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Inside This Issue

23 On The Cover

Special Report: Top 100 Privately Held P/C Agencies

August 5, 2013 • Vol. 91, No. 15 • West Region









W2 More Quake Studies for Hollywood Skyscrapers

W4 Data IQ: California’s Data Breach Year in Review

W2 $35M Award to 29 Washington Patients for Root Canals

28 Agency Opportunity: A Book of Business Transition Plan

W2 Mitsubishi Blamed in California Nuclear Plant Closure

29 The Competitive Advantage: Chris Burand

W8 Social Media: It’s Here to Stay

34 Closing Quote: Pynes on Affordable Care Act

Industry Told TRIA Won’t Be Renewed Until 2014

11 Prices Up Again in Q2 But Market Hardening May Be Moderating: The Council 11 Risk Managers Report Total Cost of Risk Up as Market Firms 12 Spotlight: 10 Things to Know About Condos 18 Closer Look: Auto Insurance Fraud: Is There a Solution? 20 Spotlight: Protecting Personal Property in a New Era of Catastrophes 23 Special Report: Top 100 Privately Held P/C Agencies 26 Special Report: Top 20 Agency Networks/Aggregators 27 Special Report: Top 20 Banks in Insurance

DEPARTMENTS 6 10 10 W10 14 32


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Opening Note New and Improved


or nine years now Insurance Journal has strived to identify the nation’s leading privately held independent property/casualty insurance agencies in our annual Top 100 P/C Agencies special report. This year, we dug a little further in that search. In previous Top 100 reports, Insurance Journal ranked leading agencies by total P/C premium, which included total commercial lines and personal lines premium for each agency. But premium doesn’t always mean profitability especially in the independent agency world, which can often thrive on agency and brokerage fee income and contingency income. As a result, we changed the 2013 Top 100 list to rank by total P/C revenue as reported in 2012, which includes total commercial lines revenue and personal lines revenue for each agency. Subsequent reports will list Top Commercial Lines Leaders and Top Personal Lines Leaders also ranked by revenue. Another big change in this year’s Top 100 report is the exclusion of an important and growing industry sub-sector — independent agency networks, clusters, franchise and aggregator groups. Network and aggregator groups — organizations that join the premium and services of many individual, privately-owned independent agencies — play an important role in the independent agency system today. Their growing prominence and unique structure made it necessary to develop a list of their own. This year’s report highlights the nation’s Top 20 Agency Networks/Aggregator Groups. We hope to expand and further develop this list for future Insurance Journal reports. Lastly, the report features a list of the nation’s Top 20 Bank Holding Companies and Banks in Insurance ranked by 2012 insurance brokerage fee income courtesy of the Michael White Bank Insurance Fee Income Report, which was sponsored by Dowling Hales. The evolution of Insurance Journal’s Top 100 report would not have been possible without the willing participation of all of the agencies and brokerages that have shared their information over the years. All information in this report is gathered from voluntary online submissions and best estimates based on other public information sources. We thank the many agencies that have contributed over the years and invite others that have never submitted information for the report to consider it next year. Be proud of what you have accomplished. For questions, comments or criticisms, write to us at Insurance Journal. And congratulations to this year’s top agencies!

Andrea Wells Editor-in-Chief



Editor-in-Chief Andrea Wells | V.P. Content Andrew Simpson | East Editor Young Ha | Southeast Editor Michael Adams | South Central Editor/Midwest Editor Stephanie K. Jones | West Editor Don Jergler | International Editor Charles E. Boyle | Senior Editor Susanne Sclafane | Editor Denise Johnson | Associate Editor Amy O’Connor | Columnists Chris Burand Contributing Writers M. Scott Carter, Jerry Hourihan, Tom McDonald, John Milburn, Jeffrey Norton, John Petricelli, Shawn Pynes


V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 West Dena Kaplan (800) 897-9965 x115 South Central Mindy Trammell (800) 897-9965 x149 Midwest Lauren Knapp (800) 897-9965 x161 Southeast Howard Simkin (800) 897-9965 x162 East Dave Molchan (800) 897-9965 x145 New Markets Sales Manager Kristine Honey | Classifieds, Jobs, Agencies Wanted/For Sale (800) 897-9965 x125 Ly Nguyen |


Marketing Administrator Gayle Wells | Advertising Coordinator Erin Burns | (619) 584-1100 x120 New Media Producer Bobbie Dodge | Videographer/Editor Matt Tolk |


Vice President/Design Guy Boccia | Vice President/Technology Joshua Carlson | Design and Marketing Executive Derence Walk | Web Developer Jeff Cardrant | Web Developer Chris Thompson |


Director of Education Christopher J. Boggs | Online Training Coordinator Barbara Whiffen |


Chairman Mark Wells Chief Executive Officer Mitch Dunford Accounting Manager Megan Sinclair |

FOR QUESTIONS REGARDING SUBSCRIPTIONS: Call: 855-814-9547 or you may subscribe or change your address online at: 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 Visit for more information.

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News & Markets Industry Told TRIA Won’t Be Renewed Until 2014 By Andrew Simpson


he property/casualty insurance industry should not count on Congress reauthorizing the federal terrorism reinsurance program this year or in time for January renewals, according to a key insurance lobbyist working on the issue on Capitol Hill. If Congress agrees to extend the terrorism insurance backstop, known as TRIA, it will probably not do so until late next year when the program is scheduled to expire, said Leigh Ann Pusey, president and CEO of the insurer trade group, the American Insurance Association. Pusey said Congress has a history of “running right up against the deadline” on TRIA and she expects the same will happen again. The current program expires Dec. 31, 2014. “I am not optimistic we will have it extended in time for January renewals,” she said. But she said she thinks it will eventually be extended. “I am optimistic it gets done in 2014 but not this year because of a crowded agenda and the history of this issue” of last-minute action, Pusey told reporters during a press availability at AIA headquarters in Washington, D.C. Thus, insurance carriers and brokers will have to discuss the potential expiration of terrorism coverage and the need for exclusions with their accounts that come up for renewal starting in late 2013, as they have had to do in the past years when Congress waited until the deadline to renew TRIA. The original federal Terrorism Risk Insurance Act (TRIA) was enacted after the Sept. 11, 2001 attacks to allow the federal government and the insurance industry to share losses in the event of a major terrorist attack. The current version of TRIA is officially the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA).

Pusey said the Boston Marathon Even the Treasury Department has bombing in March has raised questions questioned the need to extend TRIA and the level of interest in Washington and it is due to issue a new report by over TRIA and that supporters of the the end of September that could influprogram face a political battle for a ence the debate. number of reasons. Pusey said lawmakers need to know One reason is that TRIA is that Congress has ‘I am not optimistic we will designed so a “crowded agenda have it extended in time that the insurand other prioriance industry for January renewals.’ ties” right now. A has “significant key player, House Financial Services skin in the game” due to required high Committee Chair Jeb Hensarling, Rretentions and also that taxpayers are Texas, is focused on housing issues this protected because the government must year, she said. recoup monies up to $27.5 billion if it Another obstacle is that there are ever has to pay out anything and may many new members of Congress — recoup even more. Also, TRIA only almost half in Congress and on the covers losses after private insurers have House committee were not around paid $100 billion. for past TRIA debates and have never Consumer Federation of America’s J. voted on the program. These members Robert Hunter, former Texas insurance have questions and need to be educated commissioner, has criticized TRIA as about TRIA, according to Pusey. unnecessary. A third obstacle, Pusey said, is the Hunter has said TRIA amounts to a segment in Congress that is “philo$7 billion subsidy for P/C insurers. sophically hesitant” to back government Industry insiders dismiss Hunter’s $7 programs where they believe private billion figure as “bogus” and his argumarkets can do the job. Among them ment as anti-consumer. is Hensarling. “He is challenging us Dr. Robert Hartwig, president of to make the case for the program and the industry’s Insurance Information that’s a fair thing to do,” the AIA execuInstitute (III), said the TRIA program tive said. has cost taxpayers almost nothing.


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Declarations Agency-Carrier Relationship Tort Reform, or Not

Joining Forces

“We can surmise that the firming market impacted the agency-carrier relationship over the past several years.” — Rick Russell, CEO of Insurance Agents & Brokers (IA&B), a partnership of three agents’ associations serving Pennsylvania, Maryland and Delaware. IA&B’s new commercial lines survey of 457 professionals from member agencies found that its members’ overall satisfaction with commercial lines carriers has decreased slightly.

“Minnesota is joining forces with key states to help evaluate the impact of climate change on the insurance industry. … This survey will help us get a clearer picture of how insurers are addressing the risks and the best ways to adapt to our changing climate.” — Minnesota Department of Commerce Commissioner Mike Rothman discusses his state’s decision to join California, New York, Connecticut and Washington State in requiring insurers to respond to a Climate Risk Survey adopted in 2009 by the National Association of Insurance Commissioners (NAIC).

Dog Defense “At least now we have the ability to go into a courtroom when we’re sued over a dog bite and have a defense, where there was no defense before.” — Jeff Moore, director of the state Sheriff’s Association, on a new South Carolina law exempting the police from strict liability for dog bites.

“Now, because (Fallin) doesn’t like the way the Supreme Court has ruled, she’s throwing around the idea of a special session for tort reform.” — Oklahoma state Rep. Scott Inman refers to the suggestion by Gov. Mary Fallin that she may call a special session to rework a civil lawsuit bill ruled unconstitutional by the courts. Inman said a special session “would be a waste of time and money,” and that tort reform could easily be addressed in the regular legislative session that begins in February 2014.

Cleaning The Air “I can’t think of a worse way to hurt those who are lower income or middle income and to make no difference.” — Wyoming Gov. Matt Mead sharply criticized a plan by the U.S. Environmental Protection Agency to reduce regional haze, saying it did more to kill the coal industry than clear his state’s air.


