Insurance Journal West 2015-01-12

WEST California Commissioner’s 2014 Bills Court Greenlights Injured Snowboarder 2015 Insurance Industry Meetings & Conventions Directory

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WEST On The Cover

Inside This Issue

Special Report:

Labor Woes Continue for Rebounding Construction Market

January 12, 2015 • Vol. 93 No. 1 • West

W1

W4

24

38

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

8

W1 California Insurance

Commissioner Sponsored Bills

Signed into Law in 2014

26 Tech Talk: When It Comes

to Mobile It’s the App that Counts

ACE to Buy Fireman’s Fund Personal Lines; Famous Brand Fading Away

11 Many Hispanic Renters

Overestimate Cost of Insurance

W1 Former California Highway

Patrolman Convicted of Workers’

Comp Fraud

11 Personal Auto Rates Rose 2.1%,

Homeowners 3.5% in 2014:

RateWatch

W4 Oregon Man Pays $1,000 to Settle

5-year-old $57 Ticket

11 Readers’ Choice: Cyber Risk Was

Top P/C News of 2014

W4 Injured Snowboarder Can Sue,

Oregon High Court Rules

29 Fuel Your Agency’s Success

with High-Octane Leads 32 2015 Insurance Industry Meetings

& Conventions Directory 38 Closing Quote: Insurance as a Form

of Capital

12 Private Auto Premiums See

Largest Q3 Growth in 10 Years: SNL 16 Closer Look: Top 10 Casualty

Insurance Trends for 2015 20 Special Report: Labor Woes

Continue for Rebounding

Construction Market 24 Special Report: Construction

Coverage: Emerging Trends

for 2015

DEPARTMENTS 10 10 W2 14 37

Declarations Figures People Business Moves MyNewMarkets

28 Spotlight: Top Trends

in Employment Practices Claims 4 | INSURANCE JOURNAL-WEST January 12, 2015

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NATIONAL COVERAGE

Opening Note Natural Disasters in 2014

A

ll in all, 2014 was not as bad as it could have been for natural disasters in the United States.

Last year closed with fewer tornadoes, a mild hurricane season, lower acreage lost to wildfires, and an overall decline in flood and other damage, according to global property information and analytics firm CoreLogic, which released its annual Natural Hazard Risk Summary and Analysis detailing the most significant natural disasters of 2014 and forecasts for 2015.

Some of the key findings in CoreLogic’s 2014 Natural Hazard Risk Summary and Analysis include: • Just as 2013 experienced a decline in the damage caused by major hazards in the U.S. when compared with 2012, the year 2014 saw a continuation of similarly low overall damage totals.

• The 2014 hurricane season marked the second consecutive year of low tropical storm and hurricane activity in the Atlantic Ocean.

• The amount of damage attributed to flooding in 2014 is approximately $4.2 billion in losses for the year, which is below the long-term historical average of $5.3 billion annually.

• 2014 is on track to have the fewest number of The country will likely see tornadoes recorded in the a more severe hail season past decade with just 720 in 2015. tornadoes verified through August and an additional 128 storm reports filed through November.

• Overall hail fall across the U.S. in 2014 covered the greatest geographical area of any year since at least 2006.

• 2014 has had the lowest amount of acreage lost to wildfire in the past 10 years. The number of fires in 2014 is slightly above the 2013 year-to-date total, but the acreage lost to wildfire was only 85 percent of 2013’s total.

• Across the globe, the year 2014 is trending towards becoming the warmest year on record, with temperatures through the first 10 months of 2014 recorded as the warmest yet.

• CoreLogic said that looking ahead to 2015, if the number or geographical extent of storms producing larger, damaging hail returns to near or above recent norms, the country will likely see a more severe hail season in 2015 and possibly higher insurance claims volume in comparison to 2013 and 2014.

• Early drought forecasts for 2015 indicate the likelihood of a continuation of drought conditions in the west. The accumulation of higher levels of dry fuel mean that the elevated risk for wildfires seen over the past few years will continue.

• The report says that it is possible that the U.S. may still have two to three years of near-average flood-related damage before the next catastrophic loss occurs, based on projections from historic data. The 2015 flood losses could total between $5-6 billion, with flash flooding events continuing to account for a large Andrea Wells Editor-in-Chief percentage of overall annual damage.

6 | INSURANCE JOURNAL-NATIONAL January 12, 2015

Publisher Mark Wells | mwells@wellsmedia.com EDITORIAL Editor-in-Chief Andrea Wells | awells@insurancejournal.com V.P. Content Andrew Simpson | asimpson@insurancejournal.com East Editor Young Ha | yha@insurancejournal.com Southeast Editor Michael Adams | madams@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Senior Editor Susanne Sclafane | ssclafane@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Chris Burand, Tom Wetzel Contributing Writers Mark Hollmer, Jason Kulpa, Spencer Macalaster, Tom McCall, Tony Page, Corey Williams, Jody Wright SALES V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 | jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 | dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@insurancejournal.com Midwest Lauren Knapp (800) 897-9965 x161 | lknapp@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 | hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 | dmolchan@insurancejournal.com New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Ly Nguyen (800) 897-9965 x125 | lnguyen@insurancejournal.com MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 x120 | eburns@insurancejournal.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com DESIGN/WEB V.P. of Design Guy Boccia | gboccia@insurancejournal.com V.P of Technology Joshua Carlson | jcarlson@insurancejournal.com Audience Development Elizabeth Duffy | eduffy@wellsmedia.com Marketing Director Derence Walk | dwalk@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com IJ ACADEMY OF INSURANCE Online Training Coordinator Barbara Whiffen | bwhiffen@ijacademy.com ADMINISTRATION Chief Executive Officer Mitch Dunford Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com

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NATIONAL COVERAGE

News & Markets ACE to Buy Fireman’s Fund Personal Lines; Famous Brand Fading Away

By Mark Hollmer

O

n Dec. 18, Allianz Group announced that it would sell the U.S. personal lines business of its Fireman’s Fund unit to ACE for $365 million by means of renewal rights arrangement.

The merger of the personal lines business with ACE and the planned integration of the Fireman’s Fund commercial business into Allianz Global Corporate & Specialty (AGCS) will mean a brand name that has been in existence for more than 150 years will fade away. The Novato, Calif.-based company was launched in 1863.

Allianz said the sale of the personal lines business, which is focused on high-net-worth customers, allows it to focus on building its commercial P/C business across North America under the Allianz brand, creating a business with combined revenues that are expected to total more than $3 billion, based on gross premiums written in 2013.

A new leadership team for this combined FFIC/AGCS business was announced on Dec. 12, with AGCS board member Art Moossmann becoming CEO and president of both AGCS North America (AGCS NA) and FFIC. Allianz said the FFIC commercial business will be integrated into AGCS NA, with all active product lines moving to AGCS. The company said this promises continuity of service for existing commercial policyholders and agents, while also presenting one brand to customers across all segments of the U.S. P/C market.

AGCS also will seek to build on the FFIC product range globally, targeting opportunities to use FFIC’s knowledge of entertainment and mid-corporate insurance in international markets.

Subject to legal and regulatory approval, Allianz said at the same time that it plans to separate and consolidate the legacy business of FFIC, including legacy asbestos and environment exposures, legacy workers’ compensation, and legacy construction defect liabilities, into a stand-alone company, San 8 | INSURANCE JOURNAL-NATIONAL January 12, 2015

Francisco Re. Such a move requires regulatory approval.

ACE said the Fireman’s Fund business will be integrated into its existing high-net-worth personal lines business, ACE Private Risk Services, which offers coverage for homeowners, automobile, umbrella and excess liability, collectibles, and yachts. In 2013, Fireman’s Fund had $891 million in personal lines gross written premiums and ranked third among insurers serving the U.S. high-net-worth consumer market.

ACE will gain renewal rights for new and existing business, reinsurance of all existing reserves, and access to a network of about 1,100 agents and brokers. The deal is set to close in the second quarter of 2015.

Allianz bought Fireman’s Fund in 1991 for more than $3 billion as it looked to expand in the United States

‘Fireman’s Fund and ACE are both dedicated to strong agency partnerships.’

ACE to Keep Most Staff: Andrade ACE said it will keep most of the employees with Fireman’s Fund’s personal lines business.

“We value Fireman’s Fund talent and culture,” Juan Andrade, an executive vice president and head of ACE Group’s personal lines and small business insurance, told Insurance Journal. “In connection with the transaction, ACE intends to offer employment to

the majority of Fireman’s Fund Personal Insurance employees.”

Andrade said the blending of ACE and Fireman’s Fund businesses will be highly complementary.

“Fireman’s Fund is known for unparalleled service to its clients, and ACE is committed to the same high standards,” Andrade said.

“We expect our combined teams will only improve and sharpen their focus on providing outstanding service to agents and brokers and their clients. Fireman’s Fund and ACE are both dedicated to strong agency partnerships.”

ACE expects that the expanded selling and distribution network will lend itself toward major growth for high-net-worth personal lines underwriting, Andrade said, which is a strategic growth area for the company through its ACE Private Risk Services division.

“We estimate that the vast majority of high-net-worth individuals and families — perhaps more than 80 percent — have policies from standard market carriers, often sold by captive agents or direct writers.

These individuals and families frequently overpay to be underinsured in such situations,” Andrade said. “The few companies that specialize in serving [high-net-worth] clients, as well as the independent agents and brokers that represent them, have a tremendous opportunity to tap this underserved market and achieve strong growth.

Aside from the Fireman’s Fund deal, ACE said it will pursue organic growth down the line. As well, it will also “consider potential strategic acquisitions that complement our business and can provide favorable returns for our shareholders,” Andrade said.

While ACE is getting a big chunk of Fireman’s Fund’s remaining business, it won’t be getting the name. “The future of the Fireman’s Fund brand remains up to Allianz,” which retains the rights, Andrade said.

Hollmer is editor for Carrier Management magazine and CarrierManagement.com. Insurance Journal contributed to this story.

www.insurancejournal.com

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NATIONAL COVERAGE

FIGURES

$3 Million

The settlement amount paid to the family of a California patient who went missing for more than two weeks before being found dead in a stairwell at a San Francisco hospital.

DECLARATIONS

$7 Million The value of property — such as computers and other types of equipment — missing from the state-managed Recovery School District in Louisiana, according to a legislative audit released Dec 15. It’s the eighth year in a row that Legislative Auditor Daryl Purpera’s office has found the same problem in the district, which is a network of 64 public charter schools in New Orleans, Baton Rouge and Shreveport that has more than 33,000 students.

Bandit Towing

“Towing charges, which should amount to a few hundred dollars, often skyrocket to a few thousand dollars once the bandit tow truck operator hauls the vehicle away from the accident scene.”

— National Insurance Crime Bureau Special Agent Doreen Sanchez called attention to a growing problem with unauthorized “bandit” tow truck operators holding vehicles hostage for excessive payments in the Los Angeles area.

Storm Aid

“This much needed assistance will help communities still recovering from last month’s extreme snowfall and ensure that they are prepared for the upcoming winter months.”

— New York Gov. Andrew Cuomo announced on Dec. 22 that disaster aid has been made available through the Federal Emergency Management Agency to counties in Western New York and the Northern Adirondacks to supplement state, tribal and local recovery efforts in areas affected by the severe winter storm last November. Cuomo said local governments’ initial costs for recovery efforts exceeded $49 million.

24%

The percentage gain in construction jobs in Terre Haute and surrounding areas of western Indiana during 2014. With the increase, the area ranked second-highest in the nation for the number of construction jobs gained during the period between October 2013 and October 2014, according to analysis by the Associated General Contractors of America.

32,500

The approximate number of tickets that the New York City Police Department issued to bicyclists in the city during an 11-month period from Jan. 1 to Nov. 30, 2014, according to a report last month by the New York Post. The tickets reflect offenses ranging from going the wrong way to going through red lights.

Wait-and-See

“It may be beneficial for Iowa to take a page from the history books and regulate unmanned aircraft technology as needed, rather than in a preemptive manner.”

— A report issued by the Iowa Department of Public Safety says the state should take a wait-and-see approach to regulating unmanned aerial vehicles, or drones, because of their huge potential for positive uses in business and government. The report, requested by the state Legislature, reminds lawmakers that light regulation helped develop the Internet and cellphones.

The Largest Distraction

$2.5 Million

The projected cost to build two domed storm shelters in two city parks in Tupelo, Miss. The domes are designed to hold a total of 2,300 people and withstand winds up to 250 mph. The city will be responsible for 10 percent of the construction cost. The rest of the money will come from the Federal Emergency Management Agency and the Mississippi Emergency Management Agency.

10 | INSURANCE JOURNAL-NATIONAL January 12, 2015

“This is really an addiction problem …

It has become so pervasive that it is now a larger distraction than any of the other distractions that are out there.”

