WEST Calif. Commissionerâ€™s Take on Ridesharing Results of 7.5M Southern California Fault? Confie Head Eyes Commercial Through 2014
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Post TRIA, most insurers see terrorism as a risk that is uninsurable. We saw a problem that needed to be solved.
Building trust starts here.
Trust. It’s built into every policy. TRIA may soon expire and stand-alone coverage is an absolute necessity. Yet most insurers will not be willing to take on the exposure for property damage, builder’s risk and business interruption. At Ironshore, we always try to find a solution. With capacity of $300 million and backing from Lloyd’s, we can provide integrated coverage now for a wider range of risks that go well beyond TRIA coverage. When faced with the catastrophic threat of an act of terror, you need an experienced partner with in-depth solutions who’s willing to commit for the long term. For more information, please go to www.ironshore.com.
The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service.
COULD YOUR SMALL BUSINESS CUSTOMERS AFFORD TO LOSE $3,000 A DAY? That’s the average cost per day for a small business following a disaster.* The Hartford has optional coverage that helps protect small businesses and their income from disruption caused by an off-premises power, water or communications failure.
Losing power, even for one day, can have a major impact on a small business. Whether at renewal or other check points during the year, it is important for agents to review with their clients what is included in a business insurance policy and discuss any changes in their business that may require modifications to their coverage. If the overhead transmission line connected to their building was damaged, would they be covered? Discussing protection like The Hartford’s Business Owner’s Policy with optional Off-Premises Utility Services Coverage, which includes features that are not available from every other carrier, can educate small business owners about additional coverage that could help reopen their business sooner and replace income they lost during the downtime. The Hartford’s Off-Premises Utility Services Coverage option offers a 12-hour waiting period after loss before coverage applies, which helps replace income faster than some other carriers, and includes coverage for overhead transmission lines, off-premises power, and water and communication utility services with no separate elections or additional premium charges for each service. For Nuovo Pasta, an award-winning pasta company in Stratford, Conn., having a Business Owner’s Policy with a Business Income Extension for Off-Premises Utility Services from The Hartford in place meant a bump in the road rather than a catastrophe when Storm Sandy hit in October 2012. Although the business was interrupted, and they suffered damage to their roof as well as a loss of inventory and income, they were able to get back on their feet quickly and recover lost income.
NOT ALL BUSINESS INCOME COVERAGE IS THE SAME.
According to Carl Zuanelli, president of Nuovo, the insurance adjusters took a look at the damage and within 48 hours he had a check so he could repair the roof of his building, which was ripped off during the storm. “The Hartford took care of our claim so we were able to replace all of our damaged raw materials inventory and took care of our lost income,” he said. “I think The Hartford really understands the needs of a small business.” No matter where in the country a small business is located, weather can wreak havoc if a small business owner is not prepared. Industry-leading Storms like Sandy, optional which can cause offers just a significant damage to small businesses, continue to dominate headlines across the United States. However, it is not only headline-making storms that cause damage. Severe weather such as heavy rain, snow or thunderstorms can knock out power, forcing a small business to close and lose income. As recent as January 2014, record low temperatures and snowstorms afflicted much of the nation, forcing businesses to close.
12 -HOUR waiting period.
The Hartford’s 2013 Small Business Success Study asked small business owners whether they have been forced to close or have been interrupted for a significant period of time, not by choice. Sixteen percent said yes, and on average, those business owners who experienced this type of a disruption
were interrupted or closed for 49 days. Having the right coverage in place can mean the difference between getting the small business back on its feet in days as opposed to weeks, months or even years. It’s why The Hartford is CARL ZUANELLI, committed to helping NUOVO PASTA businesses be prepared and protected so that when the unexpected happens, they don’t just endure—they prevail. Chuck Schoendorf, an agent at Arthur J. Gallagher Risk Management Services in Norwalk, Conn., understands the importance of being prepared and has The Hartford on the top of his list when helping his clients find the right coverage because of the broad policies The Hartford offers. “The Hartford tends to include a lot of coverages that I may or may not even ask for, but they put them in,” he said. “When it comes claim time, there’s no way an agent or a customer is going to think of every scenario that can happen. You just can’t, it’s impossible to do. So consequently, if you have a broad policy and broad policy language to start with, it just makes it so much easier at claim time.” He added that interruption in power to a company like Nuovo, that is running freezers and refrigerators for both the raw goods and finished products, can seriously hamper that company’s ability to deliver a product. “It affects their sales and their bottom line,” he said. “It is important that a company like Nuovo has some type of power outage coverage.”
Learn more about protecting small businesses with The Hartford by visiting THEHARTFORD.COM/WEATHERPROTECTION.
Business Insurance 42098A
*Symantec’s 2011 SMB Disaster Preparedness Survey Insurance coverages mentioned in this article are underwritten by the Hartford Fire Insurance Company and its property and casualty insurance company affiliates. This article contains only a general description of coverages which may be provided and does not include all of the features, exclusions, and conditions of these policies. Certain coverages, features and credits vary by state and may not be available to all insureds. All information and representations herein are as of January 2014. © 2014 The Hartford Financial Services Group, Inc. All Rights Reserved.
Employee Benefits Auto Home
WEST On The Cover
Inside This Issue
The Future of Cyber Insurance: Back to the Beginning
April 21, 2014 • Vol. 92 No. 8 • West
NATIONAL COVERAGE 22 IPCC Concludes Climate Change Is Irreversible, Effective Responses Needed
10 Global Reinsurer Capital at All-Time High of $540 Billion: Aon Benfield
24 M&A Review: First Quarter Activity Soars
16 10 Things to Know About Public Entities
10 Fitch Sees Growth, Profitability Continuing for U.S. Commercial Lines
14 Independent Insurance Agents Find Some Pundits, Politicians in Washington Agree
28 Special Report: Cyber Risks The Future of Cyber Insurance: Back to the Beginning 32 Cyber Coverage Demand Increased Significantly in 2013, Trend to Continue in 2014: Marsh
34 Growing Your Property Casualty Agency: Alan Shulman 36 5 Vital Elements Agents Should Review to Ensure Safer Live Events 38 The Specialized Risks of Special Events 40 Minding Your Business: Catherine Oak & Rachel Schoeffler 42 Closing Quote: Why Governors Are Concerned Over FIO Report
18 Closer Look: The Rising Score of Youth Sports Head Injuries
WEST COVERAGE W2 California Commissioner Wants Insurance Burden on Ridesharing Companies W8 7.5M On Fault That Shook Southern Californians Could Be Disastrous
6 | INSURANCE JOURNAL-WEST April 21, 2014
DEPARTMENTS W8 Injured Skier Sues Oregon Resort Over ‘Drunken’ Snowboarder W8 Washington Governor Vetoes $1.5 Million Disaster Fund Cut
8 Opening Note W6 People 11 Declarations 11 Figures 12 Business Moves 35 MyNewMarkets
W10 Confie Head Eyes Commercial Acquisitions for Rest of 2014 www.insurancejournal.com
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Publisher Mark Wells | firstname.lastname@example.org
s the world increasingly becomes interconnected through technology and the internet the risks of cybersecurity and cyber terrorism have become increasingly real as well. Everything from aviation to manufacturing to national infrastructure is in some way connected to the internet. The possibility of a rise in bodily injury and tangible property damage as result of some kind of cyber event or attack is on the minds of world leaders and the insurance industry. “The world of cyber terrorism or sabotage will increase massively and I think that will raise some questions within the property market as to whether this is an exposure that underwriters should or shouldn’t be insuring,” says Graeme Newman, director at CFC Underwriting. According to Newman, the industry doesn’t have long to figure it out. “The very real threat of cyber terrorism or cyber warfare is going to present itself within the next five to 10 years. We have already seen early skirmishes.” The issue is attracting more attention after high-profile cyber events including Stuxnet — a virus that afflicted a uranium enrichment facility in Iran — and Shamoon — a virus linked to cyber assaults on energy firms in Saudi Arabia and Qatar in 2012. Energy companies have no insurance against major cyber attacks, according to an annual review of the energy sector’s insurance market by Willis, which likened the threat to a “time bomb” that could cost the industry billions of dollars. Willis highlighted the industry’s vulnerability to cyber threats and called on insurers to find a way to provide cover. “A major energy catastrophe — on the same scale as … Exxon Valdez or Deepwater Horizon — could be caused by a cyber attack, and, crucially, that cover for such a loss is generally not currently provided by the energy insurance market,” Willis said. Most insurance products currently available will cover minor things such as data losses or downtime caused by IT issues, but not major events like explosions at multiple facilities triggered remotely by hackers, Willis said. It said the lack of coverage stems from a clause included in most energy sector insurance agreements over the past 10 years that explicitly excludes loss or damage caused by software, viruses or other malicious computer code. According to Newman, the U.S. government is petrified about the threat to the national critical infrastructure right now. “People saw what happened to the uranium enrichment facility. The concern is that it could happen to any utility facility in the U.S. — hackers taking control of water treatment facilities, sewage plants, water supplies, that could have a huge impact.” The need for coverage against attacks on national infrastructures is very real, says Rick Betterley, president of Betterley Risk Consultants Inc. “I hope it will soon be more available and better.”
Andrea Wells Editor-in-Chief
8 | INSURANCE JOURNAL-NATIONAL April 21, 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 Catherine Oak, Meredith Reeves, Alan Shulman Contributing Writers Scott Carroll, Rachel Schoeffler, Bradley York 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 Chief Executive Officer Mitch Dunford Chief Financial Officer Mark Wooster | email@example.com
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News & Markets Growth, Profitability to Continue for U.S. Commercial Lines: Fitch
itch Ratings said it maintains a stable rating outlook for the U.S. commercial lines sector due to improving profitability over the past two years and strong capital levels allowing insurers to withstand considerable adversity. Fitch’s fundamental outlook on the commercial lines sector is also stable, reflecting challenges to further improve profitability going forward. In its latest market update report for the U.S. commercial lines insurance market, Fitch discusses the continuing trend of growth and profitability for the sector. In 2013, commercial lines experienced a third straight year of favorable premium growth, fueled by hardening market conditions that have persisted over the last 10 consecutive quarters. Net written premiums increased by 3.6
percent for commercial lines in aggregate in 2013, which was moderately less than 2012’s growth rate. The reported accident year loss ratio improved by nearly 6 points over the prior year to 67.7 percent in 2013. Property related segments reported the strongest changes given modest catastrophe losses in 2013, Fitch said. Workers’ compensation results improved, but this segment continues to generate a significant underwriting loss. Medical professional liability is the one segment with weak pricing and deteriorating underwriting results, according to the rating agency. Fitch said it expects commercial lines accident year loss ratios to show moderate improvement in the near term with continued, albeit lower, price increases and modest loss cost growth. The current hardening phase of the
commercial lines underwriting cycle differs from previous hard markets. Specifically, Fitch said “recent price increases represent a response to past underwriting losses, and recognition that underwriting profits are the only viable replacement for falling investment income.” On a calendar year basis, commercial lines underwriting results continued to be favorably affected by recognition of reserve redundancies from prior accident years in 2013. Reserve releases increased in 2013 in spite of expectations for slowing development and several instances of significant unfavorable reserve actions, Fitch said. Although calendar year development was favorable and improved from year-toyear, Fitch said there is a wider disparity in reserve experience by segment.
