WEST REGION Peabody’s Coal Mine Cleanup Deal Airbnb V. Southern California City CastlePoint Conserved by Regulator
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Contents August 8, 2016 • Vol. 94 No. 15 • West
West
National 12 Rough Ride for P/C Insurers in 2016, Warns S&P
W1 Peabody Reaches Coal Mine Cleanup Deal with 3 U.S. States
14 Closer Look: Planning for the Worst: Terrorism and Workplace Violence
W2 Zika Case in Utah Raises Questions over How Virus Spreads W4 Utah Law Enables Authorities to Crash Drones at Wildfires W4 Airbnb Sues Southern California City over Short-term Rental Law
W1 PEABODY REACHES
COAL MINE CLEANUP DEAL WITH 3 U.S. STATES
33 Homeowner Insurance Claim Severity Up 7% Due to Lightning in 2015
W10 Relatives of Rivera Entourage Get $70M Judgment in California
Idea Exchange W12 Insider Focus: The Future of Insurance Belongs to Intermediaries
24 Special Report: Top 100 Independent Property/ Casualty Agencies 32 Spotlight: 10 Things to Know About Drones
W4 Restaurant Damage in Northern California Due to Crank Callers
W10 CastlePoint National Conserved by California Regulator to Protect Policyholders
20 M&A Deal Activity Continues at Robust Pace in Second Quarter 2016
12
ROUGH RIDE FOR P/C INSURERS IN 2016, WARNS S&P
38 CONDOMINIUMS AND THE
PROBLEMS THEY CAUSE
36 The Competitive Advantage: Chris Burand
Departments
38 Academy Journal: Condominiums and the Problems They Cause
W6 People
42 Closing Quote: Retention Strategy with Millennial Policyholders
15 Declarations
15 Figures 15 InsuranceJournal.com Poll 30 Business Moves 34 MyNewMarkets
6 | INSURANCE JOURNAL | WEST AUGUST 8, 2016
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OPENING NOTE
Write the Editor: awells@insurancejournal.com
Congratulations Top Agencies
T
his year marks the 12th annual publication of Insurance Journal’s Top 100 Agencies special report. This year’s Top 100 welcomes nine newcomers: Cross Financial Corp. (Cross Insurance); Prime Risk Partners Inc.; Westwood Insurance Agency; Christensen Group; Premier Group Insurance Inc.; Swingle Collins and Associates; Eagle American Insurance Agency LLC; The Advantage Group LLC; and Sunstar Insurance Group. This year’s Top 20 Agency Partnerships welcomes one newcomer and one returning agency group: Georgia Agency Partners Inc. and Fiesta Insurance Franchise Corp. (Fiesta Auto Insurance Center). And what about the Future Top 100? While the following agencies didn’t make the cut in 2016, their total P/C revenue came very close. Special mention goes out to the following agencies: Publisher Mark Wells mwells@wellsmedia.com
EDITORIAL
SALES
Editor-in-Chief Andrea Wells awells@insurancejournal.com
West Sales Dena Kaplan (800) 897-9965 X115 dkaplan@insurancejournal.com
East Editor Elizabeth Blosfield eblosfield@insurancejournal.com
Romeo Valdez (800) 897-9965 X172 rvaldez@insurancejournal.com
Chief Content Officer Andrew Simpson asimpson@insurancejournal.com
Southeast Editor/MyNewMarkets Amy O’Connor aoconnor@insurancejournal.com South Central Editor/ Midwest Editor Stephanie K. Jones sjones@insurancejournal.com West Editor Don Jergler djergler@insurancejournal.com International Editor L.S. Howard lhoward@insurancejournal.com
Chief Marketing Officer Julie Tinney (800) 897-9965 X148 jtinney@insurancejournal.com
South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com
Columnists Chris Boggs, Chris Burand
Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com
Contributing Writers Dan Fash, Denise Johnson, Joan Lowy, Sarah Lucas, Kevin Michael Patterson, Michael White
Insurance Markets Manager Kristine Honey (619) 584-1100 X132 khoney@insurancejournal.com
IJ ACADEMY OF INSURANCE V.P. of Education Chris Boggs cboggs@ijacademy.com
Social Media Manager Ly Short (619) 890-7735 Lshort@insurancejournal.com
Online Training Coordinator Barbara Whiffen bwhiffen@ijacademy.com
Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125 kdelamora@insurancejournal.com
ADMINISTRATION
DESIGN/WEB
Chief Financial Officer Mark Wooster mwooster@wellsmedia.com
MARKETING
Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com
Marketing Director Derence Walk dwalk@insurancejournal.com
V.P. of Design Guy Boccia gboccia@insurancejournal.com
Marketing Administrator Gayle Wells gwells@insurancejournal.com
Senior Web Developer Chris Thompson cthompson@insurancejournal.com
NEW MEDIA
Web Developer Jeff Cardrant jcardrant@insurancejournal.com
New Media Producer Bobbie Dodge bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com
Web Developer Tim Layer tlayer@wellsmedia.com
CIRCULATION
Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com
Eustis Insurance Inc. The Nitsche Group Dean & Draper Insurance Agency LP Shepherd Insurance Kapnick Insurance Group L/P Insurance Services York International Agency Harden Emery & Webb Inc. NBT-Mang Insurance Agency Ross & Yerger Insurance Inc. Crest Insurance Group LLC Gibson The Presidio Group Inc. Foy Insurance Group Ames & Gough Insurance/Risk Management Der Manouel Insurance Group Lassiter Ware Frank H. Furman Inc. Wallace Welch & Willingham Insurance Journal’s Top 100 and Top 20 Agency Partnerships reports would not be possible without the willing participation of all of the agencies, brokerages and agency groups that have shared their information. We thank those agencies that have contributed and invite others that have never submitted information to consider it next year. Be proud of what you have accomplished. And, congratulations to this year’s top agencies!
Andrea Wells Editor-in-Chief 8 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
FOR QUESTIONS REGARDING SUBSCRIPTIONS: Call: 855-814-9547 Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at:
insurancejournal.com/subscribe Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2016 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: For reprints of articles in this issue, contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or kdelamora@wellsmedia.com Visit insurancejournal.com/reprints/ for more information.
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BETTER COVERAGE FOR THEIR DOLLARS Switching to a first-party ocean cargo policy provides the ability to tailor coverage based on a business’s specific exposures.
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• Wholesalers and distributors • Installers and processors When businesses purchase coverage through their shipping carrier or freight forwarder, their shipment is often grouped in a commodity rate. This can leave them with insufficient coverage, depending on the actual value of their goods.
NO MIDDLEMAN, NO EXTRA FEES Also, by purchasing their own policy, businesses can avoid extra fees from freight forwarders, shipping brokers and other middlemen. In short, they can purchase more precise coverage at a lower cost.
OCEAN CARGO INSURANCE: KEY CONSIDERATIONS 1. Replacement coverage? Buying ocean cargo coverage through a steamship, air cargo or express carrier may not cover full replacement value of a customer’s goods. While most freight forwarders offer full value coverage options, the rates are typically higher than for comparable coverage from a business’s own insurer. 2. Limitations or exclusions? Coverage offered by a freight forwarder may include certain exclusions and limitations that result in policyholder obligations for the business if a customer’s goods are lost or damaged. 3. Gaps in coverage? Freight forwarders often insure each shipment separately port to port. There may be no coverage if a shipment placement is overlooked. A better alternative is The Hartford’s Ocean Cargo Choice “all-risk” policy, which:
SPECIALIZING IN MARINE RISKS In this age of global trade, the uncertainties and complexities of a business’s shippingrelated risks are best handled by experienced marine underwriters. “Our marine team has decades of experience in addressing our customers’ specialized cargo protection needs,” said David Higley, vice president of The Hartford’s Marine insurance practice. Dedicated marine underwriters in The Hartford’s offices across the country,
• Covers every type of cargo being moved legally anywhere in the world, by any conveyance means, with no advance reporting requirement • Can extend to warehouse and transshipment locations 4. Claims handling? Businesses, such as foreign manufacturers of parts sourced for U.S. manufacturing, typically use foreign insurers in their own countries, which can complicate claim resolution. A manufacturer that secures shipping coverage from its U.S. property package insurer has the benefit of working with its local broker, as well as the protection of applicable state laws in the event of a problem. The Hartford Marine has dedicated marine claims adjusters ready to assist if the unfortunate happens. Leave the headaches of subrogation to us.
as well as experts in risk control and claims management, work closely with agents in designing tailored cargo programs for clients. “When losses do occur, our network of international claims adjusters is ready to jump into action when and where they are needed to make the claims process significantly easier for our customers,” said Higley. He added, “Marine is a sweet spot for The Hartford. Agents can feel confident placing their clients’ business with us.”
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National
Rough Ride for P/C Insurers in 2016, Warns S&P
T
his year could be a tough one for U.S. property/casualty insurers, as catastrophe losses, private passenger insurance woes and declining bond yields erode underwriting results and profitability, according to a report by S&P Global Market Intelligence. The firm’s 2016 U.S. P&C Insurance Market Report projects that the P/C insurance industry’s pre-tax return on equity will decline about two percentage points in 2016, while its combined ratio will increase to 99.5, the highest level since 2012. The commercial lines combined ratio is projected to increase to 95.1 from 93.4 in 2015. For workers’ compensation, S&P anticipates insurers will not be able to do as well as their 2015 combined ratio of 93.9. In personal lines, S&P projects that private passenger auto business will deteriorate further in 2016, as Americans drive more and gas prices remain low. The results will not begin to improve until rate increases fully take hold in 2017. The com-
bined ratio in the private passenger auto business is expected to rise in 2016 to nearly 105.1, up from 104.6 in 2015. Increased catastrophe losses during the first half of 2016 will negatively affect loss ratios in several business lines, including homeowners, that have produced favorable results during the past three years, according to the report. S&P says the industry’s financial results hinge on the performance of auto lines, which accounted for 34.4 percent of the industry’s 2015 direct premiums and greatly influence underwriting. “Profit margins are projected to be much narrower than they have been in the last few years, unless something dramatic happens,” according to Tim Zawacki, senior editor and Terry Leone, manager of Insurance Research at S&P Global Market Intelligence and the authors of the report. “While insurers have wisely accounted for the fact that they haven’t been able to depend on investment gains to subsidize
12 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
underwriting losses, they still need to practice restraint as they seek growth.”
First Quarter
According to a recent A.M. Best report, the U.S. P/C industry reported the highest level of Q1 catastrophe losses since 2011, and the underwriting results deteriorated from the prior year. The industry posted an underwriting gain of $2.1 billion for the quarter, down from $3.9 billion in Q1 2015. The resulting combined ratio of 97.4 was 1.6 points worse than the 95.8 posted last year, according to A.M. Best. Net investment income and realized gains also fell in Q1 2016 compared with Q1 2015. Insurers have been reporting high catastrophe losses for the second quarter as well. Insured losses in the U.S. for the first half of the year topped $14 billion, fueled by hail and thunderstorms in Texas and other states, according to Impact Forecasting, Aon Benfield’s catastrophe model development team. INSURANCEJOURNAL.COM
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NATIONAL | Closer Look | Terrorism
Planning for the Worst: Terrorism and Workplace Violence By Denise Johnson
S
everal recent manmade events, including the attack at Pulse nightclub in Florida and the Belgium airport terrorist bombing, highlight the vulnerability of the workplace. Workplace violence costs employers more than $120 billion a year, according to the National Institute for Occupational Safety and Health (NIOSH). As the chance of an onsite attack rises for employers, the focus on mitigation is increasing. According to several security experts, most instances of workplace violence are committed by one person acting alone. So-called lone-wolf attacks are difficult to predict, because most terrorism models are used to predict larger, bomb attacks, said Charlene Chia, senior risk consultant with AIR Worldwide.
Tarique Nageer, terrorism placement advisory leader for Marsh’s Property Practice, said there has been an increase in frequency in attacks against civilian targets, including more lone-wolf attacks resulting in more deaths. The potential costs associated with lone-wolf attacks include property damage, business interruption, and employee injuries and losses. According to Chris Flatt, leader of Marsh’s Workers’ Compensation Center of Excellence, workplace risk has increased as more attacks occur in less secure locations. “Terrorism is absolutely a workplace risk. We’ve seen many examples, unfortunately, of terrorist attacks in the last few years happening at or near workplaces, which includes the recent Orlando shooting. The victims there included both employees and customers of the nightclub,” Flatt said. “The
14 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
San Bernardino (Calif.) shooting last December also occurred in a workplace setting. The Paris attacks in November included several people being shot in or near restaurants or bars in the theater, with employees there being among some of the victims.” There has been a shift in terrorism toward attacks on softer targets, he said. “Of course, there still remains the risk of large scale attacks in major metropolitan areas, for example with the bombings earlier this year in Brussels, but we’re seeing more of these lone-wolf attacks in less secure locations including workplaces unfortunately.”
Workers’ Compensation
According to Flatt, the reauthorization of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) in 2015 helped stabilize the workers’ comp market. The new bill is effective until Dec. 31, 2020, and increases the aggregate loss trigger from $100 million to $200 million. Prior to the reauthorization, Flatt said employers shopping for workers’ comp coverage faced a difficult marketplace. “Workers’ comp insurers were being very selective in the risks that they would accept. In some cases insurers were being overly opportunistic in terms of how they were pricing coverage. Just simply, some
were refusing to renew certain accounts.” Flatt said even state funds, otherwise known as markets of last resort, were concerned that they could be flooded by a large number of employee concentration risks, pushing them beyond what their potential risk appetite is. The reauthorization restored workers’ comp insurers’ appetite for concentrated risk, he said.
