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WEST

Inside This Issue

On The Cover

Special Report:

2014 Agency Salary Survey

February 24, 2014 • Vol. 92 No. 4 • West

W1

W2

16

54

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

8

P/C Insurers’ Net Income Up 60%, Combined Ratio at 97.6 for 2013: A.M. Best

W1 Disaster Aid For Colorado

Flooding Surpasses $267M

36 Growing Your Property Casualty

Agency: Alan Shulman

8

Commercial Insurance Market Looking Favorable in 2014: Marsh

W1 Oregon Disaster Agency Issues

Revealed in Audit

43 Minding Your Business: Catherine

Oak

W2 Southern California’s

Construction Sector Continues

to Heat

46 What Might Terrorists Do Next?

14 The ‘Switching’ Economy:

Consumers to Buy Insurance

from Google, Amazon, Verizon 16 Spotlight: Agribusiness Segment

Stable, Yet Selective 21 Closer Look: Technical and

Medical Device Convergence

Exposes New World of Risks 24 Special Report: 2014 Agency

Salary Survey 33 Closer Look: Riding the Wave

in the Marina Marketplace 38 Spotlight: Technology’s Opening

a Whole New World of Agent E&O

Exposures

W10 States’ Rules Complicate Efforts

to Enact Uniform Data Security

Law

49 Numbers Don’t Lie: MarshBerry 54 Closing Quote: Bridging the Wage

Gap

W12 Private Flood Insurance

Agency Now Selling in 15 States W14 California’s Mass of Insurance Related Bills

DEPARTMENTS 10 Declarations 10 Figures W6 People 11 Business Moves 50 MyNewMarkets

48 Spotlight: 10 Things to Know

About Agribusiness 4 | INSURANCE JOURNAL-WEST February 24, 2014

www.insurancejournal.com

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NATIONAL COVERAGE

Opening Note Pay and Performance

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his issue of Insurance Journal brings you the 8th Annual Agency Salary Survey results.

Nearly 2,000 agency owners, producers and agency staff responded to this year’s exclusive survey, all wanting to know who’s worth what in today’s independent agency system.

What we found is that compensation for all sectors — management/owners, producers and support staff — is up but not at the same rate.

There’s no question that part of those compensation increases can directly be attributed to more profitable times in agencies across the nation. Business is up in both commercial and personal lines in most firms, which led to long-overdue pay increases for many agency staff. And salaries and total compensation looks as if it might continue to trend upward in 2014 as well.

According to a survey of large and mid-sized agencies by Reagan Consulting, independent insurance agents and brokers posted new highs in revenue growth and profitability in the fourth quarter of 2013.

The consulting firm said agencies performed well in all three of the major value creation categories of the Reagan Consulting Will agencies keep up the Organic Growth and pace in growth and Profitability (OGP) survey: profitability in 2014? How will • Median organic growth for 2013 was 6.2 percompensation be affected? cent, beating 6.1 percent for 2012.

• EBITDA (earnings before interest, taxes, depreciation and amortization) margins jumped almost a point from 18.4 percent in 2012 to 19.3 percent in 2013.

• Rule of 20 scores were 16.5, while the top 25 percent of brokers all exceeded 20 for the first time.

Reagan Consulting uses the Rule of 20 to measure agency value creation. The Rule of 20 is the sum of an agency’s organic growth rate and one-half of its EBITDA margin; if the sum equals or exceeds 20, an agency is driving strong shareholder returns.

“Broker performance has progressed significantly in the last five years,” said Kevin Stipe, president of Reagan Consulting.

Stipe said it wasn’t too long ago, in 2009, when brokers were shrinking organically (-1.9 percent median organic growth) and posting mid-single-digit Rule of 20 scores (6.9).

While the performance results are impressive, Stipe wonders if they can be sustained. “We do not necessarily think that brokers will go backwards but we are wondering if brokers can maintain their impressive run of consistently improving results.”

Will agencies keep up the pace in growth and profitability in 2014? How will compen- Andrea Wells Editor-in-Chief sation be affected? Only time will tell.

6 | INSURANCE JOURNAL-NATIONAL February 24, 2014

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, Catherine Oak, Alan Shulman Contributing Writers David Coons, Brian Michael Jenkins, Tommy McDonald, Thomas Murphy, Graeme Newman, Paul Osborne, Alina Selyukh 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 Ly Nguyen (800) 897-9965 x125 | lnguyen@insurancejournal.com MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 x120 | eburns@insurancejournal.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Matt Tolk | mtolk@insurancejournal.com DESIGN/WEB V.P. of Design Guy Boccia | gboccia@insurancejournal.com V.P of Technology Joshua Carlson | jcarlson@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com IJ ACADEMY OF INSURANCE Online Training Coordinator Barbara Whiffen | bwhiffen@ijacademy.com ADMINISTRATION Chairman Mark Wells Chief Executive Officer Mitch Dunford Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com

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insurancejournal.com/subscribe Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media Group, 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 2014 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 708, Northbrook, IL 60065-0708 ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or rhondab@fosterprinting.com.

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News & Markets P/C Insurers’ Net Income Up 60%, Combined Ratio at 97.6 for 2013: A.M. Best

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relatively quiet year for catastrophes helped the U.S. property/casualty industry achieved an underwriting profit for the first time in four years, according to A.M. Best.

The industry managed its way to a nearly 60 percent increase in net income to $63.2 billion, which helped drive an estimated

record year-end surplus of $666.3 billion. The surplus level is “particularly noteworthy given the headwinds that are anticipated in 2014,” A.M. Best said.

In a special report, the ratings agency said underwriting results reached their best level since 2007 and the industry’s combined ratio for the year is expected to come in at 97.6.

The estimated underwriting profit of $8.5 billion for 2013 ranks as the third best in the past decade — next to $28.9 billion in 2006 and $23.0 billion in 2007. In 2012, the industry suffered a $12.5 billion underwriting loss.

The drop in catastrophe losses shaved 4.3 points off the industry’s expected combined ratio in 2013. While cat losses represented

7.5 points on the 2012 combined ratio, they dropped to 3.2 points in 2013.

However, A.M. Best Co. said it is estimating a “more normal level of catastrophe losses” in the coming year.

Profitability for 2013 was further bolstered by considerable investment gains achieved in strengthened U.S. equity markets, the report said. Net income is projected to be $52.9 billion, a 7.9 percent increase over last year.

Additional highlights from last year’s performance include a 4.8 percent increase in net premiums written. Workers’ compensation was again the fastest-growing line with a 9.7 percent increase.

Looking ahead to 2014, A.M. Best said it expects premiums to continue growing through price increases, but the pace of these rate changes should slow.

Commercial Insurance Markets Looking Favorable in 2014: Marsh

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he ample capacity and competition that helped temper firming of U.S. commercial insurance rates in 2013 is expected to continue into 2014, unless catastrophe losses turn out higher than expected, according to a report by insurance broker Marsh.

U.S. commercial property insurance prices stabilized for many organizations in 2013 as a significant surplus of capital among insurers and reinsurers kept competition high, Marsh said in its U.S. Insurance Market Report 2014.

In addition, despite average year-overyear total directors and officers liability (D&O) program rate increases reaching as high as 3.6 percent in 2013, price hikes steadily lost momentum through the fourth quarter and are expected to continue softening in 2014 driven by excess insurer competition. Coverage in all areas of D&O insurance is expanding, according to the report.

8 | INSURANCE JOURNAL-NATIONAL February 24, 2014

The casualty insurance markets also tempered in 2013, as rate increases were generally lower than had been anticipated at the beginning of the year. This shift in the casualty markets is expected to continue in 2014, with rates generally poised to renew flat or with increases in the low single digits for insureds in desirable classes of business with good loss experience.

Employers typically experienced workers’ compensation rate increases in the low single digits in 2013 depending on program type. However, attempts by carriers to push for further rate increases in 2014 will likely be tempered by the ongoing competitive environment and by insureds differentiating their risk profiles, according to Marsh.

“Organizations of all sizes and across all industries should generally expect favorable market conditions in 2014 as long as capacity and competition remain plentiful and catastrophe losses remain relatively low,”

said Dave Bidmead, Marsh’s US CEO. According to the report, uncertainty about whether Congress will renew the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) is being reflected in the marketplace. Many organizations with large employee concentrations in big cities are already experiencing “significant pressure in terms of availability and pricing of workers’ compensation coverage.”

The cost of property terrorism insurance also could become volatile if TRIPRA is not reauthorized, Marsh warns. TRIPRA is set to expire on Dec. 31, 2014.

At the same time, some specialty lines of coverage, most notably marine liability, continue to firm. Premium increases of between 5 percent and 20 percent for marine insureds with good loss histories are typically expected in 2014.

Marsh also predicts modest rate firming in the employment practices liability insurance market in 2014, especially for small to midsize employers. www.insurancejournal.com

© 2014 American Institute For Chartered Property Casualty Underwriters

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NATIONAL COVERAGE

FIGURES

146,000 The approximate number of nonfatal workplace injuries and illnesses reported by New York State private industry employers in 2012, according to latest data from the U.S. Department of Labor.

That figure translates to 2.5 cases per 100 full-time workers.

$30,183,611 The amount in insured losses to residential and commercial property from flood waters that swamped Central Texas on Halloween night 2013, according to the Federal Emergency Management Agency (FEMA).

The more than $30 million represents losses to 584 homes and businesses located in Travis, Hays and Caldwell Counties. The figure does not include automobile or uninsured losses.

DECLARATIONS N.H. Workers’ Comp

“We must come together to reform workers’ compensation so that our businesses can re-invest these dollars in growing their companies and creating new jobs.”

— New Hampshire Gov. Maggie Hassan on reforming the workers’ comp market. During her Feb. 6 State of the State address, Hassan urged lawmakers to give businesses relief from rising workers’ comp costs.

Changing Communities

“Oklahoma’s policyholders received nearly $2 billion from their insurers in 2013 after multiple, deadly tornadoes struck Oklahoma, changing forever communities such as Moore.”

— Dr. Robert Hartwig, president of the Insurance Information Institute, in remarks during the National Tornado Summit in Oklahoma City, Okla.

Save the Action Figures

“Man without health insurance is forced to sell action figures to pay medical bills.”

$23.5 Million The amount the Ohio Department of Insurance said it helped save or recover for Ohio consumers in 2013. The Office of Consumer Affairs received 5,397 consumer complaints in 2013. The majority of the complaints dealt with insurance claim denial, claim delay or unsatisfactory claim settlement offers.

$3.8 Million Is how much a Southern California diocese has paid to settle two child-abuse lawsuits brought against a former Catholic priest.

The Diocese of San Bernardino said the payments settling the two civil cases involving Alejandro Castillo came from a combination of insurance and diocese funds.

942,321

The policy count as of early February for Florida’s Citizens Property Insurance Corp.

The state-backed insurer reported that the number marks the first time the policy count has dropped below one million since 2006.

10 | INSURANCE JOURNAL-NATIONAL February 24, 2014

— The headline on a banner ad for the website of the satirical news outlet, The Onion.

Illinois officials are launching an ad campaign on the site in an attempt to sell young adults on health insurance.

Councilman Fraud

“It just went sideways, your honor, and I take full responsibility.”

— Former Nampa City, Idaho, Councilman Bob Schmidt told the court he was sorry when he was sentenced in early February to 90 days in jail and 12 years of supervised probation for insurance fraud. He was also ordered to pay $47,000 for misappropriating funds from his insurance agency, making transactions without the appropriate licenses and making false statements.

A Strong, Stable Market

“The fact that today’s car insurance rates are no higher than they were in 2006 shows that North Carolina continues to have a strong and stable auto insurance market.”

— North Carolina Insurance Commissioner Wayne Goodwin said with more than 150 active auto insurance companies competing for business, his state has some of the lowest average rates in the country.

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WEST COVERAGE

News & Markets Disaster Aid For Colorado Flooding Surpasses $267M

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ince heavy rains brought flooding in September 2013, Colorado survivors have received more than $267 million in federal and state recovery assistance, according to the Federal Emergency Management Agency.

More than $219 million has come from disaster grants, flood insurance payments and low-interest disaster loans. More than $48 million has been obligated through the Federal Emergency Management Agency’s Public Assistance program, FEMA said.

To date FEMA said it has granted $55 million for housing assistance and more than $4.7 million in other needs assistance, such as disaster-related medical expenses or personal property loss in 11 designated counties. As part of the other needs assistance program, the state is funding another $1.6 million. Flood survivors have also received disaster unemployment assistance and disaster legal services, according to FEMA.

FEMA said it has obligated more than $48 million to publicly owned entities and certain nonprofits in 18 designated counties.

The U.S. Small Business Administration has approved $97.6 million in federal disaster loans to Colorado homeowners, renters, businesses and private nonprofit organizations that sustained damage from the severe storms and flooding, according to FEMA. The National Flood Insurance Program has approved $62.3 million to settle 2,015 claims, A home is pulled into the fast currents of the flooded South Platte River Sept. 16, 2013 and FEMA said it is providing AP Photo/The Greeley Tribune, Joshua Polson manufactured housing units mitigation measures to prevent future flood for 44 households who have no other suitdamage, and nearly 70 percent of large projable housing available. ects or those with a cost estimate of more Roughly 48 percent of all permanent than $67,500 contain these mitigation mearepair work submitted to FEMA and the sures. state’s Public Assistance program contains

Oregon Disaster Agency Issues Revealed in Audit

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regon’s emergency management agency may not be well equipped to recover from a major disaster because of a history of leadership problems and an incomplete plan to handle emergencies, according to an audit issued by the Secretary of State’s office.

The audit describes the Office of Emergency Management as a strained workplace with inconsistent leadership, a lack of communication and teamwork between co-workers and unclear goals. The audit said the agency has three major problems: Employees receive little to no training.

The agency has virtually no strategic plan to guide its work. There’s no formal relief

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and recovery section in the emergency management plan.

“The Office of Emergency Management needs to resolve its deep-seated organizational issues immediately and make sure that Oregon is fully prepared for a major disaster,” Secretary of State Kate Brown said in a statement released with the audit. “Anything less is inexcusable.”

Senior leadership positions have been vacant for long periods during the last decade and, when not vacant, have seen quick turnover. In four years, the agency had three directors and three deputy directors.

The emergency management office is part

of the Oregon Military Department, which has been led since August by Adjutant General Daniel Hokanson. The office has already filled vacant leadership positions and is working to correct the problems noted by the auditors, Hokanson said in a letter responding to the audit. All recommendations will be implemented by December, he wrote.

Experts say Oregon is due for a major offshore earthquake and tsunami. The audit says such an event would require the removal of more than 1 million truckloads of debris, but the agency never addressed comments on its 2011 debris-management plan.

Oregon isn’t eligible for maximum federal grants to prevent hazards because federal officials downgraded the state’s hazard-mitigation plan in 2012.

Copyright 2014 Associated Press.

February 24, 2014 INSURANCE JOURNAL-WEST | W1

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News & Markets Southern California’s Construction Sector Continues to Heat

By Don Jergler

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outhern California’s construction sector continues to gain momentum, making good on positive outlooks issued late last year, and agents and brokers who deal in this segment can’t be any happier — especially those who remember the historically rough times that began in 2008 as the Great Recession unfolded.

At that time the ranks of the unemployed swelled and construction companies ran dry of contracts and prospects with the crashing of the housing and then the commercial construction markets.

It was a double-whammy looked at from many perspectives. In Orange County, for example, home values plummeted and jobs were lost while office vacancy rates soared as a number of large mortgage companies based in the area downsized.

Commercial deals couldn’t get done because lending pipelines froze, and lenders came calling on homeowners who could no longer pay their mortgages because they lost their jobs as firms battened down the hatches and settled in for the long rough W2 | INSURANCE JOURNAL-WEST February 24, 2014

The slowly recovering economy the nation finds itself in now isn’t news, but the pace at which the region’s construction industry has begun to pick up is a cheery welcome to insurance professionals who service Southern California’s once abounding industry.

Construction Uptick “The insurance market — particularly workers’ compensation — is hard and is hardening,” said Wooditch, who is bullish on rates.

