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Inside This Issue
On The Cover
10 Hot Markets to Watch
March 24, 2014 • Vol. 92 No. 6 • West
Top 5 States for Auto, Homeowners Insurance Rate Hikes: Perr&Knight
W2 Nearly $200M More for Colorado Flood Recovery
43 Growing Your Property Casualty Agency: Alan Shulman
Commercial Lines Price Hikes Slowing: Towers Watson
W2 Idaho Hockey Fans Sue over Arena’s Large-Small Beers
44 Tech Talk: Agents’ Use of Technology Is About Attitude
W2 University of Nevada Earthquake Lab Now World’s 2nd Biggest
46 Minding Your Business: Catherine Oak
12 10 Things to Know About High Risk Property
48 Numbers Don’t Lie: MarshBerry 16 Advertising Supplement: In Their Own Words – Corporate Profiles
50 Closing Quote: Hand Gestures and Selling
32 Closer Look: Top U.S. P/C Agency/ Brokerage Acquirers in 2013 34 Closer Look: Flashback: Key P/C Insurance Mergers & Acquisitions of 2013 38 Special Report: 10 Hot Markets to Watch
4 | INSURANCE JOURNAL-WEST March 24, 2014
DEPARTMENTS 10 Declarations 10 Figures W4 People 11 Business Moves 14 MyNewMarkets
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Opening Note Flood Waters
t press time, President Barack Obama was set to sign into law a bipartisan bill relieving homeowners living in flood-prone neighborhoods from big increases in their insurance bills. The legislation — H.R. 3370, the “Homeowner Flood Insurance Affordability Act of 2013” by Sen. Bob Menendez (D-N.J.) and Rep. Michael Grimm (R-N.Y.) — reverses much of a 2012 overhaul of the flood insurance program after angry homeowners facing sharp premium hikes protested. But by reversing the reforms of Biggert-Waters Flood Insurance Reform Act of 2012 Congress has again kicked the debt can down the road. And there’s no denying that the National Flood Insurance Program (NFIP) is in debt — $25 billion in debt. The Menendez-Grimm bill restores “grandfathering” of policies located in communities with new flood maps. It also reinstates subsidies for pre-Flood Insurance Rate Map (pre-FIRM) properties that are bought and sold. According to the Congressional Budget Office, the bill would not add to the $25 billion debt of the NFIP and would pay for itself through annual reserve fund assessments of $25 a year for primary resiIt’s like Congress just threw dences and $250 a year for up its hands and decided the businesses and vacation problems weren’t worth fixing. homes. Realtors, homebuilders and lenders generally supported the legislation to unwind Biggert-Waters while some environmental and taxpayer groups opposed it. The insurance industry was split over it. The National Association of Mutual Insurance Companies (NAMIC) has called the bill an unnecessary “overreaction.” However, the measure was supported by independent agents. “The startling pace with which Congress acted in order to fix the unintended effects of these two provisions in BiggertWaters, itself less than two years old, should be commended,” said Charles Symington, Big “I” (Independent Insurance Agents and Brokers of America) senior vice president for external and government affairs. Maybe Biggert-Waters was not the best way to address the problems with the NFIP. Maybe it went too far, and too fast, in eliminating too many subsidies for too many property owners. Pulling that financial support could devastate some families, communities and real estate markets. But Congress did not have to completely drown the reforms. It’s like Congress just threw up its hands and decided the problems weren’t worth fixing. There could have been a moderate solution that retained important reforms and improvements while targeting financial assistance to those in financial need rather than throwing the baby out Andrea Wells with the flood waters.
6 | INSURANCE JOURNAL-NATIONAL March 24, 2014
EDITORIAL Editor-in-Chief Andrea Wells | email@example.com V.P. Content Andrew Simpson | firstname.lastname@example.org East Editor Young Ha | email@example.com Southeast Editor Michael Adams | firstname.lastname@example.org South Central Editor/Midwest Editor Stephanie K. Jones | email@example.com West Editor Don Jergler | firstname.lastname@example.org International Editor Charles E. Boyle | email@example.com Senior Editor Susanne Sclafane | firstname.lastname@example.org ClaimsJournal.com Editor Denise Johnson | email@example.com MyNewMarkets.com Associate Editor Amy O’Connor | firstname.lastname@example.org Columnists Tommy McDonald, Catherine Oak, Alan Shulman Contributing Writers Chet Brokaw, Richard Hurd, Robert Redfearn, Jr., Dr. Linda Talley, Thomas Wetzel SALES V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 | email@example.com West Dena Kaplan (800) 897-9965 x115 | firstname.lastname@example.org South Central Mindy Trammell (800) 897-9965 x149 | email@example.com Midwest Lauren Knapp (800) 897-9965 x161 | firstname.lastname@example.org Southeast Howard Simkin (800) 897-9965 x162 | email@example.com East Dave Molchan (800) 897-9965 x145 | firstname.lastname@example.org New Markets Sales Manager Kristine Honey | email@example.com Classifieds, Jobs, Agencies Wanted/For Sale Ly Nguyen (800) 897-9965 x125 | firstname.lastname@example.org MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | email@example.com Advertising Coordinator Erin Burns (619) 584-1100 x120 | firstname.lastname@example.org New Media Producer Bobbie Dodge | email@example.com Videographer/Editor Matt Tolk | firstname.lastname@example.org DESIGN/WEB V.P. of Design Guy Boccia | email@example.com V.P of Technology Joshua Carlson | firstname.lastname@example.org Audience Development Elizabeth Duffy | email@example.com Marketing Director Derence Walk | firstname.lastname@example.org Web Developer Jeff Cardrant | email@example.com Web Developer Chris Thompson | firstname.lastname@example.org IJ ACADEMY OF INSURANCE Director of Education Christopher J. Boggs | email@example.com Online Training Coordinator Barbara Whiffen | firstname.lastname@example.org ADMINISTRATION Chairman Mark Wells Chief Executive Officer Mitch Dunford Chief Financial Officer Mark Wooster | email@example.com
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News & Markets Top 5 States for Auto, Home Insurance Rate Hikes: Perr&Knight
ersonal auto insurance companies increased their rates by an average of 2.5 percent countrywide in 2013, while home insurers increased their rates by an average of 5.1 percent, according to figures compiled from Perr&Knight’s RateWatch. In addition, renters insurance rates were up 2.6 percent and condominium insurance rates rose 2.9 percent. Annual average rate increases have varied between 5 percent
and 7 percent for homeowners insurance, 2 percent to 4 percent for renters insurance and 2.5 percent to 6 percent for condominium insurance in the past five years, according to Perr&Knight. The report found that the five states with the highest overall increases in 2013 for homeowners insurance were Oklahoma at 12.1 percent, Florida at 11.0 percent, Kentucky at 10.9 percent, Kansas at 10.3 percent and North Carolina at 10.1 percent. The only state experiencing a double digit increase in renters or condominium rates was North Carolina, where rates increased 18.7 percent for each. Two states, California and Hawaii, experienced overall decreases in homeowner insurance rates in 2013 of -3.4 percent and -0.7 percent, respectively. Insurers in California also decreased their overall renters rates by -1.8 per-
cent and condominium rates by -1.4 percent in 2013. The 2013 auto insurance increase is in line with a five-year trend of annual average rate increases between 2 percent and 4 percent, and was lower than the 2012 countrywide rate increase of 3.7 percent, the consulting firm said. The five states with the highest overall auto insurance increases in 2013 were Michigan (8.6 percent), Georgia (5.2 percent), New York and Delaware (4.3 percent), and Nevada (4.1 percent). No states experienced an overall reduction in rates between 2012 and 2013; however, 2013 rates in North Dakota remained at 2012 levels. Perr&Knight’s RateWatch product extracts data from the public rate filings of companies representing about 80 percent of the personal insurance premiums written, according to Tim Perr, CEO of Perr&Knight.
Commercial Lines Price Hikes Slowing: Towers Watson
ommercial insurance prices have risen for 12 straight quarters, including the latest jump of 5 percent in aggregate during the fourth-quarter of 2013. But price gains are slowing down, says Towers Watson. The global professional services company published the Q4 update to its Commercial Lines Insurance Pricing Survey. The survey compares carriers’ pricing on policies underwritten during Q4 2013 to those underwritten in the same quarter of 2012. The latest 5 percent price-level increase falls below a 7 percent figure estimated for Q4 2012. The aggregate figure of 5 percent for Q4 2013 was level with the third quarter 2013 survey result. For individual lines of business, Tower Watson reports that price hikes were lower in Q4 than in Q3 in all lines with the exception of general/products liability and excess/umbrella liability. Without revealing specific figures, Towers Watson said employment practices 8 | INSURANCE JOURNAL-NATIONAL March 24, 2014
liability experienced the largest price increase year over year, with workers’ compensation and excess/umbrella liability also showing substantial increases. Other key findings were: • Prices for most lines of commercial insurance showed gains in the mid-single digits. • Specialty lines prices increased at a lower rate than standard lines. • No line of business reported a price decrease. • Price increases were consistent across account sizes. Towers Watson said that survey respondents are reporting improved loss ratios, with accident-year 2013 ex-catastrophe loss ratios estimated to be 3 points better than accident-year 2012. Offering an explanation, the firm said that earned price increases are
more than offsetting claim cost inflation. The company also noted that the 3 point loss-ratio improvement builds upon estimated improvements of more 2 percent in each of the two prior years — 2012 and 2011. “Commercial insurance prices are still on the rise and have now been increasing for three full years, but we are beginning to see a moderation in that trend,” said Tom Hettinger, property and casualty sales and practice leader for the Americas. www.insurancejournal.com
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The number of New York State residents who have enrolled for health insurance on NY State of Health (NYSOH), the state’s official health plan marketplace, as of March 10. Officials said over 70 percent of those who have enrolled to date were uninsured at the time of application.
The maximum amount for which parents of teen drivers who get into accidents would be liable under a bill that passed the Wisconsin Senate. Children under 18 need a parent or other adult sponsor to sign and verify their driver’s license application. That makes the parents or sponsors liable for the driver’s negligence or willful misconduct. Current law has no limit on a parent’s potential liability.
“Keeping the public well-informed is essential to our mission of consumer protection.”
