Insurance Journal West 2015-02-09

WEST Utah Traffic Fatalities Rose in 2014 ‘Tsunami-Proof’ School in Washington Calif. Court Rejects Prop. 103 Challenge

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WEST On The Cover

Inside This Issue

Special Report: Circle of Diversity Serving Nonprofits & Social Services

February 9, 2015 • Vol. 93 No. 3 • West

W4

24

26

34

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

8

W1 California Court Rejects Insurance

Challenge to Prop. 103

24 5 Cornerstones for Advancing

Digital Technology Strategy

in 2015

P/C Insurers’ Surplus Rose, Profitability Fell in 2014’s First 9 Months

10 Top Vehicle Claims Trends

from 2014 14 Spotlight: 10 Things to Know

About Business Auto 16 Worst Insurance Fraud Scams

of 2014 18 Special Report: Circle of Diversity

Serving Nonprofits & Social

Services

W1 Work on ‘Tsunami-Proof’ School

on Washington Coast Underway W4 Oregon Man Sues Walmart

over Gas Can Explosion W4 Wyoming Fracking Trade-Secret

Justification Required Under Deal

26 Cyber Insurance: Last Line

of Defense or Frontline Offense?

28 The Competitive Advantage: Chris

Burand 30 2014 Best of the Best:

Year in Review 34 Closing Quote: Tomorrow’s Talent

Challenge

22 Closer Look: Agency E&O

and Cyber Exposures

DEPARTMENTS W2 11 11 12 32

4 | INSURANCE JOURNAL-WEST February 9, 2015

People Declarations Figures Business Moves MyNewMarkets

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NATIONAL COVERAGE

Opening Note

Publisher Mark Wells | mwells@wellsmedia.com

Child Safety Ad Gone Wrong?

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ationwide Insurance ran into some social media backlash to its Super Bowl commercial that the company says was intended to spark a “fierce conversation” about preventing childhood deaths.

The insurer issued a statement explaining and defending the ad.

The ad depicted a little boy talking about how he will never kiss a girl, ride a bike, fly, travel the globe, or marry. Why? Because he died from a preventable household accident.

The ad is titled, “The Boy Who Couldn’t Grow Up.” The company was promoting its “Make Safe Happen” program about ways to increase safety at home. According to the Centers for Disease Control and Prevention, preventable injuries are the number one cause of death of children.

Judging from social media complaints, childhood death is apparently not a conversation people want during Super Bowl parties. Bloomberg reported that about 64 percent of the social media buzz was negative, the worst of any advertising in the Super Bowl, according to Amobee, a digital marketing platform.

However, the ad apparently worked to the extent that the company said thousands went online to its Make Safe Happen website.

Matt Jauchius, Nationwide’s chief mar‘If we save one child as a keting officer, told NPR’s result of what we did in the Morning Edition on Feb. 3, Super Bowl, it is more than the ad accomplished what the insurer expected. worth it.’

“We wanted to stage an intervention to start a conversation, and we knew if the creative went too far it would shut people down and there would be no conversation; we did not do that,” Jauchius said. “But on the other hand if we were too light and didn’t come out strong enough in a Super Bowl it might not make anyone talk about things.”

Nationwide issued this statement about the childhood death ad after the Super Bowl: “Preventable injuries around the home are the leading cause of childhood deaths in America.

Most people don’t know that. Nationwide ran an ad during the Super Bowl that started a fierce conversation. The sole purpose of this message was to start a conversation, not sell insurance.

We want to build awareness of an issue that is near and dear to all of us — the safety and well being of our children. We knew the ad would spur a variety of reactions. In fact, thousands of people visited MakeSafeHappen.com, a new website to help educate parents and caregivers with information and resources in an effort to make their homes safer and avoid a potential injury or death. ... While some did not care for the ad, we hope it served to begin a dialogue to make safe happen for children everywhere.”

Jauchius ended his NPR interview with this: “If we save one child as a result of what we did in the Super Bowl, it is more Andrea Wells than worth it.”

Editor-in-Chief

6 | INSURANCE JOURNAL-NATIONAL February 9, 2015

EDITORIAL Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@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, Tommy McDonald Contributing Writers Jeff Amy, Natalie Lehr, Tom Quy, Jerome R. Stockfisch, Marguerite Tortorello, Stephen A. Waldman, Bruce Winterburn SALES Chief Marketing Officer Julie Tinney (800) 897-9965 x148 | jtinney@insurancejournal.com Sales Manager Lauren Knapp (800) 897-9965 x161 | lknapp@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 | dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@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 Chief Technology Officer/Chief Innovation Officer Joshua Carlson | jcarlson@insurancejournal.com V.P. of Design Guy Boccia | gboccia@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 P/C Insurers’ Surplus Rose, Profit Fell in 2014’s First 9 Months

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he first nine months of 2014 saw policyholders’ surplus for the U.S. property/ casualty insurance industry reach record levels. At the same time, net income after taxes declined substantially and overall profitability took a noticeable dip.

As well the annualized rate of return on average policyholders’ surplus declined, and the industry-wide combined ratio worsened.

Those findings stem from an industry assessment conducted by ISO, a division of Verisk Analytics, and the Property Casualty Insurers Association of America. They reflect mixed perspective about where the industry stands.

Michael Murray, ISO’s assistant vice president for financial analysis, said insurers’ deterioration in underwriting results and overall profitability is cause for concern.

Readers’ Choice:

Predictions for 2015

InsuranceJournal.com asked readers which of the following statements they believed would happen in 2015. Obamacare and drones topped the list.

30.27%

(158 votes)

Congress will repeal Obamacare but President Obama will veto the repeal measure

27.78%

(145 votes) P/C carriers will be allowed to use drones to survey claims scenes.

17.43%

(91 votes)

Uber and other transportation firms will lose favor and fade.

16.67%

(87 votes)

Reinsurance rates will begin rising.

7.85%

(41 votes)

A hurricane will do more damage on the East Coast than Superstorm Sandy did.

Total Votes: 522

8 | INSURANCE JOURNAL-NATIONAL February 9, 2015

“The deterioration in underwriting results raises questions about the quality or sustainability of earnings,” Murray said in prepared remarks.

“The prospect that underwriting results could deteriorate as we close the books for 2014 and move through 2015 is a bit troubling because insurers’ overall rate Robert Gordon, PCI’s senior vice presiof return is already subpar compared with dent for policy development and research, long-term historical norms and because noted that policyholders’ surplus hit a insurers now need much better underwritrecord-high $673.9 billion as of Sept. 30, ing results just to be as profitable as they 2014, up by $20.5 billion over the same periwere in the past.” od last year.

Specifically, the P/C industry’s net He said that the result is “a testament to income after taxes for the first nine months the strength and safety of insurers’ commitof 2014 came in at $37.7 billion, down $5.1 ment to policyholders.” billion from $42.7 billion generated over the “Insurers are strong, well same period in 2014. capitalized, and well prepared Tellingly, insurers’ overall ‘The prospect pay for future claims,” profitability as determined that underwriting to Gordon said in prepared by their annualized rate results could remarks. of return on average poliAt the same time, he cyholders’ surplus landed deteriorate as we said a major storm or cataat 7.6 percent, down from close the books strophic event could make 9.4 percent from the 2013 for 2014 and move a big difference, so insurers, January to September perithrough 2015 is a homeowners, businesses and od. government officials “must As well, the drop in bit troubling …’ remain focused on risk maninsurers’ pretax operating agement, disaster readiness, loss mitigation, income stemmed from a decline in underand building economic resiliency to miniwriting results. ISO/PCI said net gains on mize the human tragedy caused by future underwriting dropped to $4.3 billion from catastrophes.”

January through September 2014, down Other P/C industry results from January from $10.3 billion over the same period in through September 2014: 2013.

• Net written premiums rose to $377 The combined ratio came in at 97.7, an billion, a nearly 4 percent hike over the uptick from 95.8 as compared to the first same nine-month period in 2013 nine months of 2013.

• Net earned premiums rose to $362.3 One thing that remained steady: net billion, up 4.1 percent from $347.9 investment income. For both the first nine billion generated in the January through months of 2013 and 2014, it came in at about September 2013 period. $34.3 billion. www.insurancejournal.com

NATIONAL COVERAGE

News & Markets Top Vehicle Claims Trends from 2014

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he top five states in which a person was most likely to file an auto claim last year were all on the East Coast.

December had the lowest volume of all vehicle claims of any month.

Those are just two of the facts mined by Progressive Group of Insurance Companies as it analyzed all of its claims in all 50 states and the District of Columbia to determine where and when claims occurred. Progressive looked at multiple areas it insures — auto, motorcycle, boat and commercial lines — and created a report for each, with a breakdown of the top claims.

Commercial lines vehicles and personal autos share similarities including the top months for claims being May and June, and the top three claims being rear-end accidents, single-vehicle claims, and parked claims.

The most common personal auto claim is for rear-end accidents while for commercial auto, that spot was held by backing claims.

“In my experience, truckers are great

10 | INSURANCE JOURNAL-NATIONAL February 9, 2015

of claims. This was largely due to the spring drivers; but when you’re moving a rig that hail season, an often-overlooked catastrophe size into tight spaces, accidents can hapthat damages thousands of vehicles each pen,” said Mark Leadem, commercial auto year. claims field specialist. “Private passenger •The weekend might seem like a more vehicles like cars and SUVs are much smalldangerous time to be on the road, however er and don’t face the same challenges.” more claims occurred on each of the week Not surprisingly, Saturday was the busidays than on either Saturday or Sunday. est day for motorcycle accidents, followed •One might think that

by Sunday and Friday. July The most common the biggest dangers on the was the busiest month for road for motorcyclists are motorcycle claims in 2014, personal auto claim followed by August and is for rear-end acci- cars and trucks, but in 2014 June. dents while for com- there were more single-vehicle motorcycle claims “On one hand, the data mercial auto, that than any other type. In fact, reinforces what we already spot was held by there were more single-veknew, which is that we hicle claims than the next see the most claims in backing claims. three types combined.

