Insurance Journal West 2015-02-23

WEST Jones’ National Ridesharing Outline Climate Change and Hawaii Island Storms Calif. Agents Inform on Financial Responsibility

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AGENCY DEVELOPMENT

celebrating

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MARKETING ASSISTANCE

20

1995-2015

years

WEST On The Cover

Inside This Issue

Special Report:

Who’s Worth What in the Independent Agency System

February 23, 2015 • Vol. 93 No. 4 • West

W8

W10

18

36

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

8

W2 City Council in Oregon Says Uber

Must Follow Traditional Taxi

Rules

32 Strategies for Young Professionals

in Salary Negotiations

Agency-Broker Profitability Reaches Record 21% for 2014: Reagan Consulting

11 Commercial Lines Softening to

Continue in U.S. in 2015: Marsh

W2 Climate Change Affecting Hawaii

Island Storms, Researchers Say

11 Fraud Adds Up to 17% to Auto

Insurance Injury Claims: IRC

W4 Lawsuit: Acupuncture Treatment

Punctured California Woman’s

Lung

18 Closer Look: 5 Things to Consider

When Insuring Yachts 20 Closer Look: How to Calm the E&O

Waters When Insuring Marinas 22 Spotlight: 10 Things to Know

About Boats & Marinas 24

Special Report: Who’s Worth What in the Independent Agency System Exclusive Results from the 2015 Agency Salary Survey

4 | INSURANCE JOURNAL-WEST February 23, 2015

W4 Montana Licensed 34 Captive

Insurance Companies in 2014

34 Growing Your Property Casualty

Agency: Alan Shulman 36 How Agents and the Industry Help

Protect Farmers, Ranchers 38 Minding Your Business:

Catherine Oak 42 Closing Quote: Low Minimum Auto

Limits Unfair

W8 Earthquake Warning System

in Obama Budget Pleases

Lawmakers W8 California Agents Asked

to Inform Customers on Auto

Financial Responsibility W10 Heading a National Ridesharing

Outline a Political Gain for Jones?

DEPARTMENTS 10 Declarations 10 Figures W6 People 12 Business Moves 16 MyNewMarkets

www.insurancejournal.com

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Opening Note Insurance and Online Dating

W

ith today’s technology the world of knowledge, commerce, and even love, are at people’s fingertips. So Answer Financial asks, why not insurance? If 40 million people choose to find love online, maybe they should buy insurance the same way.

Answer Financial, which sells personal lines insurance online through its agencies Insurance Answer Center and Right Answer Insurance, offers eight reasons to think of insurance like online dating. Among them: • People get to see if they are compatible before they commit.

• Technology does the work.

• Online services expand the pool of prospects and options.

• They can find the partner who wants them just the way they are.

Answer Financial is having some fun. Nothing wrong with that. At the same time, they and many others take online insurance very seriously.

So is online dating a good business model? Do insurance agencies and carriers want to be compared with dating services? What can insurance pros learn from the likes of match.com?

Independent agents and carriers have been criticized for being slow to adopt new technology.

There is some truth there.

Is online dating a good However gradually, more business model? and more have gotten into the online business and more will in the future.

While Answer Financial caters exclusively to online shoppers, most independent agents don’t do this, not because the agents themselves have anything against technology but because many of their customers do when it comes to buying insurance.

Just as most people do with dating.

Thirty-eight percent of Americans who are “single and looking” say they’ve used an online dating site, according to Pew Research. But only 10 percent overall say they’ve actually tried online dating.

While about half of auto insurance customers shop online, less than half end up actually buying online, according to market research. As with dating, those most active online are younger insureds.

There is some evidence to suggest that overall, there is actually less shopping around for insurance. Apparently, some people are happy in their current insurance relationships, or not unhappy enough to bother shopping around.

No doubt the numbers for both online dating and insurance are changing, and both will probably eventually increase.

Clearly, online dating, like many online experiences, is not for everyone. Neither is online insurance a perfect match for everyone. Thus, selling online may not be the answer for every provider.

The majority of insurance buyers — and lovers — still like a little human interaction before they commit to a longAndrea Wells term relationship. That’s where local indeEditor-in-Chief pendent agents come in.

6 | INSURANCE JOURNAL-NATIONAL February 23, 2015

Publisher Mark Wells | mwells@wellsmedia.com 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 Catherine Oak, Curtis Pearsall, Alan Shulman Contributing Writers Michael Biesecker, David E. Coons, Melinda Deslatte, Bill Hendrick, Bill Martin, Craig McGinnes, F.E. ‘Rick’ Russell II, Elly Yu 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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News & Markets Agent-Broker Profitability Reaches Record 21% for 2014

By Andrea Wells

A

gent-broker profitability reached 21 percent for 2014, a new record for the Reagan Consulting Organic Growth and Profitability (OGP) survey that began tracking profitability for agencies in 2008.

That median profitability for EBITDA (earnings before interest, taxes, depreciation and amortization) for 2014 was up from 19.3 percent in 2013 and 18.4 percent in 2012, the survey revealed.

Brian McNeely, partner at Atlanta-based Reagan Consulting, a management consulting and merger-and-acquisition advisory

Readers’ Choice:

What’s Important to Agents’ Careers InsuranceJournal.com asked readers which of the following has been the most important in their insurance career advancement.

Passion for the job ranks tops.

25.75%

(69 votes)

Passion for my work

16.79%

(45 votes) Success in previous job or assignment

16.04%

(43 votes)

Mentor or superior who took special interest

11.57%

(31 votes)

Networking

8.21%

(22 votes)

Luck

5.97%

(16 votes)

Working long hours

3.36%

(9 votes)

College education

2.99%

(8 votes)

Family or personal connections Total Votes: 268 8 | INSURANCE JOURNAL-NATIONAL February 23, 2015

firm for the insurance distribution system, attributes the climbing agent-broker profitability rates in recent years to three trends.

“First, agencies have become more and more efficient,” McNeely told Insurance Journal.

“Second, the industry is growing,” he said. Reagan Consulting’s study found that median organic growth for agents-brokers in 2014 was 6.2 percent, matching 2013 and 2012. “They [agents-brokers] are growing their revenues faster than their expenses,” McNeely said.

The survey showed that the fastest growing segment of business was once again commercial lines, with an organic growth rate of 7.0 percent. Group benefits grew at a 5.7 percent clip.

“Finally, there has been an increase in contingent income, which has a material impact on profitability,” McNeely added.

“Contingent incomes were up about 14 percent in 2014.” That growth stems from the lack of “material catastrophic events” in the United States last year, McNeely said, as well as the overall growth in the insurance market.

The survey also noted that the median Rule of 20 score was 16.9, up from 16.5 in the prior year.

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

“The agent/broker world grew in profitability for the fifth straight year — while sustaining positive revenue growth for a third straight year,” said Kevin Stipe, president of Reagan Consulting, in a statement.

“These two metrics drive valuation, largely determine operating health, and are imper-

ative to a firm’s ability to perpetuate.”

High agency valuation is one reason why the market is experiencing a surge in M&A activity recently, McNeely said.

“The basic fundamentals of the business are good for everyone right now,” he said.

However, there are other issues driving the M&A trend as well.

“The market is rewarding public brokers in the public markets; they are trading at all-time highs and they have an arbitrage opportunity when they do an acquisition,” McNeely said. There’s a lot of private equity money that has entered the space. “So at some level it’s simply a supply and demand issue — there is a lot of demand for quality agencies and brokers to be sellers and there’s just not enough supply to meet the demand.”

Reagan Consulting has conducted its quarterly survey of agency growth and profitability since 2008, using confidential submissions from approximately 140 midsize and large agencies and brokerage firms.

Roughly half of the industry’s 100 largest firms participated in the most recent survey. Median revenue of the firms completing the survey is more than $17 million.

Brokers surveyed forecast a median organic growth rate of 6.0 percent in 2015, the fourth consecutive year for a forecast in that range. Brokers are projecting a “pullback” in profitability for 2015 to 20.0 percent, Stipe reported. www.insurancejournal.com

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© 2015, American Institute For Chartered Property Casualty Underwriters * PwC’s 2014 U.S. State of Cybercrime Study

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NATIONAL COVERAGE

FIGURES

$500,000

The approximate total value of sewer grates that two brothers in Pennsylvania allegedly stole from suburban Philadelphia streets and parking lots.

Authorities said in January that Brian and John Vetrulli Jr. were charged for allegedly taking more than 1,000 of the $475 covers and selling them to scrap dealers for $9 each.

DECLARATIONS

29,544

The number of DUI arrests made in Tennessee in 2014. A report from the Tennessee Bureau of Investigation says more residents of the state were charged with driving under the influence in 2014 than 2013. State officials said the bump is due to new techniques that include using analytic software to predict when and where drunken drivers might crash and focusing more efforts around bars.

Anthem Data Breach

“The personally identifiable information apparently hacked at Anthem is exactly what tax fraud thieves use to make false refund claims that appear to be legitimate.”

— Kevin Sullivan, commissioner of Connecticut’s Department of Revenue Services, on dangers of tax fraud following the recent Anthem data breach that exposed millions of health insurance records. Sullivan urged taxpayers expecting income tax refunds who may be affected by the Anthem data breach to file their taxes quickly.

40 Percent Fraud?

“Our examination of workers’ compensation estimates that 40 percent of workers costs are related to abuse or outright fraud.”

$17 Million

The amount a lawsuit filed by the Washington State Department of Transportation seeks to recover for costs related to the 2013 Skagit River bridge collapse. The suit names several parties as responsible: William Scott, the truck driver whose oversized truck hit the bridge; the driver’s employer, Mullen Trucking LP; the pilot car driver, Tammy Detray, and her company, G&T Crawlers; and the owner of the metal shed being transported, Saxon Energy Services Inc.

10

The number of fingerprints that are no longer needed for an individual to be issued a driver’s license in Texas. A 2005 state law requires the department to collect “an applicant’s thumbprints or fingerprints,” but doesn’t say how many. The Texas Department of Public Safety started collecting 10 fingerprints from license applicants last year. Citing privacy issues, conservative lawmakers pressured the agency to stop printing all 10 fingers.

— Gov. Pat McCrory says workers’ comp fraud has cost North Carolina taxpayers $896 million during the past six years, but the veracity of the 40 percent claim has been questioned by workers’ comp experts and an organization that represents state employees.

Ardis Watkins, State Employees Association of North Carolina, says it can’t find a credible source to confirm the fraud percentage claim.

Uber More

“The idea that Uber is simply a software platform, a service provider and nothing else, I don’t find that a very persuasive argument.”

— U.S. District Judge Edward Chen was skeptical of Uber’s bid for a pretrial ruling its drivers are contractors. Uber and Lyft face lawsuits in San Francisco federal court from drivers who contend they are employees and entitled to reimbursement for expenses.

Quakes and Wells

joyfuldesigns / Shutterstock.com

46

The number of workplace fatalities in Ohio in 2014. Federal officials say that such fatalities have been rising in Ohio in recent years. They cite lack of attention to safe work practices and training, and the existence of younger and newer manufacturing and construction workforces. By early February, an estimated 17 workplace fatalities had been recorded statewide so far in fiscal year 2015.

10 | INSURANCE JOURNAL-NATIONAL February 23, 2015

“What’s very difficult is to point to a specific earthquake and say a specific disposal well caused that. … So, how to mitigate the earthquakes is what we’re struggling to resolve.”

— Kansas geologist Rex Buchanan estimates that for the past 15 months he’s spent 90 percent of his time studying something once relatively rare in the state — earthquakes. He says while much is still unknown, he has found there is a correlation between the majority of the 120-plus earthquakes recorded in Kansas last year and the injection of wastewater from fracking into deep disposal wells. www.insurancejournal.com

INSURANCE AGAINST REGRET TALK TO YOUR CLIENTS ABOUT CHUBB. PROPERTY / LIABILITY / EXECUTIVE PROTECTION / WORKERS COMPENSATION / MARINE SURETY / HOMEOWNERS / AUTO / YACHT / JEWELRY / ANTIQUES / ACCIDENT & HEALTH

www.chubb.com Chubb Group of Insurance Companies (“Chubb”) is the marketing name used to refer to the insurance subsidiaries of The Chubb Corporation.

For a list of subsidiaries, please visit our website at www.chubb.com. Actual coverage is subject to the language of the policies as issued.

Chubb, Box 1615, Warren, NJ 07061-1615. © 2015 Chubb & Son, a division of Federal Insurance Company.

TM

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News & Markets City Council in Oregon Says Uber Must Follow Traditional Taxi Rules

California Lawmaker Proposes Annual $52 Fee for Road Repairs

W

hile Uber may be a new kind of ride service, it should comply with the same rules as traditional taxi companies — and that means being licensed by the city, the Eugene City Council has decided.

The council voted 8-0 earlier this month to approve a code change that makes it explicit that ridesharing services such as Uber must be licensed.

Councilor Greg Evans said the change is designed to ensure that such companies follow the safety and other regulations the city requires of other transportation providers.

“We are not trying to put Uber out of business,” Evans said.

The change also lets traditional taxi companies use smartphone applications to calculate fares.

Uber relies on local drivers and mobile applications to let customers hail rides.

The company’s Northwest manager, Brooke Steger, said the code change would jeopardize Uber’s operations in Eugene.

Uber has refused to comply with Eugene’s licensing and other requirements since it began operating in the city last summer.

The city began fining it $2,000 a day in December.

The fines now total $116,000 and Uber is appealing them.

Copyright 2015 Associated Press.

M

ost California drivers would pay an extra $52 a year under a proposal to raise $2 billion a year to fix the state’s crumbling roads, bridges and highways.

Assembly Speaker Toni Atkins’ proposal released in February didn’t spell out how the money would be collected, but she said the fee could be charged as part of insurance plans and vehicle registration. The fees could be higher for trucks and for electric vehicle drivers who don’t pay gas taxes.

The San Diego Democrat’s plan responds to a call by Gov. Jerry Brown for the Legislature to tackle a $59 billion backlog in infrastructure repairs.

The shortfall is driven in part by declining gasoline tax revenues as more fuel-efficient cars use roads that continue to age and deteriorate.

A California Department of Transportation review found 16 percent of the state’s highway miles were in poor condition in 2013. That’s already impacting driver’s wallets, Atkins said.

