Insurance Journal

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FUGATE TO FEMA Florida’s Disaster Pro

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MED MALPRACTICE MAGIC South Carolina’s Reform

CONSUMER VOICES SPEAK OUT Credit Scoring and More

Inside This Issue March 23, 2009 • Vol. 87, No. 6 • Southeast Region

DEPARTMENTS

SOUTHEAST 6

| South Carolina’s 2005 Reforms Reducing Medical Damage Amounts Now Republicans Want to Cap Damages for Small Businesses

6

| Sink-ing Feeling: Florida Still Searching for Hurricane Exposure Answer State CFO Says It’s Time For the State to Start Making ‘Smart Decisions’

8

| State Farm Balks at Florida Withdrawal Conditions Seeks Modifications on Commissioner McCarty’s Exit Requirements

8

| Squires To Run for Georgia Insurance Commissioner Post Lobbyist, Former Democratic Lawmaker First to Announce in Race

48 CREDIT SCORES FALL As Credit Scores Fall, Criticism of Credit Scoring Rises Consumer Advocates Worry How Insurers Treat Buyers in Today’s Economy

8

NATIONAL COVERAGE N1 | Commercial Lines Pricing Drops 3% in Q4 Towers Perrin Survey Finds Price Stabilization N1 | General Liability Losses, Expenses to Rise Profitable Underwriting Performance Not Likely N1 | National Flood Insurance Program Gets Short-Term Extension Expires September 2009; Industry Seeks Reform N2 | Special Report: HOT Markets and Programs Hot Prospects, and Markets, Come in Unusual Packages N6 | International Report Sports Terrorism, ‘Names,’ Tongues and Mergers N7 | Special Report: GREEN Risks Hybrid Boats and Coverage N12 | Special Report: GREEN Risks Greener Opportunities: Insurers Compete for a Growing Green Industry N16 | Special Report: HOT Markets and Programs Fastest Growing Industries to Focus On

| Mississippi Warns Against StormDamaged Cottages Urges Buyers Beware of Louisiana Auction

52 N10 2 12

Business Moves MyNewMarkets Opening Note People

6 Sink-ing Feeling CFO Pushes for Florida Hurricane Solution

10 | Obama Grabs Florida’s Fugate to Head FEMA Steered State Through Disasters; Now He’s Ready for Washington 48 | As Credit Scores Fall, Criticism of Credit Scoring Rises Consumer Advocates Worry How Insurers Treat Buyers in Today’s Economy 49 | How Consumer Reps Feel About Internet, Agents, Regulation More Views From NAIC’s 2009 Consumer Liaisons

51 Why Agents Should Heed Stimulus Plan Opportunities In New Projects and Directions

50 | States Got $12 Billion Out Of AIG Bailout Funds AIGFP Made Good on States’ Guaranteed Investment Agreements

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

2 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

10 Fugate to FEMA State Disaster Chief Going to Washington

www.insurancejournal.com

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

Looking Up

EDITORIAL

A

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

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

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

America has had no shortage of challenges.

Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow ‘America’s best Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which days lie ahead.’ humans secured only tiny gains, if any, in how they lived.

Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.”

Warren Buffett in his annual letter to Berkshire Hathaway shareholders.

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

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

Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content/ and Interim Midwest/Southeast Editor Andrew Simpson | asimpson@insurancejournal.com East Editor Kenneth J. St. Onge | kstonge@insurancejournal.com South Central Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Patricia-Anne Tom | ptom@insurancejournal.com MyNewMarkets Associate Editor Chris Boggs | cboggs@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Columnists Alan Shulman Contributing Writers Stephen Bushnell, Chantal Cyr, Mitch Dunford, Brendan Farrington, Brent Kallestad

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

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

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

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

A D M I N I ST R AT I O N Accounting Manager Megan Sinclair | msinclair@insurancejournal.com Admin./ Marketing Asst.

Kristina Delavega | kdelavega@insurancejournal.com Cover designed by: Guy Boccia

Andrew Simpson Southeast/Midwest Editor asimpson@insurancejournal.com

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio 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

4 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

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Southeast Coverage News & Markets

South Carolina’s 2005 Reform Reducing Claims Against Doctors

F

times the actual damages or ewer lawsuits are being filed $250,000, whichever is greater. against South Carolina doctors “The trendline before were sigsince a state law limiting damages nificant double-digit increases,’’ went into effect in 2005. said Timothy Ward of Marsh USA An insurance executive told a Inc. runs the South Carolina state Senate panel that patient Medical claims are down about Malpractice a third and premium Patient claims are Liability Insurance increases have dwindown about a third Joint Underwriting dled to about 3 percent and premium since the state increases have been Association. Ward said his estimates imposed limits on non- minimal. are preliminary. economic damages.

“There are many variables that Now a Republican-backed go into play,’’ Ward said. “But this is Senate bill would attempt to very suggestive and it does supbroaden that by imposing a port the hypothesis that the $250,000 punitive damage cap for reform is having an impact.’’ other small businesses. Businesses Ward said more insurance carriwith more than 50 employees ers are willing to write policies in would face no more than three

South Carolina, a sign of competition that’s been absent for years.

Sen. Larry Martin, R-Pickens, the bill’s chief sponsor, said it’s important to have the legislation in place as the economy turns around so the state will be more competitive as businesses look for places to expand.

“Those data are extremely positive,’’ particularly with more competition to write policies and keep prices in check, said Martin.