July during the peak of •Drivers are more likely to have their the summer riding season,” said Scott Hall, car broken into or stolen in the District of Progressive motorcycle product manager.

Columbia than any other state. The rest “But what’s really almost counter-intuitive of the states in the top five for theft and and worth calling attention to is that in break-ins were California, Washington, 2014, Progressive saw the most motorcycle Missouri and Hawaii. claims from single-vehicle accidents — far •The top five states in which a person more than rear-end, intersection, and stolen was most likely to file an auto claim were bikes combined. all on the East Coast — the District of So the message Columbia, Massachusetts, Maryland, New is, even when York and South Carolina. The state where other vehicles customers were least likely to file an auto aren’t around, claim was Oklahoma. you need to be The fourth of July weekend was particuextremely vigilarly dangerous for boaters in 2014, with the lant on the open top three days for boat claims being July 5, road.”

July 4 and July 6.

Other notable “The goal of this report is to empower claims trends people with information so they can avoid from Progressive accidents,” said Mike Sieger, claims operain its 2014 Year tions leader at Progressive. “For example, in Claims report when people see that rear-end accidents include: were the top claim of 2014, maybe they’ll •While winthink twice before following the person ter driving can in front of them too closely. Or seeing that be dangerous, intersection claims are high on the list December saw could help convince them that running that the lowest volred light isn’t worth the time you save. We ume of claims hope consumers can use this data to their of any month, advantage when they’re on the road or on and May had the the water.” highest volume www.insurancejournal.com

WEST COVERAGE

News & Markets California Court Rejects Number of Utah Driver Cards Insurance Challenge to Prop. 103 Issued to Immigrants Falls

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he Sacramento Superior Court issued a decision in mid-January rejecting an insurance industry challenge to the California insurance commissioner’s regulations under Proposition 103.

Among other things, Prop. 103 limits the amount of advertising costs insurers may pass on to consumers through insurance premiums.

Commissioner Dave Jones called the ruling in Mercury v. Jones an important win for California.

The case began when Mercury sued Jones to challenge an order reducing Mercury’s homeowner insurance rates.

Trade associations, including the American Insurance Association, National Association of Mutual Insurance Companies, Pacific Association of Domestic Insurance Companies, the Personal Insurance Federation of California and the Property Casualty Insurers Association of America joined the lawsuit against Jones to challenge his regulations under Prop. 103.

Prop. 103 requires, among other things, for property/casualty insurers to justify their rates.

Jones said his regulation prohibits insurers from “saddling consumers with the cost of insurers’ generalized or brand advertising for such things as corporate sponsorships of sporting events, purchases of luxury boxes, and insurer name branding on stadiums and arenas.”

he number of driver privilege cards issued in Utah to immigrants in the United States without permission hit a six-year low in 2014, state figures show.

The 35,200 cards issued last year are down from a high of 43,000 in 2008. The state issued 36,300 in 2013 and 36,900 in 2012.

Since 2005, Utah has issued driving-privilege cards that must be renewed annually for those who cannot prove they’re in the country legally. The figures show that immigration has slowed in Utah, said Pam Perlich, senior research economist at the University of Utah.

The Pew Research Center estimates that there are 100,000 immigrants without legal permission living in Utah.

Normal driver-privilege cards are good for only one year. They cost $25 for an adult and $30 for people under 21 — the same cost as a regular driver’s license. But unlike regular driver’s licenses that are valid for five years, immigrants have to renew and pay each year.

They must also pay $55 for fingerprints and background check. The costs may be a slight deterrence for some, said Garza and Mark Alvarez, an attorney and activist in the Latino community.

Copyright 2015 Associated Press.

Traffic Fatalities Rose 16 Percent in Utah in 2014, Report Shows

Work on ‘Tsunami-Proof’ School on Washington Coast Underway

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he Utah Department of Transportation says 256 people died on roadways across the state in 2014, up 16 percent from 2013.

It was Utah’s highest death toll since 2008, and it reversed a trend that saw fatalities drop 41 percent during the previous 13 years.

A department report says preliminary numbers show aggressive driving resulted in 68 deaths and drunken or impaired driving was a factor in 26 deaths. Department spot checks show 83 percent of people wear seat belts, but nearly half of all people killed in accidents last year were not wearing them.

Of the total increase last year, 25 deaths involved motorcyclists, pedestrians and bicyclists. Motorcycle deaths climbed to 45, pedestrian deaths rose to 39 and bicycle deaths rose from six to nine.

Copyright 2015 Associated Press. www.insurancejournal.com

round has been broken for a new school building on the Washington coast at Westport that officials say is designed to be tsunami-proof.

The planned “vertical evacuation structure” will be an addition to the Ocosta Elementary School. School children toting shovels and clam guns were on hand for the January groundbreaking for the new 30-foot-tall gymnasium that will double as a safe haven in case of a tsunami. Planners say 1,000 students, staff and Westport residents will be able to fit on the rooftop platform.A high school and lower grades all share the same property.

Emergency coordinators say a big earthquake offshore could trigger a tsunami that could hit in 20-30 minutes.

Pile drivers plan to dig down 50 feet to provide enough structural support for the building to withstand giant waves.

Copyright 2015 Associated Press.

February 9, 2015 INSURANCE JOURNAL-WEST | W1

WEST COVERAGE

People Dawnya Campbell

Michael Tourtellott

Dustin Wittwer

Barbara Brannen

Capital Insurance Group has named Dawnya Campbell agency development manager for the Western portion of the Bay Area Territory in the Northern California Region.

The regional team serves independent agents for agri-business, personal lines and commercial lines accounts. Campbell will be working mainly with agents in the Peninsula and Western portion of the Bay Area.

Campbell has nearly 20 years of insurance experience.

She began on the agency side in new and renewal account marketing. For the past 15 years, she has managed agents, production and profit for national and regional P/C carriers.

CIG insures personal auto, homeowners, farmowners, condo owners, vacation property, renters, apartment building owners, and other types of commercial and agricultural auto and property.

USG Insurance Services Inc. has launched a new office in San Diego, Calif. and hired Michael Tourtellott as a producer and broker in the office.

Tourtellott will handle commercial lines accounts nationally, with a focus on their product lines.

Tourtellott has extensive knowledge and experience in the energy, oil, and gas sector. Prior to USG, Tourtellott was a broker at Sloan Mason Insurance Services and account executive at G.S. Levine Insurance Services Inc. USG is a national wholesaler and managing general agent with 17 offices across the country.

Dustin Wittwer has joined Dixie Leavitt Agency’s Cedar City, Utah sales office specializing in commercial insurance.

Wittwer has a background in sales and experience working as a department manager at Scheel’s Sporting Goods.

Dixie Leavitt Agency is part of Leavitt Group.

Pinnacol Assurance in Colorado has named Barbara Brannen vice president of human resources.

Brannen will oversee the company’s human resources and learning and organizational development areas.

Brannen has 35 years of experience. Her previous roles include vice president of human resources at Innovative Services of America, Qwest Communications and Rose Medical Center. She also served as director of human resources for the University of Denver and Thera-Care in Boston. For the past 12 years, she has provided human resources services through her company, Playmore LLC. Pinnacol provides safety and wellness programs to more than 55,000 Colorado businesses.

W2 | INSURANCE JOURNAL-WEST February 9, 2015

PMC Insurance Group has named Tim Viccari regional vice president in the West region.

Viccari will be responsible for growth in the region focusing on agency development, market relationships and overseeing the firm’s new business underwriting team.

He comes from PMC from Brown & Brown/Beecher Carlson.

PMC Insurance is a national workers’ compensation wholesaler.

Mark Atkins has joined OneBeacon Surety Group as vice president overseeing the Northwest region.

Atkins will service Alaska, Northern California, Colorado, Idaho, Montana, Oregon, Washington and Wyoming.

Atkins has more than 15 years of financial services experience, the most recent spent in the surety industry.

OneBeacon is a Bermuda-domiciled holding company that is publicly traded on the New York Stock Exchange under the symbol “OB.” Worldwide Facilities Inc. has named Joe Rowland vice president and broker specializing in casualty products in its Irvine, Calif. office.

Rowland will be responsible for new business development in the casualty arena.

Rowland has more than 25 years of casualty brokerage experience. He previously worked with the CRC Wholesale Group in Santa Ana. Worldwide Facilities is a national wholesale insurance broker and managing general agent.

Pacific Compensation Insurance Co. has named Ronnie O’Dell corporate development director.

O’Dell will focus on expanding PacificComp’s presence in the California workers’ compensation marketplace. He will be based in the Pacific Compensation’s Agoura Hills, Calif. office.

O’Dell has more than 20 years of sales, marketing and business development experience. Most recently, O’Dell was program manager for Alternative Risk Marketing, a non-standard workers’ compensation market for middle market high hazard high experience modification risks.

He also served as the marketing and business development manager at Atlas General Insurance Services LLC. O’Dell has also held managerial positions at ADP, Kurt Salmon Consulting and Allianz USA. Agoura Hills-based Pacific Compensation, a subsidiary of Alleghany Corp., is a specialty writer of workers’ comp insurance. www.insurancejournal.com

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WEST COVERAGE

News & Markets Oregon Man Sues Walmart over Gas Can Explosion

Wyoming Fracking Trade-Secret Justification Required Under Deal

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Coos County, Ore., man badly burned when he poured gasoline on a fire is suing Walmart, claiming the gas can he bought there was defective.

Daniel Rowlett is seeking $13 million. He says Walmart sold him a plastic can produced by Blitz USA that exploded as he poured fuel into a burn barrel in October 2013. He suffered burns over nearly half his body.

The company that made the gas can went out of business after more than 80 people sued. Many accused Blitz of not fitting the spout of its gas can with an inexpensive safety screen that would have blocked flaming fuel vapors from shooting back into the container and causing an explosion.

