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START-UP STORIES New Agencies Are Competing
AGENCY PRIORITY NO. 2 A Systematic Sales Strategy
SMALL BUSINESS UNIT Pros and Cons
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Inside This Issue February 9, 2009 • Vol. 87, No. 3 • South Central Region
SOUTH CENTRAL 10 | Closer Look: Errors & Omissions Certificates of Insurance and Agency Liability What Agents Should Know 36 | Start-Up Stories How New Agencies Are Competing
N22 Time Management 10 Tricks of the Trade
N22 | Minding Your Business Time Management: 10 Tricks of the Trade
N8 Special Report Top 100 Agency Profile Georgia-based J.Smith Lanier and Co. Employee-Powered Excellence
NATIONAL COVERAGE N1 | SPECIAL REPORT: Small Business/BOPs 5 Business Owner Policy Gaps and Pitfalls Agents Should Watch Out For N4 | SPECIAL REPORT: Small Business Pros and Cons of Running an Agency Small Business Unit N8 | SPECIAL REPORT: Top 100 Agency Profile Georgia-based J. Smith Lanier and Co. — Employee-Powered Excellence
N24 | Carrier Watch Stocks Down 14%; Middle Market Carriers Active in Intermediary Acquisitions 39 | A Systemic Sales Strategy Should Be Priority No. 2 for Agency Managers 43 | Closing Quote: Public Entities 5 Risk Management Challenges
DEPARTMENTS 6 8 8 9 N18 42
36 Start-Up Stories How New Agencies Are Competing
Opening Note It Figures Declarations People MyNewMarkets Business Moves
N12 | Closer Look: Errors and Omissions How to Avoid Agency E&O Claims N16 | Closer Look: Non-Profits/Social Service Study Shows Need for Standardizing Nursing Home Social Workers’ Credentials N20 | Closer Look: Non-Profits/Social Service Agent Advice Can Help Human Service Agencies in Tough Economic Times
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39 A Systemic Sales Strategy Should Be Priority No. 2 for Agency Managers
Texas Mutual Insurance Company
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Douglas Sanford S A NFORD & TATUM I NSURA NCE AGENCY
H E R E F O R T E X A S . H E R E T O S T A Y .®
Texas’ leading provider of workers’ compensation insurance
Find out more at www.texasmutual.com or call (800) 859-5995. Dividends are based on performance and are not guaranteed. Services for non-English speakers are available upon request. Workers’ comp health care network available for eligible policyholders.
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Idea Exchange Opening Note Publisher Mark Wells Chief Executive Officer Mitch Dunford
recent development may have agents feeling cautiously optimistic that they will have an opportunity go after a larger slice of the mid-sized business pie as Bostonbased Liberty Mutual Group shuttles direct distribution of property/casualty products to mid-sized companies in favor of marketing them through independent agents and brokers. As Insurance Journal Editor Andrew Simpson pointed out in an article that appeared on Insurance Journal’s Web site, www.insurancejournal.com, on Jan. 22, “[S]ince it couldn’t beat independent agents and brokers — who dominate sales in this segment — Liberty Mutual has decided to join them.” Liberty Mutual, the sixth largest property and casualty insurer in the United States, writes about $2.5 billion in this segment, which it defines as businesses with total account premium ranging from a low of about $150,000 up to about $1.5 million. The company is selling off the renewals on its direct middle market accounts to several large brokers: Arthur J. Gallagher & Co., Hub International and USI Holdings Corp. It is also creating a new commercial business unit, Liberty Mutual Middle Market, which will accept and serve middle market business only from agents and brokers going forward. Products available will remain workers’ compensation, general liability, commercial automobile, property, crime and umbrella for midsized companies. The company The new Middle Market unit will be organized into acknowledged three divisions, with headquarthat by limiting ters in Boston (Eastern itself to direct Division), Chicago (Central Division) and Dallas Division). Agents and brokers will be aligned distribution in the (Western with dedicated distribution and underwriting resources. The move recognizes that about 95 percent of middle middle market, it market business insurance is sold by independent agents was missing out and brokers, not through direct distribution. The comon opportunities pany acknowledged that by limiting itself to direct disin the middle market, it was missing out on to grow. tribution opportunities to grow. Liberty Mutual launched a Web site, www.liberty mutualgroupmiddlemarket.com/, to answer questions about this new development. The Web site asks and answers definitively the following question: “Is Liberty Mutual really exiting direct distribution for middle market companies? “Yes. Liberty Mutual fully intends to exit direct distribution of its products to middle market businesses and focus solely on distribution through independent insurance agents and brokers. We made this decision to satisfy the requirements of the vast majority of middle market buyers, who typically value and seek the input of a trusted agent/broker.” We remain cautiously optimistic that this is a good thing.
Stephanie K. Jones South Central Editor email@example.com
Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content/ and Interim Midwest/Southeast Editor Andrew Simpson | firstname.lastname@example.org East Editor Kenneth J. St. Onge | email@example.com South Central Editor Stephanie K. Jones | firstname.lastname@example.org West Editor Patricia-Anne Tom | email@example.com MyNewMarkets Associate Editor Chris Boggs | firstname.lastname@example.org International Editor Charles E. Boyle | email@example.com Columnists LMC Capital LLC, Catherine Oak, Bill Schoeffler Contributing Writers David J. Firstenberg, Curtis M. Pearsall, Steven Plitt, Mary Stewart, Lori Widmer
SALES V.P., Sales & Marketing Julie Tinney (800) 897-9965 x148 firstname.lastname@example.org West Dena Kaplan (800) 897-9965 x115 email@example.com South Central Eric Jeter (281) 655-0234 firstname.lastname@example.org
Midwest Lauren Knapp (800) 897-9965 x161 email@example.com Southeast Howard Simkin (800) 897-9965 x162 firstname.lastname@example.org East Dave Molchan (800) 897-9965 x145 email@example.com
MARKETING Marketing Administrator Gayle Wells | firstname.lastname@example.org Advertising Coordinator Erin Burns | email@example.com (619) 584-1100 x120 New Markets Sales Manager Kristine Honey | firstname.lastname@example.org Classified and Ancillary Sales Manager Nicola Coghill | email@example.com (619) 584-1100 x125 New Media Producer Chad Reese | firstname.lastname@example.org
DESIGN/WEB Vice President/Design Guy Boccia | email@example.com Vice President/Technology Joshua Carlson | firstname.lastname@example.org Graphic Designer Jamie Bethell | email@example.com Web Developer Jeff Cardrant | firstname.lastname@example.org Web Developer Chris Thompson | email@example.com
A D M I N I ST R AT I O N Accounting Manager Megan Sinclair | firstname.lastname@example.org Admin./ Marketing Asst. Kristina Delavega | email@example.com Cover designed by: Guy Boccia
Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2009 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052
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FOR QUESTIONS REGARDING SUBSCRIPTIONS: please call 856-380-4176 or email firstname.lastname@example.org. You may subscribe or change your address online at insurancejournal.com/subscribe. ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or email@example.com. Visit insurancejournal.com/reprints for more information.
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South Central Coverage Snapshot
It Figures 1 in 4 About one in four Oklahoma drivers is uninsured, the fourth-worst rate in the nation, according to the Insurance Research Council, which studied data from 2007. The study found 24 percent of drivers in Oklahoma were uninsured. Only New Mexico (29 percent), Mississippi (28 percent) and Alabama (26 percent) had higher rates of uninsured drivers. The Associated Press reported that Oklahoma also had the greatest increase since the IRC’s last survey in 2003, at which time about 15 percent of Oklahoma motorists were found to be uninsured. Nationwide, about one in six drivers may be driving uninsured by 2010, according to the study. The recent economic downturn is expected to trigger a sharp rise in the uninsured motorist rate.
Declarations The Job Engine “Small businesses are the job engine of this state. This increased exemption encourages the spirit of entrepreneurship and will help create new and better paying jobs for Texans.” — Texas State Representative Brandon Creighton. Creighton, who represents part of Montgomery County, has filed HB 720, which would give more small businesses an exemption from the state business tax. Current law exempts businesses with revenue under $300,000 and gives discounts to those who make up to $900,000. Under Creighton’s bill all businesses that have less than $1 million in revenue would be completely exempt from the tax. Senator Eliot Shapleigh (El Paso) is leading this issue in the Senate.
A Major Disaster
“This is a very, very dangerous (area) at risk of earthquake. … When you talk about 7 and plus, this is going to be a major disaster.”
Personal information from approximately 500 current and former Beaumont, Texas, city workers who filed workers’ compensation claims within the past five years was accidentally posted on the city’s Web site on Jan. 14. According to the Associated Press, the information, including birth dates and Social Security numbers, was removed from the site the following morning. City Attorney Tyrone Cooper told the AP the incident is under investigation and Beaumont officials are working on “damage control.”
— Haydar Al-Shukri, the director of the Arkansas Earthquake Center at the University of Arkansas at Little Rock. Al-Shukri says a previously unknown fault in eastern Arkansas, west of Marianna, could trigger a magnitude 7 earthquake in the cotton fields of the upper South with an epicenter near a natural gas pipeline. The fault is separate from the New Madrid fault responsible for a series of quakes in 1811-12 that caused the Mississippi River to flow backward.
Let the Judge Decide
Louisiana was the only state in the country with an increase in nonfarm jobs from November to December 2008, the Louisiana Workforce Commission (LWC) announced. According to the U.S. Bureau of Labor Statistics, Louisiana gained 3,700 nonfarm jobs during the month and 8,200 since December 2007. With the increases, the state posted a seasonally adjusted total of 1.949 million jobs, according to the numbers released Jan. 28. Nonfarm statistics are estimated from an employer-based sample survey by place of work. Louisiana’s unemployment rate for December 2008 was 5.9 percent, up from the November 2008 revised rate of 5.3 percent and up from the year-ago figure of 4 percent. The state still fared better than the country as a whole. The December 2008 unemployment rate for the United States was 7.2 percent, up from the November 2008 rate of 6.8 percent.