— San Antonio City Councilman Mike Gallagher on the driving distraction caused by drivers using cell phones while on Texas roads. Both Austin and San Antonio, Texas, enacted bans on the use of handheld devices while driving at the beginning of 2015. Starting in February 2015, fines in San Antonio will be $200; violators in Austin will face fines up to $500. www.insurancejournal.com

WEST COVERAGE

News & Markets California Insurance Commissioner Sponsored Bills Signed into Law in 2014

D

uring the 2014 legislative session California Gov. Jerry Brown signed nine bills sponsored by California Department of Insurance and Insurance Commissioner Dave Jones.

A bill that adds protections for small businesses has already taken effect and five other consumer protection bills were implemented Jan. 1.

The bills are: SB 1273: Sen. Ricardo Lara, D-Bell Gardens – Low Cost Auto Insurance expansion The bill enhances the California Low Cost Auto program by enabling more low-income individuals the opportunity to purchase low cost auto insurance.

AB 1804: Assemblyman Henry Perea, D-Fresno – Back-up contact Requires insurers to provide consumers the option to designate a third-party as a back-up contact and receive notification from their insurance carrier if their policy is in danger of lapsing, expiring, being terminated or canceled due to nonpayment of premium. This will take effect Jan. 1, 2016.

SB 1446: Sen. Mark DeSaulnier, D-Concord – Small business protections The bill provides small employers who

need time to transition to Affordable Care Act compliant policies additional time to make the transition.

AB 2056: Assemblyman Matthew Dababneh, D-Encino – Pet insurance Pet insurers are required to disclose important information regarding their policies, standardize definitions and provide consumers with a 30-day free look period.

California Insurance Commissioner Dave Jones

AB 2347: Assemblywoman Lorena Gonzalez, D-San Diego – Annuity disclosures Requires new disclosure language on the front of the policy jacket or on the cover sheet for an immediate annuity that aligns with the disclosure language already required for the more common deferred annuity products. This bill goes into effect July 1.

AB 2128: Assemblyman Richard Gordon, D-Menlo Park – Community development investments Reforms the California Organized Investment Network program to better focus on finding and facilitating insurance

industry investments that provide economic and social benefits to California’s underserved communities. The new law requires insurers who write $100 million or more in California premium to provide information to the commissioner, by July 1, 2016, on all of its community development investments, including infrastructure and green investments, as well as streamlining reporting requirements.

AB 2734: Assembly Committee on Insurance – Omnibus provisions Provides the Locomotive Engineers and Conductors Mutual Protection Association the authority to offer an accidental death benefit in addition to job protection insurance to their members.

SB 1142: Senate Insurance Chair Bill Monning, D-Carmel – Insurance fraud Clarifies the annual fraud health and disability assessment.

AB 1234: Assemblyman Marc Levine, D-San Rafael – Confidentiality Maintains the confidentiality of state investigations and examinations that monitor the financial health of insurance companies.

Former California Highway Patrolman Convicted of Workers’ Comp Fraud

A

former California Highway Patrol officer has been convicted in a case involving workers’ compensation insurance fraud.

A Sacramento County jury in December convicted Tony Yao on felony charges of failure to disclose a prior motor www.insurancejournal.com

vehicle accident and resulting injury, making false statements and filing a false claim.

The Sacramento Bee reported Yao was a CHP officer working in the Commissioner’s Support Unit when he alleged he had suffered a work injury to his back. Evidence showed

that Yao didn’t disclose a pre-existing back injury.

Yao claimed he was unable to work because he could not walk without a cane.

But video surveillance showed him walking normally without a cane, bending and twisting with ease.

Yao is to be sentenced Jan. 28 in Sacramento.

Copyright 2014 Associated Press.

January 12, 2015 INSURANCE JOURNAL-WEST | W1

WEST COVERAGE

People Randon Lessing

Norah Culbertson

Brie Homan

Russ Johnston

Leavitt Group of Boise has hired Randon Lessing, Norah Culbertson and Brie Homan in Idaho.

Lessing is a loss control consultant developing and supporting safety programs. Culbertson is an operations specialist with experience in office management and medical assistance. Homan is a commercial account specialist with knowledge of financial planning, including life and disability insurance as well as investments.

Lessing’s recent positions include regional environmental health and safety manager for a national tradeshow company and logistics military officer for the U.S. Army.

Homan worked for Northwestern Mutual and the Bureau of Land Management in public relations and as a writer and editor.

Leavitt Group is a privately-held insurance brokerage offering property/casualty insurance, risk management, employee benefits solutions and other services.

Gorst & Compass has named Russ Johnston vice president of business development and marketing.

Johnston is based in San Diego, Calif., and will be responsible for business development and marketing for the Western region.

Johnston comes from Conway E&S, where he was vice president and West Coast manager. Prior to that Johnston launched a nonprofit called We Minus Me, a national organization developing intern programs. He also worked for Keller Williams Realty and was golf professional at High Point Country Club in North Carolina.

Chatsworth, Calif.-based Gorst is a wholesale brokerage firm with regional offices in Mission Viejo, San Diego and Sacramento.

Beecher Carlson Insurance Services LLC named Laura Jeppson vice president.

Jeppson will report to Senior Vice President Brian Cushard and work out of the Woodland Hills, Calif office.

She will be responsible for building and maintaining relationships with regional insurance executives and underwriters, and implementing risk transfer tools for financial institutions.

Prior to Beecher Carlson, Jeppson was involved with providing insurance products for the Bitcoin and virtual currencies industry.

Beecher Carlson Insurance Services LLC is a wholly-owned subsidiary of Brown & Brown Inc. Hub International Insurance Services Inc. named James Gervang senior vice president and manager of the commercial risk division in Mountain View, Calif.

In addition to his division management role, Gervang

W2 | INSURANCE JOURNAL-WEST January 12, 2015

will assume certain account management and consulting responsibilities.

Prior to Hub Gervang was with Wells Fargo Insurance Services in San Carlos as a senior vice president, managing director and national practice leader of the international risk division. Before that Gervang held commercial risk positions at ABD Insurance and Financial Services in Redwood City, and Woodruff – Sawyer & Co. of San Francisco.

Chicago, Ill.-based Hub provides an array of property/ casualty, life and health, employee benefits, investment and risk management products and services.

SullivanCurtisMonroe has named Jaime Medrano associate vice president in its Irvine, Calif., location.

Medrano will guide SCM clients through the healthcare reform landscape and assist with the design and implementation of the employee benefits programs.

Prior to SCM Medrano was benefits senior account manager with Bolton & Co., and benefits account manager with Wells Fargo Insurance Services.

SCM is a privately-held insurance brokerage and risk management consulting firm.

California State Automobile Association Insurance Group Chief Operations Officer Greg Meyer was named a board member of the Insurance Institute for Highway Safety.

Meyer joined CSAA, an AAA Insurer, in 2014. Before that Meyer was the senior personal lines executive at Tower Group and president of their reciprocal exchanges, Adirondack Insurance Exchange and New Jersey Skylands Insurance Association.

IIHS is an independent, nonprofit organization committed to reducing deaths, injuries and property damage from crashes. The organization is supported by auto insurers and insurance associations.

The membership of the Arizona Insurance Council has elected its officers for 2015. They are: Tim Goeller, president of AIC and regional vice president for business insurance at State Auto Insurance; Phyllis Senseman, vice president of AIC and vice president of agency management and marketing at CopperPoint Mutual Insurance; Brad Oltmans, treasurer of AIC and vice president of insurance at AAA Arizona; and Brett Clausen, corporate secretary of AIC and Arizona business unit vice president at Farm Bureau Financial Services.

AIC is a nonprofit, trade group focused on consumer education and partnership building on behalf of property/ casualty insurers. www.insurancejournal.com

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WEST COVERAGE

News & Markets Oregon Man Pays $1,000 to Settle 5-year-old $57 Ticket

A

n Oregon man admits he was driving too fast on a rural highway in Nevada five years ago, but he says the state’s wheels of justice turn too slow, and his wallet is a grand lighter because of it.

Robert Larsen of Eugene says he ended up paying more than $1,000 in legal fees to settle a $500 fine and bench warrant for his arrest even though he paid the $57 speeding ticket back in 2009.

Larsen told the Reno Gazette-Journal the charges and the bench warrant were dismissed in December, but only because he’d contacted the newspaper about it and hired an attorney.

His ordeal began earlier in the summer when he received a letter notifying him a warrant had been issued for his arrest, and that he owed more than $500.

Larsen said he sent a $57 cashier’s check to Hawthorne District Court about three months after a Walker River Tribal police officer cited him in January 2009 for speeding just outside Hawthorne about 120 miles southeast of Reno.

He plans to file a complaint with the Nevada Commission on Judicial Discipline alleging the court neglected substantial evidence proving he paid the ticket and attempted to bilk him out of $572.40.

“This is willful disregard to account for court funds,” Larsen said. “The real story is the people behind the money, and what the courts do. How many people have the same experience I do?”

Hawthorne Justice Court Judge Jay T. Gunter, who dismissed the charges, said there is a reason the court waited five years.

Gunter said he hired Valley Collection Agency, of Glendale, Ariz., earlier this year to go over two filing cabinets and four drawers full of warrants dating back six years.

In May, the collection agency made copies of more than 1,700 warrants and is in the process of following up on them, he said.

Gunter estimates about 75 to 80 percent are for unpaid traffic violations.

Gunter said the court’s previous collection agency “wasn’t very active.”

Violators are alerted 30 days after failing to appear, Gunter said. Bench warrants are $300 and can include additional fees, he said.

“Bottom line is we never received it (Larsen’s check),” Gunter said. “He didn’t pay it as far as I am concerned.”

Larsen said the court neglected to examine the evidence he presented, which included a certified mail receipt from 2009 and a check that remains in Oregon’s unclaimed property database made out to Hawthorne Justice Court.

Gunter said he could only remember one other instance where a check was lost in the mail in the eight years he’s been in office.

Copyright 2014 Associated Press.

Injured Snowboarder Can Sue, Oregon High Court Rules

T

he Oregon Supreme Court has ruled a ski resort’s broad liability waiver cannot prevent a paralyzed snowboarder from suing.

The justices ruled that the liability waiver was “unconscionable” and contrary to public policy, potentially opening the door for more people injured in recreational activities to file successful lawsuits.

W4 | INSURANCE JOURNAL-WEST January 12, 2015

Myles Bagley was 18 when he was hurt in 2006 at Mount Bachelor near Bend. He filed a lawsuit two years later seeking $21.5 million. The trial court threw out his claim, citing the liability waiver that he signed when purchasing his season pass and another that appeared on the back of his ticket.

The Supreme Court’s December ruling sends the case back to the Deschutes County trial court. To win, the snowboarder will have to convince a jury that the ski resort was negligent in designing, building and maintaining the ski jump.

Oregon ski resorts will now have to spend more money defending themselves against lawsuits filed by injured customers, said Andrew C. Balyeat, a lawyer representing the ski resort Mount Bachelor argued that skiing is inherently risky, and the resort has no con-

trol over many of the factors that contribute to injuries, such as the skier’s speed, course, angle and the difficulty of his aerial maneuver.

In an opinion written by Chief Justice Thomas Balmer, the court weighed a variety of factors to conclude that the liability waiver should not stand. The justices noted that there was no opportunity for Bagley to negotiate more favorable terms and the resort has more expertise than the snowboarder in determining the safety of facilities.

The justices also said the risk of lawsuits is an important incentive for ski resorts to ensure they’re creating safe conditions.

Arthur Johnson, one of Bagley’s lawyers, said the decision will encourage ski resorts to provide safe conditions.

Copyright 2014 Associated Press. www.insurancejournal.com

NATIONAL COVERAGE

News & Markets Many Hispanic Renters Overestimate Cost of Insurance

A

lmost half (43 percent) of Hispanics without renters insurance think they cannot afford it but they overestimate the cost, a new survey shows.

Eighty-eight percent of respondents in the Hispanic market survey by State Farm overestimate what a typical renters policy costs per month, with over half thinking it costs $50 or more a month, when in many cases renters insurance can cost as little as $12 a month.

Hispanics represent about half of all renters. Yet only 29 percent report having renters insurance, according to State Farm.

Among respondents without renters insurance more than one third (34 percent) said they had never heard of renters insur-

ance. Further, most overestimated the cost of coverage and underestimated the value of their property.

The study of more than 500 renters was designed to gauge awareness and understanding of renters insurance in the Hispanic community.

“There seem to be some misconceptions when it comes to renters insurance,” said Stephanie Colegrove, operations vice president of underwriting. “We want everyone to know that if their possessions are stolen during a break-in, or damaged by a fire or another covered loss, a renters insurance policy can help them replace their valuables.”

More than 50 percent of respondents also

Personal Auto Rates Rose 2.1%, Homeowners 3.5% in 2014: RateWatch

P

ersonal auto insurance companies increased their rates by an average of 2.1 percent countrywide in 2014, according to insurance consulting firm Perr & Knight’s RateWatch reports.

The three states with the highest overall increases were: • Michigan, 5.2 percent • Georgia, 4.7 percent • Rhode Island, 4.2 percent Homeowners insurers increased their rates by an average of 3.5 percent countrywide in 2014.