48.1 %

The cumulative decrease in the workers’ compensation loss cost rate in West Virginia since 2004, when the state privatized the coverage.



The minimum amount of liability insurance coverage required by the Texas Department of Insurance for amusement park rides such as the Texas Giant roller coaster at Six Flags Over Texas, from which a woman fell to her death on July 19. Texas Giant was in compliance with that requirement, the insurance department said.



The number of children nationwide who received emergency room treatment for TV-related accidents, such as falling TVs, in 2011. That compares with 5,455 in 1990, according to a study published in the journal, Pediatrics. The injury rate nearly doubled, from 0.85 injuries per 10,000 children aged 17 and younger in 1990 to 1.66 per 10,000 in 2011. Such accidents sent nearly 200,000 U.S. children to the emergency room over 20 years and 215 children died from these injuries.

377,000 The estimated number of residents in Connecticut who lack health insurance. This figure represents nearly 11 percent of the state’s 3.5 million residents, according to a recent article from the Associated Press.


News & Markets More Quake Studies for Hollywood Skyscrapers

Mitsubishi Blamed In California Nuclear Plant Closure


os Angeles officials have asked developers of a massive Hollywood skyscraper project to conduct more studies to determine whether it’s earthquake-safe. The request came in late July after a USC quake expert voiced concerns. The Millennium project would build two towers of 39 and 35 stories near the Capitol Records building, creating more than 1 million square feet of apartment, office, hotel and retail space. Dozens of neighborhood groups oppose the plan and state officials have launched their own study to determine whether a nearby quake fault is active. The head of Millennium Partners, Philip Aarons, said that there’s no evidence of an active fault and the developer is convinced that the project is safe.


Hawaii Supreme Court Rules on Wrongful Death Suit

$35M Award to 29 Washington Patients for Root Canals



la Moana Center had a duty to care for a woman who died after getting stuck in an exhaust duct, even though she was trespassing on the roof, the Hawaii Supreme Court ruled. But the opinion also affirms parts of a lower court’s ruling in favor of Ala Moana that the mall couldn’t be liable for not anticipating she would sneak onto the roof and end up in the vent. The case now goes back to Circuit Court. The family of Jasmine Rose Anne Fry, 22, filed a wrongful death lawsuit, claiming Ala Moana was negligent and failed to care for her and her unborn baby. Fry was six- to eightweeks pregnant when she accessed the roof and squeezed into the duct and got trapped in a stove hood in 2005. She died of hyperthermia after rescuers removed her. The medical examiner said she had a psychotic episode. The high court said it was proper to grant summary judgment in favor of Ala Moana but that the mall “had a duty to exercise reasonable care to control those factors to prevent them for doing harm to Fry...” No one from Ala Moana called emergency services until about 20 minutes after a mall employee found her, according to the ruling.


outhern California Edison says it is seeking to hold Mitsubishi Heavy Industries Ltd. and Mitsubishi Nuclear Energy Systems liable for defective steam generators that forced the closure of the San Onofre nuclear power plant. The utility says in a statement that Mitsubishi should be accountable for designing and manufacturing replacement steam generators that were supposed to operate for 20 years but leaked radioactive coolant after less than a year of operation. The $670 million steam generators were supposed to extend the life of the twin-reactor plant on the coast between Los Angeles and San Diego, but the leak and discovery of excessive wear in the equipment force the utility to take it offline in January 2012. Southern California Edison subsequently announced the plant is being permanently closed.

ore than two dozen Washington patients of a former Seattle-area dentist accused of performing hundreds of unnecessary root canals have been awarded $35 million in an arbitration proceeding. Former King County Superior Court Judge Paris Kallas issued the award, finding that Henri Duyzend was negligent, failed to obtain informed consent from patients, committed fraud and violated the Washington Consumer Protection Act. A sworn affidavit from Dr. David To said Duyzend performed nearly 2,200 root canals on about 500 patients in the five years before he retired in 2007. To purchased Duyzend’s practice and says a typical patient has fewer than two root canals. Duyzend surrendered his license in 2010 after negotiations, agreeing to never practice dentistry in the state again. According to reports more than 200 patients filed malpractice claims against the dentist but the arbitration award benefits a smaller group of 29 who declined to settle their claims.

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Data IQ California’s Data Breach Year in Review


information was unencrypted. A full 28 percent of the breaches examined would not have required notification – with all the costs and reputational issues that entails – if encryption was in place. California, and all but two states with notification laws in place, includes a “safe harbor” provision making encrypted information immune from notice requirements. The attorney general noted: “In spite of the carrot of the breach notification law’s encryption exemption, organizations are subjecting too many Californians The Hardest Hit to a risk that is emi According to the report, retail, finance nently avoidable.” and insurance were the industries suffer The report’s No. 1 recommendation? ing the most data breaches in California, Encrypting digital personal information accounting for 49 percent of the 131 when moving or sending it out of a secure breaches reported to the office in 2012. The network. According to the Harris, this is average breach involved 22,500 individuals; for companies “a basic profive of the breaches tection and reasonable secureported involved ‘Online resources can the personal inforprovide a cost-effective rity measure to help them meet their obligation to mation of 100,000 or way to keep policy and safeguard personal informamore individuals. procedures up-to-date tion entrusted to them.” The attorney general also made it The Most and provide online Preventable training for employees.’ clear that her office is making investigating breaches In total, more involving unencrypted perthan 2.5 million sonal information an enforcement priority. Californians were put at risk by breaches in 2012. More than half of these – 1.4 million Tightening Security individuals – had data exposed in incidents Forty-five percent of the data breaches involving lost or stolen digital data or emanated from failures to adopt or carry misdirected emails in which the personal n case there was any doubt that regulators are focused on data security and privacy, California’s Attorney General Kamala D. Harris has issued a formal report on the topic. “Data Breach Report 2012” shares information on data breaches reported to her office in 2012, and provides observations on vulnerabilities they may reveal and recommendations for future prevention and mitigation. By Jeffrey Norton In 2003, California was the first state in the nation to require its businesses to notify consumers when their personal information was compromised by a security breach. Since then, 46 states have followed suit, and notification is federally mandated for the healthcare sector. Beginning in 2012, California required businesses to provide the Office of the Attorney General with copies of notices on breaches involving more than 500 Californians. The report offers valuable analysis for the insurance community.


out appropriate security measures. This was the impetus for the report’s second recommendation, for companies to review and tighten security controls, including training of employees and contractors on organizational policies and procedures. This can be hard for resource-strapped businesses. Online resources can provide a cost-effective way to keep policy and procedures up-to-date and provide online training for employees. Raising the Bar in Response The report highlights ways to improve data breach response. Fifty six percent of the reported breaches involved Social Security numbers. Breaches of Social Security and driver’s license numbers are continued on page W12

Ready for Battle. Sharron is here for you. She’s here to find the carrier you need to deliver your quote. She’ll fight for the best coverage at the best rates on these commercial lines: • General Liability – Manufacturers, Various Mercantile • Packages – Apartments, Property Owners, Vacant Buildings • DIC Including Quake • Builders Risk • Product Liability • Artisan & General Contractors • Property Including Large Schedules Still looking for an arsenal? Look no further. Sharron is ready.

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People Mark Kaufman

Colby Waltenburg

Art Davis

The California Wholesalers Association is adding four associate members to its ranks. CIWA elected to revise its bylaws and allow for more associate members. The new associate members are: Arthur Davis; Beth Hannon; Colby Waltenburg; and Mark Kaufman. Davis is senior vice president for binding authority underwriting at Colony Specialty. He has more than 20 years’ experience in the insurance industry. Hannon is senior director of contract transportation underwriting for Scottsdale Insurance. Hannon leads the countrywide transportation division for Scottsdale’s contract binding division.. Waltenburg is vice president of the transportation division for Coastal Brokers Insurance Services Inc. Waltenburg started his career as an underwriter in Canada. Kaufman is chief operating officer at Monarch E&S Insurance Services Inc., where he oversees multiple divisions and offices throughout the western United States and continues to manage his own book of business. Edgewood Partners Insurance Center named Charles M. Cushner as a principal and property/casualty insurance producer.  Cushner’s responsibilities will include the acquisition of new clients. He will also design, place and oversee risk management and property and casualty insurance programs. Cushner has experience in risk management with a focus on construction, consumer services, transportation and manufacturing. Prior to EPIC, Cushner was a senior vice president with Wells Fargo Insurance Services in San Carlos. Cushner began his career with Calco Insurance Brokers and Agents in San Mateo before moving to ABD Insurance and Financial Services in Redwood City. IMA Inc. named Brian Bovasso director of its public company and large risk practice. This is a new practice that will be part of IMA’s Executive

ASTISH14873.indd ASTISH15197.indd 11 ASTISH5333.indd


Risk Solutions. Bovasso will lead the continued development and expansion of IMA’s executive risk practice, which specializes in D&O and related executive liability insurance. Bovasso has worked in the insurance industry since 2000 and was most recently a senior vice president within Aon’s Financial Services Group. IMA has grown to nearly 500 employees in Dallas, Denver, Kansas City, Topeka and Wichita. Hub International Insurance Services named Viesha Treadwell senior vice president of its San Francisco Commercial Division. Treadwell will be responsible for business development and sales. Treadwell and her team will be based at one of Hub’s newest locations in San Francisco. Treadwell served as an account executive with a national insurance broker in the San Francisco Bay area and was responsible for the development of new business submissions primarily in the technology and precious metal recycling sectors. Chicago-based Hub International provides property/ casualty, risk management, employee benefits, investment and wealth management products across the United States, Canada, Puerto Rico and Brazil. Poms & Associates Insurance Brokers Inc. named Chris Warren in the firm’s West Los Angeles office as vice president of its construction practice.  Warren more than 10 years of experience providing insurance and risk management for contractors in the construction and environmental industries. Warren is a member of the California Building Industry Association and sits on the Safety Committee of the Associated Builders and Contractors Orange County Chapter. Prior to Poms Warren was the construction division practice leader at Sullivan Curtis & Monroe. Poms has offices in California, Colorado, New Mexico and Washington.

