Insurance Journal West 2018-01-08

WEST REGION California’s Fatal Work Injuries Backpage, Oregon Hotel Suit Montana Wildfires & Tourism

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Contents January 8, 2018 • Vol. 96 No. 1 • West

West

National

W1 California Reports 2016 Fatal Occupational Injuries Down

8 Netflix vs. HBO and the Race to the Insurance Customer

W2 California Company Has Marijuana License, But Its Workers Still Arrested

11 Reinsurance Price Hikes Expected to Be Short-Lived: A.M. Best

W2 Wildfires Cost Montana $240M in Tourist Spending

11 Shortened Life Expectancy Blamed on Opioid Overdose Crisis

W2 Suit Targets Oregon Hotel, Backpage.com Following Woman’s Killing

Idea Exchange

W1 CALIFORNIA REPORTS 2016 FATAL

15

OCCUPATIONAL INJURIES DOWN

WORKPLACE FATALITIES INCREASE AGAIN WITH TRANSPORTATION ON TOP

15 Workplace Fatalities Increase Again with Transportation Topping List 16 Special Report: Sexual Harassment Employment Liability Tipping Point 20 Closer Look: Parametric Insurance for U.S. Disasters

24 Insurance Agency Financing Options

26 2018 Insurance Industry Meetings & Conventions Directory

32 The Competitive Advantage: A Scary Trend 34 Closing Quote: Top Insurtech Predictions for 2018

Departments W4 People 10 Declarations 10 Figures

34 TOP INSURTECH PREDICTIONS FOR 2018 4 | INSURANCE JOURNAL | WEST JANAURY 8, 2018

12 Business Moves 23 MyNewMarkets INSURANCEJOURNAL.COM

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OPENING NOTE

Write the Editor: awells@insurancejournal.com

To Be Humble or Not

M

‘Whether leader humility is a good thing really depends on the team members’ expectations.’

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 Chris Burand Contributing Writers

Ted Devine, Robert Pettinicchi 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

CIRCULATION

aintaining a level of humility is generally considered to be a good trait.

After all we teach our children to be humble to a certain degree in sports, in school, in life. No one likes a person who gloats.

But is it always good to be a humble boss? A recent study says it’s good for a boss to be humble — as long as that’s what the firm’s employees expect.

Some workplace teams showed more creativity if the employees rated their bosses as showing more humility, Ohio State researchers studying workplaces in China found.

“Whether leader humility is a good thing really depends on the team members’ expectations,” said Jia (Jasmine) Hu, lead author of the study and associate professor of management and human resources at The Ohio State University’s Fisher College of Business.

Humble leaders are most effective when team members expect a low degree of distance between the leaders and followers, Hu said. When there is low power distance, employees share power with their boss in a collaborative way.

But humility may be seen as a weakness when the power distance is high, and employees expect their boss to be dominant, take charge and give strong direction, she said.

“One practical implication for managers is that they need to understand what their team members expect and value from them,” Hu said.

The study, conducted with colleagues at Ohio State, Portland State University and Renmin University of China, was published online recently in the Journal of Applied Psychology.

For the study, the researchers collected data on work teams and team leaders from 11 information and technology companies in a major city in northern China at three time points over six months. In all, the final study sample included 354 members from 72 teams.

While this study was done in China, Hu said the results should be applicable to the United States. Other research has shown that, both in the United States and China, there is a FOR QUESTIONS wide variation in what employees expect from REGARDING SUBSCRIPTIONS: Call: 855-814-9547 their managers and what they think their relaOutside the U.S., call 847-400-5951 or you may subscribe or change your address online at: tionship should be like. insurancejournal.com/subscribe One lesson from these results should be that Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media a business leader’s success is not dependent Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 only on his or her attributes, she said. per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pub “It is not as easy as saying humility is lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended always a good or a bad thing for leaders,” Hu 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 said. “Leadership is not just about how leaders Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. behave, but also about their team members Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, and what they Circulation Department, PO Box 708, Northbrook, IL 60065-9967 want and expect.”

ARTICLE REPRINTS: For reprints of articles in this issue,

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 Manager Elizabeth Duffy eduffy@wellsmedia.com

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or kdelamora@wellsmedia.com Visit insurancejournal.com/reprints/ for more information.

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National

Netflix vs. HBO and the Race to the Insurance Customer

By Andrew Simpson

T

“

he goal is to become HBO faster than HBO can become us, the chief content officer of Netflix said four years ago.

In the insurance world, InsureTech Connect Conference founder Caribou Honig thinks traditional insurers and insurtech startups are facing a similar challenge. To him, it’s about speed.

The question is whether the innovation executives (HBO) from within existing insurance companies that have been around for 30 or 300 years can reorient their customer-facing technology in time or whether the technology-focused startups (Netflix) trying to become the next generation of insurance companies can build the strengths and capabilities that the incumbents already have.

In the long run, the winners will have to assimilate both. They will have to have

both the strengths and capabilities of the HBOs and the Netflixes of the world, Honig told conference attendees.

Oliver Wyman’s Prashanth Gangu agrees that the pace of change is an issue. To be relevant in the future, carriers will need to adapt, create new insurance products and new capabilities for customers who will want them to manage their entire risk environment. “Incremental changes are not enough for incumbents,” he said. The configuration of one-on-one connections of insurer to customer may not fit the purpose going forward. Instead, carriers will need a service platform that maximizes the value of the entire ecosystem and not just one-to-one connections. That’s a tall order for carriers. But for their part, insurtechs also face a steep climb. They will need to “go beyond the low-hanging fruit.”

Eric Boyum, managing director for the technology and communications sector at Aon Risk Solutions, said a lot of what

8 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

insurtechs are doing is not all that exciting but is “simply doing what, frankly, the industry really ought to be able to do.”

The industry should forget the hype and embrace the cutting away of “low-hanging fruit,” he suggested.

One incumbent poised to take on the challenges of the next decade is CSAA Insurance Group, an AAA insurer. For the past six years, the home and auto carrier has been imagining a future of autonomous cars and mobility-on-demand.

The company has been reinventing its core business operations to operate in this new world. The strategy is to stay focused on customers’ changing needs and that focus suggests there may be opportunities in the blurring of lines between personal and commercial lines insurance, according to Paula Downey, president and CEO. This article was originally published by

Carrier Management, the Wells Media publication.

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Figures

0

6

The amount a Florida Atlantic University professor will receive in a lawsuit he brought against the school after he was fired for saying in his blog the Sandy Hook school shooting in Connecticut was a hoax. A jury sided with the school in the wrongful termination suit, saying that communications professor James Tracy had violated the rules regarding reporting of outside work.

$60 MILLION

The number of veterans who have taken advantage of a program offered by the North Dakota Insurance Department and the Veterans Educational Assistance Program (VEAP) that reimburses veterans for the cost of taking insurance producer exams in the state.

$70M The amount for which representatives of sex abuse victims and their survivors are suing a bankrupt Roman Catholic diocese in Montana. The Diocese of Great Falls-Billings entered bankruptcy protection as part of sex abuse settlements involving more than 400 people.

Church officials said the diocese and its insurers would contribute to a fund to compensate victims and potentially others who have yet to come forward.

Declarations No Consensus

“Until we have some kind of a consensus, or there’s an outcry from everyday business people, it just seems the issue languishes.”

— Wisconsin Assembly Speaker Robin Vos says there is no

Republican commitment to a workers’ compensation reform measure introduced by a Senate committee in late December.

The bill would add a fee schedule for medical care in the workers’ comp system. Vos says he hasn’t had a single business person tell him that reforming the workers’ compensation system was a priority.

The Cost of Business

“That is exactly why the Florida citrus industry is shrinking — they (growers) cannot afford the cost of staying in business.

If a grower has lost 50 percent of his fruit, it’s unlikely he will make a profit.”

— Ariel Singerman, assistant professor of agricultural econom-

ics at the University of Florida’s Citrus Research and Education Center. Florida citrus growers expect a significantly smaller crop this year because of Hurricane Irma, which destroyed an estimated 50 percent of this season’s oranges, grapefruit, tangerines and tangelos. Growers have also been battling citrus greening disease.

Unfair Rate Discrimination

“New York drivers who do not have a college degree or a high-paying job should not be penalized in the form of higher auto insurance rates.”

— Superintendent of Financial Services Maria T. Vullo said a

The approximate amount in pending claims from 2008’s Hurricane Ike that nine Texas school districts say they are owed by the Texas Windstorm Insurance Association (TWIA). TWIA is the insurer of last resort in coastal areas for wind and hail. Texas City Independent School District leads the list of the nine entities with more than $17 million in outstanding Ike claims. Dickinson ISD is second, with $10.5 million. The entities have said they have little faith the insurer will pay the claims without more legal battles. TWIA says the pending Ike claims are outliers.

$330,000

The amount in fines and violations proposed by the Occupational Safety and Health Administration over possible mercury exposure at Eversource’s Schiller Station power plant in Portsmouth, N.H., against Connecticut-based Manafort Brothers Inc. The company began mercury and asbestos abatement and demolition at the plant last year.

10 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

new New York Department of Financial Services’ (DFS) finalized regulation protects drivers from unfairly discriminatory auto insurance rates. The regulation prohibits insurers from using an individual’s occupational status or educational level as factors in setting rates, unless the insurer demonstrates that the use of these factors does not result in unfair rate discrimination.

Harvey and Climate Change

“Did climate change make this event more likely than in the past? Yes.” — Karin van der Wiel of the Royal Netherlands Meteorological Institute discusses research presented at the meeting of the American Geophysical Union in New Orleans in December.

Scientists say research shows that global warming’s fingerprints were all over the record rainfall from Hurricane Harvey this year.

Pesticides and Pot

“I think it’s a little funny that this year everybody’s caring about pesticides.

People have been smoking weed 30, 40, 50 years, and it’s never been an issue.”

— Mike Winderman, manager of The Green Easy in Los

Angeles, thinks the issue of pesticides, which is began coming up frequently as the state prepared for recreational marijuana to be sold legally, has been overhyped. He says the vast majority of crops that people eat are grown with pesticides, and even organic crops could be subject to pesticides drifting from nearby farms.

No Blinking

“It’s interesting to see where the under-

writers are taking their stand. Right now, no one’s willing to blink because the market has been relatively soft, and there’s a lot of capacity.”

— Paul King, senior vice president at USI, commenting on how

underwriters might change, or not change, their thinking going forward when it comes to employment practices liability following the recent storm of sexual harassment allegations.

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West

California Reports 2016 Fatal Occupational Injuries Down

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he California Department of Industrial Relations is reporting that 376 Californians died on the job in 2016, down slightly from the 388 deaths in 2015.

A review of the past 12 years indicates that workplace fatalities in California remain below the average rate of fatalities prior to 2008, when the last recession began, and remained flat over the past two years at 2.2 deaths per 100,000 workers, according to the DIR. On the national level, the rate of fatalities jumped from 3.4 to 3.6 per 100,000 workers.

There were 376 fatal injuries on the job in California in 2016, compared with 388 in 2015, 344 in 2014 and 396 in 2013.

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Data comes from the Census of Fatal Occupational Injuries, which is conducted annually in conjunction with the U.S. Bureau of Labor Statistics. Figures for 2016 are the latest numbers available.

Findings from the latest report include: • One-in-five of all California workplace deaths identified in 2016 were attributed to violence and other injuries by persons or animals. The incidence of workplace homicides in 2016 accounts for 12 percent of all workplace deaths in the state.

• Nearly two of every five California workplace deaths identified in 2016 occurred in transportation incidents.

• One-in-six of all California workplace deaths identified in 2016 were attributed

to trips, slips and falls, with 90 percent of those deaths involving falls to a lower level.

• Nearly two of every five California workplace deaths in 2016 were Latinos. This fatality rate has fluctuated over the past 10 years from 37 percent to 49 percent.