Knoop doesn’t see extremely large rate increases, expect for worker’s comp, on the horizon. However, he is feeling the pick up.

“We are inundated with work right now,” Knoop said.

Riding a surging tide of growing demand for housing, Lockton’s residential builder customers have been purchasing smaller companies and growing rapidly, he said, adding, “this has really kind of all exploded ride out of economic stagnancy. over the last six months.”

“We were giving back premiums to Late last year there were signs of clients and clients were shrinking,” said improvement in the nation’s construction Bill Wooditch, CEO of Irvine, Calif.-based market. McGraw Hill Construction’s 2014 Wooditch Risk Services. “For us it was a Dodge Construction Outlook predicted that horrific time.” total U.S. construction starts for 2014 would Looking back Wooditch referred to a rise 9 percent to $555.3 billion, higher than quote hung on a conference room wall the 5 percent increase to $508 billion estifrom hedge fund manager Paul Tudor Jones, mated for 2013. and recalled there were a lot of real world So far this year in Southern California the examples that bore out those thoughts in words “recovery mode,” especially the resthe following years of the recession. idential sector, can be used “You adapt, evolve, compete or die,” Wooditch said. ‘You adapt, evolve, with some degree of confidence.

“That really was the mantra compete or die.’

“We’ve definitely seen for the construction indusan uptick in construction,” said Kimberly try.”

Ritter-Martinez, an economist for the Los Jamie Knoop, vice president of Lockton’s Angeles County Economic Development construction services division in Southern Corp. “The housing market is definitely California, remembers the year well. doing a lot better.”

“When 2008 hit that was a pretty rough Over the past few years investor-buyers go,” he said. “The phone wasn’t ringing that have been coming in and clearing out foremuch.” closure properties, and people are jumping Lockton of course weathered the rough back into housing, leading to year-over-year patch. However, like most insurance firms price increases of double-digit percentages, with construction divisions, they suffered wages freezes, cuts and uncertainty. continued on page W4 www.insurancejournal.com

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News & Markets continued from page W2 Ritter-Martinez said.

“You’ve got price increases, you’ve got the foreclosure inventory pretty much cleared out, so builders are going to start building again,” she said.

She added that in the single-family mar-

ket there is now an “incredibly low new home inventory.”

However, with dropping affordability, rising interest rates and job and income growth failing to keep pace with rising home prices, she cautioned, “the housing

market recovery still has some time to play out.”

Perhaps the best news Ritter-Martinez could deliver on the construction front is about hiring, for which the sector has been atop the list of positive economic indicators for the region as of late.

“We’re seeing a big uptick in construction hiring,” Ritter-Martinez said.

Final figures for hiring are still being complied by LAEDC, which plans to issue a report later this month that shows just how strong construction hiring has become in Southern California, although it is still below its pre-recession peak, she said.

“It is definitely turning around,” she added.

Aging Workers Construction has picked up so much that companies have had trouble filling openings and replacing an aging workforce — a trend that some believe could have a longterm impact on workers’ comp rates.

“The challenge facing contractors and construction is that the workforce is aging,” Wooditch said. “The industry is having difficulty attracting talented young people.”

Cam Dickinson, construction practice leader at San Francisco-based WoodruffSawyer, said the problem is something those within the construction industry have been grappling with for some time.

“Like any businesses, there is a focus on attracting young talent,” Dickinson said. “Many firms and trade associations recognize the potential disparity. Many businesses and unions’ associations are collaborating through training, educational and scholarship programs to address this industry-wide concern.”

In fact, Dickinson believes that an aging workforce is already driving workers’ comp rate hikes.

“For California, workers’ compensation is hardening — this trend will continue through 2014 and possibly 2015 as claims experience continues to put pressure on pricing,” he said.

Lockton’s Knoop said base rates are experiencing a double-digit increase. continued on page W8

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2/11/14 3:49 PM

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Beyond Security®

“Immediate Results”

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“A fine wine requires time and patience, but you can expect immediate results when you partner with General Star.”

To locate the General Star broker nearest you, visit our website at www.generalstar.com.

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Insurance is placed with the General Star companies by licensed producers and, for risks that qualify, by licensed surplus lines brokers.

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People Rick Jones

Brian Weaver

Cheryl Heller

Arizona workers’ compensation insurance provider CopperPoint Mutual Insurance Co. named Rick Jones executive vice president and chief operating officer.

CopperPoint is formerly SCF Arizona.

Jones will be responsible for executing changes to CopperPoint’s operations in support of long-term strategies while focusing on day-to-day activities.

Jones will play a role in CopperPoint’s business development and expansion of products and services, and he will remain president of the company’s subsidiaries: CopperPoint Premier; CopperPoint American; CopperPoint Western; CopperPoint General; CopperPoint National; CopperPoint Indemnity and CopperPoint Casualty; as well as Mountain West Agency Services.

Jones has more than 30 years’ experience in the insurance industry, beginning with risk management for a division of Teledyne.

Prior to joining CopperPoint in 2006, Jones served as senior vice president of compliance and assistant secretary for CNA National Warranty Corp. In 1982, Jones opened the Arizona branch office of EBI Insurance Companies, and in 1986 moved to Corroon & Black as vice president of marketing.

Based in Phoenix, CopperPoint has a presence throughout Arizona.

Pacific Specialty Insurance Co. in California has promoted Brian Weaver to senior vice president of sales.

Weaver heads the company’s efforts working with the independent brokers and agents who sell the company’s products in California and nationally. He was vice president before his promotion, and he joined Pacific Specialty in 1980.

Pacific Specialty has offices in Menlo Park and Anaheim, Calif., and serves individuals and small-business owners with specialty and general policies, including homeowners insurance, recreational vehicle insurance and business insurance.

Woodruff-Sawyer & Co. named Cheryl Heller senior account manager in employee benefits in its California North Bay office.

Matt Goughnour has joined Woodruff-Sawyer as vice president the firm’s Portland, Ore., office.

Heller will focus on client service and account management, with a focus on the winery, real estate, educational and solar sectors.

Heller has an extensive background in the insurance and employee benefits industries. Before Woodruff-Sawyer,

W6 | INSURANCE JOURNAL-WEST February 24, 2014

Heller was at Vantreo Insurance Brokerage in Santa Rosa for six years.

Goughnour will focus on growing and servicing companies in the forest products industry.

Goughnour has more than 14 years of experience in the insurance industry.

He began specializing in forest products with Lumberman’s Underwriting Alliance and has spent the past several years working with a global brokerage firm.

San Francisco, Calif.-based Woodruff-Sawyer is an active partner of Assurex Global and International Benefits Network. Woodruff-Sawyer has offices throughout California and in Portland.

Heffernan Insurance Brokers named Lisa Castagnola assistant vice president in its Orange County branch.

Castagnola will focus on building the contractors niche for Heffernan in Southern California.

Castagnola has expertise in all areas of commercial insurance, including property/casualty, risk management and workers’ compensation.

Her background includes account servicing for a range of businesses, including general contractors/developers, property managers, associations, restaurateurs and manufacturers.

Walnut Creek, Calif.-based Heffernan has offices in San Francisco, Petaluma, Menlo Park, Los Angeles and Orange County, as well as in Portland, Ore., St. Louis, Mo., and New York, N.Y. Leavitt Central Coast Insurance Services has hired Joe Bonura in its Central California operation.

Bonura specializes in commercial insurance for trucking and agriculture.

Prior to the Leavitt Group, Bonura sold individual health plans.

He also worked as a media consultant selling print and digital advertising for the Monterey Herald, and was a territory manager in the floor covering industry.

The Leavitt Group offers services including property/ casualty insurance, risk management and employee benefits solutions.

Sean Morris has joined McDonald-Leavitt Insurance Agency, and will specialize in commercial insurance.

Prior to McDonald-Leavitt, Morris worked for 15 years selling real estate.

McDonald-Leavitt is part of the Leavitt Group, which has more than 125 locations across the United States. www.insurancejournal.com

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News & Markets continued from page W4 “Cleary we’re seeing the workers’ compensation market rates rising there,” he said.

Wooditch is seeing increases of 10 to 15 percent in workers’ comp.

“There’s a new saying, that a 10-percent increase is the new flat,” Wooditch said, adding that the hardening workers’ comp market is being driven by loss experiences, which are becoming more frequent as the construction workforce ages, he said.

“The industry has difficulty attracting talented young people to build that workforce,” Wooditch said.

Workplace safety is among the biggest concerns of small business owners, a poll issued in mid-February shows.

In the poll from Reno, Nev.-based workers’ comp provider Employers, workplace safety risks were cited as the source of greatest worry and the area in which small businesses expect to focus most of their attention this year.

The poll shows 35 percent of respondents plan to spend most of their time addressing workplace safety risks.

Professional liability (24 percent), cyber-security (23 percent), natural disasters (11 percent) and terrorism (1 percent)

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were other risks employers planned to address this year, according to the poll, which was conducted via phone with more than 500 businesses that have 100 or fewer employees.

Wooditch said he is trying to help his clients reduce workers’ comp costs by making them aware of where the sources of the claims that drive their rates are generated. But it’s a slow process, and it often goes against a company’s viewpoint on employees, he said.

“A lot of old-line companies that have been around 70 years, 80 years, they’re now seeing employees at well over the 50-year-old line,” Wooditch said, adding that he works to call out the aging workforce to his clients and explain that as a reason they are seeing rising workers’ comp rates. “We point them out and say it’s a position of your workforce. That’s now striking to core of an owner’s philosophy — people first. There’s a loyalty factor.

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You’re trying to fracture a loyalty.”

Wooditch’s task then becomes to explain to his clients that he as an insurance broker is not trying to encourage them to get rid of older employees, but to consider vulnerability to injury and safety when supervising jobs, and that an emphasis should be placed on recruiting more young workers.

“We’re trying to protect their people, their product and their profit,” he said. “You just need to get new young, fresh talent.”

Wrap Ups Aside from workers’ compensation, in counties like Los Angeles, Orange and San Diego, several lines of insurance are experiencing strong growth and interest.

General liability and excess is experiencing generally flat to modest increases for firms with a good experience and risk profile in nonresidential, and pollution and professional markets are competitive and pricing is expected to be flat this year, although firms are offering coverage enhancements, Wooditch said.

Both Dickinson and Knoop have seen a pickup in wrap ups — owner-controlled and contractor-controlled insurance programs — thanks to a new law that passed in California.

“With California’s new indemnity statute we have seen an increase in OCIPs — these could have an impact on a firm’s program pricing,” Dickinson said.

California Senate Bill 474, which passed in 2011, decreed that in the case of contracts for private commercial projects, indemnity obligations arising out of the active negligence or willful misconduct of an indemnified party are unenforceable.

Knoop has seen that law have a big impact on his business.

“We’re seeing a huge increase in wrap ups on the commercial side,” he said. “As a result, we are seeing an increase in OCIPs and CCIPs. We’re seeing some really competitive rates and commercial capacity on wrap ups right now.” www.insurancejournal.com

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News & Markets States’ Rules Complicate Efforts to Enact Uniform Data Security Law

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have to be alerted to ata thefts at U.S. retailers have rekindata breaches and dled enthusiasm in Congress for a what qualifies as a single federal law on how customers should breach. be notified about such breaches, but those With that, negoefforts face the same roadblock as in the tiations over fitting past: dozens of overlapping state laws state standards already in place. under an umbrella Congressional hearings and calls for new federal law face a powers by consumer protection agencies tug of war between followed quickly after breaches at retailers companies, consumTarget Corp., Neiman Marcus and Michaels er advocates and Companies were revealed. state authorities.

Several Senate bills that languished in Large companies working across state past years have been revived, spearheaded lines argue that state laws present a by powerful Democrats on commerce, judipatchwork of regulations and compliance ciary, intelligence and homeland security poses a challenge. Companies often issue committees. one nationwide notice to consumers with But the new bills are mostly reiterations state-specific supplements at the end. of old ones that failed to advance, in some “Certainly, one standard is easier to folcases repeatedly. And the same hurdles low than 47,” John Mulligan, Target’s chief to reaching agreement in the past remain financial officer, told lawmakers at a hearpowerful obstacles, notably the question ing. of whether or how the federal law would The National Retail Federation in a trump, or pre-empt, state regulations.

January letter to Congress also restated its “Pre-emption is going to be a major part decade-old position in favor of discussions,” of a nationwide standard.

Representative ‘Pre-emption is going to be Lee Terry, a major part of discussions.’ “A preemptive federal breach notification law a Nebraska would allow retailers to focus their resourcRepublican working on a data security bill es on complying with one single law and in the House of Representatives, said after a enable consumers to know their rights recent hearing on the data breaches. regardless of where they live,” the lobbying The issue tracks a peculiar path in group wrote.

Congress. Privacy concerns cut across party and ideological lines, sometimes uniting States’ Enforcement Power staunch conservatives with liberals. And Some state attorney generals worry above efforts involving multiple committees often all that federal standards would dilute their face slightly different agendas, with gridpower to pursue violators. lock often the result.

Illinois Attorney General Lisa Madigan said that states must keep their ability to Tug of War enforce. Only under those conditions “it’s Although federal laws already regulate potentially reasonable to say ‘OK, we’re how specific industries, such as banks and going to pre-empt you,’” Madigan said. “As hospitals, handle compromised data securilong as we still retain the ability to respond ty, certain other kinds of companies, includto our consumers, and this is looked at in ing retailers, face no such uniform standard. some ways potentially either as a floor and Instead, 46 states and the District of not a ceiling, we understand your role.”

Columbia have passed their own laws that But charting such a course would be tell companies when and how consumers W10 | INSURANCE JOURNAL-WEST February 24, 2014

less palatable to powerful industries and some lawmakers.

“There are 47 state standards, there’s no reason to add a 48th,” said Terry, the most prominent Republican leading a legislative effort at this point.

Consumer advocates say that the companies’ call for a single law masks the goal of having a weaker federal standard that would trump stricter laws on the books in states like California and Massachusetts.

“None of the federal proposals are as strong as the strongest state laws and that’s wrong,” said Edmund Mierzwinski, consumer program director at U.S. Public Interest Research Group. “I don’t think we need (a federal law) that’s weaker than California’s.”

California was the first state to adopt a data breach law in 2003. After a decade of fine-tuning, it requires a detailed disclosure to consumers “in the most expedient time possible and without unreasonable delay” when personal information, including emails with passwords, is “reasonably believed” to have been stolen.

Though many state requirements are broadly similar, some states require notification only if a breach poses or is believed to pose harm or material risk.

Many states also use more limited definitions of what personal information is included. A common definition includes name combined with the Social Security number, driver’s license number or payment card number together with information needed to access financial records.

Alabama, Kentucky, New Mexico and South Dakota do not have their own data breach notification laws.

(Reporting by Alina Selyukh, editing by Ros Krasny and Cynthia Osterman) Copyright 2014 Reuters. www.insurancejournal.com

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News & Markets Private Flood Insurance Agency Now Selling in 15 States

By Andrew G. Simpson

A

Florida agency selling private flood insurance said it is now selling the coverage in 15 states and making it available to commercial risks and apartment buildings.

According to Evan Hecht, CEO of The Flood Insurance Agency, located in Gainesville, Florida, with its latest expansion, his agency’s alternative to the federal government’s National Flood Insurance Program (NFIP) is now available to more than 3.5 million NFIP policyholders.

Also, the agency has expanded access to the program. Previously, only one-to-four unit residential properties could access the private flood program. However, Hecht said that effective immediately the program is also available for properties written on the Federal Emergency Management Agency’s (FEMA’s) dwelling policy form and FEMA’s general policy form.

The program is now open to non-residential and other residential properties, including commercial risks and apartment buildings.

The Private Market Flood program is currently written by Lloyd’s of London as part of the surplus lines market. Hecht said

both the dwelling policy and the general policy contain the exact same coverage as a FEMA flood insurance policy.

Surplus lines insurers are not covered by the state’s guaranty association and their rates are not regulated.

Hecht said the flood policies have been accepted by lenders nationwide.

