Insurance Journal West 2017-05-15

WEST REGION Producer Compliance in California Blood-Only Detection of Pot DUIs? California Balcony Fall Settlement

Excess and Surplus Lines Insurance A.M.Best A++ Rating | S&P A+ Rating SNL’s Top D&O Underwriter Nationwide

SOMETIMES, ONE LAYER OF PROTECTION DOESN’T PROVIDE ENOUGH COVERAGE.

Unsupported and Supported Follow Form Excess Policy $25M in capacity Lead Limits up to $10M Admitted and Non-Admitted Paper Occurrence and Claims Made Coverage

Risk can rattle your bones and freeze your business. Don’t let it. Instead, protect it with Tokio Marine Specialty’s powerful Excess & Surplus commercial insurance protection. With support from Philadelphia Insurance Companies specialized niche market expertise, and Tokio Marine Group, with its life/non-life insurance company group’s Top 20 ranking in the world, based on market capitalization, Tokio Marine Specialty provides truly powerful protection.

Learn more. Call 855.411.0797 or visit TMSIC.com Construction

I

Environmental

I

Hospitality

I

Manufacturing

A Member of the Tokio Marine Group

I

Real Estate/Habitational

I

Retail

Tokio Marine Specialty Insurance Company, a member of the Tokio Marine Group, is an authorized Excess and Surplus lines insurance carrier in all states and D.C. Tokio Marine Specialty Insurance Company is not licensed or admitted in any jurisdiction except Delaware where it is a domestic insurer licensed to write surplus lines. Surplus lines companies do not participate in state guaranty funds in any jurisdiction, except New Jersey, and thus, surplus lines insureds are not protected by those funds. © 2015 Tokio Marine Specialty Insurance Company, All Rights Reserved.

APPLIED PROTECTS THE TITANS OF INDUSTRY. ®

IT PAYS TO GET A QUOTE FROM APPLIED® ©2017 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.

Accepting large workers’ compensation risks. Most classes. All states, all areas, including New York City, Boston, and Chicago. Few capacity and concentration restrictions.

Simplified financial structure covers all exposures.

EXPECT THE WINNING DEAL ON LARGE WORKERS’ COMPENSATION. Call (877) 234-4450 or visit auw.com to get a quote.

Contents May 15, 2017 • Vol. 95 No. 10 • West

West W1 Earthquake Authority Creates Online Home Vulnerability Evaluator

W1 EARTHQUAKE AUTHORITY CREATES ONLINE

HOME VULNERABILITY EVALUATOR

National 10 Organic Growth Under Pressure: Agencies Show Weakest Growth Since 2011

W4 Oregon Judge Dismisses $4M Suit in Family Drowning

12 A Risk Pool of One: How Technology Could Make Insurance Obsolete

W4 Weak Safety Standards Caused California Exxon Refinery Blast, Agency Says

14 As Auto Insurance Sales Stagnate, Carriers Turn to Agents: J.D. Power

W6 Oregon Suit Blames Security Guard for Woman’s Leap off Insurance Building

18 Agents Suggest How Carrier Partners Can Move from ‘Good’ to ‘Great’

W8 Nevada Lawmakers Pushing Blood-Only Detection of Marijuana DUIs

12

A RISK POOL OF ONE: HOW TECHNOLOGY COULD MAKE INSURANCE OBSOLETE

W8 Partial Settlement for Victims of California Balcony Fall

20 Spotlight: Ironshore CEO Kelley on Liberty Mutual’s Acquisition 22 Closer Look: Top 10 Technical Fouls to Avoid When Filing Environmental Claims 26 Wholesale Insurance Associations NAPSLO, AAMGA Merge to Form WSIA

Idea Exchange

SR1 Special Report: 2017 Super Regional P/C Insurers™ Revealed

W10 Producer Compliance in California: The Top Three Regulatory Danger Zones 24 Tech Talk: How to Use Digital Body Language 27 The Wedge: The Scientific Selling Power of Yes, No and Maybe 32 Minding Your Business: Preparing for the Loss of a Producer

Departments

34 Closing Quote: Surplus Lines Could Meet Flood Coverage Needs

11 Declarations

W2 People

11 Figures

32 PREPARING FOR THE LOSS OF A PRODUCER 6 | INSURANCE JOURNAL | WEST MAY 15, 2017

15 Business Moves 30 MyNewMarkets INSURANCEJOURNAL.COM

OPENING NOTE

Write the Editor: awells@insurancejournal.com

Political Talk Hurting Job Performance

D 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 Catherine Oak, Bill Schoeffler, Randy Schwantz, Tom Wetzel Contributing Writers

Norma Essary, Veronica Benzinger

IJ ACADEMY OF INSURANCE Director Patrick Wraight pwraight@ijacademy.com Associate Director Barbara Whiffen bwhiffen@ijacademy.com

ADMINISTRATION

Chief Financial Officer Mark Wooster mwooster@wellsmedia.com

MARKETING

Marketing Director Derence Walk dwalk@insurancejournal.com Marketing Administrator Gayle Wells gwells@insurancejournal.com

NEW MEDIA

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

Chief Marketing Officer Julie Tinney (800) 897-9965 X148 jtinney@insurancejournal.com

South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com Insurance Markets Manager Kristine Honey (619) 584-1100 X132 khoney@insurancejournal.com Social Media Manager Ly Short (619) 890-7735 Lshort@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125 kdelamora@insurancejournal.com

DESIGN/WEB

Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com V.P. of Design Guy Boccia gboccia@insurancejournal.com Senior Web Developer Chris Thompson cthompson@insurancejournal.com Web Developer Jeff Cardrant jcardrant@insurancejournal.com Web Developer Terrance Woest twoest@wellsmedia.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

on’t talk politics – it might hurt your on-the-job performance. That’s what a new survey by the American Psychological Association revealed, which found that American workers are more likely to say they are feeling stressed and less productive because of political discussions at work now more than before the 2016 presidential election.

The survey found that 26 percent of full-time and part-time employed adults said they have felt tense or stressed out as a result of political discussions at work since the election, an increase from 17 percent in September 2016 when they were asked about political discussions at work during the election season. More than one-in-five (21 percent) said they have felt more cynical and negative during the workday because of political talk at work, compared with 15 percent before the election, according to the survey from APA’s Center for Organizational Excellence.

Some said that political talk in the workplace has hurt their job performance: 15 percent said they have had difficulty getting work done; 13 percent said their work quality has suffered; and 14 percent said they have been less productive.

The post-election data were collected online within the U.S. on APA’s behalf by Harris Poll from Feb. 16-March 8, 2017, among 1,311 adults who are employed full time or part time. The pre-election online survey was conducted from Aug. 10-12, 2016, among a nationally representative sample of 927 adults who are employed full or part time.

Half of the post-election survey respondents (54 percent) said they have discussed politics at work since the election, and for 40 percent of American workers, it has caused at least one negative outcome, such as reduced productivity, poorer work quality, difficulty getting work done, a more negative view of coworkers, feeling tense or stressed out, or increased workplace hostility. This is a significant increase from FOR QUESTIONS the pre-election survey data, when 27 percent REGARDING SUBSCRIPTIONS: Call: 855-814-9547 reported at least one negative outcome.

Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: “Employers might prefer to keep political insurancejournal.com/subscribe talk out of the workplace, but the reality is Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media these often-heated discussions have intenGroup, 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 sified since the election, posing a threat to per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pubemployee well-being and business perforlication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended mance,” said David W. Ballard, PsyD, MBA, 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 director of APA’s Center for Organizational Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission.

Excellence.

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

‘Employers might prefer to keep political talk out of the workplace, but the reality is these often-heated discussions have intensified since the election, posing a threat to employee well-being and business performance.’

Andrea Wells Editor-in-Chief

8 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

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.

INSURANCEJOURNAL.COM

ON YOUR TEAM. We’re more than your partner, we are on your team. At AmWINS Access, we understand small business. We know placing specialty property and casualty business has to be simple and fast, which is why we have developed a nationwide small business platform serviced by local underwriters. Our industry-leading technology streamlines the process of handling small E&S accounts, meaning you can expect the team at Access to deliver the right product for your insureds quickly and efficiently. To learn more about the first multi-carrier E&S quoting system for small business, visit amwins.com/onyourteam.

National

Organic Growth Under Pressure: Agencies Show Weakest Growth Since 2011, Reagan Consulting Reports

A

gencies and brokerage firms reported that their organic growth fell to 3.9 percent in the first quarter of 2017, the weakest growth rate since 2011.

According to Reagan Consulting’s Organic Growth and Profitability (OGP) Survey, the drop had a lot to do with a sluggish economy in the first quarter.

“Soft property/casualty insurance pricing certainly contributed to the disappointing performance, but the primary reason appears to be an unusually weak U.S. economy, which showed its worst quarterly performance in three years,” said Kevin Stipe, president of Reagan Consulting, an insurance agency management consulting and merger-and-acquisition advisory firm.

Despite the slippage, brokers are forecasting 5 percent organic growth for the year, Stipe said.

Profitability, defined as agent-broker 10 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

earnings before interest, taxes, depreciation and amortization (EBITDA), has continued to recede, with EBITDA margins hitting 27.6 percent in the first quarter. First quarter EBITDA margins for OGP survey participants peaked in 2014 at 29.9 percent and have been sliding each year since, according to Reagan Consulting.

Reagan consultants say that EBITDA margins tend to be highest in the first quarter due to cash-basis reporting of contingent income, and then slide throughout the year.

“That is the lowest first quarter EBITDA margin we have seen among OGP brokers since 2012. Although most brokers forecast their full-year EBITDA margins will again hit the 20 percent level achieved in 2016, only one-fifth of survey participants believe their profit margins will improve in 2017,” Stipe said.

“According to Reagan, organic revenue growth among insurance agencies and brokerage firms fell in 2016 to 4.2 percent– its lowest annual rate since 2011. The year ended on a positive note, however, as fourth-quarter organic growth outpaced the 3.6 percent in the third quarter.

Reagan consultants sees a widening gap between broker performance and valuations as concerning for investors.

“The publicly traded brokers’ average organic growth in the first quarter was 3.8 percent, yet they traded at 12.7 times EBITDA as of March 31. That is extremely high compared with the historical multiple of 9 to 11 times EBITDA,” Stipe said.

Reagan Consulting has conducted its quarterly survey of agency growth and profitability since 2008, using confidential submissions from more than 150 midsize and large agencies and brokerage firms.

INSURANCEJOURNAL.COM

West

Earthquake Authority Creates Online Home Vulnerability Evaluator

T

he California Earthquake Authority has created an online tool to help home inspection specialists evaluate a house’s vulnerability to earthquake damage.

The online tool, QuakeGrade, uses information entered by an inspector and collects data about a house’s structural and geological risks. It can calculate a INSURANCEJOURNAL.COM

vulnerability score, offer suggestions for improvements and generate a detailed report that can be sent to a homeowner or buyer.

“We want to help Californians learn more about their risks for earthquake damage to their homes,” CEA CEO Glenn Pomeroy said in a statement.

“QuakeGrade is a great new tool and will

help homeowners see what specific steps they can take to lower the risk of shake damage to their house.”

QuakeGrade can be used on desktop computers, tablets and smartphones and is available to California-licensed engineers, California-licensed contractors and certified California Real Estate Inspection Association home inspectors.

MAY 15, 2017 INSURANCE JOURNAL | WEST | W1

WEST | PEOPLE

Susanne Waite

Ed Feriance

Jim Watson

David Deacon

Doneca Delmundo

Melissa Schellinkhout

Burns & Wilcox Brokerage named Susanne M. Waite vice president and senior broker in its San Francisco, Calif., office.

Waite has more than 30 years of experience in insurance, with 14 years in wholesale.

Waite previously was a vice president and broker at Partners Specialty Group and Swett & Crawford.

Before that she was with Aon Serivces Group. Her experience in casualty includes general liability, excess and environmental.

Farmington Hills, Mich.-based Burns & Wilcox is an independent wholesale insurance brokerage owned by the H.W. Kaufman Financial Group.

Robertson Ryan & Associates Inc. added Ed Feriance as a vice president in Las Vegas, Nev. Feriance is a licensed insurance agent and specializes in tow truck operations in California and Nevada and other areas.

He was most recently was an agent with a California-based insurance broker.

Robertson Ryan & Associates offers a range of solutions for business, benefits and personal insurance.

RIC Insurance General Agency has named Jim Watson transportation underwriting manager.

RIC also named Michele Epstein vice president of management and professional lines.

Watson is based in Reno, Nev. He worked as a commercial auto product manager at Capital Insurance Group prior to RIC. He was also an underwriter at Coastal Brokers Insurance Services, and a senior underwriter at the Sutter Insurance Co. Epstein will be based in Chatsworth, Calif., and produce, enhance and expand product offerings for RIC’s agency partners.

Epstein worked as vice president and broker for AP Specialty before RIC. AP Specialty acquired ELM Insurance Brokers, where she worked in the same capacity. Prior to these roles, Epstein was founder and president of Attorneys and Professionals Insurance Services, as well as executive vice president of Jaymes & Jaymes Inc. RIC is a wholesale insurance brokerage and managing general agency.

LP Insurance Services Inc. named David Deacon to its Arizona commercial insurance sales team.

Deacon is responsible for developing new business relationships as well as retaining and servicing existing clients.

W2 | INSURANCE JOURNAL | WEST MAY 15, 2017

Deacon was most recently a sales producer at the Leavitt Group before joining LP Insurance.

Reno, Nev.-based LP Insurance has additional offices in Elko, Las Vegas, the Gold River/ Sacramento and Truckee, Calif. area, as well as Phoenix, Ariz.

San Diego, Calif.-based Cavignac & Associates has named Doneca Delmundo as an account administrator within the agency’s commercial department.

Delmundo will provide support and assistance to the agency’s commercial insurance account managers.

Delmundo previously was a paralegal for Dostart Hannink & Coveney LLP, where she worked her way up from a receptionist to paralegal.

Cavignac & Associates is a risk management and commercial insurance brokerage.

Woodruff-Sawyer & Co. has named Melissa Schellinkhout has vice president and Northwest practice director.

Schellinkhout will be responsible for oversight of property/casualty operations in the Pacific Northwest, including the firm’s Portland, Ore., and Seattle, Wash., offices. She will also manage insurance company relations and client brokerage activities.

She worked for more than 16 years at Chubb before joining Woodruff-Sawyer.

San Francisco-based Woodruff-Sawyer has offices throughout California, and in Oregon, Washington, Colorado, Hawaii and New England.

QBE North America has named Marcia Blanco as senior vice president and Western region specialty underwriting engagement leader.

She is based in San Francisco, Calif. Blanco will report to Jeff Grange, president of specialty insurance.

Blanco has more than 25 years of insurance industry experience. She joins QBE from XL Insurance, where she was a vice president.

Blanco previously held senior underwriting and leadership positions with Navigators Insurance Co., Kemper Insurance Co., CNA, Executive Risk, Reliance National Underwriters and Swett and Crawford.

QBE North America is part of QBE Insurance Group Ltd. The North America division is headquartered in New York and conducts business through its property/casualty insurance subsidiaries.

INSURANCEJOURNAL.COM

THERE’S AN ART TO SMALL COMMERCIAL THAT BRINGS YOU BIGGER RETURNS WITH LESS EFFORT.

At The Hartford, we’ve designed small commercial with the big picture in mind — yours.

We go well beyond products, tools and technology working seamlessly together. We bring you people who have mastered the details that can help you build your small commercial book with greater speed and efficiency. These are experts in the art of the volume business that’s small commercial.

See how we make it happen at THEHARTFORD.COM/ROI. Prepare. Protect. Prevail.® This insurance is underwritten by Hartford Fire Insurance Company, Inc., and its property and casualty affiliates, Hartford, CT. In TX, this insurance is written by Sentinel Insurance Company, Ltd., Twin City Fire Insurance Company, Hartford Accident and Indemnity Company, Hartford Fire Insurance Company, Hartford Insurance Company of the Midwest and Trumbull Insurance Company. In CA, this insurance is written

by Hartford Fire Insurance Company (CA license #7268) and its property and casualty insurance affiliates.

16-0228 © 2017 The Hartford. All rights reserved.

Property Liability Workers’ Comp Business Auto

WEST | News & Markets

Oregon Judge Dismisses $4M Suit in Family Drowning

A

judge has dismissed a $4 million lawsuit filed by a relative of four people who drowned in a northwest Oregon lake in 2014.

Judge Andrew Erwin dismissed the suit after Washington County argued it was entitled to immunity.

The county argued immunity under a state law that says a

public land owner isn’t liable for deaths or injuries that occur during recreational use of land.

Fishermen found the body of 3-year-old Jeremy Scholl. The bodies of his mother, Gabriela GarciaIxtacua; her brother, Michael Garcia-Ixtacua; and their mother, Jova Ixtacua-

Castano, were found nearby.

The lawsuit contended the

children stepped into or floated above a deep trench near the wading area, then disappeared into the water.

The women tried to rescue them, but were caught in the drop-off. An attorney for the family said they plan to appeal.

Copyright 2017 Associated Press.

Weak Safety Standards Caused California Exxon Refinery Blast, Agency Says

By Erwin Seba and Liz Hampton

T

he U.S. Chemical Safety Board concluded in a report issued earlier this month that a 2015 explosion at a Torrance, Calif., refinery then owned by Exxon Mobil Corp. could have been prevented.

“This explosion and near miss should not have happened,” said CSB Chair Vanessa Allen Sutherland in a statement. “The CSB’s report concludes the unit was operating without proper procedures.”

The federal watchdog found that weaknesses in the Torrance refinery’s safety program led to the blast.

The blast blew a large piece of debris 80 feet (24.38 m) to nearby alkylation unit settler tanks containing toxic hydrofluoric acid, which the board called a “near-miss event.”

Four workers suffered minor injuries and part of the refinery underwent a lengthy shutdown, contributing to a spike in the state’s gasoline prices.

The Torrance refinery sup-

plies 20 percent of the gasoline in Southern California and 10 percent statewide.

The explosion occurred when volatile hydrocarbons flowed backward through an idled gasoline-producing fluidic catalytic cracking unit (FCCU) to a pollution control device called an electrostatic precipitator (ESP), the CSB found.

The generation of sparks by the ESP ignited the hydrocarbons setting off the explosion.

The board, which has no regulatory authority and does not assess fines, found that the FCCU was operating without pre-established limits for a shutdown.

The agency also said Exxon relied on safeguards that it could not be sure were working and that a critical safe-

W4 | INSURANCE JOURNAL | WEST MAY 15, 2017

guard failed.

Exxon said in a statement: “We are confident we understand the cause of the blast and have worked cooperatively with the Chemical Safety Board and staff to fully understand their findings and recommendations.”

Regarding the hydrofluoric acid, Exxon said, “There was no evidence the Feb. 18 incident posed any risk to the modified hydrofluoric acid alkylation unit or risk of harm to the community.”

Residents near the refinery want local and state officials to ban the use of hydrofluoric acid in making octane-boosting gasoline additives.

