Insurance Journal West 2021-06-21

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June 21, 2021 • Vol. 99 No. 12

Contents

Idea Exchange

Special Report

News & Markets

8

34

18

Workers’ Compensation Profit Picture Looks Good in Short Term: Fitch

Closer Look: Why Sharing Economy Firms Just Might Be The Best Insurance Customers

12

22 Spotlight:

Despite Less Driving During 2020 Pandemic, Traffic Deaths Were Highest In 13 Years

Forgotten Your Passwords?

They Soon May Be Lost Altogether – with Insurers’ Help

12

P/C Insurers’ Underwriting Income Fell 53% in First Quarter: AM Best

13

36

The Impact of Commercial Lines Raters on Independent Agencies

38

24

Why Agents Should Specialize in the Commercial Surety Space

27

The Competitive Advantage: What a Winner is Doing and What You Can Learn from Them

Spotlight: Homeowners’ Form and Endorsement Changes Coming in ISO’s 2022 Multistate Filing

‘Zombie’ Companies Likely to Keep Commercial Insurance Rates Rising

How Agents Can Help Construction Clients Prepare for Post-Pandemic Growth

Closer Look: What Is Umbrella Coverage and Why Should Your Customers Buy It?

30

Special Report: Construction Market Keeps Hammering Away

40 42

Minding Your Business: How to Find New Producers

44

Ask the Insurance Recruiter: The Gig Economy Offers a Fresh Take on Talent Acquisition

50

Closing Quote: Preparing Policyholders for Catastrophic Events

Departments 6 Opening Note 4 | INSURANCE JOURNAL | JUNE 21, 2021

10 Figures

11 Declarations

14 Business Moves

16 People

46 My New Markets

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Opening Note Write the Editor: awells@insurancejournal.com

Publisher Mark Wells | mwells@wellsmedia.com Chief Executive Officer Joshua Carlson | jcarlson@insurancejournal.com

ADMINISTRATION / CIRCULATION

Ridesharing and Auto Collisions

T

he increased use of ridesharing apps appears to be associated with a decrease in motor vehicle collisions and impaired driving convictions.

That’s according to research by The University of Texas Health Science Center at Houston (UTHealth). The findings based on data from Houston were published in JAMA Surgery.

The study found that rideshare volume had a significant correlation with the incidence of motor vehicle-related trauma, with a reduction in the rate of incidence by one-third for every 1,000 rides. The rate continued to drop as more rides occurred.

The age group with the most significant decrease in motor vehicle-related trauma were those under the age of 30, with a reduction rate of almost 39%.

Impaired driving convictions also reduced in the years following the introduction of Uber into Houston. Before 2014, there were an average of 22.5 impaired driving convictions in Houston daily. After 2014, impaired driving convictions decreased to an average of 19 per day.

“I think this was the biggest takeaway from the study. The data shows that ridesharing companies can decrease these incidents because they give young people an alternative to driving drunk,” said Christopher Conner, MD, PhD, lead author. Conner is neurosurgery resident in the Vivian L. Smith Department of Neurosurgery at McGovern Medical School at UTHealth.

He said he hopes the results will allow people to see that anyone can be affected by a motor vehicle collision, but that they do have another option that has been proven to reduce their risk of injury, death, or impaired driving conviction.

The research is timely as more individuals are utilizing ridesharing apps, according to Conner.

“Automobile accidents are the leading cause of death and disability among young people, so anything we can do to reduce those incidents is going to have a massive effect,” he said.

The greatest number of motor vehicle collisions occurred on Friday and Saturday nights between 9 p.m. and 3 a.m. Comparing the date from before and after 2014 revealed an almost 24% decrease in motor vehicle collision traumas and the number of impaired driving convictions during those hours.

For the study, researchers asked rideshare app companies that were in Houston as early as 2014 to supply their utilization rates. Uber responded, submitting data from 2014 through 2018. They also used data from the Red Duke Trauma Institute at Memorial Hermann Hospital-Texas Medical Center and Harris Health Ben Taub Hospital in Houston as well as data on impaired driving convictions from the Harris County District Attorney’s Office from 2007-2019, limited to cases resulting in a conviction or probation.

‘Rideshare volume had a significant correlation with the incidence of motor vehicle-related trauma, with a reduction in the rate of incidence by one-third for every 1,000 rides.’

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | JUNE 21, 2021

Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com Circulation Manager Elizabeth Duffy | eduffy@wellsmedia.com Staff Accountant Sarah Kersbergen | skersbergen@wellsmedia.com

EDITORIAL

Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@insurancejournal.com East Editor Elizabeth Blosfield | eblosfield@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 & Contributors

Columnists: Chris Burand, Mary Newgard, Catherine Oak Contributors: Christopher Boggs, Tony Caldwell, Tara Kelly, Peter McMurtrie, James Patterson, Kathryn Truman

SALES / MARKETING

Chief Marketing Officer Julie Tinney | jtinney@insurancejournal.com West Sales Dena Kaplan | dkaplan@insurancejournal.com Romeo Valdez | rvaldez@insurancejournal.com South Central Sales Mindy Trammell | mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA, CT) Howard Simkin | hsimkin@insurancejournal.com Midwest Sales Lisa Whalen | (800) 897-9965 x180 East Sales (NY, PA and CT only) Dave Molchan | (800) 897-9965 x145 Advertising Coordinator Erin Burns | eburns@insurancejournal.com Insurance Markets Manager Kristine Honey | khoney@insurancejournal.com Senior Strategist Pam Simpson | psimpson@insurancejournal.com Social Media Manager Ly Short | Lshort@insurancejournal.com Marketing Administrator Gayle Wells | gwells@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com

DESIGN / WEB / VIDEO

V.P. of Design Guy Boccia | gboccia@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Ryan Kleshinski | rkleshinski@wellsmedia.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com

ACADEMY OF INSURANCE

Director Patrick Wraight | pwraight@ijacademy.com Online Training Coordinator George Jack | gjack@ijacademy.com

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News & Markets Workers’ Compensation Profit Picture Looks Good in Short Term: Fitch

W

ith favorable results driven by recent reductions in claims frequency and further recognition of material reserve redundancies, workers’ compensation underwriting performance is expected to remain strong in 2021, according to Fitch Ratings.

However, this level of profitability is unsustainable longer term, as claims trends are expected to normalize while competitive forces create renewed pricing pressure, Fitch analysts add. The workers’ compensation industry posted a third consecutive year of 90 or below combined ratios in 2020. This came with a 10% reduction in annual written premiums amid the pandemic, which also led to a sharp decline in claims frequency versus the prior year.

8 | INSURANCE JOURNAL | JUNE 21, 2021

Fitch said pandemic-related losses, particularly for essential services and health care providers to date, are manageable for insurers but remain a source of uncertainty. The segment’s combined ratio is anticipated to remain in the low 90 range for 2021.

Reserve Strength

Workers’ compensation continues to demonstrate the strongest reserve position of any property/casualty industry product line, with calendar year favorable developments averaging 15% of segment earned premiums for the last four years.

The segment’s reserve strength was likely maintained in accident year 2020, as reported loss ratios may have underestimated the benefits of declining frequency

on incurred losses.

Pricing for the segment contrasts with other commercial property and liability lines that have reported rising prices for the last two years or more. After years of declining premium rates in response to favorable results, uncertainty tied to the coronavirus promoted a stabilization in pricing in 2020. However, Fitch expects rates to again start falling by year-end 2021 as normal economic activity and market competitive forces return. Claims frequency patterns are anticipated to normalize with the return to workplace norms and economic activity, according to Fitch. Loss severity has been stable in recent years but remains a greater source of future volatility with rising general inflation and the potential for higher future medical costs.

