People tend to confuse cyber insurance with data security and data breach insurance,” Katona saud. He explained that cyber insurance is typically what happens with viruses or malicious code, and there is damage that occurs with systems being down. Data security coverages are available for almost every component of the business, and are designed to help with notification, crisis management, etc. Because the technological environment changes rapidly, agents should go over forms carefully because they are providing coverage for a moving target, Katona said. “In a form that says, ‘cyberspace activity,’ what does that really mean?” he asked. “The vast majority of old coverages are insufficient or incorrect today, because of new technology.”
“It isn’t a matter of an exposure might occur , it will occur,” Katona said. “Ninety-eight percent of the time, companies have voids in their secure data information that will expose them, with things like HIPAA (Health Insurance Portability and Accountability Act) information, credit card information and people’s home addresses. … I would guess that 5 percent of the world has coverage for secured data. That’s only a guesstimate, but it’s an enormous market, even for main street businesses that are doing credit card transactions. “I think agents, in a soft market, should be paying attention to the emerging coverages. This is one of those coverages, and one that most of their clients probably do not have,” Katona added. Customers often are not aware what the rules and regulations are when a breach
occurs. They also often are not aware of the costs associated with a breach. “It’s a wonderful opportunity for agents and brokers to educate their insureds and sell,” Katona added. Of course, that means agents and brokers must educate themselves. “Our major challenge as an industry right now is educating agents and brokers as to what kind of questions they need to ask their insureds, to get their arms around what kind of information their clients have,” Katona said. And, agents and brokers should take steps to ensure they’re covered themselves. “Insurance agents and brokers, obviously, capture a lot of information to write co verage for their insureds,” Katona said. The GrammLeach-Bliley Act requires companies to have certain security measures in place. For smaller agencies, absorbing the costs of securing doors or having password protection and certain security measures in place can be difficult. But “98 percent of the agents we deal with are not Gramm-Leach compliant,” Katona said. “As a group of insurance agents and brokers, we have a responsibility to protect that data.” IJ Crowe, Economidis, Lamb, Katona and Sills spoke on a panel about data security at the 2008 PLUS International Conference in Nov. 2008. This article is based on the presentation, as well as independent interviews with Insurance Journal.
Agent Opportunities While it may be challenging to keep up with evolving technology, it is a great time for independent insurance agents to sell coverages. “Data security has become a hot topic in the past three or four years. A lot of legislation has been passed, and data security breaches have become a main street type exposure,” so clients are a little more aware that a breach could occur, Economidis said. And with the world doing business on the Internet and the presence of Wi-Fi (wireless Internet access), “it’s virtually impossible to secure all of that information,” he said. www.insurancejournal.com
April 6, 2009 INSURANCE JOURNAL-MIDWEST REGION | 45
Idea Exchange Agency Efficiency
Don’t Cheap Out on the T raining And Other Lessons from High-Performing Agencies
By Stephanie K. Jones
se your agency management system to the max. Measure your productivity. Communicate consistently and effectively with your staff, customers and carriers. And above all, don’t cheap out on the training. Do those tactics sound familiar? Hopefully they do, as they are aimed at improving an organization’s bottom line and should be included in any high-performing agency’s management “bible,” according to a duo of consultants who work with agencies to improve operational processes and profitability. There’s a lot of redundancy out there, said Texas-based Pat Alexander, an independent consultant who works with agencies on defining and managing their agency management systems. “I have to tell you any time I thing is, get it. Then take the next thing, get go through an agency no matter at what it,” she advised. level it is performing, I can find how that “Enter data once and use it as man y times agency is not using its system to its maxias possible,” Alexander said, acknowledging mum capabilities,” Alexander that achieving said. “Maximum operational that goal with ‘Training is like performance leads to the some agency breathing, it’s someimproved bottom-line.” management sysHow does an agency tems can be thing you never want achieve operational efficiency? tricky. However, “One of the first things you to stop doing.’ systems are have to do is define the roles improving, she in an agency,” Alexander said. “The four said, and agencies need to assess how they basic roles are production, service, processcan put those improvements to the best use. ing and financial. Some agencies also have a “Unless you use your systems to their marketing department; some agencies have fullest, you have no way of measuring proother specialty departments based on their ductivity with your staff,” Alexander said. niches. But these are the four basic roles.” Because an agency can only manage what it Missed deadlines, finger-pointing and measures, management must determine how lackadaisical attitudes can all be avoided by it will measure the productivity of its agency clearly defining roles, making sure people and be “ever vigilant in assessing needs, know who is responsible for what and setusage and performance.” ting accountability, she said. An agency can’t successfully monitor its It’s a big job to assess and refine an performance unless its staff and work agency’s processes, Alexander said. The best processes are defined and employees are way to achieve success, then, is by doing one trained. While staff may have been trained at thing at a time. “Figure out what that one one time on the management and operating 46 | INSURANCE JOURNAL-MIDWEST REGION April 6, 2009
systems, “if you define something new, they have to have new training, [and a] new understanding of your expectations,” Alexander said. “You have to implement it. You have to be very firm and say, ‘from this day forward we are going to do this new process.’ Until [employees] hear that and they see that in writing, they’re in denial. “Then you have to monitor. I’ve seen agencies go from total chaos to very well run organizations with these processes.” In a time when resources are low, Alexander said many agencies are reluctant to devote the time and effort to define and streamline operational procedures. However, while it’s important to sell, “you can’t support sales unless you have the back office to do that. … I find that my most successful clients take that step when they can least afford to,” she said. The Trinity Eric Moberg, an agency errors and omissions risk management consultant based in North Carolina, agrees that agency efficiency is extremely important at this time. Bolstering sales is one way to work out of www.insurancejournal.com
said, is to determine what extent someone who sits at an agency principal’s desk or staff member’s desk is able to look at what’s there, take over and go forward with the work.
the soft market, he said, “but if you don’t lean your back office, you don’t lean your process and you don’t measure it very carefully, your sales results are not necessarily going to achieve [the] bottom-line that you’re looking for.” Moberg explained that his approach to E&O risk management uses what he calls a “trinity” of communication, documentation and consistency. “This trinity can be applied to most everything you do in your business and in every relationship that you have,” he said. Within each part of that trinity, Moberg suggested agency owners and managers ask themselves some basic questions: • Communication. How do you communicate with your staff ? How do you communicate with your brokers? How do you communicate with your carriers? Are you satisfied with the communication that you have? Are you using the best technology for that communication? If you are using imaging, are you using it the best way it can be used? Are y ou storing data multiple times? • Documentation. How do you document files? How do you document communications? Can you project yourself out three years down the road, and if you had to defend yourself in court on a case, would the documentation be adequate to do that? Does your staff understand this? • Consistency. Does everybody do it the same way all the time? Are they prepared to be trained and take the time to make sure that they understand this? This concept “of what you do day in and day out with your staff becomes extremely important,” Moberg said. The key to success in implementing consistent communication and documentation is training. “Training is www.insurancejournal.com
like breathing, it’s something you never want to stop doing. … You have to put the investment in to train your staff on how to do this. … Training becomes a critical aspect of everything that you do in the agency,” he said. Like Alexander, Moberg recommended agencies take time to review their workflow. “Put teams together to look at your existing work flow. How are you doing it today? Is it the best way? Look at your procedures. Are they well-documented? Are they accurate? Or is that procedures manual you spent oodles of time working on four years ago sitting on a shelf somewhere that no one looks at? Is it relevant to what you’re doing today?” One test of an agency’s level of communication, documentation and consistency, he
E&O Essentials While consistency and efficient use of data management systems can be used to enhance the company’s profitability, they are essential when it comes to errors and omissions claims. Courts, Moberg said, are holding admissibility of evidence in the courtroom to the highest level of technology. Therefore, it is imperative that the agency analyze its processes and how it interacts with the organization. Finally, Moberg said, it really is about the bottom-line. The work done to streamline an agency’s processes and procedures will enhance its ability to market and sell products. “Agencies and brokers exist to distribute the product for the carriers. That’s the simplest way to [put it],” he said. “Are you doing everything to optimize that with workflow?” IJ Editor’s Note: This article was based on a pr esentation at the Target Markets Program Administrators Association Eighth Annual Summit in Tempe, Ariz., in October 2008.
