Insurance Journal West 2015-03-23

WEST Big One in California?

CEA’s Program for Agents Clusters and Trade Secrets

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Inside This Issue

On The Cover

Special Report:

Hot Markets for 2015

March 23, 2015 • Vol. 93 No. 6 • West

W6

W8

24

34

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

8

W1 Increased Chance of Big One

in Long-Term Quake Forecast

for California

W8 Insurance Clusters Not Immune

from Trade Secret Liability

Independent Insurance Agents Defying Doomsayers

20 Closer Look: P/C Agent, Broker

M&A Headlines in 2014 24 E&O Insights: Do You Have Clients

That Will Be Buying or Selling?

28 Special Report: HOT Markets

for 2015 32 Spotlight: 10 Things to Know

About High-Value Homeowners

W1 Nevada’s Captive Domicile Growth

Rises by $3.8B in Premium

33 Growing Your Property Casualty

Agency: Alan Shulman 34 Building a Culture of Innovation

W6 CEA Kicks off Earthquake

Insurance Selling Program

for Agents

37 Minding Your Business:

Catherine Oak & Bill Schoeffler 42 Closing Quote: Wildfire in 2015:

What to Expect?

DEPARTMENTS 10 10 W2 36 38

4 | INSURANCE JOURNAL-WEST March 23, 2015

Declarations Figures People MyNewMarkets Business Moves

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NATIONAL COVERAGE

Opening Note Paying Tribute

T

he industry saw the passing of two of its best known and respected leaders in the past month: Liam McGee, former CEO and executive chairman at The Hartford, and Robert Benmosche, former CEO of MetLife and American International Group.

Both men took over companies in need of strong leadership and delivered.

McGee, an Irish-born banker and insurance executive who guided Hartford Financial Services Group through a taxpayer bailout and shored up the company’s finances, died at the age of 60 on Feb. 13 after a two-year battle with cancer.

Benmosche, who led AIG, once the world’s largest insurer, through the process of repaying its $182.3 billion taxpayer bailout, died at the age of 70 on Feb. 27 after fighting a long battle with lung cancer.

AIG announced in October 2010 that Benmosche had cancer, and the CEO said last August that he’d moved up his departure after his prognosis worsened. Benmosche was replaced by Peter Hancock on Sept. 1.

Benmosche came out of retirement in August 2009 to take over a troubled AIG, and led the insurer for half a decade. Benmosche became the most outspoken AIG chief since Maurice “Hank” Greenberg.

The industry has lost two of Greenberg was one of its best whose legacies should many to pay tribute to inspire others.

Benmosche. “If he had a fight, he’d fight,” Greenberg said to Bloomberg Television. “He stood up and fought for what he believed was right. That’s what a leader does, and he did that very well.”

Benmosche sold major divisions and focused on U.S. life insurance and global property/casualty coverage. He also sparred with government overseers, rebelled against U.S.-applied pay caps that he said limited the firm’s ability to retain staff, threatened to quit at least twice and succeeded in ousting then-Chairman Harvey Golub with a “him-or-me” showdown.

McGee ran Hartford as CEO from October 2009 through the middle of 2014, turning around an insurer that had been forced into a U.S. government rescue. Hartford plunged more than 90 percent from its 2007 peak to its low in March 2009 of $3.33 a share amid the worst financial crisis since the Great Depression. It received the second-largest bailout package among insurers under the Troubled Asset Relief Program.

McGee sold stock and debt to help The Hartford repay its $3.4 billion bailout, and retreated from life insurance and variable annuities to focus on property/casualty.

Chris Swift, The Hartford’s current chairman and CEO, highlighted McGee’s efforts in leading the transformation. “His vision of The Hartford as an exceptional company, celebrated for financial performance, character and customer value will continue to be a guiding principle for all of our colleagues,” Swift said.

Andrea Wells The industry has lost two of its best Editor-in-Chief whose legacies should inspire others.

6 | INSURANCE JOURNAL-NATIONAL March 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, Bill Schoeffler, Alan Shulman Contributing Writers David Coons, Howard Goldblatt, Thomas Jeffery, Robert Redfearn Jr., Craig Robson SALES Chief Marketing Officer Julie Tinney (800) 897-9965 x148 | jtinney@insurancejournal.com Sales Manager Lauren Knapp (800) 897-9965 x161 | lknapp@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 | dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 | hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 | dmolchan@insurancejournal.com New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Ly Nguyen (800) 897-9965 x125 | lnguyen@insurancejournal.com MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 x120 | eburns@insurancejournal.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com DESIGN/WEB Chief Technology Officer/Chief Innovation Officer Joshua Carlson | jcarlson@insurancejournal.com V.P. of Design Guy Boccia | gboccia@insurancejournal.com Audience Development Elizabeth Duffy | eduffy@wellsmedia.com Marketing Director Derence Walk | dwalk@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com IJ ACADEMY OF INSURANCE Online Training Coordinator Barbara Whiffen | bwhiffen@ijacademy.com ADMINISTRATION Chief Executive Officer Mitch Dunford Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com

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NATIONAL COVERAGE

News & Markets Independent Insurance Agents Defying Doomsayers

By Andrew Simpson

A

ccording to analysts, technologists, aggregators and others, the independent agency system is in trouble.

Somebody forget to tell independent agents.

Or more to the point, the doomsayers perhaps didn’t notice that independent agencies have been adapting and getting more into specialization. Or that they are employing technology along the lines suggested in order to succeed in the changing market. They may have dismissed the notion that not all trends are working against agents, including the finding that a majority of those who buy direct eventually return to their independent agent. Or the critics may be unaware how young agents are changing the business.

They may also have missed the latest agency profitability report.

The reality is that independent insurance agents and brokers continue to dominate property/casualty commercial lines and are also doing just fine in the competitive personal lines marketplace against direct response writers and captive carriers, the latest market report shows.

Market Share Independent agencies (IAs) grew faster than the overall market and thus increased market share in about half of the states and the District of Columbia, according to the 2015 Market Share Study by the Independent Insurance Agents & Brokers of America (IIABA or the Big “I”). The study is based on 2013 data from A.M. Best.

IAs still control a majority of the entire P/C market, writing nearly 57 percent of all premiums; they write nearly 35 percent of all personal lines premiums; and they still dominate commercial insurance sales, writing nearly 80 percent of a market that has grown by more than $35 billion over the last three years, says the report.

The findings show that the independent insurance agency system continues to 8 | INSURANCE JOURNAL-NATIONAL March 23, 2015

Independent agents and brokers continue to dominate property/casualty commercial lines and are also doing just fine in the competitive personal lines marketplace.

be “stable, strong and growing,” said Bob Rusbuldt, Big “I” president and CEO. ‘Good News’ Meanwhile, the latest market share numbers aren’t so scary for agents or their carrier partners.

Rusbuldt pointed to the “good news” in the study that all property/casualty insurance premium lines grew for the third year in a row, bouncing back from their recession-driven low points in 2010. And after three years of growth, both personal and commercial lines have exceeded pre-recession volumes to where combined they are now generating $532 billion in annual premiums.

Combined, the market grew by $25 billion in 2013 over 2012 levels.

The Market Share Study revealed that at both the state and carrier level, independent agents and brokers were well poised to capture their share of the market or more. Furthermore, several IA carriers increased their market shares by substantial amounts. However, there was a significant divergence between the national and regional carriers in terms of growth, according to the Big “I.”

Other findings from the Market Share Study released by the Big “I” include: • IAs grew market share in 23 states and the District of Columbia. In many states, they dominate both personal and commercial lines. That suggests IAs in other states have an opportunity to add share in more lines if they put a renewed focus on it.

• IAs can be as efficient as other models. In the personal auto market, both regional and independent insurance agency writers average better expense ratios than the captive agency model. What’s more, nearly a dozen IA companies rival or beat direct response writers on this key expense efficiency metric.

• Personal auto premiums written by IAs grew nine times more in both 2013 and 2012 than they did in 2011. IAs increased premiums by $1.8 billion in both 2012 and in 2013 — versus the mere $200 million growth figure reported in 2011.

All of which is not to say agencies face no challenges. A recent survey of agents by Accenture found that agents recognize that their strengths could be challenged by the evolving competitive landscape, but their biggest concern is online competition from their own carriers. 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

85

The miles per hour speed limit that could exist on some Nevada roads if a bill under consideration in the Legislature is successful. The bill would allow the state transportation department to raise the maximum speed limit on certain roads to 85, up from the current maximum speed limit of 75 MPH primarily on a number of rural interstates.

DECLARATIONS

$11.3 Million

The total settlement to be paid to former students of West Virginia’s Mountain State University who sued the school because they said it “did not provide them with an education worthy of the tuition they paid.”

The private university closed after it lost its accreditation in 2012 because of leadership, organizational and integrity issues.

Afterthought

“We had this spurt in the auto age where we built these enormous arterials. We built them very wide. We designed them to speed the movement of cars.

Pedestrians were a bit of an afterthought.’’

— Polly Trottenberg, New York City’s transportation commissioner, on the need to make the city’s most dangerous streets safer.

Trottenberg said the city will embark on a $250 million project to extend curbs, widen road medians and add protected bicycle lanes to reduce fatalities on four major streets in the outer boroughs, where dozens of pedestrians have been killed or injured in recent years.

That Which Shall Go Unnamed

“We were told not to use the terms ‘climate change,’ ‘global warming’ or ‘sustainability.’ That message was communicated to me and my colleagues by our superiors in the Office of General Counsel.”

10,000 The approximate number of tickets New York City issued to property owners this past winter for failing to clear snow and ice from sidewalks. The New York Times says its analysis of city data shows that since 2010, 42,000 tickets have been issued. Under city law, businesses, homeowners and other property owners have four hours from the time the snow stops to clear pavements. A first offense fine is $100 to $150 and up to $350 for multiple violations.

5.5 The combined number of years in prison to which North Dakota brothers Aaron and Derek Johnson were sentenced after committing federal crop insurance fraud by intentionally spoiling their potato crop.

The Johnsons were also ordered to pay back the federal government $932,776. Aaron Johnson, who is said to have masterminded the fraud, was sentenced to four years, and Derek received a sentence of one and a half years behind bars.

$505,000 The amount in grants the Insurance Industry Charitable Foundation’s (IICF) Texas/Southeast Division will be providing to area and regional nonprofits in 2015.

The grants were announced at the group’s third annual Lone Star Legends Benefit Dinner, which recognized former President George W. Bush as the division’s 2015 Lone Star Legend Honoree. The grant total is the largest since the Texas/Southeast Division’s inception in 2012.

10 | INSURANCE JOURNAL-NATIONAL March 23, 2015

— Christopher Byrd, a former attorney with the Florida Department of Environmental Protection’s Office of General Counsel in Tallahassee. According to the Florida Center for Investigative Reporting an “unwritten” policy about using the terms went into effect after Gov. Rick Scott, a global warming skeptic, took office. Florida’s DEP is charged with planning how to combat what could be a catastrophic sea level rise due to the very thing its employees are not supposed to mention.

San Francisco Crash Settlement

“This is the first positive step for these passengers to be able to get closure on a tragic, catastrophic crash and hopefully try to get their lives back together.”

