Insurance Journal West 2016-11-21

WEST REGION Full-length San Andreas Jolt?

Calif. Injured Workers and Pot Washington’s EQ, Tsunami Plan

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Contents November 21, 2016 • Vol. 94 No. 22 • West

West W1 Washington Governor Wants Coordinated Earthquake, Tsunami Response Plan

W1 WASHINGTON GOVERNOR WANTS

COORDINATED EARTHQUAKE, RESPONSE PLAN

12 P/C Insurance Execs See Growth Coming from Tech Innovation, New Products 13 Independent Agents on Growth, Technology and Disruption: Study

W2 Report: Big One Along Full Length of San Andreas Could Be Quite Destructive

18 Closer Look: Top Personal Lines Leaders

W6 AG Defends California Insurance Commissioner’s Regulatory Move W8 Will Legal Weed in California Increase Demand for It from Injured Workers?

National

12

20 Special Report: How Smart Building Is Changing Construction Risks

P/C INSURANCE EXECS SEE GROWTH COMING FROM TECHNOLOGY INNOVATION, NEW PRODUCTS

32 Spotlight: Advising Senior Living Residential Clients on Sexual Expression Policies

Idea Exchange 23 The New Frontier in Worker Safety: Mental Wellness and Suicide Prevention 24 How Tech Can Turn the Tide of Flood Insurance 26 Tech Talk: Insurtech Competition and New Cyber Security Threats Pose Increased Challenges 28 The Wedge: The Brutal Journey of Newly Appointed Agency Sales Managers 30 Capitalizing on the Health Clinic Marketplace

Departments

34 Closing Quote: What’s Next for Your Agency Perpetuation Plan?

W4 People 14 Declarations 14 Figures

24 HOW TECH CAN TURN THE TIDE

OF FLOOD INSURANCE

6 | INSURANCE JOURNAL | WEST NOVEMBER 21, 2016

15 Business Moves 33 MyNewMarkets

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THE RIGHT EQUIPMENT IS EVERYTHING NOT EVERY E&S CARRIER UNDERSTANDS THE UNIQUE RISKS YOUR CONTRACTOR AND CONSTRUCTION CUSTOMERS FACE. We and our wholesale general agents can help make sure the focus stays on getting the job done by offering the right coverage at the right value.

Visit our website to find a wholesale general agent near you.

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OPENING NOTE

Write the Editor: awells@insurancejournal.com

Cyber Sales Slow Down

F

or many years, cyber liability has been the hot opportunity for new sales. But that may be over, or at least the pace of sales seem to be slowing.

The overall upward trend of organizations purchasing cyber insurance continued in 2016, however there are signs the market is slowing after six years of rapid growth, according to a new survey, 2016 Zurich Insurance-Advisen.

The proportion of companies buying cyber insurance has increased by 85 percent, up from 35 percent of companies purchasing coverage in 2011 to 65 percent in 2016.

However, the proportion of companies buying in 2016 was up only 7 percent from 2015.

This compares to an 18 percent increase in 2015 over 2014.

Over the six years of this study, the cyber risk awareness of businesses outside the personal data-driven industry segment has grown, but the report's authors note there are still some companies that believe their exposure is minimal. For example, the top reason respondents do not purchase a cyber policy is they believe their organization is not susceptible to a cyber-related loss.

Businesses within personal data-driven industries such as health care, finance and banking, retail and communications industries view cyber risk more seriously, have more robust cyber security and risk management strategies, and are more likely to purchase a security and privacy insurance, according to the survey. Some 78 percent of respondents from personal data-driven industries purchase security and privacy insurance, compared with only 59 percent from all other industries.

“The nature of data security has changed immensely in the six years we have worked on this survey with Advisen,” said Bryan Salvatore, president of Specialty Products for Zurich North America. “This year’s results continue to mark the evolving views of risk professionals, C-suite executives and boards and reveal a shifting approach to information security and cyber risk management.”

Salvatore said that industries handling personal data have developed a “good underFOR QUESTIONS standing” of the risks associated with potenREGARDING SUBSCRIPTIONS: Call: 855-814-9547 tial security breaches, however there is “more Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: work to do” to help other industries better insurancejournal.com/subscribe understand the risks they face and how best to Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media protect themselves.

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 The survey reflects responses from 345 U.S.per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pubbased risk managers, insurance buyers and lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended other risk professionals covering both large 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 and small companies.

Media Group, Inc. All Rights Reserved. Content may not be photo-

The cyber risk awareness of businesses outside the personal data-driven industry segment has grown, but there are still some companies that believe their exposure is minimal.

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 Columnists Randy Schwantz, Tom Wetzel

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 Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com

Contributing Writers Insurance Markets Manager Bruce Dmytrow, John Elbl, Lawrence Kristine Honey (619) 584-1100 X132 Hurley, David James, Keith Mangini, khoney@insurancejournal.com Matthew Mitchell, Joel Rosenblat Social Media Manager IJ ACADEMY OF INSURANCE Ly Short (619) 890-7735 Online Training Coordinator Lshort@insurancejournal.com Barbara Whiffen bwhiffen@ijacademy.com Classifieds, Jobs, Agencies Wanted/For Sale ADMINISTRATION Sr. Sales & Marketing Coordinator Chief Financial Officer Kelly De La Mora (800) 897-9965 X125 Mark Wooster kdelamora@insurancejournal.com mwooster@wellsmedia.com

MARKETING

DESIGN/WEB

Marketing Director Derence Walk dwalk@insurancejournal.com

Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com

Marketing Administrator Gayle Wells gwells@insurancejournal.com

V.P. of Design Guy Boccia gboccia@insurancejournal.com

NEW MEDIA

Senior Web Developer Chris Thompson cthompson@insurancejournal.com

New Media Producer Bobbie Dodge bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com

Web Developer Jeff Cardrant jcardrant@insurancejournal.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

copied, reproduced or redistributed without written permission.

Insurance Journal is a publication of Wells Media Group, Inc.

Andrea Wells Editor-in-Chief

8 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

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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National

P/C Insurance Execs See Growth Coming from Technology Innovation, New Products

T

echnology innovation will provide the biggest growth opportunities for reinsurers in the year ahead, according to a survey by Guy Carpenter & Co. The survey polled executives from insurance and reinsurance companies, asking them to identify the top opportunities and threats, and the most significant disruptive forces.

Forty-two percent of those surveyed believe technology innovation represents the greatest growth opportunity in 2017, followed by new products (25 percent), new geographic markets (13 percent), talent acquisition (12 percent), and mergers and acquisitions (M&A) (8 percent).

Thirty-six percent of respondents cited the potential for a financial recession as the

emerging risk that will be the biggest threat to profitable growth in the year ahead.

Meanwhile, 1-in-3 professionals ranked cyber as the most threatening emerging risk, followed by technology risks (11 percent), climate change (11 percent) and terrorism (9 percent).

“One of the most important findings we can take away from this year’s survey is the significant growth opportunity that technology innovation continues to bring to the (re)insurance industry,” said Tim Gardner, CEO of U.S. operations for Guy Carpenter.

“The industry must be prepared to not only understand and manage the risks associated with these rapid advancements, but to also utilize these innovations to create actionable business intelligence and realize

12 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

profitable growth opportunities.”

Thirty-eight percent of those surveyed viewed predicted the continued rise of big data will cause the most disruption in the (re)insurance industry over the next five years. Other market-changing forces include the speed of technological innovation (29 percent), aging population (15 percent), millennials (13 percent) and expanding urbanization (5 percent).

Looking to 2017, 21 percent see regulatory and rating agency changes as the biggest threat to profitable growth. Seventeen percent are concerned about global economic and political uncertainty; 16 percent fear operational inefficiencies; and 10 percent are most concerned about catastrophe/ non-catastrophe losses.

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News & Markets | NATIONAL contributed to this renewed sense of optimism,” Winterburn said.

Tech Budgets Increase

More than half of surveyed agencies (51 percent) say their technology budget has increased over the past 12 months and another 63 percent anticipate additional increases in the next year. In much the same way as other industries, roughly half of IT budgets are allocated towards essential maintenance- based activities such as replacing outdated hardware or software updates, but agencies are also prioritizing investment in new technologies to help them grow their books of business (36 percent) and mobile smart devices (35 percent).

How Independent Agents Feel About Growth, Technology and Disruption

P

roperty/casualty independent insurance agents are more optimistic this year than they were in 2015. Nearly half (49 percent) of agencies responding to an industry survey say they are “very optimistic” about the future success of their agency compared to just 29 percent who felt optimistic in 2015.

Vertafore’s third annual report, titled “How Independent P&C Insurance Agencies Thrive in 2016’s Competitive Marketplace,” examined independent P/C agency sector’s outlook for 2016 and into the future. The report also looked at agency principal and producer perceptions of investments, threats and opportunities.

In 2015, there were several industry events that were cause for concern among independent agents, according to Bruce Winterburn, Vertafore vice president of industry relations.

“For instance, Google announced entry into the auto insurance rating market, VC (venture capital) funding in the insurtech startups more than tripled, and carriers were, and still are, getting more sophisticated in their use of predictive analytics,” Winterburn said. He said that these events were “hyped to question the value” of the independent insurance agent.

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Disruption

“Fast-forward to today, Google is no longer dabbling in insurance and agents have doubled down on their use of technology in day-to-day operations to help them compete with new insurtech market entrants,” he said.

The 2016 findings represent a significant uptick from 2015 survey results, which witnessed a 22 percentage point drop in optimism from the year before (from 51 percent in 2014 to 29 percent in 2015).

The annual survey is conducted by independent analyst firm, Hanover Research.

Vertafore sponsored the survey.

Growth Plans

The survey found that agency growth plans also are recovering. This year’s survey found 84 percent of agencies planning moderate to aggressive growth over the next three to five years, with 36 percent planning aggressive growth (up from 29 percent in 2015).

The year-over-year comparisons show a steady increase in technology budgets and adoption of business software including mobile and customer relationship management (CRM) tools, the survey found.

“The industry activity coupled with revenue increases across both P/C lines have

The digital disruption of the insurance industry has been driven by several factors and perceived threats to the independent insurance agent including, Generations X and Y’s desire to interact directly with insurance agencies (40 percent serious or moderate threat), the commoditization of personal auto insurance (39 percent), and insurance carriers’ use of predictive analytics that enable them to be more self-sufficient (38 percent).

Nearly half (47 percent) of agencies claim to be experimenting with new marketing tactics, as well as increasing customer self-service capabilities (36 percent).

Almost one-third of agencies (31 percent) reported an increase in customer inquiries on usage-based products last year and view usage-based insurance as an opportunity to grow their customer base.

Fewer agents perceive new venture capital (VC) backed insurtech startups to be threatening their agencies.

In 2015, more than half (54 percent) of agents surveyed felt moderately to seriously threatened by these competitive newcomers. Fast-forward 12 months, this year’s study found 76 percent of agencies view these entrants as a small threat or not a threat, even despite VC funding more than tripling to $2.6 billion in 2015. Share

this article with a colleague.

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NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 13

Figures

10

The approximate percentage drop in the number of opioid prescriptions written and filled in Wisconsin compared to this time last year published in a Wisconsin Controlled Substance Board report.