“Even one workplace fatality is too many, and our thoughts are with the families of those that died on the job last year,” Christine Baker, DIR director, said in a statement. “The fatality data released today is a reminder that we must all continue our efforts to reduce workplace safety and health hazards in order to prevent worker deaths.”

JANAURY 8, 2018 INSURANCE JOURNAL | WEST | W1

WEST | News & Markets

California Company Has Marijuana License, But Its Workers Still Arrested

By Michael Balsamo and Don Thompson

T

he confusing rollout of marijuana regulations in California has been underscored in Mendocino County, where local authorities licensed a company to deliver pot only to have state police arrest two employees who were trying to do just that with nearly a ton of weed.

The workers for Old Kai Distribution were transporting the marijuana from a farm when they were pulled over by a California Highway Patrol officer on Highway 101 near Ukiah, according to Joe Rogoway, an attorney for the company.

They were driving an unmarked van and were stopped for a traffic violation.

The workers showed the officer the company’s county license and a manifest for

the marijuana, but the officer insisted it was illegal, called for backup and arrested the men.

The company argues it can transport marijuana within the county with its local license, and county spokeswoman Sarah Dukett backed that interpretation.

She said Old Kai was issued a distribution license in December 2017 that allows it to legally transport marijuana under two local ordinances passed earlier in the year.

The workers were cited for unlawful transportation of marijuana and unlawful possession for sale.

Investigators also seized all of the marijuana and the company’s van.

“It is incomprehensible that this has occurred,” said Rogoway, who sent a letter to CHP demanding that the charges be dropped and the marijuana returned to Old Kai.

Acting California Highway Patrol Commissioner Warren Stanley said the arrest was appropriate because a state license also is required for legal transport and those permits wouldn’t take effect until Jan. 1, 2018, when broad legalization arrived in California.

“They are following the laws that are in place now,” Stanley said, referring to his officers.

The officer who made the Ukiah stop was not targeting the business, said Stanley.

He was not aware of any other arrests of a locally licensed marijuana operation.

CHP primarily is concerned with drivers who could be high behind the wheel and the agency has trained 97 percent of its officers and sergeants in advanced drugged driving rec-

ognition skills, he said.

California has had legal medical marijuana for two decades.

In 2016, voters approved broad legalization and the state and communities that want such “adult use” marijuana businesses spent the last year writing complex regulations.

Some didn’t get their regulations finalized in time to start issuing local licenses by Jan. 1.

Others decided to outlaw recreational pot altogether.

Copyright 2018 Associated Press.

Wildfires Cost Montana $240M in Tourist Spending

Suit Targets Oregon Hotel, Backpage.com Following Woman’s killing

new report says summer fires cost the state of Montana $240 million in visitor spending.

The report by the University of Montana’s Institute for Tourism and Recreational Research estimates that tourists spent almost $3.3 billion in Montana this year, supporting more than 53,000 jobs.

According to the institute’s report, both numbers would have been higher if it had not

he estate of a woman has filed a $3.6 million lawsuit against Backpage. com and the owners of the Portland, Ore., hotel where she was killed by a man she’d met for sex.

The suit says 25-year-old Ashley Benson had been trafficked by an abusive pimp.

It says she was killed in 2014

by Tae Bum Yoon, who found her through the classifieds website and lured her to a DoubleTree by Hilton hotel.

The Oregonian/OregonLive reports that Yoon was sen-

A

been for a series of summer fires.

The report says for every 100 visitors to the state over the summer, about nine cancelled their trips due to the smoke or fire.

The report estimates Montana lost roughly 800,000 visitors from July through September, equating to more than $240 million spending.

Copyright 2018 Associated Press.

W2 | INSURANCE JOURNAL | WEST JANAURY 8, 2018

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tenced to 18 years in prison after being convicted of manslaughter.

The lawsuit claims Backpage.com and the hotel failed to establish and use practices to protect victims of sex trafficking.

Representatives for Hilton and Backpage didn’t immediately return requests for comment. The website has long been criticized but says it doesn’t have control over third-party content.

Copyright 2018 Associated Press.

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Kevin Smith

Zoixza Martin

Encino, Calif.-based Answer Financial has named Kevin Smith director of business development.

Smith will report to Tom Capp, senior vice president of business development.

Smith has more than 25 years of experience within the banking and financial services industry, with an emphasis in insurance.

Smith was previously a national sales manager for American National Insurance Co. Answer is an auto and home insurance agency that provides third-party insurance solutions and services to businesses in complementary industries.

San Diego, Calif.-based Cavignac & Associates has named Zoixza Martin as an account administrator within its commercial department.

Martin will provide support to the department’s team members. Her primary responsibilities include processing endorsements, certificates of insurance and new and renewal policies. She also handles billing and cancellation matters, reconciles audits, reviews contracts and performs administrative follow-up and account manager tasks.

Martin previously was an enrollment and matching specialist for Big Brothers Big Sisters of San Diego County. Previous work experience includes having served as a case manager, and a bilingual outreach coordinator for the YMCA of San Diego Childcare Resource Service division. She was also a receptionist for Smith Barney.

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

The Oregon Department of Consumer and Business Services has named Andrew Stolfi administrator of the division of Financial Regulation.

Stolfi’s first day at DCBS will be Feb. 1. He replaces Laura Cali, who is now the chief financial officer at the Oregon Health Authority.

Stolfi is currently the chief operating officer and chief counsel at the International Association of Insurance Supervisors in Basel, Switzerland. Before joining the IAIS in 2012, Stolfi served in various senior management roles at the Illinois Department of Insurance, including acting director, chief of staff, and special counsel for policy and legislative affairs.

Walnut Creek, Calif.-based Ascension Insurance Inc. has named Keri Lopez president of employee benefits.

Lopez will build Ascension’s employee benefits market presence nationally.

W4 | INSURANCE JOURNAL | WEST JANAURY 8, 2018

She has 19 years of employee benefits consulting experience. Lopez was previously president of Western region benefits for Ascension. She was an area vice president for Gallagher Benefit Services before that.

Ascension Insurance is an insurance agency that offers risk management and benefits consulting services across the U.S. Pioneer Underwriters has added Zach McAbee as head of ocean marine.

McAbee is based in Seattle, Wash., and reports to Gene Hinman, chief executive officer of Pioneer’s U.S. operation.

The new division under McAbee will underwrite Hull/P&I and primary and excess marine liability, initially focusing on the northwest region of the US. McAbee has two decades of experience in the ocean marine sector, most recently as head of ocean marine at Crum & Forster, where he launched an ocean marine department and opened and staffed three offices. Prior to this, he was vice president of ocean marine for the midwest region at Liberty International. He began his career with Travelers.

Pioneer Underwriters has offices in the U.K., the U.S. and Switzerland.

Western Security Surplus has named Sherif Azer a senior broker in its Los Angeles, Calif., office.

Azer’s focus will be commercial lines, property and liability with the placement of excess and surplus brokerage, and managing general agency risks.

Azer has 11 years of experience in wholesale at both Bass and Hull & Co. WSS provides retail brokers a line of commercial and personal lines products, with access to both admitted and non-admitted markets.

San Diego, Calif.-based Cavignac & Associates has named Linda Lopez account administrator of its employee benefits department.

Lopez will assist the employee benefits department account manager with the daily service activities for client benefit offerings.

Lopez was previously the underwriting and customer support manager for Personable General Insurance Agency Inc., where she was employed for 10 years. Previous work experience includes having been the internal marketing representative for Arrowhead General Insurance Agency.

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

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News & Markets | NATIONAL

Reinsurance Price Hikes Expected to be Short-Lived: A.M. Best

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hile overall market conditions may improve over the near term as a result of catastrophe events in the third quarter of 2017, A.M. Best continues to hold a negative outlook for the global reinsurance sector in 2018.

In a new report titled “Market Segment Outlook: Global Reinsurance,” A.M. Best explained, there is considerable uncertainty surrounding the

level and sustainability of any market improvement. “[P]roperty catastrophe pricing is somewhat at the mercy of the alternative capital market and is not as heavily influenced by the traditional reinsurance market” as has been the case historically, said A.M. Best. The company noted that any near-term improvement may be relatively short-lived, given the amount of excess capacity in the market.

The report acknowledged that the market was able to absorb the 2017 events, and reinsurance balance sheets remain solid going into the Jan. 1, 2018, renewal season.

“However, earnings going into third-quarter 2017 had already been depressed compared with historical trends because of ongoing market challenges that suppressed current accident year underwriting performance,” said the report.

Combined with lackluster investment returns, this “has served to drag operating and overall performance to a level just marginally sufficient to cover the average cost of capital for many reinsurance-pre-

dominate companies,” the company further noted.

The negative impact of catastrophe losses on underwriting earnings in 2017 has further eroded the segment’s historical earnings, the company said.

A.M. Best estimates a combined ratio of approximately 110 percent and expects a return on equity (ROE) of -1 percent for the full year 2017 for the global reinsurance composite.

The ratings agency indicated it sees a need “for a sustained improvement in market conditions, and the events of 2017 should serve as a catalyst for that improvement.”

U.S. life expectancy, which fell to an average age of 78.6, down 0.1 year from 2015, and marking the first two-year drop since 1962 to 1963.

Overdose rates rose in 40 states and in Washington, D.C., between 2015 and 2016, with 17 states seeing increases of 25 percent or more, according to the TFAH analysis.

“Every community has been impacted by this crisis,”

Auerbach said, adding that the government was not making the investments needed to “turn the tide.”

As the opioid epidemic has worsened, many state attorneys general have sued makers of these drugs as they investigate whether manufacturers and distributors engaged in unlawful marketing behavior.

Shorten Life Expectancy Blamed on Opioid Overdose Crisis

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ife expectancy among Americans has fallen for the second year in a row as the opioid crisis continues to drive up overall death rates in the United States, the Centers for Disease Control and Prevention said.

A total of 63,000 people died from drug overdoses in 2016, up 21 percent from 2015, according to the CDC report.

Opioid-related overdoses surged 28 percent, killing 42,249 people, mostly in the 25 to 54 age group.

“The escalating growth of opioid deaths is downright frightening — and it’s getting worse,” John Auerbach, chief executive officer of the public health advocacy group Trust for America’s Health (TFAH), said in a statement.

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The increase largely stemmed from the continued escalation of deaths from fentanyl and other synthetic opioids, which jumped to 19,410 in 2016 from 9,580 in 2015 and 5,540 in 2014, according to a TFAH analysis of the report.

Heroin, an illegal opioid, accounted for around 15,500 deaths, and prescription painkillers were involved in about 14,500 deaths, TFAH reported.

“These are not simply numbers — these are actual lives,” said Benjamin F. Miller, chief policy officer of Well Being Trust, a nonprofit foundation focused on mental health issues. “Seeing the loss of life at this dramatic rate calls for more immediate action.”

The surge in overdose deaths has depressed recent gains in

Copyright 2017 Reuters.

JANUARY 8, 2018 INSURANCE JOURNAL | NATIONAL | 11

NATIONAL | Business Moves

Cook Maran & Associates, McDermott & Thomas Associates

Cook Maran & Associates has acquired McDermott & Thomas Associates LLC (M&T).

Cook Maran is a New York and New Jersey insurance broker, and the New York metropolitan area platform for Prime Risk Partners (PRP).

M&T is a Staten Island, N.Y.based agency specializing in employee benefits. Its partners offer more than seven decades of experience advising businesses on customized insurance solutions for human resources.

Following this transaction, M&T employees will continue to work from the agency’s Staten Island location and do business as McDermott & Thomas, joining Cook Maran’s six offices and 250 professionals across New York and New Jersey. In merging with Cook Maran, M&T also broadens the offering of PRP. Cook Maran Chairman and CEO Len Scioscia noted that the M&T partnership strengthens Cook Maran’s portfolio in

a critical area during a time when many employers grapple with rising premiums and face uncertainty in the national health insurance market.