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Walmart agreed in 2013 to chip in $25 million to resolve the litigation, with Blitz paying $136 million.

Walmart spokesman Randy Hargrove said the company requires all products to meet safety standards. He added that “It’s unfortunate when people misuse gas cans because tragic injuries can result.’’

Copyright 2015 Associated Press.

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W4 | INSURANCE JOURNAL-WEST February 9, 2015

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legal settlement will require petroleum companies to provide justification when they ask Wyoming regulators to withhold from the public details about the chemicals they pump underground.

Last year, the Wyoming Supreme Court sided with a group and against Wyoming regulators in a lawsuit that sought public disclosure of the ingredients in those fracking products. A settlement requires detailed justification when companies claim the ingredients are trade secrets.

At issue are chemicals used in hydraulic fracturing, the process of pumping water mixed with sand and chemicals into wells to get oil and gas deposits.

Copyright 2015 Associated Press.

Montana Man’s 11th DUI Gets 50 Years

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49-yearold Helena, Mont. man who has been convicted of 11 drunken driving offenses has been sentenced to 50 years in prison.

District Judge Kathy Seeley sentenced Shawn Kevin Smaage in late January, saying he would have to serve at least 25 years.

Court records say Smaage was convicted of driving under the influence three times while he was a juvenile and five times as an adult, along with felony criminal endangerment in a 1994 drunken driving case and negligent homicide for a 1988 crash in which a 15-year-old Helena girl was killed.

Smaage was on parole in December 2013 when he was arrested on his latest DUI. Smaage asked the court for help, saying he didn’t want to hurt himself or anyone else. Seeley said she didn’t see any chance for rehabilitation.

Copyright 2015 Associated Press. www.insurancejournal.com

NATIONAL COVERAGE

FIGURES

DECLARATIONS

$250,000

The amount large Wyoming employers would have to pay when safety violations result in worker fatalities under a bill winding its way through the Legislature. The Senate Labor, Health and Social Services Committee in January recommended approval of the bill. Wyoming long has been among the top states in the rate of worker fatalities.

Jumping the Uber Gun

“We jumped the gun, and we shouldn’t have.”

1.8 Million

The number of Oklahomans who are being affected by an ongoing, deepening drought, according to the U.S. Drought Monitor.

More than 60 percent of Oklahoma remains classified in moderate drought or worse.

Most areas experiencing exceptional drought are in the southwest corner of the state.

36%

The percentage of bridges in New Jersey that need repair, improvement or replacement, according to a report last month from the nonprofit Washington, D.C.-based research group TRIP. The report also said 35 percent of New Jersey’s major roads are in poor condition, providing motorists with a rough ride.

120,000

The number of people in Iowa and Nebraska who are insured for health coverage by CoOportunity Health, which Insurance Commissioner Nick Gerhart is seeking to liquidate. Gerhart says the cooperative’s medical claims would exceed its cash on-hand. He said special insurance-guarantee funds will pay outstanding claims, but recommended people find other health insurance coverage by March 1 or earlier.

$5 Million The amount South Carolina paid in claims for damages from the state’s roads in the past year. Money from the state Insurance Reserve Fund was paid to motorists and others whose cars were damaged or who were injured or killed. The state also spent more than $2 million on legal costs related to the road claims.

www.insurancejournal.com

— Jean Shiomoto, director of the Department of Motor Vehicles in Sacramento, Calif., said in a Jan. 23 statement that the agency is rescinding a notice that said private drivers for ride-sharing companies such as Uber Technologies Inc. and Lyft Inc. must have a commercial license plate or risk getting a citation, because of uncertainty about how the law relates to more recent regulations affecting ride-share operators.

No Caps = Hellhole

“Missouri will continue to be a judicial hellhole.”

— Missouri Senate Majority Floor Leader Ron Richard, R-Joplin, says a constitutional amendment capping punitive damages in lawsuit awards is a top priority of his for the legislative session. Proponents of noneconomic damage caps say they create more certainty for businesses, hospitals and doctors, and lessen the possibility of the state becoming a “judicial hellhole.”

Police Presence Needed

“These are crimes of opportunity, these people are lying in wait. … You need to have a police presence.”

— Lawyer Harry Widmann commenting on the effect of understaffing at the New Orleans police department. The force has lost about 500 officers since Hurricane Katrina struck in 2005 and it is now down to about 1,150 – far fewer than the 1,600 that Mayor Mitch Landrieu would like. Widman’s California colleague was beaten unconscious in December after he was attacked on his way back to his hotel in New Orleans’s French Quarter, and citizens are worried about what might happen during the city’s famous Mardi Gras celebrations this year.

Concussion Lawsuit

“Under the guise of providing entertainment, the WWE has, for decades, subjected its wrestlers to extreme physical brutality.”

— The opinion of two former professional wrestlers, Vito LoGrasso and Evan Singleton, according to a lawsuit filed in federal court in Philadelphia last month. The plaintiffs are accusing their former employer, WWE, of “selling violence” while ignoring concussions that they say left them with serious brain injuries.

February 9, 2015 INSURANCE JOURNAL-NATIONAL | 11

NATIONAL COVERAGE

Business Moves

AssuredPartners, Omni Risk AssuredPartners Inc. has acquired Omni Risk Management and Omni Benefits in Smithtown, N.Y. The firm specializes in coverage for commercial insurance with a specialty in construction coverage, surety bonding, personal insurance, as well as life and health insurance products. Omni has approximately $6 million in revenues.

As part of the acquisition, 25 Omni employees will join AssuredPartners. Omni Risk’s Long Island, N.Y., office will continue under the management of founders: Rob Mastrantonio, president; Frank Strcich, vice president-Insurance; and Glenn Glubiak, vice president-Surety.

Headquartered in Lake Mary, Fla., AssuredPartners acquires and invests in insurance brokerage businesses (property/ casualty, employee benefits, surety, MGA/ wholesalers) across the United States and in London.

Since its founding in 2011, Assured Partners has acquired 76 insurance firms and has grown to approximately $420 million in annualized revenue, with more than 80 offices in 27 states and a London office.

AssuredPartners is a portfolio company of Chicago-based private equity firm GTCR. Norton Insurance, Brennan Insurance Norton Insurance Agency, a division of 12 | INSURANCE JOURNAL-NATIONAL February 9, 2015

Norton Insurance Financial in Cumberland, Maine, announced that it has acquired the Brennan Insurance Agency of Winthrop, Maine. Terms of the transaction were not disclosed.

Norton Insurance Agency said it has made a strategic commitment to Kennebec County in Maine. In 2013, Norton Insurance Agency acquired the Davis Insurance Agency in Monmouth, Maine, and merged it with its nearby Winthrop affiliate Fairfield Kilgore Agency. Norton Insurance Agency said the Brennan Insurance transaction would complement the Davis and FairfieldKilgore insurance agencies.

Locally owned and operated since 1991, Brennan Insurance provides personal and commercial insurance to individuals and businesses in Winthrop and the surrounding communities of Belgrade, Monmouth, Mount Vernon and Wayne.

Brennan Insurance will continue to operate from its Winthrop location and will market under the Brennan Insurance Agency name. Michael and Patrick Brennan, along with their core team, will continue to serve their local communities.

Norton Insurance Financial has offices in Maine and Portsmouth, N.H. It provides personal and business insurance, employee benefits and retirement planning services.

Associated Banc-Corp, Ahmann & Martin Associated Banc-Corp (Associated) has entered into an agreement to acquire Ahmann & Martin Co., a risk and benefits consulting firm in Minnesota, through Associated’s subsidiary, Associated Financial Group. The transaction is expected to close in February.

Associated Financial Group is a benefits specialist firm with more than 240 insurance specialists across Associated’s threestate footprint. It generates more than $49 million in annualized insurance-related revenues. Associated Financial Group provides employee benefits, business insurance

and human resource consulting, and select individual/private insurance services.

Ahmann & Martin Co. adds a range of complementary financial services such as employee benefits, risk management and business insurance with specialization in industry-specific solutions.

Based on 2013 pro forma revenues, the company believes that this combination with Ahmann & Martin Co. will move Associated Financial Group among the United States’ top 50 insurance brokerage firms. Together, the firms will employ more than 370 colleagues and serve approximately 14,000 clients.

As part of the proposed transaction, several key Ahmann & Martin Co. executives will assume leadership roles at Associated Financial Group. Dean Hildebrandt, the current CEO of Ahmann & Martin Co., will become president and CEO of the newly combined firm. David Martin, benefits principal of Ahmann & Martin Co., will serve as executive vice president and lead Associated Financial Group’s overall benefits strategy. Richard Ahmann III, property and casualty principal at Ahmann & Martin Co., will continue playing a key role in helping to bring the businesses together.

Ahmann, Martin and Hildebrandt will all be members of Associated Financial Group’s board of directors.

The transaction is valued at approximately $48 million with the opportunity to increase the consideration by $8 million should certain contingencies be met over a defined period. The transaction is not expected to have a material impact on Associated’s 2015 and 2016 earnings and is expected to be accretive to Associated’s 2017 earnings.

Ohio’s Smith Insurance Services, Leavitt Group Ohio-based Smith Insurance Services Inc., along with Franchise Insurance Agency Inc., has entered into a partnership with the Leavitt Group.

The agency will now be doing business as Smith & Leavitt Insurance Services and will continue to exclusively offer personal insurance through Nationwide. www.insurancejournal.com

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SPOTLIGHT

10 Things to Know About Business Auto The Business Auto Coverage Form (BACF) is the most commonly used form for business auto liability insurance.