$350

$15 MILLION

“I continue to believe that the facts demonstrate an unsafe condition to the public that could easily be solved by the responsible parties at very little cost.”

— Attorney Paul Newton Jr. of Gulfport, Miss., comments on a

lawsuit he filed against Popeyes Louisiana Kitchen after he said he choked on a piece of chicken from the restaurant. Newton said he was not given a knife to cut his chicken with at the drive-thru, which caused him to choke.

Fast Food Resolution

“We entered into this mutually acceptable resolution to avoid the costs and disruption associated with continued litigation.”

— McDonald’s spokeswoman Terri Hickey said

McDonald’s Corp. is not a joint employer of franchise workers when commenting on the company’s agreement to pay $3.75 million to settle a suit claiming it was liable for labor law violations by a California franchisee.

“All the police officers … admitted to being guilty. We’re just thankful for all of this. Because all of this could have been wiped away.”

— Lance Madison, whose brother Ronald was killed by New

Orleans police on Danziger Bridge five days after Hurricane Katrina, after a former police sergeant, Gerard Dugue, pleaded guilty to helping Sgt. Arthur Kaufman cover up the bridge shootings. Kaufman also pleaded guilty to the cover up.

Drop in Uncompensated Care

The amount in damages sought by the family of the now deceased Abebe Bikila, who won the 1960 Olympics marathon barefoot, against Washington shoemaker Vibram. The company, which makes foot-glove-style shoes, named some of its models after Bikila. A judge dismissed the suit.

$151 MILLION The number of pedestrians in Houston who have been struck and killed by vehicles as of Oct. 31. That number is 31 percent higher than the total for all of 2015, which in turn had a 7.1 percent increase in such fatalities over 2014. Overall traffic fatalities have also increased in Houston.

Popeyes Lawsuit

Not Wiped Away

The amount per hour New Jersey Transit is paying a former Metro-North president to help it meet federal rail safety requirements. The agency is paying Peter Cannito to review Federal Railroad Administration violations uncovered in an audit. An Associated Press analysis found NJ Transit had more accidents than any other commuter railroad in the past five years.

71

Declarations

The settlement amount involving two companies sued over the 2014 chemical spill that contaminated drinking water in southern West Virginia. The class action settlement amount mandates that West Virginia Water Co. will pay $126 million and chemical maker Eastman Chemical will pay $25 million. The money will be distributed to those affected.

14 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

“While we still have significant challenges to ensure that all Minnesotans have access to high-quality health care at affordable rates, this drop in charity care and bad debt is a positive sign that reflects our progress in reducing the number of Minnesotans going without coverage.”

— Minnesota Health Commissioner Ed Ehlinger, in a statement

regarding a state health department report showing the cost of uncompensated care at Minnesota hospitals has dropped nearly 17 percent since the federal Affordable Care Act.

InsuranceJournal.com

Poll

Do you think the workers' compensation system needs some federal oversight?

Yes 33.07% (83 votes) No 58.96% (148 votes) Not sure 7.97% (20 votes) Total Votes: 251

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West

Washington Governor Wants Coordinated Earthquake, Tsunami Response Plan

W

ashington Gov. Jay Inslee is directing several state agencies to work together to prepare for a coordinated plan in case of a catastrophic earthquake and tsunami.

The directive, which was issued earlier this month, creates a subcabinet group of the Washington Military Department’s INSURANCEJOURNAL.COM

Emergency Management Division to work with several state agencies, including the Department of Transportation and the Department of Health, “to identify data and information gaps that hinder preparedness and response plans.”

The group will work on a public education plan and will develop actions to

coordinate across state agencies and with federal partners to improve response time.

The group’s first meeting will take place in January and initial recommendations are due to the governor June 30, 2017.

Copyright 2016 Associated Press.

NOVEMBER 21, 2016 INSURANCE JOURNAL | WEST | W1

WEST | News & Markets

Report: Big One Along Full Length of San Andreas Could Be Quite Destructive

By Don Jergler

A

large earthquake along the San Andreas fault impacting both Northern and Southern California at the same time could wreak much more havoc than most may believe.

Such an event, once considered impossible up until demonstrated otherwise by the U.S. Geological Survey a few years ago, could cause up to 126 percent more residential property damage than previously thought, according to a report out in mid-November from data provider CoreLogic.

The analysis is based on the USGS’s most recent version of the Uniform California Earthquake Rupture Forecast, which concluded in 2013 that a single large earthquake could rupture simultaneously in both in the northern and southern parts of the state, and that quakes of magnitude 8.0 and higher will affect a larger land area and greater number of people.

Until recently it was believed the northern and southern portions of the San Andreas couldn’t affect each other during a quake as they were buffered by a “quiet zone,” but now scientists believe temblors in proximity to other faults have the potential to trigger them, said Maiclaire Bolton, one of the authors of the report.

CoreLogic used the USGS data to produce a new earthquake risk analysis that illustrates the higher conditional probability of losses for an earthquake impacting both regions simultaneously.

The CoreLogic analysis shows that an M8.3 along the San Andreas fault could result in a full rupture and increase the number of homes damaged from 1.6 to 3.5 million homes, and push up the reconstruction value from

$161 billion to $289 billion.

“A full rupture now has the probability of impacting in essence almost the entire state,” Bolton said, adding those areas include the densely packed San Francisco and Los Angeles regions. “That was always thought to not be possible.”

If there’s any good news in the report it’s that for both portions of the fault to be triggered it requires a huge quake, likely 8.0 or larger, she said.

“It really is these major, large events that do have the potential to impact Northern

‘A full rupture now has the probability of impacting in essence almost the entire state.

That was always thought to not be possible.’

W2 | INSURANCE JOURNAL | WEST NOVEMBER 21, 2016

and Southern California,” Bolton said.

The report also looks at a smaller M8.0 earthquake, thought to be just big enough to have the potential to impact both regions of the fault, and shows it would impact more than 2 million homes across the state with a total reconstruction value of $145 billion.

“I think the big thing is we know we have an earthquake risk in California, that’s not new, that shouldn’t surprise anyone, but I think that what is new that (the report is) showing the potential that an earthquake could be a lot larger in terms of area than previously believed could be impacted,” Bolton said.

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WEST | PEOPLE

Ken Cooper

Matt Luis

Brittany Skiles

Jeff Gray

Pat Moore

Rosette Abud

Western Growers Insurance Services Inc. has named Ken Cooper director of risk strategy.

Western Growers also named Matt Luis as a sales executive.

Cooper will spearhead the development of solutions for Western Growers’ members.

Cooper most recently was regional vice president at a national broker. He was previously with ESIS and the State Compensation Insurance Fund.

Luis will develop insurance initiatives for agribusinesses and food clients.

Luis most recently worked with Federated Insurance Co. as a broker. Before that he was in inside sales at REC Solar.

Western Growers represents farmers growing produce in Arizona, California and Colorado.

National E&S Insurance Brokers in Palmdale, Calif., has named Brittany Skiles an account manager and Jeff Gray as an environmental wholesale broker.

Skiles works with lines of insurance including general liability, contractor pollution and workers’ compensation.

She worked the last 10 years at Legends Environmental, a division of Insurance Office of America.

Gray specializes in hard to place risks, including construction risks and environmental risks.

He was previously with National E&S as a broker from 2003 to 2013 before leaving to join NAESIP as a regional vice president.

National E&S specializes in environmental and casualty risks.

MJ Insurance has added Pat Moore as an employee benefits and risk management consultant in its Phoenix, Ariz., office.

Moore will service new and existing clients while specializing in benefits consulting and cybersecurity.

Moore was previously a sales executive at Fidelity Information Services.

Indianapolis, Ind.-based MJ Insurance is a property/casualty and employee benefits agency.

Crest Insurance Group LLC has named Rosette Abud a commercial lines producer in its Arizona office.

Abud has a background in human resources. She was formally the district manager of BenefitMall Payroll and Human Resource Services.

She was also a benefits development manager at Nesco Resource.

W4 | INSURANCE JOURNAL | WEST NOVEMBER 21, 2016

Crest has offices in Tucson, Scottsdale, Sierra Vista, Phoenix and San Diego.

Pioneer Special Risk has named Mary M. Wiseley senior vice president in San Diego, Calif.

Wiseley has 25 years’ experience in developing risk management solutions for specialty contractors, including cranes and rigging. She has held management and leadership roles with Vela, Arrowhead and AIG. Pioneer Special Risk operates from offices in New York, Atlanta, Chicago and San Diego. tKg Wholesale Brokerage has named Eric Convery vice president of the small business division in its new Portland, Ore., office.

Convery will be responsible for growth and financial performance as well as broker and client relationships for the division.

Convery was previously the Western regional manager for a national managing general agency.

Joining Convery in the Portland office will be Mike Lambert, Jason Friar, David Goldstein and Deedee

Lane.

Phoenix, Ariz.-based tKg is a member of the Keating Cos. Starr Cos. has named Leslie Conti branch manager of its newly opened Seattle, Wash., office.

Conti will be responsible for growth and financial performance as well as broker and client relationships for the Pacific Northwest.

She has more than 40 years of insurance experience. Conti was previously a regional vice president for AIG Insurance, and an underwriting manager for Chubb.

Starr is the marketing name for the operating insurance and travel assistance companies and subsidiaries of Starr International Company Inc. Steven Zimmerman has joined XL Catlin’s broker and client management team as client distribution leader in Los Angeles, Calif.

He reports to Mike Soper, XL Catlin’s U.S. West regional broker and client management leader.

Zimmerman has more than 20 years of experience in business development and as a broker. He previously was senior vice president of Gallagher Bassett Services.

XL Catlin is the global brand used by XL Group Ltd. insurance and reinsurance companies, which provide property/casualty, professional and specialty products.

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WEST | News & Markets

IICF Teams with Sesame Street Character to Promote Early Reading

T

AG Defends California Insurance Commissioner’s Regulatory Move

T

he California Supreme Court heard oral arguments this month, during which the Attorney General’s office in a suit filed by the insurance industry defended a regulatory move by Insurance Dave Jones.

The regulation was developed under Commissioner Steve Poizner and issued by Commissioner Dave Jones to address a perceived problem faced by some homeowners whose homes were damaged or destroyed in the Oakland Hills and other fires and then they found themselves underinsured.

This is because the replacement cost estimates from their insurers left out key elements of the cost to rebuild their homes, according to Jones.

In an attempt to offer artificially low premiums and compete unfairly for business, insurers removed certain elements of the actual estimated-replacement, which left homeowners without sufficient coverage to rebuild their homes, Jones alleges.

Jones said the regulation requires home insurers when providing a replacement-cost estimate to provide a complete estimate of the cost of replacing a home so homeowners know how much insurance they should buy.

Insurers sued the commissioner to block the regulation.

The Association of California Insurance

Companies and the Personal Insurance Federation of California see the case as an example of a growing trend where regulators overreach their mandates.

According to the groups, this regulatory overreach trend is driving up costs for insurers and their customers in addition to impairing insurers’ ability to effectively serve their customers.