Global Reinsurer Capital at All-Time High of $540B: Aon Benfield
he latest edition of the Aon Benfield Aggregate (ABA) report estimates that global reinsurer capital totaled $540 billion as of Dec. 31, 2013, an increase of 7 percent ($35 billion) over the year, with net income up 16 percent to $34 billion, “aided by below average natural catastrophe losses and more favorable prior year reserve development. Return on equity improved to 10.6 percent The report, which analyses the financial results of the world’s leading reinsurers in 2013, “is a broad measure of capital available for insurers to trade risk with and includes both traditional and alternative forms of reinsurance capital,” the bulletin explained. The latest study found that capital reported by the ABA group of 31 leading reinsurers “increased by 6 percent ($20 billion) to $337 billion, driven primarily by $34 billion of net income. Repatriation of equity capital in the form of dividends and share buybacks rose by 15 percent to $20 billion, partly reflecting the increasing engagement of third party capital.” 10 | INSURANCE JOURNAL-NATIONAL April 21, 2014
Other key findings of the ABA study include the following: Gross property and casualty insurance and reinsurance premiums written by the ABA rose by 5 percent to $199 billion, driven by acquisition effects and exposure growth in emerging markets. The ABA combined ratio improved by 2.8 percentage points to 89.6 percent, with all constituent companies reporting underwriting profits. Disclosed catastrophe losses fell by 38 percent to $7.9 billion, contributing 4.7 percentage points to the combined ratio. Favorable prior year reserve development rose by 23 percent to $8.7 billion, benefiting the combined ratio by 5.2 points. Net investment income was stable in dollar terms, but the yield fell by 30 basis points to 3.1 percent and is now down by a third since 2006. ABA companies continue to extend
their engagement with third party capital, principally via sidecar sponsorship and the formation of in-house fund management operations. Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, said: “Reinsurers have reported resilient results in an increasingly competitive marketplace. Most are now adapting their business models to accommodate the increasing availability of lower cost capital, thereby enhancing both their risk transfer capabilities and their offerings. www.insurancejournal.com
News & Markets California Commissioner Wants Insurance Burden on Ridesharing Companies By Don Jergler
ransportation Network Companies like Uber, Lyft and Sidecar should bear the insurance burden when they encourage non-professional drivers to use their personal vehicles to transport passengers for a profit, according to recommendations from California Insurance Commissioner Dave Jones. Jones’ recommendations earlier this month were made to the California Public Utilities Commission, which oversees TNCs in California. His recommendations stem from a recent Department of Insurance investigative hearing in which insurers and TNC operators squared off over how auto insurance should be handled. The recommendations were welcomed by insurer groups like the Property Casualty Insurers Association of America, which has been pushing for TNCs to provide primary commercial coverage for their drivers and not rely on personal auto insurance. “It’s very good. I think he came down on the side of what is right, and what is safe for consumers and for drivers,” said Nicole Mahrt Ganley, a spokeswoman for PCI. “I think that he’s being responsible.” TNCs have become a high profile topic in the last few months, and even former San Francisco Mayor Willie Brown has joined the debate. All the attention is in part due to a perceived gap in insurance coverage, and a New Year’s Even incident during which a TNC driver under contract with Uber struck and killed 6-year-old Sofia Liu. Her family has filed a lawsuit against Uber. Uber issued a statement saying the driver, 57-year-old Syed Muzzafar, was not responding to a fare and didn’t have a passenger in his car when he struck Liu. Since then the debate over TNCs has grown. The sticking point in the debate, which has taken on a triangular battle between TNCs, the insurance industry and taxi and limo providers, has been over a gap in insurance coverage during the period W2 | INSURANCE JOURNAL-WEST April 21, 2014
when TNC drivers have their smartphone Sultz said the other option to ensure coverapp on but have not been matched with a age would be to require each TNC driver to ride. purchase a commercial policy ranging from “Our position has been that when the $5,000 to $10,000, which wouldn’t be feasiapp is on and until the app is off the TNCs ble or available. should provide their drivers with coverage “We don’t’ think that you can buy comand the personal auto policy mercial insurance that covshould not be on the hook for ers livery use on a personal that,” Ganley said. vehicle,” Shultz said. “There In arguing that TNCs isn’t yet a product that offers should provide commercial a personal endorsement or a coverage, insurers noted that rider that covers this use.” most personal auto policies No one has filed with have livery exclusions that the department to offer will deny coverage if a person anything like what would is carrying a passenger for be needed to cover TNC hire. drivers using their personal TNCs were already vehicles for hire, he said. required to have a $1 million Jones’ list of recommencommercial policy on drivers dations include: California Insurance when giving rides or going • Requiring TNCs to Commissioner Dave Jones to pick up a ride, but it was provide $1 million commerassumed that during this gap that TNC cial liability insurance that begins the drivers’ personal policies would be in effect. moment a driver switches on the app; Jones has already recommended TNCs • Requiring TNCs to provide $1 million be required to carry insurance to cover uninsured/underinsured coverage to prothis gap, and large players in the market tect the driver and passenger; like Uber and Lyft have already purchased • Requiring TNCs to provide insurance excess commercial policies to cover this policy information to TNC drivers to period. carry in their cars; However, among Jones’ recommendations • Requiring TNCs to disclose to drivers was that TNCs be required provide $1 milthat their personal auto insurance coverlion commercial liability insurance as the ages may not apply while they drive for primary policy for drivers. the TNC; Chris Shultz, a California deputy insur• Requiring TNCs to provide comprehenance commissioner, told Insurance Journal sive and collision coverage for the driver’s the policies held by Uber and Lyft would auto if the driver has those coverages on not be sufficient under Jones’ latest recomthe driver’s own policy; mendation. • Legislature should revisit the ridesharing “Their coverage is excess, not primary,” and casual carpooling laws to allow for Shultz said. “Our recommendation is that it apps that match not-for-profit drivers be primary.” with casual riders. The excess policy presumes a TNC driv There are three bills pending in the state er’s insurance is in the first position, and Legislature dealing with some aspect of the excess is in second position, he said, TNC operations, and Shultz said he believes adding that in such a scenario, “every fendit’s likely that one of the authors of those er-bender is going to turn into a coverage bills may decide to include language in the dispute between the personal auto insurer bill to make it so that TNC drivers’ personand the commercial insurance for the TNC.” continued on page W4 www.insurancejournal.com
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News & Markets continued from page W2 al auto insurance doesn’t get canceled or non-renewed by their personal auto insurer. “We’re seeing where companies have canceled drivers after people have told them they are doing TNC services,” he said. Lyft and Sidecard spokespersons didn’t respond to requests for comment for this
W4 | INSURANCE JOURNAL-WEST April 21, 2014
article. An Uber spokesman provided this written response via email, which does not address the excess coverage: “Uber’s ridesharing insurance policies lead the industry and ensure safety and coverage for riders and drivers. On top
4/10/14 11:32 AM
of the $1 million commercial policy during trips, Uber was the first to add $1 million of uninsured/underinsured motorists’ coverage during trips and to put contingent coverage in place to cover the time that a driver is available to receive requests but between trips.” Geoff Mathieux, founder of Wingz, a planned rideshare provider that focuses on trips to the airport, would like to see the Legislature create laws that enable drivers to purchase optional coverage for their for-profit ridesharing activities, particularly since many TNC drivers use multiple ridesharing apps. “We’re seeking to recommend to the California Legislature to create a law to allow citizens to purchase optional coverage for any paid or for profit activities they may engage in in their personal vehicles,” Mathieux said. Mathieux has as legal representation Willie Brown Jr., San Francisco’s former mayor and former speaker of the Assembly. Brown, who Mathieux said is a part owner in Wingz, submitted written comments to CPUC to encourage the group to consider creating a legislative vehicle providing for such optional coverage. “Californians need the option to purchase additional personal insurance for their ridesharing activities, regardless of what method they use to find riders,” Brown wrote. “The requirement for automobile insurance should be on the driver, not on the website company.” In his comments Brown noted that Craiglist, Meetup.com, 511.org, and various university websites offer similar paid ridesharing but have no commercial insurance. Mathieux said a new law from Legislature that enables such coverage would eliminate confusion around which insurance is responsible. “If you continue a system where we’re the ones who have to have the insurance and there’s accidents, people are going to point the fingers at multiple companies,” Mathieux said. “It’s going to continue the climate of litigations that is currently surrounding this whole thing.” www.insurancejournal.com
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People Peter Cazzolla
Monterey, Calif.-based Capital Insurance Group President and Chief Executive Officer Peter Cazzolla announced he will retire from the company. Cazzolla’s retirement is to be effective at the end of the year. He will continue in an advisory role to ensure a smooth transition, the company stated. Cazzolla has been with CIG for 21 years. He was selected to lead the firm in 1993, when CIG was a small, regional insurance company with $103 million in written premium and $60 million in surplus. Today, CIG reports more than $400 million in written premium and $300 million in policyholder surplus. Under Cazzolla’s direction, CIG began its state expansion from California and Nevada to include Arizona, Oregon, Washington, Idaho and New Mexico. CIG employs more than 400 employees and has more than 210,000 policies in force. Edgewood Partners Insurance Center named Michael Gonthier chief financial officer. Elaine Andrian, EPIC’s current CFO, will now focus on merger and acquisition strategy and diligence. Gonthier will be responsible for overseeing all finance and accounting, human resources and information technology functions across the organization. Gonthier has more than 20 years of experience in operations, information technology, finance and administration. Prior to EPIC, Gonthier was senior vice president and chief operating officer for Crump Insurance Services. Gonthier also was vice president and finance division CFO for BISYS Insurance Service and vice president of corporate service for BISYS Group Inc. EPIC has nine offices across California: Los Angeles; Irvine; Inland Empire; Fresno; Folsom; San Francisco; San Mateo; Petaluma; and San Ramon. EPIC also has offices in Atlanta, Boston, Chicago, Denver and New York. Novato, Calif.-based Fireman’s Fund Insurance Co. named Robyn Hahn as its chief marketing officer. Hahn is responsible for developing and executing Fireman’s Fund’s marketing and communications strategy. Hahn has 20 years of experience in the insurance industry. She has held several marketing and sales leadership positions, most recently as vice president and chief marketing officer for the business insurance area of The Travelers Companies Inc. Prior to that, she spent 15 years at Nationwide in a variety of roles, including vice president of marketing and sales. Fireman’s Fund is a member of the Allianz Group. CIA-Leavitt Insurance Agency named Brenda
W6 | INSURANCE JOURNAL-WEST April 21, 2014
Gilleland-Edgar an owner/partner of the firm, as well as vice president of the corporation and vice president of operations. Gilleland-Edgar focuses on farm and ranch and banking businesses. She began her insurance career in Nevada, before returning to Colorado where she worked for State Farm insurance for nine years. Gilleland-Edgar joined CIA-Leavitt in 1997. The Leavitt Group provides clients with greater a widerange of insurance programs. National Financial Partners Corp. P&C California has hired Sue Merk as vice president of business development in California. Merk will focus on expanding and cultivating cross sell opportunities for NFP’s California region. Merk has more than 25 years of commercial marketing and underwriting experience. Prior to NFP, Merk was a new business territory manager for Liberty Mutual, formerly Golden Eagle. Merk has held positions with Unigard and Great American. NFP and its benefits, insurance and wealth management businesses provide advisory and brokerage services to companies and high net worth individuals. Woodruff-Sawyer & Co. has tapped Gordon Zellers to be the practice leader in its newly launched Denver, Colo., office, Woodruff-Sawyer Colorado. Zellers will focus on client relationship management and business development as he works to build WoodruffSawyer’s presence in the Denver marketplace. Chris Kakel, a corporate casualty specialist, will also join the office. Zellers has more than 12 years of risk management experience. Kakel has 14 years of casualty experience. Woodruff-Sawyer is an active member of Assurex Global and International Benefits Network. Employers named Russel J. Newman chief sales officer and senior vice president. Newman will be based out of Employers’ headquarters in Reno, Nev. He has more than 12 years of experience in the insurance industry, and over 20 years of management experience overall. Employers Holdings Inc. is a holding company with subsidiaries that are specialty providers of workers’ compensation insurance and services focused on small businesses engaged in low to medium hazard industries. www.insurancejournal.com
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Boston | New York | Chicago | Atlanta | Dallas | Houston | Denver | Los Angeles | San Francisco | Miami | Baltimore | London | Europe | Asia | Australia | Canada | Latin America | Middle East Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. ÂŠ 2012 Liberty Mutual Insurance.
News & Markets 7.5M On Fault That Shook Southern Californians Could Be Disastrous xperts say a bigger earthquake along the lesser-known fault that gave Southern California a moderate shake in late March could do more damage to the region than the long-dreaded “Big One” from the more famous San Andreas Fault. The Puente Hills thrust fault, which brought a magnitude-5.1 quake centered in La Habra and well over 100 aftershocks in the following days, stretches from northern Orange County under downtown Los Angeles into Hollywood — a heavily populated swath of the Los Angeles area. A magnitude-7.5 earthquake along that fault could prove more catastrophic than one along the San Andreas, which runs along the outskirts of metropolitan Southern California, seismologists said. The U.S. Geological Survey estimates that such a quake along the Puente Hills fault could kill 3,000 to 18,000 people and
cause up to $250 billion in damage. In contrast, a larger, magnitude 8 quake along the San Andreas would cause an estimated 1,800 deaths. In 1987, the fault caused the Whittier Narrows earthquake. Still considered moderate at magnitude 5.9, that quake killed eight people and did more than $350 million in damage. Part of the problem with the potential damage is that the fault runs near so many
vulnerable older buildings, many made of concrete, in downtown Los Angeles and Hollywood. And because the fault, discovered in 1999, is horizontal, heavy reverberations are likely to be felt over a wide area. The shaking from a 7.5 quake in the center of urban Los Angeles could be so intense it would lift heavy objects in the air, like the 1989 Loma Prieta Earthquake in Northern California. Another 14 residential structures around the city suffered lesser damage, including collapsed fireplaces. Copyright 2014 Associated Press.