“That’s what happens when you have a competitive market. They do compete and get better.’’

But others cautioned that Ward’s numbers don’t tell the whole story.

The 2005 law required arbitration and other measures to reduce lawsuits. Trial lawyers argued the limits harm people who are hurt and do little to discourage firms from putting people at risk.

“They’re not changing the pot of damages,’’ said Terry Richardson, a Barnwell lawyer.

Punitive awards force companies to operate more care and “reduce the number of injuries which really and truly is the only way you save money.’’ IJ Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Sink-ing Feeling: Florida Still Searching for Fix for Hurricane Exposure “It’s time to start making smart decisions and enacting solutions, lorida lawmakers need to make so that Florida will be less finansome smart decisions on reduc- cially exposed when a major storm hits,’’ Sink said. “We must establish ing the risk to Florida property a long-term, strategic owners from hurrivision for addressing canes, the state’s chief hurricane risk.’’ financial officer said.

A satisfactory soluIn a letter to legislation has been elusive tive leaders, CFO Alex for lawmakers and regSink said property ulators alike the past owners cannot afford four years. shocks to their homeA spokesman for owners insurance rates Insurance like those that came after several hurricanes Florida CFO Alex Sink Commissioner Kevin McCarty said he suphit the state in 2004 ports “viable solutions that will and 2005. further his efforts during these difShe recommended the ficult economic times.’’

Legislature authorize the Cabinet Sink said the $28 billion expoto shop for reinsurance in the fall instead of the spring to take advan- sure to the Florida Hurricane Catastrophe Fund should be incretage of more favorable market conmentally cut back and that the ditions. She also asked lawmakers state-backed Citizens Insurance to continue a $20 million program that insures more than one million that helps citizens with improvehomes at below-market rates ments that make their homes less should be an insurer of last resort. susceptible to wind damage.

By Brent Kallestad

F

6 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

“A glide path on Citizens’ rates came just days after the State to appropriate levels will help to Board of Administration, where bring national insurance compashe is one of three members, heard nies back to the Florida market proposals on possible avenues for and begin the process of lowering reducing the state’s exposure. premiums to consumers,’’ said In a move that could create Barney Bishop, president of some political room, Gov. Charlie Associated Industries of Florida.

Crist said he’s not opposed to let“We need desperately to reduce ting Citizens Insurance raise its the ‘cat’ fund.’’ rates, as long as they aren’t raised “Florida’s hurricane risk repretoo much. sents one of the largest catastrophCitizens’ rates have been frozen ic risk exposures in the world,’’ Sink agreed.

‘We must establish a longState Farm, the state’s term, strategic vision for largest private property insurer, is shutting down addressing hurricane risk.’ its property business here because it could not guarantee the solvency of its Florida for three years but are scheduled operation. The Illinois-based com- to increase in early 2010 unless pany and others have been at odds state lawmakers intervene. The with regulators in recent years hurricane season begins June 1. IJ over requests for rate increases.

However, more than three dozen Copyright 2009 Associated Press. All new companies have formed to rights reserved. This material may not pick up some of the slack. be published, broadcast, rewritten or The CFO’s recommendations redistributed. www.insurancejournal.com

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Insurance products are issued and underwritten by one of Universal North America’s insurance companies: Universal North America Insurance Company or Universal Insurance Company of North America. Issuance of coverage is subject to underwriting review and approval. Products may not be available in all states.

Southeast Coverage Snapshot

State Farm Balks at Florida Withdrawal Conditions S tate Farm Florida has appealed stipulations that Insurance Commissioner Kevin McCarty has put on its plan to withdraw from the state’s property insurance market.

Florida’s second largest insurer of homes and other property filed an administrative appeal that argues McCarty exceeded his legal authority by setting the conditions on the two-year phase-out plan.

The conditions include a requirement that State Farm Florida transition its homeowner

policies — about 800,000 — to other private companies but not to the statecreated Citizens Property Insurance Co. Other conditions would allow State Farm agents to write policies with other companies and make State Farm Florida give up its state license within 30 days of the withdrawal

plan’s approval.

“We will carefully review that petition to make sure that it clearly outlines all disputed issues of material facts and meets legal sufficiency requirements,’’ said McCarty spokesman Ed Domansky.

McCarty has until this week to complete his review. If the petition doesn’t meet those crite-

ria he can order State Farm Florida to resubmit it. Once approved, the appeal would go to an administrative law judge for a hearing.

State Farm contends that state law doesn’t give McCarty the power to prohibit any insurer from making a business decision to stop operating in Florida and that allowing agents to write policies for companies, with the exception of Citizens, would violate the exclusivity provision of their contracts with State Farm Florida. IJ

Lobbyist, Former Democratic Lawmaker Squires to Run for Georgia Insurance Post

Mississippi Warns Against Buying Damaged Cottages in Louisiana Auction

M

ary Squires, a former Democratic state lawmaker who now lobbies for the selfinsurance industry, is running to be Georgia’s next insurance commissioner.

Squires is the first candidate to enter the race to succeed John Oxendine, the Republican incumbent who is running for governor.

for the Atlanta-based Georgia Society of Professional Benefit Administrators, Inc., a public affairs trade association for corporations that self-insure their employee benefits.

Squires also serves as the director and chief executive officer of the Olive Industry Association, a national agriculture research and trade association.

T

State Politics Squires was elected to the Georgia General Assembly in 1998.

Mary Squires She served tw o terms in the House (1999-2003) and one term in the Senate (2003-2005).