— Frank Pitre, an attorney for 72 passengers who settled over the Asiana Airlines flight in San Francisco two years ago, did not disclose financial terms of the settlement.

A Bad Business Strategy

“I hope Kansas business owners are listening. … You can go to prison for knowingly employing undocumented workers.

Violating federal law is not a good business strategy.”

— U.S. Attorney Barry Grissom on the prison sentences for Munir Ahmad Chaudary and his wife, Rhonda R. Bridge, who employed illegal immigrants in their Kansas City-area Clarion hotels. The pair didn’t pay workers’ compensation or unemployment insurance. www.insurancejournal.com

WEST COVERAGE

News & Markets Increased Chance of Big One in Long-Term Quake Forecast for California

C

hances that California will experience a magnitude 8 or larger earthquake in the next 30 years has increased from 4.7 to 7.0 percent, according to an earthquake forecast by the U.S. Geological Survey and its partners.

The Third Uniform California Earthquake Rupture Forecast, or UCERF3, improves upon previous models by incorporating the latest data on the state’s complex system of active geological faults, and uses new methods for translating the data into earthquake likelihoods, according to USGS. Compared to the previous assessment issued in 2008, called UCERF2, the estimated rate of earthquakes around magnitude 6.7, the size of the destructive 1994 Northridge earthquake, has gone down by roughly 30 percent. The expected frequency of such events statewide has dropped from an average of one per 4.8 years to about one per 6.3 years, the study shows.

The study uses two scientific models to inform decisions of how to safeguard against earthquake losses: an Earthquake Rupture Forecast, which indicates where and when the Earth might slip along the state’s many faults, and a Ground Motion Prediction model, which estimates the ground shaking given one of the fault ruptures.

The study was developed and reviewed by

dozens of leading scientific experts from the fields of seismology, geology, geodesy, paleoseismology, earthquake physics and earthquake engineering. The USGS partner organizations include the Southern California Earthquake Center, the California Geological Survey and the California Earthquake Authority.

Nevada’s Captive Domicile Growth Rises by $3.8B in Premium

Lawsuit Says Oregon Woman’s Brain Tumor Sample for Biopsy Lost

T

A

he captive insurance program in Nevada outperformed growth and speed expectations by approving 26 captives in 2014, which resulted in a captive premium increase of $3.8 billion, Insurance Commissioner Scott J. Kipper announced in March.

He said 2014 was once again a record breaking year for Nevada’s captive insurance industry. The state now has 160 domestic captive insurers, the most in the history of its captive insurance program.

Nevada continues to offer a rapid applicaScott J. Kipper tion approval process and pure captive application fees will continue to remain at just $1,050, Kipper said.

Nevada has licensed more than 200 captives since the inception of its captive insurance program in 1999. Industries listed among Nevada’s captives include: Bio-tech; alternative energy; multi-national transportation; manufacturing; and financial. www.insurancejournal.com

n Oregon woman has sued a Portland hospital for $900,000, alleging that a brain tumor sample set aside for biopsy has been lost, leaving her uncertain about whether the tumor was cancerous.

Catherine Stewart is seeking $100,000 in economic damages for past and future brain scans and possible surgery and $800,000 for emotional distress. She’s accusing Oregon Health & Science University of medical negligence. A hospital spokeswoman declined comment about the lawsuit. Stewart’s lawyer says the sample was collected in September 2013 when surgeons removed a brain tumor. He says his 64-year-old client has undergone regular brain scans to determine if the tumor has grown back. So far it has not, but Wagner says Stewart worries that it might — and that it might be cancerous.

Copyright 2015 Associated Press.

March 23, 2015 INSURANCE JOURNAL-WEST | W1

WEST COVERAGE

People Denis Brady

Michael Onofrietti

Michael Carrington

Tam Duong

John Gehard

The members of the Surplus Line Association of California have named Denis Brady, president of Burns & Wilcox Brokerage in San Francisco, chair of the SLA board of directors.

Brady’s election was finalized after the SLA tallied the final ballots from members who were unable to attend the SLA annual meetings on Feb. 3 and Feb. 5 in San Francisco and Los Angeles.

Also elected to leadership were Chris Houska, California managing director of R-T Specialty LLC, who becomes vice chair, and Tom Ciardello, senior vice president and manager of Worldwide Facilities Inc., who becomes secretary/treasurer.

Brady takes over from Ian Fitt, vice chairman of Catalytic Holdings LLC, who completed his 2014 term as chair and was elected to a seat on the board.

Newly elected to seats on the board are Bob Gilbert, director of underwriting and production with Markel West Insurance Services, and Terri Moran, senior vice president and western region executive with Vela Insurance Services.

Completing the 13-member board are: Janet Beaver, Scottish American; Rupert Hall, M.J. Hall & Company Inc.; Chris Kiley, AMWINS; Davis Moore, Worldwide Facilities Inc.; Pam Quilici, Crouse & Associates Insurance Services of Northern California Inc.; Les Ross, Wholesale Trading Co-Op Insurance Services LLC; Gerald Sullivan, The Sullivan Group.

Additionally, SLA members reelected the Honorable Harry Low, a former insurance commissioner and retired presiding justice of the California Court of Appeal, as mediator.

All those elected to the 2015 board will serve until balloting is completed following the next SLA annual meeting in February 2016.

San Francisco-based SLA operates as a self-governed private organization.

Hawaii-based Island Insurance Company Ltd. has named Michael A. Onofrietti senior vice president of actuarial services, product development and management.

Onofrietti, who previously held the title of vice president, will continue to be responsible for developing techniques for pricing insurance products, loss reserving, data analysis as well as the development, management and implementation of new products.

Onofrietti has more than 30 years of experience in the property/casualty insurance industry. Prior to Island Insurance, he was vice president of AIG Hawaii Insurance Co. Island Insurance offers a range of property/casualty insurance.

W2 | INSURANCE JOURNAL-WEST March 23, 2015

Grass Valley, Calif.-based Networked Insurance Agents has promoted Michael Carrington to vice president of service and Tam Duong to vice president of commercial lines account management.

Carrington leads a team of customer service representatives and business processors. Duong leads a team of account managers.

Carrington joined Networked in 2007 and was promoted to assistant vice president in 2010. Carrington was previously with Berkshire-Hathaway in an underwriting management role.

Duong has more than 17 years of industry experience and has been with Networked since 2009. She was promoted to assistant vice president of commercial lines in 2013.

Networked has offices in Northern and Southern California, and serves more than 1,200 affiliate members in 10 Western States.

American Modern Insurance Group has named John Gerhard senior territory manager for its Pacific Northwest Territory, which includes Oregon, Washington, Alaska and Idaho.

He will be responsible for growth and profitability in the region.

Gerhard has more than 20 years of marketing, underwriting and sales experience in personal and commercial lines with insurance companies, including Oregon Mutual, North Pacific and Foremost. He has experience as an agency owner and manager.

American Modern delivers specialized products and services for residential property — like mobile homes and specialty dwellings — and for consumers in the recreational market, including owners of boats, personal watercraft, classic cars, motorcycles, ATVs and snowmobiles.

Barney & Barney Insurance Services LLC has named Knight Hinman the Bay Area sales director in its San Francisco, Calif., office.

Hinman is responsible for managing a team of 15 insurance and employee benefits professionals in the firm’s San Francisco and Walnut Creek offices.

Hinman has 14 years of experience, including experience in commercial insurance and risk management. He worked for Liberty Mutual Insurance in Denver, Colo., and Phoenix, Ariz., in a series of positions of increasing responsibility.

He was a senior account representative, business sales manager and territory manager for the company. He also worked as a sales executive for BBVA Compass Insurance continued on page W4 www.insurancejournal.com

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People Sherif Azer

Nate Bell

continued from page W2 Agency in Denver.

Barney & Barney’s Bay area locations specialize in serving clients in technology, healthcare, construction and higher education. The firm also serves local governments and non-profit organizations, among other industry segments. In 2014, Barney & Barney joined Marsh & McLennan Agency LLC, a subsidiary of Marsh Inc. Barney & Barney has offices in San Diego, San Francisco, Walnut Creek and Orange County.

Hull & Company Inc. has named Sherif Azer a commercial underwriter/broker in its Irvine, Calif., office.

Azer focuses on commercial lines with the placement of E&S brokerage and MGA risks.

Azer began his insurance career at Bass Underwriters in Culver City.

Hull & Company is a wholly-owned subsidiary of Brown & Brown Inc. Hull & Company has offices throughout the U.S. Lockton’s Denver, Colo., operation has hired Nate Bell as personal lines producer.

Bell has spent 13 years in the insurance industry, most recently as a personal lines producer and sales leader for IMA nationwide.

He has experience in developing customized insurance and risk management solutions for high net-worth individuals and families.

Kansas City, Mo.-based Lockton is a privately held, independent insurance broker.

Kayla Quinton was named a junior broker at Stone Creek Insurance Agency Inc. in Lafayette, Calif.

Quinton ‘s focus at Stone Creek is to assist in maintaining the agency’s growth and community presence in the private client realm She began her career at Allstate as an insurance specialist. Previously she worked for Kibble & Prentice, a USI company, in Seattle, Wash., as a personal lines account manager and producer.

Stone Creek offers commercial, personal and health and life insurance.

California Insurance Commissioner Dave Jones announced the members of the 2015-2016 Insurance Diversity Task Force.

The task force will make recommendations to Jones on ways to increase diversity in procurement and governing boards within the insurance industry.

Task force members are: Linda Akutagawa – President and CEO of leadership

W4 | INSURANCE JOURNAL-WEST March 23, 2015

education for Asian Pacifics Inc. Akutagawa joins the task force as an advocate/expert of governing board diversity.

Danielle K. Beavers – Economic equity program manager at The Greenlining Institute. Beavers joins as an advocate/representative for minority business enterprises.

Robin M. Billups – Director of business development at the Women’s Business Enterprise National Council.

Billups joins as an advocate/representative for women business enterprises.

Janice P. Brown – Owner and founder of Brown Law Group. Brown joins as an advocate/representative for minority business enterprises.

Pat Fong Kushida – President and CEO of the Sacramento Asian-Pacific Chamber of Commerce and president and CEO of the California Asian Pacific Chamber of Commerce. Fong Kushida joins as an advocate/representative for minority business enterprises.

Melinda Guzman – CEO of the Melinda Guzman Professional Corp. Guzman rejoins as an advocate/representative for women business enterprises.

Craig E. Holden – Senior partner and chairman of the National Commercial Litigation Department for the law firm of Lewis, Brisbois, Bisgaard & Smith. Holden joins as an advocate/expert of supplier diversity.

Ramon Jones – Regional vice president of Nationwide Insurance. Ramon joins as an insurance industry representative.

Michael G. Keeley – President and CEO of MGK Risk and Insurance Services. Keeley rejoins as a representative for diverse business owners.

Mark Morales – Vice president of the U.S. Small Business Administration division of HomeStreet Bank and co-owner of Charles Jacobsen. Morales joins as an advocate/representative for LGBT business enterprises.

Salvador Peinado, Jr. – Senior supplier and diversity and innovation advisor at CSAA Insurance Exchange.

Peinado joins as an insurance industry representative.

Cathy Schwamberger – Associate general counsel for State Farm. Schwamberger joins as an insurance industry representative.

