Insurance Journal West 2018-06-18

WEST REGION How State Fund Reduced Opioids J.D. Power on Lemonade’s Policy 2.0 Autonomous Vehicles and Bonding

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Contents June 18, 2018 • Vol. 96 No. 12 • West

West W1 Opioid Maker Wants Alaska Lawsuit Dismissed

W10 BONDING WITH CALIFORNIA’S

AUTONOMOUS VEHICLE TESTING AND DEPLOYMENT REGS

National 8 Insurtech Investments Up in Q1

W6 California’s First Cannabis Business Owners Policy Approved

10 Nearly One-Third of Workers’ Comp Claims Due to Construction Falls

W8 Driver Had Hands off Wheel in Fatal Tesla Autopilot Crash

12 Personal Cyber Security Packages Being Tested on Affluent Market

W8 OSHA Seeking $65K in Penalties in Colorado Envirotech Worker Death

14 Global Commercial Insurance Market to Grow $170B by 2021: Aon Inpoint

W12 California State Fund Says it Reduced Opioid Prescriptions by 60%

20 Special Report: Keeping Up with Construction Insurance

W14 J.D. Power: Why Lemonade’s Policy 2.0 Matters

24 Schinnerer Group Rebrands as ‘Victor’

W16 I.I.I. on How Insurance Boosts Economy, Communities and Innovation

27 U.S. Commercial Insurance Prices Increase for First Time in 3 Years

Idea Exchange W10 Autonomous Vehicles: Bonding with California’s Autonomous Vehicle Testing and Deployment Regs

8

INSURTECH INVESTMENTS HIT NEW HIGH IN Q1: WILLIS TOWERS WATSON

28 How Agency Partnerships Help Agencies at a Crossroad 30 Insider Viewpoint: Contractors’ Use of Digital Surveillance Enhances Quality; Reduces Defects

Departments

36 Minding Your Business: Becoming a Socially Responsible Agency

11 Declarations

38 Closing Quote: 3 Reasons Why Your Clients Need to Buy an Umbrella Policy

W2 People

11 Figures

30 HOW CONTRACTORS’ USE OF DIGITAL

4 | INSURANCE JOURNAL | WEST JUNE 18, 2018

SURVEILLANCE ENHANCES QUALITY WHILE REDUCING DEFECT LITIGATION

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OPENING NOTE

Write the Editor: awells@insurancejournal.com

24/7 Tech: Not Normal or Healthy

I

Publisher Mark Wells mwells@wellsmedia.com

EDITORIAL

SALES

Editor-in-Chief Andrea Wells awells@insurancejournal.com

West Sales Dena Kaplan (800) 897-9965 X115 dkaplan@insurancejournal.com

East Editor Elizabeth Blosfield eblosfield@insurancejournal.com

Romeo Valdez (800) 897-9965 X172 rvaldez@insurancejournal.com

Chief Content Officer Andrew Simpson asimpson@insurancejournal.com

Southeast Editor/MyNewMarkets Amy O’Connor aoconnor@insurancejournal.com South Central Editor/ Midwest Editor Stephanie K. Jones sjones@insurancejournal.com West Editor Don Jergler djergler@insurancejournal.com International Editor L.S. Howard lhoward@insurancejournal.com Columnists Catherine Oak Contributing Writers

Michael Aylward, Nick San Filippo, Don Neff, Rachel Schoeffler, Martha Waggoner IJ ACADEMY OF INSURANCE Director Patrick Wraight pwraight@ijacademy.com

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

South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com Insurance Markets Manager Kristine Honey (619) 584-1100 X132 khoney@insurancejournal.com Social Media Manager Ly Short (619) 890-7735 Lshort@insurancejournal.com

Associate Director Barbara Whiffen bwhiffen@ijacademy.com

Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125 kdelamora@insurancejournal.com

ADMINISTRATION

DESIGN/WEB

Chief Financial Officer Mark Wooster mwooster@wellsmedia.com

MARKETING

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

Marketing Director Derence Walk dwalk@insurancejournal.com

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

Marketing Administrator Gayle Wells gwells@insurancejournal.com

Senior Web Developer Chris Thompson cthompson@insurancejournal.com

NEW MEDIA

Web Developer Jeff Cardrant jcardrant@insurancejournal.com

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

Web Developer Terrance Woest twoest@wellsmedia.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

6 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

n an “always on” society - where we constantly carry mini-computers in our pockets that are capable of solving nearly any problem or desire with a tap, pinch or click - we can’t seem to escape the ever-increasing role that computer technologies play in our lives.

But is this “new normal” quite so normal when it comes to health?

“We have started to normalize a state of permanent urgency, and most of the time, it’s not justified,” said Simon Gottschalk, a University of Nevada at Las Vegas (UNLV) sociology professor. “From a sociological perspective, since the self emerges out of the interactions with others, the fact that an increasing number of interactions are occurring at the terminal may spell the end of the self as we know it.”

In his new book, “The Terminal Self: Everyday Life in Hypermodern Times,” Gottschalk examines the social and psychological toll of increasingly online lives on work, education, family life, interactions, our sense of self and more.

According to Gottschalk, the constant intrusion of terminals, even with all of their conveniences, impacts our lives in several distinct and often unhealthy ways.

Health: In today’s “always on” society, we’re constantly being bombarded with negativity on email and social media. The problem? Being on the receiving end of constant anger, stress or other negativity triggers toxic neurochemical reactions in the body.

Relationships: Gottschalk warns that today’s “instant gratification” culture can lead us to unrealistically expect people to tend to our desires just as quickly. “It corrupts our interaction with people. We begin to feel entitled to have every one of our impulses gratified immediately,” he said.

Empathy: Face-to-face interaction incorporates a number of non-verbal cues such as facial expressions, gestures and eye contact, but online you’re reduced to one medium — language. “That really complicates communication,” says Gottschalk.

FOR QUESTIONS Loneliness: The capacity to broadcast every REGARDING SUBSCRIPTIONS: Call: 855-814-9547 passing thought, desire or emotion online is Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: unique in human history, yet research shows insurancejournal.com/subscribe that at no point in our history have so many Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media people reported being lonely.

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 Loss of Skills: Gottschalk says there is per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pubevidence that dependence on terminals has lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended caused previous skills to atrophy. “The fewer 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 skills we develop to accomplish everyday Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. functions, the more we rely on the terminal.

Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, And the more we Circulation Department, PO Box 708, Northbrook, IL 60065-9967 use the terminal, ARTICLE REPRINTS: For reprints of articles in this issue, contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or Editor-in-Chief the less skilled kdelamora@wellsmedia.com Visit insurancejournal.com/reprints/ for more information. we become.”

‘The fact that an increasing number of interactions are occurring at the terminal may spell the end of the self as we know it.’

Andrea Wells

INSURANCEJOURNAL.COM

National

Insurtech Investments Hit New High in Q1: Willis Towers Watson

I

nsurtech investment deals reached a new high in the 2018 first quarter, with older insurers and reinsurers increasingly committing financing right along with traditional venture capitalists, Willis Towers Watson found.

There were 66 insurtech investment deals during the quarter at an investment volume of $724 million. That’s up 155 percent from the 2017 first quarter and 16 percent from Q4’s collective deal value of $624 million, Willis Towers Watson noted in its new quarterly insurtech briefing produced in collaboration with CB Insights.

The briefing cites seven insurtech investment rounds worth more than $30 million 8 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

that were completed during the quarter.

Also noteworthy: insurers and reinsurers preferred minority investments in startups developing technology that could improve things in their own operations such as distribution costs and claims handling, a focus on better processes overall. But traditional venture capital investors tended to focus on insurtechs that addressed customer “pressure points” in terms of selling products, areas such as ease of access, price and underserved markets via innovation, according to the briefing.

Willis Towers Watson said traditional venture capitalists focus more on taking majority investment stakes, and look at

integrating the technology across the industry value chain. Their main driver: investment return. Venture capitalists tend to pursue more radical ideas, the briefing said, because they “often lack meaningful access to the insurance market.”

“For insurtech startups, the funding scene is more complex, and finding the right investment partner has become more difficult,” Rafal Walkiewicz, CEO, Willis Towers Watson Securities, said in prepared remarks. “Hybrid [funding] models will continue to evolve, and may be the ultimate answer for insurtech entrepreneurs looking to balance industry expertise and the traditional value-creation mentality.”

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NATIONAL | News & Markets

Nearly One-Third of Workers’ Comp Claim Payments Due to Construction Falls

O

ver the past five years, Nationwide processed more than 10,000 workers’ compensation claims due to a multitude of accidents from construction-related businesses. One of the most common — and costly — causes of claims occur when construction workers fall from elevated surfaces. These accidents represent more than 30 percent of all construction claim payments.

To help employers reduce these injuries, Nationwide has provided safety awareness and training to thousands of construction workers over the past few years. The program supports a national campaign called “Stand-Down To Prevent Falls in Construction,” which ran in May and was sponsored by the Occupational Safety and Health Administration (OSHA).

“Construction employees work hard every day in environments that are often dangerous,” said Linda Stueber, Nationwide’s vice president of Construction. “Our data shows that falls from elevated surfaces can often lead to serious and costly worker injuries, so it’s crucial for construction companies and their workers to implement regular safety training — and put that training to practice.”

from elevated surfaces are more severe than other injury claims because these accidents result in: • More time away from work.

• Damage to multiple body parts.

• Short- and long-term disability leave.

How can construction companies keep their workers safe?

Nationwide’s Loss Control Services experts encourage managers to communicate regularly with employees about safety. Hosting a “StandDown” event onsite is one way companies can start the conversation with employees about common safety hazards and the importance of conducting safety assessments when a job requires work on elevated surfaces. Nationwide also recommends construction companies take the following workplace safety measures: • Develop written policies and plans to reduce the use of ladders and make other safe options readily available.

• Regularly inspect equipment and

Why are falls from elevated surfaces so costly?

Nationwide’s data indicates that injuries related to falls

10 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

•

repair/replace as needed.

Train workers to properly use and inspect mobile scaffolding and lifts.

What can construction workers do to stay safe on elevated surfaces?

Employees who often work on elevated surfaces should start a conversation with their managers on implementing best safety practices. Instead of relying on ladders, the Ohiobased insurer recommends construction workers use: • Mobile scaffolds, scissor lifts or other elevated work plat forms that are equipped with guardrails and additional

protective gear.

• Rope, pulleys, block and tackle or other appropriate material-handling aids to lift materials onto elevated sur faces.

• Podium stepladders, when ever possible, instead of standard A-frame stepladders.

“Falls from elevated surfaces can be reduced or even eliminated by providing companies with the right tools and resources to make jobsite safety a priority,” said Mark McGhiey, Nationwide’s associate vice president of Loss Control Services. “We encourage everyone to implement a ‘stand-down’ and support workers’ safety through proper hazard assessments and training.”

West

Opioid Maker Wants Alaska Lawsuit Dismissed

A

n attorney for Purdue Pharma, the company that makes the prescription opioid painkiller OxyContin, has told an Alaska judge that there is an opioid crisis but the state has no legal basis for trying to pin that crisis on the company.

The assertion came as attorney Mark Cheffo asked Superior Court Judge Dani Crosby to dismiss a lawsuit filed by Alaska against Connecticut-based Purdue Pharma.

Crosby did not rule immediately and gave no timeline for a decision.

The state sued Purdue Pharma and its affiliates last year, alleging deceptive marketing practices.

The state in court filings said Purdue developed “a well-funded and deeply deceptive marketing scheme that targeted prescribers and prospective patients and caused a sea change in how opioids were perceived and prescribed, both in Alaska and nationwide.”

INSURANCEJOURNAL.COM

Linda Singer, an attorney representing the state, told Crosby that Purdue should be accountable for its “fair share” of the opioid problem.

Determining an amount should be a matter for trial, she said.

Purdue and other drugmakers are facing hundreds of lawsuits from governments across the country, claiming the companies played a role in sparking opioid addiction and an overdose crisis that killed 42,000 Americans in 2016.

Drug distributors and pharmacies are named in many of the suits.

Motions to dismiss have been filed by manufacturers in some of the cases, with rulings pending in several of the lawsuits.

Requests to dismiss cases in Washington state have been denied.

More than 600 cases filed in federal courts have been consolidated under one judge in Cleveland.

In Alaska, the state alleged that Purdue engaged in aggressive brand promotion,

had representatives make “relentless” visits to doctors’ offices and had influential experts deliver paid talks and programs often sponsored by Purdue.

Purdue contends the state is trying to hold the company liable while disregarding factors such as a doctor’s judgment, a patient’s decision on how to use the drug, and the state’s decision on whether to cover drug costs through Medicaid.

Attorneys for Purdue, in court filings, also say the state has not identified any doctor in Alaska “who ever read, heard, received, or relied on any purported misrepresentation by Purdue.”

Cheffo reiterated that point in early June.

The state has said it’s not required by law to specifically reference individual patients or prescribers in seeking to recoup losses or enforce state laws, particularly at such an early stage in a case.

Copyright 2018 Associated Press. All rights reserved.