— Connecticut Insurance Commissioner Thomas Leonardi on his department’s recently launched consumer awareness campaign. The campaign seeks to raise awareness of the many resources the department offers to Connecticut’s insurance consumers. A recent survey in Connecticut found only 3 percent of respondents have used the department’s free services.
Have A Plan
The height in feet of a 200 mile-wide wall of dust that roared across parts of West Texas and New Mexico in advance of a recent cold front. Wind gusts reached 50 mph and it took about 30 minutes for the leading wall of dust to move from the north end of Lubbock County in Texas to its southern border. In October 2011, during Texas’ driest year ever, a dust storm that reached 8,000-feet-tall moved across the region.
“Whatever you do, don’t have a false sense of security based on where you live. … Always have a plan in case that tornado comes rolling in to town.”
The number of times a Kentuckian can let the insurance lapse on their vehicle before its registration is revoked under a bill that passed the House Transportation Committee. Currently, Kentucky law allows a driver’s insurance to lapse three times without consequence. Under the bill, drivers would still have 60 days from the time insurance lapses to restore coverage.
— Oklahoma Supreme Court Justice Steven Taylor in a ruling upholding the right of state-backed workers’ compensation insurer, CompSource, to transition into a mutual insurance company. CompSource writes about one-third of Oklahoma’s workers’ compensation policies.
10 | INSURANCE JOURNAL-NATIONAL March 24, 2014
OK to Mutualize
“The Oklahoma Constitution does not prohibit the Legislature from placing CompSource’s money and other assets in trust with a domestic mutual insurer.”
Is the size of a judgment against Wells Fargo & Co. for foreclosing on a New Mexico man’s home after his death, even though he had a purchased an insurance policy through the bank that would have paid the remaining balance on his mortgage. District Judge Beatrice Brickhouse said the bank’s conduct was shocking and so reprehensible that in addition to actual damages, attorney’s fees and court costs, she awarded James Dollens’ estate $2.7 million in punitive damages.
— Meteorologist Brian Barjenbruch with the National Weather Service office in Topeka, Kan.
Unfair, Illogical Burdens
“The statutory cap on wrongful death noneconomic damages fails because it imposes unfair and illogical burdens on injured parties when an act of medical negligence gives rise to multiple claimants.”
— Florida Supreme Court Justice R. Fred Lewis in a ruling that struck down the state’s caps on noneconomic damages in medical malpractice wrongful death cases. The caps had been set at $500,000 or $1 million depending the number of medical providers or plaintiffs involved.
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News & Markets Nearly $200M More For Colorado Flood Recovery
olorado is getting an additional $199 million from At least 80 percent of the the federal government to help communities devfunds will be spent on the hardastated by September’s historic floods, U.S. Housing est-hit communities – Weld, and Urban Development Secretary Shaun Donovan Boulder, and Larimer counties. announced. The funds add to the nearly The funds from HUD will help with housing and $63 million in disaster relief infrastructure repairs and flood mitigation as state that HUD awarded Colorado in officials prepare for spring runoff from the winter December. snowpack. The floods damaged or It’s going to make an enormous difference right at destroyed nearly 2,000 homes, the right time,” Donovan said, also noting that conwashed out hundreds of miles AP Photo/The Greeley Tribune, Joshua Polson struction season is just ramping up. Donovan made of roads, and damaged dozens the announcement at the state Capitol with Democratic Gov. John of bridges. Nine people were killed. Hickenlooper and U.S. Sens. Mark Udall and Michael Bennet. Hickenlooper praised the recovery efforts. “We all know that while we can never truly replace the homes, “We have seen, I think, one of the best examples of local response the businesses, the lives that were lost because of this natural disasand recovery integrated with state response and recovery, integrated ter, I know that with this announcement today, we can help you all with federal response and recovery that I could ever imagine,” he move forward with the rebuilding of your homes and your commusaid. nities,” Donovan said. Copyright 2014 Associated Press.
Idaho Hockey Fans Sue over Arena’s Large-Small Beers
University of Nevada Earthquake Lab Now World’s 2nd Biggest
handful of Idaho hockey fans have sued a Boise, Idaho, arena saying they were duped into thinking a $7 beer contains more brew than a $4 beer. The lawsuit says CenturyLink Arena, home of the Idaho Steelheads hockey team, defrauded customers by charging $3 more for a tall, narrow cup advertised as a “large” that actually holds the same amount of beer as the shorter, wider cup described as a “small.” Four fans filed the suit in Boise’s 4th District Court against Block 22 LLC, which does business as CenturyLink Arena. Brady Peck, Michele Bonds and William and Brittany Graham are seeking $10,000 in damages. Peck says in the suit he’s attended at least 30 events over the past three years at the arena and that he’s purchased beer each time. The other three say they bought at least one large $7 beer at the venue over the years. The suit came after another hockey fan posted a video on YouTube of what the fan said was a beer purchased at CenturyLink Arena. That video shows a patron holding a large cup of beer and pouring it into an empty small cup. In both cups, the beer reaches nearly to the brim. Copyright 2014 Associated Press. W2 | INSURANCE JOURNAL-WEST March 24, 2014
here’s a whole lot of shakin’ going on at the University of Nevada, Reno. UNR’s seismic-simulation facility became the largest in the United States and second largest in the world in March with an expansion that included moving three new 27-ton shake table tops into the school’s new Earthquake Engineering Laboratory. The shake table tops, called platens, are large surfaces onto which structures are attached and then shaken to determine their ability to withstand damage from earthquakes. Scientists use them to conduct simulations for governments and private industry to test new techniques to build safer bridges, highways and housing. Each one of the three tables can carry 50 tons of weight that can shake a structure forward and back just like a real earthquake. Ian Buckle, a civil engineering professor and director of the seismic laboratory, said the new Earthquake Engineering Laboratory has more than doubled the space of the laboratory and is about 20 feet taller than the UNR’s existing Large-scale Structures Laboratory. That will allow larger structures to be tested, and will provide more reliable results, he said. The structure’s $20 million price tag was paid for by $12.1 million from the U.S. Department of Commerce and $3.1 million from the U.S. Department of Energy. An additional $3.1 million came from donors and other sources. Copyright 2014 Associated Press. www.insurancejournal.com
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People Jason Webb
Renton, Wash.-based Bell-Anderson Agency Inc. named Jason Webb, Matthew Heikkala and Jennifer Lutz as senior vice presidents of sales. Webb is a member of the agency’s leadership committee. He came to Bell in 2006 from a life insurance company. Heikkala specializes in employee benefits. He joined Bell-Anderson in 2004 and previously worked with a national brokerage. Lutz heads up the agency’s surety department. Lutz came to Bell-Anderson in 2004. Bell-Anderson has six offices across Washington. Brandon Nyberg has joined The Leavitt Group’s Tacoma office. Nyberg specializes in employee benefits for companies of all sizes. His insurance experience includes working with self-funded groups with more than 100 employees. Prior to his work in insurance, Nyberg was a commercial mortgage lender and a financial sales manager in Seattle. He also worked as a commercial pilot. The Leavitt Group is a privately-held insurance brokerage that offers a wide range of insurance programs.
Swett & Crawford, part of Cooper Gay Swett & Crawford, named Jeff Bianchi as sales leader for its Woodland Hills, Calif., office. Bianchi will continue to be based in Swett’s San
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Francisco office and will remain a broker in the property practice group. Bianchi’s main responsibilities include leading the sales process and growth of the Woodland Hills office. Bianchi, who has been with Swett Crawford for 14 years, began his insurance career with The Hartford in 1995 as an underwriter, later moving to Fireman’s Fund Insurance Co. Cooper Gay Swett & Crawford is based in Atlanta, Ga. San Diego, Calif.-based Barney & Barney has promoted five senior executives to principals of the firm. The new principals, all of whom are based in California, are: Sara Bennett, an executive in the property/casualty group in San Diego; Nicole Mehrara, an executive in the employee benefits practice in San Diego; John Whalley and David Nava, executives in the firm’s employee benefits practice in Orange County; and Sean Reddy, an executive in the property/casualty group in Orange County. Bennett joined Barney & Barney’s property/casualty division in 2003 and specializes in workers’ compensation and risk management. Mehrara joined Barney & Barney in 2008 in the employee benefits division and specializes in employee benefit needs for small businesses. Whalley joined Barney & Barney’s employee benefits division in 2011 and specializes in the private equity and food services industries. Nava joined Barney & Barney in 2008 in the employee benefits practice and has more than 14 years of experience. Reddy joined Barney & Barney in 2005 in the property/casualty group and has 12 years of experience. In 2014, Barney & Barney was acquired by Marsh & McLennan Agency LLC, a subsidiary of Marsh Inc.