‘[W]hen you get to the point that you’re dealing with an actual crisis, that shouldn’t be the first time you’ve thought about how you’re going to respond to it.’ “Once it was reauthorized, the appetite from the insurance market to cover terrorism in concentration risks and workers’ comp came back … to levels that we saw before the uncertainty about TRIPRA had cropped up. Even since then, we’ve really had a much more viable marketplace for employers,” Flatt said. “The majority of our clients are able to secure rate reductions year-over-year on the workers’ comp programs, which means really that they’re able to obtain workers’ comp terrorism coverage at competitive rates, as well.”
Risk Evaluation
The first step to mitigating risk is to determine the exposures a business faces in the wake a violent attack in the workplace. Chia said AIR’s terrorism models can be used to
continued on page 18
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West
Peabody Reaches Coal Mine Cleanup Deal with 3 U.S. States By Tracy Rucinski
P
eabody Energy Corp., the largest U.S. coal producer, reached a deal to cover mine clean-up liabilities while in bankruptcy with three U.S. states, court documents showed late last month. Peabody has benefited from a federal program known as self-bonding that allows the largest miners to extract coal without setting aside cash or collateral to ensure the company will restore the site to its natural setting. The practice has come under scrutiny following bankruptcy filings by Peabody and other large coal miners because without collateral set aside for mine reclamation, taxpayers are potentially exposed to billions of dollars in cleanup costs. Under agreements reached with Wyoming, New Mexico and Indiana, about INSURANCEJOURNAL.COM
15 percent of Peabody’s $1.2 billion in selfbonds will be secured by debtor-in-possession financing during its bankruptcy. Wyoming can receive $127 million cash if Peabody were to walk away from reclamation in that state while in bankruptcy, New Mexico $32 million and Indiana $17 million. Peabody’s agreement must be approved by a federal bankruptcy judge at a hearing in August. The deals did not specify whether Peabody must replace its self-bonds once it emerges from bankruptcy, as Alpha did last month in Wyoming. In court filings, Peabody said that were it required to replace its self-bonded liabilities, its entire liquidity would be depleted, leaving it without enough cash to run its business. This is a scenario regulators have said they want to avoid.
If a producer walks away from its self-bonded mines, the state would be stuck with the cleanup. There were $3.9 billion of self-bonds across the United States as of June 1, including $2.2 billion in the hands of bankrupt coal miners, according to federal mining regulator Office of Surface Mining and Reclamation Enforcement. If Peabody were to handle its own cleanups, it said the bill would be significantly less than its $1.2 billion in self-bonds. Reclamation costs are listed on its books at $450 million, it said. Peabody has already been taking steps to reduce its environmental liabilities in Wyoming by speeding up grass planting and regulatory paperwork at former mines. (Reporting by Tracy Rucinski; Editing by Tom Hals and Marguerita Choy) Copyright 2016 Reuters. AUGUST 8, 2016 INSURANCE JOURNAL | WEST | W1
WEST | News & Markets
Zika Case in Utah Raises Questions over How Virus Spreads By Lindsay Whitehurst
T
he case of a Utah man who contracted the Zika virus after caring for his infected father raised new questions for health experts who said last month that the investigation could guide new research into the way the disease spreads. The inquiry into the two infections could shed light on the medical mystery surrounding a virus that’s still stumping doctors. Zika is typically transmitted through the bite of a tropical mosquito that is not usually present in cold, mountainous Utah and also has been transmitted sexually. The blood of the older man, who later died, contained an extremely large amount of the virus, which could mean high levels also were present in his saliva and urine, said Dr. William Schaffner, an infectious disease specialist at the Vanderbilt University School of Medicine in Nashville. Zika has spread through blood at least once in a lab and could have passed to the son through saliva or blood if he had a small cut or scrape on his hand, Schaffner said. That type of transmission would be unusual for a virus of its kind, but the discovery that Zika can be spread through sex also was a surprise to scientists. “The more we learn about Zika, the more nasty the virus appears,” Schaffner said. A more remote possibility is the illness spreading like the flu, through droplets in the
air. Though there’s no evidence yet that Zika can be transmitted through coughing, sneezing or routine touching, questions raised by the Utah case could mean researchers look into that possibility in the future, Schaffner said. The father was elderly and had another health condition, which was not identified, so the virus may have taken advantage of a weakened immune system to proliferate. Zika causes only a mild illness in most people, and the son has recovered. But infection during pregnancy has led to severe brain-related birth defects. The person who confirmed the relationship between the two Utah patients is familiar with the case and spoke on the condition of anonymity because the person is not authorized to discuss the case
W2 | INSURANCE JOURNAL | WEST AUGUST 8, 2016
by name. Authorities were testing other people who had contact with the father to ensure no one else was infected. It was not clear yet whether the case will provide information about typical infections or whether circumstances such as the high level of the virus in the older man’s system will make it unique, said Dr. Amesh Adalja, a spokesman for the Infectious Diseases Society of America. “It may just be an extraordinary circumstance that’s not really generalizable,” he said. Mosquitoes have been responsible for large outbreaks in dozens of countries in Latin America and the Caribbean. While those tropical bugs are not typically found in Utah, experts say they have not ruled out the possibility that the new case came from a mosquito, perhaps one
brought home by the father. The main type of mosquito that spreads the disease was spotted once near the southern Utah city of St. George in 2013, said Ary Faraji, manager of the Salt Lake City mosquito abatement district. They were eradicated and have not been detected since. Still, authorities are trapping and testing mosquitoes to ensure there are no invasive bugs and that domestic mosquitoes have not picked up the virus. It can be challenging because the tropical mosquito that spreads Zika thrives in standing water, like that found in old tires or on outdoor grill covers. While Utah crews are checking hotspots, they also are urging people to look in their own backyards. Copyright 2016 Associated Press. INSURANCEJOURNAL.COM
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WEST | News & Markets
Utah Law Enables Authorities to Crash Drones at Wildfires
U
tah’s governor has signed into law a measure that makes the state the first to let authorities jam drone signals and crash the devices specifically for flying too close to wildfires. Republican Gov. Gary Herbert’s office signed the law in late July, just days after law-
makers met in a special session to pass it and a handful of other bills. State Sen. Evan Vickers, who co-sponsored the law, says it technically allows firefighters and law enforcement to shoot down drones, but they probably won’t do that because it’s too difficult. Instead, authorities are expected to use technology that jams signals and crashes drones. Utah passed the law after a drone recently was sighted five times over one wildfire, causing firefighters to ground their aircraft and slow their work. Copyright 2016 Associated Press.
Idaho Rancher’s Family Initiates Wrongful Death Suit
T
he family of an Idaho rancher authorities say was shot and killed by two Adams County Sheriff’s deputies has filed a legal notice of their intent to sue the county. The family of Jack Yantis filed a tort claim earlier this year as a precursor to a wrongful death lawsuit seeking $500,000. Authorities say the deputies shot and killed the 62-yearold Yantis on Nov. 1 after one of his bulls was hit by a car and charged emergency crews on a highway just north of the tiny town of Council in west-central Idaho. Authorities said the deputies planned to shoot the injured bull when the
rancher arrived with a rifle. Investigators say all of them fired their weapons. The shooting remains under investigation. Copyright 2016 Associated Press.
Airbnb Sues Southern California City over Short-term Rental Law
Restaurant Damage in Northern California Due to Crank Callers
irbnb is suing the city of Anaheim over a law that regulates short-term rentals. The suit filed in late July argues the city violates freespeech rights and federal law by holding Airbnb responsible when users post listings for illegal short-term rentals. Anaheim is home to
everal restaurants in Northern California were damaged after suspected prank callers tricked workers into testing their fire suppression system. Elk Grove officials said three such incidents were reported in July to the Cosumnes Fire Department. Restaurant staff at Five Guys, Wendy’s and Panera Bread received calls asking them to test their fire suppression system. Staff members at Five Guys and Wendy’s activated their systems, which discharged a
A
Disneyland and Angel Stadium, and short-term rentals have proliferated as visitors seek cheaper alternatives to hotels. The City Council voted to enhance current regulations, including fines for rental platforms that don’t ban illegal listings. Airbnb argues the ordinance violates federal law that shields websites from responsibility for user-posted information. Airbnb filed a similar suit against its hometown of San Francisco in June. Copyright 2016 Associated Press.
W4 | INSURANCE JOURNAL | WEST AUGUST 8, 2016
S
suppression agent that made a mess and forced the restaurants to close for the night. The manager at Panera declined to activate the system. Copyright 2016 Associated Press. INSURANCEJOURNAL.COM
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Joshua Rosenberg
John Corbett
Wesley J. Kinder was a California insurance commissioner who served during a turbulent time. Kinder, a resident of La Habra, Calif., died on July 25 at age 94. “He was a great guy. He was the best boss,” said Roger McNitt, a San Diego-based attorney who served as Kinder’s chief assistant insurance commissioner. Kinder was appointed insurance commissioner by Gov. Jerry Brown during his first stint as the state’s governor and served from 1975 to 1980. He was born in Dubuque, Iowa, on Sept. 8, 1921. He got into the insurance industry through the mail room at Hawkeye Mutual in Iowa and “worked his way from nothing,” McNitt said. Kinder later became the regional manager for General Re on the West coast, and served as executive vice president of Freemont Indemnity. He served as president of the National Association of Insurance Commissioners in 1980. “He was very knowledgeable in reinsurance and property/casualty insurance,” McNitt said. Kinder came into office as California insurance commissioner when the Medical Injury Compensation Reform Act, MICRA, was being hammered out. Among its many changes to the state’s medical malpractice landscape, it capped non-economic damages. San Mateo, Calif.-based Worldwide Broker Network’s board of directors has elected Francie Starnes as CEO. Starnes succeeds Bruce Basso, who becomes chairman emeritus. Starnes was named WBN president and chief operating officer a year ago. Starnes was with American International Group for 23 years, most recently as vice president of its commercial distribution group and manager of independent broker networks for AIG property/casualty. She had previously served in executive positions focusing on International Employee Benefits and new business development targeting Fortune 500 multinationals. WBN has more than 100 member firms. Reno, Nev.-based LP Insurance Services Inc. has named Adam Cleghorn to its Northern Nevada team. Cleghorn previously worked for Basalite Concrete Products in Sparks. He has been in the risk management industry for more than 15 years. LP Insurance Services is a risk management and
W6 | INSURANCE JOURNAL | WEST AUGUST 8, 2016
commercial insurance brokerage firm. Barnes & Thornburg LLP has added David Wood and Joshua Rosenberg to the firm’s litigation department and insurance recovery and counseling practice group. The firm also added John Corbett as counsel in Dallas, Texas. The trio arrives from Anderson Kill’s Ventura, Calif., office, where Wood served as co-managing shareholder. Wood, a partner, and Rosenberg, an associate, are both based in Barnes & Thornburg’s Los Angeles office. Wood has more than 30 years of experience in insurance disputes and recovery litigation involving Fortune 1000 corporations and corporate directors and officers. He represents publicly- and privately-owned corporations in enforcing their claims under professional errors and omissions, D&O liability, special risk and general liability policies and fidelity bonds. He also assists clients on insurance coverage matters concerning data breaches and other cybersecurity issues. Rosenberg works with policyholders within his insurance recovery practice and also concentrates on corporate and commercial litigation. He previously worked as a land use and planning legal consultant. Rosenberg was a judicial intern for Hon. Dana M. Sabraw in the U.S. District Court for the Southern District of California prior to that. Corbett represents corporate policyholders in a variety of industries ranging from construction and transportation to telecommunications and healthcare management. He has experience in obtaining recoveries under general liability, cyber insurance, D&O and professional errors and omissions policies. Barnes & Thornburg has offices in Atlanta, Chicago, Dallas, Delaware, Indiana, Los Angeles, Michigan, Minneapolis, Ohio and Washington, D.C. JLT Re has named Pete Chandler executive vice president and managing broker. He will be based in JLT Re’s San Francisco, Calif., office and report to Ed Hochberg, CEO of JLT Re in North America. Chandler comes from Marsh, where he was leader for the Western Region. He was chief operating officer for Guy Carpenter in North America prior to that. He has also held other roles at Marsh and Benfield. JLT Re is part of the Jardine Lloyd Thompson Group plc. INSURANCEJOURNAL.COM
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Insurance Costs Rise in Idaho County Following Lawsuits
T
win Falls County’s insurance premiums have gone up due to lawsuit settlements paid by Idaho Counties Risk Management Program. The county’s insurance payments have increased 58 percent over the past five years from $350,639 for the 2012 fiscal year to $553,114 for the fiscal year beginning Oct. 1. The increase comes after the Risk Management Program paid $1.35 million to settle lawsuits against Twin Falls County between 2012 and 2015, most recently settling a gender-related harassment and discrimination lawsuit. Most of the lawsuits pertained to allegations of inmates’ mistreatment in jail.
demoted from a staff sergeant position and replaced by a man. The complaint also said they were paid less than the men and denied training
opportunities men had. The civil lawsuit also said there was a pervasive atmosphere of sexual harassment. Copyright 2016 Associated Press.