The regulation, which was adopted in 2010 and went into effect in 2011, established specific requirements governing replacement-cost estimates and decreed that any estimate not conforming to those requirements be deemed a misleading communication in violation of the Unfair Insurance Practices Act. ACIC and the PIFC filed suit against the CDI of Insurance in 2011 alleging that the Department lacked authority to promulgate the regulation.

Jones noted that the Attorney General feels different.

“The Attorney General’s office noted that the Department of Insurance is expressly authorized to issue regulations to protect consumers, and this regulation falls within that express authority as well as within the authority of a long line of cases supporting rulemaking by governmental agencies like the California Department of Insurance,” Jones said in a statement.

W6 | INSURANCE JOURNAL | WEST NOVEMBER 21, 2016

he Children’s Bureau, a Los Angeles, Calif., area nonprofit recently received a visit from Sesame Street’s Abby Caddaby as a part of the Insurance Industry Charitable Foundation’s Every Day is a Reading and Writing Day initiative.

During its annual Week of Giving in October, the IICF’s Western Division grants program donated $20,780 to the Children’s Bureau to support the underserved local children and families they help through their Orange County Prevention as well as their Magnolia Place Initiative.

Some 50 local insurance industry professionals from Chubb, Navigators, and Farmers Insurance, gathered to read with the children from IICF Seasame Street the surrounding Reading Day 2016 communities that Children’s Bureau supports, providing a day to jumpstart an increase in early literacy in the area.

The “Reading and Writing Day” program is a joint project with Seasame Street, so Abby Caddaby also visited the Children’s Bureau as a part of the reading initiative.

The Western Division also held a book drive to be able to provide each of the 150-plus children in attendance with a book to bring home. The division collected nearly 1,000 books.

Since 1998, IICF supporters have provided nearly 200,000 volunteer hours, serving over 150 nonprofits nationwide, and involving over 200 industry companies and offices.

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WEST | News & Markets ‘With recreational marijuana now legal in California, employers and insurers are well-advised to monitor this developing area of the law and its practical impact on claims processing requirements.’

Will Legal Weed in California Increase Demand for It from Injured Workers?

By Don Jergler

J

ust how legalized weed in California will impact workers’ compensation is still uncertain, but what is certain is that the insurance industry can soon expect to be grappling with issues around paying for marijuana for injured workers.

The California Workers’ Compensation Institute issued a white paper this month that examines the implications of the passage of

Proposition 64 by voters.

The paper, “Working Through the Haze: Implications of Legalized Marijuana for California Workers’ Compensation System,” examines the potential impact of the legalized recreational use of marijuana in California on employers, workers’ comp insurers and the workforce.

“With recreational marijuana now legal in California, employers and insurers are well-advised to monitor this

W8 | INSURANCE JOURNAL | WEST NOVEMBER 21, 2016

developing area of the law and its practical impact on claims processing requirements,” the paper states.

Because the U.S. Drug Enforcement Agency still classifies marijuana as a Schedule I drug, its use is prohibited by federal law, and under current California law insurers cannot be required to pay for it even if it has been recommended for medical purposes, the paper notes.

But that doesn’t mean there won’t be pressure on insurers to pay for pot, according to the author of the paper, CWCI General Counsel Ellen Sims Langille.

The legalization of marijuana may have removed the stigma from it being used only for treating serious diseases, potentially opening the floodgates for injured workers who may now see it as an option, she said.

“I think there’s going to be a greater pressure on workers’ comp doctors to recommend marijuana as a treatment,” Langille said.

It’s that pressure that may lead to more new laws, forcing the issue on the insurance industry, she added.

“Somebody somewhere in California is shortly going to start saying ‘Yes this is treatment for an industrial injury, this does cure or reduce the effects of an industrial injury,’” Langille said, adding that the conflict between federal

and state law and the demand for pot can “combine into pressure to change the law.”

The CWCI paper examines the intersection of workers’ comp with medical and recreational marijuana laws in California, in other states, and at the federal level.

Among the issues discussed in the paper are a developing trend toward compelled compensation in various jurisdictions.

The paper also discusses the compensability of work-related injuries suffered by medicinal and recreational marijuana users, the enforcement of drug-free workplace policies and the potential for retaliation and discrimination claims.

The medical efficacy of marijuana and its use as an alternative to more opioids, and a lack of uniform dosage levels and delivery methods, are other questions the paper examines.

The paper also advises the insurance industry to start thinking ahead.

“Claims administrators should work to establish standards of review for requested marijuana treatment and payment,” the paper states.

“Any policies that are developed should also consider the impact of California’s board medical privacy laws and the potential conflicts under the Employer’s Bill of Rights as codified in the Labor Code.”

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765 results for “workers comp”

Business Moves | NATIONAL USI, Johnson & Bryan

USI Insurance Services has completed its transaction to purchase Johnson & Bryan, a retail property/casualty and employee benefits insurance brokerage firm based in Atlanta. Terms of the transaction were not disclosed.

USI is a local and national insurance brokerage and consulting firm headquartered in Valhalla, N.Y. The move will establish USI’s presence in Atlanta, and continue the company’s investment and growth in Georgia alongside its team in Savannah.

The current Johnson & Bryan team, including President Robert C. Wynne, will join USI.

Hub, Riviera Insurance Services

Hub International Ltd. has acquired the assets of Santa Barbara, Calif.-based Riviera Insurance Services LLC. Chris Hill, president of Riviera, and Steve Woodward, the firm’s executive vice president, will join Hub California and report to Darren Caesar, senior executive vice president of Hub California.

Riviera specializes in property/casualty insurance solutions and employee benefits.

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

Arthur J. Gallagher, Altman & Cronin

Arthur J. Gallagher & Co. has acquired Altman & Cronin Benefit Consultants LLC in San Francisco.

Terms of the deal were not disclosed.

INSURANCEJOURNAL.COM

Ian Altman and his colleagues will continue to operate from their San Francisco location under the direction of Norbert Chung, head of Gallagher’s Western employee benefits consulting and brokerage operations.

Altman & Cronin is an actuarial employee benefits consultancy that offers retirement and administration services to middle and large institutional clients throughout the U.S. Itasca, Ill.-based Arthur J. Gallagher is an insurance brokerage and risk management services firm.

AmTrust Financial Services Inc., AmeriHealth Casualty Insurance Company

AmTrust Financial Services Inc. has entered into an agreement to acquire AmeriHealth Casualty Insurance Company from Independence Health Group Inc. for approximately $90 million in cash.

AmTrust Financial Services Inc. is a multinational insurance holding company headquartered in New York City.

AmeriHealth Casualty provides fully insured workers’ compensation insurance primarily in Pennsylvania and New Jersey.

The transaction will be funded with existing working capital. Pending regulatory approval, the transaction is expected to close during the fourth quarter of 2016.

Independence Health Group will retain CompServices Inc., its third-party administrator (TPA) for workers’ compensation business, following the acquisition. CompServices will provide TPA services to its self-insured customers, as well

as to AmTrust, in accordance with the terms of the transaction.

Aon Risk Solutions, Stroz Friedberg Inc.

Aon Risk Solutions has completed its acquisition of Stroz Friedberg Inc. Financial terms were not disclosed.

Aon Risk Solutions is the global risk management business of Aon plc. Stroz Friedberg Inc. is a global risk management firm based in New York.

The combination of Aon and Stroz Friedberg will extend Aon’s cyber risk brokerage business and create a comprehensive Cyber Risk Management Advisory Group that offers standards-based cyber assessments and risk transfer solutions for clients.

Stroz Friedberg’s more than 550 colleagues are joining Aon’s newly created Cyber Solutions Group following the acquisition. Michael PatsalosFox, Stroz Friedberg’s CEO, will become the CEO and co-chair of Aon’s Cyber Solutions Group. John Bruno, Aon’s executive vice president of

enterprise innovation and chief information officer, will join Patsalos-Fox as co-chair of the new group.

PIA Management Services Inc., PIAVT

PIA Management Services Inc., the umbrella corporation that manages the Glenmont, N.Y.-based Professional Insurance Agents (PIA) associations, has reached an agreement with PIA National to assume management of the PIA state affiliate in Vermont.

Formerly, PIA members were part of a merged association, which included PIA and Independent Insurance Agents & Brokers (IIAB) members to comprise the Vermont Insurance Agents Association.

Membership in PIAVT will be available to independent agents and insurance-related businesses affiliated with independent agents starting in November. Initial benefits will include: agents E&O and other coverages; education; information; creative services; networking opportunities and advocacy.

NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 15

TECHNOLOGY BREAKTHROUGHS: HELPING THE CONSTRUCTION INDUSTRY BUILD SMARTER.

By Tom Boudreau

4

TECHNOLOGIES TO TEAM UP WITH.

1 Drones: To track progress, monitor quality and gain insight on hard-to-reach areas.

2 BIM: To facilitate planning, improve safety, design, efficiency and minimize on-site conflicts.

3 3-D Printing: For sustainable building with lower costs and the potential for complexity of design.

4 Robotics: For speed, efficiency and safety with repetitive construction tasks

With the construction unemployment rate at a 16-year low (4.9% for August),1 we need to ask ourselves — is now the time for us to push some recent technological advances onto more construction sites? Not to displace workers, but to work with them to create efficiencies and keep America building.

It is no secret that, with the skilled labor shortage we are currently experiencing, something must change. The industry has not done a stellar job of attracting and retaining the next generation of construction workers. We must either do that now, or figure out how to build with a reduced workforce. Or better: do both.

The advancements that have been made with construction-useful technology are nothing short of amazing. Not only are these technologies resulting in improved efficiencies, but they could also be part of the labor shortage solution. Here are a few examples of some of the leadingedge technologies that are currently being utilized on job sites in the US.

and demolition.

ZOOMING IN ON PROJECTS — WITH DRONES We have all seen drones in the air — whether at a park for recreation or at one of our

job sites. Usage of drones is increasing dramatically.

Our clients are using them more frequently and for an increasing variety of tasks. At first, we saw them primarily being utilized to take video or still shots of job sites for general oversight and to track progress. Now, as technology is rapidly improving and regulation is allowing for usage coupled with a general sense of acceptance, we are seeing them used as a means to monitor for unsafe practices on a job site.

We are also seeing them used to monitor the quality of a project and to document it along the way. What better way to keep a client up to date and simultaneously document the project for possible future questions about building to specification or code?

High res down to the weeds.

The sophisticated cameras on drones today are powerful and stable enough to provide high resolution footage of even the most obscure locations on a site. In addition to these uses, we are still seeing clients utilize them for surveying, planning and marketing.

It is evident that drones are making an impact on the job site and will continue to transform how work is performed in the future.

BIM PUTS DIGITAL MODELS ON ANY DESKTOP Although spoken of conceptually for over 30 years, BIM (Building Information Modeling) technology has advanced dramatically over the last 10 years. Its adoption rate within the industry has followed as well. Just about every contractor that we work with on midsize to large projects has been involved in a project that utilized BIM technology.

The advantages of using BIM are evident — from ease of planning to improvements in safety, design and general efficiency. When utilized to its potential, BIM can minimize on-site conflicts between subs looking to work in the same space, improve material ordering and subsequently improve cash flows for the contractors.