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“Let’s go to the judge and let him decide this issue. My lawyers tell me I’m not allowed to do what (Theriot) wants me to do.” — Louisiana Commissioner of Insurance Jim Donelon. Lawmakers on Louisiana’s joint House and Senate budget committee say an ongoing public records dispute between Donelon and state Legislative Auditor Steve Theriot is hampering the state’s ability to certify its year-end financial statements and asserted they may intervene. The Associated Press reported that Donelon won a small victory in state court Jan 27. Although he did not rule on the primary issue in the case, 19th Judicial District Judge Todd Hernandez ruled the insurance department can continue to receive operational funds from the state until the dispute is resolved. Donelon says his lawyers advised that he is legally prohibited from giving certain documents to Theriot: personal e-mails, e-mails protected under attorney/client privilege and private insurer information that is proprietary and protected under confidentiality agreements. The commissioner maintains he has given Theriot all of the financial documents the auditor requested. www.insurancejournal.com
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South Central Coverage People
Kevin Paul Hale
Linda Timmons has been promoted to director of communications for the Independent Insurance Agents of Texas (IIAT). In this position, Timmons will manage the organization’s internal and external communications, publications and Web site. She previously served as communications manager for IIAT. Previous to joining IIAT in 1997, Timmons worked as a communications specialist with the Trust Financial Services Division of the Texas Bankers Association and served as marketing specialist for the Texas Research Institute. She spent five years coordinating education accreditation activities for the Texas Medical Association and two years in public affairs with the Texas Association of Realtors. Prior to her association work, Timmons also served in the Office of the Speaker of the Texas House of Representatives. Timmons will report to IIAT Executive Director David VanDelinder. Louisiana Workers’ Compensation Corporation (LWCC) announced that Kevin Paul Hale of Baton Rouge, La., has been selected as the 2008 recipient of the Stephen W. Cavanaugh Scholarship. LWCC established the scholarship fund in 2006 in honor of Cavanaugh’s leadership and contributions to the insurance industry in Louisiana. He was LWCC’s CEO from the company’s inception in 1992 until his resignation in 2006. A student at Louisiana State University Honors College majoring in mathematics with a concentration in actuarial sciences, Hale will receive the $8,000 scholarship over a four-year period. The founding donors of the scholarship include Aubrey T. Temple Jr.; Community Foundation of Acadiana; Dwight Andrus Insurance Agency; Guy Carpenter & Company LLC; Independent Insurance Agents & Brokers of Louisiana; Knox Insurance Group LLC; LWCC; LUBA Casualty Insurance Co.; Star Service Inc.; and Wright & Percy Insurance. Juan Andrade and Jonathan Bennett have been named as interim co-leads of the property and casualty operations of The Hartford. Their appointment to the interim positions follows the departure of Neil Wolin, president and chief operating officer of the The Hartford’s property and casualty operations, who has accepted a position in the White House as deputy counsel to the president for economic policy and deputy assistant to the president. Andrade is currently executive vice president of sales and distribution for property and casualty. Bennett is currently executive vice president of personal lines and small business insurance. Willis HRH, the North American retail division of
Willis Group Holdings, named Mike Phillips as regional growth leader for its South Central region and David Hofele as regional growth leader for its West region. Phillips and Hofele join a team responsible for enhancing client retention, expanding existing relationships, driving cross-selling strategies, supporting and growing the Willis Client Advocate program, and generating new business. They report to Joe Gunn, chief growth officer of Willis HRH. Willis HRH’s South Central region includes Texas, Colorado, Oklahoma, Kansas, Louisiana and Wyoming. Its West region includes California, Oregon, Arizona, Nevada and Washington State. With more than 20 years in the insurance industry, Phillips was formerly production team leader for HRH of Colorado. Hofele previously served as president of HRH’s Bay Area and Northern California offices. Phillips and Hofele join a team of Willis HRH regional growth leaders that include Jim Wylie, Midwest region; Tim Clarke, Northeast region; and Andy Daniels, Atlantic and Southeast regions. AFS/IBEX has promoted two employees: Merry Jane Eversole and Carlos De La Cruz. Eversole was promoted to the position of assistant vice president and will oversee the South Texas and Arkansas regions. She has more than 30 years of experience in the insurance industry and is active in numerous insurance associations. Eversole works and lives in Houston but is based out of the company’s corporate headquarters in Dallas. De la Cruz was promoted to assistant vice president and will oversee the Southern California region. He has more than 28 years of experience in the premium finance industry and is active in the Latin American Agents Association. He will be based in the Newport Beach, Calif., office. Both De La Cruz and Eversole have been with AFS/IBEX for 10 years. Ironshore Inc. has appointed Steven England as executive vice president responsible for running its U.S. Property/Casualty underwriting operations based in St. Louis, Mo. The new unit, Ironshore National Branch, will act as a U.S. underwriting office for certain Ironshore property/ casualty operations. Jordan Gantz and Jim Dowdy have also joined the group and both report to England. England was most recently president of AIG Landmark, where he managed the start up of an agribusiness practice. Prior to heading up AIG Landmark, he was regional vice president for AIG’s Commercial Insurance Group in Houston. He will report to Shaun Kelly, CEO of Ironshore’s U.S. operations. IJ February 9, 2009 INSURANCE JOURNAL-SOUTH CENTRAL REGION | 9
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Closer Look Errors & Omissions
Certificates of Insurance and Agency Liability: What Agents Should Know Pearsall
By Curtis M. Pearsall
common practice by insurance carriers is to inform their agents that they should not send the company copies of certificates of insurance when they are issued. This is most likely the result of mail-flow issues with the underwriting departments, many of which are now becoming “paperless” … not to mention that the task of naming and filing certificates into a computer system is cumbersome! That leaves the agent with the responsibility of issuing and filing certificates. However, if a copy is never sent to the carrier, the carrier can hide behind a “shield of ignorance” if a problem arises by stating that it knew nothing about the certificate. In effect, the practice of refusing certificates can place a carrier in a better defense posture when a claim is made based on misrepresentations on a certificate. At the same time, the defense of an agency can be weakened when a carrier claims ignorance. Certificates of insurance can and will be the basis of claims against agencies. Even though there is language present on a certificate that
in effect states the certificate does not constitute a contract between the parties – nor does it amend, extend or alter coverage under the policies listed – claims are made and suits are filed based on representations present on certificates. A common pattern involves an entity (who is not party to an insurance contract) that receives a certificate of insurance from an agency’s client as a condition before business is conducted with the agency’s client. If the information stated on the certificate is incorrect, it leads the party doing business with an agency’s client to believe that there is coverage. However, when it is discovered there is no coverage – and the party must pay for, or suffers, a loss – a claim can be made against the agent based on the theory of detrimental reliance. It will be claimed that had the party known there was no coverage, it would not have done business with the agency’s client and, therefore, would not have suffered a loss. Consider, for example, a claim by a bank that loaned money to a golf course for the purchase of GPS devices to be used in golf carts. The bank wanted proof that there was coverage for the GPS devices under the golf course’s policy. The agency’s CSR who handled the client’s request to provide proof of coverage actually misunderstood the request, thinking she was being asked to provide proof of coverage for the carts. A fire occurred at the course’s main storage facility resulting in the loss of all of the golf carts and GPS devices. The carrier paid for the carts, but paid nothing for the GPS devices because they were not covered. The bank sued the agency, alleging that it would not have loaned the money had it known there would be no coverage for the GPS devices. The claim against the agency was settled for about $50,000. Agencies should be aware of the pitfalls involved in sending out certificates of insurance that are inaccurate. For example, if an agency is
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sending a certificate to a client that lists another party as an additional insured, the agency must be certain that the party is listed on the policy. If this requires a change endorsement to be sent to the carrier, send it. Even if the carrier is sent a copy of a certificate, do not expect them to add a party without a specific request to do so. Simply stated, a certificate is not the proper vehicle for the request. Agencies also need to be familiar with certain types of vendor’s coverage or blanket additional-insured endorsements before stating a party is an additional insured. Not all parties or actions will trigger coverage under either a vendor’s endorsement or an additional-insured endorsement. If in doubt, call the carrier for an interpretation before a certificate is issued. It is important, too, to never issue a certificate as a favor to an insured without knowing Send copies of for certain that the certificates to the information stated carrier, regardless on the certificate is of whether the accurate. When a lawsuit ensues as a carrier wants result of inaccurate them. information on a certificate, all fingers will be pointed directly at the agency, especially if the carrier knows nothing of the certificate. Finally, it is advisable to send copies of certificates to the carrier, regardless of whether the carrier wants them. Once receipt of the copies has been confirmed, a carrier cannot claim ignorance – and the agency might have an additional avenue for recovery should a claim arise. 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 Communique.
Special Report Small Business/BOPs
5 Business Owner Policy Gaps and Pitfalls Agents Should Watch Out For
By Chris Boggs
usiness owner policies, traditionally referred to simply as BOPs, were introduced in 1976 and significantly revised in 1987. The BOP evolved gradually since the 1987 revisions to include risk classification and sizes not contemplated in the original or revised editions of the form. Additionally, many insurance carriers have built upon the Insurance Services Office’s (ISO) version to develop proprietary forms. BOP policies have long been viewed as the easy way to protect the client with the greatest amount of coverage, and to a great extent they are. BOP policies were designed to simplify the risk management process by packaging property and liability coverages into one form while including several coverage extensions that traditionally necessitated endorsements. However, reliance on the breadth of coverage automatically provided by the BOP may have blinded some to the form’s coverage gaps. BOP Business Income Limitations Business income protection provided by the BOP is relationally broad — there is no coinsurance with which the agent or insured need be concerned and the loss of income is “fully” covered for 12 months. But even in its breadth three weaknesses exist: 1. Ordinary payroll is limited to 60 days; 2. Coverage is limited to 12 months of www.insurancejournal.com
Many factors directly affect the “period of restoration” and the time it takes a particular entity to return to its pre-loss “operational capability.” Among the relevant factors: time for the adjustment process; time for building plans to be drawn and approved; finding and hiring a contractor; obtaining building permits; time to rebuild; and any building code-related issues. The insured may require more than 12 months to return to “operational capability” depending on the loss severity and problems in accomplishing all the necessary “period of restoration” factors. The BOP offers no way for the insured to increase the protection beyond 12 months. “Operational capability” as it relates to business income is an entity’s ability to operate at or near pre-loss production or sales capacity. This is a non-policy-defined business income term describing the point at which an insured can operate with the same level of inventory, protection; and equipment and efficiency as before the opera3. Extended business income is limited to 30 tional-closing loss. days. To clarify, “operational capability” is not synOrdinary payroll is not limited in the stanonymous with a return to pre-loss income levdard business income policies unless done so els, which may take much longer to accomby endorsement. The BOP is exactly opposite plish. “Operational capability” is merely the — unless endorsed otherwise, coverage for entity’s ability to produce goods and provide ordinary payroll is limited to just 60 days. service at the same level, efficiency and speed Should the insured desire to extend payroll to “ordinary” employees beyond these 60 days, the as before the loss (i.e., the ability to conduct “operations” at pre-loss levels). This highlights policy must be endorsed by notation on the the third limitation of declaration page, indicating the BOP’s business the number of days of coverBOP policies have long income coverage — the age desired, and payment of been viewed as the easy 30-day limit on the an additional premium way to protect the client extended period of must be made. indemnity. “Ordinary” employees are with the greatest amount Once the business has all employees other than of coverage. However, reopened and returned officers, executives, departreliance on the BOP may to full operational capament managers, employees have blinded some to the bility, returning to preunder contract or any other form’s coverage gaps. loss cash flows and employees specifically listed income levels may take a as being necessary, non-ordinary employees (done by name or job classifica- while. The unendorsed/unaltered BOP provides only 30 days of additional protection foltion). Payroll for these non-ordinary employees is covered for the entire period of restoration or lowing the period of restoration to return to pre-loss profit levels. If the insured feels this is 12 months, whichever comes first. inadequate coverage (which it probably is), the The insured has no remedy should the “period of restoration” extend beyond the 12 months period of extended business income coverage can be extended by a notation on the declaraof coverage provided by the BOP’s business tion page and the payment of an additional income protection. Business income lost after the 12-month period of indemnity is paid out of premium. the insured’s pocket. continued on page N2 February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N1
Special Report Small Business/BOPs BOPs, continued from page N1
Business Personal Property – Seasonal Increase Limitation One often touted benefit of the BOP is the automatic 25 percent seasonal increase for business personal property. This is appropriate for those insureds subject to periods of foreseeable or even unforeseen increases in business personal property. However, this extension of coverage comes with a caveat — the business personal property limit must equal 100 percent of the average monthly values on hand for the 12 months (or the length the insured has been in business, whichever is less) immediately preceding the loss. This means that the value used for the current year has to include the seasonally increased values of the year prior. If the insured averaged $100,000 for nine of the previous 12 months and $120,000 for the remaining three (within the 25 percent), what limit must they carry to assure the availability of the seasonal increase protection? The insured’s average monthly value is $105,000 [(($120,000 x 3) + ($100,000 x 9))/12]. To qualify
Breakdown, Boiler and Artificial Electrical Damage Limitations Limitation may not be the correct term for System Breakdown, Boiler and Artificial Electrical Damage losses — exclusion is more appropriate. Loss caused by a systems breakdown, steam boiler or artificial electrical damage is specifically excluded in ISO’s BOP coverage form. To pick up coverage for these exposures requires an endorsement be attached. The BP 04 59 “Equipment Breakdown Protection Coverage,” adds back the necessary protection.
intended goal, providing a wide scope of coverage without the need of much agent/policy interaction. However, relying too heavily on the BOP without knowledge of its finer details can leave the client lacking at the time of a loss. This article discusses five limitations or exclusions that may adversely affect clients, but there are others. And the BOP program offers additional endorsements to personalize the policy to fit each client’s need. Even though the BOP looks like a full package of protection, proper time must be devoted to assure the insured is protected. Writer’s Note: This article has focused solely on ISO’s BOP form. Many carriers have developed their own forms. Non-ISO forms must also be carefully analyzed to find their own weaknesses and gaps. A BOP is not a “onceand-done” form — it must be monitored like any other. IJ
ISO BOP BOP policies accomplish much of their
Boggs is the associate editor of MyNewMarkets.com. E-mail: email@example.com. Phone: 619-584-1100 ext. 137.
for the seasonal increase, the insured must carry $105,000 — not the $100,000 that is the most common amount on hand. Many agents fail to account for this policy provision, which potentially leaves their client without the proper protection should a loss occur during the time of a seasonal increase.