During the program’s first three months of writing policies,the agency has written about 150 policies on more than $45 million of property value, according to Hecht.

Policies are now offered in Alabama, California, Connecticut, Florida, Georgia, Indiana, Louisiana, Michigan, New Jersey, Ohio, Pennsylvania, South Carolina, Virginia, Wisconsin and West Virginia.

The private flood program is marketed both by appointed retail independent insurance agents and direct to the general public. The company’s website, www. privatemarketflood.com, includes sample premium rates, the policy wording, an online application and a link for independent agents to become appointed.

The agency intends on expanding its Lloyd’s offering into additional states in the coming months.

Florida officials are exploring ways to encourage more private flood policies.

A handful of other private carriers sell primary coverage on high-end properties and still others offer excess flood coverage that kicks-in after the NFIP’s $250,000 policy limits.

Tampa-based Homeowners Choice Property & Casualty Insurance Co. is offering primary flood insurance as an endorsement on its Florida homeowners policies.

See related stories on www.insurancejournal.com: “How to Encourage Private Flood Insurance; Why Delaying Biggert-Waters Is Not the Answer,” and “Rule on Requiring Lenders to Accept Private Flood Insurance Proposed.”

Former Idaho Councilman Sentenced For Insurance Fraud

A

former Nampa City Council member in Idaho was sentenced in February to 90 days in jail and 12 years of supervised probation for insurance fraud.

Terms of the sentence given to Bob Schmidt on in 3rd District Court require him to pay $47,000 in restitution.

Schmidt pleaded guilty in November to one felony count of insurance fraud. He served on the council from 2002 to 2007.

Prosecutors say Schmidt misappropriated funds from his insurance agency, made transactions without the appropriate licenses and made false statements relevant to W12 | INSURANCE JOURNAL-WEST February 24, 2014

insurance transactions.

The indictment says that starting around December 2010, Schmidt pocketed clients’ money, presented falsified cancellation requests regarding policies and conducted insurance transactions without a license.

Schmidt told the court a collapsing marriage and struggling business caused him to get in over his head.

In May 2011, Schmidt lost his insurance license for “using fraudulent, coercive or dishonest practices,” according to a civil complaint filed with the Idaho Department

of Insurance. In that case, Schmidt was hit with more than $7,000 in fines and penalties by the department.

The complaint said a Nampa restaurant owner paid Schmidt for a policy, but Schmidt never passed it along to the insurance company. The policy was canceled without the owner’s knowledge – and he didn’t learn he wasn’t covered until after his restaurant caught fire.

In 2011, Schmidt was also accused by a Babe Ruth baseball organization of misappropriating more than $3,500 intended for insurance premiums.

Copyright 2014 Associated Press. www.insurancejournal.com

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For more than a decade, OCRIMS has sponsored risk management education at Cal State Fullerton’s Center for Insurance Studies (CIS), the largest insurance program in the Western United States.

Al Gorski, a director on the national RIMS board, teaches risk management courses at Cal State Fullerton and is a strong advocate of the program.

Bridgette Castillo ’01, risk finance manager at St. Joseph Health and past president of OCRIMS, has shared her industry knowledge with students as a guest professor.

OCRIMS believes their investment in CIS will pay big dividends: “By providing the first endowed scholarship for the Center, OCRIMS ensures permanent funding to educate California’s next generation of risk management leaders,” says Dan Reynolds, incoming OCRIMS president.

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News & Markets Hole-in-one Insurance Fraudster in Washington Sentenced

K

evin Kolenda, 56, a Connecticut businessman who has been reportedly defrauding golf tournaments and golfers for two decades, was sentenced in February in King County Superior Court in Washington.

Judge Jean Rietschel sentenced Kolenda to 86 days with credit for time served and ordered him to pay $15,000 in restitution

and $550 to the Washington state Victims Assistance Fund.

Kolenda pled guilty to three felony charges in October 2013 after Insurance Commissioner Mike Kreidler’s Special Investigations Unit pursued him for selling insurance without a license and for failing to pay hole-in-one awards that he was contractually obligated to pay.

Kolenda illegally sold hole-in-one insurance policies to golf tournaments in Washington and then failed to pay the prizes when golfers scored holes-in-one.

He defrauded Washington tournaments and golfers in 2003, 2004 and 2010 for prizes ranging from $10,000 to $50,000, according to Kreidler’s office.

“I am delighted that Mr. Kolenda has finally been brought to justice after years of thumbing his nose at state regulators, golf tournaments and charities, and golfers,” said Kreidler. “We never gave

up on trying to put Mr. Kolenda out of business.

Washington doesn’t tolerate insurance scammers and fraudKevin Kolenda sters.”

Kolenda has been in business since 1995 and used several business names: Golf Marketing, Golf Marketing Worldwide LLC, Golf Marketing Inc., Hole-in-Won. com, and Hole-in-Won.com Worldwide.

He has been investigated or prosecuted for similar charges in Montana, Ohio, Georgia, California, New York, Hawaii, Alabama, Massachusetts, Florida, Connecticut and North Carolina, according to Kreidler’s office.

In December 2012, Kolenda was extradited to Washington from Connecticut. He was arrested and jailed in Connecticut in September 2012 after failing to appear in King County Superior Court for an arraignment for five felony charges. Consequently, the judge issued a bench warrant for his arrest. Kreidler’s office issued a cease-anddesist order in 2004 and a $125,000 fine in 2008. Kolenda never paid the fine.

California’s Mass of Insurance-Related Bills

T

ly issued an update on pending bills that here are a number of bills currently he feels should get the attention of people under consideration by California in the insurance industry.

Legislature that may be of interest to Norwood noted that 2013 was the first agents, brokers and insurance professionals year of California’s twoin general. year legislative session Bills under con- ‘Bills under consideration and that roughly 2,300 sideration include include everything from bills were introduced everything from changes to the insurance in the beginning of the changes to the code to texting while driving year. Some were signed, insurance code to uninsured motorists to while others were to texting while killed or vetoed last driving to uninsurplus lines insurance.’ year. Many of those bills sured motorists to that did not advance in 2013, depending on surplus lines insurance. where they were stalled, became eligible Lobbyist John Norwood, owner of for consideration in 2014.

Norwood Associates in Sacramento, recentW14 | INSURANCE JOURNAL-WEST February 24, 2014

Norwood’s list covers bills introduced last year that are still in play, as well as those introduced this year.

The list is extensive, and he offers his take on why members of the insurance industry would be interested in them. Over the course of this legislative session, some of the bills listed by Norwood may be gutted and amended to represent entirely different proposed laws, while others my stay in tact and make it to the governor’s desk.

Read text and analysis of bills on www.insurancejournal.com in the story “Lobbyist Gives Update on Insurance-Related Bills.” www.insurancejournal.com

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Business Moves Kemper Corp.

Kemper Corp. is realigning its property/ casualty business. This realignment will result in one property/casualty segment for financial reporting purposes, beginning with the first quarter 2014.

The new Kemper property/casualty segment will consist of the following: • Kemper Personal and Commercial Lines, which will include private passenger and commercial auto, home and other lines; • Kemper Specialty California, which will focus on Kemper’s largest non-standard private passenger auto market; • Kemper Direct, operating in run-off mode; and • Shared services, which will support the property/casualty segment, including legal, claims, technology, human resources, project management and finance.

Denise Lynch, Kemper’s Property & Casualty Group executive, will continue to lead the new segment. Reporting directly to Lynch will be Brian Delfino, Kemper Personal and Commercial Lines general manager, Tim Bruns, Kemper Specialty California general manager, as well as the general managers of Kemper Direct and the shared services functional leaders.

Additionally, Pete Hansen will become senior vice president for property & casualty claims.

Andrea James, Kemper Preferred’s president for the past year, left the company effective Feb. 14.

Marsh & McLennan, Barney & Barney, The Bond Network Marsh & McLennan Agency LLC has acquired San Diego, Calif.-based Barney & Barney LLC. Terms of the deal were not disclosed.

Barney & Barney is a provider of insurance, risk management and employee benefits to businesses and individuals. The firm has a reported annual revenue of $100 million and 500 employees, all of whom will join MMA. Barney & Barney will serve as MMA’s Western regional hub under the leadership www.insurancejournal.com

of Barney & Barney CEO Paul Hering.

MMA, a subsidiary of Marsh, was established in 2008 to meet the needs of midsize businesses in the U.S. MMA, which has acquired numerous agencies since its founding, said Barney & Barney is its largest acquisition.

In a separate announcement, MMA said it has acquired The Bond Network, a surety bonding agency based in Charlotte, N.C. Terms of the transaction were not disclosed.

Founded in 1985 by H. Thomas Dawkins, The Bond Network generates $1.1 million in annual revenue and offers commercial, contract, and special risk surety bonds to private contractors throughout The Carolinas. Dawkins and the rest of the agency will operate out of MMA’s mid-Atlantic region.

McGowan, Klein Insurance Services The McGowan Cos., based in Fairview Park, Ohio, has purchased the assets of Klein Insurance Services Inc. in Montclair, N.J. KIS will operate under the McGowan Program Administrators brand.

Established in 1991, KIS provides property and umbrella insurance programs to the hospitality industry. The McGowan Cos. said KIS fits well with McGowan’s growth strategy in the hospitality segment.

KIS assets in New Jersey will form the heart of McGowan’s new “MPA – Hospitality” division.

Blackmoor, Connecticut Underwriters Blackmoor General Agency of Horsham, Pa., has acquired the Pennsylvania branch of Connecticut Underwriters, an independent excess and surplus lines broker in Middletown, Conn. The business and staff of the Pennsylvania office of Connecticut Underwriters will be transferred to Blackmoor.

Blackmoor said it will accept all new and renewal businesses previously placed through Connecticut Underwriters’

Pennsylvania office, with no interruption of service. Blackmoor General Insurance Agency is an MGA/wholesale broker, with offices in Pennsylvania and Ohio.

NSM Insurance Group, PUA NSM Insurance Group acquired Professional Underwriters Agency Inc., a managing general agent specializing in professional liability, located in Oak Brook, Ill. PUA was founded more than 30 years ago as a professional liability market for architects and engineers.

NSM Insurance Group underwrites more than 20 admitted and non-admitted insurance programs nationally in specific niche markets such as collector cars, coastal condominium associations, social service, hospitality, professional liability for lawyers and dentists, construction and workers’ compensation.

NSM Insurance Group operates from nine offices across the country in New Jersey, Pennsylvania, Illinois, Texas, Arizona and California, and is aggressively seeking to acquire additional program managers and niche specific insurance businesses.

Guarantee Insurance Co. Guarantee Insurance Co., a monoline workers’ compensation insurance subcontinued on page 12 February 24, 2014 INSURANCE JOURNAL-NATIONAL | 11

NATIONAL COVERAGE

Business Moves continued from page 11

sidiary of Florida-based Patriot National Insurance Group Inc., is expanding into Texas.

Patriot National said the addition of Texas increases Guarantee’s presence in the Midwestern states and further supports the company’s expansion plan throughout the United States.

Guarantee said it has always been focused on building dedicated agency relationships and providing workers’ compensation solutions to insurance buyers.

AssuredPartners, AirSure AssuredPartners Inc. has completed the acquisition of Golden, Colo.-based AirSure Limited LLC. AirSure specializes in insurance coverage, employee benefits and risk management services for businesses in the aviation industry, including commercial operations, corporate aircraft services and helicopters.

AirSure Limited reports revenues of roughly $13 million.

AirSure has additional operations in Plano, Texas. The acquisition marks Lake Mary, Fla.-based AssuredPartners’ entrance into the Colorado and Texas markets. As part of the acquisition, 35 AirSure Limited employees will join AssuredPartners.

Operations will continue out of the Golden, Colo. and Plano, Texas office loca12 | INSURANCE JOURNAL-NATIONAL February 24, 2014

tions, under the local leadership of Bill Behan, CEO of AirSure.

AirSure will become the eighth AssuredPartners platform entity, joining Neace Lukens, headquartered in Louisville, Ky.; SKCG, headquartered in White Plains, N.Y.; Jamison, headquartered in West Orange, N.J.; Dawson Cos., headquartered in Cleveland, Ohio; SRA, headquartered in Kansas City, Kan.; AHM, headquartered in St. Louis, Mo.; and Commercial Insurance Services, headquartered in Charleston, W. Va. AssuredPartners Inc. is a portfolio company of Chicago-based private equity firm GTCR. It acquires and invests in insurance brokerage businesses, including property/ casualty, employee benefits, surety, and managing general agents and wholesalers.

Universal P&C Florida-based Universal Property & Casualty Insurance Co. has applied to expand into Indiana, Minnesota and Delaware.

UPCIC is one of the leading writers of homeowners insurance in Florida and a fully licensed operator in North Carolina, South Carolina, Hawaii, Georgia, Massachusetts and Maryland.

“Geographic diversification comprises a core component of our strategy to drive growth and increase shareholder value.

By leveraging our experience as a leading writer of homeowners insurance in Florida, we have extended UPCIC’s footprint and profitable business model to seven markets in total over the past five years,” said Sean P. Downes, the chairman, president and CEO. “We believe this is an opportune time to seek entry into new markets,” Downes said.

Program Brokerage Corp., Sirles Program Brokerage Corp., a wholesale subsidiary of insurance broker Hub International Limited, said it has acquired the assets of Sirles Insurance Group Inc., a South Carolina-based commercial insurance brokerage firm. Terms of the acquisition were not disclosed.

In connection with this acquisition, David H. Sirles, president and CEO of Sirles, will be joining PBC as a vice president, reporting to Scott Bell, senior vice president, according to the announcement.

Founded in 2003, Sirles offers property/ casualty insurance with a niche in serving the pest control, lawn care and artisan contracting industries.

This acquisition represents the expansion of PBC’s footprint into the Southeastern U.S. and will strengthen its existing pest control and lawn care programs, the company said. Program Brokerage Corp. is the endorsed insurance brokerage for the National Pest Management Association.

Leavitt Group The Leavitt Group has merged five of its agencies in southern Utah and Nevada.

The merger includes Dixie Leavitt Agency, Hunt-Leavitt Insurance Agency, Leavitt Group Benefits Services of Southern Utah, Bringhurst-Leavitt Insurance Agency and Valley-Leavitt Insurance Agency.

The combined agency’s managing principal is Adam Christensen, and the agency will rebrand as Leavitt Group Insurance.

All seven offices will remain in their same locations with the same phone numbers.

The merger will not affect current accounts, and clients will continue to work with those service representatives with whom they are familiar, according to an announcement.

The Utah offices included in the merger are in: Cedar City; St. George; Hurricane; and Kanab. The Nevada offices included in the merger are in: Ely; Mesquite; and Overton.

The Leavitt Group insurance agencies account for more than 125 offices in 15 states. www.insurancejournal.com

NATIONAL COVERAGE

News & Markets The ‘Switching’ Economy: Consumers to Buy Insurance from Google, Amazon, Verizon

N

ew global research finds that as many as two-thirds (67 percent) of insurance customers would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon.

The research by Accenture, which is based on a survey of more than 6,000 insurance customers in 11 countries, found that 43 percent of respondents, who could select multiple responses, said they would consider buying insurance from banks, almost one-quarter (23 percent) from online service providers, 20 percent from home service providers, such as telecommunication or home security companies, 14 percent from retailers and 12 percent from car dealers.

“Competition in the insurance industry could quickly intensify as consumers become open to buying insurance not only from traditional competitors such as banks but also from Internet giants,” said Michael Lyman, global managing director for management consulting within Accenture’s Insurance industry practice.

He said that overall there is a “significant switching risk” and it is possible that up to $400 billion in insurance premiums could change hands within the insurance industry over the next 12 months.

“The switching risk is important in western markets but even more so in emerging

14 | INSURANCE JOURNAL-NATIONAL February 24, 2014

countries such as China and Brazil, where help them better manage risk coverage insurance customers are even more likely to and lower premium rates. change providers,” Lyman said.