JUNE 18, 2018 INSURANCE JOURNAL | WEST | W1

WEST | PEOPLE

Rose Nordbrock

Erica Bro

Adam Matheny

EPIC Insurance Brokers and Consultants has added risk management and insurance professionals Rose Nordbrock, Jeff Breskin, Pabla Barros and Jose Fuentes to the firm’s operations in Southern California.

Nordbrock joins EPIC as principal and practice group leader. Breskin joins as vice president in his specialty of workers’ compensation. Barros joins as vice president and account executive.

Fuentes joins as senior account manager.

The practice group will be based in EPIC’s downtown Los Angeles office and report to Jim Gillette, president of EPIC’s Pacific south region.

Nordbrock, Breskin, Barros and Fuentes will be responsible for the design, placement and management of property/casualty and workers’ comp programs, and providing risk management solutions for mid-market and large clients across a range of industries.

All join EPIC from the Los Angeles office of Crystal & Co. San Francisco, Calif.-based StateFund First, a sister company of Charity First Insurance Services, has promoted Erica Bro to program manager.

Bro began her career at StateFund First in 2013, reviewing new business submissions.

She was promoted first to agency representative and then to a supervisory role.

StateFund First is a program manager in the property/casualty insurance industry, exclusively providing workers’ compensation insurance coverage.

Flow Insurance Services has named Adam Matheny a program administrator in its Spokane,

Wash., location.

Matheny has been in the insurance industry since 2011, having started with Safeco Insurance.

In 2012, he opened an agency with American Family Insurance. He also worked as a commercial underwriter with Travelers Insurance.

Flow Insurance Services a San Francisco Bay area wholesaler specializing in private flood, earthquake, workers’ compensation, building insurance and high value homes.

SAIF has named former Oregon insurance commissioner Laura Robison as its chief actuarial officer.

The appointment is effective in September.

Robison will manage the loss reserving process,

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oversee ratemaking and rate filing, and manage SAIF’s reinsurance program, among other duties.

Robison is currently chief financial officer at Oregon Health Authority. She was previously the insurance commissioner, chief actuary, and administrator within the Division of Financial Regulation in the State of Oregon’s Department of Consumer and Business Services. Previous positions include consulting actuary for Willis Towers Watson, an underwriting manager for Applied Underwriters and an actuarial analyst for Liberty Mutual Group in Boston.

SAIF is Oregon’s not-for-profit workers’ compensation insurance company.

Pinnacol Assurance in Colorado is revamping its leadership structure.

Mark Isakson, who had been senior vice president of operations, now becomes the company’s chief customer officer. He will serve as the senior executive overseeing operations, information services and agency relations.

Quincy Douglass, previously the associate vice president of customer experience, will become vice president of operations, overseeing underwriting, claims, medical operations and customer experience.

Prior to assuming the role of senior vice president of operations, Isakson was vice president of insurance operations, and has also held the roles of vice president of underwriting, business director and senior underwriter. Previously, Isakson was a business analyst and financial advisor for GAF Materials Corp. and Raymond James Financial Services.

Douglass joined Pinnacol in 2008 as a product manager, and was promoted to business director in 2011. He assumed his most recent role as associate vice president of customer experience in 2014. Prior to joining Pinnacol, he spent time at Accenture Consulting and Corporate Express.

Pinnacol provides workers’ compensation insurance to 57,000 employers.

Alliant Insurance Services Inc. has named Kelley Bernal senior vice president and senior director of underwriting in its SIU a division.

Alliant also named David Harper senior vice president within its healthcare group.

Bernal will be based in SIU’s Glendale, Calif., headquarters and is charged with using her expertise within the difference in conditions mar-

continued on page W4

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WEST | News & Markets continued from page W2

ket to grow the division.

Bernal has 17 years of experience. She was previously vice president and senior earthquake underwriter at Catalytic Risk Managers & Insurance Agency Inc. Harper will be based in Orange

County, Calif., and design customized insurance and risk management solutions for clients throughout the Western Region.

Harper was previously regional director with Beecher Carlson. He was pres-

CONTRACTORS

ident and founder of DW Harper Group Inc. before that.

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

Monarch E&S Insurance Services has promoted Lynn Bertram to senior underwriter and manager of commercial lines operations.

Bertram has worked with Monarch E&S for 15 years, underwriting new business for the past seven.

Monarch E&S is a California-based wholesale brokerage and managing general agent.

Beecher Carlson Insurance Services LLC has named Jeff C. Rhoades vice president.

Rhoades joins the practice in Portland, Ore., and will report to Erin Lynch, president of the energy practice. Rhoades will focus his efforts primarily on the West Coast.

For the last seven years, he has been a producer at McGriff, Seibels & Williams.

Beecher Carlson is a wholly-owned subsidiary of Brown & Brown Inc. Everest Insurance has added Becky Biermann as a senior underwriter within

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the environmental division.

Biermann will be located in the company’s Walnut Creek, Calif., office and will be responsible for managing broking relationships across the West and Central regions.

She has 18 years of experience underwriting casualty and environmental liability. Biermann began her career at AIG in 2005 in the environmental casualty division, and in 2011 she was promoted to regional manager for environmental business.

She most recently worked for Enviant, an environmental specialty MGA, as vice president and lead environmental underwriter for the West Coast.

Everest Insurance is part of Everest Re Group Ltd., a Bermuda holding company that operates through subsidiaries.

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WEST | News & Markets

California’s First Cannabis Business Owners Policy Approved

C

alifornia Insurance Commissioner Dave Jones has approved the first Cannabis Business Owners Policy in the State of California.

The American Association of Insurance Services designed the new CannaBOP program for cannabis dispensaries, storage facilities, processors, manufacturers, distributors, and other cannabis-related businesses operating in the state.

“Cannabis businesses need insurance coverage to help them recover when something goes wrong just as any other legalized business does,” Jones said in a statement. “This firstof-its-kind Cannabis Business Owners Policy or CannaBOP program will make it easier for more insurers to enter the market and fill coverage gaps for cannabis businesses.

I encourage insurers to take advantage of this new standardized CannaBOP program to file more cannabis insurance products with the department to meet the needs of this emerging market.”

AAIS developed a California-

specific business owners policy (BOP) program for the cannabis industry, complete with forms, rules and rating information.

The CannaBOP program provides a package policy containing both property and liability coverage for qualifying California cannabis dispensaries, storage facilities, distributors, processors, manufacturers, and other businesses participating in or

supporting the California cannabis industry.

Commissioner Jones launched an initiative last year to encourage commercial insurance companies to write insurance to fill coverage gaps for the cannabis industry.

The first filing and approval of commercial insurance for the cannabis industry from an admitted carrier was announced in November of last

year, and the first surety bond program for the industry was announced in February.

The first coverage for commercial landlords for the industry and a product liability and product recall program for the industry were announced last month.

There are also roughly 20 surplus lines writers offering cannabis insurance.

Nevada Motorists Face July 1 Auto Insurance Rate Increase

N

evada state officials are reminding as many as 600,000 vehicle owners they could face auto insurance rate increases July 1, when minimum liability coverage requirements go up.

Officials announced earlier that almost one in three of Nevada’s 2 million licensed motorists could be paying $10 more a month.

The minimum is going up to $25,000 for bodily injury coverage per person and $50,000 per accident, plus $20,000 for property damage.

Those minimums have been $15,000, $30,000 and $10,000.

Officials say some policyholders with minimum uninsured motorist coverage could pay $45 more a month.

The state Department of

W6 | INSURANCE JOURNAL | WEST JUNE 18, 2018

Motor Vehicles, Division of Insurance and Nevada Insurance Council say the increase brings Nevada more in line with insurance coverage requirements in other states.

The insurance division has posted frequently-asked-questions on its website.

Copyright 2018 Associated Press. All rights reserved.

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WEST | News & Markets

Driver Had Hands off Wheel in Fatal Tesla Autopilot Crash

By David Shepardson

T

he driver of a Tesla Inc. Model X car using Autopilot did not have his hands on the steering wheel in the six seconds before a fatal crash in California in March, the U.S. National Transportation Safety Board said earlier this month.

The NTSB said in a preliminary report the 38-year-old driver, who died in hospital shortly after the crash, had been given two visual alerts and one auditory alert to place his hands on the steering wheel during the trip.

The report also said the vehicle had sped up from 62 miles per hour to nearly 71 miles per hour in the three seconds before the crash on March 23.

Five days later, the electric car’s high-voltage battery reignited and the fire department had to extinguish the blaze.

Tesla’s Autopilot is a driver assistance system that handles some driving tasks and allows drivers to take their hands off the wheel. Tesla says drivers are supposed to keep their hands on the wheel at all times when using the system.

Tesla declined to comment on the NTSB report, but said in March that the driver had not braked or taken actions to avoid the crash in the final seconds before the crash.

The safety board is currently investigating four Tesla crashes since last year and looking at both post-crash fire issues and the use of Autopilot.

The report said the driver

got the warnings to put his hands back on the wheel more than 15 minutes before the crash, and had kept his hands on the wheel for a total of 34 seconds of the last minute before he struck a crash attenuator and concrete barrier

on US-101 in Mountain View, California. Tesla’s owner’s manual warns drivers that the system may not detect stationary objects when traveling at higher speeds.

Copyright 2018 Reuters. All rights reserved.

Lawsuit Filed Against Hawaiian Restaurant Chain After Data Breach

OSHA Seeking $65K in Penalties in Colorado Envirotech Worker Death

wo people have filed a class-action lawsuit against Hawaii restaurant chain Zippy’s.

Zippy’s alerted its customers April 27 that it experienced a data breach at all of its 25 restaurant, Napoleon’s Bakery, Kahala Sushi and Pearl City Sushi locations. It also says credit and debit cards used to buy drinks at Pomaikai Ballrooms also may have been affected by the breach.

The Honolulu Star-Advertiser reported lawyers who specialize in class-action peti-

ederal regulators are proposing nearly $65,000 in penalties for a Colorado company where a worker died after inhaling toxic fumes while cleaning the inside of a rail car.

The Occupational Safety and Health Administration said that EnviroTech Services of Greeley didn’t provide respiratory protection, didn’t properly ventilate the car and didn’t have an emergency rescue plan.

Jose Miguel Cisneros died in December. A co-worker who tried to rescue him also was overcome by the fumes while they worked at EnviroTech’s plant in Evans.

EnviroTech provides deicing, anti-icing, dust control, soil sta-

T

tions filed a lawsuit on behalf of Hawaii resident Joshua Bokelman and Suchandra Thapa, of Ill., with the hope of representing others who are victims of the breach.

The lawsuit names FCH Enterprises Inc., owner of Zippy’s Restaurants, as the defendant.

FCH Vice President of Marketing and Communications Kevin Yim says the company doesn’t comment on pending litigation.

Copyright 2018 Associated Press. All rights reserved.

W8 | INSURANCE JOURNAL | WEST JUNE 18, 2018

F

bilization and erosion control, according to its website. The Greeley Tribune reported the company did not respond to a request for comment.

OSHA Denver Area Office Director Herb Gibson has held an informal conference with EnviroTech Services to discuss the citations and work toward an informal settlement.

INSURANCEJOURNAL.COM

Idea Exchange

Autonomous Vehicles

Bonding with California’s Autonomous Vehicle Testing and Deployment Regs • The manufacturer must present either a general or a driverless testing permit.

By Todd Bryanti

A

new legislative framework for autonomous vehicle testing and deployment in California created this year is expected to lead to a strong wave of development of this technology in the state.

In February 2018, the Office of Administrative Law passed the final version of the regulations. It allows the state Department of Motor Vehicles to start providing permits for both testing and deployment of driverless vehicles. The regulations set a new trajectory, which is different from what the state had taken back in 2015. Back then, it was seeking a more restrictive approach towards autonomous vehicles, but its approach has changed.

With the newly implemented regulations, holders of permits from the California DMV can test and deploy autonomous vehicles on certain California public roads. Currently, the number of permit holders is around 50.

The California autonomous vehicle testing program has four clear requirements that manufacturers must meet: • The testing can be done only by the manufacturer; • The testing can be conducted only by a licensed driver or remote controller hired by the manufacturer; • The manufacturer must provide financial proof of $5 million; W10 | INSURANCE JOURNAL | WEST JUNE 18, 2018

The regulations also set clear technical standards for the autonomous vehicles and their operation while being tested, as well as for their deployment. They define that the Federal Motor Vehicle Safety Standards apply fully.

The new law also creates a national precedent by setting a standard for the collection of personal information by driverless technologies. The autonomous vehicles will have to qualify in terms of cybersecurity measures.

One of the most important and heated debates around driverless vehicles relates to the liability of manufacturers in case of accidents and damages. The new California autonomous vehicle law addresses these issues to a certain extent.

Manufacturers have to provide proof that they can cover damages caused by the operation of autonomous vehicles on public roads of up to $5 million. The financial proof can take the form of a surety bond, evidence of insurance, or a certificate of self-insurance.

Surety bonds are security instruments that protect the state, as well as the general public. A claim can be brought against a manufacturer in case a party suffers damages due to driverless vehicles’ operation. In this way, the bond can provide a fair compensation if there is a proven case against the manufacturer. One of the advantages of using surety bonds is that even if the principal is unable or unwilling to make good on the claim, the surety company which issued the bond is there to do it.