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News & Markets Social Media: It’s Here to Stay The Most Successful Users Know Their Markets By Stephanie K. Jones


he value of social media as a tool for marketing and selling property/ casualty insurance may be a matter of debate but one thing is for certain: While the nature of social media may be evolving, it’s not going away. Many property/casualty insurance agencies have embraced tools like Facebook, Twitter and LinkedIn to varying degrees. The most successful users are those who know their markets and are focused on what they’re going after, said Laird Rixford, vice president of Products and Marketing at Insurance Technologies Corporation (ITC), based in Carrollton, Texas. “The big pitfall is in not knowing your market,” Rixford said. “If you’re


through a claim or disaster or somesitting there trying to sell commercial thing. They want to know that their policies on Facebook, it’s just a waste of insurance agent is there for them.” time.” With both Facebook and Twitter, On the other hand, Facebook and “everything goes back Twitter offer to your website,” the ability to ‘When they go to our Rixford said. “It’s showcase the Facebook page they go where you put all your personality of back to our website to content, where you an insurance find out the products and educate your customagency and ers. It’s your home on assure cusservices that we offer.’ the web, so everything tomers that points back to there.” they matter to you. That’s exactly the strategy employed On Facebook, “one out of every seven by the Ron Patterson Insurance Agency posts should be self-promotional,” Inc., in Richardson, Texas. Rixford said. “The other six should be “What we’re using Facebook for prijust fun things that you are doing for marily is education to our clients,” said charity, your community, what’s going agency Chairman Ron Patterson. “Take on in your community. Just being out claims for example. We had a recent fire there is what people like to see.” here two weeks ago that was caused Through by a leak of gas. Fortunately the house Twitter, an didn’t explode. But that could happen in agent is able a commercial building just like it could to communihappen in a residence. We use that. We cate to their warn people about those types of things customers as a communication tool.” that the agen Patterson, speaking during a panel cy is available discussion at the Independent Insurance and is listenAgents of Texas 2013 Joe Vincent ing to them. Seminar, said his agency uses such edu “Twitter cational opportunities on Facebook to is more of drive people back to its website. a consumer He cited another instance in which customer he had the opportunity to connect with support chanhis customers through Facebook, this nel,” Rixford time about car fires. said. It’s about “We had a car that caught on fire in letting them a parking lot down the street from us. know you are One of our staff people took a picture there, “which of that car. … We took that picture and is what any put it on our agency Facebook page — consumer you know what happened? We spiked wants to the interest. An incredible number of hear from people looked at that,” Patterson said. their insur As a result, Patterson was able to eduance agent as continued on page W10 they’re going


News & Markets Social Media, continued from page W8

cate customers on the dangers of car fires and ways to prevent them. “That’s the connection that we’re making,” Patterson said. “When they go to our Facebook page they go back to our website to find out the products and services that we offer.” Business-to-Business While Facebook and Twitter are commonly seen as effective ways for retail agencies to communicate with consumers, many wholesale insurance organizations may not view those tools as being as useful in a business-to-business environment. One specialty insurance wholesaler that sees things differently is Addison, Texasbased South & Western, which uses social media to supplement its overall branding initiative. en retriever named “Brighton,” Martin said. “Although some millennials look to social To that end, South & Western’s “web sermedia as their primary source of informavices are appropriately referred to as ‘Rate tion when making buying decisions, in the Retrievers’ and ‘Policy Retrievers,’” Martin financial services industry more traditional said. And through Facebook, the company communication methods at this point promotes “Brighton” to its retail agency cusare more readily accepted,” said South & tomers.  Western vice president Bill Martin. “When “By presenting ‘Brighton’ in a fun and we define ‘traditional,’ that would include fresh way through social media, hopefully electronic forms of communication includother insurance professionals are able to ing email marketing and highly functional experience a little humor while becomwebsites.”  ing informed on some of the products and However, he said, social media “supports services our organization can provide. The the buying decision by presenting your feedback we have received has been overcompany brand in a different and fun enviwhelmingly positive,” ronment. Since today most ‘If you’re consistently out Martin said.  people use there and you’re asking A Powerful Tool Facebook or your insureds to follow “LinkedIn is an extremeTwitter in a you and to be engaged ly powerful tool for staying purely recreational or leisure with you, they’re going to in touch with business conRixford said. setting, presentknow that you’re listening sumers,” “It’s a very powerful ing a complex and that actually helps tool, especially for people subject such as improve retention.’ who are working larger insurance isn’t accounts,” he said. going to be on For instance, if a producer is working an the top of anyone’s list of ‘fun things’ to account but is not in contact with the acturesearch. That’s why it is important to presal decision-maker, they can go to LinkedIn ent your company in a fun or interesting to find the right person. manner when using social media.” “By having just one connection with South & Western’s brand, for instance, someone in that company, you can use centers around the company’s mascot, a goldW10 | INSURANCE JOURNAL-WEST REGION August 5, 2013

LinkedIn to find other people in that company and connect with them. So you can get to the right person,” Rixford said. “That’s really big on large commercial policies that take a lot of time and effort.” LinkedIn is also an excellent recruiting tool, he said. It’s a way to find and keep in touch with good talent in the industry, people that you know are knowledgeable. “You will see that they might change jobs, they might be looking for a job, you’re keeping in touch with them,” he said. “It’s that networking aspect. … It’s being in communication with multiple people with an easy to use channel, where you can post and everybody in your network sees it.” The return on the investment placed in social media is not easily identified, Rixford acknowledged. But when it comes to marketing, there’s value in just staying in touch with people. “If you’re consistently out there and you’re asking your insureds to follow you and to be engaged with you, they’re going to know that you’re listening and that actually helps improve retention,” he said. It’s unlikely that somebody would surf Facebook to find an insurance agent to buy car insurance from, but if they are already connecting with an agency through social media, they are more apt to stay with them longer, Rixford said.

In loving memory of

Bob Borisoff On the Anniversary of his passing.


“He was my mentor in insurance and my teacher in life. I watched him turn clients into friends, friends into family and family into guarded treasures. A true gentleman of the industry. Always making people feel good about themselves. He was my hero and my Dad.� Derek Borisoff CEO


Agent E&O Data Breach, continued from page W4

‘Notification is one of the most complex areas for a business to tackle, as specifics on how to notify victims of breaches vary widely.’ especially concerning as they leave victims vulnerable to the possibility of identity thieves establishing new accounts in their name. Yet in 29 percent of breaches of this type, no credit monitoring or other mitigation recourse was offered to victims. Harris recommends offering mitigation products, such ascredit monitoring, and providing information on security freezes when breaches involve this most sensitive personal information. Given that the breach notification letSelfher Serve ad were, third on pg.pdf ters sharedIJwith office aver- 1

age, at the 14th grade reading level – significantly higher than the U.S. average 8th grade level – the attorney general emphasized the need to improve readability so victims can readily understand what protective measures they can take. Notification is one of the most complex areas for a business to tackle, as specifics on how to notify victims of breaches vary widely. Some states require companies to reveal how a breach happened, others forbid it. If the breach notification itself is not written properly, it can create sub4/24/13 AM for the company issuing stantial11:50 liability

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it. Experienced legal counsel and experts in the notification process can be pivotal in enabling a company to create notices that are both compliant and customer-friendly. On The Horizon The report’s final recommendation provides a glimpse at an emerging exposure, suggesting legislation be considered to amend breach notification law to require notification of breaches of online credentials, such as passwords and user names. An area worth watching carefully, these breaches have implications for everything from the banking industry, where credentials are used for fraudulent theft of funds, to social media, where unauthorized postings can lead to claims of libel or slander. With “Data Breach 2012,” California’s attorney general offers up valuable insights based on recent experience – and sends a loud-and-clear message that as data breach risk evolves, the expectations for businesses managing and mitigating the exposure do too. Businesses across the spectrum of industries are wise to align themselves with experienced partners who can assist in managing and mitigating the multiple facets of this exposure – providing not only funding but the expertise and resources to respond to data breach incidents that occur. As the attorney general’s report makes clear, regulators are watching. Jeffrey Norton is a technology and privacy liability underwriter in the private enterprise/small business unit of Beazley Group. Phone: (312) 476-6253. Email: Jeffrey.


News & Markets Prices Up Again in Q2 But Market Hardening May Be Moderating: Council


ommercial property/casualty pricing continued to gently creep upwards in the second quarter, however signs of some moderating of increases also surfaced. The Council of Insurance Agents & Brokers’ quarterly Commercial P/C Market Index Survey revealed that, on average, pricing rose at a rate of 4.3 percent compared to 5.2 percent in the first quarter of 2013. Small and medium account pricing continued to rise more than pricing for large accounts. “There weren’t any great surprises in the second quarter,” said The Council’s President/CEO Ken A. Crerar. “Prices inched up, underwriting tightened and insurers looked to reduce exposure in some critical areas. However, the market hardening appears to have moderated in the last quarter.” Crerar said the critical areas continued to be property and workers’ compensation. The second quarter survey also showed that insurers were still feeling the sting of Superstorm Sandy.