Injured Skier Sues Oregon Resort Over ‘Drunken’ Snowboarder
New Mexico Jury Gives 1-Cent Damage Award
Washington Governor Vetoes $1.5 Million Disaster Fund Cut
skier injured when an allegedly drunken snowboarder collided with her has filed a $900,000 lawsuit against the boarder and Skibowl in Oregon. The suit from Maria Magdalena Stanila alleges the Mount Hood ski resort has a permissive attitude toward alcohol, creating an environment in which sober and intoxicated people ski and snowboard next to each other. The suit states Stanila lost the use of a kidney after the snowboarder slammed into her two years ago. A Skibowl attorney said the resort will defend itself and that Skibowl employees won’t let visibly intoxicated people on the lifts. Copyright 2014 Associated Press. W8 | INSURANCE JOURNAL-WEST April 21, 2014
potash mining company won its lawsuit against an oil and gas company over a mistake in a New Mexico drilling project but a jury awarded just one cent of damages. The award for Plymouth, Mass.-based Mosaic Co. in its suit against Oklahoma City-based Devon Energy Corp. was made earlier this month in state District Court in Carlsbad. Lawyers for the companies declined to comment on the jury’s decision as they left the courthouse. Mosaic’s 2010 suit alleged that Devon drilled in an area where drilling would interfere with Mosaic’s potash mining and that Devon’s misplaced drilling had caused substantial damages. The jury ruled that Devon’s drilling was negligent but the jurors only awarded the one cent of damages. Copyright 2014 Associated Press.
ashington Gov. Jay Inslee has vetoed a proposed cut of $1.5 million to Washington state’s disaster response fund. This decision was on a list of vetoes applied to the supplement state budget approved by lawmakers earlier this year. Most of the other vetoes were technical fixes, but the governor also saved $20 million for the Life Sciences Discovery Fund, which makes grants for scientific research. He said that the cut to the disaster response fund no longer makes sense because of expenses related to the Oso landslide. Earlier in the year, state officials thought they could safely cut the fund during fiscal 2015. But the governor now believes the mudslide response, which involves numerous state agencies, will likely eliminate any excess money in the account. Copyright 2014 Associated Press. www.insurancejournal.com
“Genuine and direct.”
Mike Magnuson President Cygnet Underwriting Agency, Inc. Blues Enthusiast General Star Broker
“Growing up in South Chicago, I’ve been following the blues for a long time. There’s something very genuine and direct about it that’s got me hooked. “There’s something genuine and direct about my relationship with the professional liability folks at General Star, too. Their experience and decisionmaking authority allow them to respond very quickly. That’s been key to our mutual success — we get the placement and they get the order. It’s that simple. “I like listening to the blues, but I’m definitely not singing them with General Star insuring my risks.” To locate the General Star broker nearest you, visit our website at www.generalstar.com. © 2013 General Star National Insurance Company is licensed in all states, the District of Columbia and Puerto Rico. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star companies by licensed producers and, for risks that qualify, by licensed surplus lines brokers. Atlanta 404 239 6777
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News & Markets Confie Head Eyes Commercial Acquisitions for Rest of 2014 By Don Jergler
Confie has more than $830 million in premiums, with the majority in personal lines. In March Confie announced a deal to onfie Seguros’ president wants it buy Ida Tunnell Insurance in Marble known that the agency made good on Falls, Texas, near Austin. That its promise a year-and-a-half ago to up its gives Confie 120 total offices in the buying spree and expand into standard perstate. sonal and small commercial lines, all while Confie isn’t alone. A handful broadening its demographic from being of large firms have been on a buyprimarily a Hispanic focused firm. ing spree for the past two years. It may be that he’s strutting, but he also Marsh & McLennan Agency LLC in likes to broadcast his agency’s buying spree the last few months has purchased several because it helps bring potential acquisitions firms, including San Diego, Calif.-based his way — on a weekly, if not daily basis, down upon purchase also helps. Barney & Barney LLC, adding $100 million he says. “We are a cash buyer,” Rothberg said. in revenue and 500 employees to The promise was made Yet another trend Confie has in its favor its ranks. USI Insurance Services by Confie President Mordy is that there are few competitors in the earlier this year agreed to purRothberg after the Buena market for small personal lines agencies. chase 42 of Wells Fargo’s insurPark, Calif.-based insurance That leaves few options for sellers who ance brokerage and consulting agency was purchased by want to get rid of their business or cash out. offices. ABRY Partners near the end “It’s up to the entrepreneur to sell to us A report issued earlier this of 2012. or to hold their business,” Rothberg said. year by Frost & Sullivan showed The Boston-based pri Confie has also pushed into standard the sized of M&A deals in the vate equity firm acquired lines and small commercial and has property/casualty industry began a majority of the equity in expanded into not just nonstandard but growing last year. Confie from San Francisco, standard preferred small commercial agenConfie President Mordy The report states that M&A Calif.-based Genstar Capital. Rothberg cies. activity declined in deal volume ABRY focuses on business “We think that’s going to be a growth but there was an increase in average deal and information services, media, and comarea for us,” he said. value in 2013. munications investments. Look for such acquisitions for the rest of Rothberg of course likes to credit his Since 1989, ABRY has completed more 2014, according to Rothberg. management team for the rapid growth, but than $36 billion of leveraged transactions “I’m more optimistic today than I was he said the positive feedback that the prinand other private equity and mezzanine last year at this time,” Rothberg said. “More cipals in their acquisitions are willing to investments, representing investments in agencies are approaching us about partneroffer for Confie roughly 450 properties. ship opportunities. ‘It’s up to the entrepreneur to sell We will be acquiris the driving The promise of great growth from the force behind president wasn’t too long of a bet when he ing more than to us or to hold their business.’ Confie’s agency made it. Growth is all Confie Seguros has over $50 million in buying momentum. known since its inception in 2008, building revenues for 2014.” “We’ve done 60 acquisitions and we have up to today what can be considered a mas According to Rothberg, he’s being 60 references,” Rothberg said. sive portfolio. approached weekly or sometimes daily by One reason that Confie is getting good Since its acquisition by ABRY the firm agency owners. word of mouth, Rothberg said, is that the has grown from $200 million in revenues Rothberg wouldn’t say how much Confie firm doesn’t take the same approach to and 300 offices to $300 million revenue and pays for agencies on average, but said the acquiring other firms each time. 540 locations. The firm is now in 17 states. firm does pay a competitive price. “We don’t have a cookie-cutter approach “We’re approaching $100 million in pre And Rothberg wouldn’t deny Confie has to our acquisitions,” Rothberg said, adding mium in the standard lines,” Rothberg said. overpaid on occasion. that the way in which deals are structured “We’ve seen exponential growth in our busi “Obviously, the amount of deals that depends on the needs of the seller. ness. Our pipeline to date has never been we’ve done, we don’t take every nickel off Having lots of cold, hard mullah to plunk stronger.” the table,” he said.
W10 | INSURANCE JOURNAL-WEST April 21, 2014
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We help you get your name out. You help us get our message out. Let the back-scratching begin! Working together, we’ll provide your policyholders with the Strength to Rebuild ® after California’s next damaging earthquake. CEA’s Marketing Value Program (MVP) offers FREE marketing tools to help you connect with clients. Simply put, it’s back-scratching all around. • Get postage-paid direct mail printed with your name and address. • Register early and get a FREE go-bag and gas-valve shutoff wrench. • Send FREE preparedness starter kits to your new CEA policyholders. • Distribute your direct mail with FREE statewide advertising support. The MVP helps CEA get its message out about earthquake insurance, and it helps your business in a way that says “I care.” All California-licensed agents employed or appointed by CEA’s participating insurance companies can join the MVP. Sign up today at EarthquakeAuthority.com/MVP
The amount the city of Lincoln, Neb., will pay to 16 homeowners whose basements were flooded with sewage when a water main break early on New Year’s Day filled a manhole and caused the sewer to back up into the basements of 21 homes. An assistant city attorney said the city is paying claims because it knew from a previous incident that there was a problem with the water main. Four other claims remain in dispute.
$3.5 Million The estimated amount of damage to property and contents from a fire and explosion at the JNS Biofuels plant near New Albany, Miss. The state fire marshal has ruled the fire as an accident. The plant used chicken fat, soybean oils and other oils to produce B100 biodiesel.
“For many New Yorkers, it’s been the worst 17 months of their lives.”
— New York City Mayor Bill de Blasio on challenges faced by New Yorkers who are still recovering from Superstorm Sandy. The mayor on March 29 named a new Sandyrecovery team to speed up recovery efforts and fund the rebuilding of homes. The mayor said he is “thoroughly dissatisfied” with what happened in the last months before his administration came into office on Jan. 1.
“This type of event raises the public’s awareness that we’re dealing with a combustible commodity.”
In damages were awarded by a judge in favor of an Ogden, Utah woman in a lawsuit over a severe dog bite. Second District Judge Mike DiReda found that Sara Loving was owed the damages from defendants James and Cindy Davis for injuries she sustained in the July 2012 attack.
The number of pounds of oil-soaked sand and debris removed from Texas shorelines two weeks after a collision in the Houston Ship Channel. Investigators say the March 22 collision between a ship and barge dumped nearly 170,000 gallons of oil into the waters.
Preventing Double Dips
“Governor Walker signed this law to ensure transparency in the lawsuit process and stop trial lawyers from double dipping.”
— Laurel Patrick, spokeswoman for Wisconsin Gov. Scott Walker. He signed a bill into law requiring plaintiffs who have suffered from asbestos exposure to reveal how many businesses their attorneys plan to sue. They also would have to go after money from an asbestos trust before suing for more.
Against Lower Deductible
3,000 The approximate number of Massachusetts state employees who had experienced job-related injuries from 2010 to 2012 that were serious enough to require time off, while four workers lost their lives, according to a report by an advisory committee in Massachusetts charged with gauging workplace risks for public employees.
— Teri Viswanath, a natural gas market strategist at BNP Paribas in New York, said an unexplained blast at a liquefied natural gas facility in rural Washington state, which injured workers and forced an evacuation, focuses attention on the risk of storing massive gas supplies near population centers.
“Lowering the maximum deductible for named storm coverage will not do anything to make insurance premiums more affordable or to entice more insurers to do business in Louisiana.”
— Paul Martin, Louisiana state affairs director for the National Association of Mutual Insurance Companies. NAMIC opposes a proposal in the Louisiana to reduce the maximum insurance deductible on named storms and require winds in excess of 125 miles per hour before the deductible could be applied.
“I don’t tell security how to do their job.”
— Pop singer Justin Bieber, in a deposition for a lawsuit brought by celebrity photographer Jeffrey Binion against Bieber and a bodyguard. The lawsuit claims the bodyguard assaulted Binion outside a recording studio. April 21, 2014 INSURANCE JOURNAL-NATIONAL | 11
Business Moves Chris Gallagher, Hudson’s president, said the deal gives Hudson an opportunity to make its partnership with MTU permanent. Hudson Insurance Group is the U.S. insurance division of OdysseyRe, a property/casualty reinsurer and specialty insurer.
Marsh & McLennan, Capstone Marsh & McLennan Agency LLC (MMA), a subsidiary of insurance broker Marsh LLC, has acquired Capstone Insurance Services LLC, a $1.8 million revenue agency located in Greenville, S.C. Terms of the transaction were not disclosed. Founded in 1995, Capstone provides property/casualty insurance and risk management to businesses and individuals across South Carolina. All of Capstone’s leadership and employees will join MMA’s Mid-Atlantic region and merge into MMA’s existing Greenville office, which was established with the 2012 acquisition of Rosenfeld Einstein. Hudson, Motor Transport Underwriters Hudson Insurance Group has acquired Motor Transport Underwriters Inc., an underwriting, claims and risk management specialist in the long-haul trucking arena with which Hudson does business. MTU will continue to be led by Greg Bonnell and operate out of Indianapolis. MTU was founded in 1995 as a program manager for insurance for trucking fleets on behalf of Travelers Insurance. In 2002, MTU transferred its business to Lincoln General Insurance Co., where it stayed until 2008 when it rolled its book to Hudson. 12 | INSURANCE JOURNAL-NATIONAL April 21, 2014
Cross Insurance, Troy, Pires & Allen Cross Insurance, a subsidiary of Cross Financial Corp. in Bangor, Maine, acquired Troy, Pires & Allen Insurance, a 78-year-old insurance agency based in East Providence, R.I. Troy, Pires & Allen Insurance will operate under the Cross Insurance name. Under the transaction, Troy, Pires & Allen’s partner Gregory Troy will serve as president of the acquired agency’s operations, while another partner, Peter Troy, will serve as head of commercial lines sales for the acquired agency’s operations. Additionally, Shove Insurance Inc., a 155-year-old, Rhode Island-based insurance agency affiliated with Troy, Pires & Allen Insurance, also was acquired by Cross Insurance as part of the transaction. Shove Insurance’s former partners, William Hunt and David Francis, will remain with the new organization as producers. Catalina Holdings, SPARTA Catalina Holdings Ltd., a Bermuda-based consolidator in the non-life run-off sector, has agreed to acquire SPARTA Insurance Holdings, a property/casualty underwriting company in Hartford, Conn. Catalina plans to place some of SPARTA’s business into run-off and to transfer SPARTA’s alternative market business to Arch Insurance Co. under a separate renewal rights agreement. SPARTA predominantly focuses on specialty program and risk transfer alternatives in the United States. At the end of 2013, SPARTA had total assets of $911 million, gross reserves of $495 million, net reserves of $309 million and shareholder equity of $201 million.