A previous draft of the regulations would have taken away the liability from manufacturers in cases when vehicles

underwent unauthorized modifications or were not properly maintained. However, this section was deleted from the latest version of the document. This means that California courts will have to establish liability for each case that comes up individually.

According to experts, the new California regulations open new doors for innovation and exploration of autonomous technology in the state. In fact, specialists see this as the first serious step towards deployment of driverless cars in everyday life.

For vehicle manufacturers, the newly set rules create a clear framework for operation in California. It allows development and testing of driverless technology while not overlooking safety measures. This is an important point, as it ensures protection and fair compensation for any damages caused to the general public.

Some states like Arizona, however, have already allowed autonomous vehicle manufacturers to test on their roads even earlier than California. This has led to companies like Ford and Tesla to move their testing units in other states. The new regulations are likely to bring back some of the attention to California, which has been a prominent tech hub in the last decades.

Bryant is the president and founder of Bryant Surety Bonds. Phone: (866) 450-3412; Email: t.bryant@ bryantsuretybonds.com.

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California State Fund Says it Reduced Opioid Prescriptions by 60%

By Don Jergler

C

alifornia’s State Compensation Insurance Fund is reporting a significant reduction in the number of opioid prescriptions for injured workers through a program launched four years ago.

State Fund’s opioid-reduction strategy, which included early prevention in new cases and reduction of chronic opioid usage in existing cases, reduced opioid prescriptions 60 percent since 2014, according to the organization.

Results also show the number of patients taking high doses of opioids over the past four years fell from 1,458 to 186, and a 74 percent reduction in expenditures on opioids prescribed to injured workers covered by State Fund.

The strategy included elements like a peer-to-peer

physician review program, education for injured workers and treating physicians and a “functional restoration program” for injured workers taking high levels of opioids.

“I got here at State Fund in 2013,” Dr. Dinesh Govindarao, State Fund’s chief medical officer, told Insurance Journal.

“We knew that we had to address the opioid crisis that was going on, not only in the worker’s comp arena, but it’s a national phenomenon.”

He said the peer-to-peer education of prescribing physicians was instrumental in the success of State Fund’s opioid-reduction program.

“Back in 2013, we started a peer-to-peer physician review pilot where some of our folks that were high prescribers, we decided to have them talk to another physician who was an expert in the field, to help

W12 | INSURANCE JOURNAL | WEST JUNE 18, 2018

them with really doing a record review, medication review, and trying to develop some type of a treatment plan to work with them and also look at various options to help them with their chronic pain patients,” Govindarao said.

State Fund’s announcement follows findings from the California Workers’ Compensation Institute in March that opioids now account for less than a quarter of all workers’ comp prescriptions in the state, down from nearly a third a decade ago.

Other drugs, such as anti-inflammatories and anticonvulsants, often used as alternative painkillers, now represent a much larger share, the CWCI report shows.

Govindarao acknowledged the trend of an opioid prescription reduction in workers’ comp, and said he believes the

experience at State Fund is a combination of their reduction efforts, as well as physicians and others getting the message that opioids aren’t always best to treat injured workers.

“A lot of it is due to a lot of our strategies that we put together,” he said. “So, I would say a lot has been as a result of that, but there’s also a lot of awareness now, you know that we read about in the news every day about opioids. And I think physicians are a lot more aware and a lot more cautious on prescribing opioids. So I think some of that just getting the word out and the awareness out has also I think had an impact too in changing providers’ behavior as well.”

He said State Fund’s work isn’t done, and that the carrier will continue to focus on reducing opioids by: • Expanding its chronic pain program to reach even more injured workers; • Adopting Division of Workers’ Compensation guidelines limiting initial opioid prescriptions to four days; • Updating its online physician training modules for treating acute and chronic pain.

“I think the big thing is that we still have a lot of work to do,” he said. “The work isn’t done yet.”

Podcast Visit InsuranceJournal.tv to hear a podcast with Dr. Dinesh Govindarao, State Fund’s chief medical officer, explaining how the carrier tackled the opioid problem.

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J.D. Power: Why Lemonade’s Policy 2.0 Matters

By Tom Super

R

ecently insurtech startup Lemonade annoulaunched a product initiative called Policy 2.0.

According to Lemonade, it will simplify the language within a standard insurance policy so insureds can easily understand what is and is not covered. Designed through an open-source platform, it enables anyone from competitors to state regulators to contribute to its design — all

towards meeting Lemonade’s mission to make insurance simple for consumers.

The project is in its design phase and not expected to be released until 2019, and is fraught with regulatory and legal challenges, but the underlying premise of the initiative is on target.

According to our J.D. Power 2018 Insurance Shopping Study, the No. 1 factor impacting customer satisfaction is understandability of coverages.

Just 67 percent of consumers felt their carrier had done a good job in ensuring they completely understood their coverages. Companies able to meet customer expectations in this regard achieved a 9 percent lift in customer satisfaction scores.

Lemonade’s Policy 2.0 initiative addresses this core issue while reinforcing three broader trends across the property/ casualty industry.

First, digital service provid-

‘According to our J.D. Power 2018 Insurance Shopping StudySM, the number one factor impacting customer satisfaction is understandability of coverages.’ ers continue to influence consumer expectations and preferences, and have ushered in an era in which products and services must be relevant, personalized, easy and timely. Despite significant tech investment, the auto insurance industry has been playing catch-up with other consumer-facing industries on this front.

Second, consumers are empowered like never before, so insurers are making investments to improve customer experience to attract and retain business. With less than 2 percent new consumer entrants this year, growth requires taking share from competitors.

This puts a focus on conveying and delivering on value.

Third, this provides anoth-

er example of insurtech’s collective impact on the P/C industry. Of the $2.4 billion in seed funding that flowed into insurtechs last year, the majority focused on enhancing the value chain rather than disrupting it. Lemonade’s Policy 2.0 is an example of this movement.

Multiple challenges persist in taking Lemonade’s Policy 2.0 from concept to market across all 50 states, but the over-arching principle of consumer-centric design is a lesson for insurers.

Super is director of J.D. Power’s P/C insurance practice in Chicago. He will be a panelist at the 2018 P/C Insurer Super Regional Conference in July.

Email: thomas.super@jdpa.com.

Digital Workers’ Comp Agency Pie Insurance Enters 3 More States

D

igital agency Pie Insurance has begun selling its low-cost small business workers’ compensation insurance policies online in Colorado, Louisiana and Texas.

That brings the total states for Pie to seven, as in March it began selling in Illinois, Georgia, Tennessee and Arizona.

The pitch from Pie includes the claim, based on research from partner Valen Analytics, that a majority of business owners are overpaying for

workers’ comp. The agency offers small businesses a tool that tells them about what they should be paying for coverage versus the market average.

Valen Analytics powers the tool, free to customers.

The insurtech will write firms with premium up to $25,000 but its “sweet spot” starting out is businesses with premiums of $5,000 and below, according to John Swigart,

W14 | INSURANCE JOURNAL | WEST JUNE 18, 2018

co-founder and CEO of Pie. In addition, Pie’s website invites business from construction, restaurants, healthcare and retail.

Pie operates as a full-stack managing general agency with backing from insurer Sirius Group. Sirius is owned by the Singapore-based division of China Minsheng Investment Corp. Ltd., run by private investors, which bought it from Bermuda-based financial services holding company White Mountains Insurance Group in 2016 for $2.6 billion.

Swigart served on the Esurance executive team for 13 years where he initially led all the financial functions and then became the company’s first chief marketing officer.

Pie has said it also plans to eventually sell through large agency partners, and Swigart said that there is “strong interest in the partner channel.”

In October 2017, Pie closed a $4.3 million seed round of funding. Investors include Sirius Group and venture capital firms Moxley Holdings and Elefund.

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WEST | News & Markets and beneficiaries rebuild their lives, properties, and businesses while also getting access to medical care. Health insurers paid $589.9 billion; life/annuity insurers provided $590.3 billion; and property/casualty insurers paid $414.6 billion.

Risk Mitigators

I.I.I. on How Insurance Boosts Economy, Communities and Innovation

W

hile consumers understand insurance as protection against financial loss, the industry’s contribution to the economy goes much further.

A white paper from the industry’s Insurance Information Institute argues that insurance also serves a wide variety of roles that preserve communities and promote overall economic growth.

The white paper, How Insurance Drives Economic Growth, examines how the insurance industry’s contributions benefit all aspects of the U.S. and global economy, especially within safety/security, economic/financial stability and development.

“The insurance industry truly is at the heart of the growth and progress of every modern economy,” said Sean Kevelighan, I.I.I. chief executive officer. “Most people real-

ize that the insurance industry is the financial first responder — providing much needed recompense after a disaster. But the industry also plays a number of important roles, quietly, that are vitally important to a modern society.”

Examples of the ways insurers and reinsurers drive economic growth outlines in the white paper include:

Financial First Responders

Insurers restore claimants and beneficiaries, which lessens the costs of unexpected losses. There is also a ripple effect that benefits those not directly affected by a loss, including businesses that repair damaged vehicles and homes. They, in turn, are helping the economy by paying taxes and keeping people employed. In 2017, the insurance industry paid roughly $1.5 trillion to help claimants

W16 | INSURANCE JOURNAL | WEST JUNE 18, 2018

Insurers sponsor and promote knowledge and activities that save lives as well as protect and preserve property.

They employ a variety of loss prevention methods and personnel to study ways to protect lives and property. On the property side, insurers have evaluated the effectiveness of municipalities’ fire suppression systems and provided incentives to upgrade them. After Hurricane Charley hit Florida in 2004, modern building codes promoted by the industry’s Insurance Institute for Business and Home Safety and property insurers were found to reduce the cost of insured losses by 42 percent and the frequency of these losses by 60 percent.

Partners in Social Policy

Insurance delivers social benefits by promoting the common good through auto and workers’ compensation insurance. For example, nearly every state requires motorists to purchase auto liability insurance or show proof of financial responsibility to compensate accident victims. As a result of mandatory insurance, drivers are protected from financial troubles if accidents occur. In addition, all states have workers’ compensation laws, requiring workers to be covered for illnesses and injuries arising out of their job, along with lost wages. In 2015, about 135.6 mil-

lion employees had coverage.

Community Builders

Insurers are among the largest investors of capital in the world, with more than $5.8 trillion in assets under management. Since these investments are essential to insurers’ ability to pay long-term claims, insurers’ investment portfolios often include private and municipal bonds that help finance the growth and prosperity of communities across the country.

By supporting state and local governments through the buying and holding of municipal bonds, insurers help to lower borrowing costs that allow for greater investments, reduce tax rates for residents, and bolster job creation and economic growth. In the last decade, financing public works projects with municipal bonds vs. taxable debt (that would have had to pay higher interest) has saved $495 billion.

Innovation Catalysts

Insurance allows innovators to safely take risks that drive the modern economy, and the industry has underwritten investments in technological breakthroughs, literally across centuries — from steam power to mass production to aviation to automation and information networks to coming advancements in artificial intelligence, nanotechnology and beyond. The global nanotech market is expected to double in value in five years, from $39.2 billion in 2016 to $90.5 billion by 2021. More than 1,600 nano-influenced consumer products are already in the marketplace, and more are being developed, all with the support of insurance.

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Figures

19

The number of varieties of ice cream products recalled in May by the Texas-based grocery chain, H-E-B. The grocer voluntary recalled some ice cream distributed to stores in Texas and Mexico amid concerns about metal possibly in the products. The recall is for certain flavors and container sizes of EconoMax and Hill Country Fare ice creams and Creamy Creations sherbets.

1,250

That’s the cap for the total number of scooters in a yearlong pilot program in San Francisco. Lime, Bird and Spin, startups that have delighted and infuriated San Franciscans with their scooter-sharing services, have pulled their vehicles from the streets while they apply for permits to operate.

210

MILLION

The Archdiocese of St. Paul and Minneapolis has agreed to pay a total of $210,290,724 in a settlement with 450 victims of clergy sexual abuse as part of its plan for bankruptcy reorganization. It’s the second-largest U.S. payout in the scandal that rocked the nation’s Roman Catholic Church. A formal reorganization plan will be submitted to a bankruptcy judge for approval and then sent to the victims for a vote.

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$1 MILLION

Declarations Pesticide Safety

“EPA’s indefinite suspension of critical pesticide safety training is reprehensible – and illegal.”

— New York Attorney General Barbara D. Underwood said

about a lawsuit she is leading with Attorneys General Xavier Becerra of California and Brian Frosh of Maryland against the U.S. Environmental Protection Agency (EPA) for the delay of what they allege is a key requirement of the Agricultural Worker Protection Standard (WPS). This comes after EPA suspended publication of an availability notice for expanded pesticide training materials.

Major League Allegations

“This lawsuit contains self-serving and meritless allegations, and Independent Sports & Entertainment will vigorously defend itself against this groundless suit.”

— Independent Sports & Entertainment is part of a lawsuit

by former major league pitcher Joe Sambito, who sued the company that employed him as an agent, claiming wrongful termination and age discrimination.

