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Contents March 19, 2018 • Vol. 96 No. 6 • West



W1 Study: California Workers Not Weaned off Opioids Had Much Higher Drug Costs

8 Cyber to Top $6.3B in Written Premium by 2020: Verisk

Idea Exchange

11 Spotlight: For U.S. Doctors, Being Sued Is Common Ailment



12 Special Report: Insurtech Innovation for Agents, by Agents 17 2018 Corporate Profiles

42 Buyers Aren’t Happy With Their Cyber Insurance: J.D. Power 44 Minding Your Business: Contingency Planning for Agency Owners 46 Tech Talk: Are Agents Finally Taking Up the Digital Challenge? 48 Analytics and Automation Reshaping the HR Process 50 Closing Quote: Benefits of Offering Legal Insurance



Departments W2 People 10 Declarations 10 Figures


16 MyNewMarkets 40 Business Moves INSURANCEJOURNAL.COM

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Write the Editor:

HR Pros Prep for Rise in Sexual Harassment Complaints


Publisher Mark Wells



Editor-in-Chief Andrea Wells

West Sales Dena Kaplan (800) 897-9965 X115

East Editor Elizabeth Blosfield

Romeo Valdez (800) 897-9965 X172

Chief Content Officer Andrew Simpson

Southeast Editor/MyNewMarkets Amy O’Connor South Central Editor/ Midwest Editor Stephanie K. Jones West Editor Don Jergler International Editor L.S. Howard Columnists Catherine Oak, Tom Wetzel

Chief Marketing Officer Julie Tinney (800) 897-9965 X148

South Central Sales Mindy Trammell (800) 897-9965 X149 Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 Midwest Sales Lisa Whalen (800) 897-9965 X180 East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 Advertising Coordinator Erin Burns (619) 584-1100 X120

Contributing Writers

Insurance Markets Manager David Coon, Dennis Healy, Justin Kristine Honey (619) 584-1100 X132 Juozapavicius, David Pieffer IJ ACADEMY OF INSURANCE Director Patrick Wraight Associate Director Barbara Whiffen


Chief Financial Officer Mark Wooster


Marketing Director Derence Walk Marketing Administrator Gayle Wells


Social Media Manager Ly Short (619) 890-7735 Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125


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New Media Producer Bobbie Dodge

Web Developer Jeff Cardrant

Videographer/Editor Ashley Waldrop

Web Developer Terrance Woest


Circulation Manager Elizabeth Duffy

even in 10 human resource professionals said they believe sexual harassment complaints at their workplaces will likely be “higher” or “much higher” in 2018 compared to previous years. An HR Certification Institute poll of more than 200 HR business leaders at U.S. organizations found that high-profile sexual harassment allegations in the news have caused businesses to step their risk mitigation: • 79 percent of HR professionals said that sexual harassment prevention training will be considered a “high priority” or “essential” moving forward, up from 40 percent prior to the 2017 news coverage. • 84 percent of HR professionals said that how the company handles sexual harassment complaints will be considered a “high priority” or “essential” moving forward, up from 65 percent. “Recent allegations and the #MeToo movement have raised awareness and, more importantly, triggered action to stamp out sexual harassment in the workplace,” said HRCI CEO Amy Dufrane, Ed.D., SPHR, CAE. “Greater awareness is likely to mean an increase in the number of reported cases over the short term. Long term, organizations are placing more emphasis on prevention and, hopefully, the eradication of sexual harassment from the workplace.” Both reported and unreported acts of sexual harassment remain common, based on the HRCI poll: 63 percent of HR professionals said that acts of sexual harassment “occasionally” or “sometimes” occur in their workplaces and 30 percent said that such acts “frequently” occur. Only seven percent said that such acts “almost never” or “never” occur. Most often, sexual harassment complaints are of the hostile work environment type, according to 60 percent of HR professionals. A hostile work environment, as defined by the Equal Employment Opportunity Commission (EEOC), is an environment in which an individual or individuals are subjected to unwelcome verbal or physical FOR QUESTIONS conduct. Six percent said the quid pro quo REGARDING SUBSCRIPTIONS: Call: 855-814-9547 variety of sexual harassment, when a superOutside the U.S., call 847-400-5951 or you may subscribe or change your address online at: visor or manager asks for sexual favors in return for some type of favorable employment Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media action, is more likely; 32 percent said that 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 either type of sexual harassment is most likely. per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pub Nearly all HR professionals — 96 percent lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended — said that sexual harassment grievances are 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 “very difficult” or “difficult” to handle. Media Group, Inc. All Rights Reserved. Content may not be photo-

‘Greater awareness is likely to mean an increase in the number of reported cases over the short term.’

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Cyber to Top $6.2B in Written Premium by 2020: Verisk


he total commercial cyber liability market will reach $6.2 billion in written premium by 2020, Verisk predicts in a market analysis titled, Sizing the Standalone Commercial Cyber Insurance Market. Standalone commercial cyber liability in 2016, excluding package policies, amounted to almost $1.5 billion of written premium as estimated by Verisk, using ISO MarketStance – Commercial Insight. The total, including package policies, was an estimated $2.5 billion. ISO MarketStance solutions projects that, assuming Verisk’s forecasted average annual growth in takeup rates of 20-30 percent, the standalone cyber market could reach $4.1 billion by 2020, with a total forecasted cyber market of $6.2 billion. “Cyber liability risk is rapidly permeating

every business that has any dependence on digital technology, which means very few enterprises are exempt,” Maroun Mourad, president of commercial lines at Verisk’s ISO business, said in prepared remarks. “Gains in small and midsized accounts will be an increasing factor as the market matures and cyber coverage becomes a contractual requirement in growing numbers of business-to-business relationships,” according to the report. By sector, healthcare and education remain especially important. Prashant Pai, vice president of cyber offerings at Verisk, added that rapid growth in commercial cyber liability comes as cyber attacks rapidly evolve and change, leaving certain industries more likely to buy cyber insurance.


Verisk projects that the standalone commercial cyber liability market will break down the following way in 2020: • Small commercial (less than $10 million in revenue): $260 million in direct written premium. Companies in this market sector will grow from 96,800 in 2016 to 242,000 in 2020. • Middle markets ($10 million-$250 million in revenue): $2.46 billion in direct written premium. The prediction is companies in this market segment will surpass 83,300 versus 43,200 in 2016. • National accounts ($250 million or higher in revenue): $1.43 billion in direct written premium. There will be 9,400 companies in this segment in 2020 compared to 6,000 in 2016. Market projections are from ISO MarketStance – Commercial Insight. INSURANCEJOURNAL.COM

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The number of employees fired in 2017 by The Medical University of South Carolina after it was determined they misused patient records. A total of 58 privacy breaches were reported last year with 11 characterized as employee snooping, sometimes on high-profile patients.


Declarations Climate Opposition

“Now more than ever is the time for the United States to be a leader and a partner on this. Not to walk away from this.” — Mary Nichols, chairwoman of California’s Air Resources

Board, said California stands in opposition to a Trump administration plan to scrap a policy slashing climate-changing emissions from power plants.

Forced Out

“They were flooded out and forced out.”

— Dickinson, Texas, resident, Charmaine Rea said many of

her neighbors gave up and moved out after Hurricane Harvey flooded their homes in August 2017. Now, Rea and other Dickinson residents are opposing the city’s plan to buyout flooded homes and rezone some residential neighborhoods as commercial.

Loss of Public Trust

“We wonder why the public loses trust in their police department.”

— Chicago city Alderman Tom Tunney said after a Chicago

City Council committee recommended paying $20 million to the families of two men killed when a drunken off-duty police detective slammed into their car nine years ago. The committee was told that the police department’s alleged code of silence “emboldened” the intoxicated policeman, Joseph Frugoli, to climb behind the wheel of his SUV.

Not Alone The amount a jury awarded to Thomas Mook, who was felled by toxic gas inside a northwest Iowa hog confinement barn in 2014. An O’Brien County jury found property owner Patrick Probst negligent for pumping manure in a pit under the barn without adequately ventilating the barn. The pumping caused a release of hydrogen sulfide and Mook was injured.

$12.6M The cost of a fine Sunoco agreed to pay over problems with a massive natural gas pipeline project in Pennsylvania. The state Department of Environmental Protection said Sunoco Pipeline has made changes since work on the $2.5 billion Mariner East 2 pipeline was halted on Jan. 3. The 350-mile project has been plagued by spills and leaks of drilling fluid and improper construction methods.