In fact, insurers were looking carefully at any catastrophe-prone property exposure on the coast or inland. Brokers across the country reported that insurers were using more wind/hail deductibles, according to The Council, which represents large commercial insurance and benefit brokers. Brokers also told The Council that carriers pulled back on terms and conditions and lowered limits and cover for exposures, such as storm surge, flood and off-site power, among others. Workers’ compensation again was a tough sell, particularly where loss

experience was poor. A broker in the Northwest reported that workers’ compensation was the line with the strongest rate increases and non-renewals and some brokers across the country reported that carriers are backing away from the line. Demand for insurance appeared to hold steady in the second quarter, according to the brokers, an indication that the economy is slowly recovering. The top concern among brokers continued to be finding young talent. The research was done by Barclays Research based on The Council’s data. .

Average Q2 2013 Commerical Rate Increases Slowed Account Size





Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012

4.6% 5.2% 5.5% 3.7% 4.3%

4.7% 5.3% 5.1% 4.5% 4.9%

3.8% 4.9% 4.4% 3.5% 3.7%

4.3% 5.2% 5.0% 3.9% 4.3%

Source: The Council of Insurance Agents & Brokers. Chart prepared by Barclays Research

Risk Managers Report Total Cost of Risk Up As Market Firms


usinesses paid about 5 percent more in 2012 than they did in 2011 to cover the total cost of risk. That compares to a rise of only 1.7 percent in 2011, according to the 2013 Risk & Insurance Management Society (RIMS) Benchmark Survey. The bigger rise in 2012 largely reflects the influence of hardening insurance market conditions, RIMS said. “While 2012 experienced a reduction in insured catastrophe losses, insurers continued to implement rate increases through the year,” said Jim Blinn, executive vice president of Advisen’s Information and Analytics unit and executive editor of the TCOR survey. “Continued pressure on underwriting results and a low interest rate environment motivated underwriting

ment to seek these higher rates.” The total cost of risk, or TCOR, includes insurance premiums, risk management expenses, self-retained losses and administrative expenses. The annual RIMS survey, produced with Advisen Ltd., uses industry data for more than 52,000 insurance programs from almost 1,500 organizations. Key findings from the survey: • Average TCOR for all companies increased 5 percent, from $10.19 per $1,000 of revenue to $10.70 per $1,000 of revenue – the result of hard market conditions. • A review of Advisen’s umbrella/excess pricing and limit data showed that pricing influences excess insurance program limit buying trends. When prices were dropping, insur-

ance buyers tended to increase their limits more. • The contribution of property premiums to average TCOR grew nearly 6 percent, from $2.92 per $1,000 of revenue to $3.09 per $1,000 of revenue. RIMS officials suggested that the trend seen in 2012 might not last.




10 Things to Know About Condominiums To adequately insure one’s condo apartment, it is important to review the condo association’s bylaws and proprietary lease to find out which structural parts of the condo units are covered by the association and which are not, the Insurance Information Institute advises. A “master policy” provided by the condo association covers the common areas in the building like the roof, basement, elevator, boiler and walkways for both liability and physical damage, the I.I.I. says. Sometimes the condo association is responsible for insuring the individual units, as they were originally built, including standard fixtures. In other situations, the association is responsible only for insuring the bare walls, floor and ceiling, according to the I.I.I. Approximately 599,000 existing condo and co-op apartment units were sold in the U.S. during 2010, at a median sales price of $171,700, according to the National Association of Realtors.

Mortgage lending institutions require proof of the condo association’s “master policy” as well as the unit owners’ own policy when considering loan applications from condo home buyers, the National Association of Professional Insurance Agents explains.

Many condo associations are seeing their premiums go up, and carriers’ inspections are getting more difficult nowadays, says Leslie Rogoff, a director for the Professional Insurance Agents of New York State (PIANY). Some condo associations are also finding themselves with less coverages and higher deductibles. In one recent renewal in New York, one association saw the flood deductible jump from $25,000 to $50,000, according to PIANY. There are a lot of good insurance packages out there. To find the best coverage, condo associations should look for companies specializing in real estate that offer specific packages for condos and co-ops. Condo owners can reduce their premium rates by raising deductibles and by installing a smoke and fire alarm system that rings at an outside service. If individual unit owners insure their unit with the same company that underwrites the building’s insurance policy, an additional reduction in premiums may be available, the I.I.I. says. There are approximately 600 insurance products and markets listed under condominium and condominium association in, part of Wells Media Group.

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Business Moves the Holborn name, and all current Lehrke personnel will consolidate with those in Holborn’s Minneapolis office headed by Tom Frank, according to the announcement. Holborn Corp., which was founded in 1920, became exclusively owned by its employees in 1998. Frank T. Harrison is CEO.

Holborn, W.J. Lehrke Reinsurance brokers Holborn Corp. of New York and W.J. Lehrke Co. of Edina, Minn., have agreed to merge. Details were not disclosed. The combined firm is operating under

USI Insurance, Cohen-Seltzer USI Insurance Services completed its acquisition of CohenSeltzer Inc., in Fort Washington, Penn. Terms of the transaction were not disclosed. A third generation family-owned insurance agency formed in 1926, Cohen-Seltzer Inc., provides risk management programs and financial products for both commercial and personal lines of business. USI said it is combining its existing

USI Plymouth Meeting, Penn., office with Cohen-Seltzer. USI said the move will extend its reach as one of the largest middle-market insurance brokerage firms in the Mid-Atlantic region. Lockton Lockton has expanded its commercial insurance operations, opening an office in the central business district of Fort Worth, Texas. The new Lockton office is located at 777 Main Street downtown. Frank Scardino is president of Lockton’s North Texas Property and Casualty Operations and Kendall Empey serves as chief operating officer. Lockton Lockton opened a new operation in Milwaukee, Wis., appointing two veteran employee benefits consultants as senior continued on page 16


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Business Moves continued from page 14 executives. John O’Connor and Bill Crowley have joined Lockton as senior vice presidents in Lockton’s new Milwaukee office. The new operation will have a temporary location downtown at 250 East Wisconsin Avenue, 18th Floor, in

Milwaukee. Lockton expects to move into permanent office space in downtown Milwaukee in late summer. O’Connor has been with Aon Hewitt and its predecessor consulting firm Hewitt Associates for more than 24 years. At Lockton, O’Connor will be responsible for business development

and client strategy Crowley has been a principal and client manager in Mercer’s Milwaukee office for the past six years. He has more than 20 years working as an employee benefits and human resources advisor. Regions Regions Insurance has established an office in Columbia, S.C. and hired insurance executive Frank Norris to lead the office, its first in South Carolina. Norris and his team join Regions Insurance from Frank B. Norris and Co., a Columbia-based insurance and risk management brokerage. Norris founded Frank B. Norris & Co. in 1984. Specialties include residential homebuilders and trade contractors. The team also brings expertise in property, including East Coast and Caribbean resorts. The Columbia office is the third addition to Regions Insurance over the past six months as part of the firm’s efforts to expand throughout the Southeast. In November Regions Insurance opened its first office in Atlanta, Ga., serving clients throughout the state. In January Regions Insurance expanded its employee benefits practice in Memphis, Tenn. Regions Insurance is an affiliate of Regions Bank. Leavitt Group, United Valley United Valley Insurance Services and Leavitt Group Enterprises have agreed to a merger, giving the two firms a collective 150 insurance agencies and counting under one owner. Under the agreement, signed on June 26, United Valley remains a separate organization that is wholly-owned by Cedar City, Utah-based Leavitt Group Enterprises. Leavitt Group owns controlling interest in all of its 70 affiliates, while United Valley has 80 independent agencies it owns and serves. The United Valley agencies will continue to be maintained separately and function separately, according to the owners. The agreement is subject to applicable conditions, including shareholder approval. Both boards have approved the merger. Closure is anticipated in August. No cuts to personnel are planned due to the merger, according to Neal Stanley, United Valley’s chief operating officer. Mike McCreary, president of United Valley, is expected to serve on Leavitt Groups’ board of directors. United Valley shareholders will receive an undisclosed amount of cash in the merger.


REGION August 5, 2013

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7/23/13 9:27 AM 7/22/13 3:09 PM


Auto Auto Insurance Fraud: Is There a Solution? By John Petricelli


ndustry estimates put personal auto insurance fraud at about 10 percent of paid losses and loss adjustment expenses a year. That equates to roughly $13.3 billion in 2011 alone. And the overall trends don’t appear good. According to the National Insurance Crime Bureau (NICB), questionable claims continue to rise each year, with a 56 percent increase between 2008 and 2012. Fraud can take the form of fabricated claims or staged accidents (“hard” fraud), or it can be opportunistic, as when claimants pad their losses or falsify information to obtain lower premiums (“soft” fraud). Unfortunately, most carriers tend to find fraud when it becomes most obvious, at the time of claim. But what if you could identify potential fraud even before you write the policy — at the time of quote?