Marijuana Use

“[Floridians] have the right to use the form of medical marijuana for treatment of their debilitating medical conditions as recommended by their certified physicians, including the use of smokable marijuana in private places.”

— Leon County Circuit Court Judge Karen Gievers, in ruling

that Florida’s ban on smoking medical marijuana was unconstitutional. The Florida Department of Health has appealed the ruling.

Passenger Safety The former chief financial officer of a New Jersey orthopedic care provider is headed to prison for stealing more than $1 million from the company for his personal use. Harry Wolfmuller received a two-year sentence and must pay $1,175,720 in restitution. He pleaded guilty last November to wire fraud.

$14.8 MILLION The amount two survivors of the deadly Tennessee wildfires that started in 2016 in the Great Smoky Mountains National Park in Gatlinburg, Tenn., sued the federal government for, claiming they lost loved ones and a home because of the negligence of park workers. The lawsuit was filed in May.

“Casino operators cannot escape responsibility when they negotiate bus contracts based on the absolute lowest bid without considering the safety of their passengers.”

— Attorney Frank Branson comments after the Court of

Appeals for Texas’ 5th District upheld a $9.3 million verdict against the southern Oklahoma tribe, Choctaw Nation, in a lawsuit involving a bus crash that killed two passengers. Branson is an attorney for the estate and children of Alice Stanley, one of the two who died in the 2016 crash in Irving, Texas.

World-Class City

“Chicago is a world-class city made up of diverse, vibrant neighborhoods, a multitude of cultural experiences, outstanding parks and recreation, eight professional sports teams and much more. The ease of global travel, employee commutes and the outstanding colleges and universities in Chicago and the Midwest gives companies located in Chicago a distinctive advantage for growing talent and our business,”

— CNA Chairman and CEO Dino E. Robusto said in a statement announcing the opening of the insurer’s new world headquarters, CNA Center, in Chicago.

JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 11

NATIONAL | News & Markets

Personal Cyber InsuranceSecurity Packages Being Tested with Wealthy

By Beth Pinsker

I

nsurance is supposed to make you feel safe, but even those who sell special cyber-security protection packages worry about hacking threats.

What makes Jerry Hourihan lose sleep is that everyone’s information already is likely compromised. Hourihan is head of the U.S. private client group for insurer AIG Inc, which last year launched a Family CyberEdge policy, offering coverage for advanced cyber threats.

When AIG was developing the project, Hourihan said a senior executive volunteered to see what security consultants

could dig up about him on the dark web. Within minutes, they purchased his Social Security number for a few dollars.

“Everyone’s information is out there, and the task is to minimize your risk,” said Hourihan.

It requires a lot more than just a monthly $9.99 identity theft monitoring service or fraud alerts on your credit card to deal with ransomware, cyberbullying, network infiltration and a host of other threats.

If you do not have a corporate-level IT department to call in a pinch, you can now buy that kind of protection. Prices vary based on the coverage, but they are intended for high net-worth families, so expect

12 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

sticker shock. Along with AIG’s CyberEdge, Chubb Ltd. just launched a cyber protection extension to its Masterpiece homeowner policy.

These policies cover losses up to $250,0000 if, for instance, you need to replace the entire smart lighting system in your house because it has been hacked. The policies also offer ongoing white-glove consulting services to shore up cyber-defenses and clean up after any incidents.

If these policies work for upper-income families, lower-priced coverage will follow, says independent security expert Robert Siciliano.

“They’re testing the waters, and they’ll see if it’ll be worth it to them to provide it to the masses,” said Siciliano, chief executive of IDTheftSecurity. com.

So far, most of AIG’s CyberEdge clients are asking questions about best safety practices.

“The goal is to provide a lot of consultation up front, and then avoid most of the issues,” said Hourihan.

Chubb’s Masterpiece is front-loading its policies with a lot of prevention, including a special wi-fi router from cybersecurity firm Symantec Corp.’s Norton, said Mike Tanenbaum, executive vice-president of Chubb’s North American cyber practice.

Home Mitigation

Without getting an expensive insurance policy, there are steps you can take to limit risk.

Change the locks, so to speak, said Mary Qualls of Floridabased Vault Insurance, catering to high net-worth homeowners. That can involve restarting

your router to break any ongoing connection a hacker has into your network and changing all of your passwords.

Siciliano does not understand why everyone does not use a password management program.

“That is pure laziness,” Siciliano said.

With no universal reporting, it is hard to get a good grasp on cybersecurity problems and figure out a way to solve them.

Eva Velasquez, president of the Identity Theft Resource Center (idtheftcenter.org), said that if more people reported hacking incidents, it would help.

Recent data from the Federal Trade Commission found that millennials are reporting fraud a lot more often than other groups, with an average loss around $200, Velasquez said.

Seniors reported less, but their average loss is $1,200.

“As you have more resources, your trigger of ‘is that painful enough to report?’ changes.

The thieves know that,” said Velasquez.

The result: Hackers keep thefts low enough to fly under the radar and continue to operate with impunity.

Velasquez, whose organization offers free services for victims of identify theft, said that insurance could be worth it for individuals if they do a cost-benefit analysis.

“Do your homework, make sure it is legit, and know what’s covered,” Velasquez said. “If it brings you peace of mind, that can be of value. At the same time, just because you have insurance, you can’t abdicate responsibility.”

Copyright 2018 Reuters.

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NATIONAL | News & Markets

Global Commercial Insurance Market to Grow $170B in P/C Premium By 2021: Aon Inpoint

G

lobal commercial property/casualty insurance premiums were worth approximately $730 billion in 2017, and by 2021, they will rise to nearly $900 billion.

U.S. commercial P/C insurance premiums were worth $274.5 billion in 2017 and are forecast to rise to $331.5 billion in 2021.

Those figures are from market reports from Aon Inpoint, insurance broker Aon’s data analytics and consulting team, which examined where premium growth is likely to happen in coming years.

Aon analysts contend that by 2021, the most rapid growth of premiums will be seen in cyber insurance products.

In addition, they expect the financial institutions, mining and minerals and technology and media sectors will expand rapidly in comparison to other industry segments.

Aon’s series of global studies looked at insurance purchased by corporate, public sector and not-for-profit organizations between 2013 and 2017 and forecasted trends into 2021.

Over the past five years, cyber premiums have grown significantly at 23 percent annually.

By 2021, Aon predicts that worldwide cyber premiums will be worth $4 billion, a compound annual growth rate of 14.1 percent.

“As we look ahead, we are seeing a broad shift of companies putting a greater value on

intangible assets, such as cyber and intellectual property,” said Michael Moran, CEO of Aon Inpoint.

Moran said there are multiple reasons for the increased focus and increased premiums ranging from financial statement protection due to a business interruption to the evolving global regulatory environment, including the European Union’s General Data Protection Regulation.

‘As we look ahead, we are seeing a broad shift of companies putting a greater value on intangible assets, such as cyber and intellectual property.’

Across all types of commercial P/C insurance, the manufacturing segment generated the highest premiums worldwide in 2017, worth approximately $111 billion.

Following manufacturing came agriculture, fishing and forestry at $72 billion, boosted by the huge value of this

14 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

segment in China and the U.S. While manufacturing will remain strong, premiums bought by financial institutions, the mining and minerals sector and technology and media firms are expected to increase most rapidly through to 2021 with an annual growth rate of around 6 percent in each case.

Additional observations from Aon’s analysts: Among the larger product categories, premiums for commercial auto insurance worldwide grew the fastest from 2013-2017, reaching $192 billion in 2017.

Globally, workers’ compensation premiums stood at $83 billion, mainly due to their vast size in the U.S., having increased from $71 billion in 2013.

Around $97 billion of the global commercial lines market is bought by micro enterprises (comprising self-employed individuals and entities with up to nine employees).

Moran sad that there is no a standardized data set that describes the size and segmentation of commercial lines insurance but that his firm’s “research, which segments the global market in detail by product, industry and client size, fills an important gap, and can be used by insurers to identify new underwriting opportunities worldwide.”

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NATIONAL | Business Moves

Kemper, Infinity

Kemper Corp. and Infinity Property and Casualty Corp. reported that the companies’ respective shareholders approved proposals related to the agreement announced in February under which Kemper will acquire Infinity.

According to the companies, the proposals received overwhelming shareholder support, with more than 99 percent of each company’s shares voting to approve.

As a result, Chicago-based insurer Kemper has agreed to acquire Birmingham-based Infinity Property and Casualty Corp. in a cash and stock transaction valued at roughly $1.4 billion, or $129 per share, creating an insurer with increased scale in the nonstandard auto insurance market.

The pending transaction is subject to regulatory approvals and is expected to close in the third quarter of 2018.

Infinity sells auto insurance in the specialty, nonstandard segment. It has roughly $1.4 billion in 2017 direct written premiums, 88 percent of which

is nonstandard auto and the rest commercial vehicle and classic car business.

For 2017, it reported operating net income of $44 million - a combined ratio of 95.2.

Kemper offers insurance for home, auto, life, health and valuables.

After completion of the transaction, Infinity’s senior management team will be integrated into the newly-combined organization.

Additionally, at closing, Kemper will increase its current board of directors by one seat and select a director from Infinity to join the Kemper board of directors.

The Evans Agency, Richardson & Stout Insurance The Evans Agency LLC has acquired the business of Richardson & Stout Insurance of Wellsville, N.Y. Terms of the deal were not announced.

The Evans Agency is a wholly owned insurance subsidiary of community financial services company Evans Bancorp Inc.

16 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

All current R&S employees will join The Evans Agency, including co-owners Richard Ewell, Ian Whitehouse and Aaron Whitehouse. The agency will be known as Richardson & Stout Insurance, a division of The Evans Agency, and will remain in its current location in Wellsville.

The Evans Agency LLC has grown from a family-owned insurance agency to a multi-location professional insurance and risk management operation providing personal, commercial and employee benefits solutions throughout Western New York. Richardson & Stout represents the 16th insurance acquisition completed by Evans.

The roots of Richardson & Stout Insurance can be traced to the beginning of the last century, starting with The Brown Agency that was founded in 1903 and the Forrest H. Allen Agency that was formed in 1929. After several mergers and acquisitions, the Brown & Stout Agency and Allen, Dygert, & Hauser Inc. merged operations to become Richardson & Stout Insurance in 1998.

Salem Five, Fabri & Rourke Insurance

Salem Five has acquired Fabri & Rourke Insurance.

Salem Five is a commercial and personal insurance provider based in Salem, Mass. Fabri & Rourke Insurance is headquartered in Georgetown, Mass., and was founded in 2000 by William Fabri Jr. and Kevin Rourke. In 2005, Rourke, who now leads Salem Five’s commercial banking division, sold his share of the business to Fabri, who will continue to lead

the agency.

This is the second Georgetown-based acquisition for Salem Five, having acquired Georgetown Bank in 2017. Salem Five has recently completed several additional acquisitions, acquiring the Otis Brown Insurance Agency in 2016 and Cape Ann Insurance earlier this year.

Fabri & Rourke will relocate its four employees to Salem Five’s Georgetown location following the acquisition. The agency will now be known as Fabri & Rourke Insurance, a division of Salem Five Insurance LLC, and will focus exclusively on commercial insurance.

Risk Strategies, Costello Benefits Group

Risk Strategies has acquired Costello Benefits Group.

Terms of the deal were not disclosed.

Risk Strategies is a privately held, national insurance brokerage and risk management firm. CBG Benefits Inc. is a full-service employee benefits brokerage firm headquartered in Woburn, Mass.

This acquisition is part of a broader strategy for Risk Strategies in the last year, in which it has brought three separate, independent specialty agencies and brokerages into its operations that are focused exclusively on employee health and welfare program challenges.

Risk Strategies’ employee benefits practice focuses on issues facing employers in industries from regulatory change and uncertainty to carrier consolidation, rising costs

continued on page 18

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D30.amtrustinsurance.com AmTrust is AmTrust Financial Services, Inc., located at 59 Maiden Lane, New York, NY 10038. Coverages are provided by its property and casualty insurance company affiliates. In TX, coverage is provided by AmTrust Insurance Company of Kansas, Inc.; AmTrust International Underwriters Designated Activity Company; Associated Industries Insurance Company, Inc.; First Nonprofit Insurance Company; Milford Casualty Insurance Company; Republic Underwriters Insurance Company; Republic-Vanguard Insurance Company; Security National Insurance Company; Southern County Mutual Insurance Company; Southern Insurance Company; Technology Insurance Company, Inc.; or Wesco Insurance Company. In WA, coverage is provided

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NATIONAL | Business Moves continued from page 16 and coverage upheavals.

Founded in 1999, CBG Benefits helps human resources and corporate finance departments on a number of fronts, including development and implementation of health and welfare benefits programs, workplace wellness programs, regulatory compliance, employee communication and benefits technology.

The Hilb Group, Bentson Insurance Group

The Hilb Group LLC has acquired New York–based Bentson Insurance Group.

Bentson Insurance Group is a property/casualty insurance agency specializing in home and business insurance as well as group benefits insurance.