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David J. Snowball has been named the new director for the Utah Insurance Department’s captive division. Snowball replaces Ross Elliott, who is set to retire at the end of the month. Snowball joined the division in July 2010. Before that Snowball owned an income tax preparation business, which included five offices and 50 employees. He also previously was a comptroller for a construction company. www.insurancejournal.com
Business Moves Arthur J. Gallagher, Tudor Arthur J. Gallagher & Co. has acquired Tudor Risk Services in Woburn, Mass. Terms of the transaction were not disclosed. Founded in 2009, Tudor Risk Services is a retail insurance broker providing property/ casualty, risk management services and employee benefits insurance and consulting services. Tudor offers property/casualty insurance coverage, group health, welfare and wellness plans, and employee benefits consulting services for commercial and high net worth clients throughout the northeastern United States. The firm specializes in the technology, life sciences, healthcare and ambulatory, real estate, financial and professional services and manufacturing industries. William Frain III, Thomas Porell and their colleagues will operate under the direction of Douglas Brown, head of Gallagher’s northeastern retail property/casualty brokerage operations, and David Ziegler, head of Gallagher’s eastern employee benefit consulting and brokerage operations. Mercer, Transition Assist Mercer, a human resources consulting subsidiary of Marsh & McLennan Cos., has reached a definitive agreement to purchase Transition Assist. Terms of the transaction were not disclosed. Founded in 2008, Norwell, Mass.-based Transition Assist specializes in benefits consulting and helping retirees in employer-sponsored plans select Medicare supplemental healthcare insurance. Mercer has more than 20,000 employees in 43 countries. Confie Seguros, Ida Tunnell Insurance Confie Seguros, a national provider of personal lines insurance, has acquired Ida Tunnell Insurance in Marble Falls, Texas, near Austin. Confie Seguros now has 120 offices in the state. Founded in 1991, Ida Tunnell provides personal lines auto and homeowners insurance. Established in 2008, Confie Seguros is a California-based national insurance distribution company operating in 17 states and www.insurancejournal.com
primarily focused on the insurance needs of Hispanic consumers. The company has market positions in California, Arizona, Texas, Florida, Washington, Oregon, New York, New Jersey, Nevada, Illinois, Alabama, Kansas, Wisconsin, South Carolina, Missouri, Louisiana and Indiana, and expects to continue its expansion in those and other states, including Georgia, Virginia and North Carolina. Hub International, Corporate Benefit Consultants Global insurance brokerage, Hub International Ltd. (Hub), announced that its subsidiary Hub International Midwest (Hub Midwest) has acquired Corporate Benefit Consultants Inc. (CBC), a Des Plaines, Ill.-based employee benefits insurance brokerage firm. The CBC team will operate from their Des Plaines office. CBC partners, Ted A. Reese, James M. Cornelius and Michael A. Traina and their team will join Hub Midwest. Headquartered in Chicago, Hub provides property/casualty, life/health, employee benefits, investment and risk management products and services through offices in the United States, Canada, Puerto Rico and Brazil. Genstar Capital Mid-market private equity firm Genstar Capital Management LLC has partnered with an insurance industry veteran to create a new platform company, Palomar Insurance Holdings, which will initially serve as a provider of commercial and residential earthquake insurance. Concurrent with the investment, Palomar acquired an admitted insurance company from a national insurer licensed to underwrite business in seven states and has changed the name to Palomar Specialty Insurance Co. Genstar didn’t make known what company was acquired. However, according to public records
from Oregon, Cottage Insurance Holdings Inc. in late 2013 filed a statement regarding the acquisition of Northwestern Pacific Indemnity Co., a wholly owned subsidiary of Pacific Indemnity Co., a Wisconsin corporation controlled by the Chubb Corp. Cottage was formed in 2013 and is funded by Genstar to acquire and hold the stock of Northwestern, according to the records. In February, Reuters reported that Fitch Ratings withdrew Northwestern’s ‘AA’ Insurer Financial Strength due to reorganization because it was no longer affiliated Chubb due to a private sale. San Francisco-based Genstar, formerly the private equity firm behind Confie Seguros until Confie was acquired by Boston-based private equity firm ABRY Partners in 2012, focuses on investments in selected segments of the financial services, software, healthcare and industrial technology industries. Genstar said it has partnered with David M. Armstrong to establish Palomar Insurance, which was funded with $75 million of equity capital from Genstar and the management team. Palomar has received a Financial Strength Rating of A- (Excellent) and an Issuer Credit Rating of “a-” from A.M. Best Co. A.M. Best assigned a stable outlook to both ratings. March 24, 2014 INSURANCE JOURNAL-NATIONAL | 11
10 Things to Know About High Risk Property There are more than 1.2 million residential properties in the Western United States that are located in “high” or “very high” wildfire-risk categories valued at more than $189 billion. In the “very high” risk category there are roughly 268,000 residences valued at more than $41 billion. (2013 CoreLogic Wildfire Hazard Risk Report)
Winter storms caused $2 billion in insured losses in 2013, up dramatically from $38 million in 2012, according to reports from Munich Re. From 1993 to 2012, winter storms resulted in about $28 billion in insured catastrophe losses (in 2012 dollars), or $1.4 billion per year on average. (Property Claim Services (PCS), a division of Verisk Analytics)
Floods are the most common natural disaster in the United States. From 2003 to 2012, total flood insurance claims averaged nearly $4 billion per year. In high-risk areas, there is at least a 1 in 4 chance of flooding during a 30-year mortgage. (www.FloodSmart.gov)
From 2008 to 2012, the average flood claim amounted to nearly $42,000. In 2012, the average flood insurance policy premium was about $650 per year. People outside of mapped high-risk flood areas file nearly 25 percent of all National Flood Insurance Program flood insurance claims. (National Flood Insurance Program)
Total U.S. natural disaster-caused insurance claims payouts came to $12.79 billion in 2013, with $10.27 billion of that figure attributable to tornadoes and severe thunderstorms. The balance was due to events such as winter storms and wildfires. (Insurance Information Institute)
The estimated insured value of residential and commercial properties in the coastal counties of the U.S. East and Gulf Coast states now exceeds $10 trillion. The estimated value of these properties in the coastal counties of Florida and New York alone totals nearly $3 trillion in each state. (AIR Worldwide) Over the past five years, the insured value of properties in coastal states increased at a compound annual growth rate of near 4 percent. New York edges out Florida as the state with the highest estimated property replacement values, at $2.9 trillion. (AIR Worldwide, “The Coastline at Risk”)
Oklahoma is second only to Texas as the site of insured claims payouts resulting from tornado/thunderstorm/hail catastrophes for 20002013, with Oklahoma cumulatively generating $9.8 billion, and Texas a total of $16.9 billion in the same period. Since 2000, insurers have paid $135 billion on millions of claims in all 50 states from severe convective events including tornadoes. (Insurance Information Institute) 12 | INSURANCE JOURNAL-NATIONAL March 24, 2014
States leading the way in the “very high” category for total potential exposure to wildfire damage are Colorado ($15.2 billion) and California ($13 billion). Those states were followed by Texas ($6.3 billion), Oregon ($1.7 billion), Arizona ($1.2 million) and New Mexico ($1.18 billion). California had $65.46 billion worth of properties in the “high” category, followed by Texas with $46 billion, Colorado with $14.1 billion and Oregon with $8.4 billion. (2013 CoreLogic Wildfire Hazard Risk Report)
After the 1994 Northridge earthquake, half the residential loss — $10 billion of $20 billion — was covered by insurance. If the earthquake occurred today, less than a quarter of residential loss would be insured — $6 billion of $26 billion. (California Earthquake Authority) www.insurancejournal.com
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MyNewMarkets Non-Standard Auto Market Detail: Greenpath Insurance Co. (www.greenpath insurance.com) covers price-sensitive and hard-to-insure drivers with a range of coverage options, and available discounts. Limits of 15/30/5, 15/30/10, and comprehensive and collision coverages are aavailable. Discounts from 5 percent to 26 percent are available for: alcohol education awareness; good driver; multi-vehicle; mature driver; good student; daytime running lights; anti-theft; and antilock brakes. Available limits: As needed Carrier: Greenpath Insurance Co. States: Calif. only Contact: Chandah Burton at 877-789-GPIC
Carriers: Unable to disclose, admitted and nonadmitted available States: All states except Alaska, Fla., Hawaii and La. Contact: Customer service at 800-446-7647
Prize Indemnification Market Detail: Interactive Promotions Group (www.interactive promotions.com) specializes in contest insurance and promotional prize coverage for contest, games and sweepstakes. Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Patricia Johnson at 888-882-5140 or email: Johnson@ interactivepromotions.com
Hole In One Insurance
Market Detail: US Hole In One (www.holeinoneinsurance.com) is a provider of hole-in-one insurance for golf outings and tournaments. Coverage for hole-in-one contests include bonus prizes and signs. Available limits: Minimum $500, maximum $1 million Carriers: Various, admitted States: All states Contact: Monte Stringer at 214-265-4923 or email: monte@usrisk. com
Market Detail: Arlington/Roe & Co. (www.arlingtonroe.com) offers coverage for monoline flood. Various limits available, including: primary-residential up to $250,000; commercial up to $500,000; excess-residential and commercial up to $10 million; and non-partic-
Commercial Building Owners Market Detail: Prime Insurance Co. (www.primeis.com) offers an apartment house package, residential property coverage, medical payments, business income, medical, glass, CGL, business interruption, general liability, property, liability, fire legal liability, and miscellaneous professional liability, and hail. Available limits: As needed Carrier: Prime States: All states except D.C. Contact: Customer service at 800-257-5590
Builders Risk Market Detail: Boston Insurance Brokerage Inc. (www.boston brokerage.com) offers primary, excess, buffer, DIC, inland marine, ocean marine, quota-share, deductible buy downs, and single peril options. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Customer service at 617-556-7000
FuneralPro Market Detail: NIP Group LLC’s (www.nipgroup.com) program includes: funeral directors professional liability; funeral directors life insurance agents E&O; commercial auto; business income; workers’ comp and umbrella, with other coverage enhancements available. Available limits: As needed 14 | INSURANCE JOURNAL-NATIONAL March 24, 2014
ipating residential and commercial up to $250,000. Available limits: As needed Carrier: Unable to disclose, admitted and nonadmitted available States: Ill., Ind., Ky., Mich., Ohio and Tenn. Contact: Jim Eades at 800-878-9891 ext. 8626 or email: jreades@ arlingtonroe.com
Trucking Market Detail: Midwestern Insurance Alliance LLC (www. mwiainsurance.com) focuses on the transportation industry (trucking, public auto and related, etc.) Midwestern Insurance Alliance writes workers’ compensation for this industry and is looking to expand its writings outside of its home region (Kentucky, Indiana and Tennessee). The program is designed for best-in-class transportation accounts — particularly those with limited to no interaction with freight. Available Limits: Minimum $500,000, maximum $1 million Carriers: Unable to disclose, admitted States: Ark., Ala., Calif., Ind., Ks., Ky., La., Miss., N.C., S.C., Tenn., and Va. Contact: Submissions Inbox at 888-408-9867 or e-mail: submissions@ mwiainsurance.com www.insurancejournal.com
From Great to Greater
The Financial Strength Rating of Great American Insurance Company and its pooling affiliates has been upgraded by A.M. Best to “A+” (Superior). We’re also one of only four of over 3,000 property and casualty insurance companies that have earned an “A” or higher rating for more than 100 consecutive years. What does this mean for you and your clients? In the unfortunate case of a claim, you can rest assured that we’ll be able to meet our obligations. If you want to deliver a financially strong and stable company to your clients, give them Great American!
Rating affirmed February 21, 2014. Great American Insurance Group, 301 E Fourth Street, Cincinnati, Ohio 45202. The following registered service marks are owned by Great American Insurance Company: the Great American Insurance Group eagle logo and the word marks Great American® and Great American Insurance Group®. © 2014 Great American Insurance Company. All rights reserved.