In addition to serving as a legislator, Squires served 10 years in the Georgia Army National Guard.

Quality of Life “I am excited to be the first candidate in the race for Insurance Commissioner. It is a very important position. The Insurance Commissioner impacts the quality of life for every day Georgians more than any other race in 2010,” she said in her announcement.

The insurance commissioner also serves as the state’s safety fire commissioner.

Oxendine was first elected to the post in 1994; he was re-elected in 1998, 2002 and 2006.

The election is Nov. 2, 2010. IJ

Self-Insurance Industry Squires currently is the executive director and chief lobbyist

8 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

he Mississippi Emergency Management Agency is discouraging people from purchasing Mississippi cottages for housing at an auction in Louisiana next month because the units were damaged by Hurricanes Gustav and Ike. MEMA Director Mike Womack cautioned potential buyers that these units are not safe to live in. “Buyers need to beware,” Womack said of the Gustav damaged units. “These units are not safe for housing because of water damage and mold, which can be dangerous to a person’s health. The damage might not be readily visible to onlookers or potential buyers.”

Two weeks ago, MEMA transferred titles of 232 Gustav damaged units to Louisiana-based Henderson Auctions. All titles were stamped as “salvage.” The units were condemned by insurance company adjusters because of water damage and likelihood of hazardous mold and mildew.

The two and three bedroom units no longer bear a U.S. Department of Housing and Urban Development inspection label since they are not considered fit for human habitation.

Also, the RV Association inspection labels, RPTIA, for the one bedroom park models were removed for the same reason.

Henderson intends to auction off the units in Louisiana in April. The auction company attempted to hold an auction in Mississippi in January. That auction was called off because the state had not yet received payment from the insurance company, according to officials. IJ

www.insurancejournal.com

It Figures

Declarations Bankruptcy No Barrier

30,000 The number of Florida homeowners who could end up as part of a class action suit against German drywall maker Knauf Gips KG and other manufacturers of Chinese drywall. The plaintiffs allege that the plasterboard is contaminated and is sickening U.S. homeowners. The suit was filed in federal court in Miami as a class-action and claims that up to 60,000 American homes could be affected. The U.S. Consumer Product Safety Commission is investigating complaints that Chinese-made drywall emits odors and causes appliance problems in homes.

9,000 The number of citations handed out to teen drivers by North Carolina Highway Patrol troopers during a campaign aimed at reducing the number of traffic accidents involving teenagers. Thirty-one drivers under age 21 were cited for driving while intoxicated, and more than 3,000 speeding violations were issued during Operation Drive to Live 2009.

Troopers also issued 1,623 citations for seat belt violations, 35 drug violations and 13 citations for passing stopped school buses. Traffic collisions are the leading cause of teenage deaths in the state and nationally.

10 The number of stolen cars a new camera system that can check license plates in an instant has helped recover, according to the police chief in North Charleston, South Carolina. Chief Jon Zumalt said that the portable Automated License Plate Recognition System also recovered 14 stolen license plates since the city bought it for $24,000 in May.

$18 Million The amount in policyholder refunds being paid by West Virginia’s BrickStreet Mutual Insurance Co. due to previous errors in its underwriting and rating rules. West Virginia Insurance Commissioner Jane L. Cline has ordered the insurer to refund the monies to more than 6,000 policyholders. The refunds include $3 million to approximately 300 state and local government entities.

$175,000 The salary plus director’s fees earned

by Warren Buffett, chairman and chief executive of the Omaha, Neb.-based company. It’s the same amount he received a year earlier. ® Reuters 2009

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“It occurs to me that you’ve structured your affairs so that your creditors would have great difficulty in reaching into your income as a doctor.”

— U.S. Bankruptcy Judge Thomas Bennett in ruling that former West Virginia physician John A. King misled the court and his creditors by filing bankruptcy papers with major omissions, including at least $670,000 in income. King will not be able to use his Chapter 7 bankruptcy filing to block payments in the more than 120 malpractice cases brought against him.

Taylor-Made Coverage “As we found out after Katrina and our fellow Texans are finding out now after Ike and Gustav, short of home and business owners hiring lawyers and engineers to take their carriers to court, insurance companies routinely and deliberately fail to pay on legitimate hurricane-related wind claims. No one should have to go through this. It isn’t fair to American homeowners and it must end.”

— Rep. Gene Taylor, D.-Miss., in re-filing his legislation to make wind coverage available through the federal flood insurance program.

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

— Rebecca Wodder, president of American Rivers, a nonprofit that works to protect waterways, explaining her group’s opposition to Taylor’s legislation to expand the feeral flood program.

Under-Mining Safety “It this were to pass, it would be signing the death warrants of hundreds of coal miners across this state. If they get away with this, God help the Kentucky coal miners.’’

— United Mine Workers of America representative Steve Earle criticizing three measures pending in the Kentucky legislature he said would undo key provisions of the state’s mine safety law. One would sharply reduce state mine inspections. Another would cut the number of medics at small mines.

And the other would strike a provision that requires ventilation fans to run continuously in underground mines to prevent the buildup of explosive gases.

Safer Kentucky Derby “We think we’ve always had one of the safest racetracks in the country, but we think these initiatives will make us even safer.’’