Melanie M. Shelby – Managing director at Gray, Greer, Shelby & Vaughn LLC. Shelby joins as an advocate/ expert of supplier diversity.

Randy Sinnott – Founding partner of Sinnott, Puebla, Campagne & Curet. Sinnott joins as an advocate/representative for disabled veteran business enterprises.

Scott Syphax – President and CEO of The Nehemiah Cos. Syphax rejoins as an advocate/expert of governing board diversity.

The first Task Force meeting will be held on March 23, 2015. www.insurancejournal.com

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WEST COVERAGE

News & Markets CEA Kicks off Earthquake Insurance Selling Program for Agents

By Don Jergler

for homeowners: Pomeroy said.

“Home is the place you love the Agents can go to the site and get most.

It just might be your access to FAQs, sales tips, the he California Earthquake Authority has most valuable asset. Which is latest blogs on selling earthagain kicked off its annual “Marketing why it’s important to consider quake insurance, discussion Value Program,” in which the quasi-private earthquake insurance,” the threads, training video earthquake insurer encourages agents to mailer states vignettes and an “overcomsign up to receive direct mail marketing It goes on: ing objections” area. pre-printed with agents’ names to send to “Call me to discuss your: “It’ll be a place for them potential clients.

Risk for earthquake to come and see what’s This is the program’s fifth year, and there damage new in the program, and are some changes in store. An email pro Costs to repair or rebuild it’ll be an easy way for moting the program started going out to your house them to order new materiagents earlier this month.

Value of personal belongals,” Pomeroy said. “I think In past the MVP program was rolled out ings, and the portal’s going to be a real helpful feain two separate Expenses to temporarily live and ture for the agents.” periods during the ‘We think bigger eat elsewhere.”

Also popular is the CEA’s earthquake preyear — spring and things are going to

Versions are available in English, paredness kit, which Pomeroy said is given fall. be in store now that Chinese and Spanish. to new policyholders.

“We’re moving it’s going to be avail- Other new features in the pro “It’s about customer services, it’s all about to a year-round gram include a Spanish language having communications with Californians program now,” said able year-round.’ version of the mailers that can be about the need for earthquake insurance Glenn Pomeroy, targeted to renters, and a specific website and it’s all about recognizing the role that CEO of Sacramento, Calif.-based CEA. for agents approved to sell CEA insurance. agents play in the whole string of dialogue,” After the March 2 launch CEA will be “We’re developing an agent portal,” he said. out there continuously talking to agents, actively encouraging agent signups, which can now occur any day of year.

With an estimated 10 percent of California homeowners having earthquake insurance, CEA sees increasing takeup rates as one of its priorities, Pomeroy said.

Each year the MVP program is rolled out CEA gets more agents into the community talking to homeowners about the need to be covered when the “big one” hits, he said.

“Last year we had 2,400 agents that participated in our program,” Pomeroy said.

Roughly 1.26 million mailers were requested during last year’s campaign, according to the CEA. From those requests CEA assembled and sent out more than 5,000 new policyholder kits with the selling agents’ name to give to those homeowners who purchased insurance, according to the CEA. “We think bigger things are going to be in store now that it’s going to be available yearround,” Pomeroy said.

Locals worked to clean up this house on Jefferson St. in Napa, which had its foundation and side staircases dam The mailer offers a point-by-point pitch aged by the M6.0 earthquake on Aug. 24, 2014. Photo by Amy O’Connor/Insurance Journal

T

W6 | INSURANCE JOURNAL-WEST March 23, 2015

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Liability Matters Insurance Clusters Not Immune from Trade Secret Liability

A

n insurance cluster — sometimes called an alliance, network or aggregator — is a group of agents and brokers combined under a common association for mutual support and the ability to market their individual books of business as part of a group.

Clusters provide independent brokers and agents access to larger markets, new lines of business, profit sharing and other services, while still maintaining the ownBy Craig Robson ership of their own books.

The association generates revenue through a percentage of the profit sharing and membership fees.

This structure seems like a win-win for the independent brokers/agents and the association, but they are complex and present a host of ambiguities. For example, is the association responsible when one of its members misappropriates the trade secrets of a non-member, competing agency, or when it steals a book of business? Does the association “acquire,” “use,” or “disclose” these misappropriated trade secrets as a part of its business model, opening itself up to potential liability? What steps can the association take to insure that it will not be brought into a lawsuit against one of its members? As part of its business, an insurance cluster may sometimes obtain information concerning its members’ customers. In a legal matter, this information is classified as “trade secrets.”

California Uniform Trade Secret Act categorizes misappropriation into three areas: (1) acquisition; (2) disclosure; and (3) use.

Likewise, if an insurance cluster receives profit sharing from its insurer member, it may also have access to the customer information privy to these members. In fact, the cluster may even use this client information to pay direct commissions, share profits or pay contingent commissions to its members, and itself. However, the question still looms: Is this enough to constitute “acquisition,” “disclosure” or “use?”

W8 | INSURANCE JOURNAL-WEST March 23, 2015

There is no case law on this issue as it relates specifically to clusters, but there is a limited amount of authority in California that imputes misappropriation of trade secrets onto third parties who use or profit from them. For example, in the 2000 case of PMC, Inc. v. Kadisha, the court found that “employing the confidential information in manufacturing, production, research or development, marketing goods that embody the trade secret, or soliciting customers through the use of trade secret information, all constitute use.”

In PMC, the plaintiff filed suit against its former employees, the corporation where the misappropriated trade secrets were used, and the corporation’s officers, directors and principal shareholders.

The defendants filed a declaration stating they had never authorized any of the corporate officers or employees to engage in misappropriation. Further, they produced evidence that the corporation had investigated the situation, and concluded that there was no wrongdoing. With this evidence, the trial court granted the defendants summary judgment motion. The Court of Appeal reversed the judgment and found that under California’s Trade Secret Act, the defendants were liable if they used the plaintiffs’ trade secrets despite knowing or having reason to know they were derived from a person who owed a duty to the plaintiffs to keep them secret.

To this end, the Court of Appeal found there were triable issues regarding whether, in anticipation of personal and corporate gain, the defendant invested in and continued operating the corporation notwithstanding the corporation’s misappropriation and the defendants’ notice of it. As the Court of Appeal explained, “A reasonable trier of fact could conclude there was no real attempt to determine, and no basis upon which to conclude, that [the corporation] had not engaged

in, and was not continuing to participate in, tortious conduct.” Finally, the Court of Appeal rejected the notion that the defendants could not be liable, since the misappropriation occurred before they became officers and investors.

Best Practices In the case of a cluster, it may or may not have access to customer information in light of the profit sharing from its members’ insurance sales both before and after being put on notice by a plaintiff who is alleging misappropriation. To the extent the cluster has plaintiff’s trade secrets in its possession, or is using these trade trades secrets for gain, it may constitute misappropriation under California’s Trade Secret Act per the PMC case.

Following are best practices if a cluster finds itself in this position: • Discuss the contract with the member and the indemnity agreements which should be in place; • Discuss removing the misappropriated customers from under the cluster’s umbrella by having the member write the insurance directly through the insurer(s); • Discuss removing the member from under the umbrella if it refuses to cooperate in moving the clients or resolving the matter; • Educate members on CUTSA. Robson is an attorney in Michelman & Robinson, LLP’s Irvine. Phone: 714.557.7990. Email: crobson@mrllp.com. www.insurancejournal.com

www.insurancejournal.com

March 23, 2015 INSURANCE JOURNAL-NATIONAL | 11

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CLOSER LOOK

Mergers & Acquisitions M&A Calendar: P/C Agent, Broker Mergers & Acquisition Headlines in 2014

I

nsurance Journal reported on more than 200 deals involving agencies’ or brokerages’ mergers and acquisitions in 2014. Activity was busiest in the first and fourth quarters, with more than 60 announcements each.

Among the noteworthy transactions were Wells Fargo selling 40 smaller regional insurance offices to USI, which also bought seven Willis retail brokerage locations across the country; Brown & Brown buying flood insurer The Wright Group; Marsh & McLennan Agency acquiring Barney & Barney in California and Senn Dunn in North Carolina; and a Texas agent trade

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association acquiring LevelFirst, a managing general agency, in order to provide markets to members.

The most active buyer by far was Arthur J. Gallagher, with AssuredPartners, Hub International, Marsh & McLennan Agency and USI also announcing multiple deals.

Insurance Journal also reported on more

than 80 deals involving P/C carriers and more than 20 mergers involving insurance claims, third party administration, technology and other industry-related firms, which can be found on InsuranceJournal.com.

Insurance Journal offers a special “thank you” to the 2015 Mergers & Acquisitions Report sponsor MarshBerry.

USI Buys Travers, O’Keefe & Associates in N.Y. Oklahoma-Based Insurica Acquires Joe West

Aronson Buys Shuffain Insurance in Mass.

A. J. Gallagher Buys N.Y.’s Spataro Insurance BB&T to Acquire Woodbury & Co. in Carolinas Stratton Buys Willis Retail Pizza Program

JANUARY AmWINS Acquires Bliss & Glennon, eReinsure Brightway Buys Florida’s Towne Center Bua Agency Buys Weather Insurance of N.Y. All Risks Acquires Stonebridge Underwriters Hub Int’l Acquires Michigan’s Pinnacle Avid Risk, Kellenberger-Landsee Merge Marsh to Acquire Scotland’s Central Insurance Hilb Group Buys Tampa’s Hockman Insurance Lucien Wright, Texas’ Paul Lowe Agency Merge Segal Group Acquires Michigan’s Moroni Fantin CBIZ Buys Centric Insurance in New Jersey California’s EPIC Acquires Georgia’s McCart Alliant Acquires Pittsburgh’s Sagewell Partners OceanPoint Acquires Raymond Insurance in R.I. AssuredPartners, Leonard Insurance Merge Bloss & Dillard Buys Agents Insurance Markets Corcoran & Havlin, Sciarratta & Doucette Merge Cross Buys Willis in Maine, Conn.’s Insurance Exchange USI Acquires Ohio’s Quintessential Advisors Leavitt Group, Mountain West Partner Risk Strategies Buys DataRisk in N.H. Brown & Brown Acquires The Wright Group USI Acquires Oscar & Associates in N.J. Texas’ Talon Insurance, Higginbotham Merge Bolton Acquires Rick Gombar Insurance in Calif.

Risk Strategies Buys Singer Nelson Charlmers Willis Acquires Capital Strategies’ Benefits Unit JLT Acquires Hong Kong’ Lambert Brothers Wells Fargo Sells 42 Insurance Offices to USI AssuredPartners Buys Commercial Insurance

20 | INSURANCE JOURNAL-NATIONAL March 23, 2015

FEBRUARY Program Brokerage Acquires S.C.’s Sirles Marsh & McLennan Buys Barney & Barney Blackmoor Buys Connecticut Underwriters Unit Confie Seguros Buys 1 Stop Financial in Texas NSM Acquires Professional Underwriters in Ill. Marsh & McLennan Buys N.C. Surety Bond Marsh & McLennan Expands in Michigan AssuredPartners Buys AirSure in Colo., Texas Ohio’s McGowan Accuires N.J.’s Klein Insurance Leavitt Group Combines Utah, Nev. Agencies MarketScout Buys QBE N. Pointe Bowling Prog.