“No organization or entity can fight this alone.” — Highmark Delaware President Tim Constantine said his

company has given four organizations $325,000 in grants to combat Delaware’s opioid crisis. State officials say 34 people have died from suspected overdoses this year, while 308 died in 2016. Overdose deaths in the state first surpassed the number of motor vehicle deaths in 2009.

That’s how much California state agencies spent fighting fierce wildfires that killed dozens of people and destroyed thousands of homes and businesses last year. The federal government will reimburse most of the costs, but the state will still need to come up with about $371 million on top of the state’s existing wildfire budget, the Legislative Analyst’s Office told the Senate Budget committee.


The approximate number of homes in Northwest Dallas to which natural gas service was shut down for up to three weeks in the wake of a house explosion in the area that killed a 12-year-old girl. Following the explosion, hundreds of homes, an apartment complex, an elementary school and a fire station were evacuated, and a series of pipeline leaks were found.


Drug Dealing MDs

“We’re not going to tolerate it.”

— U.S. Attorney Michael Stuart comments on the arrest of 10

doctors charged with overprescribing pain pills from clinics in West Virginia and Virginia. The doctors face 69 counts of conspiracy to distribute oxycodone and other controlled substances that weren’t for legitimate medical purposes between 2010 to 2015.


Which of the following do you see as insurance growth opportunities in 2018? Workers' Compensation 14.29% (31 votes) Cyber Insurance 53.46% (116 votes) Employment Practices Liability 12.44% (27 votes) Personal Auto and Home 9.68% (21 votes) Commercial Property 9.22% (20 votes) Other: 0.91% (2 votes) Total Votes: 217



Study: California Workers Not Weaned off Opioids Had Much Higher Drug Costs


njured workers who were not weaned off of opioids had much higher drug costs and higher treatment transaction volumes, according to a report released earlier this month by the Workers’ Compensation Insurance Rating Bureau. The report, Study of Chronic Opioid Use and Weaning in California Workers’ Compensation, uses data from the WCIRB databases of medical transaction records and unit statistical reports to help understand the cost implications of chronic opioid use and the process of weaning injured workers off of opioids in California workers’ comp. The study also shows that since 2012, claims with opioid prescriptions in the California workers’ comp system have dropped sharply, but opioid prescriptions INSURANCEJOURNAL.COM

still reflect a significant portion of all pharmaceutical costs. The recent decline in opioid use is attributable to both fewer newer claims for which opioids were prescribed and a reduction in opioid use on claims in which there was “chronic” opioid use, according to the study. Key findings of the report include: Claims involving chronic opioid use cost more than nine times in physician services than the average workers’ comp claim. Chronic opioid usage builds gradually. The average claim in the study reached the chronic opioid usage threshold in 11 months from the date of injury. Nearly half of the study claims demonstrating chronic opioid usage weaned off

of opioids completely within 24 months from the date of injury. Injured workers who were not weaned off of opioids had much higher drug costs and higher treatment transaction volumes and costs than those who were weaned off of opioids. The weaning process typically involved a gradual decrease in opioid prescriptions combined with a mix of alternative nondrug treatments and non-narcotic drugs. While there were no clear patterns of nondrug treatments for injured workers who were weaned off of opioids, the usage of non-opioid pain medications declined significantly less than that of opioids and other drugs. The complete report is available in the research section of the WCIRB website. MARCH 19, 2018 INSURANCE JOURNAL | WEST | W1

WEST | PEOPLE The members of the Surplus Line Association of California have elected Robert Gilbert of Markel

Robert Gilbert

Adam Bowermaster

Josh Pasek

Sharon Rogerson

Matt Cundith

West Insurance Services as the new chair of the SLA Board of Directors. Gilbert’s election was finalized after the SLA tallied the final ballots from members who were unable to attend the SLA Annual Meeting, which took place Feb. 6 and Feb. 8, in San Francisco and Los Angeles, respectively. Also elected to leadership were Terri Moran of Cove Programs Insurance Services, who becomes vice chair, and Janet Beaver of Tokio Marine-HCC Casualty, who becomes secretary/treasurer. Gilbert takes over from Tom Ciardello of Worldwide Facilities LLC, who becomes vice chair, who completed his 2017 term as chair and was elected to a seat on the board. Completing the 13-member board are the following individuals who also served on the 2015 board: Tim Chaix, R.E. Chaix and Associates Rich Gobler, Burns & Wilcox Hank Haldeman, The Sullivan Group Cameron Kelly, Worldwide Facilities, LLC Pam Quilici, Crouse & Associates Insurance Services of Northern California Inc. Les Ross, Wholesale Trading Co-Op Insurance Services LLC Kathy Schroeder, Sierra Specialty Insurance Services Inc. Gerald Sullivan, The Sullivan Group John Washington, Arch Insurance Group Additionally, SLA members reelected the Honorable Harry Low, a former insurance commissioner and retired presiding justice of the California Court of Appeal, as mediator. The 2018 board will serve until balloting is completed following the next SLA Annual Meeting in February 2019. The SLA operates as a self-governed private organization and serves as the statutory surplus line advisory organization to the California Department of Insurance. Cypress, Calif.-based Bowermaster and Associates Insurance Agency Inc. has named Adam Bowermaster president. Bowermaster has more than 20 years of experience. Mike Bowermaster, the firm’s previous president, will continue to serve as a mentor and advisor to Adam and the executive team. Bowermaster and Associates offers services


including insurance and risk management, employee benefits, and personal and small business insurance. Woodruff-Sawyer & Co. has named Josh Pasek assistant vice president in the property/casualty practice of the firm’s Southern California office. Pasek will be responsible for developing risk management programs for clients. He was previously a sales executive and producer for Moreton and Co. He was vice president of business development at Oeste Capital Management before that. San Francisco, Calif.-based Woodruff-Sawyer has offices throughout California, and in Oregon, Washington, Colorado, Hawaii and New England. Lockton has named Sharon Rogerson assistant vice president and account executive in the firm’s signature client group. The firm has also named Matt Cundith a producer in Lockton’s Los Angeles, Calif., office. Rogerson will be based out of Lockton’s Irvine, Calif., office and focus on assisting high-net worth clients. Rogerson was previously a senior account executive at Ericson Insurance Advisors. She was a personal lines customer service representative for Insurance Planning Co. before that. Cundith comes from Aon, where he consulted contractors, developers and Fortune 1000 firms. Kansas City, Mo.-based Lockton is a global professional services firm. MJ Insurance has named Sean Evans an employee benefits consultant in its Phoenix, Ariz., office. Evans previously was a franchise owner and operator of Jimmy Johns – Cali Subs LLC in Santa Barbara, Calif. Indianapolis, Ind.-based MJ Insurance is a commercial insurance, risk management and employee benefits consulting agency. Burnham Benefits Insurance Services Inc. has named Mirna Medina an account executive in the Los Angeles, Calif., office. Medina was previously senior client manager at Arthur J. Gallagher & Co. Before that, she was at Bolton & Co. She began her career as an analyst at EOI Service Co. Irvine, Calif.-based Burnham Benefits is an employee benefits consulting and brokerage firm. INSURANCEJOURNAL.COM

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Medical Liability | Spotlight | NATIONAL

For U.S. Doctors, Being Sued Is Common Ailment


etting sued is not an uncommon event for physicians. More than a third of physicians (34 percent) have had a claim filed against them at some point in their careers. Also, according to research from the American Medical Association (AMA), older physicians who have been in practice for awhile and had more exposure are even more likely to be sued. Nearly half (49.2 percent) of physicians age 55 and over have been sued, compared to 8.2 percent of physicians under age 40. The AMA recently released a series of trend reports on the medical liability system in its Policy Research Perspective. “Information in this new research paints a bleak picture of physicians’ experiences with medical liability claims and the associated cost burdens on the health system,” said AMA INSURANCEJOURNAL.COM