The states with the highest overall rate increases were: • Kansas, 8.5 percent • Texas, 7.8 percent • Montana, 7.7 percent www.insurancejournal.com

Two states implemented small rate decreases in homeowners in 2014, with Florida at -0.5 percent and Hawaii at -1.3 percent.

According to California-based Perr & Knight, during the past year, the top five insurance groups by premium volume for personal auto were State Farm, Berkshire Hathaway, Progressive, Allstate and Farmers Insurance. These companies took rate changes of 2.4 percent, 1.2 percent, 1.7 percent, 2.5 percent, and 2.0 percent respectively.

Likewise for homeowners, the top five insurance groups by premium were State Farm, Allstate, Liberty Mutual, Farmers Insurance and USAA. These companies took rate changes of 3.8 percent, 1.9 percent, 7.0 percent, 5.2 percent, and 1.3 percent respectively.

believe their belongings are worth less than $10,000. In fact, personal belongings — including clothes, furniture and electronics — can cost much more to replace.

According to a 2013 State of Hispanic Homeownership report, the number of Hispanic households has grown from 9.2 million in 2000 to 14.7 million in 2013, representing a growth rate of 60 percent with Hispanic households representing over half of all renters.

Readers’ Choice: Cyber Risk Was Top P/C News of 2014

InsuranceJournal.com asked readers what they thought was the most important property/casualty insurance story of 2014. Cyber risk came in on top, followed by news about Uber and ridesharing services.

Here’s how the results ranked:

34.1%

(198 votes)

Cyber risk and insurance

13.1%

(76 votes)

Uber, ridesharing and insurance

9.7%

(56 votes)

Terrorism insurance

8.8%

(51 votes)

Legalized marijuana

7.9%

(46 votes)

Increased global and federal regulation of insurance

6.2%

(36 votes)

Alternative capital in the P/C reinsurance industry

5.9%

(34 votes)

Federal flood insurance changes

5.0%

(29 votes)

Hank Greenberg’s legal challenge to the AIG bailout

4.3%

(25 votes)

Climate change and insurance

3.8%

(22 votes)

Self-driving vehicles Total Votes: 580 January 12, 2015 INSURANCE JOURNAL-NATIONAL | 11

NATIONAL COVERAGE

News & Markets Private Auto Premiums See Largest Q3 Growth in 10 Years: SNL

P

rivate auto insurance industry direct premiums written rose 5.13 percent in the third quarter of 2014, the largest third-quarter year-over-year growth in the past 10 years, according to an analysis by SNL Financial.

The 30 largest auto writers by market-share also grew at a healthy pace, adding 4.86 percent year-over-year to reach $42.98 billion in direct premiums written. Of these 30 insurers, almost one-third reported an increase of more than 5 percent.

The data used is sourced from the National Association of Insurance Commissioners (NAIC) quarterly filings and is the aggregate of the auto physical damage and private auto liability lines of business.

Auto physical damage includes business from commercial auto physical damage. Personalonly auto physical damage is not reported separately in the NAIC quarterly statements.

Personal auto physical damage typically makes up the vast majority of the total auto physical damage. In 2013, 91.78 percent of auto physical damage premiums were from personal business. For large auto insurers such as State Farm Mutual Automobile Insurance Co., GEICO Corp. and Allstate Corp., these percentages were even higher.

The personal share of auto premiums for each of these entities was approximately 99 percent in 2013.

GEICO appears to be on the verge of passing $20 billion in annual auto premium in 2014. The company has written $15.48 billion in direct personal auto premiums for the nine months ended Sept. 30.

It needs approximately $4.52 billion in the fourth quarter to cross $20 billion, less than the $4.54 billion it wrote in the fourth quarter of 2013.

GEICO has never reported a negative year-over-year growth rate in any quarter in the past 10 years.

Allstate recorded private auto direct premiums written growth of 5.46 percent year-over-year in the third quarter. This is the second consecutive quarter in which the company reported premium growth of more than 5 percent after premiums grew 5.67 percent year-over-year in the second quarter. The Encompass brand reported an auto loss ratio of 78 percent in the third quarter, an increase of 7.1 points compared to the previous year due to unfavorable reserve re-estimates, according to Allstate’s latest Form 10-Q filing. The Esurance and Allstate brands each experienced a modest decline in their auto loss ratios.

Biggest Decline Kemper Corp. continued its slide, recording the largest year-over-year decrease among the top 30 insurers as its premiums fell 12.59 percent to $204.6 million. Kemper attributed Highest Increases the decline to the runoff of its direct-to-con State Farm reported a 6.13 percent yearsumer business in its latest earnings call. over-year increase in private auto business, Kemper on Dec. 11 announced that it the highest for any quarter in the past 10 entered into a years, on top of its GEICO posted the largest definitive agreealready large premium base. growth rate among the top 30 ment to acquire GEICO posted insurers in the third quarter. Alliance United Group and its the largest growth subsidiaries in a deal that might help rate among the top 30 insurers in the third Kemper reverse its downward trend in the quarter. The company’s direct premiums auto insurance business. Alliance United written rose 10.31 percent compared to the Insurance Co., the underwriting subsidiary same quarter in the prior year, continuing its of Alliance United Group, grew at least 29 double-digit growth of more than 10 percent percent year-over-year in the past five years on a year-over-year basis for eight quarters in except 2011, when it grew just 8.17 percent. a row.

12 | INSURANCE JOURNAL-NATIONAL January 12, 2015

The company is expected to write more than $300 million in 2014 direct premiums.

According to an SNL study, this deal should increase Kemper’s private auto marketshare in California where Alliance United is one of the top five writers of nonstandard auto insurance.

Farmers Insurance Group of Cos. reported a modest decrease of 1.07 percent in premiums during the quarter compared to the same quarter in 2013 and continued its slide in the ranking list. USAA Insurance Group displaced Farmers to take the sixth spot by growing 7.06 percent during the quarter.

USAA also reported a loss ratio of 75.96 percent, one of the highest among the top auto insurers. Officials from Farmers provided some details on the company’s strategy at a recent investor day held by Zurich Insurance Group Ltd. USAA passed Farmers for the first time in terms of auto premiums written on last-12months basis during the third quarter. USAA and Farmers reported premiums written of $9.68 billion and $9.62 billion, respectively, on last-12-months basis.

Auto Club Insurance Association Group reported a loss ratio of 28.16 percent during the quarter, primarily due to Auto Club Insurance Association, which reported negative losses incurred in the quarter. Auto Club Insurance Association reported a higher loss ratio for its auto insurance business in recent times. Its private auto direct loss ratio was 146.49 percent and 490.21 percent in 2013 and 2012, respectively. www.insurancejournal.com

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NATIONAL COVERAGE

Business Moves

Brown & Brown, Global Benefit Strategies Florida-based national insurance broker Brown & Brown Inc. announced that its New Jersey-based subsidiary Brown & Brown Metro Inc. has acquired certain assets of Global Benefit Strategies in Morristown, N.J. Terms of the transaction were not disclosed.

Global Benefit Strategies was founded by Doug Pridgen and specializes in providing employee benefits insurance products and services. The firm has annual revenues of approximately $1.1 million. Pridgen and his team will join Brown & Brown Metro’s existing Florham Park, N.J., location under the leadership of Ty Beba, executive vice president of Brown & Brown Metro.

Brown & Brown Metro said this acquisition would enable the firm to continue to grow its retail presence in New Jersey and throughout the Northeast.

AssuredPartners, Sheehan Insurance, First Palmetto Lake Mary, Fla.-based AssuredPartners Inc. has acquired the business and assets of 14 | INSURANCE JOURNAL-NATIONAL January 12, 2015

Sheehan Insurance Group.

Terms of the transaction were not disclosed.

As part of the acquisition, 22 employees will join AssuredPartners.

Sheehan Insurance Group operations are based in Haymarket, Va., and will continue under the local leadership of Pat Sheehan. The agency specializes in coverage for businesses, including the senior living, transportation and hospitality industries; and insurance for individuals. It reports revenues of approximately $4 million.

In addition, AssuredPartners, through its subsidiary Assured Neace Lukens, has acquired First Palmetto Insurance Agency in South Carolina. Terms of the transaction were not disclosed.

First Palmetto Insurance Agency offers personal lines insurance, including homeowners and auto, and coverage for businesses including general liability, commercial property and product liability insurance.

As part of the acquisition, eight First Palmetto Insurance Agency employees will join AssuredPartners. First Palmetto operations will continue in the Murrells Inlet and Pawleys Island offices in South Carolina, under the local leadership of Will Hanna, managing director.

AssuredPartners, a portfolio company of Chicago-based private equity firm GTCR, invests in insurance brokerage businesses (property/casualty, employee benefits, surety, MGA/wholesalers) across the United States and in London. Since its founding in 2011, AssuredPartners has acquired more than 75 insurance firms and has approximately $400 million in annualized revenue.

Arthur J. Gallagher, AMG, iBEN, O’Gorman & Young Arthur J. Gallagher & Co. in Itasca, Ill.,

recently acquired the following businesses: Affinity Marketing Group LLC in Natick, Mass; Independent Benefit Services Inc. in Rockville, Md.; and O’Gorman & Young Inc. in Chatham, N.J.; and its affiliate G.R. Murray Insurance in Princeton, N.J. Terms of the transactions were not disclosed.

Established in 2001, AMG is a national program broker that provides access to products and services designed for members of affinity groups, associations and fraternal organizations throughout the United States.

AMG specializes in developing coverage programs for its client sponsors that reach more than 25 million consumers with AMG’s offerings of affinity products such as life, auto, home and ancillary health insurance, identity theft protection, and business service discounts. Doug Furbush and his team will continue to operate from their current location under the direction of Kevin Garvin, head of Arthur J. Gallagher & Co.’s North American affinity operations.

Founded in 1989, iBEN provides employee benefits, human resources and retirement plan consultation, and brokerage services for middle-market clients in the mid-Atlantic region. iBEN specializes in offering tailored group benefits, retirement planning, HR consulting and executive benefits with an emphasis on planning analysis and design, cost-benefit analysis, compliance, implementation, and communication and education. Neil Simons and his associates will continue to operate at their current location under the direction of David Ziegler, head of Arthur J. Gallagher & Co.’s Eastern employee benefit consulting and brokerage operations.

Founded in 1894, O’Gorman & Young is a retail insurance broker providing commercial property/casualty, employee benefits, risk management consulting and personal lines insurance services to clients throughout the eastern United States.

O’Gorman & Young specializes in insurance services for public and private schools, contractors, municipalities, lawyers, and financial and nonprofit institutions. Ernest “Jay” Lawton and his team will continue to www.insurancejournal.com

operate in their Chatham and Princeton locations in New Jersey under the direction of Douglas Brown, head of Arthur J. Gallagher & Co.’s Eastern region retail property/casualty brokerage operation.

Integro, Ventura Insurance New York-based brokerage and risk management firm Integro announced its acquisition of Ventura Insurance Brokerage, also based in New York. Terms of the transaction were not disclosed.

Ventura Insurance Brokerage is an entertainment specialist brokerage firm providing insurance services to the film, television, media and theatre industries. The firm also serves the aviation, commercial and private client and benefits markets.

Christine Sadofsky, president of Ventura Insurance Brokerage, and her team will continue in their leadership roles, Integro said in its announcement.

Integro said the addition of Ventura enhances Integro’s film, TV, media and theater specialties in the United States and will support the transatlantic film team.

Integro’s entertainment-focused brokerage acquisitions in recent years include: Stonehouse Conseillers Ltd. (2014) and Allan Chapman & James (2012) in the United Kingdom and U.S. Doodson Broking Group (2013) in the U.K. and the U.S.; Multimedia Risk (2013) of Canada; and Nashville, Tenn.-based Frost Specialty (2010).

Alliance Brokers & Consultants in Bakersfield, in a strategic move to enhance the employee benefits division of INSURICA’s Bakersfield office, Walter Mortensen Insurance/INSURICA. Alliance’s Clay Koerner brings more than 40 years of experience in providing benefits strate-

gies to help employers control costs while expanding benefits and services. Koerner and his four team members have joined INSURICA’s Bakersfield office.

INSURICA has 26 offices located throughout Oklahoma, Texas, Arkansas, Arizona and California.

INSURICA, James & Associates, Alliance Brokers & Consultants Oklahoma City-based INSURICA Insurance Management Network announced in mid-December that it acquired an agency in Oklahoma and one in California during the third quarter of 2014.

In Oklahoma, INSURICA added James & Associates, located in Tulsa. James & Associates has been in business for nearly 50 years. The agency was founded by Clark James, who was succeeded by his son, John James. John James manages the book of business and has joined INSURICA’s downtown Tulsa office.