— Jim Gates, general manager at Churchill Downs racetrack, which is beefing up safety ahead of this year’s Kentucky Derby. The company is enacting more than 20 changes, ranging from enhanced drug testing to limits on whips and racing ages, in time for the start of the spring meet. The filly Eight Belles finished second in last year’s Derby, only to pull up lame as she jogged past the finish line. An autopsy showed compound fractures in both front legs, and the horse had to be euthanized on the track.

March 23, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 9

Southeast Coverage News & Markets

Obama Grabs Florida’s Fugate to Head FEMA

By Brendan Farrington

F

lorida emergency manager Craig Fugate would bring a lot with him if he takes over the Federal Emergency Management Agency: plenty of hurricane experience, a blunt style, and a belief that preparation begins on the local level.

Former Gov. Jeb Bush, the Republican who appointed Fugate to lead Florida’s disaster response, says he is comforted by Democratic President Barack Obama’s choice to run FEMA. It’s a feeling that’s shared by just about anybody who’s ever worked with Fugate, including David Paulison, who resigned as FEMA administrator when Obama took office.

Paulison was appointed by President George W. Bush after the agency and its head, Michael Brown, were widely criticized for the response to Hurricane Katrina in 2005. Before that, he was the Miami-Dade County fire chief, where he often worked with Fugate, whose Senate confirmation is pending.

“Craig is absolutely the right person for this job. I can’t think of another person around the coun-

try who has more disaster experience than Craig: floods, wildfires, hurricanes, tornadoes,’’ Paulison said. “And he just does an absolutely outstanding job. He’s proven himself in Florida and Florida sets the standard.’’

Fugate, 49, grew up in Alachua County, the north-central Florida county that’s home to the University of Florida. He served as a volunteer firefighter, paramedic, a lieutenant with the county fire department and spent 10 years as Alachua’s emergency management director before moving to Tallahassee and working for the Division of Emergency Management.

After four years serving as chief of the Division’s Bureau of Preparedness and Response, Fugate took over the Division in 2001. Fugate, a Democrat, was one of only two agency heads directly appointed by the governor that Republican Charlie Crist kept in place after Bush left office.

While Florida already had plans in place to deal with terrorism, after Sept. 11 Fugate helped organize the state’s security task forces.

He also dealt with tornadoes and tropical storms during the first two years after taking over the emergency management agency.

His major test came in 2004, when an unprecedented four hurricanes hit Florida in one season.

Charley, Frances, Ivan and Jeanne caused an estimated $42 billion in damage, killing 117 people in Florida and destroying more than 25,000 homes. But supplies reached the affected areas quickly and the state was praised for its response.

10 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

describe his fondness for straight One local emergency officials talk. recalled Fugate’s response when “He’s no nonsense and he gets to Charley, the strongest of the four, the point and I really like that came ashore on Aug. 13 as a about him,’’ Mayfield said. “He cut Category 4 storm. to the chase, and gave the bottom “First light on Saturday mornline and didn’t mince words.’’ ing, Aug. 14, 2004, he was at my But at the same time they credit backdoor with the state mobile command post. That’s pretty good him with creating a smooth line of communication and cooperation response. He got that thing down among local, state and federal here from Tallahassee and he was agencies. with it, he didn’t send somebody “He would walk through every else,’’ said Wayne Sallade, Charlotte county, ‘OK, what are you doing?

County’s emergency management What are your gaps? What do you director. “That onsite leadership need? What can we do to help?’ and being right there on the That team building type of thing, ground with us spoke volumes. It showed us that he wasn’t going to that is his style,’’ Paulison said. try to manage the thing from afar.’’ “When we had the four hurricanes in Florida, a lot of people would The next year Florida was hit have come apart at by another four the seams with hurricanes, and everything happeneach time, Fugate ing. And he had a tried to improve very calm, deliberate on response. He manner.’’ also tried to beat Bush also into the heads of hopes Fugate brings Floridians that some University of they needed to be ® Reuters 2009 Florida Gator prepared: It wasn’t pride to just the state’s Washington. responsibility help His major test had this after the fact. came in 2004, really“He funky Gator “The media beach towel that would often ask when an seemed to Craig if he unprecedented always show up after a thought the state was ready for the four hurricanes storm was coming.

He’d just park hurricane season hit Florida. himself in that and Craig would thing,’’ Bush said always turn the with a laugh. “It will give me a tables and ask them about their warm feeling in my heart if I see hurricane plans, ask if they had a plan, if they had storm shutters, if him on TV and he has that Gator they had supplies and more times blanket at FEMA headquarters than not a lot of people didn’t have whenever a storm is approaching. a plan,’’ said Max Mayfield, former It will be kind of comforting.’’ IJ director of the National Hurricane Copyright 2009 Associated Press. All Center. “He’s really, really big on rights reserved. This material may not people taking personal responsibe published, broadcast, rewritten or bility.’’ redistributed.

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Southeast Coverage People

Richard Clarke

Jennifer Retamar

Shaun Woleshin

Kate Westover

Brian Deitz

Richard G. “Dick” Clarke, senior vice president of J. Smith Lanier & Co. in West Point, Ga., has been elected 2009 president of RiskProNet International, a network of 25 independent insurance brokers in North America.

Clarke is a veteran of the insurance industry, having been a broker, consultant, underwriter and insurance buyer. He is a frequent contributor to various publications and teaches in the Certified Insurance Counselors Program and workshops offered by the Chartered Property Casualty Underwriters Society. He is the author of “Decoding Executive Liability Insurance,” now in its fourth edition.

RiskProNet partners in 2008 had combined revenues in excess of $688 million and more than $6.5 billion in written premium. Each partner is an equal owner in the association.