Hydrofluoric acid is a highly toxic chemical that can kill or seriously injure at a concentration of 30 parts per million. As a gas it forms a ground-hugging cloud.

The board said it has asked a federal court to enforce subpoenas requiring Exxon to provide information about safeguards to prevent or mitigate a release of hydrofluoric acid.

Exxon said it “strongly disagrees” with any statement questioning its responsiveness or cooperation with the investigation.

“We offered to make additional documents available if the CSB could provide a sufficient basis for the documents and agreed to respect commercial confidentiality, which they have not done,” a spokesman said Wednesday.

PBF Energy Inc., which acquired the refinery last year, “has already implemented a number of measures that address the CSB’s recommendations,” PBF spokesman Michael Karlovich said in a statement.

“We plan to complete two studies later this year that will address the remaining recommendations.”

The CSB determines root causes of chemical plant accidents and provides recommendations to companies, industry organizations and regulatory agencies.

(Reporting by Seba and Hampton in Houston; editing by Gary McWilliams and Matthew Lewis) Copyright 2017 Reuters.

INSURANCEJOURNAL.COM

You’ll Get the Royal Treatment

MonarchExcess.com

At Your Service

Derek Borisoff, President / Chief Executive Officer monarchxs@monarchexcess.com // 818-249-0100 x1237

Commercial Lines // Personal Lines // Special Risk // Professional Liability // Brokerage

La Crescenta 818-249-0100 / Simi Valley 805-577-6800 / San Diego 619-521-2170 / Rancho Mirage 760-779-5555 San Marcos 760-891-2811 / Fresno 559-226-0200 / Arizona 877-406-8026 / Hawaii 818-425-9847 / Lic. #0697233

WEST | News & Markets

Idaho City Assessing Flood Risks Prior to Federal Maps Release

B

oise, Idaho, officials have expressed concerns with federal maps that propose adding hundreds of acres to a flood plain in the city, which could increase the cost and difficulty of buying or developing nearby property.

The city disagrees with the Federal Emergency Management Agency over maps predicting the contours of a 100-year flood between Lucky Peak Dam and the Snake River.

A 100-year flood is an event FEMA predicts has a 1 percent chance of being equaled or exceeded in a single year, The Idaho Statesman reported.

The city has hired its own outside experts to assess the flood risks. City spokesman Mike Journee said the findings will be presented to FEMA. “Our residents wouldn’t be able to do this on their own

unless they went out and hired experts,” Journee said. “And so we wanted to make sure that we had the right people putting it together, taking a look at it and giving FEMA feedback that would be useful to them.”

FEMA released draft versions of the redrawn 100-year flood boundaries last year.

The maps are designed to inform communities about the risks of building near waterways. Once finalized, the maps determine construction and flood insurance requirements for buildings inside the flood plain.

Officials in Boise are concerned about the maps including the additional acres in the flood plain because it could affect economic development and lead to undesirable build-

ing designs.

Karl Gebhardt, one of the city’s experts, said FEMA is relying heavily on topographical measurements taken from the air in 2007, while he and the other local experts are using data from 2015. The Boise research team is surveying the river’s channels on the ground instead of from the air in an effort to attract more data, he said.

Earlier this month, the water flowing out of the dam and into the Boise River reached almost 9,500 cubic feet per second.

Between early March and early April, the flows ran between 8,200 and 8,500 cubic feet per second (232 and 241 cubic meters per second). That is far below the indicator of a 100-year flood, which is 16,600 cubic feet per second (470 cubic meters per second).

The FEMA maps, which have not yet been finalized, are expected to go through a public comment process starting in May. During that period, the city of Boise will submit feedback from its experts’ findings to the federal agency.

Gebhart said errors are likely during the mapping process, but the goal is to try “to get it as close as you can get to make a reasonable estimate for flood risk.”

Copyright 2017 Associated Press.

Oregon Suit Blames Security Guard for Woman’s Leap off Insurance Building

Regulators in California Hit PG&E with $8.3M Fine for Deadly Wildfire

he family of a woman who jumped off a 27-story building in downtown Portland, Ore., has sued the security guard who couldn’t stop her.

The lawsuit seeks $505,000, alleging the guard was at fault for unlocking the door to the roof. The security company that employed him is also a defendant.

The guard told police in August 2015 he was in the stairwell of the Standard Insurance Center building when he real-

egulators say they have fined Pacific Gas and Electric Co. $8.3 million for failing to maintain a power line that sparked a massive blaze in Northern California that destroyed 549 homes and killed two people.

The California Public Utilities Commission said it fined PG&E $8 million for poor tree maintenance by PG&E and its contractors and the rest for failing to report one of its power lines may have started the blaze.

T

ized a woman was walking up the stairs above him. When he neared the locked door to the roof, the woman turned around and walked down past him.

The guard said he unlocked the door to make sure nothing was amiss.

That’s when the 46-year-old woman ran by and went to the ledge.

The guard said he tried to stop the suicidal woman, but she leaned forward out of his grip and dropped to the pavement.

Copyright 2017 Associated Press.

W6 | INSURANCE JOURNAL | WEST MAY 15, 2017

R

A Cal Fire investigation found the state’s largest utility and its contractors failed to maintain a gray pine tree that slumped into a power line igniting the September 2015 fire in Amador County.

The blaze burned for three weeks, killing two people and destroying more than 900 structures, including about 550 homes. The 110-square-mile fire caused an estimated $300 million in insured losses.

Copyright 2017 Associated Press.

INSURANCEJOURNAL.COM

Cheers!

We’ve Got You Covered

Many bar owners are unaware that their standard General Liability Policy does not cover claims stemming from the service of alcohol.

Yet, most state laws hold licensed businesses liable for the injury or death of bar patrons and for injury to third parties caused by patrons impaired by alcohol served at the bar. Golden Bear’s Liquor

• Available in most states • Rated A- (Excellent) • Options available for Assault and Battery coverage

Liability Policy provides restaurant, bar, tavern and lounge owners the liability and defense coverage they need for the risks associated with the sale of alcohol.

Ask your wholesale broker for a Golden Bear quote today.

For more information visit www.goldenbear.com.

We’ve Got You Covered • Restaurant • Bar • Tavern • Lounge

WEST | News & Markets

Nevada Lawmakers Pushing Blood-Only Detection of Marijuana DUIs

By Alison Noon

W

eighing in on how Nevada should test people for stoned driving, lawmakers advanced a measure to eliminate urine samples as a viable measure for police to show a driver to be impaired by marijuana.

Under the bipartisan proposal, law enforcement officers would continue using blood tests to prove a person was illegally operating a passenger car, commercial truck or boat while high.

The bill would retain specific legal limits set in 1999 for drivers’ blood content of THC, the psychoactive chemical in

pot. Anyone with a blood-THC level at or above 5 nanograms per milliliter is considered too high to drive.

“There’s still no proof that those standards mean anything, but at least we’re moving to something which is scientifically provable,” said Sen. Tick Segerblom, a Las Vegas Democrat and chairman of the Senate Judiciary Committee.

Researchers at the Touro University Nevada College of Osteopathic Medicine are among experts who say marijuana’s cognitive impairment cannot practically be

detected in urine. Marijuana can be identified in urine but not accurately measured, the Touro study shows, making it a less-expensive option to blood tests for checking on simple prior use but improper to measure impairment.

Others question the bloodTHC measure.

The automobile federation AAA commissioned a study last year that found no scientific basis reliably linking THC measures to whether a person is impaired.

Traces of marijuana can remain in a person’s blood for weeks, and at high levels in frequent users.

In 2016, Nevada was one of six states that had set exact THC blood thresholds for drivers.

Courts and juries in several of the 26 states that allow some form of marijuana use have upheld the rights of marijuana users to rebut the blood tests or decided in individual cases that blood testing is inaccurate.

Members of the Senate Judiciary Committee unanimously approved Assembly Bill 135 earlier this month, sending it to the full Senate for consideration. Members of the Assembly voted 34-4 to approve it last month.

Copyright 2017 Associated Press.

Partial Settlement for Victims of California Balcony Fall

By Janie Har

T

he victims of a balcony collapse in Berkeley, Calif., that killed six college students have reached a settlement with some of the companies they sued in 2015.

The settlements are confidential, said lawyers for the families of the students who died and seven others who were injured.

“This settlement will never restore health or life but reflects an element of justice from the wrongdoers for the deaths and serious injuries caused by the tragedy,” said attorney Matthew D. Davis.

The students, largely from Ireland, were at a birthday party in June 2015 when the balcony collapsed, sending them 50 feet down to the street below.

It’s a tradition for Irish students to visit the San Francisco Bay Area for the summer to work at tourist spots and enjoy the break.

Among the dead were cousins, Olivia Burke of Ireland and Ashley Donohoe of Rhonert Park, Calif.

Eustace de Saint Phalle, attorney for the Donohoes, said the family will continue to push for legislative changes to building codes and reporting requirements for shoddy construction work.

Lawsuits filed in Alameda County Superior Court say previous tenants reported seeing mushrooms on the balcony, but the building’s manager did not close the structure off.

The mushrooms showed the balcony’s wooden support beams were rotting, the law-

W8 | INSURANCE JOURNAL | WEST MAY 15, 2017

Workers remove part of a balcony that collapsed at the Library Gardens apartment complex in Berkeley, Calif., in 2016, (AP Photo/Jeff Chiu) suits said. A city investigation revealed the wooden beams had rotted from water damage.

Segue Construction is among the seven companies that agreed to the undisclosed settlement. The lawsuits said Segue used cheaper materials to construct the balcony, making it more susceptible to water damage.

Building manager Greystar and building owner BlackRock did not agree to settle so lawsuits against those companies continue. A spokesman for BlackRock declined comment.

Greystar did not immediately respond to a request for comment.

Copyright 2017 Associated Press.

INSURANCEJOURNAL.COM

with FIRST

Yes–yes, you can

AMERICAN.

Homeowners are worried about many things, but finding Homeowners Insurance shouldn’t be one of them. Offer them the security of a trusted leader in the industry. First American provides extensive

coverage at competitive rates, along with quality customer service. Questions or concerns? We’ll handle it, so you–and your clients can relax...and take a load off.

Be confident in working with the industry’s Homeowners experts.

Think First. Think First American.

888.922.5343 888.922.5343 t www.firstam.com First American Property and Casualty Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are either registered trademarks or trademarks of First American Financial Corporation.

©2015 First American Financial Corporation and/or its affiliates. All rights reserved.

t

NYSE: FAF

Idea Exchange

Compliance Corner

Producer Compliance in California: The Top Three Regulatory Danger Zones comes to the business of brokers and agents, particularly as it pertains to licensure, operations, sales and reporting.

No doubt, producers must be aware of insurance regulations impacting them, and the department’s resolve to ensure compliance. Presented here, three key areas of scrutiny.

Unlicensed Activity

By Mark B. Robinson

L

ike Big Brother, California’s Department of Insurance is watching you.

Okay, perhaps not literally — and certainly not all of you, but the department definitely has its antennae up when it W10 | INSURANCE JOURNAL | WEST MAY 15, 2017

Whether tipped off by an angry customer, disgruntled employee, or unscrupulous competitor, the department does not look favorably upon unlicensed activity directed by producers. Indeed, this is a major focus of the department in terms of compliance.

Some producers allow unlicensed telemarketers to solicit prospective customers.

Others permit unlicensed employees to provide insurance quotes or actually sell

policies. And there are those who tolerate additional unlicensed activity. Whatever the case may be, far too many insurance professionals dip their toes into these treacherous waters The legal standard in California is quite clear: a person shall not solicit, negotiate, or affect contracts of insurance unless he or she holds a valid insurance license.

(California Insurance Code §1631) There are exceptions to this rule — in the form of exemptions set forth in the statute — available to producers’ employees who do not receive commission and whose conduct is limited to (1) clerical or administrative duties, (2) indirect marketing, or (3) supporting efforts to determine customers’ general interest in insurance products.

(Insurance Code §1635 (i) and (m)).

Sometimes, however, even clerical and

continued on page W12 INSURANCEJOURNAL.COM

DO THE MATH =

Difficult/Distressed Auto Accounts Few/No Options Pacific Gateway Insurance Agency (Your Commercial Auto Experts)

+

PACIFIC GATEWAY INSURANCE AGENCY LICENSE# 0C04869 27200 TOURNEY RD. SUITE 360 VALENCIA CA, 91355 1-800-354-4844 WWW.PGIAINSURANCE.COM

PACIFIC GATEWAY IS BACKED BY THE STRENGTH OF THE NATIONAL INDEMNITY COMPANY, RATED A++ XV BY A.M. BEST

Idea Exchance | Compliance Corner continued from page W10

administrative duties fall within a gray area, which is why the department has promulgated further regulations (California Code of Regulations, Title 10, §§2193 – 2193.3) that provide some clarity as to what conduct does not require a license: • Distribution of brochures, business cards, or other advertising information provided the unlicensed person does not analyze, give advice or make recommendations concerning insurance policies or terms; • Preparation of applications for insurance coverage without any contact with the customer/applicant except communications with the customer solely in order to obtain factual information requested by a licensee; • Obtaining underwriting information from third parties, such as the Department of Motor Vehicles or other insurance companies (such as, loss runs); • Preparation of binders, certificates, endorsements, identification cards, policies, and similar evidence of insurance under the supervision of a licensee.

However, the unlicensed employee cannot sign the foregoing documents either in their name or in the name of the licensee; • In response to a customer’s request, disseminating buyer’s guides for insurance, applications for insurance coverage, or related forms; • Receiving information from applicants or customers or recording such information in order to provide the information to a licensee for response to the applicant or customer; • Scheduling appointments with the licensee; • Communicating with applicants or customers solely to obtain factual information requested by a licensee; • Acceptance of insurance premiums for delivery to licensees; • Receiving and recording a customer’s request for additions or deletions to existing insurance policies and preparing endorsement forms for review and signature of the licensee; • Informing customers factually in W12 | INSURANCE JOURNAL | WEST MAY 15, 2017

response to inquiries as to the category and financial limits of insurance coverage indicated in their policy, whether coverage is in effect, and any premium balance due; • Answering telephone calls, receiving faxes, opening emails and written mail, processing outgoing mail, filing, and engaging in other general secretarial or administrative functions; • Translating between the licensee and the applicant.

insurance license; • Maintains a $10,000 broker’s bond; and • Discloses in a written agreement signed by the insured all of the following: • That the producer is transacting insurance on behalf of the customer; • A description of the basic services to be provided; • The amount of the broker fee to be charged; • That the producer may receive compensation directly or indirectly from an insurer resulting from the customer’s purchase of insurance.

‘To fee, or not to fee: that is the question.’

With compliance in mind, producers should avail themselves of these guidelines so they do not, knowingly or otherwise, run afoul of the law. In fact, a proverbial firewall delineating licensed and unlicensed conduct would be most helpful. This is especially true given that unlicensed activity is one of the CDI’s hot-button concerns. Of course, when in doubt, a licensed producer should handle all matters related to the solicitation, negotiation, sale, execution and maintenance of insurance.

Disclosure of Broker Fees

To fee, or not to fee: that is the question. Well, the answer in California is clear — brokers can charge and collect fees for procuring policies of insurance on behalf of clients, though a broker’s failure to disclose them to an insured, or the imposition of excessive fees, may prompt department intervention. Translation: brokers beware — full and proper disclosure is critical.

Significantly, an agent may not receive broker fees, except in the rare event that such fees are approved by an insurance carrier as set forth in its rate filing with the department. What distinguishes brokers from agents for purposes of fees is the party they represent in any given insurance transaction. A broker acts on behalf of the insured, while agents transact insurance for the insurer.

Getting into the weeds, Insurance Code §1623 fleshes out when a producer is presumed to be a broker entitled to a fee: • The producer holds a broker-agent

Parenthetically, wholesale intermediary brokers must also comply with disclosure requirements to be eligible to charge and collect fees. They do so by revealing to the retail broker (1) a description of the basic services they will provide; (2) the amount of the broker fee to be charged; and (3) that the wholesaler may receive compensation directly or indirectly from an insurer as a result of the policyholder’s insurance purchase.

Also, any presumption that a producer is acting as a broker is rebutted, pursuant to Insurance Code §1623 (c), if there is a Notice of Appointment filed by an insurer appointing the producer as an agent, the producer has written binding authority, the producer has written authority to appoint agents, or the producer has written authority to handle claims. In that event, the producer will be deemed an agent of the insurer not entitled to broker fees.

Clearly, disclosure must be the broker’s mantra when it comes to fees. Indeed, regulations require additional disclosure and compliance when a broker fee is sought in connection with the procurement of a personal lines policy, in which case the fee agreement must contain the provisions set forth in the department’s Standard Broker Fee Agreement and the insured must be provided with the Department’s Standard Broker Fee Disclosure Form. (CCR Title 10, §§2189.01 et seq.) These regulations impart other important — and and some redundant — requirements as well:

continued on page W14 INSURANCEJOURNAL.COM

Beyond Security®

“It Takes Discipline”

Marty Hacala Fitness Enthusiast General Star President & CEO

“Rolling out of bed at 5am every morning to work out requires discipline. It’s my way of getting the very most out of my busy day.

“At General Star, we strive to get the very most out of our wholesale broker relationships. As a member of the Berkshire Hathaway family of companies, our financial strength is unsurpassed. But it’s our disciplined approach to building and maintaining profitable partnerships with a select group of brokers that drives us.

“Discipline: Whether sticking with an early morning exercise regimen or standing firm with a limited number of valuable wholesale broker relationships, it remains the cornerstone of our success.”

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

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

Atlanta 404 239 6777

Chicago 312 267 8600

A.M. Best A++ XV

Los Angeles 213 630 1930

S&P AA+

New York 212 859 3950

Stamford 203 328 5700

A Berkshire Hathaway Company

Idea Exchance | Compliance Corner continued from page W12

• The Standard Broker Fee Disclosure Form and Broker Fee Agreement must be printed in English and in any other language principally used by the broker to advertise, solicit, or negotiate the sale and purchase of insurance; • The insured agrees to the fee in advance, after full disclosure; • The fee is not being charged on a CAARP, FAIR Plan, or “Low Cost Auto” policy; • The broker is not an appointed agent of the insurer with which the coverage is or will be placed; • The broker provides the insured with a specific disclosure form; • The insured and broker sign a broker fee agreement containing certain standard information; • The broker has an in-force broker bond on file with the department; • The broker discloses the existence of the broker fee at the time of the initial premium quotation.

The moral of the story for brokers charging fees, provide full and transparent disclosure in accordance with the aforementioned statutes and regulations to minimize regulatory scrutiny.

Background Reporting

Every now and then, a producer may confront an unfortunate circumstance, be it a misdemeanor or felony conviction, adverse administrative action, bankruptcy filing or the like. While notifying the department of such a dilemma is certainly not on any insurance professional’s bucket list, it is something that must be done pursuant to the Insurance Code. The failure to do so in a timely manner puts a producer’s license at risk. Be warned: this issue is front and center on the department’s radar screen.

Prior to 2004, producers were only required to update the department of specified changes in their backgrounds every two years, concurrent with the submission of their renewal applications.