With its office in Staten Island, this acquisition will be the fifth location in THG’s New Jersey/ New York region.

Bob Bentson, principal of Bentson Insurance Group, will continue to lead the agency’s associates under its current name following the acquisition.

The Hilb Group is a middle market insurance agency headquartered in Richmond, Va., and is a portfolio company of Boston-based private equity firm, Abry Partners.

AssuredPartners, Peoples Insurance Agency

Lake Mary, Florida-based AssuredPartners Inc. has expanded into Iowa with the acquisition of the Peoples Insurance Agency, headquartered in Waverly.

PIA is a family owned and operated insurance advisor in Iowa. The staff of 88 will continue operations under Market President Josh Whitinger.

AssuredPartners Western Regions President Randy Larsen said PIA complements its transportation business with expertise in the specialty trucking marketplace.

Seeman Holtz Property & Casualty, First Choice Insurance Agency

Seeman Holtz Property & Casualty Inc., based in Boca Raton, Fla., has acquired First Choice Insurance Agency Inc., headquartered in Poplar Bluff, Missouri.

First Choice Insurance has been serving the Poplar Bluff, Dexter, Cape Girardeau, Wappapello, Doniphan, Neelyville, Perryville and Caruthersville area for more than 20 years. Led by Steve Phillips and his team, First Choice will strengthen Seeman Holtz Property & Casualty’s foothold in the Midwest.

Seeman Holtz Property & Casualty Inc. continues to target independent agencies for geographic expansion and growth throughout the U.S.

North Risk Partners, Bearence Management Group

Minnesota’s North Risk Partners has merged with Bearence Management Group, an independent insurance brokerage firm with more than 80 employees across three Midwest locations – Mendota Heights, Minn., Des Moines, Iowa, and Omaha, Neb. – and a mix of product and service offerings similar to North Risk’s.

This new partnership grows the merged group to more than $50 million in revenue, 265 employees and 21 locations across three states.

North Risk Partners CEO

18 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

Chris Meidt remains CEO of the merged company, and Bearence’s managing partners, Dan Seemuth and Stan Hamann, have joined North Risk’s executive leadership team.

Seemuth and Hamann have maintained their equity in the company and have also taken on division president roles.

Seemuth is overseeing the Des Moines and Omaha locations, and Hamann is responsible for Mendota Heights.

For the last three years, North Risk and Bearence have been majority owned by the same capital investment group, BroadStreet Partners.

Bearence has become a division of North Risk Partners, adopting the North Risk Partners brand as its own.

NI Holdings, Direct Auto Insurance

North Dakota-based NI Holdings Inc. has agreed to purchase Direct Auto Insurance Co., headquartered in Chicago.

Direct Auto underwrites specialty automobile insurance in Illinois through independent agents. Joe Fitzgerald, the president of Direct Auto and a principal shareholder, will continue to manage the Direct Auto insurance operations.

Closing of the deal is expected later this year subject to customary closing conditions, including regulatory approval.

Philo Smith Capital Corp. served as Direct Auto’s financial advisor and Beermann Pritikin Mirabelli Swerdlove LLP as legal advisor. Dorsey & Whitney LLP was NI Holdings’ legal advisor in this transaction.

NI Holdings Inc. is the stock holding company of Nodak

Insurance Co. Nodak Insurance also manages Battle Creek Mutual Insurance Co. and reinsures 100 percent of the risk on all insurance policies issued by Battle Creek.

Risk Strategies, Cincinnati Intermediaries

National insurance brokerage and risk management firm, Risk Strategies, has acquired Ohio-based Cincinnati Intermediaries LLC, a specialty wholesale brokerage and managing general underwriter focused on professional liability. Terms of the deal were not disclosed.

The company’s wholesale operation does business as Cincinnati Intermediaries, and its MGU operates under the name ALTRU. The company works with retail agencies and select wholesale brokerages.

Cincinnati Intermediaries places insurance on a wholesale basis with nearly 50 insurance carriers. Risk Strategies has previously added specialized wholesale and MGU capabilities through its acquisition of Advanced Insurance Underwriters and Atlass Marine Insurance, both based in South Florida.

The majority of Cincinnati Intermediaries’ customers are located in the Midwest and the South, though California, Massachusetts and Texas are also represented in its book of business.

The acquisition of Cincinnati Intermediaries brings added distribution in areas such as errors and omissions, directors and officers, cyber, architects and engineers, financial institutions, lawyers and non-profits.

Risk Strategies is a privately held, national firm.

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NATIONAL | Special Report | Construction

20 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

INSURANCEJOURNAL.COM

By Andrea Wells

B

rokers who specialize in the construction industry love their clients and are very committed to keeping up with their needs. Ask them, “So what’s new?” and the conversations inevitably veer off in various directions: risk management, pricing, hot areas, technology, coverage questions and more.

Here are just a few of the directions that emerged from recent Insurance Journal talks with construction specialists who love their construction clients.

Construction Continues to Grow

It is a good time to be in the construction insurance business. U.S. construction spending grew by 7.6 percent from April 2017 to April 2018 with employment growth in the sector increasing in 256 out of 358 metro areas, according to the Associated General Contractors of America (AGC). For the same timeframe, the AGC reported that private residential construction spending soared 9.5 percent, private nonresidential spending grew 5.3 percent, and public construction spending jumped 7.7 percent.

While building hasn’t hit the peaks of the housing boom prior to the Great Recession, construction overall is in good shape.

“It’s a healthy construction market outlook,” says Danette Beck, national construction practice leader at USI, an insurance brokerage and consulting firm.

“There aren’t any projections right now that there is going to be a slowdown.”

Beck still sees apartment and residential construction on the rise — another positive sign for future growth in the broader construction market.

“I always look at that growth (in apartments and residential) as a positive — if homebuilders are buying land and still building buildings, that’s a positive.” What follows is more building in other sectors — for roads, schools, shopping centers — other infrastructure projects that support communities.

Construction specialist Marc Kaplan, an agent and broker for San Diego-based Michael Ehrenfeld Co., said his builder cliINSURANCEJOURNAL.COM

ents are still seeking out available land for new buildings. That’s a good sign for his book of business, which includes a mix of both builders and contractors.

“So as long as my builders are looking for land, that’s going to mean that my trade contractors are going to continue to have work,” Kaplan said. “There’s just a lot of building going on right now in residential, although some of it is segmented,” he said.

“Some price points are just flying out the door while others [higher-end homes] are sitting a little longer.”

‘I always look at that growth (in apartments and residential) as a positive – if homebuilders are buying land and still building buildings, that’s a positive.’

Paul Hohlbein, president of Builders & Tradesmen’s Insurance Services Inc. (BTIS) based in Rocklin, Calif., said BTIS is seeing substantial growth in its large book of what Hohlbein calls the “micro-contractor” space.

“There’s a lot of growth because the economy is good and there’s a lot of new start-up businesses,” he said. Small contractors, or those with one, two or three employees, are busy building small projects in just about every area of the country, he said.

BTIS writes “micro-contractors” in 45 states. Hohlbein says his firm, which writes more than $330 million in premium, has new business coming in from all over.

“We are seeing really nice growth in the New Jersey, Pennsylvania area, and in the Midwest states, Illinois, Wisconsin, Minnesota.” He said the Southeast is growing as well in the Carolinas, Georgia, and Florida. “Texas is always good to us just because of the sheer size of Texas.”

Meaningful Risk Management

Another area that is evolving in today’s growing construction market is risk management, the experts say. If they are to capitalize on new business opportunities,

agents and brokers serving this market need to understand more than insurance; they also need to know how risk management needs in construction are changing.

“Contractors are taking on more risks today than they were yesterday,” USI’s Beck said. With so much construction work going on right now, “it’s incumbent on contractors to be diligent about their risk management philosophy and plans and be careful to not take on more risk than they are prepared to handle,” according to Beck.

Professionals insuring contractors need to be thoughtful when managing risk. “You have to sit down and understand what their goals are and consider that insurance is only one piece of risk management,” said Beck.

She sees risk allocation continuing to shift as contracting structures and projects become more complex. “Owners are asking contractors to do more and more,” she said. “The risk allocation shift puts added pressure on contractors to manage risk effectively and efficiently.”

In addition, the industry is still experiencing heightened merger and acquisition (M&A) activity as contractors continue to find ways to grow and capture more market share. With M&A, additional risks such as geographic nuances or vertical integration present themselves, she says.

“You hear ‘insurance and risk management’ and you think ‘OK, we’re going to put together an insurance program that manages all the risks,’ and it doesn’t. There are other things that contractors can do to manage risks,” Beck said. She advises insurance professionals to be well-versed on “meaningful” risk management practices in construction.

“It’s a much more thoughtful conversation about how you structure a meaningful risk management program,” Beck said.

“You can’t just walk into a construction client’s office and expect that since you understand the concepts of insurance, that you’re going to understand the risk issues.”

For example, sub-contractor pre-qualification is one area that general contractors and large trade contractors are always wor-

continued on page 22

JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 21

NATIONAL | Special Report | Construction continued from page 21 ried about due to sub-contractor defaults.

Construction insurance professionals must help clients create a better risk profile for underwriters, she said. “The better adept that you are at understanding who your partners are, the better you can manage their risk profile,” Beck said.

Technology Helps the Process

As contractors are increasingly turning to technology and analytics to help them with risk management, construction brokers are also turning to technology.

“We utilize technology to really help them as they take on more risks,” Beck said. “When you look at insurance brokerage firms, you look at the platform and what they have from a value-add standpoint on what they give to their clients.”

‘If you have various people in a room, there would be a slight misconception as to what the cover provides and how the cover responds and what should be reported as value.’

USI’s tech investment in construction was one reason Beck joined the brokerage earlier this month from Marsh. “The investments that they’ve made in technology to help clients make informed decisions are really powerful. It helps our teams to be better and be extensions of their clients, so they can help them make decisions to do what they do best, which is build buildings, or build infrastructure.

And they can make decisions that can help them take on more risks while protecting their balance sheet.”

BTIS’s investment in technology is helping it reach its goal of being a $1 billion firm in less than 10 years, Hohlbein says. But it’s also helping its retail agents and the end customer — the contractor — with ease of doing business in today’s fast-paced construction market.

New technology is streamlining the insurance buying process for micro-con22 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

tractors and agents that use BTIS, he says.

“We’re trying to make it easy for them to purchase insurance product and give them options, so they choose and custom tailor what they need,” he said. Hohlbein’s goal is to give contractors a different way to buy coverage that helps his firm and his agency partners as well. “BTIS has been busy building technology to put on agents’ websites, that will allow the contractor to get a price and actually submit and bind the piece of business online through the agent website.” The API-based technology aims to cut quoting and binding times from five minutes to 60 seconds, the announcement said.

Hohlbein said the firm is currently working with a group of beta agents to test the technology and it will soon be made available to all the retail agents that do business with BTIS.

Coverage Trends

The construction insurance market is no different than the overall property/casualty market, according to Kaplan.

“Everything is soft to stable,” he said.

“There isn’t really a hard market for any line of coverage except commercial auto,” he said.

Beck agrees commercial auto is a challenging market for construction but added that catastrophe exposed regions such as California might be experiencing some pain as well. With last year’s wildfire activity in California “we’re seeing some carriers struggle with writing coverage for wildfire risk,” especially with infrastructure-related construction. “That’s just because California got hit really hard.”

One coverage area that is trending in importance during today’s construction building uptick is delay in start-up coverage, according to Tim Kania, Aspen’s global head of onshore Energy and construction.

While delay in start-up coverage has been around for a

long time, it’s still probably one of the most misunderstood coverages in construction insurance, he says. It’s not just insureds that don’t understand the coverage – there remains uncertainty around what the coverage covers from multiple players in the construction transaction from lenders to brokers, and even insurers, according to Kania.

“If you have various people in a room, there would be a slight misconception as to what the cover provides and how the cover responds and what should be reported as value. That obviously can lead to misalignment or misunderstanding whenever events happen,” Kania said.

With the uptick in construction activity, this coverage is becoming more prevalent and should be understood, he said.

Kania describes the coverage, simply, as time element coverage related to construction projects. Delay in start-up coverage is provided to insure against potential loss of earnings, debt service obligations, fixed costs and/or other soft costs following a delay beyond the anticipated date of a building’s completion resulting from a covered property damage loss under the property construction policy.

Kania says the coverage can be purchased as an option by the principal/ owner of the project. Coverage might also be mandated as a condition of applicable financial lending covenants.

INSURANCEJOURNAL.COM

Providing quality

Environmental Insurance It’s important for projects of all sizes.

“Delay in start-up coverage as well as the coverage components can be sought on a wide array of projects with varying project size and complexity and is not limited to mega projects or to a minimum sized project,” he said.

It has similarities to business interruption coverage but is unique for construction. “It is triggered only after the project goes beyond an anticipated date of completion,” Kania said. “In other words, the project has to go beyond the original estimated date that the project would be completed.”

If coverage is triggered, claims are paid based on indemnities from losses that were covered under the property damage section of the policy, he said.

