The Disaster Issue: Flood, Earthquake, Windstorm, Terrorism, Cyber Attack & More; Commercial Auto (I

JULY 1, 2013 | Vol. 91, No. 13

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NATIONAL

Inside This Issue July 1, 2013 • Vol. 91, No. 13 • National

16

The Disaster Issue On The Cover 22

Where Insurers Fear to Tread

27

40

31

NATIONAL COVERAGE

Idea exchange

8

27

31

40

Insurers Attained Underwriting Profit, Record Surplus in Q1

10 Survey Explores How Carriers

Support Agency Growth

Strategies

5 Tips for Putting Your Best Foot Forward in a Crisis The Competitive Advantage: Burand Closing Quote: MGAs in the UK

16 Special Report: How

Catastrophe Experts Model Hurricane-Induced Storm Surge 20 ‘Mayhem’ Outspending ‘Good

Neighbor’ in Advertising 22 Special Report: Where Insurers

Fear to Thread 26 Top 25 P/C Companies: Direct

Premium Up Nearly 4.5% 30 Spotlight: 10 Things to Know

About Taxis & Limos 33 2013 Digital Product Guide

DEPARTMENTS 6 12 14 37 38 38

4 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

Opening Note People Business Moves MyNewMarkets Declarations Figures

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NATIONAL COVERAGE

Opening Note Man-Made Disasters

D

isasters strike in many forms. Insured disasters often arrive in the wake of natural catastrophes — floods, earthquakes, drought, tornadoes and hurricanes. But disasters are also man-made as in the terrible tragedy that occurred at the Rana Plaza factory in Bangladesh on April 24.

On that day in Savar, Bangladesh, more than 1,100 people perished when the factory building collapsed. The disaster highlights the risks that labor conditions can pose not only to workers but also to the reputations and supply chains of the organizations that use their services.

For many of the world’s largest suppliers and retailers the tragedy brought widespread negative attention to the use of outsourcing textile goods following the Rana Plaza incident.

A recent report by Marsh Risk Management Research, Bangladesh Factory Collapse: Lessons in Risk for the Retail Industry, provides an overview of the risks retailers face when sourcing textile goods from Bangladesh and Poor working conditions other low-cost markets.

“Even though major retailare a threat to more than ers and suppliers have sourced workers. from Bangladesh for decades and have worked to improve labor conditions in the past, the Rana Plaza incident clearly reinforces to organizations that labor-related globalization risks require robust oversight efforts, greater visibility, increased vigilance, and continuous improvement,” said Tracy Knippenburg Gillis, Global Reputational Risk and Crisis Management Practice Leader for Marsh Risk Consulting. Gillis says retailers and suppliers should use this tragedy as a catalyst to more fully understand their operational and supply chain risk exposures, strengthen workforce safety practices and improve supply chain and reputational risk resiliency.

Bangladesh’s textile industry plays an important role in the retail industry’s supply chains due to its low-cost production capability.

But while the country may be home to the world’s lowest minimum hourly wages (Bangladesh workers make just 23 cents per hour at minimum wage), according to Maplecroft’s “Working Conditions Index” it also ranks as the eighth-worst country for industrial working conditions — resulting in significant reputational, compliance and supply chain risks for retailers.

Bangladesh remains one of the most attractive global markets from which to source primary retail goods for demanding consumers because costs to produce remain low.

But retailers should beware, the Marsh report said. Retailers should carefully consider their approach to reputational risk, crisis management, and supply chain resiliency, and focus on improving compliance efforts and transparency.

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

EDITORIAL

Editor-in-Chief Andrea Wells | awells@insurancejournal.com V.P. Content Andrew Simpson | asimpson@insurancejournal.com East Editor Young Ha | yha@insurancejournal.com Southeast Editor Michael Adams | madams@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Senior Editor Susanne Sclafane | ssclafane@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Chris Burand Contributing Writers Aarti Dinesh, Lisa Doherty, Sian Fisher, Karen Lombardo, Douglas Powell, Lori Widmer

SALES

V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 mtrammell@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 New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale (800) 897-9965 x125 Ly Nguyen | lnguyen@insurancejournal.com

MARKETING/NEW MEDIA

Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com (619) 584-1100 x120 New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Matt Tolk | mtolk@insurancejournal.com

DESIGN/WEB

Vice President/Design Guy Boccia | gboccia@insurancejournal.com Vice President/Technology Joshua Carlson | jcarlson@insurancejournal.com Design and Marketing Executive Derence Walk | dwalk@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com

IJ ACADEMY OF INSURANCE

Director of Education Christopher J. Boggs | cboggs@ijacademy.com Online Training Coordinator Barbara Whiffen | bwhiffen@ijacademy.com

A D M I N I S T R AT I O N

Chairman Mark Wells Chief Executive Officer Mitch Dunford Accounting Manager Megan Sinclair | msinclair@insurancejournal.com

FOR QUESTIONS REGARDING SUBSCRIPTIONS: Call: 855-814-9547 or you may subscribe or change your address online at: insurancejournal.com/subscribe Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semimonthly 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 2013 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 3618, Northbrook, IL 60065-3618 ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or rhondab@fosterprinting.com. Visit insurancejournal.com/reprints for more information.

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News & Markets Insurers Turned Underwriting Profit in Q1, Attained Record Surplus

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irst quarter results for U.S. property/ casualty insurers show they made a profit on underwriting for the first time since late 2009.

Private U.S. property/casualty insurers’ net income after taxes rose to $14.4 billion in first-quarter 2013 from $10.2 billion in first-quarter 2012, with insurers’ annualized rate of return on average policyholders’ surplus climbing to 9.6 percent from 7.2 percent, according to a new report released on June 24 from analytics firm ISO and the Property Casualty Insurers Association of America (PCI).

The increases in insurers’ net income and overall rate of return were driven by a $4.8 billion swing to $ 4.6 billion in net gains on underwriting in first-quarter 2013 from $0.1 billion in net losses on underwriting in first-quarter 2012.

Insurers’ profits on underwriting, the first since fourth-quarter 2009, reflect a combination of premium growth, increases in reserve releases and a decline in weatherrelated catastrophe losses.

ISO and PCI said that insurers’ overall results for first-quarter 2013 also benefited from special developments that bolstered investment results. Net investment gains — net investment income plus realized capital gains — rose $0.4 billion to $12.8 billion in firstquarter 2013 from $12.3 billion in first-quarter 2012 as write-downs on impaired investments dropped.

Pretax operating income — the sum of net gains or losses on underwriting, net

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investment income, and miscellaneous other income — grew to $15.9 billion in first-quarter 2013 from $11.9 billion in firstquarter 2012.

Policyholders’ surplus — insurers’ net worth measured according to Statutory Accounting Principles — increased $20.9 billion to a record-high $607.7 billion at March 31, 2013, from $586.9 billion at December 31, 2012. The figures are consolidated estimates for all private P/C insurers based on reports accounting for at least 96 percent of all business written by private U.S. P/C insurers.

Premiums Rose, LLAE Declined Insurers swung to $4.6 billion in net gains on underwriting in first-quarter 2013 as premiums rose and loss and loss adjustment expenses (LLAE) declined.

Net written premiums increased $4.6 billion, or 4.1 percent, to $117.1 billion in first-quarter 2013 from $112.5 billion in firstquarter 2012 as net earned premiums rose $4.8 billion, or 4.5 percent, to $112.9 billion from $108.1 billion.

Net LLAE dropped $1.4 billion, or 1.9 percent, to $74.2 billion in first-quarter 2013 from $75.6 billion in first-quarter 2012.

The decrease in overall LLAE reflects favorable reserve development and associated reserve releases.

Insurers released $5.6 billion from reserves in first-quarter 2013, with reserve releases rising from $3.9 billion in firstquarter 2012.

The decrease in overall LLAE also reflects a decline in catastrophe losses. ISO estimates that private insurers’ net LLAE from catastrophes fell $1.1 billion to $2.3 billion in first-quarter 2013 from $3.4 billion in first-quarter 2012.

Reflecting the growth in premiums and the decline in LLAE, the combined ratio improved by 4.1 percentage points to 94.8 percent in first-quarter 2013 from 99 percent in first-quarter 2012. www.insurancejournal.com

NATIONAL COVERAGE

News & Markets Survey Explores How Carriers Support Agency Growth Strategies

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This is one of the findings in a new survey of more than 1,000 agents and brokers recently released by Channel Harvest Research. The annual survey of agents on their attitudes regarding carriers — on a wide range of issues — is sponsored by Insurance Journal.

According to the survey, 47 percent of agents said they grew by more than 5 percent in 2012, while 20 percent said they grew by less than 5 percent. Only 14 percent of respondents reported that their agencies’ revenues dropped in 2012.

When asked what drove the revenue growth, 56 percent of agents polled attributed it to referrals. Another 10 percent cited increasing coverages to existing customers as the primary strategy.

Another 7 percent cited expanding into new geographic areas, while 5 percent said they grew production by adding new producers. Additionally, 4 percent cited a merger with another firm, while another 4 percent credited new product lines with their growth.

Word-of-mouth recommendations and actively soliciting referrals from both existing customers and acquaintances are longestablished methods to grow revenue at agencies, but now approximately half of the agents also are using social media to generate referrals and promote additional coverages to existing customers, according to the survey.

“Carriers are instrumental in helping independent agents go after their growth goals, whether that is achieved through increased referrals or the other leading strategies,” says Steve Craig, Channel Harvest’s research director. “Whether it is by helping them getting up and running on Facebook or providing sales training for new products and coverages, agents often look to carriers for ways to better promote quality policies.

“Carriers that roll out new products and coverages that are supported by specific sales training and materials are much more likely to have agents take advantage and sell these to your joint customers,” Craig said. www.insurancejournal.com

NATIONAL COVERAGE

People Andrew Torrance

Lori Dickerson Fouché

Jonathan Zaffino

Sharon Binnun

Martin Jenns

Andrew Torrance has been named the new president and CEO of Novato, Calif.-based Fireman’s Fund Insurance, succeeding Lori Dickerson Fouché who left for Prudential Financial. Torrance, Fireman’s Fund’s fifth executive at the helm since 2007, is expected to assume his new role later this summer.