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Contractor General Liability | Workers’ Comp | BOP | Professional Liability | Commercial Auto Inland Marine | Builders Risk | Excess | Bonds | Cyber Risks | Special Events

Figures

3,000

The number of grants for FORTIFIED roofs the Strengthen Alabama Homes program has awarded to help families protect their homes from severe weather, the Insurance Institute for Business & Home Safety (IBHS) said. The IBHS FORTIFIED Home program identifies key construction and roofing practices that can minimize damage from winds up to 130 mph, torrential rain and hail up to 2 inches in diameter. Since 2009, Alabama has required insurers to provide discounts for homes with a FORTIFIED designation.

$22,000 A former U.S. Postal Service (USPS) carrier was ordered to pay this amount in restitution after being sentenced on a federal charge in Maryland for making false statements to obtain disability compensation. U.S. District Judge Paula Xinis sentenced Ronald S. Repass, age 57, of Poolesville, Md., to five years of probation on the federal charge of making false statements or fraud to obtain federal employees’ disability compensation.

5.3 That’s the magnitude of the earthquake that struck near the Salton Sea in Southern California on June 5. There were no reports of injuries or serious damage, the U.S. Geological Survey said.

10 | INSURANCE JOURNAL | JUNE 21, 2021

$2.12 Billion The amount in damages Johnson & Johnson’s still owes to women who blamed their ovarian cancer on asbestos in the company’s baby powder and other talc products after the U.S. Supreme Court declined to hear J&J’s bid to overturn the damages award.

That non-action left in place a Missouri state court ruling in litigation brought by 22 women whose claims were heard together in one trial. J&J said in a statement that there are unresolved legal issues that will continue to be litigated. It previously has said it faces more than 19,000 similar claims.

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Declarations

Western Wildfires

Stayin’ Alive

One of Many

“All these steps are in the right direction, but the challenge is big and complex.”

— John Bailey, professor of silviculture and fire management at Oregon State University, said wildfire mitigation steps ongoing in the drought plagued Western U.S. are good, but that more needs to be done.

“If you look at that crash it’s like, how did somebody not die?”

— Scott Barthelmass, spokesman for the Eureka, Missouri, fire department, said no one was injured after a car flipped end-over-end down an embankment in the town and crashed through the roof of a home just feet from where two people were sleeping.

One of the homeowners used a garden hose to put out a small fire caused by the crash. Two men in the car were able to get out of the wreckage on their own.

“I’ve been in the industry since 1992, and this is the worst ever. … People seem to be more angry. When they’re asked to do something, compliance seems to be more difficult.”

— Lyn Montgomery, president of Local 556 of the Transport Workers Union, said the in-flight incident in which a flight attendant for Dallas-based Southwest Airlines was assaulted by a passenger and lost two teeth in the attack was unfortunately “just one of many occurrences.” Montgomery said there were 477 incidents of “misconduct” by passengers on Southwest planes between April 8 and May 15.

Suing CVS

Tesla Safety

Willful Violations

“As both distributor and pharmacy, CVS was in a unique position to monitor and stop the peddling of these highly-addictive drugs from their stores, yet they ignored their own safeguard systems.”

— Kentucky Attorney General Daniel Cameron said upon filing suit against CVS Health, accusing the pharmacy chain of flooding his state with prescription opioids that contributed to Kentucky’s addiction woes. The lawsuit seeks civil penalties and punitive damages; it is the latest legal action against companies the state blames for supplying a massive pipeline of prescription pills into Kentucky.

CVS Health said it is prepared to defend itself against the allegations.

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“If a driver thinks their vehicle has a safety feature and it doesn’t, that fundamentally changes the safety profile of the vehicle. … It might not be there when they think it would save their lives.”

— David Friedman, Consumer Reports’ vice president of advocacy, said in a statement after Consumer Reports pulled its “Top Pick” status for Tesla’s Model 3 and Y vehicles built after April 27. The Insurance Institute for Highway Safety also plans to remove the vehicles’ “Top Safety Pick Plus” designation. The endorsement removals come after the company stopped using radar on its safety systems on the vehicles. Consumer Reports said removing radar and relying on cameras means the safety features may not be there when needed.

“Management’s knowledge of these hazards and their failure to correct them led us to cite these conditions as willful violations.”

— The U.S. Occupational Safety and Health Administration (OSHA) Area Director David McGuan of Augusta, Maine, said regarding a Waterville, Maine, auto body manufacturing plant that faces nearly $400,000 in proposed fines for unaddressed fall and noise hazards that placed its employees at risk. The Shyft Group Duramag LLC – formerly F3 MFG Inc. – faces the fines for not addressing these and other hazards after OSHA cited the plant for two willful and 10 serious violations.

JUNE 21, 2021 INSURANCE JOURNAL | 11

News & Markets

Despite Less Driving During 2020 Pandemic, Traffic Deaths Were Highest In 13 Years

E

ven though Americans drove less in 2020 due to the pandemic, early estimates of crash fatalities from the U.S. Department of Transportation’s National Highway Traffic Safety Administration reveal the largest projected number of deaths since 2007.

According to NHSTA, an estimated 38,680 people died in motor vehicle traffic crashes last year, representing an increase of about 7.2% as compared to the 36,096 fatalities reported in 2019.

Preliminary data from the Federal Highway Administration (FHWA) show vehicle miles traveled (VMT) in 2020 fell by about 430.2 billion miles—a 13.2% decrease. The fatality rate for 2020 was 1.37 fatalities per 100 million VMT, up from 1.11 fatalities per 100 million VMT in 2019.

NHTSA’s analysis shows that the main

behaviors that drove this increase include: impaired driving, speeding and failure to wear a seat belt.

While passenger vehicle occupants had the largest number of fatalities, accounting for 23,395 of the 38,680 (up 5%), motorcyclists saw the biggest increase in crash deaths, rising 9% to 5,015.

Deaths among bike riders also increased, rising 5% to 846, while pedestrian deaths were estimated at about the same levels in 2020 and 2019.

NHSTA said crashes involving a large truck were among the few areas where the agency projects a declining number of deaths in 2020, but the drop was only 2%.

Crash fatalities among people aged 65 fell by about 9%.

Crash factors reviewed by NHTSA that showed the largest increases in 2020 as

compared to 2019 included: • Occupant ejection, up 20%.

• Unrestrained occupants of passenger vehicles, up 15%.

• Crashes on urban interstates, up 15% • Crashes on urban local/collector roads, up 12%; Speeding-related crashes, up 11% Nighttime driving produced an 11% jump in crash deaths, and deaths from weekend crashes rose 9%.

Demographically, non-Hispanic Black drivers were the most impacted, with crash deaths rising 23%.

Auto Insurers

The NHTSA data is consistent with reports from auto insurers that cited a reduction in the number of claims during

P/C Insurers’ Underwriting Income Fell 53% in First Quarter: AM Best

T

he U.S. property/casualty industry saw its net underwriting income fall in first-quarter 2021 by 53% as compared with the same prior-year period, according to preliminary financial results analyzed by AM Best.

Increased incurred losses, loss adjustment expenses and underwriting expenses, as well as a 72% rise in policyholder dividends, were behind the underwriting income decline, according to a report from AM Best. Underwriting

12 | INSURANCE JOURNAL | JUNE 21, 2021

income declined despite 2.3% growth in net earned premiums in the quarter.