UP AND COMING: 3-D PRINTED BUILDINGS Certainly not used as frequently as BIM or drones, 3-D printing has been gaining momentum and may be only a few years away from widespread use.

The call for greener building may be the catalyst that drives more investment in and usage of 3-D printing.

Currently, the primary use of 3-D printing in the construction industry is to produce building components. But there are several companies that have been utilizing 3-D printing for largescale projects. The belief among many that operate in the 3-D world is that the speed to delivery will be incredibly quick. Stories of entire houses being “printed” in as little as 24 hours overseas

suggest that technological advances have improved dramatically over the past few years.

3-D printing purportedly will reduce cost of building, allow for increased complexity of design and will be more environmentally friendly than traditional building methods.

LABOR-READY, LABORFRIENDLY ROBOTS

advances in equipment used for demolition as well. High-powered water demolition robots are being used more frequently on construction sites and are a safe alternative to the traditional demolition methods. The speed, efficiency and safety gains that can be realized in conjunction with more advanced recycling capabilities will be a win-win for the industry.

HUMANLY POSSIBLE

There are many exciting advances in It is evident that new technology is robotic construction technology. In fact, currently and will continue to have too many to list them all, an impact on the but a common theme We must adopt and construction industry. among them is they are embrace this technology, It is imperative that typically able to reduce we, as an industry, not to replace the human costs on larger projects; adopt and embrace worker, but to work increase efficiency and this technology — not alongside our teams. thus increase speed of to replace the human delivery; and increase worker, but to work alongside our job site safety. teams. When utilized correctly, this technology will improve worker One example of this technology that safety, improve margins, improve we are hearing about more frequently sustainability, and keep America is automated bricklaying machines. building.

There are several projects around the U.S. currently that are utilizing this technology and the early read on this method has been positive. Not ABOUT THE AUTHOR only are there speed and efficiency Tom Boudreau is vice president gains, but the need for human labor, of construction insurance in though reduced, is not eliminated.

The Hartford’s Commercial Markets This technology allows for a lot of division. The Hartford is a premier the physical tasks associated with provider of property and casualty bricklaying to be performed by insurance and risk management the robot and the fine-tuning to be services for midsize and large performed by a human. This is a winconstruction companies, with a win for an industry sorely in need of focus on heavy trade contractors, labor. Not only are we experiencing commercial builders and technological advances in construction sub-contractors. building, but we have seen many

To learn more about how The Hartford partners with the construction industry, visit thehartford.com/construction.

Prepare. Protect. Prevail.® 1

http://www.bls.gov/news.release/pdf/empsit.pdf

Insurance coverages mentioned in this article are underwritten by the Hartford Fire Insurance Company and its property and casualty insurance company affiliates. The Hartford® is The Hartford Financial Services Group, Inc. and its subsidiaries, including Hartford Fire Insurance Company. Its headquarters is in Hartford, CT. 16-0986 © 2016 The Hartford. All rights reserved.

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NATIONAL | Closer Look | Personal Lines Leaders

Personal

About the Personal Lines Leaders: The 2016 Personal Lines Leaders in this

Lines Leaders

report are taken from Insurance Journal’s Top 100 Property/Casualty Independent Agencies as reported in August. This list utilizes only the 2015 personal lines numbers of the independent agencies and brokerages that submitted data to the Top 100 agencies report. For more information on Insurance Journal’s Top 100 Property/Casualty Independent Agencies list, contact: awells@insurancejournal.com.

Top 50 Personal Lines Agencies Ranked by Total 2015 Personal Lines Revenue

2016 2015 Rank Rank Agency Name

2015 Personal Lines Revenue

2015 Total P/C Revenue

2015 Total Other Than P/C Revenue

2015 Total P/C Premiums Written

No. of Full-Time Employees

Main Office

1

1

Confie

$472,571,000

$472,571,000

$0

$1,450,000,000

4,400

Huntington Beach, Calif. www.confie.com

2

2

HUB International

$244,807,000

$1,007,636,000

$326,028,000

$6,721,541,337

8,453

Chicago, Ill.

www.hubinternational.com

3

3

AIS Insurance / Auto Insurance Specialists *

$84,633,000

$85,705,000

$0

$508,780,000

500

Cerritos, Calif.

www.aisinsurance.com

4

5

Answer Financial Inc. *

$80,000,000

$80,000,000

$0

$630,000,000

628

Encino, Calif.

www.answerfinancial.com

5

4

USI Insurance Services

$72,310,499

$514,562,044

$441,245,004

$4,714,624,598

4,406

Valhalla, N.Y.

www.usi.biz

6

7

AssuredPartners Inc.

$64,905,301

$422,546,495

$134,462,724

$5,305,033,766

3,600

Lake Mary, Fla.

www.assuredptr.com

7

6

BroadStreet Partners Inc.

$58,250,000

$265,250,000

$44,350,000

$2,313,000,000

2,000

Columbus, Ohio

www.broadstreetcorp.com

8

13

Acrisure LLC

$45,053,544

$319,954,127

$91,697,750

$2,831,531,430

2,064

Caledonia, Mich.

www.acrisure.com

9

8

TWFG Insurance Services

$39,438,676

$54,732,020

$500,000

$366,637,461

88

The Woodlands, Texas

www.twfg.com

10

NEW

Westwood Insurance Agency *

$37,686,941

$39,637,229

$0

$309,474,238

109

West Hills, Calif.

www.westwoodinsurance.com

11

11

NFP

$31,571,915

$126,287,686

$1,153,911,862

$1,000,000,000

3,400

New York, N.Y.

www.nfp.com

12

9

Leavitt Group

$29,456,062

$144,552,466

$67,831,600

$2,295,478,072

1,420

Cedar City, Utah

www.leavitt.com

13

NEW

Cross Financial Corp., dba Cross Insurance

$27,300,058

$94,600,000

$18,800,000

$770,000,000

700

Bangor, Maine

www.crossagency.com

14

10

Crystal & Co.

$23,020,000

$137,170,000

$19,830,000

$1,483,620,000

406

New York, N.Y.

www.crystalco.com

15

12

Eastern Insurance Group LLC **

$21,500,000

$47,511,000

$13,910,000

$338,000,000

340

Natick, Mass.

www.easterninsurance.com

16

18

Risk Strategies Co.

$20,000,000

$121,000,000

$41,000,000

$905,000,000

610

Boston, Mass.

www.risk-strategies.com

17

15

PayneWest Insurance Inc.

$15,852,170

$71,490,327

$19,277,957

$566,244,927

649

Missoula, Mont.

www.paynewest.com

18

NEW

Premier Group Insurance Inc.

$14,950,000

$16,570,000

$0

$108,129,000

15

Denver, Colo.

www.PGIAgents.com

19

19

Marshall & Sterling Enterprises Inc.

$13,351,072

$53,024,655

$10,847,988

$390,575,830

403

Poughkeepsie, N.Y.

www.marshallsterling.com

20

14

Professional Insurance Associates Inc

$13,000,000

$40,000,000

$0

$300,000,000

50

San Carlos, Calif.

www.piainc.com

21

43

Integro Insurance Brokers

$12,850,000

$257,000,000

$18,000,000

$1,500,000,000

1,087

New York, N.Y.

www.integrogroup.com

22

35

Eagle American Insurance Agency LLC

$12,434,721

$16,153,664

$130,724

$126,819,754

158

Longwood, Fla.

www.ioausa.com

23

NEW

Prime Risk Partners Inc.

$12,236,000

$69,315,000

$15,452,000

$902,882,041

468

Alpharetta, Ga.

www.primeriskpartners.com

24

27

Towne Insurance **

$10,695,292

$32,829,245

$8,579,227

$241,879,314

259

Virginia Beach, Va.

www.townebank.com/insurance

25

23

Baldwin Risk Partners

$10,531,000

17178000

7453000

245725000

175

Tampa, Fla.

www.bks-partners.com

26

22

Starkweather & Shepley Insurance Brokerage Inc. $10,190,000

$37,418,000

$3,429,000

$282,000,000

197

East Providence, R.I.

www.starshep.com

27

20

J. Smith Lanier & Co.

$9,854,181

$86,835,389

$36,496,189

$1,040,000,000

603

West Point, Ga.

www.jsmithlanier.com

28

21

Lockton Cos.

$9,149,000

$947,343,000

$381,226,000

$8,627,519,000

6,000

Kansas City, Mo.

www.lockton.com

29

24

Lawley Insurance

$8,978,076

$36,761,709

$17,433,984

$293,719,549

338

Buffalo, N.Y.

www.lawleyinsurance.com

30

17

Gowrie Group

$8,500,000

$34,550,000

$1,800,000

$274,080,000

160

Westbrook, Conn.

www.gowrie.com

31

NEW

The Advantage Group LLC

$8,303,525

$15,667,029

$1,566,704

$118,240,094

103

Edmonds, Wash.

www.theadvantagegroupllc.com

32

NEW

ABD Insurance and Financial Services

$8,300,000

$21,000,000

$22,585,000

$150,500,000

200

San Mateo, Calif.

www.theabdteam.com

33

26

Rogers & Gray Insurance

$8,200,000

$18,200,000

$3,600,000

$105,100,000

130

South Dennis, Mass.

www.rogersgray.com

34

46

The Hilb Group

$7,500,000

$38,000,000

$13,000,000

$284,000,000

570

Richmond, Va.

www.hilbgroup.com

35

29

Tompkins Insurance Agencies Inc. **

$7,500,000

$17,985,000

$8,573,000

$282,950,000

179

Batavia, N.Y.

www.TompkinsIns.com

36

31

Wortham Insurance & Risk Management

$7,406,119

$97,129,488

$21,853,051

$953,919,083

501

Houston, Texas

www.worthaminsurance.com

37

34

John M. Glover Agency

$7,237,283

$20,000,000

$502,064

$137,615,000

175

Norwalk, Conn.

www.johnmglover.com

38

30

INSURICA Inc.

$7,090,531

$65,483,893

$14,706,313

$540,341,307

477

Oklahoma City, Okla.

www.insurica.com

39

32

Robertson Ryan & Associates Inc.

$6,959,680

$29,157,479

$3,526,000

$275,000,000

230

Milwaukee, Wisc.

www.robertsonryan.com

40

33

Higginbotham

$6,800,000

$78,661,000

$53,346,000

$549,052,000

756

Fort Worth, Texas

www.higginbotham.net

41

37

Sihle Insuirance Group

$6,125,811

$23,024,622

$1,932,526

$205,063,041

200

Altamonte Springs, Fla.

www.Sihle.com

42

47

Ansay & Associates LLC

$6,000,000

$19,200,000

$6,400,000

$200,000,000

225

Port Washington, Wisc.

www.ansay.com

43

NEW

Arroyo Insurance Services

$5,700,798

$20,669,327

$2,066,000

$19,055,844

140

Arcadia, Calif.

www.arroyoins.com

44

42

Foy Insurance Group

$5,600,000

$10,100,000

400000

60000000

75

Exeter, N.H.

www.foyinsurance.com

45

39

Otterstedt Insurance Agency

$5,585,432

$17,480,577

$885,975

$105,359,434

82

Englewood Cliffs, N.J.

www.otterstedt.com

46

38

Crane Agency

$5,516,502

$30,996,092

$4,436,916

$209,898,594

245

St. Louis, Mo.

www.craneagency.com

47

44

Hays Cos.