Catalina will acquire SPARTA from cash at hand and a senior debt facility. The transaction is expected to close during the third quarter of 2014. AssuredPartners, MHB Lake Mary, Fla.-based AssuredPartners Inc., through its subsidiary Assured SKCG, recently acquired MHB Insurance of Peekskill, N.Y. Founded in 1919, MHB Insurance specializes in insurance for businesses, municipalities and individuals, and provides life, health and employee benefits services. MHB Insurance will combine operations with Assured SKCG in White Plains, N.Y. PSA Insurance, Councill PSA Insurance & Financial Services in Hunt Valley, Md., acquired Councill, a Towson, Md.-based firm offering insurance products, third-party administration and risk management services for nursing homes, assisted living and independent living facilities. Councill’s president, Nancy Councill, and two of her associates will work from PSA’s Hunt Valley, Md., headquarters, while six others will work remotely from cities across the country. Johnson & Johnson, Stateside Underwriting Charleston, S.C.’s Johnson & Johnson has acquired Stateside Underwriting Agency Inc. in Crystal Lake, Ill., and Chagrin Falls, Ohio. Stateside Underwriting Agency will continue to operate under the leadership of Richard Nowell and Chad Gaizutis, according to Johnson & Johnson President Francis Johnson. Stateside Underwriting Agency is an underwriting manager for specialty professional liability risk products including mortgage bankers bond and professional liability for mortgage companies, architects and engineers, property managers, lawyers and other classes. In addition, SUA writes fidelity bonds for title agents. Johnson & Johnson is a managing general agency that serves independent agents. www.insurancejournal.com
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Financial Strength and Exceptional Claim Service Property | Liability | Executive Protection | Workers Compensation | Marine | Surety Homeowners | Auto | Yacht | Jewelry | Antiques | Accident & Health
Chubb Group of Insurance Companies (“Chubb”) is the marketing name used to refer to the insurance subsidiaries of The Chubb Corporation. For a list of these subsidiaries, please visit our website at www.chubb.com. Actual coverage is subject to the language of the policies as issued. Chubb, Box 1615, Warren, NJ 07061-1615. ©2012 Chubb & Son, a division of Federal Insurance Company.
News & Markets Independent Insurance Agents Find Some Pundits, Politicians in Washington Agree By Andrew Simpson
thinks Republican Sen. Mitch McConnell of Kentucky will lose either in the Republican primary or the general election. Big “I” CEO Bob Rusbuldt, acting as panel moderator, criticized the Obama Administration for modifying the ACA by executive order while ignoring bipartisan calls for changes such as guidelines for navigators or changing the definition of full time employees. Begala agreed that Obama and Democrats should listen to suggestions for improvements but said the current political atmosphere does not allow for compromise. “We are not more polarized than we were under Bill Clinton but we are more paralyzed. The legislative process has broken down,” Begala said. On the Republican side, those who compromise get challenged in primaries or otherwise “fired,” he said. “You can’t love the Constitution and oppose compromise,” Begala said. “The Constitution is a compromise.” Carlson said there is no overlap between the Democratic and Republican parties today. “There is not a single Republican who is more liberal than the most conservative Democrat,” he said.
ews flash: a conservative and a liberal in Washington agree — on quite a few matters, in fact. Before an audience of independent insurance agents, commentators Tucker Carlson, a conservative, and Paul Begala, a liberal, agreed that the coming midterm elections could be difficult for Democrats. Carlson predicted gains for Republicans and Begala did not disagree during a panel at the annual legislative conference of the Independent Insurance Agents and Brokers of America (Big “I”). Both stopped short of predicting that Republicans, who hold the majority in the House, will be able to wrestle control of the Senate from Democrats. Tucker is co-founder and editor-in-chief of The Daily Caller and hosts FOX and Friends Weekend. He formerly co-hosted CNN’s Crossfire and his own show on MSNBC. Begala is a Newsweek/Daily Beast columnist and a CNN contributor. The former adviser to President Bill Clinton teaches at Georgetown University and is a senior adviser to Priorities USA Action, a progressive PAC. Carlson said Democrats will be hurt by Bipartisan Talks having to run on the Affordable Care Act, Bipartisanship was also the focus of although he predicted Democratic Sen. Mary House Majority Whip Kevin Landrieu of Louisiana, McCarthy (R-Calif.) and who faces a tough re-elec- ‘There is not a single Rep. Steve Israel (D-N.Y.), tion, will survive. Republican who is Democratic Congressional Begala said hismore liberal than the Campaign Committee tory does not favor most conservative (DCCC) Chairman. Democrats in the mid McCarthy told the terms. Only two presDemocrat.’ association’s members that idents who have been they can use their political power to help in office for six years, as President Obama make America’s future their own. “Don’t has been, have ever gained seats, he said. blame somebody else for the problem,” said However, while the outlook is not great for McCarthy, who started his own business Democrats right now, Begala predicted that when he was just 19 years old. “We should better news in coming months on the ACA not leave our problems for another generaand the economy could help Democrats. tion — we need to face them head on.” Begala said he thinks Sen. Mark Pryor, an McCarthy said the nation must develop Arkansas Democrat, is in trouble but he also 14 | INSURANCE JOURNAL-NATIONAL April 21, 2014
Tucker Carlson, editor-in-chief, The Daily Caller. a national energy policy, as well as reform the tax code, education, immigration and government itself by tackling unnecessary regulation. “We have to be able to compete,” he said. Israel cited five trends he said will affect America in the next two decades: a booming global middle class; rapid expansion of the elderly population; increasing movement back into cities; “breathtaking” acceleration of technology; and an “alarming” increase in demand for natural resources. Both representatives suggested that the solution to the nation’s challenges is bipartisan politics. “Washington is not just the capital of United States of America — it’s the capital of blame,” Israel said. “That blame may make us feel good in terms of our partisan gratifications, but that blame is not going to put one person to work — and it’s not going to save a single small business.” www.insurancejournal.com
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10 Things to Know About Public Entities
There are 3,141 counties and county equivalents in the 50 U.S. states and the District of Columbia. (USGS CoreFacts, U.S. Geological Survey)
Counties build and maintain 45 percent of the public roads and 230,690 of the nation’s bridges, and are involved in one-third of the transit and airport systems in the United States. (National Association of Counties)
Three areas about which public entities currently are curious about are cyber coverage, physical abuse and molestation coverage — particularly on the West Coast — and prevailing trends in insurance market and the effect those trends have on individual entities. (Daniel Howell, Alliant Insurance Services, California)
The liability side of the public entity insurance market could be characterized as a “musical chairs of underwriters” with new entrants in the market and new appetites. The property side overall is relatively soft depending on loss history of the individual public entity and its exposure to catastrophe perils. (Daniel Howell, Alliant Insurance Services, California)
It is estimated that more than 80 percent of cities, towns, schools, counties and special districts in the United States use risk pools to manage some or all of their risk management and risk financing needs. (Association of Governmental Risk Pools)
According to 2009 data, there were 87,849 entities in the public entity market nationwide, including counties, municipalities and townships, special districts, school districts. (“Public Entity Pooling - Built to Last,” Karen Nixon, Public Agency Risk Sharing Authority of California, 2011)
More than 14,000 public school districts in the United States spend an excess of $500 billion on public elementary and secondary education annually through a combination of federal, state and local funds (U.S. Census Bureau). In 2013, nine states enacted legislation related to weapons in schools, including Tennessee, which allows any K-12 employee to carry a firearm on school grounds as long as they are licensed and have undergone selected training. Oklahoma passed a similar law related only to private schools. (Education Commission of the States) 16 | INSURANCE JOURNAL-NATIONAL April 21, 2014
Since the 1980s, a large number of public entities have joined insurance pools and group purchasing programs, and utilized self-insured retentions. Agents and brokers would do well to help those entities choose the correct amount of retention and find the appropriate markets. (Daniel Howell, Alliant Insurance Services, California)
Some 39 percent of public entity risk pools are staffed by their own employees; 35 percent of pools are managed by a broker or thirdparty administrator; 26 percent are administered by associations. (“Public Entity Pooling - Built to Last,” Karen Nixon, Public Agency Risk Sharing Authority of California, 2011) www.insurancejournal.com
Our Community Gives Back to Us. At Sullivan, we recognize that, in countless and inexplicable ways, the insurance & private charities with whom we are privileged to associate teach us invaluable lessons, as individuals & as an organization: to be conscious of and considerate of the needs of others, to think beyond ourselves, to use our resources wisely towards an endeavor greater than ourselves, to serve unselfishly & lead humbly. This is just one part of who we are at Sullivan and why we’re different.
“We’re Different” is a bold claim. We back it up everyday. For more information contact us at (213) 626-1000 or www.gjs.com
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Sports The Rising Score of Youth Sports Head Injury Claims By Denise Johnson
ast year, the NFL agreed to settle a concussion lawsuit filed by former players for $914 million. As concussion-related lawsuits continue to be filed against professional sports teams, equivalent claims and litigation will soon be seen in a variety of youth sports and non-professional organized sports leagues, according to partner Robin Dusek, a member of Freeborn & Peters Insurance/Reinsurance Industry Team. A study released last year by the Institute of Medicine (IOM) that focused on young athletes five to 21 years old, found that concussions rates were higher among high school athletes than college athletes in certain sports, including football, men’s lacrosse, soccer and baseball. Concussion rates were also typically higher during competition than in practice, except for cheerleaders. Concussion rates were noted more frequently in children with a history of prior concussions and in female athletes. The report found that while the typical concussion recovery rate among young athletes was about two weeks, in 10 percent to 20 percent of cases symptoms could continue for weeks, months or even years. Dusek, a Chicago-based attorney, said
18 | INSURANCE JOURNAL-NATIONAL April 21, 2014
insurers should prepare for increasing claims arising from players and their families against non-professional sports leagues, including high school and junior high football, soccer, hockey, rugby and lacrosse. “We live in a litigious culture. There’s more awareness of this as a problem. I think that’s going to cause more people to take action and make them see it a lot of different ways because deep pockets are always an issue with litigation. I think it’s going to be particularly apparent with youth sports, because a lot of park districts and schools will be protected or protected to some degree by governmental immunity, and so they won’t be a viable target for a lawsuit,” Dusek said. Impacted Lines The claims could impact several lines of insurance, according to Dusek. A medical malpractice claim could arise if a doctor failed to properly diagnosis a head injury and allowed an athlete to return to play. A homeowners’ insurance claim could arise as a result of a coach being sued for his or her alleged role in an injury claim. “Individual coaches may be sued because a lot of coaches will have homeowners’ policies or other umbrella policies that protect them from liability, or protect their exposure to liability, I should say. Doctors who don’t take the necessary steps to make sure a kid doesn’t have a concussion and then it turns out they have a concussion and they play and they get hit again and maybe have a more lasting impact because of that,” said Dusek. Even with the possibility of governmental immunity, Dusek expects school districts will continue to be targeted. “You may see some
suits against school districts that, to get around the governmental immunity, are alleging more willful or wanton acts against the school district; that they should have known and the fact that there’s not a trainer on the sidelines, for example, during practice. That’s something that is not just negligent, but rises to a level that’s beyond negligence to try to get around the governmental immunity protection that a lot of schools will have,” Dusek explained. Director and officer liability policies could also be implicated. “If you look at, I guess a situation where a school board hasn’t authorized enough trainers to be available for games and practices or they know that there’s a coach that is known to take risks with players and they don’t replace him or her. I think that’s certainly an area of exposure with school boards and with universities, with their board of directors and those types of situations,” the Chicago-based attorney said. Insurer, Governmental Response According to Renee Callantine, a San Francisco attorney, claims for bodily injuries could present a variety of coverage issues, depending upon who the claim is made against and the policy under which the claim is tendered. “If a claim is made against a coach or manager for personal injuries by a player, the claim may be tendered under a homeowners’ policy. This type of policy provides coverage for bodily injuries but, as relevant here, will typically contain exclusions for “business pursuits” and “professional services,” Callantine said. “The former applies to claims arising out of any business engaged in by the insured and ‘business’ is interpreted broadly to include full or parttime activity engaged in for profit or gain.” Callantine said that the “professional services” exclusion bars coverage for injuries arising out of the rendering or failure to render professional services. “Again, most states interpret ‘professional continued on page 20 www.insurancejournal.com
Sports continued from page 18 services’ broadly as an activity normally undertaken for pay. Both exclusions would apply to claims made by coaches and others employed by schools to oversee the sports activity. The exclusions might also apply to voluntary coaches, as both have been found applicable in cases where the activity is undertaken free of charge, although the applicability in that scenario is a little less clear and will vary by jurisdiction,” Callantine said. Claims tendered under a school or organization’s policy will be analyzed differently because those policies will not contain business pursuits or professional services exclusions. But the exclusion for “expected or intended” injuries may apply, depending on the facts of the case, Callantine said. “[W]here the claims are brought against the directors and officers of an organization, they will typically be excluded from coverage under the standard D&O forms. This coverage is not intended to apply to bodily injury exposures and are typically specifically excluded,” Callantine added. Other issues, according to Marsh, include multiple policy triggers, allocating claims to appropriate policy years and negotiating coverage agreements with multiple insurers. Marsh noted that insurers could seek to challenge coverage based on whether an injury occurred during the policy term, the “expected or intended injury” exclusion, lack of an “occurrence” and known risk defenses. School Exclusions As sports-related claims and litigation rise, concussive injury exclusions will begin to show up in school insurance policies. “Insurance companies can play a role in making sports safer for participants because they can impose exclusions, impose certain requirements for making sure sideline tests for concussions are available or requiring that there has to be a certain number of trainers available,” Dusek said. Besides adding exclusions to policies, insurers could raise premiums or impose safety requirements, the Freedman and Peters partner said. 20 | INSURANCE JOURNAL-NATIONAL April 21, 2014