President David O. Barbe, M.D., M.H.A. “The reports validate the fact that preserving quality and access in medicine, while reducing cost, requires fairness in the civil justice system.” One report — Medical Liability Claim Frequency Among U.S. Physicians — analyzes medical liability claims frequency among patient care physicians in the U.S. and finds that getting sued is virtually a matter of when, not if, for physicians. In addition to finding that older physicians had a higher incidence of claims than younger ones, the report also found a wide variation in claim incidence by specialty. General surgeons and obstetricians/ gynecologists (OB/GYN) were the physicians most likely to be sued, more than 3½ to 4 times greater than pediatricians and psychiatrists, who have the lowest risk. Before they reach the age of 55, more than 50

percent of general surgeons and obstetricians/gynecologists have already been sued. “Even though the vast majority of claims are dropped, dismissed or withdrawn, the heavy cost associated with a litigious climate takes a significant financial toll on our health care system when the nation is working to reduce unnecessary health care costs,” Dr. Barbe said. A second report — Medical Professional Liability Insurance Indemnity Payments, Expenses and Claim Disposition, 20062015 — analyzes indemnity payments, expenses, and claim disposition based on a sample of medical liability claims that closed between 2006 and 2015 aggregated by PIAA, the association representing the medical and health care professional liability insurance community. This report’s key findings include: • The average expense incurred on medical liability claims that closed in 2015 was $54,165 – a substantial increase

of 64.5 percent since 2006. • In 2015, 68.2 percent of all closed claims were dropped, dismissed, or withdrawn; however, they are not cost-free. Each of these claims costs an average of $30,475 to defend, accounting for more than onethird (38.4 percent) of total expenses incurred. • Only 7 percent of claims are decided by a trial verdict, and the vast majority (87.5 percent) were won by the defendants. • In about 25 percent of claims, an indemnity payment was paid to the claimant. The average indemnity payment was $365,503 for claims that closed in 2015—an increase of 11.5 percent from two years prior. Another report in the series — Medical Professional Liability Insurance Premiums: An Overview of the Market from 2008 to 2017 — analyzes annual changes in medical liability insurance premiums for 20082017 from the Annual Rate Survey Issues of the Medical Liability Monitor. Despite increasing stability in liability premiums, the prospects for this continuing into the near future are less than certain, according to this analysis. Since 2015, more premiums increased than decreased, reversing the trend of the earlier part of the study period. In 2017, 13.4 percent of premiums were higher than those for 2016. According to the report, there is wide geographic variation in premiums for physicians. In some areas of New York, premiums for obstetricians/gynecologists reached $214,999 in 2017 – while premiums for obstetricians/gynecologists in some areas of California were $49,804.


NATIONAL | Special Report | Agency Technology

By Andrea Wells


nsurance industry technology is experiencing a revolution. While insurance carriers and venture capital firms have been behind much of today’s insurtech innovation, insurance agents and brokers have also jumped into the fray, seeking to turn insurtech to their advantage even as others seek to deploy new technologies to displace them. Agents need not fear disruption from insurtechs, or at least not all of them. While there’s a good percentage of startups looking to replace agent distribution, there’s a growing number of insurtechs looking to help the agent distribution channel, too, says Steve Anderson, long-time technology authority for agents. “It’s not quite as unbalanced as some people think it is.”

Ron Berg, Agents Council for Technology (ACT) executive director, agrees, adding that while in the past insurtechs may have been viewed as “disruptors” to the agency model that’s not the case today. “We need to drop the term disrupter because it clouds what is really available for innovation and what we can learn from and use as a distribution channel,” Berg said. According to Berg, technology is both accelerating and merging to the benefit of agencies. He sees two categories of insurtechs: those trying to take over the independent agency segment and those trying to partner with independent agents, vendors and carriers. There are so many new insurtech ventures it’s difficult to track and Berg and others predict continued investment in agency-focused insurtechs.


“We are absolutely going to see more expansion,” Berg said. Anderson, agrees, that the opportunities for insurtech platforms focused on the agency distribution system are plentiful — especially those focused on improving the customer experience and increasing operational efficiency. “Those to me are the two areas where I see lots of startups,” he said. Threats to the agency channel will continue as well because some will always INSURANCEJOURNAL.COM

see agents and brokers as an unnecessary middleman. “But, frankly, we’ve heard for 25 years that the agent was dead and there hasn’t been much change,” he said. However, agents and brokers can’t rest on their laurels, according to the veteran agency consultant, who urges them to adopt an “innovation mindset.” “I think it’s really difficult for agents and brokers to truly innovate and their mindset is an issue,” he said. He reminds agents that while there is always a risk in action, in doing something, today there is perhaps a “greater risk in not doing something, in inaction.” Agencies must experiment with insurtech to find the right fit, Anderson says. First, he advises agents to be aware of what’s “out there.” They should read, look and listen to what’s going in agency technology advancements, Anderson says. Second, agencies should understand that technology isn’t perfect and some insurtechs won’t work. “They’re going to fail, and that’s a necessary part of the process.” Third, agents must try and then try again. It’s cheaper today than ever before to try a new technology platform, he said. “You’ve got to be willing to experiment to find the real nuggets that are going to work, and mindset is really key here. The impediment will always be, ‘We’ve never done it that way.’ That’s just not a viable answer to anything anymore.” Small commercial lines is one area ripe for insurtech innovation and there’s no shortage of players looking to INSURANCEJOURNAL.COM

revolutionize this space. Small commercial rating has been a losing proposition for most agents and brokers. According to Anderson there have been many attempts to make small commercial rating more efficient, but the cost of obtaining a policy quote remains high and often unprofitable for agencies. “Comparative rating in personal lines has streamlined the quoting process (making it more efficient) but we don’t have the same type of process for small commercial,” Anderson said.

Not all insurtechs are out to displace agents. “If somebody can streamline that process, from both a sales growth (perspective) as well as an operational efficiency perspective, that would be a huge advantage.” Not all insurtechs are out to displace agents. For every incumbent insurer investing in or partnering with online platforms that bypass agents and brokers, there is at least one committed to agents and the small business market. In this report, Insurance Journal examined several insurtech options that are looking to help the agency channel in small commercial lines.


Touted as a single-entry market access solution for property/casualty agents, xagent announced in March the closing of a $2.1 million seed funding round in which NFP Property & Casualty Insurance Services Inc., and Insgroup, a

Houston-based privately held independent broker, participated. The startup also has the financial support and backing of several other top 100 agencies. Terry Scali, CEO, NFP’s P&C division, and Brian Kapiloff, CEO of Insgroup, helped to spearhead the seed funding, according to Bryan Baird, president and CEO of xagent. NFP and Insgroup are among a growing number of xagent fans — more than 500 thus far, according to the firm — that have registered for the upcoming beta release of xagent’s new Universal Submission App. Scali describes xagent as similar to personal lines rating platforms but for small commercial lines accounts. “At the moment our account managers, account executives and producers have to go online to the insurance company rating portal, input information that’s already in our systems and generate a single quote from a single carrier,” he told Insurance Journal. “If we can multiply that effect with one single source technology and remove our people from the process of sitting in front of rating systems, then we increase our efficiency and that delivers a better relationship between us and our participating carriers.” Insgroup was one of the first beta test users of the system and Kapiloff believes in the platform so strongly the agency was willing to invest it its development not only for its own growth but also for the

benefits it will bring to the agency distribution system. “Platforms like xagent, or another similar platform, are going be a disrupter in the distribution model,” Kapiloff said. “Small agents that don’t have the volume to attract direct appointments are going to be able to access standard markets that they did not previously have direct access to by using this platform, or other platforms like it.” For NFP, the xgent platform stood out as a solid fit for what all agencies want to accomplish – improved efficiencies and productivity for producers. “We’re interested in technology and other insurtech that brings to the forefront efficiencies and productivity,” Scali said. There’s no shortage of insurtech ideas in the market today centered on what some might call the “disintermediation of agents or insurance companies or both,” he said. But the xagent platform is more of a friend rather than a foe to agents. “This is kind of an ally, if you will, to productivity for insurance agents and brokers and that’s what caught our attention,” Scali said. “In our business model our largest expense in servicing customers is the human factor so anything we can do to gain productivity, bring processes that take time through communications with insurance companies more efficient, that improves productivity levels and frees up time for our people to help customers.” The idea for xagent (pronounced “za-agent”) began in 1997, says CEO Baird, when

continued on page 14


NATIONAL | Special Report | Agency Technology continued from page 13 he first entered the insurance industry. “I just remember seeing how behind we were in technology,” he says. Baird went on to build two different wholesale brokerage firms in the senior living/assisted living segment: Lighthouse Elder Care and K&B Underwriters. “That’s a very complex, subjective underwriting process that takes a lot of work,” Baird said. “We had to build a process to streamline business as much as possible and began to look at gathering data and building predictive modeling rates for pricing.” Baird knew he could move toward a more automated model. As the years progressed, Baird realized: “If we can do this in a class of business as complex and subjective as nursing homes, why can’t we do this in any class? We can, literally, and so that’s where xagent began.” Baird sold his wholesale brokerage interests and began developing xagent’s Universal Submission App about a year ago. “I just thought, there’s got to be a way to scale this (small commercial quoting) and do it much quicker by creating an automated submission process. But also building out of that your analytics of pricing and program development by partnering with agencies.” For the past year, xagent has been getting ready to launch, “bootstrapping” with very little money put into marketing. “We’ve been out there working with our first carrier and getting ready to launch our multi-carrier platform in the next six weeks,” he said. “Those 500 agencies that have signed up are just doing that from the landing page, which is