In California, INSURICA acquired www.insurancejournal.com

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January 12, 2015 INSURANCE JOURNAL-NATIONAL | 15

CLOSER LOOK

Casualty Top 10 Casualty Insurance Trends for 2015

W

hile casualty insurance rates are stable and new capacity continues to enter the market, certain classes of business continue to be difficult to place, according to Marsh’s U.S. Casualty Practice. Following are 10 key trends Marsh expects will shape the casualty insurance marketing in 2015.

Casualty Market Softens Casualty insurance rates remain stable heading into 2015, with the market poised to soften. Average rates had been rising, but the magnitude of those increases has slowed.

“We expect this trend to pick up in 2015, which would turn average rate changes negative. As insurers battle for favorable classes of business, those that rely on reinsurance may no longer be able to hold on to the price arbitrage they have enjoyed and may have to pass some savings on to their clients to maintain a competitive advantage,” Marsh said.

“A softening U.S. casualty market could lead to aggressive multi-year options in both the primary and the excess liability space.”

entered the market has indirectly influenced the casualty market by encouraging traditional property reinsurers to shift their appetites to casualty. “A few reinsurers have established specialty and casualty reinsurance platforms in the United States.

But from an alternative capital perspective, the casualty space continues to be untapped on a direct basis,” according to the report. The long-tail nature of the risk, contract ambiguities and the lack of any reliable third-party industry loss index make for a challenging proposition for shorter duration appetites. “We expect to see some attempts at bifurcating the casualty risk to isolate and quantify the short-tail liability portion of the risk (for example, claims-made policies with defined payout triggers and vertical-loss events as opposed to horizontal exposures),” Marsh said. “Even if successful, these attempts are unlikely to result in alternative capital directly altering the casualty reinsurance landscape or influencing casualty insurer buying strategies.”

New Capacity: Where it Will Come From New capacity continues to enter the U.S. casualty marketplace, particularly as the workers’ compensation line returns to profitability, according to the Marsh report.

“Thanks to record policyholder surplus, some of the new capacity comes from The Haves and Have Nots expanded appetite of current players looking Although the casualty insurance market for premium growth. Asian markets also is relatively calm, certain classes of business continue to expand their footprints; one continue to be favored while others continue insurer gained approval for a full Lloyd’s synto be more difficult to place, Marsh said. dicate, and others are making acquisitions Underwriters are flocking to the favored in the U.S. and elsewhere.” Also, additional classes with capacity is likely good loss expeto enter and A softening U.S. casualty market improve the could lead to aggressive multi-year rience, leaving less competition competitive options in both the primary and for risks that are landscape for the excess liability space. more difficult casualty insurto place such as ance buyers.

California workers’ compensation, workers’ compensation for employers with large conNew Capacity: Where it Won’t centrations, excess workers’ compensation, Come From trucking fleets, and New York labor law-ex New alternative capital capacity that has 16 | INSURANCE JOURNAL-NATIONAL January 12, 2015

posed risks. “This will result in more alternative programs being developed and upward pressure on rates and retentions on loss-sensitive programs for these harder-to-place risks.”

Data is Power Marsh said that insurers continue to focus on underwriting profitability — and are using analytics to find it in a very competitive marketplace.

Carriers are getting more granular in their underwriting to differentiate between risks and to be able to feed their models. A “go or no-go” decision for carriers often comes down to a ZIP code or a street address. “Trading ranges are narrowing across the book, which could indicate that the low-hanging fruit of price differentiation has been picked,” Marsh said. “In excess casualty, for example, the spread between the first and fourth quartiles of rate changes was 9.2 percent in the fourth quarter of 2013; it is now 5.5 percent.” Insurance buyers are also using data more aggressively to help them negotiate the most favorable programs and make buying decisions.

Insurer Differentiation Insurers in 2015 will likely look to differentiate themselves on flexibility and relationship, according to Marsh. Clients will enjoy an increased acceptance of alternative collateral forms to the always popular letter of credit. “This phenomenon has been moving in a positive direction for the past 18 months and is starting to gain momentum going into 2015 as more carriers accept surety for a portion of total collateral, and are willing to sell credit and offer larger credit deviations,” the report said. Meanwhile, carriers are offering multi-line discounts as they seek to round out their books. On the negative side, insurers will likely become more insistent when continued on page 18 www.insurancejournal.com

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CLOSER LOOK

Casualty continued from page 16 it comes to increasing their product penetration with clients.

The Dog Starts to Wag the Tail While brokers and insureds have historically benchmarked premium rates and limits purchased, the ever-increasing volume of data and enhanced analytics will provide more insight into loss costs — often the most significant component of total cost of risk. New analytical tools remove subjectivity in claims-handling success and allow clients to quantify how well their third-party administrators (TPAs) manage medical costs on workers’ compensation claims.

Refocusing cost-reduction efforts on what is driving the workers’ compensation spend will empower buyers in an increasingly competitive and consolidating TPA environment.

Unintended Consequences The increasing severity of individual,

multi-district, and class-action settlements and judgments is likely to result in more difficult coverage and claim negotiations related to excess liability, Marsh said. “Carriers continue to scrutinize language before binding and after losses. Program structures will likely be reevaluated and changed at renewal with a post-claim mindset. Marsh gave the following examples: • Will quota share layers — although they may save organizations money today — be the best option post-claim?

• What about short limits? Does the cheaper option mean that more carriers will be involved in the claim scenario?

• Will a decision to forego punitive damage coverage mean carriers will have a leg up in allocation discussions during settlement negotiations?

“We believe that 2015 will see more insureds factor these types of post-loss consequences into their buying decisions.”

Wildfires damage property.

Innovation Continues “Carriers will likely be pushed to focus on reducing complexity and ambiguity in policy wordings and on innovating products to cover never-before-seen exposures,” Marsh said. “ISO’s recent cyber endorsements do not provide the required clarity when it comes to bodily injury and property damage.”

Other general liability components that will continue to evolve include professional liability exclusions and pollution wording in the context of communicable disease. In excess liability, clients are likely to demand consistency in the tower, which will push insurers to adopt new endorsements or policy forms.

“The socioeconomic shifts we are experiencing, crowdsourcing, farm-to-table initiatives and the impact of the Affordable Care Act on workers’ compensation costs, are likely to have implications for the liability landscape, forcing an increased level of innovation by insurers in 2015,” Marsh said.

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SPECIAL REPORT

Contractors

By Andrea Wells

W

ith construction activity picking up steam all across the nation, insurers are expressing concern over how the construction sector will meet the growing demand for qualified labor. Insurers are concerned not only with the shortage of new workers but also with the aging of the current construction industry workforce across the country.

The insurance industry knows what the construction industry is going through as it also has a graying workforce and experiences difficulty finding new construction insurance specialists, according to industry professionals.

Overall, construction payrolls are increasing, more projects are coming online and the scope of work is increasing. According to 20 | INSURANCE JOURNAL-NATIONAL January 12, 2015

Lockton Co.’s construction insurance specialists (see article on page 24), insurance coverage is generally available for both commercial and residential projects and pricing is stable with a few exceptions.

The 2015 outlook is good, as total U.S. construction starts for 2015 are predicted to rise 9 percent to $612 billion, compared with 2014’s estimated 5 percent increase to $564 billion, according to the 2015 Dodge Construction Outlook, published by Dodge Data & Analytics (www.construction.com).

The Dodge report predicts that in 2015: • Commercial building will increase 15 percent.

• Institutional building will advance 9 percent.

• Single family housing will rise 15 percent.

• Multifamily housing will rise 9 percent.

• Public works construction will improve 5 percent. www.insurancejournal.com

Only electric utilities (9 percent decline) and manufacturing plant construction (16 percent decline) are predicted to see drops in construction starts in 2015, according to the Dodge Construction Outlook report.

Rick Keegan, president of the Construction Business Unit at Travelers, says that right now the convergence of two trends — an aging workforce and a shortage of new workers — has the potential to alter a contractor’s risk profile and put pressure on their loss experience.

Matt Chase, executive vice president and head of the construction practice for Pasadena, Calif.-based Bolton & Co., says the shortage of quality labor is the biggest concern he hears from construction companies also.

Keegan adds that while the construction industry is just at the front-end of this challenge, a workforce of older and less experienced workers has the potential for a longterm impact from an insurance perspective.

“We track statistics by industry segment and it shows that in certain segments about 40 percent of construction worker injuries occur during the first six months of employment,” he said. “Worker inexperience and unfamiliarity in construction site hazards really can lead to a significant increase in accidents as contractors try to assimilate new workers. Not only do we see an increase in frequency, the impact on the severity side is pretty significant as well.”

Add to that the rising cost of medical, which now accounts for about 60 percent of workers’ compensation loss costs, and the trend becomes one worth noticing, he said.

At the same time industry data shows that more construction workers are working longer, which means that contractors also have the challenges associated with an aging existing workforce, Keegan said.

“That can result in having injured workers that can be more difficult to medically rehabilitate post-injury and in turn maybe less likely to return to work in the event that they do get hurt,” according to Keegan.

The end result is an extended disability period, increased medical costs and even more pressure on a contractor’s workers’ www.insurancejournal.com

compensation costs and experience.

Long-Term Effects Workers’ compensation is an early concern, but it is not the only concern.

While construction labor woes tend to initially show up in the workers’ comp line, Keegan says there is a longer-term effect in other contractor coverages.

Concerns over construction defect issues are “absolutely something to watch,” he says, suggesting that quality of work could suffer. “When you think about it from a standpoint of potential construction defect exposures related to the job not being done right — that’s a concern. The tail on that is dramatically longer so it doesn’t show up as quickly,” he said.

Construction specialist Jim Zimmermann, vice president with Dallasbased McQueary Henry Bowles Troy (MHBT) LLP, agrees defects and quality of work are factors to watch going forward, although he says carriers have not shown much interest yet.

“We haven’t seen underwriters dig into the age breakdown of a construction company’s employees, or at least show any real concern for it. With that being said, it certainly could be an issue going forward,” Zimmerman said.

“The biggest frequency of claims comes from employees in the first year of employment, but the claims involving older workers are frequently much more expensive,” he said.

Zimmerman says for older workers the medical costs for injuries are higher, older workers earn more and therefore are paid more in lost wages, and the recovery time from injuries is much longer.

Aside from an aging construction workforce, many skilled workers left the industry during the economic downturn, another reason for the worker shortfall, says Dan Horton, vice president and construction practice group leader for Orland Park, Ill.based The Horton Group.

“There was a good portion of seasoned workers that retired or went away during those years,” Horton said. “Now the indus-

try has a real challenge … they can’t find enough people to get the work done.”

Zimmerman says that many subcontractors have told his general contractor clients that they could hire five, 10, even 20 more people if they could find the skilled labor they need.

“The work is there; the employees are not,” Zimmerman said.

Another problem, at least in West Texas where the oil and natural gas industries are drawing economic growth, is the competition from other business segments for employees. “There are stories of McDonald’s paying $15 an hour for unskilled crew members in West Texas, so you can imagine the difficulty in finding, compensating at a reasonable level, and keeping truly skilled labor,” he said.

Keegan says while a lot of the attention has been focused on the need for construction craft workers, the same issue exists for construction professional positions as well. “In fact, a lot of the contractors we speak with actually cite filling professional positions — such as project managers, construction superintendents and safety professionals — as the biggest labor challenge,” Keegan said.

Construction Specialists Needed While the construction industry struggles to fill a shortage in qualified labor today, the insurance industry itself also struggles to fill a shortage of construction insurance specialists, according to some.

“I absolutely believe there is a shortage of young construction insurance specialists,” MHBT’s Zimmerman said. “There are a relatively small number of agents that have controlled the construction insurance and bonding marketplace in many areas of the country, and that’s been for good reasons.”

Zimmerman said many of today’s construction insurance specialists are considered experts in either insurance and/or bonds, they’ve provided quality services to their clients, and they are highly-respected within the industry. “However, speaking very generally, the majority of those agents continued on page 22 January 12, 2015 INSURANCE JOURNAL-NATIONAL | 21

SPECIAL REPORT

Contractors continued from page 21 are closer to the end of their careers than the beginning,” he said. “When those agents try to transition or sell their business, there is often a serious drop-off in service.”

According to Zimmerman, many construction-focused agencies recognized this need years ago and have been hiring and training specialists to take over. “Those are the ones that are going to thrive, not just because they will likely keep the business they have, but because they will win the business from agencies that have not had the same level of employee investment.”

The graying insurance industry provides an excellent opportunity for younger construction specialists to step up, Zimmerman says.

Bolton’s Chase is one example of a younger specialist that has found success in construction.

Chase grew up on construction sites. His father and grandfather owned and operat-

ed one of Los Angeles’ largest commercial plumbing contracting firms. While Chase knew the ins and outs of a construction project, he wanted to focus on the business side more than the mechanical side.

“My uncle referred me to Bolton because they wrote his bonds and they had a very good reputation,” Chase said. But Bolton wasn’t the only agency that wanted to hire Chase. His family’s construction business was a perk that came with his new hire, or so he thought.