In addition to J. Smith Lanier & Co., RiskProNet members are AH&T Insurance, Virginia; Associated Financial Group, Minnesota; BFL Canada, Canada; Brady, Chapman, Holland & Associates, Texas; Dawson Companies, Ohio; Eustis Insurance & Benefits, Louisiana; Gateway Insurance Agency, Inc., Florida; Herbert L. Jamison Company, New Jersey; J.W. Terrill, Inc., Missouri; Johnson, Kendall & Johnson, Inc., Pennsylvania; Lawley, New York; Litchfield Insurance Group, Connecticut; M3 Insurance Solutions for Business, Wisconsin; Mazonson LLC, Massachusetts; Mesirow Financial, Illinois; Old National Insurance, Indianapolis; Rebsamen Insurance, Arkansas; Reynolds & Reynolds, Iowa; Sterling & Sterling, Inc., New York; SullivanCurtisMonroe Insurance Services, LLC, California; Tanner Companies, LLC, California; Waldman Bros., LLP, Texas; Watson Insurance, North Carolina; and Wick Pilcher Insurance, Inc., Arizona.

Harden & Associates in Jacksonville, Florida recently named Jennifer Retamar and Shaun Woleshin as vice presidents. Retamar is an Employee Benefits account executive in the Jacksonville office and Woleshin is a Commercial Insurance account director in Harden’s Fernandina affiliate, John T. Ferreira Insurance.

Prior to joining Harden, Retamar was an assistant vice president and senior consultant with a large national broker.

Woleshin joined John T. Ferreira Insurance in 1999 and since then he has been assisting commercial clients.

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

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

Deitz joined the Atlanta-based insurance agency consulting

12 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

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

Jeremy Borak has joined Tanner, Ballew and Maloof Inc. in Atlanta as vice president and account executive. He will be involved with the development and servicing of new risk management and insurance clients for the insurance firm. Borak had previously been a senior vice president with CBIZ in its Atlanta Property and Casualty branch and prior to that, with A.J. Gallagher.

Stockbridge, Georgia-based wholesale insurance broker Gresham & Associates has welcomed a new property/casualty broker, Scott Griffin, to its Orlando, Florida branch.

Griffin, a University of Georgia-Risk Management School Graduate, began his insurance career in 1987 and has worked as a wholesaler since 2000. His experience includes work with Travelers, Hartford Steam Boiler and, most recently, as a broker in the Tampa area.

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

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

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

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

Willis HRH, the North American business of Willis Group Holdings, reported that David Finnis has been named executive vice president and national property practice leader. Finnis, who joins Willis HRH from Integro Insurance Brokers, will report to Leslie Nylund, chief placement officer for North America and a national partner for Willis HRH. He will be based in Atlanta. Finnis will lead the company’s property practice in North America, including its property placement operations in London and Bermuda.

Finnis has 25 years of experience with property insurance programs for Fortune 1000 clients. Prior to joining Willis HRH, he was at Integro. He joined Integro in 2005 after serving as director, Southeast Property, for Aon in Atlanta from 1996. Earlier, he was at Johnson & Higgins and Marsh & McLennan, both in New York. IJ www.insurancejournal.com

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National Coverage News & Markets

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

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

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

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

ty/casualty insurance practice leader for the Americas region.

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

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

General Liability Losses, Expenses Likely to Rise Rapidly

National Flood Insurance Program Gets Short-Term Extension

T

C

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

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

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

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

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

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

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

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

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

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

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

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

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

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

March 23, 2009 INSURANCE JOURNAL-NATIONAL REGION | N1

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Special Report HOT Markets and Programs

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

By Christopher Boggs

A

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

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

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

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

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

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

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Her expertise is protecting the environment. And your clients.

–Karen Companion, Assistant Vice President LIU Environmental

Yes, there’s an Environmental insurer that’s as responsible as you are.

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

For specific information about the types of risk we write, visit liu-usa.com/environmental. Liberty Mutual is rated A by A.M. Best.

Responsibility. What’s your policy?

EXCESS CASUALTY & UMBRELLA • E&O • D&O • PRIMARY CASUALTY • FIDELITY • ENVIRONMENTAL • CONSTRUCTION • MARINE • ENERGY

All products written by member companies of Liberty Mutual Group. © 2009 Liberty Mutual Group.

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

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

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

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

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

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

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

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International Coverage News & Markets

Sports Terrorism, ‘Names,’ Tongues and Mergers

By Charles E. Boyle

A

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

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

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

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

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

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

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

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

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

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

N6 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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

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

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

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

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

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

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

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

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

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

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Special Report Green Risks

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

By Chantal Cyr

H

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

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

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

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

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

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

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

Cyr

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

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

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

Understand which carriers know boats and yachts the best.

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

March 23, 2009 INSURANCE JOURNAL-NATIONAL REGION | N7

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Special Report Green Risks Innovatice Boats, continued from page N7

what’s best for their watercraft? Probably not.

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

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

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

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

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New Markets The following markets were selected from the MyNewMarkets database of 25,000 coverages and programs. To find additional markets, or to submit markets, go to www.MyNewMarkets.com.

Misc. Medical Malpractice Market Detail: NAS Insurance Services

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

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

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

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

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

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

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

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

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

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Available Limits: As needed.

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

Admitted.