For M&T, building a competitive benefits package that fits the realities of the agency’s bottom line and explaining the plan to employees has been its mission for the past three decades.

By merging with Cook Maran, M&T’s founders see new opportunities to pursue their mission while offering clients the same personal service from familiar faces.

Hub International, Contractor’s Services, Surety Services

Global insurance brokerage Hub International Ltd. (Hub) has acquired the assets of Contractor’s Services Inc. (CSI) and Surety Services LLC (SS).

Terms of the acquisitions were not disclosed.

Headquartered in Timonium, Md., CSI and SS service the construction industry by providing bid, performance, supply and payment surety bonds.

12 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

Both agencies also offer several specialty programs designed for wind and solar, large residential and commercial, and U.S. State Department and government and international construction.

CSI President Len Callahan said that this move will enhance CSI’s ability to protect clients against the financial impact related to general, commercial, professional, automotive and site-specific claims.

SS President Steve Johnson aid that by joining Hub, SS can offer clients insurance solutions to grow and protect their businesses, such as reducing their workers’ compensation and employee benefits costs.

Johnson, Callahan and CSI Vice President Jim Jones will join Hub Mid-Atlantic and report to Norman Breitenbach, president of Hub Mid-Atlantic, following the acquisition.

Risk Strategies Company, Delmarva Surety

Risk Strategies Company has acquired Delmarva Surety in a move that extends its MidAtlantic footprint while adding specialized contract surety expertise. Terms of the deal were not disclosed.

Risk Strategies is a privately held, national insurance brokerage and risk management firm. Formally established in 2010, the Risk Strategies construction group is staffed with veterans of both the insurance and construction industries.

With a client base ranging from ENR 400 firms to specialty artisan shops, its expertise spans all aspects of construction risk and liability, from financing and the design process to pre-construction, construction

and property sales.

Established in 1995 and headquartered in Hunt Valley, Md., Delmarva specializes in the sale and servicing of surety bonds and commercial insurance. The company has more than 450 clients throughout the Mid-Atlantic and eastern U.S., including Maryland, Virginia and the District of Columbia.

Surety bonds, such as payment or performance bonds, serve as a type of guarantee, ensuring obligations of the bonded entity will ultimately be fulfilled. Delmarva’s surety and insurance programs serve all areas of the construction industry.

Delmarva Surety President Thomas Whipple has more than 30 years of industry experience, including just more than two decades with Delmarva. His sons, Brian Whipple and John Whipple, are vice presidents, heading commercial lines and surety.

The addition of Delmarva is expected to bolster Risk Strategies Company’s specialty knowledge for its practice and its clients.

Distinguished LLC, American Hole ’n One

Distinguished LLC has acquired American Hole ’n One (AHNO).

Distinguished is a New Yorkbased group of entrepreneurial businesses serving the insurance industry. AHNO is a global hole-in-one and event promotions company.

In tandem with the AHNO acquisition, Distinguished LLC will also acquire AHNO’s sister company, Worldwide Hole ’n One Ltd., based in the U.K.

continued on page 14

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NATIONAL | Business Moves continued from page 12 American Hole ’n One has a team that offers 30 years of industry expertise, said Distinguished CEO Jeremy Hitzig.

Hitzig added that by adding process improvements, additional marketing, IT, sales experience and Distinguished’s management expertise, Distinguished hopes to continue to build on AHNO’s success and grow the business substantially.

According to company estimates, a small percentage of the estimated 350,000 annual golf tournaments in the U.S. currently use promotional prizes. AHNO represents a majority of that existing market.

Mark Kissick has been tasked with expanding that market share as AHNO’s new president. Kissick most recently served as president of York Programs and senior vice president at York Risk Services Group. He brings nearly 30 years of industry experience to his new role, focusing on the financial results, segment growth, marketing strategy, business development and client satisfaction for AHNO. Prior to his role at York, Kissick held management and executive positions with a national underwriter and financial services company, and two of its subsidiaries.

Mick Luckhurst, a former place-kicker for the NFL’s Atlanta Falcons from 1981 until 1988, launched AHNO’s U.K. operations, Worldwide, in 1995, and expanded AHNO to operate in all 50 U.S. states. He will now serve as chairman.

In addition to serving on the Distinguished Programs board of advisors, Luckhurst will serve on the executive commit-

tee of AHNO and help the team build its strategy, expand relationships and find new opportunities to grow the business.

The Hilb Group, Insurance Trustees

Hilb Group LLC (THG) announced the acquisition of Insurance Trustees Inc. in Garrett, Ind. Founded more than 100 years ago, Insurance Trustees offers a wide range of property/ casualty and employee benefits insurance products and services for businesses and individuals in the Indiana region.

Mike Shuherk, managing partner of Insurance Trustees, and his associates will continue to operate out of their office in Garrett under their existing name.

The Hilb Group, headquartered in Richmond, Va., is a portfolio company of Bostonbased private equity firm Abry Partners. The company now has 60 offices in 18 states.

Alera Group, Hallberg Commercial Insurers

Deerfield, Ill.-based employee benefits, property/casualty, risk management and wealth management firm, Alera Group, has acquired Hallberg Commercial Insurers Inc. in Oakbrook, Ill. Hallberg Commercial provides employee benefits, risk management and insurance services to clients in the Chicagoland area. It provides coverage for businesses, organizations and clients throughout the Midwest.

Hallberg Commercial will join Alera Group through local firm GCG Financial.

Alera Group also announced the completion of two new

14 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

acquisitions, effective Dec. 1: Armstrong/Robitaille/ Riegle Business and Insurance Solutions in Irvine, Calif.; and the employee benefits division of Walker Higgins Associates in Spartanburg, S.C. Alera Group acquired a total of 15 new firms in six states in 2017.

Truman Taylor Insurance, Galveston Insurance Associates

Texas state Sen. Larry Taylor, president of Truman Taylor Insurance in Friendswood, has closed his agency after 55 years of operation and joined Galveston Insurance Associates (GIA), effective Dec. 15.

GIA has been operating on Galveston Island for 125 years and has had an office in Friendswood since 2010. Sen. Taylor and his two employees will join GIA’s staff of 38 in the GIA Friendswood location.

Founded in 1892, Galveston Insurance Associates (GIA) is Galveston County’s oldest insurance agency. GIA is a full-service insurance agency specializing in commercial, personal, and life and health insurance. As a locally owned and operated independent agency, GIA represents many top-rated insurance companies and is one of the largest independent agency writers of windstorm and flood insurance in Texas.

Casey, Brightway

Ashley Casey, owner of Brightway, The Casey Agency in St. Augustine, Fla., has opened a new Brightway store in Palm Coast, Fla., making him the latest multiunit owner with Brightway Insurance.

The new agency, located at

55 Plaza Drive, Suite 5, in St. Augustine, has been rebranded to Brightway, The Casey Agency.

According to Brightway President, Talman Howard, Casey is among the top 10 percent most successful store owners at Brightway based on sales. Casey’s first agency in St. Augustine opened in May 2008. He is one of nine Brightway multiunit owners.

Brightway, The Casey Agency, offers customized home, condo, renters, auto, flood, recreational vehicle (RV) motorcycle, boat, all-terrain vehicle (ATV), umbrella and business policies from numerous insurance brands, including American Colonial, Bankers, Nationwide, Progressive, Safeco and Travelers.

Brightway Insurance is a national property/casualty insurance retailer selling through a network of franchised independent stores throughout the country.

Brightway began franchising operations in 2008 and has since grown to more than 700 people in 19 states, serving customers in all 50 states.

Hanson Insurance, Corvallis, Stineff

Oregon-based Hanson Insurance Group of Corvallis has acquired and will be merging Corvallis Insurance Services and Stineff Insurance Services of Monmouth, Ore., into the Hanson Insurance Group name.

Both independent agencies serve clients in the MidWillamette Valley.

Hanson Insurance Group provides service to customers in 32 states.

INSURANCEJOURNAL.COM

News & Markets | NATIONAL

Workplace Fatalities Increase Again with Transportation as Top Fatality

T

here were 5,190 workplace fatalities reported in the U.S. in 2016, a 7 percent increase over the previous year.

According to the Bureau of Labor Statistics’ Census of 2016 Fatal Occupational Injuries, the fatal injury rate increased from 3.4 per 100,000 full-time equivalent workers in 2015 to 3.6 in 2016.

This was the third consecutive annual increase and the first time in nearly a decade that the number has surpassed 5,000, according to the National Safety Council (NSC).

More workers lost their lives in transportation incidents INSURANCEJOURNAL.COM

than any other event in 2016, accounting for about one out of every four fatal injuries.

Workplace violence injuries increased by 23 percent, making it the second most common cause of workplace fatality.

Two other events with large changes were exposure to harmful substances or environments, which rose 22 percent, and fires and explosions, which declined 27 percent.

The new report showed the number of overdoses on the job increased by 32 percent in 2016.

The number of fatalities linked to overdoses has increased by at least 25 percent annually since 2012.

Other statistics from the report: Loren • Deaths among workers aged 55 or older Sweatt, deputy totaled 1,848 — a 9.9 percent increase assistant secretary for the • Deaths among black or African-American, Occupational non-Hispanics increased 18.6 percent, totaling 587 Health • Deaths among Asian, non-Hispanic workers and Safety Administration increased 40.4 percent, totaling 160 deaths (OSHA), said • Homicides increased 19.9 percent, the increase in totaling 500 deaths, the highest homicide fatalities was figure since 2010 the biggest since 2008. industry, from 118 to 165.

“America’s workers deserve The logging industry recordbetter,” Sweatt said, vowed the highest fatal injury rate ing that OSHA will “work to in 2016, at 135.9 fatalities per address these trends through enforcement, compliance assis- 100,000 full-time workers. The tance, education, training and fishing industry, airline pilots outreach,” and the government and roofers had the next highest rates. will “work with public and Fatal work injuries among private stakeholders to help eradicate the opioid crisis as a protective service occupations deadly and growing workplace increased by 68 fatalities (32 percent) in 2016 to a total of issue.”

281. This included an increase of 24 fatalities among police officers, 13 fatalities among first-line supervisors/managers of law enforcement workers, and 23 fatalities among miscellaneous protective service workers, including crossing guards and lifeguards, ski Occupations with increaspatrol, and other recreational es in fatal work injuries in protective service workers.

2016 greater than 10 percent Police officers incurred 51 included food preparation and homicides in 2016, up 50 perserving-related occupations (64 cent from 34 fatalities in 2015.

Industries reporting declines percent); installation, maintenance, and repair occupations greater than 10 percent in fatal (20 percent); building and work injuries in 2016 included healthcare practitioners and grounds cleaning and maintenance occupations (14 percent); technical occupations (19 percent), military occupations (15 and sales and related occupations (11 percent). percent), and production occu Fatal injuries in the leisure pations (14 percent).

There were 36 states that had and hospitality sector were more fatal workplace injuries in up 32 percent (225 to 298) and reached an all-time high in 2016 than 2015, while 13 states and the District of Columbia 2016. This was largely due to a had fewer. Wyoming had the 40 percent increase in the food same number as in 2015. services and drinking places

Workplace violence injuries increased by 23 percent, making it the second most common cause of workplace fatality.

JANUARY 8, 2018 INSURANCE JOURNAL | NATIONAL | 15

NATIONAL | Special Report | Employment Practices Liability

16 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

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By Andrea Wells

F

rom Hollywood mogul Harvey Weinstein to famed television journalist Matt Lauer, to thousands of others speaking out through the social media movement #MeToo, sexual harassment allegations from individuals who claim to have been victimized by their employers and colleagues continue to surface.

The insurance industry is expecting a wave of employment practices liability insurance (EPLI) claims to roll in following the recent storm of sexual harassment allegations in entertainment, media, hospitality and other industries.

The current period represents a tipping point, according to Patrick Mitchell, management liability product head at Hiscox.