“Jail is the biggest liability you have in this business,” Twin Falls County Sheriff Tom Carter said. Twin Falls County Commissioner Leon Mills said the premiums have increased so dramatically because of the settlements. The Risk Management Program “pays whatever the settlement is, then adjusts premiums to get their money back over time,” Mills said. Of the $1.35 million paid, $500,000 was for the discrimination lawsuit filed by former deputies against Carter. The female deputies said they were bypassed for promotions and one was ABRAM16754.indd 1
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AUGUST 8, 2016 INSURANCE JOURNAL | WEST | W9
WEST | News & Markets
Relatives of Rivera Entourage Washington Tunnel Contractors Get $70M Judgment in California File $11M Lawsuit
T
he families of four members of Jenni Rivera’s entourage who were killed along with the MexicanAmerican superstar in a 2012 plane crash are entitled to $70 million, a judge Jenni Rivera has ruled. Los Angeles Superior Court Judge Holly Kendig entered a default judgment last month against Starwood Management Inc., the owners of a Learjet that crashed in northern Mexico in December 2012. The judgment was entered because the plane’s owners,
Starwood Management Inc., abandoned their defense in the case and no longer have an attorney representing them. The judgment was entered on behalf of Rivera’s publicist, makeup artist, hairstylist and attorney. Their attorney, Paul R. Kiesel, said the next step will be getting Starwood to pay the judgement. Rivera, 43, sold more than 15 million records over her career. A case by Rivera’s estate against Starwood and other companies is pending. Copyright 2016 Associated Press.
T
he contractors who built Bertha the tunnel machine in Washington two years ago have filed a lawsuit seeking $11 million in extra pay. The contractors contend that their efforts working with tough soil conditions cost more than originally anticipated. Malcom Drilling Co., which created the 120foot deep access vault, filed the lawsuit against Seattle Tunnel Partners earlier this year. Seattle Tunnel Partners are the primary contractors for the future State Route 99 Alaskan Way Viaduct. They hired Malcolm to repair the massive
machine after it stalled due to overheating. According to the lawsuit, Malcolm contractors had to fend off sloppy soils and groundwater much than expected to access the damaged machine. The Seattle tunnel was the preferred choice to replace the viaduct when it was damaged in a 2001 earthquake. But the tunnel boring machine broke down in late 2013, leading to a more than two-year delay while it was fixed. Copyright 2016 Associated Press.
CastlePoint National Conserved by California Regulator to Protect Policyholders
C
astlePoint National Insurance Co., the sole remaining carrier member of the Tower Group, was placed into conservation in late July by order of the San Francisco Superior Court to protect policyholders and injured workers covered under policies issued by CastlePoint and the other member companies of the Tower Group. After being appointed conservator of CastlePoint, California Insurance Commissioner Dave Jones filed a motion seeking approval of a conservation and liquidation plan for CastlePoint to further protect policyholders by deconsolidating CastlePoint from the Tower Group and providing for
transactions that will bring in more than $200 million in new value for the benefit of policyholders and claimants.
A hearing on the motion to approve the Plan is set for Sept. 13 in Superior Court. The plan will also a process for liquidating CastlePoint by ensuring that the insurance guaranty funds around the country can assume responsibility for administering and
W10 | INSURANCE JOURNAL | WEST AUGUST 8, 2016
paying CastlePoint’s insurance claims without disruption when the Court issues a final liquidation order, according to a statement from Jones. During the initial conservation phase there should be no disruption or delay in the delivery of workers’ compensation benefits to injured workers and other claims covered under CastlePoint policies, according to Jones. The Tower Group’s troubles started emerging during 2013 when it announced that it had deficiencies of nearly $400 million in its aggregate policyholder loss reserves. That was compounded by accounting errors that resulted in the parent company, Tower Group withdrawing its previously
filed consolidated financial statements for 2011 and 2012. In 2014, the Tower Group was acquired by ACP Re, a Bermuda reinsurer with ownership aligned with AmTrust Financial Services Inc. and National General Holdings Corp. While that acquisition improved Tower’s situation, the volatility and deterioration of the pre-acquisition claims continued unabated through 2015. By the end of 2015, the Tower Group reported additional loss reserve deficiencies above $400 million. Tower was made up of 10 insurance companies that operated on a largely consolidated financial basis through an intercompany reinsurance pooling arrangement. INSURANCEJOURNAL.COM
In loving memory of
Bob Borisoff On the Anniversary of his passing.
1928-2003
“He was my mentor in insurance and my teacher in life. I watched him turn clients into friends, friends into family and family into guarded treasures. A true gentleman of the industry. Always making people feel good about themselves. He was my hero and my Dad.� Derek Borisoff CEO
Idea Exchange
Insider Focus
The Future of Insurance Belongs to Intermediaries
By Dan Fash
G
reat efforts have been made recently to disintermediate the insurance process. One prevalent example of this is by routing insureds directly to the carrier, bypassing the independent agency distribution channel. More and more compa-
nies continue to jump on the direct-to-consumer bandwagon, joining Coverhound, Insureon, Coverwallet, and IVANS to name a few, some even moving their sites beyond merely a lead generating tool, and integrating product and pricing with a few extra clicks. While innovation is always a driving force for any industry, the reality is, the future of commercial insurance belongs to the intermediaries. MGAs write some $40 billion in gross annual premiums, with roughly half writing more than $100 million annually. Intermediaries like an MGA have several distinct advantages over the other business models competing in the insurance mechanism. The advantages are not just signif-
W12 | INSURANCE JOURNAL | WEST AUGUST 8, 2016
icant, but impossible to compete with.
Distribution and Products
MGAs bring distribution into the risk transfer chain. It’s not unusual for them to have thousands of appointed retail agents nationwide, or regionally — sometimes thousands in some of the larger states, like California or Texas. When smaller shops are unable to represent a particular carrier because of their limited size, they rely on an intermediary who can provide access to that product for the insured. Because of size and capitalization, it’s easy for MGAs to obtain appointments with insurance carriers. While the old model of MGA thinking touted control of distribution, that was just one
side of the coin. The new model is acting like an insurance company. Combine distribution with product, and you have a winning strategy. MGAs bring product to the insurance transaction. The number of carrier relationships varies. An MGA with a specialty mindset focuses on one line of business and typically works with between five and eight carriers. However, some MGAs that are operating from a generalist mindset can represent 40 or more insurance companies. This breadth of product offers a vast suite of coverage solutions to their agency distribution plant.
Program Business
Let’s now take the evolution
continued on page W14 INSURANCEJOURNAL.COM
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of product one step further and discuss program business. When an MGA has distribution, sizable premiums in certain niches, can demonstrate underwriting expertise in writing certain classes, and has a technology platform to support all steps in the insurance process, carriers become open to extending actual underwriting authority to the wholesaler. The ultimate form of authority is a program manager at the MGA who “holds the pen.” In this scenario, the MGA is now operating as an MGU with full delegated underwriting authority. In a business world trying to excite customers about a product and drive traffic to the point of sale, the MGA does the opposite. They design product to fit the customer need. It seems like a revolutionary concept in today’s business world. However, this is the true reason a company should be in business — putting the horse in front of the cart. Now the stage is set. The MGA has control of the customer front-end, the coverage underwriting middle, and avoids the back-end claims, paid by the fronting carrier or their reinsurers. This is a smart and profitable combination: Lots of submissions and minimal
interjection by the carrier. The application hopper is full and the quotes are cranked out quickly, without having to bounce back-and-forth between the retail agent and carrier underwriter. Where underwriting expertise was the top priority for a MGAs five years ago, underwriting responsiveness is king today. Program business is the surest way to enable being the first proposal back to the agent, providing a substantial competitive advantage over the other guys waiting on that brokered quote to come back from the open market. This strategy makes it easy to define a value proposition to your customer. The MGA program manager is incentivized to build a book of profitable program business, and averse to writing accounts that will negatively impact the loss ratio and overall performance of the program. At this stage, the MGA has essentially become the insurance carrier, without the balance sheet. The MGA then involves a third-party administrator for claims
‘Intermediaries like an MGA have several distinct advantages over the other business models competing in the insurance mechanism.’
“There is little success where there is little laughter.” -Andrew Carnagie
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handling, to have input into claims determinations, but inevitably, a loss results in a payout — not paid by the MGA, but the carrier. In the intermediary world, money comes in, no money goes out. Well, of course money goes out for expenses, just not for losses.
Lastly, let’s talk about how MGAs make money. The agency-billed policy premiums ultimately go to the carrier. Whoever is on the hook for paying the claims, collects the premium. No way around that. That makes MGAs revenue-focused, not premium-driven. They earn a commission just like any agent does for their services, as well as fees for additional services like inspections. The commission is a fraction of the premium, but predictable, with no risk. This reduces volatility, taking the mystery out of the MGA’s bottom line, and makes quarter-to-quarter financial reporting quite predictable. And this equates to very little financial risk. Any risk manager will tell you reduced volatility brings a peaceful night’s rest, so this is a big advantage over the carrier, which most of the time relies on float and investment income to bring the company’s performance into the black. Not so with an intermediary, such as an MGA. The intermediary enjoys the best of all worlds, while avoiding many of the downsides. Worried about a brush fire, hurricane or hail storm? Not the MGA. If you look at the various risk management techniques available to businesses, it becomes clear the MGA finds success by adopting a strategy centered around risk avoidance. In an industry of uncertainty and fluctuating hard and soft market cycles, an MGA operates under an umbrella of stability. Fash is a commercial business analyst for Atlas General Insurance Services LLC. Phone: (858) 529-6776. Email: dan@atlas.us.com.
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Figures
Declarations
73
Culture of Indifference
“The federal government’s culture of indifference to worker safety at Hanford must end.”
The number of charges Texas lawyer, Mikal Watts and six co-defendants now face in a federal trial over accusations that they faked more than 40,000 damage claims after the BP Gulf of Mexico oil spill in 2010. They initially were charged with 95 counts.
10
The percent rise in Michigan traffic deaths last year. The Michigan Office of Highway Safety Planning said the number of deaths rose from 876 in 2014 to 963 in 2015. The increase was most notable for bicyclist fatalities, up 57 percent from 21 in 2014 to 33 in 2015. Motorcyclist fatalities rose 29 percent, from 107 in 2014 to 138 in 2015.
58%
That’s how much Twin Falls County’s insurance premiums have gone up during the past five years due to lawsuit settlements paid by Idaho Counties Risk Management Program. County commissioners blame the upward trend on settlements. INSURANCEJOURNAL.COM
$630,000
— Washington Attorney General Bob Ferguson asked a federal court to order the U.S. Department of Energy to implement enhanced safety and vapor monitoring measures in the aftermath of more than 50 workers exposed to toxic vapors at the Hanford Nuclear Reservation.
Moving Forward
“The family is really focused on just moving forward and healing.”
— Sara Brady, spokeswoman for the Graves family, whose son, Lane, was killed by an alligator at a Walt Disney World Resort in Orlando, Fla., in June. The family announced in July that it would not sue the resort over the death of their son. Brady didn’t say if a settlement had been reached with Disney World.
A Terrible Situation
The approximate amount that Toledo, Ohio, collected during its first four months of using handheld cameras to catch speeding drivers. The program was expected to generate $800,000 in a year but is on pace to collect more than twice that amount.
$7 MILLION
The amount a western New York man struck by a Rochester police cruiser earlier this year seeks in a lawsuit against the department. Brian Norford, 24, claims in the lawsuit that police used excessive force when the cruiser rammed into him on a sidewalk in February. Police said they were responding to a call about men selling drugs and when they approached Norford, he took off and dropped a handgun during a foot chase.
$500,000 The amount of money raised as of July 21 by actress and West Virginia native Jennifer Garner for West Virginia flood victims. The amount didn’t include T-shirt sales or a fundraiser hosted by the star and her childhood friend, State Sen. Corey Palumbo. Garner grew up in Charleston and held the fundraiser at Herbert Hoover High School, which faced extensive flood damage.
“The fact is we comply with all local codes, and we exceeded the local codes in this jurisdiction. ... This was an (EF5) tornado, and we’re confident the construction of the building would not have helped in that terrible situation.” — Stephen Holmes, a spokesman for Atlanta-based Home Depot, comments after a federal judge threw out Edie Howard Housel’s wrongful-death lawsuit against the company over the deaths of her husband and two children who sought refuge inside the big-box store destroyed during the 2011 tornado in Joplin, Mo. U.S. District Judge Douglas Harpool ruled Housel did not sufficiently prove any design failures of the 11-year-old store were to blame.
Some Better than None
“Given the scope of this crisis, some action is better than none. … However, I am deeply disappointed that Republicans failed to provide any real resources for those seeking addiction treatment to get the care that they need.”
— President Barak Obama, upon signing into law a bill to curb abuse of heroin and opioid drugs. The Comprehensive Addiction and Recovery Act of 2016 authorizes $181 million in new spending; Obama had asked Congress for more than $1 billion. More than 47,000 U.S. drug abuse deaths were recorded in 2014, double the number in 2000.
InsuranceJournal.com
Poll
When processing lightning claims, what is the most important? Time & Date: 68.42% (91 votes) Latitude & Longitude: 5.26% (7 votes) Polarity: 3.01% (4 votes) Amplitude of the stroke: 23.31% (31 votes) Total Votes: 133
AUGUST 8, 2016 INSURANCE JOURNAL | NATIONAL | 15
NATIONAL | Closer Look | Terrorism continued from page 14 evaluate workers’ comp exposures. “Clients can now perform accumulation reanalysis from workers’ compensation exposures in the U.S. Instead of accumulating replacement values or insured values, the accumulation is now based on the number of employees at a given location,” Chia said. “This can be divided between the day, evening or night-shift. You can also create custom deterministic scenarios or run the probabilistic model to calculate your losses by injury type.” Flatt said a key factor in workers’ comp modeling is large employee concentrations and associated loss potential. Insurers want to know the number of shifts at a location, whether campus settings exist and the maximum number of employees in a particular building at any given time. “Insurers really want to understand with precision the risks that individual companies present to them, and from an employer’s perspective it’s not really just a matter of sharing payroll data,” Flatt said. “The bottom line here is that the better the employee and exposure
data that you can provide to your insurers, the more credible your modeled output is going to be, and ultimately that will be reflected in your pricing and really the market’s appetite for your risk,” Flatt said.