That changed more than a decade ago.

Effective Jan. 1, 2005, producers became obligated to provide notification of such changes to the department — and if endorsed onto an organizational license, to the officer, director, or partner it lists — within 30 days of their occurrence.

(Insurance Code §1729.2)

‘Be warned: this issue is front and center on the department’s radar screen.’

WE HAVE THE COVERAGE YOU NEED FOR YOUR SPECIAL EVENT RISKS THIS SUMMER M.J. HALL AND COMPANY, INC.

WWW.MJHALLANDCOMPANY.COM (209) 948-8108 STATES COVERED: AK, AZ, CA, NV, & HI

LICENSE #0488901

MJHALLCO16820.indd 1

W14 | INSURANCE JOURNAL | WEST MAY 15, 2017

Of note, these reporting requirements apply to both California resident and non-resident licensees and applicants.

What type of change requires such notification? Insurance Code §1729.2 provides specifics, as follows: • A misdemeanor or felony conviction (including citations or traffic violations considered misdemeanor or felony offenses); • A filing of felony criminal charges in state or federal court, including convictions for driving under the influence, reckless driving, or driving on a suspended/revoked license; • An administrative action regarding a professional or occupational license; • Any licensee’s discharge or attempt to discharge, in a personal or organizational bankruptcy proceeding, an obligation regarding any insurance premiums or fiduciary funds owed to any company, including a premium finance company or managing general agent; or • Any admission — or judicial finding or determination — of fraud, misappropriation or conversion of funds, misrepresentation, or breach of fiduciary duty.

To be clear, a producer who overlooks the background reporting requirement can face the revocation, suspension, or restriction of his/her license — or denial of a license or issuance of a restricted one when an application is pending), and it may cost money in the form of financial penalties.

No doubt, insurance professionals must be mindful of the reporting mandate in the wake of any relevant changes in their backgrounds, and employers should remind licensed employees of their continuing — and time sensitive — reporting obligation. On the plus side, all necessary forms toward compliance can be found on the department’s website.

Robinson is founding partner of Michelman & Robinson LLP, and an insurance industry specialist who primarily represents retail brokers and agents. Phone: (310) 564-2670. Email: mrobinson@mrllp.com.

4/27/17 9:11 AM

INSURANCEJOURNAL.COM

orst & I

N

S

U

R

A

N

ompass C

E

General & Artisan Contractors Coverage Available

Eliglible Risks

• Monoline General Liability • Monoline Property • Monoline Inland Marine • Package Policies

• New in Business or No Prior Insurance OK • Commercial Remodelers & New Construction • Residential Remodelers & New Construction including Room Additions & Patios • Up to 100% Subcontracted Work OK

Coverage Highlights • Minimum Premiums Begin at $500 • Blanket A/I, Primary & NonContributory Wording & Subrogation • Up to $8,000,000 Per Project Aggregate • Up to $10,000,000 Excess Coverage

Get More From Gorst & Compass • Low Minimum Premiums • Access to “A” Rated Insurance Carriers • 24-Hour Turnaround (in most cases) Submissions

ilable Also avan Onli e

Call or email today for a quote!

www.gorstcompass.com (800) 437-6616 or (818) 507-0900 Fax : (818) 507-1133 CA INS LIC. #0359417/ #0443957

News & Markets | WEST

Study: Expected Increase in Tornadoes Raises Risk to Mobile Homes

By Andrew G. Simpson

T

ornadoes and mobile homes don’t mix to begin with, but throw in the volatility of climate change and the potential for massive property damage and deaths is even higher in coming decades, indicates a new study by Michigan State University researchers.

The number of mobile homes in the United States has risen dramatically in the past 60 years, to about 9 million currently.

Meanwhile, the U.S. is the most tornado-prone country in the world, with an average of 1,200 twisters per year, and scientists predict climate change will continue fueling more unstable weather events including tornadoes.

The annual impact of tornadoes is expected to increase threefold over the next few decades due to the “twin forces of increased climate variability and growth in the human-built environment,” according to the study, “Double danger in the double wide: Dimensions of poverty, housing quality and tornado impacts,” published in the journal Regional Science and Urban Economics.

“If the climatologists are right about the continuing effects of climate change,” said Mark Skidmore, MSU economics professor and co-author of the study, “then people living in mobile homes could be particularly vulnerable to tornadoes in the years to come.”

The researchers investigated underlying factors of tornado fatalities in the U.S. from 1980 to 2014. There were 2,447 tornado-related deaths during that period; the bulk occurred in the “tornado alley” region of the Midwest and Southeast.

On average, Texas has the most tornadoes annually (150) followed by Kansas (80), Oklahoma (64) and Florida (61).

Florida also has the most mobile homes in the nation (849,304), followed by Texas (731,652), according to U.S. Census data.

IBHS: Attached Structures often Magnify Damage

S

tructures attached to manufactured homes fail about 80 percent of the time during high wind conditions such as tornadoes and hurricanes, an analysis of closed insurance claim files from 2004’s Hurricane Charley concluded.

According to the Insurance Institute for Business & Home Safety, which conducted the study, failure of attached structures such as carports, awnings and porches can result in damage not only to host buildings but to nearby structures as well.

One reason that attachments to sitebuilt or manufactured houses often fail is that they are typically designed to lower building standards than those of the homes to which they are attached.

If replacing a deficient carport is not INSURANCEJOURNAL.COM

in the picture, the IBHS suggests a few retrofits to upgrade the wind resistance of existing units: • Replace any small, weak or damaged posts, and strengthen post connections to the foundation/carport slab using appropriate brackets, bolts, and anchors; • Supplement attachments of roof pans fastened with corroded fasteners, or fasteners without washers, by adding larger-size fasteners that use combination metal/neoprene washers — and installing fasteners no more than 4” apart across each panel; • Unless the home included specific anchorage designed to support the roof of the attached structure, install posts and a support beam near the side of the home, and attach roof pans to this beam.

The two biggest factors related to tornado fatalities were housing quality (measured by mobile homes as a proportion of housing units) and income level. When a tornado strikes, a county with double the number of mobile homes as a proportion of all homes will experience 62 percent more fatalities than a county with fewer mobile homes, according to the study data.

The number of mobile homes in the U.S. increased from just 315,218 in 1950 to 8.7 million in 2010 — a trend that has been driven largely by persistent income inequality, Skidmore said.

“Though mobile homes offer a relatively inexpensive but comfortable housing alternative, it appears that this trend has made the United States more vulnerable to tornadoes over time,” the study says.

While tax advantages make mobile home living more attractive, they also encourage people to live in housing that is more vulnerable to tornadoes, according to the study. “The external cost of being exposed to greater tornado risks may be ignored when households choose to live in mobile homes due to affordability,” the authors say.

Co-authors are Jungmin Lim, a doctoral student, and professors Scott Loveridge and Robert Shupp, all with MSU’s Department of Agricultural, Food and Resource Economics.

MAY 15, 2017 INSURANCE JOURNAL | WEST | W17

It’s simple, trust matters.

Reliability. Experience. Stability.

These are the qualities clients look for in an agent.

Shouldn’t they be the same qualities you look for in a carrier?

When you’re choosing a business to partner with, look for one ranked by your peers for those very values.

United Fire Group (UFG) was named a Five Star Carrier in four categories by Insurance Business America: ■■

Carrier reputation and financial stability

■■

Claims processing

■■

Underwriting expertise

■■

Range of products

To learn more about UFG, visit www.UFGSolutions.com

simple solutions for complex times ®

Figures

42

The percentage decrease in collisions at North Carolina highway railroad crossings in 2016 compared to 2015. The total number of collisions in 2016 was 39, according to a report from North Carolina Operation Lifesaver, compared with 67 the previous year.

The years commemorated on a Pennsylvania historical marker dedicated to the Insurance Company of North America (INA) by Chubb in collaboration with the Pennsylvania Historical and Museum Commission (PHMC). INA has operated in Philadelphia for 225 years and is Chubb’s oldest subsidiary company, founded in 1792.

INSURANCEJOURNAL.COM

“The legislature’s policies, so long as they are constitutional, are beyond our purview … We neither applaud the wisdom of such choices nor condemn their folly. We simply assess their legality.”

— Indiana Supreme Court Justice Geoffrey Slaughter ruling that a wounded police officer can’t sue a sporting goods store that sold a handgun, which was later used to shoot him, because of immunity granted to gun sellers by Indiana law.

Flustered

“He was a bit flustered after his vehicle being hit by a train.”

— Lake Charles, La., police Cpl. Shaun Touchet refers to

Healthcare Reality

$20 MILLION

225

Neither Applaud nor Condemn

64-year-old Frank Scalisi Jr., who, after a train clipped a side mirror off his car, lost the whole door when he pulled up to another intersection and opened it to tell the crew about the mirror. The train took off the door and damaged the 2016 Volvo V60’s front quarter-panel.

$175,000 The amount mattress and box spring company Sealy of Minnesota has agreed to pay to resolve a racial harassment charge filed with the U.S. Equal Employment Opportunity Commission (EEOC). An investigation found black and Hispanic employees were subjected to racial harassment. The EEOC said the misconduct included a noose, a Ku Klux Klan hood and racist epithets and jokes. The EEOC also found that Sealy discriminated against black and Hispanic employees when hiring for lead positions at its St. Paul facility.

Declarations

The approximate amount of a penalty ExxonMobil has been ordered to pay for releasing 10 million pounds of pollutants into the air over the course of eight years from a complex it operates east of Houston. In a lawsuit filed in 2010 by two environmental groups, U.S. District Judge David Hittner ruled that Exxon on thousands of occasions from 2005 to 2013 violated federal clean-air standards.

“We have the chance to make universal health care a reality now.”

— Sen. Ricardo Lara, D-Bell Gardens, is one of many California lawmakers considering a proposal that would substantially remake the state’s healthcare system by eliminating insurance companies and guaranteeing coverage for everyone.

Farm First

“Sometimes an operation that’s being sued was there first. I feel like if a farm is there first, and you know this is going on, then don’t complain.”

— North Carolina Rep. Larry Pittman, who supported legislation giving hog and poultry operations protections from nuisance lawsuits by neighbors.

InsuranceJournal.com

Poll

What will be the fate of the technology-first, or insurtech, insurance startups over the next year? Which of the following will come true?

$40 MILLION

The size of a fraudulent medical billing and kickback operation shut down by California authorities in April. Charges were filed against more than two dozen doctors, pharmacists and business owners.

17.23% A few will be successful on their own,

be bought out, or go to IPO 12.38% Most will fail and the overall impact of

insurtechs on the P/C industry will be minimal 5.83% They will morph into more traditional

carriers and brokerages 11.65% They will spur development of new

insurance coverages and risk

management services 18.93% Traditional carriers and brokers will

adopt similar technologies 2.91% Venture capitalists will get bored and

move onto another industry 6.80% They will have the most impact on distribution 6.80% They will change underwriting and

claims processing 7.04% They will start attracting top talent in

the P/C industry 10.44% There will be more startups and more

disruption than the current industry expects

MAY 15, 2017 INSURANCE JOURNAL | NATIONAL | 11

NATIONAL | News & Markets

A Risk Pool of One: How Technology Could Make Insurance Obsolete

By Joseph S. Harrington “

W

ill technology make insurance obsolete?”

That was the stark question posed by William Hartnett, a former Microsoft and ACORD executive, in his opening address to the 2017 Global Insurance Symposium, April 26-27 in Des Moines. The annual event is sponsored by a coalition of Iowa insurers, reinsurers, system vendors, university insurance departments, and the state’s insurance department.

Citing the exponential growth and declining cost of computing power, Hartnett said “a lot of technology today is getting to the point where it’s essentially free.”

Harnett, who led Microsoft’s financial services operation for more than two decades, projects that, by 2023, a sum of

$1,000 will be able to purchase all the cognitive capability of a human brain. Just two years later, in 2025, that $1,000 will be able to purchase the equivalent of the cognitive capabilities of all the human brains on earth.

The implications of this for insurers, Hartnett said, is that risk control will be embedded in “smart” devices that will monitor and regulate where we live and work, and how we travel. Eventually, the level of an individual risk will be identified with such precision that the “law of large numbers,” long the foundation of insurance pricing, may become irrelevant.

“We can get down to a risk pool of one,” Hartnett said.

“That doesn’t sound like insurance to me. If we’re not doing insurance anymore, let’s just admit it.”

12 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

An example of how insurance becomes one component in a package of personalized risk management services was provided by speaker Matteo Carbone, founder of the Connected Insurance Observatory, an insurance innovation organization based in Milan, Italy, but with participants throughout Europe and North America.

According to Carbone, an Italian auto insurer is utilizing advanced networked technology to achieve what he calls the “four Ps” of success: productivity, profitability, proximity (to customers), and persistence (account retention).

Carbone said the carrier offered a discounted rate plus a package of optional services to customers who would voluntarily accept telematic monitoring devices in their vehicles, which was still a novelty at the time.

There was an immediate boost in risk selection productivity, he said, as drivers with relatively good risk profiles willingly “self-selected” for telematics-based coverage,

providing an account base with nearly 20 percent fewer claims than the market average.

Information provided by the telematics then contributed to a 7 percent reduction in average claims costs, Carbone continued. With real-time, in-depth information on accidents, the carrier has had more time to compare and manage repair costs, and to challenge estimates by body shops and inflated claims.

For example, he said, monitors in insured vehicles can measure and record the impact of a crash, allowing the company to challenge inflated claims of bodily injury and property damage arising from a low-impact accident.

The program contributes directly to company profitability and customer “proximity,” he added, as most of the customers opt to pay for the comprehensive package of services available through the program. The services, accessible through a smart phone, cover every phase of a driving experience. They provide, among other things, alerts regarding traffic and weather, as well as the driver’s own speed and braking. There is even information on hazards at parking locations, including a feature for summoning a bodyguard to walk you from the car.

The result, he concluded, has been less “churn” and more “persistence” (higher retention) for the program’s accounts than for counterparts among other Italian auto insurers.

Harrington is a business writer and communications specialist. Previously, he served as director, corporate communications at the American Association of Insurance Services (AAIS).

INSURANCEJOURNAL.COM

KAUFMAN

DEFINING THE WORLD OF

INSURANCE SINCE 1969.

True global reach: Powered by commitment.

Together by design.

NATIONAL | News & Markets shopper considers or quotes a brand.

• Agents continue to play a key role: Agent recommenda-

tions have become an increasingly important driver of customer consideration and quote generation. This category saw a nine-percentage point increase.

Shoppers are also increasingly reliant on agent recommendations when considering and quoting insurers, compared to 2015 (a 10-percentage point increase).

• Communication is a critical driver of satisfaction: The

As Auto Insurance Sales Stagnate, Carriers Turn to Agents: J.D. Power

A

mid a second straight year of stagnant auto insurance shopping activity and modest rate increases, auto insurance companies have grown increasingly reliant on great customer service, personalized advice and strong agents to win customers, according to the J.D. Power 2017 U.S. Insurance Shopping Study.

‘The auto insurance industry is at an inflection point where customer patterns and behaviors are on the verge of shifting.’

With average premiums increasing by a modest 2 percent to 3 percent annually, new insurance shopping rates flat

and new customer acquisition rates unchanged, auto insurers are faced with the challenge of resisting commoditization, the report says.

The study finds that as auto insurers struggle to compete on price, they are being forced to differentiate based on factors such as brand reputation, agent recommendations, product and service to drive new business.

Communication remains critical, as the key performance indicator (KPI) that has the greatest influence on customer satisfaction in this year’s study.

“To survive this period of price stagnation, insurers must develop strategies to be able to better differentiate not just to acquire new customers, but also to acquire customers with desirable risk profiles in order to maintain profitability,” said Greg Hoeg, vice president of

14 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

U.S. insurance operations at J.D. Power.

Key findings of the 2017 study include:

• Auto insurance market shopping stagnates: This year

sees a continuation of the slowdown in shopping activity that was first noted in 2016. Average premium rates have increased just 2 percent to 3 percent; customer acquisition rates are flat; new quote volume is flat; and the total number of insurance shoppers is largely unchanged from the previous year.

• Price is more influential in brand consideration and quoting: Despite stagnant pric-

ing, price remains a driver in every stage of the acquisition process, meaning insurers must always consider price to be competitive in the auto insurance market. For example, the influence of price on a shopper’s decision to consider and quote a brand has increased 5 percentage points in each of the past two years. As a result, the importance of price has surpassed that of a good past service experience when a

KPIs affecting the purchase experience index the most are ensuring the customer completely understands coverage; providing guidance or tools for selecting the right coverage; and ensuring customers understand premium calculations.

Study Rankings

In the JD Power customer satisfaction rankings, Erie Insurance came in highest among auto insurers in providing a satisfying purchase experience, with a score of 879.

This marks the fifth consecutive year Erie Insurance has ranked highest in the study.

American Family ranks second (869); The Hartford third (861); Automobile Club Group fourth (852); and Amica Mutual fifth (850).

The study is based on responses from more than 16,400 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past nine months and includes more than 50,000 unique customer evaluations of insurers. The study was fielded in April, July and October 2016, and January 2017.

INSURANCEJOURNAL.COM

Business Moves | NATIONAL Validus, Crop Insurance Agency

Validus Holdings Ltd. has completed its acquisition of Crop Risk Services business (CRS), a primary crop insurance managing general agent, from Archer Daniels Midland Co. In the deal that was announced in January, ADM received $127.5 million in cash in exchange for 100 percent of the outstanding stock of CRS. The transaction includes a marketing services agreement under which ADM and Validus will continue to work together to offer a full range of insurance and farm products and services to CRS customers.

CRS will operate as part of the Western World Insurance Group.

CRS, based in Decatur, Ill., had $555 million gross premiums written in 2016 and has 1,170 agents across 36 states.

Validus Holdings is a holding company for reinsurance and insurance operating companies and investment advisors including Validus Reinsurance, Talbot Underwriting, Western World Insurance Group and AlphaCat Managers.

CRS was established in 1982 as ASI AgriServe Inc. In 2010, ADM acquired 100 percent of the shares of ASI, and the company became ADM Crop Risk Services

World Insurance Associates, Mark Lauria Associates

World Insurance Associates LLC, an independent insurance agency headquartered in Tinton Falls, N.J., has merged with Mark Lauria Associates Inc., an independent insurance agency with offices in Staten Island, N.Y. and Red Bank, INSURANCEJOURNAL.COM

N.J. The transaction went into effect April 1, 2017.

Mark Lauria Associates Inc. began business in June 1979 when co-founders Mark Lauria and Laura Lauria set out to provide better service for insureds as an independent agency.

The company guides its clients through the insurance process, acting as an adviser and resource. Mark Lauria Associates is a leader in providing personal and professional business insurance to clients in New York, New Jersey and Florida.

Mark Lauria is joining World Insurance as a partner of the firm, and Laura Lauria is joining World Insurance as vice president.

World Insurance Associates LLC offers personal and business insurance solutions in 46 states. The company specializes in group benefits and insurance for transportation companies, the hospitality industry, coastal properties and high-net-worth individuals, in addition to general commercial clients in diverse industries.