• Almost half (48 percent) of respondents The research shows that loyalty in said they would consider comments insurance is a key issue, with 40 percent on social media in making their insurof consumers likely to switch to another ance-buying decisions. automobile or home insurance provider over the next 12 months. In the life insurance Personal Data market, one-quarter (25 percent) of respon The research also reveals that two-thirds dents said they were likely to cancel an (67 percent) of consumers are interested in existing contract and more than one-third mobile insurance services — such as send(35 percent) said they were likely to take ing pictures of their car to report a claim, out a new contract with a new provider in or displaying their proof of insurance on the next 12 months. their mobile phone — while less than half Lower prices and (46 percent) of Competition in the insurance the respondents more personalized service are the top rea- industry could quickly that are mobile sons for consumers to intensify as consumers device owners switch to a new insuralready used become open to buying insur- have er, cited as important their tablets, and ance from Internet giants. or very important 37 percent their in switching decisions by 87 percent and smartphones, to deal with their insurers.

80 percent, respectively, of the insurance Also according to the survey, more than customers surveyed. Forty-one percent of one-third (35 percent) of insurance customrespondents said they were willing to pay ers are open to provide access to their usage more to get personalized advice when puror behavior information — such as car-uschasing their insurance. age or lifestyle information — if this can “The switching economy represents a give them better value for their insurance huge opportunity for many insurers to gain coverage. market share,” said Lyman.

“While Internet access using personal “Personalization clearly emerges as a key computers or laptops was the first step in driver in retaining existing customers and enabling customers to use digital channels, attracting new ones. Innovation in pricthe real game-changer has been the growth ing strategy and the ability to make their in mobile,” said Lyman. customers feel that they are unique are Visionary insurers must be prepared to thus critical to capturing share within the conceptualize their business more broadly, switching economy.” building online communities and offering Among the survey’s other findings: non-insurance services and be willing to • More than two-thirds (71 percent) create ecosystems of partners who together of consumers surveyed would be can provide the total, personalized and ready to buy insurance online, such convenient experience today’s customers as travel and assistance policies, expect, said Lyman. extended warranty, home insurance Accenture commissioned a survey of 6,135 or life insurance products. owners of life and/or auto and home insur• More than half (54 percent) of ance policies in 11 countries. The online surrespondents are interested in gaming vey, designed by Accenture, was conducted solutions that insurers may offer to

by Lightspeed Research in July 2013. www.insurancejournal.com

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SPOTLIGHT

Agribusiness Agribusiness Segment Stable, Yet Selective

By Amy O’Connor

C

rop insurance and farm bill debates have dominated the news headlines and led to uncertainty and frustration for many farm and ranchers, but insurance experts in the agribusiness industry say the property/casualty segment of this market has actually remained stable in terms of rates and coverage options, so far.

Where insureds can expect to see some fluctuations, say agribusiness specialists, are in regions hard hit by weather this year.

Luckily, few natural catastrophes struck U.S. soil in 2013 but droughts in the West and bad winter storms in the Midwest and East may lead to some underwriters reevaluating their books of business.

“Weather is what drives how this segment is underwritten,” says Jim Henry, chief underwriting officer for MiniCo in Denver.

“What you will see carriers doing is potentially reducing new writings in certain territories — especially those that have been hit with severe weather in the last few years.”

Henry says without the capacity to grow in regions that have been hard-hit, carriers may continue to renew but may not write new business. They may also raise rates,

offer increased deductible options, restrict coverages and potentially remove wind/hail coverage deductibles.

so workers’ compensation is affected,” says Ron Abram, president of Rocklin, Calif.based Abram Interstate, which writes agribusiness coverage in the Western U.S. “It does affect the insurance products we sell because [the farmer’s] inventory fluctuates.”

Drought One weather issue that can be less of an agribusiness worry on the P/C side is Agribusiness Market drought. Henry says limited access to water Abram says the overall agribusiness tends to be more of a crop insurance matsegment is a relatively robust marketplace. ter, but it is still something that Henry says The agency does see carriers tightening up he often hears insureds worry about. on specific classes of business because of “I just spoke with a farmer in California national exposures. who raises cattle and “For the carriers the grass there has Droughts in the West and we represent, we have been so chewed down bad winter storms in the seen some changes it is pretty much Midwest and East may in rate or coverage non-existent. He is lead to some underwriters but not as a result of worried that even regional results. It with rain there may reevaluating their books has more to do with not be enough moisof business. national results and ture for it to regrow,” the changes they are making across the he says. country,” he says. “In California in particu Drought can also impact a farm’s bottom lar, property exposures in brush zones have line and leave it short for other lines of seen pricing go up.” business of insurance.

Agribusiness product lines can include “In California, the impact of drought is coverage for commercial agricultural opersignificant. If they can’t water the crops ators or traditional farm and ranch owners they can’t grow them and if they don’t with coverage extending to all aspects of grow the crops they don’t have workers, the farm or ranch operations, including: growers, packers, shippers, nurseries, livestock, viticulture (wineries), equine, dairies and products (crops after they are harvested). Property, workers’ compensation, auto, farm equipment, farm buildings and home, machinery, inland marine, commercial and farm liability, and umbrella coverage are also usually part of an agribusiness program.

MiniCo began covering the agribusiness segment in 2012 after its parent company, Aran Insurance Services Group, reached an agreement with Zurich. MiniCo is currently approved to write its package program in 17 states with plans to be in two more by the end of the year and eventually in 30.

Henry says so far they have been successful because of the comprehensive product continued on page 18

16 | INSURANCE JOURNAL-NATIONAL February 24, 2014

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Agribusiness continued from page 16 they offer.

“Our program picks up not only the personal lines exposures but the commercial exposures as well,” he says. “If you think of a traditional farmer — they have a home, personal vehicles, farm vehicles, the farm itself, silos, heavy duty equipment out in the field, etc. Our product is a blend that addresses both needs.”

Henry says many other carriers have shied away from offering complete programs because agribusiness can be a difficult and expensive program to set up correctly.

MiniCo is also looking for agents who specialize in the agribusiness industry to partner with them and help it expand its agribusiness book of business.

“We want to work with those agents who have knowledge and work directly with the farmers and are already well-versed in the industry,” he says.

vides excess liability and umbrella protection for large, middle market commercial Risks agribusiness entities. The lead umbrella pol There is no shortage of risks that affect icy offers coverage enhancements for those the agribusiness segment. Food contaminarisks that are not typically included in the tions leading to recalls, in particular, have standard umbrella market, such as coverage dominated the headlines and those in the for herbicide, pesticide and fertilizer applifood industry have to ensure they are taking cation, misdelivery of liquid products, and extra precautions to protect their businessfailure to supply. es from catastrophThe carrier ic loss. also put in ‘In this day and age, it is For the larger, an exception pretty clear that if you are put- for anhydrous middle-market ting out food to the general commercial ammonia, liquid agribusiness entipublic you don’t have to be that petroleum gas, ties, Ironshore and propane big to assume a big exposure.’ increased its in it its polluexcess liability limtion exclusion its for its lead umbrella policy from $25 miland the fungus exclusion doesn’t apply to lion to $50 million because of the demand products intended for bodily consumption. it saw from the agriculture space, says Mad Cow Disease and genetically modified Jordon Gantz, chief underwriting officer for organism coverage are considered on an Ironshore’s Specialty Casualty Operations in individual account basis.

New York.

Gantz says Ironshore launched the lead Ironshore’s AgriProtection lead umbrella umbrella product because of the need it saw coverage, which was launched in 2011, proin the marketplace for agriculture risks to 18 | INSURANCE JOURNAL-NATIONAL February 24, 2014

have more protection against catastrophic loss.

“In this day and age, it is pretty clear that if you are putting out food to the general public you don’t have to be that big to assume a big exposure,” he says. “The agriculture industry wants more capacity and they want it with the same company.”

Gantz says the positive response and growth Ironshore has seen so far to the increased capacity is what led it to increase limits to $50 million, but it is going to be selective with this business and look at each risk on a case-by-case basis.

“The concern for a lot of these [agribusiness] companies is not just from Fortune 1000 multinationals — the larger middlemarket companies distribute on a national or even an international basis and they will seek to buy more limits over time, not less,” says Gantz.

Gantz says Ironshore will be reviewing its coverage this year and possibly launching other enhancements for its agribusiness accounts, including a form of product recall expense coverage. www.insurancejournal.com

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CLOSER LOOK

Emerging Risks Technical and Medical Device Convergence Exposes New World of Risks

W

hen the acclaimed television drama series Homeland climaxed with a devious plot by terrorists to kill the U.S. vice president by hacking into his electronic pacemaker, critics mocked the ludicrousness of the idea deeming it as simply far-fetched fiction. However, the storyline was thought

By Graeme Newman of as credible by those in the know within the world of computer security. Among those was the New Zealand-born computer ethical hacker, Barnaby Jack.

It was recently concluded that an acci-

dental drug overdose caused Jack’s untimely death. Jack, who was famed for demonstrating cash machine hacks live on stage in Las Vegas and later highlighted the insecurity of smart medical devices, was found dead at home in San Francisco last July, days before he was due to give a talk on hacking electronic medical implants at the Black Hat conference in Las Vegas.

The presentation he was due to give Barnaby Jack, New Zealand-born computer ethical hacker was named, “Hacking Humans.”

The idea of causing bodily harm by hackmaker shock at the BreakPoint conference ing an implanted device may have previousin Melbourne. Jack believed it was possible ly been disregarded as implausible — but to infect the pacemaker companies’ servers in 2012 the lines between fiction and reality with a bug that would spread through their began to blur when Jack first demonstrated systems like a virus potentially causing just how easy it is to deliver a deadly pacecontinued on page 22

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CLOSER LOOK

Emerging Risks continued from page 21 mass murder. Another of his stunts was presented the issue of hacking in a new to reveal how a diabetic’s insulin pump — light. which is designed to deliver insulin to the body day and night — could be hacked New World of Risk from 300 feet away, so it could dispense a Connecting our bodies and DNA to the fatal dose.

Internet exposes a whole new world of risk, An era of open information in healthcare not only for the user, but for manufacturers, is now underway. With continuous technodevelopers, software companies and even logical and medical advances in recent years back bedroom coders who may be unaware it was inevitable that of the consequencThe idea of causing bodily the two fields would es of their personal eventually collide. harm by hacking implanted projects.

Now technology devices may have previously So, what does has become an intrinthis mean for the been disregarded as sic part of modern insurance industry? implausible — but in 2012 medical devices. In

The rapidly particular, implantincreasing integrathe lines between fiction able medical devices tion of software and reality began to blur.

(IMBs) have in recent and Internet conyears been enhanced with the use of wirenectivity within medical devices presents a less connectivity. Technologies such as long major challenge for product liability insurand short range wireless communications, ers, who to date have simply addressed the cloud computing and information security impact of “tangible” products within mediare being employed by an ever increasing cine. Professional liability insurers for softnumber of medical devices such as patient ware companies, meanwhile, have focused monitors capable of communicating data to almost exclusively on financial loss. remote locations, wearable devices includ As software and medicine collide, the ing those which regulate and monitor heart potential for major gaps in coverage, or rate, as well as online self-diagnostics and inadvertently covered claims, presents a medical apps. The introduction of remote very real risk. Combine that with major access to these types of devices has clearly jurisdictional differences in product liability

law and it becomes clear that the insurance industry has some way to go to in order to keep pace with the innovation of the companies it insures.

As app developers increase their reach into the medical arena and smart devices become increasingly pervasive, the line between medical devices and smart technology become increasingly blurred. This uncertainty presents a serious regulatory risk to everyone involved.

Future Regulation The Food and Drug Administration (FDA) is now alive to the issue and is shortly expected to address the topic with a 24-page set of recommendations for regulating this new world of medical and pseudo-medical devices. With the looming threat of game-changing regulation the future is uncertain.

Software developers, medical device manufacturers and back bedroom coders alike expose themselves to unknown risks as they attempt to push the boundaries of modern technology and leverage the power of the Internet to transform the healthcare industry.

As modern medicine experiences a revolution on a scale not seen since the 1900s, the early pioneers are exposing themselves to regulatory uncertainty as well as previously unheard of and unimagined risk.

The insurance industry is one of the most dynamic, reacting and responding to constant changing risk and regulatory landscapes. When it comes to the blurring lines between technology and medicine, it is more important than ever that our industry pools its knowledge. It’s going to require the combined skills of our technology, cyber and healthcare underwriters to address the growing needs of this new generation of Alexander Flemings.

Newman is a director at CFC Underwriting, a specialist lines UK-based underwriting agency backed by a number of Lloyd’s syndicates. CFC Underwriting distributes products through brokers in 16 countries around the world including America, Australia, Canada, and the UK.

22 | INSURANCE JOURNAL-NATIONAL February 24, 2014

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24 | INSURANCE JOURNAL-NATIONAL February 24, 2014

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Exclusive Survey Shows Compensation Up, Benefits Up With a Cost

By Andrea Wells

stable or increasing. (See “What Benefits Agencies Offer” chart.)

Megan Bosma, senior vice president of or the second year in a row, salaMarshBerry, a national consulting services ries and total compensation rose organization for independent agencies and in independent insurance agencies brokerages based in Willoughby, Ohio, sees across the nation. More agencies similar trends concerning health insurance are offering health insurance and benefits in agencies today. offerings seem to be up — although at a “There’s a lot more cost sharing plans, cost to some employees. high deductible plans, and HSA plans According to Insurance Journal’s annual where employees are being asked to pay Agency Salary Survey 2014, all levels of for a larger percentage of the overall health agency personnel averaged between a 2 insurance,” she says. percent to 3 percent salary raise in 2013, but Al Diamond, president of the Cherry managers and producers earned a 5 percent Hill, N.J.-based Agency Consulting Group, average increase in compensation as higher an independent agency valuation and conrevenues triggered other forms of income. sulting firm serving organizations nation• Agency owners, principals and managewide, says prior to the economic recession ment reported salary increases of 4.3 benefits in agencies were out of control. percent in 2013, compared to 2.8 per “The agents who paid health insurance cent in 2012. were just taking a hit every time a rate • Producers/sales reported average increasincrease occurred. In the last two or three es in salary of 5.1 percent in 2013, comyears of tough times for the agencies many pared to 2.9 percent in 2012. said: ‘We have to limit our health insurance • Agency support staff reported a 2.5 percosts to X number of dollars per employee,’ cent increase in 2013, compared to a where previously agencies paid for all of it.”

2.2 percent increase in salary for 2012.

Diamond expects healthcare costs to rise Shifting Healthcare Costs The 2014 Agency Salary Survey revealed further as agencies feel the impact of the According to the survey, the percentage even more positive trends in total income, Affordable Care Act in the coming years. of agencies offering group health insurance which includes profit sharing, bonuses, and “Obamacare hasn’t yet affected agencies rose 3 percent: In 2013, some 80.6 percent other income: but when it does what you can expect to of survey respondents said their agency • Agency owners/principals/managers see is a lot more part-timers in agencies offered group health, while in 2012 only 77.7 reported a 7.2 percent bump in total than full-timers,” he says. “The industrypercent offered the coverage. income for 2013, compared to a 4.5 perwide response to Obamacare is going to While more agencies now offer health cent increase in total income for 2012. be a collapse of 10 percent to 15 percent of coverage, agencies are shifting more of the • Producers/sales reported the largest jump Sales Accounting full-time Personal Commercial Marketing employees.

It’s an impact that no cost toOffice employees as well. in their total income for 2013,Owners/Principals which P/C Premium Volume President/CEO Manager Manager Manager Lines Mgr. Lines Mgr. Manager one has yet understood. … It’s going to be The survey showed that 15.1 percent of increased by 8.8 percent, according to way too expensive for companies, especially responding agencies shifted health the $1 survey, compared to 5.5 percent Under million $51,500in $45,179 $42,000costs of$31,000 $30,750 $43,750 $55,000 those with over 50 to 100 employees; they coverage to employees in 2013, while just 9.4 2012. $1 million - $5 million $75,259 $45,631 $53,580 $35,918 $36,500 $45,602 $102,813 are going to have to do something.” percent shifted costs in 2012.