“In the past, employees feared retaliation and may not have reported harassment,” he said. Recent attention is likely to ease those fears. “So while retaliation is definitely possible, it appears now employees have the courage to report regardless of the consequences.”

Insurance experts say no industry or company is immune. While the initial wave of EPLI claims is likely to target high profile and large companies, there is the potential for a trickle-down effect on other industries, experts say.

“We’ve seen a lot of headlines for particular industries (entertainment/media), but the truth is, sexual harassment allegations can happen in any industry and in companies of all sizes,” Mitchell said.

“I think we’re seeing the tip of the iceberg,” agrees Jared Zola, a partner and insurance recovery expert at the law firm Blank Rome. While today it’s high-profile alleged bad actors being targeted who are very public figures in politics, media and entertainment, he thinks there will soon be “a flood of claims from employees or former employees at companies in every industry of every size.”

The likelihood of an employer being hit by a discrimination charge of any kind is higher than employers may realize. In 2016, U.S. companies had at least a 10.5 percent chance of having an employment INSURANCEJOURNAL.COM

charge filed against them, according to The Hiscox Guide to Employment Lawsuits, which was compiled using the latest data on employment charge activity from the Equal Employment Opportunity Commission (EEOC) and its state counterparts. Employment charges are often the first step toward employment suits.

Employment discrimination charges can be based on race, sex, disability, age, national origin, religion, color and others in addition to sexual harassment. Most employers with at least 15 employees are covered by EEOC laws.

‘This is not a situation with an insurance company saying, ‘We never planned on covering that.’ They did plan on it. They wrote the policies to cover it.’

EEOC data from 2016 show that retaliation is the most common discrimination charge filed and is named in nearly half of all charges (45.9 percent). However, in many cases, more than one category can be cited in an EEOC discrimination filing.

Watershed Moment

Rick Betterley, president of Betterley Risk Consultants Inc., and author of The Betterley Report, believes this period will be seen as a watershed moment similar to what happened in 1991 when Anita Hill accused Clarence Thomas, President George H.W. Bush’s Supreme Court nominee, of sexual harassment when the two worked together. Betterley sees this moment as a significant turning point not only in U.S. employment, but also in employment-related insurance.

While the recent surge in sexual harassment allegations has not yet translated into claims, it’s most likely only a matter of time before the EPLI claims start arriving. When they do, there is most likely to be coverage for those employers that have purchased EPLI coverage.

“This is not a situation with an insurance company saying, ‘We never planned on covering that.’ They did plan on it. They wrote the policies to cover it. EPLI grew out of the Clarence Thomas hearings and Anita Hill’s testimony. That’s a big part of where this coverage started,” Betterley said.

At the same time, he believes the insurance industry can handle the claims. “It could be a big deal for the line, but I don’t see it as wrecking the line either,” he said.

EPLI has been a mature market for many years, with growth averaging 4.4 percent over the past four years in the United States, according to Betterley’s recently released Employment Practices Liability Insurance Market Survey 2017.

Potential Claims

Betterley foresees most claims activity stemming from the recent storm in sexual harassment allegations targeted at larger and/or prominent employers and suggests they may even be limited to only higher risk industries.

“There are some industries where you would say that the underwriters are already looking more carefully, thanks to the last couple of months, than maybe they would have been before. Entertainment’s one of them,” he said.

Underwriters are also likely to closely watch companies whose leaders have a more visible public profile.

“Let’s say it is an investment banking firm (with a high-profile CEO). … As an underwriter, they’re already paying closer attention to those industries or scenarios … the famous person or the entertainment person, but now they’re paying even closer attention,” Betterley said.

However, the insurance effects will not be restricted to industries being more closely scrutinized by underwriters. The problem of sexual harassment will even-

continued on page 18

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NATIONAL | Special Report | Employment Practices Liability continued from page 17

tually spill into all industries, according to Betterley, because employees who believe they’ve been harmed are now less likely to remain silent than before the current outpouring.

“If they brought a case against the employer, they perhaps didn’t have a great lawyer, maybe they settled for $25,000, or didn’t really push the allegation at all,” Betterley said. “Now, they’re reading about people getting millions and millions of dollars (in settlements). They’re saying, ‘I’m not going to settle as easily as I might have before.’”

Betterley compares it to what the insurance industry saw in the medical liability market years ago.

“I remember having a client say, ‘Our typical med-mal claim used to be $800,000, but people have been reading about lottery winners and CEOs with tens or hundreds of millions of dollars of compensation.’ All of a sudden, $800,000 is ‘paltry.’ Well, no, it’s not, but if you believe it is, then you won’t settle as quickly,” he said. “I think the same thing will happen with EPLI.”

Coverage

The industry will feel the impact because there’s not much dispute that sexual harassment is covered as a wrongful practice under an EPLI policy.

“The policy provides coverage for a wrongful employment practice, which is a defined term. One of the prongs of what a wrongful employment practice is, is sexual harassment,” Zola said.

The definition of sexual harassment under an EPLI policy can be some “actual or alleged sexual advance that is unwel-

comed, that has a purpose of creating an intimidating or hostile work environment,” Zola explained. This can encompass a broad set of circumstances, however, where there’s unwelcomed attention brought on an employee by another individual at the company that creates an uncomfortable work environment. That circumstance is probably enough to trigger coverage, according to Zola.

‘The EPLI contract is very straightforward in covering claims of sexual harassment so there’s no coverage issue.’

Joe Kelly, vice president and employment practices liability practice leader at Sompo International, a Bermuda-based global specialty insurer and reinsurer, agrees that there’s no question that sexual harassment is covered under EPLI policies.

“The EPLI contract is very straightforward in covering claims of sexual harassment so there’s no coverage issue,” Kelly said.

However, one issue that could affect the recent wave of sexual harassment allegations is the statute of limitations for coverage to be triggered.

The statute of limitations for filing a discrimination charge with the EEOC is 180 days. The statute does vary by state so it’s possible there’s a window of opportunity to file in a certain state beyond the 180 days, Kelly stated.

Some claimants are choosing to file under RICO (Racketeer Influenced and Corrupt Organizations Act), which does not expressly establish a period of limitations.

“We saw this with some of the Weinstein claims and now there’s a group of women bringing a claim under RICO,” he said.

“That’s one reason why they might bring charges under RICO.” Another reason claims might be filed under RICO, according to Kelly, is that damages can be much higher.

Sexual harassment coverage is commonly broad, with no sublimit for sexual harassment, according to Marie-France Gelot, senior vice president of the insurance and claims counsel at Lockton.

Coverage under an EPLI policy goes to both employees, and in most policies today, also for third parties including clients, customers and vendors. “It’s not just employees, it’s a vendor of the company, a customer of the company.” Any party – employee, customer, vendor – alleging they are sexually harassed by someone from the insured employer can trigger coverage, she said.

Some policies provide broader coverage than others, so it’s important for employers and their agents and brokers to review all terms and conditions, she said.

For example, many EPLI policies have bodily injury exclusions, but some don’t, notes Gelot. “The bodily injury exclusion in a sexual harassment conversation would draw a very hard line if harassment leads to something like rape,” she said. “But I’ve had cases where you had a rape by an employee that the EPLI insurer has had to cover despite the fact that the company didn’t want the carrier to cover it. The carrier had to cover it because there was no bodily injury exclusion, and the coverage was so broad.”

Another example, according to Zola, is that coverage could possibly be voided if certain individuals in a workplace knew

Source: 2017 Hiscox Guide to Employee Lawsuits. All information was referenced from www.eeoc.gov, fiscal year 2016.

18 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

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about the alleged harassment.

“The real question is going to be who does the policy identify as being a person whose knowledge is sufficient to exclude coverage,” Zola said. “The language is different on policies, but some typical language is fact, circumstance, situation or event that reasonably would be regarded as a basis for a claim. That language being imprecise, I think, is fertile grounds for factual disputes as to when a company or officers or directors of a company should have known that a claim was likely based on the knowledge they had at the time.”

Zola says this can be seen in the media allegations that some “bad actors” had certain reputations for activities that would be considered sexual harassment. “The question is who at the company knew about that reputation and whether rumor and reputation are sufficient to exclude a claim based on the policy language,” Zola said.

The size of the claim makes a difference when it comes to knowledge-based exclusions, he added.

“The claims that I’ve handled in the past involving sexual harassment allegations, there was no media spotlight on them, and so, there wasn’t this deep-dig by the media and by the public into what people at the company knew or didn’t know about the allegations,” Zola said. Even so, an employer’s knowledge of harassment by an alleged harasser is a defense that the insurance companies will pursue through discovery rather than in the media, he said.

Other lines of insurance, including directors and officers (D&O), could potentially be involved as well.

“The idea with D&O policies is, especially for public companies, if there are widespread allegations, that the directors or officers failed to protect their fiduciary obligations to the shareholders by allowing a culture of impropriety,” Zola said.

When allegations are made, stock prices may drop, which can lead to “very serious derivative suits” that could be covered by D&O insurance.

Zola says general liability could be another line to come into play for allegations of bodily injury in certain states.

According to Zola, in states like New York, INSURANCEJOURNAL.COM

sexual harassment can rise to a level of emotional distress even without any physical touching. “This is considered bodily injury, as that word is used in a general liability policy. In all states, physical touching that leads to damages is considered bodily injury,” he said. “It depends on the allegations by the claimant, but it could implicate both of those lines as well.”

In Kelly’s view, general liability would have excluded this type of coverage, but the D&O coverage could play a role as it can in cyber.

“We saw this with cyber where there were cyber breaches but then there were follow-on derivative suits brought on behalf of the company against the board of directors for failing to put the proper controls in place to prevent a breach,” said Sompo International’s Kelly. “You could have the exact same type of derivative suit for failing to supervise the CEO of the company who is a known harasser or failing to remove that person if there was a known event that occurred, and the board didn’t act appropriately.”

Time to Review

Lockton’s Gelot said this is a time for employers and agents/brokers to review policy wording carefully.

“You have some policies today that have specific wording meant to narrow the scope of covered sexual harassment – and those policies would drive a clear distinction between behavior that is insurable versus behavior that is so egregious that to insure it would be offensive or outright against public policy,” she said. That might include wording in some policies that the policy will cover “everything except harassment that is deemed licentious or immoral or sexual abuse or exploitation or abuse of child.” Not all policies contain such wording, she said.

EPLI Going Forward

The disturbing recent spate of workplace sexual harassment complaints could have positive effects for the industry and the EPLI market as well, experts say.

“Anytime there’s a major event in any line of insurance, it always raises aware-

ness,” said Kelly. “Major senior level execs and the boards are even being called out on what they are doing (to prevent such behavior) and they are asking what kind of EPLI coverage do we have?”

These executives better make sure that they not only have EPLI coverage, but also that their limits are adequate, Kelly said, noting that this type of questioning is going to drive more demand in the market and potentially higher limits.

In 2016, gross written premium for EPLI was $2.1 billion, according to MarketStance, and it estimates a possible bump to $2.3 billion or more for 2017-2018.

There are many smaller employers that still do not purchase the coverage. Roughly seven out of 10 businesses don’t carry EPLI, according to TrustedChoice.com.

But just how market growth will be affected following the attention on sexual harassment in the workplace remains to be seen, Betterley said. Small commercial accounts, while forecast to grow most rapidly over the next year, have the lowest take-up rates for EPLI coverage, he said.

“I think it (the recent attention) will have an impact,” Betterley said. “I don’t know that I’ve seen it just yet. One impact perhaps is that if you’ve got a potential insured that has not been buying EPLI, now they will want to buy.”

Those employers that haven’t purchased the coverage might get a tougher reception from insurance markets, he added. “The underwriter is going to be really interested in the why now? A good answer, I guess, would be, ‘Have you read the newspaper?’” While insurers may be glad to gain more insureds, they may be more cautious about taking on employers that until now haven’t been buying coverage, he said.