“The insurance field can actually potentially make sports safer. I think they will use their ability to write in exclusions or write in requirements, increase premiums for school districts or park districts that don’t have certain precautions in place, that their premiums will be higher than another school district that has a lot more precautions in place. I think that the insurance world will make a difference in how all this plays out. My hope ever’s being sued was acting Claims could be is actually that it makes a within the sphere of what made against safer environment for those be expected or were doctors, schools, should participating in sports,” said they being extra negligent or executives, even what the specific facts are,” Dusek. Some insurers have already homeowners. Dusek said. “What it seems begun programs to address to me, and this is a general sports-related concussion injuries. statement and individual cases can differ. AIG insures more than 5,000 athletic If it’s outrageous enough or if the damage organizations and sport camps, providing is terrible enough, courts tend to find ways participant coverage, risk management seraround a release.” vices and liability insurance. The company Some fear that overwhelming litigation instituted “aHead of the Game,” which against school districts and small youth provides education and risk management to organized sports teams could lead to the coaches, parents and athletes. end of non-professional youth sports. But Wells Fargo also initiated a program for Dusek does not expect that to happen. schools and youth programs it insures. Play “It’s going to be interesting to see what It Safe Concussion Care provides concusplays out with this. There’s certainly a lot of sion testing and coverage for players. ... people who see value to kids participat Dusek said other measures insurers could ing in sports, and there is value to kids partake include defining what is and isn’t an ticipating in sports. I think right now we’re occurrence and imposing aggregate limin a point where we don’t know enough its. Governmental entities could consider about how to protect adults or children imposing damage caps. from lasting brain injury from their participation in sports,” Dusek said. Waivers “As we know more that may allow sports What about signed releases or waivers? to continue as they have been with maybe “I’ve looked at the impact of releases in different helmets or different rules in general in sports and whether athletes can place,” Dusek said. “But I do think it will sue for things that are arguably released. have an impact, certainly, on the number of It really is just going to be a case-by-case children participating in sports like football analysis,” Dusek said. “Whether the release and hockey and possibly lacrosse, rugby, really would be read by a common person soccer.” to cover whatever damage is being alleged. Whether the school or the coach or whoJohnson is the editor of ClaimsJournal.com www.insurancejournal.com
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News & Markets IPCC Concludes Climate Change is Irreversible, Effective Responses Needed
he Intergovernmental Panel on Climate Change (IPCC) has issued its latest report, which states that “the effects of climate change are already occurring on all continents and across the oceans. The world, in many cases, is ill-prepared for risks from a changing climate.” The report also concludes that “there are opportunities to respond to such risks, though the risks will be difficult to manage with high levels of warming.” The report, titled “Climate Change 2014: Impacts, Adaptation, and Vulnerability,” from Working Group II of the IPCC, details the impacts of climate change to date, the future risks from a changing climate, and the opportunities for effective action to reduce risks. A total of 309 coordinating lead authors and review editors, drawn from 70 countries, were selected to produce the report. They enlisted the help of 436 contributing authors, and a total of 1,729 expert and government reviewers. The report concludes that responding to climate change “involves making choices about risks in a changing world.” The nature of the risks of climate change is increasingly clear, though climate change will also continue to produce surprises, the report says. The report spells out the populations most vulnerable people to the effects of climate change, as well as the “industries and ecosystems” around the world that will be affected. The report also concludes that the “risk from a changing climate comes from vulnerability (lack of preparedness) and exposure 22 | INSURANCE JOURNAL-NATIONAL April 21, 2014
(people or assets in harm’s way) overlapping with hazards (triggering climate events or trends).” Each of these three components can be a target for smart actions to decrease risk, the report says. Man-Made Climate Change Vicente Barros, co-chair of Working Group II, said: “We live in an era of manmade climate change. In many cases, we are not prepared for the climate-related risks that we already face. Investments in better preparation can pay dividends both for the present and for the future.” Adaptation to reduce the risks from a changing climate is now starting to occur, “but with a stronger focus on reacting to past events than on preparing for a changing future,” according to Chris Field, co-chair of Working Group II. “Climate-change adaptation is not an exotic agenda that has never been tried. Governments, firms, and communities around the world are building experience with adaptation,” Field added. “This experience forms a starting point for bolder, more ambitious adaptations that will be important as climate and society continue to change.” Future Risks The severity of risks produced by changes in the world’s climate patterns, foreseen in the near future, may turn out to depend strongly on the amount of future climate change. Increasing magnitudes of warming raises the likelihood of severe and pervasive impacts that may be surprising or irreversible, the report concludes. Field said: “With high levels of warming
that result from continued growth in greenhouse gas emissions, risks will be challenging to manage, and even serious, sustained investments in adaptation will face limits.” The study of the changing climate has progressed significantly since the establishment of the IPCC by the World Meteorological Organization in 1988. The IPCC’s mandate is to “provide policymakers with regular assessments of the scientific basis of climate change, its impacts and future risks, and options for adaptation and mitigation.” Although the summary of the report doesn’t expressly use the term “tipping point” to described the changes in climate, it acknowledges that in many cases they are irreversible; i.e. it’s too late ‘Understanding that to try and stop the climate from climate change is a changing, and challenge in manthe world must aging risk opens now look to a wide range of ways that it can opportunities.’ adapt to and try to mitigate the effects caused by the phenomenon. Adaptation can play a key role in decreasing these risks, Barros noted. “Part of the reason adaptation is so important is that the world faces a host of risks from climate change already baked into the climate system, due to past emissions and existing infrastructure,” he explained. Field added: “Understanding that climate change is a challenge in managing risk opens a wide range of opportunities for integrating adaptation with economic and social development and with initiatives to limit future warming.” “We definitely face challenges,” Field said, “but understanding those challenges and tackling them creatively can make climate-change adaptation an important way to help build a more vibrant world in the near-term and beyond.” www.insurancejournal.com
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M&A Review First Quarter Activity Soars
ith the strongest start in the past five years, the first quarter of 2014 carries with it the momentum from the end of last year. With 77 announced transactions, January through March was not only the strongest first quarter in the past few years — it was among the strongest quarters over the past decade. January began the year with 36 transactions, outshining every month in 2013 with the exception By Meredith Reeves of December, while February remained steady with 25, and March posted a respectable 16. The first quarter is nearly double that of last year. In comparison, 2013 did not hit 77 transactions until we were in the heat of June. There have been 48 different buyers this quarter with 14 of them completing multiple transactions. AssuredPartners continued its aggressive growth strategy with eight transactions in the first quarter. With a mix of property/ casualty and multiline retail firms as well as wholesalers, AssuredPartners continues to expand its middle market presence. AssuredPartners claimed the most active buyer spot for the first quarter 2014, and is already nearly halfway to its 2013 total of 20. The public and private equity-backed buyers remained atop the leader board and accounted for half of all transactions occurring in the first quarter. Arthur J. Gallagher announced six completed transactions in the first quarter followed by Hub International with five. Both buyers are comfortably outpacing last year’s activity. USI Holdings (USI) and Marsh & McLennan Agencies (MMA) each completed three acquisitions, including announcing some very large transactions. In its largest acquisition to date, MMA made headlines with its acquisition of California-based Barney & Barney. With annual revenue of approximately $100 mil-
lion, the Barney & Barney acquisition proer speed with 24 transactions in the first pels MMA’s total revenue to approximately quarter compared to 36 in each of the past $500 million on a national basis. The move two full years. At 31 percent of all activity further expands MMA’s footprint and serves through March, we expect this segment to as a foundation to build out in the West. continue to be active as buyers seek oper In another big announcement, USI agreed ations with market access that can drive to acquire 42 offices from Wells Fargo, growth and profitability. which represents approximately 40 percent Momentum continues to build for mergof the bank’s brokerage and consulting er and acquisition activity and we remain locations throughout the country. The move cautiously optimistic about 2014. There is broadens USI’s presence in considerable capital in the new and existing markets. If the first quarter market and buyers continue At the same time, the move look for optimal ways is any indication, we to supports Wells Fargo’s to put it to work. Firms could be in for an continue to search for profstrategy of growing its core strategic middle-market itable growth, whether that active year. insurance business. is achieved by expanding Brown & Brown announced the acquiinto new markets, developing new niches, sition of The Wright Insurance Group, or expanding distribution channels. If the another large deal that made headlines. The first quarter is any indication, we could be acquisition will be a part of the Program in for an active year. Division of Brown & Brown and marks one Securities offered through MarshBerry Capital of its largest acquisitions in the past few Inc., Member FINRA and SIPC, and an affiliate years. The transaction, expected to close in of Marsh, Berry & Co. Inc. 4420 Sherwin Road, April, was announced for a total net considWilloughby, Ohio 44094 (440-354-3230). Except eration of $602.5 million. where otherwise indicated, the information The majority of the acquisitions (56 perprovided is based on matters as they exist as of cent) in the first quarter were of P/C firms, the date of preparation. Past performance is not followed by multi-line agencies (27 percent) necessarily indicative of future results. and employee benefit only firms (17 percent). Reeves is a senior consultant for MarshBerry & Co. The wholesale market continues to gathcontinued on page 26
24 | INSURANCE JOURNAL-NATIONAL April 21, 2014
Figure 1: Number of Announced Deals (U.S. Transactions) 133
135 115 95 75
35 15 -5 Q1
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Figure 2: Merger & Acquisition Activity : January - March 2014 Announced Date 03/07/14 01/01/14 01/07/14 02/24/14 01/06/14 01/01/14 02/14/14 02/19/14 02/20/14 03/04/14 03/18/14 03/24/14 01/07/14 01/20/14 01/28/14 02/05/14 02/07/14 02/18/14 02/25/14 03/24/14 03/27/14 01/27/14 03/24/14 02/01/14 01/13/14 01/15/14 01/16/14 01/16/14 01/01/14 01/01/14 02/07/14 02/03/14 03/03/14 01/13/14 02/01/14 01/14/14 02/01/14 01/09/14 01/21/14 03/20/14 01/16/14 03/12/14 01/01/14 01/01/14 02/04/14 02/04/14 03/03/14 03/05/14 01/07/14 01/30/14 02/18/14 01/27/14 01/14/14 01/07/14 02/13/14 02/03/14 02/03/14 02/05/14 01/02/14 01/01/14 03/01/14 01/06/14 02/03/14 01/06/14 02/24/14 01/14/14 02/13/14 03/31/14 02/05/14 03/14/14 01/07/14 03/04/14 01/14/14 01/17/14 01/28/14 01/23/14 02/28/14
Acrisure, LLC All Risks, Ltd. Alliant Insurance Services Altamont Capital Management, LLC AmWINS Group Aronson Insurance Agency, Inc. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. AssuredPartners, Inc. AssuredPartners, Inc. AssuredPartners, Inc. AssuredPartners, Inc. AssuredPartners, Inc. AssuredPartners, Inc. AssuredPartners, Inc. AssuredPartners, Inc. BB&T Corporation Berkshire Hathaway Inc. Biglari Holdings Blackmoor General Agency, LLC Bloss & Dillard Inc. Bolton & Company Captive Resources, LLC Captive Resources, LLC CBIZ, Inc. CBIZ, Inc. CoBank, ACB Confie Seguros Insurance Services Confie Seguros Insurance Services Corcoran & Havlin Insurance Group Cretcher Heartland, LLC Cross Insurance Cross Insurance Edgewood Partners Insurance Center Edgewood Partners Insurance Center Engle Martin Higginbotham & Associates, Inc. Higginbotham & Associates, Inc. Hilb Group LLC Hub International Limited Hub International Limited Hub International Limited Hub International Limited Hub International Limited Insureon INSURICA Insurance Management Network Johnson & Johnson, Inc. Kohlberg Kravis Roberts & Co. L.P. Leavitt Group Lucien Wright Insurance Agency Marketscout Corporation Marsh & McLennan Companies, Inc. Marsh & McLennan Companies, Inc. Marsh & McLennan Companies, Inc. McQueary Henry Bowles Troy LLP North Point Group, Inc. North Point Group, Inc. NSM Insurance Group, Inc. NSM Insurance Group, Inc. OceanPoint Financial Partners, MHC PSA Holdings, Inc Risk Strategies Company, LLC Ryan Specialty Group, LLC Stratton Agency The McGowan Companies The McGowan Companies The Segal Group Undisclosed buyer USI Holdings Corporation USI Holdings Corporation USI Holdings Corporation Willis Group Holdings Limited World Insurance Associates, LLC
CIMA Companies Inc. Stonebridge Underwriters, Inc. Sagewell Partners, Inc. Celestite Holdings, Inc. Charles A. Walker Corporation Shuffain Insurance Agency, LLC Benefit Development Group, Inc. Insurance & Actuarial Consultants, LLC Kent, Kent & Tingle Tudor Risk Services, LLC L&R Benefits, LLC Spataro Insurance Agency, Inc. Leonard Insurance Services Agency, Inc. Commercial Insurance Services, Inc. Insurance Back Office, Inc. AirSure Limited LLC Anna Berman Agency, LLC Creech & Stafford Insurance Agency, Inc. Bateman Agency, Inc. Spencer Lloyd and service team Woodbury & Co. Insure America LLC First Guard Insurance Co. Pennsylvania branch of Connecticut Underwriters Agents Insurance Markets Inc. Rick Gombar Insurance Services, Inc. HealthCare Risk Specialists, LLC Western Summit, Inc. Centric Insurance Agency Clearview National Partners, L.L.C. Crop Insurance Business 1-Stop Financial Service Centers of America, LLC Ida Tunnell Insurance Sciarratta & Doucette Insurance Agency Power Group Company LLC The Insurance Exchange, Inc. Driscoll Agency, Inc. The McCart Group Certain assets of Altus Specialty Group Totura & Co. Talon Insurance Agency Ltd Edgmon Insurance Agency Hockman Insurance Agency, Inc. Sirles Insurance Group, Inc. Baldrica & Company, Inc. Tammariello Group, LLC Corporate Benefit Consultants, Inc. First National Administrators, Inc. Insurance Noodle Joe West Company H.T. Bailey Insurance Group Majority Stake in Sedgwick Claims Management Services Inc. Mountain West Benefits Paul Lowe Agency Bowling Center Barney & Barney LLC Great Lakes Employee Benefit Services, Inc. Bond Network, Inc. Mims & Smith Insurance Associates Dillon Insurance Services, Inc. Taylor Turner & Hartsfield LLC American Collectors Insurance, Inc. Professional Underwriters Agency, Inc. Raymond Insurance Agency, Inc. Risk Management Councill, Inc. DataRisk LLC Blais Excess & Surplus Agency of Texas, Ltd. PizzaSurance division of Willis Insurance Services Klein Insurance Services, Inc. Breeds Hill Insurance Agency, Inc. Portion of the business of Moroni Fantin Customer accounts and fixed assets Quintessential Advisors, Ltd. Oscar & Associates Travers, Oâ€™keefe & Associates, Inc. Employee benefits consulting division of Capital Strategies Group Fritz Insurance Agency, Inc.