World Insurance Associates began business in 2012 and now serves more than 18,000 customers from 11 offices in New Jersey, Pennsylvania and New York.

The Hilb Group, Keough Kirby Associates

The Hilb Group LLC (THG) has acquired Keough Kirby Associates (KK) of Woonsocket, R.I. The transaction became effective April 1, 2017.

As an established agency in New England, KK has been providing property and casualty, life and employee benefits services since 1914.

KK and its employees will join THG’s regional operations in New England while continuing to operate out of the Woonsocket office following the acquisition.

The Hilb Group is a middle-market insurance agency headquartered in Richmond, Va., and is a portfolio company of Boston-based private equity firm, ABRY Partners. Going forward, The Hilb Group seeks to grow through targeted acquisitions in the middle-market insurance brokerage space.

Insurance Services United, Lewis Casualty

Insurance Services United (ISU), a full-service insurance agency in York, Pa., has purchased Lewis Casualty, an insurance services company based in Quarryville, Pa. The purchase of Lewis Casualty is the second recent expansion announcement for ISU, serving to double the company’s size within the past eight months.

Lewis Casualty has provided insurance services throughout southeastern Pennsylvania

for 36 years. Although Lewis Casualty’s current Lancaster office will close due to the purchase, the company’s President, John Lewis, will join the ISU team and will continue to provide insurance services to clients. Existing Lewis Casualty clients will continue to receive insurance services without interruption.

ISU has been a local insurance company serving individuals, families and businesses in south central Pennsylvania for 65 years.

ISU previously announced the purchase of Runkles Insurance in October 2016.

With the recent purchase of Lewis Casualty, ISU will now have a team of 13 insurance experts at its office.

Motorists Mutual, BrickStreet Mutual Ohio-based property/casualty insurer Motorists Mutual Insurance Co. and West Virginia-based workers’ compensation insurer BrickStreet Mutual Insurance Co. Inc., have been granted regulatory

continued on page 16

MAY 15, 2017 INSURANCE JOURNAL | NATIONAL | 15

NATIONAL | Business Moves continued from page 15 approvals to affiliate through a joint venture.

This affiliation has created a new super regional carrier ranked in the top 20 mutual companies in the United States and includes more than 1,600 employees, 10 offices writing in 29 states, premiums of nearly $1.2 billion, a surplus of nearly $1.55 billion and assets of $4.5 billion.

The proposed marriage was announced in October 2016.

The companies have spent the past seven months working with regulators from West Virginia, Ohio, New Hampshire, Pennsylvania and Wisconsin to make the joint venture through affiliation a reality.

Because it is not a merger, policyholder approval was not necessary.

BrickStreet and Motorists said their joint venture using an affiliation agreement will allow them to partner together financially and operationally, while maintaining their individual brands. As mutual companies, both will continue to be owned by their policyholders and remain headquartered in West Virginia and Ohio.

The companies market products under both the Motorists Insurance Group and BrickStreet brands. Co-branded products will first be available through select independent insurance agents in West Virginia, Pennsylvania and Illinois later this year. Other operating states will be added over time.

Arthur J. Gallagher, Commercial Insurance Brokers

Arthur J. Gallagher & Co. has acquired Tulsa, Okla.-based Commercial Insurance Brokers

LLC. Terms of the transaction were not disclosed.

Commercial Insurance Brokers was formed in 2012 as a group of insurance producers and service personnel offering a broad range of property/casualty and employee benefit products and services to energy, construction, financial services, manufacturing, transportation, professional services, nonprofit, healthcare and high-net-worth clients throughout the United States and internationally.

Brad McCrory and his associates will continue to operate from their location under the direction of Bret VanderVoort, head of Gallagher’s south central retail property/casualty brokerage operations.

Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Rolling Meadows, Ill., has operations in 33 countries and offers client service capabilities in more than 150 countries through correspondent brokers and consultants.

Platform Partners, Beneplace Platform Partners LLC, a private company headquartered in Houston, has completed the acquisition of Beneplace LLC, which markets and distributes voluntary employee benefits and employee discount programs serving Fortune 1000 companies, large associations and government agencies.

Founded in 1995, Austin, Texas-based Beneplace serves employers and institutions in the United States, Canada, Latin America, Europe, Australia and Asia. Along with a comprehensive voluntary benefits offering that includes

16 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

auto and home, critical illness, dental, disability, group legal, long-term care, and other voluntary benefits, Beneplace offers an employee discount platform for well-known products and services such as consumer electronics, vacations, automobiles, tax preparation and many others.

Beneplace offers its products and services to more than 9 million employees across multiple industry sectors. Its management team, led by President Rusty Stein, will continue to manage the business.

In addition to Platform and the management team, Galtney Partners LP, led by Will Galtney, a successful owner and investor in numerous insurance and healthcare companies, invested alongside Platform.

Focus Strategies LLC acted as financial advisor to Beneplace, and Hogan Lovells LLP acted as legal counsel in connection with the transaction.

NFP, Hole-in-One in Nevada

NFP Corp. has acquired Reno, Nev.-based Hole-in-One U.S.A. (HIO).

HIO is a provider of hole-inone coverage for golf events throughout the U.S. David Nelson, principal of the firm, will join NFP as a director and report to Terry Scali, CEO of NFP’s property/ casualty (P/C) division.

NFP is a broker and consultant that provides employee benefits, P/C, retirement and private client solutions.

Alliant, Summit Insurance Resource Group

Alliant Insurance Services Inc. has acquired Summit Insurance Resource Group in

Sandpoint, Idaho.

Summit will operate as part of Alliant Americas, which provides the middle market with regionally focused insurance products and services through a dedicated platform.

Angela Oakes, Summit’s owner, along with the Summit management team and staff, will join Alliant and continue to service clients from its Sandpoint offices.

Terms of the deal were not disclosed.

Summit provides commercial and personal insurance solutions, including homeowners, auto, business, health, life, recreational and umbrella/ excess liability.

Newport Beach, Calif.-based Alliant provides property/casualty, workers’ compensation, employee benefits, surety and financial products and services.

Hub International, City Insurance Services

Hub International Ltd. has acquired the assets of Buena Park, Calif.-based City Insurance Services, its affiliates Silver City Insurance Services Inc. and MOA Financial Services. Terms of the deal were not disclosed.

Brian Jeung, City’s president, will join Hub California and report to Andrew Forchelli, senior executive vice president of Hub California.

City is a multiline insurance solutions provider including commercial and personal lines insurance, as well as employee benefits solutions.

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

INSURANCEJOURNAL.COM

By remodeling our rates and strengthening our coverage offering, Nautilus Insurance Group equips you with the right tools to profitably grow your business.

Building the perfect coverage for

CONTRACTORS

O.N.E. more reason to do business with Nautilus.

A.M. Best A+XV Rated Carrier

800.842.8972 | nautilusinsgroup.com | nautilusagents.com

Products and services described above are provided through various surplus lines insurance company subsidiaries of W. R. Berkley Corporation and offered through licensed surplus lines brokers. Not all products and services may be available in all jurisdictions, and the coverage provided by any insurer is subject to the actual terms and conditions of the policies issued. Surplus lines insurance carriers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.

NATIONAL | News & Markets

Survey: Agents Suggest How Carrier Partners Can Move from ‘Good’ to ‘Great’

18 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

EXCLUSIVE

2017 FINDINGS

EXPECTATIONS

VS

REALITY

How Carriers can go from 'Good' to 'Great' Claims Service: 77%

Rated better than average

Customer Service: 71% Rated better than average

Underwriting Responsiveness: 69%

“

“

Y

ou might expect to see high levels of satisfaction between an independent agency and its top carrier, but that isn’t always the case. Peeling back the layers usually reveals fertile ground for improvement and shows the path to higher performance and more profitable agencycarrier relationships, according to a new industry study.

The study, “Agents’ Views on How Carriers Can Compete & Win,” is the 10th in an annual series from Channel Harvest Research that examines agents’ views on property/casualty carriers and marketplace issues. More than 2,000 independent agents provided their opinions for the survey, which was sponsored by Insurance Journal.

On the personal lines side of the study, agents gave their top carriers high marks for claims service, customer service and underwriting responsiveness.

However, they hold their leading carriers to an even higher standard when it comes to those performance measures.

For example, 77 percent said their most favored carrier’s claims service was better than average or far better than average, yet 95 percent rated claims service as very or somewhat important.

“Agents are saying, ‘You’re doing well on these things but we need more,’” said Regis Coccia, research director of Channel Harvest. “And those are the kinds of discussions you hope to see taking place when agent advisory councils meet. Ideally, agents and carriers will focus on moving the needle from ‘good’ to ‘great’ because that’s where the most immediate and measurable improvements can be made.”

Other areas where a gap exists between

Rated better than average

Agents are saying,

You’re doing well on these things but we need more!

performance and expectations include customer service (71 percent rated better than average compared with 95 percent of agents saying it’s important) and underwriting responsiveness (69 percent to 94 percent). Even larger gaps between performance and expectation were seen for competitive pricing, underwriting appetite and underwriting flexibility.

Agents hold their leading carriers to an even higher standard when it comes to those performance measures.

“With risk continually changing and changing faster than ever, it’s understandable that agents are concerned about their carriers’ ability and willingness to take on new and evolving risks,” Coccia said. “The economy and regulation will drive some of that, too, as business growth will create a bigger demand for insurance." According to Coccia, the question will be, “Can carriers keep up, and can agents find markets?”

expectation? around 95% *Based on agent opinions of top personal lines carriers

channel harvest research

Feed your strategic planning

The survey also revealed a wide array of perceptions — both positive and negative.

For example: • “Direct channel killing us in personal lines.”

• “High authority to make decisions and get things done at the field level.”

• “Old-school apps sometimes hard to get business owners to complete just for quote.”

• “Provides agents with tools to help them do surveys of clients … surpri singly most agents don’t take advantage of this resource.”

• “We have a very good rapport with the marketing specialist.”

Nearly 2,100 agency personnel working in personal and commercial lines responded to this year’s survey, co-sponsored by Insurance Journal and conducted between February 1 and April 1. Respondents including principals, producers and CSRs answered nearly 200 questions about personal lines and commercial lines carriers.

For more information and to purchase the report, contact Bob Fritze, sales director, at bob@channelharvest.com.

INSURANCEJOURNAL.COM

NATIONAL | Special Report

2017 Super Regional P/C Insurers

TM

Demotech Company Classification System

- 2017 is the 10th anniversary of publishing the Super Regional P/C Insurer™ list.

- The inaugural conference will be held July 16-18, 2017, at the Grand Geneva Resort & Spa in Lake Geneva, Wisc.

- Space is limited. For more information visit: www.superregional.net.

I

n order to continue the discussion regarding what constitutes a Super Regional P/C Insurer™ and to give definition to this important group of insurers, Demotech Inc. analyzed year-end 2016 data for property/casualty insurance companies. This data was utilized to classify and stratify insurers reporting data to the National Association of Insurance Commissioners (NAIC).

This year marks the 10th year of this effort, as the original criteria and objective definiBy Barry J. tions for Super Regional Koestler II P/C Insurers™ and our other company classifications were established in the Feb. 12, 2007 issue of Insurance Journal.

The Demotech Company Classification System categorizes property/casualty insurers, not groups or families of insurers, into one of 11 categories based on an analysis of the data reported by the companies.

The 11 categories that comprise the system are Nationals, Near Nationals, Super Regionals, Regionals, State Specialists, Coverage Specialists, Strategic Subsidiaries, Risk Retention Groups, Surplus Lines Carriers, Reinsurers and companies with less than $1 million in direct premium written.

A company cannot be assigned to 2017 more than one category. Therefore, a company not designated as a Super Regional is given another classification, perhaps Near National, Regional, or State Specialist.

Super Regional Criteria and Thresholds

Prior to the establishment of an industry-wide definition, a number of property/ casualty insurers had referred to themselves as Super Regionals. Demotech, the official research partner of Insurance Journal, has compared the data to the

In recognition of the 10th anniversary of the creation of Demotech’s Company Classification System, Insurance Journal and Demotech have created the Super Regional P/C Insurer™ Conference to assist and edu2017 Property/Casualty Insurance Cos. cate carriers of all sizes and Demotech Company Classifications specialties. On July 16-18, 2017, Direct Premium at the Grand Geneva Resort Written Less than Near Nationals 2% $1 million 4% and Spa in Lake Geneva, Wisc., Nationals 2% Reinsurers 2% subject matter experts will Super Regionals 6% Surplus Lines Carriers 7% convene to discuss a variety of relevant topics, including: Risk Retention Groups 9% Regionals insurtech; cybersecurity; rein8% surance; big data; finding talent; autonomous vehicles and Strategic Subsidiaries more.

State Specialists 17% 29% For more information on this Coverage conference, please visit www.

Specialists 14% superregional.net.

SR1 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

INSURANCEJOURNAL.COM

criteria and updated the list to determine the companies for the 2017 Super Regional Property/Casualty Insurer™ list. These specific, objective qualifying criteria and thresholds evaluated as of Dec. 31, 2016 were used: • •

•

•

•

Active, individual companies; Reporting data using the property/ casualty annual statement format; At least $1 million of direct premium written in each of two to 34 states; Less than 90 percent of direct premium written in any one state; Less than 90 percent of direct premium

written in any one line of business; • Policyholders surplus of at least $100 million; • Net premium written of at least $50 million; and • Direct premium written of at least $25 million.

In general terms, a Super Regional is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines insurers, and reinsurers are not eligible for the Super Regional category as they are assigned to their own classifications.

The 2017 Super Regional Property/ Casualty Insurers™

For 2017, 161 Super Regional Property/ Casualty Insurers™ were identified. They are presented in this Insurance Journal Special Report both alphabetically and by size as ranked by direct premium written as of Dec. 31, 2016. For 2017, there are 15 Super Regional companies that were not classified as Super Regionals in 2016, as well as 10 insurers identified as Super Regionals in 2016 that have been reclassified into another category this year based on year-end 2016 information. Of the 161 Super Regionals for 2017, 77 have been

2017 Super Regional Property/Casualty Insurers™ Alphabetical Listing

ACUITY, a Mutual Insurance Co. Alaska National Insurance Co. All America Insurance Co. Alterra America Insurance Co. American Commerce Insurance Co. American Family Home Insurance Co. American Family Mutual Insurance Co. American Hallmark Insurance Co. of TX American Mercury Insurance Co. American Road Insurance Co. American Security Insurance Co. American Select Insurance Co. American Strategic Insurance Corp.

Amerisure Insurance Co. Amerisure Mutual Insurance Co. AMEX Assurance Co. AmGUARD Insurance Co. Atlantic States Insurance Co. Auto Club Group Insurance Co. Auto Club Insurance Association Automobile Insurance Co. of Hartford, CT Auto-Owners Insurance Co. AXA Insurance Co. Bay State Insurance Co. BITCO General Insurance Corp.

BITCO National Insurance Co. Brethren Mutual Insurance Co. Builders Mutual Insurance Co. California Casualty Indemnity Exchange Cambridge Mutual Fire Insurance Co. Capitol Indemnity Corp.

Central Mutual Insurance Co. Central States Indemnity Co. of Omaha Century-National Insurance Co. Cherokee Insurance Co. Citizens Insurance Co. of America Civil Service Employees Insurance Co. Columbia Insurance Co. Columbia Mutual Insurance Co. Concord General Mutual Insurance Co. Contractors Bonding and Insurance Co. COUNTRY Mutual Insurance Co. Courtesy Insurance Co. CSAA Affinity Insurance Co. Cumberland Mutual Fire Insurance Co. Dentists Insurance Co. Donegal Mutual Insurance Co. Electric Insurance Co. EMCASCO Insurance Co. Erie Insurance Co. Erie Insurance Exchange Executive Risk Indemnity Inc. Farm Bureau Property & Casualty Insurance Co. Farm Family Casualty Insurance Co.

INSURANCEJOURNAL.COM

Farmers Alliance Mutual Insurance Co. Farmers Automobile Insurance Association Farmers Insurance Co., Inc. Farmers Insurance Exchange Farmers Mutual Hail Insurance Co. of IA Farmers Mutual Insurance Co. of NE Farmington Casualty Co. Farmland Mutual Insurance Co. FCCI Insurance Co. Federated National Insurance Co. Federated Rural Electric Insurance Exchange Federated Service Insurance Co. Fire Insurance Exchange Frankenmuth Mutual Insurance Co. General Casualty Co. of WI Goodville Mutual Casualty Co. Grange Insurance Association Grange Mutual Casualty Co. Gray Insurance Co. Great Midwest Insurance Co. Grinnell Mutual Reinsurance Co. Hallmark Insurance Co. Harco National Insurance Co. Harford Mutual Insurance Co. Hartford Insurance Co. of IL Hastings Mutual Insurance Co. Imperium Insurance Co. IMT Insurance Co. Insurance Co. of North America Integon National Insurance Co. Jewelers Mutual Insurance Co. Lightning Rod Mutual Insurance Co. Lititz Mutual Insurance Co. Protective Property & Casualty Insurance Co. MemberSelect Insurance Co. Merchants Mutual Insurance Co. Mercury Casualty Co. Merrimack Mutual Fire Insurance Co. MHA Insurance Co. Mid-Continent Casualty Co. Middlesex Insurance Co. Milbank Insurance Co. Mitsui Sumitomo Insurance Co. of America Motorists Commercial Mutual Insurance Co. Motorists Mutual Insurance Co. Motors Insurance Corp.

Mountain West Farm Bureau Mutual Insurance Co. Mutual of Enumclaw Insurance Co. National Lloyds Insurance Co. Nationwide Mutual Fire Insurance Co. NGM Insurance Co. North River Insurance Co. North Star Mutual Insurance Co. Oak River Insurance Co.

Old Republic General Insurance Corp.

Old United Casualty Co. Owners Insurance Co. Pacific Employers Insurance Co. Pacific Specialty Insurance Co. Peerless Insurance Co. Pekin Insurance Co. Penn National Security Insurance Co. Pennsylvania Lumbermens Mutual Insurance Co. Pennsylvania National Mutual Casualty Insurance Co. Pharmacists Mutual Insurance Co. Philadelphia Contributionship Insurance Co. Physicians Insurance a Mutual Co. Preferred Mutual Insurance Co. Progressive Casualty Insurance Co. Progressive Northern Insurance Co. Progressive Preferred Insurance Co. Quincy Mutual Fire Insurance Co. Redwood Fire and Casualty Insurance Co. SECURA Insurance, a Mutual Co. Selective Insurance Co. of America Selective Insurance Co. of NY Selective Insurance Co. of SC Selective Insurance Co. of the Southeast Selective Way Insurance Co. Shelter Mutual Insurance Co. Society Insurance, a Mutual Co. St. Paul Fire and Marine Insurance Co. St. Paul Mercury Insurance Co. Star Insurance Co. State Auto Property & Casualty Insurance Co. State Automobile Mutual Insurance Co. Stillwater Insurance Co. Toyota Motor Insurance Co. TransGuard Insurance Co. of America, Inc. Trinity Universal Insurance Co. Triton Insurance Co. Truck Insurance Exchange Unigard Insurance Co. United Financial Casualty Co. United Fire & Casualty Co. United Ohio Insurance Co. United Property & Casualty Insurance Co. Utica First Insurance Co. Utica Mutual Insurance Co. Vanliner Insurance Co. Vermont Mutual Insurance Co. West Bend Mutual Insurance Co. Western Agricultural Insurance Co. Western National Mutual Insurance Co. Western Reserve Mutual Casualty Co. Westfield Insurance Co. Westfield National Insurance Co.