not even a full website.” Xagent also has been transacting real business as well. “We’ve got a private beta right now where we’ve had agents working live, quoting business to make sure everything works.” The investment by NFP and Insgroup is taking his platform to a new level and their influence over carrier partners is also helping. “We’ve actually been inviting our carriers to participate on this platform with us,” Scali said. Kapiloff believes that xagent’s Universal Submission App will change the way that carriers distribute their products. “Carriers are going to find that their technologies, and their way of doing business, asking agents to input the information to their systems, and asking agents to input the same information into multiple systems, sometimes three, four, five, six systems, is going to be a thing of the past,” he said. “Whether it’s our company or other companies that are trying to change the business model, in similar ways, I think the days of carriers having their own proprietary rating systems is coming to an end.” The hurdles to connecting insurance companies and brokers are starting to come down, said NFP’s Scali. “Many of those hurdles were simply access to market barriers and a lot of those barriers are now being challenged somewhat or entirely removed,” he said. One advantage, Baird said, is that xagent is built by agents, for agents. “We’re agents and we’ve got agents coming in and investing and helping us,” he said. Another advantage: the


time is right to implement a real insurance exchange platform, he said. “People have tried to come up with (exchange) solutions in the past,” Baird admits. But insurance carriers weren’t ready to go this direction. “That’s changing right now.” Think of xgent like a Priceline for insurance agencies, Baird said. “They can put their data in one time and get multiple quotes back. In the platform, we’ll not only connect carriers to log-in and get the quotes back and bind the business real-time (but) our platform will also do rate, quote, bind and issue.” Xagent is a licensed managing general underwriter or managing general agent in 50 states and will write both standard and surplus lines markets.

Bold Penguin

Bold Penguin, a start-up known for its online marketplace portal for commercial lines property/casualty agents, is also an “exchange” of sorts, says Ilya Bodner, CEO of Bold Penguin. Bodner has been a tinkerer in the insurance industry for 15 years. He started his career as a captive insurance agent by becoming the principal and opening up two Allstate offices in central Ohio. “Bold Penguin is an exchange where different agents, agencies, brokers, carriers, MGAs, insurtechs, whatever you call yourself, can come in and trade risks based on their desired appetite,” Bodner said. “An example would be someone from Arthur J. Gallagher that doesn’t get paid commission on anything that’s

less than $10,000 premium, can load in their customer’s application and try to match it with a small retail agent on the corner of Main and High that wants exactly that type of small business, and vice versa.” The platform provides a variety of segmentations based on business type or size, coverage type, size of coverage, number of employees, date incorporated, past carrier, past coverage; just about anything on an Acord form, Bodner explained. “We are trying to make it easier for the agents, specifically in commercial insurance, to go from quote to bind faster. That’s our big, hairy, audacious goal,” he said. “There’s nothing in the pre-sales or the marketing side. Nothing in the data management or agency management system or servicing, and nothing post the bind itself.” Bold Penguin tries to digitize, virtualize, and capture everything, and then automate workflows. “The exchange helps enable that because when you’re trading risks inside the exchange, all the information’s captured there so there’s no dual data entry. We can hook into agent portals, carrier rates, you name it, to make it a seamless transition,” according to the CEO. Bodner says Bold Penguin is helping to solve efficiencies by finding certain niches, certain classes, certain business types, where carriers are more INSURANCEJOURNAL.COM

technologically flexible to offer the integration. But even he admits there’s more work to be done when it comes to quoting small commercial, or in Bold Penguin’s view, SME’s with 100 or fewer employees. “I think anyone that tells you they solved it as a start-up is either lying or just completely brainwashed themselves to believing an alternative reality,” he said. “We’re certainly making great strides to solving it, but it still has a long way to go, and the industry itself has a long way to go.” The biggest challenge for solving the years long dilemma of single entry rating is carrier integration, Bodner said. “The biggest hurdle for us has been, by far, integrating with insurance companies and the first part of the problem was them believing or taking a chance in a startup,” he said. “We struggled with that for the first year of existence, and we’ve overcome that successfully because the exchange took off.” The challenge is age. “That is the legacy technology that exists in insurance companies,” he said. “Even the CIOs that bought into our concept, even the CEOs that have given us money to go out there and integrate with their insurance companies ... Even when that happens, when people buy in, there are still mainframe software and servers that exist inside these insurance companies that are old.” Often, the people who originally wrote that code are either retired or passed away. “The people that are fixing the legacy systems are scared and I can’t blame them.” Added to that has been the distrust people had in the INSURANCEJOURNAL.COM

beginning over insurtechs. “People weren’t sure if we were friends or foe in the beginning. Are we digitizing, are we cutting out the agent, are we virtualizing the process? We’ve been very consistent with our message that we’re here to empower the agent, the trusted advisor, to do his or her job a little faster, simpler, smoother.” Bold Penguin has options for any size agency, he says. “If you’re a small mom-and-pop shop or a fourth generation agency, we have a login, a web portal, or an app you can go through, and use our technology. If you are an insuretech, we have an API (application programming interface) you can integrate. If you are a giant call center, a giant brokerage, we have business rules and mechanisms you can adopt and pull-in and just set up your own contract. If you are a carrier-owned internal brokerage, we have a way for you to have an enterprise level integration or an account you can set up just by going to our website.”

Ask Kodiak

Ask Kodiak sees itself as a for commercial insurance. Ask Kodiak’s cloud-based, software platform helps commercial and specialty property/ casualty insurers market their products to independent agents, providing them with real-time carrier appetite information, eligibility requirements, and product highlights for rating, quoting and underwriting decisions. However, according to Michael Albert, co-founder of Ask Kodiak, he’s not in the insurance business. “The one thing that I would

say about us upfront is that we are a technology company, which is to say we’re not really in the insurance business proper,” Albert said. “We are support players in building technology that folks on the distribution side and on the carrier side can all use.” Ask Kodiak offers brokers a simple way to search for eligible carrier markets. Carriers get a digital marketing platform that gives them unique analytics about what agents and brokers are searching for and some easy-to-use tools to feature their products. The company’s search engine capabilities are also integrated with Bold Penguin’s commercial lines agent portal. “The integration with Bold Penguin helps agents quote new business faster and gives insurers more desirable classes of risk by their own definition,” Albert said. Bold Penguin uses the Ask Kodiak API to do just that. Agents and brokers can use the Ask Kodiak platform for free after signing up. “We’re trying to help the agent on the commercial lines side with efficiency. The way

things are traditionally, they’re getting updates on carrier products as appetite changes, or new states are rolled out, or new coverages are rolled out. They’re getting those updates by an in-person visit from a ter-

ritory manager, or by an email, or we’ll just say by old-fashioned means of communication,” he said “What we’ve built is a tool really that our carriers can use as a marketing platform to more effectively get the message out about their products, what coverages they support, what they’re good at, what classes they’re in, what geographies they’re in.” For agents, it really comes down to a “search bar,” Albert explained. “They can come in and type, ‘I’m looking for insurance for a roofing contractor,’ or ‘I’m looking for a business owners policy.’ Our search engine will then surface the matching carrier contacts,” he said. Ask Kodiak works well for small to the more complex middle market risks, he said. Albert and his co-founder, Allan Egbert, are no strangers to insurtech. The two built Agency Port, an agent portal for insurance carriers. “We know the space well enough to know that our customers, the carriers, don’t view their products as commodities and don’t always want to compete on price,” he said. Ask Kodiak is not about delivering the cheapest, fastest quote. “It’s about giving our carrier customers a stage to say, ‘Hey, here’s why we are the best product for a lawyer in Minnesota, or a car dealer in Iowa. Not only price, but here’s the attributes that make us special in that class, or in that state.’ So the agent is really armed to sell a policy,” according to Albert. Albert understands consumers will pressure agents on price and service. “Consumers

continued on page 49


NATIONAL | MyNewMarkets underinsured and un-insured motorist and UMPD; towing; more. New ventures accepted; multiple billing options as well as several discounts available. Available limits: Maximum $1 million Carrier: Mercury Insurance Group States: Ariz., Calif., Fla., Ga., Ill., Nev., Okla., Texas, and Va. Contact: Candace Borja at 760599-7242 or e-mail: candace@

Apartments, 1-4 Family Dwellings

Market Detail: Bass Underwriters (www.bassuw. com) covers residential apartment buildings and one-to-four family dwellings. In-house rates with a 10 minute turnaround available. Coverage includes property by the water with wind. Available limits: Maximum $7.5 million Carrier: Lloyds of London States: Conn., Mass., N.J., N.Y., and R.I. Contact: Customer service at 888-422-7715

Physical Damage Insurance Commercial Trucking

Market Detail: Guardian Insurance Wholesalers Inc.’s ( Physical Damage Program is offered through Lloyd’s of London and available in all states. Acceptable commodities include: paper, plastics, groceries, flatbed, reefer and more. The program is focused on risks with one-to-10 power units, including new ventures. This comprehensive coverage can be monoline or written as a combo policy with cargo.