Autos in the form are defined to include cars, trucks, trailers, vans or other vehicles designed for use on public roads. — Insurance Information Institute

Commercial automobile insurers reported a third consecutive year of underwriting losses in 2013, when the combined ratio came in at 106. 2013 compared with 107 for 2012. — Fitch Ratings The personal vehicle is the dominant mode for business travel, comprising 81 percent of all trips. — U.S. Bureau of Transportation Statistics

The top five writers of commercial auto liability and physical damage in terms of market share for 2013 were: Travelers Companies Inc. (8.1 percent); Progressive Corp. (7.3 percent); Nationwide Mutual Group (6.3 percent); Liberty Mutual Group (6.2 percent); American International Group Inc. (3.5 percent). — SNL Financial, Fitch Ratings

Among the leading commercial auto insurance writers — Berkshire Hathaway Group, Progressive Corp. and Erie Indemnity Co. — were the most profitable in the commercial auto segment during 2009-2013. — Fitch Ratings

Roughly 55 percent of all business trips are made by people aged 30 to 49. — U.S. Bureau of Transportation Statistics

Gallons of fuel wasted annually due to congestion was down nearly 12 percent on average in very large urban areas, and down more than 10 percent in large urban areas from the period between 2006 and 2011, while wasted fuel was down even more in median urban areas (-17.9 percent) and small urban areas (19 percent). — U.S. Department of Transportation

The commercial auto insurance business is only 15 percent as large as the personal auto line. — Fitch Ratings

Commercial car insurance can apply to a diverse group of professions, including: plumbers; landscapers; delivery drivers; electricians; salespeople; realtors; truckers. — DMV.org 14 | INSURANCE JOURNAL-NATIONAL February 9, 2015

The average total number of miles driven by people annually is 13,467. Males (16,550) drive more than females (10,142), and the age group that logs the most miles on average is the 35 to 54-year-old group. — U.S. Department of Transportation www.insurancejournal.com

Where there’s risk, there’s complexity. It’s really that simple. That’s why we built an insurance company that manages risk across a broad spectrum of niche, real-world industries. From social and human services, sports and fitness to entertainment, education to the environment. At Philadelphia Insurance Companies, we handle complex risk and make it simple for you to manage. Giving your clients the freedom they need to do what they do best. Learn more. Call 855.411.0797 or visit PHLY.com.

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Philadelphia Insurance Companies is the marketing name for the property casualty insurance operations of Philadelphia Consolidated Holding Corp., a member of the Tokio Marine Group. All products are written by insurance company subsidiaries of Philadelphia Consolidated Holding Corp.

Coverages are subject to actual policy language.

NATIONAL COVERAGE

News & Markets Worst Insurance Fraud Scams of 2014

A

driver rockets his $1 million Bugatti into a salty lagoon … Two kids perish in a home insurance arson their own mother set … A cancer doctor pumps healthy patients with toxic chemotherapy in a $125 million insurance plot. These masters of disaster are among the eight worst insurance criminals of 2014. The extreme schemers were chosen by the Coalition Against Insurance Fraud.

The “No-Class of 2014” displays the year’s most brazen, bungling or vicious convicted insurance swindlers.

One of America’s largest financial crimes, insurance fraud steals at least $80 billion annually. The true-life cases reveal insurance fraud’s high human costs. Innocent people are traumatized, injured and lose their savings. Consumers also pay higher premiums. Welcome to the crime warp:

Pelican Power. A phantom pelican doomed Andy House, who barreled his rare $1 million Bugatti Veyron into a salty marsh to seek $2.2-million of insurance.

The Galveston, Texas-area man claimed he swerved to avoid a pelican, yet a passing car enthusiast filmed House surging into the lagoon. No pelican was in the video. The birdbrained plot will earn House up to 20 years in federal prison when he’s sentenced.

Burning Desire. Angela Garcia let her infant daughters die in a house fire she set for just $64,000 worth of insurance money. The Cleveland, Ohio, woman said she crashed through a window and slid down the porch roof, yet Garcia had no cuts, soot or bruises.

16 | INSURANCE JOURNAL-NATIONAL February 9, 2015

Investigators also found suspicious burn patterns inside the rubble. Nor, did Garcia want the kids anymore. The court denied her bid to overturn an earlier sentence of two life terms.

Dollars & Dents. Innocent traffic victims were hounded for months of worthless injury treatment by a crash cartel that handed out factory-line medicine. Personalinjury attorney Joseph Haddad erected a large network of corrupt doctors, chiropractors and medical clinics. The Bridgeport, Conn., man used police reports to badger crash victims for useless treatment — often without exams or diagnoses. Haddad stole $1.8 million of insurance money and was handed 51 months in federal prison.

Armed for Fraud. New York Police Department Officer Christopher Inserra moonlighted and fistpumped as lead singer for a punk rock band while claiming a painfully injured right arm to steal more than $31,000 in workers’ compensation money. Inserra said he couldn’t even bend the arm, yet video shows him flailing and thrashing around on stage. Inserra lucked out with three years of probation, yet threw away his police career. His band: Cousin Sleaze.

Cancer Con. Sara Ylen lay near death with cervical cancer. She said she contracted cancer from being raped in

a parking lot. Ylen’s Lexington, Mich.-area community rallied around her and she received $122,000 in hospice care from her insurer. Ylen also sent the supposed rapist — an innocent man — to jail for 10 years.

However, Ylen’s cancer was fake, with forged medical records. Ylen received a year in jail, and the innocent man was released.

Chemo Crimes. Seniors received painful chemotherapy for phantom cancer so Dr. Farid Fata could falsely bill Medicare $125 million. Other chemo victims were so near death they were beyond the treatment.

The Detroit-area man gave one cancer-free patient 155 chemo treatments. Another patient badly injured his head at Fata’s office, yet Fata made him receive full chemo before sending him to the ER. The patient later died. Fata faces up to 175 years in federal prison when sentenced.

Joint Efforts.

Orthopedist Dr. Alex Panos botched or faked thousands of joint surgeries to seek more than $35 million worth of insurance money. The Poughkeepsie, N.Y., man rushed up to 20 suspect surgeries in a day. One operation lasted seven minutes. He botched surgeries, or opened up patients and stitched them up, without making repairs. Christine Steele had two useless knee surgeries and can’t work fulltime anymore. Panos received four and a half years in federal prison.

Deadly Romance. Buddy Musso dreamed of being a cowboy singer. The New York City-area man also had the intellect of an 8-year-old. Suzanne Basso romanced and lured him to the Houston area. They married, and Basso took out a small life policy that paid up to $60,000 if Buddy died violently. Basso’s gang cut, beat and doused him with painful bleach. His body was found in a ditch. Basso was executed. www.insurancejournal.com

E S T. 1 9 6 0

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SPECIAL REPORT

Nonprofits & Social Services

By Andrea Wells

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onprofit and social service organizations are as plentiful and diverse as the world itself. To better serve communities, nonprofits must bend, mold and adapt 18 | INSURANCE JOURNAL-NATIONAL February 9, 2015

to rapidly changing conditions and so must the insurance industry that serves this specialty market, the experts say.

“The nonprofit world has become so diverse; organizations are always reinventing themselves to access additional fund-

ing,” says Diane McDaniel, senior marketing analyst at Lovitt & Touché, an independent insurance agency based in Tempe, Ariz., that employs nearly 200 employees in three offices and writes more than $300 million in total premium. www.insurancejournal.com

That trend is different from the past when nonprofits were more “vanilla” in how they structured their programs and services, McDaniel says. “What I mean by that is they would say ‘OK, we are only going to handle homeless shelters, or drug addiction.’ But now we are seeing more cross-services, so they are helping the homeless but they are also treating drug addiction.”

The expansion in programs and services is needed in communities everywhere, McDaniel says, who handles marketing for Lovitt & Touché’s nonprofit renewal and new business for clients ranging from $50,000 in premium and up. “The consumer base for the nonprofit industry is definitely growing,” she said. “More people need more help.”

According to the National Center for Charitable Statistics (NCCS), 501(c)(3) public charities — which include everything from health-related, mental health, housing, youth, human services, recreation, food, employment, education and religious organizations — grew 29.7 percent in 10 years (2003-2013). The NCCS estimates there are now 992,543 public charities in the United States.

That’s a large market, which is one reason why specialty agents and their carrier partners target the nonprofit industry. But that’s not the only reason.

Insurance companies and their agents enjoy working in this niche not only because it’s a growing industry but also because of the opportunity to help the people and organizations whose mission is to help others.

“There’s a lot of good will,” says Jamie Crystal, executive vice president and third-generation principal of Crystal & Co. based in New York. With 10 offices throughout the United States, Crystal & Co. ranks among the world’s largest family-owned insurance brokerage firms, writing more than $1.3 billion in P/C premium in 2013.

Its nonprofit practice is the largest division within the company.

Crystal says that while many people view New York City as the nation’s financial services epicenter, not-for-profit organizations employ the largest number of people. www.insurancejournal.com

“It’s a big market,” Crystal said, whose firm writes more than 1,000 not-for-profit clients. “Most insurance companies I deal with really like supporting the nonprofit industry, just as we do, because if we can help these organizations manage their risk and have the right protection in place, that means in our own little way we are helping them to provide their services more effectively.”

With so much diversity among nonprofit organizations, the challenge for agents and brokers serving this niche then becomes finding the right “bucket” to fulfill their insurance needs, he says. That can be difficult as many nonprofit organizations reinvent their services constantly in an effort to seek new funding sources. The experts agree that agents, brokers and carriers serving this niche must be nimble and whole-heartedly committed to this sector to provide the right insurance protection.

Changing Needs Making sure that nonprofit clients have the right coverage and the right risk management in place has become more of an issue in today’s rapidly-changing industry.

“We’ve seen a lot of not-for-profit organizations pushing to enter different programs to generate sources of funds, and there’s a danger of those organizations going outside their area of expertise and changing their risk profile,” Crystal says. He says it’s important that organizations ask whether or not they have the risk management controls in place to safely provide new services.