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N2 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009
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REVIEW YOUR RISK
SPECIAL REPORT Small Business
Pros and Cons of Running a Small Business Unit Agencies Say SBUs Take Dedication, Technology But Offer Profitability that would enable the firm to handle a large flow of potential clients and insureds. oing for the big fish may bring in Heffernan Group has operated a small busibig returns but some agencies ness unit since it opened its doors in 1988, but think having a strategic plan to go about nine years ago the firm invested to make after all those little fish is just as the unit a little bigger. Then about two years important. Three of the largest agencies in the ago, the firm again invested capital to make country say having small business units (SBUs) the SBU what it is today — 26 small business as in integral part of their agency is simply a producers generating about $4.2 million in revmust. enue. That’s up from $1.8 million in revenue just two years ago, Heffernan said. “I just can’t imagine not doing it,” says Tim Heffernan says that Templeton, president and while its SBU generates chief operating officer of ‘Not only is it just 4 percent of the North Carolina-based Senn Dunn. “For us it turned out serving the small agency’s total revenue, the unit and the people who that the client was getting clients but it’s run it are an integral part served better by having a of the company’s plan. small accounts unit. And it helping the rest He says there’s a big turned out that our producers of the company market in the small busiwho were very tenured, very ness arena that few other experienced, were really able grow. agencies target. “A lot of to work on more larger and carriers have done very more complicated accounts well in that arena and a lot of brokers really which then helped the agency grow a lot.” do not concentrate on it,” he said. “We saw a Senn Dunn, an Insurance Journal Top 100 lot of brokers, our competitors, not aggressiveagency with $22 million in revenue, brings in ly pursuing small business and almost letting just $500,000 in revenue through its small accounts unit, but Templeton says the benefits it go. So to me there was opportunity there for of having it go beyond that. “I think it has also us to give the independent agent touch to clients who might not have been getting it helped us grow the larger clients,” he says. “Not only is it serving the small clients but it’s from their current broker or on a direct basis.” helping the rest of the company grow.” For Steven Grossberg, president of The NIA Target Market For Senn Dunn and The NIA Group, the Group in New Jersey, also an IJ Top 100 success of their SBUs has depended upon findagency, having a small business unit is just ing the right target small business market. part of having an agency that writes all facets If the small business account fits with a of accounts — benefits, life, property/casualty standard market, or stock carriers, a lot can or personal lines. “We like to cross-sell small be done to make the operation very efficient, accounts,” he says. “We find it to be very effecsays NIA Group’s Grossberg. However, he tive. … What may be a small property/casualadded, the efficiencies just aren’t there when ty case could be a large group benefits case,” writing a small account through an alternate he added. market. For another IJ Top 100 agency, CaliforniaLinda Coleman, executive vice president for based Heffernan Group, targeting small busiThe NIA Group, who supervises the agency’s ness was always in the cards, according to small business division, says risk appetites for Mike Heffernan, founder, president and CEO. insurance companies are not very broad when “One of my goals was always to build a small dealing with small business clients, which can business unit and have it be more like personal lines,” he said. Heffernan envisioned an SBU be a challenge. “That leads you to go into the that used technology, procedures and systems continued on page N6 By Andrea Wells
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N4 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009
SPECIAL REPORT Small Business Small Business Unit, continued from page N4
alternative markets and that requires a lot more involvement in the underwriting process,” she added. “You’ve got to be able to pick something up, answer it and put it back down,” Senn Dunn’s Templeton said. “The volume is a challenge. There’s a lot of renewals every
month. There’s a lot of activity going on every month.” According to Templeton, in order for Senn Dunn’s SBU to be effective, it had to decide what type of small business account to focus on. “We have to focus on things we can control, focus on things that are rela-
tively straightforward,” he said. “We get a call from a small contractor, we know exactly where to go, what carrier to use, we know how to get it done, we can turn a quote around very quickly,” he said. “But if we had somebody call with a really unique exposure, say a ship’s hull inspector that would take a lot of work and we really don’t have that expertise.” Templeton said, “sure there’s a market out there ‘We like to crossfor Mr. Hull sell small Inspector,” but the time spent accounts. … What chasing specialty may be a small coverages might have been better property/casualspent writing ty case could be a three retail locations. large group “As we benefits case.’ became more focused on the right carrier and right type of client our service improved,” he said. “Once we got the discipline to do that then we really had more time and more capability to handle those good Main Street businesses.” For Heffernan Group, much of its small business has gone to monoline workers’ comp carriers in California and to the surplus lines market, but Heffernan expects to do more in the future with standard carriers. “The Hartfords and the Travelers of the world definitely enjoy the fact that we have a dedicated unit that kind of mirrors their own corporate structure,” he said. “They are able to allocate the resources that they have for that unit directly.” Even though small business growth has been good with standard carriers, Heffernan envisions it being even better in the future. “One of our goals for this year is to try to take advantage of the fact that they are giving us resources. And we just want to have better results with them.” Phil Runge of Travelers’ Select Accounts division likes that Heffernan’s business model focuses on lower exposures and smaller premium based accounts. “Their business model fits in quite well with our business model,” he said. continued on page N14
N6 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009
TOP100 AGENCIES D. Gaines Lanier Chairman and CEO
With a Conservative View on Growth and Employees as Owners, J. Smith Lanier & Co. Has Risen to the Top Even in the Toughest Market Imaginable By Lori Widmer
or J. Smith Lanier & Co., 1981 was a big year. That’s when the people into the business and let them have an equity play in it; particWest Point, Ga.-headquartered insurance firm decided to ipate in the financial gain of the business. His shares grew at the same switch from what was a long history of rate.” being family-owned and operated to an Therein lies the beauty. If employees share the Insurance Journal employee-owned business model. wealth, in J. Smith’s estimation, they have a vested Top 100 Agency Profile interest in the health and management of the comNot that the old model wasn’t working. In fact, RANKING: No. 9 pany. In turn, everyone wins. In 1993, the ESOP the company had been operating as a family-owned Agency Name: was born. enterprise since its inception in 1868. That’s right J. Smith Lanier & Co. Today’s J. Smith Lanier & Co. employee is win— 1868. Started just after the Civil War by Ward Headquarters: West Point, Ga. ning big time. Since 1993, the company has quadruCrocket and Lafayette Lanier, the company was Year Founded: 1868 first part of a dual operation — a bank and an Additional Locations: Alabama - pled in value and has managed to outpace even its own expectations in terms of success. Each insurance company — that the founding brothers Huntsville, Birmingham, Opelika; employee receives equity — Gaines estimates that established in order to help their community Florida - Tallahassee; Kentucky a staffer making $40,000 can bring in an additional rebuild after the war. Today it’s one of the top Lexington; Tennessee $160,000 to $180,000 in equity. While it’s true ranked independent brokerage firms in the country, Chattanooga, Knoxville, employees are not the majority shareholders — yet it still maintains its regional location; the comMurfreesboro; Georgia - Albany, they comprise 20 percent of the shareholder interpany’s main headquarters is in West Point, Ga., with Atlanta, Augusta, Carrollton, 19 offices throughout Georgia, Tennessee, Alabama, Columbus, Loganville, Manchester, est with an additional 70 shareholders making up the remaining interest — they are very much Kentucky and Florida. Newnan, Thomasville, Waycross, invested in the well being of the company. Presently at the helm is D. Gaines Lanier, CEO West Point. Gaines says there are no regrets going employeeand a descendant of the founders. In fact, the 2007 Premium Volume owned. At the outset, the changes were difficult to Lanier family has headed the company since its Property/Casualty: see, but within just a few short years, employees inception, passing ownership from one Lanier to $655.1 million were seeing a positive change on their year-end another four times in the 140 years the company has Other than statements. “They could see the value that’s been existed. Gaines Lanier, who came on board in 1976 Property/Casualty: created. It has an impact on longevity, the work and was appointed CEO in 1999, has been with the $433.3 million (benefits) ethic and loyalty to the company.” company through some of its key transitions, the % Commercial: 65% Not to mention an impact on employee involvemost important being the establishment of the % Personal: 10% ment and awareness of business as usual. employee ownership model. % Benefits: 25% “Employees are conscious of cost-cutting and Principals: D. Gaines Lanier, Sharing the Wealth CEO; Gary Ivey, COO; Frank Plan, expenses and client retention. They have engaged as being owners. They have seen over these 15 years The company’s third CEO, J. Smith Lanier II (and chief financial officer. what that value means to them financially.” And Gaines’ grandfather), is the mastermind of employMergers/Acquisitions: that, he says, makes for a stronger business foundaee ownership in the company. As Gaines puts it, Insuramerica Aviation (Loganville, tion. the elder Lanier was a leader who understood the Ga.) Associated General Agency Treating employees right by allowing them to importance of securing the buy-in of the employees. (Chattanooga, Tenn.) participate in the growth and success of the com“One of the traits that Smith Lanier brought was his Number of Employees: 576 business savvy to spread the wealth. He brought continued on page N10
February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N9
J. Smith Lanier & Co., continued from page N9
are much more engaged in the culture of the organization than the pany, as well as giving them control over decisions that affect their financials. Our first meetings are always about the people — we operating success, has created a welcome cost-saver — employee never talk about the money. We look for people who are culturally retention. Employees have a strong presence on steering committees, like us — conservative, honest, of high integrity, similar value sysusually 20 producers and a smattering of management teaming to tem and sales oriented. If they’re willing to grow the business and determine necessary resources and business methods that help be part of a business. There is a difference between someone who increase their success rates. Gaines believes this additional layer of wants to own the business and someone who wants to share ownerinvolvement has created not only the company’s exponential profit ship. I have every desire to be on top of the mountain; I just have no growth, but also has allowed them to hang on to key talent. “We lose very few produc‘One of the traits that Smith Lanier brought was his business savvy to spread the ers. wealth. He brought people into the business and let them have an equity play in it …’ When they get desire to be there alone.” here and after 10 or 15 years they have a half million to a million or His goal is to maintain the cooperative attitude that is pervasive in better in value, they’re not looking to leave if we treat everyone the organization. “If a producer in Atlanta writes a nice account, a right.” producer in Albany celebrates with him — we as an organization The company also has a highly-tuned resource distinction — a are successful. We have a competitive nature with our competition, stable of claims staff, loss control professionals, alternative risk perbut we don’t have to compete with ourselves. It’s part of our strucsonnel, errors and omissions, and directors and officers liability speture that we’re stronger together than we are by ourselves.” cialists, large casualty specialists, and large property specialists. Each J. Smith Lanier & Co. producer has plenty of resources to bring Conservative Business Equals Growth in to the client as needed. “We’ve had a great deal of success over the Another factor Gaines attributes to the company’s success is its last few years in forming captives and alternative risk mechanisms conservatism in both business and personal endeavors. “We’re a confor clients. Our claims advocacy group is, in our minds, where the servative people. We’ve never leveraged the company hard. We make client really sees us create value when he has a very difficult claim. good business decisions. We put money back into the company every We assist instead of standing back and handing it over to the insuryear. It started in 1980 when we really started running the business er.” like a business and not like a family company.” That’s not to say the family ideals have been abandoned. To the Choosing Wisely contrary, in explaining his belief that each employee from manageOne thing J. Smith Lanier & Co. does well is evaluate opportuniment to mail room has the same responsibility to the health of the ties and let the opportunities find them, not the other way around. collective, Gaines speaks of the family atmosphere. “In our world “Opportunities arise, but not on our schedule. We stay in a position there’s a responsibility of the family member to the family. You ask to capitalize on the opportunities.” the family to help when he can, but every member needs to underAs for a perfect fit, Gaines says it’s not what one would think. “We stand he has to bring his value back to the family or he doesn’t stay part of the family. Most people say the family takes care of you, but in our world it works both ways.”