The proposal would need Republican support because a twothirds vote of the Legislature is required to pass new fees.

Copyright 2015 Associated Press.

Climate Change Affecting Hawaii Island Storms, Researchers Say

Disaster Declaration for Most of Nevada Due to Drought

T

wo university of Hawaii researchers say climate change is affecting rainfall on Hawaii Island.

The researchers say heavy rainstorms are occurring more often on the Big Island.

Ying Chen and Pao-Shin Chu reported their findings in a paper published in the International Journal of Climatology.

The researchers reviewed storms on Hawaii Island over 50 years.

Through 1960, a storm that dumped 12 inches of rain on the Big Island occurred once every 20 years.

That has picked up in recent years. By 2009, stronger storms occurred every three to five years, dumping down more than 16.5 inches of rain.

The study says there’s a need to rethink flood control standards and other guidelines related to rain.

Copyright 2015 Associated Press.

W2 | INSURANCE JOURNAL-WEST February 23, 2015

T

he U.S. Agriculture Department has declared most of Nevada a natural disaster area due to lingering drought. And state water officials say more trouble is brewing for ranchers and farmers in western Nevada where cutbacks have been ordered in irrigation supplies.

The USDA announced the designation of primary disaster areas in Carson City, Churchill, Clark, Douglas, Esmeralda, Humboldt, Lander, Lyon, Mineral, Nye, Pershing and Washoe counties.

Farmers and ranchers there will be eligible for low-interest emergency loans. So will those in the neighboring counties of Elko, Eureka, Lincoln, Storey and White Pine. In February the state water engineer ordered a 50 percent reduction in the amount of groundwater that can be pumped for crops in the Smith and Mason valleys.

Copyright 2015 Associated Press. www.insurancejournal.com

Beyond Security®

“We’re On The Hunt”

Nick Cortezi CEO, All Risks Hunter General Star Broker

“I’ve loved duck hunting since my father got me started as a kid. It requires skill, discipline and the ability to focus accurately on a moving target.

“These fundamentals drive our partnership with General Star. With Berkshire Hathaway behind them, their strength and dependability are unrivaled. But it’s their skill in gauging distressed risks and unusual prospects – within their trademark disciplined approach – that impress me most. They can hit the moving target.

“Together, we’re on the hunt for new opportunities to expand our reach and build our businesses. We’re aiming high, together.”

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

© 2015 General Star National Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. Insurance is placed with General Star National Insurance Company by licensed producers. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star Indemnity Company by licensed producers and, for risk that qualify, by licensed surplus lines brokers.

Atlanta 404 239 6777

Chicago 312 267 8600

A.M. Best A++ XV

Los Angeles 213 630 1930

S&P AA+

New York 212 859 3950

Stamford 203 328 5700

A Berkshire Hathaway Company

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News & Markets Palomar Specialty in California Raises $17.5M in Surplus Capital

Lawsuit: Acupuncture Treatment Punctured California Woman’s Lung

P

A

alomar Specialty Insurance Co. announced that it has successfully completed a $17.5 million surplus note issuance in a private placement to RenaissanceRe Ventures Ltd. and funds under management by a premier asset manager.

Proceeds from the transaction will be used for general working capital purposes and will increase its policyholder surplus, the company stated.

Willis Capital Markets & Advisory acted as exclusive placement agent in the transaction. Michelman & Robinson, LLP and Ropes & Gray LLP acted as legal counsel.

Palomar Specialty is a recently established catastrophe insurer that has initially focused on writing residential earthquake insurance, commercial earthquake insurance and difference in conditions in earthquake-exposed states including California, Oregon and Washington. In recent months, the company has expanded its licensure and is now an admitted carrier in 16 states.

New Mexico Bill Would Reduce Benefits if Workers Are High

A

New Mexico lawmaker has introduced a bill to reduce workers’ compensation in cases when an employee’s death or injury results from being drunk or high on the job.

Republican Rep. Dennis Roch of Logan said being under the influence on the job puts lives at risk and the legislation would help protect workers and hold violators accountable.

Currently, an employee is eligible to receive 90 percent of his or her workers’ compensation if alcohol or drugs contribute to injury or death on the job. Under the legislation, benefits would decrease by 35 percent to 85 percent.

An Albuquerque Journal poll conducted in September found 67 percent of New Mexicans supported reducing workers’ comp when drugs or alcohol result in injury or death.

Copyright 2015 Associated Press.

W4 | INSURANCE JOURNAL-WEST February 23, 2015

San Diego, Calif. woman is suing a chiropractor she claims collapsed her lung during an unlicensed acupuncture treatment.

Jamie Del Fierro says she was injured about a year ago during a treatment for tension headaches at the office of Chula Vista chiropractor Walker Scott.

Her lawsuit says Scott inserted fine needles in her chest even though he isn’t licensed to perform the procedure. Her lawyer said doctors drilled a hole in Del Fierro’s chest and hooked her up to a machine to regulate her breathing, which she carried for a week while her body healed.

Copyright 2015 Associated Press.

Montana Licensed 34 Captive Insurance Companies in 2014

S

tate insurance department officials report that Montana licensed 34 new captive insurance companies in 2014, bringing the state’s total number of licensed captives to 177.

In addition to the 34 new captive insurance company licenses, the number of series business units grew by 19 and there were 29 new captive cells added during the course of last year, according to the department.

NTSB Says Deadly Plane Crash in Colorado Linked to Selfies

F

ederal investigators say selfies were a likely factor in a small plane crash near Denver, Colo., last year that killed two people.

The National Transportation Safety Board says recordings from a GoPro camera found near the wreckage show the pilot and a passenger were taking flash “self-photographs” with their cellphones before the May 31 crash.

An NTSB report said cellphone use likely disoriented the pilot and he lost control of the plane. It says the cause of the crash was probably an aerodynamic stall and that the aircraft spun into the ground.

The crash killed 29-year-old pilot Amritpal Singh and his passenger after they took off from Front Range Airport in Adams County.

The wreckage was found about a mile west of the airport.

Copyright 2015 Associated Press. www.insurancejournal.com

WEST COVERAGE

People Julie Tinney

Josh Carlson

Andrew Simpson

Lauren Knapp

Property/casualty insurance media company Wells Media Group announced four C-suite and managerial staff promotions.

Julie Tinney now serves as chief marketing officer, Josh Carlson has been promoted to chief technology officer/chief innovation officer, Andrew Simpson became chief content officer and Lauren Knapp is now the company’s sales manager.

Tinney, most recently vice president for sales and marketing, is now responsible for leading the company’s promotional and branding strategies, sales management, corporate communications and public relations. Her media career began with a position at Petersen Publishing Co. in Los Angeles. She was the Western regional sales manager for Selling Power Magazine, and also owned an independent media rep firm.

Carlson, previously vice president of technology, heads the team responsible for all aspects of web publishing, including server and database administration, email delivery, online ad trafficking and creation and development of online products.

Simpson, formerly vice president of content, will continue to oversee team coverage for Wells Media’s multiple print and digital platforms, and will also be responsible for multi-channel publication and syndication of Wells Media’s content across brands online, in print and mobile, and via audio and video platforms. Simpson is a veteran of insurance publishing and journalism. He is based in his home state of Massachusetts.

Knapp has served as the 12-state Midwest sales manager for the company for the past seven years. In her new role, she will be providing day-to-day leadership of the Insurance Journal, ClaimsJournal.com, MyNewMarkets. com and Carrier Management sales team members. Her career has included marketing and sales positions with Maclean Hunter Publishing, Thomson Financial Publishing and Ball Publishing.

San Diego, Calif.-based Wells Media Group serves the property/casualty insurance industry. In addition to Carrier Management website and magazine, its services include: national and regional Insurance Journal magazines; the P/C insurance industry’s leading website, InsuranceJournal.com; a website, www.

ClaimsJournal.com, for P/C claims professionals; an online database of available P/C markets, www.MyNewMarkets. com; a media site featuring insurance industry videos and podcasts, www.InsuranceJournal.TV; and the Academy of Insurance, an online learning center for P/C insurance professionals.

The American Insurance Association has named

W6 | INSURANCE JOURNAL-WEST February 23, 2015

Jay F. Day vice president of state affairs for the Western region.

The appointment is effective March 9. Day, who will join AIA’s Assistant Vice President Steve Suchil in the association’s Sacramento, Calif. office, will oversee AIA’s state affairs activities in the following states: Alaska; Arizona; California; Hawaii; Idaho; Montana; Nevada; Oregon; Utah; and Washington.

Day joins AIA from the office of California Assemblyman Jim Frazier, D-Oakley. Prior to that Day worked as a consultant for former Assembly Speaker John Perez, D-Los Angeles. He has also served in various capacities for a variety of legislators in the California Assembly and Senate since 1994.

AIA is a property/casualty insurance trade organization representing roughly 300 insurers that write more than $100 billion in premiums each year.

Hub International Limited added Bobbi Curry and Robyn Welch to its entertainment practice in Los Angeles, Calif.

Curry, named managing director of entertainment, focuses on commercial risks, including live event production, and music and touring risks. Welch, named managing director of entertainment, focuses on personal insurance and risk services for high profile and high net worth individuals. They will report directly to Andrew Forchelli, president of Hub’s entertainment practice.

Both women have more than 30 years of experience working with entertainment and risk services. Prior to Hub, Curry and Welch led the entertainment division at Lockton Cos. Based in Los Angeles, Hub’s entertainment practice offers risk management and insurance solutions across the U.S. for film and television productions, music tour and festivals, theatres and performing arts centers, business management firms, high-risk live events and video game companies. Chicago, Ill.-based Hub International Limited is a global insurance brokerage that provides property/ casualty, life and health, employee benefits, investment and risk management products and services.

Berkshire Hathaway Specialty Insurance named Akshay Gupta senior vice president and head of catastrophe engineering and analytics.

Gupta is based in the San Francisco Bay area.

Gupta has more than 20 years of experience in catastrophe risk analysis, engineering, mitigation and modeling. Most recently he was senior vice president at AIR Worldwide, where he led a practice providing engineercontinued on page W8 www.insurancejournal.com

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News & Markets Earthquake Warning System in Obama Budget Pleases Lawmakers

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resident Barack Obama’s recommendation to spend $5 million next year on an early earthquake warning system for the West Coast represents a significant breakthrough, congressional supporters of the project said.

It’s the first time Obama has included funding for the project in his annual budget recommendation. Sen. Dianne Feinstein and congressman Adam Schiff, both Democrats, say the change shows the president recognizes the importance of moving

continued from page W6 ing-based risk modeling and assessments for complex industrial and commercial facilities and operations.

His background also includes catastrophe model research and development, supply chain risk modeling, and disaster risk financing and mitigation projects for corporations and sovereign states.

Boston-based Berkshire Hathaway provides commercial property/casualty, healthcare professional liability, executive and professional lines, surety, travel, programs and homeowners insurance. Berkshire Hathaway has regional underwriting offices in Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, Toronto, Hong Kong and Singapore.

Liberty Mutual’s national insurance property operation has named Melissa Kayali division underwriting manager in W8 | INSURANCE JOURNAL-WEST February 23, 2015

ahead with the project more quickly.

“We couldn’t agree more,” Schiff said.

Lawmakers had secured $5 million for the early warning system in this year’s spending bill and were seeking at least $16 million more in the next fiscal year, which begins in October. The money allows for the installation of more seismic detection stations and sensors. Several universities along the West Coast are working with the United States Geological Survey to put an early warning system in place.

A limited system has already been deployed for test users. Supporters of the project in Congress said the test users at the University of California at Berkeley received 10 seconds of warning when an earthquake hit in Napa Valley this past September. A few extra seconds can be critical, allowing doctors to pause surgeries, utilities to shut off the flow of natural gas, or train operators to brake before the shaking starts.

Copyright 2015 Associated Press.

its West region.

Based in Los Angeles, Calif., Kayali is responsible for expanding Liberty Mutual’s global property presence in the West. She oversees a team of property underwriters, risk engineers and service professionals.

She has more than 30 years of experience. Prior to Liberty Mutual, Kayali served as vice president and senior property underwriter at XL Insurance. She also held underwriting and risk engineering positions at Royal and Sun Alliance, ZurichAmerican Risk Engineering and American International Underwriters.

Liberty Mutual’s national insurance property operation provides commercial property products, including single carrier, shared and layered, multi-national, equipment breakdown and inland marine. Boston, Mass.-based Liberty Mutual has operations in 30 countries around the world.

California Agents Asked to Inform Customers on Auto Financial Responsibility

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alifornia Insurance Commissioner Dave Jones and state Sen. Ricardo Lara in February urged Californians to make sure they are meeting their obligation to carry minimum liability insurance coverage on their vehicles and announced resources to help educate motorists and make it easier to get affordable coverage.

Since Jan. 2, when a new law was put in place more than 76,000 new drivers have been issued driver’s licenses under Assembly Bill 60, which enables those who can’t prove they entered the United States legally to get driver’s licenses.

The California Department of Insurance also sent a letter to insurance agents and brokers licensed to sell auto insurance reminding them that new drivers may need help navigating and understanding the financial responsibility law and their obligation to carry auto insurance, and to help watch out for scammers and schemes targeting the new population of drivers.

The next step in reducing the number of uninsured drivers and making California’s roads and highways safer is to reduce the number of uninsured motorists, Jones and Lara, D-Bell Gardens, said.

Additionally the two addressed Lara’s Senate Bill 1273, which passed in 2014, that made changes to California’s Low Cost Auto Program that make it easier for new licensed drivers to qualify for the affordable coverage program.

“Getting auto insurance is the law and for some who can’t afford it, we have the Low Cost Auto Program,” Lara said.

CDI is offering workshops through community based organizations. www.insurancejournal.com

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News & Markets Heading a National Ridesharing Outline a Political Gain for Jones?

By Don Jergler

A

committee of regulators led by California Insurance Commissioner Dave Jones is working on standards on ridesharing that departments of insurance in states across the U.S. can look to as an example.

Whether the National Association of Insurance Commissioners Sharing Economy Working Group’s efforts will eventually yield recommendations, guidelines, or even a model law, remains to be seen. They may just offer what amounts to a friendly suggestion.

This isn’t merely a question of semantics.