Sources: SNL Financial, Insurance Journal, other publicly available sources and MarshBerry proprietary databases Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. 26 | INSURANCE JOURNAL-NATIONAL April 21, 2014
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By Andrea Wells
here’s a saying in the cybersecurity industry that there are two types of businesses today: Those that have been breached and know it and those that have been breached and just don’t know it. Cyber-related data breach incidents increased in frequency and severity in 2013, driving cyber insurance buying by double digits last year. The trend is accelerating, according to early signs in 2014 and a Marsh Risk Management Research briefing titled, “Benchmarking Trends: Interest in Cyber Insurance Continues to Climb.” In today’s cyber world everybody has been breached, says Rick Betterley, president of Betterley Risk Consultants Inc. based in Sterling, Mass. In reality, it’s more like continual breaches. “There’s folks that are phishing around in your network right now,” he says. The future of cyber insurance will move beyond data breaches and privacy concerns. In effect, experts say, the future of cyber coverage will mean going back to basics. “The U.S. cyber insurance market is being predicated on concept of data breach,” says Graeme Newman, director at CFC Underwriting. “People stopped talking about cyber as a concept and started talking about data breach and data breach response and privacy liability — the market became very fixated on that.” What’s beginning to take shape today and what some experts believe will evolve into the cyber market of the future is cyber coverage that goes back to original product concepts. “What we are seeing now is an expansion back to where we started with cyber in the late ‘90s when cyber was much more of a first-party, system damaged, system interrupted product that also picked up some liabilities,” Newman says. Betterley agrees. “From a product development standpoint, breach is getting ho-hum. We are going well beyond good ‘ol breach,” Betterley says. While cyber coverage for data breach is very important, and there will continue to be a lot of data breach claims, in his opinion, the product has matured.
Consider how the industry went from focusing on the data breach to the response to that data breach. In 2000, when Betterley, author and publisher of The Betterley Report, a publication devoted to specialty insurance products for commercial insureds, began writing about cyber issues, the concept of breach response coverage was vague. By 2005, The Betterley Report mentioned data breach response coverage only as a “side coverage or add-on coverage.” Today, cyber is “all about breach response,” he says. Breach response will begin to take a back seat, in Betterley’s view. The cyber insurance “pendulum is swinging back to non-response, first-party coverages — such as loss of data, corruption of data and especially business interruption.” “So far, the real cost has been on the first-party side,” according to E. Stuart Powell Jr., vice president of insurance operations and technical affairs for the Independent Insurance Agents of North Carolina. But those costs have come from data breach response costs — credit monitoring, forensics, notification costs, crisis management, among others. In the next five years, the cyber insurance market will move away from data security and privacy issues — which is what everybody talks about right now — to a more all-encompassing cyber product for intangible assets and system availability, Newman says. Newman is already seeing the expanded coverage idea take hold in some companies. “We are seeing companies now understanding that they currently insure their physical assets of the business,” such as plants and machinery, he says. While insurance coverage for those tangible assets is in place, the costs of those assets — the physical equipment — has come down dramatically. “But the value of the data — the intangibles assets of the business — has grown exponentially, and yet they can still buy cover for the physical assets and not the intangibles,” he says. continued on page 30 April 21, 2014 INSURANCE JOURNAL-NATIONAL | 29
continued from page 29
a connection with a heating and air contrac Newman anticipates a mind-shift in tor, OneBeacon’s Wurzler says. Most comthe insurance industry and in the way mercial and new HVAC systems have extercommercial insureds view cyber coverage nal monitoring going through the internet in five years. He expects cyber insurance to enable adjusting the settings remotely. to become the direct mirror to a property That’s one of the drawbacks to the “interpolicy. net of things” for underwriters. “So right now businesses buy a property “We are currently concerned with the policy in case they have physical damage; ‘internet of things’ where every electronic cyber will become the mirror image of that, device is connected to — and managed which will cover all things — the intangithrough — the internet and can be used ble loss — any non-physical damage giving to infiltrate larger sysrise to financial loss,” he tems,” says Lloyd Takata, says. “I think the policy, ‘I think the policy, senior vice president of which in the U.S. marwhich in the U.S. marOneBeacon Technology ket has become privacy ket has become privacy Insurance. focused, will expand Even restaurants can back out to become focused, will expand be a risk. “There have much more about back out to become also been exploits where first-party elements hackers introduced and that’s going to start much more about first-party elements.’ malware into the online driving people’s buying menus of restaurants behavior.” popular for takeout lunch, so when the That move back to the beginning where menus were downloaded by local corporate cyber coverage focused more on first-party employees, the hackers were able to gain elements is already happening, according access to their company’s network,” Takata to John Wurzler, president of OneBeacon says. Technology Insurance. While it’s bad enough that cyber attacks “Outside of the United States, the rest cause loss of economic value and physical of the world has a less litigious legal cliproperty, underwriters must also worry mate and the emphasis of cyber coverage about attacks that could bring about bodily has been the first-party elements,” he says. injuries as well. “Even within the U.S., the recent innova “We are also concerned that there is a tions in cyber coverage have been on the serious potential for real, not virtual, harm first-party side as companies recognize that if hackers can get into programs supporting remediation expenses and loss of business healthcare devices,” Wurzler says. “Consider due to cyber incidents can have a large devices that monitor certain functions financial impact on their organization.” through an internet connection and automatically dispense medication or adjust Interconnected Dangers body levels of a certain chemical. If these Underwriters predicting the exposures are hacked and disrupted, that person’s for the next 10 years have much to consider. health could be at risk.” “When we talk about how the internet The bottom line is that there are new and things are developing and in 10 years’ exploits every day. time, we will undoubtedly have everything As cyber coverage continues to evolve, from driverless cars to refrigerators and one coverage area — or loss of coverage — ovens that will be internet connected,” that will become increasingly important to Newman says. As a result hackers will have corporations involves the war exclusion and lots of new crime targets. cyber war, according to Betterley. As an example, in the recent Target “If you think about insurance and you breach, hackers were able to get into the think about war exclusions, and cyber war, corporation’s point of sale software through 30 | INSURANCE JOURNAL-NATIONAL April 21, 2014
you think insurance policies that exclude war-type activities,” he says. Some of the cyber exposures where there have been losses are believed to be war-like acts by other countries. “At what point is the cyber insurance industry going to say that even though we can’t identify who the attacker is, it is believed to be under the sponsorship of a hostile nation and therefore we will deem it a war-like act and we will exclude it,” Betterley says. Right now, if an insured has one of those losses “you can’t really prove that it’s war; therefore you can’t deny the claims,” he says. “Some of us have concerns that the industry is not going to be able to tolerate that level of risk and is going to need to find a way to exclude it.” In Betterley’s view, that exposure presents an opportunity for an insurance product that will buy back that risk, similar to terrorism insurance. While the concept may
seem “out there,” the exposure is real, he says. “There are attacks that are done by ‘bad actors’ www.insurancejournal.com
in China that appear to be closely aligned to the Chinese government,” he says. While it’s almost impossible to prove, he says, it’s almost certain that other countries are sponsoring cyber attacks on U.S. companies. Those cyber attacks are not about stealing credit card information. “Those attacks are more about breach on how you are designing your latest advanced machine tool, or military device, on and on. At some point you have to wonder how the insurance industry is going to respond because the industry is not in the business of protecting against war-like acts.” Tip of the Iceberg The opportunities for the future cyber insurance market are plentiful, the experts say. “If you wanted to use privacy as the tip of the iceberg, then 75 percent of the rest of the iceberg has gone unexamined, at least by the insurance community,” says Bob Parisi, Network Security and Privacy Practice leader for Marsh. The significant increase in interest for cyber coverage, as well as new business that was initiated during the third quarter of 2013 as a result of high profile cyber events, has continued www.insurancejournal.com
Newman says. “Whether you are a small and even accelerated so far in 2014, accordretailer on a corner shop or a huge global ing to a recent Marsh report (see page 32). retailer it is irrelevant, you are as exposed, “The exposure that companies have you are a target for cyber criminals. because of their reliance upon technolo While the cyber insurance industry has gy — whether it’s point of sale devices, seen a huge influx of buyers since the Target inventory, or even just something as small breach, Newman predicts that within the as email — there’s no company that doesn’t next five to 10 years cyber coverage will be have that technology-related risk as part of the norm in all industries. their operations,” Parisi says. Businesses that “Cyber as a product will be as maindon’t hold privacy risk haven’t been looking stream as buying a property or commercial at cyber exposures as aggressively as other general liability policy,” Newman predicts. industry sectors, until now. “It will be seen as a core pillar of anybody’s The technology used by various indusinsurance program whereas now it’s seen as tries and how that affects cyber risk will be a niche product or an ancillary product.” a focus for the next few years, Parisi says. Newman believes fewer than 15 percent “What you are going to see — and the to 20 percent of businesses purchase cyber market has started to respond and provide coverage today. “But my guess is that persome solutions — is the industry looking centage will move to 70 percent to 80 perat what happens when technology doesn’t cent in five to 10 years’ time.” work, when data is corrupted, what hap What happens in the future is anyone’s pens when the supply chain or manufacguess, and predicting can be a dangerous turing process because of a technical failure game, says Powell. or because the vendor that a business relies But based on his decades of insurance on — whether it’s a technology provider industry experience, Powell believes the or cloud provider or some other vendor — future of cyber insurance might follow the isn’t there when needed and they provide path of other insurance products. some aspect of the corporate infrastruc“I remember 20 years ture?” he asks. ago now when employ When businesses and ‘We are also concerned ment practices liability the insurance industry that there is a serious was first coming on to begin examining that potential for real, not the scene and it was type of risk, then a all surplus lines market much broader spectrum virtual, harm.’ business,” Powell says. of industries will start Coverage was very expensive, with high to embrace cyber coverage, Parisi says. deductibles. EPLI forms differed tremen “Financial institutions, retail, healthcare, dously and policy applications were complihigher education, all of those industries are cated. “Within 20 years employment pracvery much attune to privacy-related risks. tices has evolved to be included into most But when you start to talk about technology standard package policies,” he says. as the driver behind risk, you start to real Powell believes that it’s reasonable to ize and look at manufacturing, life sciences, assume that cyber insurance will follow a pharmaceutical firms — every other indussimilar track. try in addition to those that are concerned “Right now the problem with cyber is we about privacy.” don’t have a lot of experience; it’s a little bit People have always thought about online risky to price because you don’t have historsales as being the driver for cyber but that ical data,” Powell says. In a few more years psychology is changing now, according to that will change. “Once experience develops Newman. and pricing becomes more precise, I think The Target breach, as an example, had you’ll see it become a more standard covernothing to do with online sales. “It was age issued by standard markets.” their traditional point of sale software,” April 21, 2014 INSURANCE JOURNAL-NATIONAL | 31