holders and/or positively place them at the provided garaging address. • Fraudsters are beginning to use a “credit Detecting Potential Fraud? card” model to secure larger settle Can carriers better detect the potential ments, filing small initial claims to for fraud or false information before they “test the carrier” and then following up bind the risk? The short answer: Yes, with large multi-feature claims. according to a series of broad-based stud How did the insurers achieve those gains ies looking at premiums and losses from in fraud identification? The approach identimore than 12 million policies across more fied patterns of behavior in the information than 110 carriers. The study was comsubmitted through an insurance application missioned by Verisk Insurance Solutions when compared with data from multiple – Underwriting, and performed by the independent sources. The result was a mulanalytical consultancy Inovatus. The contifactor model that scores the accuracy of an sultancy focuses on delivering solutions insurance application and its potential for addressing underwriting fraud and prefraud or rate evasion by examining nearly a mium leakage. hundred different variables. Among the study findings: How good was • Participating carthe model? In multiriers identified Carriers need to step up their ple studies, a regrespotential fraud game in a big way to combat sion of the model in 7.4 percent auto insurance fraud. scores against actual of new policies loss ratios produced that filed a claim within the first 125 close correlations (an average R-squared of days. The analysis was able to predict 0.93). An important additional finding of the 84 percent of those policies (a total of study was that insurers couldn’t accurately 6.2 percent of new policies). detect fraud potential based on any single • In an astonishing 21.5 percent of policies behavioral characteristic viewed in isolawith early (suspicious) claims, the cartion. Precise detection comes from bringing rier couldn’t positively identify policy18 | INSURANCE JOURNAL-NATIONAL REGION August 5, 2013

together multiple characteristics to create an overall picture of the probability of fraud — and being able to quantify the degree of probability in a way that’s useful for taking effective action during the underwriting process. That approach differs from a more traditional underwriting approach, where carriers implement rules that produce various “flags” during the underwriting process indicating the need for additional research and followup. Too often, those rules-based approaches rely on the judgment and experience of a handful of individuals. Carriers aren’t deriving the significance of any one or combination of rules empirically through data and analytics but from personal experience and judgment. And all too often, traditional rules-based solutions generate too many false positives, thereby undermining their credibility and causing carriers to ignore real instances of fraud or rate evasion. Why is fraud becoming more of an issue? The nature of buying auto insurance has fundamentally changed. All market participants — consumers, agents, and call center representatives alike — expect convenience, speed, and ease of doing business. That means carriers have only a matter of seconds

or minutes to size up the risk and ferret out any inaccuracies or inconsistencies. And technology is accelerating those trends. The majority of consumers now use the Internet when shopping for auto insurance. They may not always complete the purchase online, but they use it at some point during their shopping experience. Requesting an Online Quote To gain more insight from fraud trends, the studies included a review of more than a thousand call center phone calls as well as the “keystrokes” of more than 3,000 online sessions for individuals seeking a quote or policy through the Internet. One conspicuous pattern involved consumers who not only completed the quote process but also went through multiple iterations online. In those cases, the first completed quote contained extensive details, including what appeared to be every household member along with their corresponding information. Once the system returned the initial quote with an estimated premium amount, the consumer almost immediately began to make changes. Youthful drivers might disappear. Consumers changed performance vehicles to nonperformance, or they modified dates of birth for children, making them appear older to avoid the carrier’s “youthful” categorization. In a handful of cases, they even modified gender to reduce the premium associated with youthful male drivers. Once the consumer was able to manipulate the premium to a more acceptable level, most of them abandoned the online session, and within a minute, a call center representative would quote and write a policy with exactly the last iteration of the online quote. Carriers Can Make a Difference What can carriers do to combat fraud? Basically, carriers need to step up their game in a big way. They’ve made large investments deploying technology and data to improve the customer and agent experience. But they’re falling behind in the race to identify fraud and rate evasion — a race they can’t afford to lose. Because rules-based processes tend to be very limiting and completely miss the sophisticated patterns that only become clear through the skilled

cation of data and analytics, carriers need to take a different approach. The most effective antifraud measures, as shown by these studies, will likely be measures that use large stores of data with sophisticated analytics in real time. Most carriers will need to look outside their

organizations to obtain and deploy the best antifraud solutions. Petricelli is principal and executive vice president of analytics for Inovatus LLC. Inovatus and Verisk have a strategic business alliance and work together on underwriting fraud models for the personal auto industry.


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Homeowners How to Manage the Winds of Change for High Net Worth Clients Protecting Personal Property in a New Era of Catastrophes


s insurance professionals, we’re in the business of anticipating and responding to severe weather. However, heightened activity in recent years points to some startling trends: Atlantic named storms in the month of June have nearly doubled since 1995. Cal Fire reports 3,719 fires and 63,701 acres burned from Jan. 1 to July 13, 2013, compared to 2,597 fires with 33,412 acres burned for the same time period in 2012. The 2011 earthquake in Virginia triggered landslides at distances By Jerry Hourihan four times farther — and over an area 20 times larger — than previous research would have indicated. More than 20 percent of flood insurance claims come from areas mapped outside high-risk areas. Unfortunately, those with the most to protect often are not aware of their exposures.

sions, even as they grow more successful and Even in the face of an uncontrollable storm acquire higher-value homes and possessions. or natural disaster, a significant number of However, the increased frequency and severclaims can be prevented (or their severity ity of catastrophic weather events reinforces lessened) through proactive risk managethe importance of considering value in addiment. tion to price. For example, an antique rug was irrepa Today’s savvy insurance buyer also should rably damaged when wind-driven rain ask, “Do my policies adequately cover my assets?” breached a window and created a puddle “If I have a claim, will my of water on the floor. Although the The best agents and brokers service expectations be met, or even exceeded?” puddle was merely are champions of proactive “Will my insurance coma fraction of an risk mitigation. pany show me how to inch high, it was mitigate risk?” enough to destroy a After all, upfront premium savings can be sentimental family heirloom. Had the homeeroded quickly by uncovered damage or the owner known to move valuable items away frustration of timely repairs. from windows and doors, the damage could have been avoided entirely. High Net Worth Households A more alarming example occurred after Direct writers are a suitable fit for much Hurricane Katrina: A large estate made it of the insurance-buying population, but afflusuccessfully through the storm. Yet when ent and high net worth households are betthe owner subsequently left the home with ter served by independent agents or brokers candles burning, a multi-million-dollar fire who can be year-round advisors and connect loss ensued. their clients to tailored coverage and service Most personal lines consumers look to solutions. As each household has its own set price as the driving factor behind their deciof exposures and circumstances, choice of carrier becomes critical to finding the right fit. In addition to pairing personal lines clients with well-rounded coverage, the best agents and brokers become champions of proactive mitigation. By working in collaboration with the select group of companies that devote staff and resources to loss prevention and risk management, they can glean best practices that homeowners can adopt. In many instances, implementing losscontrol measures also can lead to premium credits. Just as an independent agent will uncover a client’s needs and devise appropriate coverage recommendations, an insurance provider specializing in the high


net worth niche can identify individual vulnerabilities and offer recommendations and resources to address them. In some instances, there are formal mitigation programs in place to assist with large-scale perils such as wildfires and hurricanes. In others, overarching home vulnerability assessments may be conducted at the onset of the policy term. For example, when an AIG risk manager recently visited a home in California, he noticed that a large, antique grandfather clock was not properly secured to the wall studs. If an earthquake were to occur, the clock could topple over — potentially diminishing its value or even worse, injuring someone in the household. By spending time in the home, the risk manager was able to help the client alleviate this exposure. Encouraging Client Participation While those with large estates benefit from sophisticated preparedness plans, there are a multitude of tips that nearly all homeowners can employ well in advance of a catastrophe. Following are just a few examples. Hurricanes and Heavy Storms Minimize water damage in the basement or lower level by installing a sump pump with a back-up. Follow the manufacturer’s recommendations for regular maintenance. These vary from running the pump every two to three months, to a yearly cleaning before storm season. Replace standard windows and slidingglass doors with impact-resistant systems. French doors should open “out” to increase resistance against strong winds. Have storm shutters and anchor bolts professionally inspected annually to ensure they perform as designed. Wildfires Install ember-resistant vents to increase the home’s overall protection and lessen the chance of fire damage. Create 100 feet of “defensible” space around the home and any other structures on the property. In the first 30 feet,

scape with fire-resistive plants only, trim overhanging trees and remove debris from roofs regularly. In the remaining 70 feet, clear away any vegetation that would be considered flammable, dead or dying. Grass, leaves and pine needles all become fuel once they dry out. Water all landscaping and vegetation regularly, and prune tree branches so they are at least 6 feet to 10 feet away from the ground.

All Perils Every household can benefit from devising a comprehensive emergency plan. Consider the possible scenarios; sometimes a family will need to evacuate the residence, while in other scenarios they need to stay inside for an extended period of time. While family comes first, also consider plans for fine art, collector cars, wine and watercraft.

Earthquakes Install a seismic shut-off valve on the gas meter to protect the home from fires due to a broken gas line. Bring in a professional to hang/install artwork. He/she can assess individual pieces and determine how to secure them appropriately. Turn to technology. There are free apps through the Red Cross and others to access timely alerts and stay connected with loved ones.

Final Thoughts Access to proactive risk management expertise can mean the difference between minor property damage and major headaches for homeowners. By elevating the importance of preparedness across the entire industry, we can make a profound difference from coast to coast. Hourihan is executive vice president and chief marketing officer for AIG Personal Lines in the United States and Canada.

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About This Report: Welcome to Insurance Journal’s new and improved Top 100 Independent Property/Casualty Agencies report. This year’s Top 100 features a number of agencies that are new to the list thanks to a change that ranks the agencies on total property/casualty revenue in 2012. Previous reports ranked by total P/C premium. Also, Insurance Journal’s Top 100 list comprises solely privately-owned firms whose business is primarily retail, not wholesale. This year also brings a new addition to the report. The nation’s Top 20 Agency Network/Aggregator Groups can be found on page 26. Aggregator groups — organizations that






GR 01 O UP 3


join the premium and services of many individual, privately-owned independent agencies — play an important role in the independent agency system today. Also included is a list of the nation’s Top 20 Bank Holding Companies and Banks in Insurance ranked by 2012 insurance brokerage fee income courtesy of the Michael White Bank Insurance Fee Income Report, which was sponsored by Dowling Hales. Insurance Journal wishes to thank all of the agencies and brokerages that were willing to share their information for the Top 100 report and cooperated in the process. The result is a glimpse at some of the nation’s most successful privately-held independent insurance agencies and brokerages.