• $5 Support staff reported a 2.8 percent million- $10 million $101,853 $63,917 $92,593 $50,774 $47,656 $61,198 $54,250 $60,861 In Diamond’s $69,194 opinion, by 2015-2016, Despite the rising cost of healthcare total income in 2013, $10increase million -in$25 million $155,257 $77,537 $99,813 $55,303 $68,143 agen$25just million - $50up million $181,424 $89,143 $168,750 $81,875 $106,908 $108,810 cy$110,161 owners will begin cutting down on fullcoverage for employees, most respondents slightly from the 2.3 percent $50increase million -in$100 $244,095 $145,441 $88,889 $77,500 $85,476 time staff. “What$89,808 they’ll do is desk share, to the $95,804 Agency Salary Survey reported that totalmillion income in 2012. or appear more to be trending $312,500 $229,643 $108,750 $142,647 overall$97,031 benefits offered by agencies $94,342 were $100 Whilemillion salaries up, continued$118,269 on page 26

F

employee benefits such as health coverage for agency employees appear to be trending up was well, but at a higher cost to employees, according to the survey results.

More independent agencies are offering health insurance than in the previous six years of the Agency Salary Survey, says Paul Osborne, senior consultant for Demotech Inc., Insurance Journal’s official research partner who assisted with analysis of this year’s survey results.

“Generally, an agency needs to pass the $5 million premium volume mark before healthcare is covered more often than not,” Osborne says.

He adds: “While there are dramatic differences by region as to whether healthcare is offered, when it is offered, the survey revealed that agencies pay on average nearly 75 percent of premiums in all regions.”

The survey showed that many agencies that do not offer employees health insurance offer a subsidy or higher salary for the employee to purchase their own, Osborne says.

Agencies' Average Salaries by Premium Volume (Management)

Average Agency Salary Adjustment Management/Agency Owner/Agency Principal Producer/Sales Support Staff/CSR/Account Executive www.insurancejournal.com

2013 4.3% 5.1% 2.5%

Average Agency Total Income Change*

2012 2.8% 2.9% 2.2%

2011 1.1% 1.6% 2.1%

2010 -0.6% -0.2% 0.6%

2009 -1.2% -0.8% -0.1%

2008 2.2% 2.3% 2.7%

February 24, 2014 INSURANCE JOURNAL-NATIONAL | 25

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Co Per Su

CS

Eas Mid Sou Sou We

Wh in

Cut Shif Incr

SPECIAL REPORT

Agency Salary Survey continued from page 25 and hire part-timers, instead of full-timers,” he says.

agents expand their education because it says travel and entertainment (T&E) and makes their employees better.” auto expenses are dropping steadily.

According to the 2014 Agency Salary “T&E has taken the most hit,” Diamond Survey, education reimbursement jumped says. “If an agency is not doing well they Benefits CSR Sala from 28.0 percent of agencies offering the just basically tell their folks no T&E.” Agencies' Another area where MarshBerry’s Bosma Average Salaries by Premium Volume (Management) benefit Commercial in 2012, to 32.8Marketing percent of agencies comes to sees benefits taking Owners/Principals Office SalesWhen it Accounting Personal Commercial lin ‘ThePresident/CEO industry-wide Volume Manager Manager Manager Mgr. inManager offeringLines the benefit 2013. (See “What auto expense, many Lines Mgr. a P/C hit Premium in agencies is in Personal lines Benefits Agencies Offer” chart.) agencies are choosing retirement plans.

Support staff a response to Obamacare is million $51,500 $45,179 $42,000 $43,750 Hiring also appears$55,000 to be another bright to pay a $31,000 monthly sti- $30,750 Under “Ever $1 since the going to be a collapse of $53,580 $1 million - $5 million $75,259 $45,631 $35,918 $36,500 $45,602 $102,813 spot in $61,198 the independent agency world with pend, or$50,774 pay “as used” $47,656 downturn themillion econ$5 million-in$10 $101,853 $63,917 $92,593 $54,250 10 percent to 15 percent nearly half of all survey respondents (42.8CSR Aver for auto to trim costs omy we are seeing $10 million - $25 million $155,257 $77,537 $99,813 $55,303 $60,861 $69,194 $68,143 employees.’ $25 million - $50 million of full-time $181,424 $89,143 $168,750 $81,875 $110,161 $108,810 percent)$106,908 — this includes all personnel down, he adds. lower contributions million $244,095 $95,804 $145,441According $88,889 $77,500 $89,808 $85,476 — reporting that their agency’s staff size East to to$50 401(k) and- $100 othermillion $100 million or more $97,031 $229,643 $94,342 $142,647 Midwest increased in 2013. $118,269 Diamond, education reimbursement ben- $108,750 retirement plans on the part of $312,500 the agency,” South Central Agency managers responding to the surefits remain steady, but most agencies just Bosma says. “Agencies haven’t necessarily Southeast vey reported increases in hiring as well. West pay for the minimum. changed their matching programs; it’s just Average Agency Salary Managers in 34.3 percent of the agen “Most agencies budget just enough for that profit sharing contributions typicallyAdjustment 2012 re-qualified 2011 2010 2009to the survey 2008 said they cies responding education 2013 to get their people made in the past are lower.”

Owner/Agency 2.8% 1.1% -0.6% -1.2%in 2013,2.2% What Stra increased hiring while only 24.2 perand renew4.3% license requirements and that’s Management/Agency Diamond sees retirement and pension Principal Producer/Sales 5.1% 2.9% 1.6% -0.2% -0.8% reported 2.3% cent of managers increased hiring all they pay for,” he says.

“But the smart plans remaining stable and “sacred,” but in 2013 vs Support Staff/CSR/Account Executive 2.5% 2.2% 2.1% 0.6% 2.7% in 2012. -0.1% Some 47.3 percent of agency managers Cut benefits expect to increase hiring again in 2014, Shift health pla Increase benefi Average Agency Total Income Change* according to the survey.

Force reduction 2013 2012 2011 Salaries, total compensation and hiringPostpone hiring trends are up thanks to growth in both Postpone raises Management/Owner/Principal 7.2% 4.5% 3.9% Increase hiring personal lines and commercial lines almost 8.8% 5.5% 3.3% Producer/Sales Increase compe nationwide, Diamond says.

2.8% 2.3% 2.2% Support Staff/CSR/Account Executive

The result: “Owners can pay themselves *Includes all income changes in year a little bit more and producers are getting What Stra more by virtue of the commission rates,” Implemen Diamond says.

How Agencies Base Compensation Incentive Plans Cut benefits

Agency profits Productivity Revenue growth Contingent commissions Individual performance No incentive plan Other

37.9% 29.5% 27.5% 15.4% 41.2% 23.5% 4.2%

Agency Compensation Satisfaction Index* Management/Agency Owner/Agency Principal Producer/Sales Support Staff/CSR/Account Executive * 5 = Most Satisfied; 1 = Least Satisfied

26 | INSURANCE JOURNAL-NATIONAL February 24, 2014

2013 3.68 3.19 2.90

2012 3.51 3.03 2.75

Incentive Programs Shift health pla Incentive-based compensation programs Increase benef for most positions in an independent Force reduction agency — not just producers or sales staffPostpone hirin Postpone raise — are helping to drive the trend of “across Increase hiring the board increases in salaries,” accordingIncrease to compe Diamond.

Diamond says in agencies where incentive-based compensation programs have What Ben been implemented, increased productivity by individual agency employees, not just Group health in producers and owners, is pushing compenHealth Savings Dental sation up further.

However, incentive-based programs doGroup life/disa 401(k) not work in every agency. Only about 10 Profit Sharing to 20 percent of agencies “qualify” for an IRAs incentive compensation program, according Pension Plan to Diamond. That’s because the culture ofESOP

Stock Options FSA Education reim www.insurancejournal.com Childcare/Dayc No Benefits Pro

Average Agency Salaries By Experience Less than 1 year 1-2 years 3-5 years 6-10 years 11-20 years 21-30 years More than 30 years

Manager/Owners

Producers

Staff

$77,483 $180,000 $98,100 $124,994 $98,042 $148,635 $151,415

$36,456 $34,113 $43,013 $59,125 $84,025 $70,326 $82,069

$40,000 $41,525 $44,685 $56,452 $50,649 $64,719 $68,075

management and owners do not fit well with the philosophy of an incentive-based pay environment for all employees.

“We have disqualified a lot of agencies (for incentive compensation programs) Average Agency Salaries by Region because we have said to them, ‘the way you Manager/Owners Producers Staff are set up this won’t work here.’ In many East $179,195 $77,917 $57,502 cases it’s the owner that wants to get their Midwest $119,282 $56,705 $58,561 employees to do more but they don’t necSouth Central $124,742 $42,233 $62,107 essarily want to pay more for them to do Southeast $110,153 $42,497 $56,551 West $122,096 $73,731 $63,864 it,” Diamond says. “It’s a big change in the thought process.”

Diamond believes that as more agencies CSR Salaries and Hours to new owners the buy-in for Volumetransition (Management) Average Salary Paid Average Hours Worked incentive-based compensation models will s Accounting Personal Commercial Marketing Commercial lines CSR $64,513 41.73 grow. ager Manager Lines Mgr. Lines Mgr. Manager Personal lines CSR $41,363 40.72 According to Insurance Journal’s annual Support staff average $57,091 41.04 Agency Salary Survey 2014, 39.7 percent of 000 $31,000 $30,750 $43,750 $55,000 580 $35,918 $36,500 $45,602 $102,813 agencies do not offer incentive compensa593 $50,774 $47,656 $61,198 tion for CSRs. Of those that do, 28.8 per-$54,250 CSR Average Salaries 813 $55,303 $60,861 $69,194 $68,143 cent base incentive compensation on new ,750 $81,875 $110,161 $106,908 $108,810 Commercial Lines Personal Lines Support Staff business commissions, while 12.5 percent ,441 $88,889 $77,500 $89,808 $85,476 East $64,442 $45,391 $47,853 based it on the number of$142,647 policies sold.$118,269 (See ,643 $94,342 $108,750 Midwest $61,140 $39,739 $62,380 “Incentive Compensation for CSR” chart.)

South Central $69,570 $32,174 $59,231 Southeast $59,491 $32,882 $61,362 “In a majority of agencies, we are not seeWest $69,600 $47,583 $52,657 ing a lot of incentive compensation in service or support functions,” says Bosma. But 2012 2011 2010 2009 2008 there’s one caveat-0.6% to that observation — the 2.8% 1.1% -1.2% 2.2% What Strategies Agencies Implemented pay the CSR more for doing the work.” account role, she says.

2.9% 1.6%executive-0.2% -0.8% 2.3% That’s a common question Burand hears 2013 vs.But 2012 The solution is simple, but many agency in the industry. fixing “More agencies -0.1% are providing2.7% from manyin 2.2% 2.1% progressive 0.6% owners can’t have2013 the necessary 2012 conversathe problem means agency owners must incentives at the service and support level,” Cut benefits 5.9% 7.3% tion regarding accountability, he says. address producer accountability, and that’s Bosma says. “These agencies are providing Shift health plan costs to employees 15.1% 9.4%

“It’s a true problem,” Burand says. a difficult Increase task for some, Burand says. an incentive to cross-sell and retain books benefits 5.5% 5.9% “Owners know it needs but psy “In a lotForce of agencies the staff is 100 perof business. However, this is not the norm.” reduction of employees 5.2% to be done 9.4% 2012 2011 Postpone hiring chologically they29.2% just can’t do it.37.9% They are cent correct; they Postpone raises 24.6% 32.2% 4.5% Producer 3.9% Pay people pleasers and they can’t have a negare doing all the ‘Why pay the producer Increase hiring 34.3% 24.2% 5.5% 3.3% ative conversation.

They can’t have people work and producOne of the most diffor doing nothing? It’s notcompensation Increase 36.5% 25.6% that would be upset at them.” ers get all the pay,” areas in agency 2.3% ficult 2.2% why pay the CSR more for MarshBerry’s Bosma agrees that the idea Burand says. “There compensation is producdoing the work.’ of changing producer compensation models is no question that er pay, the experts say.

What Strategies Agencies Plan to is challenging. “It’s a hard topic to tackle so that is a very valid The biggest concern over Implement in 2014 a lot of agency owners just don’t want to point made by the staff.” e Plans producer compensation is nothing new, but 2014 have those difficult3.6% conversations to change But according to Burand, unless there is it’s also the most challenging to fix.

Cut benefits it even though most of them know it’s probsomeone inShift the organization willing to have “Producers are a world unto themselves,” health plan costs to employees 13.6% .9% ably what they ought to do.” the crucialIncrease conversations necessary to create says Chris Burand, founder and owner of benefits 5.1% .5% Force reduction of willing employees Results from IJ’s 3.2% Agency Salary Survey producer accountability, and to creBurand & Associates LLC, a consulting serPostpone hiring compensation 16.6% owners do not .5% reveal that most agency ate a correct and responsible vices organization for the property/casualty Postpone raises 12.9% change (79.8 percent) producer commission plan, the problem will not go away. industry, based in Pueblo, Colo. .4% Increase hiring 47.3% structures.

Only 6.4 percent noted changing

“The right way to ask that question is to

If service staff is doing all the work, most Increase compensation 44.0% .2% commission structures in 2013 while 13.8 reverse it,” he says. “That is, why pay the notably on renewal accounts, why aren’t .5% producer for doing nothing? It’s not why they getting paid part of the commission? continued on page 28

2%

x*

What Benefits Agencies Offer

www.insurancejournal.com

Group health insurance Health Savings Account*

201424, 2014 2013 2011 | 27 February INSURANCE2012 JOURNAL-NATIONAL 80.6% 77.7% 76.8% 79.9% 38.3% 32.2%

8 % % %

Southeast West

$59,491 $69,600

$32,882 $47,583

$61,362 $52,657

49.7%

What Strategies Agencies Implemented in 2013 vs. 2012

Higher than 2012 Lower than 2012 Same in 2013 compared to 2012

2013 5.9% 15.1% 5.5% 5.2% 29.2% 24.6% 34.3% 36.5%

Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

2012 7.3% 9.4% 5.9% 9.4% 37.9% 32.2% 24.2% 25.6%

What Strategies Agencies Plan to Implement in 2014 2014 3.6% 13.6% 5.1% 3.2% 16.6% 12.9% 47.3% 44.0%

Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

What Benefits Agencies Offer Group health insurance Health Savings Account* Dental Group life/disability 401(k) Profit Sharing IRAs Pension Plan ESOP Stock Options FSA Education reimbursement Childcare/Daycare* No Benefits Provided

2014 80.6% 38.3% 57.2% 56.6% 63.4% 18.9% 8.4% 6.0% 4.4% 4.9% 29.3% 32.8% 2.2% 10.5%

2013 77.7% 32.2% 52.5% 53.7% 57.7% 17.8% 10.4% 5.7% 4.6% 4.5% 24.4% 28.0% 3.0% 11.7%

2012 76.8%

2011 79.9%

48.9% 56.6% 55.0% 17.4% 9.1% 5.4% 4.5% 1.8% 14.0% 44.6%

50.1% 56.1% 53.9% 20.1% 8.4% 5.0% 4.3% 2.6% 12.3% 48.2%

12.6%

10.0%

* First year response

Health Insurance: % Paid by Agency for Employee East Midwest South Central Southeast West

75% 75% 75% 77% 78%

Health Insurance: % Paid by Agency for Employee Under $1 million $1 million - $5 million $5 million - $10 million $10 million - $25 million $25 million - $50 million $50 million - $100 million $100 million or more 28 | INSURANCE JOURNAL-NATIONAL February 24, 2014

Agency Salary Increases in 2013

35.6% 54.4% 83.3% 79.1% 75.8% 76.8% 74.9%

Changes to Health Insurance Plan in Past Year

43.7% 6.7%

Agency Staff Size continued from page 27 in 2013

percent plan to make changes in 47.6% 2014. 42.8% Increase “Most agencies probably don’t change Decrease their commission structures and don’t 9.6% Stayed the same review them as often as they should,” Bosma says. She advises agencies to review producer commission structures annually or at Anticipated Agency least every couple of yearsStaff to compare what Size inare 2014 others doing in the market.