Crisis Management
Crisis management planning, the next step in mitigating risk, is meant to consider every type of crisis and risk that an organization faces, as well as what the senior level response to a situation will be. “There are different thresholds for activation of the plan,” Flatt said. “Some smaller-scale incidents might not trigger the plan, but something like an act of terrorism or a workplace shooting affecting one or more of your locations certainly would. If an event meets this triggering threshold, the plan activates a crisis management team.” That team should include representatives from different functional areas, Flatt said. “The primary purpose of the team is to coordinate the organization’s response to the event. That includes communicating with and assisting employees and their families in
18 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
the wake of the incident, working with law enforcement and many other actions,” he said, emphasizing the importance of having a plan pre-attack. “The reality is once you’re in the middle of a crisis, nothing’s going to feel like normal dayto-day operations,” Flatt said. “When you get to the point that you’re dealing with an actual crisis, that shouldn’t be the first time you’ve thought about how you’re going to respond to it.” The plan should encompass scenarios and procedures to address different forms of violence, including active shooter incidents or other types of terrorist attacks. “Employees should complete awareness training on what to do when faced with these types of incidents,” Flatt said. Jonathan Bernstein, a former U.S. Army Intelligence officer and owner of Bernstein Crisis Management, said research suggests close to 95 percent of employers are completely unprepared or seriously underprepared for a crisis. “It’s not usually until they’ve had at least once significant crisis that they start getting better prepared,” Bernstein said. The crisis management specialist routinely conducts vulnerability audits, which he described as broader than an insurance risk assessment, looking for red flags that indicate something might go wrong. “Most of the time, there are huge gaps in preparedness for workplace violence,” he said. “Until the wheel squeaks hard enough and it applies
to them very personally, they don’t even want to open the door to crisis preparedness because they see it as additional workload on top of their already busy workload. They see it as an expense versus seeing it as an investment ... You can’t just have a policy. You have to have training to go along with it, refresher training on an ongoing basis and sanctions for not following the policy.” Bernstein explained that there are four categories of professionals that can assist employers in becoming better prepared for the possibility of a terrorist or workplace attack: Security experts conduct physical audits and educate human resources on early warning signs that may appear in employee records. Human resources psychology experts provide information on the types of personalities to look for, warning signs and how to handle a person exhibiting potentially threatening behavior. Crisis communications experts help with creating procedures to follow should a violent attack occur. Strategists conduct initial vulnerability audits. No matter how much work a crisis management plan may seem to entail, in the long run, it will save lives and protect property from damage, Bernstein said. If a business remains unprepared, the cost of the civil lawsuits resulting from an incident could close it down, he said.
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NATIONAL | M&A Review
M&A Deal Activity Continues at Robust Pace in Second Quarter 2016
By Sarah Lucas
M
erger and acquisition activity was slower in the second quarter of 2016, compared to Q2 2015, but was still above 2012, 2013 and 2014 levels for the same period. In Q2 2016, there were 88 transactions, compared with 119 in the prior year. Year-to-date (YTD), through June 30, 202 transactions were announced,
compared to 238 for the same period last year. The 10 most active buyers (out of 100 that did a transaction YTD 2016) completed roughly 50 percent of the transactions YTD. Similar to prior quarters, private equity (PE)-backed firms are doing more deals on a pro rata basis than other categories of buyers (independent agencies and brokerages, insurance and other, public brokers, and banks and thrifts). YTD June 2016, PE-backed firms completed nearly 50 percent of the announced transactions, compared to 43 percent for the same period in 2015, and 35 percent in 2014. The activity of the PE-backed firms hasn’t necessarily increased, but the activity of the other categories of buyers has decreased. Comparing the first two quarters of 2016 to the same
period in 2014 and 2015, public brokers’ share of the deal flow decreased, as did that of independent agencies and brokerages. Banks and the “other” category (private equity firms, underwriters, financial technology firms, specialty lenders and other unclassified buyers) had a relatively consistent pro rata share of deals in 2014, 2015 and 2016 (all YTD through June). YTD June 2016, PE-backed buyers announced 98 deals, compared to 102 for the same period last year, and all other categories of buyers announced 104 deals, compared to 136 last year (Jan. 1 – June 30). The three PE-backed brokers that had the highest deal count were AssuredPartners Inc., BroadStreet Partners Inc., and Hub International Ltd. (Hub). AssuredPartners completed 14 deals with property/casualty (P/C) and multiline agencies (no employee benefit [EB] only agencies). The majority were retail agencies, and a few were specialty distributors. Roughly one-third of the deals were in the Northeast, one-third in the
Source: SNL Financial, Insurance Journal, and other publicly available sources All transactions referenced in this article are announced deals involving public company acquirers, banks, and private equity groups as well as private company acquirers. All targets are U.S. only. MarshBerry estimates that only 15 percent to 30 percent of all transactions are actually made public. Past performance is not necessarily indicative of future results.
20 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
Southeast and the other onethird in the Midwest and West. Broadstreet Partners closed 13 transactions with primarily retail P/C firms. About twothirds were in the Midwest. Hub closed 13 deals YTD, and all were retail agencies. Approximately half of the agencies were multiline agencies (P/C and EB), a quarter were P/C only and a quarter were EB only. The geography of the acquisitions was dispersed across the U.S., and there was one transaction in Puerto Rico. Public brokers closed 22 transactions during the YTD period, with Arthur J. Gallagher & Co. (AJG) the most active (with 16 deals closed). During the six months, AJG primarily closed retail transactions (75 percent retail compared to 25 percent wholesale brokers and program administrators). More than half of AJG’s deals were multiline agencies, with EB only and P/C only each comprising 25 percent of AJG’s closed transactions. Brown & Brown Insurance and Marsh & McLennan Companies Inc. each had three transactions that closed in the first two quarters of 2016. Other categories of buyers include many independent agencies, banks and thrifts, and insurance and other. Independent agencies closed 54 transactions in the first two quarters, banks and thrifts closed 10, and insurance and other closed 18. In total for the first two quarters of 2016, 44 percent of the announced deals were P/C-only firms, 44 percent were multiline agencies and 12 percent were EB and consulting firms. Hub and AJG closed the highest
continued on page 22
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NATIONAL | M&A Review continued from page 20 number of EB firm deals during the first two quarters.
While the number of closed transactions is down slightly from 2015, deal activity continues at a robust pace across
Merger Announced and Acquisition Activity Date Buyer Announced Date
Buyer
4/1/16 4/1/16 4/1/16 4/1/16 4/1/16 4/1/16 4/1/16 4/4/16 4/4/16 4/4/16 4/4/16 4/4/16 4/5/16 4/5/16 4/5/16 4/8/16 4/11/16 4/11/16 4/11/16 4/12/16 4/13/16 4/18/16 4/19/16 4/20/16 4/21/16 4/27/16 5/1/16 5/1/16 5/1/16 5/1/16 5/1/16 5/2/16 5/2/16 5/3/16 5/3/16 5/3/16 5/4/16 5/4/16 5/4/16 5/4/16 5/4/16 5/4/16 5/5/16 5/9/16 5/9/16 5/10/16 5/11/16 5/12/16 5/16/16 5/16/16 5/18/16 5/18/16 5/18/16 5/19/16 5/19/16 5/24/16 5/31/16 5/31/16 6/1/16 6/1/16 6/1/16 6/1/16 6/1/16 6/1/16 6/1/16 6/1/16 6/1/16 6/1/16 6/2/16 6/3/16 6/3/16 6/6/16 6/7/16 6/7/16 6/7/16 6/9/16 6/13/16 6/14/16 6/15/16 6/16/16 6/17/16 6/20/16 6/20/16 6/21/16 6/22/16 6/26/16 6/30/16 6/30/16
BroadStreet Partners Inc. Hilb Group LLC Hilb Group LLC Hilb Group LLC Hilb Group LLC Hilb Group LLC KRA Insurance Agency Inc. Alliant Insurance Services Confie Seguros Insurance Services Element Group LLC Hub International Limited Marsh & McLennan Companies Inc. Arthur J. Gallagher & Co. Risk Strategies Company LLC Windhaven Insurance Acrisure LLC Acrisure LLC Arthur J. Gallagher & Co. Hilb Group LLC Arthur J. Gallagher & Co. AssuredPartners Inc. Arthur J. Gallagher & Co. McDermott-Costa Co. Inc. AssuredPartners Inc. People’s United Financial Inc. Champion Risk & Insurance Brokers LP BroadStreet Partners Inc. BroadStreet Partners Inc. BroadStreet Partners Inc. John Yurconic Agency Walsh Duffield Companies Inc. Arthur J. Gallagher & Co. Prime Risk Partners Inc. Hub International Ltd. IMA Financial Group Inc. USI Holdings Corporation ABD Insurance and Financial Services Confie Seguros Insurance Services Confie Seguros Insurance Services Confie Seguros Insurance Services Hilb Group LLC Hilb Group LLC Worldwide Facilities Inc. A.N. Ansay & Associates Inc. Farmers National Banc Corp. CMS LLC Eastern Bank Corporation Salem Five Bancorp Arthur J. Gallagher & Co. Brown & Brown Inc. Amos A. Phelps & Son Insurance Agency Inc. AssuredPartners Inc. Oscar Seikaly Arthur J. Gallagher & Co. Digital Insurance Inc. Risk Strategies Company LLC Risk Strategies Company LLC VALE Insurance Partners Acrisure LLC BroadStreet Partners Inc. BroadStreet Partners Inc. BroadStreet Partners Inc. BroadStreet Partners Inc. Duffy Insurance Agency Inc. NFP Corp. Oswald Companies Protective Life Corp. Risk Strategies Company, LLC Hub International Limited Hub International Limited R&R Insurance Services Inc. Arthur J. Gallagher & Co. Alliant Insurance Services Arthur J. Gallagher & Co. Confie Seguros Insurance Services Jacobson, Goldfarb & Scott Inc. Arthur J. Gallagher & Co. Insurance Office of America Higginbotham & Associates Inc. AmTrust Financial Services Inc. Cross Insurance Digital Insurance Inc. Risk Strategies Company LLC Integro Ltd. Rogers & Gray Insurance Agency Inc. SCS Insurance Agency Insurance Office of America USI Holdings Corp.
the country, and many buyers are reporting strong pipelines of transactions they expect to close this year.
Lucas is vice president for MarshBerry. Phone: 616-723-8375. Email: Sarah.Lucas@MarshBerry.com.
April to June 30, 2016 Seller Seller Undisclosed Seller (NY) Clark-Mortenson Agency Inc. Clay Thomas & Associates LLC P.A. Post Agency LLC Stone Transportation LLC W.F. Clayton & Associates LLC New Agency Partners LLC Andre-Romberg Insurance Agency Inc. Axiom Insurance Agency Inc. Barnett Insurance Inc. Pickett and Associates Inc. Corporate Consulting Services Ltd. Capitol Benefits Group Inc. Maggs & Associates, The Business Insurance Brokers Inc. ATX Premier Union Benefit Planners Inc. Aronson Insurance Agency Inc. Charles Allen Agency Inc. Undisclosed Independent Agency Insurance Plans Agency Inc. Bynum Insurance Co. KDC Associates LLC Mello Insurance Services, Inc./Myers-Stevens-Mello & Co. Inc. Daly Merritt Insurance Inc. Eagle Insurance Group LLC Adams Clay Insurance Brokerage Co. Undisclosed Seller (IL) Undisclosed Seller (IN) Undisclosed Seller (IN) Hazleton Insurance Center Don Allen Agency Inc. Hagan Newkirk Financial Services Inc. Old National Insurance First Santa Fe Insurance Services Inc. Waldman Bros LLP Hanratty & Associates Inc. SharedHR Auto Insurance Specialists Inc. Trinity Insurance LLC Whitehead Insurance Inc. Employee benefits business Group Insurance Concepts LLC Sloan Mason Insurance Services Disher Insurance Services Bowers Insurance Agency Inc. Diversified Professional Risk Managers BBS Employee Benefits Otis Brown Insurance Agency Inc. Hogan Insurance Services Inc. Morstan General Agency Inc. J.H. Slattery Insurance Agency Inc. MaximGroup NSI Insurance Group McNeary Inc. Corporate Health Systems Inc. John Buttine Inc. Atlass Insurance Group Inc. Onyx Transportation Services LLC Allen Lawrence & Associates Inc. Undisclosed Seller (AR) Undisclosed Seller (IN) Undisclosed Seller (KS) Undisclosed Seller (WV) Jay Colangelo Insurance Agency Inc. First West Brokerage Services Inc. Hoffman Group Assets of MacNamee Group OakBridge Advisors Inc. 1st Alaska Insurance LLC FirstBank Insurance Agency Inc. Frett Barrington LTD Ashmore & Associates Insurance Agency LLC Western Carwash Insurance Agency KRW Insurance Agency Inc. Expresslink Inc. AURA Holdings LLC Buchholz Planning Corp. Eagle American Insurance Agency LLC AmeriCap Insurance Group Inc. Total Program Management LLC Bardwell, Bowlby & Karam Insurance Agency Inc. Stevenson Group McLaughlin Brunson Insurance Agency LLP Jerry Parks Equine Insurance/Parks Insurance Corp. The Albert G. Brock Co. Samuel Weisman & Sons Inc. Thomas J. Hornung & Associates Inc. MVB Insurance LLC
Sources: SNL Financial, Insurance Journal, other publicly available sources and MarshBerry proprietary databases. Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. MarshBerry estimates that only 15 percent to 30 percent of all transactions are actually made public. Past performance is not necessarily indicative of future results.