$5,500,000

$91,000,000

$92,300,000

$923,500,000

699

Minneapolis, Minn.

www.hayscompanies.com

48

40

Frenkel & Co.

$5,423,825

$45,553,501

$22,055,276

$502,065,000

164

New York, N.Y.

www.frenkel.com

49

48

Alliant Insurance Services Inc.

$5,328,251

$553,560,874

$251,236,594

$3,772,152,076

2,329

Newport Beach, Calif.

www.alliant.com

50

NEW

The IMA Financial Group Inc.

$5,281,460

$111,890,430

$25,799,401

$1,259,694,354

605

Denver, Colo.

www.imafg.com

Website

Editor's Note: *=Carrier Owned Agency; **=Bank Owned Agency

18 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

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NATIONAL | Special Report | Contractors & Builders

By Andrea Wells

W

ith “smart” building becoming the gold standard in today’s commercial construction world, builders, building owners, workers and insurers are dealing with new technologies and risks. These smart technologies — from high tech gadgets aimed at increasing building efficiencies to wearable devices aimed at improving safety — are invading

almost every corner of construction.

Whether smarter is better in the long run remains to be seen. This new world of construction brings advantages in sustainability and safety, but it also means additional risks related to costs, delays and materials, as well as worker privacy and safety.

The smart or green building movement is growing faster than convention-

20 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

al construction, according to Mahesh Ramanujam, chief operating officer and incoming president and CEO of the U.S. Green Building Council (USGBC), which administers the LEED (Leadership in Energy and Environmental Design) certifications worldwide.

To date, there are nearly 90,000 commercial buildings and 120,000 residential INSURANCEJOURNAL.COM

projects participating in LEED across the U.S., saving energy and water, improving indoor air quality, saving businesses and homeowners money, and helping communities create jobs.

Scott Rasor, head of construction for Zurich North America, says most new buildings he sees qualify as “smart built” buildings.

“Contractors are seeking to provide a solution for the owners, for their customer, that delivers a building where the ongoing cost of maintenance of the building is reduced or maintained at a reasonable and foreseeable level,” Rasor said. “Owners will often ask, ‘How will this building function after it’s complete? What are the maintenance costs?’”

Rasor says building information modeling (BIM) — a construction design technology used to provide a digital representation of physical and functional characteristics of a facility — and other new technologies help the owner plan and then schedule maintenance for a building so it’s sustainable and maintained appropriately for the lifetime of the building.

Tom Boudreau, The Hartford’s head of construction and energy insurance, said interest in green building has been growing. “Many of the projects we are quoting and contractors we underwrite are emphasizing their commitment to green building and are proud of the fact that their project is seeking LEED certification or will have features centered around sustainability,” he told Insurance Journal.

“Virtually everything is ‘green’ in some fashion these days,” agreed Brian McDonnell, managing principal in the construction practice at EPIC Insurance Brokers & Consultants based in San Francisco.

Bret Lawrence, partner and senior vice president at Woodruff-Sawyer & Co., also based in San Francisco, said builders must go green to compete.

“If you are going to compete in the commercial side of general building you have to have a component or some expertise in green building or LEED certification,” Lawrence said. “It’s a requirement almost at this stage in construction.”

INSURANCEJOURNAL.COM

Process and Risks

Not only are more buildings smarter, but the way they are being built is also smarter and driven by new technologies.

The Hartford’s Boudreau sees technology improving the means and methods, in conjunction with workers, of how construction gets done.

“We are also excited to see how advancements in building information modeling and robotic demolition machines improve safety and productivity,” Bourdreau said.

McDonnell also points to increasing use of BIM, along with 360 video, drones, 3-D laser scanning and other technologies to improve the quality of construction and to address constructability issues.

Yet at times, McDonnell fears, the emphasis on technology can become too much and merits some “healthy skepticism.”

Some technology tools can be like a “solution looking for a problem,” he said.

Also, some green technologies are “introducing untested building materials into the mix,” which might increase risk.

In many regards, the risks associated with smart technologies and green building materials mirror the risks addressed by design professionals and contractors in traditional environments, said Mary Ann Krautheim, senior vice president, Design & Construction Group, Lockton Cos. “However, the growth of this sector may create challenges for design firms and contractors when it comes to such things as meeting (or not meeting) owner expectations, challenges to scope, and the use of untested products and building materials.”

Though designed to be more efficient, “smart buildings” can also create such vulnerabilities as a greater risk of building malfunction, hacking, negligence and breach of privacy.

“Like most advances in building systems or other technology, the insurance industry will determine what can go wrong once it, in fact, does goes wrong,” Krautheim said. “The experience with technology is still somewhat green and actuarial models have not captured

enough instances to properly price for this risk.”

McDonnell also noted that there continue to be differing opinions by experts in the field and contractors over how well “green” materials including concrete and other non-structural materials such as cork and bamboo flooring perform.

But he said the experts tend to agree that green materials increase construction costs and potentially impact project completion “due to delay and little historical evidence on performance relative to their use, both during and after construction operations."

Those are are all possible issues, he said.

ZNEs and Smart Tech

The next advancement in green building taking hold in the construction world is zero net energy building. Zero net energy (ZNE) buildings are ultra-efficient construction and deep energy retrofit projects that consume only as much energy as they produce from clean, renewable resources.

“The greenest buildings now are really zero net energy buildings,” said Jim Untiedt, president of PentaRisk Insurance Services LLC based in San Jose, Calif.

The construction process is unique.

“You take these old concrete buildings that used to be warehouses. You cut holes. Put windows in. Put in sky lights.

Put in systems in place where the building can pretty much generate its own energy, its own heat, its own air condi-

tioning system,” he said.

Zero net energy buildings sometimes use recycled materials for construction and provide unique methods for recycling water.

continued on page 22

NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 21

NATIONAL | Special Report | Contractors & Builders continued from page 21 ZNE has required some adjustment from insurers' underwriters. “The insurance industry sort of had to catch up a little bit,” Untiedt said. “Our normal builder’s risk insurance products would pay for brand new products and not necessarily recycled products.”

He said most insurance companies over the last three to five years have developed green endorsements to the builder’s risk insurance policy to address those unique issues.

In Untiedt’s view, while there’s no real added exposures from green building materials, some smart technologies are increasing risks.

With smart technologies “you can hack into a building system and shut down these systems since they’re all dependent on their own building systems rather than outside power, gas and energy,” he said. He imagines an owner being unable to occupy a commercial building for a couple of days because it was held hostage. “Rather than holding a computer system hostage, why not hold a smart building hostage?” he asked.

This is where cyber liability insurance might come into play, he said.

Cyber liability exposures are a major concern in smart construction.

“I think cyber is really applicable to the construction industry because the more things we are able to control remotely the more potential exposures we have to the bad guys that are trying to get to our systems and our controls,” said Michael Born, vice president and account executive for Lockton Cos., who discussed the Internet of Things (IoT) at the IRMI Construction Risk Conference in Orlando in early November.

“Any kind of control that you have over a building … and we have more and more of this in our home systems all the way up to a commercial building … where you can do all those same things but the potential impact is much greater.”

Born said possible hacks into IoT technologies, including smart HVAC systems or refrigeration systems, could have possible effects from minor inconveniences or minor financial cost impairments or loss of

business income, to serious property damage or even potentially bodily injury.

While the construction industry hasn’t yet seen any major cyber issues involving IoT technologies, in Born’s view it’s only a matter of time before cyber terrorists realize they can control physical objects, such as a commercial building, remotely and decide to target them.

Technology and Safety

Technology’s not all bad, of course. It is improving worker safety.

Wearable technologies can monitor heart rate, body temperature, perspiration levels, geophysical location, time in motion and even EEG brain waves and generate valuable human behavioral data for optimizing job sites large and small.

Zurich’s Rasor says some risk managers do have concerns about privacy when it comes to wearables. “They are trying to understand whether HIPAA or other laws around privacy with the individual versus actually monitoring of what’s going on at the job at the time that there might be risk,” he said.

But Rasor believes wearables and other high tech devices on the construction site can be very useful in reducing risk and, in the end, will mean fewer accidents and injuries.

“One of the things that we always worry about and issue warnings to our customers around are heat warnings,” Rasor said. “A wearable vest that could tell you that person’s body temperature could signal to a foreman or a supervisor to get that person off the job and get them hydrated before something bad happens.”

Construction sites are inherently dangerous, he said. “Bad things can happen.

There’s falls from elevation. There’s trip hazards. How do you prevent that?”

Virtual reality safety training programs offer another way to manage construction risk. Suffolk Construction, a national general construction firm based in Boston, envisions a virtual reality program where workers could walk through a jobsite and be presented with a scenario in which the worker must point out all the possible hidden dangers, such as live wires, misplaced

22 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

ladders or a worker cutting a small piece of steel without wearing his protective goggles. Or if a real accident occurs on the job, the scenario could be recreated virtually to teach workers how to avoid the same mistake twice.

There is an area where technology may be lessening safety.

Smartphones are one technology that can be very positive and very negative.

They improve communication on the construction site and provide instant information on safety. But they can also cause their own set of problems.

“In some ways, absolutely, these technologies can have a big impact. Even the smartphone that we all carry around can be a huge positive for managing a construction site. But if you’re behind the wheel it’s a huge negative,” said Dennis M. Tsonis, senior vice president, construction practice leader at Arizona-based LovittTouche.

He notes that the biggest cost issue right now in construction insurance is automobile claims driven by distracted driving.

“Auto claims are the biggest claims. It’s really got underwriters concerned,” Tsonis said.

In this case, technology may rescue itself. There is now new technology that will prevent the use of smartphones while driving vehicles. “That’s a very positive thing and we are just starting to see some clients adopt that technology,” Tsonis said.

Finally, not all technology is affordable.

Tsonis points to GPS technology for fleet telematics as being a “huge help” in reducing risk but notes that it comes with a cost.

“Construction is still done with very thin margins for the most part and the cost is still a major issue for many of contractors,” he said.

For one large client with hundreds of vehicles, Tsonis said he even had an insurance company willing to pay half the cost.

But in the end, the construction client said the cost was still too high and decided against going the telematics route.

“That’s just how tight things are still in construction,” he said. Share this article

with a colleague.

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Idea Exchange

Construction

The New Frontier in Worker Safety: Mental Wellness and Suicide Prevention Construction/Extraction ranked No. 2 in suicide deaths.

Only the industry group of farming/fishing/forestry ranked higher at 84.5.per 100,000. However, construction/extraction was No. 1 in actual deaths by suicide, as our industry has a higher workforce count.

Why Construction?

By David James

A

s a contractor, partnering is a critical element to our daily operations.

One such key partnering relationship is with our insurance broker and carrier. We work together tirelessly to assure our work zones are safe, our people are trained in safety protocols and proper resources are available to allow them to return safely to their families. This zero accident mentality has found a partner as well, zero suicides!

The human and financial impacts of an injured worker can be mirrored or often eclipsed when a suicide death is experienced in our workforce.