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When a tornado is bearing down on your town, the last thing you should be worrying about is whether the carrier you recommended to your clients has less than stellar claims service. To process claims quickly and smoothly takes the expertise of specialists who know and understand how to turn grim to great. Great American’s strength of specialization gives us that rare ability. We’re able to see risks, write coverages, and handle claims in a way that gives your clients greater satisfaction.
Don’t settle for less. Turn grim to great with Great American. Agriculture • Annuities • Environmental • Equine • Excess & Umbrella • Fidelity and Surety • Financial Institutions • Inland & Ocean Marine Non-Profits • Professional Liability • Transportation • Workers’ Compensation Coverage is underwritten by Great American Insurance Company, Great American Insurance Company of New York and Great American Alliance Insurance Company, authorized insurers in all 50 states and DC; and Great American Lloyd’s Insurance Company, authorized in Texas only. ©2014 Great American Insurance Company. 301 E Fourth Street, Cincinnati, OH 45202
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Norman-Spencer serves the insurance community as a Program Administrator as well as a Wholesaler. With over 160 employees spread across eight offices throughout the country, we focus on three niche areas â€“ Construction, Marine and Specialty.
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Knights Videos Royally Over the Top
p air of kooky knights in armor touting insurance products is not inconceivable in an advertising world ruled by reptiles, Neanderthals, and a man in suit wreaking mayhem. But the popular video advertisements from La Crescenta, Calif.-based Monarch E&S Insurance Services, one of California’s leading managing general agents and wholesalers, have raised more than a few eyebrows. The most recent eye-catching ads are even more slapstick than usual. One ad features the two knights, Derek Borisoff, who has been at the helm of Monarch since 1994, slapping Monarch COO Mark Kaufman upside the head in various situations leading to a bout of forgetfulness. The ad highlights the fact that the firm writes employment practices liability insurance. Another ad has the two men preparing for a battle of “epic proportions,” including attending to a bit of personal hygiene. Past ad segments have Kaufman coming to the rescue of a stuck-and-creaking Borisoff with a can of WD-40, and another has Kaufman toying with an expensive vase behind Borisoff ’s back to highlight the fact the firm writes personal article floaters. The men have taken some flak from colleagues and peers, as well as a bit of fire from competitors, says Borisoff. “Our advertising videos serve two purposes,” Borisoff says. “One is to take a not-so-serious look at a very serious industry. We hope we are making someone smile or even laugh. We want to provide a relief, if you will, to our ever more complicated work days.”
The main purpose of the ads, of course, is to drive retail agent customers to Monarch’s website and encourage them to access the firm’s “Knight Rater,” which offers indications on hundreds of commercial classes with multiple carriers in seconds. “We hope the videos will remind retail agents to think of Monarch for their E&S needs,” Borisoff says. “Obviously we are not afraid to make fun of ourselves. We are not averse to putting ourselves out there for potential ridicule. I’m a big boy, I can take it!” A few of Monarch’s competitors have given Borisoff a bit of grief about the ads, and even a handful of Monarch vice presidents called at least one of the videos “over the top.” But in a business in which companies must really put themselves out there to be distinguished, a little clownish chivalry that opens a few eyes wider is just part of the plan. “Our partner carriers and London underwriters seem to enjoy the videos and they have been well received by our retail agent customers,” Borisoff says. “The videos always seem to come up as a topic of conversation at meetings and business lunches.” He adds: “We get calls all the time as a result of those videos, as well as our advertising in general. As they say, call me what you like, just call.” Monarch writes a broad range of coverages, and has California offices in La Crescenta, San Diego, Rancho Mirage, Simi Valley, Novato, Fresno and in the states of Arizona and Hawaii.
Mergers & Acquisitions Top U.S. P/C Agency and Brokerage Acquirers in 2013
nsurance Journal’s review of property/ casualty agency and brokerage mergers and acquisitions occurring in 2013 found that Arthur J. Gallagher was the most active agency acquirer — as was the case in 2012. Hub International, which was quiet in 2012, swung back into action in 2013 after being bought out in 2013 by fund manager Hillman & Friedman in a deal valued at $4.4 billion. Investment funds managed by Hellman & Friedman now hold a majority interest in the company, but members of Hub’s senior management also continue to have a significant equity position.
Arthur J. Gallagher-25
Jenkins and Associates Cleaveland Insurance Group McIntyre Risk Management Barmore Insurance Agency Longfellow Financial Bergvall Marine Giles Group Employee Benefits Analysis Corp. The Parks Johnson Agency G.S. Levine Insurance Services RJ Dutton Inc. Fine Arts Broker Team Belmont International R.W. Scobie Dickinson & Associates Bollinger Garza Long Group Property & Commercial Limited Benefit Advisors Metzler Brothers Insurance Insurance Risk Managers of Missouri Gardner & White Corp. Argus Benefits Corporate Benefits Advisors Hardman & Howell Benefits
Daystar Financial Bixler & Associates Maxwell Health Pallister Insurance Brokers Hellman & Friedman Manuel Lujan Insurance Vicencia & Buckley The Unity Group The Dorsey Group Southeastern Insurance Services Ger-Win Enterprises St. Andrews Insurance Nunavut Insurance Brokers Lottie Chan Beartooth Insurance Advantage Insurance Services Complete Brokerage Services AFBS Strata Benefits Consulting
DeFranco Insurance Agency James S. Sullivan Agency Advanced Auto Insurance in New York Family Insurance Insurance Group of American Affirmative Insurance Holdings of Texas (retail unit) Economy Insurance Mart CW Baker Lewiston Insurance Agency Texas State Low Cost Insurance Capital Insurance Agency Jayla Insurance Cannello Agency Moose Insurance
The JRJ Agency Biltmore Benefits Rosemary Spring Kenderdine Agency Partners in Benefit Planning
Except for public broker Gallagher, buyers backed by private equity led the 2013 parade. Among the leaders, those owned by private equity include Hub, Assured Partners, Confie Seguros, USI Holdings, AmWINS and Higginbotham. Florida-based AssuredPartners went on a tear in 2013 — and looks to be at least as active in 2014. Already this year through the end of February it had announced eight acquisitions. Confie Seguros was acquired by Bostonbased private equity firm ABRY Partners
Wick Pilcher Insurance Pediatrics Insurance Consultants Welsch Flatness and Lutz Construction Insurance Partners Cohen-Seltzer Alliance Benefit Solutions Richard J. Princinsky & Associates Van Gilder Insurance Corp. Molton, Allen & Williams
from Genstar Capital in late 2012. The firm had been focusing on the Hispanic auto insurance brokerage market but in 2013 Confie Seguros expanded into standard personal and small commercial lines, while broadening its demographic from being primarily Hispanic focused. It now has operations in 17 states and says it expects 2014 to be its busiest year yet. If the first two months of the year are any indication, 2014 looks to be a very busy year for agency and broker M&A activity.
Alliance Marine Risk Managers Evans Insurance Agency Stoutamire-Pavlik & Associates MGA Property & Casualty Insurance Agency. AHM Financial Group LLC Insurance Business Lee F. Murphy Eastern Insurance Group Preferred Advantage Anderson-Jackson-Metts Dwyer Franchise Insurance International Golseth & Gregson Insurance Services/GBP Risk Solutions AxisPointe Donald F. LaPenna Associates Buckley & Company Insurance Agency Alan James Insurance Tobias Insurance Group Inc. Wade & Egbert Insurance Partners
Marsh McLennan Agencies-6
Liscomb Hood Mason McGraw Wentworth Franco & Acra Tecniseguros (Dominican Republic) Rehder y Asociados (Peru) Cambridge (Michigan) Property & Casualty Elsey & Associates
Brown & Brown-4
O’Neil Financial Services Agency Agency Services Consolidated Beecher Carlson Holdings The Rollins Agency
Chapman Schewe Benefits Consulting Capital Benefits Group Sawyer Insurance Agency Safe Harbor Benefits
32 | INSURANCE JOURNAL-NATIONAL March 24, 2014
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iTrade Unit Broker Doodson (UK) Multimedia Risk (Canada)
Knight Field Fabry Associated Insurance Agents
Ryan Specialty-2 Westrope S.H. Smith & Co.