45.4% 51.7% Increase Owners should ask: Are the commission 2.9% Decrease competitive or not in the market? structures same generating enough profit to IsStay thetheagency meet their goals, both the owner return goals for the shareholders as well as for goals for reinvestment for Health the agency, she Change in Agencies’ 4.0% asks.

Plans in Past Year 36.3% “A lot of times when they look at that Yes second piece, is the agency driving59.8% enough No profit to satisfy the owners, the answer Not Sure oftentimes is no,” she says. “And because compensation is one of the largest expenses for an agency, that’s usually Agencies Paying for the area that 4.0% needs to be adjusted or changed.”

Spouse/Family Health 28.7% Bosma sees many of her clients waiting 67.3% Yes until the time of a potential sale to start No making Not Sure tough decisions on compensation.

“When clients are approaching the potential sale of an agency that’s when they will make the hard decisions and make comProducer Commissions pensation changes,” she says. “But we would in 2013 recommend making those changes earlier46.5% 43.8% soIncrease that you drive the profitability that your Decrease firm needs to make investments in the9.7% Stayed the same in 2013 compared to 2012 future of the agency and be more sustainable.”

Agencies’ Plans to Change Accountability 6.4% Commission Structure As much as possible, agency owners 13.8% should to implement employee perChangedstrive in 2013 79.8% Will changemanagement in 2014 formance into their agency No changes culture, Bosma says.

“People are more satisfied with their job if they know what they are supposed to How Agencies Determine do and if they know that if they hit perforFees mance metrics they will earn a bonus or 28.9% a higher salary — then they are going to be 74.5% happier,” Bosma says. “Laying out clear goals % of Premium Flat fee based on account type those metrics to and objectives, and tying an individual’s performance to drive both salary and incentive compensation, can lead to more productive and satisfied staff.”

Producer Compensation

Accountability is the one area in compenand Fees sation that can make the most impact 36.8% to 61.8% Producer receives % of fee 1.5% Producer receives all of fee Producer doesn’t receivewww.insurancejournal.com fee

16.6% 12.9% 47.3% 44.0%

on

Change in Agencies’ Health 4.0% Plans in Past YearSPECIAL REPORT 36.3%

Agency Salary Survey Yes No Not Sure

its Agencies Offer

nce unt*

ement

d

2014 2013 2012 2011 80.6% 77.7% 76.8% 79.9% the agency’s bottom line, the experts agree.

38.3% 32.2% “For CSRs you can look at productivity 57.2% 52.5% 48.9% 50.1% in terms of56.6% the book of 53.7% business that56.6% they 56.1% handle and how that lines up with industry 63.4% 57.7% 55.0% 53.9% averages and metrics,” Bosma they 18.9% 17.8%says. “If17.4% 20.1% 30 8.4% continued 10.4% on page 9.1% 8.4% 6.0% 5.7% 5.4% 5.0% 4.4% 4.6% 4.5% 4.3% 4.9% 4.5% 1.8% 2.6% Agencies’ to Change 29.3% Plans 24.4% 14.0% 12.3% 4.4% 32.8% 28.0% 44.6% 48.2% Payroll Expense in 2014 7.1% 2.2% 3.0% 36.4% 52.1% Reduce payroll expense 10.5% 11.7% 12.6% 10.0% Increase payroll expense Keep the same Not sure

59.8%

Agencies Paying for Spouse/Family Health

4.0% 28.7% 67.3%

Yes No Not Sure

Producer Commissions in 2013

43.8%

Increase Decrease Stayed the same in 2013 compared to 2012

46.5%

9.7%

ance: % Paid by Agency for Employee Agency Salary Increases 75% in 2013 49.7% 75% Higher than 2012 75% Lower than 2012 Same in 2013 compared to 2012 77% 78%

43.7% 6.7%

Agency Staff Size

ance: % in Paid

by Agency for Employee 2013

Increase on Decrease 5 million Stayed the same 10 million $25 million Anticipated Agency Staff $50 million Size in 2014 $100 million or more Increase Decrease Stay the same

42.8%

47.6%

35.6% 9.6% 54.4% 83.3% 79.1% 75.8% 76.8% 45.4% 51.7% 74.9% 2.9%

Health Insurance Plan in Past Year

Change in Agencies’ Health ployee contribution 42.3% 4.0% Plans in Past Year ductible limits 62.5%36.3% higher co-pays for participants 39.0% Yes 59.8% No g benefit 9.8% Not Sure r benefits 11.2% Agencies Paying for Spouse/Family Health

www.insurancejournal.com

Agencies’ Plans to Change Commission Structure Changed in 2013 Will change in 2014 No changes

6.4% 13.8% 79.8%

How Agencies Determine Fees % of Premium Flat fee based on account type

Producer Compensation and Fees Producer receives % of fee Producer receives all of fee Producer doesn’t receive fee

Owners Thinking About Selling the Agency Yes No Not applicable

28.9% 74.5%

36.8%

61.8%

1.5%

5.1% 5.6%

89.3%

February 24, 2014 INSURANCE JOURNAL-NATIONAL | 29

4.0% 28.7%

Increase benefits Force reduction of employees Postpone hiring SPECIAL REPORT Postpone raises Increase hiring Increase compensation

5.1% 3.2% 16.6% 12.9% 47.3% 44.0%

Stay the same

Change in Agencies’ Health Plans in Past Year

Agency Salary Survey

Yes No Not Sure

What Benefits Agencies Offer Group health insurance Non-Owner Producer Health Savings Account* Compensation Dental Group 15.7%life/disability Salary Only 401(k) Profit Sharing 31.1% Salary plus commission IRAs Commission only 25.6% Plan Pension ESOP 11.9% Draw against commission Stock Options FSA6.9% Other Education reimbursement Childcare/Daycare* Agencies NoHow Benefits Provided

Charge Fees * First year response

2014 80.6% 38.3% 57.2% 56.6% 63.4% 18.9% 8.4% 6.0% 4.4% 4.9% 29.3% 32.8% 2.2% 10.5%

2013 77.7% 32.2% 52.5% 53.7% 57.7% 17.8% 10.4% 5.7% 4.6% 4.5% 24.4% 28.0% 3.0% 11.7%

2012

2011

Incentive fo Agencies PayingProducers for 50.1% 35.9% No Incen Spouse/Family Health Fees 56.1% are charged in addition to commissions

76.8% Agencies 79.9% How Charge Fees

48.9% 56.6% 55.6% 55.0% 53.9% 13.1% Trips 6 Yes 17.4% Fees 20.1% 44.4% are charged in lieu of commissions No 9.1% 8.4% 19.9% Contests Not Sure 5.4% 5.0% 4.5% 4.3% 8.0% Club mem 1.8% 2.6% 30.2% Educatio 14.0% 12.3% Producer Commissions 44.6% 48.2%

Incentive for Non-Owners 12.6% 10.0% Producers

35.9% No Incentive How Compensation for 55.6% Incentive Fees are charged in addition to commissions CSRs is Insurance: Determined % Paid by Agency for 13.1% Health Employee Trips 44.4%

Fees are charged in lieu of commissions

12.5%

No. of policies sold

East 28.8% New business commissions Midwest 9.3% Central Renewal commissions South Southeast 8.9% Set dollar amount West Do not offer incentive comp 39.7%

19.9%

Contests

75% 8.0% Club memberships 75% Education 30.2% 75% 77% 42.2% Cash bonus 78% 8.4% Car

Health Insurance: % Paid by Agency for Employee

continued from page 29

in 2013

42.2%

Increase 8.4% Decrease Stayed the same in 2013 compared to 2012

Cash bon 43 Car

Agencies’ Plans to Change Commission Structure Changed in 2013 Will change in 2014 No changes

How Agencies Determine Fees

equal amount under any circumstances. dously because it will make your employees 35.6% good guys won’t more productive and % of The Premium Flat fee based on account type 54.4% like you and even your drop more money ‘Most agencies probably lousy employees will to the bottom line,” 83.3% don’t change their comthink they are being Diamond says. “Even mission 79.1%structures and cheated.” if you are not an Producer Compensation don’t review them as One of the best incentive compensa75.8% rewards to tion agency, pay your often as they should.’ and Fees imple76.8% 36 menting a culture employees based on 74.9% % of fee of accountability Producer — moralereceives improves. what they do for you; don’t pay them an Producer receives all of fee “Wherever my clients introduce accountProducer doesn’t receive fee ability to the producers, agency morale Changes to Health Insurance Plan in Past Year improves,” Burand adds.

outperform the industry average — you can Under million give them an$1 incentive.

This applies to pro$1 million - $5accountable millionto meet ducers also. Hold them their sales goals and reward them if they $5 million - $10 million achieve and exceed their goals, but have $10 million million consequences in place- if$25 they fall short.” $25 Diamond advises owners to investigate million - $50 million whether or not incentive-based compensa$50 million - $100 million tion will work in their agency. or more $100 “If it fits million you, it will benefit you tremen-

Increased employee contribution Increased deductible limits Implemented higher co-pays for participants Reduced drug benefit Reduced other benefits 30 | INSURANCE JOURNAL-NATIONAL February 24, 2014

42.3% 62.5% 39.0% 9.8% 11.2%

Insurance Journal’s Agency Salary Survey collectOwners Thinking About ed 1,970 responses from independent insurance Selling the Agency agencies and brokerages nationwide via an online survey. Demotech Inc., Insurance Journal’s offiYes cial research partner, Noassisted with analysis of this year’s survey results.

For more information, Not applicable contact awells@insurancejournal.com. www.insurancejournal.com

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CLOSER LOOK

Marinas Industry Update: Riding the Wave in the Marina Marketplace

By Thomas Murphy

A

s the $4.2 billion marina industry continues to expand, independent agents who seek to leverage their specialization and partner with experienced carriers have a significant opportunity to grow their businesses.

With the growth of the marina industry have come significant advancements in their operation. When we think of a traditional marina, we picture a facility where boaters simply berth their vessels.

Today’s marina provides a wide range of facilities and should be seen as a total hospitality business rather than just a standalone operation. Marinas are offering full service restaurants, fueling stations, repair facilities and rental operations.

“Generally speaking, as a business grows • Marine Operators Legal Liability: This covso does the risk a business owner faces. ers both the boats as well as marine While marina owners are very knowledgeitems of others that are in the care, able, very often they aren’t fully aware custody and control of the marina, of the insurance risks that could put including fueling operations and transtheir businesses in jeopardy,” said Darren portation.

Sliney, underwriting manager with North • Protection and Indemnity: A marina’s liabilAmerican Marine Underwriters, an underity towards its workers arising out of writer of package business for marinas, the operation of any vessel (i.e. towing, boat dealers, yacht clubs and boat yards, launching, demonheadquartered in Lynnfield, Mass.

Today’s marina provides a wide strations).

• Bumbershoot or “Independent range of facilities and should Umbrella Coverage: agents and brobe seen as a total hospitality This coverage kers like us who business rather than just a allows marina specialize in the owners to purmarina business stand-alone operation. chase higher liabilcan provide more ity limits than offered under standard value by offering deeper insight and counsel contracts. to our customers and providing more tailored insurance protection.”

Changes in Marinas Today For example, in addition to standard Advances in dry rack storage facilities commercial property and general liability, and dock materials are also changing the marina owners today should consider: way marina owners run their businesses.

• Docks and Piers Coverage: Marina owners By stacking boats on racks in warehouses have a duty and responsibility to proand other large structures off of the water, vide a safe and secure mooring. Docks marina operators can handle far more boats and piers coverage provides physical with less waterfront than a conventional damage coverage to property over the wet slip marina. water. www.insurancejournal.com

In addition, using refined composite dock materials or even concrete allows a dock to withstand the elements more effectively than wood. This creates a stronger, more durable dock.

“With the many changes in the business, marina owners face many new and significant risks that, left unaddressed, could have dire financial consequences,” said Phil Begeman, underwriting manager with Harbor Risk, an underwriter of marine insurance, headquartered in Grand Rapids, Mich.

For example, marinas are subject to various state and federal environmental regulations concerning direct water pollution from boaters, contaminated storm water runoff and dredging operations. Marinas also need suitable water depths to stay in business and marinas owners across the country are feeling the effects of low water levels.

“The impact can range from minor disruptions when moving boats, lost income for having to cut a season short, or the additional expenses incurred when having to dredge a marina,” said Begeman.

Marina owners face a great deal of expocontinued on page 34 February 24, 2014 INSURANCE JOURNAL-NATIONAL | 33

CLOSER LOOK

Marinas continued from page 33 sure to potential losses. From the liability of maintaining a marina to the potential property damage to buildings, other structures, contents, docks and piers, the need for comprehensive commercial marine insurance coverage is critical. These new and emerging exposures for marinas create opportunities for agents who know the industry, who can offer valuable expertise and offer customized solutions with industry leading products.

Expertise The most successful agents and brokers in the marina marketplace are those who can offer unique expertise, knowledge, and counsel.

In addition, they provide quality insurance products and services through a leading carrier, along with additional risk solutions and support, from online educational webinars, to print resources, and on-site

training sessions.

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close to the marine industry and understand the latest trends and developments in the market. Whether it is the latest regulatory change or a new environmental exposure, agents and brokers are uniquely positioned to provide value counsel and support to their customers. They are investing in the marina market and understand the risks their clients face.

The growing and continually changing marina industry is creating significant growth opportunities for well positioned

‘With the many changes in the business, marina owners face many new and significant risks that, left unaddressed, could have dire financial consequences.’ agents and brokers. By investing in their own capability, partnering with the right carrier, and staying abreast of the marina industry, the best, most committed agents always will find ways to capitalize on opportunities and win.

Murphy is the director of Ocean Marine at The Hanover Insurance Group.

www.insurancejournal.com

IDEA EXCHANGE

Growing Your Property Casualty Agency Retro-Theme Marketing, a Fun Approach to Motivation and Sales

N

ow that the new year has settled down into just “the year,” it’s a great time to inspire growth-driven agency action. But, touting what you offer the same way, year after year, can be downright dismal for everyone involved. Sure, the use of social media can generate fresh interest, but if you employ it simply to digitize what you already do, the enthusiasm

By Alan Shulman it engenders is minimal. So instead of randomly tweeting and posting photos, develop theme-marketing campaigns that motivate your people and prospects. Here’s one fun example.

more than images of stuff; also display photos of 1950s families on picnics, in and about their cars, etc., to evoke warm feelings for the past. Build them into “Time Capsule” campaigns that contrast the relatively modest insurance limits of the past to the much higher numbers of today. Use your website, social media, email, and direct mail to distribute such marketing messages.

Go Retro Retro is something that charms everyone.

Further Promos Young people see retro objects and images Bring long-established commercial as kitsch, while boomers view them with insureds into the picture. Co-sponsor a nostalgia. This makes it an ideal insur“retro day” with them ance marketing theme with universal appeal.

Retro is something that where the prices they charge for a selected Inherent in it is the charms everyone. product or service is the promise of classic sersame as it was in the year they were foundvice, promulgated via modern marketing. ed. For instance, a plumber charges a 1950 hourly rate of [$5] to fix a simple clogged Younger Prospects drain.

Use social media to attract young insur Another approach is to offer small, retro ance prospects. Display cool, stylized imagitems with every auto or home quote. es of interesting “old stuff.” For instance, Potential giveaways might include toy modsend tweets with photos of outdated els of old cars, old-time candy bars, rotary devices that say something like “Is your dial smartphone apps, gift certificates to [auto] insurance protection as outdated as a local ‘50s theme diner, tickets to old car this rotary dial phone? Get up-to-date at a shows, etc. All promos are subject to insurgreat price. [Phone number] [Landing page ance regulations.

URL].” Follow-up with images of an ancient TV, a manual typewriter, a classic car, etc.

Staff Participation Employ variations of this approach on addi Motivation is needed throughout the tional social media. calendar to encourage agency employees to meet established sales goals. Success Baby Boomers depends on the people involved, realistic There are 72 million U.S. baby boomers, expectations, and making the process pleasall of whom are old enough to recall the ant for the seller as well as the buyer. A everyday objects of bygone decades. Feature 36 | INSURANCE JOURNAL-NATIONAL February 24, 2014

well-considered retro marketing campaign, conducted over multiple months, is entertaining for all.