Torrance most recently served as CEO of Allianz UK. Prior to being appointed CEO in 2003, he was the director and head of the Allianz broker division. Torrance also held senior and board positions at consulting firms and insurers, including London & Edinburgh and Boston Consulting Group.

Fouché succeeded Michael LaRocco in July 2011, who the company said left to pursue other professional opportunities.

Fouché started with Fireman’s Fund in February 2006 and before being named president and CEO, she was president of Fireman’s Fund commercial insurance. At Prudential, Fouché will be president and chief operating officer of the group insurance business.

Binnun, a former insurance regulator who became Citizens’ CFO in 2007, is taking a job with a Florida-based insurer that has not done depopulation business with Citizens, the statecreated insurer of last resort. The name of the carrier Binnun would be joining was not disclosed at press time.

Service Group, based in Austin, Texas, named Martin Jenns as its new president. Jenns joins Service Group after 10 years with Assurant, where he was most recently senior vice president of Assurant Solutions’ Mobile Services business.

The company also announced the recent retirements of senior vice presidents Patrick Vance and Gary Holliday.

Vance retires after 20 years with Service Group; Holliday worked for the company for 27 years.

Chevy Chase, Md.-based underwriting manager Victor O. Schinnerer & Co. has tapped senior Marsh executive Jonathan Zaffino to be its president. Zaffino will also join the senior leadership team of the parent company, The Schinnerer Group. Over his 19-year career, Zaffino brings a diverse background that includes numerous casualty and specialty underwriting positions and a strong brokerage component.

Most recently, Zaffino served as the leader of Marsh’s U.S. Casualty Practice. Before joining Marsh, he held senior underwriting positions with ACE. His brother is Peter Zaffino, current president and CEO of Marsh.

Berkshire Hathaway Specialty Insurance appointed Dan Fortin as senior vice president, executive and professional lines. Fortin was previously senior vice president of CNA Specialty. He was responsible for management and professional liability globally at CNA Specialty for nearly a decade, and served as interim CEO of CNA Europe in 2009.

Berkshire Hathaway Specialty Insurance, the new commercial P/C insurance unit of Berkshire Hathaway, began laying its foundation in April with the hiring of four key AIG executives — Peter Eastwood, David Bresnahan, Sanjay Godhwani and David Fields.

It now has some 40 professionals on board. About half of the employees are in Boston, with the rest spread throughout other regional underwriting offices in New York, Chicago, Los Angeles and Atlanta.

Following a six-year tenure as Jacksonville, Fla.-based Citizens Property Insurance Corp.’s chief financial officer, Sharon Binnun has accepted a position in the private sector and will resign effective July 5. Citizens stated that during her tenure, Binnun spearheaded efforts to spread Citizens risk and protect Florida taxpayers by negotiating agreements with traditional reinsurers and capital markets to better spread Citizens risk among private market investors.

Anita Glasmeier has been appointed vice president of distribution of Liberty Mutual Insurance’s Mid-Atlantic business insurance operation. She is based in Fairfield, Ohio.

She has more than 20 years of marketing management and sales experience. Previously, Glasmeier was vice president for Liberty Mutual’s National Insurance Specialty operation, where she managed marketing for construction, energy, excess casualty, multinational practice and programs.

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Business Moves Heffernan, Consuasor Insurance Walnut Creek, Calif.-based Heffernan Insurance Brokers recently acquired Consuasor Insurance Advisors in New York.

Founded in 2006, Consuasor is a multilines middle market broker with offices in New York City and Long Island, N.Y.

Consuasor’s New York City operations will relocate to Heffernan’s midtown office, while its Long Island office will become Heffernan’s 10th location nationally.

Former Consuasor President and CEO Marc Hudak will serve as regional senior vice president, overseeing the group bene-

fits practice for the New York City office of Heffernan Insurance Brokers. Hudak brings with him a three-person support team and a book of benefits business, along with commercial insurance and personal lines.

UK MGA Nexus Group, PartnerRe Nexus Group, a London-based Specialty MGA, has announced a transaction with reinsurer PartnerRe, which covers the current core financial lines underwritten

by Nexus for a term of up to five years.

The bulletin also noted that the Nexus Group “has become the largest independent specialty managing general agent in the London market with gross written premium due to surpass US$100 million in 2013.” It has also made profits in the last two years in excess of $3 million.

Brown & Brown, Rollins Agency Brown & Brown of New York Inc., a subsidiary of Brown & Brown Inc., acquired certain assets of The Rollins Agency in Rye Brook, N.Y. With roots dating from 1910, The Rollins Agency provides a wide range of insurance products and services to clients throughout the Connecticut, New Jersey, and New York tri-state area. The agency has annual revenues of approximately $5.5 million.

Brown & Brown of New York’s existing White Plains, N.Y., office will relocate to The Rollins Agency’s existing office in Rye Brook, N.Y. The combined office will operate under the leadership of Mark Rollins, who has been serving as co-chairman and CEO of The Rollins Agency.

Sawyer Insurance, Higginbotham Sawyer Insurance Agency has merged with the Dallas office of Higginbotham.

Sawyer Insurance in Richardson, Texas, has been owned and operated by agent Mike Sawyer since 1975. He and two insurance professionals provide personal and commercial coverage to clients owning property in the U.S. and other countries. At Higginbotham, Sawyer will retain current clientele and focus on personal home, auto and liability accounts. Sawyer Insurance will adopt the Higginbotham name.

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Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2013 CNA. All rights reserved.

SPECIAL REPORT

Disasters How Catastrophe Experts Model Hurricane-Induced Storm Surge

By Aarti Dinesh

T

he 2004 and 2005 North Atlantic hurricane seasons were a turning point in the way the property/casualty insurance industry viewed hurricane risk. The needs of the insurance industry required catastrophe models to explicitly model storm surge risk. Until this point, storm surge risk was not explicitly modeled.

A slew of hurricane landfalls in 20042005 led to massive levels of destruction to property and life. A trigger point was Hurricane Katrina (2005), which caused unprecedented levels of losses (an estimated $47 billion in total losses), the largest storm surge and flooding damage to date in the United States. Katrina caused a fundamental shift in the way the insurance industry looked at risks along the U.S. eastern coastline.

The lack of focus on storm surge was not due to cognitive dissonance within the risk management community. Hurricanes have always arrived with storm surge — Hurricane Andrew (1992) hit South Florida with tides reaching as high as 16.9 feet above normal; Hurricane Hugo (1989) had a peak surge of 20 feet near Seewee Bay, S.C.; and the Galveston Hurricane of 1900 (a category 4 hurricane at landfall) brought a tremendous surge that caused thousands of fatalities.

Recent demographic shifts in population and wealth toward more-exposed coastal locations greatly increase the risk of losses from storm surge related to hurricanes.

Hurricane Katrina (2005) and Superstorm Sandy (2012) introduced an associated phenomena — flooding that persisted for days as opposed to hours.

A Known-Known Risk Storm surge, an omnipresent factor of hurricanes that has received attention in recent decades as losses attributed to it have risen, is caused primarily by high winds pushing on the ocean’s surface, the result in water piling up higher than the ordinary sea level. Additional factors

include the low-pressure core of the translating storm, and the offshore bathymetry (the underwater equivalent of topography) and tidal surge. The resulting storm surge (water depths, velocity and on-shore runup) are influenced by the speed, intensity, radius of maximum winds (RMW), radius of the wind fields, angle of the track relative to the coastline, the physical characteristics of the coastline and the bathymetry of the water offshore.

Storm surge causes damage to properties on shore from many aspects of the surge — static water depth, the kinetic energy in the moving water (velocity), and from the kinetic energy of waves impacting partially submerged structures.

Rainfall associated with the hurricane can exacerbate the flooding associated with surge. Hurricane Irene (2011) demonstrated that the water flowing down inundated watersheds can trigger flooding far upstream of the coast as rivers are prevented from flowing to the ocean.

Inundation from storm surge can also slow down recovery efforts. Storm surge damage can also increase building cost inflation post-storm (demand surge) due to pentup demand for labor and materials.

The risk of storm surge damage along the

16 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

U.S. coastline varies.

The immediate coastal regions are within the high velocity zones, which during a hurricane are where wave action or high velocity water can cause significant structural damage. At more than 60 pounds per cubic foot, a 3-foot wave traveling at 5 mph can deliver a lateral force far exceeding building standards. Further inland, rising waters could cause significant damage to building interiors.

The interactions of storm characteristics upon the inconsistently populated U.S. coastline produce a varying risk of catastrophic surge potential.

For example, Miami has high coastal exposures where storm surge losses would be expected to be high, but the risk is in fact lower due to deeper bathymetry characteristics, while Tampa has very shallow sea floors where surge losses can be much greater.

Central Louisiana has shallow sea floors resulting in significant storm surge risk, but its low coastal exposures lessen potential damage. The west by northwest land falling azimuth of Super Storm Sandy greatly contributed to the severe and persistent flooding along the New Jersey shoreline.

Most flood losses are uninsured, but the continued on pg 18

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Disasters

continued from pg 16 biggest insurance losses from flood have been from the National Flood Insurance Program. Another take away from these recent events is that private insurers are accepting a significant amount of flood exposure either through the acceptance of mortgage-originated forced insurance placement measures, as excess layers on large residential risks and as sub-limited layers on commercial multi-peril and difference in conditions policies.

The continued treatment of flooding as a separately named sub-peril of a hurricane makes loss settlements difficult, especially in the velocity zone where there may not be much evidence available to make a forensic determination of the cause of loss.

The lasting images of a flooded New York subway system and the damage the New Jersey coastline are searing reminders of this sub-peril’s powers.