Pictured standing left to right in back: Board members Scott Crawford, executive vice president; Gary Ivey, president and COO; Frank Plan, CFO. Seated left to right in front: Sloan Howard, senior vice president and steering committee representative to the board; Board members D. Gaines Lanier, chairman and CEO, and Robert Culpepper, executive vice president. N10 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009
Decisions, Decisions Not every decision made in the company has been a good one. Gaines laughs about some of the not-so-successful decisions, of which he says there were more than enough out there. Of the successes, he says, “We’re very fortunate. We’ve made some mistakes — no question about it, and some I would obviously not do again. Fortunately, none have been that big in magnitude that it created a real problem for us. Our real success has been finding those people who culturally fit us.” He cites the recent acquisitions in Lexington and Tallahassee. “These people believed in our culture more than anything else. That’s why they’re here. It’s not necessarily the economics of every transaction — they enjoy working in this environment.” One not-so-successful decision involved a merger attempt with two groups in 1980, one which Gaines is reluctant to talk about. “We realized shortly after that it was a bad merger and we split it back out in 1981.” www.insurancejournal.com
TOP100 AGENCIES But even the bad decisions can be catalysts for positive change. When the company decided to leave behind the merger, Gaines became an owner, as did William Parr Jr., who is the company’s current vice-chairman emeritus. They also brought on board the company’s current Chief Operating Officer Gary Ivey, who is also a major shareholder. Maintaining in a Tough Market At present, Gaines says the company is looking at a flat growth year for 2008 as well as 2009. Thank the current recession and volatile market conditions, which are testing (and in some cases sinking) competitors and many large financial institutions. Still, Gaines maintains a positive outlook. Business as usual must go on. “It’s not necessarily that we aren’t writing new clients, we’re not growing or we’re not competing to bring on new talent. We are. It’s just that you cannot go through the economic downturn and the rate reductions of the competitive market we’ve been in and it not have an effect on growth, but we’re not going negative.” He attributes that back to the company’s conservative approach. The company, he says, makes a good return, but doesn’t over-leverage and try to outdo the competition in deal making. “We’re conscious of who we are. We’re not going to overpay for a deal just to make a deal. We’ve probably lost some opportunities from maybe even better than a double-digit growth. We have not done that because we’re not going to go out and overpay for transactions.”
D. Gaines Lanier and J. Smith Lanier II
think it’s going to change us. We’re not going to change this company a great deal by that. We’re going to be conservative in our expansion. Fortunately, we have a very strong capital base. We’ve been diligent in building retained earnings. We may all tighten our belts, and I really think we are. But we’re not going to go out of business.” What about coverage availability? In Gaines’ estimation, it will be Recession and Opportunities there and the market will be competing heavily for business. “Carriers Gaines’ outlook in a recessionary era could well be fueled by a do have capital, and they’re going to want to continue to grow the long history of conservative, smart decision making. How does the business.” It takes no crystal ball, in his opinion. “We all should’ve current economic situation affect the industry and how J. Smith known this was coming. Nothing stays great forever.” His only concern Lanier & Co. will be conducting business? “I think they are going to — maintaining caution and not overstaffing until revenue comes back. That’s going to be tough, as he points out, ‘We’ve had a great deal of success over the last few years in because of the influx of talent that he expects is already flooding the market. forming captives and alternative risk mechanisms for clients.’ be very parallel to each other for this reason — we have seen over the last several years rate decreases coming from carriers where rates have actually gone down. Couple that with exposure increases that we’re going to see because of the economic downturn. Payrolls are going to be lower, sales are going to be lower, and you’re not going to see the expansion in businesses. All that’s going to come through in premium. That’s going to affect all of us. The carrier is going to be faced with the same problem — so are we as brokers. We’re going to see return premium audits, in my estimation, much heavier in ’09 and ’10. “I think the next two years are going to be the toughest years that this industry’s faced in the last 10 (years). In the market we’re in now, rates are going down, exposure base is going down, competition’s still there, so obviously everyone’s going to earn less. In the last several months the real business climate is changing. We’ve seen the demise of businesses, bankruptcies, and everything else increase. We think that’s going to continue. That’s going to have a major impact on our world and on the industry.” But as for how it will affect operations, Gaines is positive. “I don’t www.insurancejournal.com
Family Attitude, Employee Involvement For now the company plans to continue its current way of doing things, which is to work together and to reach into the surrounding communities in order to make a difference. J. Smith Lanier & Co. employees are very much part of the communities in which they work, donating not only time but money to various organizations and community projects. The company itself is very involved in the Fuller Center for Housing, and Lanier employees have built six Habitat for Humanity houses. The company also sponsors the Brain Tumor Foundation for Children charity event, which raised an estimated $225,000 in 2007. Additionally, each office gets $5,000 to donate to local charities at Christmas, worth about $50,000 to the company annually. Gaines believes it’s the focus on the whole that distinguishes his company from its competitors. “We’re real people who happen to be in the insurance business. We’re grounded.” IJ Widmer is a Philadelphia-based freelance writer who specializes in insurance and risk management topics. February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N11
Closer Look Errors and Omissions
How to Avoid Agency Errors and Omissions Claims Advising Clients on Specific Dollar Values of Coverages They Need to Consider May Create Unnecessary Exposures Plitt
By Steven Plitt
here have been an increasing number of lawsuits brought against agents in situations where the client/policyholder does not have sufficient liability coverage limits to pay for the liability exposure caused by an accident. Typically, in these types of situations the client/policyholder sues the insurance agent alleging that the agent should have recommended the purchase of higher policy limits. This situation also arises frequently with uninsured and underinsured motorist (UM/UIM) claims as well. In most states, insurance agents are not required to recommend a specific amount of coverage. Also in most states, insurance agents are only required to provide to the client the appropriate insurance products to protect against the client’s risks. This recommendation does not include the limits of coverage which should be purchased, however.
At the time of the insurance purchase the amount of insurance coverage necessary to protect the insured is purely speculative. Irrespective of the client’s financial status, if an insurance agent were to recommend large limits and no accident occurred then the client would have, in hindsight, overpaid for the amount of risk coverage needed. On the other hand, when an accident does occur which produces substantial injury or liability exposures — that realized exposure— in hindsight demonstrates that larger limits should have been purchased and that the purchase of higher limits was a prudent decision. The point to this is that the agent, at the time of the policy sale, cannot predict with any accuracy the amount of coverage that the insured should purchase. Any recommendation will cut both ways depending on hindsight.
N12 | INSURANCE JOURNAL-NATIONAL REGION February 9, 2009
Assessing the Amount of Liability In order to assess the appropriate amount of liability and UM/UIM coverage that the client should purchase would require the agent to have substantial access to the insured’s financial investments and properties. With respect to UM/UIM coverage, the amount of health insurance can be relevant. Even with this information, an agent cannot accurately assess the insured’s risk which is expressed through the dollar amount of the policy’s limits. Perhaps one of the most comprehensive discussions of the public policy for judicial refusal to declare that insurance agents owe a duty to recommend specific amounts of insurance can be seen in the Maryland case of Sadler v. Loomis Co., 139 Md.App. 374, 776 A.2d 25 (Md. App. 2001). In Sadler, the Maryland Court of Special Appeals found that a lawsuit brought by an insured against her insurance agent for “woefully underinsuring” her was not a legally recognizable claim. The court in Sadler noted that the majority of states refused to hold agents liable for failing to recommend a sufficient amount of insurance because it is the insured who is “in the best position to assess the value of his or her assets, and the extent of potential loss in the event that a risk materializes, whether by adverse judgment, business interruption, fire, theft, or the like.” (139 Md.App. at 400, 776 A.2d at 40) Additionally, the court observed that it is the “insured [who] is generally considered best able to balance the factors relating to potential economic loss against the expenses of purchasing additional insurance, the likelihood that a particular risk will materialize, and the insured’s own comfort level with the risk versus the cost of greater protection.” The court expressed concern that requiring agents to advise policyholders of the www.insurancejournal.com
amount of coverage they should purchase would “readily encourage an insured who suffers a loss to fabricate that he or she would have bought more insurance had it been recommended.” In essence, the creation of such an obligation to advise insureds on the amount of coverage they should purchase would indirectly afford insureds the opportunity to insure after the loss by merely asserting that they would have bought the additional coverage had it been offered.
believes is adequate to protect against the possibility of risk exposure. The letter can tell the client that the agent may make a recommendation, generally, that it is the client who must choose the amount of coverage purchased. As an example, the agent could recommend an umbrella or excess policy as a type of product and then
explain the coverage requirements that are a condition precedent to the availability of that product. IJ Plitt is a national legal expert on insurance law and insurance agent issues. He is the current author of the national treatise COUCH ON INSURANCE 3D. E-mail: firstname.lastname@example.org. Web site: www.kunzlegal.com.
Minimizing Risk of Litigation Where does this leave the insurance agent? It is appropriate and required that insurance agents assist their clients with the selection of the right products to protect their clients. Oftentimes agents will recommend that an umbrella or excess policy be purchased above the primary There have been an limits because of the client’s increasing number general financial of lawsuits brought condition or the against agents in size of the busisituations where the ness being client/policyholder insured. This does not have sufficient type of advice liability coverage limits falls under the category of the to pay for the liability agent’s obligaexposure caused by tion to present an accident. the right products for the client’s needs. Specific dollar values are not directly recommended, although they are independently obvious, i.e., a $1 million umbrella. By recommending an umbrella or excess policy, the agent is recommending coverage in excess of the threshold attachment point. With respect to UM and UIM coverage, agents will often tell their clients that they should consider insuring themselves as much and as fully as they insure themselves against the prospect of a lawsuit against the insured. This type of general advice does not rise to the level of a specific recommendation for coverage limits. In order to minimize the risk of litigation, the prudent insurance agent should prepare a letter which is sent to every insured indicating that the insured must determine how much coverage he or she www.insurancejournal.com
February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N13
SPECIAL REPORT Small Business Small Business Unit, continued from page N6
Technology SBUs rely heavily on technology to create greater efficiencies, including in-house automation tools and carrier resources that enable producers and service staff working with small accounts to move quickly.