“But when I met with the president of Bolton — Steve Brockmeyer — out of all the firms I interviewed with, he’s the only one who said, ‘Yeah, we’ll hire you, but you’re not allowed to write your dad’s account for two years. That made me feel like they cared about me. They didn’t want to just hire me because of my dad’s decent sized account.”

That began Chase’s 10-year career at

Bolton as an insurance construction specialist where he’s helped grow the construction practice from near zero to about $30 million in written premium.

“I think that if you’re interested in the construction industry and you can relate to the construction buyer, you can be successful at this,” Chase said.

The outlook for construction specialists is good, says Horton, but the challenge for agencies to find the right people will be much greater in the coming years.

“It’s not just an issue of finding new construction specialists for agencies. It’s a huge challenge just trying to attract the next generation of professionals” in general, he says. “If you can figure out how to get young people into an agency first, construction is one of the industries they might specialize in, but it all depends on if the agency can get the next generation into the agency, period.”

How Mitigation Services Work for Contractors

R

ick Keegan, president of the Construction Business Unit at Travelers says that construction specialists must help contractors understand that the changing labor force dynamics require proactive risk management to ensure the potential for cost and adverse experience is mitigated.

“A lot of contractors are just highly focused on finding skilled labor, which of course is a challenge,” he said. “What we want to do is ensure that the focus on risk management continues as they assimilate those new workers into the industry.”

According to Keegan, peer review systems that allow contractors to compare the safety and risk management controls they have in place to industry peers and then identify possible areas for improvement can be useful. “We can even break it down by industry segment and then by size of contractor. It would allow a street and road contractor at a certain revenue threshold to look at other street and road contractors of the same size and see what they do for 22 | INSURANCE JOURNAL-NATIONAL January 12, 2015

things like pre-employment screening, MVR, mandatory drug testing, contractual risk transfer controls, and compare with the practices of others.”

Construction specialty agents can also offer help in mitigating loss exposures in a changing labor force climate.

Matt Chase, executive vice president and head of the construction practice for Pasadena, Calif.-based Bolton & Co., says the construction sector has seen a large spike in soft tissue injuries for workers’ compensation over the past 10 years. But loss control programs such as the “warm up” or “stretching” programs offered through Bolton’s construction practice have helped to change that trend for some contractors.

“The sophisticated clients are proactively implementing stretch programs and we’re helping them with that,” Chase said. “Our in-house loss control helps build that plan

for them. We take pictures of the employees wearing their company gear, their shirt and their hardhat, and we put posters around the office and the job sites of these actual employees performing the stretches with directions on how to properly do the stretch.”

Chase says a simple five minute stretching period, similar to what athletes might do prior to a sport, makes a huge difference in reducing construction worker injuries.

For clients that have been doing the warm-up program for a couple of years, Chase has seen a noticeable dip in soft tissue injuries. “The hard part is getting buy-in from the workforce.”

Chase advises his clients that any dollar they spend in safety is going to be returned back three times between lost worker time and in insurance premiums. “But they have to actually use and implement the program.” www.insurancejournal.com

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Contractors Construction Coverage: Emerging Trends for 2015

B

olstered by a resurgent economy and renewed optimism, the construction industry is showing signs of significant growth. Payrolls are increasing, more projects are coming online and the scope of work is increasing. Ample insurance coverage is available for both commercial and residential projects, and pricing is stable with the exception of New York and a few other states where construction defect

By Jody T. Wright actions are prevalent.

That’s positive bottom-line news for contractors of every stripe. Yet a number of forces are combining to make obtaining the right insurance coverage more challenging than ever. We foresee Tom G. McCall developments on three major fronts in the coming year: •Potential coverage gaps in project specific insurance.

•Reduced coverage for additional insureds.

•Limited indemnity & Tony Page leaving contractors potentially exposed.

All of these factors warrant careful attention for contractors and risk managers.

CIPs Require a Critical Look Originally created for megaprojects, the controlled insurance program (CIP) has become common in the past few years, especially if the project has a residential element. Traditionally, the owner would sponsor the program and general liability was bundled with workers’ compensation for all participants to maximize premium dollars and leverage discounting. Because of the efficiency and unified coverage of these 24 | INSURANCE JOURNAL-NATIONAL January 12, 2015

programs, many general contractors are routinely sponsoring CIPs and have made it a part of their marketing strategy.

There are several reasons for the growth of CIPs: •Reduced availability of insurance for contractors of all levels caused by evolving definitions of “residential” and the prevalence of residential exclusions.

•Concerns about availability of coverage and adequacy of limits to pay claims, driven by the persistence of construction defect claims from residential projects.

•Continuity and certainty from being able to lock-in coverage and cost, for both the active construction period and the extended completed operations tail to match statutory liabilities.

•The single path to coverage of a CIP results in streamlined claims processes and reduced frictional costs of negotiations with multiple insurers and attorneys.

The CIP presents challenges, however, when coverage differs from what’s normally available in the contractor’s own insurance program. Contractors and owners considering a CIP should research their exposures and available coverage with the input of legal and risk advisors. Specific areas to address include: Limits •On master programs that share limits, a loss on a project other than yours may result in reduction or exhaustion of your coverage.

•Be mindful of limits that aren’t adequate to cover potential losses.

Coverage •Determine what parties are covered. It may be the general contractor and owner or general contractor, owner and all subs.

•Establish how repair and warranty work is covered after completion of the project.

•Know what exclusions have been attached to the policy and how they will affect you.

For example, how does the policy respond to repair work, and how are common exclusions such as condo conversion and subsidence handled?

•Be clear on how insurance costs are accounted for in the bidding and billing process.

•Make sure contracts use consistent language on insurance issues that reflect the implementation of a CIP. •Know how deductibles are allocated among the parties and make sure the bids reflect this assumption of risk.

CIPs can be mutually advantageous but before binding coverage, it’s important to take a critical look at terms and conditions.

A Squeeze on Additional Insureds Additional insured protection is continually changing, but the one constant in every new ISO form is reduced coverage offered to the additional insured party.

The latest ISO Additional Insured (AI) form, effective April 4, 2013, contains three significant revisions that introduce uncertainty into the risk management process.

A brief look at each revision reveals some potential challenges.

AI coverage only applies to the extent permitted by law. Does this void AI coverage if the contractual indemnity provision is void under the state anti-indemnity statute?

Some courts have ruled that the antiindemnity provision also applies to the AI www.insurancejournal.com

endorsement, and this creates a problem for insureds operating in multiple jurisdictions.

Coverage will not be broader than that required of the named insured by the contract or agreement to provide for such additional insured.

This means AI coverage will be no broader than the underlying agreement, regardless of the scope of the AI endorsement.

Limits of coverage afforded to the AI are the lesser of: a) the amount of insurance required by the contract or agreement, or b) limits shown in the declarations page for the named insured’s policy. This limits AI coverage to the contract terms or policy limits, whichever is less. Previously, if the carrier provided $2 million of per occurrence coverage and the loss was for $2 million, even if the contract only required $1 million of coverage, the carrier would have to pay the full $2 million loss. Under the new AI form, the carrier is obligated to pay only $1 million of the $2 million.

The new AI coverage restrictions and uncertainty over how the forms will be interpreted by the courts means that risk managers need to beware of the potential limitations of the new AI forms.

Shrinking Indemnity from Negligence The evolution of California law shows how changes in statutory indemnity limit traditional risk transfer models. California Civil Code Section 2782 was enacted to prevent construction contracts from requiring indemnity for claims arising out of design defects or one’s own “sole” negligence.

Subsequent case law amplified Section 2782 by defining three types of valid indemnity agreements: • Type 1 agreements afford protection to the indemnitee for everything but “sole” negligence.

• Type 2 agreements afford protection for “passive” but not “active” negligence.

• Type 3 agreements afford protection only in the event of the indemnitor’s negligence (MacDonald v. San Jose (1972) 29 Cal. App.3d 413).

The MacDonald analysis governed indemnity interpretation for many years.

However, recent legislation has limited the scope of indemnity protection and the www.insurancejournal.com

applicability of MacDonald.

In 2006, Section 2782 was amended to eliminate Type 1 and 2 indemnity from residential construction agreements. Therefore, residential builders no longer may seek indemnity for their own negligence regardless of how it may be classified. Also they may not seek indemnity from a subcontractor unless the claim arises from the subcontractor’s work. These limitations, however, do not affect additional insured rights.

In 2009, Section 2782 was amended to limit a residential builder’s ability to enforce

Additional insured protection is continually changing, but the one constant in every new ISO form is reduced coverage. defense indemnity obligations by allowing subcontractors to select their own counsel to defend the builder, or pay a “fair share” of the builder’s defense fees. A more recent enactment confers the same rights to commercial and public works subcontractors.

In addition, a new statute limits indemnity rights against residential subcontractors who enroll in owner-controlled insurance USA12043.qxd 1/4/08 2:26 PM Page policies. (Civil Code Section 2782.9 et. seq.)

Section 2782 was amended again in 2013 and a new statute was drafted. (Section 2782.05) These statutes collectively prevent virtually all public and commercial owners and contractors from seeking Type 1 indemnity. Unlike residential projects, however, Type 2 indemnity agreements can still be used in public and commercial projects to protect against liability for “passive” negligence.

These limitations do not affect additional insured rights or the right to recoup defense costs, known as “Buss rights.” (Buss v. Superior Court, 16 Cal.4th 35 (1997)) Construction risk is being shaped by narrowing definitions of indemnity, reduction in coverage for additional insureds and the presence of potential coverage gaps in project-specific insurance, or CIPs. Contractors who want to emerge with a healthy balance sheet should engage a risk manager with an understanding of claims and underwriting trends, legislation and case law.

McCall is executive vice president, Construction Practice Group of Lockton Pacific Series (LPS) in Irvine, Calif. Page is senior vice president of LPS in San Diego. Wright is senior vice president and construc1 tion department manager of Lockton Cos. in Denver.

January 12, 2015 INSURANCE JOURNAL-NATIONAL | 25

IDEA EXCHANGE

Tech Talk When It Comes to Mobile for Independent Agents It’s the App that Counts

By Tom Wetzel

Americans are always looking to save time, whenever and wherever ave agents reached a tipping point they can. Convenience, when it comes to making their serprompt service and easevices accessible with a smartphone? Some of-use rank as critical believe the independent agent still has factors when consumers time to adapt. Others argue that those who choose what products wait will be run over by competitors — and services to buy. It’s both direct writers and their digital-savvy also not hard to underagency brethren. It’s risky to make a prestand why the smartcise prediction. However, looking at how phone is so popular, not smartphone use has evolved provides some just with the young but eye-opening clues as to just how much with Americans of every time agents have to make changes to their age and background. current service and marketing models.

Smartphones place the For starters, smartphone penetration in world at one’s fingertips the United States is now seven out of 10 with just a click or two — and they do it Americans, according to Nielsen. Those almost anywhere. Agents who downplay smartphone owners are not all young the importance of the smartphone and either. Nielsen also reports that 51 percent of having their own app will pay a heavy of mobile owners over the age of 55 now price. own smartphones, up 10 percent from Jason Cass, an agent based in Centralia, 2013. Moms and millenials are the top Ill., and a passmartphone users and comScore reports that The window of opportunity is sionate digital advocate, puts it 18 percent of the latter still open but closing fast. bluntly. do all their browsing, “The client of today is going to get the emailing, social networking, and news information they want in the way they reading on a smartphone or tablet. The most want it,” he says. “A mobile app bottom-line is that the smartphone and makes it possible for an agent to provide the staggering array of apps developed for this information without the client going it has become the communications devicedirectly to the company, thus cutting the of-choice for huge chunks of an agent’s agent out of the equation. Customer ser clients and prospect vice is about creating a client experience pool. and the mobile phone is at the center of that experience.”

It’s well-known that one can now perform a staggering array of functions with a smartphone, including buying groceries, airline and theater tickets; checking the status of an order or a flight; making bank deposits; and paying bills.

Consumers can use their smartphone as

H

26 | INSURANCE JOURNAL-NATIONAL January 12, 2015

their wallet to buy merchandise with just the wave of their hand.

The medical profession has also embraced the smartphone to make communications easier and more immediate between patients and their healthcare providers.

The argument against agents making more use of the smartphone has been that insurance is too complex a product to be reduced to a smartphone. Consumers, however, are being conditioned to do everything with a smartphone. Many insurance carriers already make their policies, payments, and claims filing procedures accessible through a smartphone.

Why would insurance agents believe they are somehow exempt from making their services more accessible and immediate with a smartphone through their own agency-branded app?

The window of opportunity is still open but closing fast.

Wetzel heads his own insurance marketing firm that specializes in social media programs for agents through its Social Media Content Roadmap.

For more information, the firm’s website is www. wetzelandassociates.com. Contact him at twetzel@ wetzelandassociates.com.

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Employment Practices Liability Top Trends in Employment Practices Liability Claims

By Denise Johnson

U

npaid internships, illegal background checks, pregnancy and health-related employment discrimination continue to be the top trending employment practices litigation cases, according to industry experts.