States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., D.C., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., La., Maine, Md., Mass., Mich., Minn., Miss., Mo., Mont., Neb., N.H., N.J., N.M., N.Y., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wash., W. Va., Wis. and Wyo. Contact: Fran Coulter at 800-662-2141 or e-mail fcoulter@fairwayunderwriters.com.

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

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

Available Limits: Up to $100 million.

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

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

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

Available Limits: $1 million to $5 million.

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

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Special Report Green Risks

Greener Insurers Compete for a Growing Green Industry

By Andrea Ortega-Wells

J

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Special Report Green Risks Greener Opportunities, continued from page N13

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“We’re probably smarter on risk elements of

N14 | INSURANCE JOURNAL-NATIONAL REGION March 23, 2009

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

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

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

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

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

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

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

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

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

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Special Report HOT Markets and Program

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

By Chris Boggs

P

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We hope you find this supplement interesting and informative.

Best wishes from all of us at Insurance Journal.

Mitch Dunford CEO Insurance Journal mdunford@insurancejournal.com

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

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

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Announcing the formation

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

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

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

of a more perfect union.

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

Expanded operations into Texas and Arizona.

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

2000

2006

FEB. 2007

With roots stretching back to 1913, EMPLOYERS has a heritage and history unlike any other workers’ compensation insurance company in the United States.

1913

2002-2005

OCT. 2008

State Workers' Compensation Fund ("The Fund") established in Nevada.

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

Acquired AmCOMP, EMPLOYERS operates in 30 states.

2002

2007

Acquired assets of Fremont Comp and entered CA, CO, ID, MT and UT; established key distribution relationships with strategic partners WellPoint and ADP.

Expanded into Florida, Illinois and Oregon.

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

Southeast Coverage News & Markets

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

By Patricia-Anne Tom

W

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

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

“We have already seen credit scores having an impact on interest rates charged to consumers on their credit cards and loans. If insurers continue to use credit scores in determining risk levels, premiums will increase and consumers may be forced to reduce the insurance carried to protect their financial assets,” according to Karroll Kitt, associate professor at the University of Texas at Austin.

Pamela J. Bolton, director of policy and research for Texas Watch, thinks the credit crisis is hard on many consumers.

“The credit crisis has already lowered the credit roponents for the use of credit-based scores of thousands. As lenders lower credit limits insurance scores argue that they are and increase rates, consumers are seeing their credit predictive of an insured’s future claims scores suffer through no fault of their own,” Bolton experience, and are necessary tools for said. She said the “grave” situation has been docuunderwriting and/or rating. mented by the Wall Street Journal, Fox News, Critics argue that the use of credit-based Bloomberg, and others. insurance scores unfairly discriminate against lower-income individuals and some Changes By Lenders protected classes of people and that they Bolton, who supports a ban on credit scor- have no loss mitigation benefit. ing, expressed doubt but hopes the insurance Forty-eight states have taken some form industry will take into account differences of legislative or regulatory action limiting between changes in credit scores due to the the use of credit-based insurance scores, consumer’s own actions versus economic including: conditions or changes by lenders. “This criSome states have limited the use of credsis presents the industry with a very it-based insurance scoring, requiring that it important choice: Will it choose to act in not be the sole rating factor used by insurthe best interests of its customers, rather ers to evaluate risk. than its bottom lines, by embracing fair Some states believe that the process practices that don’t unfairly penalize itself is not intended to be discriminatory, policyholders, or will it be business as and any disparate impact based on race or usual?” Bolton asked. “Only time will ethnicity is merely coincidental. tell.”

Some states believe that a majority of If insurers don’t somehow adjust, policyholders benefit from the use of credconsumers and insurers both “will it scoring. be worse off,” warned Brenda Cude, Some states have taken issue with the professor of housing and consumer use of credit scores and other rating criteeconomics at the University of ria, such as occupation and education.

Georgia in Athens.

Some states prohibit the use of credit“It is already very difficult to based insurance scores. IJ

Status of Credit Scoring

P

continued on next page 48 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

www.insurancejournal.com

explain to consumers how their credit score could be related to their access to insurance and the price they pay,” she said.

“It will be even more difficult to explain that when the drop in the credit score is due to, for example, their credit card company lowering their credit limit when the

consumer’s behavior hasn’t changed in any way.”

Pay a Price Insurers taking advantage of insureds’ credit plight could pay a price. “One outcome will likely be a continued erosion of

consumers’ faith in financial institutions,” Cude said.

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

“The question is how many consumers continued on page 50

How Consumer Reps Feel About Internet Sales, State Regulation Consumer Advisors See Pros and Cons to Internet; Role of Independent Agent Clouded By Commissions

I

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

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

“The Internet is a great option for many consumers in the purchase of many products. It has the potential to vastly increase the transparency of the insurance marketplace,” said Brenda Cude, professor of consumer economics at the University of Georgia in Athens.

Yet there is also a downside.

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

Cude wants consumers to be able to check payments, file claims and make other changes online. Web sites that are simply lead generators don’t serve consumers well, she said.

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

Some of the consumer liaisons believe that independent insurance agents play an important role in insurance. Because they www.insurancejournal.com

sell products representing multiple insurers, “consumers can benefit from having more choice in their insurance protection, that is several policies to review for their insurance needs,” Kitt said.

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

Agent Commissions But Daniel Schwarcz, associate professor of law at the University of Minnesota Law School, is concerned that contingent commissions can compromise the value of independent agents. “When it comes to contingent commissions and any sort of differential compensation paid to an agent I think is independent, I think there needs to be closer regulatory scrutiny to that,” he said.