22 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
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About This Report: Welcome to the
12th annual Insurance Journal Top 100 Independent Property/Casualty Agencies report. The Top 100 list is ranked by total property/casualty agency revenue for 2015 and comprises only those agencies whose business is primarily retail, not wholesale. This report also features the nation’s Top 20 Agency Partnerships, which can be found on page 27. This list includes agency groups such as aggregators, clusters, networks and franchise organizations, all of which play an important role in the independent agency system today. Also included is a list of the nation’s Top 20 Bank Holding Companies and Top 20 Banks in Insurance ranked by 2015
Sponsored by insurance brokerage fee income courtesy of the Michael White’s Bank Insurance Fee Income Report - 2016 Edition. See page 28. Insurance Journal wishes to thank all of the agencies and brokerages that were willing to share their cies eligible for listing but for which no information and cooperated in the proinformation was received or located. cess for the Top 100 and Top 20 Agency We encourage all qualifying agencies Partnerships reports. The result is a to submit data for future reports. Also, glimpse at some of the nation’s most sucsubmitted data was not independently cessful independent insurance agencies verified. and brokerages. A special thank you to the 2016 Top All information in this report has been 100 P/C Agencies report sponsor AFS garnered from voluntary online submisIBEX. sions from agencies and brokerages and For more information about this best estimates based on other public report, contact Andrea Wells at: awells@ information sources. There may be ageninsurancejournal.com.
Ranked by Total 2015 P/C Revenue
2016 2015 Rank Rank Agency Name 1 2 3 4
2 1 4 3
HUB International Lockton Cos. Alliant Insurance Services Inc. USI Insurance Services
5
6
Confie
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
5 10 7 8 9 11 19 13 22 12 14 15 NEW 18 21
AssuredPartners Inc. Acrisure LLC BroadStreet Partners Inc. Integro Insurance Brokers Leavitt Group Crystal & Co. NFP Insurance Office of America Inc. Risk Strategies Co. EPIC Insurance Brokers & Consultants The IMA Financial Group Inc. Wortham Insurance & Risk Management Cross Financial Corp., dba Cross Insurance Hays Cos. Heffernan Insurance Brokers
2015 Total 2015 Total Other P/C Revenue than P/C Revenue $1,007,636,000 $947,343,000 $553,560,874 $514,562,044
$326,028,000 $381,226,000 $251,236,594 $441,245,004
$472,571,000
N/A
$422,546,495 $319,954,127 $265,250,000 $257,000,000 $144,552,466 $137,170,000 $126,287,686 $123,944,033 $121,000,000 $119,683,837 $111,890,430 $97,129,488 $94,600,000 $91,000,000 $90,094,600
$134,462,724 $91,697,750 $44,350,000 $18,000,000 $67,831,600 $19,830,000 $1,153,911,862 $12,098,796 $41,000,000 $46,002,481 $25,799,401 $21,853,051 $18,800,000 $92,300,000 $28,260,500
2015 Total P/C Premiums Written
2015 Other than Full-Time P/C Revenue Employees
Main Office
$6,721,541,337 $4,151,826,261 $8,627,519,000 $13,898,378,000 $3,772,152,076 $4,590,757,390 $4,714,624,598 $8,688,603,029
8,453 6,000 2,329 4,406
Chicago, Ill. Kansas City, Mo. Newport Beach, Calif. Valhalla, N.Y.
$1,450,000,000
N/A
4,400
$5,305,033,766 $3,004,448,475 $2,831,531,430 $1,185,490,969 $2,313,000,000 $766,000,000 $1,500,000,000 $400,000,000 $2,295,478,072 $981,364,744 $1,483,620,000 $305,077,000 $1,000,000,000 $11,547,100,000 $1,269,333,541 $178,998,787 $905,000,000 $650,000,000 $967,272,000 $907,995,000 $1,259,694,354 $518,393,297 $953,919,083 $364,671,457 $770,000,000 $580,000,000 $923,500,000 $1,000,000,000 $639,948,000 $265,703,800
3,600 2,064 2,000 1,087 1,420 406 3,400 800 610 785 605 501 700 699 409
Huntington Beach, Calif. Lake Mary, Fla. Caledonia, Mich. Columbus, Ohio New York, N.Y. Cedar City, Utah New York, N.Y. New York, N.Y. Longwood, Fla. Boston, Mass. San Francisco, Calif. Denver, Colo. Houston, Texas Bangor, Maine Minneapolis, Minn. Walnut Creek, Calif.
21
17
J. Smith Lanier & Co.
$86,835,389
$36,496,189
$1,040,000
$456,000,000
603
West Point, Ga.
22
20
AIS Insurance / Auto Insurance Specialists *
$85,705,000
N/A
$508,780,000
N/A
500
Cerritos, Calif.
23
23
Answer Financial Inc. *
$80,000,000
N/A
$630,000,000
N/A
628
Encino, Calif.
24
24
Higginbotham
$78,661,000
$53,346,000
$549,052,000
$1,333,650,000
756
Fort Worth, Texas
$75,200,000
$30,000,000
$704,300,000
$575,500,000
405
San Francisco, Calif.
$71,490,327
$19,277,957
$566,244,927
$280,015,441
649
Missoula, Mont.
$69,460,059
$39,766,499
$548,424,598
$1,195,343,950
359
Chicago, Ill. Alpharetta, Ga.
25
29
Woodruff-Sawyer & Co.
26
25
PayneWest Insurance Inc.
27
27
Mesirow Insurance Services Inc.
28
NEW Prime Risk Partners Inc.
$69,315,000
$15,452,000
$902,882,041
N/A
468
29
28
Hylant Group Inc.
$68,094,895
$35,574,855
$551,100,000
$784,000,000
599
Toledo, Ohio
30
26
INSURICA Inc.
$65,483,893
$14,706,313
$540,341,307
$229,092,074
477
Oklahoma City, Okla.
31
30
Assurance
$55,615,530
$26,212,332
$506,537,390
$373,890,000
428
Schaumburg, Ill.
32
32
TWFG Insurance Services
$54,732,020
$500,000
$366,637,461
$5,000,000
88
The Woodlands, Texas Poughkeepsie, N.Y.
33
33
Marshall & Sterling Enterprises Inc.
$53,024,655
$10,847,988
$390,575,830
$278,666,666
403
34
34
Eastern Insurance Group LLC **
$47,511,000
$13,910,000
$338,000,000
$334,000,000
340
Natick, Mass.
35
38
Propel Insurance
$47,000,000
$15,000,000
$405,000,000
$165,000,000
297
Tacoma, Wash.
36
31
Frenkel & Co.
$45,553,501
$22,055,276
$502,065,000
$882,211,000
164
New York, N.Y.
37
35
SterlingRisk
$43,551,000
$11,423,000
$362,929,000
$136,964,000
225
Woodbury, N.Y.
38
37
The Graham Co.
$43,529,853
$5,644,067
$267,863,217
$44,996,223
169
Philadelphia, Pa.
39
40
Houchens Insurance Group
$40,247,252
$12,823,023
$435,928,688
$397,526,186
272
Bowling Green, Ky.
40
39
Professional Insurance Associates Inc.
$40,000,000
N/A
$300,000,000
N/A
50
San Carlos, Calif.
41
NEW Westwood Insurance Agency *
$39,637,229
N/A
$309,474,238
N/A
109
West Hills, Calif.
42
81
The Hilb Group
$38,000,000
$13,000,000
$284,000,000
$130,000,000
570
Richmond, Va.
43
36
$37,496,394
$10,831,054
$317,318,527
$166,558,200
234
Houston, Texas
44
41
$37,418,000
$3,429,000
$282,000,000
$133,000,000
197
East Providence, R.I.
$36,761,709
$17,433,984
$293,719,549
$329,033,752
338
Buffalo, N.Y.
$36,407,840
$7,731,839
$239,274,688
$74,832,895
173
Jackson, Miss.
45
46
Bowen, Miclette & Britt Insurance Agency LLC Starkweather & Shepley Insurance Brokerage Inc. Lawley Insurance
46
45
Fisher Brown Bottrell Insurance Inc. **
47
49
Parker Smith & Feek Inc.
$35,855,000
$9,446,000
$255,030,000
$166,870,000
200
Bellevue, Wash.
48
48
Gowrie Group
$34,550,000
$1,800,000
$274,080,000
$60,000,000
160
Westbrook, Conn.
49
47
Andreini & Co.
$34,156,950
$11,425,300
$336,450,000
$265,000,000
185
San Mateo, Calif.
50
51
The Horton Group Inc.
$33,299,411
$23,348,182
$332,284,446
$288,546,531
330
Orland Park, Ill.
Editor’s Note: * = Carrier Owned Agency; ** = Bank Owned Agency
INSURANCEJOURNAL.COM
AUGUST 8, 2016 INSURANCE JOURNAL | NATIONAL | 25
Ranked by Total 2015 P/C Revenue
51
50
TrueNorth
$33,021,612
$16,018,751
$361,682,014
$246,317,986
280
52
43
The Mahoney Group
$32,964,422
$7,391,679
$248,966,438
$111,299,424
185
Mesa, Ariz.
53
58
Towne Insurance **
$32,829,245
$8,579,227
$241,879,314
$384,176,161
259
Virginia Beach, Va.
54
53
LMC Insurance & Risk Management Inc.
55
52
Crane Agency
56
61
57
Cedar Rapids, Iowa
$32,501,703
$11,296,513
$297,898,509
$167,947,497
$30,996,092
$4,436,916
$209,898,594
$38,565,164
245
252 West Des Moines , Iowa
Rich & Cartmill Inc.
$29,316,529
$867,336
$205,500,000
$1,000,000
168
Tulsa, Okla.
55
Robertson Ryan & Associates Inc.
$29,157,479
$3,526,000
$275,000,000
$74,500,000
230
Milwaukee, Wis.
St. Louis, Mo.
58
57
Riggs, Counselman, Michaels & Downes Inc.
$28,451,080
$13,866,355
$339,907,442
$60,051,287
239
Towson, Md.
59
54
Moreton & Co.
$28,032,588
$13,082,520
$361,478,394
$261,000,000
194
Salt Lake City, Utah
60
59
James G Parker Insurance Associates
$27,467,000
$6,110,000
$346,995,000
$87,285,000
200
Fresno, Calif.
61
60
Haylor, Freyer & Coon Inc.
$27,252,359
$4,136,512
$20,720,000
$98,000,000
179
Syracuse, N.Y.
62
62
Bouchard Insurance
$25,002,662
$9,357,811
$224,000,000
$177,000,000
224
Clearwater, Fla.
63
64
Tolman & Wiker Insurance Services LLC
$24,880,288
$6,002,952
$202,207,029
$98,846,379
155
Ventura, Calif.
64
66
Bolton & Co.
$24,194,400
$15,997,900
$218,661,600
$243,813,800
170
Pasadena, Calif.
65
79
Insureon
$24,100,000
N/A
$210,300,000
N/A
250
Chicago, Ill.
66
70
HNI Risk Services
$23,800,000
$2,741,000
$280,000,000
$28,000,000
108
New Berlin, Wis.
67
67
Advanced Insurance Underwriters LLC
$23,517,500
$470,350
$204,500,000
$4,090,000
171
Hollywood, Fla.
68
68
$23,375,000
$8,725,000
$247,523,000
$267,587,000
187
Irvine, Calif.
69
76
Sullivan Curtis Monroe Insurance Services LLC Wood Gutmann & Bogart Insurance Brokers
$23,040,322
$2,002,505
$254,541,095
$29,897,195
142
Tustin, Calif.
70
69
Sihle Insuirance Group
$23,024,622
$1,932,526
$205,063,041
$23,049,270
200 Altamonte Springs, Fla.
71
77
ABD Insurance and Financial Services
$21,000,000
$22,585,000
$150,500,000
$600,500,000
72
63
Scirocco Financial Group Inc.
$20,850,638
$2,887,212
$169,891,813
$41,472,469
122 Hasbrouck Heights, N.J.
200
San Mateo, Calif.
73
74
Arroyo Insurance Services
$20,669,327
$2,066,000
$19,055,844
$2,066,000
140
Arcadia, Calif.
74
75
R&R Insurance Services Inc.
$20,654,000
$3,350,000
$195,811,000
$57,300,000
175
Waukesha, Wisc. Knoxville, Tenn.
75
72
TIS Insurance Services Inc.
$20,405,187
$6,700,801
$153,190,810
$65,993,478
142
76
94
Turner Surety & Insurance Brokerage Inc.
$20,203,000
N/A
$165,549,000
$421,000
53
Paramus, N.J.
77
84
John M. Glover Agency
$20,000,000
$502,064
$137,615,000
$1,132,462
175
Norwalk, Conn.
78
87
Insgroup Inc.
$19,900,000
$2,110,000
$146,000,000
$25,500,000
97
Houston, Texas
79
71
Ansay & Associates LLC
$19,200,000
$6,400,000
$200,000,000
$60,000,000
225
Port Washington, Wis.