Claims costs are rising, in part due to the length of time it takes to resolve an EPLI claim. According to an Advisen white paper released recently, defense costs can top out at $300,000 and the timeline for resolution can be anywhere from 18 to 24 months.

The paper reported that multiple claimant disputes are on the rise. Federal, state and city regulators as well as plaintiff attorneys can file a claim on behalf of an employee or group of employees.

The U.S. Equal Employment Opportunity Commission has 53 regional offices throughout the country and as such can file an action within state and federal courts.

According to Advisen, “For this reason, claim trends will vary by state, with certain states pursuing particular types of claims at any one time.”

The top four EPLI litigation generating states, according to Advisen, are: • New York • California • Texas • Florida Genetic Discrimination GINA, the Genetic Information Nondiscrimination Information Act which took effect Nov. 21, 2009, prohibits employers from using genetic information in employment-related decisions, classifying employees based on genetic information or requesting genetic information from an employee.

According to Gail Gottehrer, a partner with the East Coast firm of Axinn, Veltrop & Harkrider who often represents insurers, GINA governs the privacy of a person’s genetic information which is sometimes released with family medical histories.

Gottehrer said the agency has imple-

28 | INSURANCE JOURNAL-NATIONAL January 12, 2015

mented a strategic enforcement plan that includes a focus on preventing genetic discrimination.

“We’re seeing the EEOC bring class actions to enforce the Genetic Information Nondiscrimination Act. Employers should make sure that they are not requesting family medical history or other genetic information from job applicants or using that kind of information as part of their hiring process.

Requesting family medical history from job applicants has been found to be a violation of GINA,” said Gottehrer.

According to EEOC statistics, GINA lawsuits began being filed by the government agency in 2010. So far, the agency has filed a couple of individual actions and a class action based on the law.

Pregnancy Discrimination The EEOC’s Strategic Enforcement Plan also included pregnancy-related discrimination as one of its top six priorities between 2013 and 2016.

The Pregnancy Discrimination Act was enacted in 1964 and requires employers to allow pregnant employees to work at their jobs as long they can perform their jobs and employers aren’t allowed to hold pregnancy against a prospective new hire.

“The EEOC’s been very focused on that, too, and they’ve issued guidance recently about that, about making sure that women are hired even though they’re pregnant or not discriminated against, or make it harder for them to get jobs because they’re pregnant,” said Gottehrer.

Illegal Background Checks Lawsuits resulting from illegal background checks are also on the rise, according to experts.

“Recent class actions have focused on the use of pre-hiring background checks,” said Gottehrer. “Employers who use background checks will want to make sure that they

comply with the requirements of the Fair Credit Reporting Act and similar state laws and that they conduct the background checks uniformly, and not just for certain applicants or protected groups of applicants.”

According to Gottehrer, before a credit report can be requested as part of an application process, the potential employee must be notified in writing of the request and that it will be used as part of the employment decision.

Written permission from the job applicant is required to obtain a credit report.

Gottehrer said that with credit reporting there’s always a concern that there could be an error or decisions could be made based on inaccurate information. While it might be relevant for some job categories, she said it’s not necessarily relevant to others.

Unpaid Interns The Department of Labor has perimeters that they use for determining if an intern is or isn’t an employee, according to Gottehrer. Factors considered include whether there is an education component to the internship, benefits to the intern, an intern’s duties and whether they mirror an employee’s job duties.

“In light of the recent spate of unpaid intern class action filings and settlements, this is a good time for companies who have interns to review their internship programs, policies and practices,” said Gottehrer.

“Companies that can show that their programs have educational value, do not give interns work that would otherwise be done by employees, and do not automatically entitle interns to paid jobs at the conclusion of the internship will be well-positioned to argue that the participants are truly interns and not employees who are subject to the Fair Labor Standards Act.” www.insurancejournal.com

IDEA EXCHANGE

Sales Fuel Your Agency’s Success with High-Octane Leads

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eads are the fuel that powers an agency’s sales engine. And if you run out of fuel — or you’re trying to run your diesel engine on gasoline — you’re not going to make it very far. This is precisely what happens when you try powering your agency with poor-quality leads.

Your leads may be bad to begin with, or they may degrade over time. But before you can hope to transform your sales

By Jason Kulpa process, you have to understand what distinguishes a high-octane lead from a low-quality one.

How to Identify a High-Octane Lead When it comes to insurance leads, timing is everything. If the consumer was interested in purchasing insurance six months ago, that’s a poor-quality lead. High-octane leads happen in real-time. For example, a consumer who is in the late stages of the buying cycle and is actively searching for information on Google is in a prime position to buy.

Another key to lead quality is intent to purchase. Low-quality leads are often generated without effective targeting, such as when a prospective buyer is asked to check a slew of boxes to express interest, or when he is incentivized to fill out an online form to earn a coupon to his favorite store.

Agencies often run into trouble when they start buying low-quality leads from vendors. The problem is that a vendor isn’t just selling to your agency; he’s selling those leads to six of your fellow agents. And if several agents from the same carrier are calling a lead, they’re needlessly competing against one another. This problem is further exacerbated by aggregators that sell across vendors.

High-octane leads are measurable (i.e., you know how they were generated), verified, and internal. That means that the www.insurancejournal.com

company generating the lead controls the consumer’s entire experience. The consumer wasn’t incentivized to fill out a form, and he’s easy to contact.

phone number or any other information that might be relevant. Just don’t overwhelm the consumer with too many form fields.

Combine call and email strategies. Speed-toGoing From Zero to 60 call is the single-largest driver of lead con Once you know how to spot red flags version, but combining a call strategy with that indicate low-quality leads, you can a smart email marketing strategy can yield fine-tune your exceptional If you fill the tank with the best leads results. There sales engine for optimal and supercharge your sales strategy, are a number performance. you can turn your agency around. of software Fuel your solutions that engine with high-octane leads. To get more will automatically schedule calls and send good leads (and avoid the bad ones), avoid out emails according to a set plan. aggregators and buy directly from lead-gen Of course, these efforts will all go to erators. Teach your system to check for waste if you’re trying to run your sales undesirable lead characteristics before you engine without the right fuel. But if you buy, such as multiple leads from the same fill the tank with the best leads and superIP address, leads coming in batch formats, charge your sales strategy, you can turn and leads without duplication checking. It’s your agency around and pull ahead of the also good to use third-party fraud detection pack. services such as LeadiD. Audit your website’s content. Driving a Kulpa is the CEO of Underground Elephant, a prohigh-octane lead to your website does no vider of online marketing technology and customer good if the potential buyer can’t find what acquisition solutions. Servicing multiple industries, he’s looking for. Make sure the information including auto insurance, post-secondary education, on your website is accurate and easy to health insurance, and home services, Underground find. There should be an easily accessible Elephant provides cloud-based SaaS marketing form for receiving a quote or contacting technology and platforms. your agency for more information.

Create fresh, educational content. Film an interesting video on a subject that your ideal client might be searching for online, or create a series of educational blog posts and a squeeze page where visitors can opt-in to get a free educational report or booklet. You can use the free download to collect an email address, January 12, 2015 INSURANCE JOURNAL-NATIONAL | 29

IDEA EXCHANGE

The Competitive Advantage Insurance Policies — Too Clever by Half

I

have known coverage was only for delayed have a duty to read your policy and ask flights, missed connections and lost bagquestions if you have concerns,” the insured gage. This $25 tuition was a huge lesson rightly wonders what they paid the agent for me. The typical consumer would likely to do. be livid because they want the insurance Consider another, even more extreme, to pay for getting home late regardless of example of an old accidental hand and whether the plane they were supposed to foot injury policy I recently heard about. be on is late or if the airAccording to this particular line put them on a differ- Most producers policy, a person had to suffer ent airplane that arrived hand and a foot injury for and carriers are too acoverage. home late.

The policy was not scared or too clev- hand or foot.

The Details When I bought the er by half, patting People buy insurance to themselves on the travel policy, I never thought solve a problem. My probthe important distincback for making a about lem was not the flight tion between cancelled and was delayed or cancelled sale that does not delayed. My problem was but that I was getting getting to my destination late, really solve the home late. At that point, insured’s exposure. not which plane delivered I could not care less about me late. The policy at time of the details or the fine print. purchase did not explicitly warn that can Insureds could not care less about the cellations were not covered but if it had, I fine details when they have purchased a would have been much more aware. policy only to learn when a claim occurs Insurance companies are too clever-bythey have no coverage. Worse yet, when the half, seemingly offering coverage and then agent hides behind the disclaimer, “You taking it away. This is the image problem.

Another great example is when companies, particularly surplus lines companies, send a renewal and the forms have the same title ® and often even the same form number, but careful reading shows coverage has been stripped. (Which is why all surplus lines SALES & MARKETING IDEAS FOR P&C PROFESSIONALS policies should be reviewed in the agency to verify all renewal form names, form numbers, and edition dates are the same as expiring.)

When people don’t know what they are New Idea-Packed Book by Alan Shulman, CPCU purchasing, they will treat the purchase as a commodity. A commodity has no brand 500 Sales Ideas for Commercial Lines Producers by definition. Then companies wonder why features tons of traditional and social media-based their retention is poor and price alone is so approaches for prospecting and selling to smallimportant. to-medium sized businesses • Only $59

recently bought one of the new airline travel insurance policies. I’m on planes all the time visiting agencies and speaking across the country, so this new product appealed greatly to me. Many of my flights suffer lengthy delays and cancellations annually. The price ($25) was good, too, and being a quasi-insurance geek, I

By Chris Burand wanted to see how it worked. However, I’m only a quasi-insurance geek so I did not read the policy.

My flight was cancelled, I was rebooked on a later flight and so I filed a claim.

The claim was denied in about 30 minutes. I can’t say enough for the fast claim response. My claim was denied because the flight was cancelled and not delayed.

“Tomato”/”tomato.” I was going to get home late, whether on my original plane or a new plane, so it was all the same to me.

However, the policy was specific and if I’d bothered to read the language, I would

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Agent Value Proposition Agents have a valuable client proposition and that is to be a professional. Step up to the plate and be a pro. Don’t hide behind the “duty to read” language that makes a professional look underhanded. A profeswww.insurancejournal.com

sional insurance agent has the brightest future because when they understand a risk, not only can they advise the exposures that need coverage, they can explain what the policy covers and the important silent points. The silent points are key because a non-expert is highly unlikely to ever pick up on the silent points. Duty to read won’t help them even if they read every word three times.

Computers today can do the job of the hacks and peddlers just fine. Those agents are mostly obsolete. They are dinosaurs.

The environment has not quite extinguished them yet, but it is coming just as sure as the sun is rising. Whether technology gets them or companies eliminate them, it is just a matter of time. OCR (optical character recognition) technology is already being used to rate apples-to-apples and even compare coverages, and I have already seen companies cut agents’ commissions in half.

The peddlers still write with these companies, which begs the question, can they survive on half? At some small level, amateur insurance agencies will likely always have a role, but it will be in one- and two-person shops.

The perspective that insurance is a commodity obviously also negatively affects agencies, especially when agencies hide behind the “duty to read” language.

Commodities are, by definition, bought; quality is sold.

Professional insurance advice then, by definition, is sold. To avoid a poor image and commoditization, professional insurance services must be sold rather than relying heavily on marketing. The $6 billion in advertising being spent pretty much already makes this clear, at least to me. But I see a lot of agencies whose futures would be much brighter focusing on selling instead paying for marketing, either directly or indirectly. Selling insurance gives consumers the confidence a professional is looking after them.

Selling is personal. Marketing is not personal. Marketing by its nature is aimed at the masses (precise marketing programs are the exception, but these are rather rare in this industry). www.insurancejournal.com

Too Scared Most producers and carriers will not get the point of this article. They are too scared or too clever-by-half, patting themselves on the back for making a sale that does not really solve the insured’s exposure. For anyone with much experience, you have likely had the same experience at some point or another in your career when reviewing an account written by certain competitors.

It does not speak well of the industry or brand the industry well.

For the professionals, these are great times because while everyone else is running for cover, the best agents are standing proud as professionals. The best clients are recognizing these agencies. Without exception, my clients growing organically by double digits (after subtracting rate increases) are taking a stand and being justly rewarded. Their retention is 95 percent plus.

They are attracting the best and brightest employees and young people that create a vitality lacking in so many agencies. They

are attracting quality producers to their agency instead of searching fruitlessly as is so common.

Insurance is a fairly basic industry.

Rocket science it is not. The best time to get back to selling professional services rather than being too clever-by-half is today.

Are you up to it or are you running for cover?

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719485-3868. E-mail: chris@burand-associates.com.

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January 12, 2015 INSURANCE JOURNAL-NATIONAL | 31

2015

Insurance Industry Meetings & Conventions Directory

Welcome to Insurance Journal’s 2015 Insurance Industry Meetings and Conventions Directory. The information in this directory is taken from a larger database containing additional information on these and other meetings, including industry-related seminars, conferences and workshops. The online Insurance Journal events database can be found at www.InsuranceJournal.com/events. Meeting planners are invited to add new meetings, conventions and seminars to the database free of charge, all year long.