All information in this report has been garnered from voluntary online submissions from agencies and brokerages and best estimates based on other public information sources. There may be agencies eligible for listing but for which no information was received or located. We encourage all qualifying agencies to submit data for future reports. The more submissions and cooperation Insurance Journal receives, the more accurate and comprehensive this listing can be. Also, submitted data was not independently verified. For more information about this report, contact Andrea Wells at:



Insurance Journal’s Top 100 Privately Held Property/Casualty Agencies Ranked by Total 2012 P/C Revenue 2012 Total P/C Premium Written $5,554,900,760 $9,860,400,000 $3,068,345,869

2012 Other than P/C Premium $2,792,156,816 $8,524,600,000 $6,446,262,214


HUB International Ltd. Lockton Cos. USI Insurance Services

$749,731,437 $747,375,000 $334,907,369

2012 Other than P/C Revenue $153,461,485 $269,376,000 $377,638,888


Alliant Insurance Services Inc.






Confie Seguros Holding Co.







AssuredPartners Inc. Leavitt Group Integro Insurance Brokers Beecher Carlson* Insurance Office of America

$173,264,000 $119,859,378 $111,658,000 $97,876,000 $87,425,201

$66,171,000 $65,938,315 $1,153,000 $4,916,000 $9,487,676

$1,750,114,141 $1,089,630,718 $1,700,000,000 $862,774,000 $891,935,779

$832,000,000 $939,288,340 $21,000,000 $169,486,000 $148,115,108


The IMA Financial Group







J. Smith Lanier & Co. Heffernan Insurance Brokers Hylant PayneWest Insurance Mesirow Insurance Services Woodruff-Sawyer & Co. Higginbotham Barney & Barney LLC Crystal & Co. Marshall & Sterling Enterprises Inc. EPIC Insurance Brokers and Consultants Assurance Agency Ltd. Frenkel & Co. Sterling & Sterling Inc. Risk Strategies Co. Houchens Insurance Propel Insurance

$80,460,000 $71,558,734 $66,464,177 $65,667,300 $60,129,731 $52,357,053 $49,291,000 $48,150,564 $45,428,260 $44,821,461 $44,803,000 $40,647,000 $40,233,765 $37,295,000 $37,250,000 $34,722,500 $34,500,000

$32,068,000 $13,048,592 $26,729,112 $21,153,900 $26,953,851 $22,470,569 $42,814,000 $42,678,362 $50,632,383 $7,226,068 $17,067,000 $14,771,000 $20,559,941 $5,995,000 $7,900,000 $10,958,500 $11,900,000

$1,150,000,000 $559,323,490 $709,986,000 $682,456,200 $479,437,312 $428,929,985 $429,370,130 $459,005,000 $380,595,943 $276,080,369 $755,525,000 $517,642,000 $332,002,359 $311,000,000 $498,500,000 $336,018,100 $280,000,000

$665,000,000 $164,477,903 $726,205,000 $236,512,000 $973,403,026 $414,220,295 $835,963,000 $1,166,995,000 $731,895,675 $176,992,678 $349,077,000 $187,669,000 $304,676,739 $119,900,000 $280,650,000 $254,975,000 $187,000,000


TWFG Insurance Services















Houston, Texas


The Graham Co. Bowen, Miclette & Britt Insurance Agency LLC Ascension Insurance Inc. The Mahoney Group Lovitt-Touche Inc.

$33,086,000 $32,722,534 $32,464,000

$44,664,000 $8,018,187 $11,987,000

$236,703,000 $216,400,000 $16,792,000

$423,697,000 $83,200,000 $11,987,000

433 185 225

Overland Park, Kan. Mesa, Ariz. Tempe, Ariz.


InterWest Insurance Services Inc.






Sacramento, Calif.


15 16 17 18 19 20 21 22 23 24 25 26 27

31 32 33

No. of Employees

Main Office


6,148 Chicago, Ill. 4,950 Kansas City, Mo. 3,316 Briarcliff Manor, N.Y. Newport Beach, 1,508 Calif. Huntington Beach, 2,126 Calif. 1,326 Lake Mary, Fla. 1,463 Cedar City, Utah 514 New York, N.Y. 422 Atlanta, Ga. 655 Longwood, Fla. Wichita, Kan. and 482 Denver, Colo. 554 West Point, Ga. 425 Walnut Creek, Calif. 618 Toledo, Ohio 645 Billings, Mont. 315 Chicago, Ill. 317 San Francisco, Calif. 543 Fort Worth, Texas 456 San Diego, Calif. 450 New York, N.Y. 365 Poughkeepsie, N.Y. 320 San Francisco, Calif. 303 Schaumburg, Ill. 233 New York, N.Y. 203 Woodbury, N.Y. 190 Boston, Mass. 211 Bowling Green, Ky. 212 Tacoma, Wash. The Woodlands, 75 Texas 155 Philadelphia, Pa.


GR 01 O UP 3





8 9




1 2

2012 Total P/C Revenue

Agency Name


2013 Rank






Bellevue, Wash.








Irvine, Calif.


Moreton & Co. Advanced Insurance Underwriters LLC

$24,376,000 $23,650,000

$12,372,000 $0

$233,000,000 $215,000,000

$215,000,000 $3,500,000

175 157

Salt Lake City, Utah Hollywood, Fla.

38 39 40 41



The Horton Group Inc. Starkweather & Shepley Insurance Brokerage Inc. Charles L. Crane Agency MHBT Inc. Bainswest Inc. Robertson Ryan & Associates Inc. Cook Maran & Associates Inc. Professional Insurance Associates Inc. Lawley Insurance Andreini & Co. Riggs Counselman Michaels & Downes Inc. Parker Smith and Feek Inc.



42 43

44 45 46







Orland Park, Ill.






East Providence, R.I.

$30,000,000 $29,950,000 $29,675,190 $29,574,246 $29,000,000 $29,000,000 $28,159,229 $26,224,000

$0 $18,600,000 $9,033,251 $3,063,670 $8,000,000 $0 $16,050,964 $9,200,000

$182,000,000 $278,500,000 $222,987,050 $230,000,000 $177,000,000 $225,000,000 $211,292,858 $218,533,833

$4,000,000 $372,000,000 $116,233,269 $48,000,000 $107,000,000 $0 $544,233,598 $230,000,000

240 260 272 210 150 50 311 170

Saint Louis, Mo. Dallas, Texas Tulsa, Okla. Milwaukee, Wis. East Hampton, N.Y. San Carlos, Calif. Buffalo, N.Y. San Mateo, Calif.






Towson, Md.

*= Beecher Carlson acquired by Florida-based national insurance agency Brown & Brown Inc., July 2013. 24 | INSURANCE JOURNAL-NATIONAL REGION August 5, 2013

2013 Rank

Agency Name

2012 Total P/C Revenue

2012 Other than P/C Revenue

2012 Total P/C Premium Written

2012 Other than P/C Premium

No. of Employees




$23,500,000 $23,087,548 $22,860,912 $22,412,073 $21,488,075 $21,029,086 $20,094,000 $20,000,000 $19,459,375

$3,500,000 $3,797,108 $6,077,724 $5,475,229 $7,112,941 $4,103,329 $0 $0 $11,792,260

$174,000,000 $139,816,167 $208,920,433 $163,764,626 $199,517,875 $157,553,590 $270,000,000 $245,000,000 $153,309,099

$89,000,000 $45,252,970 $36,608,251 $85,936,373 $129,091,487 $65,684,812 $0 $0 $217,048,014

198 145 140 164 200 185 153 66 210


Sihle Insurance Group







Scirocco Financial Group Inc.







Ansay & Associates






64 66

TIS Insurance Services Inc. Gowrie Group John M. Glover

$17,219,245 $16,911,537 $16,750,069

$6,745,919 $1,142,373 $550,000

$215,996,872 $179,575 $120,000,000

$87,260,007 $38,079,100 $1,000,000

131 130 150


Ag States Group








M3 Insurance Solutions Inc.






West Des Moines, Iowa Syracuse, N.Y. Van Nuys, Calif. Birmingham, Ala. Ventura, Calif. Clearwater, Fla. Fresno, Calif. Los Angeles, Calif. Orlando, Fla. Cedar Rapids, Iowa Altamonte Springs, Fla. Hasbrouck Heights, N.J. Port Washington, Wis. Knoxville, Tenn. Westbrook, Conn. Norwalk, Conn. Inver Grove Heights, Minn. Madison, Wis.


J.W. Terrill






St. Louis, Mo.


$15,851,252 $15,762,000 $15,372,683 $15,300,000

$2,642,076 $25,753,000 $8,148,562 $2,100,000

$83,752,384 $139,994,000 $103,675,290 $175,000,000

$26,276,045 $1,052,559,000 $120,693,032 $25,000,000

121 197 141 107

Salt Lake City, Utah Omaha, Neb. Leesburg, Va. New Berlin, Wis.






Tustin, Calif.


The Buckner Co. SilverStone Group AH&T Insurance HNI Wood Gutmann & Bogart Insurance Brokers Insgroup Inc. The Daniel and Henry Co. Bolton & Co.

$14,300,000 $14,289,000 $14,054,293

$703,000 $5,102,000 $10,107,429

$105,300,000 $111,374,000 $117,119,108

$10,500,000 $72,793,000 $202,148,580

70 171 120


Celedinas Insurance Group







Eustis Insurance Inc.






Houston, Texas St. Louis, Mo. Pasadena, Calif. Palm Beach Gardens, Fla. Metairie, La.


Senn Dunn Insurance






Greensboro, N.C.






Los Angeles, Calif.