80
86
Associated Financial Group LLC. **
$19,186,231
$49,955,018
$157,282,210
$1,011,346,676
363
Minnetonka, Minn.
81
96
The Buckner Co. Inc.
$18,453,108
$2,457,421
$149,278,188
$36,094,391
155
Salt Lake City, Utah
82
73
Lovitt & Touché Inc.
83
85
Rogers & Gray Insurance
84
83
The Daniel and Henry Co.
85
82
Tompkins Insurance Agencies Inc. **
86
80
CHS Insurance Services LLC
$17,502,000
Otterstedt Insurance Agency
$18,250,671
$12,503,161
$174,821,221
$198,572,448
177
Tempe, Ariz.
$18,200,000
$3,600,000
$105,100,000
$58,900,000
130
South Dennis, Mass.
$18,120,000
$5,397,000
$142,860,000
$58,458,000
163
St. Louis, Mo.
$17,985,000
$8,573,000
$282,950,000
$137,000,000
179
Batavia, N.Y.
$1,650,000
$127,980,000
$21,000,000
97
$17,480,577
$885,975
$105,359,434
$24,905,808
82
Inver Grove Heights, Minn. Englewood Cliffs, N.J.
$17,291,971
$6,572,158
$146,421,391
$100,780,000
117
Minnetonka, Minn.
87
91
88
NEW Christensen Group
89
89
AHT Insurance
$17,224,044
$12,686,229
$141,498,121
$203,788,973
176
Leesburg, Va.
90
92
Associated Insurance Management Inc.
$16,935,534
N/A
$123,470,292
N/A
69
Silver Spring, Md. Denver, Colo.
91
NEW Premier Group Insurance Inc.
$16,570,000
N/A
$108,129,000
N/A
15
92
NEW Swingle Collins and Associates
$16,500,000
N/A
$16,500,000
N/A
65
Dallas, Texas
93
65
$16,338,237
$7,272,654
$161,001,289
$80,802,162
132
Birmingham, Ala.
94
NEW Eagle American Insurance Agency LLC
Longwood, Fla.
95
88
Eagan Insurance Agency LLC
96
97
Foa & Son Corp.
Cobbs Allen
$16,153,664
$130,724
$126,819,754
$1,188,400
158
$16,111,225
$1,195,214
$108,757,007
$11,952,140
85
Metairie, La.
$15,797,579
$1,456,588
$143,614,355
$30,345,583
105
New York, N.Y.
97
NEW The Advantage Group LLC
$15,667,029
$1,566,704
$118,240,094
$7,833,520
103
Edmonds, Wash.
98
NEW Sunstar Insurance Group
$15,599,938
$888,611
$126,835,495
$8,242,136
121
Memphis, Tenn.
99
95
Lipscomb & Pitts Insurance
$15,557,648
$5,766,462
$139,501,000
$210,754,000
130
Memphis, Tenn.
MJ Insurance Inc.
$15,538,642
$11,820,951
$136,375,865
$583,286,437
138
Indianapolis, Ind.
100 98
Editor’s Note: * = Carrier Owned Agency; ** = Bank Owned Agency
26 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
INSURANCEJOURNAL.COM
Ranked by Total 2015 P/C Revenue
Insurance Journal’s Top 20 Agency Partnerships (Ranked by 2015 Total P/C Revenue) Employee count for these groups does not necessarily include all affiliates responsible for total revenue. 2015 2015 Rank Rank
Agency
2015 Total P/C Revenue
2015 Total Other than P/C Revenue
2015 Total P/C Premiums Written
2015 Other than P/C Premium
Full-Time Employees
Main Office
1
1
SIAA Inc.
$810,921,469
N/A
$6,051,652,752
N/A
35
Hampton, N.H.
2
2
Keystone Insurers Group
$353,093,002
$63,635,360
$2,942,441,687
$813,588,349
3,271
Northumberland, Pa. San Francisco, Calif.
3
3
ISU Insurance Agency Network
$320,376,375
$33,395,500
$2,475,735,000
$443,500,000
1,785
4
4
SecureRisk
$199,270,625
$28,952,012
$1,652,853,566
$434,973,359
9
Tucker, Ga.
5
5
The Iroquois Group
$110,556,562
N/A
$880,239,634
N/A
61
Allegany, N.Y.
6
6
Combined Agents of America LLC
$96,289,576
$5,255,422
$738,035,381
$25,141,393
778
Austin, Texas
7
7
Renaissance Alliance Insurance Services LLC
$84,962,645
$1,493,197
$517,685,863
$15,266,732
67
Wellesley, Mass.
8
8
United Valley Insurance Services Inc.
$74,174,063
$4,896,450
$593,392,500
$81,607,500
950
Fresno, Calif.
9
10
Pacific Interstate Insurance Brokers
$72,174,180
N/A
$542,607,330
N/A
8
El Dorado Hills, Calif.
10
9
Insurors Group LLC
$67,660,605
$46,315,342
$451,070,699
$50,728,743
455
College Station, Texas
11
11
Smart Choice
$55,682,000
$1,421,000
$464,000,000
$2,500,000
44
High Point, N. C.
12
NEW
Georgia Agency Partners Inc.
$51,240,418
$7,699,741
$344,074,453
$67,089,196
420
Statesboro, Ga.
13
13
Brightway Insurance
$45,508,000
$1,434,000
$363,155,858
$6,768,594
215
Jacksonville, Fla.
14
12
GreatFlorida Insurance
$43,200,000
$420,000
$360,000,000
$210,000
408
Stuart, Fla.
15
14
United Agencies
$42,606,575
$10,980,743
$309,886,007
$221,833,191
274
Pasadena, Calif.
16
15
Bainswest Inc.
$36,844,102
$6,533,800
$309,213,102
$73,417,283
322
Owasso, Okla.
17
16
Networked Insurance Agents
$35,247,696
N/A
$206,399,432
N/A
106
Grass Valley, Calif.
18
NEW
Fiesta Insurance Franchise Corp. dba Fiesta Auto Insurance Center
$27,978,390
$4,081,760
$285,000,000
$4,081,760
21
Las Vegas, Nev.
19
17
The Insurance Alliance of Central Pennsylvania Inc.
$25,610,268
N/A
$225,880,193
N/A
235
Camp Hill, Pa.
20
18
PacWest Alliance Insuarance Services Inc.
$23,066,753
$2,981,224
$1,201,884,810
$44,500,000
250
Fresno, Calif.
Editor’s Note: List includes aggregators, clusters, and franchise groups.
INSURANCEJOURNAL.COM
AUGUST 8, 2016 INSURANCE JOURNAL | NATIONAL | 27
Top 20 Bank Holding Companies in Insurance Brokerage Fee Income (2015/Nationally) Rank
2015 Insurance Brokerage Fee Income Bank Holding Company Name
City, State
Website
1
$1,534,411,000 BB&T Corp.
Winstom-Salem. N.C.
www.bbt.com
2
$1,251,000,000 Wells Fargo & Co.
San Francisco, Calif.
www.wellsfargo.com
3
$485,000,000 Citigroup Inc.
New York, N.Y.
www.citigroup.com
4
$176,000,000 American Express Co.
New York, N.Y.
www.americanexpress.com
5
$133,031,000 Regions Financial Corp.
Birmingham, Ala.
www.regions.com
Charlotte, N.C.
www.bankofamerica.com
6
$124,000,000 Bank of America Corp.
7
$117,103,000 BancorpSouth Inc.
Tupelo, Miss.
www.bancorpsouthonline.com
8
$75,804,000 Stifel Financial Corp.
St. Louis, Mo.
www.stifelbank.com
9
$75,363,000 Associated Banc-Corp
Green Bay, Wisc.
www.associatedbank.com
10
$73,000,000 Morgan Stanley
New York, N.Y.
www.morganstanley.com
11
$69,280,000 Eastern Bank Corp.
Boston, Mass.
www.easternbank.com
12
$69,135,000 First Niagara Financial Group Inc.
Buffalo, N.Y.
www.firstniagara.com
13
$67,501,000 Discover Financial Services
Riverwoods, Ill.
www.discovercard.com
14
$64,358,000 Huntington Bancshares Inc.
Columbus, Ohio
www.huntington.com
15
$49,153,000 Cullen/Frost Bankers Inc.
San Antonio, Texas
www.frostbank.com
16
$43,000,000 Popular Inc.
San Juan, P.R.
www.popular.com/
17
$42,452,000 Old National Bancorp
Evansville, Ind.
www.oldnational.com/index.asp
18
$37,496,000 M&T Bank Corp.
Buffalo, N.Y.
www.mtb.com
19
$36,424,000 Trustmark Corp.
Jackson, Miss.
www.trustmark.com
20
$30,731,000 People's United Financial Inc.
Bridgeport, Conn.
www.peoples.com/portal/site/peoples
About this report: With few exceptions, the Federal Reserve Board requires only what it defines as “large” bank holding companies (i.e., BHCs with consolidated assets in excess of $1 billion) to file line item fee income like insurance brokerage. Ranking excludes several traditional life insurers that do not engage in significant banking activities. Source: Michael White’s Bank Insurance Fee Income Report - 2016 Edition
Top 20 Banks in Insurance Brokerage Fee Income (2015/Nationally) Rank
2015 Insurance Brokerage Fee Income Bank Name
City, State
Website
1
$1,532,914,000 Branch Banking and Trust Co.
Winston Salem, N.C.
www.bbt.com
2
$700,000,000 Citibank, N.A.
Sioux Falls, S.D.
www.citibank.com
Tupelo, Miss.
www.bancorpsouthonline.com
3
$115,436,000 BancorpSouth Bank
4
$74,124,000 Associated Bank, N.A.
Green Bay, Wis.
www.associatedbank.com
5
$69,280,000 Eastern Bank
Boston, Mass.
www.easternbank.com
6
$69,135,000 First Niagara Bank, N.A.
Buffalo, N.Y.
www.firstniagara.com
7
$67,501,000 Discover Bank
Greenwood, Del.
www.discovercard.com
8
$49,153,000 Frost Bank
San Antonio, Texas
www.frostbank.com
9
$48,169,000 Towne Bank
Portsmouth, Va.
www.townebank.com
10
$37,509,000 Manufacturers and Traders Trust Co.
Buffalo, N.Y.
www.mtb.com
11
$36,424,000 Trustmark National Bank
Jackson, Miss.
www.trustmark.com
12
$30,731,000 People's United Bank
Bridgeport, Conn.
www.peoples.com
13
$17,410,000 Fifth Third Bank
Cincinnati, Ohio
www.53.com
14
$17,233,000 Valley National Bank
Passaic, N.J.
www.valleynationalbank.com
15
$17,114,000 Bank of the West
San Francisco, Calif.
www.bankofthewest.com
16
$15,164,000 Univest Bank and Trust Co.
Souderton, Pa.
www.univest.net
17
$13,604,000 The Peoples Banking and Trust Co.
Marietta, Ohio
www.peoplesbancorp.com
18
$13,222,000 The Adirondack Trust Co.
Saratgoa Springs, N.Y.
adirondacktrust.com
19
$13,203,000 Arvest Bank
Fayetteville, Ark.
www.arvest.com
20
$13,075,000 First-Citizens Bank & Trust Co.
Raleigh, N.C.
www.firstcitizens.com
Note about this report: These rankings include commercial banks, savings banks and savings associations (a.k.a. thrifts) which are required to report line item fee income like insurance brokerage. Source: Michael White’s Bank Insurance Fee Income Report - 2016 Edition 28 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
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NATIONAL | Business Moves
World Insurance Associates, AIV Group
World Insurance Associates, an independent insurance agency based in Tinton Falls, N.J., has acquired AIV Group, an insurance agency serving the Asian community. AIV Group, in Avenel, N.J., was founded in 2010 by Sonali Shah, who will now join World Insurance Associates as a principal. Terms of the deal were not disclosed. AIV Group specializes in insurance for hospitality, real estate, professional services and retail sectors for the Asian community. World Insurance Associates sells in 41 states and specializes in insurance for transportation companies, the hospitality industry, coastal properties, and high-net worth individuals in addition to general commercial clients in diverse industries. World Insurance Associates was founded in 2012 and has eight offices in New Jersey, Pennsylvania and New York. It has completed 14 acquisitions.
Cross Insurance, Sargent, Tyler & West
Maine’s Cross Insurance has acquired another Maine insurance agency, Sargent, Tyler & West in Bangor, and its Bucksport branch office, Roland Grindle Insurance Agency. Sargent, Tyler & West has been in business for nearly 200 years. Michael Shea is president. Cross plans to merge the accounts with its own Bangor office. The Bucksport office will remain a separate branch office.