Asked to detail the goals of the committee, California Deputy Commissioner Chris Shultz pointed out that the NAIC has a process for guidelines or model laws, but what is underway now is a working white paper.

Pressed if the committee may eventually come out with guidelines or a law, Shultz did his best to characterize the committee’s objective without committing to anything beyond the white paper.

“Commissioner Jones and the NAIC Sharing Economy Working Group are trying to provide a set to things to think about,” he said.

Shultz was cautious about his wording, he said, because he doesn’t want it to seem like the committee is planning to act authoritatively and by seeming to tell other states what to do.

But one conservative political think tank believes the caution being shown is so the Democrat and former state Assemblyman, and Harvard University law school graduate, doesn’t come off as being politically motivated.

W10 | INSURANCE JOURNAL-WEST February 23, 2015

Next Campaign Congressman John Garamendi, a Ian Adams, Western Region Director at R Democrat from Central California, served Street Institute, believes Jones is using his as the state’s insurance commissioner from role on the commission as a podium to cam1991 to 1995 and again from 2003 to 2007, paign for his next office as he before becoming lieutenant enters his final four-year term governor and then getting in office and begins looking elected to Congress. down the road.

Like Garamendi, Jones There those who believe has positioned himself as Jones has his eye on California a staunch consumer advoAttorney General Kamala cate, and in 2014 he turned Harris’ post. Harris in January his pro-consumer stance formally entered the U.S. up a notch when he stood Senate contest to replace retirbehind propositions 45 and ing Sen. Barbara Boxer. Harris 46 on the November 2014 balis so far considered by most to lot. Prop. 45 was a measure be the front-runner. to require approval before California Insurance Commissioner Dave Jones “You’ve got Kamala Harris, health insurers can change who in two years will be leaving office rates, and Prop. 46 would have raised the early, and I think Dave Jones does have his medical malpractice cap on pain and suffereye on higher office and he probably likes ing. the idea of attorney general,” Adams said.

Both consumer advocate-backed ini“Jones is going to be essentially campaigntiatives were defeated, but they turned ing for the next three-and-a-half years for into high-profile battles with Jones’ name attached.

Jones this year was handed a major victory against Mercury Casualty Co. and a slew of insurance associations when the Sacramento Superior Court issued a decision rejecting a challenge on the regulations under Proposition 103 that limit the amount of advertising costs insurers may pass on to consumers through insurance premiums.

“He’s really doing a lot of things that are designed to get media attention,” Adams said. whatever office comes next.”

Chairing an NAIC committee on a hot Jones hasn’t announced his intentions, topic like ridesharing is a way for Jones to but he wouldn’t be the first California comcall attention to the fact that California has missioner to ride the office and a reputation led the way on ridesharing regulation, and for consumer protection to higher success. continued on page W12 www.insurancejournal.com

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News & Markets continued from page W10 a way for him to show everyone he can help lay groundwork for dealing with issues of national importance, Adams said.

“If he does have another office in mind this is a great way of raising his profile,” Adams said. “There’s been a larger push by the California Department of Insurance with consumer-friendly, relatively high-profile, attention-getting moves.”

California Showing Way The 2014 NAIC committee was comprised of Jones and several insurance commissioners whose states are tackling the ridesharing conundrum — how to regulate and mandate insurance for these app-based ad hoc taxi services.

Members include: Connecticut Insurance Commissioner Thomas B. Leonardi; Nevada Insurance Commissioner Scott J. Kipper; Oklahoma Insurance Commissioner John D. Doak; and Washington Insurance Commissioner Mike Kreidler. Most if not all are expected to return to the committee for the 2015 year, according to committee staff member Jennifer Gardner, an NAIC research analyst.

The group has put out a draft white paper that outlines suggestions from the committee. An open comment period on the paper was expected to close Feb. 20.

Since California passed its regulations, AIA through lobbying efforts and informal conversations has pushed California as a model for other states to consider.

“We’ve been putting it out there in a lot of places and we’re getting a lot of interest,” he said. “I’ve seen this legislation pretty much around the country now showing up as drafts and bills.”

States like Iowa, Georgia and Maine seem to be closely following in California’s footsteps, he said, adding, “I think all of the states are looking at what California has done.”

Mirroring California One of the most notable breakthroughs So far, suggestions in the white paper California made was to closely resemble the laws and regulations in ‘From our perspective it’s deal quickly with the between ridesharplace in California for a good model with which gaps ing activities — when a dealing with ridesharTNC driver has an app ing companies. That’s to build and hopefully on, but hasn’t gotten a not surprising because use around the country.’ ride match, according to Jones is chairing the Whittle. committee, however there is a solid argu Regulations pushed for by Jones and ment that the state has led the way when proposed by California’s Public Utilities it comes to dealing with this issue and that Commission, which oversees ridesharing California should serve as an example for operators in the state, define ridesharing the rest of the states to consider following. operators — transportation network com “From our perspective it’s a good model panies — and ridesharing activities, and with which to build and hopefully use require a $1 million commercial liability polaround the country,” said Jim Whittle, assisicy to be in place whenever a TNC driver tant general counsel and chief claims counhas a smartphone app turned on to accept sel for the American Insurance Association.

W12 | INSURANCE JOURNAL-WEST February 23, 2015

rides.

Before that there was a coverage gap in question pertaining to when a TNC driver was covered under a personal policy, or a TNC’s commercial auto policy. California is also considered to be the first state to divide the ridesharing process into three periods — when a smartphone app is on and when a driver is looking for a ride, when there’s a match and a driver is on the way to pick up a ride and when a driver has a ride.

“I think that’s why we, as an industry, and other state legislatures are looking at California,” Whittle said.

Cited throughout the white paper are measures taken to address ridesharing and insurance taken by California, which was the focus early on for calls for greater regulation of the ridesharing industry following a tragic accident that kicked off the ridesharing debate when an Uber driver went through a San Francisco crosswalk and killed 6-year-old Sophia Liu. White Paper Shultz said the committee has yet to decide how to follow up on the white paper, or whether to follow it up. The committee is also tasked with examining other parts of the evolving sharing economy, such continued on page W14 www.insurancejournal.com

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News & Markets continued from page W12 as rental property sharing — like Airbnb — so members may move on to other topics after the white paper is completed and approved, he said.

There is a lot to be looked at in terms of the sharing economy, which has myriad insurance implications.

PricewaterhouseCoopers estimates that the five traditional sharing economy sectors — equipment rental, bed and bath and hostels, car rental, book rental and DVD rental — generate roughly $22 billion in global revenues, making up just 5 percent of total revenue generated by the 10 sectors PwC looked at.

However, by 2025, these same five sharing economy sectors could generate more than half of overall sales in the 10 sectors for a potential revenue opportunity worth $508 billion, according to PwC. The committee hopes to adopt the white paper at the NAIC Spring National Meeting, then send it to the Property and Casualty Insurance Committee — called the C Committee.

The Executive Committee gets a crack at it, and then the Plenary Committee is the last stop. Typically once it’s adopted by the C Committee, such a document is unlikely to change and will probably remain in it’s in final form at that point, Garner the NAIC staffer said.

“I think we can expect that it will be finalized by the C Committee by hopefully spring, and then it’s pretty much out there and available for the states,” Garner said.

Among its assertions, the 23-page white paper points out that rideshare operators initially

W14 | INSURANCE JOURNAL-WEST February 23, 2015

relied on drivers’ personal auto insurance or various combinations of the above. policies for coverage, which conflicted with One of the more conservative suggestions the livery exclusion in most policies. It was in the white paper is to recommend that a practice that drew calls by insurer associregulators consider requiring underinsured/ ations like the Property Casualty Insurers uninsured motorists coverage in the same Association of America and AIA for reguamount as liability coverage. lators to run interference with rideshare “While TNCs argue that some taxicabs operators by demanding they provide their are not required to provide UM/UIM, the drivers coverage. better practice is to require TNCs to main The white paper states: tain this coverage,” the white paper states.

“From “Otherwise, a pasthe personal ‘The new products present many senger injured in auto insurer’s concerns for insurance regulators, an accident caused perspective, by an uninsured including but not limited to, the this activity or underinsured translates into cost for the new hybrid coverage.’ motorist may increased risk be left without of loss due to: 1) additional miles driven; recourse.”

2) heightened geographic hazard caused Spokespersons for major TNC providers because TNC drivers typically find matches Uber, Lyft and Sidecar did not respond to a in urban, high traffic locations; 3) more request for comment. All three groups are people in the car that can be injured; and free to offer input into the white paper, but 4) the additional risk caused as drivers rush to date Gardner the NAIC staffer for the to accept matches and pick-up and deliver committee says she has yet to receive any passengers in a timely manner.” input — although she did say that on such Recommendations in the white paper documents most people wait right up until include advice on how to deal with gaps in deadline to submit comments. coverage in the face of new insurance prod One area Whittle with AIA sees as a ucts coming on the market. potential sticking point for Jones and his Assuming hybrid policies become readily NAIC committee is if they push for higher available, regulators may be able to require limits.

TNCs and TNC drivers to share the burden “The truth is when talking about these of insurance for ridesharing activities, so things you probably don’t want insurance the paper suggests regulators require: limits so high that few insurers will want • TNC drivers to maintain coverage in perito take that on,” he said. “If it’s a big manod 1 (app on but no ride accepted) and datory minimum coverage, you can see TNCs to maintain coverage in periods 2 some saying ‘That’s too rich for our blood.’ (when there’s a match and a driver is on They need to look carefully at managing the way to pick up a ride) and 3 (when a the needs of the public, the needs of the driver has a ride). businesses so we have good lively products • TNC drivers to maintain primary covthat are priced well and everybody can be erage up to a certain limit (for example satisfied.” $100,000), while requiring TNCs to R Street’s Adams shares the fear that the maintain excess coverage that pays for committee could make overreaching sugaccidents resulting in damages above the gestions in terms of insurance coverage and primary limit. make future innovations from the budding • TNC drivers to maintain primary coverridesharing more onerous for companies to age in period 1 up to a certain limit (for introduce. example $100,000), while requiring TNCs “You don’t want to strangle the industry to maintain excess coverage in period 1 in the crib,” Adams said. “I think there will and primary coverage in period 2 and 3, continued on page W16 www.insurancejournal.com

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News & Markets continued from page W14 be a lot of pushback on the issue of coverage expansions across the board in terms of coverage amounts.”

Endorsements Also budding are insurance products for

ABRAM16735.indd 1

W16 | INSURANCE JOURNAL-WEST February 23, 2015

ridesharing activities. Early this year policy endorsements began to be offered for personal auto policies to fill coverage gaps. The white paper calls these endorsements “a valuable tool to close gaps for TNC drivers willing to purchase them.”

2/9/15 9:53 AM

These hybrid insurance products, which add some level of coverage for TNC activities onto personal auto polices, are being introduced by insurers willing to take on the risk and gain market share in an evolving and growing space, according to the white paper.

“Because the products are not being standardized, but are being developed by different insurers, they will likely establish coverage via different methods for different time periods,” the white paper states. “The new products present many concerns for insurance regulators, including but not limited to, the cost for the new hybrid coverage.”

In January, Jones approved a filing that will enable Uber drivers purchasing coverage through Metromile, which has partnered with National General Assurance Co. to add a new coverage endorsement to their personal policy. The endorsement will provide coverage during period 1, when the ridesharing app is open but the driver is not matched to a passenger.

Outside of California, Erie Insurance Co. began offering an endorsement that makes the TNC driver’s personal policy excess for TNC activity for any insured with a business classification on their personal auto. It covers all three time periods, but is currently available only in Illinois and Indiana.

USAA announced its plans in January to offer coverage in Colorado for TNC drivers from the moment their mobile apps are turned on until they are matched with a passenger. The pilot program, which began in February, extends a member’s existing auto policy coverages and deductibles, and costs about $6-$8 more per month, according to the carrier.

“In developing these new hybrid insurance products, TNCs may need to share with participating insurers any statistical information they track regarding driver and passenger characteristics, delivery patterns, hours of operation and any other factors relevant for determining insurance rates,” the white paper states. “One way to accumulate information on TNC driver behavior may be the use of telematics installed in driver vehicles.” www.insurancejournal.com

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News & Markets Commercial Lines Softening to Continue in U.S. in 2015: Marsh

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ompetition among property/casualty insurance carriers and the flow of capital into the industry are continuing to drive down rates in most U.S. commercial lines and conditions are particularly favorable for clients with attractive risks and good loss histories, says global insurance broker Marsh.

Cyber insurance is an area where demand is strong and rates are volatile, the broker notes.

In its annual U.S. Insurance Market Report 2015, Marsh says that the U.S. commercial property insurance market is expected to continue to soften into 2015.

Barring unforeseen events, clients with non-catastrophe exposed risks should expect competition for their property insurance programs in 2015 with favorable terms and conditions and price decreases typically averaging between 5 percent and 15 percent, depending on the insured’s specifics.

Catastrophe-exposed clients also can expect typical rate decreases in the 10 percent to 15 percent range, depending on their risk profile and concentration of catastrophe prone areas, Marsh predicts.

The U.S. casualty insurance market also

appears poised to soften in 2015, following a stable 2014 in which rates generally edged upward, but the pace of increase slowed, according to the report. Of particular note, 2014 is projected to be the first profitable year for workers’ compensation since 2006, although insurers are still pressing for rate increases.

Cyber Market Cyber remains one of the fastest growing sectors in the insurance market, as evidenced by continued growth in premium and policy count, as well as the steady influx of new capacity. Marsh reports that continued growth in supply and demand for cyber insurance, coupled with unexpected loss activity, led to significant volatility in pricing during 2014, which is likely to continue in 2015, Marsh notes.

Cyber insurance rates were up on average between 2 percent to 10 percent in the fourth quarter of 2014 for clients with average to good loss profiles.

“Strong capital positions, ample capacity and competition within the U.S. property/ casualty market are leading to favorable conditions for insureds, especially those

with well-managed risks,” said Robert Bentley, president, U.S. and Canada division. “While this is good news, organizations need to remain vigilant in their efforts to stay abreast of the changing marketplace, where new and emerging risks can quickly escalate if not properly managed.”

Other predictions: Cyber remains • The release of the one of the fastest revised Fair Labor Standards Act reg- growing sectors in the insurance ulation is likely to increase wage and market. hour claim filings, a key issue to watch in employment practices liability in 2015.