John Pritchard, Heffernanâ€™s senior vice president and manager of special accounts, or small business, says to be successful an SBU has to have to a lot of volume and has to track that volume constantly. â€œWe have invested in technology
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THE SALES & MARKETING PUBLICATION FOR P&C PROFESSION ALS PAGE TWO
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Use Compariso n Charts to Highlight the Advantages of Your New Bu siness Propo sal
that allows us to track activity for each producer, which is very, very important. Weâ€™ve also, to the extent possible, taken advantage of as much technology as we could from our carriers, using their online rating systems, and the like.â€? â€œEvery producer is extremely accountable for activity,â€? Heffernan said. â€œWe cannot allow someone to not constantly prospect. In the larger commercial, we monitor it but itâ€™s not that hands on.â€? Small commercial prospecting has to be tracked daily, Pritchard added. â€œWe actually track it real-time, daily. Iâ€™m tracking activity on a day-to-day basis for everybody to make sure they have a consistent flow of activity on a daily basis.â€? Heffernan says, most importantly, for an SBU to be successful it has to have quality leadership and management support. â€œSomeone has to lead it. Thereâ€™s a lot of people, thereâ€™s a lot of moving parts, you have to have the passion and understand the insurance business. You have to have the knowledge about pretty much every product available because we are selling to manufacturers, to contractors, to non profits â€Ś you have to have broad-based knowledge and you have to be a good leader. It doesnâ€™t work â€˜I think you have without that kind of indito have a belief vidual.â€? in it. You canâ€™t Heffernan also believes a belittle it. You successful canâ€™t make it SBU must have support seem like itâ€™s just from the top small business.â€™ down. â€œI think you have to have a belief in it. You canâ€™t belittle it,â€? he adds. â€œYou canâ€™t make it seem like itâ€™s just small business.â€? Dedication to the SBU is a must for success, Heffernan says. â€œItâ€™s taken us two years and believe me itâ€™s a capital investment. You donâ€™t start making money right off the bat. I think if you want to do it, you have to be dedicated and spend at least three years to see if it works.â€? IJ www.insurancejournal.com
We insure the printing industry from A to Z. Not to mention C, M, Y and K. Technology in the printing industry is constantly evolving. And so are the risks your clients face. From the breakdown of sophisticated equipment to errors and omissions in a customer’s order, the economic implications can be huge. That’s why Travelers has developed insightful insurance solutions that stay in-synch with printers’ needs, including a product that addresses the expense of replacing or recreating a customer’s lost files. Which is something we think you will find is well worth the paper it’s printed on. To find out more information, contact your local Travelers Commercial Accounts Representative. ©2009 The Travelers Companies, Inc. All rights reserved. The Travelers Indemnity Company and its property casualty afﬁliates. One Tower Square, Hartford, CT 06183
Closer Look Non-Profits/Social Services
Study Shows Need for Standardizing Nursing Home Social Workers’ Credentials Only Half of Nursing Homes Surveyed Employ Social Workers with Degrees in Social Work
ocial workers play a vital role in improving the quality of nursing home residents’ lives. But qualifications of nursing home social workers vary wildly in part because of low federal standards and inconsistent state laws, the first national study on nursing home social workers reveals. Only half of nursing home social workers have a degree in social work, and 20 percent do not have a four-year degree, a University of Iowa survey of 1,071 nursing home social service directors shows. Despite their desire to learn, two-thirds of nursing home social workers report they do not belong to a professional organization that helps to keep them up-to-date on nursing home social work issues, and only 38 percent are licensed in
social work. For-profit nursing homes are 31 percent less likely to hire a degreed social worker. The numbers are concerning, given the important responsibilities nursing home social workers have, said Mercedes Bern-Klug, the assistant professor of social work in the UI College of Liberal Arts and Sciences who led the study. Nursing home social workers advocate for residents and watch for signs of stress and depression. They connect residents and families with resources in and outside the nursing home and facilitate transitions such as hospice, a hospital stay or a return to independence. They guide families, residents and care providers through difficult conversations or conflicts. “Nursing home social workers handle very
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serious emotional issues affecting residents, family members and other staff members, and they deserve to be educated on how to handle these issues,” Bern-Klug said. “Everyone benefits when nursing homes hire qualified social workers.” Older adults struggle with dementia, and the highest rates of suicide are among older adults. Some are victims of physical, emotional or financial abuse. “Still, many people in charge of social work in nursing homes aren’t social workers, and the federal government doesn’t require that they be social workers,” Bern-Klug said. Homes with more than 120 beds are required by federal law to employ a full-time social worker, but anyone with a bachelor’s degree in any human service field — not necessarily social work — and one year of supervised experience in the field is considered qualified. Seventy percent of nursing homes have less than 120 beds, and therefore are not required by federal law to employ a social worker. Most homes do employ one — but typically only one — which means devoting adequate time to each client is difficult, Bern-Klug said. Many times social workers’ jobs involve other duties like marketing or activity planning. “I asked 1,000 social workers, ‘How many residents can you handle? Federal guidelines say you can do 120,’” Bern-Klug said. “An overwhelming majority said fewer than 60. “We need legislation to demand well-prepared social workers and to set reasonable social worker-to-resident ratios, but unless families demand changes, it will be difficult to get them,” Bern-Klug said. “Decades of research has documented the negative consequences of having too few nurses in a nursing home, and still we don’t have strong laws demanding a realistic nursing ratio.” Bern-Klug examined state laws and found that 10 states don’t address qualifications for nursing home social workers, and seven state codes do not appear to comply with federal standards. Twenty-one states require www.insurancejournal.com
a social work degree, and most others require a four-year degree, but not in social work. Iowa’s guidelines for social services in nursing homes with more than 120 beds are identical to the federal guidelines. Iowa code does not address the social service credentials of the majority of its nursing homes, which have fewer than 120 beds. The research also uncovered loopholes in state laws. In Colorado, for-profit nursing homes in rural areas don’t have to hire a qualified social worker if they advertise for a week in a local paper and don’t find one. In Indiana, social services can be provided by a member of the clergy who completes a 48-hour course and consults with a social worker. “We need to standardize nursing home social worker qualifications, regardless of the number of beds, and nursing homes need to make sure their social workers have access to the training they deserve in order to do their jobs well,” Bern-Klug said. Nursing homes need to support existing social workers by providing educational and professional development opportunities, along with decent salaries and benefits, she said. Full-time salaries in some regions are as low as $15,000 per year, while others exceed $60,000, the study showed. “Nursing homes tend to focus on physical care — the risk of falling, the risk of bed sores or skin ‘We need legislation wounds — which are very serious to demand wellissues,” Bern-Klug prepared social said. “But people workers and to set need more than good physical care reasonable social to thrive, and physworker-to-resident ical conditions have ratios, but unless emotional consequences that social families demand workers can help changes, it will be address. As individdifficult to get uals and families them.’ compare nursing home options, they should ask about the qualifications of the social worker and the number of residents under his or her care.” The analysis of laws on nursing home social worker qualifications was published in the fall issue of the Journal of Gerontological Social Work. Results of the national survey will be published in the Journal of American Medical Directors Association. IJ www.insurancejournal.com
U N S H A K A B L E
Through markets hard and soft, Markel Insurance Company remains your unshakable source for specialty insurance. We write property & casualty and accident & health coverage for: • Amateur/youth sports
• Health/swim/racquet clubs
• Arts organizations
• Horse & farm programs
• B&Bs, inns
• Museums and historic homes
• Boys & Girls Clubs, Scouts
• Outdoor sporting programs
• Schools – private K-12,
• Child care centers, preschools
• Child welfare agencies
• Senior centers
• Community programs
• Counseling services
workshops • Shelters
• Group homes
• Social Services/nonprofits
• Gymnastics and
• Substance abuse recovery
cheerleading schools • Head Start programs
facilities and many more…
MARKEL IS: Admitted Rated “A Excellent” by A.M. Best
www.markelinsurance.com 800-496-1184 ®
February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N17
New Markets The following markets were selected from the MyNewMarkets database of 25,000 coverages and programs. To find additional markets, or to submit markets, go to www.MyNewMarkets.com. High-Value Homeowners’ Protection Market Detail: Irwin Siegel Agency Inc. (www.isapcg.com) brings agents access to AIG’s Private Client Group program. Private Client Group is a comprehensive package program for high net worth individuals seeking to protect their valuable assets and benefit from flexible coverages, innovative products, extraordinary services and competitive pricing. A high-deductible option is available to allow targeted high net worth clients effectively control costs. Agents are not subject to production minimums. Available Limits: As needed. Carriers: American International Group. “A” rated by A.M. Best. Admitted. States: All. Contact: Mark Madsen at 800-622-8272 or e-mail mark.madsen@SiegelAgency.com.
General Liability for Roofers Market Detail: MarketScout (www.marketscout.com) gives agents access to a general liability market for roofers. Residential, repair and commercial roofers are welcome. No exclusions for hot tar or heights. New entities are also welcome. The carrier can provide blanket additional insureds and blanket waivers of subrogation endorsements. Minimum premiums begin at $10,000 and the minimum deductible is $5,000. Available Limits: $1 million to $5 million. Carriers: Unable to disclose. “A” rated by A.M. Best. Non-admitted. States: All. Contact: John Gaskill at 972-934-4212 or e-mail firstname.lastname@example.org.
Specialty Equipment Rental General Liability Program Market Detail: Trade Group Insurance Specialties Inc. (www.tradegroupins.com) created and is the exclusive underwriter for the FLOW Rental Program. FLOW provides general liability protection for specialty rental trades such as traffic control/barricades, portable toilet, temporary power and fencing,
and water pump/flow diversion. Minimum premiums begin at $10,000. Available Limits: As needed. Carriers: Unable to disclose. “A” rated by A.M. Best. Non-admitted. States: All except New York. Contact: Michael Bell at 866-366-7938 or e-mail email@example.com.
TeleRadiology Professional Liability Market Detail: Founders Professional LLC (www.founderspro.com) offers medical mal-
Bringing Market Seekers and Market Providers Together • Find markets in our database • Promote your markets on our site • Join our community forums • Membership is free! practice/professional liability protection to TeleRadiology practices serving hospitals, imaging centers, ASCs and physician groups. Coverage is provided on a claims-made basis with available prior acts protection. Minimum premiums begin at $25,000 and deductibles begin at $5,000. Available Limits: $1 million to $10 million. Carriers: Unable to disclose. “A” rated by A.M. Best. Non-admitted. States: All. Contact: Robert C. Hall at 813-769-1290 or e-mail firstname.lastname@example.org.
Vacant Property Market Detail: American Management Corp. (www.amcinsurance.com) offers property protection to owners of residential and com-
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mercial vacant property in 45 states and the District of Columbia. Minimum premiums begin at $750. Available Limits: Up to $2 million. Carriers: Various carriers. “A” rated by A.M. Best. Non-admitted. States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., D.C., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Maine, Md., Mich., Minn., Miss., Mo., Mont., Neb., Nev., N.H., N.J., N.M., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., W. Va., Wis. and Wyo. Contact: Stephen Strange Jr. at 800-233-2398 or e-mail email@example.com.
Large Commercial Umbrella Market Detail: Northern Star Insurance Agency LLC (www.northernstarins.com) can offer certain classes of commercial insureds umbrella and excess coverage with limits up to $100 million. Northern Star specializes in community associations, real estate, hospitality, public entities, restaurants, museums and cultural centers, auto dealers, contractors, distributors, manufacturers, retailers, service organizations and many other market segments. Minimum premiums begin at $500. Available Limits: $1 million to $100 million. Carriers: Unable to disclose. “A-” or better as rated by A.M. Best. Admitted and non-admitted. States: Ala., Alaska, Ariz., Ark., Calif., Colo., Conn., Del., Ga., Ill., Ind., Md., Miss., Mo., Neb., Nev., N.J., N.M., N.Y., N.C., Ore., Pa., R.I., S.C., Tenn., Texas, Utah, Va. and Wis. Contact: Eric Magee at 714-938-0015 or e-mail firstname.lastname@example.org.