Berkshire Hathaway, Medical Liability Mutual Insurance Co. Berkshire Hathaway subsidiary National Indemnity Co. is acquiring Medical Liability Mutual Insurance Co. of New York for an undisclosed price. The deal comes as the insurer completes its conversation from a mutual company to a stock insurer. The insurer is the largest underwriter of medical professional liability insurance in New York. MLMIC reported
30 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
$1.8 billion in policyholders’ surplus as of Dec. 31, 2015. The deal will close in the 2017 third quarter, pending the usual closing conditions and regulatory approval processes. Berkshire Hathaway CEO Warren Buffett called MLMIC “a gem of a company that has protected New York’s physicians, midlevel providers, hospitals and dentists like no other for over 40 years.” He said the acquisition will help boost the insurer’s “capacity to serve these and other policyholders for many years to come.” Once the deal is completed, each owner of an eligible MLMIC policy will be entitled to receive a proportionate share of all of the cash consideration paid by National Indemnity Co. MLMIC President Robert Menotti said the acquisition will allow MLMIC to expand, with more customized policy limits, risk-sharing features and services to groups, facilities, and other large accounts. Menotti added that Berkshire Hathaway is also committed to keeping MLMIC’s culture and approach. In 2012, Berkshire Hathaway’s medical professional liability insurance unit, Medical Protective Co., purchased New Jersey-based Princeton Insurance Co., a professional liability insurer for healthcare providers, which was previously owned by Medical Liability Mutual Insurance Co. Berkshire Hathaway had acquired Medical Protective Corp. from GE for $825 million in 2005. More recently, last July, Berkshire Hathaway’s MedPro Group agreed to acquire
Oklahoma healthcare liability insurer PLICO Inc., which is owned by the Oklahoma State Medical Association.
National Interstate, Great American
National Interstate Corp. based in Richfield, Ohio, has agreed to be acquired by Great American Insurance Co., a subsidiary of American Financial Group Inc. (AFG). Under the terms of the agreement, Great American will acquire approximately 49 percent of the company’s issued and outstanding common shares that Great American does not presently own. The merger is an all-cash transaction that values National Interstate at approximately $660 million, including assumption of debt in connection with the merger. National Interstate is the holding company for a specialty property/casualty insurance group that offers products and services designed to meet the unique needs of niche markets. Great American is a property/ casualty insurance company, focusing on specialty commercial products for businesses, and in the sale of traditional fixed and fixed-indexed annuities in the retail, financial institutions and education markets. The proposed merger is expected to close in the fourth quarter of 2016, subject to approval by the Great American shareholders and regulatory authorities, as well as the satisfaction or waiver of customary closing conditions. National Interstate Corp. was founded in 1989. Insurance subsidiaries include the three primary insurers, National INSURANCEJOURNAL.COM
Interstate Insurance Co., Vanliner Insurance Co. and Triumphe Casualty Co.
Heartland Crop Insurance, CGB Diversified Services
Bermuda’s Everest Re Group is selling its U.S. crop insurance company, Heartland Crop Insurance Inc., to CGB Diversified Services Inc., a crop insurance, transportation and storage firm in Illinois. Upon completion of the sale, Everest Re will provide quota share reinsurance capacity on the combined crop insurance portfolio of the Diversified/ Heartland companies. CGB offers crop insurance products and services to farm-
ers across 38 states. This transaction is contingent upon all customary closing provisions, including all required regulatory and board approvals. Diversified Services is headquartered in Jacksonville, Ill. It offers crop insurance, risk management and grain marketing expertise. Everest Re Group provides reinsurance to property/casualty insurers in both the U.S. and international markets
Mesirow, Alliant
Chicago-based Mesirow Insurance Services (MIS), a division of Mesirow Financial, has joined Alliant Insurance
Services’ middle-market platform, Alliant Americas. Terms of the agreement were not disclosed. Founded in 1972, MIS is a full-service insurance brokerage and consultant specializing in property/casualty insurance, employee benefits, life and disability, private client insurance, and structured settlements. Mesirow Financial is an 80-year-old independent, employee-owned financial services firm. MIS will continue to operate under its existing organizational structure, with the MIS leadership team and division employees joining Alliant. In addition, MIS will continue
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HGGC, Integrity, Premier
Palo Alto, Calif.-based middle market private equity firm HGGC, has completed its equity investment in Integrity Marketing Group LLC, an independent distributor of life/ health insurance products focused on serving the senior market. Concurrently, HGGC and Integrity announced they will acquire Norfolk, Neb.-based Premier Companies Inc., an insurance marketing organization.
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AUGUST 8, 2016 INSURANCE JOURNAL | NATIONAL | 31
10
SPOTLIGHT | Drones
Things to Know About Drones
real estate; telecommunications; utilities and energy. — Assurex Global, “Drone Insurance: A Market on the Rise”
1
Federal Aviation Administration (FAA) drone definition: “An unmanned aircraft system (UAS), sometimes called a drone, is an aircraft without a human pilot onboard. Instead, the UAS is controlled from an operator on the ground.” — FAA
2
Insurance Services Office (ISO) defines “unmanned aircraft” as: “An aircraft that is not: 1. Designed; 2. Manufactured; or 3. Modified after manufacture to be controlled directly by a person from within or on the aircraft.” — Chris Boggs, director, Academy of Insurance
3 4
FAA estimates sales of UAS will rise from 2.5 million in 2016 to 7 million in 2020. — FAA Under the new FAA rules for commercial use of small UAS, effective Aug. 29, pilots must keep them within visual line of sight; height and speed are restricted; and flights over unprotected people who aren’t directly participating in the UAS operation are prohibited. — FAA
7
Common exposures: theft of the drone and attached equipment; damage to the drone, including attachments, electronics and components; property damage caused to others by the drone; bodily injury caused to others by the drone; premises liability at locations used in connection with scheduled flights; malicious damage; system hacking; contractual liability. — Assurex Global
B (Personal and Advertising Injury); Exclusion – Unmanned Aircraft (Coverage A Only) (CG 21 10 06 15); and Exclusion – Unmanned Aircraft (Coverage B Only) (CG 21 11 06 15). — Chris Boggs
9
ISO has three exclusionary endorsements with specific exceptions: Limited Coverage for Designated Unmanned Aircraft (CG 24 50 06 15): limited protection under Coverages A and B; Limited Coverage for Designated Unmanned Aircraft (Coverage A Only) (CG 24 51 06 15) ; and Limited Coverage for Designated Unmanned Aircraft (Coverage B Only) (CG 24 52 06 15). — Chris Boggs
5
Drones weighing more than 0.55 pounds must be registered with the FAA. As of April 2016, over 430,000 were registered in the U.S. — FAA
6
Ten markets needing insurance coverage for drones: agriculture; construction and surveying; film and photography; freight transport; law enforcement and security; news media; oil and gas;
32 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
8
ISO’s three exclusionary endorsements for drones: Exclusion – Unmanned Aircraft (CG 21 09 06 15): excludes the use of UAS in both Coverage Part A (Bodily Injury and Property Damage) and Coverage Part
10
Both the 2016 Republican and Democratic national conventions were deemed “no drone zones” by the FAA. — FAA INSURANCEJOURNAL.COM
Homeowners | Spotlight | NATIONAL
Homeowner Insurance Claim Severity Up 7% Due to Lightning in 2015
T
he number of homeowners insurance claims from lightning strikes in the United States fell in 2015. However, the total insurers paid on those claims rose by nearly 7 percent, according to the Insurance Information
Institute (I.I.I.). In fact, $790 million in lightning claims was paid in 2015 to nearly 100,000 policyholders. An analysis of homeowners insurance data by the I.I.I. and State Farm found: • Total insured losses from
Homeowners Insurance Claims & Payout for Lightning Losses, 2010–2015 Year Value of Claims Number of Average cost ($ millions) claims per claim 2010 $1,033.5 213,278 $4,846 2011 952.5 186,307 5,112 2012 969.0 151,000 6,400 2013 673.5 114,740 5,869 2014 739.0 99,871 7,400 2015 790.1 99,423 7,947 % change, 2014-2015 6.9% -0.4% 7.4% % change, 2010-2015 -23.6% -53.4% 64.0%
INSURANCEJOURNAL.COM
Top 10 States with Estimated Number & Cost of Lightning Claims, 2015 Rank State Number Average Value of of cost per claims claims claim ($millions) 1 FL 156.2 $11,898 $13,131 2 GA 61.0 10,442 5,844 3 TX 84.9 8,844 9,595 4 LA 24.4 5,333 4,578 5 AL 28.3 4,508 6,280 6 NC 28.8 4,226 6,810 7 PA 13.2 3,686 3,579 8 TN 24.5 3,397 7,212 9 VA 21.0 3,174 6,607 10 SC 13.7 3,163 4,318 TOP 10 455.9 58,671 7,771 Other 334.2 40,752 8,200 USA 790.1 99,423 7,947
lightning rose 6.9 percent from 2014 to 2015, although losses have declined 23.6 percent since 2010. • There were 99,423 insurer -paid claims in 2015, down 0.4 percent from 2014. • The average lightning claim paid 7.4 percent more than a year ago: $7,947 in 2015 vs. $7,400 a year earlier. • The average cost per claim rose 64 percent from 2010 to 2015. By comparison, the Consumer Price Index, which measures the change in the cost of a fixed basket of prod- ucts and services, including housing, electricity, food, and transportation) rose by 9 percent in the same period. “The average cost per claim is volatile from year to year,” said James Lynch, I.I.I. vice president of information Services and chief actuary, “but it has generally continued to rise, in part because of the enormous increase in the number and value of consumer electronics including increasingly popular home automa-
tion systems.” The drop in claims is consistent with data from the National Weather Service, which recorded 334 events with property damage in 2015, down from 401 in 2014. There were 135 days in 2015 in which lightning caused property damage, and 128 such days in 2014. Florida — the state with the most thunderstorms — was the top state for lightning claims in 2015, with 11,898. Damage caused by lightning, such as fire, is covered by standard homeowners insurance. Some policies provide coverage for power surges that are the result of a lightning strike. “Not only does lightning result in deadly home fires,” Lynch said, “it can cause severe damage to appliances, electronics, computers and equipment, phone systems, electrical fixtures and the electrical foundation of a home.”
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NATIONAL | MyNewMarkets TicketProtect
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vehicleadminservices.com) offers a new motor club product that reimburses members for unexpected traffic citations. Members are also afforded emergency roadside assistance benefit that covers towing, lockouts, tire changes, jump starts, and more. The product is designed to complement existing insurance products and can be added for as low as a few cents per month. Available limits: As needed Carrier: Unable to disclose, admitted States: All states except Ala., Calif., Conn., Kan., Md., Mont., N.C., Neb., N.H., Tenn., and Wyo.
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Nonstandard Auto - Liability & Physical Damage Market Detail: SCJ Insurance Services
(www.scjins.com) specializes in California nonstandard auto insurance sold through independent insurance brokers. We provide marketing, as well assistance to the insurance companies we represent and the brokers who submit insurance applications, with underwriting, policy issuance, premium accounting and research and analysis. Available limits: As needed Carrier: Unable to disclose States: Calif. only Contact: Customer service at 800-6406046
Companies’ (www.phly.com) nonprofit mum $2 million insurance package policy program is Carrier: Philadelphia Insurance Cos. designed to provide a wide range of special States: All states except La. insurance needs for the nonprofit sector as Contact: PHLY Marketing Department at defined under IRS code (C)(3).bridgegap ad 1.qxp_Layout 800-873-4552 30357 Ins. Journal 2016 501 4.75x7.5 1 or 6/29/16 6:57 AM Page 1 Available limits: Minimum $5,000, maxiemail: phlysales@phly.com
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Community Banks
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Services (www.onebeacon.com) offers property/casualty coverage for commercial banks, savings banks and savings and loan institutions, security broker-dealers, investment advisors, insurance companies and credit unions. Specialty coverage, including management liability, professional liability, cyber liability and financial institution bond, are available for institutions with less than $3 billion in assets. Available limits: As needed Carrier: OneBeacon Insurance Group States: All states Contact: Craig Collins at 952-886-7111 or email: ccollins@onebeacon.com
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AUGUST 8, 2016 INSURANCE JOURNAL | NATIONAL | 35
Idea Exchange
The Competitive Advantage
Agencies’ Greatest Struggle
By Chris Burand
A
n agency’s greatest struggle, per many surveys, is finding staff and producers. What if they were as available as different loaves of bread and you could go to a supermarket to purchase producers and staff? Let’s say you wanted the cheap and unhealthy white bread equivalent of a producer. You would know you’re not going to get much production and if you use the producer too much, your agency would suffer, just like eating too much cheap white bread is bad for your body. But, white bread is available everywhere, you know what you’re getting, and it does not cost much. For peddlers of insurance, ver-
sus professionals, the white bread equivalent of a producer may be perfect. Easy come, easy go. Or maybe you are looking for something healthier, say a multigrain commercial customer service representative (CSR). You don’t always know what you’re going to get. Sometimes they taste good and sometimes they’re not that palatable. In theory, multigrain breads are always healthier, but if they cost more and you don’t like it, you have incurred an expensive lesson. Maybe you go to a specialty market because you are looking for a high-priced producer. Each one is custom built and expensive. You have plenty of choices, but choose carefully because just like food, there are no returns. Each producer is high quality and capable. Whether they succeed in your shop depends entirely on whether your culture supports high-quality producers, whether you have the tools and carriers to write larger, more sophisticated accounts, and whether you have the leadership to manage these producers, some of whom can be divas. Some will be more like cheese than bread — better with age and best aged within a particular agency.
itors have the same opportunity to shop at the same market. Now that you know where to find these people, what changes in your agency? Not much in many agencies. Many agency owners simply use the lack of quality people as an excuse to not grow, develop or even prosper. They know no one will challenge their reasoning (excuse). This is especially true if the other person in the conversation is a company person. It reminds me of a scene where a middle-aged man, not handsome or evidently wealthy by any visible means, kept looking and staring at a beautiful young woman at a hotel restaurant. Eventually she came to his table, began a conversation and then made a suggestion. He had been wishing for her all evening, and now that he had an opportunity, he hadn’t a clue what to do, say, think, feel or act. Some agency owners have been staring so long into space wishing for quality people, they would not know what to do if one landed on their door (and yes, I have seen quality producers land at an agency door, as if dropped by a spaceship, and not once did the agency owner know what to do).