• The captive insurance market is expected to continue to grow this year; captive owners should be focused on evolving regulations in domiciles foreign and domestic.

• With political risk insurance capacity at record levels, buyers in 2014 experienced generally favorable market conditions, which are expected to continue into 2015.

• Bankruptcies in the U.S. retail sector caused some trade credit insurers to express concerns and reduce their exposure.

Fraud Adds Up to 17% to Auto Insurance Injury Claims: IRC

A

new study estimates that fraud and claim “build-up” add between $5.6 billion and $7.7 billion in excess payments to auto injury claims paid in the United States.

The excess payments represented between 13 percent and 17 percent of total payments under the five main private passenger auto injury coverages, according to the study from the Insurance Research Council (IRC) of 2012 claims data.

Twenty-one percent of bodily injury (BI) claims and 18 percent of personal injury protection (PIP) claims closed with payment had what the www.insurancejournal.com

study terms the “appearance” of fraud and/ or build-up in 2012.

The most common type of abuse was claim build-up, defined as the inflation of otherwise legitimate claims; claims with appearance of build-up accounted for 15 percent of dollars paid for BI and PIP claims in 2012. Claims with the appearance of fraud and/ or build-up were more likely than other claims to involve chiropractic treatment, physical therapy, alternative medicine, and the use of pain clinics.

The prevalence of apparent fraud and build-up varied widely among states, especially

no-fault states. States with highest rates of fraud and build-up among PIP claims included: • Florida (31 percent) • New York (24 percent) • Massachusetts (22 percent) • Minnesota (22 percent) “The costs associated with auto injury claim abuse make auto insurance more expensive for everyone,” said Elizabeth Sprinkel, senior vice president of the IRC. “Efforts to lower insurance costs must include measures aimed at reducing the amount of fraud and buildup in the system.”

The study, Fraud and Buildup in Auto Injury Insurance Claims, is based on more than 35,000 auto injury claims.

February 23, 2015 INSURANCE JOURNAL-NATIONAL | 11

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Business Moves and business intelligence.

Robert Buhrle, former partner at Agile, has joined Majesco as vice president of client servicing.

Majesco provides core policy administration, distribution management, underwriting, billing applications and portals to insurance carriers. The firm is based in New York and has offices in Edison, N.J.; Glastonbury, Conn.; Toronto, Ontario, Canada; India; the United Kingdom; Malaysia; Singapore; and Thailand.

Agile has offices in New Jersey, Georgia and Ohio.

Majesco, Agile Insurance technology firm Majesco has completed the acquisition of the insurance business of Agile Technologies, a technology consulting firm with revenues of more than $9 million. Terms of the deal were not disclosed.

In December 2014, Majesco announced the acquisition and said it also planned to merge with Cover-All Technologies, another insurance tech company. The Cover-All deal is expected to close in the second quarter of 2015 and will create an operation with $100 million in annual revenue and a global reach. Cover-All provides browser-based commercial lines policy, business intelligence, and claims programs.

Majesco said the addition of Agile’s consulting services will support and accelerate the company’s growth plans. Agile is fully integrated into Majesco and will operate under the Majesco brand, the firm said.

All employees including the leadership team at Agile have joined Majesco.

Bill Freitag, founder of Agile as well as its managing partner and CEO, has joined Majesco as executive vice president. He will lead Majesco’s consulting business.

John Johansen, former partner and co-founder at Agile, has joined Majesco’s executive team as senior vice president with responsibility for leading data strategy 12 | INSURANCE JOURNAL-NATIONAL February 23, 2015

MAPFRE, MiddleOak Insurance Spanish insurance giant MAPFRE SA has said it wants to expand and is eying acquisitions in Europe and the United States, most recently closing on a deal in New England.

Carrier Management, a sister publication of Insurance Journal, reported on February 5 that MAPFRE, in an email to affected agencies, revealed its U.S. arm inked a deal with MiddleOak Insurance to take over its personal lines insurance business. MiddleOak, which was formed by Massachusetts companies Holyoke Mutual Insurance Co. and Middlesex Mutual Insurance in 2006, will continue with its commercial lines business.

MAPFRE USA, which has its U.S. headquarters in Webster, Mass., writes in 17 states, offering private passenger auto, home and commercial auto and property through various underwriting companies that include The Commerce Insurance Co., American Commerce Insurance Co. (Columbus, Ohio), and Citation Insurance Co. MAPFRE primarily focuses on New England, where it writes $1.6 billion in Massachusetts, New Hampshire, Connecticut and Rhode Island combined.

MiddleOak’s book will add business in Maine and Vermont.

MiddleOak writes commercial residential property for apartments and community associations across the country, and person-

al home, auto and boat insurance in New England.

MiddleOak CEO Gary Vallo said his operation will begin to withdraw from personal lines on March 1, and that MAPFRE USA “will offer a policy of insurance to most MiddleOak policyholders who would otherwise have been renewed by MiddleOak.” MiddleOak is exiting personal lines because it is a “high risk/low return business for MiddleOak” and that “associated catastrophe reinsurance expenses impose a significant burden on personal lines profitability,” Vallo said.

Additionally, evolving financial regulation is burdensome and expensive, and “diversifying personal lines outside of New England is infeasible given MiddleOak’s agency relationship-based strategy,” he added.

Vallo said, however, that MAPFRE USA will make the transition seamless, and “MiddleOak personal lines agents and policyowners will be better served aligning with MAPFRE USA, a provider committed to making the investments required for future success in personal lines with independent agents.”

John Kelly, MAPFE USA’s senior vice president of business development - Eastern region, worked to assure MiddleOak agents about the transition. He said MAPFRE would make MiddleOak specialty products available to affected agents late in 2015. He also said that MAPFRE has offered jobs “to some MiddleOak employees ... to assist our efforts in minimizing any disruption.”

Brown & Brown, Liberty Insurance Brokers Brown & Brown Inc. announced that its subsidiary Brown & Brown of Pennsylvania LP has acquired certain assets of Liberty Insurance Brokers Inc. and its related affiliate companies in Philadelphia. Terms of the transaction were not disclosed.

Founded in 1996, Liberty Insurance Brokers and its affiliate companies provide commercial and personal lines insurance for the multi-family residential industry continued on page 14 www.insurancejournal.com

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Business Moves continued from page 12 primarily in Pennsylvania and New Jersey.

Liberty Insurance Brokers and its affiliates report annual revenues of approximately $4 million.

As part of the transaction, Liberty Insurance Brokers’ President and Founder Scott Engel and his team will combine with Brown & Brown of Pennsylvania’s existing Plymouth Meeting, Pa., location under the leadership of Rob Heller.

Florida-based national insurance broker Brown & Brown Inc., through its subsidiaries, offers insurance and reinsurance products and related services. Additionally, certain Brown & Brown subsidiaries offer a variety of risk management, third-party administration and other services. Brown & Brown serves business, public entity, individual, trade and professional association clients nationwide.

Smith Brothers, McMahon Company Smith Brothers Insurance LLC, an independent insurance agency based in Glastonbury, Conn., has acquired the assets of the McMahon Company Inc., an independent agency in Rocky Hill, Conn. Terms of the transaction were not disclosed.

The McMahon Company, founded in 1970 and led by Blaine Kaiser, provides insurance and risk management services for businesses and individuals in the greater Hartford community. The McMahon Company plans to retain the company name, and the firm’s team of six employees will remain in the Rocky Hill location.

Smith Brothers Insurance provides insurance, surety, risk management, employee benefits, and financial services to individuals and businesses. Headquartered in Glastonbury, Smith Brothers has additional satellite locations in Waterford, Conn. (operating as Atlantic Insurance); Chester, Conn. (Archambault Insurance); Northampton, Mass.; and also in Rocky Hill, Conn., following the McMahon Company acquisition. In total, Smith Brothers has approximately 115 employees.

Spencer Capital, USA Risk Group Spencer Capital Holdings Ltd., the par14 | INSURANCE JOURNAL-NATIONAL February 23, 2015

ent company of reinsurer Spencer Re, has agreed to acquire USA Risk Group, an independent captive insurance manager based in Barre, Vt. Financial terms of the transaction were not disclosed.

The transaction is subject to customary closing requirements and regulatory approval, and is expected to close during the first quarter of 2015.

Founded in 1981, USA Risk Group is an independent provider of alternative risk management services with captive management operations in Arizona, Barbados, Bermuda, the British Virgin Islands, Grand Cayman, Malta, South Carolina, Tennessee and Vermont, managing companies in 20 domiciles. USA Risk serves more than 300 clients, holding $9 billion assets under management. USA Risk has 70 employees on- and offshore.

Spencer Capital Holdings Ltd. said its reinsurance subsidiary Spencer Re and USA Risk are expected to be mutual beneficiaries from cross-selling opportunities. Spencer Re is a reinsurance company focused on the U.S. auto dealership industry.

After the transaction closing, H. Lincoln Miller, Jr., group chairman of USA Risk, will join the board of directors of Spencer Capital. Gary Osborne, president of USA Risk, will join the Spencer Re board of directors.

Arthur J. Gallagher, Aequus Trade Credit Arthur J. Gallagher & Co. announced the acquisition of Aequus Trade Credit LLC in Warren, N.J. Terms of the transaction were not disclosed.

Established in 1997, Aequus Trade Credit is a specialist insurance broker that offers credit risk mitigation products and services.

Aequus Trade Credit focuses on credit and political risk insurance and accounts receivable puts for middle-market and Fortune 1000 clients throughout the United States. Marc Wagman and his associates will continue to operate under the direction of Douglas Brown, head of Arthur J. Gallagher’s Northeastern region retail property/casualty brokerage operation.

Arthur J. Gallagher said Aequus Trade Credit’s team and its expertise will complement Arthur J. Gallagher’s Trade Credit and Political Risk practice group.

Headquartered in Itasca, Ill., Arthur J. Gallagher & Co. is an international insurance brokerage and risk management services firm. It has operations in 30 countries and offers client service capabilities in more than 140 countries through a network of correspondent brokers and consultants.

United Insurance, Shiretown Agency United Insurance, an independent insurance agency headquartered in Falmouth, Maine, announced the acquisition of the Shiretown Agency in Farmington, Maine.

Terms of the transaction were not disclosed.

United Insurance has 16 Maine locations and one in Rochester, N.H. The firm provides personal and business insurance, employee benefits and risk management services.

Shiretown Agency and its six staff members will continue to operate from their Farmington location.

Clark Insurance, James L. Cooney Clark Insurance, an employee-owned independent insurance agency with offices in Maine and New Hampshire, has acquired the James L. Cooney Insurance Agency of Lowell, Mass. Terms of the transaction were not disclosed.

The James L. Cooney Insurance Agency began business as the Cooney and Lynn Agency in 1946. The agency offers personal, commercial and employee benefits insurance to families and businesses throughout the region. The office will remain in its location in Lowell.

The James L. Cooney Real Estate Agency, the real estate agency part of the James L. Cooney company, was not part of the sale and will continue to be retained by the James L. Cooney company owners.

Clark Insurance is an employee-owned agency founded in 1931 in Portland, Maine, and has grown to more than 100 employees in four Maine locations, one in Manchester, N.H., and now an office in Lowell, Mass. www.insurancejournal.com

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

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

Construction - Casualty - All kinds Market Detail: Peachtree Special Risk Brokers (www.psrllc.com) offers capacity up to $500 million with minimum premiums starting at $7,500 for primary CGL and $5,000 for excess/umbrella. Coverage is available nationwide with underwriting authority in house in Florida. The New York contractor insurance marketplace also is available with a minimum $75,000 CGL with comprehensive coverage.

Available limits: As needed Carrier: Various, non-admitted States: All states except Alaska and Hawaii Contact: David O’Keeffe at 201-913-8030 or email: dokeeffe@psrllc. com 16 | INSURANCE JOURNAL-NATIONAL February 23, 2015

ment related practices liability; $100,000 fire legal liability; $10,000 medical payments (on request); $1 million hired and non-owned auto (on request); up to $25 million excess pollution (on request).

Available limits: Minimum $1 million, maximum $10 million Carrier: Unable to disclose, non-admitted States: All states except Alaska and Hawaii Contact: Customer service at 256-260-0412

Nonprofit Organizations Market Detail: Donald Gaddis Co. Inc. Insurance Services (www. gaddiscompany.com) writes all lines of professional liability; directors and officers liability; media liability; cyber and employment practices liability. Difficult or unusual commercial property, casualty, or package coverages, liquor liability and hard-to-place homeowners are also available. Workers’ compensation or automobile liability coverage are not available. The company represents 70 excess and surplus lines and specialty carriers on a brokerage basis.

Available limits: As needed Carrier: Unable to disclose States: All states Contact: Chris Gaddis at 312-853-0071 or email: cgaddis@ gaddiscompany.com www.insurancejournal.com

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CLOSER LOOK

Boats & Marinas 5 Things to Consider When Insuring Yachts

D

riving by a marina or boatyard, most of us admire the beautiful yachts, and may even daydream about a weekend on the water. Insurance agents likely also envision easily selling coverage to recreational boating customers. However, even as other areas of insurance become increasingly automated, insuring yachts requires a specialized focus on five important considerations: relationships, information, value, losses and

By Craig McGinnes experience.

Relationships A successful yacht insurance agent needs to maintain connections with various related marine professionals, to benefit from their knowledge and experience (and referrals). These include manufacturers, dealers, banks and finance brokers, and marine surveyors.

Few carriers specialize in yacht insurance, and many agents may lack the experience or expertise to evaluate a prospective customer and secure the best coverage. It takes effort and commitment to develop, but specialized knowledge and experience can assure the necessary exchange of information between insurer and prospect.

Information Email and the internet make it easy to communicate quickly, but in yacht insurance brevity often can lead to overlooking important details.

Electronic submissions can be insufficient on such key details as the actual ownership of

18 | INSURANCE JOURNAL-NATIONAL February 23, 2015

a vessel, the loss history of all its owners, or the navigation needed by the policyholder — in other words, the waters the vessel will navigate throughout the year.

Complete disclosures are critical. For example, warranting that a yacht will be “in layup” (decommissioned and out of use, often during winter months) for an extended time generally results in a premium discount. But it also restricts coverage, and an owner inadvertently using the vessel during the layup period forfeits protection if a loss occurs.