Medical Property Protection Market Detail: RPS of New York (www.rpsins.com) offers agents a property protection program designed specifically for the health care industry equipment. The medical diagnostic equipment coverage form is crafted to provide protection for: MRIs, CAT scanners, X-Ray equipment and other portable diagnostic equipment. Power units www.insurancejournal.com
and specialized trailers part of mobile units can also be covered. Blanket limits of $250,000 are also available on items such as accounts receivable, EDP (including extra expense), extra expense, food spoilage and contamination, loss data preparation costs, personal property of patients and valuable papers and records. Minimum premiums and deductibles begin at $5,000. Available Limits: $1 million to $100 million. Carriers: Unable to disclose. “A” rated by A.M. Best. Admitted. States: All. Contact: Robert Hecht at 631-969-1900 or e-mail email@example.com.
insurance, language, modeling, music, photography, public speaking, real estate, tailor, theater, tutoring instruction and more. General liability is available as part of a package or on a monoline basis. Professional liability and abuse/molestation coverage are also offered. Available Limits: As needed. Carriers: Various carriers. “A++” rated by A.M. Best. Admitted and non-admitted. States: Ariz., Calif., Colo., Md., Neb., Nev., N.M., Ore., Pa., Tenn., Texas, Utah, Va. and Wash. Contact: Elizabeth Gaida at 619-593-2059 or e-mail firstname.lastname@example.org.
Artisan Contractors Package Training Schools Package Market Detail: Agostini Wholesale Insurance (www.agostinisurplus.com) offers agents a program focused on specialty training schools including: art, athletic, bartending, beauty, business, computer, cooking craft, dance,
Market Detail: Chopra Insurance Brokerage Inc. (www.choprainsurance.com) offers an artisan and trade contractors insurance program using some hard-to-find coverage – the 11/85 edition of the CG 20 10. Coverage is provided using Insurance Services Office’s (ISO’s)
occurrence policy form. Other often requested coverages include: waiver of subrogation language, “primary” wording, blanket additional insured and a per-project aggregate. Coverage is also available for residential repair and remodeling contractors. Minimum premiums begin at $5,000 and deductibles start at $1,000. Available Limits: $1 million to $2 million. Carriers: Unable to disclose. “A +” rated by A.M. Best. Non-admitted. States: Ala., Ariz., Calif., Colo., Del., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Ky., La., Maine, Md., Mass., Mich., Minn., Miss., Mo., Mont., Neb., Nev., N.H., N.M., N.C., Ohio, Okla., S.C., S.D., Tenn., Utah, Vt., Va., Wash., W. Va. and Wis. Contact: John Upchurch at 818-551-4588 or e-mail Jupchurch@choprainsurance.com. IJ Submit your company’s property/casualty markets to the industry’s leading searchable database at www.mynewmarkets.com.
There’s a better way to find Markets. Searching for a Particular Market? Find it here. From Dude Ranches to Pizza Delivery, we have markets covered. Stop Searching and Start Finding. Our database of over 25,000 markets makes it quick and easy to find that obscure market you are searching for. Best of all the service is FREE! So sign up today!
February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N19
Spotlight Non-Profits/Social Service
Human Services Agencies Can Benefit from Agent Advice, Especially in Challenging Economic Times Custom Coverages and Loss Control Can Help Non-Profits Survive By David J. Firstenberg
hile today’s economic environment presents some challenges for many companies large and small, independent agents who understand and embrace those challenges can help solve problems for their clients and even create new opportunities. This is especially true for agents with not-for-profit, human services organizations as customers, because they are being uniquely impacted by the country’s financial landscape. Fortunately, with the expert advice of independent agents, these organizations can protect themselves against many risks, helping to ensure their stability and even success into the future.
Human Services Landscape Unlike other businesses, human services organizations are experiencing an increase in the demand for services tied to economicrelated issues. And, at the same time, longreliable sources of funding, including state and local governments and charitable foundations, are being compromised. Because most of these non-profits are small or mid-sized local agencies with budgets of under $1 million — they are precisely the kind of organization that stand to benefit from the skill and knowledge of local independent agents. The Importance of Agent Advice Independent agents — who, generally, are
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well-known to be personally vested and involved in their local communities — can enhance the ability of local non-profit organizations to operate with greater efficiency and effectiveness. Through their expertise and valuable advice, agents can be a major asset to customers in this highly specialized, unique market, helping them to thrive and be more successful to carry on their mission, in spite of the prevailing economic environment. First, by extending important baseline coverages to small to mid-sized non-profit and human services agencies — including professional liability, general liability, physical and sexual abuse, management liability (including employment practices liability), umbrella and commercial auto — independent agents can
provide these critically important organizations with protection against further financial strain resulting from accidents, lawsuits and more. Additionally, agents can provide guidance on new types of coverages that are designed to help protect non-profits against existing and emerging risks, which are especially relevant during the current fiscal climate. For instance, coverage for unpaid donations and pledges — a growing problem in challenging economic times — will pay out when a donor is unable to fulfill a written pledge due to bankruptcy or unemployment. For organizations that place patients who are aging or have mental or physical disabilities, some carriers also are offering protection for residential room reserve. Such coverage will replace state reimbursement income to human service agencies when a client is temporarily discharged to the hospital because of accident or illness, protecting nonprofits against the sudden loss of budgeted revenues. Additionally, some carriers are extending protection provided by the property form to also cover property and vehicle damage caused by a client placed by the insured not-for-profit organization. This type of protection would cover foster care agencies placing a child in the residence of a home health care provider. Later this year, The Hanover Insurance Group, which has a long and proud history of supporting local non-profit organizations through charitable donations and the valuable contributions of employee volunteers, will introduce Human Service Advantage, an expanded package of coverages strategically created for a broad range of not-for-profit organizations. Human Service Advantage expands existing offerings for not-for-profit organizations and will enable agent partners to offer an important safety net for those organizations that do so much to help others. Loss Control Besides advising non-profits on specific coverages to protect against their unique exposures, independent agents can deliver significant value to human services agencies through www.insurancejournal.com
counseling on loss control issues. Agents know that the only thing their customers want more than fast, efficient claims services, is to not have any claims at all. Working closely with loss control experts from their most experienced carriers, agents can provide a wide variety of valuable loss control services that will help reduce the likelihood of incidents that might result in a claim and, in this way, provide added financial protection for their customer. Appropriate loss control services may include seminars on exposures unique to human services organizations, such as helping clients employee effective de-escalation techniques to diffuse tense situations, reducing the need to use manual restraints which can lead to severe injuries and even death; risk transfer programs, to protect organizations from paying the price for someone else’s error or carelessness; discounted staff screening services (especially important in an industry that provides personal services and where there is a relatively high turnover rate). Together, these services can help organizations save money, and eliminate the need for claims before they even happen. Agents can work with their partner carriers, to offer loss control services unique to specialized organizations, like not-for-profits. A Unique Way to Help While insurance may not be the first thing that comes to mind when people consider how they can help local non-profits survive a severely strained economy, it can make a meaningful difference. In partnership with strong carriers, independent agents can help these organizations to take a more pro-active approach to understand and effectively manage their risks, while reducing costs and operating more efficiently, so they can continue to meet the needs of the most vulnerable members of the community. IJ Firstenberg is the commercial lines president for The Hanover Insurance Group.
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Marketing Strategy | Business Development Campaigns | Prospecting | Sales Support Industry & Client Benchmarking Competitive Benchmarking Research & Product Development Copyright © 2009, NIF Nonprofit Advisor, All Rights Reserved
February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N21
Idea Exchange Minding Your Business
Time Management 10 Tricks of the Trade
By Catherine Oak & Bill Schoeffler
ime is the only resource we cannot recreate and we all have the same amount. How can you optimize your life by being “in control of time” rather than being “controlled by it?” Here are 10 tips to help you be time efficient.
1. Determine Your Time Wasters What are your biggest time wasters? Is it surfing the net? Email? Phone calls (on your cell phone of course)? Reading or sorting junk mail? Why is it we find these things essential when they did not exist for most of humanity? Trim down or eliminate the “time wasters” in your life. Make time for the truly important things — the big rocks — in your life (major work projects, family, personal time, etc.). Allocate only an hour a day on the “time wasters.”
2. Prioritize and Delegate Determine the key things to accomplish each day. Write them on a white board or in your day planner. Create a task list of secondary important items to do in between the scheduled primary important items. If possible, get through your big items first and you will feel better because you have finished the most important things each day. Delegate “large time — small gain” items. For example, yard work, which does not need your expertise, train or hire someone else to handle it.
3. Limit Tasks Most people put too much on their “to do” lists. For some people it is hard to say no, or they just want to be a “superhero.” Be realistic. Only schedule what is possible to accomplish on a given day and “double buffer” the time allocated. If you take on too much, you will feel let down at the end of the day because of all the things you did not accomplish. It is better to do less and be grateful for the things you actually did get done.
4. Paper - Only Handle it Once One of the biggest “time killers” is how paper is mishandled. Someone a while back came up with a system for handling each piece of paper. There are only five options to handling each piece of paper when received. Decide to: 1) Toss it; 2) File it; 3) Read it; 4) Delegate it; or 5) Act on it. If possible, go paperless and get rid of the clutter. Start fresh and get rid of the old paper. Remember: O.H.I.O. — Only Handle it Once!
5. Improve the Hit Ratio Don’t practice quote. We don’t need the practice, nor do the underwriters. Track your “quote-to-write” or hit ratio. The closer the ratio is to 1.0 the better. The key is to pre-screen each prospect to see if they fit your program or book of business. Spend a few minutes pre-qualifying them so that there is a high likelihood of you writing the business.
6. Schedule Time for New Business Most salespersons don’t have much time to write new business because of daily pressures from existing accounts, such as service issues or account renewals. Time must be scheduled each day for producers to work on new business. Otherwise, they will not take the time to prospect and handle new accounts.
7. Streamline the Renewal Process In order for producers to focus on new sales, the renewal process needs to be streamlined and handled mostly by the service staff. Producers and CSRs should go over the list of renewals at least 90 to 120 days in advance to discuss the strategy for each account. From there, the CSRs or account executives should gather renewal information, submit for renewal or re-market the account and deliver the renewals to the client or to the producer for final review. Producers should work only on those accounts that need their expertise or relationship.
8. Staff Stratification Whenever possible, all persons in the agency should delegate tasks to the least costly, qualified employee who can handle that work. With automation, however, most service staff are doing it all themselves, including claims. But certain projects can be batched up, such as faxing, scanning, filing, all of
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which can be handled by a clerical person. Consider outsourcing work, such as certificates, which can be handled online or outsourced to third parties.
9. Plan Your Day Set up daily or weekly calendars on your desk that can be visible to you at all times. Plan when to make calls and appointments and fill the time in between the secondary tasks. Remember to make some time for your “time waster” as well. When out of the office optimize the time by scheduling more than one client or prospect in the same area. Plan the order of the visits based on the proximity to each other and the office. Try not to let new prospects or even existing clients, change your scheduled day. Changes will waste time and can cause you a lot of other problems.