But Sandy was unique, arising from the confluence of an Atlantic tropical storm that merged with an onshore cold front to

transition to an extra-tropical storm that What’s next? was steered that all happened during an Lessons from past storms impact insuruncharacteristically extreme high tide. ers’ view of risk. Over the years, the risk Extensive measurefootprint for storm ments of flooding have surge risk has Recent demographic provided opportunities changed, attributable shifts in population and for the validation of to climate change. storm surge model com- wealth toward moreAdditionally, populaponents. exposed coastal locations tion shifts are putting The hazard data was more of society’s produce an enormous available shortly after assets at risk. The Sandy made landfall, and increase in the risk of U.S. government is was incorporated within losses from storm surge reconsidering the the model to create role of NFIP and related to hurricanes. the wind footprint and private insurers may storm surge footprint for be expected to accept the event. more insured flood risk. Consequently, risk The modeled peak gust wind speeds and evaluation strategies must constantly evolve storm surge heights for Sandy were comto provide the best value in a competitive pared and validated against observed data marketplace. to ensure that the model is emulating the characteristics of the actual event.

Dinesh is product manager at EQECAT Inc. She joined Claims data are now becoming available EQECAT in 2007 and is responsible for the management of for use.

EQECAT’s global tropical storm models.

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News & Markets ‘Mayhem’ Outspends ‘Good Neighbor’ in Advertising: SNL

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llstate’s “Mayhem” trumped State Farm Mutual’s the “Good Neighbor” in advertising dollars in 2012.

According to an analysis by SNL Financial, Allstate’s ad spend increased 14.8 percent year-over-year to $828.8 million, while State Farm Mutual reduced its advertising expense 4.4 percent from the year before to $777.9 million.

SNL said that much of the Allstate advertising spending has gone into re-branding Esurance as “Insurance for the Modern World” while associating Esurance with the Allstate name.

A number of companies joined Allstate in upping their ad dollars in 2012. Allstate, GEICO, United Services Automobile Association, Nationwide Mutual, Liberty Mutual, American International Group and Amica Mutual Insurance all recorded year-

ATLASFIN16634.indd 1

over-year increases in excess of 10 percent.

GEICO was the top U.S. P/C insurance advertiser in 2012, spending $1.118 billion, up 12.5 percent from the previous year.

The SNL data showed that GEICO is currently the only P/C insurer to spend in excess of $1 billion on advertising. While GEICO and Allstate have expanded their ad spend, several of their competitors have reined in their advertising spending in 2012. State Farm, Farmers

20 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

Insurance, Progressive, American Family Mutual, The Hartford and Travelers Cos. all posted slight year-over-year decreases in ad spending for 2012 in contrast to doubledigit percent increases in 2011.

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Huge losses due to weather events and other natural causes are resulting in higher premiums or lack of coverage availability. What risks are making insurers turn away? www.insurancejournal.com

By Lori Widmer

O

ne storm is all it takes these days.

Anyone who’s been paying attention needn’t be reminded that even a post-tropical cyclone can cause major damage. That’s what Sandy was when she came on shore in New Jersey and devastated communities along the eastern seaboard. With winds reaching across an 1,100mile geographic area, the storm caused damage as far away as Michigan, where storm warnings and high waves were posted for Lake Huron.

Just how much are these events costing insurers? The current estimated total of the devastation according to the U.S. National Oceanic and Atmospheric Association (NOAA): more than $50 billion. While that number is still climbing, it’s still less than half the total costs of Hurricane Katrina, which came in at $108 billion and was the costliest hurricane in U.S. history.

That’s just two storms. Other weather events have become quite costly, as well. For example, the expected total for the tornado damage caused in Moore, Okla., during the May 20, 2013, storms is set at $3 billion. One event, one big price tag. In fact, tornado insurance claims in Oklahoma just in the month of May have already topped $250 million in claims, says the state’s insurance commissioner. But what does one do about the weather?

Mitigation through insurance has been one of the go-to methods of risk transfer, but a number of back-to-back events that are increasing in severity and claims costs have insurers increasing premiums significantly to shore up reserves. Moreover, some insurers are backing off coverage altogether.

Flooded with Claims From 2007 to 2011, flood claims averaged $35,000 per claim, according to FEMA. As the most common natural disaster, floods have occurred in every state. More intense storm systems have increased claims and were part of the reason the Biggert-Waters Flood Insurance Reform Act of 2012, which attempts to close a $27 billion deficit in the www.insurancejournal.com

understand the increase.

NFIP by adopting several changes, including “It is AIR’s view that increases in natural removing subsidized rates for certain propcatastrophe-related losses, including those erties, boosts annual rate limits increases, for hurricanes, are primarily driven by the defines severe repetitive loss properties (for increase in and distribution of exposures in single family residences as four or more areas susceptible to natural perils,” he says. claims, each for more than $5,000 and cumu“As the number of properties in highlylatively more than $20,000), and increases exposed areas of the world and the overall annual deductibles. penetration of insurance increase, insured The average homeowner can expect to see losses from natural catastrophes will only a 25 percent increase in rates over the next continue to rise.” four years, which to Loretta Worters’ mind It’s no wonder then that insurers, starcould cause a backlash effect. ing at what are becoming record-breaking “That’s going to make people buy even claims, are finding ways to cushion the less flood coverage; so it’s a Catch-22. I blow and spread the risk out so that their don’t believe there is an availability probown reserves aren’t depleted in one event. lem but more of an affordability problem,” Worters says insurers in the coastal states says Worters, vice president, Insurance from Florida to Maine limit their exposure Information Institute. by using a percentage deductible, replacing Flood insurance coverage rates are expectthe named dollar amount deductible on ed to increase an average of 25 percent as most policies. well over the next five years. However, in “If a house is insured for $300,000 and has early June, the House of Representatives a 5 percent deductible, the first $15,000 of a voted to approve an amendment to the flood claim must be paid out of the policyholder’s insurance premium increases. Should the pocket,” says Worters. amendment become law, it would prevent That’s a big change if you’re not paying FEMA from implementing the provision attention. in the new NFIP law that affects premium At this writing, 19 states and the District increases. of Columbia have hurricane deductibles: Should the amendment fail to pass, Alabama, Connecticut, Delaware, Florida, homeowners can expect to see a dramatic Georgia, Hawaii, Louisiana, Maine, increase to what FEMA has determined to Maryland, Massachusetts, be rates that reflect “actuMississippi, New Jersey, arial risk.”

Some insurers New York, North Carolina, In one New Jersey could decide to Pennsylvania, Rhode Island, town, a house that was South Carolina, Texas, demolished by Hurricane reallocate capacity Virginia and Washington, Sandy left the homeowner or reduce their D.C. Agents in those states with a difficult choice exposure if a TRIA should be aware of the — rebuild the home on renewal fails to pass. policy language and make 14-foot supports or pay sure customers understand a $30,000 annual flood the difference between the dollar amount insurance premium. and the percentage amount.

That is, if the insurer decides to renew.

Twisters and Hurricanes As Worters says, each insurer is different.

That such tough flood insurance deciFor insurers with a large portfolio of busisions come after hurricanes is no surprise. ness in one area, there could be a decision That the claims are becoming prohibitively to reduce their risks by not renewing some expensive for insurers is also no surprise, of the policies. especially not to Dr. Peter Dailey, vice presi “This is a prudent course of action on the dent and director of Atmospheric Science part of an insurer, who may make the decifor AIR Worldwide. Dailey says that the population distribution makes it easy to continued on pg 24 July 1, 2013 INSURANCE JOURNAL-NATIONAL REGION | 23

SPECIAL REPORT

continued from pg 23 sion with a view to managing the risks of the other households they insure,” Worters says. Hurricane deductible plans must be reviewed by the state insurance department, she says.

Currently, there has been no action by insurers to limit exposure in tornado-prone areas, though that too could be happening on a case-by-case basis. Worters says depending on the state, insurers determine the level of windstorm or wind/hail deductible and where it should apply, except in Florida where state law dictates these variables.

How Dry I Am Sometimes the problem isn’t water, but lack of it.

Last year, severe drought plagued nearly half the United States, killing crops and herds across the country. According to a National Climatic Data Center (NCDC) report, approximately 55 percent of the continental United States experienced moderate to extreme drought the last weeks of June 2012.

The cost to insurers: $15 billion, according to Munich Re. For Charles Collier, vice president of the Albuquerque, N.M., branch of Poms & Associates, an insurance brokerage firm, it’s been a dry season for more than 10 years.

His state, New Mexico, isn’t a state that normally gets a good deal of rain. However, Collier says as far back as he can remember, the state has been struggling with the lack of what little rain they do get.

It’s a struggle the state is losing.

NOAA’s National Weather Forecast Office in Albuquerque reported as of June 4, most of the state was experiencing extreme to exceptional drought conditions. The rest of the state was suffering through moderate to severe conditions. The statewide precipitation was 47 percent of normal, with other areas posting just 30 and 31 percent of normal.

With all that dryness comes the larger threat — fire. As we spoke, Collier was handling claims that were the result of four fires in the state. A total of nearly 34,000 acres have burned, and with little rain expected through December, that total could rise significantly as more fires are sparked.

Collier says homeowners who don’t have coverage for fire aren’t going to be able to buy it as the fire starts appearing on the horizon.

“If there is a forest fire, the carriers usually put a moratorium on whatever ZIP codes are in the path of the fire,” he says.

“Once the fire has been contained, they release the moratorium and continue writing business.”

Collier says he’s not seen insurers failing to renew coverage in most cases, but the premiums can often skyrocket, as can deductibles. Minimum deductibles, he says, typically average $2,500 for hail or fire in higher risk areas.

“Carriers are telling the brokers to expect those types of underwriting changes, and

sometimes, higher than normal premium due to the high risk of fire,” he says.

In a few cases, Collier has seen coverage applications denied. One customer living in rural Colorado had suffered a serious fire.

When the customer applied for coverage quotes, two insurers refused the business based on the previous loss and the remote location of the property. “It had taken the fire department two hours to reach the property,” Collier says.

Yet not all damage from drought is covered. Collier says his state’s largest cattle producer has reduced his herd by 75 percent. The reason: drought-related animal loss is excluded from coverage.