“For example, one of the organizations we work with that serves children decided they could also provide services for veterans. They asked us: ‘Are we covered?’ And we said: ‘Yes, you are covered but have you thought from a risk management standpoint how you are going to manage the new exposure of having children and adults in the same building?’ They hadn’t thought about that at all,” Crystal says. “In their zeal to provide these services and with this push to get revenue there’s pressure to provide services they might be fully capable of providing, but they may not have the risk management in place to safely provide

those services.”

Jeff Kunce, a producer for Assured / Neace Lukens Insurance, who has been writing nonprofit human services organizations in Indiana for more than 15 years, says just about every nonprofit in his book of business is trying to expand services to add new revenue streams.

“The states are paying less and less

‘The nonprofit world has become so diverse; organizations are always reinventing themselves to access additional funding.’ through Medicare and Medicaid so these organizations have to expand their offerings,” Kunce said. “We have to educate them about those new exposures.”

To be successful, agents and carriers need to be completely dedicated to this industry and passionate about the mission of the nonprofits they serve, says Melani Conti, senior vice president/nonprofit practice director, at Heffernan Insurance Brokers based in Walnut Creek, Calif.

Serving the diverse nonprofit industry involves much more than just writing insurance, Conti says.

“A broker needs to be aware of what types of obstacles that their nonprofit clients are facing, issues that are important to them, impending legislation, etc.,” she said.

Then, the broker needs to have the resources available to address those issues either through their own insurance brokerage firm or through developed partnerships with other nonprofit specialists, Conti said.

Outside of traditional insurance-related services, nonprofits often seek out ancillary services from their insurance agents, according to Conti. “We have developed a wide range of partnerships with providers from attorneys, accounting firms, banking, staffing, even car donation specialists and more. We, as brokers, tend to become the resource for our clients for much more than just insurance. We need to be prepared to help them on many different levels.” continued on page 20 February 9, 2015 INSURANCE JOURNAL-NATIONAL | 19

SPECIAL REPORT

Nonprofits & Social Services continued from page 19 In the insurance world, nonprofits often get treated as “second-class citizens” but in reality not-for-profits are every bit as complex and challenging as for-profit companies, Crystal says. “Not-for-profits are frankly very complex and have very sophisticated needs. They have very similar risk management needs as for-profits from a complexity standpoint,” he said.

Why Specialists The ever-evolving risk profiles of nonprofit clients make specializing in this market an important advantage.

“I have cleaned up a lot of accounts that came from brokers that don’t have a specialty in nonprofits, and it costs insureds more in the long run, especially in Arizona

because we do have some unique coverage issues,” McDaniel said.

McDaniel said that two years ago the state changed requirements for sexual abuse coverage being on a claims-made form to an occurrence form — a change that was mandated by the Department of Economic Security, which provides funding in this area.

“I have seen out-of-state agents that maybe did not provide correct coverage with the correct tail or correct nose and then we would have to go back to fill that gap,” she said. “It would cost the insured anywhere from $5,000 to $60,000 to go back and provide the coverage.”

Today’s nonprofits and social service organizations realize their need for spe-

Growing Cyber Exposure

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ike all businesses today, the nonprofit sector is struggling to understand how to handle the growing concern of cyber risk in their organizations.

Cyber and privacy coverage is the new employment practices liability, says Steve Parkhurst, producer for Heffernan Insurance Brokers. While many nonprofits have cyber exposures, a great number continue to go without cyber liability coverage, Parkhurst said.

“It’s amazing how many do not have that coverage; it baffles me.”

One of the challenges to selling cyber coverage in the nonprofit sector is often organizations don’t align their operational practices with the exposure, according to Jamie Crystal, executive vice president and third-generation principal of Crystal & Co. based in New York.

“For a lot of our clients, there’s a constant push to generate new funding sources because their funding at the state, federal and local levels have been severely limited or reduced,” he says.

“They are going after individual donors in different ways and using social media 20 | INSURANCE JOURNAL-NATIONAL February 9, 2015

to do that. That’s really cool, but that now creates cyber liability exposures.”

Similarly not-for-profit organizations might have personally identifiable information such as healthcare records, or Social Security numbers, and have to figure out from a risk management perspective how to manage that exposure, Crystal says.

“Certainly healthcare-related institutions understand that but now educational institutions and social service organizations are starting to ask the questions about their exposures, and a lot more are purchasing privacy liability-related insurance covers,” he says.

Michael Liguzinski, division president, specialty human services, Great American Insurance Group, concurs. He says Great American has seen a definitive increase in the demand for cyber coverage.

“We experienced a three-fold increase in the amount of cyber coverage that we wrote from 2013 to 2014,” Liguzinski said. “Because cyber is a unique coverage, similar to nonprofits, we have a specialty group that focuses in offering this coverage.”

cialists when it comes to insurance, says Steve Parkhurst, producer for Heffernan Insurance Brokers.

“They are definitely looking for specialists,” Parkhurst said.

“They like to know that the resources and services are catered to nonprofits in general, and more specifically to their niche in nonprofits.”

Parkhurst said that it’s the specialization that often wins him the account.

“When I go in, that’s what I’m selling,” he said. “We have great relationships with the underwriters and carriers so we can get the price.” But the specialized resources and services often put his agency on top. “That’s how I sell … talking about the resources and services we offer.”

‘Not-for-profits are frankly very complex and have very sophisticated needs.’

Agent specialists can help drive changes in coverage and forms with traditional nonprofit carriers as well.

McDaniel, who handles a number of nonprofit behavioral health organizations at Lovitt & Touché, says there’s a current shift in that sector to expand beyond behavioral health, adding basic primary healthcare services, as well. But covering professional liability exposures for primary health services is something traditional nonprofit insurers are uneasy about underwriting, she says.

“The funding is pushing toward integrated health, so not only are they treating for behavioral health, like seriously mentally ill or drug addiction, they are also treating people for primary medical needs at the same time and they get more funding for www.insurancejournal.com

that,” she said. While the move is good for the nonprofit providers, she says it’s been somewhat difficult to get standard market insurance specialists to buy-in.

“Nonprofit carriers really do provide

www.insurancejournal.com NEGA16493.indd 1

everything — property, auto, general liability, professional … but it has been somewhat difficult for the standard markets, the markets that have been in nonprofit for a long time, to provide that primary medical because they are just not comfortable with it,” McDaniel said. Many of the forms now actually exclude primary medical, she says.

It’s a different exposure and coverage has been difficult to find in standard lines, but it’s an issue that’s not going away, she says.

Integrated services — behavioral health and basic primary health combined — are the future for this segment, McDaniel says.

If traditional nonprofit insurers continue their hardline stance to refuse coverage on primary medical malpractice, they could lose market share in that area, she adds.

Michael Liguzinski, division president, specialty human services, Great American Insurance Group, understands the need to be flexible in today’s diverse nonprof-

it world. “As we’ve seen over the years, nonprofits are always adjusting how to best serve their clients,” Liguzinski said.

“Because we have expertise that focuses on the non-profit marketplace, we are nimble and able to adjust to various trends.”

Liguzinski says Great American always tries to evaluate the changing marketplace, including looking at new classes of coverage and determining the best way to utilize expertise to serve the needs of behavioral health organizations as they include primary healthcare.

Jamie Crystal says it’s natural for the industry to be somewhat reactionary. “Look at how they handled religious organizations and sexual abuse coverage,” he says. First they eliminated coverage; then figured out how to write it. “I think there is a constant catchup from the insurance companies to try and stay current,” he says. “But they are certainly relevant and the effort is there.”

1/23/15 10:35 AM February 9, 2015 INSURANCE JOURNAL-NATIONAL | 21

CLOSER LOOK

Errors & Omissions E&O Experts: Agents Not Immune to Cyber Segment Exposures

By Amy O’Connor

cated about these issues in recent years. much in the past 20 years. The leading caus “In our discussions with agents, we have es of E&O claims still remain the failure to seen an increase in awareness of their obliprovide coverage that a customer requested n today’s digital world of constant comgation to protect their customer’s data and or the failure to effectively communicate munication through methods like email, with all the industry discussions around and explain the coverage being offered. texting and social media, consumers expect customer data they are more aware of the Technology has also helped agents cut 24/7 access to everyone, including their products available to [agents] in the marketback on E&O problems in many ways, insurance agent. And while this access can place,” she says. but they still need to have increase business for agents, it can also Swiss Re Corporate acceptable documentation ‘They don’t percreate exposures if agents are not diligent of the conversations they about when and how they respond. ceive it’s a problem Solutions’ insurance agents have with their clients, says based on the size of E&O policy, offered “Agents are struggling with how to comthe Big “I” and Sally. municate with customers so they can still their business. But I through underwritten by Westport Another facet of technolhave that relationship and document their believe that’s going Insurance Corp., offers a ogy that has created E&O conversations with customers,” says Sabrena $25,000 per policy period exposures for agents is in Sally, senior vice president and head of to change.’ limit for first party personthe storing and proper hanagent and broker business for Swiss Re al data breach and a $1 million sublimit for dling of sensitive client data, and ensuring Corporate Solutions in the U.S. third party personal data breaches on their that clients are adequately protecting their Sally says even with the big changes in insurance agents E&O program. own sensitive information. communication, the main E&O exposures Sally says agents have become more eduagents face actually haven’t changed that Small Agencies at Risk The exceptions to this awareness, according to Jay Martin, president and CEO of Professional Underwriting Group (PUG) in DelRay Beach, Fla., seem to be the smaller agencies who do not perceive themselves as having a need for this coverage.

“They are not really concerned about cyber coverage… they don’t perceive it’s a problem based on the size of their business.

But I believe that’s going to change because of the issues going on across the board,” he says.

Martin says PUG added the option for Nonprofits cyber coverage to its new admitted insurInsur ance ance agents E&O program that is currently Alliance Group available in 14 states in anticipation of an A Head for Insurance. A Heart for Nonprofits. increase in demand for the coverage and at the request of some clients. The managing A Head for Insurance. A Heart for Nonprofits. general underwriter focuses on the smallto mid-size agency niche, and Martin says as a specialist they closely follow what is www.insurancefornonprofits.org going on in the marketplace.