R-T Specialty Buys Blais E&S of Texas A.J. Gallagher Buys Ala.’s Benefit Development Johnson & Johnson Buys H.T. Bailey of Mass.

A.J. Gallagher Acquires La.’s Kent, Kent & Tingle AssuredPartners Buys Bateman Agency in N.J. AssuredPartners Buys Va.’s InSight Aviation AssuredPartners, Creech & Stafford Merge

MARCH Confie Seguros Acquires Ida Tunnell Insurance A. J. Gallagher Acquires Tudor Risk Services AgentLink Buys Ind.’s Consolidated Brokerage Hub Int’l, Corporate Benefit Consultants Merge Texas’ Higginbotham, Edgmon Agency Merge Ohio’s McGowan Purchases Breed’s Hill in Mass.

A.J. Gallagher Acquires L&R Benefits in Conn.

APRIL Johnson & Johnson Buys Stateside Underwriting Hudson Acquires Motor Transport Underwriters McGriff, Seibels & Williams, Caledonian Merge PSA Insurance & Financial Buys Council in Md. Marsh & McLennan Acquires S.C.’s Capstone A. J. Gallagher Buys N.Z.’s Mike Henry Brokers A. J. Gallagher Buying Australian Wesfarmers AssuredPartners Acquires N.Y.’s MHB Insurance Cross Insurance Buys Troy, Pires & Allen in R.I. BancorpSouth Acquires La.’s Knox Insurance AssuredPartners Acquires CBS Coverage in N.Y. Texas’ All-Star Insurance Buys Hogue Insurance Eastern Insurance Buys Smith Buckley & Hunt A.J. Gallagher, American Wholesalers Merge

MAY Minnesota Agencies Maguire and Kelly Merge Hub Int’l Acquires E.J. Wells Agency in Mass.

Wells Fargo, USI Complete Regional Office Sale Declaration Brokerage Acquires RBLA of Pa. Towne Insurance Buys N.C.’s Southern Insurance A. J. Gallagher Acquires Sunderland in Calif.

Marsh & McLennan Buys Ohio’s Kinker-Eveleigh

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Mergers & Acquisitions continued from page 21 Brown & Brown Buys 2 RV-Focused Fla. Agencies Marsh & McLennan Acquires Visicor in Texas RSA to Sell Canada’s Noraxis to A.J. Gallagher Hilb Group Acquires Florida’s Newman & Crane Brown & Brown, Wright Complete Merger Gallagher Buys Florida’s MGA Insurance Group AVID Risk, Brent Harris Agency Merge in Wis. Willis Completes Acquisition of Charles Monat THL Private Equity, Beecher Carlson Ex-Execs Form Prime Risk Partners Marsh & McLennan Acquires Senn Dunn in N.C.

JUNE State Auto Acquires Partners General Insurance CoVerica Acquires Forbes-Troxel in Texas Lockton Buys UK’s MIS Motorsport Brown & Brown Acquires Gaston & Assoc. in N.Y. All Risks Acquires Alive Risk Integro Buys Lugo & Associates in Calif.

A. J. Gallagher Buys Md.’s Tri-State General Capacity Coverage Unit Buys Mt. Pleasant Agency A.J. Gallagher Acquires The Plus Cos. in N.J. Aon to Acquire National Flood Services Frederick H. DiMeo Buys Part of Hughes AllMart Marsh to Take Majority Stake in Panama’s Semus Marsh Buys Part of S. Africa’s Alexander Forbes Integro Acquires Daugherty Insurance in Calif.

Broad Insurance Buys Florida’s Hartselle Florida Agencies Acentria, Gateway Plan Merger AmWINS Buys Cabrillo and Tidewater in Calif.

Hub Int’l Acquires Fla.’s Ballard Insurance Hilb Group Acquires Martin Agency of Ken., Fla. Confie Seguros Buys N.Y., Texas, S.C. Agencies Norman-Spencer, N.J.’s Northern Star Merge Aon Acquires Peru-Based Agency Integro Entertainment Unit Buys London’s Stonehouse Conseillers A.J. Gallagher Buys Mo. Travel Ins. Agency A.J. Gallagher Acquires Minvielle & Chastanet A.J. Gallagher Acquires Cowles & Connell in N.Y. USI to Acquire 7 Willis U.S. Retail Brokerages NFP Acquires 2 Agencies in New England A.P. Michaud Buys Greenwood Agency in Mass.

Integrated Employee Benefits One Risk Merge

SEPTEMBER A.J. Gallagher Buys Dezelan Insurance Agency Kaufman Financial Buys Marine Broker Oval Int’l Hub Int’l Acquires Canadian Commercial Book Anchor to Buy Southeast Surplus Underwriters A.J. Gallagher Acquires Everett James in Conn.

Ion Insurance Buys Drescher Agency in Conn.

R&R Insurance Services, Snyder Agency Merge A.J. Gallagher Acquires Hagedorn & Co. in N.Y. Insure.net Acquires Stark Agency in Conn.

AssuredPartners Buys Md.’s Crawford Advisors Ames & Gough Acquires Bixby Insurance in R.I. Insurica Acquires Okla.’s James, Calif.’s Alliance

OCTOBER JULY Univest Acquires Sterner Insurance in Pa. AssuredPartners Buys W.Va.’s Ramsey Insurance Higginbotham Acquires Share of Willis of Texas Hub Intl Acquires Canada’s Gibson Insurance Corporate Insurance Merges with IMA Financial Aon Completes National Flood Svcs. Acquisition MarshBerry Acquires Gill & Roeser Greater Texas Insurance Merges with BKCW USI Acquires BHB Insurance Services in N.J. Cross Buys Maine’s Merchant, Needham & Assoc.

EPIC Buys Jenkins Insurance Services in Calif.

Markel Ventures Buys Ga. Auto Transport Equipment Firm N.M.’s Millennium Merges with Leavitt Group A. J. Gallagher Acquires Insurance Point

AUGUST Broker-Dealer Buys Alabama Wholesale Broker AssuredPartners Buys The Wright Group in Colo.

22 | INSURANCE JOURNAL-NATIONAL March 23, 2015

Risk Strategies, DeWitt Stern Merge NSM Buys Specialty Aviation Underwriters Lockton Buy’s Scotland’s Griffiths & Armour JLT to Acquire Part of Alliant’s Energy Business AmTrust Buys Fla. Blue Cross’ Work Comp Unit Hub Int’l Acquires FieldEddy in Mass.

Risk Strategies Buys Crow Friedman in Tenn.

Confie Seguros Buys AA Insurance, Parietti & McGuire in N.Y. Confie Seguros Buys North Texas Auto Agency First Commonwealth Buys Thompson/McLay White Mountains Buys Stake in Tranzact A. J. Gallagher Buys Illinois’ Bennett & Shade USI Insurance Acquires Wallace/Scott in Alaska Lawley Acquires S. Turtletaub & Sons in N.J. Willis, Miller Talk Merger of Wholesale Brands Heffernan Buys Pilot Employee Benefits in N.Y. Risk Strategies Buys Benefit Development Group Horton Group Buys BF&S Insurance in Ill., Mich.

Fla.’s AssuredPartners Ala.’s Turner & Hamrick

Assurant to Buy French Broker CWI Hub Int’l to Acquire Chicago’s Laurus Strategies

NOVEMBER Starkweather & Shepley Buys R.I.’s Universal USI Completes Willis Retail Brokerage Mergers Hilb Group Buys N.C.’s Lake Norman Benefits RT Specialty Acquires Tennessee Underwriters Confie Seguros Acquires N.Y., Calif. Brokers EPIC Acquires Rusconi and Team AssuredPartners Buys Premiere Coastal in S.C. A.J. Gallagher Buys Discovery Benefit Solutions Marsh & McLennan Acquires Nuwest in Calif.

CBIZ Acquires Weekes & Callaway in Florida Hub Int’l Acquires Fotek Agency in New Jersey A.J. Gallagher Buys SGB-NIA Brokers in Calif.

A.J. Gallagher Acquires Illinois’ The Forker Co. Pa.’s C&R Insurance Announces 2 Acquisitions Texas Agent Group Buys LevelFirst, Forms MGA A.J. Gallagher Acquires The Titan Group in Va. FBinsure Acquires Gramlich Agency in Mass.

A.J. Gallagher Acquires Iowa’s Miller-Harrison North Risk Partners, Thune Insurance Merge Aquiline Capital Buys Stake in Beach & Assoc.

EPIC Acquires Atlanta Brokerage Greyling

DECEMBER Schinnerer to Acquire SeaFire Insurance in Kan. Regions Insurance Buys Fla’.s Teaberry Business USI Acquires Holmes Murphy in Missouri Hub Int’l Acquires Canada-Based MGA Partners S&S Ins. Solutions Acquires Imperial Insurance Regions Insurance Buying A.I. Insurance Risk Solution in Hawaii Joins Woodruff-Sawyer Integro Buys Canada’s Finning Insurance Svcs.

Willis Completes IFG Ireland Acquisition AssuredPartners Acquires First Palmetto in S.C. Alliant Insurance Buys The Camps Group in N.Y. NFP Acquires Foran Insurance in Mass.

A.J. Gallagher Buys N.J.’s O’Gorman & Young USI Buys Askin, Weber & Reed’s Program Bus. Meeker Sharkey, James F. Hurley Merge Integro Acquires UK’s Howard Global Insurance A.J. Gallagher Buys Independent Benefit Svcs.

Integro Acquires Ventura Insurance in N.Y. A.J. Gallagher Buys Affinity Marketing Group Donald Gaddis Acquires Chicago’ Kelly and Elliot AssuredPartners Buys Sheehan Insurance in Va. Hub Int’l Acquires Iowa-Based Ruhl & Ruhl Brown & Brown Buys Global Benefit Strategies

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CLOSER LOOK

Mergers & Acquisitions E&O Insights: Do You Have Clients That Will Be Buying or Selling?

W

hile most agents are aware that mergers and acquisitions are hot topics in the world of insurance agencies, insurance is not the only segment of our industry affected. In many communities, hospitals, accounting firms, real estate firms and law firms also look to acquire, merge or sell. If your insurance agency is “the agent” for one of the parties, there are key insurance issues that will need to be discussed

By Curtis M. Pearsall and could come into play. For virtually

24 | INSURANCE JOURNAL-NATIONAL March 23, 2015

all businesses with a professional liability exposure, the manner in which the professional liability coverage is handled could make a significant difference on whether a professional liability “error or omission” is covered. Whether your agency’s client is the buyer or the seller, proper planning and attention to detail are extremely important.

Tail Coverage As most agents are aware from their own coverage, there are some potential considerable differences between various E&O policies. The same holds true for agency clients that have a professional liability exposure.

One of the key differences involves the

degree of the extended reporting period, also known as the tail coverage.

There are typically various issues that determine whether the tail coverage is available, for what periods of time and what the cost will ultimately be. Some policies are much broader than others. It could be troublesome for some clients to advise you that they are looking to sell, only to discover that the tail options of their current coverage are rather limited.