An essential resource for yacht insurance transactions is a thorough marine survey. Reputable marine surveyors have unique training and skills to provide detailed assessments of the condition of a vessel.

The credibility of an objective, experienced surveyor is beneficial to the owner and insurer alike. It can be challenging to choose a marine surveyor, since there is no licensing, government regulation or industry standard that applies to assure competence or professionalism. While it is not the agent’s or insurer’s place to choose a surveyor, they can provide their customers with names of multiple qualified candidates

and encourage them to seek additional references and evaluate their work product in order to choose wisely.

Value Many owners overestimate the value of their vessels, perhaps biased by emotional attachments or equating the significant funds invested in maintaining or customizing their yacht with the market value.

Unfortunately, it is also not uncommon for less professional marine surveyors to state valuations above market conditions, without any supporting evidence.

Most yacht policies are written based on “agreed value” coverage, representing the current market value of a yacht at the time

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a policy is written. Agents and yacht owners should be wary of cheaper options that may only provide for actual cash value.

Also, over-insuring a vessel can be an expensive mistake, paying for coverage that is of no clear benefit and often results in higher deductibles as well.

In contrast, a yacht owner shouldn’t cut corners by purchasing low liability coverage. In addition, many marinas are increasingly requiring yacht owners to maintain high liability limits in their policies. Fortunately, increasing liability limits typically doesn’t substantially increase premiums.

Umbrella policies, and their requirements for underlying contracts, are also important considerations and good reason to scrutinize the financial strength of any yacht insurer under consideration.

Losses An insurer proves its mettle in how it handles claims. An agent must not only evaluate an insurer’s ability to pay claims, and the responsiveness of its claims adjusters, but understand the unique processes and expertise involved in handling a yacht loss.

A yacht claim specialist must know the unique nature and broad variety of vessels, and how to mitigate and evaluate complicated marine losses.

Experienced yacht claims staff have knowledge of marine construction, electronics, mechanics, navigational rules and regulations, maritime law considerations, weather patterns and more. Insureds will benefit from their established relationships with surveyors, repairers, salvors and others www.insurancejournal.com

to provide expert claims service.

Vessel owners also must maintain focus on loss prevention. Most insurers, for example, offer incentives to encourage strong prevention of losses due to named tropical storms. There is also a need for owners to be diligent in regular maintenance and usage of their vessels to prevent common, avoidable losses. Insureds frequently look for guidance in such areas as storm planning or vessel security, and experienced agents can help their customers understand the importance of active loss prevention.

Experience An agent who wants to develop a yacht specialty needs to do so by gaining experience firsthand, starting with key relationships.

Joining local chapters of marine insurance or trade associations can give access to current knowledge on yacht-related industries while building a network of marine

An essential resource for yacht insurance transactions is a thorough marine survey.

professionals.

Experienced agents provide invaluable analysis of competing terms and conditions among various insurers’ policies. While most contracts have broad similarities, there can be subtle but meaningful distinctions among them.

Insurers can vary in their underwriting and risk appetites, and knowledge of those distinctions is needed to guide customers to the best fit for their needs and circumstances.

For those that are called to venture out to sea, the specialized knowledge of an experienced yacht insurance agent is important to every voyage.

McGinnes is yacht manager for Catlin US.

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CLOSER LOOK

Boats & Marinas E&O Insights: How to Calm the E&O Waters When Insuring Marinas

A

s spring approaches, agencies may have some opportunities to secure commercial accounts dealing with watercraft business. These accounts, typically classified as marinas, boat yards or boat moorage, offer a multitude of services to private and commercial boat/yacht owners.

Understanding the class of business and the variety of these exposures could make a difference in “calming the errors and

By Curtis M. Pearsall omissions waters.”

Benefits of Risk Evaluation System Many of these risks offer slips or dock space rental and usually launching slips, too — some to members only and some to the public. Some offer storage facilities, both wet and dry (out of the water). Other services include: boat rental facilities, service and repair facilities, dry dock facilities for painting, refitting, refueling, refill of water and other supplies, sales of equipment and accessories, and restaurants or bars. The marina might provide lifts to take boats out of the water and also offer recreational opportunities and instruction, boat races and contests, demonstrations, and promotions as well.

These risks present a wide array of exposures. A great place to start learning about these risks is an exposure analysis checklist.

This will help your producers to better understand the exposures, the applicable coverages and key questions to ask.

These checklists provide a full description of this class of business and the exposures broken down by line of business. They provide tremendous assistance in helping insurance producers become more educated on this class of business.

Without the use of this tool, it 20 | INSURANCE JOURNAL-NATIONAL February 23, 2015

would be extremely difficult to identify the exposure and propose necessary coverages.

Exposures to Consider There are a wide variety of coverages to consider, including property (real and personal), business income, general liability, environmental impairment and workers’ compensation. The checklist will provide important questions to ask such as: • Is there any boat repair?

• Do they do any spray painting?

• Do they have a liquor liability exposure?

• Do they have any exposure to the Longshore and Harbor Workers’ Compensation Act? • Do they lift boats out of the water?

• Are they involved in instruction, boat races and contests, demonstrations, and promotions?

Sales and Service. The sales and service of boats is a significant potential exposure. If your account has this exposure, you must determine the type(s) of boats sold and/or serviced. This can range from canoes/kayaks and cabin cruisers, to fishing boats and power/racing boats.

Tours and Rentals. There is the definite possibility that the marina offers tours or boat rentals. They may also store boats for the season. These all present some unique exposures that the agency needs to understand when presenting the risk to

the carrier and the eventual proposal to the prospect.

Environmental Impairment Exposures. There are a host of possible environmental exposures such as: • Do any of the other occupancies in this building pose a catastrophe risk or other hazard to the applicant (explosion, fire, chemical, other)?

• How does the marina dispose of waste?

Are there any fuel tanks on the applicant’s premises?

• What is the procedure in place to control spillage during the filling process?

Large losses have occurred in this class of business, so there should be consideration and discussion on limit options/umbrellas, etc.

Attention to detail is important, as noted by the following claim.

An agent had a marina as a client and procured a policy covering physical damage to boats stored there. The client wanted coverage for theft and vandalism in addition to the other perils. The procured policy excluded loss by theft and vandalism.

Coverage could have been bought back for those perils for $400. The agent missed the exclusionary language, and a theft of equipment from a boat occurred. The client claimed $23,000 in damages. Due to the agent’s negligence, the loss was settled for $17,500.

Insuring marinas can be complicated. There are a host of exposures and it is fair to say that no two marinas are the same. By proper use of the various exposure analysis checklists, agents will be better able to understand the exposure of the specific marina.

Pearsall is president of Pearsall Associates Inc. He is also a special consultant to the Utica National Agents E&O program. Phone: 315-768- 1534.

Email: curtis@pearsallassociates. com. Blog: www.agentseotips.com.

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SPOTLIGHT

10 Things to Know About Boats & Marinas Wreck removal is another needed coverage.

If a boat sinks the owner may be required to have the wreck removed from a navigable waterway. — Kim Loos, St. Louis Marine Service Center from American Modern

Recreational boating in 2013 accounted for 4,062 accidents that involved 560 deaths; 2,620 injuries; and approximately $39 million dollars of property damage. — United States Coast Guard (USCG)

There were 5,537 watercraft thefts in the U.S. in 2013, down 6 percent from 2012, with jet skis being the most frequently stolen watercraft. — Insurance Information Institute

Compared to 2012, the number of boating accidents decreased by 10 percent in 2013; the number of deaths decreased 14 percent; and the number of injuries decreased 12.7 percent.

— United States Coast Guard (USCG)

The top five primary contributing factors to boating accidents in 2013 were: operator inattention, improper lookout, operator inexperience, excessive speed and machinery failure. — United States Coast Guard (USCG) 40 percent of the thefts in 2013 were recovered

by April 30, 2014 — Insurance Information Institute

The 10 states with the highest boating thefts in 2013, according to the I.I.I., were: Florida (1,310), California (628), Texas (382), Washington (208), Georgia (182), North Carolina (178), Tennessee (167), Alabama (165), Arkansas (157) and South Carolina (151). — Insurance Information Institute Most marine policies offer pollution coverage, which is a very important coverage to have if the boat sinks and spills oil or fuel. Especially on larger boats, most marinas are now requiring evidence or proof of pollution coverage. All types of pollution and/or fuel spill losses can cause a lot of damage to the environment. — Kim Loos, St. Louis Marine Service Center from American Modern

Boat and yacht owners should have Agreed Value vs. Actual Cash Value (ACV). If the vessel suffers a total loss on an ACV form, the owner will receive the current market value, which could be thousands of dollars less than what was paid for the boat. Agreed Value is a set amount and not a depreciated amount at time of loss. — Kim Loos, St. Louis Marine Service Center from American Modern

22 | INSURANCE JOURNAL-NATIONAL February 23, 2015

It was estimated that 25,000 boats in New Jersey were damaged during Hurricane Sandy, at a cost of $242 million. — Insurance Information Institute www.insurancejournal.com

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Corporate Banking | Capital Markets & Advisory Services | Dedicated Industry Experience © 2015 Regions Securities LLC. Investment banking and business advisory services are offered through Regions Securities LLC, 1180 W. Peachtree St. NW, Suite 1400, Atlanta, GA 30309. Member FINRA and SIPC. Regions Securities LLC is an affiliate of Regions Bank. | Regions and the Regions logo are registered trademarks of Regions Bank. The LifeGreen color is a trademark of Regions Bank.

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SPECIAL REPORT

Agency Salary Survey

24 | INSURANCE JOURNAL-NATIONAL February 23, 2015

www.insurancejournal.com

Employee Pay Up But Morale Down

By Andrea Wells

3.68 in the 2014 survey, based on a scale of 1-to-5 where “5” equaled “most satisfied.”

• Producers/sales reported satisfaction of gency employees are not happy when 3.12 in the 2015 survey, down from 3.19 in it comes to compensation, and money the 2014 survey. isn’t the problem.

• And support staff/CSR/account execu Despite some reported increases in tives reported a satisfaction score of 2.73 in salaries and total compensation, many the 2015 survey, down from 2.90 in the 2014 employees continue to be unsatisfied when survey. it comes to overall compensation, according “The agency is growing, but not adequateto Insurance Journal’s annual Agency Salary ly staffing. … Been here 10 years, no incenSurvey 2015. tives for support staff, no reports pulled to Compensation satisfaction declined in consider retention rates or new business 2014 compared with 2013, according to the sold,” one survey respondent commented. survey’s “Compensation Satisfaction Index.”

Another understaffed.

We While agency staff reported increases in Owners/Principals Officesaid: “We are Sales Accounting P/Csalary Premium President/CEO Manager Manager are always asked to doManager more work for no both andVolume total income for 2014, their additional compensation.” happiness for overall compensation fell in million of personnel surveyed. $51,500 $42,000 And$45,179 another: “It seems like every$31,000 agency allUnder three $1 categories million - $5 million $75,259 $45,631 $53,580 $35,918 I've ever worked in, including this one, has $1 According to the 2015 Agency Salary sur$5 million- $10 million $101,853 $63,917 $92,593 $50,774 underpaid and overworked staff.” vey: $10 million - $25 million $155,257 $77,537 $99,813 $55,303 While all three categories — manage• $25 Management/agency owners/agency prinmillion - $50 million $181,424 $89,143 $168,750 $81,875 ment/owners/principals; producer/sales; cipals reported a compensation satisfaction $50 million - $100 million $244,095 $95,804 $145,441 $88,889 and support staff — reported score of 3.62 in the 2015 survey, down from $100 million or more $312,500 $97,031 $229,643 positive $94,342

A

salary and income adjustments in 2014 the increases overall were less than 2013 adjustments, the survey revealed.

There’s more to job satisfaction than just salary, says Chris Burand, founder and owner of Burand & Associates LLC, a consulting services organization for the property/casualty industry, based in Pueblo, Colo., and author of Insurance Journal’s “The Competitive Advantage” column.

“Everybody is making more money — whether it’s a little bit or a lot — the industry and carriers made a fortune last year,” Burand said. “The agency owners I know seem to be making plenty of money right Personal Commercial Marketing Lines Mgr. Lines Mgr. Manager now, too.”

However, Burand says, the money is com$43,750 $55,000 ing$30,750 with a lot more work attached. $102,813 $36,500 “My thought is$45,602 that any decrease in sat$47,656 $61,198 $54,250 isfaction has to do with how much harder $60,861 $69,194 $68,143 agencies are having to work —$108,810 for the $110,161 $106,908 same amount of money,” he said.

“Staff and $77,500 $89,808 $85,476 owners are having to work much harder for $108,750 $142,647 $118,269 their money right now.”

According to Burand, agencies and their staff are stressed 2012 now as carriers continue to place additional 3.28 work on their agencies.

2.87 “That’s putting a lot 2.58 of strain on people. The pressure on the agents to grow faster is really intense,” Burand contends.

He has seen agen2011 cies that have generated 3.9% good business in the 3.3% last year and achieved 2.2% excellent loss ratios continued on page 26

Agencies' Average Salaries by Premium Volume (Management)

Agency Compensation Satisfaction Index* Management/Agency Owner/Principal Producer/Sales Support Staff/CSR/Account Executive

2015 3.62 3.12 2.73

2014 3.68 3.19 2.90

2013 3.51 3.03 2.75

2013 7.2% 8.8% 2.8%

2012 4.5% 5.5% 2.3%

* 5 = Most Satisfied; 1 = Least Satisfied

Average Agency Total Income Change* Management/Owner/Principal Producer/Sales Support Staff/CSR/Account Executive

2014 6.7% 5.7% 3.5%

*Includes all income changes in year

Average Agency Salary Adjustment Management/Agency Owner/Agency Principal Producer/Sales Support Staff/CSR/Account Executive

2014 3.9% 4.4% 3.4%

2013 4.3% 5.1% 2.5%

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How Agencies Base Compensation Incentive Plans

2012 2.8% 2.9% 2.2%

2011 1.1% 1.6% 2.1%

2010 -0.6% -0.2% 0.6%

2009 -1.2% -0.8% -0.1%

February 23, 2015 INSURANCE JOURNAL-NATIONAL | 25

CS

Co Per Su

CS

Eas Mid Sou Sou We

Wh in

Cut Shif Incr Forc Pos Pos Incr Incr

W Im

Cut Shif Incr For Pos Pos Incr Incr

$100 million or more

$312,500

$97,031

$229,643

$94,342

$108,750

$142,647

$118,269

SPECIAL Agency REPORT Compensation Satisfaction Index*

Agency Salary Survey Management/Agency Owner/Principal Producer/Sales Support Staff/CSR/Account Executive

2015 3.62 3.12 2.73

2014 3.68 3.19 2.90

2013 3.51 3.03 2.75

2012 3.28 2.87 2.58

continued from page 25 Satisfied * 5 = Most Satisfied; 1 = Least • Producers/sales reported average increasreceiving a note come year-end from a car• Agency support staff reported a 3.5 peres in salary of 4.4 percent in 2014, compared rier partner that says: “’That’s great, but you cent increase in total income for 2014, comwith 5.1 percent in 2013. didn’t grow fast enough.’ That’s really drivpared with 2.8 percent in 2013.