Involve the entire agency by encouraging employees to find old family photos, old toys, old product packaging, old insurance company giveaways and more. (Tip: Old is relative, so declare a minimum age for stuff to avoid hurt feelings.) Photograph these objects to bond employees to the concept, instead of just purchasing stock photos.

Feature your campaign images, formatted in classic retro style (using photo filter software), on your website, Facebook wall, Pinterest pinboard, YouTube videos, and tweets. Display them in your emails, direct mail pieces, in-office posters, and more.

Keep staffers excited for the duration of the campaign with such agency events as a 1950s sci-fi film hosted in your conference room during lunch (popcorn provided), a ‘60s dress-up day, break-time assembly of a retro jigsaw puzzle, and more.

Shulman, CPCU, is the publisher of Agency Ideas, a subscription-only sales and marketing newsletter.

He is also the author of the many tools posted on the Agency Ideas Instant Download Store. Phone: 800-724-1435. Email: alan@agencyideas.com. Website: www.agencyideas.com.

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SPOTLIGHT

Errors & Omissions Technology’s Opening a Whole New World of Agent E&O Exposures

By Amy O’Connor

T

hose in the insurance industry have another errors and omission (E&O) risk to consider these days, and they have technology to thank for it. Anyone in the insurance industry that possesses, stores, transmits or disposes of customers’ personal information has a duty to protect that personal information. Failure to do so opens up agencies to E&O exposures.

“When you think about the typical information you give an insurance agent — name, date of birth, health insurance information, social security numbers — they do have a significant amount of personal data,” says Sabrena Sally, senior vice president and head of agent and broker business for Swiss Re Corporate Solutions in the United States “With each state having regulations that addresses that data and federal regulations also out there, there are third- and first-party exposures that agencies face.”

It would be tough to find anyone in the industry that isn’t holding personal data of some kind.

Even commercial lines agencies have their

Being Aware own employees’ personal data on hand and The real problem isn’t the fact that the often the data of their clients’ employees as industry has this personal information but well. how aware insurance professionals are of Commercial lines agencies also typicaltheir vulnerabilities and how vigilant they ly sell personal lines products, as well as are in protecting sensitive customer inforemployee benefit services, Sally says. mation, says Josh Schmidt, vice president In addition, the increased use of Internet and chief information security officer for sales portals gives agents the ability to Vertafore. expand into other “There was a regions, but it also The increased use of perception [in the increases an agent’s Internet sales portals insurance industry] vulnerability and gives agents the ability to that they weren’t as liability, which many still don’t realize. expand into other regions, much of a target as banks because they “If agencies are but it also increases an don’t take large deposdoing business in agent’s vulnerability and its and carry cash,” multiple states, they liability.

Schmidt says. “Now, it must be aware of doesn’t matter. If you what their obligations have consumer personal information, you are in the different states to protect personare just as much of a target.” al data, and they need to stay abreast of the Vertafore is a software service provider different regulations,” Sally says. that works with the insurance industry to Failing to follow these regulations and protect sensitive information. It also works requirements could be costly and devastatas a cloud service-provider for the industry ing to any size agency, with penalties, fines to store important data. While industry and the costs of customer notification and awareness of data security exposures may credit monitoring if a breach occurs. not have been stellar in the past, Schmidt says there has been a shift occurring lately.

Instead of just asking questions about software and cloud security, Vertafore’s clients have become better at overseeing third-party data management, including vetting security measures of third-party providers and incorporating security requirements into contracts with these entities, he says. Vertafore welcomes all of this. “I take that as a good sign that the insurance industry as a whole is realizing that there is risk in data and they need to take precautions in managing those risks,” he says.

Sally says Swiss Re Corporate Solutions also has seen improvement in industry awareness, but there is still a learning curve, particularly with smaller agencies. continued on page 40

38 | INSURANCE JOURNAL-NATIONAL February 24, 2014

www.insurancejournal.com

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SPOTLIGHT

Errors & Omissions continued from page 38 which helps agencies identify the most effective business processes, practices and technologies.

Sally says this learning curve became especially apparent in 2011, when the company introduced an insurance agents E&O policy that included a low limit of $10,000/$25,000 for first-party data breach exposures and a $1 million limit for third-party claims. The coverage is automatically built into a policy, but for agents to qualify they had to comply with relevant state and federal regulations and many agencies were not on top of these. Since then, demand and education levels have improved.

Third-Party Providers Vertafore’s Schmidt says agencies should be mindful that using a third-party provider to manage personal data does not take them off the hook if a privacy breach occurs.

“You, as the organization who collects the data from the consumer, are still ultimately responsible,” he says. “You can never hand off all your ‘These days, you can’t just liability to a third-party because they put up a firewall and have are not the ones soliciting the data some antivirus software on from the end consumer.” work stations and assume Schmidt says there are multiple steps agencies should take to make you are protected because sure their data is safe, including: you aren’t.’ properly vetting service-providers; identifying and addressing security risks; “We never intended to replace a standard and implementing multiple layers of proteccyber liability policy, and we are hearing tion of data through passwords and encrypmore frequently that agencies are seeking tion. He says it’s important that agencies that out in the market,” Sally says. stay data focused.

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is located, your compliance obligations and how you are protecting that data where it is,” he says. “These days, you can’t just put up a firewall and have some antivirus software on work stations and assume you are protected because you aren’t.”

Sally recommends that agencies incorporate standard written procedures about data security so that every employee is aware of how the agency collects, handles and stores personal data. Procedures could include: •Only allowing authorized individuals in the agency to access personal data; •Outlining how data can be used within a business; •Addressing whether employees can put customer personal data on their individual devices and take it out of the office, and if so what is the protocol for that; •Putting in place proper physical security procedures for data servers or personal files.

Agents also should update their E&O checklists to address their clients’ procedures and protections for personal data and if they are properly insuring that data.

“If you are having a robust discussion with your customer about protecting their assets and business, you need to address if they have an exposure to a breach of personal data as well,” she says.

1/31/14 6:23 PM

www.insurancejournal.com

IDEA EXCHANGE

Minding Your Business How to Be a High Performing Agency

T

o be a high-performing firm, one needs to emulate what the best firms are doing and the traits that bring high-performance to fruition.

This article focuses on the top five characteristics the best agencies have in common.

1 – Growing a SalesOriented Firm Everyone inside the

By Catherine Oak agency should feel that sales are part of their job. Even employees in the customer service roles should be rewarded for bringing in new business and cross-selling existing accounts. In high-performing firms, retention of the business is quite good because of this, and customer loyalty is high. Clients regularly send referrals to the agency and are proud to tell their suppliers, distributors and even competitors whom they are insured with.

2 – Don’t be a Generalist, Specialize in These great agencies stand out from the Some Areas rest. You can feel a sales agency when walk Firms that specialize grow faster and also ing into it. There is activity; noise, bells better serve their particular niches. They that go off, accolades given; the conference know what is needed, have markets and room has goal sheets posted, including employees that understand these niches, prospects the producers are going after; and and can set themselves the staff knows what is apart. It is OK to write going on with sales. They The business without business that comes from support the producers a plan is like a ship other industries, but once and it is a win-win team without a rudder. a firm has written more approach. than a few of a particular Despite the economy industry, the producers and marketers still being challenging, top-performing know how to beat the competition and agencies are cross-selling more, when serve this niche. premiums drop due to lower rating bases.

Most agencies have about five key classes When there are savings, good agents will of business. If these are identified by prosell their clients additional coverages, such ducers and for the firm overall, more focus as business interruption, umbrellas and can be placed there in targeting accounts, employment practices liability insurance. advertising and training. It would be easier Firms should be growing at least 15 perto achieve the firm’s growth and profitabilicent to 20 percent per year to keep up with ty goals. increasing expenses and attrition, and to earn profits for the owners and employees.

3 – Employ and Appreciate Great People Employee quality is very important.

The top-performing firms employ the best employees they can find and challenge them. Reward employees that bring in good, new employees. When an agency has really good people, it needs fewer employees. With this approach, total payroll costs tend to be less, thus productivity is higher.

Great, happy people are the key to success. If people feel appreciated and praise or accolades are regularly given, morale will be better. If employees are allowed to use their heads, present new ideas and have authority to make changes, they will enjoy their work more.

4 – Strategic and Sales Plans The business without a plan is like a ship without a rudder. This is a common cliché and very true. Agencies without a plan are totally reactive to their environment and have little control over their future. Firms that incorporate an annual planning procontinued on page 44

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IDEA EXCHANGE

Minding Your Business continued from page 43 cess tend to be more efficient, more profitable and highly valued businesses.

Top-performing agencies take the time to develop a business plan each year, monitor it and keep the firm on track. Planning sessions are an excellent forum for people in the organization to give their ideas, brainstorm with each other and come up with great solutions to areas that need improvement. Change is important and fosters growth.

A written sales and marketing plan is also imperative. Oak & Associates has templates, if assistance is needed.

5 – Know Your Agency’s Value Value comes from the ongoing value of the firm’s operations, which comes from the earnings that come from the income statement. The firm’s EBITA, pro forma earnings before interest and taxes is multiplied by a multiple usually in the 5.5 to 7 times range,

depending on the firm’s risk of the earnings continuing. To that value is added the value of the firm’s balance sheet, which is its tangible net worth. This value is added on a dollar for dollar basis and is calculated on the date of the transaction. Then about 30 to 60 days of working capital is deducted from this value to give a buyer the ability to run the firm for a period of time with this cash flow before the revenues become

booked to the buyer.

It is helpful for owners to know each year if the firm’s value is actually improving.

An annual valuation can give owners a great idea of the attributes of the firm that are important to a third-party buyer and what it is that drives agency value. It is also less expensive to do a valuation update each year then to wait to do it every few years.

High performing firms work toward serving their clients well (through great service and attention).

Owners know that making decisions based on the effect they have on the firm’s value is a very astute way to run a firm as a high performer.

Summary Remember. being a high-performing firm by having these key characteristics will set you apart from the competition.

High-performing firms work toward serving their clients well (through great service and attention). These firms also focus on their employees. They hire good people, treat them well and give them training and authority. Follow these key points to be a high-performing agency in 2014!

Oak is the founder of Oak & Associates, an international consulting firm that provides consulting and financial services focused on the insurance industry.

Phone: 707-478-8527. Web: www.oakandassociates. com MIDRE16792.indd 1

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IDEA EXCHANGE

Terrorism What Might Terrorists Do Next?

T

he Sept. 11, 2001, terrorist attacks created an atmosphere of anxiety and uncertainty. No one knew how many more large-scale attacks were in the pipeline.

Might more Mohammad Attas already be in the country making the final preparations for new 9/11s? Were armies of terrorist “sleepers” awaiting their wakeup call?

Over the last dozen years, would-be terrorists plotted to

By Brian Michael Jenkins strike the American homeland with bombs, bullets, poisons and fire, targeting transportation venues, sporting events, financial institutions, any place that offered the potential for a high body count. For all their plotting, though, only a few domestic terrorists have succeeded in striking on U.S. soil since 2001. America’s counterterrorism defense was crafted with attention to past terrorist behavior and critical thinking about what might be ahead.

46 | INSURANCE JOURNAL-NATIONAL February 24, 2014

America’s evolving counterterrorism regimen included a fundamental shift in law enforcement. Instead of investigating attacks after they took place — a dissatisfying response to terrorists trying to kill thousands — investigators were pushed to uncover and thwart terrorist attacks before they occurred.

Post-9/11 Post-9/11, the focus of analysis shifted from threat-based to vulnerability-based assessments. Instead of starting with what we knew about terrorists’ intentions and capabilities, the traditional starting point for assessing risk, analysts started with hypothetical vulnerabilities. Attacks on the power grid, transportation, food processing, nuclear reactors, were among the worstcase hypotheticals considered.

There were alarming alerts, but no more 9/11s, no army of sleepers. Domestic intelligence efforts, while still not optimal, have thus far proved largely successful. Of 43 jihadist terrorist plots in the U.S. since 9/11, the FBI and local police have uncovered

and thwarted all but four of them — two attacks by lone gunmen, a failed attempt to detonate a bomb in New York’s Times Square and the 2013 bombing at the Boston Marathon.

Al Qaeda’s intense online campaign to inspire homegrown terrorists to action mustered a tiny turnout. Its message of armed jihad against the West gained little traction among America’s Muslims. Since 9/11, fewer than 300 persons have been arrested for providing material support to jihadist groups, attempting to join jihadist fronts, or more seriously, plotting to carry out terrorist attacks in the United States. Few resembled the “lone wolves” portrayed in the news media. Most were barely competent although still dangerous.

Still a Threat But terrorism will continue to be a threat. Unrelenting pursuit of al Qaeda’s leaders has degraded its operational capabilities but not dented its determination. The spread of its ideology and its establishment of new footholds in Africa and the Middle East demonstrate al Qaeda’s resiliency and guarantee new generations of terrorists to continue its global terrorist campaign. And al Qaeda is not the only terrorist threat.

Since 9/11, would-be terrorists contemplated crashing a hijacked airliner into an urban area at least seven times.

New security measures make that more difficult, but terrorists continue to be obsessed with sabotaging commercial airliners.

Authorities also worry about commercial airliners being shot down with missiles — there www.insurancejournal.com

IDEA EXCHANGE

have been a few attempts. Meanwhile, terabroad, but terrorists can fabricate smaller rorists have bombed or plotted to bomb airdevices. ports. They have targeted subways, trains, Online extremist publications urge terand stations and have attempted to derail rorists to exploit the more accessible weapspeeding passenger trains. For terrorists on of fire. Terrorists also have thought about seeking high body releasing poison gas or ‘If there is one lesson counts, surface transdispersing homemade portation targets are ricin in crowded pubAmerica learned about easily accessible and counterterrorism on 9/11, lic places. offer crowds of people it’s that the coming attack explosivesConventional in confined environmay cause may look nothing like ments. more casualties, but Most planned chemical, biological, those that preceded it.’ attacks involved bombor radiological attacks ings, though suicide bombings have rarely would cause more alarm and create costly been contemplated. Most focused on “soft” cleanups. targets that offered easy access. New secu Terrorists have plotted the assassination rity measures hopefully have made it more of government officials, but security officials difficult for local terrorists to assemble the worry most about terrorists killing and large vehicle bombs seen in conflict zones seizing hostages at shopping malls, hotels

or other public places as we saw in Mumbai and recently in Nairobi.

But many of the terrorist plots that come to light today are nothing more than ambitious fantasies.

No one can predict with any certainty what terrorists might do next. However, looking back at their recent attacks, attempts, and interrupted plots gives us an idea of what they are thinking about.

This is useful, though it should not get in the way of creative thinking. If there is one lesson America learned about counterterrorism on 9/11, it’s that the coming attack may look nothing like those that preceded it.

Jenkins is senior adviser to the RAND president and the author of “Al Qaeda in Its Third Decade: Irreversible Decline or Imminent Victory?” and “The Dynamics of Syria’s Civil War.”

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February 24, 2014 INSURANCE JOURNAL-NATIONAL | 47

CLOSER LOOK

Agribusiness 10 Things to Know About Agribusiness The U.S.D.A. is working on a program to help small and underserved farmers understand crop insurance and other tools needed to effectively manage risk. (I.I.I.)

According to the United States Department of Agriculture’s 2007 Census of Agriculture, there were 2,204,792 farms in the United States, an increase of 4 percent from 2002.

Livestock insurance, which allows policyholders to lock in prices for animals to be sold for slaughter, is now available in all states where livestock is farmed. (I.I.I.) The average farm in the United States has 418 acres and $135,000 in sales, according to the U.S.D.A.’s 2007 Census of Agriculture.

The government has supported agriculture financially since the 1930s but the success of crop insurance has helped farmers today become more self-sufficient than in the past. (I.I.I.)

There are currently 18 crop insurance companies. (I.I.I.)