Hiscox’s Mitchell says it’s difficult to predict how EPLI insurers will react to a rise in sexual harassment claims in 2018, but it’s likely to be a mix of changes in premium rates, retentions and restructuring coverage. For now, one thing is certain. “It’s something all insurance companies will be Share this monitoring closely,” he said.

article with a colleague.

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NATIONAL | Closer Look | Catastrophe Coverage

Experts See Expanding Role for Parametric Insurance, Including for U.S. Disasters

By Denise Johnson

C

atastrophic losses this year due to extreme weather events have led to a growing interest in parametric insurance in the U.S., according to industry experts.

Parametric coverage is also gaining traction as hazard modeling continues to improve, weather stations more accurately gauge wind speeds and satellites snap images that reveal the extent of flood damage.

Some see the custom coverage having a future role in insuring floods, business interruption and other specific risks.

Parametric insurance covers

a set event, like an earthquake of a certain magnitude or a hurricane that unleashes winds over a certain speed.

Payment occurs if the parameters surrounding the event are triggered. The payment itself is also an agreed upon figure prior to the event. Thus, there is no need for claims adjustment after the event occurs.

Multinational insurer AXA Corporate describes its parametrics department as one that “uses new types of information and big data processing methods to build custom-made insurance covers against unexpected weather events.”

According to Stephen Moss, director for RMS Capital Market

20 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

Solutions, interest around parametrics is focused primarily on large-scale commercial contracts. “These structures work well where there are relatively highly concentrated assets in the regions of high and specific risk,” he said.

The specific risks parametric coverage targets are generally specialty coverages.

“In traditional policies, we see these risks being dealt with through endorsements. Perils such as hurricane endorsements, earthquake endorsements, flood endorsements, etc. These don’t generally form part of a bulk, standard policy, but are incredibly important where we see that overlay of

high hazard and high exposure,” Moss said.

Parametric products aren’t only used for limit protection, they are also used for deductible protection and to help people collectively proxy a deductible buyback, Moss explained.

“We are seeing growing interest in regions like Florida, where we have the high risk component, but also because of the significant deductibles associated with traditional hurricane policies,” he said.

Customization is key in constructing a parametric policy to ensure there isn’t a disparity between the loss incurred and the payout provided by the policy, Moss said.

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a better understanding of its business interruption risk if insuring it under a parametric policy. That’s because it takes months to assess a business income loss under conventional insurance.

He also sees the potential for parametric insurance to reconfigure flood insurance, and he expects to see a mix of parametric and conventional coverage in the future.

Structuring a Policy

“The complexity and structuring of parametric policies requires an in-depth understanding of the risk itself,” Moss said. “Therefore, if the prospective policyholder either has that understanding of the risk themselves, or can work alongside someone who can bring that insight, then they can truly tailor the structure to specifically address needs.”

Nigel Brook, partner at global law firm Clyde & Co., agrees there is growing interest in parametric insurance both in the U.S. and in Europe.

According to Brook, some lines of insurance could benefit from parametric coverage. For example, an insurer might gain INSURANCEJOURNAL.COM

A parametric policy is more about inclusion than exclusions, Moss and Brook agree.

“Parametric structures are generally structured in a way which defines the inclusions rather than having a base policy and then specifying exclusions,” Moss said. “They are explicit in how they determine what risks they cover. It’s this explicit nature that means that it is simple to say, ‘this policy will cover a specified risk,’ ‘will trigger when a specified parameter level is reached’ and ‘it will pay out a specified amount when that criteria is met.’”

There is no need to refer to the actual exposure, Moss said.

The policy doesn’t care what the asset at risk is.

“All a parametric policy cares about is how hard does the wind blow or how much does the ground shake. That’s what defines whether there is a payout from the policy or not,” Moss said.

Defining the parameters is paramount, as is having explicit definitions on who decides how quickly or how hard the wind blows. Payment under the policy occurs when an agreed upon entity, such as the National Oceanic and Atmospheric Administration

(NOAA), issues a measurement on wind speed after an event.

The policy is time-bound after an event to allow the insurer to obtain the specific information.

“What is required to determine the parameters is a party who’s independent, well recognized and well respected — nationally or internationally.

In the U.S., for hurricanes, we generally see NOAA taking this role, or the U.S. Geological Survey for earthquakes,” Moss said.

Parametric insurance covers a set event, like an earthquake of a certain magnitude or a hurricane that unleashes winds over a certain speed.

Moss aid independence is essential as it removes the subjectivity associated with payouts and removes concerns around moral hazard.

Removing subjectivity allows clarity over who makes that definition on the parameter and what time period is acceptable before a final determination is made. “This provides speed of payment, clarity of payment value and can remove the potential for legal challenges caused when the causes of loss become difficult to separate,” Moss said.

Benefits

Both Brook and Moss contend that the key upside of parametric insurance over conventional indemnity insurance is the fact that no loss assessment is necessary, leading to a speedier loss payment.

“The whole process of pay-

ment is much faster because that determination, once it’s made, then you can just make a payout,” Moss said.

In addition, parametric coverage benefits insurers by taking the burden of assessing a loss off insurance adjusters, Moss said.

Another benefit, according to both experts, is that parametric insurance may be cheaper than conventional policies.

Still another advantage is the flexibility of this kind of policy, said Moss, where an event could be insured for just one day or for much longer than a conventional year-long policy.

Moss said the policy terms are dependent upon what the policyholder wants to achieve.

“How soon does the policy holder need the money after a loss? If we look at some of the parametric contracts out there, some of them have been paid out in three months and others within 14 days,” Moss explained. “What matters is the goal. Are they trying to achieve an immediate capital injection after an event so that they can rebuild their manufacturing plant or if the immediate capital isn’t that important, they’re happy to wait 90 days or even a year? I think it comes down to structuring the policy in the appropriate way to fit the need for which that policyholder is buying that protection.”

Another advantage to procuring parametric insurance is that it isn’t necessary to procure reinsurance, an insured could purchase a catastrophe bond instead.

Downsides

Experts admit there are a few downsides to this type

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NATIONAL | Closer Look | Catastrophe Coverage continued from page 21 of coverage. One downside is the basis risk, the difference between the amount that is lost and the amount that is paid out, Moss explained.

Will the policyholder get the correct amount of money?

“Unexpected basis risk is something which we always try and avoid when we’re structuring these contracts.

But, often, unexpected basis risk can manifest itself in traditional insurance policies as well, whereby people expect to be paid, but don’t because they’ve got an exclusion that they hadn’t incorporated into their thinking around that policy.” Moss said.

Another possibility is the risk might not be triggered at all.

Yet another possibility, according to Brook, is if an error is made in the description of the property insured, as in the case of an ARC model in which the policyholder identified the wrong crop to be protected.

African Risk Capacity (ARC) parametric insurance is offered through the government to cover countries in Africa for drought.

“Structural diligence is vital,” Moss said. “When defining a structure, we sit down and clearly define the needs of the contract. If it is trying to proxy a traditional insurance contract and match actual losses, it would need to be structured so as to bring basis risk down as low as possible.”

According to Conor Meenan,

senior consultant in RMS’ Capital and Adjacent Markets team, there are built-in redundancies within the contracts.

“We talk about the primary reporting agencies. Let’s say if the contract is based off surge heights, then NOAA may be the primary reporting agency, but then there are secondary and tertiary, and even fourth backups for that system. You don’t want the insurance to fail if the surge station goes down

during the event. There are redundancies built into these parametric contracts,” Meenan explained.

Moss emphasized the need to have more than one independent arbiter.

“You need to have fall-backs.

If a station goes down, you need to have another measurement to fall back upon,” Moss said.

“Part of the game when trying to design one of these contracts is to think about all the what-ifs and define contingencies in case of failure.”

22 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

Policy Differences

According to Moss and Brook, a parametric policy looks physically different than a traditional policy.

Policies will range from a few pages to several. For example, ARC policies, said Brook, read and look like a doctoral thesis. They contain grid points along with other scientific data.

There’s also no need for oneyear term policies.

“We actually have seen some parametric products that only provide protection for a six-month period around the hurricane season. There’s no real need to define it as a one-year term, particularly if the cost of implementing these is significantly lower,” Moss said. “Part of the reason for having a one-year traditional policy is you need to update your exposure. You don’t need to do that in a parametric policy because the assets which underlie that just don’t affect the payout. As such, we can remove that temporal limitations from the contract.”

‘All a parametric policy cares about is how hard does the wind blow or how much does the ground shake. That’s what defines whether there is a payout from the policy or not.’

Parametric policies are currently being offered by insur-

ance-linked securities specialist funds, investment banks and some larger insurers.

“There’s a mix out there of who is actually going out and providing these kinds of protections,” Moss said.

“We are seeing a whole raft of different investors, funds, insurance companies and others throughout the insurance value chain starting to get to grips with parametric contracts and starting to provide them as options to their more advanced clients.”

‘We are seeing a whole raft of different investors, funds, insurance companies and others throughout the insurance value chain starting to get to grips with parametric contracts and starting to provide them as options to their more advanced clients.’

Moss said there is support for this kind of product from the alternative investment capital side, as well.

“Those kinds of investors are much keener to get answers fast,” Moss said. “They are in the game to take certain risks and accept those risks. In the end, they just want to know whether they are going to take a loss on a contract or whether they should be thinking about redeploying their capital.”

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MyNewMarkets | NATIONAL

Excess Liability Residential Artisan Contractors

Market Detail: Risk Transfer Partners (www.risktransferpartners.com) offers a monoline excess liability program for residential artisan contractors. No state restrictions and no minimum premium.

Types of accounts that can be considered include: roofers, HVAC, drywall, electrical work, painting, plumbing, and artisan contractors that sub out all work. General contractors not accepted.

Available limits: Minimum $1 million, maximum $5 million Carrier: Unable to disclose, non-admitted States: All states Contact: Customer service at 469-310-9159

Vacant Property - Residential/ Commercial

Market Detail: Aberdeen Insurance Group (www.aberdeeninsgrp.com) has property & general liability available for vacant residential and commercial property. The program is for properties valued up to $3 million. Residential and INSURANCEJOURNAL.COM

commercial (basic or special) forms are available with low minimum premiums. This is a high commission program with deductibles from $1,000 to $10,000. One, Three, six, nine and 12-month policies with GL available up to $1 million and $2 million limits. Builders risk also available. Fifteen percent commission paid.

Available limits: Minimum $50,000, maximum $3.5 million Carrier: Unable to disclose, non-admitted States: Md., N.J., and Pa. Contact: Tom Downie at 800845-4150 or e-mail: aberdeeninsgrp@hotmail.com

Vendor Management Services

Market Detail: World Wide Specialty Programs, Inc. (www. wwspi.com) offers auto commercial-standard, blanket additional insureds, blanket waivers, care/custody/control, cyber liability, E&O, employee benefits, EPLI, fidelity bonds, GL, identity theft, misc. professional liability, non-owner & hired auto, professional liability, property, sexual misconduct liability, technology E&O, umbrella, and workers’ comp.

Available limits: As needed Carrier: Unable to disclose, admitted

States: All states Contact: Dorothy Taylor at

866-927-2004, ext. 114

Non-Franchised Used Car Dealers Market Detail: TMR General

Agency (www.tmrins.net) is a managing general agency based in Dallas providing garage liability and/or dealer open lot coverage for non-franchised used car dealerships.

Motor truck cargo and physical damage coverage for trucking operations is also available.

Coverages include garage liability, dealer open lot, garagekeepers legal liability, physical damage and cargo, and contractors equipment.

Available limits: Minimum $100,000, maximum $1 million Carrier: Unable to disclose, non-admitted States: Ariz., and Texas Contact: Customer service at 346-413-0601

Pizza Delivery Insurance / Deli Delivery Insurance

Market Detail: AFC Insurance’s (www.afcins.com) pizza

delivery insurance program is designed for pizza restaurants with or without delivery services. A broad selection of coverages are available to insureds, including liability for non-owned auto (some restrictions may apply). The program offers a business owners package (BOP), employee benefits, hired & non-owned auto, owned auto, EPLI and payment card security extra expense coverage.

Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Dina Tristani at 877-456-5323 or e-mail: dina. tristani@afcins.com

Bid Bonds

Market Detail: Pro Surety Bond (www.prosuretybond. com) has special programs for contractors who need bid and performance bonds. Special programs also available to help those with credit problems get the bonds they need. In-house underwriting authority on many bonds and fast turnaround time.

Available limits: As needed Carrier: Unable to disclose States: All states Contact: Customer service at 800-314-7003 This section brought to you by Insurance Journal’s sister website: www.mynewmarkets.com

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JANUARY 8, 2018 INSURANCE JOURNAL | NATIONAL | 23

Idea Exchange

Agency Financing

Insurance Agency Financing Options

By Robert J. Pettinicchi

Y

es, maybe and no. While these responses might sound like loan decisions you might expect to hear from a lender, they represent my response to the often-asked question of where to seek financing for loans to facilitate an agency acquisition or perpetuation.

I will start inversely with the “no” response. Avoid the temptation of obtaining a loan directly from an insurance carrier you represent. While their offer of financing may be appealing due to a favorable interest rate and long repayment term, this option is fraught with both ethical and business issues. Interestingly, I have observed a resurgence of carriers offering such financing. All cases are similar — the carrier is more than willing to provide financing to your agency provided the level of business you currently produce with them is maintained.

There is an obvious problem here: As an independent agent, you are looking out for the best interest of your client and providing the best service you can

give them along with choice of carriers. This can compromise your ability to truly be independent. It is a question best left to ethics scholars, but looks untrustworthy to me.

Further, there is no assurance that the particular carrier will have the same products, pricing and risk appetite to best serve your clients through the repayment of the loan, which may run over several years.

From a business perspective, you will be giving up your most valuable asset — ownership of the client relationship as security for the loan — to the carrier. You also close out any opportunities you may have to sell or merge your business because that same carrier may not provide consent unless even higher levels of production are promised. You may be restricted from rolling a book to a carrier that may provide better coverage and rate for your clients. You may give up opportunities for contingencies.

business and prefer to compete unfairly, placing a thumb on the scale to protect turf.

The better carriers that are stronger and more focused on the value and importance of the independent distribution channel have not been actively providing direct financing.

However, they are willing to provide advice and counsel for acquisitions and perpetuations by referring you to specialty

Avoid the temptation of obtaining a loan directly from an insurance carrier you represent.

At the very least, keep in mind that the carrier will be taking the loan payment directly out of your direct bill commission payments, causing a nightmare for any of you who like to reconcile these receipts.

For the most part, the recent financing offerings have been from the carriers that are feeling less certain about their ability to compete for your client’s

24 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

INSURANCEJOURNAL.COM

insurance lenders and reputable consultants.

Small Business Administration (SBA)

The “maybe” response is for financing guaranteed by the Small Business Administration.

The SBA plays a valuable role in expanding access to finance for businesses. Their charge is to help make credit available when a bank is uncomfortable about an aspect of the loan, often the collateral position.

For your local community bank, this likely means that the banker does not feel that your years of hard work have generated something of lendable value and so needs the guarantee of the SBA to make the loan. While SBA financing is generally longer term (up to 10 years), the rules attached to the program are quite rigid and can’t easily accommodate incomplete ownership transitions, rendering them not helpful for many perpetuations.

Also, the longer term and rules potentially make it difficult to build equity should another opportunity come along or if you need to make a change in the loan such as the release of a retiring owner.

Anyone can afford a Lexus if they can get 10-year financing — but hope you don’t need to sell it in two years because you will be upside down.

Another thing to consider is the provider of the SBA loan.

This financing program has been a great source of income to lenders because of the opportunity to sell the guaranteed loan to investors. As a result, these lenders may structure the loan with a particularly high variable rate to maximize their profit on sale.

INSURANCEJOURNAL.COM

For the most part, the recent financing offerings have been from the carriers that are feeling less certain about their ability to compete for your client’s business and prefer to compete unfairly, placing a thumb on the scale to protect turf.

While the prospect of a long term may have appeal and the SBA may make a deal work that otherwise might not be feasible, I suggest you seek a lender that utilizes the SBA program as a financing option, but not the only option offered.

The “SBA-only” option is the norm for the largest players in this field. You are likely better

served by your community bank if this is the only way the loan can work for you.

Agency Finance Specialists

The “yes” response is for the very small group of lenders that specialize in agency finance. These lenders understand the value you have created in your book of business and can be flexible, making a loan to your agency with your book of business as acceptable security. These lenders will help you compete with bigger players by providing capital for acquisitions and assisting you by keeping your options for growth and value building wide open.

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IJMAG.COM/108FI Pettinicchi is chief lending officer of InsurBanc. Email: rpettinicchi@ insurbanc.com.

JANUARY 8, 2018 INSURANCE JOURNAL | NATIONAL | 25

NATIONAL | Special Report

2018

INSURANCE INDUSTRY MEETINGS & CONVENTIONS DIRECTORY

Welcome to Insurance Journal's 2018 Insurance Industry Meetings and Conventions Directory. The information in this directory is taken from a larger database containing additional information on these and other meetings, including industy-related seminars, conferences and workshops.

The online Insurance Journal events database can be found at: www.InsuranceJournal.com/events Meeting planners are invited to add new meetings, conventions and seminars to the databse free of charge, all year long.

CIWA Industry Days Jan 8-10 Hilton La Jolla Torrey Pines La Jolla, Calif.

California Insurance Wholesalers Association (CIWA) Contact: Thomas Shovlin, thomas@ciwa.net The 19th Annual Windstorm Insurance Conference Jan 15-19 Rosen Shingle Creek in Orlando Orlando, Fla. Windstorm Insurance Network Inc. Contact: Susan Coone, meetingplanner@windnetwork.com Motor Carrier I and II Jan 16-19 Residence Inn Orlando Airport Orlando, Fla. Motor Carrier Insurance Education Foundation Contact: Beth Medina, trs@ibci.net 2018 Big "I" Winter Meeting Jan 17-21 The Westin Mission Hills Golf Resort & Spa Rancho Mirage, Calif.

Independent Insurance Agents & Brokers of America

KAIA Rural & Small Agents Conference Jan 23-25 Atrium Hotel Hutchinson, Kan. Kansas Association of Insurance Agents

MCIEF Advanced Underwriting Jan 23-24 Residence Inn Orlando Airport Orlando, Fla. Motor Carrier Ins. Education Foundation Contact: Beth Medina, trs@ibci.net PIANY's Metropolitan Regional Awareness Program Jan 25 The Roosevelt Hotel New York, N.Y.

Professional Insurance Agents of New York State Inc. Contact: Education and Conference Department, conferences@pia.org IIAT's 55th Annual Joe Vincent Management Seminar Jan 28-30 Renaissance Austin Hotel Austin, Texas Independent Insurance Agents of Texas

2018 PLUS D&O Symposium Jan 31-Feb 1 Marriott Marquis Hotel New York City, N.Y. PLUS Contact: Lance Helgerson, lhelgerson@plusweb.org InsurePath Jan 31-Feb 2 DoubleTree by Hilton Hotel Fresno Convention Center Fresno, Calif.

IIABCaL

WSIA Surplus Lines Management Feb 5-8 Emory University Goizueta School of Business Atlanta, GA Contact: WSIA, debbie@wsia.org 2018 NAMIC Claims Conference Feb 6-8 Hilton Orlando - Disney Springs Area Lake Buena Vista, Fla. NAMIC Contact: Amy Thornburg, athornburg@namic.org IIAG YAC Sales & Leadership Conference Feb 7-8 Classic Center - Hyatt Place Athens, Ga. Independent Insurance Agents of Georgia

IIAND 2nd Capitol City Conference Feb 7-8 Ramkota Hotel & Conference Center Bismarck, N.D. Independent Insurance Agents of N.D.

26 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

10th Annual NIIA Tradeshow Feb 8 Peppermill Resort Spa Casino Reno, Nev. Nevada Independent Insurance Agents Association

MCIEF Motor Carrier I and II Feb 12-15 Residence Inn Orlando Airport Orlando, Fla. Motor Carrier Insurance Education Foundation Contact: Beth Medina, trs@ibci.net MAIA 2018 Annual Convention Feb 19-21 Amway Grand Plaza Grand Rapids, Mich.

Michigan Association of Insurance Agents

IIAN 2018 Winter Conference Feb 20-21 Holiday Inn Kearney, Neb. Independent Insurance Agents of Nebraska

Houston Insurance Day 2018 Feb 21 Houston Marriott Westchase Houston, Texas Independent Insurance Agents of Houston

2018 NAMIC Commercial Lines Seminar Feb 28-Mar 2 Renaissance Chicago Downtown Hotel Chicago, Ill. NAMIC Contact: Crista Hassett, chassett@namic.org WSIA Automation Conference 2018 Mar 4-7 Bally's Las Vegas Las Vegas, Nev. Contact: WSIA, debbie@wsia.org 2018 SIR Spring Research Workshops Summit Mar 5-7 Verisk Analytics Jersey City, N.J. Society of Insurance Research (SIR) INSURANCEJOURNAL.COM

Contact: Erica Linc, erica.linc@sirnet.org 2018 Ohio Joint Insurance Fraud Seminar Mar 7 James G. Jackson Training Academy Columbus, Ohio National Society of Professional Insurance Investigators Contact: Mary Beth Robinson, nspii@nspii.com 2018 Insurance Council of Texas Workers' Compesation Seminar Mar 7 TCEA Conference Center Austin, Texas Insurance Council of Texas Contact: Cynthia Haywood, chaywood@insurancecouncil.org PIA of Connecticut Annual Convention Mar 8-9 Foxwoods Resort Casino Mashantucket, Conn.

Professional Ins. Agents of Connecticut Contact: PIA Education and Conference Department, conferences@pia.org 3rd Annual Northern California Insurance Professionals Ski Day Charity Mar 8-9 Bear Valley Ski Area Bear Valley, Calif.

Hull & Company Northern California Contact: Jeffrey Case, jeffrey.case@hullstk.com MCIEF Motor Carrier I and II Mar 12-15 Residence Inn Orlando Airport Orlando, Fla. Motor Carrier Insurance Education Foundation Contact: Beth Medina, trs@ibci.net ACT Meeting - March, 2018 Mar 14-15 Westin San Diego Gaslamp Quarter San Diego, Calif.

Agents Council for Technology (ACT) Contact: Ron Berg, ACT@iiaba.net Annual Insurance Public Policy Summit Mar 14 Ronald Reagan Building and Trade Center Washington, D.C. Networks Financial Institute Contact: Ray Thomas, raymond.thomas@indstate.edu 2018 PLUS Healthcare/Medical PL Symposium Mar 20-21 Loews Chicago Hotel

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San Antonio, Texas Federation of Insurance Women of Texas

MCIEF Motor Carrier I and II Apr 16-19 Residence Inn Orlando Airport Orlando, Fla. Motor Carrier Insurance Education Foundation Contact: Beth Medina, trs@ibci.net

Chicago, Ill. PLUS Contact: Lance Helgerson, lhelgerson@plusweb.org LSLA 2018 Annual Convention Mar 21-Feb 23 Bourbon Orleans Hotel New Orleans, La. Louisiana Surplus Lines Association

IAIP Region III Annual Conference Mar 22-24 Crowne Plaza Hotel Charleston, Tenn.