MAY 15, 2017 INSURANCE JOURNAL | NATIONAL | SR2

designated as such for each year of the Super Regional report.

Super Regional insurers are critically important to the insurance industry, and of particular importance to their agents, producers, and insureds. These companies are typically strong, stable markets that work hard for their agents, insureds, and their reinsurers. This is why Insurance Journal continues to have Demotech quantify and identify the criteria used to define an insurer as a Super Regional.

Insurers and interested readers are encouraged to review the selection cri-

teria and thresholds used to determine the 2017 Super Regionals. The selection criteria remain quantitative and transparent. Demotech is focused on setting benchmarks at levels that accurately categorize the industry. The relative consistency of the company type distribution over time suggests that the categorizations that have been established are valid and effective in classifying the industry.

It is important to reiterate that the Demotech Company Classification System is an objective stratification of the companies that comprise the industry based on

their business models. It is not equivalent to or suggestive of ratings of the individual insurers. Moreover, inclusion on the list of Super Regionals does not imply that a company is superior to companies that were not included in that classification.

Future issues of Insurance Journal will report on the other categories within the Demotech Company Classification System.

Koestler II is the chief ratings officer of Demotech Inc., a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers.

Website: www.demotech.com.

NEW 2017 Super Regionals Company Name American Security Insurance Co. Auto Club Group Insurance Co. AXA Insurance Co. Columbia Insurance Co. CSAA Affinity Insurance Co. Farmers Mutual Hail Insurance Co. of IA Federated National Insurance Co. Grinnell Mutual Reinsurance Co. Oak River Insurance Co. Pacific Employers Insurance Co. Pennsylvania Lumbermens Mutual Insurance Co. Selective Insurance Co. of NY Selective Insurance Co. of the Southeast St. Paul Fire and Marine Insurance Co. Western Agricultural Insurance Co.

2017 Demotech Company Classification

2016 Demotech Company Classification

2015 Demotech Company Classification

2014 Demotech Company Classification

2013 Demotech Company Classification

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Near National State Specialist Regional Coverage Specialist Regional Coverage Specialist State Specialist Reinsurer State Specialist Strategic Subsidiary

Near National State Specialist Regional Strategic Subsidiary Regional Coverage Specialist State Specialist Reinsurer State Specialist Strategic Subsidiary

National State Specialist Strategic Subsidiary Strategic Subsidiary Regional Super Regional State Specialist Reinsurer State Specialist Strategic Subsidiary

National State Specialist Strategic Subsidiary Strategic Subsidiary Regional Super Regional State Specialist Reinsurer State Specialist Coverage Specialist

Super Regional

Near National

Super Regional

Super Regional

Near National

Super Regional Super Regional Super Regional Super Regional

Regional Regional Near National Regional

Regional Regional Near National Regional

Regional Regional National Regional

Regional Regional National Regional

RECLASSIFIED 2016 Super Regionals Company Name

Aspen American Insurance Co. Berkshire Hathaway Specialty Insurance Co. Caterpillar Insurance Co. Endurance American Insurance Co. Financial Pacific Insurance Co. First Colonial Insurance Co. Home-Owners Insurance Co. Property-Owners Insurance Co. Republic Underwriters Insurance Co. Securian Casualty Co.

2017 2016 Demotech Demotech Company Company Classification Classification

2015 Demotech Company Classification

2014 Demotech Company Classification

Why Company 2013 Does Not Demotech Qualify as a 2017 Company Super Regional Classification

Near National Near National Coverage Specialist Near National Regional Regional State Specialist State Specialist Strategic Subsidiary Near National

Super Regional Strategic Subsidiary Coverage Specialist Super Regional Regional Super Regional State Specialist State Specialist Super Regional Super Regional

Strategic Subsidiary Coverage Specialist Coverage Specialist Super Regional State Specialist Super Regional State Specialist State Specialist Super Regional Super Regional

Strategic Subsidiary Coverage Specialist Coverage Specialist Super Regional State Specialist Super Regional State Specialist State Specialist Super Regional Regional

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

States > 34 States > 34 States > 34, LOB > 90% States > 34 PHS NPW State > 90% State > 90% NPW States > 34

LOB = Line of Business; NPW = Net Premium Written; PHS = Policyholders Surplus

SR3 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

INSURANCEJOURNAL.COM

2017 Super Regional P/C Insurersâ„¢

As developed by Demotech Inc. for Insurance Journal. Ranked by Direct Premium Written as of 12/31/2016.

Company

12/31/2016 DPW OOOs omitted

Group Name

State Of Domicile

1

American Family Mutual Insurance Co.

$5,238,091

American Family Insurance Group

WI

2 3

Erie Insurance Exchange Farmers Insurance Exchange

$4,537,058 $4,031,141

Erie Insurance Group Farmers Insurance Group

PA CA

4

Auto-Owners Insurance Co.

$3,047,951

Auto Owners Group

5

Owners Insurance Co.

$1,699,529

Auto Owners Group

6 7

Fire Insurance Exchange COUNTRY Mutual Insurance Co.

$1,565,745 $1,548,699

8

Nationwide Mutual Fire Insurance Co.

$1,479,542

Farmers Insurance Group Country Insurance & Financial Services Group Nationwide Corp Group

9 10

Shelter Mutual Insurance Co. Progressive Casualty Insurance Co.

$1,464,644 $1,421,405

Shelter Insurance Group Progressive Group

11

Progressive Northern Insurance Co.

$1,394,819

Progressive Group

12

ACUITY, a Mutual Insurance Co.

$1,376,335

N/A

13

Westfield Insurance Co.

$1,251,533

Westfield Group

14

$1,194,279

Iowa Farm Bureau Group

15 16

Farm Bureau Property & Casualty Insurance Co. Erie Insurance Co. United Financial Casualty Co.

$1,181,441 $1,168,020

Erie Insurance Group Progressive Group

17 18 19 20

West Bend Mutual Insurance Co. Farmers Insurance Co., Inc. MemberSelect Insurance Co. Integon National Insurance Co.

$1,115,054 $1,024,960 $990,637 $939,037

N/A Farmers Insurance Group Automobile Club MI Group Amtrust NGH Group

21

American Security Insurance Co.

$936,373

Assurant Inc Group

22

Citizens Insurance Co. of America

$859,168

The Hanover Insurance Group

23

Truck Insurance Exchange

$856,742

Farmers Insurance Group

24 25

$759,451 $685,100

Progressive Group State Auto Mutual Group

26 27

Progressive Preferred Insurance Co. State Auto Property & Casualty Insurance Co. United Property & Casualty Insurance Co. Central Mutual Insurance Co.

$664,236 $624,766

28

United Fire & Casualty Co.

$611,706

United Ins Holdings Group Central Mutual Insurance Co Group United Fire & Casualty Group

29 30

Federated National Insurance Co. Selective Insurance Co. of SC

$609,934 $607,977

Monarch Delaware Group Selective Insurance Group

FL IN

31 32

Frankenmuth Mutual Insurance Co. Automobile Insurance Co. of Hartford, CT

$586,600 $575,778

Frankenmuth Group Travelers Group

MI CT

33

$552,217 $525,316

Pennsylvania National Insurance Group Berkshire Hathaway Group

PA

34

Pennsylvania National Mutual Casualty Insurance Co. AmGUARD Insurance Co.

35

Selective Insurance Co. of the Southeast

$521,744

Selective Insurance Group

IN

36

American Strategic Insurance Corp.

$515,435

Progressive Group

FL

37

Selective Insurance Co. of America

$487,698

Selective Insurance Group

NJ

38

Farmers Mutual Hail Insurance Co. of IA

$486,478

IA

39 40 41 42 43 44

Grange Mutual Casualty Co. Motorists Mutual Insurance Co. Auto Club Group Insurance Co. Hastings Mutual Insurance Co. FCCI Insurance Co. St. Paul Fire and Marine Insurance Co.

$470,887 $448,812 $440,645 $439,091 $437,238 $435,953

Farmers Mutual Hail Insurance Group Grange Mutual Casualty Group Motorists Mutual Group Automobile Club MI Group N/A FCCI Mutual Insurance Group Travelers Group

45 46

SECURA Insurance, a Mutual Co. State Automobile Mutual Insurance Co.

$423,399 $410,874

Secura Insurance Group State Auto Mutual Group

SR4 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

Number/States Greater than $1 Million DPW as of 12/31/2016

18 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,NE,NV,ND,OH,OR,SD,UT,WA,WI

12 - DC,IL,IN,KY,MD,NC,OH,PA,TN,VA,WV,WI 33 - AL,AZ,AR,CA,CO,GA,ID,IL,IN,IA,KS,ME,MD,MI,MN,MO,MT,NE,NV,NJ, NM,ND,OH,OK,OR,SD,TN,TX,UT,VA,WA,WI,WY MI 26 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN,MO,NE,NC,ND,OH,PA, SC,SD,TN,UT,VA,WI OH 25 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MN,MO,NE,NC,ND,OH,PA,SC, SD,TN,UT,VA,WI CA 16 - AL,CA,CO,MI,MN,MO,MT,NE,NV,ND,SD,TX,UT,WA,WI,WY IL 18 - AL,AK,AZ,CO,GA,IL,IN,IA,KS,MN,MO,NV,ND,OK,OR,TN,WA,WI OH 31 - AL,AZ,AR,CA,CT,DE,DC,FL,GA,IL,IN,KY,ME,MD,MI,MS,NH,NY,NC,OH, OK,OR,PA,RI,SC,TN,TX,VT,VA,WA,WV MO 14 - AR,CO,IL,IN,IA,KS,KY,LA,MS,MO,NE,NV,OK,TN OH 21 - AZ,AR,CA,CO,CT,DC,HI,KY,ME,MD,MA,MN,MO,NV,NY,OH,PA,RI,TX, VA,WA WI 23 - CT,DE,IL,IN,IA,KY,ME,MN,NE,NV,NH,NM,NY,OK,OR,PA,RI,SC,SD,VT, VA,WI,WY WI 24 - AZ,CO,ID,IL,IN,IA,KS,KY,ME,MI,MN,MO,MT,NE,NV,NM,ND,OH,PA,SD, TN,UT,WI,WY OH 26 - AL,AZ,AR,CO,DE,FL,GA,IL,IN,IA,KY,MD,MI,MN,MS,MO,NM,NC,OH,PA, SC,TN,TX,VA,WV,WI IA 8 - AZ,IA,KS,MN,NE,NM,SD,UT PA 13 - DC,IL,IN,KY,MD,NY,NC,OH,PA,TN,VA,WV,WI OH 28 - AK,AZ,AR,CA,CO,DE,ID,KS,KY,ME,MD,MA,MN,MT,NV,NH,NM,NY,ND, OH,PA,RI,SD,TX,UT,VT,WA,WV WI 11 - IL,IN,IA,KS,KY,MI,MN,MO,NE,OH,WI KS 5 - AR,IA,KS,MO,OK MI 10 - GA,IL,IN,IA,MI,MN,NE,ND,OH,TN NC 25 - AL,AZ,CA,CO,CT,FL,GA,IL,LA,ME,MA,MI,MO,NH,NJ,NY,NC,OH,PA,RI, TN,TX,VA,WA,WI DE 34 - AL,AK,AZ,CA,CO,CT,FL,GA,IL,IN,KY,LA,ME,MD,MA,MI,MN,MS,MO,NV, NJ,NM,NY,NC,OH,OK,PA,RI,SC,TN,TX,UT,VA,WA MI 24 - AZ,CA,CO,CT,GA,IL,IN,ME,MA,MI,MN,MO,NH,NJ,NY,OH,PA,RI,SC, UT,VT,VA,WA,WI CA 33 - AL,AZ,AR,CA,CO,CT,ID,IL,IN,IA,KS,MD,MI,MN,MO,MT,NE,NV,NJ,NM, NY,OH,OK,OR,PA,SD,TN,TX,UT,VA,WA,WI,WY OH 10 - AZ,CO,GA,HI,MN,MO,NV,NM,OH,PA IA 28 - AL,AZ,AR,CT,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MS,MO,NC,ND,OH,OK, PA,SC,TN,TX,UT,VA,WV,WI FL 10 - CT,FL,GA,LA,MA,NJ,NC,RI,SC,TX OH 19 - AZ,CO,CT,GA,IL,IN,KY,MA,MI,NH,NM,NY,NC,OH,OK,SC,TN,TX,VA IA

PA

29 - AL,AZ,AR,CA,CO,FL,ID,IL,IN,IA,KS,LA,MI,MN,MS,MO,MT,NE,NM,ND, OH,OK,OR,SD,TN,TX,UT,WI,WY 6 - AL,FL,GA,LA,SC,TX 22 - CT,DE,GA,IL,IN,IA,KY,MD,MA,MI,MN,MO,NJ,NY,NC,OH,PA,RI,SC, TN,VA,WI 14 - AL,GA,IL,IN,KY,ME,MI,NH,NC,OH,SC,TN,VT,WI 32 - AL,AZ,AR,CO,CT,DC,GA,ID,IL,IN,KS,KY,ME,MD,MN,MS,MO,MT,NV,NH, NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA,WI 10 - AL,DE,MD,NJ,NC,PA,SC,TN,TX,VA 31 - AL,AZ,CA,CO,CT,DE,DC,FL,GA,IL,KS,LA,ME,MD,MA,MI,MN,MS,MO,NV, NH,NJ,NY,NC,PA,RI,SC,TN,TX,VT,VA 27 - AL,CT,DE,DC,FL,GA,IL,IN,IA,KY,LA,MD,MA,MI,MN,MS,MO,NY,NC,OH, PA,RI,SC,TN,TX,VA,WI 28 - AL,AZ,CO,CT,FL,GA,IL,IA,MD,MA,MI,MN,MS,MO,NV,NJ,NM,NC,OH,OK, OR,PA,SC,TN,UT,VA,WA,WI 25 - CA,CT,DE,DC,GA,HI,IL,IN,IA,MD,MA,MI,MN,MO,NJ,NY,NC,OH,PA,RI, SC,TN,VA,WA,WI 17 - AR,CO,IL,IN,IA,KS,KY,MI,MN,MO,NE,ND,OH,OK,SD,TX,WI

OH OH MI MI FL CT

9 - GA,IL,IN,KY,OH,PA,SC,TN,VA 6 - IN,KY,MI,OH,PA,WV 6 - IN,IA,MI,NE,ND,WI 6 - IL,IN,IA,MI,OH,WI 18 - AL,AR,FL,GA,IL,IN,KY,LA,MD,MI,MS,MO,NC,OH,SC,TN,TX,VA 26 - AR,CA,CO,FL,GA,IL,KS,KY,LA,MI,MN,MS,MT,NJ,NM,NY,ND,OH,OK,PA, TN,TX,UT,VA,WV,WY WI 12 - AZ,CO,IL,IN,IA,KS,KY,MI,MN,MO,ND,WI OH 27 - AL,AZ,AR,CO,CT,GA,IL,IN,KS,KY,MD,MA,MI,MN,MS,MO,NC,ND,OH,PA, SC,SD,TN,TX,VA,WV,WI

INSURANCEJOURNAL.COM

Company

12/31/2016 DPW OOOs omitted

Group Name

State Of Domicile

IL MI

Number/States Greater than $1 Million DPW as of 12/31/2016

47 48

Pekin Insurance Co. Amerisure Insurance Co.

$404,991 $400,883

Pekin Insurance Group Amerisure Co Group

49

Courtesy Insurance Co.

$398,638

N/A

50

Amerisure Mutual Insurance Co.

$392,287

Amerisure Co Group

51 52 53

American Commerce Insurance Co. North Star Mutual Insurance Co. Farm Family Casualty Insurance Co.

$392,011 $390,695 $380,235

54

American Road Insurance Co.

$371,327

Mapfre Insurance Group North Star Co Group American National Financial Group N/A

55

Redwood Fire and Casualty Insurance Co.

$369,199

Berkshire Hathaway Group

NE

56

NGM Insurance Co.

$361,750

Main Street America Group

FL

57 58 59

Farmers Mutual Insurance Co. of NE Vermont Mutual Insurance Co. EMCASCO Insurance Co.

$359,876 $353,373 $347,524

N/A Vermont Mutual Group EMC Insurance Company Group

NE VT IA

60 61

Grinnell Mutual Reinsurance Co. BITCO General Insurance Corp.

$340,320 $335,138

Grinnell Mutual Group Old Republic Group

IA IL

62 63

Merrimack Mutual Fire Insurance Co. Peerless Insurance Co.

$323,318 $322,315

Andover Group Liberty Mutual Group

MA NH

64

Electric Insurance Co.

$317,317

Electric Insurance Group

MA

65 66 67 68

Westfield National Insurance Co. Preferred Mutual Insurance Co. Donegal Mutual Insurance Co. General Casualty Co. of WI

$311,729 $311,045 $305,515 $305,322

Westfield Group N/A Donegal Group QBE Insurance Group

OH NY PA WI

69 70

Western National Mutual Insurance Co. Old Republic General Insurance Corp.

$292,482 $287,101

Western National Mutual Group Old Republic Group

MN IL

71 72

Mutual of Enumclaw Insurance Co. Star Insurance Co.

$277,405 $264,819

Mutual of Enumclaw Group Meadowbrook Insurance Group

OR MI

73 74 75 76 77

American Select Insurance Co. Western Agricultural Insurance Co. Builders Mutual Insurance Co. Alaska National Insurance Co. California Casualty Indemnity Exchange

$264,808 $257,858 $255,813 $253,157 $253,007

OH IA NC AK CA

78 79 80

Century-National Insurance Co. Farmers Automobile Insurance Association Farmington Casualty Co.

$242,533 $241,837 $241,046

Westfield Group Iowa Farm Bureau Group Builders Group N/A California Casualty Management Group Amtrust NGH Group Pekin Insurance Group Travelers Group

81

Motors Insurance Corp.

$238,709

Ally Insurance Holdings Group

82

Mitsui Sumitomo Insurance Co. of America

$235,181

MS & AD Insurance Group

83

North River Insurance Co.

$231,336

Fairfax Financial Group

84 85 86

Selective Way Insurance Co. Pacific Specialty Insurance Co. Farmland Mutual Insurance Co.

$228,890 $219,572 $218,519

Selective Insurance Group Western Service Contract Group Nationwide Corp Group

87

$217,579

Pennsylvania Lumbermens Group

88 89

Pennsylvania Lumbermens Mutual Insurance Co. Quincy Mutual Fire Insurance Co. Vanliner Insurance Co.