Competitive rates, quick turnaround. Fleet submissions are also welcome. Available limits: As needed Carrier: Lloyd’s of London States: All states except N.Y. Contact: David Huff at 800325-9059 or e-mail: dlhuff@

Motorcycle Insurance

Market Detail: Pacific Specialty Insurance Company (PSIC) (www.psic-onespot. com) specializes in all types of power sports insurance, including street-legal, off-road motorcycle, scooter or ATVs. Available limits: Minimum $1 million, maximum $5 million Carrier: Pacific Specialty Insurance Company (PSIC) States: All states except Mass. Contact: Brian Weaver at 800303-5000 or e-mail: bweaver@

DJ Insurance

Market Detail: Insurance Canopy’s ( policies are structured specifically for DJ, VJ, and KJ professionals, with affordable, A+ rated general liability insurance through an easy online instant application process. One-to-three day


event policies available starting at $59. Unlimited additional insureds can also be purchased for just $5. An annual policy starts at $199. Available limits: Minimum $2 million, maximum $52 million Carrier: Great American, non-admitted States: All states Contact: Joanne Duke at 801763-1375 or e-mail: joanne@

Commercial Auto

Market Detail: SIS Wholesale Insurance Services ( offers 10 percent commission on commercial auto policies. Eligible vehicles include: passenger vehicles; vans; SUVs; pick-ups/light trucks; box trucks; flatbeds and stake trucks; cherry pickers under 60 feet; water trucks; refrigerator and utility trucks; snowplows; food trucks; hearses; and trailers. Target classes include: artisan; service and general contractors; agricultural; food trucks and caterers; manufacturers; wholesalers; retailers; office; sales/marketing professionals. Available coverages: commercial auto; trailers; liability; comprehensive; collision; medical and PIP;

Horse Drawn Carriage

Market Detail: Allen Financial Insurance/The Equestrian Group’s ( commercial equine liability policy is designed to insure any type of horse-related business including: arenas & stadiums; auctions & sales; boarding, breeding and training stables; carriage & wagon rides; guest ranches; equine assisted therapy; farrier’s insurance; guided trail rides; horse hauling; horse shows and clinics; outfitters and guided trail rides; polo clubs and polo grounds; pony rides and petting zoo; racing stables; riding clubs; rodeos; and therapeutic riding. Available limits: As needed Carrier: Unable to disclose States: All states except Alaska, Hawaii and Ala. Contact: Brent Allen, 800-8749191, This section brought to you by Insurance Journal’s sister website:


Dear Reader:


very business has a story to tell. For many corporations, small and large, that story ties closely to the personal lives of their founders. Throughout Insurance Journal’s history, we have come to know and appreciate many of the unique stories in our industry. And year after year, we have watched as our advertisers’ and readers’ companies have grown and changed.


As a leading industry news and information source, we are not able to profile all of the corporations that cross our path. Our position as journalists sometimes makes it difficult as well. Consequently, we have created this special supplement to allow our clients, and some of thecorporations you may work with on a daily basis, to tell their story ... in their own words. We hope you find this supplement interesting and informative. Best wishes from all of us at Insurance Journal.


Unlike others who have tried to replicate our success, the SIAA model focuses on quality, not quantity. We’re very careful about who we allow into our organization, and make sure we are operationally prepared to deliver on our mission.” Jim Masiello,

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your Future I The story of SIAA (Strategic Insurance Agency Alliance) goes back more than three decades to Jim Masiello and his independent insurance agency in New Hampshire. Struggling through a particularly difficult market, he – like so many others – was searching for a way to help his agency grow. As he put together the national network of agencies that became SIAA, Masiello focused on a mission to support the growth and continuing success of the independent insurance agency distribution system. SIAA has come a long way since then, growing into the nation’s largest independent agency distribution channel. More than 6,750 independent agencies

have chosen to join the alliance, writing more than $7.4 billion in combined premium. SIAA has 49 regional master agencies to uniquely deliver upon its founding principles with the tools and resources built for the agency of today and tomorrow. By partnering with SIAA, agents seeking to grow the income and value of their agencies gain access to many of the nation’s biggest and best insurance companies – at top-tier commissions, along with national and regional incentives and profit sharing. Independent agency members gain access to support services well beyond the reach of smaller agents,

Is Here including marketing, educational events and training, programs & specialty markets, E&S partnerships, life & benefits partners, and perpetuation planning. The result is the ability to grow and compete with bigger agencies. For captives, direct writers, experienced agency producers and life and financial agencies, SIAA and its master agencies provide structure and teach them how to become an independent insurance agency business. For many of the top insurance companies, SIAA partnership has proven to be their largest independent agency distribution channel, allowing them to consistently meet or exceed their goals. SIAA is committed to delivering profitable premium growth and

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NATIONAL | Business Moves

Hub, Der Manouel

Hub International Ltd. has acquired the assets of Fresno, Calif.-based Der Manouel Insurance & Financial Services Inc. Terms of the deal were not disclosed. DMIG’s leadership team and staff will join Hub California. Michael Der Manouel Jr., president and CEO of DMIG, will join the Hub California executive management team. DMIG is a multi-line insurance brokerage that specializes in numerous vertical markets including agriculture, transportation, non-profits and construction. Chicago, Ill.-based Hub is an insurance brokerage that provides property/casualty, life and health, employee benefits, investment and risk management products and services.

Alera Group: Aisling Partners, HR Benefit Advisors, Spring Consulting, Tigard

Alera Group has acquired three East region firms, effective February 1, 2018. Alera Group is a Deerfield, Ill.-based national employee benefits, property/casualty, risk management and wealth management firm. Aisling Partners Insurance Brokerage LLC, located in Worcester, Mass., is an independent employee benefits brokerage

benefits plans, including life, health and ancillary, and has annual revenues of approximately $4.5 million. The yourPFO team will become part of Brown & Brown’s Westchester, N.Y., profit center, which operates under the leadership of Don McGowan, regional president of Brown & Brown Inc. The addition of the yourPFO operation to the Westchester profit center will bring employee benefits consulting experience and expertise for large employer groups, McGowan said in a company press release. Brown & Brown Inc., through its subsidiaries, offers a range of insurance products and related services, serving business, public entity, individual, trade and professional association clients nationwide. Additionally, certain Brown & Brown subsidiaries offer a variety of risk management, third-party administration and other services.

and consulting firm that has been in the Northeast for more than 15 years. It is a boutique firm specializing in the design, implementation and administration of health and welfare programs. HR Benefit Advisors, located in Rochester, N.Y., and founded in 1993, focuses on offering products and services to help businesses navigate the employee benefits industry. Spring Consulting Group LLC, located in Boston, Mass., is a multidisciplinary employee benefits and risk management consulting firm. Simultaneously, Alera Group acquired Tigard, Oregon-based Davidson Benefits Planning. This new round of acquisitions brings Alera Group's total number of acquisitions since launching in January 2017 to 20.

Associated Benefits and Risk Consulting (ABRC) announced it will acquire Diversified Insurance Solutions, based in Milwaukee, Wisconsin. The transaction is expected to close next month. Terms of the transaction were not disclosed. Based in Green Bay, Wisc., ABRC is an affiliate of Green Bay, Wisc.-based Associated Banc-Corp, and is a multi-line insurance and consulting firm with 400 employees. As part of the proposed transaction, key Diversified Insurance Solutions executives will continue leadership roles for some time. Along with current ABRC senior leadership, the team will be responsible for the integration and expansion of the business going forward.