Excluding Terrorism Then there’s TRIA. On Sept. 10, 2001, terrorism insurance was a free coverage on most policies.

In one day, it became an expensive, impossibly scarce product that had to be created from scratch to cover the now alltoo-real risks that terrorism brings. Insurers came into the terrorism mitigation business cautiously, a caution that has proven to be prudent. Several years and a number of

24 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

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terrorist events later, it’s a risk that’s being rethought by insurers.

The Terrorism Risk Insurance Act is set to expire at the end of 2014. That’s when analysts predict insurers will shy away from insuring large metropolitan areas should the Act not renew. At the very least, premiums will increase significantly, say some experts.

That would depend on the demand, of course. A recent Marsh report revealed that 62 percent of U.S. companies purchase terrorism insurance, a rate that has been fairly steady since 2009. Regionally, the Northeast saw 77 percent buy-in from companies, which is more than the Western portion of the country (53 percent). Media companies buy the most terrorism coverage at 81 percent.

Yet should the government not continue as the program’s backstop, many companies could find themselves without coverage.

As policies tend to be renewed in the fall, TRIA’s failing to renew in December could cause a huge gap for companies in metropolitan areas.

“Of course, individual insurers will make their own decisions based on their individual books of business,” says J. Stephen www.insurancejournal.com

Zielezienski, senior vice president and general counsel for the American Insurance Association (AIA). But, generally, without the stability provided by the shared loss program established under TRIA, insurers will need to carefully determine how they would manage their exposure to terrorism losses, particularly for insurance lines like workers’ compensation that do not allow insurers to limit their exposure and for terrorist attacks that involve unconventional weapons like nuclear devices.”

Zielezienski adds that some insurers could decide to reallocate capacity or somehow reduce their exposure through what he calls “difficult choices on which risks they write.”

He says because the frequency of terrorism can’t be modeled and because potential attacks are known only to the government, modeling companies and insurers can’t get an accurate portrait of the risk.

Will Congress fail to renew? It’s possible, but the decision wouldn’t be based on claims data. To date, TRIA has not paid out on any claim. However, the increase in terrorist activity could have legislators nervous about potential payouts.

every decade.”

Add to that a 38 percent total exposure located in the Gulf and East Coast states, which accounts for 16 percent of the total value of properties for the entire country, and it’s no surprise that insurers are working hard to transfer part of that loss back to the homeowner.

Some weather detection methods are helping insurers unravel the business of mitigation, prediction, and prevention.

In the case of tornadoes, hurricanes, and severe storms, NOAA, along with several private vendors, have developed methods of detection that allow for preparedness that can save lives.

In the case of the Moore tornado, residents had a 36-minute window in which to take shelter, according to the National Weather Service. The first warning went out 16 minutes before the tornado touched down. Average warning time is 14 minutes.

What has yet to be predicted is terrorism. Experts agree it’s difficult to predict with any certainty human behavior. A 2010 President’s Working Group on Financial Markets report states “Market participants (policyholders, insurers, and reinsurers) remain uncertain about the ability of models to predict the frequency and severity of terrorist attacks.”

With other loss events, catastrophe modPredicting the Hard-to-Predict eling allows companies to understand their It’s a valid trepidation. If hurricanes are risks and shore up not only their properany indication, losses ties, but their finances can mount quickly Premiums are rising ahead of a catastrophic and exponentially. In and some insurers are event. “Today, models the case of hurricanes, are more sophisticated backing off coverage as more data as computpopulations migrate to altogether. coastal areas. Dailey sees ing power has increased the increased coastal almost exponentially, population having a huge impact on an allowing for more precise and higher resoinsurer’s ability to cover losses adequately. lution model output,” says Dailey.

“According to AIR, in the past five years, “The industry, too, has made enormous the insured value of properties in coastal strides in collecting detailed exposure data areas of the United States increased at a that is essential to produce more reliable compound annual growth rate of just under model results — although more progress is 4 percent,” says Dailey. “Indications are that, still needed.” as the economy recovers, the rate of growth will pick up. At a historical rate of 7 perWidmer is a Philadelphia-based writer specializing in cent, the total values insured would double insurance and risk management topics July 1, 2013 INSURANCE JOURNAL-NATIONAL REGION | 25

NATIONAL COVERAGE

News & Markets P/C Direct Premium Up Nearly 4.5% for All-Time Industry High

D

irect premium growth for property/ casualty insurance companies continues to increase. At year-end 2012, more than $523 billion of direct premium written (DPW) was reported, an all-time high for the industry. For 2012, total DPW for all P/C insurers aggregately increased 4.4 percent over 2011. This increase in DPW represents nearly $22.3 billion in premium growth,

By Douglas Powell of which slightly less than half is attributed to the Top 25 P/C insurers in terms of growth.

Overall, P/C insurance companies have continued to serve their clients by responding to catastrophic events, difficult economic conditions and regulatory uncertainty.

For the 12 months ending Dec. 31, 2012, P/C companies comprising the Top 25 insurers, in terms of DPW, leveraged their experience and increased their DPW 9.6 percent over 2011.

The Top 25 accounted for nearly 45 percent of the growth for the P/C insurance industry’s DPW. In contrast, the remainder of the industry reported an increase in DPW of only 3.1 percent, or $12.3 billion, year-over-year.

P/C companies have aggregately maintained a sufficient level of policyholders’ surplus (PHS) while increasing DPW. This is demonstrated by the nearly $50 billion P/C insurers added to PHS in 2012. One measure that implies P/C companies are conservatively leveraged is the DPW to PHS ratio.

An insurer’s DPW to PHS ratio is indicative of its leverage on a direct basis, without consideration for the effect of reinsurance.

Since 2010, this ratio has remained stable at approximately 70 percent.

Although the market continues to exhibit signs of firming and DPW continues to increase, P/C insurers should not expect a traditional hard market in the near future.

More importantly, it is possible that the double-digit premium growth experienced in the historical hard market cycles may have created unrealistic premium growth expectations for this current recovery.

If the industry continues to hold to its 10-year historical pattern, growth this year would again lead to the highest level of year-end DPW ever reported by the P/C industry.

Powell is a senior financial analyst with Demotech Inc. Email: dpowell@demotech.com.

Top 25 Property/Casualty Companies

Based Upon Dollar Amount of Direct Premium Written (DPW) Growth Year-to-Date Results Dec. 31, 2012, Versus Dec. 31 2011

DPW Company Name

12/31/2012

DPW 12/31/2011

$ Growth

% Growth

Top 25 by DPW Growth All Other P/C Companies Total

113,416,911,310 409,836,759,211 523,253,670,521

103,480,411,244 397,515,012,444 500,995,423,688

9,936,500,066 12,321,746,767 22,258,246,833

9.60% 3.10% 4.44%

GEICO Casualty Co. Continental Casualty Co. State Farm Fire and Casualty Co. Allstate Fire and Casualty Insurance Co. State Farm Mutual Automobile Insurance Co. Atlantic Specialty Insurance Co. LM General Insurance Co. State Insurance Fund Workers’ Compensation Fund QBE Specialty Insurance Co. Travelers Property Casualty Company of America QBE Insurance Corp.

GEICO General Insurance Co. Liberty Mutual Insurance Co. Zurich American Insurance Co. United Services Automobile Association ACE American Insurance Co. USAA Casualty Insurance Co. USAA General Indemnity Co. Factory Mutual Insurance Co. ADM Insurance Co. LM Insurance Corp.

COUNTRY Mutual Insurance Co. Liberty Insurance Corp.

Foremost Insurance Co. Grand Rapids, Michigan Erie Insurance Exchange

1,363,632,265 4,970,066,475 17,021,682,666 4,605,761,469 30,935,399,277 537,006,205 760,283,461 1,943,837,922 1,021,677,539 4,258,249,635 1,288,918,909 6,602,148,803 5,049,033,910 4,801,761,856 6,371,408,435 3,832,112,795 4,290,784,176 1,352,089,544 2,677,986,653 297,677,128 747,364,131 1,436,962,176 1,961,488,123 1,545,374,883 3,744,219,874

681,173,567 4,316,474,367 16,435,513,890 4,032,528,791 30,389,177,203 17,886,674 241,614,667 1,495,864,902 584,810,645 3,855,640,564 901,392,028 6,228,617,033 4,676,494,087 4,451,431,877 6,047,987,100 3,522,836,852 3,999,088,165 1,061,237,158 2,390,310,918 18,437,011 472,831,442 1,171,192,640 1,698,445,614 1,291,076,154 3,498,347,895

682,458,698 653,592,108 586,168,776 573,232,678 546,222,074 519,119,531 518,668,794 447,973,020 436,866,894 402,609,071 387,526,881 373,531,770 372,539,823 350,329,979 323,421,335 309,275,943 291,696,011 290,852,386 287,658,735 279,240,117 274,532,689 265,769,536 263,042,509 254,298,729 245,871,979

50.05% 13.15% 3.44% 12.45% 1.77% 96.67% 68.22% 23.05% 42.76% 9.45% 30.07% 5.66% 7.38% 7.30% 5.08% 8.07% 6.80% 21.51% 10.74% 93.81% 21.51% 18.50% 13.41% 16.46% 6.57%

Data Source: The National Association of Insurance Commissioners, Kansas City, Missouri, by permission. Information derived from an SNL product. The NAIC and SNL do not endorse any analysis or conclusion based upon the use of its data.

26 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

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IDEA EXCHANGE

Disasters 5 Tips for Putting Your Best Foot Forward in a Crisis

By Lisa Doherty and Karen Lombardo

N

o business today is immune from the ravages of storms and power outages — not to mention earthquakes, fires or other unforeseen disasters that can strike in a minute.

Although all companies need a disaster recovery plan, insurance agents have an even greater obligation to put one in place to enable them to operate after a catastrophe to handle the claims of hard-hit clients.

Here are five tips to keep in mind when developing a plan for confronting disaster and for keeping your agency operating through tough times.