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

He said he has found that a “lot of problems on the regulatory side, whether there’s less robust competition in insurance markets or claims handling, contingent commissions are at the root of a lot of problems. And I think it’s a joke to think that disclosure solves that..”

Regulation Birny Birnbaum, executive director for the Center for Economic Justice, said his group is

Howard Goldblatt

interested in the debate over state versus federal regulation with an eye to seeing where consumers can get the best regulatory treatment. “Right now, the federal proposals are very anti-consumer,” he said.

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

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

He believes the debate will be an ongoing one. Part of the problem, Birnbaum said, is that the states and the industry don’t seem to know what they really want. “On the one hand, the states say we don’t want the feds to regulate insurance and yet there’s a flood insurance program, there’s a terror insurance program, they want a natural catastrophe insurance program, there’s a crop insurance program.”

The industry doesn’t want the government to control its business, but it wants the government to step in when it comes to risks the private market has no interest in, continued on page 50

Amy Bach

Damiel Schwarcz

March 23, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 49

Southeast Coverage News & Markets Credit Scores, continued from top page 49

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

“The problem is compounded by the fact

States Received $12 Billion in AIG Bailout Funds

M

unicipalities in the states received a total of $12.1 billion from American International Group Financial Products between the date of the federal government bailout, Sept. 16, 2008 and Dec. 31, 2008 in satisfaction of Guaranteed Investment Agreement (GIA) obligations. GIAs are structured investments with a guaranteed rate of return. Municipalities typically use GIAs to invest the proceeds from bond issuances until the funds are needed.

State Amount ($Billion) California 1.02 Virginia 1.01 Hawaii 0.77 Ohio 0.49 Georgia 0.41 Colorado 0.36 Illinois 0.35 Massachusetts 0.34 Kentucky 0.29 Oregon 0.27 Delaware 0.26 New York 0.21 New Jersey 0.21 Mississippi 0.18 Washington 0.17 Pennsylvania 0.15 Florida 0.15 Rhode Island 0.14 Arizona 0.12 Texas 0.10 Top 20 Total $7.00 Billion Other 5.10 Total GIAs $12.10 Billion Source: AIG

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

Trusting Providers Kitt said that consumers are trying to do the best with what they have and want to trust providers. “Consumers are experiencing fear regarding their money and how to protect what money they currently have,” said Kitt. They are guarded in spending their money and want to feel confident that they can trust who is selling a product.

This is reflected in purchasing less and only what is felt to be essential, foregoing luxury items.”

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

“There’s already an indication that this is happening — there’s a Safe Auto ad in which the major point is that if you miss a few payments, SafeAuto will take you back.

The ad doesn’t say whether you come back at the same rate as before, however.”

Bolton, too, has concerns about how insurers will treat consumers in the current economy. “Insurers have the vast majority of their funds in the bond market, which has been much less affected than the stock market,” Bolton said. “Despite this, I think insurance companies are likely to use the economic crisis as an excuse to increase rates.”

Cude, Bolton and Kitt are in a position to have their views on credit scoring and other consumer issues heard. They are three of the 17 consumer liaisons to the National Association of Insurance Commissioners (NAIC) for this year. They will undoubtedly have forums to air their opinions. NAIC has announced it will be holding public hearings to review the credit scoring issue and the issue continues to surface in states. Last month Florida Insurance Commissioner Kevin McCarty, a credit score critic, grilled a group of insurers on how their companies use credit scores. Last week, the credit scoring issue resurfaced in Michigan— where it is before the state Supreme Court — when Insurance Commissioner Ken Ross denied rate increases that were based in part on credit scores. IJ

How Consumer Reps Feel, continued from bottom page 49

such as flood or terror insurance. “I know insurance companies want a handout whenever they can get it. But regulators don’t seem to have a good idea about what role they want the market to play and what role regulation should play,” Birnbaum said.

“There’s no reason for private market not to be offering flood insurance or terror insurance or catastrophe insurance,” he continued.

“It’s done in other countries, and the governments in those other countries provide a backup in the event of a mega catastrophe.”

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

Bach suggested that disaster programs show where a state or regional perspective has advantages over a national perspective.

50 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

Her organization works closely with the California Earthquake Authority and she hopes to share some of the best practices learned in California with the NAIC. “We want to help export our success to other states as best we can, and brainstorm how to resolve failures,” Bach said.

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

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

Idea Exchange Stimulus Package

Five Reasons Agents Should Pay Attention to the Stimulus Package Bushnell

By Stephen G Bushnell

T

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

insurance customers in fundamental ways.

The package is the first step in defining the priorities of the new administration, setting a direction that will have a financial and risk management impact on all Americans.

Forward looking agents can and will recognize the opportunities and new ways of thinking about risk that this new direction offers. There are five significant areas — five reasons to pay attention: Investment in Energy Retrofits Nearly $16 billion will flow to energy retrofit projects. Energy Secretary Steven Chu is on record saying he wants this money to be spent in the next 18 months. Not only will retrofits stimulate the home improvement industry, they also will affect energy use. It is cheaper to conserve than to build new plants. Some insurance companies are ahead of this curve, having launched green building insurance products and consulting services. Many agents have already recognized that energy costs are a www.insurancejournal.com

financial risk that can be managed through the right insurance program. Reduced energy costs translate quickly to a stronger bottom line for business and more disposable income for citizens. Agents who help their customers find insurance solutions to energy efficiency dramatically change the total cost of risk.