MCIEF Annual Conference January 10-February 10 Hyatt Regency Orlando International Airport Orlando, FL Motor Carrier Insurance Education Foundation www.transportationriskspecialist.com 2015 California Wholesaler Industry Days January 11-13 The Hilton La Jolla Torrey Pines La Jolla, CA CIWA www.ciwa.net P/C Insurance Joint Industry Forum January 13 Waldorf-Astoria New York, NY Insurance Information Institute www.iii.org 2015 Windstorm Insurance Conference January 19-22 Roosevelt Hotel New Orleans New Orleans, LA Windstorm Insurance Network Inc. www.windnetwork.com Big “I” Winter Meeting January 21-25 The Westin Mission Hills Golf Resort & Spa Rancho Mirage, CA Independent Insurance Agents and Brokers of America Inc. www.independentagent.com City of Hope Emerging Insurance Leaders Play18 Networking Event January 22 Play 18 Golf Chicago Chicago, IL City of Hope www.cityofhope.org/chicago American Bankers Association 2015 Insurance Risk Management Forum January 25-28 The Roosevelt New Orleans New Orleans, LA American Bankers Associaiton www.aba.com/Pages/default.aspx 32 | INSURANCE JOURNAL-NATIONAL January 12, 2015

52nd Annual Joe Vincent Management Seminar January 25-27 Renaissance Austin Hotel Austin, TX Independent Insurance Agents of Texas www.iiat.org IIA IOWA Rural Agents/Small Town Agency Conference January 28-29 Holiday Inn, Airport Des Moines, IA Independent Insurance Agents of Iowa www.iiaiowa.com/default.aspx Nevada Independent Insurance Agents 7th Annual Tradeshow January 29 Tuscany Suites & Casino Las Vegas, NV Nevada Independent Insurance Agents www.niia.org PIANY’s MetroRAP 2015 January 29 New York Marriott at the Brooklyn Bridge Brooklyn, NY Professional Insurance Agents of New York State Inc. www.pia.org

Xactware Solutions Inc. www.xactware.com NAMIC Claims Conference February 10-12 Wigwam Arizona Phoeniz, AZ NAMIC www.namic.org IIANC InsurEXPO15 February 18-19 Sheraton Imperial RTP Durham, NC Independent Insurance Agents of North Carolina www.iianc.com ACT/AUGIE Meeting February 18-20 Embassy Suites Downtown Convention Center Tampa, FL Independent Insurance Agents and Brokers of Arizona, Inc. www.independentagent.com/default.aspx IIA Houston “I” Day February 18 Houston Marriott Westchase Houston, TX Independent Insurance Agents of Houston www.iiah.org/

2015 Community Association CIRMS Insurance Masters Program January 29-31 Westin St. Francis San Francisco, CA Community Associations Institute (CAI) www.caionline.org/Pages/Default.aspx

PIA of Florida Agent Expo 2015 February 19-20 Embassy Suites Lake Buena Vista South Orlando PIA of Florida www.piafl.org/

2015 PLUS D&O Symposium February 4-5 Marriott Marquis New York, NY Professional Liability Underwriting Society www.plusweb.org

2015 NAPSLO Mid-Year Leadership Forum February 23-26 Fontainebleau Miami Beach Miami Beach, FL NAPSLO www.napslo.org

Xactware User Conference February 10-11 Grand America Hotel Salt Lake City, UT

MAIA Michigan Annual Convention February 24-25 Soaring Eagle Resort & Casino Mt. Pleasant, MI www.insurancejournal.com

Michigan Association of Insurance Agents www.michagent.org NAMIC Commercial Lines Seminar March 4-6 Chicago Marriott Downtown Chicago, IL NAMIC www.namic.org AAMGA University East 2015 March 10-11 Doubletree Buckhead Atlanta, GA AAMGA www.aamga.org PIACT’s Annual Convention 2015 March 12-13 Foxwoods Resort Casino Mashantucket, CT Professional Insurance Agents of Connecticut Inc. www.pia.org 11th Annual Insurance Public Policy Summit March 17 Ronald Reagan Building and International Trade Center Washington, DC Networks Financial Institute, Indiana State University www.isunetworks.org AAMGA 2015 Automation Conference March 21-24 Hyatt Regency Bellevue Seattle, WA AAMGA www.aamga.org NAMIC Personal Lines Seminar March 25-27 JW Marriott Hotel Chicago Chicago, IL NAMIC www.namic.org 2015 PIA National Federal Legislative Summit & Spring Governance Meetings March 25-28 Crystal City Marriott Arlington, VA National Association of Professional Insurance Agents www.pianet.com City of Hope: Hoops for Hope, Philadelphia March 26 Hard Rock Cafe, Philadelphia Philadelphia, PA City of Hope - National Insurance Industry Council www.cityofhope.org/niic

www.insurancejournal.com

PCI Marketing and Underwriting Professionals Seminar April 12-14 The Meritage Resort & Spa Napa, CA Property Casualty Insurers Association of America www.pciaa.net San Diego “I” Day April 15 Location TBA San Diego, CA IBA San Diego www.ibasandiego.com/

Society of Insurance Research www.sirnet.org 2015 PLUS Medical PL Symposium April 28-29 Location TBA Atlanta, GA Professional Liability Underwriting Society www.plusweb.org 2015 PLUS Professional Risk Symposium April 28-29 Location TBA Atlanta, GA Professional Liability Underwriting Society www.plusweb.org

FIWT Leadership & Education Mid Year Expo April 17-18 Omni Hotel Austin Southpark Austin, TX FIWT www.fiwt.com

IIAB of Minnesota Annual Convention April 29-30 Minneapolis Convention Center Minneapolis, MN MN Independent Insurance Agents & Brokers www.miia.org

2015 AAIS Main Event April 19-21 Four Seasons Hotel Santa Barbara Santa Barbara, CA American Association of Insurance Services www.aaisonline.com

BIG Convention Trade Expo 2015 April 30-May 3 Riverside Convention Center Riverside, CA BIG Independent Group www.biginsusa.com

PIANY’s Long Island RAP 2015 April 22 Crest Hollow Country Club Woodbury, NY Professional Insurance Agents of New York State Inc. www.pia.org

2015 Blue Ribbon Conference May 3-7 Mauna Lani Bay Hotel & Bungalows Kohala Coast, HI Independent Insurance Agents and Brokers of California

Big “I” Legislative Conference April 22-25 Hyatt Regency Washington Washington, DC PCI Human Resources Conference April 26-29 Caesars Palace Las Vegas, NV Property Casualty Insurers Association of America www.pciaa.net RIMS Annual Conference & Exhibition April 26-29 Ernest N. Morial Convention Center - New Orleans New Orleans, LA RIMS www.rims.org 2015 Spring Workshop Summit April 28-29 Progressive Insurance Company Conference Center Mayfield Village, OH

Directors’ Education Series: Boot Camp & Advanced Courses May 4-6 Intercontinental Hotel - Kansas City at the Plaza Kansas City, MO NAMIC www.namic.org NICB Special Investigations Academy May 4-7 Sheraton WestPort Plaza Tower Hotel St. Louis, MO National Insurance Crime Bureau www.nicb.org 2014 TMPAA Mid Year Meeting May 4-6 Hyatt Regency Atlanta, GA Target Markets Program Administrators Association www.targetmkts.com

January 12, 2015 INSURANCE JOURNAL-NATIONAL | 33

2015 Insurance Industry Meetings and Conventions Directory PIANJ-YIP Golf Open May 4 Olde York Country Club Chesterfield, NJ PIANJ-Young Insurance Professionals www.younginsuranceprofessionals.org/nj/ 116th IIAW Annual Convention May 13-14 Kalahari Resort Wisconsin Dells, WI Independent Insurance Agents of Wisconsin www.iiaw.com/ NCCI’s Annual Issues Symposium 2015 May 14-15 Portofino Bay Hotel at Universal Orlando Orlando, FL NCCI www.ncci.com Brand Camp 2015 May 17-19 Magnolia Hotel St. Louis St. Louis, MO Aartrijk www.aartrijk.com/brandcamp2015 PCI National Flood Conference May 17-20 Crystal Gateway Marriott Washington, DC Property Casualty Insurers Association of America www.pciaa.net AAMGA 89TH Annual Meeting May 17-20 Gaylord National Resort National Harbor, MD AAMGA www.aamga.org NAMIC Farm Mutual Forum May 19-21 The Osthoff Resort Elkhart Lake, WI NAMIC www.namic.org 2015 Canadian Insurance Financial Forum (CIFF) May 27 The Metro Toronto Convention Centre Toronto, Ontario MSA Research Inc. www.msaresearch.com/ciff 117th Annual IIAT Conference & Trade Show June 3-5 Grand Hyatt San Antonio, TX Independent Insurance Agents of Texas www.iiat.org

34 | INSURANCE JOURNAL-NATIONAL January 12, 2015

PIANJ/PIANY Joint Annual Conference 2015 June 7-9 Location TBA Atlantic City, NJ Professional Insurance Agents of New Jersey and New York State Inc. www.pia.org

IMCA Annual Conference and Showcase Awards June 21-24 Hutton Hotel Nashville Nashville, TN IMCA www.imcanet.com

IIA of Connecticut 26th Annual Golf Tournament June 8 Blackledge Golf Course Hebron, CT Independent Insurance Agents of Connecticut www.iiact.org

IIABL 2015 Convention June 21-25 Sandestin Beach Hilton Destin, FL Independent Insurance Agents & Brokers of Louisiana www.iiabl.com/default.aspx

PIANJ-YIP Fun Run 2015 June 9 Location TBA Atlantic City, NJ PIANJ-Young Insurance Professionals www.younginsuranceprofessionals.org/nj/

2015 PIA OR/ID EXPO June 23-24 Sheraton Portland Airport Portland, OR Professional Insurance Agents Western Alliance www.piawest.com

IIA Georgia 118th Annual Meeting & Trade Show June 11-13 Location TBA Amelia Island, FL Independent Insurance Agents of Georgia Inc. www.iiag.org/default.aspx Nevada Independent Insurance Agents 69th Annual Convention June 13-17 Edgewater Hotel Seattle, WA Nevada Independent Insurance Agents www.niia.org 2015 International Cyber Risk Management Conference June 14-16 Hilton Montreal Bonaventure Montreal, Canada MSA Research Inc. www.msaresearch.com FAIA’s 111th Anniversary Convention & Education Symposium June 18-20 Rosen Shingle Creek Resort Orlando, FL Florida Association of Insurance Agents www.faia.com/ NAMIC Management Conference June 21-24 The Coeur d’Alene Coeur d’Alene, ID NAMIC www.namic.org

PIACT-YIP Golf Open 2015 June 23 Lyman Orchards Middlefield, CT PIACT-Young Insurance Professionals www.younginsuranceprofessionals.org/ct/ MAIA Michigan YAC Conference June 24-25 Bavarian Inn Frankenmuth, MI Michigan Association of Insurance Agents www.michagent.org NAMIC Agricultural Risk Inspection School July 14-16 West Des Moines Marriott West Des Moines, IA NAMIC www.namic.org IIA Indiana Young Agents Conference July 15-17 Indiana University’s Memorial Union Bloomington, IN Independent Insurance Agents of Indiana PIA of Georgia Annual Agents Convention July 18-22 The Westin Savannah Harbor Golf Resort & Spa Savannah, GA Professional Insurance Agents of Georgia www.piaga.com 2015 TSLA Mid-Year Meeting July 19-22 Ritz Carlton Half Moon Bay Half Moon Bay, CA Texas Surplus Lines Assn. Inc. www.tsla.org www.insurancejournal.com

ACIC General Counsel Seminar July 21-23 Encore Las Vegas, NV Property Casualty Insurers Association of America www.pciaa.net IIAB Idaho’s 91st Annual Convention July 26-29 Riverside Hotel Boise, ID Independent Insurance Agents & Brokers of Idaho, Inc. www.iiaba.net 2015 FSLA Annual Convention July 29-31 The Ritz-Carlton Golf Resort, Naples Naples, FL Florida Surplus Lines Association www.myfsla.com City of Hope Midwest Insurance Golf Outing August 3 Bryn Mawr Country Club Lincolnwood, IL City of Hope www.cityofhope.org/chicago Trusted Choice Big “I” National Championship August 3-6 Prairie Dunes Country Club Hutchinson, KS Independent Insurance Agents and Brokers of America Inc. www.independentagent.com PIANY-YIP Golf Open 2015 August 17 The Seawane Club Hewlett Harbor, NY PIANY-Young Insurance Professionals www.younginsuranceprofessionals.org/ny/ IIABAZ’s 81st Annual Convention & Trade Show August 19-21 Arizona Biltmore Resort & Spa Phoenix, AZ Independent Insurance Agents and Brokers of Arizona Inc. www.iiabaz.com IAIABC 101st Convention August 31-September 3 The Drake Hotel Chicago, IL International Association of Industrial Accidents Boards and Commissions www.iaiabc.org IIA of Connecticut Annual Meeting & Installation of Officers September 6 www.insurancejournal.com