It is not uncommon to find professional liability policies that only provide tail coverage for a very limited period. This limitation could be a significant issue and will probably play a role in whether the buyer feels that he or she is adequately protected moving forward. For this reason, it is beneficial for the review of the professional liability coverage at renewal time to include a detailed discussion of that policy’s tail coverage. As you explain the tail coverage and when it is applicable, this may prompt the client to advise you of plans to sell his or her operation in the future.

If the client advises you of the desire to sell in the future, this may prompt exploring the market to find carriers with more extensive tail coverage. It is important for clients (and agents) to understand that this is only one of the issues.

There are other significant factors when determining which professional liability is the best fit for that account.

Issues such as the coverage grant, the covered professional services and a host of key definitions (such as the definition of who is an insured) need to be explained and factored in. These all speak to the need for proper planning.

If your client is the seller, the policy should be reviewed for the proper handling of any potential continued on page 26 www.insurancejournal.com

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All admitted coverages are written by Philadelphia Indemnity Insurance Company. Coverages are subject to actual policy language.

CLOSER LOOK

Mergers & Acquisitions continued from page 24 claims that may arise. Typically, the current E&O carrier should be put “on notice” of potential claims as most E&O carriers will consider those claims covered regardless of when the actual claim is made. It essentially locks in the “date claim made.”

Does the Firm Being Bought Look Like the Buyer?

Most professional liability carriers have a certain appetite. This has the potential for the E&O carrier insuring the buyer to not have an appetite for the exposures of the firm being acquired.

Suppose a real estate firm is looking to buy a firm that is a licensed appraiser. Will that E&O carrier be willing to take on that additional exposure? Perhaps a law firm client is buying a firm that is heavy into SEC

litigation. Will that E&O carrier be willing to insure that new exposure? If the firm being bought had some claim problems, this could throw a “monkey wrench” into the equation.

As the agent, be aware that these scenar-

ios can and do occur, so you should advise your client of this possibility.

Don’t hesitate to reach out to your client’s E&O carrier for its thoughts, guidance and direction on how best to manage this process.

Not all transactions look the same.

The transaction could involve a purchase or it could be viewed as a merger. The E&O carrier may require additional paperwork, copies of the proposed transaction documents, applications, etc., to make this determination. E&O policies are not assignable. Therefore, having your client give his or her E&O policy to the buyer and requesting that he or she keeps making the payments is not the solution. If a problem developed, this approach could very well leave both the buyer and seller with no coverage.

When Your Client Is the Buyer If your client is the buyer, the traditional approach is to have the E&O policy endorsed to provide coverage for the “new” exposure. The coverage typically will provide protection against errors made by the “new” professional liability client starting with the effective date of the acquisition.

Be sure to inquire whether any premium adjustments are If you have a necessary.

If you have a cliclient that is ent that is looking looking to buy to buy or sell, it’s or sell, it’s critcritical to address ical to address the key issues in advance. This will the key issues in play an important advance. role in ensuring that the transaction is handled smoothly and that the proper protection is in place.

Pearsall is president of Pearsall Associates Inc., a risk management consulting firm. 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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26 | INSURANCE JOURNAL-NATIONAL March 23, 2015

2/9/15 12:28 PM

www.insurancejournal.com

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CONSTRUCTION

Building restoration projects are a complex business with multiple risks. This presents multiple opportunities for you if you partner with Burns & Wilcox. From builder’s risk, to the contractors and architects doing the work, we have solutions for every exposure related to any project. Find the structure you need to capitalize on this opportunity. Work with the global leader in wholesale insurance – Burns & Wilcox.

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SPECIAL REPORT

Insurance Journal examined industries experiencing changes and expansions in the past year.

Here are the top market sectors that just might deliver hot opportunities for agents and brokers in the property/casualty insurance industry in 2015.

Construction

Overall, construction might be the hottest market in 2015. Construction payrolls are increasing, more projects are coming online and the scope of work is increasing. And according to Lockton Co.’s construction insurance specialists, insurance coverage is generally available for both commercial and residential projects and pricing is stable with a few exceptions.

Construction experts say that the 2015 outlook is good.

Total U.S. construction starts for 2015 are predicted to rise 9 percent to $612 billion, almost double from the 2014’s estimated 5 percent increase to $564 billion, according to the 2015 Dodge Construction Outlook, published by Dodge Data & Analytics (www.construction.com).

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

• Institutional building will advance 9 percent.

• Single family housing will rise 15 percent.

• Multifamily housing will increase 9 percent.

• Public works construction will improve 5 percent.

Only electric utilities (9 percent decline) and manufacturing plant construction (16 percent decline) are predicted to see drops www.insurancejournal.com

in construction starts in 2015, according to the Dodge report.

A good construction market is good for many ancillary industries, too.

According to Sageworks’ analysis — a financial information company — nine out of the top 10 fastest-growing industries in the country are related to residential and commercial construction.

Sageworks’ list ranks the fastest-growing industries based on annual sales increases.

This year, real estate and broker offices topped the list as the fastest-growing industry in the United States for 2015.

Other fast-growing home construction-related industries listed were: residential building construction; other wood product manufacturing; foundation, structure, and building exterior contractors; utility system construction; lumber and other construction materials merchant wholesalers; other specialty trade contractors; and architectural, engineering, and related services.

Non-residential building construction also ranked in the top 10 as one of the fastest-growing industries for 2015.

The construction industry in general may be one to keep an eye on, given these signs of recovery.

Mergers & Acquisitions

The merger and acquisition (M&A) space has attracted some new capacity recently as several insurers have launched new transactional risk practices. This increase in capacity is most likely in response to a huge increase in demand.

According to Marsh’s Annual Transactional Risk Report released this month, there was a 36 percent increase in policies placed and a 51 percent increase in limits placed globally by Marsh to $7.7 billion in 2014. The limits placed in the U.S. rose to $2.7 billion in 2014, up 103 percent from 2013.

Marsh’s Private Equity and Mergers & Acquisitions Services www.insurancejournal.com

Practice Transactional Risk Solutions: Global Update, released in November 2014, found that the amount of buyer-side reps and warranties insurance, another coverage that is typically used in M&A deals to protect clients against a breach in an acquisition agreement, increased 225 percent during the first half of 2014 compared to the same time period in 2013.

Craig Schioppo, managing director in Marsh’s U.S. Private Equity and M&A Services Practice and leader of the transactional risk team, said buyers in the U.S. are increasingly using representations and warranties insurance strategically to differentiate their M&A bids.

In addition, “Seller-initiated buyer-side representations and warranties policies, which have traditionally flourished in Europe, are also increasingly being used in the U.S. to enable sellers to free up capital for new acquisitions,” he said.

U.S. insurers don’t want to miss out on the action. So far this year, two major carriers have announced new transactional risk products: • ACE introduced three new transactional risk insurance products for buyers and sellers participating in M&A’s and other transactional deals throughout North America internationally.

• QBE North America launched its Transactional Liability Practice to under write reps and warranties insurance and tax liability on primary and excess basis.

Ambridge Underwriters, a managing general underwriter based in New York City, also formed a new team to focus on reps and warranties coverage for small-to medium-sized transactions.

“We have seen a significant increase in placement requests for transactional risk products over the past couple of years. In some instances, these have doubled from one year to the next,” Steven Goldman, senior vice president, Professional Risk, ACE USA. “Deal participants recognize that these coverages offer the high degree of sophistication that complex transactions require.”

Small Business

The small business market is a huge driver of economic growth, historically representing about half the private U.S. gross domestic product and accounting for half of the total private sector workforce.

That trend changed during the recession as huge numbers of firms and jobs were lost. The National Federation of Independent Business (NFIB) data suggests that the surviving firms are regaining stride and BLS data now shows more starts than terminations, supporting job growth. Some 60 percent of NFIB member organizations have five or fewer employees, and 55 percent of NFIB members report gross sales of $350,000 or less.

NFIB Chief Economist Bill Dunkelberg said earlier this month that in spite of slow economic activity, small business owners are finding reasons to hire and spend.

“During the recovery, this sector did not pull its historic weight, slowing the recovery in employment substantially,” Dunkelberg said. “Huge numbers of firms and their jobs were lost in the recession, nearly 900,000 establishments in each of the years 2008 and 2009.”

Today’s environment is much better for small business owners, he said. In the NFIB’s Small Business Optimism Survey for February 2015 — which polls its more than 350,000 small and independent business owners across the nation — reported that optimism rose 0.1 points to 98.0, a solid result despite some unfavorable conditions, Dunkelberg said.

“Owners are finding reasons to hire even though the ‘macro’ indicators are not showing a lot of growth,” Dunkelberg wrote in the recent report.

NFIB predicts the fastest growing industries for small business in 2015 will be: software as a service, mobile payments, construction and online resources. continued on page 30 March 23, 2015 INSURANCE JOURNAL-NATIONAL | 29

SPECIAL REPORT

Hot Markets continued from page 29 Hiring growth in the small business sector means added opportunity for insurers and their agents.

The overall small business market premium hit $81 billion in 2013, according to a November 2014 report by Conning. Excluding specialty and high-hazard business, the principal small business market premium is at $58 billion. That comes down to 20 percent of the total U.S. property/ casualty commercial market premium. The Conning report projects 8.4 percent growth over the next five years for the principal small business market, from $58 billion premium in 2013 to $63 billion by 2018.

Ben Sloop, president of AmWINS Access, a new division focused entirely on the small business segment, agrees there’s opportunity ahead in small business.

“From looking at our overall submission flow, premium trend, combined with our segment data in terms of what we are seeing, there definitely does seem to be some rejuvenation,” he said.

IT: Software and Service

It’s no surprise to see tech-related industries in any hot market report. Computer technology in general is an industry enjoying healthy growth, but IT services are performing particularly well.

Whether it’s offering on-site management systems or designing systems, the sales growth in this sector grew by 15 percent in the past year. According to the U.S. Department of Labor’s Bureau of Labor Statistics, the computer system design and related services industry will see a 15 percent rise in employment from 2012 through 2022 as well.

Business investment specifically geared toward extending the capabilities of cloud, social, mobile and big data will accelerate and account for 30 percent of total IT 30 | INSURANCE JOURNAL-NATIONAL March 23, 2015

spending and nearly all of the industry’s growth during 2015, according to the report “Top Industry Trends to Watch in 2015” by GE Capital.

According to International Data Corporation (IDC), the worldwide market for software, services and analytics related to big data will reach $125 billion in 2015. The edge of the network will continue to extend into the physical world with more “smart” cars, commercial buildings, homes, industrial equipment and wearables connecting to the Internet. IDC estimates the overall global market for Internet-of-Thingsrelated hardware, software and analytics enabling nearly 15 billion “Internet aware” devices will grow 14 percent to $1.7 trillion during 2015 and the global market is expected to grow to 30 billion devices and $3 trillion worth of related spending by 2020.

Data Security

Data security and protection is and will continue to be a hot market as well delivering opportunities for agents and brokers selling cyber related coverages.

The rising number of cyber-attacks is a growing threat to the business community. High-profile cyber incidents in 2014 reflected the expanding spectrum of cyber threats — from pointof-sale (POS) breaches against customer accounts to targeted denial-of-service (DoS) attacks meant to disable a company’s network.