Kania advises construction brokers to have a good understanding of the following:

1. The principals in the scope of the coverage provided. “That can be complicated

because it can be tailored for a particular project and the needs of that project, and projects vary from project-to-project. Even though it’s two building projects, those building projects may vary in how they want to protect loss of earnings,” he said.

2. The insurance parameters need to be understood clearly. “That’s who is

insured, what is the sum that’s insured, and how long is the period of indemnity,” he said. “Look at potential loss scenarios in the indemnification examples to make sure that you get the principals in scope of cover correct and the insurance parameters correct.”

3. Translate potential revenue loss into covered delay in start-up. “So, it’s not a

loss of revenue cover; it’s a loss of earnings cover. It really looks at net profit and fixed costs as the indemnification and doesn’t look at lost revenue,” he said.

Kania says all coverage concepts and misconceptions apply regardless of size of project when it comes to delay in start-up coverage. “But if it’s clear and concise and INSURANCEJOURNAL.COM

from trusted carriers since 1990.

people understand what they’re trying to protect against, what they’re paying for, and insuring, then it’s very good.”

For the Love of Construction

Construction has been the perfect niche for Michael Ehrenfeld’s Kaplan. “There’s a lot to know in this industry, but there’s a lot to know with anything,” he said.

Kaplan says he has met “some of the best people” through specializing in construction. “Contractors are sometimes stereotyped as flaky and I don’t get that,” he said. That stereotype is just wrong, he said. “My clients are not flaky; they’re responsible. They want to do the right job.

It’s important that they have a good reputation,” Kaplan said.

‘Everything is soft to stable.

There isn’t really a hard market for any line of coverage except commercial auto.’

USI’s Danette Beck couldn’t agree more.

“People ask me all the time, ‘Why did you get into construction?’ And I say, ‘I think it’s the best industry,’” she said. By insuring the construction industry, Beck plays a small role in how she impacts the communities in which she lives. “The skylines, the cities, the infrastructure that connects people. What other industry says they can do that?” But it is an industry that requires a specialist to be thoughtful and knowledgeable when it comes to insuring risk, not unlike any other industry.

Construction firms, like many U.S. business, are family-owned companies, second generation, third generation, or fourth generation companies and their personal brand, their thumbprint in the community is at stake, she said.

“When something goes wrong, it’s very personal,” she said. “This is a family name that’s going on the face of this building, this road, this bridge, this wastewater treatment plant, this nuclear power plant,” she said. “I look at all my clients and prospective clients as family. It’s really important that you not only protect their balance sheet, but also their reputation.”

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NATIONAL | Spotlight | Managing General Underwriter

Major Growth Plans Ahead for Schinnerer Group – Now Rebranded as ‘Victor’

By L.S. Howard

B

ig changes are ahead at The Schinnerer Group, a managing general underwriter (MGU), which is getting a new name – Victor – and has some major expansion plans.

From its current premium base of $1.2 billion, Victor has plans to double its size over the next few years through a combination of organic growth and acquisitions, said Christopher Schaper, CEO of Chevy Chase, Md.-based Victor. Schaper is located in the company’s Bermuda office.

The Schinnerer Group’s businesses will start using the Victor brand over the next year, and combine to operate as a global entity. The companies include Victor O. Schinnerer & Co. in the U.S., ENCON in Canada, Bluefin Underwriting in the UK, Mees & Zoonen in Italy and the Netherlands and Schinnerer’s operation in Bermuda.

Recent Schinnerer Group acquisitions, ICAT and Dovetail Insurance, will also be part of the Victor global business but will retain their current names.

Why was a rebranding necessary when the businesses are successful? Schaper pointed to a changing industry in a globalized world. As the company grows, the brand needs to resonate internationally – and digitally, he said.

“By unifying our companies under a global brand and combining capabilities in analytics, underwriting and technology, we will be able to more quickly offer innovative insurance products and services to our clients around the world,” said Schaper in a statement when the rebranding was announced.

“We felt that Victor was a simpler name — frankly, more straightforward. It cer24 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

tainly works well internationally,” he said, admitting that “Schinnerer” doesn’t necessarily work well more broadly as a global brand.

Schaper described the rebranding exercise and the company’s growth plans in an interview with Insurance Journal.

After considering nearly 600 different names for its rebranding — many of which had already been taken — the company came almost full circle when it decided on “Victor.” It not only resonated with the company’s roots as Victor O. Schinnerer, which began operating in the 1930s, it also strongly resonated “with what we’re trying to accomplish — creating a winwin environment for all parties that come to the table,” Schaper explained. “We’re all victors when we work together as a group.”

It goes well beyond the name of a person, he emphasized. “As an MGU we’re servicing insureds as well as agents and brokers, carriers and other capital providers. And we’re trying to do that in a very strong fashion and create value for everyone across the board.”

Moving from his discussion of the company’s new name to its growth plans, Schaper said Victor is planning to double its size — very carefully — over the next few years with organic growth and acquisitions, which will complement its business with products or geographical locations.

“Obviously, Victor will move very safely and very carefully [when considering acquisitions] because we’re in a market” that is highly competitive across all products, he added.

Initially, Victor will be looking at growth in the U.S., the UK and Europe, while eventually considering opportunities in the Australasian market, Schaper said.

As an example of a strategic acquisi-

tion, Schaper cited the example of the company’s purchase in August 2017 of International Catastrophe Insurance Managers. ICAT is a U.S.-based managing general agent that focuses on property risks for small-and-medium-sized enterprises (SMEs).

The Schinnerer Group had long been focused on casualty and specialty lines of business and did not have much of a property book, he explained. “As we were thinking about growth opportunities, when the ICAT opportunity presented itself, we thought it was a very good complement to our overall book.”

Further, he added, ICAT specializes on a line of business that has the ability to scale, not just in the United States but also globally, as the need for property cat capacity continues to grow. “ICAT was an organization that had strong reputation; they’ve been around for 20 years and they were a technology-based MGA as well.”

Speaking of technology, Schaper said that also has been, and will continue to be, a focus for Victor, so it will look at acquisitions and technology that can help the company improve its efficiencies. “We’ve got over 25,000 active insurance agents that we engage with. How do we do that better? How do we create better efficiency for them?”

He predicted that number of agents will rise as Victor continues to expand, so it matters how Victor brings efficiency to the table and creates value in the market.

He pointed to the example of one of the company’s lines it has been underwriting for decades for a U.S. insurer with small, medium, and large sized accounts in its overall portfolio. “We’ve instituted a new technology that has shortened the amount of time for the accounts to be underwritten from two to three days to just a few minutes.”

Schaper thinks the MGU/MGA business model is a great model to create change.

“We can do a lot without all the head count, all the bricks and mortar. We can actually create value by either partnering with other enterprises or just being able to institute these tools into a line of business, verify that it works, and then expand it INSURANCEJOURNAL.COM

and terms and conditions, Schaper said in the interview. He noted that Alternus generated millions of dollars in premium in the first year and represented trillions of dollars in total insurable value (TIV).

innovations. “Bringing us together collectively is a way for us to enhance our intellectual capital capabilities; we are bringing together the minds of the entire team, globally, to provide real changes for the industry.”

In its rebranding announcement, Victor laid out its strategy, which is founded on four key cornerstones: • Combining extensive underwriting experience with modern data and analytics capabilities.

• Providing cloud-based solutions that enable agents and brokers to quote, bind and issue insurance policies in real time – all in one place.

• Enabling a global network of more than 25,000 active agents and brokers.

• Collaborating with leading insurance carriers and alternative capital providers to offer organizations innovative coverage 12/28/15 10:22 AM solutions.

Victor’s CEO Christopher Schaper thinks the MGU/MGA business model is a great model to create change.

Christopher Schaper, CEO of Chevy Chase, Maryland-based Victor into multiple lines of business.” (The company’s global businesses currently employ 700 people, mostly in North America.)

In a separate example of innovation, Schaper pointed to last year’s launch of a product called Alternus. “What Alternus is seeking to do was actually to bring alternative capital into the insurance arena and directly provide the benefits of alternative capital to insureds – the companies that actually support the entire industry.”

Alternus was the first dedicated commercial insurance solution for retail clients backed by alternative capital, he said, explaining that, in the past, alternative C capital primarily benefited the industry’s M insurance, reinsurance and retrocessional Y areas, but not insureds.

Alternus is exclusively offered throughCM Marsh and covers up to 10 percent of an MY insured’s entire property insurance pro- CY gram with up to $200 million in limits CMY per program, according to the April 2017 announcement. The solution is under- K written and managed by Schinnerer and backed by a combination of Allianz Global Corporate & Specialty (AGCS) and alternative capital through asset manager Nephila Capital Ltd. “We think we bring the value proposition of alternative capital which includes stability in terms of security. Alternus provides better and more enhanced security to the insureds as well as at better prices

Schaper said an MGU can provide a strong value proposition by “being able to access all the tools that exist and that are coming to bear in the industry and to do it nimbly. Then we need to be able to take those tools and apply them to actual lines of business or to the insureds’ needs.”

That’s what Victor is seeking to do with its new global brand, its growth plans and A&M into IJ Personal Umbrella.pdf 1 its aim to tap the latest technological

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JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 25

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News & Markets | NATIONAL

Commercial Insurance Prices Increase First Time in 3 Years

C

ommercial insurance prices in the U.S. increased modestly in the first quarter of 2018, according to leading global advisory, broking and solutions company Willis Towers Watson’s Commercial Lines Insurance Pricing Survey (CLIPS). The survey compared prices charged on policies written during the first quarter of 2018 with those charged for the same coverage during the equivalent quarter in 2017.

Price changes were in excess of 1 percent for the first time in 11 quarters, breaking the moder-

ating trend in price increases observed since 2013.

Data for three standard lines — commercial auto, commercial property and excess/ umbrella liability — indicated fairly significant price increases in the first quarter.

Commercial property price data, which had been showing small price decreases in the recent past, now indicate increases in the low- to mid-single digits for the second consecutive quarter. The outlier in the survey findings continues to be commercial auto, with price increases nearing

double digits for the second consecutive quarter.

The survey indicates ongoing price reductions for workers’ compensation, in contrast to all other surveyed lines. Price

changes were positive across all account sizes, as mid-market and large accounts pricing indications moved closer to the recently larger increases reported for small accounts.

“Commercial insurance prices trended upward across nearly all lines during the first quarter of 2018, with aggregate price changes crossing the 1 percent threshold for the first time in almost three years,” said Pierre Laurin, Americas Property & Casualty sales and practice leader for Insurance Consulting and Technology, Willis Towers Watson.

“Workers' compensation was the only line showing a downward price trend, as claims frequency declines and workplace safety continues to improve.”

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JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 27

Idea Exchange

Agency Partnerships

How Agency Partnerships Help Agencies at a Crossroad Then, the internet came along, and changes began to occur. While most agency business historically took place face-toface, a growing number of insurers are opting to circumvent the agency distribution system by selling directly to consumers using online platforms and by phone.

More small and midsized agencies are finding success by joining an aggregator.

By Nick San Filippo

E

ven as they look back on several years of steady growth and success, many owners of independent insurance agencies now find themselves at a crossroad where they are pressed to make critical strategic decisions about the future of their firms.

Ongoing consolidation, intensifying competition from direct writers, large brokerages aggressively pursuing middle market accounts as well as their experienced producers, and the imperative to invest in new technology are among the developments that have created an increasingly challenging landscape for independent agencies.

Shifting Realities for Agencies

Today, auto, homeowners and small commercial insurance policies are being sold over the internet as more companies are offering individual and small business insurance policies online and customers are becoming more comfortable making purchases this way.

Of course, many agencies and brokers are still getting their share of the business, but it’s less profitable as insurers lower rates and reduce agency compensation.

Even though midsize and large agencies and brokers increased their premium growth by approximately 4.5 percent in the past year (from 4.2 percent in 2016), EBITDA (earnings before interest, taxes, depreciation and amortization) grew by only 0.4 percent, according to the Reagan Consulting Group’s Organic Growth and Profitability Survey.

Someone Moved Our ‘Cheese’

Today as they look for the best way forward, owners of many independent agencies must weigh the pain against the potential gain associated with each of the following four options.

1. Go It Alone.

This route often calls for making what can be substantial investments to recruit and train personnel as well as for technology upgrades and ramped up sales and marketing efforts. Often, this can be an uphill battle when as many as 50 percent of the sales people recruited in the insurance industry fail to meet their validation (i.e.: commission vs. draw). That makes it expensive to bring in sales people, train and manage them and have them be profitable over the long-term. Firms will need significant financial and human capital resources to pursue this strategy.

2. Sell the Business.

As reported by investment banker Optis Partners in its Agent & Broker 2017 Merger & Acquisition Update, a record 600 independent U.S. property/casualty insurance agencies were sold or merged into other firms in 2017.

Even though the trend reportedly has slowed this year, it remains a popular option for agency owners. Those facing

It wasn’t too long ago that independent agencies got their business locally and were able to grow from walk-ins, yellow page ads and mailings for auto, home and small business.

Commissions in those days were adequate, and premiums increased fairly regularly at 5 percent to 10 percent a year, as insureds needed greater protection and carriers raised rates. Renewals could be counted on to sustain the business and the agency ownership would typically be passed within the family. Competition came primarily from other independent agencies and captive agents.