The report notes the combined ratio for the property/casualty industry deteriorated to 96.4 from 95.0 in the first quarter of 2020. Catastrophe losses accounted for an estimated 6.9 points on the three-month 2021 combined ratio, up from an estimated 3.3 points in first-quarter 2020.

The financial review is detailed in Best’s Special Report, “First Look: Three-Month 2021 Property/Casualty Financial Results.”

The data is derived from companies’ threemonth 2021 interim statutory statements received June 1, representing an estimated 99% of the total P/C industry’s net premiums written. With net investment declining, the drop in underwriting income drove a 12.9% reduction in pre-tax operating income. As tax expenses were down 18.4% and realized capital gains were up $4.1 billion, industry net income increased by 11.4% from the same prior-year period to $20.2 billion.

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2020 but an increase in the severity of claims due to fatalities. Many insurers returned premiums and lowered rates to reflect the reduction in claims. Still, many personal auto insurers reported healthy profits in 2020.

Fitch Rating reported that the premiums returned and rebated, while substantial, “did not fully offset loss cost benefits derived from lower frequency.”

Auto claims statistics from Allstate, Progressive and GEICO show that frequency dropped by 27-30% in 2020 for physical damage claims, and by 25-30 for bodily injury. In contrast, in 2019, the frequency declines for these coverages were in the 0-4 percent range.

Still, Fitch noted, declines in frequency were partly offset by jumps in claims severity last year: 8-10 percent for physical damage and 12-13% for bodily injury.

Accidents occurring at higher speeds in less crowded traffic conditions and

distracted driving are thought to be contributors to the severity trends.

Fitch does not see the 2020 profits of auto insurers as sustainable.

“Further pricing pressure is likely in response to recent operating success and as companies strive to retain policyholders, which will contribute to a reversion to pre-pandemic performance levels in 2021,” Fitch predicts.

Mark Sektnan, vice president of the American Property Casualty Insurance Association, said insurers “took immediate action” when driving was reduced in 2020, and that auto insurers voluntarily provided more than $14 billion in refunds and credits to policyholders for reduced driving during the pandemic.

Some contend that insurers should have done more to account for the drop in driving and crashes.

California Insurance Commissioner Ricardo Lara has said insurers in his state have continued to “overcharge drivers”

despite reduced risk of accidents during the pandemic.

Class action lawsuits have been filed in Nevada against 10 major auto insurance companies, contending that the companies charged excessive insurance premiums during the pandemic.

The industry has pushed back against critics.

“The 2020 increase in road fatalities suggests that despite improved automobile technologies and auto safety laws, driver behavior is deteriorating at a rapid pace,” said Stef Zielezienski, executive vice president and chief legal officer for the American Property Casualty Insurance Association.

“Trends in reckless driving could prove even more fatal as traffic volume starts to return to pre-pandemic levels. These dangerous trends, combined with increasing litigation, medical, and auto repair costs impact the marketplace,” Zielezienski added.

‘Zombie’ Companies Likely to Keep Commercial Insurance Rates Rising

By Alwyn Scott

T

he expectation that hundreds of so-called zombie companies will fail over the next few years and drag on the economy is among the major concerns prompting insurers to reduce risk and charge higher premiums, a trend likely to continue as failures increase, Swiss Re AG said earlier this month.

Zombies – which lack the cash flow to cover the cost of their debt — are “a ticking time bomb” whose explosive effects will be felt as governments and central banks withdraw measures that have helped keep these companies alive during the pandemic, Jerome Haegeli, chief economist at the Swiss insurer, told Reuters. The sober prediction comes as stock prices hit records and the U.S. economy appears headed for 6.5% growth this year. Yet these strengths are illusory, Haegeli said, because they are based on temporary fiscal and monetary support.

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Haegeli said the proportion of companies that are zombies certainly increased during the pandemic, as central banks flooded markets with money and governments provided relief. At the same time, U.S. company bankruptcies fell 5% in 2020, Swiss Re said in a report.

Before the pandemic, about 20% of listed firms in the United States and UK were zombies, and 30% in Australia and Canada, the Bank for International Settlements said in September. By comparison, zombies constituted about 15% of listed companies in 14 advanced economies in 2017 and 4% before the 2008 financial crisis.

Insurers are being cautious as they forecast where the economy will be in a year or more, Haegeli said. They are

reining in underwriting risk, being more prudent about investment portfolio asset allocations and even taking precaution on insuring operations and supply-chain risk.

“They are not getting fooled by the short-term picture,” Haegeli said. “If you look at the market today, everything looks great. However, it’s illusionary to think that this environment can last” as “life support” is withdrawn in coming months. And that will bring an increase in long-overdue bankruptcies. “I’m concerned that you’re going to see a sudden spike in defaults because the default rates are so low,” he said.

Insurers also are likely to continue raising prices to be sure they are adequately pricing the risks ahead, he said. Global commercial insurance prices started rising in 2017 and have climbed since, including an 18% rise in the first quarter of 2021, according to data from Marsh & McLennan Companies Inc.

Copyright 2021 Reuters.

JUNE 21, 2021 INSURANCE JOURNAL | 13

Business Moves

National

Aon, Smooth WTW

Global insurance broker Aon has agreed to sell its U.S. retirement business to private investment firm Aquiline and its Retiree Health Exchange individual health insurance business to Illinois-based digital services firm Alight for total gross consideration of $1.4 billion.

Aon said the sales are intended to address certain questions raised by the U.S. Department of Justice with respect to Aon’s proposed $30 billion takeover of rival Willis Towers Watson, creating the world’s largest insurance broker.

Aon and Willis Towers Watson said they continue to work toward completing the proposed merger as soon as possible in the third quarter of 2021.

Aon and Willis Towers Watson have previously announced the divestiture of Willis Re, a set of Willis Towers Watson corporate risk and broking and health and benefits services to rival Arthur J. Gallagher, and Aon’s retirement and investment business in Germany. Total 2020 revenue announced or offered to be divested, contingent on the combination, is $2.3 billion. Of the $2.3 billion, approximately 35% occurred in Q1, 23% in Q2, 18% in Q3, and 24% in Q4.

The U.S. retirement business Aquiline will acquire includes approximately 1,000 colleagues and the agreement includes U.S. core retirement consulting, U.S. pension administration and the U.S.-based portion of Aon’s international retirement consulting business, along with many solutions 14 | INSURANCE JOURNAL | JUNE 21, 2021

and tools, including: Benefit Index and SpecSelect; Risk Analyzer; DBCalc and YPR; and Aon Pooled Employer Plan (PEP).

The agreement with Aquiline does not include Aon’s non-U.S. actuarial, non-U.S. pension administration or international retirement businesses based outside of the U.S. Aquiline Capital Partners invests in companies across financial services, technology, business services and healthcare.

The Aon Retiree Health Exchange, which Alight will acquire, is an individual market platform for employers and their retirees.

All of the announced regulatory divestitures are contingent on the completion of the pending Aon and Willis Towers Watson merger, as well as other customary closing conditions.

Allstate, SafeAuto

Allstate has agreed to acquire Ohio-based SafeAuto, which offers car insurance that meets the minimum legal requirements in 28 states.

The acquisition will be through Allstate subsidiary National General, and SafeAuto will be integrated into National General’s direct-to-consumer non-standard auto insurance operations.

Total consideration includes a $270 million cash purchase price plus approximately $30 million in pre-close dividends of certain non-insurance assets.

Allstate closed on its $4 billion acquisition of National General in early January.