$212,122 $207,830

Quincy Mutual Group American Financial Group

90 91 92 93 94

Auto Club Insurance Association Cherokee Insurance Co. Mercury Casualty Co. Atlantic States Insurance Co. Utica Mutual Insurance Co.

$206,312 $206,071 $205,723 $202,094 $196,588

Automobile Club MI Group N/A Mercury General Group Donegal Group Utica Group

95 96 97

Merchants Mutual Insurance Co. Society Insurance, a Mutual Co. Jewelers Mutual Insurance Co.

$196,543 $194,862 $189,045

Merchants Mutual Group N/A N/A

98

American Family Home Insurance Co.

$188,396

Munich Re Group

$186,154

Mountain West Farm Group

8 - AZ,CA,FL,IL,MI,NV,TX,WA 4 - IL,IN,IA,WI 32 - AL,AZ,AR,CO,CT,DE,DC,GA,IL,IN,KS,KY,LA,MD,MI,MN,MS,MO,NH,NM, NY,NC,OK,OR,PA,RI,SC,SD,TN,TX,UT,VT MI 28 - AL,AR,CA,CO,FL,GA,IL,IN,IA,KS,LA,MI,MN,MS,MO,NE,NJ,NM,NY,NC, ND,OH,OK,PA,SC,SD,TN,TX NY 30 - AL,AZ,CA,CO,CT,FL,GA,HI,IL,IN,KS,KY,LA,MD,MA,MI,MS,MO,NV,NJ, NY,NC,OH,OR,PA,SC,TN,TX,VA,WA NJ 33 - AL,AZ,AR,CA,CO,CT,FL,GA,HI,IL,IN,IA,LA,MD,MA,MI,MN,MS,MO,NV, NH,NJ,NY,NC,OH,OK,PA,RI,SC,TN,TX,VA,WI NJ 10 - DE,DC,GA,MD,MI,NJ,NY,PA,SC,VA CA 6 - AZ,CA,CO,CT,NJ,TX IA 33 - AL,AZ,AR,CA,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN,MS,MO,MT,NE,NC, ND,OH,OK,OR,PA,SC,SD,TN,TX,UT,WA,WI,WY PA 34 - AL,AR,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MI,MN,MS,MO,NE, NH,NJ,NY,NC,OH,OK,OR,PA,SC,TN,TX,VA,WA,WI MA 4 - CT,MA,NY,RI MO 32 - AK,AZ,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MS,MO,NE,NV, NJ,NY,NC,OH,PA,SC,TN,TX,UT,VA,WA,WI MI 4 - IL,MI,MN,WI MI 17 - AL,AR,CA,IN,KS,MI,MS,MO,NE,NC,OH,OK,PA,SC,TN,TX,VA CA 5 - AZ,CA,NV,NY,VA PA 9 - DE,GA,IN,IA,MD,OH,PA,TN,VA NY 24 - CT,DE,GA,IL,IN,KY,MD,MA,MI,MN,MO,NH,NJ,NY,NC,OH,PA,RI,SC, TN,TX,VA,WA,WI NY 9 - MA,MI,NH,NJ,NY,OH,PA,RI,VT WI 4 - IL,IN,IA,WI WI 33 - AL,AZ,AR,CA,CO,CT,FL,GA,HI,IL,IN,KS,KY,LA,MD,MA,MI,MN,MO,NV, NJ,NY,NC,OH,OK,OR,PA,SC,TN,TX,VA,WA,WI FL 30 - AL,AZ,AR,CA,CT,FL,GA,IL,IN,KY,MD,MA,MI,MS,MO,NE,NJ,NM,NY,NC, OH,OK,PA,RI,SC,TN,TX,VA,WA,WI WY 2 - MT,WY

$183,310

Berkshire Hathaway Group

KS

99

Mountain West Farm Bureau Mutual Insurance Co. 100 Old United Casualty Co.

SR5 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

6 - AZ,IL,IN,IA,OH,WI 26 - AL,AZ,AR,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,NV,NC,OK,PA, SC,TN,TX,UT,VA,WI FL 21 - AL,AR,CA,CO,FL,GA,IL,MD,MA,MS,NH,NJ,NM,NC,OH,PA,SC,TN,TX, VA,WI MI 28 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,NY,NC, OK,PA,SC,TN,TX,UT,VA,WI OH 17 - AZ,CA,CO,CT,FL,ID,IL,IN,KY,NJ,NY,OH,OR,RI,TN,TX,WA MN 6 - IA,MN,NE,ND,OK,SD NY 11 - CT,DE,ME,MA,NH,NJ,NY,RI,VT,VA,WV MI

34 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MI,MN,MS,MO, NE,NJ,NM,NY,NC,OH,OK,OR,PA,SC,TN,TX,VA,WI 27 - AZ,CA,CO,CT,DE,GA,HI,ID,IL,IN,IA,KS,KY,LA,MD,MI,MN,NV,NJ,NC, OK,PA,SC,TN,TX,UT,VA 22 - AZ,CT,DE,FL,GA,ME,MD,MA,MI,NV,NH,NJ,NY,NC,PA,RI,SC,TN,TX, UT,VT,VA 2 - NE,SD 7 - CT,ME,MA,NH,NY,RI,VT 32 - AL,AZ,AR,CO,CT,GA,ID,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,MT,NE,NC, ND,OH,OK,OR,PA,SC,SD,TN,TX,UT,VA,WI 11 - IL,IN,IA,MN,MO,NE,ND,OH,OK,SD,WI 34 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,MT,NE, NM,NC,OK,OR,PA,SC,SD,TN,TX,UT,VA,WA,WI,WY 8 - CT,IL,ME,MA,NH,NJ,NY,RI 24 - CA,CT,DE,GA,IL,IN,KY,LA,ME,MD,MA,MO,NH,NY,NC,OH,OK,PA,RI, SC,TN,TX,VT,VA 33 - AL,AZ,CA,CO,CT,FL,GA,IL,IN,KS,KY,LA,ME,MD,MA,MI,MN,MO,NH,NJ, NY,NC,OH,OK,PA,SC,TN,TX,UT,VT,VA,WA,WI 19 - AZ,CO,GA,IL,IN,IA,KY,MD,MI,MN,NM,NC,OH,PA,SC,TN,VA,WV,WI 4 - MA,NH,NJ,NY 13 - AL,DE,GA,IN,IA,MD,NE,NC,OH,PA,TN,VA,WI 34 - AL,AZ,AR,CA,CO,CT,GA,ID,IL,IN,IA,KS,MA,MI,MN,MS,MO,MT,NE,NV, NJ,NY,NC,ND,OH,OR,PA,SC,SD,TN,TX,UT,WA,WI 7 - CA,IL,IA,MN,ND,SD,WI 23 - AL,AZ,CA,CO,FL,GA,HI,IL,IN,LA,MA,MI,MO,NV,NJ,NY,NC,OK,PA,SC, TN,TX,UT 5 - AZ,ID,OR,UT,WA 33 - AL,AZ,AR,CA,CT,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MI,MN,MO,NE,NH, NJ,NY,NC,OK,PA,RI,SC,SD,TN,TX,VT,VA,WI 14 - AZ,CO,GA,IL,IN,IA,MI,MN,NC,OH,PA,TN,WV,WI 8 - AZ,IA,KS,MN,NE,NM,SD,UT 9 - DC,FL,GA,MD,MS,NC,SC,TN,VA 7 - AK,AZ,CA,ID,NV,OR,WA 18 - AL,AZ,CA,CO,CT,DE,GA,IN,KS,MD,MN,NV,NM,OK,PA,TN,TX,VA

CA IL CT

5 - AZ,FL,KS,MI,TX

INSURANCEJOURNAL.COM

Company

12/31/2016 DPW OOOs omitted

Group Name

State Of Domicile

101 AMEX Assurance Co.

$180,083

N/A

IL

102 AXA Insurance Co.

$172,573

Axa Insurance Group

NY

103 Federated Rural Electric Insurance Exchange 104 Harco National Insurance Co.

$164,031

N/A

KS

$161,324

IAT Reinsurance Co Group

IL

105 American Hallmark Insurance Co. of TX

$155,770

Hallmark Financial Services Group

TX

106 United Ohio Insurance Co. 107 Federated Service Insurance Co.

$155,241 $154,177

Ohio Mutual Group Federated Mutual Group

OH MN

108 Grange Insurance Association 109 Utica First Insurance Co. 110 Great Midwest Insurance Co.

$152,682 $152,373 $151,209

WA NY TX

111 112 113 114

Stillwater Insurance Co. CSAA Affinity Insurance Co. Concord General Mutual Insurance Co. Central States Indemnity Co. of Omaha

$148,673 $138,029 $137,706 $137,568

Grange Insurance Group N/A Houston International Insurance Group WT Holdings Group CSAA Insurance Group Concord Group Berkshire Hathaway Group

115 116 117 118 119 120 121

Goodville Mutual Casualty Co. Brethren Mutual Insurance Co. Harford Mutual Insurance Co. Columbia Mutual Insurance Co. Cambridge Mutual Fire Insurance Co. Oak River Insurance Co. Pharmacists Mutual Insurance Co.

$137,502 $133,475 $132,915 $131,501 $130,079 $129,373 $129,122

Goodville & German Mutual Group N/A Harford Group Columbia Insurance Group Andover Group Berkshire Hathaway Group Pharmacists Mutual Group

PA MD MD MO MA NE IA

122 123 124 125 126 127 128 129 130

National Lloyds Insurance Co. IMT Insurance Co. Executive Risk Indemnity Inc. Middlesex Insurance Co. Unigard Insurance Co. Farmers Alliance Mutual Insurance Co. Insurance Co. of North America Cumberland Mutual Fire Insurance Co. Penn National Security Insurance Co.

$127,516 $127,308 $124,320 $123,575 $122,628 $122,298 $118,824 $110,747 $107,358

TX IA DE WI WI KS PA NJ PA

131

Protective Property & Casualty Insurance Co. TransGuard Insurance Co. of America Inc. Mid-Continent Casualty Co. Hartford Insurance Co. of IL Philadelphia Contributionship Insurance Co.

$103,486

NLASCO Group IMT Mutual Holding Group Chubb Ltd Group Sentry Insurance Group QBE Insurance Group Alliance Insurance Group Chubb Ltd Group Cumberland Group Pennsylvania National Insurance Group Protective Life Insurance Group

132 133 134 135

$101,992 $100,318 $99,267 $98,750

136 Western Reserve Mutual Casualty Co. 137 Imperium Insurance Co.

$96,362 $95,314

138 139 140 141

$93,210 $92,318 $91,096 $88,864

Pacific Employers Insurance Co. Lightning Rod Mutual Insurance Co. Toyota Motor Insurance Co. Physicians Insurance a Mutual Co.

142 Milbank Insurance Co. 143 Alterra America Insurance Co.

$86,439 $81,533

144 145 146 147 148 149 150 151 152 153

BITCO National Insurance Co. Hallmark Insurance Co. Lititz Mutual Insurance Co. Contractors Bonding and Insurance Co. MHA Insurance Co. Triton Insurance Co. Dentists Insurance Co. Bay State Insurance Co. American Mercury Insurance Co. Capitol Indemnity Corp.

$77,625 $73,302 $72,832 $72,738 $71,307 $70,487 $68,138 $67,133 $66,175 $62,323

154 155 156 157 158

Selective Insurance Co. of NY Gray Insurance Co. Civil Service Employees Insurance Co. St. Paul Mercury Insurance Co. All America Insurance Co.

$62,275 $60,307 $54,911 $46,667 $42,571

159 Trinity Universal Insurance Co. 160 Columbia Insurance Co. 161 Motorists Commercial Mutual Insurance Co.

$36,128 $34,365 $32,987

IAT Reinsurance Co Group American Financial Group Hartford Fire & Casualty Group Philadelphia Contributionship Group Western Reserve Group Houston International Insurance Group Chubb Ltd Group Western Reserve Group N/A Physicians Insurance, a Mutual Group State Auto Mutual Group Markel Corp Group

CA AZ NH NE

Number/States Greater than $1 Million DPW as of 12/31/2016

31 - AL,AZ,CA,CO,CT,DC,FL,GA,HI,IL,IN,KY,LA,MD,MA,MI,MN,MO,NV,NJ, NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA 32 - AL,AZ,AR,CA,CO,CT,DC,FL,GA,HI,IL,IN,IA,KS,LA,MD,MA,MI,MN,MO, NJ,NY,NC,OH,OK,PA,SC,TN,TX,VA,WA,WI 34 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,MT,NE,NM, NC,ND,OH,OK,OR,PA,SC,SD,TN,TX,VA,WA,WI,WY 30 - AL,AZ,AR,CA,CO,CT,FL,GA,ID,IL,IA,KS,LA,MI,MN,MS,MO,NV,NJ,NY, NC,OH,OK,OR,PA,SC,TN,TX,VA,WI 21 - AZ,AR,GA,HI,ID,IL,IN,MT,NV,NM,OH,OK,OR,PA,SC,TN,TX,UT,VA, WA,WY 6 - CT,ME,NH,OH,RI,VT 32 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,NE,NV,NY, NC,ND,OH,OK,OR,PA,SC,TN,TX,VA,WA,WI 6 - CA,CO,ID,OR,WA,WY 6 - CT,MA,NJ,NY,OH,PA 21 - AL,AZ,CA,CO,GA,IL,IN,KY,MI,MN,MT,NV,NJ,NC,OH,OK,PA,TX,VA, WV,WI 17 - AZ,CA,FL,HI,IN,MO,NE,NV,NM,NY,OH,PA,SC,TN,TX,VA,WA 7 - AZ,CT,DE,MD,NJ,PA,VA 3 - ME,NH,VT 28 - AZ,AR,CA,CO,GA,ID,IL,IN,IA,KS,KY,LA,MI,MN,MO,MT,NE,NY,NC,OH, OK,OR,PA,SC,TN,TX,UT,WI 8 - DE,IL,IN,KS,OH,OK,PA,VA 3 - MD,PA,VA 8 - DE,DC,MD,NJ,NC,PA,TN,VA 12 - AR,GA,IL,IA,KS,MS,MO,NE,OK,SD,TN,TX 8 - CT,IL,ME,MA,NH,NJ,NY,RI 6 - AK,CA,FL,KS,MO,NE 34 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,IA,KS,KY,LA,MA,MI,MN,MS,MO,NE,NJ, NM,NY,NC,ND,OH,OK,PA,SC,SD,TN,TX,VA,WA,WI 5 - GA,MO,OK,TN,TX 6 - IL,IA,MN,NE,SD,WI 20 - CA,CO,DC,FL,GA,IL,KY,MD,MA,MI,MN,MO,NJ,NY,OH,PA,SC,TX,VA,WA 15 - AL,CA,CT,FL,GA,IL,IN,MI,MN,MS,NJ,TN,TX,WA,WI 7 - AZ,CA,ID,MT,OR,UT,WA 8 - CO,ID,KS,MT,NE,ND,OK,SD 3 - CA,MA,NY 4 - DE,MD,NJ,PA 9 - AL,DE,MD,NJ,NC,PA,SC,TN,VA

MO 21 - AZ,CA,CO,FL,GA,IL,IN,IA,MA,MI,MN,MS,MO,NC,OH,OK,PA,TX,VA, WA,WI IL 13 - CA,CO,FL,GA,IL,MN,MT,NJ,NC,PA,TX,VA,WA OH 12 - AR,FL,KS,MO,MT,NC,ND,OK,SC,TX,UT,WY IL 4 - CT,IL,NY,PA PA 4 - DE,MD,NJ,PA OH 2 - IN,OH TX 21 - AL,AZ,CA,CO,FL,GA,IL,LA,MA,MS,NV,NJ,NM,NY,NC,OK,PA,SC,TX, VA,WV PA 3 - AZ,CA,NY OH 2 - IN,OH IA 16 - AZ,CA,CO,DE,FL,IL,KS,MD,MA,NV,NJ,NY,OH,PA,VA,WA WA 3 - ID,OR,WA IA DE

7 - AZ,CO,IN,MN,ND,SD,UT 22 - AL,CA,CO,FL,GA,HI,IL,IN,LA,MA,MS,NV,NJ,NY,NC,OH,OR,PA,TN,TX, VA,WA Old Republic Group IL 16 - AR,FL,GA,IL,IA,LA,MO,NE,NC,OK,PA,SC,TN,TX,VA,WI Hallmark Financial Services Group AZ 20 - AL,AZ,AR,CA,FL,GA,IL,IN,LA,MI,MO,MT,NV,NM,NC,OH,OK,PA,TX,WA Lititz Mutual Group PA 9 - DE,KS,MD,MO,NC,PA,SC,VA,WV RLI Insurance Group IL 9 - AZ,CA,FL,MT,NV,NM,OR,TX,WA Coverys Group MI 8 - IN,IA,MI,MN,ND,OH,SD,WI Fortress Group TX 9 - CA,DE,IL,NJ,NY,NC,OH,PA,TX N/A CA 4 - CA,HI,IL,PA Andover Group MA 3 - MA,NJ,NY Mercury General Group OK 4 - CA,OK,TX,VA Alleghany Group WI 23 - AL,AZ,CA,CO,GA,IL,IN,MI,MN,MO,MT,NE,NV,NY,OH,OK,OR,PA,SD, TN,VA,WA,WI Selective Insurance Group NY 2 - MA,NY Gray Insurance Group LA 7 - AL,CA,FL,LA,MS,OK,TX Civil Service Employee Group CA 3 - AZ,CA,NV Travelers Group CT 16 - CA,CO,CT,FL,IL,KS,MA,NM,NY,ND,OH,PA,TX,UT,WV,WY Central Mutual Insurance Co OH 14 - AZ,CT,GA,IL,IN,MA,MI,NY,NC,OH,OK,SC,TN,VA Group Kemper Corp Group TX 7 - AL,AR,ID,MT,OK,TX,UT Berkshire Hathaway Group NE 6 - CA,CO,NE,SC,UT,WA Motorists Mutual Group OH 12 - IL,IA,KY,ME,MA,MI,MN,NE,NH,OH,PA,WI

Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from an SNL product.

The NAIC and SNL do not endorse any analysis or conclusion based upon the use of its data.

INSURANCEJOURNAL.COM

MAY 15, 2017 INSURANCE JOURNAL | NATIONAL | SR6

NATIONAL | Spotlight | Specialty Lines

Kevin Kelley

Ironshore CEO Kelley: Goal Under Liberty Mutual Is to Become Premier Specialty P/C Insurer

By Mark Hollmer

L

ongtime Ironshore Inc. CEO Kevin Kelley said his company has a genuine shot at becoming a “premier” specialty property/casualty insurance company, both domestically and abroad, now that Liberty Mutual Insurance is its corporate parent.

“I am dead serious,” Kelley said. “We can build a premier specialty property/ casualty insurer. By knowing and utilizing the resources of Liberty Mutual, which are extensive both from the insurance product side and distribution side, but just as importantly [on the technology side], what we want to do is build the premier specialty property/casualty insurer of tomorrow.”