“With new technology and cyber problems we thought this coverage was something we should make available to our cusOutside California In California tomers,” he says.

Nonprofits Insurance Alliance Christopher Lucas, account manager of of California (NIAC) agents & brokers E&O for insurance broker

I

Different in a Good Way

Nonprofits Insurance Alliance Group

NONPRO16375.indd 1

22 | INSURANCE JOURNAL-NATIONAL February 9, 2015

1/28/15 9:47 AM

www.insurancejournal.com

can include costs associated with notifyDealey, Renton & Associates in Oakland, ing applicable parties of a breach, credit Calif., says more E&O carriers are adding monitoring services, identity restoration coverage via endorsement for nominal addicase management services, and help line tional premiums. The broker is an exclusive services. marketing agent for the Liberty Mutual Insurance Agents E&O ‘E&O policies by Investing in Sufficient program, which added data Coverage compromise coverage to its themselves are Dealey, Renton & insurance agents E&O pronot designed to Associates’ Lucas says cyber gram last year as an endorsecoverage and privacy liability ment for no additional cost to respond to these exposures.’ issues are definitely at play insureds. for agents, so they would be The coverage includes wise to invest in sufficient coverage. an annual aggregate limit of $100,000 “Primary, stand-alone policies should also for response expenses and an additional be considered since broader coverage and $100,000 annual aggregate limit for defense higher limits are often available. Of course and liability for suits and damages resulting this comes at an additional cost,” Lucas told from a data breach. Response expenses www.insurancejournal.com

Insurance Journal last fall.

David Derigiotis, corporate vice president and director for the Professional Liability Center of Excellence, agrees. He says with so many cyber and privacy liability risks right now, agents should really look into having more of a robust policy.

“E&O policies by themselves are not designed to respond to these exposures. A lot of times the endorsement just doesn’t give enough across the board,” he says.

“There’s so much competition in the marketplace and it’s such a competitive product right now that anybody should be able to obtain an affordable product within the insurance agency space,” Derigiotis says.

But coverage isn’t the only way to mitigate E&O exposures for insurance agents. PUG offers newsletters and risk management education to its clients.

Swiss Re Corporate Solutions and the Big “I” provide an “E&O Happens” website with information around the topic of preventing and mitigating E&O situations, including those that deal with technology issues.

Sally says the cyber liability space as a whole is a challenge for agents because there is no standardization with the coverage.

Agents also have to understand the complexity of the coverage, differences in terms and conditions from one carrier to another and be able to assist customers that use all different types of technology. Staying educated and informed will help agents assess and tackle these challenges.

“Agents need to keep abreast of what their customer is doing and have timely discussions so they are on the same page as the customer — what are their exposures and is the agent addressing what they need for insurance?” she says.

February 9, 2015 INSURANCE JOURNAL-NATIONAL | 23

IDEA EXCHANGE

Technology 5 Cornerstones for Advancing the Insurance Industry’s Digital Technology Strategy in 2015

I

By Bruce Winterburn

t is a brand new year, and for many people that means the promise and potential of resolutions, goals and aspirations. This is the time to plan, to dream, to improve.

This can be said for individuals looking to shed a few unwanted pounds or a business contem-

plating a long-needed IT project. I am an knowledge workers, who not only expect insurance technologist, and although some technology in the workplace, but are much may argue that is an oxymoron, technology more effective when armed with it. is unquestionably altering the fabric of our That brings me to the inevitable quesindustry at a pace never before seen. tions that come with the birth of a fresh Our industry has New Year. As somelong been maligned one who has worked ‘In 2015, it is less about for its lethargy in to digitalize this what is predicted to leveraging new or industry for more happen and more about even commonly than 20 years, I am what is already happening.’ often asked, “What do accepted technologies, but today’s you see as important modern marketplace for carriers and agents and tech-savvy consumers are demanding in the coming year?” This question may change. At first blush, one might think that prove to be more relevant today than at any the buying habits of consumers are respontime in the recent past. sible for the recent acceleration of change, In 2015, it is less about what is predicted but it is also the expectation of modern to happen and more about what is already happening. The digital community and resulting virtual economy are firmly in place. For carriers and agents who have already positioned their firms to better leverage the modern economy, 2015 is simply a time to continue the good work. It is a build-out or refinement year.

But what about the majority of insurance businesses that unfortunately find themselves behind the curve? The message is clear and simple: It is not too late.

The more difficult questions become, “Where do I start?” or “Where should I focus my limited resources?”

To answer these questions, I like to review certain cornerstone, foundational technologies that must be in place to properly take advantage of the much broader technical landscape.

End the Multiple-Password Nightmare Multiple passwords and the inefficiencies associated with their management continue to be the single biggest encum-

24 | INSURANCE JOURNAL-NATIONAL February 9, 2015

www.insurancejournal.com

brance to progress. This is especially true within the independent insurance channel, where the ability to efficiently represent multiple markets and services is at the heart of the value proposition. Enter ID Federation Inc. and the SignOn Once initiative. As a response to the daunting task of solving the multiplicity of password challenges, the industry has rallied to form a nonprofit consortium dedicated to addressing the problem. The goal is to offer agents the ability to sign on once. So what should one do to take advantage of SignOn Once?

Visit IDFederation.org, where you can find the information you need to better understand the initiative. Carriers need to get involved — if they aren’t already.

Resources are always limited, but agents understand the importance of this issue and are looking to their partners for help.

Carriers need to join the ID Federation.

They then need to work with the vendors to leverage the savings and convenience provided by single sign-on. Again, there is more information on the initiative at IDFederation.org.

The Social Medium Can Have Large Impacts Everyone would likely agree about the relevance of digital social networking. It is not so obvious how to actually leverage the opportunity. The rules are clearly different, especially with regards to the consumer’s tolerances for conventional marketing through this new channel.

A big part of the independent agent’s value has always been the ability to establish and leverage their community and the relationships that make it up.

There is no doubt the definitions of community and relationship have both vastly expanded and consequently, so have the opportunities. Everyone should have a social strategy, and the first step of that strategy should be to “be present.” Whether it is on Facebook, Twitter, Instagram, LinkedIn or Google+, it is like a door-prize — you must be present to win.

Digital Signatures in the Digital World Once you have solved the password issue and deployed a proper mobile and social Embrace the Mobile Office strategy, the next big concern facing the There is no denying the fact that we are insurance industry is the ability (or lack rapidly becoming a mobile society. The thereof) to properly support standardized proliferation of mobile devices has forever electronic forms and signatures. These, too, changed our social and economic landshould be considered foundational techscapes. All businesses should be looking to nologies. If we have better serve modern ‘If we have armed our armed our distribconsumers anywhere, utors with mobile anytime. That being distributors with mobile devices, generated said, don’t discount devices, generated interest through the needs of modern interest through building building social relaknowledge workers.

Arming our industry’s social relationships and still tionships and still workforce with mobile require customers to come require customers to come in and sign technologies not in and sign paper forms, forms, we have only untethers them we have clearly missed the paper clearly missed the from their desk, but point.’ point. also affords them the opportunity to leverage Analytics and Transparency information at their fingertips. For carriers There has always been power in inforwho are working to implement mobile mation — this is no new revelation. What strategies, I encourage them to contemplate is new, however, is the shear amount of the need to be able to push those services information available through new technolto the agents for distribution through their ogy and the transparency provided by the (or their chosen vendor’s) systems. www.insurancejournal.com

unprecedented ability to digest that information. Insurance in particular is a very process-oriented business, and being so, it generates a huge amount of information.

The aptitude to leverage that information, whether as a carrier or agent, often separates the leaders from the pack. The good news is that vendors and information-providers are continuing to improve the way the information is provided — making it ever more intuitive.

There is nothing that I mentioned that is necessarily new or revolutionary. There is also no question there are some more exciting new technologies on the horizon. But before one can even contemplate these new, sparkly things, the foundational technologies have to be in place. Although it might seem like it, it is not too late to start laying that foundation.

Winterburn, Vertafore vice president of industry relations, has spent the past 20 years working within the insurance software industry. He has a solid understanding of the insurance vertical, with exposure and knowledge in the agent, wholesale and carrier channels in both the United States and London markets.

February 9, 2015 INSURANCE JOURNAL-NATIONAL | 25

IDEA EXCHANGE

Cyber Liability Cyber Insurance: The Last Line of Defense or Frontline Offense?

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t’s a common saying in the cybersecurity industry that if you haven’t yet suffered a cyberattack, you soon will. According to the Identity Theft Resource Center, this

By Natalie Lehr & year alone has seen more than 600 data breaches and more than 78 million personal records have been exposed. This is a 25 percent increase in the number of breaches from January to November 2013, Tom Quy which shows that hackers are becoming increasingly more competent and cyberattacks are becoming more frequent and difficult to stop.

26 | INSURANCE JOURNAL-NATIONAL February 9, 2015

Not only are breaches growing in quantity, but hackers are constantly changing their attack methods. A 2013 PandaLabs report found that 30 million new malware threats were created in 2013 — an average of 82,000 new threats every day. When a security team doesn’t know what is coming, there is simply no way to defend against it.

Based on this and other statistics, it’s clear these attacks are going to occur with increasing frequency and success. Insurance professionals can’t stop attacks from happening, but they can find ways to minimize the effect of breaches to avoid irreparable harm to victimized clients. It starts with a cyber liability insurance policy, an evolving practice for both the underwriter drafting the policy and the company receiving it.

New Age of Pre-Binding Assessments The process behind developing a cyber liability insurance policy has remained the

same for years; however, the ways in which companies are suffering from cyberattacks is rapidly changing. When looking at recent data breaches, it’s clear that there are multiple factors and parties involved in a cyberattack. In the case of Home Depot’s massive data breach, the hackers gained access to 53 million email addresses and 56 million credit card accounts through a third-party vendor with legitimate access to the retailer’s network.