Commit to Having a Plan The surprising truth is that many companies — insurance agencies included — have an inadequate disaster recovery plan if they have one at all. In fact, one study indicates that up to 60 percent of small business owners don’t.

Commit to developing a plan that covers at minimum three critical areas: IT, customer service and employees.

If you can’t make the time, hire a dedicated outside firm or join an association, such as the National Association of Professional Insurance Agents (PIA) that offers preparedness and recovery plans to members.

Ask clients if they have a disaster recovery plan and provide recovery firm referrals if they don’t.

Documenting that you not only had a plan on file but reviewed it regularly with your staff and recommended disaster plans to clients can help protect you from potential errors and omissions (E&O) claims.

Back Up Your Data and Figure Out How to Get Internet Access … Quick!

Keeping your data secure and accessible is the number one priority. Back it up and store off-site for ready access and to ensure your ability to work remotely if your physical office location is compromised.

Remember, too, that your data and syswww.insurancejournal.com

tems will be of little value without power. Although your agency might be tied to the carrier’s system for reporting claims, this process will be of little use without Internet access.

When considering backup power sources like generators, check with local laws and building regulations.

One company lost power for a week after severe thunderstorms but was unable to use a generator due to an obscure city ordinance.

Be prepared for the worst possible scenario and maintain a list of active clients (particularly GL clients in the event zone) with key policy information. Store the information on

a USB drive or storage disc located offsite.

Keep IT Near and Dear Today’s agencies are dependent on increasingly more complex technology. So it should continued on pg 28

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IDEA EXCHANGE

Disasters continued from pg 27 come as no surprise that your IT team is critical to keeping the agency afloat during a crisis. Keep an updated list of all support personnel and their contact information handy. If they’re local, make advance plans for how to meet up with them in situations when they can’t be reached using typical communication modes.

their phone numbers, advice on critical pieces of information to print out (policy, carrier phone numbers, alternative contact information for agency), and storage suggestions.

When possible, call your carriers in advance Educate Your Clients to discuss their proto Be proactive by making sure your policols, especially with cyholders have the information they will events of the magnitude need in a disaster, especially one that might of Hurricane Sandy. It’s affect your office as well. Remind them to comforting for check their policies to clients to hear what they can be sure that they have Many companies — expect, i.e. you talked to XX adequate coverage and insurance agencies carrier, they are doubling their insure that all their staff, and they have rallied their properties or business included — have an locations are included inadequate disaster claims personnel to be out in under the policy. recovery plan if they force.

Some companies use a One Oklahoma have one at all. third-party answering and callinsurance agency had ing service to deliver scripted the right idea. On the messages, emails, text messages or social home page of its website in big red letters, media updates to clients and employees customers found “TORNADO SEASON IS informing them of a disaster, office closures HERE” with a link to a list of carriers and

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and alternate contact options.

Stay ahead of the curve going forward.

For example, keep abreast of the redrawing of flood zones and understand the impact on your clients located in vulnerable areas.

Communicate with Your Employees Develop an employee communication plan. Workers often complain they didn’t know what was going on because their firm hadn’t set up an adequate backup means of communication. While making personal cell phone numbers available for emergencies can be helpful, cell service isn’t always reliable in disasters so consider various options.

Once the disaster strikes and primary communication is spotty or down, it’s too late.

If you have advance notice, tell employees what they should take with them — such as contacts, certain paperwork and devices.

During Hurricane Sandy, many employees didn’t think to take their laptops when evacuating buildings never imagining it would be another six weeks before they were allowed back in without an escort.

Depending on the nature of the disaster, your employees might be as impacted as the company. Be prepared to operate with less staff since a number of them may be dealing with their own crises.

Doherty is president of Business Risk Partners, a managing general underwriter in specialty insurance.

Lombardo oversees the firm’s portfolio of E&O solutions for insurance agents and brokers. Website: www.

BusinessRiskPartners.com.

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SPOTLIGHT

Commercial Auto 10 Things to Know About Taxis & Limos California lawmakers proposed new safety requirements after two recent incidents in which limousines caught fire.

One bill would require two doors and two emergency window exits in the rear of all limos made after Jan. 1, 2015, and another would require limos to carry fire extinguishers.

Five people died in three separate stretch limo accidents in 2010, and 21 people died in another three accidents in 2011, U.S. DOT said.

The average profit margin for limousine companies was 16.7 percent in 2012, up from 10 percent a year prior, according to the LCT Magazine (Limousine, Chartered & Tour) Fact Book for 2013-2014.

The chauffeured transportation industry generated $2.6 billion in revenue in 2012, according to LCT Magazine.

There were 148,000 taxis in service as of 2012, according to the annual Automotive Fleet Fact Book published

by Bobit Publishing.

There are about 500,000 taxi trips – taken by roughly 600,000 riders – every day in the Big Apple, according to the New York City Taxi & Limousine Commission.

The estimated number of chauffeured vehicles in service is roughly 109,300, including sedans, stretch limousines, SUVs, shuttles, vans and motor coaches, according to LCT Magazine.

The average chauffeured fleet size in 2013 was 17, according to LCT Magazine.

There were nearly 5.5 million fleet cars in operation as of 2012, according to Bobit Publishing. Roughly 834,700 were commercial, while government accounted for more than 1.2 million cars, and rental fleets numbered more than 1.7 million.

The median annual wage of taxi drivers and chauffeurs in 2010 was $22,440, according to the U.S. Bureau of Labor Statistics.

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IDEA EXCHANGE

The Competitive Advantage Effort versus Success

I

wrote two columns in the summer of 2012 that elicited more online comments and emails than any article, out of the hundreds, that I’ve written.

One column’s subject was that producers are paid to produce. If they do not produce, they are not producers, regardless of the title. In

By Chris Burand other words, the title does not make the man. Results make the man.

Many of the negative responses to this article were clearly scribed by people who cannot sell. They want the title “producer” to be the seal of success, regardless of their results. Their protests were clearly motivated by the fear they would be discovered for what they really are, people responsible for sales but cannot sell.

Others, without intending to do so, wrote that they were owed sales. These writers feel the agency or the companies owe them sales. They think the agency should generate walk-in and call-in business so all they have to do is take orders. They envision a stereotypical retail business where marketing generates the leads and someone on the phone or behind the counter then makes the sale. Some direct writers work this way and if this is appealing, then those folks should probably go work for a part of the insurance industry that actively uses that sales model.

Others are just simply confused. They are confused about effort and success. In other words, they wrote that since sales is hard — really, really, really hard in the words of one protester — they should not be knocked for not making sales. They are trying their hardest and effort should suffice.

Sales is indeed very hard work. I’ve been selling for 25 years. However, how much effort sales requires is a moot point. As Winston Churchill wrote, “It’s not enough that we do our best; sometimes we have to do what’s required.”

Sales Plateau When an industry has an average 90 perwww.insurancejournal.com

cent retention rate (which means if your retention rate is 90 percent, you only earn a “C” for retention), it is easy to get comfortable with average results. And anyone comfortable with average results is a sitting duck. These agencies and producers get comfortable and begin taking clients for granted. Once a book is built, retention is high enough to even cease thinking about new sales.

This is the sales plateau agency owners dread their producers reaching. Because sales is tough work, once a person makes enough money the tendency is to migrate to what is easy. This is especially true if a producer is given accounts from an owner, other producers, walk-ins, call-ins, email-ins, programs, or even if they buy a book because these producers never made the initial sale.

A huge difference exists between producers who find and sell new clients and people who take orders and people who service accounts, regardless of how effectively they take orders or service accounts. Taking orders effectively in the appropriate business model and servicing accounts are important.

But they do not make a person a producer.

I have interviewed dozens and dozens of these “producers.” Deep down most know they cannot sell and they’re scared of anything that might expose them. The same reaction can happen with insurance companies that have nothing special to sell.

Many of these producers wonder why

they cannot close sales of more sophisticated accounts since they are bringing a good price to the table. Others wonder why they are losing large, sophisticated accounts since they are still friends, they are local, they have a good price and they’ve had the account forever.

These producers are taken aback when their friendly, life-long account quotes them.

And to lose the account, especially after being asked to complete an RFP, is a low blow.

These people take the loss of larger, sophisticated accounts personally. They never really had to prove anything to get the account, and then they lost the account because they did not or could not prove their worth.

Coverage Checklists My second column that raised so much ire was a tongue-in-cheek article about how not using coverage checklists is good for an agency just like another drink is good for someone with cirrhosis. Based on the comments and phone calls I received, many readers took this seriously.

It was sad, too, that many readers got the satire but disagreed with the appropriateness of using coverage checklists.

One reader wrote: “One other reason to use checklists is it creates larger E&O claims.

Every checklist I have seen misses likely items a [sic] insured is going to encounter. I struggled to find a comprehensive checklist and continued on pg 32

July 1, 2013 INSURANCE JOURNAL-NATIONAL REGION | 31

IDEA EXCHANGE

The Competitive Advantage continued from pg 31 there is none. They are OK on BOP accounts, What will be the missed percentage of a but beyond that, marginal value. [sic] best typical producer working off the top of his checklist, talk to client and their staff as or her head in a fast, organized, professional well as search Internet to see what they are manner in front of a client? doing.”

After doing E&O Given that audits for almost 20 The way to stand out is to between 100 and years, with 100 percent acquire technical expertise 1,000 checklists certainty I can warrant and combine it with a message that 98 percent of all exist including ones that are producers will miss far of quality built by using a four to six pages coverage checklist. more than 0.3 percent of small print, I of the coverages. doubt this person Now let’s say that searched that hard for comprehensive checka producer misses 100 coverages, including lists. More important, it is impossible for a ones the client needed, instead of .003. What coverage checklist to create an errors and are the odds then for being sued? omissions (E&O) exposure.