Kelley’s comments come a few days after Liberty Mutual closed its $3 billion acquisition of Ironshore from China’s Fosun international. Liberty Mutual touted the move 20 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

as creating a global specialty business with $6.5 billion in net written premium. The insurer said it will combine its existing Liberty International Underwriters U.S. business and Ironshore’s U.S. specialty business under the Ironshore brand. By doing so, the combined entity becomes the sixth-largest writer of excess and surplus lines in the United States in terms of 2016 direct written premium.

Sean Kelly, Ironshore president and CEO of Ironshore U.S., will lead the combined operation and report to Kelley. Kelley, in turn, who has been in charge of Ironshore since late 2008 (two years after its founding), remains in charge of Ironshore proper and now reports directly to Liberty Mutual Chairman and CEO David Long. Ironshore also keeps its corporate identity and management team.

The sale ended Ironshore’s short and unusual tenure as a division of Fosun, which spent $2.3 billion to acquire Ironshore in phases from 2015 through 2016, and at one point wanted to spin it off

with an IPO. Fosun had accumulated major debt in a 20-year acquisition spree, but then delayed the Ironshore IPO after running into U.S. government national security concerns over how Fosun would operate Ironshore’s Wright & Co., which provides professional liability coverage to U.S. government employees including the Central Intelligence Agency.

Wright was a small part of Ironshore’s overall business, but in late 2016, Starr Companies agreed to acquire Wright.

Not long after, Liberty Mutual’s successful bid to buy Ironshore from Fosun became public.

Kelley declined to comment on Fosun’s ownership tenure, choosing instead to focus on Ironshore’s new corporate parent.

“What Liberty brings is not just a [strong] balance sheet, but it brings a much broader

commercial business,” Kelley said. “They have a very robust standard multiline commercial business that, quite frankly, gives us greater access to clients and further access to a broadened distribution.”

Kelley added that those elements are key to competing successfully in the future.

“When you look at the environment of today and tomorrow, I think you need to offer a very broad and complete set of products and services to a client base,” Kelley said. “Through ownership from Liberty Mutual, we not only get access to their balance sheet but to their other commercial businesses.”

his tenure leading Lexington Insurance Company from 1987 through 2008, while American International Group just happened to be the corporate owner.

“I know how to build a company within

“

There is a lot of money from private equity and public brokers buying agencies of all sizes. Why can’t I do the same?”

You have built significant value in your agency through years of hard work. InsurBanc can help you to unlock the value to grow your agency to the next level, independently. InsurBanc can provide funding for acquisitions, perpetuations

‘By knowing and utilizing the resources of Liberty Mutual, which are extensive both from the insurance product side and distribution side, but just as importantly [on the technology side], what we want to do is build the premier specialty property/ casualty insurer of tomorrow.’

and producer development.

Protect your own legacy.

Ironshore Will Remain Relatively Autonomous

While Kelley will be reporting to Long, he noted that he and Ironshore will be fairly autonomous.

“We’re going to be given the freedom to run our business, and I look forward to working with my new colleagues in a mutually beneficial way,” Kelley said.

“We’ve got a pretty good opportunity with sufficient operating freedom to get and build what we want to build.”

Kelley believes he can build a unique company that happens to have a corporate parent. He noted as evidence of this

a large company structure,” he said. “I would anticipate the same kind of operating freedom that I had under AIG and look forward to the opportunity to build something special.”

Acquisition & Perpetuation Loans | Working Capital | Equipment Leasing Cash Management | Online Banking

866.467.2262 | Visit InsurBanc.com INSBAA16715.indd 1

3/29/17 11:29 AM

MAY 15, 2017 INSURANCE JOURNAL | NATIONAL | 21 IB_Ad_Protect_BW_4.625x7.625_11.1.15.indd 1

11/1/15 12:46 PM

NATIONAL | Closer Look | Environmental

Top 10

Technical Fouls to Avoid When Filing Environmental Claims

By Veronica W. Benzinger

C

laims are where the rubber meets the road for an insurance policy. For some lines of coverage, like workers’ compensation, the protocol for filing claims is routine and automated, with incidents emailed or faxed into a central insurance company location. For others, like environmental policies, claims are infrequent and usually severe. This can present a hurdle to insureds that may be unsure how to begin to file a claim.

Environmental insurance policies are a specialty insurance and, unlike workers’ compensation policies, are nonstandard with every carrier having unique policy language and reporting provisions.

Here are the top 10 areas that merit careful attention when a client must file an environmental claim.

emergency response telephone tree (usually contained in Spill Prevention Control and Countermeasures plans) so you can immediately put the carrier on notice. All policies contain instructions on how to do this by mail, email, phone or fax.

In addition, many carriers offer emergency applications for mobile telephones, for instance, Chubb Environmental Incident Alert. If the carrier has such an app, then have the Environmental Health & Safety (EH&S) personnel use the app and reap additional benefits such as claims reporting and emergency contractor deployment.

Emergency or not, risk management should be in lock step with EH&S to avoid proceeding and incurring costs before putting the carrier on notice.

2. Consent

Proceeding without consent to remediate or engage counsel can be risky. Many insurance policies contain consent clauses

— even property, auto and general liability contain a “voluntary payments” condition.

It is relatively easy to get a carrier to consent, particularly with experienced service providers or other experienced vendors, and the rates charged are reasonable.

There may be some discussion as to what is reasonable. However, it is better to know upfront what a carrier is willing to pay and perhaps negotiate a more reasonable rate than to try to survive a challenge that the insured has violated the voluntary payment provision of the policy by proceeding without consent. In that case, there will be little if any leverage to negotiate.

3.

Remediating Before Reporting

This is unfortunately an all-too-frequent situation. Just as one would not repair a car before the insurer approved repairs, why would someone expect to remediate before the insurer approved the remedial approach and expenses? However, if acting in a situation that presents an imminent threat to human health or the environment, most carriers make an exception to the consent requirement. In these situations, there are usually timing requirements, such as reporting to the carrier within 72 hours after the pollution condition giving rise to the emergency is discovered. These emergency exception provisions must be carefully evaluated.

1. Late Reporting/Notice (Late Tender)

Although it may seem obvious, when confronted with an emergency response, teams very often neglect to involve or belatedly inform risk management or the insurance manager. A simple solution could be to add the risk manager to the 22 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

INSURANCEJOURNAL.COM

Coverage and policy wording negotiations are where an environmental specialist can be a valuable asset, as they can modify these clauses to provide broader time spans and definitions of emergency costs.

In addition, working with a specialist broker can help guide the insured to make timely notification to the carrier so that the remediation is proceeding with the carrier’s involvement and required consent.

4. Who Has ‘Knowledge’

A policy is generally intended to provide coverage for unknown pollution conditions discovered or triggering a claim regarding an unknown pollution condition during the policy period. Limiting that knowledge to the right personnel can be important.

This is not about concealment, but rather, looking at the practicalities of the insured’s organization and the policy.

Environmental policy forms can broadly include every employee within the scope of the definition of an insured, from the groundskeepers to the CEO. If the policy is triggered by discovery of a pollution incident by an “insured,” then something that is discovered by the groundskeeping staff could be deemed as knowledge to the organization. If that staff member does not inform the risk management team of the incident, the organization may have a fundamental issue about triggering coverage as well as an issue with a known pollution condition in a subsequent policy term.

Specialists can work with the insured to tailor knowledge clauses to the appropriate persons within the organization.

5.

Forgetting to Include an Insured

There have been many battles with insurers on this point. Unfortunately, some insureds purchase a policy, put it in a drawer and dust it off when they think they need it (often after the pollution has been remediated). This can be particularly true for environmental policies that are often written on a multiyear basis of three, five and increasingly rare, 10-year durations.

Mergers, acquisitions, joint ventures and other contractual obligations sometimes require policy modifications. Remember that an environmental policy is a dynamic INSURANCEJOURNAL.COM

asset that deserves attention whenever there is a change in an insured’s operations or ownership structure.

6.

Inadequate Documentation of Damages

The quantum of backup documentation requirements varies by carrier. At a minimum, carriers will be looking for a scope of work for a remediation and litigation strategy for a lawsuit. Carriers will be looking for a budget of the expected cost of the remediation or litigation. Documentation supporting the source of the pollution conditions (in the circumstance of a remediation) and any correspondence with the claimant (in the circumstance of litigation) will be a necessary part of the claim. As with any prudent business, maintaining records will be critical to avoid parts of a claim being denied because the insured cannot show the worker was in the field doing what they said they did.

7.

Not Understanding What Coverage Is Provided by the Environmental Policy

Insureds want an environmental policy to cover what their other property and casualty policies exclude, plus more. An environmental policy may provide some of this coverage. However, it may not completely dovetail with other property and casualty policies, particularly in regard to pre-existing pollution conditions, off-site operations or ancillary operations. There are many misconceptions of the liabilities an environmental policy can cover, including asbestos litigation, Superfund Potential Responsible Party (PRP) information requests, disposal operations, product liability, business interruption and restoration costs. Many of these coverage gaps may be addressed by environmental liability policies, but some, especially remediation of known actionable conditions or asbestos liability associated with a product or historic operations, cannot be addressed.

A specialist broker is a key advisor and EH&S colleagues, and like risk managers, should understand what risk transfer they can expect from an environmental policy.

The more information provided to the insurance company, the better the oppor-

tunity for more expansive coverage. If the information is limited, carriers may only be willing to provide coverage for conditions resulting after the policy inception date.

8.

Forgetting to Involve a Specialist Broker

There are trusted advisors for many different issues, including legal, financial, engineering and consulting. An environmental insurance broker should be in that group, because when involved from the outset of a claim, they can help make a difference in whether a claim is accepted, denied or settled for more or less money.

9.

Not Questioning a Reservation of Rights or Not Responding

The most likely first response by an insurance company to a reported claim is a reservation of rights letter. This is supposed to let an insured know that the insurer is willing to investigate a claim and may deny coverage at some point in the future. Do not ignore these letters or an outright denial of coverage letter. Instead, consult with advisors and respond in a cooperative manner without giving up any rights under the policy.

Many environmental polices contain specialized wording tailored by an environmental insurance broker to match specific negotiated coverage. Brokers and attorneys are advocates for coverage, so involve them in a response to a carrier and keep records of the information provided.

10. Unscheduled Assets

Like forgetting to add an insured or additional insureds, do not forget to add acquired assets or other business elements that require coverage. Confusion with addresses can also lead to a carrier claiming that a particular location is not included for coverage. When policies are negotiated, look to the broadest description of a covered property or asset as is available and ask for the legal description to be included in policy documents and underwriting submissions.

Benzinger is chief broking officer and managing director at Aon Risk Solutions Environmental Practice.

MAY 15, 2017 INSURANCE JOURNAL | NATIONAL | 23

Idea Exchange

Tech Talk

How to Use Digital Body Language

“

By Tom Wetzel “When the eyes say one thing, and the tongue another, a practiced man relies on the language of the first.” — Ralph Waldo Emerson

A

gents pride themselves on their sales skills — to meet a prospect face-to-face, take their measure, and craft an insurance package to fit their needs. Many studies show today’s insurance buyers, including millennials, want a relationship with an insurance agent they know and trust. The problem, however, is that the vast majority of buyers start their journey online. In too many cases, a prospect will decide to move on and the agent never gets the chance to look them in the eye.

24 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

Aside from creating a compelling digital presence that attracts prospects to an agency website or social media, agents possess another powerful tool in their marketing kit – the data that can be derived from these sites. The fact is, prospects and clients send out a lot of signals about what they are looking for, are interested in and willing to take action on when they visit online. Call it “digital body language,” a phrase coined by Steve Woods and Paul Teshima, two of the co-founders of Eloqua and now of Nudge Software.

Digital body language comprises everything an online visitor does with an agency. For the agency website, this includes questions such as: How long does a visitor spend on the site and what do they look at? How does a visitor’s behavior change on the site? After the first 10 seconds, what clicks, scrolls, and mouse movements take place and over what period of time? What pages do visitors linger over most and what actions are more likely to produce a phone or email inquiry? To what extent does the agency’s social media activity drive traffic to the website? Taken together, these actions can guide agents in understanding how to frame their online messaging and adjust accordingly. Unfortunately, too many agents don’t take the time to

access this information or if they do, to understand fully its implications and what actions to take.

Without this information, agents are “marketing in the dark,” according to Brian Bartosh, president of Top O’ Michigan Insurance Agency Inc. in Alpena.

Marc McNulty, vice president of Insurance Operations for The Uhl Agency in Dayton, Ohio, adds that he is not aware of any agency in his area that actively tracks website and social media activity.

So why don’t more agents access this information?

“I think business intelligence and use of it is new and ‘scary’ for many,” said Bartosh. “It appears that they have under-utilized technology and have not seen the value of data.” Bartosh says use data - it is searchable and mineable.

Another possible explanation: agency management systems generally do not access this data. Agents must collect it from other sources such as Google Analytics and then import to track the characteristics of prospects and clients.

“We don’t monitor this as closely as we probably should,” McNulty said. However, the data he collects is helpful. “I like to see the numbers regarding pages/session, average session duration, and what the most visited pages on our site are.”

Bartosh is an advocate for using data.

“We want to know as much as we can so that we can pinpoint our marketing efforts,” he said. “This has taken our results from the traditional 1 percent to 2 percent response to double-digit response because we know more and can target our messages.”

It’s also important that the data be current to be useful, he added. “We are mining data monthly for various purposes including cross-sell, win-back and new prospecting efforts.”

Share this article

with a colleague.

IJMAG.COM/515JL 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.

INSURANCEJOURNAL.COM

TechTalk Sponsor

WHAT’S YOUR CODE TO UNLOCK SUCCESS

Websites | Marketing | Rating | Management

Find your agency’s combination at GetITC.com UUDDLRLRBA

NATIONAL | Spotlight | Specialty Lines

Wholesale Associations NAPSLO, AAMGA Merging to Form WSIA

By Andrea Wells

T

hings are moving forward for a new insurance industry trade association for the wholesale, specialty and surplus lines insurance industry.

The new Wholesale and Specialty Insurance Association (WSIA) is being formed by the proposed merger of the National Association of Professional Surplus Lines Officers (NAPSLO) and the American Association of Managing General Agents (AAMGA).

In April, both boards of directors for the AAMGA and NAPSLO approved the merger proposal, an agreement and plan of merger, and a board resolution to merge.

The merger proposal outlines the material terms in connection with the merger of the AAMGA and NAPSLO; (2) outlines the process and timing by which the merger will be considered, approved and effectuated; and (3) documents the terms and conditions applying to the merger.

The full memberships of both associations must still vote on the merger in June but signs point to a successful passage of the merger and the new WSIA will be fully operational shortly thereafter, said Brady R. Kelley, executive director of NAPSLO 26 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

Exhibit 8

who is expected to serve as the executive director of the WSIA once operational.

Both associations have rich histories with highly congruent memberships, and a merger of the two just “makes sense,” Kelley said.

Currently, 77 percent of AAMGA members also belong to NAPSLO and 48 percent of NAPSLO voting members also belong to the AAMGA. The AAMGA’s voting membership is comprised of 253 (68 percent) wholesale insurance members; and 119 (32 percent) associate members (insurance companies and other risk bearing entities).

NAPSLO’s voting membership is comprised of 370 (77 percent) wholesale broker/agent members; and 108 (23 percent) company/underwriting manager members (insurance companies and other risk bearing entities).

“Our programs are similar. Our positions

in the market are similar. Legislation we support is similar. Most the time we are coordinating with regulators and lawmakers on the same issues,” Kelley said. Even efforts to educate and developing new professionals in the industry are the same.

“It’s our mission and vision that through this merger we will become an even stronger organization,” he said.

Hank Haldeman, NAPSLO past president, who has served as chairman of the merger, said there has been consensus at every step. “What’s been especially rewarding is that we’ve reached all our conclusions and recommendations, without exception, through consensus,” he said. “We are confident that this consolidation has been approached in a thorough, thoughtful manner and will leverage the synergy of the AAMGA and NAPSLO,” he said in a letter to members.”

“The board of directors of the AAMGA is very excited about the merger and its opportunity for members and our industry in the formation of WSIA,” said Ed Levy, AAMGA president. “The board is excited about the future potential of the new organization with an affirmative vote by the membership.”

“I’m certain that WSIA members of all shapes and sizes, from the localized delegated authority and brokerage operation to the global wholesale broker, along with the insurers serving the wholesale channel will all gain a competitive advantage in the marketplace through active participation in this, the only association dedicated specifically to the wholesale, specialty and surplus lines insurance industry,” said Bobby Owens, vice chairman of the merger committee and AAMGA secretary-treasurer.

WSIA is calling itself “an association of insurance professionals working to build profitable business relationships in the wholesale, specialty and surplus lines insurance industry.” WSIA is promising to provide members with networking, education, talent recruitment, regulatory and legislative advocacy, and promotion of wholesale value. Share this article with

a colleague.

IJMAG.COM/515JU INSURANCEJOURNAL.COM

Idea Exchange

The Wedge

Sales Gamification: The Scientific Selling Power of Yes, No and Maybe

By Randy Schwantz

M

y dad was a fighter pilot. He flew a P-47 Thunderbolt, one of the heaviest fighter planes ever built. The aircraft was equipped with eight 0.50-calibre machine guns, four per wing, which were an absolutely devastating combination.

The Thunderbolt carried 10 five-inch rockets or a 2,500-pound bomb. It was a beast of an airplane, and I’m proud my dad flew it.

Just after my dad died, I was walking through an airport and saw a book in one of the stores that I just had to get. The title was “Boyd: The Fighter Pilot Who Changed the Art of War.”

Forty-Second Boyd

Boyd went to the Flight Weapons School at Nellis Air Force Base and not only performed well, he rose to the top of his class. Upon graduation, he was invited to become an instructor pilot at Nellis, and it was there he was given

the nickname, “Forty-Second Boyd.”

The Flight Weapons School at Nellis Air Force Base was to the Army Air Force what the Navy Fighter Weapons School (TOP GUN) Top Gun School is to the Navy; only the best pilots in the world are invited.

Boyd had a standing bet with any pilot that showed up at the Flight Weapons School: “Let’s go up, you start off on my six-o’clock (rear end) and within 40 seconds we’ll have reversed positions and I will have shot you down.”

According to the book, he never lost and only got tied once.

pen is highly predictable.

So predictable, that he knew what he would do in advance. He couldn’t be tricked.

In his aerial-attack-study guide published in 1964, he said:

He Never Lost; He Was Only Tied Once

A Quick Interpretation

Personally, I found that amazing.

When questioned, “How do you do that?” he responded with a simple answer.

He said when in aerial combat (a dogfight), for every move, there is a counter-move.

And for every counter-move, there is a counter to the counter. The point he was trying to make is this: He believed that when flying a jet airplane in combat, doing loops, rolls, moves and counter-moves, that anything and everything that can hap-

“In discussing fighter-versus-fighter combat, it is evident that many pilots believe there are an infinite number of situations and solutions in a given tactical encounter. Such is not the case! The field in which a fighter pilot must operate is three-dimensional and finite.

The size and shape of the field is determined by the pull of 1G gravity and the performance limitations of the aircraft and its pilot.”