Wethersfield Country Club Wethersfield, CT Independent Insurance Agents of Connecticut www.iiact.org 2015 NAPSLO Annual Convention September 9-11 Location TBA San Diego, CA NAPSLO www.napslo.org PCI Information Technology Conference September 13-16 The Meritage Resort & Spa Napa, CA Property Casualty Insurers Association of America www.pciaa.net 45th Annual Conference & Exhibit Fair September 13-16 Walt Disney World Swan & Dolphin (Swan) Orlando, FL Society of Insurance Research www.sirnet.org IIA Iowa Annual Convention September 15-16 Prairie Meadows Altoona, IA Independent Insurance Agents of Iowa www.iiaiowa.com/default.aspx PIA National Fall Governance Meetings 2015 September 16-20 Hotel Monteleone New Orleans, LA National Association of Professional Insurance Agents www.pianet.com Spencer Educational Foundation Gala Dinner September 17 Waldorf Astoria New York New York, NY Spencer Educational Foundation www.spencered.org 2015 Washington Joint Conference and Trade Show September 17-18 Tulalip Resort Tulalip, WA Professional Insurance Agents Western Alliance www.piawest.com 2015 PLUS Cyber Symposium September 17 Location TBA Chicago, IL Professional Liability Underwriting Society www.plusweb.org

PCI Investment Seminar September 20-22 Hotel Viking Newport, RI Property Casualty Insurers Association of America www.pciaa.net IIA North Carolina 118th Annual Convention September 20-23 Marriott Grande Dunes Marriott Grande Dunes, SC Independent Insurance Agents of North Carolina Inc. www.iianc.com 2015 Alliance Convention & Expo September 24-27 JW Marriott Desert Springs Resort & Spa Palm Desert, CA American Agents Alliance www.agentsalliance.com 2015 IFCA Annual Conference September 27-30 Renaissance Washington DC Dupont Circle Hotel Washington, DC Insurance & Financial Communicators www.ifcaonline.com IIAT Small Agency Conference September 28-29 Embassy Suites Hotel San Marcos, TX Independent Insurance Agents of Texas www.iiat.org National African-American Insurance Association 2015 National Conference and Empowerment Summit September 30-October 2 Atlanta Marriott Marquis Atlanta, GA National African-American Insurance Association www.naaia.org/ 2015 National Insurance Conference of Canada (NICC) September 30-October 2 Le Centre Sheraton Montreal Montreal, Canada MSA Research Inc. www.msaresearch.com 2015 PIA of Montana Producer Seminar October 5-6 Best Western Great Northern Helena, MT Professional Insurance Agents Western Alliance www.piawest.com

January 12, 2015 INSURANCE JOURNAL-NATIONAL | 35

2015 Insurance Industry Meetings and Conventions Directory IIAV Young Agents’ Conference October 8-9 Omni Richmond Hotel Richmond, Virginia Independent Insurance Agents of Virginia www.iiav.com Insurors of Tennessee 122nd Annual Convention October 10-13 Holiday Inn World’s Fair Park Knoxville Knoxville, TN Insurors of Tennessee www.insurors.org IIA Nebraska Annual Convention October 14-16 Embassy Suites La Vista, NE Independent Insurance Agents of Nebraska www.iian.org/default.aspx IIAB South Carolina Annual Convention October 18-20 Sonesta Resort Hilton Head Island, SC Independent Insurance Agents & Brokers of South Carolina www.iiabsc.com/Education/Pages/default. aspx 70th Annual CPCU All Industry Day October 20 Sportsmen’s Lodge Studio City, CA CPCU www.losangeles.cpcusociety.org IBA Sacramento “I” Day October 20 Sacramento Convention Center Sacramento, CA

Insurance Brokers and Agents of Sacramento www.ibasacramento.com/ FIWT 71st Annual Convention October 25 Omni Corpus Christi Corpus Christi, TX FIWT - Federation of Insurance Women of Texas www.fiwt.com PCI Annual Meeting October 25-28 Diplomat Resort & Spa Hollywood, FL Property Casualty Insurers Association of America www.pciaa.net/web/sitehome.nsf/main 15th Annual TMPAA Summit October 26-28 Westin Kierland Resort Scottsdale, AZ Target Markets Program Administrators Association www.targetmkts.com PIANY’s Hudson Valley RAP 2015 October 28 Doubletree Hotel Tarrytown, NY Professional Insurance Agents of New York State Inc. www.pia.org

IIA Indiana Big “I” Annual Convention November 2-4 The Westin Hotel Indianapolis, IN Independent Insurance Agents of Indiana www.bigi.org/default.aspx 2015 TSLA Annual Meeting November 8-9 Four Seasons Hotel Austin, TX Texas Surplus Lines Association Inc. www.tsla.org PLUS 2015 International Conference November 11-13 Location TBA Dallas, TX Professional Liability Underwriting Society www.plusweb.org IIABCal Kern County 2015 Trade Show November 13-13 Location TBA Bakersfield, CA IIABCal Kern County IIA of Connecticut Mid-Year Convention December 11 Aqua Turf Club Plantsville, CT Independent Insurance Agents of Connecticut www.iiact.org

ACORD 2015 November 2-4 Boca Raton Resort Boca Raton, FL ACORD www.acord.org

Advertisers Index

Readers, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/ Agency Ideas www.agencyideas.com Anderson & Murison www.andersonmurison.com Applied Underwriters www.auw.com Burns & Wilcox Brokerage www.burnsandwilcoxbrokerage.com Burns & Wilcox Ltd. www.burnsandwilcox.com Catlin US www.catlinus.com CoreLogic www.corelogic.com Great American Insurance Group www.GreatAmericanELD.com Insurance Technologies Corp. www.getitc.com

36 | INSURANCE JOURNAL-NATIONAL January 12, 2015

30 31 2, 3, 40 19 7 17 18 9

Louisiana Commerce & Trade Association www.lctacomp.com McClelland & Hine www.mhi-tx.com Monarch E&S Insurance Services www.monarchexcess.com PersonalUmbrella.Com www.personalumbrella.com The Institutes www.theinstitutes.org U.S. Risk www.usrisk.com Universal Service Agency, Inc. www.universalbonds.com Vertafore, Inc. www.vertafore.com

SC5 SC4, SE3 W3 5 23 15 25 13

23 www.insurancejournal.com

NATIONAL COVERAGE

MyNewMarkets Building Materials Distributors & Manufacturers Program Market Detail: Empire Underwriters (www.empireunderwriters. com) has a general liability insurance program for manufacturers and distributors of building materials and products. This program is available to accounts that manufacture or distribute products or services used in home or building construction. Contractors’ licenses are not required for eligibility. Eligible classes include: appliance distributors and manufacturers; building material distributors; door and window manufacturers; electrical equipment distributors and manufacturers; heating and air conditioning equipment; locksmiths; lumberyards; manufacturers; metal goods dealers; paint manufacturers; plumbing suppliers; wood products manufacturers and more.

Available Limits: As needed Carriers: Unable to disclose, admitted States: Calif., Nev. and Texas Contact: Jay Jaggers at 800-758-8113 or email: jay@ empireunderwriters.com

Fraternal Organizations Market Detail: RV Nuccio & Associates (www.rvnuccio.com) coverage offerings include crime, medical payments, accidental death, CGL, trade shows and festivals, inland marine, weather, EPLI, and nonprofit D&O. Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Customer service at 800-567-2685

Vendors & Exhibitors Market Detail: Abacus Insurance Brokers (www.abacus.net) provides coverage for a vendor, exhibitor or concessionaire at a single trade show, festival, fair and similar festivities. Includes coverage up to 30 days and no restriction on the number of attendees. Coverages include: GL; liquor liability; automobile liability and physical damage; third-party property damage; rented equipment, props, sets and wardrobe; excess liability; and owned equipment (all risk).

Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Darren Lewin at 310-500-2302 or email: darren.lewin@ abacus.net

Retail Centers & Strip Malls Market Detail: Insurance Noodle’s (www.insurancenoodle.com) retail center platform carriers offer coverage options for facilities’ property owners to tenant businesses. For store operations, the business owner’s policy coverage extends to product inventory and includes business income protection. Retail center and store risks include strip centers, open-air malls, enclosed malls with retail tenants including boutiques; card and gift shops; florists; and nail salons. Bars, bowling alleys and tattoo parlors are excluded. Eligible classes include property values up to $15 million, per location; store sales up to $10 million, per location; and new ventures acceptable.

Coverages include: property, GL, auto liability, workers’ comp, umbrella, inland marine, and other standard lines including industry-specific coverage enhancements; public and private-company D&O and E&O. Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states except Alaska, Fla., Hawaii, La. and Minn.

Contact: Brian Dunn at bdunn@insurancenoodle.com www.insurancejournal.com

Brokerage Property Market Detail: MAXIMUM (www.maxib.com) has wholesale access to more than 50 markets and has both brokerage and underwriting facilities available. Specializes in construction, energy, gaming, healthcare, habitational, manufacturing, real estate investment trusts (REITs), real estate and vacant buildings.

Available Limits: Minimum $25,000, maximum $15 million Carriers: Various, admitted and non-admitted available States: All states Contact: Leanna Rak at 312-559-9343 or email: leannar@maxib.com

Auto Repossessors Program Market Detail: The Insurance Professionals (www.theinspros. com) auto repossessors program is available on admitted paper in all eligible states.

Available limits: Minimum $250,000, maximum $1 million Carrier: White Mountain Group States: All states except Hawaii, Mass. and W.Va. Contact: Michael Chernek at 480-905-5103 or email: mike@ theinspros.com

Property Insurance Market Detail: Tracy Driscoll Insurance (www.tracy-driscoll. com) offers property coverage insurance for buildings and business personal property, and logging garages. Commissions can be split on occasion with an agreement in place.

Available limits: As needed Carrier: Unable to disclose States: Ky., Maine, Mass., N.H., N.Y., R.I., and Vt. Contact: Veracity Insurance at 866-395-1308 or email: info@ veracityins.com January 12, 2015 INSURANCE JOURNAL-NATIONAL | 37

IDEA EXCHANGE

Closing Quote

Insurance as a Form of Capital

By Spencer Macalaster “

Y

our building is on fire!” Terrible words to hear late at night — or anytime for that matter. Without warning, a portion of your invested capital can disappear in a matter of minutes.

Both private and public companies require capital to operate and grow. There are many aspects of risk that companies face in the course of acquiring, selling, managing, developing or owning property. Risk managers, along with their consultative brokers, identify the risks and then design, negotiate and implement insurance programs that can provide the capital to rebuild, replace and continue operations. Companies can spend a significant amount of money to mitigate risk by crafting contractual language to address their concerns, which may address some of the exposure, but not all. The use of insurance programs are designed to provide protection as a backstop to contractual language, as well as to provide coverage for those areas

38 | INSURANCE JOURNAL-NATIONAL January 12, 2015

where contractual wording may not go far enough.

Capital, in the most basic terms, is money. All businesses must have capital to purchase assets and maintain their operations. Most companies maintain their liquidity or capital through earnings and cash flow. Companies with predictable earnings will maintain their valuation either through potential value in the marketplace if they are a private company or through increased stock value if they are a public company. Higher market valuation or stock prices are a form of currency the company can use to grow and expand.

In the case of debt capital, the cost is the interest rate that the firm must pay to borrow funds. For equity capital, the cost is the returns that must be paid to investors in the form of dividends and capital gains. In the case of insurance capital, it is the premiums paid for the limits of insurance purchased to protect against catastrophic losses.

Avoiding interruptions in earnings or reducing volatility in earnings has the potential to help companies maintain a predicable source and cost of capital. Companies that are able to maintain a strong balance sheet will generally be able to obtain funds under more reasonable terms than other companies during an economic downturn or catastrophic loss.

Companies can protect themselves against unexpected events that could have a negative impact on expected earnings. They can tighten their budgets, establish conservative cash reserves, or limit customer credit; lower borrowing costs; seek to obtain better credit terms from their In many cases, the vendors; cut expenses; institute most overlooked safety programs throughout form of capital is operations; or outsource dangerous activities. However, acciinsurance. dents and large, unanticipated negative financial events can still occur and affect earnings. What are the options?

Businesses can look to fund the event through additional debt capital or raise equity capital. In many cases, the most overlooked form of capital is insurance. If a company has the correct types of insurance, it can use it as a source of capital to the extent it applies to the loss, to the level of the policy limits. Insurance is a form of risk-management used to hedge against the risk of a contingent, uncertain loss. It can be a very effective hedge against volatility of expected earnings due to a catastrophic corporate loss.

Macalaster is executive vice president and Real Estate Practice leader at Risk Strategies Company.

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