Cyber Risks Cyber Coverage Demand Increased Significantly in 2013, Trend to Continue in 2014: Marsh By Amy O’Connor
emand for cyber insurance rose by 21 percent across all industries in 2013 compared to 2012, and early indications in 2014 are that the buying trend is accelerating, according to a Marsh Risk Management Research report. Marsh found that financial institutions saw the biggest increase of 29 percent in coverage buying, followed by retail/wholesale with an increase of 19 percent. Other industries that saw increases included education (14 percent); professional services (13 percent); communications, media and technology (11 percent) and healthcare (11 percent). Industries that represent emerging sectors buying cyber coverage — manufacturing, power and utilities, and hospitality — showed a combined increase of 37 percent. The report, “Benchmarking Trends: Interest in Cyber Insurance Continues to Climb,” is a compilation of Marsh’s own customer data specific to cyber coverage. “What you are seeing is a continued awareness of cyber risks as well as a maturation or evolution of the product itself,” says Bob Parisi, Network Security and Privacy Practice leader for Marsh. “There have been several events that have occurred over the last few years that have continued to push demand for the coverage.” The amount of limits purchased by individual companies also increased in 2013. More companies purchased cyber coverage with $100 million limits or more. The average limits purchased by companies with revenues more than $1 billion rose by 10 percent in 2013, with financial institutions purchasing the highest limits of $53.2 million — a 9 percent increase from 2012. Parisi says the request for higher limits is a realization by all indus-
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tries of their reliance on technology and the “totality” of their risks. “Companies are looking beyond just privacy and at how technology or the failure of technology would impact their business. They are looking for more business expense or business interruption coverage and buying a broader bucket of coverage,” says Parisi. Clients are also moved to purchase coverage by the value-added services that come with most cyber policies now, particularly among the small- to mid-market segment that doesn’t have a sophisticated cyber risk or crisis management plan, says Parisi. The Marsh report noted that cyber policies are much broader now than several years ago, and in addition to pre-and postloss services, many policies now cover third party losses and business interruption. Parisi says competition has influenced
this buying trend, as it has also kept pricing for the coverage down. Renewal rates remained stable in 2013, according to the report, and average increases were typically small — ranging between 2 and 3 percent compared to 2012. The significant increase in interest for coverage, as well as new business that was initiated during the third quarter of 2013 as a result of high profile cyber events, has continued and even accelerated so far in 2014, noted the Marsh report. Parisi says he expects demand and the uptick in coverage buying to continue throughout 2014. However, Parisi acknowledges full market penetration of cyber coverage is still a way off. When that does occur, it will be because the coverage will have evolved to more specifically address different industry exposures, he believes. “I think what we are going to see is cyber becoming less of a discretionary purchase and more of a structural or elemental part of a client’s risk transfer approach,” says Parisi. www.insurancejournal.com
Growing Your Property Casualty Agency 12 Survival Suggestions for Today’s Independent Agent
o survive, think backwards. Consider what you shouldn’t do before contemplating what you should, as avoiding negative acts improves your agency’s health. Don’t just promote from within. As important as it is to have a career path for your staff, don’t overlook the value of hiring from the outside. Fresh blood generates fresh ideas and energy, particularly in sales positions. By Alan Shulman Don’t forego all small accounts. Seemingly tiny accounts may be allied to larger businesses. Some are divisions, subsidiaries, or even experimental operations, while others may be new businesses financed by venture capitalists. Don’t be dismissive of new local rivals. The barriers of entry to the agency business are minimal. Direct company representation isn’t required to place business and new digital-only operations appeal to certain demographic groups. Don’t make your lead carrier your brand. Your agency is more than a shop
window for your primary insurance company. Build an identity that’s uniquely your own to entice and retain business. Furthermore, be cautious about delegating brand-building to outsiders or low-level employees. This integral element of marketing requires more than just your approval — it requires serious input from agency management.
Don’t overlook the importance of a strong digital presence. Apps for smartphones and tablets offer agencies and their insureds an easy-to-use, specialized feature set. As such, they are desirable additions to your digital arsenal. Don’t rely solely on digital interaction. Be respectful of how people want to do business. Some prefer everything to be online, others merely like email, and still others thrive on the classics: physical correspondence, phone calls, and face-to-face contact.
Don’t complain about your carriers too often. Disintermediation is no longer just a big word; it’s likely discussed in every carrier’s boardroom. Company people are as Build an identity human as you are, so if you that’s uniquely your Don’t avoid hiring don’t like them, odds are producers. own to entice and younger they won’t like you back. People mainly want to do retain business. And it can be costly to business with others their your operation. own age, so add agents to align with each insurance-buying generaDon’t overlook the value of personal tion. It adds longevity to your agency and to relationships. Many top producers favor the industry. actual relationships to digital touches. Human contact is how they sell and it’s Don’t abandon humor to your rivals. their “secret” to retaining accounts in this Humor and insurance were once non-sedigital age. Virtual contact is valuable as quiturs. It’s no longer the case with the well. What kind and how much of it to largest personal lines companies employing employ depends on the individual buyers it in their national advertising. Show your and sellers involved — not just what’s curagency’s personality and display your sense rently in fashion. of humor. Don’t overwork yourself. Burnout is real. Take some time off from the all-encompassing world of insurance and recharge. It’s worth it. Do something sales-positive every day. Do something sales-positive every day. Promote the value of doing business with your agency at least once a day (and random social media posts don’t count). 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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MyNewMarkets Florida Agriculture Bond Market Detail: Smith Insurance & Bonds’ (www.flsuretybonds. com) offers coverage to meet the agricultural products dealer bond required in the state of Florida by the Florida Department of Agriculture & Consumer Services. Any person or company that is a dealer of agricultural products is required to obtain a license from the Commissioner of Agriculture as well as produce a bond in the amount specified by the Commissioner. This surety bond guarantees that the applicant (principal) will faithfully and truly account for and make payment to producers, their agents or representatives, and/or other licensed agricultural dealers, for all agricultural products purchased or handled. Available limits: As needed Carrier: Unable to disclose, admitted States: Fla. only Contact: Customer service at 866-976-2185
Human Clinical Trials Market Detail: James River Insurance Co. (www.jamesriverins. com) offers coverage for all phases I-IV, medical device testing, and drug trials. Available coverages include: products Liability, general liability and professional liability; $5 million primary limits available; unsupported excess available; claims made & reported; prior acts available; and vendor’s coverage. Premium’s starting at $5,000. Target risks include: small to medium, average premium $20,000; policy deductibles of $2,500 on some classes. Available limits: As needed Carriers: James River States: All states Contact: Customer service at 804-289-2700
Public Transportation Market Detail: Bolton & Co. (www.bolton mga.com) offers primary liability, non-trucking liability, physical damage and cargo coverages through A or A+ rated carriers. Available limits: As needed Carrier: Unable to disclose States: Ill., Ind., Ky., Ohio, and Tenn. Contact: Customer service at 502-583-8361
Vacant Property Market Detail: Innovative Risk Solutions (www.irs-incorporated.com) offers property and GL coverage for vacant residential and commercial properties. Large schedules welcome. Available limits: Maximum $100 million Carrier: Lloyd’s of London States: All states except Alaska, Hawaii and Mich. www.insurancejournal.com
Contact: John Watt at 954-931-4795 or e-mail: email@example.com
Skincare Franchise Insurance Program Market Detail: Marine Agency Corp. (marineagency.com) offers property, general liability, professional liability,coverage for massage and skincare franchise locations. Available Limits: As needed Carriers: Zurich States: All states Contact: Customer service at 800-763-4775
New Public Entity Program Midlands is now the primary access point for Markel’s Excess Casualty Package for individual public entity risks that prefer to self-insure their exposures. Target Classes
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3/27/14 10:06 AM
April 21, 2014 INSURANCE JOURNAL-NATIONAL | 35
Entertainment & Special Events 5 Vital Elements Agents Should Review to Ensure Safer Live Events
afety should be the top priority for every live event producer as well as for the agents who write policies for their production clients. This includes safety for guests, for workers, and for all of the temporary structures and equipment that make the event possible. After working with the Event Safety Alliance By Scott Carroll over the past year, itâ€™s become clear that there are some relatively simple steps that agents can review with their event production clients to both help ensure a safer live event and ensure that clients have the right coverage in place. The biggest mistake an agent and event producer can make is to not ask enough 36 | INSURANCE JOURNAL-NATIONAL April 21, 2014
questions. Gathering information from every vendor and company involved in the event helps identify issues, while ensuring that everyone operates safely and has an insurance policy of their own. Verify Insurance Coverage The first step an agent can take is to verify that all vendors involved in the event have insurance policies with contractual capabilities to make anyone an additional insured to their policy. Each vendor should be able to produce proof of insurance, and asking a few simple questions about their coverage can highlight potential coverage gaps or inadequacies. Venues One of the major factors in recent live
event accidents has been the venue itself. From the weather and the size of the crowd to the stages and rigging for lights and electronics, the more you know, the better able you will be to make judgments about safety. For indoor venues, request tech packets that detail the building and its safety protocols. For outdoor events, be sure you understand the terrain and consider how the stage and rigging will be secured, and use on-site weather monitoring tools to stay ahead of any potential storms. There are powerful apps for smartphones and tablets that can show wind speed, direction, and approaching rain, but for larger, more sophisticated shows and venues, actual on-site weather monitoring personnel may be best. www.insurancejournal.com
Behind the Scenes It’s just as important to know the people behind the scenes as knowing the venue itself. Agents need to identify the stakeholders behind the vendors and the venue. Who has the authority to stop the show should equipment fail or inclement weather becomes a safety issue? Find this person and meet with them to determine a decision timeline and then make sure it is fully understood by everyone involved. The last thing you and your client need when a safe event becomes unsafe is confusion regarding who makes the call to end the event, what circumstances are required to end the event, and what procedures will be followed. These questions are easy to overlook but the answers are critically important for developing a thorough safety plan and protecting your client’s interests and liabilities.
event can help to identify and ultimately eliminate potential disasters before they have a chance to happen. All parties involved in a live event want it to go smoothly, and doing your due diligence as an agent beforehand can help to
put your clients’ minds at ease. Carroll is executive vice president and program director at Take1 Insurance, a division of U.S. Risk Insurance Group Inc., one of the nation’s largest managing general agents and wholesale brokers.