SafeAuto offers direct-to-consumer sales and customer contact centers through 1-800-SafeAuto and its website.

Ari Deshe, co-founder and chairman

of SafeAuto, said that combining forces with National General with the backing of Allstate will allow SafeAuto to grow its platform in the non-standard space.

The insurer, which was launched by Deshe and Jon Diamond 27 years ago, reported $378 million in eared premium and a 95.3 combined ratio in 2018.

SafeAuto has twice announced plans for an initial public offering — in 2004 and again in 2019 — but later withdrew both proposals, according to filings with the Securities and Exchange Commission.

The transaction is expected to close by the end of the third quarter of 2021.

East

NFP, The Schuster Group

NFP, an insurance broker and consultant that provides property/casualty, corporate benefits, retirement and individual products and services, has acquired Schuster Driscoll LLC, d/b/a The Schuster Group, and its nonprofit membership platform, TANGO Administrative and Management Services LLC (together, TSG).

TSG, located in Farmington, Connecticut, with ancillary sales offices in Rhode Island and Massachusetts, is a multidisciplinary insurance broker and consultant focused on employee benefits.

The firm also offers capabilities in retirement advisory services.

NFP’s acquisition of TSG brings expertise in the nonprofit space that will be integrated into NFP’s existing benefits offerings and resources to enhance insurance solutions to nonprofit clients.

Firm Principal Rollin Schuster will join NFP as a managing director and report to Kate Henry, a regional managing director in NFP’s Northeast region.

The Hilb Group, Parallel Risk Advisors

The Hilb Group LLC has acquired Maryland-based Parallel Risk Advisors LLC. (PRA).

PRA is a commercial lines property/ casualty consulting and advisory firm specializing in the commercial real estate industry. As part of the transaction, the Principals Debbie Dorsch, Jessica Gray and Eileen Hartzell and their associates will INSURANCEJOURNAL.COM

join THG’s Mid-Atlantic region.

THG is a property/casualty and employee benefits insurance brokerage and advisory firm based in Richmond, Virginia.

Hub International Limited, IBG Financial Partners

Hub International Limited, a full-service global insurance broker, has acquired IBG Financial Partners LLC. Located in Foxborough, Massachusetts, IBG is a team of retirement plan consultants that provides fiduciary and retirement plan consulting services to plan sponsor clients. It provides advisory support in the areas of investment, plan design and administration, while helping clients support their employees toward a meaningful retirement. IBG manages approximately $1.6 billion in assets as of Dec. 31, 2020.

IBG Principal Peter Vacheron and the IBG team will join Hub Retirement and Private Wealth (Hub RPW) in New England. This move continues to strengthen Hub’s retirement and wealth management services, according to a Hub press release.

Alera Group, The Waterford Group

Alera Group, a financial services and risk management company, has acquired The Waterford Group, a Rochester, New York-based retirement plan specialist providing consulting and fiduciary services to companies.

Following the acquisition, The Waterford Group team will continue serving clients in their existing roles.

The Waterford Group provides 3(38) fiduciary and educational services to employer-sponsored retirement plans and wealth management services.

Alera Group is a financial services and risk management company with more than $500 million in annual revenue offering employee benefits, property/casualty, retirement services and wealth management solutions to clients nationwide.

Midwest

Scottish American, Fastcomp

Wholesale insurance broker and manINSURANCEJOURNAL.COM

aging general agent, Scottish American, has acquired Fastcomp of Boston Heights, Ohio.

Fastcomp was created in 1998 by an experienced team of insurance underwriting professionals to provide independent agents with the opportunity to unbundle and place monoline workers’ compensation coverage profitably.

Giordano, Halleran & Ciesla provided legal counsel to Scottish American.

Alvarez & Marsal provided financial diligence, and Filament AI provided technological diligence.

Stark & Knoll Co. provided legal counsel to Fastcomp and MarshBerry advised them on the transaction.

No other advisors, diligence firms or legal counsel were disclosed.

South Central

Arthur J. Gallagher, LDJ American Online Benefits Group

Arthur J. Gallagher & Co. has acquired Addison, Texas-based LDJ American Online Benefits Group LLC. Founded in 2013, AOBG designs, markets and services supplemental health insurance and wellness products, including short-term medical, hospital indemnity, AD&D, vision care and a wellness program, through more than 2,500 independent agents across the U.S. Ronnie Dee Hohenberger and his associates will continue to operate from their current location under the direction of Kevin Garvin, head of Gallagher’s North American Affinity operations.

Arthur J. Gallagher & Co. is headquartered in Rolling Meadows, Illinois.

and CEO Lisa Worley.

AssuredPartners Regional President Jack Suber said the move is part of its strategic growth in the region.

Headquartered in Lake Mary, Florida, AssuredPartners is an insurance broker providing commercial insurance, risk management, employee benefits and personal lines through consulting and services.

It has more than 8,000 employees located in offices throughout North America, London, Belgium and Scotland.

West

Newfront, Aviation Marine Insurance

Newfront Insurance has acquired Aviation Marine Insurance Services in Sausalito, California.

AMIS is led by Scott Gault, who joins Newfront along with his team of aviation insurance experts.

AMIS is a specialist brokerage focused across general aviation from individual owners, managed fleets, charter companies, to aviation related business in 35 states.

Newfront is a tech-enabled brokerage based in San Francisco, Calif.

InterWest, Aegis

InterWest Insurance Services LLC has opened a new office in Reno, Nevada, and has acquired Aegis Insurance Markets in Truckee, California.

Tony Commendatore, founder of AEGIS, will continue in his leadership role.

InterWest is an insurance brokerage providing commercial, employee benefits, surety and personal insurance solutions.

Hub, EnterMedicare

Southeast

AssuredPartners, Anchor Pardue Insurance

AssuredPartners Inc. has acquired Anchor Pardue Insurance Inc. of Mountain Brook, Alabama.

Anchor Pardue was AssuredPartners' second acquisition in May and 18th acquisition in 2021.

The team will remain under the leadership of President Richard Pardue

Hub International Ltd. has acquired the assets of EnterMedicare Inc. in Los Angeles, California.

Dennis Negron, founder and CEO of EnterMedicare, and the EnterMedicare team will join HUB’s national employee benefits practice.

Chicago, Illinois-based Hub is a global insurance broker providing risk management, insurance, employee benefits, retirement and wealth management products and services.

JUNE 21, 2021 INSURANCE JOURNAL | 15

People National

Cover Genius recently named Darcy Shapiro as its

chief operating officer for the Americas and Amer Massoudi as global chief revenue officer.

Cover Genius is a global insurance technology company. Based in New York, Shapiro initially joined Cover Genius in 2018 to lead insurance partnerships and legal in North America, Canada and Latin American markets and established a 50-state managing general agency licensing model.

She has more than 15 years of commercial and general insurance experience. Shapiro joined Cover Genius from The Hartford, where she was the product director for cyber, tech, media and miscellaneous professional liability products.

She also spent time at AIG and the specialty division of Liberty Mutual in different roles including claims and litigation management.

Massoudi will be the first person to serve as global CRO at Cover Genius, where he will control partner integrations, account management, mid-market sales and various growth and margin expansion initiatives from San Francisco.

Previously, he was senior vice president of analytics and partner services for Cover Genius, for which he and his team have overseen the company’s data analytics API, BrightWrite.

Before joining Cover Genius, Massoudi was vice president of product and growth at Freelancer.com, overseeing all revenue, product management, data science and customer operations.