April 6, 2009 INSURANCE JOURNAL-MIDWEST REGION | 47
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Midwest Coverage Business Moves CAA, Bridges Group Inc. Austin, Texas-based Combined Agents of America LLC (CAA) has added Bridges Group Inc., based in Kansas, to its roster of agency members. Since 1894, the Bridges Group has served the region surrounding Norton, Kan., with a range of insurance products, including home, business, crop, farm and ranch, auto, health, and other financial services. Since 2004, Bridges Group has been selected by the Independent Insurance Agents & Brokers of America (IIABA) as a Best Practices agency. Founded in 1997, Combined Agents of America LLC (CAA) has 40 independent insurance agency members located throughout Texas, Oklahoma and Kansas. Zurich North America Zurich North America Commercial’s Energy Casualty group has opened offices in Cleveland, Ohio, and Atlanta, Ga. The Cleveland office will be the base of operations for an expanded mining practice, while the Atlanta office will serve accounts in the southeastern United States. Motorists Mutual Insurance, Federal Home Loan Bank Motorists Mutual Insurance Company (Motorists) of Columbus, Ohio, reported it has been approved for membership at the Federal Home Loan Bank of Cincinnati (FHLBank). With $1.2 billion in assets and rated “A” (Excellent) by A.M. Best, Motorists is the 21st insurance company to join FHLBank and is among more than 180 insurance companies in the 12-district FHLBank system. Membership allows Motorists to take advantage of FHLBank’s product line of financial services, including low-cost advances that can be used for liquidity management and general asset/liability management. Motorists Mutual Insurance Company is the lead company in The Motorists Insurance Group. The group of companies is composed of nine property and casualty, life and brokerage companies. Motorists’ products are sold by a network of more than 4,000 independent agents in Ohio, Pennsylvania, West Virginia, Kentucky, Indiana and Michigan.
48 | INSURANCE JOURNAL-MIDWEST REGION April 6, 2009
The FHLBank is a $98 billion congressionally-chartered wholesale regional bank providing financial services for residential housing and economic development to 728 member financial institutions located in Kentucky, Ohio and Tennessee. American Enterprise, Homesteaders Two Des Moines area insurance companies have called off plans for a merger. American Enterprise Group Inc. of Des Moines and Homesteaders Life Co. of West Des Moines said in a joint statement that they’ve nixed the deal. The companies ha d signed a letter of intent to merge in January. Homesteaders spokesman Dean Lambert says the deal came apart because the two companies were unable to ensure that policy owner value before and after the transaction could be maintained. American Enterprise owns Des Moines-based American Republic Insurance and Omaha-based World Insurance Co., which specialize in health insurance. AIG American International Group (AIG) has taken down the most prominent sign at its downtown Manhattan offices. According to a Reuters report, the company replaced the large AIG sign outside the entrance to its property/casualty offices as part of its plan to change that operation’s name to AIU Holdings Ltd. and re-brand the global insurance operations. The sign is outside the company’s Water Street offices, around the corner from AIG’s 70 Pine Street headquarters, which has long been marked only with an understated brass plaque inscribed, “American International Building.” AIG has said it may sell the headquarter building, as part of its drive to raise funds to repay its debt to the U.S. government. The AIG name became tainted after large losses on mortgage bets necessitated a government bailout of $85 billion last September. Twice since then, more aid has been provided to AIG, with the rescue now costing U.S. taxpayers as much as $180 billion. IJ www.insurancejournal.com
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April 6, 2009 INSURANCE JOURNAL-MIDWEST REGION | 49
Idea Exchange Closing Quote
6 Steps to Take Before the Soft Market Hardens By Scott Chang