Some producers seem to think that omis To prove this point, take this person’s persions do not count as errors. Which is better: spective about needing a thorough checklist. to omit an offer of coverage for one out of 300 Let’s assume a detailed one has 300 covercoverages or 20, 40, 100 or 200 out of 300 covages listed and misses one. It then misses 0.3 erages? percent or .003 coverages for each one it gets A consultant who works with large, correct. sophisticated accounts wrote me, too. This

We Believe

person stated: “I see evidence from many contractors and consultants hoping to secure vendor contracts. It is apparent from gaping holes in coverage that their agents and brokers have not used checklists. Guess which contractors and consultants get my recommendation? The ones whose agents and brokers use coverage checklists.”

People with their head in the sand tend to keep their head in the sand for as long as possible. This article is not for them. It is for all the truly proactive producers willing to put forth the effort a checklist requires.

The way to stand out is to acquire technical expertise and combine it with a message of quality built by using a coverage checklist.

This provides the credibility to overcome age discrimination and build a book far more quickly.

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: chris@burand-associates.com.

superior education raises the standards for everyone.

It is for this purpose that we created Certified Insurance Counselors (CIC). With over 300 CIC institutes conducted each year, we offer the most up-to-date information covering important aspects and changes in the insurance field. Those attending earn CE credit and all institutes are followed by an optional exam for attendees who wish to earn the CIC designation.

Certified Insurance Counselors (CIC) institutes: • Personal Lines • Commercial Property

• Commercial Casualty • Life & Health

• Agency Management

Register at 800-633-2165 or www.TheNationalAlliance.com

1 32 | NATALL16638.indd INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

6/14/13 9:08 AM www.insurancejournal.com

2013 Digital Product Guide ** The following are paid advertisements.

Accounting / Billing / Financial AON eSOLUTIONS, INC.

GUIDEWIRE SOFTWARE

200 E. Randolph Chicago, IL 60601 Contact: Peter Govek Office: 920-451-9777 Mobile: 920-254-3466 www.aon-esolutions.com peter.govek@aon.com

1001 E. Hillsdale Blvd., Ste. 800 Foster City, CA 94404 Phone: 650-357-9100 Fax: 650-357-9101 www.guidewire.com info@guidewire.com

Aon eSolutions - iVOS

Guidewire BillingCenter©

solutions. Its iVOS product offers comprehensive claims management capabilities with sophisticated automation and rules-based workflow to enhance efficiency and service. iVOS also offers bill review, policy administration and billing modules for an integrated solution that can be configured to meet a client’s unique needs.

Guidewire BillingCenter© is a comprehensive billing system for all lines of property/casualty insurance BillingCenter is a flexible system designed to make it easier for insurers to: automate the billing lifecycle; design flexible billing, payment and delinquency plans; manage agent commissions; and enable rapid integration with external payment systems – i.e. EFT, EBPP, check writing, payroll deduction, etc. BillingCenter is available as a standalone system or as part of the Guidewire Insurance Suite™.

www.aon-esolutions.com

DELIVER INSURANCE YOUR WAY.

Accounting / Billing / Financial

Agency Management Systems

Aon eSolutions is a leading provider of global risk and insurance

INSURESOFT

XDIMENSIONAL TECHNOLOGIES, INC.

2500 Bond Street University Park, IL 60484 Contact: Brad Stoub Office: 708-534-1775 Mobile: 708-534-0163 www.insuresoft.com sales@insuresoft.com

145 S. State College, Ste. 160 Brea, CA 92821 Contact: Roger Banks Phone: 208-755-4303 Fax: 714-672-8908 www.xdti.com sales@xdti.com

Insuresoft - The Diamond System Insuresoft offers the Diamond System Suite, an innovative solution for property and causalty insurers. Both exceptionally configurable and scalable, the Diamond system extends functionality for policy processing, rating, underwriting, billing, claims, analytics and other business-critical functions.

Innovative. Intuitive. Insurance

XDimensional Technologies XDimensional® Technologies, Inc. (www.XDimensional.com) develops and markets Nexsure®, the Internet agency management solution connecting agents, brokers, carriers and policyholders, driving efficient business production and superior customer service. Nexsure offers robust contact management, sales force automation, advanced workflow, standard and custom lines of business, policy life cycle management, submission management, CRM, and multi-office accounting and reporting. As a Web-based Microsoft .NET solution, with built-in Web services, data processing and transactional capabilities, Nexsure provides unmatched ease of use, scalability and information availability.

Agents / Consumer Portals

Claims

OCEANWIDE, INC.

YORK RISK SERVICES GROUP, INC.

Contact: Mark Adessky Phone: 514-289-9090 ext. 111 Fax: 514-289-1909 www.oceanwide.com mark@oceanwide.com

99 Cherry Hill Road Parsippany, NJ 07054 Contact: Lisa Arguello Phone: 973.404.1215 www.yorkrsg.com lisa.arguello@yorkrsg.com

Oceanwide Bridge Oceanwide’s BRIDGE is a cloud based application featuring a robust portal module that is configurable by end-users with zero programming. The Portal empowers agents and consumers to communicate and exchange information seamlessly and to create, administer and distribute insurance products in-real time to a global market. With BRIDGE, carriers, brokers and MGAs can create multiple, branded portals for different agents, products or channels, with customizable content, colours and fonts. BRIDGE is multi-lingual and supports multiple currencies.

Agents can obtain instant quotes, bind and issue policies, process endorsements & renewals, review invoices and track & report losses through their portal 24hrs a day.

BRIDGE offers carriers, brokers and MGAs in the specialty and broader P&C market cost-effective solutions that can be implemented quickly as a tactical solution to address specific needs or as an end-to-end solution. www.insurancejournal.com

FOCUS Simple, intuitive, engaging…York’s new customer interface, FOCUS, is a powerful, yet easy-to-use risk management tool that gives you instant access to the risk management information you want, exactly the way you want to see it. Designed specifically for risk managers, FOCUS provides access to all the claims data in our claims management system, plus data visualization, a library of customizable reports, and interactive tools that transform your data into meaningful information so you can manage your risk more effectively. Available on all platforms, including tablets and other mobile devices, it is intuitive and engaging to use.

www.yorkrsg.com

July 1, 2013 INSURANCE JOURNAL-NATIONAL REGION | 33

2013 Digital Product Guide ** The following are paid advertisements.

Claims AON eSOLUTIONS, INC.

GUIDEWIRE SOFTWARE

200 E. Randolph Chicago, IL 60601 Contact: Peter Govek Office: 920-451-9777 Mobile: 920-254-3466 www.aon-esolutions.com peter.govek@aon.com

1001 E. Hillsdale Blvd., Ste. 800 Foster City, CA 94404 Phone: 650-357-9100 Fax: 650-357-9101 www.guidewire.com info@guidewire.com

Guidewire ClaimCenter®

Aon eSolutions - iVOS Aon eSolutions is a leading provider of global risk and insurance

solutions. Its iVOS product offers comprehensive claims management capabilities with sophisticated automation and rules-based workflow to enhance efficiency and service. iVOS also offers bill review, policy administration and billing modules for an integrated solution that can be configured to meet a client’s unique needs.

Guidewire ClaimCenter® is a leading end-to-end claims management system, built from the ground up to meet the specific needs of today’s P&C insurers.

ClaimCenter’s flexible business rules enable claims organizations to define, enforce, and continually refine their preferred claim handling practices in order to optimize and monitor their claim processes. ClaimCenter is in use by insurers of all sizes across all product lines to improve speed and accuracy, reduce loss adjustment expense, and enable proactive management of claims.

DELIVER INSURANCE YOUR WAY.

www.aon-esolutions.com

Claims

Digital Marketing

INSURESOFT

ASTONISH

2500 Bond Street University Park, IL 60484 Contact: Brad Stoub Office: 708-534-1775 Mobile: 708-534-0163 www.insuresoft.com sales@insuresoft.com

300 Centerville Rd., Ste. 200E Warwick, RI 02886 Phone: 888-899-1243 www.astonish.com sales@astonish.com

Insuresoft - The Diamond System Insuresoft offers the Diamond System Suite, an innovative solution for property and causalty insurers. Both exceptionally configurable and scalable, the Diamond system extends functionality for policy processing, rating, underwriting, billing, claims, analytics and other business-critical functions.

Insurance Marketing In The Digital Age Astonish is on a mission to change the way insurance is sold in America. They firmly believe the local distribution channel is the greatest asset of the insurance industry. They are dedicated to helping this channel (including the agencies, firms, and individuals) adapt to the modern landscape of Internet consumers in order to thrive and not get left behind.

Innovative. Intuitive. Insurance

The Astonish “FIND - SELL - KEEP” system has been successfully installed in over 3,500 businesses across the country in 3 different industries. In 2007, while looking for a new market, Astonish found incredible success in the insurance industry.

Since that time, Astonish has moved exclusively into insurance and has acquired over 750 clients that range in all types, shapes, sizes, and product specialties.

Astonish is currently one of the fastest growing technology companies in America.

Document Management

Policy Administration / Processing

FUJITSU COMPUTER PRODUCTS OF AMERICA, INC.

INSTEC

1250 E. Arques Ave. Sunnyvale, CA 94085 Phone: 888-425-8228 http://us.fujitsu.com/scanners

1811 Centre Point Circle, Ste. 115 Naperville, IL 60563 Contact: Carey Straetz Phone: 630-799-6485 www.instec-corp.com cstraetz@instec-corp.com

Instec’s quicksolver 3 Fujitsu Fujitsu Computer Products of America, Inc., is an established leader in the document imaging market, featuring state-of-the-art scanning solutions and services in the workgroup, departmental, and production-level scanner categories. Fujitsu offers the industry’s most comprehensive and competitive product offering. With scanning solutions from 15-120 pages per minute (ppm), Fujitsu possesses an extensive scanner lineup to meet the functional needs of customers at affordable price points.

34 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

Instec, founded in 1982, is a leading provider of services and technology to the commercial property and casualty insurance industry. Noted for longterm client relationships, Instec is a partner in providing business expertise and creating profitable growth. As providers of full policy lifecycle management, Instec works with its clients on successful Program Business as well as streamlining operations from first quote to last endorsement. Instec’s flagship technology, Quicksolver, is a best-of-breed rating and policy administration solution supporting all major lines of business, in all 50 states, and with native bureau rates, rules forms and statistical content. To learn more, visit www.instec-corp.com. www.insurancejournal.com

2013 Digital Product Guide ** The following are paid advertisements.

Policy Administration / Processing OCEANWIDE, INC.