In addition, Julio Castellón has been appointed as senior vice president of partnerships

for Latin America to further build Cover Genius’ partner network in the area. He brings more than 25 years of senior partner and leadership experience.

East

Buckle, a tech-enabled financial services company, has added insurance product executive, Andrew Sand, as vice president of product management and auto dealership executive, Tim Morris, as director of dealer development.

Sand comes from Farmers Insurance, where he was head of commercial auto. He has previously served as director of product management and commercial lines for Mercury Insurance for nearly 12 years.

For more than 16 years, he held various underwriting, sales and service and product positions at Progressive Insurance.

Morris most recently served as director of outside sales at Cox Automotive. He has held various sales positions at automotive companies of all sizes, from startups to multinational corporations, including Mercedes-Benz, VinSolutions, Grayson BMW and Dealertrack, among others.

He has experience in retail auto dealership operation and dealership vendor and partner representation.

RT Specialty

has promoted

Joe Reynolds

Joe Reynolds

to vice president within its environmental and construction professional (ECP) practice. He is based in Spring City, Pennsylvania.

He joined the company in 2018 as an assistant vice president and has since built a book

16 | INSURANCE JOURNAL | JUNE 21, 2021

of business within the contractor’s pollution liability (CPL), architects and engineers (A&E) and contractors professional (CPrL) liability marketplace.

Prior to joining the organization, Reynolds served as an A&E product head at Hiscox Insurance and vice president and executive underwriter in XL Catlin’s Design Professional division.

For more than a decade, he also underwrote and developed product strategy for management and professional liability products at Travelers Insurance and The Chubb Corporation.

Southeast

USG Insurance Services Inc.,

a national Bob Reardon wholesaler and managing general agency, has added Bob Reardon as business development manager for the Southeast.

Reardon joined USG in July 2020 as the branch manager of the Alpharetta, Georgia, satellite office. Reardon has 28 years of combined retail and wholesale insurance industry.

In his new position as business development manager for the Southeast, he will support the overall effort to expand USG’s Southeast footprint through agency development, carrier development and talent development for the Georgia, Florida and Louisiana regions.

This move is the most recent change that USG has implemented as part of its national expansion plans.

Insurance adjusting firm

Catastrophe

Tom Noonan

& National Claims (CNC) has added Tom Noonan as senior

vice president of strategy and innovation.

In this newly created role, Noonan helps lead strategic planning and accelerate CNC’s innovation initiatives.

He joins the team with more than 36 years of experience in operations and business development within the claims industry.

Noonan began his career with Hartford Insurance in 1985 and has experience building teams and businesses, including his own insurance adjusting and private investigation firm in 1993.

In 1997, he sold his interest in the firm and joined Cunningham Lindsey as an assistant vice president overseeing operations in the West. Noonan also worked as regional manager for American Technologies and director of business development for Rimkus Consulting.

Most recently, he served as vice president of strategy and development for Leading Edge Claims Service.

Founded in 1988, Catastrophe & National Claims is an independent adjusting firm offering full assistance to regional and national insurance carriers.

South Central

Workers’ compensation insurer, Texas Mutual Insurance Co., promoted Bill Potter to chief financial officer (CFO). Potter succeeds Mike Barron, who served as Texas Mutual’s CFO for more than 17 years and has retired.

Potter joined Texas Mutual in 2018 as vice president of premium audit, after accumulating more than 25 years INSURANCEJOURNAL.COM

of finance, accounting and business leadership experience in multiple executive roles.

Texas Mutual also named Larry Martin as the company’s new senior vice president of human resources. Martin assumed this role following the retirement of Lynette Caldwell, who held the position for more than 12 years.

Martin has been a part of Texas Mutual since 1994, after spending five years at Blue Cross Blue Shield. He has held a number of roles at Texas Mutual, including vice president of human resources consulting services.

Martin also played a role in overseeing the growth of Texas Mutual’s college recruitment program and implemented the company’s learning and development and performance management strategies.

Commercial insurance brokerage and consulting firm, The Plexus Groupe, has named industry veteran John

Stollenwerck

to vice president of business John Stollenwerck development.

He is based in Dallas, Texas.

Stollenwerck has more than 20 years of client service experience across multiple industries and lines of business. He joins The Plexus Group from Ragland Strother & Lafitte, an independent insurance brokerage in Texas, where he was named a partner in 2015.

Before entering insurance, Stollenwerck was in technology consulting and sales with Electronic Data Systems, now part of Hewlett-Packard, INSURANCEJOURNAL.COM

among other firms.

Stollenwerck has experience in the insurance industry, with expertise in complex accounts and serving clients in private equity, the golf and country club industry, technology, real estate, law and manufacturing.

where she was responsible for clinic operations, including supervision, training, compliance and scheduling.

Most recently, Barnes served as utilization review supervisor with Berkshire Hathaway Homestate Cos.

Midwest

West

Root Inc., the parent compa-

ny of Root Insurance, named Christine Patrick as vice president of investor relations.

Patrick comes to Root with more than 10 years of insurance industry experience, both in investor relations and as a sell side analyst.

Most recently, Patrick led investor relations with Kemper Corp. and previously with National General Holdings Corporation.

As a senior equity research analyst at JMP Securities, she covered both the property/ casualty and mortgage insurance sectors.

Workers’ compensation insurer, Omaha National Insurance Co., in Omaha, Nebraska, promoted Theresa Aronson to director of operations and Cori Barnes to director of medical services.

Aronson joined Omaha National in January 2019 and built the premium audit department.

Before joining Omaha National, Aronson had 18 years of experience in payroll services and premium audit.

Barnes joined Omaha National in October 2020 to build the utilization review operation and soon assumed the role of medical services manager. Barnes spent more than 20 years with CHI Health as both a radiologic technologist and a clinical coordinator,

Midwestern Insurance Alliance has named Robert Young to its

wholesale division as vice president of business development. Young Robert Young will be based out of San Diego, California.

Young’s focus will be to help the team grow revenue by enhancing retail agent partnerships and carrier relationships as well as bringing on new brokers to the team and expanding the product line.

He has 33 years of insurance experience holding executive positions in both underwriting and marketing. He has spent most of his career in the wholesale and managing general agent area of the business, but has also spent time as a retail agent and a company underwriter.

Most recently, he ran Valiant Insurance Services, a start-up workers’ compensation wholesale brokerage.

Crest Insurance Group LLC of

Jeramie Holt

Ft. Collins, Colorado, has added Jeramie Holt.

Holt has more than 15 years of industry experience, including a background in employee benefits. He will join Crest in the Ft. Collins branch.

Dane Lupe has joined Lockton’s Pacific region as

senior vice president and producer based in Los Angeles, California.

Lupe will partner with private equity and commercial real estate firms to provide guidance in proactively mitigating, transferring and insuring their risk.

Lupe previously served at Arthur J. Gallagher & Co. as area senior vice president.

He started in the industry at Lockton.

Lockton’s Pacific region has also added Jordan Burbach, Daniel Denham and Andrew Szot.

Burbach and Szot are based in Lockton’s San Francisco office. Denham is based in Lockton’s Los Angeles office.

Burbach is a senior vice president and producer at Lockton.

He joins Lockton after serving as a senior vice president of Marsh’s global private equity and mergers and acquisitions practice for more than seven years.

He previously worked at Zurich Insurance as the underwriting manager responsible for the Western US. He started his career in insurance at Marsh as an insurance placement broker.

Denham is also joining Lockton as senior vice president and producer.

He has nearly 13 years in insurance working at brokerages including HUB International and Marsh.