According to a recent report by Marsh, “Benchmarking Trends: As Cyber Concerns Broaden, Insurance Purchases Rise,” a growing number of insureds sought financial

protection through insurance, buying coverage for losses from data breaches and due to business outages. In 2014, the number of U.S.-based Marsh clients purchasing standalone cyber insurance rose 32 percent over 2013. The cyber take-up rate — the percentage of existing Marsh financial and professional liability clients that purchased cyber insurance — rose to 16 percent. Marsh says early evidence in 2015 shows a continued acceleration in the demand for cyber insurance.

The challenge for this market is smaller firms who have yet to play big in the buying trend. According to a recent poll on InsuranceJournal.com, 69 percent of readers report that less than 10 percent of their small business policyholders are buying cyber coverage today.

Studies show that most cyber insurance is purchased by larger companies with more than $1 billion in revenue. This concern has not gone unnoticed. U.S. Treasury officials have asked the Federal Advisory Committee on Insurance (FACI) in Washington, D.C., to examine ways in which the industry can make cyber insurance more accessible to companies of all sizes.

ISO’s new cyber insurance coverage options for small and midsize businesses, which became available March 1, is one way the insurance industry is responding.

The optional cyber endorsements are for use with the ISO Businessowners Program, a package policy used by insurers to provide broad property and liability coverage for small and midsize businesses. It allows insurers to tailor coverage for customers by offering set packages that protect against data breaches, data replacement and restoration, cyber extortion and business interruption.

ISO businessowners customers can also receive preferred pricing on services from IDT911, which is ISO’s preferred vendor for data breach avoidance and remediation services. IDT911 provides identity and data www.insurancejournal.com

risk management, resolution and education services.

Marijuana

A hot market for some niche specialists is marijuana.

According to governing.com, 23 states and the District of Columbia currently have laws legalizing it in some form. Four of those states — Washington, Colorado, Alaska and Oregon — have legalized it for recreational use. And parts of the country that have historically said “no” to allowing the legal use of the drug for medical purposes are now evaluating laws to allow it, including Florida, Georgia and South Carolina.

Legal cannabis markets in the U.S. are expected to grow 700 percent over the next five years, according to an industry report, “The State of Legal Marijuana Markets 2nd Edition,” published by The ArcView Group.

The report values the total U.S. legal marijuana market at $1.53 billion, and it’s projected to grow to $2.57 billion by the end of 2014. The five-year national market potential is $10.2 billion, according to ArcView. Gains will stem from increased demand in existing state markets, as well as from new state markets coming online within a five-year horizon.

So what does this mean for the insurance industry? Plenty of opportunity, say those already in the business.

“These business owners need help figuring out issues like: Where can I set up a dispensary? What are the state regulations?

What is my workers’ comp liability? And what are the liabilities that other businesses have like theft, fire, business interruption, etc. They have unique issues and those need to be seen and be addressed,” said Ed Kuhn, president of Creative Edge Nutrition www.insurancejournal.com

(CEN) and the newly-formed Wellness Medical Protection Group/Liability Insurance Solutions in Chicago.

Insurance coverage requirements touch on all lines of business, including: workers’ compensation, business interruption, theft, products liability, cargo insurance, business owners policy (BOP) coverage, equipment breakdown, and cyber liability.

There is also opportunity for agents beyond the marijuana-related businesses themselves, because they work with vendors that welcome the expertise an agent that specializes in the marijuana industry can offer, says Mike Aberle, vice president of sales and marketing for Next Wave Insurance Services, the program administrator for the marijuana-focused entity MMD Insurance.

Aberle says MMD’s core program started with indoor/outdoor cultivators and retailers and has since grown to cover the businesses that work with them like construction, security and supply companies.

Extreme Sports

The trend toward more dangerous and extreme sports like “Tough Mudder” and “Iron Man” triathlons and non-traditional sports activities has been staggering, according to a 2014 report by the American Bar Association (ABA).

Tough Mudder has grown from three events and 20,000 participants in 2010 to 35 events with more than 460,000 participants in 2012, the report found.

Runningusa.org reports that non-traditional running events drew a record 4 million participants in 2013, surpassing the record 2.5 million finishers of both the half-marathon and marathon combined the

year before. With each event charging a per participant registration fee of $50 and up, these races are turning into big business.

But these exciting sport opportunities come with risks like major injuries, paralysis and even death of participants, according to the ABA. That risk hasn’t deterred the growth of these sports, nor has it deterred new entrants in the insurance market.

Sports Insurance Group began writing the segment in early 2014. SIG is a member of Everest Re and was started by sports and entertainment veterans, including David Harris, founding partner of sports and entertainment insurance company American Specialty Insurance and Risk Services.

Harris, who serves as senior vice president of SIG, says most of the capacity in the market currently is for the “plain vanilla” part of the segment, not the more extreme sports and events side that they target.

“There are not a lot of people jumping over tables to write the ‘Tough Mudder’ kinds of risks. These are challenging activities that are relatively new to the industry,” he says.

“Much of what you have to do in terms of pricing and how you design the product has to be experienced outside the industry you are considering. That is part of the whole discussion of emerging sports.”

Yet Harris thinks the emergence of these new risks can be a fun, albeit risky, distraction in the insurance world for those who are looking for a challenge.

“This is an exciting, fast-paced business and an evolving business. People want to go faster and be more challenged in sports so you have to be on your toes…and there is a certain excitement with that,” he says.

March 23, 2015 INSURANCE JOURNAL-NATIONAL | 31

SPOTLIGHT

10 Things to Know About High Value Homeowners There are a lot of companies trying to get into the high-value homeowners and luxury condo markets, even in coastal regions like Florida, where it is traditionally more difficult to find capacity.

— Scott Sauter, personal lines product leader for All Risks Ltd.

It is estimated that 40 percent of high-value homes are underinsured.

Often, homeowners will only hold enough insurance to cover their mortgage or the sale price of the home, and not enough to rebuild in the event of a total loss. The mortgage or sale price of the home does not include custom work or specialty construction. Agents need to review these areas with their clients. — Bill Gatewood, director of personal lines at Burns & Wilcox

Direct writers control about 85 percent of the high-value homeowners market.

There is still a whole lot of business out there that is ripe for the picking. — Molly Rondeau, distribution sales and marketing executive at Crestbrook Insurance.

Luxury condos are a popular choice among high-net-worth individuals looking for a second or seasonal home. In many cases where individuals may rent out or use these second homes for “vacation swaps,” agents need to be aware that a client is doing this. — Scott Sauter, personal lines product leader for All Risks Ltd.

Most standard homeowners policies don’t guarantee full repair or replacement in the event of a major loss. High-value home insurance typically covers these costs. If after a total loss, the insured doesn’t want to rebuild the home a standard policy would not pay out.

But many high-value home policies give the equivalent of the replacement cost in cash. — Tom Ealy, president of Encompass Insurance

The “high-net-worth” or “affluent” consumer market is relatively small. Using the definition of home values in excess of $1 million and more than $1 million in investable assets, it includes 1.2 million U.S. households. Nearly half of these households are in more catastrophe-prone areas of the country. — Tom Ealy, president of Encompass Insurance

32 | INSURANCE JOURNAL-NATIONAL March 23, 2015

Most high-value home policies provide generous, if not essentially unlimited, living expenses coverage. Most high-value home policies provide protection for back-up of sewers and drain. They also provide generous basic coverage, with options to customize higher limits, for valuable collections. — Tom Ealy, president of Encompass Insurance

Founded in March 2014, The Private Risk Management Association (PRMA) in Palm Beach, Fla., provides education to help members better serve the high-net-worth risk management needs of their clients. Some 450 individuals representing agents, carriers and other specialists have joined PRMA. — Denise Koslowsky, principal at Advocate Brokerage Corp. and a PRMA founding member

The culture of the high-valued market is to deliver quality products while providing personal attention. The opportunity in this niche is tremendous, but expertise is important. — Denise Koslowsky, principal at Advocate Brokerage Corp. and a PRMA founding member

The carriers that agents work with should be able to provide training opportunities. Chubb, for example, offers classroom, online and other agency education programs. — Mary Parsons, national sales program manager for Chubb Personal Insurance www.insurancejournal.com

IDEA EXCHANGE

Growing Your Property Casualty Agency 10 Practical Ways to Pump Up Your Agency’s Volume

T

here are endless ways to grow your agency. Yet today, pretty much all you hear about is using social media and establishing a strong mobile presence.

These biggies are essential weapons in your agency’s arsenal, but they can cast a shadow over other avenues of growth. Here are 10 other ways to pump up your book.

Local Influence.

Broaden your local marketing efforts to

By Alan Shulman augment and solidify your agency’s home field advantage. National operations are intruding (or soon will be) on your turf.

Build your homegrown brand by continuously interacting with the people, businesses and organizations in your community. A digital-only presence keeps everyone at a distance and doesn’t adequately distinguish you from the economy-sized rivals who flourish in the virtual marketplace.

Geographical Imprint. Your insurance license works everywhere in your state(s), so why not expand your reach to attract additional prospects? Establish sales-only satellite offices, in selected locales, with all service performed at your main office or via company service centers. Support the satellites with aggressive geo-focused marketing.

Commercial Lines Target Size. Some small businesses you insure may grow into significant accounts — but you can’t bank on this. Hedge your bets by going after considerably larger accounts as well. Start by asking the small firms you insure to refer you to their top buyers and suppliers.

Lines Written. Broaden your marketing into key lines where you desire to grow. For instance, offer life and retirement planning services to P/C insureds and prospects.

Delve into high-end personal lines if your agency focuses mainly on commercial. www.insurancejournal.com

Target Market Spread. If you are a generalist agency, expand into the solicitation of selected target markets. Work to become known as the go-to expert within each given field. Or if you have fully mined your current niches, seek out fresh possibilities, based on your personal interests and carrier strengths.

Staff Interaction. You’ll suffer the detriment of disharmony if you treat front office staffers like disposable underlings. These pros are indispensable team members and deserve to be treated as such. Professional intra-office mingling, joint attendance at continuing education classes and various industry events help to team build and engender mutual respect. A competitive base salary plus achievable financial incentives are vital to growth as well.

Education. You can’t know too much about insurance itself, plus its marketing and sales. Do more than just meet your state’s continuing education requirements. Get a professional designation if you don’t already have one, and keep up with the ever-evolving art of the promotion.

Sales Force. Add one or more inside sales professionals to handle online leads and the

cross-selling/upselling of existing insureds.

Then use the additional revenues they generate to finance the hiring of outside producers to go after new business accounts.

Cross-selling. Keep rivals at bay and pump up policies per account by identifying, soliciting, and writing the contracts your insureds are either missing or have insured elsewhere. Tech tools exist to aid this oft-underperformed task, including ATraC’s ProTraC software.

Upselling. The tenth (and easiest) avenue to pump up your book is by upselling additional limits and coverages on current contracts, when needed by your insureds.

Start with umbrella/excess liability policies.

Suggest increases to folks and firms with only the basic $1 million limit. Continue the upsell process throughout your book, with other policies, as part of your regular renewal reviews or within multiple, self-financing, upgrade campaigns.

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.

March 23, 2015 INSURANCE JOURNAL-NATIONAL | 33

IDEA EXCHANGE

Agency Management Building a Culture of Innovation

L

ooking for the next great business concept? Searching for a breakthrough idea in workplace processes? Your organization is not alone. According to a study conducted by The Conference Board, promoting innovation is the top challenge companies are facing.