• Agency support staff reported a 3.4 pering a lot of the stress in agencies. Everybody Al Diamond, president of the Cherry 2014 2013 2011 Agency Consulting Group cent increase in 2014, compared with 2.5 2012Hill, N.J.-based is under intense pressure to find some Management/Owner/Principal 7.2% 4.5%(ACG),3.9% percent in 2013. 6.7% growth and while the economy is coming an independent agency valuation

The 2015 Agency Salary Survey revealed back, it’s not growing fast enough to satisfy and consulting 5.7% 8.8% 5.5% 3.3% firm serving organizations Producer/Sales higher bumps as well in total income, theSupport companies’ Staff/CSR/Account growth appetites.” nationwide, 3.5% 2.8% 2.3% 2.2%says that while agencies are Executive which includes profit sharing, bonuses and showing growth, he agrees that employee *Includes all income changes in year other income: Pay Up, Spirits Down satisfaction with pay is down.

• Agency owners, principals and manage Amid the waning compensation satisfac Compensation for employees is not ment reported the largest jump in total tion, agency personnel at all levels received moving forward the way employees expect income for 2014, which increased by 6.7 pera salary boost of between 3 percent to 4 it to, Diamond says. “The past 40 years or cent, compared with a 7.2 percent increase percent on average in 2014: longer we have been in an era of regular pay 2014 2013 2012increases,”2011 2010 2009 in total income for 2013.

• Agency owners, principals and managehe says. “Now, there’s a great deal Management/Agency Owner/Agency Principal 3.9% 4.3% 1.1% -0.6% and -1.2% • Producers/sales reported a 5.7 percent 2.8%of stress on ment reported salary increases of 3.9 peragency commissions agency Producer/Sales 5.1% 1.6%so the growth -0.2%[in salaries] -0.8% increase in total 4.4% income for 2014, compared 2.9%contingencies cent in 2014, compared with 4.3 percent in Support Staff/CSR/Account Executive with 8.8 percent 3.4% 2.5% 2.2%that has happened 2.1% 0.6% -0.1% in 2013.

2013. in the past is not as consistent.”

Everett W. Shaw, president of Cheshire, How Agencies Base Compensation Incentive Plans Conn.-based B.H. Burke & Co. Inc., says compensation trends are mixed in agencies today. “In the last year or so some agencies Agency profits 34.8% have begun to institute increases going back Productivity 30.7% to the pre-2008-2009 period while others have not,” says Shaw, whose firm offers Revenue growth 25.7% business-valuation and consulting services Contingent commissions 15.5% for independent insurance agencies and Individual performance 42.1% brokerages on matters of agency finance, No incentive plan 24.8% operations, technology and management.

Diamond’s Agency Consulting Group’s Other 5.3% own data shows a similar mixed trend.

ACG has collected data and published composite groups of insurance agency operating performance since 1987. His data show that Manager/Owners Producers Staff for small agencies under $1 million, comLess than 3 years $56,429 $44,877 $43,122 pensation has been relatively flat. But the 3-5 years $90,850 $69,469 $45,944 story is different for larger agencies.

6-10 years $84,167 $76,832 $45,286 “The latest composite group productivity 11-20 years $169,437 $65,194 $53,610 table and compensation per employee grew 21-30 years $143,556 $74,117 $60,637 by one-tenth of a percent,” Diamond says.

More than 30 years $142,755 $71,535 $61,366 “However, in the larger groups, the agencies over $2 million, $3 million, $4 million in revenue, compensation is growing and growing consistently.”

Manager/Owners Producers Staff What’s different is the method by which East $154,144 $70,875 $57,345 many agencies compensate employees Midwest $127,827 $52,965 $50,926 today, according to Diamond.

South Central $132,024 $32,583 $53,591 Compensation growth no longer comes Southeast $108,600 $67,757 $50,863 from simple cost-of-living pay increases West $177,094 $68,219 $61,310 — but is now measured in many cases by

Average Agency Total Income Change*

Average Agency Salary Adjustment

Average Agency Salaries By Experience

Average Agency Salaries by Region

26 | INSURANCE JOURNAL-NATIONAL February 23, 2015

www.insurancejournal.com

H

West

$177,094

$68,219

$61,310

Compensation Satisfaction Index* vs.

Cost of Living Increase No, do not receive annual cost of living increase in pay Yes, receive annual cost of living increase in pay

3.08 3.72

* 5 = Most Satisfied; 1 = Least Satisfied

employee productivity.

For instance, in ACG’s intermediate group — the $2 million to $3 million agencies — productivity by revenue per employee grew by 5.5 percent in the last year, and compensation grew by 5.4 percent in those agencies. He says that means compensation is tracking almost the same as productivity in those agencies.

“The same thing happened in large agencies where compensation grew almost equal to the productivity growth,” he said.

However, in smaller agencies, those with me (Management) less than $2 million in revenue, compensaAccounting Personal Commercial Marketing slipped orMgr. stayed stagnant.

Manager tion actually Lines Mgr. Lines Manager In the future, Diamond sees agency com$31,000 $30,750 $43,750 more$55,000 pensation being measured and more $35,918 $36,500 $45,602 $102,813 by productivity. $50,774 $47,656 $61,198 $54,250 “My recommendation to agency owners is $55,303 $60,861 $69,194 $68,143 to start measuring your productivity gains $81,875 $110,161 $106,908 $108,810 … look at your compensation in terms $88,889 $77,500 $89,808 $85,476 of productivity gains for individuals,” he says. $94,342 $108,750 $142,647 $118,269 “I think you are going to see in the next five to 10 years a strong growth in productivity-based compensation instead of longevity-based compensation. You don’t get more 2013money2012 because you’ve been here for another 3.51year. You 3.28 get more money because you’ve 3.03been more 2.87productive.”

2.75 According 2.58 to the 2015 Agency Salary Survey, employees who received a costof-living pay increase were significantly more satisfied with their compensation than those who did not. (see chart above). in the East region were almost 3 2012Employers 2011 twice as likely % 4.5% 3.9% to offer a cost-of-living adjustment as the South Central region. % 5.5% 3.3% Paul Osborne, senior consultant for % 2.3% 2.2% Demotech Inc., Insurance Journal’s official research partner who assisted with analysis of this year’s survey results, says one reason compensation satisfaction might be trending down could be that some employees believe that salaries are being set capricious2012 2011 2010 2009 ly or unfairly.

2.8% 1.1% -0.6% -1.2% survey 2.9% “Managers 1.6%also commented -0.2% in the -0.8% that bonuses are set by whatever they think 2.2% 2.1% 0.6% -0.1% is right,” Osborne said. “Sometimes it’s not the amount they are paid, but what they think they are losing to someone else or ns missing out on.” www.insurancejournal.com

Agencies That Give Annual Cost of Living Increase East Midwest South Central Southeast West

43.4% 36.0% 24.8% 26.3% 28.2%

CSR Salaries and Hours Average Salary Paid

Commercial lines CSR Personal lines CSR Support staff average

Average Hours Worked

$59,561 $42,737 $53,183

38.75 38.92 37.99

Ye N N

CSR Average Salaries East Midwest South Central Southeast West

Commercial Lines

Personal Lines

Support Staff

$61,062 $55,783 $57,025 $58,059 $65,468

$46,422 $39,150 $49,250 $29,828 $48,014

$57,123 $44,608 $46,400 $63,561 $60,333

2014 6.6% 13.0% 6.4% 6.6% 30.8% 20.1% 29.8% 38.2%

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

cial-oriented agencies, producers are paid What Producers Want What Strategies Agencies Plan to from 40 percent to 50 percent on new busi Producer pay is one of the most Implement in 2015 ness for the first year commissions, Shaw important areas in agency compensation.

2015 says.

On renewals, Producers pay attention to how they are Cut benefits 2.7% 25 percent to 35 percent is the rule of thumb. treated, rewarded and supported.

Shift health plan costs to employees 7.0% Increase benefits Agencies4.5% paying much below those “Number one, producers want to know Force reductionfair of employees marks could3.7% find it difficult to attract expethey are receiving cash compensation Postpone hiring 18.9% rienced, sophisticated producers, he says. for writing new business and handling the Postpone raises 11.4% Number48.8% two, the more sophisticated book of business Increase hiringthey have written,” says producers want Shaw of B.H. Burke.

“They want to know Increase compensation 41.3% to know there are resources behind them. “They want to know there they are being treated fairly in terms of is some backroom support, they want an cash compensation.”

In the more sophisticated commercontinued on page 28 What Benefits Agencies Offer Group health insurance Health Savings Account Dental

Ag Pay

Re In Ke N

Ag in 2

What Strategies Agencies Implemented in 2014 vs. 2013 Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

Ag of L

2015 2014 2013 2012 2011 75.4% 77.7% JOURNAL-NATIONAL 76.8% 79.9% February80.6% 23, 2015 INSURANCE | 27 37.7% 38.3% 32.2% 56.3% 57.2% 52.5% 48.9% 50.1%

H Lo Sa

Ag in 2

In D St

An Siz

In D St

Cha Pla

Ye N N

9 % % %

Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

6.6% 30.8% 20.1% 29.8% 38.2%

SPECIAL REPORT

5.2% 29.2% 24.6% 34.3% 36.5%

Agency Staff Size in 2014

What Strategies Agencies Plan to Implement in 2015

2015 75.4% 37.7% 56.3% 55.6% 60.0% 17.5% 11.2% 5.9% 4.8% 5.3% 28.2% 30.5% 3.2% 13.7%

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

10.7%

experienced staff, they want to50.8% know 45.4% they Increase are with an agency that has a good repDecrease 3.8% utation and has been around the block a Stay the same

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

39.1%

Anticipated Agency Staff continued Size in 2015from page 27

2015 2.7% 7.0% 4.5% 3.7% 18.9% 11.4% 48.8% 41.3%

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

50.2%

Increase Decrease Stayed the same

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

2012 76.8%

2011 79.9%

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

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

12.6%

10.0%

number of times with similar accounts they want to write,” Shaw contends.

Change inaccording Agencies’ Health Third, to Shaw, the best pro4.7% ducers are looking for some sort of equity Plans in Past Year 33.8% position in the book of business they proYes 61.4% duce.

No Not Sure “That could be deferred compensation, phantom stock, book equity — it’s called a whole bunch of different things but ultiProducer Commissions mately they are looking to gain some sort of interest in the book of business that they in 2014 45.8% 43.7% produce,” he says.

Increase

Agency owners who provide those plans Decrease 10.5% Stayed 2014 good producers, but will the notsame onlyin retain compared to 2013 also will attract quality, new producers, Shaw says.

Agencies’ Plans to Change Commission Structure Owner Awareness

5.3% 10.2%

When it comes to producer compensation

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

73% 71% 73% 78% 80%

Health Insurance: % Paid by Agency for Employee Under $1 million $1 million - $5 million $5 million - $10 million $10 million - $25 million $25 million - $50 million $50 million - $100 million $100 million or more

27.4% 50.1% 69.4% 74.6% 78.7% 75.1% 76.8%

Changes to Health Insurance Plan in Past Year Increased employee contribution Increased deductible limits Implemented higher co-pays for participants Reduced drug benefit Reduced other benefits 28 | INSURANCE JOURNAL-NATIONAL February 23, 2015

41.5% 63.8% 39.9% 11.0% 10.4%

Changed in 2014 84.4% and eveninstaff Will change 2015 compensation, it’s importNo changes ant for agency owners to know what’s

going on around the agency, says Brian McNeely, partner at Atlanta-based Reagan How Agencies Determine Consulting, a management consulting and Fees merger-and-acquisition advisory firm for the 33.2% insurance distribution system.

70.4% always important to understand % of “It’s Premium Flat fee based on account type you in the market what’s going on around and what your competitors are paying. It will give you guidance on how you should Producer pay your Compensation employees,” McNeely says. and Fees McNeely adds that when it comes to pro41.0% ducer compensation, it’s not just about57.7% pay.

Producer receives % of fee 1.3%

“If I had one area of advice to give owners Producer receives all of fee Producer doesn’t receive fee regarding producer compensation it would be that producer compensation is largely not going to impact the performance of Producer Bonus for an individual,” he says. “People will often Exceeding Goal call us andSales say, ‘Hey if I pay them more35.6% in 64.4% commission splits will their book autoYes matically grow?’ We have found that is not No true. Someone’s core behavior is not going to change just by changing their compensation,” McNeely said. “Compensation is Owners Thinking About not going to materially impact someone’s 6.1% 7.5% Selling the Agency performance from a production perspective.

Paying above market is not going to improve Yes 86.4% No someone’s performance.”