Szot joins Lockton as vice president and client services consultant specializing in private equity insurance services.

Szot most recently served as vice president in Marsh's Private equity and mergers and acquisitions practice.

JUNE 21, 2021 INSURANCE JOURNAL | 17

Closer Look: Sharing Economy Why Sharing Economy Firms Just Might Be The

Best Insurance Customers

By Andrew G. Simpson

I

magine insurance customers who actually enjoy meeting with their insurance broker. Customers who see insurance not as a nuisance mandate but as an integral part of their own and their customers’ success.

Insurance buyers who are enthusiastic about discussing risks and coverages regularly, not just begrudgingly once a year. Customers who are eager to share data on safety and performance. Or customers who view insurance not as a cost but as a revenue builder.

These insurance customers do exist. Some of them come from the sharing economy and three of them recently shared their experiences with insurance in a Lloyd’s of London webinar titled The Sharing Economy.

Host Rosie Denee, Innovation and Thought Leadership manager at Lloyd’s, stressed how the pandemic has recalibrated the sharing economy of independent

contractors, entrepreneurs, service providers, drivers, property owners, renters, riders and buyers and the technology platforms they love.

“Companies have had to adapt to changes in demand and pursue new growth opportunities, particularly in delivery services but also in urban mobility and accommodation,” she said. “Demand for shared services now varies significantly depending on individual business models and companies are adapting to the new normal as consumer preferences may have shifted for an indefinite time.”

Denee cited Airbnb as an example. For the year 2020, Airbnb reported bookings were down 40% and revenue was down 30%. Since the pandemic started, Airbnb clients have stayed close to their homes, traveled by car, stayed longer and prioritized safety and affordability. Renters now prefer to rent a cottage or apartment over a room in a shared home.

Another example might be

Daniel Ramot and Oren Shoval, founders of Via Transportation 18 | INSURANCE JOURNAL | JUNE 21, 2021

Uber, where ride revenues were way down during 2020.

But Uber managed to pivot to offset its losses in passenger rides with deliveries of food orders by its Uber Eats business, where revenue has doubled during the pandemic, according to Reuters. Uber also acquired smaller food-delivery rival Postmates and alcoholic beverage delivery service Drizly.

Denee believes the insurance industry initially struggled with how to create protection to meet the needs of the sharing economy, but that has changed.

“Over the last 10 years, the sharing economy has seen and brought with it a cultural shift in the insurance sector,” she maintained, adding that the “very essence” of the sharing economy is flexibility, which has forced insurance providers to offer more flexible insurance arrangements.

The webinar showcased three sharing economy insurance customers: • New York-based Via Transportation that provides on-demand ride-sharing transportation software and services for cities, schools, universities, hospitals and corporations; • Dallas-based ShearShare, which brings together hair stylists with clients and salon workers with empty chairs; and • Austin Texas-based Outdoorsy, a peer-to-peer rental marketplace for owners of recreational vehicles (RVs).

As different as their customers are, the three businesses and their executives have much in common, starting with their Lloyd’s insurance broker, Chris Moore. Moore heads Apollo Syndicate Management’s special unit, ibott (insuring businesses of tomorrow, today) that specializes in sharing economy companies. Moore has been with Apollo since 2013 and was instrumental in the setup of ibott. He is on the Lloyd’s innovation panel and the Lloyd’s Market Association Committee for both U.S. and International Casualty. Moore, who works with each of these clients, says they share a perspective.

“They are not interested in off-the-shelf products," Moore said. "They are interested in products that are going to be tailor made to their business, that allow their platforms to grow and protect the marketplace of users of that platform."

Moore has come to appreciate the mindset of these technology and business entrepreneurs and enjoyed working with them to fashion and refashion the products they need. “It’s different. When I speak to these guys, it’s not a view of insurance like, ‘It’s that time of year again. I have to renew my insurance policy,’” he said.

Rather, he maintained, they’re like he is, constantly thinking about insurance. The entrepreneurs are, in turn, happy to have found someone who listens to them and understands how important insurance is to their current INSURANCEJOURNAL.COM

customers and to their firms’ futures.

Erin Abrams is general counsel at Via Transportation, the on-demand shared transit software platform. It offers its software-as-a-service in 200 cities and countries around the world, providing a full stack turnkey solution for private and public transit operators.

Abrams became the company’s insurance handler because she happened to make eye contact with the CEO when he asked who would do it and nobody else in the meeting looked up. She says she does not regret it. As Via has grown and scaled, insurance has become co-managed between her legal team and the finance team.

Colin Gardiner calls Outdoorsy “the Airbnb of RVs.” It has nearly a billion dollars in sales from its marketplace of people renting RVs from neighbors and strangers. It operates in Canada, the United States, Australia, New Zealand, and is moving to Europe, as well.

“It’s very much a business that’s very hot right now given everyone’s stuck at home in a lot of ways,” he said.

Gardiner’s interest in insurance stems from his role as chief revenue officer.

“I focus on all things growth and monetization and I think that’s a different approach,” he explained. “We don’t view insurance as a cost center. We view it as a strategic advantage so we really use it to our advantage.”

In fact, Outdoorsy has evolved to become a full RV insurance provider, selling insurance for its members not only when they are renting but also when they are outside of their rental period.

If Outdoorsy is the “Airbnb INSURANCEJOURNAL.COM

for RVs,” ShearShare is “Hairbnb” for the beauty industry. Courtney and Dr. Tye Caldwell founded the platform to solve what they know from their 30 years of experience with the beauty salon businesses is a major problem, one that became even more acute during the pandemic. The company serves independent beauty professionals who need a location and the salons and barber shops that have empty space available to rent by the day. In the words of the Caldwells, ShearShare is a “machine-learning enabled mobile marketplace.”

ShearShare is now in more than 800 cities.

They take pride in helping people rebuild their businesses after the pandemic and shutdowns. Broker Moore said that when he first met the Caldwells a few years ago, he was struck at how they were thinking about the insurance needs “right at the outset” and how they talked about safety being important.

“It’s so often, for a lot of companies, an afterthought and it’s almost, ‘We’re ready to launch. Who’s done insurance?’” he said.

But the Caldwells “had it from the start” and insurance has been a key pillar to their business, he said.

ShearShare’s Courtney Caldwell told Moore that no other insurance company would take the risk in 2017 when they started their business. “They didn’t really understand the beauty industry. They didn’t understand that we’re the second largest industry for freelancers and independent contractors. But you guys [Lloyd’s] jumped in that big ocean with us and so

Via Transportation, on-demand transit we appreciate that,” she said.

Today, stylists “can find workspace on the ShearShare platform by the day and also purchase professional liability insurance for just five bucks.

It’s amazing,” she said.

For Abrams at Via Transportation, insurance plays a significant role because, although Via is a tech company that is providing transit software, it also provides transit operations, and thus has physical, real-world auto operations risk. But it’s not the same traditional auto exposure as a legacy transit provider with employees and owned vehicles. Via primarily works with independent contractors and doesn’t typically own the vehicles that operate on its platform. “In some cases we operate the deployments.

In other cases, our partners operate the deployments,” she explained.

Many of Via’s partners are governments with varying risk tolerances and projects with different use cases, perhaps non-emergency medical transport or educational transports for students.

What’s more, since Via is required to submit competitive

bids, Abrams said she needs a program from which she can pull down specific bespoke insurance coverages that meet the needs of a specific program or deployment, and often on short notice. “So it’s really important for us to bake in the insurance cost into the margins and have some predictability about what those insurance costs will be,” she explained.