Charleston Association of Insurance Professionals Contact: Paula Stubblefield, pstubblefield@ctlowndes.com

The IAIABC Forum 2018 Apr 16-19 Westin Atlanta Buckhead Atlanta, Ga. IAIABC Contact: Jessica Faust, jfaust@iaiabc.org

MAIA Small Agency Conference Mar 22-23 Holiday Inn Columbia, Mo. Missouri Association of Insurance Agents

Race to the CE (Sea) Mar 22-23 Sheraton Oceanfront Virginia Beach, Va. PIA of VA & DC Contact: Sheryl Chasse, sheryl@piavadc.com MIAA Annual Convention Apr 9-10 DoubleTree Hotel South Portland, Maine Maine Insurance Agents Association

International Cyber Risk Management Conference Apr 11-12 Metro Toronto Convention Centre Toronto MSA Research Inc. Contact: Kimberly McCallum, kim.mccallum@icrmc.com WSIA 2018 Spring Summit Apr 11-14 JW Marriott Phoenix Desert Ridge Resort & Spa Phoenix, Ariz.

WSIA Buffalo I-Day Apr 12 Buffalo Niagara Convention Center Buffalo, N.Y. Insurance Club of Buffalo FIWT 2018 Leadership & Education Mid Year Expo Apr 13-14 Hilton San Antonio Airport

2018 Big "I" Legislative Conference Apr 18-20 Grand Hyatt Washington Washington, D.C. Independent Insurance Agents & Brokers of America

2018 CPCU Society Leadership Summit Apr 19-21 Hilton Baltimore Baltimore, Md. The Institutes CPCU Society

2018 NAMIC Personal Lines Seminar Apr 23-25 Renaissance Chicago Downtown Hotel Chicago, Ill. NAMIC Contact: Christy Hall, chall@namic.org 2018 Spring Governance Meetings Apr 23-26 Hilton Crystal City Arlington, Va. National Association of Professional Insurance Agents Contact: Roxanne Johnson, roxannejo@pianet.org 2018 Federal Legislative Summit Apr 24-25 Hilton Crystal City Arlington, Va. National Association of Professional Insurance Agents Contact: Roxanne Johnson, roxannejo@pianet.org Albany I-Day Apr 25 Albany Capital Center Albany, N.Y. Independent Insurance Agents of the Capital Region, Northeastern NY CPCU

continued on page 28

JANUARY 8, 2018 INSURANCE JOURNAL | NATIONAL | 27

NATIONAL | Special Report continued from page 27 Society Chapter, Insurance Professionals of Albany, Albany Claims Association, Albany Field Club

Long Island Regional Awareness Program Apr 25 Crest Hollow Country Club Woodbury, N.Y. Professional Insurance Agents of New York State Inc. Contact: PIA Education and Conference Department, conferences@pia.org 2018 PLUS Cyber Liability Symposium May 2-4 Marriott Marquis Hotel Chicago, Ill. PLUS Contact: Lance Helgerson, lhelgerson@plusweb.org 2018 Blue Ribbon Conference May 6-10 Mauna Lani Bay Hotel & Bungalows Kohala Coast, Hawaii IIABCaL

2018 TMPAA Mid Year Meeting May 7-9 Baltimore Hilton Baltimore, Md. TMPAA Contact: Monica Elischer, monica.elischer@targetmkts.com PIA OR/ID Expo May 7-8 Red Lion Jantzen Beach Portland, Ore. Professional Insurance Agents Oregon/ Idaho Contact: Kim Legato, kimlegato@piawest.com IIAW 2018 Annual Convention May 8-9 Madison Marriott West Madison, Wisc.

Independent Insurance Agents of Wisconsin

2018 Annual Conference & Trade Show May 8-9 Embassy Suites Norman, Okla.

Independent Ins. Agents of Oklahoma MCIEF Motor Carrier I and II May 15-18 Gainey Suites Hotel Scottsdale, Ariz.

Motor Carrier Ins. Education Foundation Contact: Beth Medina, trs@ibci.net

I-Day San Diego 2018 May 16 Town & Country Convention Center San Diego, Calif.

Independent Insurance Agents & Brokers of San Diego

MIIAB/Trusted Choice Convention May 16 Minneapolis Convention Center Minneapolis, Minn.

Minnesota Independent Insurance Agents & Brokers Association NCCI's Annual Issues Symposium May 16-18 Hyatt Regency Grand Cypress Orlando, Fla. NCCI Contact: Dean Dimke, Dean_Dimke@ncci.com MCIEF Advanced Underwriting May 21-22 Gainey Suites Hotel Scottsdale, Ariz.

Motor Carrier Insurance Education Foundation Contact: Beth Medina, trs@ibci.net Insurance Agents & Brokers Delaware Convention May 30-31 Atlantic Sands Hotel Rehoboth Beach, Del. Insurance Agents & Brokers Contact: Alane Fagan, alanef@iabforme.com IIAG Annual Convention & Tradeshow - YAC Annual Conference Jun 7-9 Hilton Head Marriott Resort & Spa Hilton Head, S.C. Independent Insurance Agents of Georgia

PIA of New York Annual Conference Jun 10-12 Harrah's Resort Casino Atlantic City, N.J. Professional Ins. Agents of New York State and Professional Ins. Agents of NewJersey PIA Education and Conference Department, conferences@pia.org 117TH IIA of Arkansas Annual Convention Jun 11-13 Embassy Suites Norman - Hotel & Conference Center Rogers, Ark. Independent Insurance Agents of Arkansas

FAIA's 2018 Convention Jun 13-18

28 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

Rosen Shingle Creek Orlando, Fla. The Florida Association of Insurance Agents

IIAT'S 2018 Annual Conference & Trade Show Jun 13-15 TBA San Antonio, Texas Independent Insurance Agents of Texas

IIAI 2018 Young Agents Conference Jun 13-15 French Lick Springs Hotel French Lick, Ind. Independent Insurance Agents of Indiana

IIABL 2018 Convention Jun 17-20 Sandestin Beach Hilton Destin, Fla. Independent Insurance Agents & Brokers of Louisiana

SEIP 2018: Expanding The Market Jun 18-20 Sheraton Fisherman's Wharf San Francisco, Calif.

Society of Environmental Insurance Professionals Contact: Angela Oroian, Dybdahl@seipro.org NAIC Insurance Summit Jun 18-22 Sheraton Kansas City at Crown Center Kansas City, Mo. National Association of Insurance Commissioners (NAIC) Contact: NAIC Meetings Department, meetingsmail@naic.org Elevate 2018 Jun 24-26 Hilton Cleveland Downtown Cleveland, N.Y. Agency Nation Contact: Jenn Haack, jenn.haack@trustedchoice.com AIIA Convention & Trade Show Jun 24-26 Grand Hotel Point Clear Resort & Spa Point Clear, Ala. Alabama Independent Insuran Agents

IMCA 2018 Annual Conference & Showcase Jun 24-26 W Atlanta - Midtown Atlanta, Ga. Ins. Marketing & Communications Assoc.

Contact: Gloria Grove, ggrove@imcanet.com

INSURANCEJOURNAL.COM

MCIEF Motor Carrier I and II Jun 25-28 Residence Inn Orlando Airport Orlando, Fla. Motor Carrier Ins. Education Foundation Contact: Beth Medina, trs@ibci.net CIWA Summer Forum & Annual Meeting Jun 25-26 Monterey Plaza Hotel & Spa Monterey, Calif.

California Insurance Wholesalers Association (CIWA) Contact: Thomas Shovlin, thomas@ciwa.net AIIA Young Agents Summer Conference 2018 Jun 26-28 Hilton Pensacola Gulf Front Pensacola, Fla. Alabama Independent Insurance Agents

IIAV Annual Conference & Exposition 2018 Jun 27-29 Virginia Beach Hilton Virginia Beach, Va. Independent Insurance Agents of Virginia

IIAV Annual Convention & Exposition 2018 Jun 27-29 Hilton Beach Oceanfront Virginia Beach, Va. Independent Insurance Agents of VA Contact: Teri Chester, tchester@iiav.com ICT Property & Casualty Symposium Jul 12-13 Hyatt Hotel Austin, Texas Insurance Council of Texas Contact: Barbara Schoenfeld, Bschoenfeld@insurancecouncil.org 2018 TSLA Mid-Year Meeting Jul 15-18 Park Hyatt Aviara Carlsbad, Calif.

Texas Surplus Lines Assn. Inc. Contact: Jean Patterson, jptsla@tsla.org Missouri Agents Connection (MAC) Summit Jul 18-20 Tan-Tar-A Resort Osage Beach, Mo Missouri Association of Insurance Agents

Super Regional P/C Insurer Conference 2018 Jul 22-24 Grand Geneva Resort & Spa Lake Geneva, Wisc.

Insurance Journal & Demotech, Inc. Contact: Kelly De La Mora, kdelamora@wellsmedia.com INSURANCEJOURNAL.COM

FSLA Annual Convention Aug 1-3 The Don CeSar St. Pete Beach, Fla. Florida Surplus Lines Association Contact: Christina Welty, cwelty@executiveoffice.org LAAIA's 48th Annual Convention Aug 1-5 Diplomat Resort & Spa Hollywood, Fla. Latin American Association of Insurance Agencies (LAAIA) Contact: Soraya Regalado, soraya@laaia.com LAAIA 48TH Annual Convention Aug 1-4 The Diplomat Beach Resort Hollywood, Fla. Latin American Association of Insurance Agencies

2018 VCIA Annual Conference Aug 7-9 DoubleTree by Hilton Hotel (formerly Sheraton Burlington) and UVM Davis Center Burlington, Vt. Vermont Captive Insurance Association Contact: Megan Precourt, info@vcia.com 2018 VCIA Annual Conference Aug 7-9 DoubleTree by Hilton Hotel (formerly Sheraton) Burlington, Vt. Vermont Captive Insurance Association Contact: Janice Valgoi, janice@vcia.com 2018 Big "I" State Convention Aug 12-15 Coeur d'Alene Resort, Idaho Independent Insurance Agents & Brokers of Idaho IIABAZ's 84th Annual Convention & Trade Show Aug 15-17 JW Marriott Phoenix Desert Ridge Resort & Spa Phoenix, Ariz.

IIABAZ

2018 Big "I" Fall Leadership Conference Aug 22-26 Sheraton Springfield Monarch Place Hotel, Springfield Marriott MassMutual Center Springfield, Mass.

Independent Insurance Agents & Brokers of America

IIABO 90th Annual Convention Aug 26-28 Eagle Crest Resort Redmond, Ore. Independent Insurance Agents and Brokers of Oregon

TCCO Convention Sep 12-13 Ameristar Black Hawk Casino Black Hawk, Colo.

Trusted Choice Insurance Agents of Colorado

Big "I" Young Agents Leadership Institute Sep 13-14 The Westin Savannah Harbor Golf Resort & Spa Savannah, Ga. Independent Insurance Agents & Brokers of America

Washington Joint Conference & Trade Show Sep 19-21 Hyatt Lake Washington Renton, WA PIA and IIABW Contac: Suzanne Arnett, sarnett@wainsurance.org IIABW/PIA Conference Sep 19-21 Hyatt Regency Lake Washington Renton, Wash.