Opportunity to Shop
Before you go shopping for a quality person, what has to change in your agency? In some cases, existing people, especially lousy producers, need to be fired.
You have your choice of hundreds of quality staff and producers in this fantasy supermarket. Of course, all your compet-
36 | INSURANCE JOURNAL | NATIONAL AUGUST 8, 2016
What Has to Change
INSURANCEJOURNAL.COM
In some agencies, better staff needs to be hired prior to hiring a high-quality producer, or a high-quality producer needs to be hired to keep quality staff from leaving. Sometimes the owner needs to go through roll play of what it will be like a month after employing much better people — because having high-quality people on board requires a change in the way owners walk in the agency door every morning. Having higher quality people requires elevating leadership and management. If every agency can shop at the same store, what is the competitive advantage of you, the potential employer? An agency is best served thinking through the competitive advantages required, other than just hiring a quality key employee. Obviously humans can’t be bought like bread and cheese. They get to choose their employer. Failing to realize producers choose their employers is a fundamental mistake agency owners make when they
complain about not being able to find quality people. If you’re looking for quality producers and not finding, then your strategy is wrong. The strategy should be to become attractive to potential, quality employees. What kind of bread do the highest quality staff and producers enjoy? That is the most important question to ask when searching for quality people. What makes you, the employer a place for quality people? I’ve challenged agency owners for years to name three, hard, tangible reasons anyone would ever want to work for them. Almost no one can give a plausible answer immediately, or even in a week or month. Even if they have three reasons, how would potential employees know those three reasons? What are you doing to get the message to the job-seeking public? The solution for finding high -quality employees is to quit looking. The solution is to build an agency that gives potential
high-quality employees the environment, culture, and means they will need to succeed. This means something different for everyone, but the only way to execute a strategy to achieve this goal is through a methodical, step-by-step plan. If you have the time, fortitude, knowledge, and self-discipline to do this yourself, wait not another minute, because you will be so far ahead of your peers. Otherwise, hire a third-party to assist with finding a quality person now rather than waiting another five or 20 years. It’ll be a great return on your investment. Remember, you are the loaf of bread on the store shelf hoping to be purchased, not the other way around. What makes you attractive, especially at a premium price?
Share this article with a friend. IJMAG.COM/88RF Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868.
Liars Lie.
Can you handle the truth? Liars will leave as soon as the claim is
Policy Address
Address Based on Vehicle Sightings
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Idea Exchange
Academy Journal
Condominiums and the Problems They Cause Who Insures Which Property?
By Christopher Boggs
C
ondominiums present a unique problem for insurance agents and underwriters. Two separate persons (one a legal person and the other a natural person) may “split” the ownership of contiguous property. Regardless of the client’s status as the association or individual unit owner, one key question must be answered to design the insurance program correctly: Who is responsible for what property?
Associational responsibility is divided into three levels: original specifications, all-in and bare walls. And each definition presented in this article is from the association’s perspective — delineating which part of the real property the association must insure. Property not insured by the association must be protected by the unit owner’s insurance policy. To fully understand the three levels of associational responsibility first requires the four categories of condominium real property be specifically described and understood. Condominium real property is classified as either a: 1) common element; 2) limited common element; 3) unit property or 4) unit improvements and betterments. • Common elements are owned by and benefit all or nearly all members of the association. Land, parking lots and the building’s structural foundations and
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• • •
load-bearing walls are examples of common elements. Also included in this definition are club houses, pool houses, pools, fences, gates, playground equipment, tennis courts and other property owned by and allocated to all unit owners. Not all property categorized as a common element is insurable in standard property policies (i.e. land), but most can be scheduled. Limited common elements are beneficial to more than one but less than all unit owners. Common hallways or corridors providing access to several units, walls and columns containing electrical wiring or sprinkler piping serving or protecting multiple units or a plenum enclosure providing heating and cooling to multiple units are examples. Doorsteps, stoops, decks, porches, balconies, patios, exterior doors and windows or other fixtures designed to serve a single unit but located outside the unit’s boundaries are often catego- rized as limited common elements because the appearance and safety of these fixtures directly affects multiple unit owners although connected to just one unit. Unit property is defined by the association’s declarations or statute and is limited to and benefits none but the unit owner. The inside of the exterior walls, interior partition walls, counter tops, cabinetry, plumbing fixtures, appliances and any other real property confined to the unit are examples. Unit property’s definition can vary widely with no universal designation. Unit improvements and betterments like unit property benefit none but the unit owner. The three previous definitions of associational responsibility classifications require improvements
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and betterments be classed separately – excluding improvements and better ments from the definition of covered property under the association’s policy. A unit improvements and betterments is created by the unit owner’s engagement in any activity or improvement that increases the value of the real property within an individual unit – such as updating the flooring from carpet to hardwood or other such improvements.
provides all-in protection, and betterments and the owner’s then: personal property within the unit. • The association insures common At issue in bare wall situations is the elements, limited definition of unit. Unit does not have a common elements, universal or even uniform definition. Unit unit property and unit boundaries, the beginning of the area the improvements association is not responsible for insuring, and betterments; can be everything from the studs; or the • Unit owners insure only unfinished walls (meaning the paint is personal property insured by the unit owner); or the sub-floor within the unit. and underside of the ceiling, or any other variation. Bare walls wording limits associational insurance NFIP – A Special Case responsibility to the common elements Two standard flood insurance policies and limited common elements. To com(SFIPs) connect in condominium forms of plete the puzzle: ownership: the Residential Condominium • The association insures the common Building Association Policy (RCBAP) pro elements and the limited common vides coverage for the association and the elements; Dwelling Form is purchased by the individA&M helps BIG.pdfwith 1 insuring 1/5/16 12:36 ual PM unit owner to cover personal property. • Unit owners are tasked unit property, any unit improvements continued on page 40
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Levels of Associational Responsibility Explained Original specification requirements,
known as single entity coverage, make the association responsible for the common elements, limited common elements and C unit property. Unit improvements and betterments are not the responsibility of theM association. Connecting the pieces: Y • The association insures the common elements, limited common elements CM and unit property; MY • Unit owners insure unit improvements CY and betterments and their personal CMY property within the unit.
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All in (all inclusive) requirements differ
from original specification wording in one major aspect: the association’s additional responsibility to insure unit improvements and betterments. In addition to insuring common elements, limited common elements and unit property, associations extending protection on an all in basis are also charged with insuring unit improvements and betterments. If the association INSURANCEJOURNAL.COM
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Academy Journal continued from page 39
Advertisers Index
Read, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/
Abram Interstate www.abraminterstate.com W9 Accident Fund www.accidentfund.com SE9 Ace Limited www.chubb.com 13 American Agents Alliance www.agentsalliance.com 41 Anderson & Murison www.andersonmurison.com 39 Aon Affinity www.affinityhcp.com 19, SC6, SE5, E3 Applied Underwriters www.auw.com 4,5,44 Burns & Wilcox Ltd. www.burnsandwilcox.com 9 California Earthquake Authority mvp.earthquakeauthority.com W3 Century National www.cnico.com W13 CTC Transportation Insurance Services www.coast-ins.com 29 Cypress P&C www.cypressig.com SE10 Cypress Texas Lloyds www.cypressig.com SC7 Digital Recognition Network www.drndata.com 37 EMC Insurance www.emcins.com W7, SC3, SE3, E3, M3 Energi Insurance Services, Inc. www.eservicesco.com 38 EZLynx www.ezlynx.com 16,17 First Amer. Specialty Insur. Co. www.firstam.com W8 Fujitsu FCPA www.fcpa.fujitsu.com 21 GeoVera Insurance Company www.geovera.com SC8, SE7 Leavitt Group Enterprises, Inc www.leavitt.com 2 Louisiana Commerce & Trade Assoc. www.lctacomp.com SC9 M.J. Hall & Company www.mjhallandcompany.com W14 MetaPay www.afsibex.com 23 Monarch E&S Insurance Services www.monarchexcess.com W3, W11 NAPSLO www.napslo.org 35 Pacific Gateway Insurance Services www.pgiainsurance.com W15 Pacific Specialty Insurance Company www.pacificspecialty.com W5 Patra Corporation www.patracorp.com 43 PersonalUmbrella.Com www.personalumbrella.com 7 Siracusa Staffing & Leasing www.ssandlnow.com SE3 South & Western www.southandwestern.com SC3 St. Johns Insurance Company www.stjohnsinsurance.com SE9 Texas Mutual - Safety Group www.texasmutual.com SC5 The Hartford Insurance Group www.thehartford.com 10,11 United Valley Insurance Services www.unitedvalleyins.com W16 Westfield Bank www.westfield-bank.com 34 Worldwide Broker Network www.wbnglobal.com 31
These forms apply as per NFIP standards regardless of any statutory or associational declaration regarding insurance responsibility. The RCBAP policy form specifically states that coverage is provided for all real property to include real property that is part of the unit. FEMA guidelines further clarify in rule “IV.
COVERAGE: A. Property Covered: The entire building
is covered under one policy, including both the common as well as individually owned building elements within the units, improvements within the units, and contents owned in common. Contents owned by individual unit owners should be insured under an individual unit owner’s Dwelling Form.” In essence, the RCBAP is allin coverage.
Completing the Condo Coverage Picture
Agents for both the association and the unit owner require the same mass of information to complete the condominium puzzle. All the pieces must be available. To properly write property coverage, agents must have: • A copy of the association’s declarations or covenants, conditions and restrictions; • A copy of the applicable state statute; • An official letter documenting the definition of a unit’s boundaries detailing who is responsible for insuring which property. Many agents forego this step, depending on their own experience and knowledge to make this determination. This decision could prove detrimental in court; and • A verifiable or signed property valuation calculation. Due to the intricacies of ownership and various combinations of responsibility to which condominium associations and unit owners are subject,
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getting a written valuation from a specially trained professional or approval from the insured will be beneficial should any question arise. When insuring personal property only, let the insured value his property. Insuring individual unit owners requires gathering and piecing together the same detail as does insuring a condominium association. Association and unit owner programs must dovetail seamlessly. Unless both sides utilize the same data, such a clean connection and complete picture is impossible.
Share this article with a friend. IJMAG.COM/88JE Boggs is vice president of education for the Academy of Insurance. Email: cboggs@ijacademy.com. INSURANCEJOURNAL.COM
Closing Quote Retention Strategy with Millennial Policyholders
By Kevin Michael Patterson
W
ithin the last decade, the global business marketplace as a whole has undergone several facelifts when it comes to the comprehensive sales process. Perhaps the most noticeable change within this spectrum is the hefty online presence of most businesses. As a result, billions of dollars and man hours have been spent by insurance companies making it easier than ever to get a hassle-free online quote. Within the same timeframe, a new and less predictable group of consumers has emerged — millennials. Consequentially, the stability of the average book of business has been inversely impacted due to the ease of switching companies. At the forefront of this liquidity is the millennial demographic, which according to Nielson, makes up roughly one-fourth of the U.S. population. Compared to their counterparts of generations before,
millennials have grown up with a vastly different shopping experience. Just like computers have slowly made libraries obsolete, the online presence of insurance companies is slowly doing the same to brick and mortar agencies. Captive agencies, once high and mighty within our sector, have flattened, while web-based companies have thrived. Valuable market share has changed hands at an unprecedented rate and updated our industry’s identity. To stabilize this segment, we must understand the demographic more clearly. According to the U.S. Census Bureau, the average pre-tax income of millennials is $33,000, significantly lower than their contemporaries. In addition, SDL researchers concluded that millennials use their smartphones about 45 times per day. With these two statistics alone, it’s simple to understand why the millennials have become significantly less loyal than generations before. Although today’s youngsters earn similar wages as recent college grads of years past, they are now funding expenses that didn’t exist 15 years ago like wifi and cellphone data. With less disposable income, these customers tend to shop more based upon price, making them quick to utilize online resources to save a few bucks. Although pre-Y2K insurance sales differed significantly compared to current times, many insurance agencies have failed
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The pervasiveness of mobile devices has changed consumer expectations. to adapt. Historically, insurance has not been shopped each year by most policyholders and most changes were made faceto-face. Yet, 16 years into the millennium, changing communication standards have made it socially acceptable to maintain financial services without meeting an agent face-to-face. The good news is that for agencies willing to adapt, there is still time to maximize the potential of millennial policyholders. By strategically using the same principles that have made this sector so unstable, agents can make insurance more of a “set it and forget it” aspect of life. Adopting new payment options like re-occurring auto-drafts from a checking account or credit card enables agents to offer millennials a more hands-off experience. This strategy alone provides the consumer with less responsibility. Making customers less apt to be reminded of small changes in premium increases an agency’s chance of
long-term retention. Another approach to millennial retention is to keep more detailed CRM data. Staying up-to-date on financial information such as auto lienholders and third-party interests at apartment complexes can serve value at the time of a claim or during renewal as the need to rely upon the consumer is again minimized. By harnessing the same concept that has made this arena so unsteady, agencies are able to increase both retention and customer satisfaction. By taking payments, insurance certificates, and renewal information out of the client’s hands, the consumer’s personal involvement is put on auto-pilot, making the idea of switching companies unappealing. Patterson is a young insurance agent with American Family Insurance currently working in the North Indianapolis, Ind., suburbs. He can be reached at 317-770-6006 and by email at: Kevin. Patterson@amfam.com. INSURANCEJOURNAL.COM
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