Abrams praised Moore and Apollo for being willing to dig into a novel business model and look at how Via’s is different from legacy operators, not just at the start but throughout the company’s journey.

For Gardiner of Outdoorsy, viewing insurance not just as a necessity for the business but also as a revenue and business generator is part of an overall philosophy of concentrating on the customer experience.

“What are the things that differentiate you and really give you control?” is the question he asks. One answer is insurance, in his view.

He cites an example of someone who rents out an RV having an accident. That owner must take the RV offline and can’t rent it while the claim

continued on page 20

JUNE 21, 2021 INSURANCE JOURNAL | 19

Closer Look: Sharing Economy continued from page 19

is being taken care of and the vehicle repaired. Everyone loses income the longer that claim takes. If Outdoorsy can help expedite the claim, everyone wins. That’s how insurance helps improve the customer experience.

Control over the user experience is also key — that’s why Outdoorsy has also invested in its own in-house claims company, which Gardiner said also helps it control costs.

A similar philosophy focused on flexibility, customization and customer experience is at work at ShearShare.

According to Dr. Tye Caldwell, insurance fits into the ShearShare business model by driving customer satisfaction with the platform. ShearShare’s goal is to let their users know that they are there not to just make money themselves but also to help them grow their own businesses and take care of them should something go wrong. “We wanted to always give them an opportunity to look back and say, ‘Hey, you know what? ShearShare is taking care of us, they’re thinking about us first, and it’s not just about collecting a dollar and being a part of a platform as a number,” he said.

Bad things can happen even when the best stylists are working on clients — a nip on an ear with the clippers, a burn with a curling iron, a skin infection from leaving a hair product on too long or even a loss of power or equipment.

“Anything could happen. So having that insurance gives them that protection that they need and it really eases their mind,” he said.

Courtney Caldwell thinks of their independent beauty

Courtney and Dr. Tye Caldwell, founders of ShearShare and barbering professionals as “solopreneurs” for whom there has been no business-to-business ecosystem where they can get the tools or resources they need on a given day and pay for what they use. That is, until the Caldwells stepped up. “No matter what small business you are, I think there are three constants. You’re always looking to increase your revenue, decrease your cost and mitigate your risk,” she said.

She said their customers “use and leverage the ShearShare platform to build their small businesses atop our small business” because they know that when they come to ShearShare they’re able to get the resources they need very easily and maximize their earnings.

Whereas brick and mortar salons, barbershops or spa owners are likely to have insurance, that’s less often the case for independent contractors.

“Where do you go to just purchase that by the day? That did not exist before ShearShare and Lloyd’s decided to partner

20 | INSURANCE JOURNAL | JUNE 21, 2021

them.

together,” she explained.

Moore added that the insurance product provides more than protection; it can also provide a “stickiness” with customers.

Beauty solopreneurs can go to a local beauty salon to negotiate or they can go to ShearShare and get bookings and insurance that protect

Data Collaboration

According to Moore, data is a critical part of sharing businesses. Data can not only inform insurance but also influence decisions about what to offer, where to offer it, what schedule to follow and more.

Via’s Abrams said that the real asset for her technology company is the data that it has. Via’s patented technology identifies and updates ShearShare the best travel routes, virtual bus stops, where to pick up and drop off different people. It also tracks how many passengers are in a vehicle and other information that makes routes more efficient.

Beyond the data it has for its own uses, Via also

provides data to its partner municipalities and private and public transit operators about how people are using the service, whether they are using their fleets in an efficient way and filling vehicles as much as possible or driving around empty. Also, it can reveal how they are serving lower income communities or people who might lack access to other modes of transportation.

Via also collects safety data around the vehicles themselves and telematics data on the safety of the drivers. When Via shares its data with its insurers, Abrams makes sure Via gets the credit for the data that shows it is a safer operator than perhaps some legacy transit operators with which Via competes. “We think we should be judged on the merits of our own data and our own strong safety record.

And the fact that we have more data to share with insurers should enable them to make more granular calculations about our risks, which should benefit us as well,” Abrams said.

“For us, it’s about collaboration,” said Moore. “It costs money to store data; it costs time and effort to take data. We only want data that’s going to be of value.”

With collaboration, he said his team can give insureds transparency about what is affecting insurance costs and what a company can do to change that during the policy period, not 12 months down the road.

Gardiner said Outdoorsy INSURANCEJOURNAL.COM

Outdoorsy dashboard has more information about its hosts, their behaviors and vehicles than any insurance company. One reason is it provides personal and commercial insurance for them even outside of their rental season. It knows how many days they’re renting it, when their vehicle has had maintenance, and more. “One of the great parts about collecting all this data is that we’re able to quote very quickly. We already know all of their information by their vehicles, things like that,” Gardiner said.

In addition to data helping to optimize the user experience, it is also helpful in running the business. “As a platform, we care a lot about retaining our users and so we want to use that data to deliver the best low-cost products, so they don’t go anywhere else. We want to be a one-stop-shop,” he said. “We’re the experts on RVs, but we’re not actually the experts on picking insurance for those RVs." He said collaboration is useful for digging deeper into the data and together understanding the rating factors.

Outdoorsy is also focused on risk mitigation. It has invested in machine learning models and data points to go INSURANCEJOURNAL.COM

beyond traditional metrics like driver’s checks. “People have driving records, but they’re not necessarily RV driving records.

So for us, trying to build a rating model for people before they rent is really important,” Gardiner said.

The model helps Outdoorsy decide what to charge, whether to have a higher deductible or a higher security deposit. “I think the more data you have, the better products you can deliver and the better expectation you can set for your users as well,” he said.

At ShearShare, Courtney Caldwell said their data shows where stylists and salons are across the country, how many days a licensed stylist works, and even stylists’ willingness to travel more than 10 miles

outside of their home base. The data can be used by stylists to decide which salons to choose for specific customers. Perhaps one customer likes a rugged barber shop and another a “mom” atmosphere. Or someone is closer to one shop than another.

Data also help them with their dynamic pricing. “If you think about ShearShare as you would renting maybe an RV early on or purchasing a plane ticket, maybe your price is going to look different if you’re booking two weeks in advance versus the day before,” said Courtney Caldwell.

Lessons for Insurers

Moore sought advice from his clients for brokers and underwriters just starting to look at the insurance market for the sharing sector. “I’m struck by how much insurers look at the past as a predictor of the future and are so focused on a company’s loss history and industry’s loss history,” said Abrams. “Most of us got into these various different businesses to disrupt the legacy industries. So I don’t think legacy industry data is necessarily the best predictor of where our business is going.”

Outdoorsy customers enjoying their RV trip. Photo from Outdoorsy.

She said startups move fast and are always adapting their products and services, sometimes several times within a year. “So I think for us the past is not always the best predictor of the future,” she added.

As for advice to brokers and underwriters, Abrams urged them to engage with their startups in projecting into the future and the “thought exercise of where will our business be a year from now, where will our business be three years from now?”

She urged brokers to think about those types of forward-looking projections and the risk factors, because that’s how startups think about the world.

Outdoorsy’s Gardiner thinks it is important for insurance professionals to understand that they are providing insurance for technology companies that are aggregating customers and so they need to be thinking about those end customers, too.

“We may be your customer in the sense of we’re paying a bill, but at the end of the day, the consumer is the customer.

And we’re bringing those people together in a certain way, in a certain risk profile and behavior and it’s just characteristic of that group,” he explained.

ShearShare’s Courtney Caldwell sees the industry’s role as helping to educate their customers on the need for insurance.