Traditionally, cyberinsurance policies are crafted based on a simple checklist that summarizes potential risks and protective security measures that an enterprise either has or has not put into place. Clearly, cyberthreat has evolved well beyond the limited, static examples included in these standardized lists. For instance, no checklist can assess the likelihood that a trusted insider is committing corporate espionage or that a third-party heating, ventilation and air

www.insurancejournal.com

conditioning (HVAC) partner has a network vulnerability that could lead to a data breach. Similarly, reliance on this checklist approach to accurately define enterprise risk can no longer be an accepted practice because it doesn’t adequately serve policyholders.

To combat the challenges and limitations of traditional cyber risk assessment, insurers and enterprises are placing more emphasis on holistic assessment performed by independent third-party security firms.

Instead of checking off a list of requirements, these assessments look at everything including the maturity of the company’s security practices and the security of their third-party vendors, the sensitivity of their data, and their ability to recover and return to regular operations following a cyberattack. All of this information is taken into account to help an underwriter determine an entity’s insurability and craft a fair and accurate policy.

and can be used to improve security maturias an offensive measure, it can be a signifity whether or not a policy is cant part of a proactive risk Cyber insurance offered or purchased. management strategy. By By requiring a thorough implementing comprehenis often viewed risk assessment at the outset, as the last line of sive risk assessment as part insurers are communicating the pre-binding process, defense, but when ofinsurers their commitment to deliver can create a collaboapproached as an ration with both prospective fair and accurate policies.

Additionally, there are new offensive measure, clients and policyholders to cyberinsurance policies that it can be a signifiimprove cybersecurity matuincorporate the findings of and resilience, and help cant part of a pro- rity the pre-binding assessment organizations mitigate the active risk manand provide incentives and impact of a cyberattack and funds for risk mitigation. In agement strategy. get back to business faster. this way, insurers are eliminating the us-versus-them mentality that’s Quy is a specialist producer and broker of cyber historically prevalent between insurers and risks, cyber insurance at Miller Insurance Services insured.

LLP. Lehr is co-founder and vice president of analyt Cyber insurance is often viewed as the ics for TSC Advantage. Previously, Lehr held roles at last line of defense, but when approached the U.S. Department of Defense.

The Power of Proactive Risk Mitigation Consider the examples of Home Depot, Target, Dairy Queen, JP Morgan Chase, Goodwill and Staples. These enterprises were all victims of major data breaches in the past year. In addition to the financial liability incurred, each breach has cost these businesses hundreds of millions in lost sales, not to mention customer trust.

While each of these enterprises had strict cybersecurity policies in place, they were still unable to stop hackers from manipulating their way into their networks through unsuspecting third-party vendors and stolen credentials.

In most cases, these entities had some form of cyber liability insurance in place.

But insurance has traditionally been a method for offsetting risk, not mitigating it.

However, a third-party conducted, pre-binding risk assessment not only supplements the traditional checklist security review most underwriters use, it also provides the pre-insured with critical insights about their security preparedness and maturity.

This data belongs to the assessed company MIDRE16805.indd 1

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February 9, 2015 INSURANCE JOURNAL-NATIONAL | 27

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The Competitive Advantage Valuing Agencies Using Multiples of EBITDA

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ultiples of EBITDA (earnings before interest, taxes, depreciation and amortization) has been used for various business valuations, investment decisions, and loan arrangements for many generations so there is nothing new about it (barring the somewhat creative derivatives companies deep in debt and unable to grow organBy Chris Burand ically are now creating). I find that most agency owners though do not have an adequate understanding of EBITDA or an EBITDA multiple valuation.

It sounds simple but nothing simple is connected to this methodology. The fact that it sounds simple but is not simple makes this methodology very, very dangerous.

First, because using this methodology is complex, most agency owners do not have the education to know how to use it. This is not a critique of their IQ. Unfortunately, because it sounds so simple, they think they know how to use it.

Second, even so-called experts have a tendency to not make the right adjustments using this methodology. Even big-time firms using this method have a tendency to use it incorrectly. Part of the problem is this method was never designed for financial service firms, which includes insurance agencies. It was designed for capital intensive firms such as utilities that have to invest heavily upfront in physical infrastructure.

Using it for firms like insurance agencies (or especially an insurance company) is risky because to use this method correctly requires several crucial subjective factors that are not easily apparent in the formula. These factors are not any of the letters: E, B, I, T, D, or A. In other words, the formula makes it sound as though the only calculation is earnings excluding interest, taxes, depreciation and amorti28 | INSURANCE JOURNAL-NATIONAL February 9, 2015

zation but this is absolutely, 100 percent wrong. Other factors include risk of the operation and growth rates. These extremely important factors are supposed to be included in the “multiple.” In other words, if the EBITDA is supposed to be multiplied by five, but the firm has no risk and will grow 20 percent annually forever, the multiple should be adjusted — probably to a 10-plus.

The huge mistake agency owners most often make is they think the multiple is a pure comparable. In other words, are agencies selling for five or six or seven times EBITDA? That is the wrong approach.

Extremely simplified and still partially wrong, but less wrong, the question might be asked, “Are agencies that have high risk but high organic growth selling for five or six or seven times EBITDA? What about agencies that have low risk and low organic growth?”

The best appraisal firms have objective or at least less subjective methods for making these adjustments but agency owners doing their own appraisals do not (and neither do many people completing agency appraisals if truth be told).

Third, the actual complexity of this simple looking method is used to take advantage of sellers. For example, the other day I heard of a well-known buyer paying

10 times EBITDA. They may have paid 10 times EBITDA, using the seller’s unadjusted EBITDA, but they did not come close to paying 10 times the applicable EBITDA. Again, the simpleness of “EBITDA” leads to mistakes. I find most agency owners think only one earnings number can be calculated using this formula. But that is wrong. When analyzing an agency, multiple “E’s” may be calculated. There is the agency’s unadjusted earnings, there is the buyer’s applicable earnings, there is the seller’s adjusted earnings, and other variations may be applicable.

So what “E” is being used when you hear someone say that so and so sold for eight, nine, or 11 times EBITDA? More than once, 11 times EBITDA has really been equivalent to five times the truly applicable EBITDA. Some buyers therefore make sellers think they are getting far better deals than they are really getting. The result is that some sellers are leaving money on the table. They are being taken advantage of by people that truly understand how to use the EBITDA methodology.

Fourth, for regular agencies that are not public and not going public (I’d argue the brightest people within even the public environment understand that EBITDA is not applicable there either ), EBITDA is not that important relative to this aspect of value, period.

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In the chart, there is an example of four different scenarios for the same agency.

1) The first example is a standard agency using an unadjusted EBITDA. 2) The second example is the same agency but it has borrowed a lot of money. The EBITDA is the same but the cash flow is half. Which agency would you prefer?

One that has free cash flow of $195,000 or one that has free cash flow of $95,000?

The value is the same on an EBITDA basis. Should it be?

3) The third example illuminates another weakness of EBITDA. In the third scenario the agency is spending to grow organically. Organic growth is the most valuable growth. Yet it cost money, expenses that show on the income statement and are not excluded by EBITDA. Therefore, the “EBITDA” is always going to be less in an organiza- tion that is actually investing in the best kind of growth, all else being equal. On an EBITDA multiple then, especially if the multiple is used as a comparable, the firm will be valued much less. This is not correct and it is a way smart buyers take advantage of some sellers.

4) The fourth example shows how the EBITDA methodology makes an acquirer look more valuable than they are. In the chart, compare the first scenario to the fourth. In the first scenario, the EBITDA and free cash flow are the same.

This is the normal scenario in most agencies. But someone buying a lot of agencies typically has a lot of debt. Why should debt payments not be considered?

Obviously, debt payments should be con sidered which is why free cash flow is a far better method for valuing a compa- ny than is EBITDA — assuming the read- er wants a true value.

(Do not take that to mean a multiple should be applied to free cash flow because it should not be. What I am showing in the chart is simply to exemplify the difference between EBITDA and free cash flow. The reason free cash flow multiples do not exist is because the people that use this earnings stream correctly also use much more sophisticated valuation methodology.)

My goal in writing this is to help agenwww.insurancejournal.com

cy owners avoid making mistakes when buying an agency or selling their agency.

Obviously, this is a short article and much more consideration and knowledge is required but hopefully this article at least

helps the readers ask the right questions.

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

(1) (2) No Loan Up to Neck Agency Debt Agency

(3) (4) Organic Acquisition Growth Agency

Revenue $1,000,000 $1,000,000 $1,100,000 $1,100,000 Sales Salaries $300,000 $300,000 $375,000 $325,000 Staff Salaries $200,000 $200,000 $200,000 $200,000 Executive Salaries $50,000 $50,000 $50,000 $50,000 Benefits & Taxes $75,000 $75,000 $85,000 $85,000 Total Compensation $625,000 $625,000 $710,000 $660,000 Sales Expense $30,000 $30,000 $40,000 $30,000 Admin Expense (excluding ITDA*) $150,000 $150,000 $160,000 $160,000 Amortization - - - $15,000 Depreciation - - - Taxes - - - Interest - - - $5,000 Total Expense $805,000 $805,000 $910,000 $850,000 Profit $195,000 $195,000 $190,000 $250,000 EBITDA $195,000 $195,000 $190,000 $270,000 Loan Payments - $100,000 - $75,000 Free Cash Flow $195,000 $95,000 $190,000 $175,000

5 times EBITDA $975,000 $975,000 $950,000 $1,350,000 5 times Free Cash Flow $975,000 $475,000 $950,000 $875,000

* interest, taxes, depreciation, and amortization

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Agency Management 2014 Best of the Best: Year in Review The Difference Between Single and Double Digit Growth

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014 was certainly a joyful year in the insurance distribution industry.