With today’s rapidly changing markets and fast-paced busiBy David E. Coons ness mindset, creating the next great innovation is important to future success. More and more, the mantra “innovate or die” is being invoked as today’s growth leaders continue to be those organizations that have embraced and embodied innovation. In light of the increasing pressure to stay relevant and cutting-edge, how can your organization embed a mindset of innovation, change and forward-thought into your culture?

Why Is Innovation So Important?

Innovation is the foundation for maintaining an edge in today’s business environment. It is one of the key differentiating factors in setting your organization apart from the crowd. Every company must innovate to compete successfully.

The marketplace demands new products, new services and creative ideas. Recent, emerging trends including globalization and shifting technology have increased the push for efficiency and effectiveness, further driving the innovation process.The fear of appearing obsolete or out-of-date is only expanding that drive. Business as usual is no longer enough to prosper.

As marketplace conditions evolve, technology advances at a breakneck pace, and the face of the workplace continues to transform. Positioning your organization at the forefront is an important factor in building success. For insurance orga-

nizations in particular, climate concerns, growing cyber risks, changing compliance demands and continued global expansion are pushing the continued quest for innovation.

What Drives Innovation?

While most organizations understand the need for innovation, many struggle to turn this idea into a workplace reality. If your organization is ready to embrace forward-thinking and new ideas, now is the time to take that next step.

The most important driver of innovative thought within a company is internal corporate culture. The key is to examine your current culture and determine whether it is successfully cultivating engagement and enthusiasm. Is your culture challenging people to take risks in a safe and supportive environment? Are you fostering learning and encouraging independent thought?

Take a good look at your current company culture and see where there is room for change. Even a slight adjustment may be the ticket to big results. A number of organizations have already embraced the move toward flexible hours and open office environments. Now is the time to take things a step further and make a splash in the innovation game.

How Can Organizations Encourage Innovation?

Thanks to the conservative reputation of the insurance industry, many individuals refer to the common cliché that the only time “innovation” and “insurance” appear together is in the dictionary. However, the industry’s current reputation hides a historic record of firsts — from the first written insurance contract to today’s mobile insurance apps. While the industry may not lend itself to the groundbreaking innovations of other business segments, the demand for new methods and models remains. The challenge is in fostering and nurturing a mindset of creativity and ideation.

One of the first steps in building this new innovative mindset is to create a culture of confidence. Taking risks and proposing ideas requires a cer-

www.insurancejournal.com

tain level of trust within the organization.

If that trust is missing, it can be challenging to get employees to truly open up and share their ideas.

Provide safe spaces where risks can be taken. Consider implementing innovation meetings and group workshops built around brainstorming to encourage ideas.

Promote the free sharing of new ideas and encourage employees to take risks.

Build a culture that understands the positive aspects of failing. As difficult as it may be, innovation often means overcoming the desire to mitigate risks within your organization.

If you truly want to innovate, your organization must be willing to take a chance — and accept the occasional failure. Avoid penalizing employees for failures and instead embrace them as an opportunity to learn and grow. Knowing they will not face significant trouble for an idea that did not pan out will encourage employees to speak up and share their insights and ideas.

Consider implementing “innovation time” for employees If you truly want get away to innovate, your to from their organization must daily tasks be willing to take and work on projects a chance — not directly and accept the related to occasional failure. their work.

A number of companies have used this tactic to tap into employees’ creative processes with great success. 3M Corporation’s famed yellow sticky note was a byproduct of the organization’s “15 percent time” — a program that allows employees to use a portion of their time to follow their passions.

Do not just sit back and collect the great ideas of your staff. The key to success is following through. Innovation is only worthwhile if it results in your organization taking action. Make sure you have the time and resources to develop and implement the concepts you feel are worth acting upon. A lack of follow-though will limit the flow of ideas as employees begin to feel the www.insurancejournal.com

to your organization’s future success. innovation process is pointless.

Building a culture of innovation and forward thought will not happen overnight. It Coons is senior vice president of The Jacobson takes time and dedication to be truly benGroup, a provider of talent to the insurance eficial. However, when fostered correctly, industry. Phone: 800-466-1578. Email: dcoons@ this curiosity and discovery can be the1 key jacobsononline.com.

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March 23, 2015 INSURANCE JOURNAL-NATIONAL | 35

NATIONAL COVERAGE

MyNewMarkets Specialty Transportation Program-Waste Haulers Market Detail: Transportation Insurance Services LLC (www. tis-insure.com) has an admitted market focused on commercial auto and general liability for waste haulers, including commercial and residential operators, septic tank haulers, construction and demolition haulers, roll-off and street sweeping companies. In-house underwriting authority and quick quote turn-around is available. Workers’ compensation coverage available in some states.

Available limits: Minimum $500,000, maximum $1 million Carrier: Falls Lake Insurance Co. States: Ala., Ariz., Ark., Ga., Ill., Ky., Md., N.C., Ohio, Pa., S.C., Tenn., and Va. Contact: Customer service at 321-499-3880

Video Game Developers Market Detail: RPS Technology & Cyber (www.RPSins.com/ techcyber) works with video game developers, offering coverages including: computer programming errors and omissions, theft of tangible or intangible property, breach of network security, and contractual disputes.

Available limits: As needed Carrier: Various States: All states Contact: Molly Hoffman at 800-336-5659 or email: techcyber@ rpsins.com

and general liability are available on a wrap and non-wrap (rolling and single projects), and practice policy basis.

Available limits: Minimum $1 million, maximum $2 million Carrier: Unable to disclose, non-admitted States: Ariz., Calif., Colo., Ga., Md., Mich., N.C., Nev., N.J., Ohio Okla., Pa., S.C., Texas, Va., and Wash.

Contact: Tim Mitchell at 949-636-5785 or email: tim.mitchell@ coveprograms.com

Taxi Cabs Market Detail: Evolution Insurance Brokers (www.eibdirect.com) offers coverage for automobiles used for business purposes, including taxi cabs and medical transport vehicles, with customizable options for the insured’s specific needs in select states. Secondary auto such as drive away or non-owned auto coverage is available in all states.

Available limits: As needed Carrier: Unable to disclose States: All states except Alaska, Calif., Conn., D.C., N.H., N.Y., R.I., and W.V. Contact: Customer service at 877-678-7342

Tattoo & Body Piercing Insurance Program Market Detail: Allen Financial Insurance/The Equestrian Group (www.eqgroup.com) has a national program for tattoo and body piercing studios offering property, commercial general liability and professional liability coverage on full occurrence form. Liability form includes infectious disease, contractual, products and completed operations. New ventures, guest artists, apprenticeships and piercing of minors can be written. Salon, tanning bed and medi-spa coverage can be added by endorsement. National A rated insurer offers installment plans with same-day quote and issue.

Available limits: Minimum $100,000, maximum $1 million Carrier: Capitol States: All states Contact: Jay Pallante at 800-874-9191 or email: jay@eqgroup.com

Commercial Construction Program - GL and Builders Risk Market Detail: Cove Programs (www.coveprograms.com) has a new commercial construction program. As with all Cove Programs initiatives, this program is suited to owners and general contractors who want a collaborative relationship with their carrier. All programs are customized to the business operations of each insured, with great attention to predictability and efficiency. Builders risk 36 | INSURANCE JOURNAL-NATIONAL March 23, 2015

Commercial General Liability Market Detail: NationsBuilders Insurance Services Inc. (NBIS) (www.nbis.com) offers a broad general liability coverage form tailored for the crane and rigging industry, as well as for millwrights.

Available limits: Maximum $3 million Carrier: Lloyd’s of London States: All states Contact: Customer service at 866-668-6247

Truckers/Trucking Firms Market Detail: For 15 years, Applied Underwriters (www.auw.com) has provided workers’ comp options to customers throughout the U.S. Applied underwrites most all classes and offers competitive commissions to agents, brokers and their clients.

Appointment required in N.Y. only, not required in all other states.

Available limits: Minimum $1 million, maximum $1 million Carrier: Various States: All states except Ala., Alaska, D.C., Fla., Miss., La., and Texas Contact: Customer service at 877-234-4450 www.insurancejournal.com

IDEA EXCHANGE

Minding Your Business How to Attain What Agencies Want in 6 Easy Steps

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here’s a very simple formula for getting whatever you want for your agency.

This is so simple it seems trivial and few people follow it.

But if these steps are followed, agency owners can create anything they want in the agency and actually even in life. There are six steps to this forBy Catherine Oak & mula: Step 1: Know where the firm is. This means circumstances in the firm are honestly evaluated and it becomes crystal clear exactly where the firm is at. It also means Bill Schoeffler the owners don’t beat themselves up for where the firm is today, or feel victimized if they don’t like where they are. The owners simply know where they are at in this moment in time. If you want to get to China, you can’t really start traveling until you know where you are starting from.

How would you know what direction to go?

Step 2: Know the direction where the firm should be headed. This is a big one. The owners have to know where they want the firm to go, or what they want, before they can set out to go there or attain it. Without knowing, one wouldn’t have enough information to know what to do or specifically what actions to take. The more specific the owners’ aims are, the more they will know what to do, how to start, and how to know when the outcome is attained.

Step 3: Take action. This is a huge stumbling block for many people and most owners. What actions should be taken? When someone or their agency is successful and says, “Sure, it’s easy for you. You know what www.insurancejournal.com

to do.” Here’s a big secret, and very few people know it. The successful person doesn’t know what to do any more than those owners who are not yet successful, unless he or she is doing something for the second time.

Almost no one knows what to do when they do something for the first time. Take your best guess and do something!

Step 4: Evaluate the results of the action. This can be called “The Dr. Phil Step,” where he says, “How’s that workin’ for your firm?” The agency owners take some sort of action, no matter how pathetic it might be, and then they check and see what happened. If some progress is made, the owners might want to do some more of the same action. If not, ask what other action might be taken? If there’s not much progress, the owners ask themselves how to improve the actions taken in order to make things work better. Take enough action and owners can become very wise.

Step 5: Refine the action. Based on the evaluation just made what should the owners refine and improve on? Now the refined actions might be just as bad as the first action, or hopefully, might be better. It doesn’t matter. After evaluating the first actions and then some refining and improvement, the owners need to take action again. This idea of taking action is the key. Don’t just stand there, do something, no matter what it is. It is also called “Ready, Fire, then Aim!” Obviously, the

better the actions, the faster the results will occur. Know that people who wait and wait and wait to act don’t realize: People learn a thousand times more from a bad action than they do from waiting until they have everything figured out. When a person acts, they really find out what works and what doesn’t work. Before an owner acts, they are just guessing.

Step 6: Keep repeating steps three, four and five. Continue acting, evaluating the results, and refining actions until the firm gets to where the owners want it to go.

Following these six steps may sound too simple. However, by taking these steps agency owners can have anything they want for their firm and even in life.

Oak is the founder and Schoeffler is an associate of Oak & Associates. The firm specializes in mergers, acquisitions, valuations, perpetuation and management consulting for the insurance industry. Phone: 707-935-6565. Website: www.oakandassociates.com.

Email: catoak@gmail.com.