Brown & Brown of New York, yourPFO Consulting

Arthur J. Gallagher & Co., Williams Insurance Agency

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Arthur J. Gallagher & Co. has acquired Sioux Falls, South Dakota-based Williams Insurance Agency Inc. Terms of the transaction were not disclosed. Founded in 1967, Williams Insurance Agency offers a full range of property/ casualty, life, health and voluntary benefits coverages to businesses and individuals, INSURANCEJOURNAL.COM

primarily across South Dakota. Greg Heineman, Timothy Donohue, Dwight Vondra and their associates will continue to operate from their current location under the direction of Patrick M. Gallagher, head of Gallagher’s Midwest retail property/casualty brokerage operations, and Jerry Roberts, head of Gallagher’s Heartland region employee benefits consulting and brokerage. Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Rolling Meadows, Ill.

Jardine Lloyd Thompson Group, International Risk Consultants

Global broker Jardine Lloyd Thompson Group has acquired International Risk Consultants, a U.S. broker specializing in specialist trade credit and political risk insurance. Based in Columbus, Ohio, and operating across the U.S., Brazil, China and Hong Kong, IRC provides trade credit, singleand-multi-buyer and political risk insurance. The announcement said IRC’s product specialties align with JLT’s global credit, political and security risk capabilities in Europe, the Middle East and Africa, and Asia. JLT and IRC already work together serving a number of JLT’s global CPS clients. IRC companies will be rebranded JLT Specialty USA CPS practice, JLT Asia CPS practice and JLT Brazil CPS practice.

provides risk management consultation and placement of professional liability and other insurance coverages. It was a founding member of a/e ProNet, the National Network of Architects’ and Engineers’ Professional Liability Insurance Brokers.

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Risk Strategies, Prosurance Redeker

Risk Strategies has acquired New York City-based Prosurance Redeker Group LTD. Terms of the deal were not disclosed. Risk Strategies is a Boston, Mass.headquartered, privately held national insurance brokerage and risk management firm. Prosurance Redeker Group is a specialty brokerage serving architects and engineers. Formed in 1991 from the merger of Redeker Brokerage and Prosurance Brokerage, Prosurance Redeker Group is led by its two principal owners, Greg Kumm and Warren Redeker. The company

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3/2/18 11:13 AM


Idea Exchange


Buyers Aren’t Happy With Their Cyber Insurance: J.D. Power

By David Pieffer


n any given day, it is hard not to read an article or report on some type of cyber topic. Cyber insurance is one of the key concerns within the insurance industry today and possibly one of the most misunderstood. In late 2017, Advisen in partnership with Partner Re reported that 62 percent of the agents and brokers they surveyed felt cyber coverage was becoming more consistent but that it still was hard to compare policies between carriers. The report also noted that the industry was split on whether cyber property damage should be covered by the property policy (44 percent) or the cyber policy (40 percent). The takeaway: Agents not understanding the exposures and coverages is the main obstacle to selling cyber insurance. (AdvisenPartner Re: 2017 Survey of Cyber Insurance Market Trends) Further exacerbating the situation is the fact that cyber liability, business interrup-

tion and property coverage all potentially apply, in some degree, to cyber-related claims. Knowledge of the cyber-related particulars of these coverages is particularly important when determining which policy is triggered depending on how the incident occurred and relative to the other policies. Clearly, this developing area of risk is one that can be confusing for insurance professionals and even more so for insureds. In the 2017 J.D. Power/RIMS Large Commercial Study, the survey of more than 1,200 risk professionals found that the respondents were least satisfied with the industry’s response to cyber insurance. There was a lack of confidence in the handling of cyber prod-


ucts, including liability, physical damage, business income and business interruption. As one respondent said: “I think more emphasis on assisting with the preventive aspects of cyber losses—loss control, training, pre-loss resourcing of business partners who will respond postloss — would attract a bigger response. There are so many hidden and unknown sides to this exposure that clients require more education and hand-holding to perceive their insurers as partners.”

Low Satisfaction

As found in the survey, customers have a low level of satisfaction related to cyber products, generally viewing them as a specialty line and expecting carriers to have the expertise and capability to handle this line of business. So far, there is a lack of customer trust in the industry’s ability to deal with this exposure. There also are strong feelings that both claims and loss control lack the capabilities to handle the exposure or to provide the kind of risk management support customers need to address their financial, reputational and operational exposures.

The low satisfaction scores for cyber products are fueled by a lack of understanding by the customer of the coverage being provided compared to what the customer believes they need. The survey also found that one-third of the respondents either didn’t know or thought there were additional coverage gaps in their cyber program. Given the respondents to this survey were all insurance/risk professionals, the lack of clarity related to cyber coverages points to the monumental task the industry faces to provide more information and insight about their policies. Respondents also identified gaps in risk and loss prevention (16 percent) and product alignment (10 percent), suggesting carriers need to provide more communication and clarity related to loss prevention and risk structuring services. Carriers must be able to better educate customers and brokers about the alignment of potential risks and the coverages, risk mitigation and claim management services that are needed related to cyber risk. The Large Commercial Study also found that as customers try to understand whether they currently have the right coverage, they also are undecided about what their future needs might be related to cyber insurance. Respondents predominantly cited “other drivers” (29 percent) as the future drivers of cyber risk. This underscores the challenges insurers have in understanding the nature of cyber risk and how it complicates their ability to navigate INSURANCEJOURNAL.COM

the choice of insurance tools to address it. Such uncertainty belies the need insureds have for quality advice, service and education related to cyber risk and what drives it. Among respondents, there is little consensus on what is driving or will drive cyber risk going forward, but those most commonly mentioned were: • Social engineering (e.g., phishing, malware, ransomware) — 14 percent: Attacks have been growing in frequency and severity and are often crippling and destructive to organizations. • Advancements in technol ogy/Internet of Things (IoT) — 13 percent: As companies become more reliant on technology and systems become more integrated and connected, comments indicate this will lead to greater exposure and vulnerabilities to a host of devices and networks. • Insurance product alignment, customization and breadth — 10 percent: Comments underscore the need for alignment of insurance products, standard languages and broader coverages. • Breaches leading to data corruption or theft (intellectual property, identity) — 8 percent: General breaches and breaches leading to data corruption or theft of intellectual property and identities also are leading concerns. Findings of the Large Commercial Study reported a strong alignment between current coverage gaps and future INSURANCEJOURNAL.COM

drivers related to cyber risk. This alignment shows there is both an immediate and ongoing need for greater loss prevention services, risk mitigation strategies, insurance product alignment, clarity of coverage and greater coverage options. Carriers must rethink how they develop their products and staff, how they educate agents and brokers, and how they market and sell cyber policies to their customer base. Even though the study discussed here was focused on large commercial carriers, the issues are not limited to large companies such as Merck or Toyota. The problems are equally as important for middle-market companies and small businesses. Smaller firms are much less likely to have the ability or time to put in place elaborate

or extensive security precautions, yet their exposures are just as real. Even individuals are not immune to a cyber event given the growth of individual-focused technologies like autonomous (self-driving) cars, drones, smart vehicles, smart homes and the 62 percent of adults in the United States using online banking. (; Online and mobile banking statistics, Jamie Gonzalez-Garcia, March 20, 2017) Clearly, there is or soon will be a need for robust cyber insurance products in the personal lines market also. According to PricewaterhouseCoopers (PricewaterhouseCoopers, Insurance 2020 & beyond), the U.S. cyber market is the fastest-growing line in the insurance industry and will grow nearly 300 percent over the next two years to $7.5 billion. With so much uncertainty in the market, carriers can’t simply put out a piecemeal cyber strategy.

The strategy must be clearly defined and aligned with the other standard lines of business (property, liability, inland marine and BI, among others) to answer customer needs and concerns. This should include strong loss prevention and risk mitigation plans, knowledgeable claim organizations and effective educational processes for customers and agents/brokers. Carriers must build and manage cyber products with the understanding that the cyber coverages will become fully integrated with property, liability and personal auto/homeowners. Cyber insurance also will impose some realignment/ restructuring of insurance organizations. Carriers not willing to address the changes needed to properly service customers’ growing cyber risk needs may find themselves out of the market altogether. Share this

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Pieffer is the Property & Casualty Insurance Practice Lead for J.D. Power, where he handles advancing the growth of J.D. Power’s core P&C insurance practice.