Independent Insurance Agents & Brokers of Washington

Rochester I-Day Sep 20 ArtisanWorks Art Museum Rochester, N.Y. Independent Insurance Agents of Monroe County, Rochester CPCU Society Chapter

2018 American Agents Alliance Convention & Expo Sep 20-23 JW Marriott Desert Springs Resort & Spa Palm Desert, Calif.

The American Agents Alliance VIAA 112th Annual Convention Sep 20-21 Burlington Hilton Burlington, Vt. VT Insurance Agents Association Contact: Cindy Sherwood, info@delaneymeetingevent.com WSIA 2018 Annual Marketplace Sep 23-26 Atlanta Marriott Marquis Atlanta, Ga. Contact: WSIA, debbie@wsia.org

continued on page 30

JANUARY 8, 2018 INSURANCE JOURNAL | NATIONAL | 29

NATIONAL | Special Report continued from page 29 James K Ruble Seminar Sep 24-25 Sheraton Portland Airport Hotel Portland, Ore. PIA Western Alliance Contact: Pam Busch, pambusch@piawest.com IA&B Futures Conference Sep 25-26 Omni Bedford Springs Resort Bedford, Pa. Insurance Agents & Brokers Contact: Karen Robison, karenr@iabforme.com IIAI 2018 Annual Convention, Trade Show & EXPO Sep 25-26 Prairie Meadow Convention Center Altoona, Iowa Independent Insurance Agents of Iowa

IIANM Annual Convention Sep 26-27 Sandia Resort & Casino Albuquerque, N.M. Independent Ins. Agents of New Mexico

2018 Fall Governance Meetings Sep 26-29 Westin Portland Harborview Portland, Maine National Association of Professional Insurance Agents Contact: Roxanne Johnson, roxannejo@pianet.org IAIABC 104th Convention Oct 1-4 Williamsburg Lodge Williamsburg, Va. IAIABC Contact: Jessica Faust, jfaust@iaiabc.org 2018 - IIA of IL Convo Oct 2-4 Crowne Plaza Hotel Springfield, Ill. Independent Insurance Agents of Illinois MCIEF Annual Conference Oct 4-5 Hyatt Regency Orlando International Airport Orlando, Fla. Motor Carrier Ins. Education Foundation Contact: Beth Medina, trs@ibci.net Montana Joint Conference and Trade Show Oct 8-9 DoubleTree Edgewater Missoula, Wash.

PIA and IIAM

Contact: Connie Jacobson, education@iiamt.org IIAN Annual Convention Oct 10-12 Embassy Suites Norman - Hotel & Conference Center LaVista, Neb. Independent Insurance Agents of Nebraska

ACORD Connect Oct 10-11 JW Marriott New Orleans New Orleans, La. ACORD Contact: Tricia Psychas, tpsychas@acord.org 2018 CPCU Society Annual Meeting Oct 13-16 Manchester Grand Hyatt San Diego, Calif.

The Institutes CPCU Society

2018 IIA&B of South Carolina Annual Convention Oct 14-16 Hyatt Regency Greenville Greenville, S.C. Independent Insurance Agents and Brokers of S.C. FIWT 2018 Annual Convention Oct 18-21 Embassy Suites San Marcos, Texas Federation of Insurance Women of Texas

Annual Business Meeting & Networking Event Oct 21-23 The Water Club at Borgata Atlantic City, N.J. Big "I" of NewJersey

IIANC 121st Annual Convention Oct 21-23 TBA Myrtle Beach, S.C. Independent Insurance Agents of North Carolina 2018 SIR Annual Conference & Exhibit Fair Oct 21-23 The Hotel Monteleone New Orleans, La. Society of Insurance Research (SIR) Contact: Erica Linc, erica.linc@sirnet.org Big I New Jersey 125th Annual Business Meeting & Networking Event Oct 21-23 The Water Club at Borgata Atlantic City, N.J. Big I New Jersey

30 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

Contact: Jennifer Kacmarsky, jkacmarsky@biginj.org 19th Annual TMPAA Summit Oct 22-24 Westin Kierland Resort & Spa Scottsdale, Ariz.

TMPAA Contact: Monica Elischer, monica.elischer@targetmkts.com James K Ruble Seminar Oct 22-23 Doubletree Guest Suites Seattle, Wash.

PIA Western Alliance Contact: Pam Busch, pambusch@piawest.com WIFS 2018 National Conference Oct 24-26 Renaissance Austin Austin, Texas Women in Insurance and Financial Services (WIFS) Contact: WIFS National Office, office@wifsnational.org The Insurors 125th Annual Convention Oct 27-30 The Omni Nashville Nashville, Tenn.

Insurors of Tennessee

2018 PLUS Conference Nov 7-9 Manchester Grand Hyatt San Diego, Calif.

PLUS Contact: Lance Helgerson, lhelgerson@plusweb.org IIAC 2018 Mid-Year Convention Nov 8 Aqua Turf Plantsville, Conn.

Independent Insurance Agents of Connecticut

2018 TSLA Annual Meeting Nov 11-12 Four Seasons Hotel Austin, TX Texas Surplus Lines Assn., Inc. Contact: Jean Patterson, jptsla@tsla.org IIAI 2018 Annual Convention Nov 12-14 Westin Hotel Indianapolis, Ind. Independent Insurance Agents of Indiana

INSURANCEJOURNAL.COM

Kudos to Aubrie Hoopingarner from JM Wilson Corporation,

Winner of the Insurance Careers Contest and recipient of an all-access membership at www.ijacademy.com.

Here’s Aubrie’s answer to the question: “What’s the coolest part of your insurance job?”

We want to thank the many young insurance professionals who participated in the Insurance Careers Contest contest. The future of the industry is in good hands!

Insurance Journal and the Wells Media companies are proud partners in the Insurance Careers Movement.

Learn more at insurancecareertrifecta.org

Idea Exchange

The Competitive Advantage

A Scary Trend: Carriers Taking Action Against Their Agents

By Chris Burand

M

aybe “trend” is inaccurate because the data is scant, or maybe “trend” is a presage. The “trend” does not yet exist, but it will. The “trend” is companies taking drastic action against, or at least quite detrimental to, their own agents. Examples of arguably (from specific perspectives) reasonable but aggressive actions I see carriers taking against their own agents include the following.

Egregious: E&O Claims. According to some of the errors and omissions (E&O) claim data I have seen, companies are much less shy about suing their own agents to recover claims they have paid. Some specific areas include: Binders. Issuing binders that exceed the agent’s authority, writing binders when the agent should not write a binder, changing the terms of binders, or using the wrong binder form. A fundamental issue I have seen in many agencies is that no one, or at least almost no one, has any idea what a binder really is. It is a temporary insurance contract. A bind er is not proof of insurance. It is best to not write binders unless the situation really requires it and the agency truly understands its binding authority.

giving the insured the option of turning the claim in. I understand well, and personally, the price paid for turning in a “claim” that is not really a claim and having the insurance company treat the nonevent as if it was the most egregious claim it has ever seen. However, from an agent’s E&O perspective, read your carrier contracts. Probably every contract requires you to notify the carrier if you learn of a claim, even if it may be a “non-claim.” The exposure is that if that claim gets large, the company can play the white knight, pay the claim, and sue the agency to get its money back for violation of the companyagency contract.

More Egregious Taking Ownership of Expirations. When

I wrote about a company taking ownership of expirations, arguably forcibly and definitely without cause, some readers flat disbelieved me. I get their disbelief. I was in disbelief, too, when I first read the new contracts.

To this day, I do not understand why this has not become more public, especially because affiliates of that carrier have expanded the expropriation of expirations. I do not think a large portion of agency owners are reading their contracts, especially benefit contracts.

Options other than bending over do exist if agents will communicate loudly with their associations.

Claims. Learning of a claim and then 32 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

Service Centers. Another example is

purely the agents’ fault, and that is using company service centers. Think about it just for a second. This is simple. If a company services your clients well, the company does not need to pay the agency a renewal commission. If they do not need to pay the agency a renewal commission, they do not need to leave agents with ownership of expiration

rights. This is not rocket science. The writing is on the wall — though in invisible ink, for now.

Most Egregious

A carrier suing its own agents for educating clients on which coverages are better. Unfortunately, for all involved, the carrier with the worst forms decides it would prefer the public not know this so it sues agents for describing the differences between the better and worse forms. Rather than improve its forms, the company sues.

I sometimes see similar actions at the broker level.

It seems parts of the

industry refuse to improve and become more competitive, whether with products, rates or quality of employment, so it sues to institute ignorance and serfdom.

Many carriers, agents and brokers do not have a clue how to grow organically.

They literally do not have a clue. This is not my opinion. This is a fact backed up by reading the financials of carriers and brokers and analysis of privately owned entities. Some can’t grow because they have no money after acquisitions. Some do not have even an inkling of a sales culture. Some see their strategy as litigation rather than better products. Their strategy must be to invent damage whenever a key employee (or when they deem an employee as key) leaves or when agents move business to other carriers. These behaviors smell of desperation.

Many carriers and agents and brokers do not have a clue how to grow organically.

They literally do not have a clue.

How to Protect Your Agency

My suggestions for protecting yourself and your agency from these trends include: 1. Improve your E&O procedures with the understanding the agency has to protect itself against its carriers/brokers and clients. That means following contracts and documenting communication with carriers too.

2. Read your company contracts, always, before signing, and don’t sign if the contract contains aspects that you truly disagree with. Make sure you have a point because

some agents can’t distinguish reasonable provisions that do not favor the agent and completely unreasonable provisions.

3. Be careful hiring important people from other agencies/brokers without complying with their prior employers’ confidentiality contracts. Do your part.

4. When you are doing coverage comparisons, word the comparisons carefully.

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Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868.

Email: chris@burand-associates.com.

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JANUARY 8, 2018 INSURANCE JOURNAL | NATIONAL | 33

Closing Quote Top Insurtech Predictions for 2018 end-to-end user experience for both customers and agents.

I always remind carriers that insurance isn’t their product – customer experience is the product. If they can optimize the experience, they will come out ahead. That’s one of the many areas where insurtech firms can help.

Data and Machine Learning

By Ted Devine

I

nsurtech is often framed as a force of disruption in the insurance industry. But technology doesn’t disrupt the industry – it enhances the way carriers and customers interact.

In 2018, I predict we will continue to see more carriers and agents embrace technology and partner with insurtech companies, not compete with them.

More carriers will also incorporate data and machine learning and offer on-demand insurance products in the coming year.

Partners, Not Adversaries

Insurtech is about improvement. Agents will still be the primary distribution force for insurance over the next 20 years and carriers will still be the primary capital for the next 20 years. None of that will radically change.

But as we move forward, carriers will realize they can form mutually beneficial partnerships with insurtech companies. This will help them leverage technology to improve

Our company, Insureon, works with seven of the 10 biggest carriers in the country, and across the board, we see them turning to technology, data and machine learning to improve their businesses. I predict that in 2018, the insurance industry will make better use of technology and artificial intelligence and more fully integrate both into their systems.

Machine learning is already improving the insurance buying process in many ways.

Chatbots help customers complete applications, while machine-learning models for scripting help agents give advice. Machine learning can also help carriers analyze data to better understand customers and sell them the right products.

Carriers that resist incorporating technology into their business model will get left behind. They simply won’t be seen as innovators and may even start to see their bottom line dip. Carriers need technology to make them more efficient so they can better meet the evolving needs and demands of customers.

34 | INSURANCE JOURNAL | NATIONAL JANUARY 8, 2018

On-Demand Services

The rise of the sharing economy has increased the desire for on-demand services.

Consumers expect an instantaneous buying process for every need, and that includes insurance. The insurance carriers that will succeed in 2018 are the ones that can offer on-demand insurance products.

Take Metromile for example.

This company allows drivers to pay for coverage based on the actual miles they drive.

Meanwhile, the home insurance company Lemonade demonstrates that instant renters and homeowners coverage is feasible.

While traditional carriers may not be able to offer the same type of on-demand coverage as smaller insurtech startups, they can streamline the insurance buying process.

I predict many carriers will move to a more simplified, mobile-friendly application, similar to what insurers like Trōv and Cuvva offer.

However, despite simpler and shorter applications, we won’t see agents disappear from the picture. Our firm strives to be the most technically driven, advice-oriented agency in the U.S., and every one of our customers still talks to an agent.

Carriers that succeed in 2018 will be the ones that successfully merge technology with agent interaction to create the best possible experience for customers.

By tapping into the tech advances insurtechs offer, savvy carriers will be able to reduce costs, improve the customer experience and boost the bottom line in the coming year.

Devine is the CEO of Insureon, an online small-business insurance agency. Prior to joining Insureon, Devine held several senior executive leadership positions at Aon Corp., including president of Aon Risk Services and CEO of Aon Re. Before joining Aon, Devine spent 12 years as director of McKinsey & Company.

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