INSURESOFT

Contact: Mark Adessky Phone: 514-289-9090 ext. 111 Fax: 514-289-1909 www.oceanwide.com mark@oceanwide.com

2500 Bond Street University Park, IL 60484 Contact: Brad Stoub Office: 708-534-1775 Mobile: 708-534-0163 www.insuresoft.com sales@insuresoft.com

Oceanwide Bridge Oceanwide’s BRIDGE is a cloud based software solution that provides carriers, brokers and agents with a comprehensive insurance policy management system to create, administer and distribute insurance products in real-time to a global market.

BRIDGE features customizable screens and workflows using a step-by-step wizard that allows end-users to configure products, rates, rules and documents with zero programming required.

Users can manage documents and forms using MS-Word, maintain multiple portals for different products or channels and benefit from extensive business intelligence functionality analytics to more effectively rate and underwrite products and manage their lines of business.

BRIDGE offers carriers, brokers and MGAs in the specialty and broader P&C market costeffective flexible solutions that can be implemented as a tactical solution to address specific needs or as an end-to-end solution.

Insuresoft - The Diamond System Insuresoft offers the Diamond System Suite, an innovative solution for property and causalty insurers. Both exceptionally configurable and scalable, the Diamond system extends functionality for policy processing, rating, underwriting, billing, claims, analytics and other business-critical functions.

Innovative. Intuitive. Insurance

Policy Administration / Processing QUALCORP, INC.

AON eSOLUTIONS, INC.

PO Box 803280 Santa Clarita, CA 91380 Contact: Allen Beggs Phone: 661-799-0033 Fax: 661-799-0020 www.QualCorp.com abeggs@QualCorp.com

200 E. Randolph Chicago, IL 60601 Contact: Peter Govek Office: 920-451-9777 Mobile: 920-254-3466 www.aon-esolutions.com peter.govek@aon.com

QualCorp, Inc.

Aon eSolutions - iVOS

Since 1992, we have been providing software for MGA’s/Carriers that afford them with the ability to: RATE and ISSUE POLICIES in all 50 states ISO and Non-ISO Programs and LOB Commercial / Personal and Workers’ Comp All Microsoft-based - latest technology

Aon eSolutions is a leading provider of global risk and insurance solutions. Its iVOS product offers comprehensive claims management capabilities with sophisticated automation and rules-based workflow to enhance efficiency and service. iVOS also offers bill review, policy administration and billing modules for an integrated solution that can be configured to meet a client’s unique needs.

www.QualCorp.com

www.aon-esolutions.com

Policy Administration / Processing

Rating Software

GUIDEWIRE SOFTWARE

M & R INFORMATION SERVICES

1001 E. Hillsdale Blvd., Ste. 800 Foster City, CA 94404 Phone: 650-357-9100 Fax: 650-357-9101 www.guidewire.com info@guidewire.com

P.O. Box 2188 Frankfort, MI 49635 Contact: Mike Madden Phone: 231-882-9536 Fax: 231-882-9537 www.MandRInfoServices.com mail@MandRInfoServices.com

Guidewire PolicyCenter® Guidewire PolicyCenter® is a flexible underwriting and policy administration system that enables property/casualty insurers to grow business profitably by improving efficiency, while responding with agility to market opportunities and enhancing relationships with agents and customers. Designed to support both commercial and personal lines, PolicyCenter streamlines insurers’ front and back office processes, from new business submission and quoting through policy renewals. PolicyCenter is available as a standalone system or as part of the Guidewire Insurance Suite™.

Deliver insurance your way.

www.insurancejournal.com

Work Comp Rating Software Specialists Build your Book of Business! Over 1,200 workers’ compensation professionals in CA, GA, IL, MI and PA use E!Z Work Comp Rater, M & R’s on-line software.

E!Z Work Comp Rater enables Producers, Brokers, MGAs, Wholesalers, and Uunderwriters to confidently rate work comp accounts for 99% of the carriers in the state, knowing they are using continuously updated, always current and correct rates and rating factors. Coming soon to NC and NY. Now integrated with TAM and AMS360 to streamline your workflow.

www.MandRInfoServices.com July 1, 2013 INSURANCE JOURNAL-NATIONAL REGION | 35

2013 Digital Product Guide ** The following are paid advertisements.

Rating Software

Underwriting Tools

INSTEC

OCEANWIDE, INC.

1811 Centre Point Circle, Ste. 115 Naperville, IL 60563 Contact: Carey Straetz Phone: 630-799-6485 www.instec-corp.com cstraetz@instec-corp.com

Contact: Mark Adessky Phone: 514-289-9090 ext. 111 Fax: 514-289-1909 www.oceanwide.com mark@oceanwide.com

Instec’s quicksolver 3

Oceanwide’s BRIDGE is a cloud based software solution with a full-featured underwriting workstation that is configurable with zero programming. Underwriters benefit from a complete workstation module with a sophisticated rating engine that supports configurable rates, rate drivers and rating rules to improve efficiency and accountability. BRIDGE provides complete control over all aspects of premium calculations, can be setup to automate emails and document generation through workflow triggers and easily integrates with external insurance rating engines.

Instec, founded in 1982, is a leading provider of services and technology to the commercial property and casualty insurance industry. Noted for longterm client relationships, Instec is a partner in providing business expertise and creating profitable growth. As providers of full policy lifecycle management, Instec works with its clients on successful Program Business as well as streamlining operations from first quote to last endorsement. Instec’s flagship technology, Quicksolver, is a best-of-breed rating and policy administration solution supporting all major lines of business, in all 50 states, and with native bureau rates, rules forms and statistical content. To learn more, visit www.instec-corp.com.

Oceanwide Bridge

BRIDGE offers underwriters in the specialty and broader P&C industry cost-effective flexible solutions that can be implemented as a tactical solution to address specific needs or as an end-to-end solution. It provides carriers, brokers and agents with a comprehensive insurance policy management system to create, administer and distribute insurance products in real-time to a global market.

Wholesaler / MGA Website

Workers’ Compensation

QUALCORP, INC.

M & R INFORMATION SERVICES

PO Box 803280 Santa Clarita, CA 91380 Contact: Allen Beggs Phone: 661-799-0033 Fax: 661-799-0020 www.QualCorp.com abeggs@QualCorp.com

P.O. Box 2188 Frankfort, MI 49635 Contact: Mike Madden Phone: 231-882-9536 Fax: 231-882-9537 www.MandRInfoServices.com mail@MandRInfoServices.com

QualCorp, Inc.

Work Comp Rating Software Specialists

Since 1992, we have been providing software for MGA’s/Carriers that afford them with the ability to: RATE and ISSUE POLICIES in all 50 states ISO and Non-ISO Programs and LOB Commercial / Personal and Workers’ Comp All Microsoft-based - latest technology

Build your Book of Business! Over 1,200 workers’ compensation professionals in CA, GA, IL, MI and PA use E!Z Work Comp Rater, M & R’s on-line software.

E!Z Work Comp Rater enables Producers, Brokers, MGAs, Wholesalers, and Uunderwriters to confidently rate work comp accounts for 99% of the carriers in the state, knowing they are using continuously updated, always current and correct rates and rating factors. Coming soon to NC and NY. Now integrated with TAM and AMS360 to streamline your workflow.

www.QualCorp.com

www.MandRInfoServices.com

Workers’ Compensation

Decision Management

AON eSOLUTIONS, INC.

DEMOTECH, INC.

200 E. Randolph Chicago, IL 60601 Contact: Peter Govek Office: 920-451-9777 Mobile: 920-254-3466 www.aon-esolutions.com peter.govek@aon.com

2715 Tuller Pkwy.

Dublin, OH 43017 Contact: Joseph Petrelli Phone: 614-761-8602 Fax: 614-761-0906 www.demotech.com jpetrelli@demotech.com

Aon eSolutions - iVOS Aon eSolutions is a leading provider of global risk and insurance

Demotech, Inc.

www.aon-esolutions.com

Demotech, Inc. is a Columbus, Ohio based financial analysis and actuarial services firm providing a wide range of services including pricing analysis, state filings assistance, Financial Stability Ratings® and support for other required regulatory reporting. Having worked with insurers of all sizes, Demotech possesses broad experience addressing actuarial and financial analysis issues, whether the issue is unique to a particular insurer or faced throughout the industry.

36 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

www.insurancejournal.com

solutions. Its iVOS product offers comprehensive claims management capabilities with sophisticated automation and rules-based workflow to enhance efficiency and service. iVOS also offers bill review, policy administration and billing modules for an integrated solution that can be configured to meet a client’s unique needs.

NATIONAL COVERAGE

MyNewMarkets Lawyers Professional Liability Market Detail: ProLawyer Insurance LLC (www.

ProLawyerInsurance.com) offers an admitted product designed for law firms with one to 50 attorneys. Various limits of liability options are available up to $5 million, with deductible options as low as $1,000 and first dollar defense available to qualifying firms. Policy highlights include: broad definition of professional services; career coverage available for qualifying firms; defense costs in addition to the limits of liability available; defendant’s reimbursement coverage of $500 per day up to $10,000 per policy period; disciplinary defense coverage of $15,000 per proceeding/$30,000 per policy period; free 60-day automatic ERP. Coverage available for part-time law firms and reduced rates for part-time attorneys.

Available Limits: Minimum $100,000, maximum $5 million Carrier: ProAssurance Group Cos. States: Pa., N.J., Dela., D.C., and Md. Contact: Ian Massaro at 215-525-3293 or e-mail: Ian@ prolawyerinsurance.com This section brought to you by Insurance Journal’s sister website, www.mynewmarkets.com

Need a Market? Find it. FAST. General Liability Market Detail: Promont Specialty’s (www.promontspecialty. com) coverage is available to habitational risks including: apartments, condominiums, rental dwellings; hospitality: hotels/ motels, restaurants, bars/taverns; and mercantile: shopping centers, lessor’s risk, warehouses, gas stations, convenience stores, office buildings, and supermarkets.