10. Take Care of Yourself If you are one of those people that never get to the gym, or take the time to read, think or meditate, you need to make sure it is scheduled every day. The best thing for the body and the
ficult because people tend to do too much, too mind is sleep. A good night’s sleep will leave fast. Change is accomplished by taking one you refreshed and feeling like you are ready to take on the day. And don’t forget to eat right, as step at a time. Just like building muscles, it can be challenging at first, but with small increwell. mental changes over time it gets easier. Invest some time for personal growth. Read Choose one thing you want to change and books that enrich one’s life, such as motivationmake one small adjustal tapes, biographies, histoment, today. Add one more ry, etc. Utilize open time to Discover how your step each day. As small as open your mind. Sign up life can be enhanced these changes may seem, for a (non-insurance) semiyou will see big results. nar, preferably in resort and made much Soon, when you look back, locations. Personal growth more enjoyable by the change will be notably cannot only be painless, making simple drastic. but also a pleasure. Listen adjustments. Start Oak & Associates is here to audio books (CDs, tapes to help guide your agency or iPods), while driving for now to design your to reach its full potential. maximum use of your time. use of time, now and We are offering agency in the future. owners and managers a Summary free half-hour consultation Discover how your life on issues impacting you and your agency. Give can be enhanced and made much more enjoyus a call today for your success for tomorrow! IJ able by making the simple adjustments outlined in this article. Don’t worry about the past because it’s gone. Start now to design your use Schoeffler and Oak are partners at the consulting firm of Oak of time, now and in the future. & Associates. Phone: 707-935-6565, E-mail: bill@oakand Change to one’s habit or behavior is often dif- associates.com. Web site: www.oakandassociates.com.
February 9, 2009 INSURANCE JOURNAL-NATIONAL REGION | N23
Idea Exchange Carrier Watch
Insurers’ Stocks Down 14%; Middle Market Carriers Active in Intermediary Acquisitions Stock Price: Commercial lines stocks mirrored those of major indices in 2008, trading down 14 percent. Mergers & Acquisitions: Middle market carriers continue to be major players in the acquisition market as they look to wholesalers and managing general agencies (MGA) to add scale and distribution during the soft market. ProAssurance Corp. (NYSE:PRA) agreed to acquire Houston-based Mid-Continent General Agency Inc., an MGA that produces approximately $25 million a year in premiums from ancillary health care providers and other professional liability coverages. HCC Insurance Holdings Inc. (NYSE:HCC) also made two MGA/wholesaler acquisitions, picking up specialty divisions from Arrowhead General Insurance Agency and U.S. Risk Insurance Group Inc. Likewise, FCCI Mutual acquired Mississippi Insurance Managers. FCCI Mutual and Mississippi Insurance Managers jointly owned Brierfield Insurance Co. and as part of the transaction, FCCI acquired the remaining 20 percent of Brierfield. Also active in the carrier sector, the above mentioned HCC acquired Californiabased Surety Co. of the Pacific. HCC expects the acquisition to add $20 million of premium in 2009. ProAssurance Corp. also announced two carrier acquisitions during the quarter. The PICA Group will become part of ProAssurance through an all cash, sponsored demutualization. A provider of professional liability to doctors of podiatric medicine, the PICA Group insures approximately 9,800 podiatric physicians in 47 states and the District of Columbia. PICA also insures other health care professionals and provides errors and omissions liability insurance for a small, but growing, number of independent insurance agents through its PACO subsidiary. PICA wrote $99 million in premium in 2007, has $284 million in total assets, and has maintained an A.M. Best rating of “A-” (excellent) for the past 13 years. Earlier in the quarter ProAssurance announced it is expanding its legal profession-
al liability business by purchasing the Georgia Lawyers Insurance Co. ProAssurance is also establishing new relationships with agencies that produce legal professional liability business in 11 additional jurisdictions in the MidAtlantic and the West. These moves complement its existing $10 million book of legal professional liability business in the Midwest. GLIC insures approximately 2,700 lawyers in Georgia and had direct written premium of approximately $5.5 million in 2007. The fifth workers’ compensation transaction of 2008 was announced in October. Companion Property & Casualty Insurance Group announced that it has acquired all of the insurance and insurance-related service operations of AmFed Holding Co. Inc., the largest workers’ comp insurance and self-insurance administration company in Mississippi. The acquisition includes AmFed National Insurance Co. and AmFed Casualty Insurance Co., along with operating entities AmFed Cos. LLC and AmFed Insurance Services LLC. AmFed administers more than $75 million in annual premiums in Mississippi. In November, State Automobile Mutual
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Insurance Co. agreed to acquire Rockhill Insurance Group of Kansas City, Mo. With approximately $122 million in capital and surplus, Rockhill writes approximately $135 million in specialty property/casualty direct written premium through four insurance company subsidiaries. Key business segments include commercial property, general liability for residential construction, commercial umbrella and surety; a monoline workers’ compensation company, RTW; and Absentia, a third party administrator providing workers’ compensation claim and loss control services. Rockhill writes business on a non-admitted basis in 49 states and the District of Columbia and is licensed on an admitted basis in 42 states and the District of Columbia. Rockhill was started in November 2005 with $145 million in capital from private equity investors. IJ LMC Capital LLC is a national investment banking firm focused exclusively on the insurance industry. Services include qualified, industry-specific advisory relating to mergers and acquisitions, capital raises and valuations. Phone: 704-943-2600. E-mail Info@LMCCapital.com. Web site: www.LMCCapital.com. www.insurancejournal.com
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South Central Coverage News & Markets
Start-Up Stories: How New Agencies Are Competing A Crop of Agency Start-Ups Are Defying Hard Economy, Soft Market
he independent insurance agency system is enjoying a resurgence. For years, the number of agencies in the United States had been declining but that trend, while not reversed, has been halted. In 2008 there were 37,500 independent agencies — the same as in 2006 — according to the “2008 Future One Agency Universe Study” sponsored by the Independent Insurance Agents and Brokers of America, Trusted Choice and several carriers. The study attributes the stabilization to two key trends: fewer mergers among larger agencies and a new phenomenon of more start-up agencies. Eleven percent of the agencies involved in the study were founded after 2004, and about 4 percent as recently as 2007 and 2008. Insurance Journal found that many of these agencies may be small, for now, but all have big plans. New York: Marsh & McLennan Agency New York-based global insurance broker Marsh, accustomed to handling large accounts, announced in October 2008 that it is launching a separate retail agency to go after a share of the $80 billion in premium paid by smaller and emerging growth companies. Marsh & McLennan Agency LLC will be hiring producers as it opens in select cities in the first quarter of 2009. Jack Butcher, president and CEO of the new venture, said the retail agency will conduct its business separately from Marsh’s insurance brokerage operations, although the launch is part of Marsh’s overall growth strategy. The
target market will be small business and emerging growth companies, which Butcher considers to be firms with revenues from about $75 million down to $50 million or less. Butcher has specific cities in mind where he wants to launch the new operation but isn’t going public with that information yet. He said Marsh will “almost certainly” be looking to hire producers to staff these locations, in addition to using current employees. It also will be acquiring agencies. Marsh named David L. Eslick chairman of the new agency. He previously was chairman, president and CEO of USI Holdings, where he negotiated more than 50 acquisitions over five years. Texas: Bridge Insurance Partners Jeff Turner had long harbored ideas on how to operate an independent insurance agency in a way that would create opportunities for producers. So when he and his business partners Tommy Saxon and Ryan Perry opened the doors to Bridge Insurance Partners in Dallas a little more than a year ago, they immediately put those ideas to work. The ideas are paying off. Within a year they have grown the business they bought from their previous employer, Ft. Worth-based Higginbotham and Associates, by more than 100 percent. Lifelong friends, Turner and Saxon held leadership positions in Higginbotham’s Dallas branch office
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in late 2007 when they negotiated to buy their book of business from that firm. Perry, who Turner described as “a very effective salesperson,” joined them from Sleeper Sewell Insurance Services, also headquartered in Dallas. Although there have been challenges, Turner and his partners believe they are well-positioned going into 2009 and beyond. While the agency is a “generalist to some degree,” the firm is targeting a half-dozen industries that fall within the expertise of the principals, producers and their carrier partners. The areas of concentration include health care, with an emphasis on medical malpractice or professional liability for surgery centers, hospitals and other provider organizations; real estate; private equity; manufacturing and wholesale distribution; life sciences; and certain types of construction accounts. Bridge was financed without much difficulty. “We really had no problems raising money,” Turner said. Between a bank and investments from three clients, Bridge was able to secure working capital for the first 15 continued on page 38
Profile of New Agencies 11% 4% 33% 20% 11% 10% 10% 48% 41% 80% 47
founded since 2004 founded in 2007 and 2008 in South Atlantic states in West South Central states in Mountain region states in East North Central states in West North central states of revenues from personal lines commissions from commercial lines commissions grew between 2006 and 2007 at an average of 55 percent is average age of principal (compared to 52 for all agencies)
Source: 2008 Future One Agency Universe Study sponsored by the Independent Insurance Agents and Brokers of America, Trusted Choice and several carriers. www.insurancejournal.com
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South Central Coverage News & Markets Start-Up Stories, continued from page 36
months of operations. The partners also were successful in securing carriers. “We feel really fortunate that every carrier we approached said ‘yes,’” Turner said. “We were really specific with the carriers we chose. Our focus was — can we be faithful to these carriers that we perceive as
our partners? … Our thought was we don’t want everybody, but carriers that we know we can be faithful to and give a lot of business to. That approach worked really well.” While Bridge Insurance Partners’ focus is strictly property and casualty, the partners have formed an alliance with a financial serv-
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ices organization that provides group benefits, employee benefits and other kinds of financial services products. The team builds relationships by taking advantage of “centers of influence” and pursuing an active introduction process with existing clients and those in the agency’s areas of concentration. “While our producers are active working on gaining introductions and meeting with centers of influence and going through this introduction process, business development is always going on behind the scenes,” Turner said. For instance, if the group is Jeff Turner conducting a campaign geared toward the private equity sector, there will be “a series of multiple touches on that industry class. We’ve identified prospects that we think we’re a fit for and can serve well. … So we will send them a letter or some kind of mailer piece, and then we’ll follow up with a phone call to try and initiate a meeting. ... Then there will be another follow up; and there might be an event associated with a particular campaign.” For an upcoming event, Bridge is partnering with Chubb to host a breakfast for private equity enterprises. A specialist from Chubb will speak on directors and officers and professional liability exposures in light of the current credit environment. The economic downturn that began in 2008 has not yet hurt business, but it could affect the agency and its clients going forward, Turner said. “It has the potential to slow expansion,” he said. “We’re aware that the lending environment is definitely different. … I would say more than anything that the effect of the economic downturn is that we’re being really more cautious in evaluating opportunities.” Nevada: Trenchant Insurance At first glance, it seems like Gina Russo’s newly formed Las Vegas agency, Trenchant Insurance Co., has three strikes against it. First, Russo is a woman operating in a maledominated industry. Second, she’s only 27 years old and has eight years of insurance industry experience. Third, as the mother of continued on page 40
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This Inter Juan Insur
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Idea Exchange Managing an Agency in a Troubled Economy
Systematic Sales Strategy Should Be Priority No. 2 for Agency Managers Andrade
n this hard economy coupled with the soft market, most agencies expect sales and revenues to go down. Even the best performers feel the downward trends in premiums. According to Juan Andrade, executive vice-president for sales and distribution at The Hartford, who oversees his company’s agency management consulting arm, Business Management Group, customer retention should be an agency’s first priority when managing in a troubled economy (see Jan. 26, 2009 edition of Insurance Journal). As critical as it is, customer retention alone may not be enough. Andrade’s priority number 2 for managing an agency in these troubled times is following a systematic sales strategy. Insurance Journal’s Andrew Simpson asked Andrade for advice for agencies that would lead to growth even in today’s market. You advise agencies to take a systematic approach to sales. What does that mean? Andrade: I think this is a strategy that is time tested. It works for the hard market as well as the soft market. And you know at the end of the day we are all sales people. And so what we’ve got to keep our focus on really is number one, on the pipeline; and on ensuring that we have the right people within our organization, bringing in accounts, building that pipeline et cetera, executing on that vision. This is not a strategy that we can afford to employ only in a hard market or a soft cycle. I think this is Video something that This is the second installment we’ve got to conin an Insurance Journal tinue doing at all Interview with The Hartford’s times within our Juan Andrade. View the entire market cycles Insurance Journal video series, and within the Managing an Agency in a economy basicalTroubled Economy, at ly. The focus on www.insurancejournal.tv. the pipeline is very critical, the www.insurancejournal.com