United Valley Insurance Services Golf Insurance Services www.insurancejournal.com
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Mergers & Acquisitions Flashback: Key P/C Insurance Mergers and Acquisitions of 2013 By Andrew Simpson
ompared to some previous years, there were not a lot of mergers in the property/casualty carrier space in 2013 but there were some interesting ones. Major carrier transactions included specialty insurer Markel’s acquisition of reinsurer Alterra for $3.1 billion and Travelers Companies’ invasion of Canada through the purchase of Dominion of Canada. As a result of the Markel-Alterra marriage, two new businesses, Markel Global Insurance (large commercial accounts) and Markel Global Reinsurance, have been added to Markel Specialty, Markel Wholesale and Markel International units. The combined entity has approximately $23 billion in assets and $6 billion in shareholders’ equity. “As we have said from the outset, we believe the combination of Alterra with Markel will create a strong company in global specialty insurance and investments, with a demonstrated track record of underwriting discipline in niche market segments and proven asset management strengths that should benefit all our stakeholders,” said Alan I. Kirshner, chairman and chief executive officer of Markel. A recent interview with Carrier Management Senior Editor Susanne Sclafane shed some light on the due diligence Markel conducted on Alterra. Michael Crowley, chief operating officer, was asked about the acquisition and responded with this behind-the-scenes account: “In our due diligence prior to the acquisition of Alterra, there were two key litmus tests. One was we snuck away, before we announced that we were willing to do the deal, with about 40 of their top key people and 40 of our top key people, for three days outside Washington, D.C., and under the cover of darkness spent three days together, 34 | INSURANCE JOURNAL-NATIONAL March 24, 2014
just seeing if Sponsored by people could work together, seeing if it was a culture fit. We left there feeling really good about it. a strategic advantage in the face of govern “We also did a deep dive into their reservment restrictions and rate rollbacks. ing practices — were their reserves con In 2011, Dominion of Canada was the servative enough for us to do the deal? We 10th-largest P/C insurer in the Canadian felt they were. Time will market with $1.3 billion in Notable property/ premiums and a 3 percent tell, but we still feel good about it. market share. Dominion casualty carrier “We paid a fair price has produced underwritmergers in 2013 for Alterra. We didn’t ing losses over the past included Markel’s buy it cheap, but I don’t five years, reporting a 107 acquisition of Alterra percent combined ratio in think we overpaid. We’ll see, five years down the 2012. and Travelers Cos.’ road. Alterra was not a Mark Dwelle, an equity purchase of Dominion analyst fixer-upper in our mind. at RBC Capital of Canada General Markets, said Travelers has We have done acquisitions Insurance. in the past that were. been writing only a modWe’re delighted with the est amount of business in people. Hopefully they’re delighted with us. Canada, mostly surety and commercial. He The cultures seem to be meshing extremely said the acquisition should complement well.” Travelers’ existing mix and broaden out its Canadian platform — both through new Travelers to Canada products and new distribution channel. The Travelers Companies’ decision “We think the way the deal will work is to acquire Dominion of Canada General by (a) applying their underwriting/technolInsurance, a unit of E-L Financial Corp., for ogy to improve loss ratios (b) ramping up $1.1 billion makes strategic sense, according premiums to realize the benefits of scale to analysts. Dominion and (c) potentially is one of Canada’s removing some costs,” largest auto, home Dwelle said. and business insurAnd while Travelers ers. has shied away from A.M. Best said the transaction will acquisitions domestically, this type of enhance Travelers’ scale and product acquisition makes sense when trying to breadth in Canada by coupling Dominion’s effectively build out a platform in a major small commercial and personal portfolios international market, Dwelle said. with Travelers Canada’s surety, manageHe added, however, that the real margin ment liability and commercial middle marbenefit from this transaction may take some ket products. time, as Travelers repositions the book and The acquisition, which closed in returns Dominion’s operations to an underNovember, gives Travelers an opportunity writing profit. to quickly build up economies of scale for Paul Newsome, managing director at its Canadian operation and gives Dominion continued on page 36 www.insurancejournal.com
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Lexington Insurance Company, an AIG company, is the leading U.S.-based surplus lines insurer. AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit www.aig.com. Products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent third parties. Insurance products may be distributed through affiliated or unaffiliated entities. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.
Mergers & Acquisitions continued from page 34 Sandler O’Neill and Partners, said the deal is expected to help Dominion’s operations going forward. “I would expect them to try to improve the underwriting performance. Travelers has a pretty good track record of doing that,” he said. Direct Expansion There was another interesting acquisition that closed at the end of 2013. Direct property insurer Homesite Group Inc. is now part of American Family Mutual Insurance Co., of Madison, Wisc. Boston-based Homesite is a direct writer of homeowners, renters and condominium insurance in 46 states and the District of Columbia. By adding direct channel options to serve a different customer segment, American Family Insurance is complementing its 3,500 exclusive agents who it says
will remain its primary distribution channel. “American Family agents are the best in the business and remain the key to our future success,” said Jack Salzwedel, American Family chairman and chief executive officer. “At the same time, there’s another customer segment that strongly prefers direct channels. We will meet the needs of those customers, also.” Adding Homesite also spreads American Family’s homeowners catastrophe risk beyond its primary Midwest concentration. The Homesite purchase, at a price of $660 million, comes one year after American Family acquired non-standard
auto insurer The General. Homesite was privately owned by multiple parties that included Alleghany Corp, Metalmark Capital through its management of the Morgan Stanley Capital Partners funds and The Plymouth Rock Co. Inc. Homesite sells insurance using the internet, call centers and technology-enabled services. Founded in 1997, Homesite sells using the internet and call centers primarily through alliances with other insurers and financial services companies. Mutual insurer American Family offers multiline insurance products and annuities in 19 states, while its subsidiary The General conducts business in 27 states.
Noteworthy P/C Carrier Transactions in 2013 MARKEL COMPLETES ALTERRA ACQUISITION SOUTHPORT LANE ACQUIRES DALLAS NATIONAL INSURANCE CO. TOWER CLOSES MERGER WITH CANOPIUS ACE ACQUIRES MEXICO PERSONAL LINES INSURER ABA SEGUROS SOUTHPORT LANE ACQUIRES IMPERIAL FIRE & CASUALTY AMERICAN FAMILY ACQUIRES HOMESITE GROUP PROASSURANCE TO ACQUIRE EASTERN HOLDINGS FAIRFAX COMPLETES ACQUISITION OF AMERICAN SAFETY LIBERTY MUTUAL ACQUIRES MEXICAN SURETY COMPANY TRAVELERS COMPLETES DOMINION OF CANADA ACQUISITION
Other Noteworthy P/C Related M&A Activity in 2013 APPLIED SYSTEMS ACQUIRES IVANS P/C BUSINESS JACOBSON COMPLETES MERGER WITH UK’S EJSSEARCH CORELOGIC BUYS MARSHALL & SWIFT/BOECKH, DATAQUICK APPLIED SYSTEMS ACQUIRES INSURECOM IN U.K. KKR TO BUY CLAIMS TECHNOLOGY FIRM MITCHELL W.R. BERKLEY DIVESTS, CONNECTICUT BANK ACQUIRES INSURBANC MONSANTO BUYS WEATHER MODELER, FARM INSURER CLIMATE CORP.
36 | INSURANCE JOURNAL-NATIONAL March 24, 2014
Insurance for businesses, families and individuals | acegroup.com/us
What does it mean to be ACE insured? It means businesses, families and individuals are protected by an AA- rated insurer, one of the largest and strongest in the world. The people of ACE truly understand our risks and go out of their way to help us. We can rest assured knowing ACE is there when we need them.
© 2014 ACE Group. Coverages underwritten by one or more companies of the ACE Group. Not all coverages available in all jurisdictions. ACE®, ACE logo®, and ACE insured are trademarks of ACE Limited.
By Amy O’Connor and Andrea Wells Insurance Journal examined industries experiencing changes and expansions in the past year. Here are the top 10 market sectors that just might deliver hot opportunities for agents and brokers in the property/casualty insurance industry in 2014.
Private Flood Insurance
Private (re)insurers today have the capacity to provide coverage for flood risk along with new technologies and a better understanding of flood risk — all of which could increase private insurers’ interest in providing flood insurance, according to Fitch Ratings. More sophisticated risk mapping 38 | INSURANCE JOURNAL-NATIONAL March 24, 2014
and modeling tools mean the private industry is more able to provide coverage and more accurately price the risk. Several states, including Florida and West Virginia, have advanced legislation to give private insurers more leeway in policy forms, underwriting and pricing in hopes of increasing the availability of private flood insurance. However, there are obstacles to a private flood market. The obstacles include political and consumer resistance to full cost-based pricing of flood risks, a resistance demonstrated by the legislation to roll back rate increases under the Biggert-Waters Flood Insurance Reform Act of 2012.
While private (re)insurers have the capacity to cover flood risk according to Fitch, they need to be able to charge actuarially sound rates to be willing to write significant amounts of risk. The efforts to delay Biggert-Waters “may reinforce private insurers’ skepticism that they would ever be permitted to charge adequate rates and make their participation unlikely in the foreseeable future,” according to a recent Government Accountability Office (GAO) report. Despite the unwinding of the Biggert-Waters reforms, there are some who think there is opportunity in the private flood sector. The Flood Insurance Agency, located in Gainesville, Florida, is now selling private flood insurance underwritten by Lloyd’s of London in 15 states and making it available to commercial risks and apartment buildings. Also in Florida, Homeowners Choice Property and Casualty Insurance Co. is offering a flood insurance endorsement for its existing 140,000 homeowners policies that the company says will cost the same as what homeowners have been paying for their NFIP policies. Insurance software firm Vertafore formed a partnership with flood insurance policy processing firm StoneRiver National Flood Services (NFS) to provide agents an easier way to quote flood insurance. Also, federal regulatory agencies will soon require lenders to accept private flood policies to satisfy the mandate that certain homebuyers in flood hazard areas purchase flood insurance. If federal subsidies for flood insurance are reduced and the cost of government-provided insurance goes up, the demand for private flood coverage could also rise. The reduction or elimination of federal assistance could create a potential opportunity for traditional private (re)insurers or alternative capital markets to serve this sizable market. But it remains to be seen if the private market would be able to provide sufficient capacity at an economically viable price. www.insurancejournal.com
Accountable Care Organizations
Accountable Care Organization’s (ACO) — networks of healthcare providers working together to offer a full range of healthcare services — have so far emerged as the most popular healthcare delivery model of the Affordable Care Act. But insurers have struggled with how to best insure these, says Mike Grady, president of independent agency Grady Professional Services, a medical professional liability insurance agency operating in 15 states. Grady says all of the different coverages ACO’s require and the different exposures from insuring large physician groups, have left many med mal companies scratching their heads. “It’s going to be interesting to see the Doctors Companies, the Medical Protectives, the ProAssurances of the world figure out, ‘Hey, with this large ACO, do we need to handle their property and their workers’ comp, as well as their managed care liability, their directors and officers coverage, and their malpractice piece?,’” says Grady. Perhaps that’s why many of the products created for ACO’s have been from traditional property and casualty insurers. CNA launched a product that addresses the full range of exposures ACO’s face, including: healthcare professional liability; directors and officers liability; business errors and omissions — with managed care E&O; cyber liability; and privacy and social media. ACE USA’s Medical Risk Group introduced a range of physician professional liability products and coverage options targeting hospitals, healthcare facilities and ACO’s providing insurance or alternative risk financing to their employed physicians or owned or affiliated medical groups. NAS Insurance introduced a professional liability insurance program for ACO’s that www.insurancejournal.com
combines E&O and D&O coverage that address regulatory exposures, as well as cyber liability. The policy also offers MEDEFENSE Plus for billing errors and regulatory claims.