28 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

INSURANCEJOURNAL.COM

this option must answer a difficult question: Are they selling because they want to or because they have to?

While the payoff of cashing out may seem appealing, it doesn’t come without a cost. Sellers typically lose control of the direction of their business and status of their personnel, and they are often required to remain in place for a defined transition period that can be several years.

For entrepreneurs used to being owner/ operators, it can be a difficult adjustment to become another firm’s employee. Sellers also may face the challenges of living on a limited budget and declining income stream as they enter their later years, especially if they retire too early. Ultimately, potential income shortfalls may mean lifestyle compromises as they enter retirement and grow older. Notably, 40 percent of those retiring at age 65 have gone back to work, according to a 2017 study by RAND Corporation.

3. Managed Decline.

This strategy calls for accepting the fact that without making necessary investments in your enterprise, it will lose business and shrink in size. As sales decline, agencies going this route reduce expenses and maintain margins until the firm sells what’s left over or closes its doors. In the early stages of this strategy, an agency may be able to maintain its income. As the company’s revenue stream declines, it’s reducing overhead. By saving and investing some of the profits, the owner can prepare for retirement and remain self-employed.

The longer the owner works, the longer he/ she can delay living off of retirement savings.

4. Pursue Growth with Assistance.

More small and mid-sized agencies are finding success by joining an aggregator, which enables them to remain independent while achieving stability and growth.

The larger aggregators offer additional markets, ongoing staff training and higher commissions. This concept works well in conjunction with options one and three above.

Today, 25-to-30 percent of independent

agencies in the U.S. are part of a network.

As agency leaders revisit their business strategies to address the realities of the current environment, they might explore how working with an aggregator can help them reach their goals.

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San Filippo is the CEO of American Insurance Services Agency, Comp-Care Brokerage, and the New Jersey Agency Network. He started American Insurance Services in 1986, which became Strategic Insurance Agency Alliance's first Master Agency in 1994. Email: nick@americanins.com.

6/5/18 11:29 AM

JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 29

Idea Exchange

Construction

Insider Viewpoint: How Contractors’ Use of Digital Surveillance Enhances Quality While Reducing Defect Litigation

By Don Neff

I

n the quality assurance world, the days of clipboards, pencils and punch lists have gone the way of green eye shades and buggy whips. Today’s quality assurance is based on sophisticated, digitally generated business intelligence with ready application to counter, in real time, construction issues, such as labor shortages, that affect the building industry and its insurance carriers.

In its most recent labor survey, the General Contractors of America Association reported that two-thirds of construction firms say they are having a hard time filling hourly craft positions that represent the bulk of the construction workforce.

“With the construction industry in most of the country now several years into a recovery, many firms have gone from worrying about not having enough work to not having enough workers,” said the Associated General Contractors. “These shortages have the potential to undermine broader economic growth by forcing contractors to slow scheduled work or choose not to bid on projects, thereby inflating the cost of construction.”

One of the biggest issues that our firm has witnessed is competition for skilled labor across multiple trades in multiple regions. For instance, we see that Sacramento area builders cannot effectively compete with San Francisco Bay Area 30 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

builders for drywallers due to dramatic pricing differences — Bay Area drywall contractors pay much higher piece labor rates than drywall contractors in Sacramento. It is a painfully serious lesson that labor will move without notice to the highest piece rates available. They may be in Sacramento one day and leave the job unfinished to earn higher rates elsewhere. This marketplace disruption creates scheduling and delivery challenges, site supervision headaches and continuing quality issues that can result in construction deficiencies.

Lacking top-grade workers for whatever reason, builders must resort to B and C quality trades, requiring constant and tedious oversight by field superintendents and construction managers. Deficiencies in field workmanship can result from misinterpretation of plan details and deviations from the manufacturer’s recommendations, leading to more project delays and delivery pressures. An increasing volume of construction issues make it more difficult for project managers and contractors to identify, address and close these items in a timely and cost-effective manner.

Dealing with these growing construction problems has increased quality assurance burdens and challenges on project site personnel, leaving builders, contractors and insurance carriers potentially exposed to quality issues and a higher risk of construction defect litigation.

the status of these four factors in real-time provides builders and their insurance underwriters with three key information benefits: 1) evaluation of trade contractors; 2) evaluation of the field team; and 3) evaluation of a contractors or sub-contractors overall performance on other comparable projects.

The first of these — evaluation of contractors — is essential in a work environment where there are labor shortages that result in a scarcity of experienced tradesmen whose availability is depleted

Construction Performance Metrics

There are solutions for overcoming labor shortages and potential litigation.

Significant U.S. builders rely on several digital software methodologies to assist them in high quality project deliveries.

The critical factors for reducing construction litigation are based on accurate plan details, durable manufactured products, adherence to relevant manufacturer recommendations and top-quality field workmanship in the construction process.

Data via digital surveillance that assesses INSURANCEJOURNAL.COM

by high demand for their skills, such as Sacramento vs. San Francisco. The ability to measure trade contractor performance in the field helps increase work quality or detect problem areas before they become serious. This also includes measuring trade performance on different product types with the ability to accurately measure and cross-reference good and bad performance, which can be the difference between a successful project portfolio and one impacted by complications and losses.

Next is identifying whether a builder’s site management is a contributor to project issues or delays. Like conductors of an orchestra, site managers must effectively schedule, direct and manage the trade contractors in a fusion of the best work-

manship and construction performance.

This is a vital factor in attaining on-time project deliveries, achieving closing dates and managing an owner’s expectations of post-closing warranty service. The better the conductor, the less chance of construction defects and costly litigation.

Finally, knowing how well contractors have performed on a comparable project in the past may be an accurate indicator of how well they will perform on the next project going forward. From the insurance carriers’ perspective, also knowing how well a contractor performs in comparison to other contractors that are building the same product type in the same or different regions can identify helpful criteria to evaluate their inherent risk profile and make

a judgement about whether to use their services.

Hanover, headquartered in Houston, Texas, with a national construction practice, relies on technology by PlanGrid, Procore and CaptureQA to improve operating efficiency and reduce risk.

Growing construction problems have increased quality assurance burdens and challenges on project site personnel, leaving builders, contractors and insurance carriers potentially exposed.

“These innovations enable our project teams to have real-time mobile access to current plans and punch-list functions reducing errors in the field,” said Howard Dyer-Smith, Hanover’s president, and Allen Cortez, vice president of quality and safety. “As part of our Quality Process, it enables Hanover to document and track work deficiencies through correction.

Third-party consultants working independently from the project staff, identify, document and close out individual items which are available to Hanover during the process via a dashboard for completion tracking and trending analysis.”

The Most Common Construction Defects

Our 25-years of experience as a third-party quality assurance consultant for builders has produced substantial data and insight on construction defects that has enabled us to identify the more egregious and pervasive issues. Based on this experience, we have identified the following “seven deadly sins” as the most common causes of construction defect claims. These potential “sins” require continuing, sophisticated surveillance during the building design, construction and maintenance life cycle.

1. Improperly Designed and Constructed Roofs: Water leakage from any source can

result in unhealthy living conditions due to mold growth and damage to interiors, but

continued on page 32 INSURANCEJOURNAL.COM

JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 31

Idea Exchange

Construction

continued from page 31 poorly designed and constructed roofs are at the top of the list. For instance, increasingly popular flat roofs with decks over living spaces (functioning like a walkable roof) are a potential water intrusion disaster. Keep in mind that many of the most vulnerable roof installation defects are out of sight and consequently create longer term deterioration.

2. Improperly Installed Windows & Doors: Windows and doors are

often the first defects noticed, primarily because of water intrusion that leaves telltale drywall stains. More difficult to find are hidden defects such as improperly lapped flashing membranes; missing sheet metal head flashing; and improperly installed flashing at heads, jambs and sills. Those deeply recessed windows, currently in vogue with building designers, are particularly troublesome if lacking positive sloping sills for effective drainage.

Similarly, radius topped windows need extra care from installers to assure proper lapping of the head flashing strips from bottom to top.

3. Improperly Designed and Built Decks Or Balconies: Safety is a critical issue in

balcony design and construction—whether a two-story wood-frame structure in Los Angeles or a 60-story concrete/steel highrise in Miami. Of most concern are poorly drawn plan details or missing saddle-flashing of cantilevered structural supports that can result in rotting structural members.

Was this a contributing factor to a disastrous balcony failure in the summer of 2015 that killed six foreign students in Berkeley?

4. Improperly Constructed Structural Components: Structural components such

as framing members are the bones that support the entire building. The presence of construction defects in these systems may increase the likelihood and extent of structural damage as well as possible injury to occupants. Also, failure to properly

32 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

design and construct the required load paths from the foundations to the walls and the roofing members is a recipe for disaster when Mother Nature’s fury strikes with earthquakes, tornadoes and hurricanes.

5. Improperly Constructed Exterior Siding: Brick, rock, aluminum, wood, vinyl

and stucco are typical exterior cladding systems that protect the actual building structure while giving a home aesthetic appeal. However, improperly constructed siding can result in water intrusion that may be difficult to find and repair, leading to pervasive wood decay, dry rot, mildew and mold growth, with potentially significant health consequences for residents.

6. Defective Foundations and Concrete Slabs: The

structural integrity of a home can be compromised if foundations and concrete slabs are defective. For example, improperly mixed concrete (e.g.: too much water in the design mix) can result in weakened concrete with high porosity which is more vulnerable to vapor transmission and possible damage to structural embedments if soluble sulfates are in the native soils.

7. Improperly Installed Meps, HVAC:

Mechanical, Electrical and Plumbing (MEP) designs and installations are somewhat less prone to deficiencies because they are usually installed by professionals who are trained, tested and licensed. Nevertheless, construction defects do occur and can cause life-safety issues as well as substantial monetary damage. Certain defects can be difficult to find and repair such as improper installation of electrical wiring and plumbing because they are hidden behind walls and ceilings and under floors.

Digital, Quality Assurance Surveillance

These and other construction issues can be detected and solved as soon as they are found with digital, quality assurance surveillance.

LJP Construction Services has a proprietary tool in the form of an iPad-driven app that visually documents construction projects with the simplicity of a stoplight by identifying subtle structural and non-structural anomalies of specific construction assemblies that may affect overall project performance. With the app, “good” is represented by green-framed images, “not ready” by yellow images, and “workmanship issues” by red-bordered images.

‘We recognize the need for multi-faceted third-party quality assurance oversight on construction projects as fundamental to creating insurable risk in the residential market space.’

This all-encompassing view of the construction site tells a more complete and comprehensive story about the project as it progresses, making it easier to identify potential trouble spots.

INSURANCEJOURNAL.COM

Digitally generated business intelligence also measures variation within and between builders’ regional or divisional data sets for a clearer picture of overall company performance. This can be a builder’s best tool for managing team reviews, and just as suitably, an underwriter’s tool for predicting builder performance and insurance premium pricing. This type of rifle shot accuracy compared to a shotgun scatter removes guesswork and increases efficiency of the entire quality assurance and control process.

Finally, another advantage of digital programs is that they can clearly identify construction and vendor problems which could exist across several different projects, and thus allow the builder and contractor to act quickly to rectify problems before they become a trend that can turn into costly, ongoing construction defects company-wide.

Catching these types of vendor problems by a methodical, quality assurance process before they become widespread defects can save developers and contractors, and their insurance carriers, millions of dollars in repairs or, worse yet, lengthy, time-consuming lawsuits.

The need for this third-party quality assurance attention for insurance company underwriters cannot be overstated.

“We recognize the need for multi-faceted INSURANCEJOURNAL.COM

third-party quality assurance oversight on construction projects as fundamental to creating insurable risk in the residential market space,” said Chris Day, president of Tokio Marine/HCC. Holly Heimbruch, vice president at Venture Underwriters Inc., agrees. “As an underwriter, I am 1/4/08 quite dependent on the USA12043.qxd 2:26 PM Page reports provided from knowledgeable and

experienced quality assurance companies (who are typically experts in construction practices),” she said. “Over the years, the third-party peer reviews have proven to be a valuable tool for tracking a project, whether it is ground-up construction or renovation. The reports provide clear evidence as to the quality builtin before being covered up. If a correction is required, the contractor has the necessary time to correct before a claim is filed. Along with the independent, third-party peer review reports, I also find the quality assurance review process provides insights to the risks of contractors which are not fulfilled by simply reading a project insurance application. In leading QA/ Peer Review companies, technical staff is always available to assist with any type of construction-related question.”

Neff is the president of LJP Construction Services, an Irvine, Calif.-based firm that offers asset management, third-party peer review, risk management 1and quality assurance services to the construction industry.

JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 33

NATIONAL | MyNewMarkets Carrier: Unable to disclose, admitted

States: All states Contact: Sandip Chandarana

at 630-572-0600 or e-mail: sandip@puainc.com

One-Shot Builders Risk

Bakers Insurance

Market Detail: Food Liability

Insurance Program’s (FLIP) (www.fliprogram.com) bakers insurance protects bakers from third-party claims that might arise from their business operations. Covered claims may include slip-and-fall accidents, illnesses caused by baked products, or equipment loss. Baker insurance from FLIP provides coverage for business personal property/inland marine, general liability, product liability, and identity recovery coverage.