Idea Exchange

Minding Your Business

Contingency Planning for Agency Owners

By Catherine Oak


ost of us don’t want to think about what would happen to our businesses if we were not able to be there one day because of disability or death. Most owners that are key to the organizations know that their firm would be in “real” trouble overnight if something happened to them and there was not a catastrophe plan or contingency plan in place. We know about planning for our clients and insuring their risks, so what about planning for our agencies to be able to transition in the event something happens to the owners? Such a plan is called a contingent buy-sell. The purpose of the contingent buy-sell

is to have a known buyer with known terms to allow for the orderly sale of the business. It is an attempt to prevent a “fire sale” or total collapse of the business upon the death or disability of owners. Contingent buy-sells are similar to “regular” buy-sells. It is an agreement between an owner of a business and someone else to sell the owner’s interest if or when some triggering event occurs, such as the death or disability of the owner. The contingent buy-sell can, and often does, include parties outside of the business as the potential future buyers. This is only true if there are not parties within the agency that have not been designated as “key” and don’t have any stock or a written agreement in place if something were to happen prematurely to the owner.

Finding the Right Party

Finding the appropriate party to potentially sell the business to is typically the first step. The thought process needs to be finding a party that can run the business, retain the accounts, preserve the equity and pay a fair price. This person might be another stockholder, an employee or even a friendly competitor down the street. The other party is the one that will be buying the business, and once the triggering event occurs, it might not be reversible. After the other party is properly screened, the next step is for the two parties to work


on key elements of the agreement, with or without a consultant or attorney.

Basic Facts

Each contingent buy-sell agreement must be tailored to meet the unique circumstances of a specific situation. Competent legal and tax advice must be used to draft an effective document. The following are some common elements that a contingent buy-sell agreement should include: • The recital should have a specific commitment that the owner agrees to sell and the buyer agrees to buy the interest in the agency. Variations, such as first-right-of refusal need to be clearly stated at some point in the agreement. • The triggering event needs to be defined. Death is self-evident, but disability needs to be clearly defined. • An agreement as to what is being sold and how to determine the assets and liabilities of the business interest that will be transferred. The sale of stock is more likely in an internal sale. If external assets (book of business) are sold, the third party cannot write off the purchase of stock. Most third parties also do not want liabilities. • A stated purchase price or a method to determine the value, such as an appraisal, needs to be included. This should also include terms outlining any payout structure and the funding mechanism, such


as life or disability insurance, if any, in an internal plan. Externally, the third party needs to make sure they can handle the terms of the sale, including the down payment required. If there is an earn-out, and usually in contingent buy/sells there are, then based on the price that the parties agree is fair, the time period can be selected and a reasonable earn-out established. Most often, this would be around 30-to-40 percent per year for three or four years, unless there is a down payment. • Spouses need to be signers to the agreement. The owner’s personal trust or will should be written to factor in the contingent buy-sell as well.

Variations to the Terms

The buy-sell can have variations to the terms, such as the seller can sell to another party (not the stated buyer) if offered a higher price. In some cases, the “buyer” might just manage the firm until an orderly sale can take place. In this case, if there is just one owner, the seller might be the spouse. It is often a good idea if the spouse does not have insurance experience to have an industry expert, such as an insurance consultant that performs insurance agency mergers and sales, written into the contingency plan. This person can also be another insurance agency friend that is not purchasing the agency but may be available to guide the spouse and family.

of what renews, which usually makes a third-party buyer more comfortable.

‘Every business needs to have an arrangement for the death, disability or retirement of the owners.’ Tax Considerations

All agreements must take into consideration any tax consequences. Thorough estate planning must be part of the process. Determination of the deductibility of insurance premiums or any other funding techniques must be established and included in the analysis of the plan. If premiums are deducted as a business expense, benefits are not tax free to the recipient. Seek out proper tax advice.

Securing Key Employees

internal sale, it is also important that the owners have set in place which of the key people might need to have stock or additional compensation.

Final Advice

Every business needs to have an arrangement for the death, disability or retirement of the owners. The damage that occurs when a firm does not plan for these events can be devastating not only to the agency, but also to the family members, employees and clients. The business may end up being sold at a fire sale price or may not be able to be sold at all. Proper planning will limit most problems and allow for the successful perpetuation of the agency. Take the time to estabShare lish a contingent buy-sell now.

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Whether there is an internal or external sale, it is also important for the agency owner or owners to make sure that key people are taken care of in case of their death or disability to help transition the USA12043.qxd 1/4/08 2:26 PM isPage book of business to the buyer. If there an

Catherine Oak is the founder of the consulting firm, Oak & Associates, based in Northern California. The firm specializes in financial and management consulting for independent insurance agencies, including valuations, mergers/acquisitions, clusters, sales and 1marketing planning as well as perpetuation planning. Phone: 707-936-6565. Email:

Setting the Purchase Price

The establishment of the purchase price can often be the weakest link in any buysell agreement. Stating a specific price is very dangerous. It must be updated annually and based on reasonable assumptions. Using a formula is safer, however, it may also eventually become outdated and does not take current circumstances into consideration. The best method to determine the purchase price is to require a professional appraisal at the appropriate time as an option to the formula if it becomes unrealistic. Current debts or obligations will need to be part of the equation. The purchase price can be paid in a lump sum or it can be based on some type of pay-out or earn-out INSURANCEJOURNAL.COM


Idea Exchange

Tech Talk

Are Agents Finally Taking Up the Digital Challenge? By Tom Wetzel


hen the results of the second Insurance Digital Transformation Survey (www. are released in a few weeks, we should see improvement in how agents are adapting to digital technology - more agencies upgrading their websites, adding a client portal or mobile app and using social media more effectively. There will likely be reason to applaud but perhaps not to cheer because significant deficiencies and practical roadblocks continue to remain. In advance of the IDTS survey, our firm conducted a small survey to explore the digital challenges from a different perspective.

For practicality, we kept the survey short and limited it to small-to-mid-sized agencies. Several takeaways jumped out. First, we found agreement that showcasing “services and expertise” is the most important function for an agency website. No consensus, however, emerged on whether or not each agency derived significant value from it. Slightly more than one-third reported a modest increase in leads and new business while less than one-quarter reported seeing some new business from their websites “but not enough to justify spending more time on it.” On the positive side, more agents are looking to add features such as mobile apps, chat, video and testimonials. Respondents also expressed greater interest in video and a growing understanding that Google and Facebook are changing the rules of engagement and what it takes to maintain online visibility (SEO). Marketing takes manpower,


so we also asked who performs marketing duties for the agency and how much time they spend. Over half employ one staff member who does the marketing for the agency in addition to other duties. Onefifth reported having a marketing person full-time and another one-fifth had not assigned anyone to perform marketing functions.

Too many agencies still don’t measure the effectiveness of their website. In 2016, the first IDTS study showed only 43 percent of agents reported that they operated on a 24/7 basis using staff, automation, or a combination. In our study, we asked agents how they handle after-hours claims. The results produced a mixed bag. Thirty percent said they instruct policyholders to report the details to the carrier first, another quarter only provide voicemail and another 20 percent use an answering service. One concern: more than half of survey respondents said they either have no access to the metrics of how their web-

site is performing or do not read reports they do receive. Given the large number of technology options available to agencies as well as time and staff constraints, it’s not hard to understand how these metrics could be overlooked. At the same time, however, the critical importance in evaluating the ROI of an agency website cannot be overstated. These findings indicate two things: • Too many agencies still don’t know how or take the time to measure the effectiveness of their website, and; • More agents now see their website transitioning from a “passive” tool to a more dynamic, promotional engine. Agents can never become complacent about digital technology because the landscape is forever changing – and the pace of change is speeding up Share this artias well.

cle with a colleague. IJMAG. COM/319DC Wetzel heads his own insurance marketing firm that specializes in website design and social media programs for agents through its Social Media Content Roadmap©. Website: www. Email:


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Idea Exchange

Human Resources

Analytics and Automation Reshaping the HR Process

By David E. Coons


dvancements in technology are driving continued evolution throughout the insurance industry. From insurtech and telematics to artificial intelligence (AI) and digitalization, the industry continues to face increased disruption across all areas and functions. Within the human resources segment, AI and predictive analytics are beginning to play an important role throughout the recruitment and staffing process — from sourcing through retention. Organizations are utilizing new technologies to pull increasingly in-depth data and information that can establish trends and develop insights throughout the employee lifecycle. In addition, automation is providing a number of advantages that can be leveraged for recruitment and retention.