On July 1, 2016, the Center for Disease Control released a report identifying suicide deaths by industry. At 53.3 deaths per 100,000 employees, INSURANCEJOURNAL.COM

Why construction? Look no further than many of the same industry issues that impact workers when we develop safety protocols and analyze what puts workers at risk for injuries on the job site. Those issues include: • Long hours, sleep shortage, inconsistent sleep patterns • Hard physical labor, fatigue, chronic pain • Job pressures, budgets, schedule, relationship challenges with owners and up/down chain contractors • Tough guy mentality • Alcohol and drug abuse • Seasonal work layoffs.

Imagine a worker in family crisis or suffering from depression, and contemplating suicide. How safe will they be on your job? How safe are their co-workers? How productive will they be?

These questions, and their obvious answers, reflect the linkage between zero accidents and zero suicides.

Workers in distress often display warning

signs. The key for concerned co-workers is to spot the signs, and communicate available resources. A worker may exhibit behaviors out of character with their past, such as drinking or drugs, acting anxious or agitated, showing rage or revenge or extreme mood swings. They may talk about wanting to die, or their family being better off if they were not around, or merely expressing feelings of hopelessness.

One of FNF’s operations officer states: “They need to know there is help out there and it takes more of a man to ask for help than to run and hide from getting help.”

Beginning the Dialogue

So, where does a construction company begin? By break-

ing the silence and creating a caring culture.

Company leaders must learn to speak openly and candidly about the risks of suicide among their employees and their families.

Construction companies can promote awareness through company newsletters, posters in the office and at job sites and by establishing an Employee Assistance Program. Share

this article with a colleague.

IJMAG.COM/1121NB

James is the chief financial officer for FNF Construction Inc., a heavy highway contractor in Tempe, Ariz. He is a member of the National Action Alliance for Suicide Prevention and the Construction Industry Alliance for Suicide Prevention.

RESOURCES AND WEBSITES

Awareness by employees must be accompanied by resources that give them and their families a place to go for help.

National Suicide Prevention Lifeline: 1-800-273-TALK(8255) http://suicidepreventionlifeline.org/ This number provides 24/7 response that routes the call to a local responder, based on the caller area code.

The Construction Industry Alliance for Suicide Prevention http://www.cfma.org/news/content.cfm?ItemNumber=4570 This site offers resource materials and links to construction industry groups partnering to address this industry issue.

The Carson J. Spencer Foundation

www.carsonjspencer.org This site offers resource materials and numerous suicide prevention links.

Working Minds: Suicide Prevention in the Construction Workplace

www.constructionworkingminds.org This site offers resource materials and links that support the construction industry.

Man Therapy

www.mantherapy.org This site offers a humorous approach to this very serious topic.

NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 23

Idea Exchange

Flood

How Tech Can Turn the Tide of Flood Insurance help insurers understand the severity, frequency, and location of potential flood events on and off the floodplain.

Federal Protection

By John Elbl

A

s residents of coastal Louisiana, New York and New Jersey have discovered, a house with a sea view can carry a serious and soggy downside. In terms of storms and their severity, a building’s location has never seemed more critical — both for a dry basement and peace of mind. Yet, outside of federally funded programs, the market for private insurance for homeowners in flood zones is extremely limited. In the event of another Hurricane Katrina or Sandy, only a fraction of properties exposed would have real financial protection.

Insurers understand that catastrophic floods have been damaging homes for as long as people have lived in permanent dwellings. Floods can cause devastating losses to businesses and homeowners almost anywhere in the United States.

But advanced technology is helping insurers and homeowners before waters rise.

Innovative tools are available to enable insurers to assess a property’s flood risk more accurately. These models can

At the time of its founding by Congress in 1968, the National Flood Insurance Program (NFIP) carried the best intentions of lawmakers. Previously, flooding had been a covered exposure in a typical homeowners policy. But the claim payouts for a series of damaging floods during the 1950s and 1960s consistently exceeded the premiums. Flood coverage proved to be unprofitable and was almost eliminated from homeowners policies.

To ease the burden of risk borne by homeowners in flood-exposed regions, the government established NFIP. The program’s purpose was to enable homeowners to purchase insurance directly from the government for flood events. Originally intended as a way to lessen the burden on individuals by pooling flood risks nationally (while incentivizing flood risk management by spreading the burden of the risk across a greater number of people and encouraging more people to buy policies that could then be offered at much lower rates), NFIP has evolved from its intended purpose.

This has led to a crisis, of sorts. The aim from the start was to provide affordable coverage for at-risk property owners, so NFIP insurance has never been subject to actuarially sound rates. Presently, NFIP covers more than 5 million properties, and as many as 1

24 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

million of them are subject to rates less than half the price a private insurer would charge.

NFIP was more than $20 billion in debt as of November 2012, according to a report from the Union of Concerned Scientists, a nonprofit research organization. Such debt has forced a program once intended to be self-sufficient to look for special subsidies and borrow heavily from the government.

Some notable changes include revising existing rates and updating mapping information, which together have changed flood classifications for some policyholders. To reduce deficits accrued by NFIP, this new program requires the program’s rates to be actuarially sound.

The result has been that policyholders in some of the most at-risk locations are facing massive rate increases.

Flooded in Debt

A Fresh Approach

Despite the admirable aims of lawmakers who enacted NFIP, the goal of providing affordable insurance to homeowners and businessowners in some of the most flood-prone areas has resulted in a case of significant adverse selection — that is, a small percentage of covered properties are responsible for a disproportionately large number of payouts. In some areas, individual properties that have been flooded more than a dozen times continue to receive federal aid without a commensurate increase in premiums. In this way, NFIP has led to a large number of property owners living in flood-exposed regions while receiving a government subsidy for doing so.

For NFIP to conquer its mounting debt, “subsidies” to property owners in flood-exposed areas will likely have to end. Lawmakers have long recognized this problem and continue to seek ways to remedy the situation. To that end, NFIP has undergone changes and improvements in recent years, starting with the BiggertWaters Reform Act of 2012.

Yet those increases are providing the insurance industry an opportunity to step in and offer alternative coverage. In practice, this proposition has been fraught with complications. Some state insurance commissioners want private insurers to change policy terms to provide added protection (such as different deductibles or additional replacement cost protection), while others want to retain NFIP’s terms entirely.

Furthermore, some banks have not provided clear guidance as to what flood insurance they deem acceptable; and other banks have been reluctant to accept policy wording that is not identical to NFIP coverages.

This uncertainty can restrict the ability of a customer to choose private coverage.

Fortunately, insurance companies have several tools at their disposal that were not available in the past, including: • Federal Emergency Management Agency (FEMA) flood maps updated and converted into an electronic format, making zonal deter- mination easier for agents; • Improved mapping INSURANCEJOURNAL.COM

•

technology, which allows for an alternative (or updated) view of risk, especially in areas that may not have a recent FEMA evaluation; • Probabilistic flood modeling that provides insurance com- panies with a capability to manage aggregate exposures and evaluate the effect of different financial structures.

These tools enable insurers to assess a property’s inherent flood risk more accurately.

Such reviews can reveal opportunities for profitable expansion into areas that previously had been deemed unacceptable due to the perceived risks from flooding. The coarsely defined flood maps previously used to determine rates made it difficult for insurers to intelligently select their risks. Now insurers have the tools necessary to assess risk at a finer granularity INSURANCEJOURNAL.COM

— potentially revealing undiscovered opportunities.

To further ease regulatory restrictions, allow third-party insurers better access to this market, and give customers more choice in flood coverage beyond NFIP protection, U.S. Rep. Dennis Ross, R-Fla. introduced a draft Flood Insurance Market Parity and Modernization Act to the House on June 25, 2015. U.S. Sen. Dean Heller, R-Nev., submitted the sister bill in the Senate. Key provisions of both bills include: • Banks would be allowed to accept flood policies from insurance companies to satisfy mortgage protection requirements.

• State insurance commission ers would approve policy wordings and rates, as already done for other insured perils.

• Admitted and nonadmitted

policies would satisfy the flood insurance requirement.

The required flood insurance purchase would be lowered to the least of three values: the home’s value, outstanding mortgage loan balance, or the maximum NFIP policy limits available.

In effect, these bills would open the door for insurance companies to compete directly with NFIP and might help guide the approvals of state insurance commissioners. If the bills pass, insurance companies would be able to write stand-alone polices, include proper endorsements, allow customers to choose from a range of deductibles, and provide additional protections. All are issues that have plagued adjusters for years. Many in the insurance industry support legislative reform, and their backing will be critical helping to ensure that the bills are able to pass swiftly through Congress.

Test Case: Florida

Some of these ideas are being tested in Florida’s insurance market. Florida represents about 40 percent of the NFIP’s total market and is composed primarily of property owners located off flood plains. To comply with legal provisions designed to restore NFIP to solvency, some homeowners in Florida are facing increases as large as 80 percent above the rates of their current policies.

Among this pool of policyholders, almost all of whom are located in eight coastal counties, the inception-to-loss ratio is 15 percent of total premiums collected. While this loss ratio is due in part to a 10-year “hurricane drought,” it

represents an opportunity for private insurers to step in and profitably offer more affordable coverage — with the potential to provide even more comprehensive coverage — than NFIP. Although the situation may not be the same in every state, it provides an example of how insurance companies can use new tools and better data to supplement (or replace) NFIP coverage without incurring an unacceptable amount of risk.

Similar cases can be found throughout the United States; it’s only a question of when the federal government and state departments of insurance recognize the room for private insurers to compete with NFIP, thus reducing taxpayers’ burden in an unprofitable system.

Coming changes in flood insurance regulation may enable the insurance industry to provide coverage to customers that it had previously been unwilling or unable to serve. As the choices expand, customers will probably seek out insurers that offer the best protection at the most competitive prices.

Insurers looking for a competitive advantage in serving those customers may turn to a probabilistic inland flood model to provide them with a robust assessment of risk. Using these analytics, the insurance industry can move forward more confidently to offer much-needed flood protection in the private market. Share

this article with a colleague.

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Elbl is a vice president at catastrophe modeling firm AIR Worldwide, a Verisk Analytics business. Email: jelbl@ air-worldwide.com.

NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 25

Idea Exchange

Tech Talk

Insurtech Competition and New Cyber Security Threats Pose Increased Challenges

By Tom Wetzel

H

aving just returned from the combined meetings of the Agents Council for Technology (ACT) and the ACORD conference earlier this month, I am struck with two lasting impressions.

First, those in the industry who dismissed the rise of the so-called insurtechs are taking a fresh look at these technology competitors.

Second, agents and carriers are addressing cyber security with a new sense of urgency and a realization of the multiple threats the issue poses.

Last year, when Google announced its intention to bring its Google Compare auto insurance comparison shopping site to the U.S., some sounded an alarm but others said the threat was overblown.

When Google shuttered the venture, the skeptics felt vindicated. Since then however, dozens of new ventures have already launched or are preparing to do so. Many will fail but more than a few will likely catch fire and provide competition to independent agents, primarily but not limited to personal lines coverages.