Not applicable continued on page 30 www.insurancejournal.com

48.8% 41.3%

n

Change in Agencies’ Health Plans in Past Year

nt ent

2015 2014 2013 2012 75.4% 80.6% 77.7% 76.8% 37.7% 38.3% 32.2% 56.3% 57.2% 52.5% 48.9% 55.6% 56.6% 53.7% Agency Gives Annual Cost 56.6% 7.3% 60.0% 63.4% 57.7% 55.0% of Living Increase 17.5% 18.9% 17.8% 17.4%30.5% 8.4% 10.4% 9.1% Yes11.2% 62.1% 6.0% 5.7% 5.4% No 5.9% 4.4% 4.6% 4.5% Not 4.8% Sure 5.3% 4.9% 4.5% 1.8% 28.2% 29.3% 24.4% 14.0% 30.5% 32.8% 28.0% 44.6% Agencies’ Plans to Change 5.6% 3.2% 2.2% 3.0% Payroll 6.5% 13.7%Expense 10.5% in 2015 11.7% 12.6% Reduce payroll expense Increase payroll expense Keep the same Not sure

35.1%

52.8%

nce: % Paid by Agency for Employee 73% Agency Salary Increases 71% in 2014 50.9% 73% Higher than 2013 78% Lower than 2013 Same in 2014 compared to 2013 80%

6.3%

in 2014

3.8%

ealth Insurance Plan in Past Year

Change in Agencies’ Health oyee contribution 41.5% 4.7% Plans in Past Year ctible limits 63.8% 33.8% igher co-pays for participants 39.9% Yes 61.4% No benefit 11.0% 11 Not Sure 9% benefits 10.4% Producer Commissions in 2014

www.insurancejournal.com

50.1% 56.1% 53.9% 20.1% 8.4% 5.0% 4.3% 2.6% 12.3% 48.2% 10.0%

61.4%

Producer Commissions in 2014

45.8%

Increase Decrease Stayed the same in 2014 compared to 2013

10.5%

Agencies’ Plans to Change Commission Structure Changed in 2014 Will change in 2015 No changes

43.7%

5.3% 10.2% 84.4%

33.2%

42.8%

39.1% 50.2% n 27.4% Increase million Decrease 50.1% 10.7% Stayed the same million 69.4% 5 million 74.6% 0 millionAnticipated Agency Staff 78.7% 00 million 75.1% Size in 2015 45.4% 50.8% more 76.8% Increase

1% 1% 9%

2011 79.9%

Yes No Not Sure

How Agencies Determine Fees

nce: % Paid

by Agency Agency Staff Sizefor Employee

Decrease Stay the same

33.8%

Agency Salary Survey

s Agencies Offer

e t

4.7%

% of Premium Flat fee based on account type

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

70.4%

41.0%

57.7%

1.3%

Producer Bonus for Exceeding Sales Goal

35.6% 64.4%

Yes No

Owners Thinking About Selling the Agency Yes No Not applicable

6.1% 7.5%

86.4%

February 23, 2015 INSURANCE JOURNAL-NATIONAL | 29

SPECIAL REPORT

Agency Salary Survey Non-Owner Producer Compensation 18.2%

Salary Only

30.8%

Salary plus commission

22.2%

Commission only

8.6%

Draw against commission

5.6%

Other

How Agencies Charge Fees 54.1%

Fees are charged in addition to commissions

45.9%

Fees are charged in lieu of commissions

Incentive for Non-Owners Producers 41.4%

No Incentive

13.5%

Trips

17.7%

Contests

8.3%

Club memberships

27.8%

Education

40.8%

Cash bonus

7.4%

Car

How Incentive Compensation for CSRs is Determined 14.4%

No. of policies sold

30.3%

New business commissions

11.7%

Renewal commissions

6.5% 42.9%

Set dollar amount Do not offer incentive comp

30 | INSURANCE JOURNAL-NATIONAL February 23, 2015

continued from page 29 Happier Employees McNeely says in his view compensation packages overall are still competitive in independent agencies.

“If there’s any area that people are constantly evaluating that’s their health insurance premiums which is more of a macro-economic issue more than anything.” Other than that McNeely sees compensation and agency staffing moving in the right direction.

Increased staffing levels in agencies is one good sign for the industry. “Agencies are having to invest more because their clients are requesting more and more of them and they are having to hire people to meet those requests,” McNeely says.

According to the 2015 Agency Salary Survey, 39.1 percent of respondents reported that agency staff size increased in 2014, and 45.4 percent of agency managers/owners reported they plan to increase their agency’s staff size in 2015.

Growth is both a function of a growing industry and an increasing level of services that clients are demanding. “It’s a great thing to see that trend happening,” McNeely says.

ACG’s Diamond says keeping employees happy is both simple and very complicated.

“Frankly, the way to make employees happy is to appreciate them and that isn’t necessarily in tangible ways,” Diamond says.

“Agency owners aren’t the best human relations managers that we’ve seen and we are trying to convince them to identify the best employees for what they do and give them credit; they are not just drones in a factory. Those that do I find the employees are much more satisfied.”

Shaw says agency owners should make every effort to understand the needs of the staff by listening and asking questions about what’s important to them.

“Have you ever asked your employees what they would like?

You may not be able to give them what they are asking for but at least ask them. They will appreciate it,” Shaw says.

Burand sees agency owners putting more thought into how they can make their agency a better place to work.

“Whether it’s a better break room, maybe bowling party, or even better computer monitors,” Burand says.

Owners are struggling to find the right balance when it comes to compensation, workload and people, he says. “They are trying really hard to not hire any more people than they absolutely have to. There’s just a higher level of consciousness to pay the right amount, limit hiring and not overpay.”

Burand’s bottom line: “It’s not one specific thing but overall the workload for a lot of different reasons really has increased. I could see that being the cause of stress and lower satisfaction — not just pay — but all of the little things that are adding up.”

Insurance Journal’s Agency Salary Survey collected 1,342 responses from independent insurance agencies and brokerages nationwide via an online survey. Demotech Inc., Insurance Journal’s official research partner, assisted with analysis of this year’s survey results. www.insurancejournal.com

We live it.

®

Matt Ness, farmer and Great American policyholder

Dennis Biewer, Great American Divisional AVP and farmer

With specialty insurance expertise like this, it’s hard to tell our people from our policyholders In hundreds of niche industries, Great American’s expertise is built on the knowledge and experience of people who know our insureds’ business as well as our own. People like Dennis who grew up farming and still plants and harvests with his family. His passion has been cultivated through every growing season—on the farm and on the job.

That’s expertise you and policyholders like Matt can count on when looking for a company that provides protection for specialty business risks.

www.GAIG.com/WeLiveIt

Agriculture • Annuities • Environmental • Equine • Excess & Umbrella • Fidelity & Surety • Financial Institutions • Inland & Ocean Marine Non-Profits • Professional Liability • Transportation • Workers’ Compensation Coverage is underwritten by Great American Insurance Company, Great American Insurance Company of New York and Great American Alliance Insurance Company, authorized insurers in all 50 states and DC; and Great American Lloyd’s Insurance Company, authorized in Texas only. ©2014 Great American Insurance Company. 301 E Fourth Street, Cincinnati, OH 45202

IDEA EXCHANGE

Compensation Strategies for Young Professionals in Salary Negotiations

S

alary negotiation is a key factor in getting one’s career off to the right start.

In fact, the first salary discussion often sets the tone and track for future success.

Research has shown that professionals who do not discuss their salary often enter the industry with a much lower salary than their counterparts who do negotiate. This

By David E. Coons is particularly true for today’s young professionals and recent graduates.

Wage disparity is an important issue that must be addressed to ensure today’s insurance professionals start their careers off on the right foot. So what is the state of compensation for young professionals and graduates? How can these individuals successfully negotiate their starting salaries?

The State of Workplace Compensation Having experienced deteriorating wages in the midst of the recession, young professionals still find themselves earning less than their predecessors. According to the National Association of Colleges and Employers, the average starting salary for college graduates increased just 1.2 percent in 2014 — placing the median 2014 salary at nearly 16 percent lower than the average starting salary in 2002.

In addition, salaries for young professionals have grown at only half the rate of all workers in the United States since the recession. Between 2006 and 2013, median earnings for recent graduates rose only 6 percent, 7 percent lower than the earnings growth for the workforce at large. Despite recent gains, young professionals are struggling to reach the median starting salaries of their pre-recession counterparts.

Negotiation and the Wage Gap Many young professionals do not understand the key role that salary negotiation can play in bridging the wage gap.

32 | INSURANCE JOURNAL-NATIONAL February 23, 2015

Individuals who do not negotiate their starting salaries stand to lose hundreds of thousands of dollars over the course of their careers.

With concern over landing their first professional position, recent graduates and job seekers worry that negotiating their salary or pushing too hard will result in a potential employer rescinding the offer. As a result, young professionals are the least likely to negotiate their salaries compared to more experienced professionals.

A perceived lack of job skills and applicable experience are the top impediments to salary negotiation among recent graduates, who often believe that several years of experience is required in order to ask for a higher starting salary. By jumping on the first offer provided, they often undervalue their true market worth.

Successful Salary Negotiation Salary negotiation has become a standard part of the employment offer process. In fact, many employers build room for negotiation into their initial offers. Yet negotiating a salary can be intimidating, especially for recent graduates and young professionals who have not done so previously.

Young professionals looking to enter the workforce or move to a new opportunity must take the time to fully understand their value to an employer. They must research to determine reasonable salary expectations for their roles. Comparing average salaries and pay scales in their area will provide a base line. A thorough self-evaluation and appraisal of the skills and experiences they are bringing to the table will allow them to build upon that base line. Young professionals must be prepared to articulate how their accomplishments and job history can translate to success in their desired roles.

Recent graduates and young professionals must avoid using their peers as benchmarks — salaries and compensations very widely depending on industry, job role and experience. They must be realistic about their salary history and experience.

Negotiations should be seen as a collaboration — a conversation between both parties. If there is little flexibility in regards to starting salary, there may be room to negotiate other portions of the total compensation package, so the key is understanding the package. What else is being included along with the base salary? What are the benefits? Is there bonus potential? Is there a flexible work option? How does the PTO policy compare with the industry standard?

Negotiating for flex time, more vacation days and telecommuting options can be a great way to supplement a lower starting salary.

Preparation is key to success. By doing the necessary research and self-evaluation, young professionals can enter the salary negotiation stage from a position of strength and knowledge. It is from this position that they can negotiate an advantageous starting point upon which to build a lucrative insurance career.

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

www.insurancejournal.com

IDEA EXCHANGE

Growing Your Property Casualty Agency 9 Marketing Basics to Recall about Email in the Age of Social Media

I

t’s easy to overlook the continued importance of email as a marketing device with today’s digital focus set firmly on social media. Email, as we know it, has been around for about a quarter of a century and it has gone through relatively few changes in that time, compared to the dynamism of social software. But in many ways, its relative stagnation is its primary appeal.

With email, there

By Alan Shulman is no significant learning curve, making it fairly painless to enhance its effectiveness as a marketing medium. Here are nine reminders to help you get the most out of this still popular digital dinosaur.

1. Email isn’t free. Treat it as something of value, rather than a throwaway.

It’s costly to build a quality, permission-based e-list and to design a viable mailing, regardless of whether you do this yourself or hire it out. Furthermore, you must buy software, or pay a service,

to distribute your emails, and to track and report back the results.

2. Know what to expect. There are two key metrics when measuring emails: the open rate (those who actually open it) and the click-through rate (those who also click on your URL). For marketing emails, the typical open rates are about 20 percent and the click through rate is around 3 percent.

While your percentages for some mailings may exceed these levels, it isn’t common, so keep your expectations in check.

3. Target your mailings. Don’t send emails to just anyone in your marketing territory. To be effective, your message and its intended recipient must align. Also, be certain to follow all applicable CAN-SPAM rules and that you have permission to send.

This is usually the case when emailing to insureds, but it’s not always so when mailing to prospects.

4. Send actual information. Don’t focus exclusively on selling. Instead, send your recipients useful tips and information, in addition to the periodic pitch. Examples: Seasonally-driven emails (weather-related, backto-school, etc.) … Coverage of the month …

Overlooked coverage of the quarter, etc.

5. Subject lines.

Test a variety of subject lines in your mailings to entice recipients to open, read and click through them. Compare the results and learn from your

34 | INSURANCE JOURNAL-NATIONAL February 23, 2015

victories and failures. Compare phrases such as, “5 money-saving [auto] policy discounts you want” against questions like, “Which of these 5 [auto] insurance discounts are you missing?”

6. From lines. Specify from whom your emailings are sent via your email authoring software. Options include sending it from your agency’s name, a particular producer or CSR, or from something generic like “Your Insurance Agency.”

7. Images. Include tie-in images with your message to attract interest and drive your click-through rates. Note: Some recipients don’t allow their incoming emails to automatically display images, so never make them integral to the message itself.

8. Links. Just because you can add multiple URLs to an email, doesn’t mean that you should. Keep each message as simple as possible. Author your text so that recipients need only click on one primary link to direct them to your mailing’s Web landing page (or elsewhere).

9. Experiment. Test variations of your targets, messages, subject lines, “from” lines, images and links to find the combination that consistently generates the best results.

Email has its flaws, including limited open/click-through rates and myriad delivery issues (spam filters, blacklists, Do Not Mail restrictions, etc.). But it also has its virtues, particularly the fact that virtually everybody with a PC or mobile device has an active email account. You can’t say the same thing about social media.

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

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

www.insurancejournal.com

IDEA EXCHANGE

Farm & Ranch Risky Business:

How Agents and the Industry Help Protect Farmers, Ranchers

W

hen you think of hazardous jobs, what comes to mind? First responders, military professionals, even NFL football players are typically associated with some of the most dangerous jobs on earth. But what about farmers and ranchers?

By Bill Martin The National Safety Council reports that of the approximately 3.1 million people who work on farms and ranches, 1,300 die each year and 120,000 are injured. In fact, statistics show farmers are 800 percent more likely to die while working than other workers.

Without question, those that provide us with our breakfast, lunch and dinners work in

try to not just transfer risk, but to assist in reducing costly accidents. Thus the agents, managing general agents, and companies that specialize in the agricultural segment play an important role in the overall health of our food supply.

Diana Trachier, farm and ranch manager at South & Western General Agency, says agents who work directly with small farmers can make a big difference when writing new business.

“In order to make a quality submission to the insurance marketplace, the retail agent has to assess the hazards intrinsic to farming and ranching,” Trachier says. “As part of this task, the agent is ideally suited to identify areas of concern and is positioned to offer loss control measures that can eliminate accidents or minimize their effect on the business should the unfortunate take place.”

one of the most dangerous sectors of the economy.