Artificial Intelligence

Within the insurance industry, the war for talent continues to rage. As a result, organizations are looking for new ways to successfully fill their critical open roles. More and more, they are harnessing evolving AI capabilities to better source and match candidates. According to a recent LinkedIn survey, 46 percent of talent acquisition leaders report that their recruiting teams struggle to source and attract qualified candidates. Incorporating AI into the sourcing phase

allows teams to streamline the process and increase recruitment success. This technology searches the multitude of available data provided online — including resumes, professional portfolios and social media profiles — to find passive candidates who match job requirements. It can also be used to narrow down and identify key sources that have historically produced the highest success in terms of hires and placements for an organization. In addition to talent sourcing, 52 percent of talent acquisition leaders from the LinkedIn survey report that identifying the right candidate is the hardest part of their jobs. By using automated candidate matching systems, organizations are able to utilize an algorithm to identify the strongest matches for open roles. Multiple algorithms pull from multiple sources to gather

data on skills, salary preferences, personality traits, qualifications and experiences. AI is then able to compare that information against the job requirements and organizational culture. The systems are also able to identify candidates who have opted in and are either actively job seeking or are considered open to new opportunities. With modern talent acquisition supported by AI, the time used for the recruitment process is cut nearly in half. In addition, the candidate search is efficiently narrowed down to only the best matches.


Predictive Analytics

Turnover is a constant concern for organizations. In today’s tightened labor market, ensuring employees are engaged is critical to increasing retention and cutting down on turnover. Fortunately, predictive analytics is providing organizations with unique insights into employee retention. Human resources continues to collect enormous amounts of information. In addition, the rise of employee engagement surveys and other metric-gathering systems are garnering additional data that can provide an inside look at turnover and retention. Depending on the metrics collected, some analytic systems are able to predict pending turnover. These insights are helping organizations be more proactive in addressing the top reasons employees are leaving. Companies are also utilizing analytics to gain a deeper understanding of the true cost of turnover. By determining the cost-per-hire and the cost-per-turnover, organizations are able to gauge whether it is costlier to retain current employees than to replace them. AI and analytics are predicted to transform the recruitment area in the coming years. These technological advancements are being used to streamline and automate many of the time-consuming tasks historically undertaken by recruiters. As a result, these professionals are able to be more strategic and focus on the critical piece of recruitment — relationship building. The true role of emerging HR tech is to enable today’s recruiters to develop real connections at a more efficient speed. While AI and analytics can help, it is still important for recruiters to grow connections and have real conversations with candidates. Share this article with a

colleague. IJMAG.COM/319AI Coons is senior vice president of The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: INSURANCEJOURNAL.COM

NATIONAL | Special Report | Agency Technology continued from page 15

just expect more,” he acknowledges. “Our platform, our tool, is really designed to help agents be more efficient in the sales cycle, so that they can get the business closed.” For Ask Kodiak, as for Bold Penguin, carrier buy-in and integration have been challenging. “It’s a mean industry,” Albert said. “Insurance is not exactly a supportive, nurturing incubator for any kind of start-up, whether that start-up is supportive of the insurer, or trying to disrupt the industry. It’s a tough space to get something new going.” But not when it comes to agents. “Agents are game. They are salespeople, and fundamentally, I see more action from them because they’re closer to the metal,” Albert said.


Another insurtech getting ready to stirup the commercial lines market is Corvus Insurance based in Boston. At the helm is Phil Edmundson, 30-plus year veteran and co-founder of William Gallagher Associates (acquired by Arthur J Gallagher). Edmundson was an active leader in both the Worldwide Broker Network and Council of Insurance Agents and Brokers. Corvus is set up as a managing general underwriter, but Edmundson is quick to note that Corvus is not a traditional commercial insurance company. Corvus leverages big data and Internetof-Things technologies to put tools and insight into the hands of middle market brokers and their clients to help predict and prevent loss. Founded last year by Edmundson, Corvus offers an online platform called the CrowBar that gives brokers and policyholders on-demand access to policy information, claims reporting, loss prevention recommendations and business intelligence. Corvus announced that Bain Capital Ventures invested $4 million in seed round INSURANCEJOURNAL.COM

funding in February. Edmundson believes that Corvus helps everyone in the insurance chain: “For the underwriter who pays fewer claims, for the broker who brings powerful data to the customer and for the customer who has a way to visualize their risk.” Corvus is operating in a “soft launch” and will begin accepting submissions for its Smart Cargo product this month. Argo Insurance will serve as the primary cargo carrier. Edmundson says different carriers will be selected for two future products to be released this year – Smart Cyber and Smart Commercial Auto. What sets Corvus apart, according to Edmundson, is its use of big data in underwriting. For example, for its cargo product, Corvus utilizes data from sensors placed inside shipments for temperature control for decades, he said. “That kind of data gives us a really big data set and it’s through an exclusive contract with a sensor company. From that we can recognize good data and bad data, recognize anomalies and things that change over the policy year.” The data for future products will come from other sources, he said. “In the case of our cyber product, it can come from web scans. For commercial auto, it comes from data of mobile phones of the drivers of a commercial organization. In other cases, it might come from social media or private big data sets. “But overall, it’s the same. We are taking new types of data that no one has used before to predict and prevent commercial insurance claims,” he said. Edmundson believes his experience as retail broker provides good insight into the needs of retail insurance brokers of today and their desire to bring new, differentiated tech-enabled products to their customers. “The policyholders see digital revolution in everything else that they work in but haven’t experienced a great digital platform or tech enable product from commercial insurance industry,” he said. Those customers are driving the industry to change as well as venture capitalists looking to invest. “Commercial insurance is a huge market

that is ripe for innovation and there’s a lot of investment interest. That stirs the pot and brings together insurance professionals with tech expertise and funds new ventures like Corvus,” Edmundson said. He expects the industry will see many more insurtech startups focused on empowering brokers rather than those that want to displace them. “We are not trying to disintermediate anyone,” he said. “We are trying to empower brokers because the present system moves a little too slowly in bringing tech-enabled insurance products to Share this article with a colmarket.”

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Closing Quote Benefits of Offering Legal Insurance

By Dennis Healy


re standard voluntary benefit offerings enough to keep employees (and, by extension, employers) satisfied? A Society for Human Resource Management study found that while three-quarters of HR professionals believe employees are happy with benefit offerings, only 27 percent of employees reported high satisfaction. What’s causing the disconnect? Perhaps it’s that employees now expect a more robust benefits package that can help with more of their medical, emotional, financial and legal needs. They want benefits that they can use in their everyday lives, on a regular basis — not just when they are sick, injured or elderly. For example, long-term care insurance can help with the costs of assisted living or home health aides down the road, but what about everything they should be doing now to help prepare — creating an estate plan that includes a will, trust and other legal documents that

make their wishes clear? Employers who want to be more proactive about their employees’ health and well-being are turning to other voluntary benefits like legal insurance to fill in gaps. In the past 20 years, the percent of employers who offer a legal benefit to their employees has gone from 13 to 25 percent, according to SHRM. These are the employers who understand how legal insurance complements and supports other voluntary benefits.

Benefit Choices

When employers are choosing what to include in their benefits package, many of them tend to go with more traditional voluntary benefits. One reason is because they aren’t as familiar with legal insurance and may need additional education about the benefits. Employers may not realize, for example, that legal insurance is one of the few voluntary benefits useful to every single employee. No matter an


employee’s age, relationship status or background, every single person encounters legal situations. ARAG recently conducted a study that found three out of four Americans experience at least one legal event every year. Common legal matters include wills, traffic tickets, divorce, child support and bankruptcy. Providing employees access to a legal insurance plan will help them save money on attorney fees, which average $343 an hour, according to The National Law Journal and ALM Legal Intelligence. With legal insurance, those attorney fees are usually covered. Not only does legal insurance save employees money, it also decreases the time and stress employees spend dealing with these issues – which impacts their productivity at work. By providing employees a benefit that reduces financial stress (by saving money on attorney fees) and connecting them with professionals to help with stressful situations like divorce, caregiv-

ing and debt, employers benefit their own bottom line.

Employers who want to be more proactive about their employees’ health and well-being are turning to other voluntary benefits like legal insurance. Once employers understand this and add legal insurance to their benefits, they see the value firsthand. In fact, 97 percent of employers with ARAG legal insurance retain the plan from year to year. When employers realize they need a more comprehensive benefits package to remain competitive, they’ll be looking for options beyond traditional voluntary benefits. Legal insurance is easy to implement and provides more value to employees. Healy is the chief sales officer at ARAG Legal Insurance.


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Insurance Journal West 2018-03-19  
Insurance Journal West 2018-03-19  

Agency Technology. Market: Medical Professional Liability. Corporate Profiles - Spring Edition.