MarshBerry recently released the 2014-2015 Market & Financial Outlook Report outlining key statistics and trends within the agent and broker space. Out of

By Tommy McDonald the more than 100 statistics produced in the survey, there was nothing more jubilant than a reported 22 percent year-over-year increase in agency valuation. Historical investments in privately-held agencies have produced favorable investment results, but

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based on our numbers, 2014 was the best in the past decade.

Louisiana Commerce & Trade Association www.lctacomp.com SC9 M.J. Hall & Company www.mjhallandcompany.com W4 McClelland & Hine www.mhi-tx.com SC7; SE4 Midlands Management Corporation www.midlandsmgmt.com 27 Monarch E&S Insurance Services www.monarchexcess.com W3 Negley Associates www.jjnegley.com 21 Nonprofits’ Insurance Alliance Group www.niac.org 22 PersonalUmbrella.Com www.personalumbrella.com 5 Philadelphia Insurance Companies www.phly.com 15 Pro Premium www.pro-premium.com FL5 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com

FL12, SE3; E3 Texas Mutual www.texasmutual.com SC3, SC5 Vertafore, Inc. www.vertafore.com 7

Seeking Established Brokerage Operations Seeking established Brokerage operations who have experience in Marketing and Sales within Indian Country for a newly formed Tribal Insurance facility.

Please submit a resume of your agency/brokerage operation and include your tribal experience within Indian Country.

Reply to: interestedbroker@yahoo.com

30 | INSURANCE JOURNAL-NATIONAL February 9, 2015

The best firms in the Still, despite industry leverage very strong results, most of the recent economic the performance improvements as is being driven a spring board for not by better growth, not the sole new business provider of it. performance, but rather improved industry and economic fundamentals (a.k.a. uncontrollable factors). The best firms in the industry, however, leverage the recent economic improvements as a spring board for growth, not the sole provider of it.

Owners and managers position these firms to produce high single-digit growth even in weaker economic environments. Therefore, with the economic and industry lift in 2014, these firms averaged double-digit growth rates.

So, where did your 2014 results stack up against the best firms in the industry?

McDonald is vice president at MarshBerry. Phone: 440-392-6700. Email: Tommy.McDonald@MarshBerry.com.

* Profit is calculated as based on earnings before interest, taxes, depreciation, and amortization (EBITDA) and is a percentage of agency total commission and fees, which does not include overrides, contingency, or miscellaneous income. * Reported EBITDA numbers are actual results and have not been adjusted to remove any extraordinary expenses, inflated compensation numbers, or non-recurring expense items. * Growth is calculated on total commission and fees growth which does not include overrides, contingency, or miscellaneous income. This includes acquired and organic growth * The numbers produced in this report are taken from MarshBerry’s proprietary benchmarking tool Perspectives for High Performance (PHP).

Best of the Best are a hand-selected group of agencies who have produced historically strong results in growth, profitability, staffing metrics, and the firm’s current capital position. www.insurancejournal.com

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NATIONAL COVERAGE

MyNewMarkets School Districts Market Detail: R-T Specialty, LLC Corporate Headquarters (www. rtspecialty.com) offers options for hard-to-place property risks.

Available limits: Minimum $100,000, maximum $5 million Carrier: Unable to disclose States: All states Contact: Customer service at 888-884-1900

Condo Associations Market Detail: Preferred Property Programs (www.ppp-quotes. com) coverage includes: boiler & machinery; commercial excess; environmental liability; equipment breakdown; and umbrella.

Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Customer service at 888-548-2465

Earthquake - Commercial Market Detail: Earthquake coverage is being offered exclusively to IIABCal (www.IIABCal.org) members. New and renewal business is eligible with limits of $2.5 million per location and per insured. Age limitation for wood frame construction is 1960 and newer (effective March 1, 2008). Age limitation for HCB & tilt-up construction class is 1974.

Available limits: As needed Carrier: Markel States: Calif. only Contact: Customer service at 800-772-8998

Bed & Breakfasts, Caterers, Wineries/ Microbreweries Market Detail: Western Heritage Insurance Co. (www.westernheritageins.com) offers property, inland marine, equipment breakdown, general liability, garage liability, physical damage, identity theft, crime, employment practices liability, and incidental professional coverages. Coverage can be offered on a monoline, package, BOP, or master-policy basis, and on a regional or national nonadmitted basis in all states, with admitted paper available in some states. Western Heritage works with program managers who are industry experts in writing, quoting and binding business.

Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Kathy Szur at 480-596-7809 or email: szurk1@ westernheritageins.com

Abortion Clinics Market Detail: PULIC – TDC Specialty Insurance Co. (www. pulic.com) specializes in medical liability protection for physicians, surgeons, dentists, podiatrists and other medical professionals who have difficulty finding coverage within the standard markets, who 32 | INSURANCE JOURNAL-NATIONAL February 9, 2015

have been denied coverage, or whose policies have been nonrenewed or canceled. Coverage options are available for those whose histories include claims, licensing actions, board sanctions, and a variety of other underwriting issues.

Available limits: As needed Carrier: The Doctors Co. States: All states Contact: Cheri Priddy at 310-492-4927 or email: cpriddy@ thedoctors.com

Wind Deductible Buy Backs Market Detail: Commercial Sector Insurance Brokers (www. comsectorins.com) has multiple markets that provide competitive wind deductible buy-back policies (WDBB) to lower the percentage of flat-dollar deductibles the insured would otherwise be responsible for in the event of a wind-related claim. Any class of business, location, limit and type of construction can be considered at competitive rates. Coverage is available for residential and commercial property, as well as property in the course of construction. WDBB

policies are typically written as annual terms and run concurrent with the overlying property policy. Also ask about coastal property alternatives for clients, including monoline wind/hail.

Available limits: As needed Carrier: Unable to disclose States: All states except D.C., Maine, R.I., S.D., and Vt. Contact: Lamar Andrews at 205-332-8117 or email: landrews@ comsectorins.com

Dealer and Transporter Plates Market Detail: Lancer Insurance Co. (www.lancerinsurance.com) offers commercial auto coverages for local and intermediate trucks, delivery vans, tow trucks, dump trucks, contractors’ vehicles, household movers and most other classes of commercial auto. Garage coverages for dealer and transporter plates, used car dealers, repair shops, tire sale shops, service stations, parking lots and garages, and roadside repair and service businesses are also available.

Available limits: Minimum $60,000, maximum $1 million Carrier: Unable to disclose, admitted States: Conn., N.Y., and Pa. Contact: Steve Shapiro at 516-431-9191 or email: sshapiro@ lancerinsurance.com www.insurancejournal.com

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Closing Quote

Tomorrow’s Talent Challenge

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By Marguerite Tortorello

magine you are CEO of a company and nearly half the employees that make your company succeed will retire in just 15 years. This is a reality for many insurance industry CEOs. Talent shortage is a major, looming problem.

Recent studies by the Jacobson Group and Deloitte provide the numbers, which tell a gripping story: Of the 2.3 million workers serving in the insurance industry, more than 1 million will retire in the next 10 years. The entire insurance industry will have 400,000 positions to fill by 2020. Workers over the age of 45 make up 48 percent of the industry’s workforce. Even more troubling, 70 percent of insurance adjusters are over the age of 40, and 20 percent of experienced underwriters will retire in the next few years.

As Baby Boomers move into a new phase of life, are new workers entering the field to carry the industry forward?

The answer right now is no.

The new up-and-coming talent pool is filled with Millennials. In fact, Millennials make up 25 percent of the U.S. workforce and are expected to form 50 percent of the global workforce by 2020.

Millennials, or “Generation Me,” are individuals born between 1980 and 2000, and they have a different perspective than those that came before them. This generation has grown up with almost constant access to technology

34 | INSURANCE JOURNAL-NATIONAL February 9, 2015

and is accustomed to instant gratification. Millennials are multi-tasking, tech-savvy, connected, collaborative team players that want recognition, advancement, and to work for collaborative and socially conscious organizations.

The growing problem for the graying insurance industry is eight out of 10 Millennials report having limited knowledge and understanding of the employment opportunities available within the insurance industry.

Another problem for the employee-seeking insurance industry is reputation. According to Valen Analytics, 44 percent of Millennials think working in the insurance industry is, frankly, boring.

Millennials also have less exposure to insurance as they delay homeownership and some put off even owning a personal car. They may not be familiar with the innovation, technological advancements and forward thinking burgeoning in the insurance industry.

As previous generations know, it takes insurance to buy a home or a car, build a business or building, run a company or manage a community. Insurance is relevant, necessary to protecting personal and business investments, and plays a vital role in the economy. To attract Millennials into the industry, insurers need to better tell their story about the growing importance of technology and analytics.

Millennials also need to be aware of how insurers are using social media and are innovating new solutions to meet the demands of cybersecurity, green technology, the sharing economy and other emerging trends.

Given that more than 40 percent of recent college graduates are unemployed and 16 percent are only employed Now is the time for part-time, there is a ready millennials to take pool of new talent. a closer look at the Several in the insurance industry have joined forces insurance industry. to demystify insurance and recruit the next generation of top talent to best serve consumers. The Institutes, Jacobson Group, Valen Analytics and Property Casualty Insurers Association of America are raising awareness within the industry about the talent shortage and to attract Millennials. They have launched the Tomorrow’s Talent Challenge Initiative to spark the industry’s involvement in engaging Millennials and efforts to promote science, technology, engineering, and mathematics education and career choices. They also have created the MyPath website, which provides insurance internship opportunities, and scholarship and educational information on the insurance industry’s limitless opportunities.

Tortorello is a senior vice president of the Property Casualty Insurers Association of America. Phone: 847-297-7800.

www.insurancejournal.com

Expect big things in workers’ compensation. Expect to save a third of your clients 30% or more. Most classes approved, nationwide.

For information call (877) 234-4450 or visit auw.com/us. Š2015 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best.

Insurance plans protected U.S. Patent No. 7,908,157.