Despite a sluggish start in 2014, construction insurance experts expect slow, but steady growth in the sector as the industry recovers from the recession’s fallout. The Dodge Momentum Index — a monthly measure of nonresidential building projects in planning — slipped 2.6 percent in February compared to the previous month. However the drop in “builder momentum” is expected to be just a brief pause in a broader upward trend, according to McGraw Hill Construction, which publishes the index. The year 2014 began slowly, due to behavior specific to each of the three main construction sectors, said Robert A. Murray, chief economist for McGraw Hill Construction. Nonresidential building in 2013 advanced 7 percent, but the progress was occasionally hesitant, including sluggish activity at the end of last year that carried over into January, Murray said. The prospects for continued growth for nonresidential building during 2014 are generally positive. Residential building in 2013 climbed 24 percent, but towards the end of last year growth began to decelerate as mortgage lending to first-time homebuyers remained stringent, Murray said. The January slowdown for housing was due in part to tough winter weather conditions. Meanwhile, competition among insurance markets remains strong for the construction segment and has kept rates from rising dramatically across most construction lines in 2013, a trend that should continue in 2014, according to Marsh’s “Insurance Market Report 2014” released in February. There is still a lot of capacity in the industry and some of it is new capacity that has
come into the industry over the last two to three years, Michael Anderson, managing director and CEO of the U.S. Construction Practice for Marsh, told Insurance Journal. “There has not been any significant uptick in the overall rate levels, but underwriters have been a little more selective in individual account underwriting based on a given contractor’s loss experience,” he said. A few notable expansions in the construction market include: Berkshire Hathaway Specialty Insurance introduced a consolidated endorsement which combines numerous primary general liability coverage enhancements in a single product designed for construction wrap ups and project-specific programs. Pioneer Programs Insurance Solutions expanded its specialty program, Contractor’s Choice, to now include excess liability. XL Group partnered with the American Contractor’s Insurance Group, a construction industry owned insurance organization, to provide data and analytics for clients.
Directors & Officers It is no secret that the D&O market has seen a flurry of claims activity since the financial crisis in 2008. Financial institutions saw the brunt of the claims against directors and officers, with an estimated one-third of the directors and officers of failed financial institutions between 2009 and 2010 being sued by the Federal Deposit Insurance Corp., according to a report by Cornerstone Research. While many insurers have opted to stay away from this segment, new entrant Berkshire Hathaway Specialty Insurance says it is committing to the class for the long term with a new product for directors and officers of financial institutions. Dan Fortin, senior vice president of Executive and Professional Lines for BHSI, says their approach to being successful involves being selective in pricing and with continued on page 40 March 24, 2014 INSURANCE JOURNAL-NATIONAL | 39
Hot Markets continued from page 39 whom they insure, as well as partnering with brokers who share their perspective. “In a seven to 10 year period, there will be a time when underwriting results will not be pretty. But that can be offset by some very good years,” says Fortin. That being said, there are plenty of other issues that are keeping underwriters and their D&O insureds awake at night. According to Rachel Turk, D&O underwriter at Beazley, the frequency of merger and acquisition claims against directors and officers are going up and so are the defense costs, which erodes the retention of limits faster. “It is a very active claims environment but also very different because we are now seeing an increased frequency of claims that affect the primary and low level limits,” she says. Beazley formed a consortium with Hiscox so the two insurers could offer combined limits of $50 million to the commercial D&O segment, excluding financial institutions. Turk says the goal of the consortium is to give the two London-based markets a “seat at the table” when it comes to providing D&O coverage to U.S.-based companies. Another segment of the D&O market that is ripe with opportunity is the non-profit sector. Travelers, which updated its D&O coverage for public, private and non-profit organizations earlier this year, conducted research in the fourth quarter of 2013 on nonprofit buying habits and found that 69 percent of the more than two million U.S. nonprofits don’t have D&O coverage. The top four reasons the carrier found for nonprofits not to purchase coverage were: 40 | INSURANCE JOURNAL-NATIONAL March 24, 2014
lack of perceived risk, lack of budget, lack of necessity, or they felt the coverage was not affordable. “The lack of perceived risk is most concerning,” says John Trefry, D&O product manager for Travelers’ Bond and Financial Products. “There is a knowledge gap and that is valuable information,” he says. “We are trying to encourage our trading partners to educate their nonprofit clients.”
One area ripe for market growth is the cyber liability sector. Capacity in this marketplace has increased tremendously in the last five years, as has demand, but it is not keeping pace with what the insurance marketplace has produced. Instead, all that capacity is pushing rates down in a segment that has tremendous opportunity for — and evidence of — loss. The year 2013 might be considered a “cyber tipping-point” — or the point at which businesses and governments finally realized the severity of the threats they were facing, says Advisen, a New Yorkbased commercial insurance research and data analytics firm. In its annual survey on information security and cyber liability risk management, Advisen found that the vast majority of respondents (89 percent) believe that cyber and information security risks pose “at least a moderate threat” to their organization, but only 52 percent of respondents reported purchasing cyber liability as a result of that threat. The threat is real and increasing. Headlines from the massive Target breach, Nieman Marcus, and other high profile inci-
dents are helping to push demand for cyber coverage, particularly among large companies. “[The buy rate] among larger companies was probably around 20 percent five years ago and is now in the 50-percent range, with at least 70 percent of the market considering cyber coverage,” says John Kerns, executive managing director for Beecher Carlson in the New York office. Where the demand is not increasing as rapidly is among small to medium-size organizations. Advisen found that only 5 percent of companies with revenues under $5 million buy coverage. Some agencies, like Connecticut-based Business Risk Partners, are encouraging small and mid-market clients to purchase coverage by emphasizing the add-on services that comes with it. BRP began offering standalone data breach/privacy coverage through Liberty International Underwriters in January. Hiscox has also enhanced its coverage for small- to mid-size organizations with a cyber crime endorsement launched last fall.
Superstorm Sandy taught insurers and insureds a lot about the importance of protecting fine art collections. Considering fine art insurers reportedly faced claims of up to a half a billion dollars from art owners since the storm, according to a report by Reuters, it is no surprise that insurers are putting that knowledge to use. Michelle Impey, fine art director for Fireman’s Fund, says disaster preparedness and proper storage of expensive art pieces, were a couple of the major lessons from the storm that ravaged New York in October 2012. But Sandy also reinforced the fact that insurers and insureds need to work together to protect these high value “passion investments”. “Everyone says with insurance you don’t realize how valuable it is until you’ve experienced a loss,” says Impey. “So certainly for those who have experienced a loss, unfortunately, they’re going to be thinking about it.” www.insurancejournal.com
A number of insurers have launched new and enhanced coverages for the fine arts segment this year, including: MarketScout acquired a specialty fine arts and collectibles facility providing nationwide coverage for all types of fine arts and collectibles and offers property coverage for museums, exhibitions and galleries. Fireman’s Fund introduced “death of an artist” loss settlement coverage as well as seven other coverages and provisions to its Prestige Collections Coverage, which addresses elements of fine arts acquisition and ownership. XL launched a luxury lines program for private clients that includes XL’s ArtWorks fine arts and collectibles coverage. AXA ART formed a strategic business partnership with Trident Insurance Services to offer fine art insurance coverages.
The marijuana industry is turning over a new leaf, and there is plenty in the pot to go around. Last year, Colorado and Washington State’s voters approved the sale of marijuana for personal use. In January — the first month of Colorado’s legalized retail sale of cannabis to those 21 years or older — customers spent more than $14 million purchasing marijuana or related products from state licensed facilities, according to information from NORML, a non-profit working to reform marijuana laws nationwide. NORML also reported that as of midMarch, more than 150 licensed retail facilities were approved to operate in the state and that number is expected to grow. Washington State received nearly 1,700 business license applications from people seeking to grow, process or sell cannabis during the first month of the new recreational marijuana law, according a report by the Associated Press. www.insurancejournal.com
Nationwide, 20 states and the District of Columbia have approved the use of marijuana for medical purposes and so far this year, California, New Mexico, Alaska, Florida, and New Hampshire are reevaluating marijuana restrictions either for medical or recreational purposes. So what does all this mean for the insurance industry? New business opportunities abound and new products are needed. Many exposures go into the growing, selling and storing of marijuana and businesses need specialized insurance that can protect them from carrying such a controversial product. There can also be legal issues for dispensary and retail store owners surrounding federal vs. state laws. MMD Insurance, a specialist in marijuana industries, launched a products and completed operations with health hazards coverage and removed the “marijuana and its derivatives” exclusion explicitly.
One hot market that continues to evolve is the cloud computing segment. Insurers are still grappling with exposures and how to insure cloud computing risks. “The insurance industry has taken awhile to embrace the aspect of cloud computing. But as more companies move to clouds, the insurance industry has to recognize that data won’t be in an internal server but in the cloud,” says Fred Bartkiewicz, co-founder and partner of CyberRiskPartners, which develops and manages risk mitigation platforms for cloud companies through its subsidiary, CloudInsure. “Insurers have not fully embraced this technology and how it works.” Businesses are reallocating IT operational costs away from hardware and software and human capital to a service platform — the cloud. However, many do not have contracts that require third parties to cover all the
costs associated with a data breach. This is a concern as many cyber liability products either exclude data loss by a third-party provider or have minimal coverage. As more companies turn to cloud providers better coverage options are needed. Cloud computing is gaining in popularity. Gartner, a business technology research and consulting firm, predicts that the bulk of new information technology (IT) spending by 2016 will be for cloud computing platforms and applications with nearly half of large enterprises having cloud deployments by the end of 2017. The worldwide cloudbased security services market totaled about $2.1 billion in 2013, and Gartner expects that to rise to $3.1 billion in 2015. The cloud computing industry’s growth will continue to drive insurer interest in product development. Liberty International Underwriters partnered with CloudInsure last summer to provide insurance backing for cloud providers and the businesses that utilize them. CloudInsure also formed an agreement with Lockton at the beginning of 2013, which allows it to establish relationships with primary insurers to offer liability. And most recently, Oceanwide Inc. launched its Cloud Provider Assessment Model (CPAM) designed for the insurance industry to give IT and information security groups a method of comparing cloud technology providers. CPAM allows the IT professional to compare multiple cloud providers side-by-side in order to assess risk.