Agriculture is considered to be one of the top 12 industries poised for growth over the next 10 years, according to the Insurance Information Institute (I.I.I.)’s 2013 “Overview & Outlook for the P/C Insurance Industry.”

The federal crop insurance program covered more than 280 million acres in 2012. (I.I.I.)

The price of corn, soybeans, wheat and cotton reached record levels in 2011.

48 | INSURANCE JOURNAL-NATIONAL February 24, 2014

Crop insurance claim payouts in 2012 totaled nearly $17 billion and claims in 2011 were $10.9 billion. (I.I.I.) www.insurancejournal.com

IDEA EXCHANGE

Agency Management Numbers Don’t Lie: Agency Best of the Best - Quality vs. Quantity

O

n a recent agency visit, I met with an account manager who was being paid a salary of $85,000 and a 5 percent to 7 percent bonus on top of the base. By industry standards, this customer service individual was overpaid, right? Wrong. The account manager was self-managing an $850,000 book of business with no producer involvement, acted as the lead relationship on another $150,000 of revenue with

By Tommy a producer involved and McDonald was responsible for agency-sponsored risk management seminars for an agency’s key niche.

The reality is that industry titles, responcontinued on page 52

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February 24, 2014 INSURANCE JOURNAL-NATIONAL | 49

NATIONAL COVERAGE

MyNewMarkets Day Spas

Private Collections

Market Detail: SASSI – Salon & Spa Specialty Insurance (www. sassiagency.com), a division of W.H. Brownyard Corp., provides specialized liability coverage to the beauty and cosmetic industries.

Classes include beauty salons, nail salons, barber shops, day spas and electrologists.

Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states except Alaska, Hawaii, Va., and Wash.

Contact: Jennifer Brownyard at 800-645-5820 or e-mail: info@brownyard.com

Market Detail: MarketScout’s (www.marketscout.com) Private Client Solutions offers a comprehensive, customized approach to managing life’s risks. Products and risk management services are designed specifically to enhance protection and minimize threats to personal wealth and safety clients.

Available limits: Maximum $100 million Carrier: Various, admitted States: All states Contact: Courtney Kerr at 972-934-4214 or e-mail: cnkerr@marketscout.com

Construction Advantage Workers’ Comp

Builder’s Risk Insurance

Market Detail: Real PEO Insurance Programs (www.realpeo. com) has a new program called Construction Advantage and offers exclusive programs available for construction companies of all types.

Features include: high xmod; no Deposit; most class codes eligible; pay as you go billing; quick quote response with 24 – 48 hour turnaround. Partner agents see 90 percent client retention and competitive commissions. Real PEO Insurance Programs offers agents access to over 20 insurance programs for hard to place workers` comp prospects and clients. Submission requirements include: Acord 130 application; currently valued loss history (90 days); AMS Programs submission cover page.

Available Limits: Minimum $25,000, maximum $1 million Carriers: Various, admitted and non-admitted available States: All states Contact: Curtis Prince at 925-914-9531 or e-mail: Curtisp@amsprograms.com

Market Detail: Empire Underwriters’ (www.empireunderwriters. com) builder’s risk insurance programs are available nationwide for residential, commercial, educational, office, retail, lodging, healthcare, recreational and street and road projects. Program highlights include: several carriers rated “A” or higher by A.M. Best, including Great American, Zurich, Lexington and Beazley; up to $100 million

CATalyst Coastal Property Insurance Market Detail: Venture Insurance Programs’ (www. ventureprograms.com) CATalyst Property Insurance features monoline commercial property coverage for coastal, high-hazard and other specialty property exposures. CATalyst has contractual relationships with all the major property writers and can provide: commercial property with limits up to $500 million; inland marine with limits up to $500 million; and incidental general liability for property-driven risks. CATalyst program features include “all risk” policies available including wind, flood & earthquake difference in conditions for flood & earthquake high hazard property. This includes: commercial coastal properties; national property schedules; manufacturing & warehousing risks; DIC flood & quake; vacant buildings; renovation projects; builders risk; heavy terrorism exposure & risks with poor loss history. High hazard inland marine includes contractors equipment, motor truck cargo, marine cargo and fine arts.

Available limits: As needed Carrier: Various, admitted and non-admitted available States: All states Contact: Michael Rogers at 800-282-6247 or e-mail: CATalyst@ventureprograms.com 50 | INSURANCE JOURNAL-NATIONAL February 24, 2014

per risk capacity; one-shot and extensions available. Commission rates of up to 12.5 percent. Target classes include: residential; commercial; educational; lodging; healthcare; retail; office; infrastructure; recreational; street and road; and military.

Available Limits: As needed Carriers: Various, admitted and non-admitted available States: Ala., Alaska, Ariz., Ark., Calif., Colo., Ga., Fla., Ill., Ind., Ky., La., Miss., Mo., N.C., Nev., N.J., N.M., N.Y., Pa., S.C., Tenn., Texas, Utah, Va., and W.V. Contact: Customer service at 800-758-8113

Contractors Pollution Liability Market Detail: Environmental Insurance Agency, Inc. (www. eiains.com) has coverage available in all states. Coverage features include: property damage and cleanup coverage for unintentional pollution caused by covered operations performed at job sites not owned or occupied by insured; available on either an annual basis for all operations or on a project-specific basis; may be written on a claims made or occurrence form. Minimum premium $2,500.

Available limits: Maximum $10 million Carrier: Unable to disclose continued on page 52 www.insurancejournal.com

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NATIONAL COVERAGE

Classifieds NOTICE OF PROPOSED AMENDING SCHEME OF ARRANGEMENT IN THE MATTERS OF

OIC RUN-OFF LIMITED (formerly Ralli Brothers Insurance Company Limited and The Orion Insurance Company plc) and THE LONDON AND OVERSEAS INSURANCE COMPANY LIMITED (formerly Hull Underwriters’ Association Limited and The London and Overseas Insurance Company plc) (BOTH SUBJECT TO A SCHEME OF ARRANGEMENT) (TOGETHER THE “COMPANIES”) On 7 March 1997 the Companies, which are insolvent, became subject to a scheme of arrangement (the “Original Scheme”). The current Scheme Administrators are Dan Schwarzmann and Paul Evans, both of PricewaterhouseCoopers LLP. The Companies have been developing an amending scheme of arrangement under Part 26 of the Companies Act 2006 (the “Amending Scheme”). If you believe that you are, or may be, a creditor of one or more of the Companies (a “Scheme Creditor”) you may be affected by the proposed Amending Scheme.

The Original Scheme is a reserving scheme of arrangement under which the Companies continue to agree Scheme Creditors’ claims in the ordinary course of business. The Amending Scheme would convert the Original Scheme to a crystallisation scheme of arrangement under which Scheme Creditors’ claims, including notified outstanding liabilities and incurred but not reported claims, would need to be submitted to the Companies by a specified bar date. The primary objective of the Amending Scheme is to enable Scheme Creditors’ claims to be valued and the Companies’ assets to be distributed to Scheme Creditors earlier than would be the case under the Original Scheme.

This Notice informs you of: (a) the Scheme Administrators’ decision to propose the Amending Scheme; (b) the Scheme Administrators’ intention to apply to the High Court of Justice at the Royal Courts of Justice, 7 Rolls Building, Fetter Lane London EC4A 1NL, for a Court hearing (the “Court Hearing”) for permission for the Companies to convene the necessary meetings of Scheme Creditors to consider and, if thought appropriate, approve (with or without modification) the Amending Scheme; and (c) the place where you can locate details of the composition of the meetings of Scheme Creditors which the Companies propose to convene for the purpose of voting on the Amending Scheme.

Information on the proposed classes of Scheme Creditor, as well as other important information in relation to the Amending Scheme, can be found in the Practice Statement Letter which is available on the Companies’ website at www.oicrun-offltd.com.

The date, time and location of the Court Hearing will also be confirmed on the website once known.

If you are a broker, agent or other intermediary who has acted on behalf of Scheme Creditors in placing business with one or more of the Companies and you have not provided detailed policyholder contact information to them, please forward this notice to your clients.

Alternatively, please provide us with your clients’ names and addresses so we can write to them directly.

Certain policyholders may have a policy written through a broker facility (which includes brokers covers, broker lineslips and binding authorities) and may not know the identity of the insurance company. A list of known broker facilities is available on the Companies’ website.

FURTHER INFORMATION CAN BE OBTAINED BY CONTACTING THE COMPANIES AS FOLLOWS: Armour Risk Management Limited, 4th Floor,

By Post: 20 Old Broad Street, London EC2N 1DP, United Kingdom, marked for the attention of Andrew Jones By e-mail: OICClosureHelpdesk@armourrisk.com By phone: +44 (0) 20 7382 2020 By fax: +44 (0) 20 7382 2001

52 | INSURANCE JOURNAL-NATIONAL February 24, 2014

Agency Management continued from page 49 sibilities, performance and salary statistics can be deceiving. Adding necessary context to the role, agency, and title often brings more dynamic details on the agency’s success in staffing and compensation.

Regardless of agency type, role, responsibility, and geography, compensation costs represent the largest expenses of an insurance agency. Few components have a bigger impact on agency value than compensation. There is a misguided perception in the marketplace that profitability is driven primarily by lean payroll. Agency owners, who pay employees less, have significantly higher margins, right?

Wrong again. The best agencies actually have higher total compensation expenses than the average (5 percent difference actually), but employ 10 percent less full time people.

The best firms that hire quality over quantity, pay their people more, employ less, and drive extremely high valuation metrics in the process.

Where do your employees rank against the best in the business?

McDonald is vice president, MarshBerry. Phone: 440-392-6700 Email: Tommy.

McDonald@MarshBerry.com

MyNewMarkets continued from page 50

States: All states except Hawaii, N.D., S.D., Neb., Ks., Miss., Ky., Ind., and D.C. Contact: Customer service at 800-977-3335

Small Business Workers’ Compensation Market Detail: Corporate Risk Services (www.HealthcareWC. com) offers a workers’ compensation program designed specifically for small businesses. 180 eligible class codes for these types of risks.

Eligible risks have premiums under $25,000 and E-Mods under 1.10.

Available Limits: Minimum $500, maximum $25,000 Carriers: Unable to disclose, admitted States: Nev., Idaho, Mont., Colo., S.D., Neb., Ks., Texas, Minn., Wisc., Iowa, Mo., Ill., Ark., Tenn., Ind., Mich., Pa., N.J., Conn., Md., N.C., S.C., Ga., and Fla. Contact: Justin Mills at 479-271-7475 or e-mail: jmills@mrmsi.com

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Advertisers Index

Readers, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/ Abram Interstate www.abraminterstate.com W4 ACE Insurance www.acelimited.com 15 American Reliable www.assurantspecialtyproperty.com 37 Anderson & Murison, Inc. www.andersonmurison.com 40 Applied Underwriters www.applieduw.com 56 Arrowhead General Insurance Agency www.arrowheadgrp.com 42 Atain Specialty Insurance www.atainins.com 3; SC3 Atlas General Insurance Services www.atlas.us.com SC6; SE6; M2 Atlass Insurance Group www.atlassinsurance.com 34 Burnett & Company www.bcoinc.com SC2 Burns & Wilcox Brokerage www.burnsandwilcox.com 32 Burns & Wilcox Ltd www.burnsandwilcox.com 7; FL7 California Earthquake Authority www.calquake.com 15 California State University Fullerton- CIS www.centerforinsurancestudies.com W13 Catlin www.catlinus.com 31 Century National www.cnico.com 9 City of Hope www.cityofhope.org 49

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Demotech www.demotech.com 23 EMC Insurance www.emcins.com 21, 47 FAIA www.faia.com SE8 FEMA www.agents.floodsmart.gov/ij 45 Fujitsu www.fcpa.fujitsu.com 20 General Star www.generalstar.com W5; SE3; E5; M4 GeoVera Insurance Company www.geovera.com SC7; SE7 GIC Underwriters, Inc. www.gicunderwriters.com FL1 Gorst & Compass Insurance www.gorstcompass.com W16 Great American Insurance Group www.greatamericaninsurancegroup.com 39 IMCA www.imcanet.com 51 Ironshore www.ironshore.com 55 JM Wilson www.jmwilson.com FL4 Johnson & Johnson www.jjins.com FL2 K&K Insurance Group www.kandkinsurance.com 13 Midlands Management Corporation www.midlandsmgmt.com 44 Monarch E&S Insurance Services www.monarchexcess.com W3

Navigators Management Company, Inc. www.navg.com 41 Pacific Gateway Insurance Services www.pgiainsurance.com W11 PersonalUmbrella.Com www.personalumbrella.com 5 QBE www.qbededicated.com 35 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com FL12 Scottsdale Insurance Company www.scottsdaleins.com 2 SIAA www.siaa.net 17 South & Western www.southandwestern.com SC9; SE9 Southern Cross Underwriters www.scui.com FL5 State Compensation Insurance Fund www.scif.com W1 Swett & Crawford www.swett.com 19 Tejas American General Agency www.taga1.com 3 The Hartford www.privatecompanyinsurance.com

W7; SC5; SE5; E3; M3 The Institutes www.theinstitutes.org 9 Western Security Surplus www.wssib.com W8; SC8

February 24, 2014 INSURANCE JOURNAL-NATIONAL | 53

IDEA EXCHANGE

Closing Quote This mindset, and the reluctance to negotiate a fair wage, can be traced back to the mentality engrained during children’s educational years.

According to David Sadker, author of “Still Failing at Fairness,” girls are more likely to raise their hands and wait patiently to be recognized, while boys are more likely to aggressively raise their hands and shout. Even when boys do not volunteer, teachers are more likely to encourage them to give an answer or opinion than they are to encourage the girls in the room.

As a result, the boys received more attention and esteem-building than their female classmates. The girls learn that they must work harder to prove themselves and begin holding themselves back — not raising their hands, struggling with self-esteem and becoming less assertive.

Bridging the Wage Gap

T

By David E. Coons

oday, the number of women working in the insurance industry is roughly equal to the number of men, with 191,000 women and 197,000 men currently employed. Yet women continue to face a serious wage gap when compared to their male counterparts.

The Bureau of Labor Statistics (BLS) reports that women in the industry are currently earning just more than 62 cents per dollar earned by men. To put this current number in perspective, women working in the United States in 1951 made nearly 64 cents per dollar when compared to men. For 34 years, the insurance industry has been unable to make significant strides in bridging the wage gap. The reality of the gender disparity in the industry is a “black eye” that we must focus on addressing.

Why the Wage Gap? Surprisingly, women can trace a large portion of the wage gap back to their first salary negotiation with a new employer. According to a study conducted by the National Bureau of Economic Research, unless an employer explicitly invited them to do so, women were often unwilling to negotiate their starting pay. Men, on the other hand, were much more likely to negotiate for a higher salary or additional benefits. As a result, women are starting their career at a disadvantage when compared to their male counterparts.

54 | INSURANCE JOURNAL-NATIONAL February 24, 2014

What Can We Do? As HR professionals and hiring managers, our focus needs to be on providing fair compensation and not perpetuating the growing wage disparity. Do not take advantage of an individual’s unwillingness to negotiate.

Make sure to offer a compensation package that is fair and commensurate to an individual’s skills and contributions.

Be creative with raises, bonuses and other incentives to level the playing field for professionals that are contributing to the company in the same capacity. Furthermore, don’t let someone’s current salary drive your opinion of his or her perceived value.

Women preparing to enter the workforce or to accept a new position must understand and embrace their value. Do your The reality of the research and make sure you inves- gender disparity tigate the average salary and comin the industry is pensation trends for the position in question. Use this as a starting a ‘black eye’ that we must focus on point and negotiate for a salary that matches the skills and experi- addressing. ence you bring to the table.

Also, be ready to articulate how past accomplishments can translate into success. Don’t hold back when sharing your achievements with a potential employer or your current boss. Often, women choose to place their team first, sharing the praise with their teammates and opting to put “we” before “me.” Yet, to truly be successful, women must focus on putting themselves first, embrace self-promotion and highlight accomplishments.

Coons is senior vice president of The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: dcoons@ jacobsononline.com.

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