Let me try to interpret what he is saying and then apply it to our world of selling.

The first thing he said is this: most pilots believe that the number of situations and solutions in combat are infinite.

Boyd said it is finite, and because it is finite, it is predictable. If a pilot becomes a student of the capabilities of the aircraft (i.e. weight, thrust, turning radius) and a student of potential moves and counter-moves, then the pilot will beat his or her competitor.

What does that have to do with the title of this article, “Sales Gamification, the Scientific Selling Power of Yes, No and Maybe?"

Many salespeople believe that the number of situations and solutions when dealing with a prospect are virtually infinite. I believe it’s finite.

When you ask your prospect a question, their predictable and categorical answer will fall into one of three buckets — yes, no, and maybe.

If you would take the

continued on page 28

Idea Exchange

The Wedge

continued from page 27 time to write out your questions and their answers, you’ll see the patterns. When you write out their “yes” answer, their “no” answer and their “maybe” answer, then your corresponding next question, your sales call becomes highly predictable.

I call that sales gamification.

To date, I’ve done this with a number of my classes, where we cover the wall in butcher paper, we get out the markers and write it all out. It’s a dialogue decision tree.

It works best when you have a defined sales process with a beginning and an end and defined steps along the way.

The resulting level of confidence derived from this scientific approach to selling as compared to the unprepared, unarticulated guessing that most producers do is amazing.

Imagine, as a relatively new producer, that you could write out the dialogue of the buyer and the seller. Ultimately, you

could play either role in a sales call. It’s that predictable.

Confidence: A Feeling Driven by Knowledge and Skills

There are a lot of leaders, managers and coaches that tell you to “fake it until you make it.” It’s about the stupidest advice ever given.

Jordan Spieth, Rory McIlroy and Jason Day are not fakers. Stephen Curry, Lebron James and Kevin Durant are not fakers. Cam Newton, Tom Brady and J.J. Watt are not fakers.

These guys have a knowledge of the game they play that is unbelievable.

Use Jordan Spieth as an example. Ask him the carry distance of any of his clubs and see what he says. Ask him to draw out every hole of the Masters, with distances, slope, creeks, lakes and the elevation of the tee box, and you won’t be disappointed.

THE

Ask any of these guys how much time they spend practicing to develop their skills, and you won’t be disappointed.

They are freaks when it comes to working on their skills. Their knowledge and skills lead to extraordinary confidence.

If you want to be great, you’ve got to work at it.

Now you have a method, inspired by “Forty-Second Boyd” using “Sales Gamification and the Scientific Selling Power of Yes, No and Maybe” to build your sales dialogue, step-by-step and word-by-word.

Master this, and I’ll see you at the top of the leader board.

Share this article with a colleague.

IJMAG.COM/515TK Schwantz is founder of The Wedge Group. Phone: 214-446-3209. Website: www.thewedge.net. Email: randy@thewedge.net

TLAS

ADVANTAGE

EXCELLENCE IN THE INSURANCE WORLD

Exclusive Carrier Relationships Competitive Commissions Flexible Coverage Options Exceptional Service

WORKERS’ COMPENSATION | COMMERCIAL LINES | PROPERTY

SAN DIEGO | KNOXVILLE | DALLAS | LOS ANGELES | NEW YORK atlas.us.com | 855.309.3310 | CA License #0G61094

ATLASG002.indd 1

28 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

5/4/17 1:27 PM

INSURANCEJOURNAL.COM

IICF Women in Insurance Global Conference June 7–9, 2017 • New York, NY

The Power of Diverse Thought and Innovation Insurance Industry Charitable Foundation (IICF) invites you to join the conversation and explore the global impact of innovation and the importance of a fully inclusive work environment. We are proud to present today’s leading voices on innovation, diversity and inclusion.

Join your colleagues and hear the latest from industry-leading speakers!

Register today: iicf.org/register

Victoria Budson

Pascal Finette

Ivy Kusinga

Bo Young Lee

Norah O’Donnell

Daniel Schreiber

Founder and Executive Director, Women and Public Policy Program Harvard Kennedy School of Government

Vice President SU Labs, Entrepreneurship Chair & Global Evangelist Singularity University

Chief Culture Officer Chubb

Global Diversity & Inclusion Leader, Risk and Insurance Services Marsh LLC/ Guy Carpenter

Co-Host, “CBS This Morning” & Contributor, “60 Minutes”

CEO Lemonade

For a complete listing of featured speakers please visit: womensconference.iicf.org/speakers

Special thanks to all of our Sponsors

womensconference.iicf.org

#IICFdiversity

THERE’S AN INVISIBLE FORCE DRIVING YOUR BUSINESS GROWTH

NATIONAL | MyNewMarkets

Live Music Venue Insurance Market Detail: Entertainment Risks’s

insurance organizations.

(www.entertainmentrisk.com) coverage highlights include: AM Best “A-XI” rated carriers; able to quote 100 percent liquor sales; includes general liability, assault and battery, liquor liability and property.

Available limits include: general aggregate limit of $2 million; products-completed operations aggregate $2 million; personal and advertising injury limit of $1 million; each occurrence limit of $1 million; liquor liability limit of $1 million; fire damage limit (any one fire) $100,000; medical expense limit excluded; assault and battery available up to $1 million; excess limits available up to $5 million; hired/nonowned auto liability limit $1 million.

Available limits: As needed Carrier: Unable to disclose States: Ariz., Calif., Colo., Fla., Ga., Ill., La., Mass., Md., Mich., Nev., N.Y., Tenn., Texas, Utah, and Va. Contact: Frank Nerney at 844-368-7475 or email: info@entertainmentrisk.com

Call us to hear how leading

Umbrella Liability

Just like the air that we breathe or the wind that fuels our turbines, operations are not visible to the naked eye but they are vital to the growth and profitability of

insurance organizations work with ReSource Pro to rethink operations at 1.877.761.7276, email more@resourcepro.com or visit us at www.resourcepro.com.

Iowa, Idaho, Ill., Kan., Maine, Mich., Minn., Mo., Miss., Mt., N.C., N.D., Neb., N.H., Nev., Ohio, Ore., Pa., R.I., S.C., Tenn., Utah, Wash., Wis., and Wyo. Contact: Daina M Kawchack at 800-5641799 or email: dkawchack@ personalumbrella.com

Workers' Compensation

Market Detail: Aberdeen Insurance Group,

Inc. (www.aberdeeninsgrp.com) can help with the placement of preferred or hardto-place workers' compensation coverage.

Aberdeen is an insurance wholesaler specializing in workers' compensation products that only works with licensed retail insurance brokers in Pa., N.J. and Md. Markets are A.M. Best rated that focus on delivering competitive quotes.

Available limits: As needed Carrier: Unable to disclose, admitted States: Md., N.J., and Pa. Contact: Tom Downie, Jr. at 215-540-9898 or email: tom.downie@insure-mail.com.

Market Detail: PersonalUmbrella.com

Insurance Services Inc. (www.personalumbrella.com) provides online standalone personal umbrella policies with the fastest service in the industry. Online quotes and orders are issued in less than six minutes, and policies with limits up to $10 million within 24 hours. Admitted, A+ Superior XV rated carrier. No MVRs. No signed applications. Direct bill to insured new and renewal.

Available limits: As needed

30 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017 RESOIJ005.indd 1

Carrier: Unable to disclose States: Ariz., Calif., Colo., Del., Fla., Ga.,

4/27/17 9:11 AM

This section brought to you by Insurance Journal’s sister website: www.mynewmarkets.com

Need a Market?

Find it. FAST INSURANCEJOURNAL.COM

SUPER REGIONAL P/C INSURER

TM

CONFERENCE 2017 The Premier Event for C-Suite Professionals Throughout the Industry

July 16-18 | Grand Geneva Resort & Spa in Lake Geneva, WI

The historic Grand Geneva luxury resort was originally the famed Lake

Who Should Attend: · Insurance Carrier C-Suite Titles

Geneva Playboy Club Hotel. It’s

(CEO, CFO, COO, CTO, CIO, CMO)

home to one of the best golf courses

· Other Sr. Level Carrier Executives

in the Midwest, and is accessible from both Chicago and Milwaukee.

· Insurance Carrier Boards of Directors · Reinsurance Executives

Space is limited. Register today.

www.SuperRegional.net

Special Thanks to Merlinos & Associates Opening Reception Sponsor

Idea Exchange

Minding Your Business

Preparing for the Loss of a Producer

By Catherine Oak and

Bill Schoeffler

R

ecently, a client of ours had two producers leave to start their own agency. The impact on the agency was significant. These two producers generated about half the agency commissions.

The owner was scrambling to adjust to the change.

Producers come and producers go. That is the nature of the insurance industry.

There are a variety of reasons why producers change agencies. The most common reasons include seeking higher compensation or benefits, but it could include getting better support or finding a friendlier working environment.

As soon as the first producer is hired, the agency owner needs to have an idea in the back of his or her mind about what to do if that producer were to leave. This contingency plan obviously changes as 32 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

the producer becomes more ingrained and integral in the agency. So what are some of the basic ideas that an agency owner needs to consider regarding a producer’s departure?

The first thing to consider is does the agency have a contract with the producer?

We highly recommend that all producers have contracts. A well-written contract will define the essential terms of the arrangement between the producer and the agency. It allows for a performance benchmark on both sides and will help resolve (or squelch) many common disputes. The contract should spell out any requirements or expectations, if the producer were to leave or be terminated.

For example, the producer might not be entitled to any deferred compensation if they were employed for less than three years. Some producer contracts require the producer to pay back to the agency any draw on commission they were paid, if they quit within a certain timeframe or during their training.

does not mean that they should take the accounts when they leave. Some CSRs might have a better relationship with the accounts than the producers.

It might make better sense if the agency were to buy the accounts back from the producer; otherwise, the client might find a totally new agency to handle their business. In some cases the producer might be going to an agency that does not have the markets to handle some of their accounts.

It’s a wise thing for the agency and the producer to sit down and review who should keep which accounts.

On the other side of the coin, if the agency owns the accounts but the producer is really tied to the accounts, it might make sense for the agency to sell those accounts to the producer.

This way at least the agency is getting paid for an account that will most likely

Account Ownership

Another common issue when producers leave an agency is related to account ownership.

Regardless of whether there is a written contract or not, some producers can have some ownership in the accounts in their book of business. Problems arise when there are different understandings of what the account ownership arrangement is between the agency and the producer.

It is always best to periodically review the account ownership situation with the producers, such as at review time.

Just because a producer has ownership in the accounts INSURANCEJOURNAL.COM

eventually migrate to the departing producer.

Non-Piracy, Non-Solicitation and NonCompete Agreements

The rules on upholding non-piracy, non-solicitation and non-compete agreements will vary based on the state and what’s written in the contract. If there is no written contract it’s very difficult to enforce any of this. In general, an agency can block a producer from taking client lists (non-piracy) and directly contacting (non-solicitation) from those lists. The courts usually uphold this arrangement for a period of two to three years. However, the client is free to do business with whomever they choose. So if a client contacts the producer at the new agency, there is typically nothing the agency is legally allowed to do. Each state is different so an owner should contact a local attorney to find out what is enforceable in their particular state.

Transferring Accounts

What’s the best way to transfer the accounts from the old agency to the producer’s new agency? If the book of business is large enough and concentrated in one or two markets, the insurance companies will often allow a block transfer of the Broker of Record (BOR).

For a small number of accounts or those that go through the wholesale/E&S marketplace, individual BORs must be issued. It is common industry practice for the new agency to be responsible for servicing the accounts while the original agency still gets paid on any commission from those accounts until the policy renews.

INSURANCEJOURNAL.COM

However, there is a trend with some companies to not allow BORs until the renewal date. Cooperation between the producer and the agency is required for a successful and smooth transfer of the accounts.

Animosity and ill-will could mean a loss of business for everyone.

Problems arise when there are different understandings of what the account ownership arrangement is between the agency and the producer.

Service Staff

A producer that takes a large enough book of business will also impact the service staff. It is not unusual for producers who leave with a large book of business to also include their CSR in their plans. It can be considered the piracy of employees.

However, if cooler heads prevail it might actually make sense. After the producer leaves the agency an employee may not have accounts to service. Cooperation and negotiations between the producer and the agency can avert expensive litigation.

Accounts That Stay

Often producers do not own their accounts or take a book of business with them when they leave. This provides the agency a good opportunity to go through the book of business and reassign the accounts. We recommend that a CSR or account manager handle all personal lines accounts and small commercial accounts rather than a producer. The medium or large commercial accounts that are assigned to a new producer should be done so at a lower commission rate than if they produce the accounts themselves, often at a 20 to 25 percent rate.

Bottom Line

Producers will leave. The question is whether it’s on the producer’s terms or the agency’s terms. A well-written producer contract and some contingency planning will allow for the orderly transition of a producer from one agency to another, as well as maximizing the protection of the

agency’s assets.

Share this article with

a colleague.

IJMAG.COM/515HU Oak is the founder of the international consulting firm, Oak & Associates, based in Northern California.

Schoeffler is an associate of the firm. The firm specializes in financial and management consulting for independent insurance agencies, including valuations, mergers acquisitions, clusters, sales and marketing planning as well as perpetuation planning. Phone: 707-936-6565. E-mail: catoak@gmail.com.

Advertisers Index

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

AAMGA www.aamga.org 19 Amwins Group, Inc. www.amwins.com 9 Applied Underwriters www.auw.com 4, 5, 36 Atlas General Insurance Services www.atlas.us.com 28 Burns & Wilcox Ltd. www.burnsandwilcox.com 13 California Earthquake Authority mvp.earthquakeauthority.com 7 EZLynx www.ezlynx.com 7, 15 FAIA www.faia.com S7 First American Specialty Insurance Co. www.firstam.com W9 FSLSO www.fslso.com 3 General Star www.generalstar.com W13, S3, E3, M5 Golden Bear Insurance Company www.goldenbear.com W7 Gorst & Compass Insurance www.gorstcompass.com W16 IICF www.iicf.org 29 Insurance Technologies Corp. www.getitc.com 25 InsurBanc www.insurbanc.com 21 JM Wilson www.jmwilson.com S8, M7 Louisiana Commerce & Trade Assoc. www.lctacomp.com SC9 M.J. Hall & Company www.mjhallandcompany.com W14 Monarch E&S Insurance Services www.monarchexcess.com W5 Nautilus Insurance Company www.nautilusinsgroup.com 17 Pacific Gateway Insurance Services www.pgiainsurance.com W11 PersonalUmbrella.com www.personalumbrella.com 35 Philadelphia Insurance Companies www.phly.com 2 ReSource Pro www.resourcepro.com 30 South & Western www.southandwestern.com SC5 Texas Mutual www.texasmutual.com SC7 The Hartford Insurance Group www.thehartford.com SC3, S5, E5, M3 United Fire Group www.ufgsolutions.com W18

MAY 15, 2017 INSURANCE JOURNAL | NATIONAL | 33

Closing Quote Surplus Lines Could Meet Your Insured’s Flood Coverage Needs

By Norma Essary

T

he National Flood Insurance Program (NFIP) has been the topic of much debate in recent years, especially with the program set to expire on September 30.

The NFIP is administered by the Federal Emergency Management Agency and is available to property owners in areas that have opted-in for NFIP coverage, which include more than 20,600 U.S. communities, according to benefits. gov. Coverage limits through the NFIP max out at $250,000 for building property and $100,000 for personal property on residential buildings.

For some policyholders, these limits are not high enough to cover the value of their property. In that case, private flood insurance may come into play. These policies can be purchased through the admitted or surplus lines markets, and can provide additional protection above the NFIP limits.

In the past, homeowners have been hesitant to purchase private flood coverage above NFIP coverage because of a lack of clarity in the National Flood Insurance Act. In 2012, Congress passed the BiggertWaters Flood Insurance Reform Act, which increased rates over a period of time to pull the NFIP out of the red after it was depleted by disasters such as Hurricane Katrina and Hurricane Sandy. The current deficit is reported to be around $24 billion. The Act also explained to lenders that private flood insurance could be accepted in place of NFIP coverage.

This year, Rep. Dennis Ross (R-Fla.), Rep. Kathy Castor (D-Fla.), Sen. Dean Heller (R-Nev.), and Sen. Jon Tester (D-Mont.) have reintroduced the Flood Insurance Market Parity and Modernization Act in Congress, which will likely renew the NFIP. The Act was introduced last session in Congress, and the federal House of Representatives passed it unanimously in April 2016. The Act may allow private insurers into the flood market by simplifying issues that have previously created barriers between private insurers and the flood market. With a streamlined entry method into the market, surplus lines insurance could become a solution to rising NFIP premiums.

Surplus lines organizations across the country have

34 | INSURANCE JOURNAL | NATIONAL MAY 15, 2017

The pervasiveness of mobile devices has changed consumer expectations. announced support for this Act. Flood insurance is not new territory for the excess and surplus lines industry, as these insurers have long covered specialized risks that do not meet the requirements of the NFIP. Surplus lines insurance is not regulated by the states in the same way that the standard market is regulated. However, these insurers must usually meet more stringent financial requirements to write coverage.

In Texas, surplus lines insurers must maintain at least $15 million in capital and surplus, and if they’re based in a foreign country, that number increases to $45 million. Admitted insurers are merely required to maintain $5 million.

Over the past few years, surplus lines insurance has come to supplement, or even replace, the NFIP in Texas. The Surplus Lines Stamping Office of Texas (SLTX) determined that, during the three-year period from 2014 to 2016, surplus lines flood premium in the state increased

108 percent from $9.2 million to $19.1 million.

This growth can be partially attributed to a significant increase in primary residential flood policies, which are surplus lines insurance policies that homeowners purchase as their primary source of coverage. Premium for these policies increased 1,037 percent during this period, with premium at $572,000 in 2014 and rising to $6.5 million in 2016.

There also has been a growth in surplus lines premium for primary commercial policies.

From 2014 to 2016, premium increased 92 percent, from $4.18 million to $8.03 million.

Surplus lines insurance is strong enough to insure unique or specialized risks, flood or otherwise, and flexible enough to provide individualized coverage for those who want more out of their insurance policies.

Essary is the executive director/chief executive officer of the Surplus Lines Stamping Office of Texas.

INSURANCEJOURNAL.COM

Life’s not neat.

GET A standalone PERSONAL UMBRELLA for stuff that can be a little messy.

FROM a LANDLORD to a LEAD FOOT, ANSWER 4 quick QUESTIONS ONLINE AND GET a $5 MM POLICY IN MINUTES FROM AN ADMITTED CARRIER RATED A+ XV BY A.M. BEST. plus, no volume requirement. umbrellas are for everyone.

Family-owned and operated. Proudly dog-friendly. available nationally. Underwriting criteria varies by state. Visit us online for guideLines.

California Insurance License 0D08438. A.M. Best rating effective APRIL 2017. For the latest rating, visit ambest.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. Š2017 Applied Underwriters, Inc., a Berkshire Hathaway company. Our insurance carriers are rated A+ (Superior) by A.M. Best.

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