ost insurance professionals detest a soft market due to the increase in competition, unreasonably low pricing and increased market vulnerability. Some, however, may appreciate a softening precisely because of the change in underwriting and pricing philosophies. No soft market (or hard one) lasts forever. I’m no economist or fortune teller but I’m confident the hard market will arrive. Just like the “real estate bubble” had to end, carriers cannot sustain both underwriting and investment losses. What does this mean to retail agents and brokers? Agencies with a majority of their book placed with preferred carriers may spend additional, unanticipated time trying to re-market those accounts because of the crises being faced by these carriers. Carriers know that if they continue to entertain risks as they have during the soft market, they could wind up insolvent. This commentary is not intended to scare; just to remind agents to prepare for the return of the hard market. When the market does turn, the burden once again will be on agents to adapt to the new market — to which some may not be accustomed or even ever experienced. Underwriting complacency and pricing latitude will disappear in the next hard market, as in all hard markets. Additionally, clients accustomed to the current market conditions are going to complain, asking why their renewal offers are so much higher, or why the incumbent carrier is not renewing the policy despite a clean claims history. Being able to satisfactorily answer these questions and successfully retain clients will soon be the mission of every agent. Don’t Be Left Behind How do agents avoid being left behind when the shift happens? I’m an underwriter and this is not a bout soliciting business. It’s about the reality of the coming marketplace and the need to be prepared. I offer a few suggestions: 1. Just as a grocery store operator regularly checks, agents should do the same to make sure current markets are not significantly changing guidelines or increasing rates. If they are, this could mean they are planning to cut a few agencies as soon as they feel that their executives can no longer spend $1.2 million to renovate their offices (I won’t say who). Agents who
50 | INSURANCE JOURNAL-MIDWEST REGION April 6, 2009
have other preferred carriers should approach them before the market changes. They shouldn’t wait until the last minute. 2. Agencies should gather individual loss runs and agency loss data as quickly as possible. This is important because if/when markets become insolvent, it is very difficult, if not impossible, to obtain loss runs or analytical reports. Agents shouldn’t assume that the insurance departments, guarantee associations or any other governmental agencies can or will assist in securing this data. They will most likely disregard such requests since they work for consumers, not the industry. 3. Agents should renew and/or rebuild their relationships with their excess and surplus lines markets. Surplus lines brokers, wholesalers or MGAs make markets available to retail agents who lack the necessary “preferred” markets or need a market for risks normally declined by preferred carriers. 4. Agents should not be afraid to ask questions or reach out to past or current contacts. Many insurance practitioners rely on knowledge gained from on-the-job experience, selfClients are going education or acquaintances rather than company trainto ask why their ing programs. Unlike standard carrier underwriters, many excess and surplus renewal offers lines underwriters have knowledge and direct expeare so much rience at both the carrier and retail levels. MGA higher. underwriters cannot only advise on current market conditions, but they can also help agents by obtaining rates and coverages not normally available. 5. Agencies must automate. More people buy insurance via the Internet. Agencies need to communicate with customers more through technology. 6. Participate and invest in industry seminars and conventions. Agents who are well informed understand the deeper aspects of the industry and the market. The industry will be facing great challenges in the near future. I believe preparation is the best option. IJ Chang is an underwriter with RIC Insurance General Ag ency Inc, a managing general agent in California. Chang has been in insurance for 18 y ears on both retail and wholesale side. At RIC, he specializes in program business including restaurants and garage. http://www.ric-ins.com/ www.insurancejournal.com
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