Almost every business, in one way or another, is affected by weather. And as extreme and unpredictable weather continues to disrupt businesses and bring big losses to the insurance industry, underwriters and the weather technology industry have stepped up their efforts in deploying more continued on page 42 March 24, 2014 INSURANCE JOURNAL-NATIONAL | 41
Hot Markets continued from page 41 accurate weather prediction models. So far this year, severe winter weather has totaled more than $1.5 billion in insured losses from about 175,000 claims and 2014 is expected to be the fifth costliest year in the last 34, according to estimates from the Insurance Information Institute. Winter losses in 2013 totaled $2 billion. Creative insurance products have helped insureds deal with some of the business interruption and business income losses that can result from weather. Christian Phillips, contingency underwriter for Beazley, says the big cost to businesses from severe winters like this one can come from snow removal and event cancellations. Last year, the insurer expanded its Weather Guard contingency coverage to the United States to help businesses against the business risks of extreme weather. The coverage assists clients to develop weather-related sales promotions, stabilize revenue
42 | INSURANCE JOURNAL-NATIONAL March 24, 2014
or contain costs. Demand has increased for the product this year because clients are looking for ways to protect their balance sheets, says Phillips. The company uses a meteorological database with more than four decades of data and information from more than 5,500 weather stations nationwide to help insureds monitor perils that could interrupt or cost them revenue. Phillips says with issues like rising sea temperatures, the polar vortex, and increased heat that leads to drought — just to name a few — more clients are going to rely on insurance to keep their businesses stable through unpredictable weather. “There’s no indication that it’s going to change,” he says.
Medical Technology Technology has become an intrinsic part of modern medicine, but the convergence of technology and medical advancements are leading to a new world of risk that insurance underwriters must solve. Implantable medical devices now use wireless connectivity. New technologies such as long and short range wireless communications, cloud computing and information security can now connect to many medical devices such as patient monitors, wearable devices including those which regulate and monitor heart rate, as well as online self-diagnostics and medical apps. “The introduction of remote access to these types of devices has clearly presented the issue of hacking in a new light,” says Graeme Newman, director at CFC Underwriting, a specialist lines UK-based underwriting agency. Technological developments such as 3D printing are also making a mark on the medical industry. In 2013, scientists from Cornell University successfully created an artificial human ear by printing it on a 3D printer. Many speculate that technology could pave the way for purpose-built replacement organs in the near future. But using such modern-day medical devices doesn’t come without risk. “Connecting our bodies and DNA to the internet exposes a whole new world of risk, not only for the user, but for manufacturers, developers, software companies and even back bedroom coders,” Newman says. Within as little as five years the world could see the creation of products and medical devices never before imaginable. Some insurers, such as Berkley Life Sciences, Travelers, and ACE, are forging a coverage path for life sciences companies, which could be a predictor as to what markets are willing to cover these risks as they evolve.
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Growing Your Property Casualty Agency Evaluate and Share Your Sales Successes and Failures
he “typical” P/C producer’s life is packed with sales drama. It features climactic successes and failures mixed in with routine yesses and noes. You can accept these ups and downs as business as usual or you can use sales history as a breadcrumb trail for producers to follow. As the cliché goes, there is nothing fatal about failure as long as you learn something from it. And when you are a sales professional, there is always By Alan Shulman plenty to learn. That’s why it’s wise for commercial lines producers to keep a record of wins and losses. Successes Dissecting successes is often more difficult than analyzing failure. That’s because some producers like to imagine that their professional instincts were spot-on, resulting in the sale, when in reality, further factors came into play. They often include the following, among others. • Systematizing the pre-qualification process to eliminate the weakest sales candidates, allowing you time to concentrate on the most salable opportunities.
• Researching the selected business’ operation/industry and the decision-maker’s personal interests to uncover sales-aiding hot buttons. • Recognizing which proposal format, page elements and presentation style helped to close the sale. • Considering the online factor. Determine whether social marketing activities or other online research helped you to find or otherwise develop the lead. • Noting the successful sale’s original source, as it may be mined for quality leads. Failures A competitive premium is an essential ingredient for taking business away from another P/C provider. But it’s a rookie mistake to hang your hat on this issue alone. Imagining that price closes every sale every time is overly simplistic. Here are 10 reasons why someone walks away. 1. Allowing the incumbent agent adequate time to overcome your offer. 2. Inaccurate information about the prospect’s industry or business. 3. Inaccurate auditables like payroll and sales. 4. Missing or insufficient coverages. 5. Poorly constructed proposal document.
6. Weak proposal presentation. 7. Failure to identify and address the prospect’s key concerns. 8. Personality conflict with the prospect. 9. Using an “unknown” company or being allocated second-tier carriers. 10. Various payment-related issues. Take Notes Spend a few moments, immediately after the final determination of each new business offer, to record what you perceive are the reasons for the prospect’s decision. In each instance, note your preparations and actions, and match them to the prospect’s reactions. Accumulate this sales data over time, and combine it with similar insights from others to enhance productivity. Share While individual producers can learn from their solo sales history, they can divine even more when they combine their production trail with selected agents. Shared information helps each participating producer to get a better handle on what works. It accompanies (or supplants) the traditional behavioral adjustments for the various prospect types. It’s not a magic formula for closing sales; rather it’s a road sign on the never-ending path to sales success. Shh! Evolve and guard your agency’s best sales secrets. Keep these hard-earned insights in-house. But of course, you can’t fully share and compare if you are a small one or two producer shop. So, reach out to friendly insurance pals who operate outside of your marketing territory and exchange sales analyses. But, never involve local agents with whom you actively compete, or your success may become theirs. 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: firstname.lastname@example.org. Website: www.agencyideas.com.
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Technology Agents’ Use of Technology Is About Attitude By Thomas H. Wetzel
echnology overload is a common lament among independent agents, who face a growing list of challenges in how to use it effectively. According to leaders on the front lines, however, the number one technology issue is not privacy, security, the use of mobile, or even its cost — it is accepting technology in all its forms as critical to their survival. “Agents must become more efficient and do more with less,” says Bruce Cochrane, president of the Massachusetts-based Renaissance Alliance. “It’s a matter of evolution vs. revolution. It’s like changing a tire at 60 miles an hour and we have to adapt to the reality we’re in.” Jason Cass of JDC Insurance Group is just as blunt. “When it comes to technology, we’re not talking incremental change, we’re facing transformational change — the same kind that the newspaper and music industries are caught up in,” says Cass, an agent from Centralia, Ill., and former chairman of National Young Agents of the IIABA. For example, Cochrane cites how technology is pushing down loss costs and commissions as the use of telematics ratchets up. Examples in personal lines include driverless cars and cars that talk to each other. He says agents also must become masters of data analytics, measuring everything. “Carriers love predictive modeling and will be less dependent on agents to produce quality risks,” says Cochrane. “Agents will be rewarded for growth, however.” As a conse-
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quence, Cass says agents need to become much the consumer is now in control. “sales machines.” “Insurance consumers don’t like to be Beyond the understanding that technolsold something even if it’s in their best ogy touches every aspect of an agency operinterest,” says Cass. “Agents react the same ation, Brian Bartosh says agents should not way when they’re being sold. But the fact assume that keeping up requires buying the is, because society is changing so dramatlatest system so much as making sure they ically, agents must change their mindset are fully utilizing the system they have. and turn the push-pull marketing model “It’s not about just working faster or on its head. Agents were taught to push harder,” says Bartosh, president of Alpenaout their messaging to consumers and based Top O’ Michigan Insurance and businesses. In today’s world, consumers chair of the Applied and businesses alike are ‘When it comes to Systems Client resisting that — they want Network (ASCnet.) technology, we’re not to be pulled in to a rela“Agents need to tionship and many agents talking incremental work smarter, and don’t yet grasp just how change, we’re one simple way to do transformative and how facing transformational completely different the that is to make full use of the system marketing landscape has change.’ you have to ensure a changed.” healthy ROI and increase agency value and Cochrane summed up the technology profitability.” absolutes for agencies: to be fast and nim Bartosh points to fundamental but often ble, completely mobile and interactive and overlooked uses of techhave access to big data. nology such as encrypted This is the first of a series on the techemails and a disaster plan nology issues facing agents. The focus will for data breaches. be on practical solutions on many fronts, “If you’re not using your including the customer experience, mobile, system with all of its capabilities privacy and security. now, what do you have to offer?” he asks. “Efficient use of technology must expand Wetzel is owner of Thomas H. Wetzel Associates, an beyond the ‘techies.’” insurance social media consulting firm. Phone: 708 All of these executives stressed just how 524-4944. Email: email@example.com. www.insurancejournal.com
I’M A SUPERHERO When I initially started Shift Insurance that specializes in personal and commercial auto insurance lines, I was generating leads through car dealerships. I saw the large potential for growth I could get from a high-end website and potentia started investing all my proﬁts into a new website. Because ITC specializes in insurance agencies and has scalable plans, I chose them to help me grow my agency long term. We’re basically a digital agency with a physical location. Everything about ITC products allows for integration and an extremely streamlined process. In addition to Insurance Website Builder, we use AgencyBuzz for automated agency marketing and TurboRater for quoting auto, home and motorcycle insurance. Since I started with ITC two years ago, I’ve grown my agency from one person to four. ITC products are still the core for operating our digital business. Raphael Locsin Want to be a superhero like Raphael? Visit us online at Wan www.GetITC.com/ITCSuperheroes. Or, call us at (800) 383-3482.
Minding Your Business Managing Time is Imperative
ime is the only resource we cannot recreate, but how can you optimize being “in control of time” rather than being “controlled by it?” People tend to number their days when they are dying. A woman named Wendy who worked for more than 20 years with hospice patients states that there are two main regrets people have when they are dying: “The No. 1 regret is they say, ‘I should have lived my life By Catherine Oak to follow my dreams, not what other people expected of me.’ The No. 2 regret [is] ‘I worked too much and wish I had spent more time with my children and my relationship.’” Here are 10 tips to help everyone be time efficient so you don’t have any regrets about how you spent your time. Determine Time Wasters What are the biggest time wasters? Is it surfing the net? Email? Phone calls? Reading or sorting junk mail? Why is it that these things now seem essential when they did not exist for most of humanity? “Time wasters” need to be trimmed down or eliminated. People need to make time for truly important things — major work projects, family, personal time, etc. Allocate only an hour a day or less to the “time wasters.” Prioritize and Delegate Determine the key things to accomplish each day. Write them down on a white board or on a day planner. Create a task list of secondary items to do in between the scheduled primary items. If you get through the big items first, you will feel better because you will have completed the most important things each day. Delegate “large time-small gain” items such as yard work or house cleaning, which does not need a key person’s expertise. Train or hire someone to handle these tasks the way they should be done, so delegation continues. 46 | INSURANCE JOURNAL-NATIONAL March 24, 2014
Limit Tasks Most people put too much on their “to do” lists. For some people it is difficult to say “no.” Others may want to be a superhero. Be realistic. Only schedule what is possible to accomplish on a given day and “double buffer” the time allocated. If you take on too much, you will feel let down at the end of the day because of all the things that did not get accomplished. It is better to do less and be grateful for the things that got done. Discover
to work on new business. Otherwise, they will not find the time to prospect and work on new accounts.