These include on-demand insurance platforms such as Trov, Slice, SafeShareGlobal and Lemonade, the last of which is also a licensed insurer. Time will tell as to their ultimate success. At the same time, their appeal to buyers in enabling simple coverages via a smartphone is unmistakable. Agents who fail to respond by providing 24/7 ser-

vice and at least some services through a smartphone may lose forever a chance at a large swath of younger insurance buyers.

Many agents are still taking a wait-and-see attitude. It was encouraging, however, to see agents keep an eye on the rearview mirror while also stepping up efforts to upgrade their digital capabilities.

A more immediate challenge for agents is on the cyber security front, including data breaches and cloud security. Both meetings featured presentations on various aspects of the security problem — not just on cyber security threats but also how to mitigate them.

Ryan Spelman, senior director at the Center for Internet Security (www.cisecurity.org/cyber-pledge) discussed the urgent need for agents to take greater control over their “cyber hygiene” to reduce the likelihood of cyber attacks.

Spelman dispelled the myth that agents are not vulnerable because of their relatively small size.

“Cyber criminals are part of a $300 billion global business,” he said. “They look for the easier targets and size is not a barrier. Breaches at small community banks and doctors’ offices are all too frequent.”

Spelman asked agents to imagine the consequences of lost trust from their clients if their business was hacked.

Spelman cautioned that no prevention protocol is 100 percent effective but recommended five simple steps agents can take to be as secure as possible.

1. Count: It is critical to know what’s connected to your network. Create an inventory of every piece of equipment that’s 26 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

connected, including computers, smartphones, routers, scanners and building systems. Simply put, you can’t protect what you don’t know exists.

2. Configure: Protect systems by implementing key security settings and using unique, strong passwords and changing them periodically.

3. Control: Manage accounts and limit user and administrator privileges to change, bypass or override security settings.

4. Patch: Patch and vulnerability management is a security practice designed to proactively prevent the exploitation of IT vulnerabilities that exist within an organization.

5. Repeat: Stay current.

Spelman also underscored the need to have a clear written security policy and continual security awareness training for employees.

Share this article with a colleague.

IJMAG.COM/1121SC Longtime insurance communicator Wetzel heads his own insurance marketing firm that specializes in website design and social media programs for agents through its Social Media Content Roadmap©. Website: www.wetzelandassociates.com. Email: twetzel@ wetzelandassociates.com. Phone: 708-771-1533.

INSURANCEJOURNAL.COM

Idea Exchange

The Wedge

Stuck in the Middle: The Brutal Journey of a Newly Appointed Agency Sales Manager

W

By Randy Schwantz

Yes, I’m stuck in the middle with you And I’m wondering what it is I should do It’s so hard to keep this smile from my face, Losing control, and I’m all over the place Clowns to the left of me, jokers to the right, Here I am, stuck in the middle with you

ho knew this song would be so prophetic when considering the journey of a sales manager in the independent insurance agency world.

I was on the phone yesterday with a good guy who wants to do the right thing, by contributing to the growth of the agency. In his mid-30s, he’s got a nice book of business in the $700,000 range. He just bought enough agency stock to care about the growth of the agency, but not enough to affect his financial future in any significant way. He is one of five partners, but he’s a minority partner … very minority.

Lucky him, he’s been asked to take the sales manager job. Before that, he was a happy producer. Now, he’s frantically searching for a solution that doesn’t exist: A way to drive revenue without having to commit any time or money toward the outcome.

He’s stuck. Here are his three biggest problems.

though it’s still 30 years down the road.

Problem No. 1: He makes money when he

The Dilemma

grows his book of business. Anything that pulls him off that task is a big intrusion on his ability to feed his family, fund the cars, university and wedding for the kids. Then if he’s lucky, there’s enough left to poke some money away for retirement, even

28 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

Problem No. 2: The other partners, and

there are four of them, have zero appetite for improvement. They are all successful in their own right, but he says they sometimes forget that at least half of their book was inherited. Nevertheless, they are untouchable, which means anything he does will be shunned, ridiculed and mocked. Sounds like a fun role doesn’t it.

Problem No. 3: They hired four new pro-

ducers in the past 18 months. Two are fairly seasoned salespeople but have no insurance knowledge. The other two are fresh as a daisy, no sales experience and don’t know insurance. The new producers are not the problem. The problem is no tools, no training and no process. That means he’ll have to make it up as he goes, or spend time developing something that works (that might take a few years).

This freshly appointed sales manager can’t make up his mind. “Should I focus on growing my own book, because that is what pays the bills. Or should I sacrifice bunt, and spend my valuable time with these newbies to ensure their success?”

INSURANCEJOURNAL.COM

Michael Scott (played by Steve Carrell).

What’s this guy to do?

Look to Nick Saban, head coach of Alabama Crimson Tide as a source of inspiration. Channeling Nick a little bit, this is what I think he would say: • Negotiate full authority to hire/fire any producer you are responsible for. (If you can’t get this, don’t take the job).

• Every great coach has a playbook.

(Without a playbook, you have chaos).

• Ask all nonparticipants (owners and producers that have an exempt card) to stay out of the way.

• Recruit assistant player/coaches to help you do training and drive the process (it's the best way to get them involved in their own success and gain leverage freeing up your time commitments)

Nothing is worse than having to play politics to get rid of a lazy or underperforming producer.

One of my bosses early in my career said, “responsibility without authority makes you an a__hole.” Nothing is worse than having to play politics to get rid of a lazy or underperforming producer. If you are going to be held responsible to make others better, you need authority.

Here’s another thing to consider. You can’t drive an idea, you can only drive a process. There is a good chance that your agency doesn’t have a sales process, it has a sales idea. An example would be, build a relationship, ask good questions, close hard. Those are great ideas, but hardly a process that can be driven. So, if you don’t have a sales process, you should get one.

In closing, avoid taking a job or responsibility if you don’t have the authority, the tools and support to make it happen. If not, you’ll be singing this song: Clowns to the left of me, jokers to the right, Here I am, stuck in the middle with you.

Share this article with a colleague.

IJMAG.COM/1121MD Schwantz is founder of The Wedge Group. He has two new books: “GRIT: How to Find, Hire and Develop REAL Producers” and “Agency Growth Machine: Transform Producer Potential into Agency Growth and Profit.” Phone: 214-446-3209. Website: www. thewedge.net. Email: randy@thewedge.net

He’s stuck in the middle.

To add a little salt and pepper to the complex situation, three of his partners have an attitude about new producers.

They feel these newbies should just pull themselves up by their bootstraps and make it happen. “No one helped me.

What’s the problem with these guys?”

You’ve probably seen this scenario play out in agencies across the country. To make it just a tad worse, this guy has the responsibility to get better results and virtually no authority. Here’s a quick review: • He makes no money by helping the new producers.

• His partners have no desire to be involved.

• He has no tools, training or processes in place (what is there to implement).

• He has the responsibility, but no authority.

It sounds like the making of at least six new episodes of The Office, starring INSURANCEJOURNAL.COM

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NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 29

Idea Exchange

Healthcare

Independent Agents: Capitalizing on the Health Clinic Marketplace system. With urgent care centers opening around the country, the number of clinics is expected to hit record-highs by 2017.

As a result, some of the best independent agents in the country are capitalizing on this emerging market and growing their books of business.

Expansion of Health Clinics

By Matthew S. Mitchell

T

he increasing number of health clinics across the nation constitutes a new trend in today’s healthcare

Walk-in clinics are a relatively new addition to the American healthcare landscape, only dating back about 15 years. Given the success, however, they’re expected to continue to multiply for years to come. This recent growth is driven by quality care at lower prices and the shortage of primary care physicians nationwide.

Today, consumers can get much of the same medical attention in a clinic setting

that previously required treatment in an emergency room, usually faster and at a lower cost. Consumers are heading to health clinics for treatment of more common ailments, like sore throats or respiratory infections. Often, the cost of treatment at a clinic is significantly lower than treatment for the same ailment at a hospital. With many consumers paying a larger share of healthcare costs than in the past, they’re looking to compare and select options that best fit their budgets.

The other reason health clinics have increased in popularity is the significant shortage of primary care physicians; a deficit that is expected to hit record numbers in less than five years. This growing shortage is making it increasingly challenging for consumers to find primary care doctors, leading many patients to turn to walkin clinics instead. Fortunately, this is something that is comforting for many patients. Research shows the majority of consumers are more comfortable at clinics than at hospitals and traditional doctors’ offices. This especially rings true for millennials, who are leading the trend in turning to clinics.

Benefits for Agents

The increase in health clinics has some interesting implications for independent insurance agents. While larger hospital facilities typically are self-insured, health clinics very often depend on the expertise of independent agents to set up individualized and comprehensive insurance programs. For agents looking to improve their agency’s economics, it’s a great time to capitalize on the opportunity to provide expert advice.

Today’s clinics are designed to perform a variety of medical tests and procedures, and their insurance program should reflect these exposures. Agents in this market are ensuring health clinic clients are protected against an array of potential professional liability 30 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

INSURANCEJOURNAL.COM

exposures, including scope of practice and credentialing, two main areas of concerns.

Specialized independent agents understand the importance of defining the scope of practice for a clinic. Providing medical care to patients is no longer limited to doctors and nurses alone. Clinics hire a variety of healthcare professionals to administer patient care, meaning some patients may not need to meet with a doctor.

As a result, agents in this marketplace are arranging for coverage that is broad enough to cover the many healthcare professionals providing services, including any nurse practitioners, physician assistants and primary care physicians on the policy.

1. Quality and Tenure of the Claims Team:

Some of the best independent agents in the country are capitalizing on the healthcare clinic emerging market and growing their books of business.

Today’s agents know insurance protection should not be limited to handling claims as they happen, but

Healthcare organizations are often targets of litigation and many claimants in this arena will have multiple ailments, which can complicate any potential claims. Carriers that have a specialized claims team, staffed with experienced

medical malpractice attorneys and

adjusters with clinical capabilities, can help agents offer better protection to their clients. The top carriers will also have a strong network of outside attorneys who

specialize in medical mal- practice, providing enhanced protection for clinic clients.

2. Clinical Risk Management Services:

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should also offer support to healthcare organizations in the area of prevention.

An insurance carrier that provides education around risk management and assessment can help lessen the likeli- hood of a malpractice claim for a health care client. For example, specialized carriers in this field may offer free online risk management training courses for clinics to share with their staffs.

Winning independent agents are embracing this growing trend in health clinics and are taking advantage of the opportunity to provide expert advice and consultation to help protect their clients’ employees and businesses. By partnering with experienced, specialized carriers, independent agents can better serve their healthcare clientele, while improving their agencies’ economics. Share this article

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IJMAG.COM/1121HO Mitchell is president of healthcare at The Hanover Insurance Group Inc.

Page 1

Credentialing is another area of concern for clinics. Any medical professional who is hired by a clinic and administers patient care should be credentialed. Many of the most successful independent insurance agents in this space are teaming up with insurance carriers that can help them add value. It is important that a clinic’s professional liability policy is broad enough to cover its administrative services, which includes the credentialing of healthcare professionals.