Vendors What about the most customer-facing vendors such as concessions, security and parking companies? These types of vendors typically have the most exposure to incidents because they touch virtually every spectator and show personnel, and choosing the right vendor can be the difference between smooth sailing and a huge headache. These vendors should always be chosen based on which company has a safe and successful track record, not whichever company offers the cheapest bid. Emergency Plans Finally, use all the information you’ve gathered and urge your client to create their own plan for emergency situations. Ask yourself “what if” questions and figure out the best way to address the potential issues. What if the wind suddenly picks up above 30 miles per hour? What if there is an active shooter on the scene? What if the rigging vendor can’t supply evidence of insurance? What if a food vendor has a fire? Answering these questions and any others that may affect the safety of your client’s www.insurancejournal.com
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April 21, 2014 INSURANCE JOURNAL-NATIONAL | 37
Entertainment & Special Events The Specialized Risks of Special Events
s the days of spring get longer and the weather warms into summer, communities and towns across the country will come out of hibernation and celebrate — with fairs, festivals and open air festivities. Memorial Day, Independence Day and outdoor weddings; there are plenty of reasons to celebrate. As communities come together for these events public entities — your specialized By Bradley York clients — must be on guard to avoid and mitigate the unique risks of special events pose. As a knowledgeable agent or broker in the public sector, you may be thinking that this does not apply to your clients; the insurance program you’ve placed is comprehensive and can sustain the inevitable highs and lows of the market and any claims related to an event. While this may be true, and most policies include coverage for events held on the public entity’s premises, what actually happens when a claim, especially a serious one such as a severe injury or death, occurs? The unfortunate truth is that your public entity client may feel the effects of that claim, through pricing, adverse experience and many other important factors, for years to come. While even the best agent or broker cannot prevent claims, there are ways to help protect your clients when it comes to short-term exposures such as special events. To help solidify your partnership, obtain a thorough and deep understanding of the exposures your clients face, and the possible coverage options available. Understanding the Risks There are many types of special events that may take place in the communities your clients serve. From public events such as music festivals, parades and state fairs to private or for-profit events such as weddings and concerts, there are some common overarching liabilities and risks your clients 38 | INSURANCE JOURNAL-NATIONAL April 21, 2014
must consider. Facilities. Although each type of event has very different and specific facility needs (e.g., a concert requires a stage while a parade requires street closures), there are a few shared requirements for all. For instance, your client is most likely always considering parking at the facility or event, as well as the influx of traffic in the community or surrounding area. Similarly, public entities will need to consider equipment brought onsite by the event sponsor, as well as whether a separation between the event and event attendees is required for safety (such as a fence or security line). People. No matter the event, public entities are concerned about the safety and protection of attendees, performers and any other participants. Even if the event facility is being leased by a third-party, risk managers should still be concerned with ensuring that the event attendee total falls within the safety capacity of the facility, that bathrooms are accessible and available at the event and that crowd control, emergency services or security services are available for use, if necessary. Contracts. Every special event held within a city or town should require a contract. Be it with vendors supplying services or with a third-party sponsoring an event, public entities must pay very close attention to the contracts it enters and creates. In the past, these contracts were “easy,” only one or two pages, but today, contracts have become lengthy and convoluted, with easily missed clauses and addendums. One of the most important ways an agent or broker can help their public entity clients is to offer to review such event contracts as well, to ensure the appropriate insurance needs are met. Some important items these contracts should contain include: • Clear details about the event including date, time, location and the nature of the event, promotion or performance including duration; • Rights regarding photographs, reproduc-
tions, recordings and merchandise; • Specifics around terms of payment, permits and who is providing services such as lighting, sound etc.; and • Terms of cancellation, a clear outline of insurance and security, and post-event expectations. Finding Solutions Depending upon what coverages and exposures are included in the general insurance program you have placed for your client, their current program may or may not already provide coverage for events. However, when it comes to a short-term exposure such as a special event, agents may want to consider, or advise clients to consider, a Tenant Users Liability Insurance Policy, or TULIP. TULIP is an insurance policy designed to provide low-cost, short-term general liability insurance for tenant users of venues or facilities. It is intended to protect both the user and the facility against claims by guests and attendees who may be injured as a result of attending an event. The cost of the policy could be as low as $100 to upwards of $1,000 or more with industry capacity up to $5 million. Transferring Risk You understand the risks your clients take when special events are held. All the considerations listed in this article and more weigh heavily on your public clients as well as the comprehensive insurance program you provided. Separating the placement of coverage for www.insurancejournal.com
a special event can help corral these exposures that may not otherwise be contemplated or intended under the overall policy. A TULIP policy is a quick and cost-effective strategy to prevent pressure on an insurance program, allowing you to focus on core operations and exposures and perhaps making subsequent renewals less challenging. Furthermore, the costs of a TULIP policy may be shifted to the end user or event sponsor and is a viable strategy to transfer risk and protect your client’s experience as well as providing protection to the end user. For example, if a family would like
IPHONE16649.indd 1 www.insurancejournal.com
to hold a wedding ceremony in a beloved community park, an entity can require the happy couple to purchase a TULIP policy — thereby providing protection for the couple, and the entity, should something occur during the ceremony that injures a guest. Claims Example Let’s consider a real-life claim scenario: Every Fourth of July, a city enlists a local vendor for the purchase and exhibition of a fireworks show for the holiday. No formal contract is created, because the partnership is tradition and has been in place for many years, and as such, each party relies upon their own insurance. After the big display, and during the clean-up and recovery process, an errant firework explodes, causing significant bodily harm to several innocent bystanders walking nearby. When the claim was filed, numerous insurance carriers lined up to
protect their named insureds. All participated in the claim, thus placing unintended pressure on the city’s insurance program. If the city had obtained a TULIP policy, its exposure may have been significantly lessened, and at a nominal cost. Securing a TULIP policy is far simpler and far superior to administering an owner controlled insurance program (OCP) or the inherent pitfalls of tracking down additional insured endorsements or certificates of insurance. Although an entity may be covered through their core program, why risk the negative effects, should a claim arise, when another low-cost strategy is available? By advocating the use and implantation of TULIP policies for your clients, you can provide valuable insight and protection for the communities your clients serve. York is with OneBeacon Government Risks.
3/31/14 1:07 PM April 21, 2014 INSURANCE JOURNAL-NATIONAL | 39
Minding Your Business Use Social Media to Improve Sales
oday’s generation is all about social networking. Social networking has become the most popular way to network and promote business. And in the current “tech savvy” environment it’s becoming increasingly apparent social media is here to stay, so it’s important to get on track with successful and smart self-marketing. By Catherine Oak &
Have a Corporate Facebook Page Facebook is the leading social media website with over 900 million monthly active users. Many users consider Facebook their “modern newspaper.” Hot Rachel Schoeffler topics and updates are constantly refreshed on to the timeline. High performer businesses create Facebook pages where prospective clients can “like” their page IJ andSpecial receiveEvent all ofadtheir updates. quarter pg.pdf Facebook pages can teach businesses about
the firm’s target audience, and provide a way to talk and get direct feedback from them. It’s similar to ongoing focus groups, because the firm’s fans are aware of the company and want to learn more. A company’s Facebook page is also useful to collect feedback from customers. An estimated 82 percent of small businesses use Facebook as a marketing tool to collect information for their own business and monitor their competitors. Social connections and genuine communication are essential parts of social media sites. It gives people the unique opportunity to give their business a personality. Some interesting facts about the firm can be displayed, such as their fundraising efforts, their employees’ accomplishments and their unique products. Facebook’s motto is to bring people together and with this website people can make connections with people worldwide in a matter of seconds. Salespeople can build their own community through Facebook and prospective 4/4/14 with 11:32customers AM cliental. Once the community is developed,
Self Serve 24/7
Don’t Disappoint the Bride on Her Wedding Day Special event policy after normal business hours? No problem. With A&M Self Serve, you can rate, quote, bind and issue a policy while you are on the phone. Email the certificate to the venue staff and wish your customer congratulations. Simple to use. 24/7 access. All within your fingertips plus a 15% commission. For any A&M Self Serve questions, please contact Louie Martinez at (323) 255-2333 ext 243 or email@example.com for answers.
California License #0323106 www.andersonmurison.com ANDERS16750.indd 1
40 | INSURANCE JOURNAL-NATIONAL April 21, 2014
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current clients and prospects become the loyal following. This can continue to grow and expand to an even larger population. Another plus to creating a Facebook page is it will direct traffic to the firm’s website. The more active the firm’s employees and customers are on Facebook, the more popular the site becomes when someone is searching for a business competitor. A Facebook page can also provide training for prospects and clients through the use of videos. Some agencies have developed videos on how to reduce risk exposures for different types of firms. With this information a prospective client can reduce claims, which could lead to lower premiums. Facebook is also great for hiring. Prospective employees can get a personal feel for the firm by viewing posted photos of the many things that the firm does for its employees and the community. Twitter Is Fun and Effective Twitter has become the second leading social media website with over 645 million monthly users. Although it may look confusing at first, it becomes very simple once a person understands the concept. Twitter says: “Every day, millions of people use Twitter to create, discover and share ideas with others. Now, people are turning to Twitter as an effective way to reach out to businesses, too. From local stores to big brands, and from brick-andmortar to internet-based or service sector, www.insurancejournal.com
people are finding great value in the connections.” The main reason businesses use Twitter is to connect with customers. If there is an unsatisfied customer or even if they have a question, the firm can connect and hear them out on Twitter. Twitter is similar to Facebook in being able to get feedback from clients, but it is a more personal interaction, where there can be that one-on-one connection. Twitter allows for short and sweet updates that are 140 characters. However, if a company wants to promote a recent article or a link to a website, Twitter makes that easy. If a firm succeeds at gaining some popularity on Twitter, they can become viral very fast. The more interesting a firm’s tweets are, the more interactions one gets. Becoming viral will help expand awareness of the business, especially if the firm is currently small. Giving the business a personality can be very important to the brand, and gives prospects a reason to follow the business. Another major aspect of Twitter is “spy-
Summary Social media marketing is unique in the way it brings consumers, media and the business world together. Consumers have the ability to instantly interact, comment, or even alter or create content about your business. Use LinkedIn Social media marketing Social media, as a mar LinkedIn is the keting tool, has leveled is unique in the way business version of the playing field. Small it brings consumers, Facebook. Most often, businesses can compete media, and the busibrokers use LinkedIn with large organizato research a protions with a substantial ness world together. spective firm’s owner marketing budget to before meeting with them. LinkedIn is a reach the consumer. Once one discovers the great business tool for showing someone’s best ways to interact with customers and background, experience and possibly some visitors through social media, and build a good information and attributes of the firm personal and professional “friend” network, they work for. This gives the salesperson the business can successfully market its a leg-up in understanding the person they products and services, generate buzz and will be calling on. Many agency owners consumer interest, build brand awareness, and producers also put a note at the end and connect one-on-one with customers. of their emails to join them on LinkedIn. Some professionals get endorsements from Oak & Associates is an international financial and others on LinkedIn, which looks very good business consulting firm for independent insurance to prospective customers and employees. agencies and wholesalers across the United States, LinkedIn also is the key resource used by Canada, Australia and New Zealand. Phone: 707recruiters to search for prospects to hire. 935-6565. Website: www.oakandassociates.com ing.” Simply searching the competition on Twitter can really give the company a legup. Example, customers can complain about an aspect of the competitor’s service or business model and this information can be applied to one’s own business.
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April 21, 2014 INSURANCE JOURNAL-NATIONAL | 41
Why Governors Are Concerned Over FIO Report
n behalf of the National Governors Association, Alabama Gov. Robert Bentley and West Virginia Gov. Earl Ray Tomblin on March 28 wrote Treasury secretary Jacob Lew about Treasuryâ€™s Federal Insurance Office (FIO) report last December on how to modernize the U.S. insurance regulation system. The following is an abridged version of the governorsâ€™ letter expressing their concerns over the report. Governors believe that states must maintain their long-standing authority as the functional regulators of the business of insurance. Governors are concerned by the FIO reportâ€™s suggestion of a greater federal role that could invite a dual regulatory system. It is our position that federal laws and regulations must not preempt or undermine the strong state-based insurance regulatory system that for more than 140 years has protected consumers and safeguarded the capital adequacy and solvency of insurers. Our state-based regulatory system is world-class. States have developed deep regulatory expertise over the business of insurance, and state regulation subjects insurance companies that operate domestically to stringent solvency and capital requirements, limits on the nature and extent of investments, and quarterly analyses and periodic examinations. Moreover, states 42 | INSURANCE JOURNAL-NATIONAL April 21, 2014
have sought to improve speed to market for insurance products. Existing state consumer protection, antitrust, and unfair trade practice laws also provide necessary tools to help protect consumers and prevent anti-competitive conduct within the business of insurance. Unfortunately, there are some who argue that state regulation of financial services, and insurance in particular, chills competition, creates a drag on this sector, and hampers the overall economy. These arguments do not stand up to the facts. The insurance sector, including its regulation, is a significant generator of high-skilled, well-paying jobs in the states. In 2012, state insurance departments employed 11,532 professionals who fielded 2.3 million consumer inquiries and handled 271,000 consumer complaints. In 2012, seven million individuals and entities were licensed to provide insurance services in the United States. Those professionals were responsible for helping generate more than $1.8 trillion in premium volume resulting in $19.5 billion in state revenues. In addition, despite recent years of economic headwinds, the business of insurance remained profitable and competitive in a functional regulatory environment, non-domestic firms continued to enter the U.S. market, and we saw the expansion of innovative products and services. Recent global economic conditions and systemic risk concerns have elevated international attention to financial services regulation and the proposed convergence of solvency and market protection standards. The Financial Stability Board, a G-20 advisory body established to help develop regulatory, supervisory, and other financial sector policies and standards, includes U.S. representation from the Federal Reserve, Treasury and the Securities and Exchange Commission. Governors recommend that the United States seek to expand its FSB participation to include state insurance regulatory expertise. For generations, states have protected consumers of insurance products. We know that insurance is a special product that is essential to protecting not just the U.S. economy, but also the most-cherished personal effects of individual consumers. Governors stand ready Insurance is part of the social to protect state-based fabric and financial safety net insurance regulation. that enables citizens, small businesses, and global corporations to move forward each day with confidence. We recognize the possibility for federal intervention should states fail to act collectively on issues of legitimate concern, but preemption of state regulatory authority must be the exception rather than the rule. Governors stand ready to protect state-based insurance regulation. The diversity of consumers, financial services products and institutions, investors, and local market conditions are currently addressed by state regulators with a proven track record. www.insurancejournal.com
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Published on Apr 16, 2014