FLIP baker insurance costs $299 with additional coverage options that can be added for an additional premium to customize a policy.

Available limits: Minimum $2 million, maximum $2 million Carrier: Great American Insurance Group States: All states Contact: Joanne Duke at 844520-6992 or e-mail: info@fliprogram.com

E-Cigarette, Vape Shop, and E-Liquid Insurance Market Detail: Veracity

Insurance Solution’s (www. veracityinsurance.com) VIP coverage was designed specif-

ically for the e-cigarette industry with exclusive insurance coverage forms to respond to the needs of the vape industry.

Coverage includes no health hazard exclusion. Health hazard exclusions vary from one insurance company to another and can limit coverage to totally exclude all health-related issues, e-liquids, devices, or a combination of these items.

As the industry changes and the FDA regulation redefines “tobacco products,” a health hazard exclusion may be more limiting than anticipated. VIP coverage options available with low minimum premiums.

Startups and new ventures welcome.

Available limits: Minimum $100,000, maximum $25 million Carrier: Unable to disclose, non-admitted States: All states Contact: Veracity Insurance at 866-395-1308 or e-mail: sales@ veracityins.com

Businessowners

Market Detail: Heritage Specialty Insurance (www. heritagespecialty.com) offers BOP or monoline GL for retail, office, wholesale, service and

34 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

other types of businesses.

Available limits: As needed Carrier: Chubb States: Ark., Okla., and Texas Contact: Bradley Hurt at 866544-1900 or e-mail: info@heritagespecialty.com

Horse Farms

Market Detail: Tejas American General Agency (www.taga1. com) writes arenas, commercial boarding operations, training, breeding, roping’s, etc.

Available limits: As needed Carrier: Unable to disclose States: Ark., Ariz., Calif., Colo., La., Mo., Miss., N.M., Okla., Tenn., and Texas Contact: Anita Herzog at 888999-8242 or e-mail: anita@ taga1.com

Professional Liability

Market Detail: NSM Insurance’s (www.nsminc. com) specializes in attorneys, financial institutions, architects & engineers, tech & media, healthcare and hard-to-place miscellaneous. Coverage specialties include: professional liability for any industry, cyber liability, management liability and employment practices liability.

Available limits: As needed

Market Detail: Builders & Tradesmen’s Insurance Services, Inc.’s (www.btisinc. com) One-Shot Builders Risk program is underwritten by a carrier rated A XIII by A.M. Best Co. and accepts many kinds of residential and commercial risks. It also comes standard with easy online quoting & binding. The program provides builder's risk/course of construction coverages for owner/ builders, contractors & developers building or remodeling residential and small commercial properties during course of construction.

Available limits: As needed Carrier: Great American Insurance CO. States: All states Contact: Lindsey Taylor at 916772-9200 or e-mail: ltaylor@ btisinc.com

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

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Idea Exchange

Minding Your Business

Becoming a Socially Responsible Agency owners and employees that are active in the community are also engaging with potential customers, and thereby, indirectly marketing the company in the process.

Agencies that are involved in the community will stand out from the competition.

An agency that organizes a fundraiser for a local charity will create a noticeable gap between that agency and its competitors that are not socially responsible.

By Catherine Oak &

Rachel Schoeffler

Customer Engagement

Many people enjoy being part of an agency’s Corporate Social Responsibility program. In California, Whole Foods Market Inc. will donate the $0.05 per bag refund if you bring in reusable bags. Such programs help build strong relationships with customers. Some customers will pay more for a product or service if a portion of the profit goes to a charity. An agency that promotes its activities with a worthy cause can retain clients and attract new ones, thus increasing sales and profits.

Employee Retention

ocial responsibility is becoming increasingly important to all agencies, especially for millennials.

Whether the social issue is local, national, or global, the concern for some aspect of society is becoming more and more a part of doing agency business.

Many agencies and the owners already are involved with charities and other causes. However, the key is to make it a formal part of the agency plan. In addition to helping a cause you believe in, there are many other reasons why an agency might engage in social responsibility.

S

Employees typically want to feel that the work they do is meaningful. Agencies that are active with social responsibility issues will provide motivation to employees. It is important that part of a strategy is to engage the employees in the activities.

Provide some time during the work day for employees to work on the cause promoted by the agency. This will improve morale and a sense of pride in the agency and the cause.

There are several types of corporate social responsibility initiatives that an agency can follow. These include the following:

Improve Company Brand

Philanthropic Initiatives

A great way that an agency can bolster its image and build its brand is by being socially responsible. An agency that promotes its social responsibility will be projecting a positive image and improving public perception. Agencies, agency 36 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

Companies’ philanthropic efforts can include the donation of time, money or resources to charities and organizations at local, national or international levels.

Donations can be directed to a variety of worthy causes including conservation,

medical research, human rights, national disaster relief, clean water and education programs in underdeveloped countries.

This is the easiest way for a small agency to become involved with a worthy cause.

Apple CEO Tim Cook developed a program in 2011 to match employee donations, so far resulting in more than $50 million for charities around the world. Google has a deep global reach with offices in more than 40 countries. Last year, more than 6,500 Google employees volunteered nearly 80,000 hours of service.

Most large companies in the U.S. work closely with nonprofits by forming partnerships, offering donations or bringing in volunteers. They understand that nonprofits are out there fighting to make the world a better place, so they institute corporate giving programs that provide funds to more organizations.

Ethical Agency Practices

The main focus on ethics is to provide fair labor practices for agencies’ employees as well as the employees of their clients.

Fair agency practices for employees may include equal pay for equal work and living wage compensation initiatives. Ethical labor practices for the suppliers include the use of products that have been certified as meeting fair trade standards.

Fair Trade Certified companies (www. fairtradecertified.org) tend to be food and clothing related. Patagonia is one of the most notable Fair Trade Certified companies.

The premise is simple: for every product made by a Fair Trade Certified factory, companies such as Patagonia choose to pay an additional premium that workers can use to elevate their standard of living and bridge the gap between a minimum wage and a living wage. A worker-elected committee votes on how to spend the money – either as a cash bonus or to pay for social, economic and environmental community projects. However, the idea can be extrapolated to other industries.

INSURANCEJOURNAL.COM

Environmental Responsibility

Environmental sustainability initiatives can range from eliminating waste and emissions to maximizing the efficient use of resources and productivity and minimizing activities that might impair the enjoyment of resources by future generations. Agencies can become environmentally responsible by organizing car pools, encouraging biking to work, improving the energy efficiency of the office or recycling waste.

Economic Responsibility

Economically responsible companies focus on practices that facilitate the longterm growth of the company while also meeting the standards set for ethical, environmental and philanthropic practices. By balancing economic decisions with their overall effects on society, agencies can improve their operations while also engaging in sustainable practices.

Crayola created a ColorCycle Program, with a goal of teaching children about the importance of recycling. Schools and families can collect used markers and send them to Crayola for free, so they can transform the markers into clean-burning fuel.

INSURANCEJOURNAL.COM

This program not only helps the environment, but it also saves Crayola money on fuel by recycling used products. Ultimately, this initiative increases profit for the company by cutting costs of fuel in the factories.

Some states and countries have created a B (Benefit) Corporation status designed for firms that create a positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals.

B Corps are for-profit companies certified by the nonprofit B Lab (www.bcorporation.net) to meet standards of social and environmental performance, accountability and transparency.

Summary

Insurance agencies need to become more socially conscious. In addition to helping society, it helps build a relationship with the community, customers and vendors, and it creates a positive work environment for employees. Consumers, especially millennials, expect to see great products and services and how the company can improve society. Some of the best client prospects are likely to choose a com-

pany that is active in the community and dedicates its resources to helping others.

Do well by doing good.

Oak is the founder and president of Oak and Associates, an international consulting firm to the insurance industry, and specializes in mergers, acquisitions, perpetuation planning, valuations, planning meetings and streamlining operations for insurance agencies.

Schoeffler is a financial analyst and junior consultant for the firm. Email: catoak@gmail.com. Website: www.oakandassociates.com. Phone: 707-935-6565.

Advertisers Index

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

Access Home Insurance www.accesshomeinsurance.com S5 AmTrust www.amtrustgroup.com 17 Anderson & Murison www.andersonmurison.com 25 Aon Affinity www.affinityhcp.com 29 Applied Underwriters www.auw.com 2, 3, 40 Atlas General Insurance Services www.atlas.us.com 27 Beacon Hill Associates www.b-h-a.com 23 Crawford Contractor Connection www.contractorconnection.com 5 Golden Bear Insurance Company www.goldenbear.com 19 Gorst & Compass Insurance www.gorstcompass.com W13 Hastings Mutual Insurance Company www.hastingsmutual.com M4 Liberty Mutual www.libertymutualgroup.com 9 Louisiana Commerce & Trade Assoc. www.lctacomp.com SC5; S5 M.J. Hall & Company www.mjhallandcompany.com W4 Midlands Management Corporation www.midlandsmgmt.com SC2 Monarch E&S Insurance Services W5, W15 www.monarchexcess.com PersonalUmbrella.Com www.personalumbrella.com 39 PSIC - Pacific Specialty Insurance Co. www.wwfi.com W11 Regions Bank www.regions.com 15 SIS Wholesale www.sisinsure.com 13 State Compensation Insurance Fund www.statefundca.com W3 Texas Mutual www.texasmutual.com SC3 Topa Insurance Company www.topa-ins.com W9 United Fire Group www.ufgsolutions.com E5 Universal Service Agency, Inc. www.universalbonds.com 33 Worldwide Facilities www.wwfi.com 7

JUNE 18, 2018 INSURANCE JOURNAL | NATIONAL | 37

Closing Quote 3 Reasons Why Your Clients Need to Buy Personal Umbrella

By Michael F. Aylward

T

here are at least three reasons for an individual to buy a personal umbrella policy.

To begin with, the primary policies otherwise available generally do not provide liability limits commensurate with the exposure such individuals may face.

Second, the cost of this excess coverage is comparatively cheap.

Third (and perhaps most importantly), umbrella policies not only provide coverage when losses exceed the available primary limits, but add coverage for certain types of losses, such as “personal injury” claims that are generally not covered by primary policies.

Although the limits of homeowners insurance and other forms of personal primary insurance have increased, most only provide coverage with “per occurrence” limits of $300,000 or $500,000.

Substantial as that sum may seem, it is hardly sufficient to

satisfy the liability an insured may face due to a serious accident.

Umbrella coverage is also surprisingly affordable. As a result, umbrella insurers are willing to quote coverage of $1 million to as much as $10 million at rates that are proportionally cheaper than primary insurance. Umbrella carriers can quote coverage with confidence that statistics show their insureds are unlikely to be sued, and any resulting suits are likely to be resolved within the limits of the insured’s primary coverage. Umbrella insurance not only boosts available coverage limits at a relatively advantageous cost compared to dollar limits on primary policies, but it does so with respect to a portfolio of primary risks.

Thus, an insured has excess coverage available for serious auto or premises liability claims without having to pay to increase limits on primary insurance policies that would insure these separate risks.

Umbrella insurance presents a particular feature that separates it from other types of excess insurance.

Umbrella policies (deemed “bumbershoot” policies in the London market) not only provide insurance coverage once the primary limits are exhausted, but they drop down to provide primary coverage

38 | INSURANCE JOURNAL | NATIONAL JUNE 18, 2018

for certain types of losses that may not be covered under the insured’s primary policy.

For instance, umbrella policies typically include “personal injury” coverage for quasi-intentional tort losses, such as claims for wrongful entry or eviction, defamation or disparagement and malicious prosecution or false arrest that many homeowners policies do not cover. Umbrella policies may also define “bodily injury” to include claims for emotional distress that primary policies do not cover. In these cases, the umbrella insurer will step in to defend the underlying claim and fill a gap in the insured’s coverage profile that might otherwise prove expensive and perilous.

While the decision to purchase umbrella coverage should be an obvious one for most policyholders, deciding whether to buy umbrella coverage from the same company that underwrites your primary policies may be more difficult.

Some primary insurers may be willing to discount the cost of such insurance when the

policyholder agrees to buy a package of policies. Using the same insurer may also avoid a seamless web of insurance and avoid unexpected gaps due to conflicting wordings. At the same time, having a different insurer write the excess coverage may be to the benefit of the insured in cases where the primary insurer is reluctant to accept coverage and the excess insurer acts in concert with the policyholder to apply pressure to the primary carrier to pay the loss or defend.

Personal umbrella policies can help customize insurance coverage by filling gaps in a client’s coverage profile and raise the limits of coverage to safer levels. In short, the answer to the question of whether an insured should buy personal umbrella insurance is not “yes, you should” but rather, “why on earth would you not.”

Aylward is a partner in the Boston law office of Morrison Mahoney, where he chairs the firm’s complex insurance claims resolution group. Phone: 617439-7556 Email: maylward@morrisonmahoney.com INSURANCEJOURNAL.COM

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