Similarly, carrier partnerships can make all the difference when independent agents look to provide health clinic clients with a specialized approach to claims and risk management. When selecting comprehensive insurance protection for health clinic clients, the most successful agents are assessing each carrier’s capabilities, looking at the: INSURANCEJOURNAL.COM

NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 31

NATIONAL | Spotlight | Long Term Care/Assisted Living overlooked are staff member and institutional biases. Some staff members may not approve of the idea of sexual expression among elderly residents and they may overtly express their opposition to these relationships. Some administrators may decide it is easier to ignore or prohibit sexual activity within the community. In a 2011 case, a man in a memory care unit in Minnesota fondled six women. In response to this resident’s actions, the organization banned all kissing, caressing and nudity in public areas, rather than assessing and addressing the topic of sexual expression in the community. The state cited the facility for failure to report possible abuse and for a lack of staff training and policies.

Advising Senior Living Residential Clients on Sexual Expression Policies

By Bruce W. Dmytrow

S

amantha Jones of “Sex and the City” is probably a few decades away from moving into a senior living community. Nevertheless, the topic of sexual expression in senior living communities is a resident matter that should be recognized and addressed from an enterprise perspective.

As Samantha and the baby boomers begin moving into senior living communities, sexually active residents will become more common, as this generation has experienced greater sexual freedom than previous generations. Therefore, an organization’s policy on sexual expression may become a consideration for boomers when deciding where to live.

A recent New York Times article highlighted the approach of one New York organization, The Hebrew Home at Riverdale, which has had a sexual expression policy since 1995. To help facilitate relationships among residents, The Hebrew Home has sponsored happy hours, organized senior proms and started a dating service. While these activities are viewed as entertaining events for residents, they potentially present associated risks.

The Risks on Sexual Expression

A specific challenge relating to resident sexual expression involves those with dementia because what constitutes sexual consent may be ambiguous and questionable. In one situation, a 79-year-old man was charged with third-degree sexual assault for engaging in sex with his wife.

The facility and the woman’s daughter from a previous marriage asserted that the resident was incapable of consent because she had Alzheimer’s disease.

Resident family dynamics and family member views on sexual expression also represent sensitive considerations that are paramount to address in this setting.

Residents with Alzheimer’s disease may form romantic relationships with one another, forgetting their living spouses.

A high-profile example involved retired U.S. Supreme Court Justice Sandra Day O’Connor, whose husband fell in love with another Alzheimer’s patient. While O’Connor and her sons were supportive of this relationship, other families may have unfavorable reactions to this situation.

Organizational realities that cannot be

32 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

Sex Education is Not Just for Teenagers

In order to manage risks associated with sexual expression, an organization should institute a policy on resident sexual expression that reflects a variety of needs and safeguards applicable to situations that may make other residents uncomfortable.

The policy should consider that residents must be assessed on their ability to make decisions regarding sexual expression and educated on their right to say “no,” as well as require all curtains and doors to be closed during any type of sexual activity between consenting residents.

Training programs should be developed to help staff members identify signs that a relationship is unwelcome and recognize situations when sexual expressions are making a resident feel uncomfortable.

Frequent, candid communication with residents and their family members is essential to understanding resident needs and effectively managing expectations.

An organization’s staff must be trained to discuss this topic in a manner that is respectful of the resident’s privacy and wishes. Through comprehensive training, exceptional professionalism and candid communication with residents and family members, senior living communities can help minimize risks related to this topic.

Dmytrow is vice president, Aging Services and National Programs, Healthcare, for CNA. INSURANCEJOURNAL.COM

MyNewMarkets | NATIONAL

Workers’ Comp High Risk

Market Detail: RWISI (www.rwisi.com)

offers non-standard workers’ comp coverage for high-risk, high mods, USL&H, construction, roofing, temporary staffing, oil & gas, steel & tower erection, small to medium (1-1000 employees), start-ups, and difficult-to-place risks. Commissions are typically higher than standard.

Available limits: As needed Carrier: Varies by state, admitted States: All states excecpt Alaska, N.D., Ohio, and Wyo. Contact: Randy White at 813-220-9220 or e-mail at Randy@rwisi.com

Equipment, Tools, Floaters Market Detail: BindDesk Insurance

Services (www.BindDesk.com) can write mono-line tools, equipment floaters, and miscellaneous property floaters and quickly. Admitted and non-admitted markets available nationwide with a variable of deductibles and limits available.

Available limits: As needed Carrier: Various, admitted and non-admitted available States: All states Contact: Greg Liewald at 858-204-9530 or e-mail: greg@binddesk.com

Bookkeepers

Market Detail: Herbert H. Landy

Insurance Agency Inc. (www.landy.com) offers E&O, professional liability, workers’ comp, BOP and more for bookkeepers.

Available limits: As needed INSURANCEJOURNAL.COM

Carrier: Unable to disclose States: All states except Alaska and La. Contact: John Torvi at 781-292-5417 or e-mail: johnt@landy.com

Home Health Care & Miscellaneous Home Services Market Detail: M.J. Hall and Company,

Inc. (www.mjhallandcompany.com) offers general liability coverage with primary limits up to $1 million occurrence/$3 million aggregate. Included coverages: medical payments coverage - $5,000 limit; errors and omissions coverage - policy limits; sexual and physical abuse coverage - $50,000 per claim/$100,000 aggregate (higher optional limits available). No deductible required. Property coverage includes: basic, broad or special form; replacement cost or ACV; building; business personal property; business income; equipment breakdown; accounts receivable; computer equipment; outside signs; and valuable papers. Crime coverage includes: inside the premises - theft of money and securities; inside the premises - robbery or safe burglary of other property; and outside the premises.

Available limits: As needed Carrier: Various, admitted States: Alaska, Ariz., Calif., and Nev. Contact: Stacey Shurson at 209-870-2978 or staceys@mjhallandcompany.com

National School Bus Contractors Program

Market Detail: All Trans Risk Solutions

LLC (www.alltransins.com) has an exclusive school bus contractors program with an A.M. Best “A” Rated Carrier. Writing in all 50 states, available coverages include business auto, general liability, commercial property, abuse & molestation, excess and EPLI. Mixed fleets are acceptable up to 20 percent non-school bus. Program includes in-house underwriting, 24 hour claims reporting, loss control services as well as risk management products and discounts on services such as drug testing.

Available limits: Maximum $5 million Carrier: Unable to disclose, admitted States: All states Contact: Megan Morbee at 201-661-2365 or e-mail: megan@alltransins.com

Advertisers Index

Read, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/

Accident Fund www.accidentfund.com SC5; FL19 Applied Underwriters www.auw.com 2, 3, 36 Boston Insurance Brokerage www.bostonbrokerage.com 29 Burns & Wilcox Ltd. www.burnsandwilcox.com 9; FL3 Cypress P&C www.cypressig.com FL7 Demotech www.demotech.com FL13 EZLynx www.ezlynx.com 10, 11 First American Specialty Insurance Co. www.firstam.com W5 GIC Underwriters, Inc. www.gicunderwriters.com FL1 Gorst & Compass Insurance www.gorstcompass.com W12 Insurance Technologies Corp. www.getitc.com 27 Johnson & Johnson www.jjins.com FL2 Marsh & McLennan Agency LLC www.mma-newengland.com E5 Maximum www.maxib.com FL5 Monarch E&S Insurance Services www.monarchexcess.com W3 MUSIC www.music-ins.com 7 National General Insurance www.nationalgeneral.com 19 Pacific Specialty Insurance Company www.pacificspecialty.com W7 PersonalUmbrella.Com www.personalumbrella.com 4, 5 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com FL20 St. James Insurance Group www.stjamesinsurance.com FL9 Texas Mutual www.texasmutual.com SC3 The Hartford Insurance Group www.thehartford.com 16, 17 United Fire Group www.ufgsolutions.com W9 Universal Service Agency, Inc. www.universalbonds.com 31

NOVEMBER 21, 2016 INSURANCE JOURNAL | NATIONAL | 33

Closing Quote What’s Next for Your Agency Perpetuation Plan?

By Keith Mangini

Y

ou’ve built a successful agency and are now starting to look ahead to retirement. What’s your exit plan? What do you need to start thinking about today as you plan for the transition of your business?

The absence of a good perpetuation plan not only can affect an agency’s value and your retirement date, but also the ability to fund such a transaction.

What steps can agency principals take now to maximize the value of their agency? One way is to grow your agency’s book of business, including growing both organically and through acquisition.

“A valuable agency is one that can not only grow organically, but also can grow by making strategic acquisitions and folding them in successfully,” says Robert J. Pettinicchi, chief lending officer of InsurBanc.

Although there are only weeks left in 2016, it is not too late to do something positive

today to improve your agency’s value. A current best practice is to establish a line of credit that can be used for small agency acquisitions that will help grow your book of business and increase the size of your agency, maximizing its value. This will give you more options for the transition of your business.

Due to competition, opportunities to purchase books of business to complement your agency, while fewer, can come up quickly. A line of credit positions your agency to be ready to buy ahead of the competition. Another option is to take out a bank term loan to recapitalize the business, refinance a variety of agency debt and possibly take out some capital.

The economic and tax picture may be different in 2017. Tax rates may, and likely will,

The absence of a good perpetuation plan not only can impact an agency’s value and your retirement date, but also the ability to fund such a transaction. change next year with a new administration and a change in the congressional majority.

It is highly recommended that, with so much at stake, you get a valuation by industry experts early on when putting together a perpetuation plan.

The cost that these industry

34 | INSURANCE JOURNAL | NATIONAL NOVEMBER 21, 2016

The pervasiveness of mobile devices has changed consumer expectations. professionals may charge is far less than the amount of money that could be lost if the transaction is structured improperly from a tax or legal standpoint.

The services of industry experts will undoubtedly help to avoid costly errors and identify opportunities. You will also want to make sure your bank can provide the capital you need. It is important that a lender understands agency value and can provide the proper amount and sustainable structure of debt to make the transition work smoothly from a financing perspective.

From a lender’s perspective, the ability for your successors to obtain financing will depend on a well-crafted perpetuation plan and a well-run agency.

Everyone who is part of building the plan will have a vested interest in its success and in your agency’s ability to maximize value.

Take steps today to maximize your agency’s value for the future, and to ensure that

you have attractive alternatives available when you are ready to perpetuate. This can include selling the agency internally to a family member or key employees, or externally to another agency or third party.

Regardless of whom the next generation of ownership might be, the best perpetuation plans are flexible to change, take time and effort to prepare, and allow for the selling generation to achieve its retirement goals while enabling the successor generation to purchase a business with a stable financial footing. Share this article

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IJMAG.COM/1121SQ

Mangini is vice president, commercial loan officer at InsurBanc, a division of Connecticut Community Bank, N.A. InsurBanc is dedicated to providing agency financing and deposit services to independent insurance agents.

Email: kmanginii@insurbanc.com.

Website: www.insurbanc.com.

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Insurance Journal’s Charity Issue highlights some of the many charitable tales of insurance. Send us your firm’s story about how you support the community so we can share it with the industry.

(We’re helping too! 10% of all ad sales in this issue go to charity.)

Send us your story and photos by Dec 2nd | charity@insurancejournal.com

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

For information call (877) 234-4450 or visit auw.com/us. Follow us at bigdoghq.com. Š2016 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best.

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