March 23, 2015 INSURANCE JOURNAL-NATIONAL | 37

NATIONAL COVERAGE

Business Moves New York-based Design Insurance Agency Inc., founded by Thomas G. Coghlan in 1984, offers professional liability coverage to licensed design professionals, errors and omissions liability coverage to specialty design and construction consultants, and the accompanying lines of property/casualty coverage for design firms.

Coghlan will continue to lead the Design Insurance team and report to Michael Klaschka, co-head of Integro’s Management Risk practice in New York.

Integro, Design Insurance Agency Insurance brokerage and risk management firm Integro has acquired Design Insurance Agency Inc., a specialist brokerage providing professional liability coverage and risk management services to architects, engineers and other design consultants in IJ Get Financial Big quarter pg.pdf 1 1/6/15 private practice. details of the transaction were not disclosed.

World Insurance Associates, John Cecchettini Agency World Insurance Associates LLC, an independent insurance agency based in Tinton Falls, N.J., completed its acquisition of the John Cecchettini Agency of South Plainfield, N.J. Terms of the transaction were not disclosed.

The John Cecchettini Agency is an independent agency that has been providing personal and commercial insurance prod11:15 ucts to AM New Jersey residents for more than 50 years. The agency specializes in classic

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car, garage and contractors insurance. Steve and Gina Cecchettini, owners/sellers of the John Cecchettini Agency, and their team will continue to serve clients from their location in South Plainfield.

Founded in 2011, World Insurance Associates offers personal and business insurance services in 34 states, and specializes in insurance for transportation companies, hospitality companies, and coastal and high-value home markets. The firm serves more than 10,000 customers and places more than $50 million in annual premiums.

Higginbotham, Aycock & Fowler Fort Worth, Texas-based Higginbotham and Aycock & Fowler, in Lubbock, Texas, have merged.

Both are independent insurance firms providing property and liability insurance, risk management, and employee benefit services to businesses and individuals.

Higginbotham in recent years has expanded throughout Texas by partnering with like-minded brokers that add geographic scale and service capabilities to its practice. The union with Aycock & Fowler marks Higginbotham’s entrance into Lubbock, bringing its number of locations in Texas to 22, and adding 12 employees to its workforce of 650.

Brent Aycock and Jeff Fowler partnered in 2002 to open their namesake agency in Lubbock. Aycock, a commercial property and casualty broker, and Fowler, an employee benefits broker, combined their two disciplines to become one all-inclusive insurance service provider.

Aycock and Fowler will serve as managing directors and continue operating as Aycock & Fowler with current staff.

Hilb, West Coast The Hilb Group, LLC (THG) has acquired West Coast Insurance (WCI) of Tampa, Fla. The transaction became effective on March 1. WCI will continue to operate at its current location under the leadership of previous owner and president, George Lackey. WCI is THG’s second acquisition in 2015. continued on page 40

1/14/15 10:05 PM

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Business Moves continued from page 38 Founded in 1993, WCI is focused on commercial and personal lines in Florida. It also has developed a national insurance practice focused on supporting the marine industry.

The Hilb Group was founded in 2009 by Robert H. Hilb, the former founder, CEO and Chairman of Hilb, Rogal and Hobbs (HRH), and Robert J. Hilb, a former corporate VP of HRH. The Hilb Group seeks to grow through targeted acquisitions in the middle market insurance brokerage space. The company is headquartered in Richmond, Va., with 22 offices in Georgia, Florida, Kentucky, Maryland, New York, North Carolina, Tennessee, Virginia, and West Virginia.

Arthur J. Gallagher, Excel Insurance Services, Metcom Excess, NationAir Arthur J. Gallagher & Co. announced the acquisition of two New Jersey-based wholesale brokers: Excel Insurance Services Inc., located in Hamilton; and McCloskey Surplus & Excess Inc. (d/b/a Metcom Excess), located in Ridgefield Park. Terms

of the transactions were not disclosed.

Established in 1999, Excel Insurance Services is a commercial property/casualty and personal lines wholesale broker that offers coverages for difficult-to-place risks to its agent and broker clients throughout the Northeastern United States. The firm specializes in the hospitality, real estate, construction and auto industries. Dennis Pellegrino, Jr. and his associates will continue to operate from their current location under the direction of Joel Cavaness, president of Risk Placement Services Inc., a subsidiary of Arthur J. Gallagher & Co. Founded in 1979, Metcom Excess is a managing general agent and wholesale insurance broker that provides excess and surplus, property/casualty, commercial binding and brokerage, professional liability and other specialty insurance products and services to its agent and broker clients throughout the Northeastern U.S. The firm also specializes in personal lines and insurance coverages for the transportation industry. Charles McCloskey, Jr. and his

Advertisers Index

Readers, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/ ACE Insurance www.acegroup.com/us 5 Anderson & Murison www.andersonmurison.com 38 Applied Underwriters www.auw.com 2, 3, 44 Burns & Wilcox Ltd. www.burnsandwilcox.com 27 Continental Underwriters, Inc www.cultd.com 7 Golden Bear Insurance Company www.goldenbear.com W9 Great American Insurance Group www.gaig.com 16, 17 IICF www.iicf.org 41 JM Wilson www.jmwilson.com SE5; M6 K&K Insurance Group www.kandkinsurance.com 14, 15 Lexington www.lexingtoninsurance.com

W5; SC3; SE3; E3; M5 Liberty International Underwriters www.liu-usa.com 43 Lighthouse Holdings, LLC www.lighthousepropertyins.com SC1; SE1 Marshberry www.marshberry.com 21

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Midlands Management Corporation www.midlandsmgmt.com 26 Monarch E&S Insurance Services www.monarchexcess.com W3 NAPSLO www.napslo.org 35 National General Insurance www.nationalgeneral.com 18, 19 Pacific Gateway Insurance Services www.pgiainsurance.com W7 PersonalUmbrella.Com www.personalumbrella.com 11 Philadelphia Insurance Companies www.phly.com 25 SIAA www.siaa.net 39 SIP Insurance Services www.sipsurplus.com W10 Smart Choice Agents Program www.smartchoiceagents.com 12, 13 South & Western www.southandwestern.com SC10, SC11 Texas Mutual - Safety Group www.texasmutual.com SC4 The Institutes www.theinstitutes.org 9

colleagues will also operate from their current location under the direction of Risk Placement Services’ Cavaness.

In a separate agreement, Arthur J. Gallagher & Co. announced the acquisition of NationAir Aviation Insurance (NationAir) based in West Chicago, Ill. Terms of the transaction were not disclosed.

Founded in 1978, NationAir is a retail insurance broker offering commercial property/casualty and risk management insurance services for the aviation industry. It provides insurance for the entire spectrum of aircraft owners and operations worldwide, and specializes in corporate, commercial, private and public entity coverages.

Jeffrey Bauer and his associates will continue to operate in West Chicago under the direction of Michael Pesch, head of Gallagher’s Midwest region retail property/ casualty brokerage operation.

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

Hub, Laubacher Hub International Ltd. has acquired the assets of Laubacher Insurance Agency Inc., which services the California counties of Ventura, Santa Barbara and San Luis Obispo.

Terms of the deal were not disclosed.

The agencies will become part of the California operations of Hub California. The firm’s owners, Tom Laubacher and Harry Crosby, will join Hub California as senior vice presidents, reporting to Darren Caesar, senior executive vice president. With this acquisition, Hub California will employ more than 950 employees in the state.

Laubacher is a full-service property/casualty, employee benefits and personal lines agency and brokerage with locations in Oxnard and Solvang. The firm’s focus is on farm and ranch insurance.

Chicago, Ill.-based Hub is a global insurance brokerage through offices located throughout North America. www.insurancejournal.com

Save the Date!

IICF Women in Insurance Global Conference returns to New York City, June 17 – 19, 2015

Empowered to Change – Women in Insurance Global Conference 2015 In June 2013, the Insurance Industry Charitable Foundation (IICF) launched the Women in Insurance Conference Series with the first multi-day global conference directed to women in the insurance industry. In June 2014, IICF hosted four one-day regional women’s forums. Over 1,300 professionals representing 33 states and over 200 companies attended. The response has been overwhelming, and the series continues.

Explore, Network, Enrich...and Grow

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Closing Quote

Wildfire in 2015: What to Expect?

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By Thomas Jeffery

he past two years did not result in the amount of wildfire activity that many wildfire scientists, foresters and fire responders had expected. Looking back, the 2013 season had the earmarks of a bad year, with the continued U.S. drought and related accumulation of dry fuels.

The 2014 season saw an enhancement of the drought in many areas and even more trepidation about the potential for a spark that would ignite massive firestorms similar to or even greater than the huge blazes in Southern California in 2003 and 2007. While there were wildfires in 2013 and 2014, they never came close in total size or number to the fires that were anticipated for those years. So what happened, and what can we expect in 2015?

The two most commonly used metrics of wildfire activity are the number of fires and the total size of the area burned. In 2013, there were 47,579 wildfires in the United States that consumed a total of 4.3 million acres of land. These figures account for the fewest number of fires and the fifth lowest acreage burned since 2000. Then last year, we saw a total of 63,312 fires and 3.6 million acres burned, representing the second fewest total fires and also the third lowest burned acreage looking back over the previous 15 years. Although it would appear contradictory to have such low wildfire activity during years in which

42 | INSURANCE JOURNAL-NATIONAL March 23, 2015

record-setting drought was common throughout nearly all of the Western U.S., there is no “smoking gun” that caused reduced activity. However, two factors likely contributed.

First is the obvious issue of fire response. From post-fire media articles, it was clear that response to even small fires in the Western states was in many cases overwhelming in 2013 and 2014. By dedicating large amounts of equipment and personnel to respond as quickly as possible to fight new fires, it helped to reduce the overall size and effect of these blazes. In many cases this prevented them from damaging homes.

Another critical factor in wildfire reduction would be property owner mitigation. In many regions, homeowners in areas of elevated wildfire risk are working to reduce the opportunity for wildfires to migrate onto their property like clearing brush to create defensible space, re-roofing and many other options in-between. Mitigation has gained a larger following due to the efforts of Firewise and other such entities and agencies that are promoting proactive ways to reduce wildfire impact.

If the overall number of fires and the total acreage burned is not indicative of the amount of property damage that can occur, what factors are? The answer is largely the same as it would be for any natural disaster: hail storms, hurricanes, floods and fires all have a geographic footprint.

Where that footprint falls in relation to the population is the driving factor in determining property damage.

It appears that this states the obvious, but it is often overlooked when we see the figures related to natural hazards. The discussion of fewer hurricanes or Last year’s numbers earthquakes really doesn’t or the decadal mean much when it only average does not takes one such event in the wrong place (ala indicate the potential Superstorm Sandy) to damage for the wreak havoc on the local present or upcoming population and begin tabuyear. lating damages in the tens of billions of dollars. The same is true of wildfires.

What is important to consider for any hazard, including wildfire, is that last year’s numbers, or the decadal average, does not accurately indicate the potential damage for the present or upcoming year. The most accurate method of determining risk from these hazards is to evaluate the risk on and around a property, and to prepare for the coming year with the understanding that these events will happen in the future as they have in the past.

Jeffery is a senior hazard scientist for CoreLogic Spatial Solutions.

www.insurancejournal.com

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March 23, 2015 INSURANCE JOURNAL-NATIONAL | 45