Available limits: Maximum limit $2 million Carrier: AmTrust International Underwriters Ltd. States: All states except Calif., Nev., La., N.J., Conn. and N.H. Contact: Mark Niemann at 312-262-3331 or e-mail: mniemann@ promontspecialty.com

Hotel/Motel Umbrella Market Detail: Sangamon Associates (www.platinumleisure. com) offers a nationwide facility for limited-service hotels and motels. More information is available at www.hotelexcess.com.

Coverage for limited-service franchised hotels and motels.

Available limits: Minimum $5 million, maximum $15 million Carrier: Unable to disclose, not-admitted.

States: All states except Alaska Contact: Customer service at 609-818-9535

Contractors - Including New Ventures Market Detail: Regency Insurance Brokerage Services (www. ribsnyllc.com) covers: roofers; demolition contractors; plumbing contractors; masonry contractors; welding contractors; www.insurancejournal.com

street and highway paving contractors; HVAC contractors; commercial or paper G.C. Available limits: As needed Carrier: Unable to disclose, admitted States: Fla., Tenn., N.Y., and N.J. Contact: Customer service at 800-982-1895

InventPro Abatement Insurance Program Market Detail: Intellectual Property Insurance Services Corp.’s (www.patentinsurance.com) InventPro program is specifically designed to help enforce the policyholder’s intellectual property rights against costly IP litigation. The InventPro program offers an insurance policy specifically for accommodating inventors and small companies who have one to three patent applications, issued patents, trademark applications and/or registered trademarks.

Available limits: Minimum $100,000, maximum $500,000 Carrier: Unable to disclose, non-admitted States: All states Contact: Janet Zahnd at 502-855-5314 or e-mail: jzahnd@ patentinsurance.com

Advertisers Index Readers, browse, contact, or do product searches on any of our full page advertisers at: http://www.insurancejournal.com/adshowcase/ Abacus Insurance Brokers, Inc www.abacus.net Agency Ideas www.agencyideas.com Applied Underwriters www.applieduw.com Astonish Results www.astonishresults.com Atlas Financial Holdings www.atlas-fin.com Atlass Insurance Group www.atlassinsurance.com Burns & Wilcox Ltd www.burnsandwilcox.com California Earthquake Authority www.calquake.com Catlin US www.catlinus.com Century National www.cnico.com CNA Insurance www.cna.com CoreLogic www.corelogic.com Demotech www.demotech.com FSLSO www.fslso.com GIC Underwriters, Inc. www.gicunderwriters.com JM Wilson www.jmwilson.com

19 28 7, 42 12, 32 20 8 FL3 3 2 17 15 18 11 FL15 FL1, 11 FL13

Liberty Mutual www.libertymutual.com 41 Lighthouse Holdings, LLC www.lighthousepropertyins.com

SE4; SC4 Midlands Management Corporation www.midlandsmgmt.com 27 Monarch E & S Insurance Services www.monarchexcess.com 13 Morstan General Agency of Florida www.morstan.com FL5 National Alliance for Insurance Education & Research www.scic.com 32 Pacific Gateway Insurance Services www.pgiainsurance.com 21 PersonalUmbrella.Com www.personalumbrella.com 5 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com FL16 South & Western www.southandwestern.com SE4; SC4 TAPCO www.gotapco.com FL7 U.S. Reports us-reports.com 14 United Contractors Insurance Agency www.ucisg.com 30 Westrope www.westrope.com 10 Wright Flood www.wrightflood.com FL2

July 1, 2013 INSURANCE JOURNAL-NATIONAL REGION | 37

NATIONAL COVERAGE

Declarations Portable Insurance

Ways to Do Business

Improving Business Climate

“This type of insurance has been available without regulation for some time.”

— Idaho Department of Insurance Director Bill Deal said the department will begin licensing businesses to sell portable electronics insurance to cover the repair or replacement of portable electronic devices such as cell phones and tablets and their accessories starting July 1.

“I can’t see (insurance companies such as) State Farm, or an Allstate, or Farmers doing business this way. … For one thing, they would be out of business.”

— Texas state Rep. John Smithee, R-Amarillo, chairman of the House insurance committee, comments after David Durden, a lawyer with the Texas Windstorm Insurance Association, said during a committee meeting that TWIA paid claims for damaged property based on the owner’s estimate.

“The Michigan Future Business Index surveys continue to show increasing evidence that Michigan’s business climate is improving.”

— Mike Britt, president of Accident Fund Insurance Co. of America, which sponsors the Michigan Future Business Index survey of small and midsize business leaders. Business owners said in the latest survey that their businesses have grown over the past six months and they plan to make further investments in their workforce.

Flood Plan After Sandy “Hurricane Sandy made it all too clear that, no matter how far we’ve come, we still face real, immediate threats.”

— New York City Mayor Michael Bloomberg, who has called for a $20 billion system of flood barriers to protect the city’s low-lying areas. The Bloomberg administration made 250 recommendations, including installing bulkheads and dune systems on beach areas and bolstering building codes.

No Weigh In for Take-Out “Our office does not weigh in for or against any Citizens take-out action. Instead, we expect the experts at Citizens and the Office of Insurance Regulation to act in the best interest of Citizens policyholders and the taxpayers that support the company.”

— Adam Hollingsworth, chief of staff for Florida Gov. Rick Scott, insists that no one in the Scott administration took a position before Citizens Property Insurance Corp. approved a transaction in which the state-backed insurer would pay $52 million to Heritage Property Insurance and Casualty to absorb 60,000 policies in a transaction known as a “take-out.”

Figures

$100

The reward amount that tipsters who report drunken drivers in Columbia, S.C., can get under a new initiative, the Report A Drunk Driver program, launched by AAA Carolinas’ Foundation for Traffic Safety and Columbia officials. AAA says South Carolina ranks third highest in the nation for drunken driving deaths per vehicle miles traveled. In 2011, Richland and Lexington counties recorded 13 percent of the state’s drunken driving deaths.

$55 Million

Is how much a jury has awarded to a Southern California man who lost his legs because he claims a private security firm’s guard failed to protect him from gang members who shot him at an apartment building.

38 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

70,782 The number of insurance claims filed in response to the major tornado outbreak in Oklahoma in late May, as of June 18. Insurance payments had reached $561,976,781 as of that date, according to the Oklahoma Insurance Department.

$31.1 Million The overall amount that the National Flood Insurance Program paid to Rhode Island residents after processing over 1,000 flood claims filed in the Ocean State post-Sandy, as of June 11. Some 96 percent of flood claims have now been processed in the state, with an average payment of $35,603. www.insurancejournal.com

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Closing Quote

Across the Pond: Managing General Agents in the UK

T

By Sian Fisher

One of MGAA’s aims from the outset was to set its underwriting agency members apart from those falling under the wider “wholesale intermediary” tag, which the UK regulator ascribes it. The body’s founders felt confusion over the definition of an MGA was holding back the professional development and rigor of the sector in the UK. This had been compounded by the current regulatory framework not acknowledging underwriting agents as a class of intermediary unto themselves.

So, while one octogenarian body prepares to widen its net, its infant counterpart in the UK remains focused on achieving its clear and unwavering goal of first defining what “good” looks like in a well-run MGA. This was a big part of the motivation for the MGAA’s creation — its founders felt it vital the Financial Conduct Authority (FCA) understands the distinctive nature of MGAs if it is to regulate them effectively.

Greater understanding should also reduce the duplication of activities between MGAs and insurers that produces cost and bureaucracy in an already expensive and inefficient industry. It will help breed greater trust and unmask any conflicts of interest or bad practices.

To ensure governance is appropriate and proportionate, MGAA’s structure comprises a 10-member board of directors supplemented by five committees. Its chief purposes are to put forward members’ views and negotiate on their behalf with government agencies and departments, including the new FCA regulator, both in the UK and Europe, to establish best practices, including a code of ethics, while working to promote the competitiveness and professionalism of MGAs.

he past two years have seen interesting developments unfold on both sides of the Atlantic with regard to Progress & Success managing general agents and their representation, albeit This mission has been a success. When MGAA launched in electing to move in slightly different directions.

2011 it counted 40 full members underwriting approximately In May, the 87-year old American Association of £1.25bn ($1.9 billion). In the less than two years that premium Managing General Agents (AAMGA) ended a two-year profigure has doubled to more than £2.75bn ($4.3 billion), while cess of inward reflection and market demographic examimembership statistics stand at 67 full, 29 market participant nation, by voting to throw open its doors to all wholesale and 24 supplier. There are thought to be more than 250 insurance practitioners. According to executive director MGAs now operating in the UK, underwriting around 11 perBernd Heinze, AAMGA’s transformation into the American cent of its £47bn ($61.7 billion) general Association of Wholesale Insurance Professionals (AAWIP) will create a 2011 marked a milestone insurance [non-life] premium income. stronger body that ensures the lonin the United Kingdom as And while they are by no means a new phenomenon in the UK, their recent gevity of the market segment. it gave birth to its first resurgence made the need for indepen Meanwhile, 2011 marked a miletrade body dedicated dent representation more important. stone for the sector in the United AAMGA and MGAA are at differKingdom as it gave birth to its first specifically for managing ent points in their lifecycle but both trade body that gives a distinctive general agencies. are undoubtedly driven by the desire voice for MGAs — the Managing to create the most relevant, influential General Agents’ Association (MGAA). and representative body possible for their members operating Eligibility for full membership is reserved for those whose in specific geographic markets. primary fiduciary duty is to their insurer principals — as opposed to that of the broker being the agent of the insured — and drawing attention to this distinction is what drove Fisher is the managing director of OIM Underwriting and a director the UK’s the body’s creation.

Managing General Agents’ Association.

40 | INSURANCE JOURNAL-NATIONAL REGION July 1, 2013

www.insurancejournal.com

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