$13,189,590 $13,000,000 $12,719,881 $11,926,933

$1,837,317 $26,000,000 $6,243,637 $3,169,675

54 55 56 57 58 59


71 72 73 74 75 76








GR 01 O UP 3



LMC Insurance & Risk Management Inc. Haylor, Freyer & Coon Inc. Momentous Insurance Brokerage Cobbs Allen TWIW Insurance Services LLC Bouchard Insurance James G Parker Insuarance Associates The Sullivan Group Risk Transfer TrueNorth

Main Office

Otterstedt Insurance Agency






87 89

ABD Insurance & Financial Services Rogers & Gray Insurance Agency Kapnick Insurance Group

$11,700,000 $11,553,900 $11,397,000

$12,000,000 $1,975,000 $9,879,000

$153,000,000 $79,518,000 $85,000,000

$354,000,000 $33,032,000 $175,000,000

130 115 120


SGB-NIA Insurance Brokers Inc.







$10,786,000 $10,760,867 $10,754,257

$0 $4,969,463 $1,476,294

$60,226,000 $114,405,598 $108,402,831

$0 $262,532,964 $24,852,810

100 105 95






Metairie, La.

$10,406,657 $10,294,572 $9,450,000 $8,503,000 $8,500,000 $8,379,003

$2,321,306 $6,771,049 $3,750,000 $4,322,000 $15,000,000 $600,675

$80,000,000 $86,272,584 $70,000,000 $63,605,000 $75,000,000 $104,750,855

$32,000,000 $110,108,549 $122,000,000 $225,000,000 $140,000,000 $10,280,203

43 98 121 95 150 50

Harrison, N.Y. Jackson, Miss. Carmel, Ind. South Bend, Ind. Baltimore, Md. Radnor, Pa.







Eagan Insurance Agency


York International Agency LLC Ross & Yerger Insurance Inc. Shepherd Insurance LLC Gibson Insurance Agency Inc. PSA Insurance & Financial Services Odell Studner

W 93

TWG Insurance Harden & Associates Foa & Son Corp.


96 97 98 99 100



Ridgeland, Miss. Wyomissing, Pa. Indianapolis, Ind. Houston, Texas Englewood Cliffs, N.J. San Mateo, Calif. South Dennis, Mass. Adrian, Mich. Woodland Hills, Calif. Irving, Texas Jacksonville, Fla. New York, N.Y.




TheGNW-Evergreen Insurance Services LLC SouthGroup Insurance The Loomis Co. MJ Insurance Inc. Dean & Draper Insurance Agency LP


$138,768,888 $120,000,000 $105,347,173 $98,016,401

$14,891,894 $800,000,000 $329,540,355 $53,734,027

175 300 119 108

Special Mention: The following bank-owned agencies reported Total P/C Revenue for 2012 that would fit within the Top 100 — First Niagara Risk Management, Inc.; M&T Insurance Agency Inc.; Bankers Insurance LLC; Towne Insurance; Mang Insurance Agency LLC; and Tompkins Insurance Agencies Inc. Insurance Journal’s Top 100 Independent P/C Agencies list does not include bank-owned agencies.




Insurance Journal’s Top 20 Agency Network/Aggregator Groups 2013 Rank Agency Name

2012 Total 2012 Total Other P/C Revenue than P/C Revenue

GR 01 O UP 3

(Ranked by 2012 Total P/C Revenue) Employee count for these groups does not necessarily include all affiliates responsible for total revenue. 2012 Total P/C Premiums Written

2012 Other than P/C Premium

No. of Employees

Main Office





Hampton, N.H.

SIAA Inc.*




ISU Agency Network






San Francisco, Calif.


Keystone Insurers Group





2,480 Northumberland, Pa.


Combined Agents of America LLC Renaissance Alliance Insurance Services LLC United Valley Insurance Services Inc. INSURICA Insurance Management Network Insurors Group LLC






Austin, Texas






Wellesley, Mass.






Fresno, Calif.




















Oklahoma City, Okla. College Station, Texas El Dorado Hills, Calif. Stuart, Fla.

7 8



Pacific Interstate Insurance Brokers GreatFlorida Insurance Holding Corp. Smart Choice Agents Program


United Agencies Inc.



Networked Insurance Agents



Brightway Insurance


The Insurance Alliance of Central Pa. Inc. Acrisure LLC






High Point, N.C.




Pasadena, Calif.





Grass Valley, Calif.






Jacksonville, Fla.






Camp Hill, Pa.






Caledonia, Mich.




Fresno, Calif.





Ponchatoula, Md.






Miami, Fla.






Edmonds, Wash.






The Advantage Group LLC



PacWest Alliance Insurance Services Inc. Northlake Insurance Group Ltd. Estrella Insurance














* The following SIAA individual members also submitted to Insurance Journal’s Top Agency Network/Aggregator Groups in 2013, however, the total revenue of all SIAA members was combined for the purposes of this list. SIAA members with more than $10 million in Total P/C Revenue include: Satellite Agency Network Group Inc.; Midwest Insurance Agency Alliance Inc.; SIA Group; SAN of Florida / Comegys Insurance Agency; AHA Insurance Network; North Florida Agents Network Inc.; SIA of the Great Lakes; Continental Insurance Agency Alliance / Glenwood Insurance Agency; and CoVerica Agency Alliance.


Top 20 Banks in Insurance Brokerage Fee Income (2012/Nationally)


2012 Insurance Brokerage Fee Income $1,243,571,000

2 3

Bank Name Branch Banking and Trust Co.

City, State Winston Salem, N.C.



Citibank N.A.

Sioux Falls, S.D.


Bank of America N.A.

Charlotte, N.C.



BancorpSouth Bank

Tupelo, Miss.



Discover Bank

Greenwood, Del.



First Niagara Bank N.A.

Buffalo, N.Y.



Eastern Bank

Boston, Mass.




Associated Bank N.A.

Green Bay, Wis.


Manufacturers and Traders Trust Co.

Buffalo, N.Y.



TD Bank N.A.

Wilmington, Del.

GR 01 O UP 3

8 9 11


Frost Bank

San Antonio, Texas



People's United Bank

Bridgeport, Conn.



Bank of the West

San Francisco, Calif.



Towne Bank

Portsmouth, Va.



Trustmark National Bank

Jackson, Miss.



Fifth Third Bank

Cincinnati, Ohio



Compass Bank

Birmingham, Ala.



PNC Bank N.A.

Wilmington, Del.



Barclays Bank Delaware

Wilmington, Del.



Hancock Bank

Gulfport, Miss.

Note about this report: These rankings include commercial banks, savings banks and savings associations (a.k.a. thrifts) which are required to report line item income like insurance brokerage.


Source: Michael White Bank Insurance Fee Income Report sponsored by Dowling Hales - 2013 Edition



6 7

City, State San Francisco, Calif.


BB&T Corp.

Winston-Salem, N.C.

New York, N.Y.


American Express Co.

New York, N.Y.


Goldman Sachs Group Inc., The

New York, N.Y.


Regions Financial Corp.

Birmingham, Ala.


Morgan Stanley

New York, N.Y.



Bank Holding Company Name Wells Fargo & Co.

CitiGroup Inc.


3 4



2012 Insurance Brokerage Fee Income $1,556,000,000





Top 20 Bank Holding Companies in Insurance Brokerage Fee Income


BancorpSouth Inc.

Tupelo, Miss.



Discover Financial Services

Riverwoods, Ill.



First Command Financial Services Inc.

Fort Worth, Texas





First Niagara Financial Group Inc.

Buffalo, N.Y.



Huntington Bancshares Inc.

Columbus, Ohio



Eastern Bank Corp.

Boston, Mass.



Stifel Financial Corp.

St. Louis, Mo.



Associated Banc-Corp.

Green Bay, Wis.



M&T Bank Corp.

Boston, Mass.



Raymond James Financial Inc.

Saint Petersburg, Fla.



TD Bank US Holding Co.

Portland, Maine



Cullen/Frost Bankers Inc.

San Antonio, Texas

$37,425,000 Fifth Third Bancorp. Cincinnati, Ohio 20 Note about this report: With few exceptions, the Federal Reserve Board requires only what it defines as “large” bank holding companies (i.e., BHCs with consolidated assets in excess of $500 million) to file line item fee income like insurance brokerage. Ranking excludes several traditional life insurers that do not engage in significant banking activities. Source: Michael White Bank Insurance Fee Income Report sponsored by Dowling Hales - 2013 Edition



Management Agency Opportunity: A Book of Business Transition Plan By Tom McDonald


gency value is always at risk, battered by external challenges such as the rate environment, or internal ones, like an aging producer team. Many agency leaders deal with retiring producers by transitioning their book of business over to younger people. But before you introduce another producer into a long-term relationship with the goal of transitioning your retiring producer’s book, take a second look. You may be missing an opportunity. As agency advisors, our job is to identify and assess potential risk factors associated with an organization’s value. Short term risks are easy to identify. Challenges such as addressing health insurance reform, the rate environment, or strength of current staff are front-and-center in the mind of an agency owner. Decisions on such issues need to be made within two years in order to meet those challenges. Longer term risk factors can be much more difficult to manage. One such factor is an aging staff or the imminent retirement of the most senior, highly productive people. This issue can easily get lost in the business

plan and not addressed until it’s too late. This is why more than three-quarters of independent insurance agencies will never be able to perpetuate internally. Age Factor It is estimated that over 50 percent of the average agency’s book of business is currently controlled by producers who are over the age of 50. Agency stakeholders face a long-term risk of not retaining this business as producers retire. Agency owners can fight this battle with a diligent, systematic producer reinvestment plan. The goal is to develop people fast enough to be able to transition the accounts over a period of time. Over the next 20 years, the average agency has to transition more than 50 percent of its revenue. For some, the transition has to happen much sooner. For all, this reality can be daunting. Finding good people continues to be a struggle. That’s the first hurdle. But even agencies that have planned ahead and built a book of business transition process will miss a huge opportunity to help improve the agency’s long-term value, because that very transition process might be inherently flawed. As you develop your plan


to move the business, consider this: producers need time to sell. Time management is a critical component of successful and consistent book growth. The biggest reason why producers stop producing new business is because there is too much time spent servicing their existing book of business. So why would you take a block of business from one producer’s book and provide it to another to service? Transitioning a book of business down to a producer only further hinders that producer’s ability to spend more time prospecting. Support Organic Growth Some organizations will target a younger producer as the right candidate to accept a block of business as a seasoned producer moves out of the agency. Gifting a large book of business could have a negative impact on the producer development process. Many producers with large books of business that have not grown their book are producers who received gifted blocks of business. A more sustainable way to grow the agency’s business is to help producers learn to originate their own book of business. A hybrid approach, with the work being done by a combination of producers, high-level servicers, and a small business unit, is the best way to support growth, improve profitability and control retention. McDonald is a vice president at MarshBerry and is responsible for the company’s Peer Exchange Networks.