focus on working accounts that you already have, working on cross-sell. By that what I mean is really getting leads from accounts that you already own within the agency. So if you are thinking about going into a particular industry vertical or a particular segment that you may not have been in, for example healthcare, and you may already have a couple of accounts in that area, go talk to your contacts, to your relationships in these areas and find out who else they would recommend, what other areas might be that we are not looking at, etcetera. I think the whole science of selling becomes very important and that discipline is critical, particularly to surviving a soft cycle. Is this a good time for agents to consider entering new markets, new states or adding products? Andrade: I think it is a wonderful time to be looking at diversification, particularly given that the cycle has really impacted, particularly, more of the commercial lines of insurance than anything else. Certainly, you wouldn’t want to minimize it and personalize it. We are seeing that across the board. But I think if you are a commercial specific, quality agent you have been particularly affected by this. I think diversifying is wise to do anyway. We are seeing a lot of our agents and brokers do that. We are looking at different industry verticals, different niches of the economy. So there are pockets there. There are infinities. There are different programs that we can be involved in. As a whole, it does make sense to diversify. Are there pockets of the economy that you think are worth an agent looking at now? Andrade: Absolutely. Even though we are living in unprecedented times, we are seeing things in the economy that we never thought we would see in our lifetimes, there are still areas that are very vibrant. I would say healthcare is
one. Energy is another one, particularly as you start looking at green energy, alternative energy areas. I think these are areas where you are starting to see smaller businesses make a lot more investment, and they are still growing. I think those are places that I would be looking at. Areas like construction, depending on what part of the country you’re in, are probably either good or bad, depending This is a wonderful on what part of time to be looking the economic at diversification cycle you happen There are still to be in. There is such a substantial areas that are very vibrant. Healthcare amount of our GDP in the econo- is one. Energy is another one. my that is tied to construction. That’s still an area to look at, depending, again, on the specific area of the country. I would say from what I have seen in my experience, health care, energy, those are very good places to be looking at right now. What do you think is a realistic goal for new sales in this economy for an agency? Andrade: That’s a tough question because I think it really does depend on where you are geographically in the country and in the segments that you’re in. If I were owning an agency these days, from a revenue perspective I would feel probably OK about being flat with total written premium at this point in time, with a big focus on retention in trying to grow new business in whatever areas I could. I think if I was in the mid-single digits I would be feeling pretty good about myself. If you, obviously, have reached the double digits, you would feel real good about it. It all depends, too, on where you are. Some agencies have had more of a focus on retention than new business. I would say flat to single digits probably could be a good place to be, given market conditions. IJ
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C South Central Coverage News & Markets
Start-Up Stories, continued from page 38
a nine-month-old baby, she’s juggling the demands of running a business and being a parent. But Russo is proving that she has the gumption, authority and knowledge to run an insurance agency. Trenchant Insurance Co. opened in Las Vegas in October 2008. Catering primarily to
clients in Clark County, Nev., the agency relies on its contracts with American International Group (AIG), Colorado Casualty, The Hartford, Mercury Insurance, Safeco and other carriers to place risks. Russo, a native Las Vegan, said building her business in the city was a natural pro-
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gression. She attended the University of Nevada, Las Vegas, and started in the insurance field in that city in 2000. For three years, she worked for a captive insurance company, and then she transitioned to the independent channel, working for another agency that was owned by someone else, but where she acted as the agency manager. “Even though I didn’t technically own the business, I always felt like it was my baby,” Russo said. That gave her the impetus to start her own Gina Russo agency. She received a business start-up grant from the Moms in Business Network and ‘I love being an secured financing independent from Oak Street Funding, which agent because I specializes in can offer insurance agencies and commission options.’ redirection finance loans. Trenchant Insurance is specializing in home, auto, life, health and flood insurance for residential and commercial clients, as well as handling business insurance and bonds. “I have had circumstances inside and outside of my office where people have questions about my authority and knowledge,” Russo said. “But with my overall performance and through education, people gain confidence in my skills. I do a good job and do it well. So when the whole experience is complete, customers can see the job I’ve done, my level of expertise and professionalism, know that I’ve explained coverage well, and leave with the experience that I’ve done a good job.” Of course, running an independent agency has its challenges. Any agency owner must continually learn new technology and systems and set new goals. “Technology helps keeps processes streamlined for myself and my customers,” she said. She also is focusing on customer retention and marketing, including a customer newsletter, Web site and blog. “I love being an independent agent because I can offer options. Working with me allows the consumer to have access to multiple companies through one source,” Russo said. IJ www.insurancejournal.com
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South Central Coverage Business Moves Sun Belt, Higginbotham & Associates Sun Belt Insurance & Associates Inc., a Waco, Texas-based commercial and personal insurance and group benefits brokerage firm, and Ft. Worth, Texas-based Higginbotham & Associates Inc., a national insurance and financial services firm, joined forces. Established in 1988 in Waco, Sun Belt is one of the largest insurance brokerage firms in Central Texas and is under the leadership of Mike Simon, Ben Perry, Gary Carter, David Bell, Jack Henry and Gary Henry. The firm specializes in commercial property and liability insurance, bonds, employee benefits and individual life and health. Sun Belt is retaining its 16person staff. Higginbotham’s Waco office, which practices employee benefits and was established in 2006 under the leadership of benefits broker Cindy Brown, will move into Sun Belt’s office. Higginbotham previously announced it is aggressively expanding operations throughout Texas by joining forces with insurance firms that have strong footholds in their local markets. Within the past year, Higginbotham expanded into Houston, Wichita Falls, Henrietta and Granbury via partner firms in addition to Sun Belt. U.S. Risk Insurance Group Dallas-based managing general agency and surplus lines wholesaler, U.S. Risk Insurance Group Inc., rolled out a new online platform through which agents can rate, quote and bind a policy. According to the company’s announcement, through QUOTE-NOW agents may access real time indications and quotes. By completing a short indication request, an agent can get an immediate indication. If the indication is attractive, the agent completes the online application. If the application is accepted, a real time, bindable quote is delivered; the quote can be bound and the policy printed. QUOTE-NOW is available for miscellaneous healthcare, insurance agents and VOCAL, a workers’ compensation substitute for live entertainment venues. It will soon be available for home inspectors, medical tourism and assisted living under 30 beds, the company said. 42 | INSURANCE JOURNAL-SOUTH CENTRAL REGION February 9, 2009
Texas Security General, Emerald Surplus San Antonio-based Texas Security General Insurance Agency Inc. (TSGA) acquired the stock of Emerald Surplus Inc. and is transitioning all business to TSGA, the company announced. All contracts signed by insurance producers with Emerald Surplus were assigned to TSGA, and all future payments and deposits should be made payable to TSGA. In the announcement TSGA noted that correspondence and payments for accounts transitioned to TSGA should be addressed to: Texas Security General Insurance Agency Inc., 18545 Sigma Road Suite 101, San Antonio, Texas 78258; www.texassecuritygeneral. com. HCC, VMGU Insurance Agency, Surety Company of the Pacific HCC Insurance Holdings Inc., based in Houston, acquired two specialty insurance organizations: VMGU Insurance Agency and Surety Company of the Pacific (SCP). VMGU underwrites lumber, building materials, forest products and woodworking industries. Headquartered in Waltham, Mass., VMGU underwrites lumber and wood products, and operates on a national basis in all 50 states. VMGU is headed by President Richard D. Hayes, who will remain with the operation. VMGU, which is expected to write approximately $20 million in gross written premium in 2009, will become part of Professional Indemnity Agency, an HCC subsidiary. SCP, which writes license and permit bonds, is headquartered in Encino, Calif. The transaction is subject to approval of the California Department of Insurance and is expected to close during the first quarter of 2009. Founded in 1969, SCP specializes in license and permit bonds for California contractors. SCP will be merged with American Contractors Indemnity Co., an HCC subsidiary rated “A” (Excellent) by A.M. Best Co. The merger is expected to add approximately $20 million of premium to ACIC in 2009. IJ www.insurancejournal.com
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Idea Exchange Closing Quote
5 Risk Management Challenges for Public Entities in Todayâ€™s Economy By Mary Stewart
ocal governments increased their commitment to risk management over the past decade, as they met the challenges posed by several major natural disaster and terrorism events. Better local government loss prevention, crisis management and risk communication resulted. We now face a more prolonged, national disaster: a major economic downturn. This latest disaster threatens to erode, rather than strengthen, local government risk management. Risk management must demonstrate its centrality to the governmentâ€™s mission and find ways to succeed with fewer resources. A key attribute of a strong risk management program is vision; the ability to anticipate and address emerging risk prior to a critical event. The following are a few difficult risk issues that public sector should think about in the coming year: 1. Increased Demand for Services. One predictable outcome of an economic downturn is increased criminal activity. Another is an increased need for social services. The government must evaluate whether it has sufficient capacity to handle the increased responsibility. Are the courts able to handle an increase in their case load? Will sheriffs and police officers become more involved in noncore activities, such as foreclosures/evictions or increased domestic disturbances? Can the jails accommodate an increase in population? Will non-sworn personnel (police aides, volunteers) be used Public risk to enforce codes/laws? managers Will unmarked cars be used to transport arrested persons and on have faced disasters; other official business, due to a now they lack of marked police cruisers? face another Do social services agencies have one: a major the resources to provide added economic assistance to families in trouble?
2. Privacy Concerns. As local law enforcement agencies work with Homeland Security to protect against terrorist attacks, there may be more claims alleging breach of privacy. Have law enforcement policies been updated to reflect privacy issues under federal/state laws? Has the agency created spewww.insurancejournal.com
cial units to handle cyber crimes and to protect information related to those crimes? 3. Using Technology to Address Risk Issues. Technology is an important tool for addressing many societal risk issues, including disasters, dwindling natural resources, and homeland security. But it must be used with care to avoid negative consequences. Will government be liable if the technology fails to achieve its purpose or causes damage? Will technology providers require liability protection in exchange for participation in efforts to manage societal risk? (Examples are telecommunications and vaccine providers.) 4. Public Health Emergencies. Local governments are closely involved in managing public health emergencies, such as pandemic illness or bioterrorism. They must know in advance the extent of their legal authority to quarantine individuals, close schools and public gathering places, shut down transportation, and take other steps to reduce the spread of communicable illness. To the extent possible, plans should be shared in advance with all government employees. Will mandatory quarantines or business closures result in lawsuits? How will emergency responders be protected from infection? Will the government be responsible for the safety and actions of volunteers who assist with care of the ill? How will the jail manage a pandemic that threatens the incarcerated population? 5. Benchmarking and Performance Measurement. Benchmarking and performance measurement help risk management demonstrate its value by providing quantitative evidence to support its priorities, decisions, programs and results. Share documents, procedures and ideas with other governments to promote better performance. Use cost/benefit analysis and measurements to identify areas with high frequencies or severe claims. Maintain regular communication with a group of governments (peer group) that are similar to your organization. Join PERIâ€™s Data Exchange to gain state/ national comparison. Stewart is director of research and development, Public Entity Risk Institute PERI), Fairfax, Virginia, www.peri.org. February 9, 2009 INSURANCE JOURNAL-SOUTH CENTRAL REGION | 43
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