Although the farm and ranch industry has transitioned over the years from small, family-owned operations to larger corporate entities, the backbone of the agriculture sector firmly remains small business. And no different than any other small business, farmers and ranchers depend upon the insurance indus-

Farm Hazards As with most commercial concerns, fire is typically the most debilitating event for farmers and ranchers. From 2007 to 2011, the National Fire Protection Agency (NFPA) studied the number of fires and their effects on America’s farms. During the study period, fire accounted for more than $55 million in damages to farm structures. Hence, reducing the number and severity of farm fires should be the number one goal for both the insured and insurer.

Joe Haynes, president and CEO of Sanger & Altgelt LLC, a large independent agency located in San Antonio, Texas, that specializes in farm and ranch business, says that many fires can be eliminated by taking a common sense approach to farm risk assessment.

“Nothing replaces the eyes and ears of an onsite visit to an account,” says Haynes.

“When an agent takes the time to under-

36 | INSURANCE JOURNAL-NATIONAL February 23, 2015

stand the risk before making the submission, it’s a natural for him to offer simple, common sense risk management and safety assistance. Obviously it’s in everyone’s interest to eliminate losses.”

“Looking at how fire accelerants like common fuels are stored can be the difference between a major catastrophe and business as usual,” Haynes says. “In addition, knowing where hay stacks or bails are positioned and what brush control measures are in place is critical in farm and ranch risk assessment.”

Hazards related to hunting, fishing and other non-agricultural exposures like caliche and water sales to oil and gas operators need to be identified and properly addressed, Haynes says. “Checking for hold harmless and indemnity agreements with lessors along with insurance compliance is immensely important. Aviation operations like crop dusting and runways should not be overlooked.”

Along with fire, farmers and ranchers

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face other daily hazards that can make the difference between not just profit and loss, but life and death. Farmers and ranchers work with heavy machinery on a regular basis, and when injuries occur, many are fatal. The National Agricultural Tractor Safety Initiative reports that the common farm tractor Statistics show causes about 130 deaths annually. farmers are In addition to 800 percent tractors, hay balmore likely to ers, grain augers, die while work- skid steer loadcorn pickers, ing than other ers, combines and workers. brush hog mowers cause thousands of deaths and injuries annually.

“Knowing the operations of a farmer or rancher is the single-most important thing an agent can do for his customer,” says Trachier. “If he is growing cotton, the exposures with equipment are very different than an equine operation.

The smaller the operation, the more important it is that the insurance industry, from agent to company, is able to provide the risk management services he needs. “It’s more than just selling a policy … it’s providing a valuable service the farmer or rancher may not even know is needed.”

Risk Management Help There are thousands of resources available that promote farm and ranch safety on the internet.

For example, the websites for the National Safety Council (NSC.org) or the Farm Safety Association (farmsafety.ca) are two good places to start.

However, carriers and MGAs that specialize in agribusiness are also more than willing to assist. www.insurancejournal.com

So the next time you sit down to eat, remember the dangers and hazards farmers and ranchers undertake every day, along with the role the insurance industry has in making not just the food safer, but the

one responsible for bringing it to your table safer.

Martin is vice president at South & Western, a managing general agency based in Addison, Texas.

Website: www.southandwestern.com.

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Minding Your Business Profile of a Great Account Manager

W

hat ingredients make up a good account manager? What do you look for in terms of skills, knowledge, education and experience? Which responsibilities should management give them? The answers to these questions — which will vary by agency — determine the profile of that agency’s perfect account manager.

The account manager role requires a responsible, knowledgeable person with

By Catherine Oak excellent customer service skills. Is there a perfect blend of these abilities?

Yes, and it changes from agency to agency because each firm has a unique personality and approach to customer service. The type and style of an agency’s account managers

will be directly related to the type and style of the agency’s producers.

Major Strength When asked to list the major strengths of their agency, most owners usually include the agency’s quality of service to the client.

In the typical agency, the customer service representative is the foundation of good service. Logically, one can say that the account manager is therefore a major part of the strength of an agency.

Because of their personal contact with clients, account managers are a critical component to the retention of accounts. They must provide consistent, quality support to keep the business on the books. If accounts are lost, revenue drops and the value of the agency diminishes.

Account managers account for roughly half of all employees in an agency. The

ratio of account managers to producers in the industry is about two or three to one, depending on the size of producer and “house” books. Keeping in mind that payroll is the largest expense in any agency, usually 55 percent to 70 percent of all agency revenues, the productivity of account managers is directly related to the profitability of the agency. Hiring and retention of good account managers then becomes a key to increasing profitability and value.

Best Profile Before hiring any account manager (or any employee, for that matter) management needs to sketch out a basic profile of what they are expecting. Should the agency hire an experienced account manager? Should they have skills in a particular niche such as construction or should the agency start from scratch?

Outline an objective minimum standard and compare candidates to this standard.

Don’t hire anyone that fails to meet any minimum requirements.

The typical account manager is a woman or man who graduated from high school and took a few college classes but did not graduate. Some account managers get into the business because of family connections.

Others were persuaded by their friends to join. However, most account managers (and producers) “fell into” the insurance industry.

Working as an account manager in insurance was not their specific career goal.

Responsibilities and Testing The responsibilities of an account manager vary based on the culture of the agency.

Some agencies expect the producer to do a lot of the service work and the account manager to support the producer. Other agencies require the account managers to handle their own book of business with little input from the producer after the account is written. This role is often referred to as an account executive and can be a nice “next step” up for savvy account managers.

38 | INSURANCE JOURNAL-NATIONAL February 23, 2015

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Some account managers may be expected to perform other duties as well, such as accounting.

It is important to match the temperament of the account manager to the agency’s culture. Don’t hire a “go-getter fireball” when the producers like to control the account service.

The basic job of the account manager boils down to the collection, processing and distribution of information. The collection of information tends to be the most significant skill. The account manager needs to know what information to gather and how to ask for it. Patience, determination and diplomacy are necessary whether probing the client for pertinent information to complete a claim form or quizzing a producer when filling out an application.

The account manager needs to be a people person. Good social skills and the ability to act as a go-between for the different parties — clients, producers, underwriters and agency owners — are a must.

An account manager needs to be able to handle complaints and negotiate a favorable outcome. A qualified account manaager has the ability to say no, can take criticism from others and provides constructive input to resolve problems.

The typical account manager spends about half of her/his time talking to clients or insurance company personnel gathering and distributing information, and problem solving. The balance of her time is spent on paperwork and computer input.

Because of this emphasis on listening and talking, communication is an account manager’s most important skill. Look for it when hiring — it is a natural skill that account managers must already possess.

Technical knowledge can be easily taught later.

It is really important to test for these skills. We suggest the Caliper test or Omnia, in addition to a good interview and even a written coverage test to see if they have coverage skills and good writing ability.

First, management must understand why account managers leave an agency. The most frustrating aspect of the job for most account managers is dealing with difficult people. The inability to effectively communicate with someone prevents the account manager from properly doing her/his job.

When an account manager can’t get along with a person, management needs to act quickly and decisively. If the problem is with a client, the reassignment of that account to another account manager could solve the problem. A stickier problem is when that difficult person is another employee, such as a producer.

The agency needs to make sure that specific ground rules are established and fairly enforced. Management should outline the role of the account manager versus the producer.

Another very common reason why people leave an agency is that management never clearly communicated what they expected

from the employee. When responsibilities and authority are not specifically discussed, then miscommunication and hurt feelings can occur.

Communicate Expectations Write a job description spelling out the

Hiring and retention of good account managers is key to increasing agency profitability and value. account manager’s tasks and responsibilities and make sure both parties agree to it. A key component that is often overlooked is setting performance standards.

An account manager needs to know what size book management expects her/ him to handle. It is especially important to look at these standards compared to continued on page 40

Common Issues How does management keep qualified account managers? www.insurancejournal.com

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Abram Interstate www.abraminterstate.com W16 ACE Insurance www.acegroup.com/us 13 Amerisafe www.amerisafe.com SC8 Anderson & Murison www.andersonmurison.com 40 Applied Underwriters www.auw.com 44 Arrowhead General Insurance Agency www.arrowheadgrp.com 21 Atlass Insurance Group www.atlassinsurance.com 19 Burnett & Company www.bcoinc.com SC6 Burns & Wilcox Ltd. www.burnsandwilcox.com 17 Catlin US www.catlinus.com 15 Century National www.cnico.com W15 Chubb Corporate www.chubb.com W1; SC1; SE1; E1; M1 Continental Underwriters, Inc www.cultd.com 7 General Star www.generalstar.com W3; SE3; E3; M3 GeoVera Insurance Company www.geovera.com SC4; SE7 Golden Bear Insurance Company www.goldenbear.com W13 Gorst & Compass Insurance www.gorstcompass.com W11 Great American Insurance Group www.gaig.com 31

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InsurBanc www.insurbanc.com 37 M.J. Hall & Company www.mjhallandcompany.com W9 Midlands Management Corporation www.midlandsmgmt.com 39 Monarch E&S Insurance Services www.monarchexcess.com W7 Nautilus Insurance Company www.nautilusinsgroup.com 33 Navigators Management Company, Inc. www.navg.com 35 Pacific Gateway Insurance Services www.pgiainsurance.com W5 PersonalUmbrella.Com www.personalumbrella.com 5 Philadelphia Insurance Companies www.phly.com 43 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com

SE5; E5 Regions Bank www.regions.com 23 Scottsdale Insurance Company www.scottsdaleins.com 2 SIAA www.siaa.net 3; SC3 South & Western www.southandwestern.com SC5 St. James Insurance Group www.stjamesinsurance.com SE9 Tejas American General Agency www.taga1.com 3 Texas Mutual www.texasmutual.com SC7 The Institutes www.theinstitutes.org 9

continued from page 39 the average size of account on his/her desk.

Management, on the other hand, needs to offer proper training and support to allow the account manager to get the productivity level expected.

Very often, account managers struggle with time management. With the exception of small agencies, account managers should have technical and clerical support.

A good ratio to follow is one assistant for three account managers. Delegation is a great antidote for the time management disease.

Management can also assist employees in balancing their business and personal life.

Flextime is a good start. Some agencies may even pay for daycare or provide the services of a financial planning expert for employees. Sometimes a health club membership is provided to reduce stress and help keep the employees fit. Be creative.

Summary The role of the account manager must never be underestimated — just ask any owner or producer who just lost a great account manager. Take the time to find the person who possesses that “perfect” blend of diverse skills and knowledge.

Understanding your agency’s needs and expectations must precede any hiring. Hire only those who will fit the agency’s culture.

Don’t allow a candidate’s technical skills or years of experience to cloud one’s judgment — hire only those who have good communication skills.

Good account managers will make the operation run smoothly and efficiently.

Hiring the right account manager for the agency will enhance agency value, which benefits everyone.

If you would like account manager standards based on size of account, let us know.

Oak is the founder of Oak & Associates, an international consulting firm specializing in valuations, financial management, mergers and acquisitions for the insurance brokerage industry. Email: catoak@ gmail.com. Phone: 707-935-6565. Website: www. oakandassociaties.com.

www.insurancejournal.com

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Congrats to the Winners of the 2014 Recall & Readership Study!

Third-party research firm Signet Research, Inc. has conducted a study on behalf of Insurance Journal magazine, measuring the memorability of all full- and half-page print ads in the November 3, 2014 issue.

The five highest-scoring ads in this issue: #1 Applied Underwriters, #2 Pacific Gateway Insurance Agency, #3 FEMA, #4 Applied Underwriters, and #5 PersonalUmbrella.com.

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Closing Quote

Low Minimum Limits Unfairly Shift Financial Responsibility

F

By F.E. “Rick” Russell II

or years, we’ve listened to those who beat the drum to maintain minimum liability insurance limits that have been in place for decades. They frame their viewpoint as pro-consumer, and on its surface, their message is an easy sell. After all, who wants to burden low-income families, especially in this still-jittery economy?

The time has come to push back with logic and a true pro-consumer agenda.

As the topic is brushed aside year after year, minimum liability insurance limits continue to stand still in certain pockets of the country while the world continues to spin.

While the cost of living continues to increase, so does the cost of medical care and property values.

Meanwhile, fiscally responsible drivers are forced to pay more and more in auto insurance premiums because they must add underinsured motorists’ coverage to account for drivers who carry what have become inadequate minimum liability limits.

Inaction on this issue is not a victimless pursuit. You see, the driver who carries woefully low liability limits simply spurs another driver to overcompensate with additional coverage. This is an unfair shift of financial responsibility.

42 | INSURANCE JOURNAL-NATIONAL February 23, 2015

Overseeing the Insurance Agents & Brokers organization provides me with a unique perspective because my organization manages independent agents’ associations in three states: Delaware, Maryland and Pennsylvania. In 2010, our Maryland agents successfully spearheaded legislation to adjust the Old Line State’s minimum liability limits from 20/40/15 to 30/60/15. The change took effect Jan. 1, 2011.

We heard the predictions in Maryland — that premiums would skyrocket, that the already excessive number of uninsured motorists (estimated at 15 percent of drivers) would jump. But truth be told, we have found no evidence of either since the adjusted liability limits took hold.

The experience of their Maryland counterparts is further ammunition for our Pennsylvania agents who have told us time and again that the state’s severely outdated minimum limits (last addressed in the 1970s and now ranking second-lowest in the nation) are an issue for their customers — actually translating into higher premiums thanks to the need for underinsured motorists’ coverage.

We’ve championed this issue at the state Capitol several times in recent years. But in the end, our efforts were met with the same opposition. However, it is time that our agents, with their own pro-consumer logic — logic that is rooted in commonsense and stems from their work educating and guiding their customers — are heard.

This legislative session, which features new faces in the state legislature and the governor’s office, provides a new opportunity for our Pennsylvania agents to state their case.

They can explain that simply shifting the burden of The time has come to coverage is not a solution, push back with logic but that the supposed and a true proimpact on some consumers does not justify an actual consumer agenda. impact on other consumers. That financial responsibility is what this issue is truly about.

We have our sights set on success this legislative session in Pennsylvania, just like our contemporaries at other agents’ associations in the remaining state strongholds (although their numbers are dwindling) across the nation.

Let’s make this the year when logic trumps emotion, when the burden of coverage falls on the appropriate shoulders, and when all insured drivers carry adequate liability limits.

Russell is president and CEO of Insurance Agents & Brokers, a partnership of three agents’ associations: Delaware Association of IA&B, IA&B of Maryland, and IA&B of Pennsylvania.

www.insurancejournal.com

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