3/15/13 11:18 AM


The Competitive Advantage People Pleasers as Agency Owners: On the Periphery of Extinction?


he insurance agency distribution system model was built around 1900 and is still amazingly similar to agencies of 100 years ago, albeit the monitors and lack of filing cabinets do create a different ambiance. This model is to be admired for its strength, longevity, flexibility to adapt into captive and independent arms, cost By Chris Burand savings, and delivery of quality products to every single socio economic group in many countries. Few sales distribution systems have been so successful for so long through good times and bad, wars, famines, financial busts, and massive changes in what is insured. Its longevity is a key to understanding some of its quirks, such as its language and some mathematically incorrect metrics. Why has it been so successful? The low barrier to entry is the most important factor. The barriers to entry are low on multiple fronts. One important low barrier is the extremely low capital requirement. Initially, a pen and paper, some stamps, envelopes, desk, a chair, and a filing cabinet were all the capital necessary to open an agency. Another low barrier is that getting a license does not require much knowledge. Similarly, not much education was or really is (relatively) necessary. More than one producer today makes six figures and yet never earned a college degree.

to dozens of good companies if they try hard enough. Moreover, in a move that I cannot begin to understand, many carriers do not even look at the quality or even the results of these individual agents gaining access to them through these firms. This is changing

somewhat as I write this and some incompetent agents are being fired from their clusters, but this change is still in its infancy relative to what needs to occur to prevent serious loss ratio problems. continued on page 30

Appointments An additional low barrier is the ability to obtain company appointments. Initially, because so many insurance companies competed, getting appointments from several was relatively easy. Approximately 900 property/casualty carriers still do business in the U.S. so relative to other products, getting an appointment from a few of these 900 is still relatively easy. For a while, appointments were more difficult to obtain, but now with the dramatic increase in clusters and aggregators, anybody with a license can get access

NIF.indd 1

7/23/13 1:04 PM August 5, 2013 INSURANCE JOURNAL-NATIONAL REGION | 29


The Competitive Advantage continued from page 29 When minimal barriers to entry exist, two elements are usually required for a distribution system to succeed. First, the sales offices must be small and widely distributed. Second, the sales people have to be people pleasers. This combination works well because if the organization is small, not much management is required and people pleasers get to live their strength pleasing people. Because the firms were small, the insurance companies needed lots of them, one in every community. The best old time producers were buddies with everyone. They worked hard, sometimes partied hard, sometimes prayed hard, and built a great reputation that then created its own referral system. Since not many people had to be managed, the weakness of people pleasers — displeasing people — rarely played a role.

People pleasers are generally lousy sales will remain viable, even though carriers will managers unless they can set boundaries for eliminate some clusters and force other clustheir people pleasing nature. The vast majori- ters to improve quality. ty of people pleasing agency owners are com- For the independent agency that reppletely incapable of setting such boundaries. resents their own carriers and desires to As people pleasers, they are on rocket fuel continue to stand, grow and succeed on its to please all and displease no one. People own, can people pleasers continue to manpleasers’ emotional turmoil, angst, anxiage them? Or are people pleasers, as agency ety, and debilitating loss of direction that owner managers, nearing extinction? I do not overwhelms them when they face potential know if I have seen more than a handful of conflict and crucial conversapeople pleasers ever tions incapacitates them. The Moderating the people truly build a sustainable toil these situations can take growth model pleasing environment organic on their insides and mind are and those that did, had may be the biggest huge. special circumstances. Yet managing people, change in 120 years. particularly the cult known Moderating as sales people, requires a The characteristic heavy hand at times if one is to generate that built the industry will fail the industry. enough volume at a profit to meet company Simply put, the industry has too much of a demands. The fact is that most producers good thing. Going forward, agency success Distribution Changes never make it in this industry and this has to defined as an agency with at least 15 people A single key element in this distribube addressed to grow profitably. Some agency achieving material organic growth annually tion model has changed. Companies began owners avoid facing this reality by joining while achieving a real profit margin of at demanding too much volume for this system clusters or subsidizing inadequate producleast 15 percent, requires moderating people to continue as it had for decades. Agencies, ers with their own sales, personal lines, or pleasing personalities so that someone can or at least independent agencies, had to a house book. Subsidies always have an end take uncomfortable action, someone can deal grow. To grow means employing more peolife, often sudden death, so the subsidy stratwith displeasure constructively, and someone ple and this means more producers. egy is not sustainable. The cluster solution is not paralyzed by the thought of someone being upset with them. Effective change is easiest achieved by hiring or partnering with someone who can take a strong stand and still sleep easily. Hiring third-parties to be the ® “bad” guy can be extremely effective too. Even professional executive coaching, not the rahrah kind, works well. SALES & MARKETING IDEAS FOR P&C PROFESSIONALS Moderating the people pleasing environment may be the biggest change in 120 years. The facts of the case make the change THIS WRECK INSPIRED ME TO SELL IDEAS inevitable. To grow big enough to please the companies requires hiring more people Alan Shulman survived this accident, at age 5, due and when more employees are employed, to his massive snowsuit (in the era before car seats)! especially sales people, they need managing. It inspired him to recognize there are many ways And managing people always means having to accomplish goals… some new, some traditional. to have uncomfortable, at least from a people pleaser’s perspective, discussions. For those Sell more personal and commercial lines after who accept reality, management creates an exploring Agency Ideas® Instant Download Store. opportunity to help your people grow beyond It’s packed with hundreds of insurance sales and their own expectations. marketing tools — all authored by Alan to help

Agency Ideas

you to creatively grow your P&C agency.


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

ris Ch by

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Delay in Employer Mandate Review is Welcome

T By Shawn Pynes

he Obama Administration’s recent decision to delay implementation of the Employer Mandate and reporting requirements in the Affordable Care Act should be viewed as a welcomed move. Namely, it’s an opportunity for U.S. businesses to prepare for the most significant changes to employee benefits since the enactment of Medicare. Now that they have this extra time, businesses and their agents should use it wisely. The new rules, along with associated expenses and operational challenges, will require a coordinated, staged strategy.

Impact of the Delay The U.S. Department of Treasury’s decision to postpone the employer mandate until 2015 allows regulators to streamline the rules that businesses would be required to follow under the landmark legislation. More than 70,000 pages of regulation have already been written to implement the legislation. Businesses that do not offer healthcare benefits to employees will not be subject to the penalty provisions under the ACA until 2015. The Obama Administration also postponed implementation of the employer reporting requirements until 2015. For the majority of large employers, the delay will have no impact. Most large Resource Box To listen to a podcast interview on the firms currently offer coverage to their employees. Small businesses with fewer ACA delays with Pynes visit: than 50 workers were already exempt 34 | INSURANCE JOURNAL-NATIONAL REGION August 5, 2013

from the rules and will also see no changes. The Treasury Department’s announcement pertains only to the employer mandate and the employer reporting requirements under the ACA. The decision does not delay the individual mandate, which requires Americans currently without health insurance to obtain coverage effective Jan. 1, 2014. Managing the Big Impact While businesses across America got a temporary break from employer mandate, Barney & Barney estimates costs will still double by 2020 in spite of the delay. The ACA will have significant impact in three ways. First, the ACA is going to have a material negative impact on the bottom line. Costs are going to start rising each year between now and 2020, when they may be twice the current rate. Second, the ACA will be an operational challenge that many companies haven’t encountered. The compliance, human resources and legal implications from the regulation will be significant. Third, the law fundamentally alters the human capital strategy. It’s entirely possible that companies with more than 50 employees, which will bear the full brunt of healthcare reform, may decide not to Companies and brokers add more workers.

should use the delay to

What to Do? make sure they have a The expense and complication of the ACA very good game plan. means that the role of brokers has never been more strategic. To prepare for the ACA, employers need to do the following: • Model the anticipated costs of healthcare reform to understand the significant financial fallout you may face. • Determine the best approach to providing health benefits based on the expense structure and needs. The key question: Should you execute a “play” or “pay” model? • Decide whether a defined contribution plan is the best way to proceed. Financial modeling is an essential step to developing a strategy to comply with healthcare reform. The starting point for the analysis should begin in 2014, with the modeling extending to 2020. Calculating all of the costs is critical to having a comprehensive understanding of the financial implications. The financial and other impacts of the ACA will usher in the most sweeping change to benefits since the enactment of Medicare and Social Security. Companies and brokers should use the delay in implementing the rules to make sure they have a very good game plan in place. Pynes is principal of Barney & Barney LLC and leads the firm’s Employee Benefits Division. Phone: 858-550-4983. Email:

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