Obama advisor, estimates the final cost to modernize the grid could exceed $400 billion.

In their role as risk managers, agents need to advocate for a reliable grid.

Private Investment Will Follow We are already seeing venture capital flowing to energy-related investments. The long term returns are attractive. T. Bone Pickens Investment in Alternative and a group of Minnesota investors are planEnergy ning a major new facility to produce better, Again, nearly $16 billion will be stronger blades for wind turbines. Silicon used to incent investment in wind and solar, spur research and develop- Valley has re-tooled to manufacture solar panels. The U.S. is full of unused manufacturing ment (R&D) for new forms of alterfacilities, and the green jobs fever is just catchnative energy (biomass, biofuels, ing on. Consider how quickly American induslithium ion batteries) and research try retrofitted itself to make tanks and carbon sequestration technologies. bombers in the early 1940s. The risk challenges This investment will impact multiand insurance opportunities are already here. scale manufacturing, construction For the past several years, state and local and operation of alternative energy governments have carried the ball when it facilities, mostly in the private seccomes to these investments in energy and tor. New projects and new technoloenergy efficiency. Western and New England gies create new risks that the insurstates have implemented carbon cap and trade ance industry must understand. Trusted advilegislation. California and at least 10 other sors who devlop expertise and help their cusstates allow local government to finance enertomers manage these new risks will be big gy retrofits through property tax loans and winners. liens. Most major cities have enacted building codes that Investment in the Grid Forward looking require construction to conToday’s electrical grid is a agents can and form to LEED (Leadership in mess. It is essentially a patchEnergy and Environmental work of different systems that will recognize the Design) standards. Some exposes Americans to signifiopportunities and insurance companies and cant financial risk. The many agents have already Electric Power Research new ways of recognized these developInstitute estimates that power thinking about ments. outages cost more than $100 The train is about ready to billion per year. Most are uninrisk that this new leave the station. Agents sured. The Insurance direction offers. with an eye to the risks and Information Institute estiopportunities of the future mates that 85 percent to 90 are on board. Are you? IJ percent of U.S. businesses are not insured against power failure. The $11 billion in the stimulus package for smart meters is probably Bushnell is senior director of Emerging Industries, just the down payment. Dr. Daniel Kamman of Commercial Insurance for Fireman’s Fund Insurance Co. Lawrence Berkeley National Labs, and an based in Novato, Calif.

March 23, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 51

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

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

Burton says BrickStreet also plans to ask Insurance Commissioner Jane Cline to allow it to pay off a $200 million startup loan from the state loan this year.

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

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

Agents and brokers can submit new business from Alabama, Arkansas, Florida, Georgia,

Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.

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

National City Bank An independent holding company owned by an insurance industry veteran has purchased Harbor Insurance Agency and Florida Consolidated Agency, both former wholly owned subsidiaries of National City Bank.

The new owner, Tom Cook, prior to acquiring Harbor Insurance, was president of National City Insurance Group, Inc. Prior to joining National City, Cook was president and CEO of Acordia of Northeast Ohio (now Wells Fargo Insurance). He also worked for Progressive Insurance Co. The two agencies, which operated in eight eastern Florida coast locations, will be consolidated into one new organization, Harbor Insurance. Former Florida Consolidated Agency offices located in Juno Beach and Greenacres will be absorbed into a new West Palm Beach office. The former Harbor Insurance Agency locations in Palm Bay and

Palm City will be consolidated in Vero Beach.

Harbor Insurance will also continue to operate existing offices in Fort Pierce and Port St. Lucie, for a total of four locations.

Former Harbor Insurance Agency President David Willbur and former Florida Consolidated Agency President Bill Lay will remain in leadership roles with the new company.

Insurance Specialty Group, Wastepac Insurance Specialty Group LLC has acquired Wastepac, a provider of insurance coverage to the waste hauling and sanitation industry.

Wastepac will continue to operate as a risk purchasing group under its own brand as part of Insurance Specialty Group.

Lee Orabona, president of the ISG Underwriting Division, will head the operation located in Port Jefferson, N.Y. Formed in 2003, ISG is a national insurance brokerage and underwriting firm headquartered in Atlanta.

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

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

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

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

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

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

Ascension serves middle-market companies nationwide. Ascension is led by president and CEO Leonard P. Kline, Jr. The Ascension insurance agency has 20 locations nationwide. IJ

52 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

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March 23, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 53

Idea Exchange Closing Quote

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

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

A

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

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

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

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

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

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

You have chosen to work in the insurance

54 | INSURANCE JOURNAL-SOUTHEAST REGION March 23, 2009

Dunford

industry. While others seek to minimize risk you embrace it.

You study it, you calculate it, you even profit from it. You are now, and have been for hundreds of years, our economy’s last line of defense. You make it possible for businesses to open and grow, for loans to be made, for new inventions to come to market, and for young peo‘The insurance ple to buy their first car or their first home. Without you and your indusindustry is one of try, the way of life we have grown the most lucrative accustomed to would come to a professions in the grinding halt.

Inside the insurance industry, there world. But with that opportunity comes is tremendous potential for growth, a responsibility.’ both personal and financial. The industry is one of the most lucrative professions in the world. But with that opportunity comes a responsibility: to act with integrity and with character in how you do business. Our economy cannot afford to lose confidence in our industry.

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

Our industry must resist temptations to deceive.

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

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

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

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