Streamline the Renewal Process For producers to focus on new sales, the renewal process needs to be streamlined and handled mostly by the service staff. Producers and CSRs should go over the list of renewals at least 90 to 120 days in advance to discuss the how life strategy for each account. From there, CSRs or account can be enhanced executives should gather Handle Paper Once by making simple renewal information, submit One of the biggest “time killers” is how paper is time management for renewal or re-market mishandled. Someone the account, and deliver the adjustments. a while back came up renewals to the client or to with a system for hanthe producer for final review. dling paper. There are only five options Producers should work only on accounts to handling each piece of paper when it is that need their expertise or relationship. received: toss it, file it, read it, delegate it or act on it. Staff Stratification If possible, go paperless! Get rid of the Whenever possible, all persons in the clutter. Start fresh and remember OHIO — agency should delegate tasks to the least only handle it once! costly, qualified employee who can handle that work. With automation, however, most Improve the Hit Ratio service staff are doing it all themselves, Don’t practice quote. No one needs the including claims. In addition, certain practice, nor do underwriters. The firm projects can be batched, such as faxing, should track the “quote-to-write” or hit scanning and filing — all of which can be ratio. The closer the ratio is to 1.0, the bethandled by a clerical person. Consider outter. sourcing work, such as certificates, which The key is to prescreen each prospect to can be handled online or outsee if he or she fits the firm’s program or sourced to third-parbook of business. A few minutes should be ties. spent pre-qualifying so that there is a high likelihood of the business being written. If there is not pain, the prospect won’t move to a new program or agency. Schedule Time for New Business Most salespersons don’t have much time to write new business because of daily pressures from existing accounts, such as service issues or renewals. Time must be scheduled each day for producers www.insurancejournal.com
Plan the Day Daily or weekly calendars should be visible at all times. Calls and appointments need to be planned for ahead of time and in between those times secondary tasks need to be done. Remember to make “some time for time wasters” as well — unplanned phone calls, meetings, personal problems. When out of the office, optimize the time by scheduling more than one client or prospect in the same area. Plan the order of the visits based on the proximity to each other and the office. Try not to let new prospects or even existing clients change the scheduled day. Changes will waste time and can cause a lot of other problems. Take Care of Oneself Time for activities like going to the gym, reading, thinking or meditating need to be scheduled every day. You will feel better and be ready to take on the day. And don’t forget to eat right. Health brings a freedom very few realize until they no longer have it! Creating “breathing room” in life has lots of health benefits and reduces stress. This is done by sitting down and making a quick list of key things that need to be added, subtracted, doing more of (exercise) or less of (doing for others) in life. Invest some time for personal growth. Books that enrich life should be read, such as motivational tapes, biographies, history, etc. Use free time to open the mind. Sign up for a (non-insurance) seminar, preferably in resort locations. Personal growth is not only painless, but also a pleasure. Listen to audio books while driving for maximum use of time versus listening to depressing news and talk shows. Discover how life can be enhanced and made much more enjoyable by making simple time management adjustments Start now to design your use of time, now and in the future. Changing behavior is often difficult because people tend to do too much, too fast. Change is accomplished by taking one step at a time. Just like building muscles, it
can be challenging at first. But with small incremental changes over time, it gets easier. Time is finite for us humans. We don’t want to reach the end of our lives and have regrets about how we spent our time —
make time today for what is important! Oak is the founder of the financial management and consulting firm, Oak & Associates, based in Northern California. Phone: 707-936-6565. Email: firstname.lastname@example.org.
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Agency Management Numbers Don’t Lie: Agency Best of the Best Total Agency Performance
specific areas: Revenue and Expense Management: To drive value, an agency must produce profitability, growth and expense control. Traditional indicators of performance in this area include growth and profitability. Other key performance indicators in this area include consistency in supplemental income, servicing costs and owner/executive reward. Employee Productivity Management: Total agency performance should include employee productivity numbers that allow agency executives and leaders to benchmark efficiency by department and by role. Cash Flow and Asset Management: Independently held firms will need to build an adequate balance sheet for a variety of reasons, but mostly because firms committed to remaining independent will typically cash flow the transition through agency financing, which can strain the agency’s financial position. Those firms that 3/4/14 4:11 PM distribute 100 percent of earnings to share-
rowth and profit are two of the most important components of agency performance, but even high growth or high margin businesses can become low-performers without looking at the big picture. For example, if a firm is growing the top line rapidly but has not built effective financial controls, By Tommy McDonald the bottom-line suffers creating a low-valued firm. On the flip side, a high-margin firm that distributes 100 percent of profits to owners without retaining earnings can create balance sheet problems. Gauging total agency performance should include a valuation consideration, employee productivity measurement and sustainability assessment based on the firm’s financial position. To gauge total agency perforIJ Self Serve ad quarter pg.pdf 1 mance, an agency needs to excel in three
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48 | INSURANCE JOURNAL-NATIONAL March 24, 2014
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holders need to understand the importance of building a balance sheet and managing receivables accordingly. Where do you stack up against the most balanced agencies in the business? McDonald is vice president at MarshBerry. Phone: 440-392-6700. Email: Tommy.McDonald@ MarshBerry.com.
Total Agency Performance Best of the Best
Growth Operating EBITDA as % of Total Commission and Fees Grofit
15.5% 14.9% 30%
Revenue & Expense Management Reward Ratio 0.50 Non-Comp Costs as % of 20.4% Total Commission and Fees Servicing Costs Per $ of Commission 0.33 Total Commission and Fees Growth Rate 15.50% Contingent and Override Consistency Ratio 1.07 Employee Productivity Management Total Commission and Fees Per Employee $173,184 Total Commission and Fees Per Producer $591,167 Total Commission and Fees Per Service Person $307,314 Employee Marginal Profitability $94,213 Support Staff as % of Total Employees 13.30% Cash Flow and Asset Management Average Collections Period (Days) 9.9 Cash Management Ratio 0.10 Trust Ratio 3.34 Defensive Interval (days) 114 Tangible Net Worth Ratio 0.25
Readers, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/ ACE Insurance www.acelimited.com 37 Anderson & Murison, Inc. www.andersonmurison.com 48 Applied Underwriters www.applieduw.com 2, 52 Arrowhead General Insurance Agency www.arrowheadgrp.com 24, 25 Astonish Results www.astonishresults.com 18, 19 Burnett & Company www.bcoinc.com SC2 Burns & Wilcox Ltd. www.burnsandwilcox.com 7 Chubb Corporate www.chubb.com 13 City of Hope www.cityofhope.org 47 Great American Corporate www.greatamericaninsurancegroup.com 16, 17 Insurance Technologies Corp. www.insurancewebsitebuilder.com 45 K&K Insurance Group www.kandkinsurance.com 20, 21 Lexington www.lexingtoninsurance.com 35 M.J. Hall & Company, Inc. www.mjhallandcompany.com W4 Marshberry www.marshberry.com 33 Midlands Management Corporation www.midlandsmgmt.com 42 Monarch E&S Insurance Services www.monarchexcess.com 30, 31
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Hand Gestures Create Attraction or Distance with Clients By Dr. Linda Talley
hen meeting with a client and discussing needs and services, you probably talk with your mouth as well as your hands, as most sales professionals are very animated. What is important to know is that your clients will watch what you do before they listen to what you say. You spend time refining your verbal message, but how much time do you spend on nonverbal messages or body language? Do you even bother monitoring your body language when you are with clients? If not, you could be creating distance between you and the client, rather than attracting them to you and your products. Research has found that certain hand gestures create more attraction than others. By understanding what you are doing to block a relationship with your client, you can take steps to minimize these gestures to fast-forward your relationship. Let’s talk first about the hand gestures that distance you from your clients. I call these defensive hand gestures, and some of these may surprise you. The key thing to remember is that you must become aware of how you use your hands to block an effective interaction with your clients. By monitoring and making changes, you will increase your attraction to clients, and increase your emotional intelligence — a key skill for effective leadership. Leaders are what your clients are looking for. And, did I mention increasing your sales? 50 | INSURANCE JOURNAL-NATIONAL March 24, 2014
Here are the three defensive hand gestures and results. Hands in your pockets. This pertains mostly to men, but I have seen some women who put their hands into their pockets. People are not attracted to this and wonder what you’re hiding. It also indicates uncertainty and nervousness. I have been told by many men that they put their hands in their pockets because they don’t know what else to do with them. If you watch your client closely, when you put your hands in your pockets, their eyes move from your face to your pockets. You have lost eye contact and they are wondering what you are hiding. People are not attracted to someone who has their hands in their pockets. Crossing your arms/hands over your chest. We all know that this is perceived as defensive, yet so many of us do this. We say that it is comfortable to cross our arms/hands this way, and it’s true. When we move into defensive positions, it is a way to comfort ourselves but it creates distance with our clients. If you are cold, that is a different story. If you are cold, tell your client so there is no faulty judgment on their part. Better yet, dress more appropriately so you don’t encounter this situation. Hands behind your back. Men and women serving in the military may have a tendency to stand at parade rest (hands behind the back), which is fine if you are talking with military personnel. But if not, this position is seen as arrogant, superior, defensive and distancing. When you stand with your hands behind your back, you create an uncertainty with your clients. They wonder: “What does s/he have behind her/his back?” When your client is concerned for perceived safety, s/he cannot create a relaCertain hand gestures tionship with you! create more attraction Your goal is to create than others. a relationship with your clients to address their insurance needs and provide them with the products and services they need. When your body is talking louder than your words, your clients hear the body language first and respond to that. These defensive gestures create distance from your clients, and that’s not what you need to create the relationship, be a leader for your clients and provide clients with what they need. When you begin monitoring these defensive gestures and replace them with positive gestures, you will see your relationships change. Talley is a behavioral theorist, organizational consultant, and international business speaker on advanced communication strategies and leader development.
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