“You guys don’t have to know everything about beauty and barbering. You guys don’t have to know everything about micro transportation or RVs. Leave that to us,” she said. “We rely on you guys to help us educate our user base.”

JUNE 21, 2021 INSURANCE JOURNAL | 21

Spotlight: Cyber Forgotten Your Passwords? They Soon May Be Lost Altogether – with Insurers’ Help

T

he most popular password in 2020 was exposed almost 24 million times and took less than a second to crack.

While a shocking statistic,

By James Patterson when you learn that the most popular password of 2020 was “123456,” this news becomes somewhat less surprising.

This data perfectly encapsulates the flaws inherent in passwords, and why it is easy to predict that it won’t be too long until passwords are phased out altogether. Indeed, cyber insurers might provide an impetus in this direction as they increasingly insist on controlling exposure from lax protocols, systems and passwords, using the latest technological innovations.

Passwords are the Achilles

heel of many firms’ cyber security defenses, with 80% of cyber breaches being the direct result of stolen or hacked passwords, according to the 2017 Verizon Data Breach Investigations Report.

Even in instances where passwords are strong and not easily guessed, they still pose a significant vulnerability, all thanks to the heightened phishing attempts now present online. The rise of the dark web has also created a second-hand market for the large tranches of passwords that are successfully hacked or phished, in which they’re sold to the highest bidder along with corresponding emails.

Once previously the reserve of computer geniuses, the crime of phishing has been democratized in recent years, thanks to the proliferation of “off the shelf” phishing systems which can be purchased by amateur hackers on the dark web. As a result, pretty

22 | INSURANCE JOURNAL | JUNE 21, 2021

much anyone with criminal intent can become a phisher, meaning the phishing threat is ubiquitous in day-to-day life. A seemingly harmless request to re-enter a password could therefore in fact result in a breach that enables a bad actor to infiltrate your firm’s network.

For a while now, there have been various methods to increase the security of passwords. The most common of these is two-factor authentication (2FA). Instead of just proving knowledge (the password), the user has to confirm possession of something such as a security token or a specific cell phone. While 2FA is significantly more secure than using passwords alone, there are still weaknesses that can be exploited with these systems.

The Rise of Biometrics

Thankfully, the rise in phishing has been accompanied

by significant innovations in technology and security, with the utilization of biometric data being one of these innovations.

The introduction of biometric technology has been slow and steady, so much so that most people don’t recognize the extent to which they’re deploying this data day-to-day.

Unlocking our phones, paying for groceries, speaking to our bank or entering the country — these are just a few examples of the day-to-day tasks that are permitted through biometrics.

App developers for mobile devices are even incorporating biometrics into their apps to enable users to bypass the password altogether when accessing online accounts.

The phasing away from passwords to biometric data represents a shift away from “something you have” mode of security to “something you are,” and this shift is welcome.

Thanks to biology, our biometric data is near impossible INSURANCEJOURNAL.COM

to phish, guess or hack. While biometrics aren’t infallible, attempts to hack biometrics are largely only attempted by some of the more sophisticated criminals, meaning the prevalence of this threat is minimal when compared to the threat facing our passwords.

Cyber Security Restored as Key Priority

The pandemic has seen a significant uptick in cyber attacks over the past 12 months. Cyber criminals have been merciless in exploiting the pandemic for their gain.

The work from home set-up saw billions switch to remote working overnight and many companies are still playing catch up, looking to implement remote cyber security defenses comparable to those they had in their offices.

On a behavioral level, the pandemic has also seen attention diverted elsewhere, with criminals capitalizing INSURANCEJOURNAL.COM

on the fact that many leaders remain in fire-fighting mode, attempting to respond to the immediate aftershocks of the pandemic, leaving their cyber-security defenses untended to and exposed.

As business leaders adapt to the new reality they find themselves in, many are choosing to put cyber security back up on their list of priorities, with biometric data one means of defense they’re willing to explore. Forrester Research predicts that in 2021 60% of global security decision-makers are planning to implement or expand their use of fingerprint, facial or voice biometrics.

Biometric security doesn’t need to replicate the plot line of a sci-fi film; it can be simple and easy to implement.

Indeed, the more simply and seamlessly employees are able to interact with biometric systems, the more eager they will be to engage with these systems going forward.

Upgrading work cell phones to those that require touch or face ID is perhaps the easiest way to start, and shore up one of the most breachable devices used by corporates. An additional benefit is that it obviates the need to collect biometric data in a centralized location, with the biometric information being stored exclusively on the user’s phone, which then simply provides a yes/no response when asked to verify that users are who they claim to be.

A Catch-22?

Naturally, the integration of biometric data may cause privacy concerns among employees, sparking worries employers are amassing personal data that encroaches on their civil liberties.

Furthermore, while the use of biometric data might help to bolster cyber-security defenses, it can open up other risks that businesses should be mindful of. The collection and usage of data can spark increased interest from cyber criminals, by offering a treasure trove of data that could be exploited, resulting in what is potentially a catch-22 situation.

After all, despite their flaws, passwords can be reset, fingerprints can’t. Additionally, several states have privacy laws specifically related to the collection and use of biometric data which must be taken into consideration before any are collected.

For businesses looking to integrate biometric data into their security processes, it should be undertaken with these considerations in mind.

Data needs to be stored safely and securely, and be managed strictly in line with the appropriate processes to ensure it doesn’t contravene data regulations now in place.

To ease employees’ concerns, it’s also important that the processes in place to securely store and manage this data are communicated clearly and transparently.

Increased Insurer Scrutiny

With cyber risk heightening and the cyber insurance market hardening, businesses are set to face increased scrutiny from underwriters on the robustness of their cyber security and their exposure to risks. Underwriters are looking at insureds’ security protocols and measures in increasing detail, even in the space of a year, we have seen the level of consideration applied to firms’ cyber security increase considerably, with

insurers making more and more specific IT security improvements a requirement before coverage can be bound.

Businesses are increasingly being offered less favorable terms or no cover at all if their protocols and systems are seen to be too lax. An over-reliance on basic passwords could be one such flaw that limits businesses’ options when it comes to coverage, however deployment of biometrics could be the solution.

While underwriters recognize biometrics and their role in shoring up cyber defenses, a number of carriers are now requesting additional underwriting information surrounding insureds’ biometric data collection. Before implementation of a biometric security initiative, insureds should speak with legal counsel to ensure that the program is implemented in compliance with the relevant laws.

It is likely that these two underwriting concerns will converge. If biometrics are the answer to underwriters’ need for more robust security defences, insureds may also have to demonstrate such data is being used in a manner that is in compliant with legal privacy requirements.

Patterson is vice president, Cyber & Technology E&O for Ambridge Partners, a New York City-headquartered managing general agent.

Located in Ambridge’s San Francisco office, Patterson joined the company in 2019 from AIG where he was a cyber specialist, focused on educating clients and insurance brokers on cyber exposures. Prior to that, he was AIG’s senior underwriter for Cyber & Technology. In 2015, Brit Insurance Holdings Ltd. acquired a non-controlling stake in Ambridge.

JUNE 21, 2021 INSURANCE JOURNAL | 23

Spotlight: Homeowners Homeowners’ Form and Endorsement Changes Coming in ISO’s 2022 Multistate Filing

I

nsurance Services Office (ISO) has released its upcoming homeowners’ multi-state filing.

This first major revision in over 11 years is

By Christopher Boggs filed to be effective in March 2022. Within this filing, ISO: • Introduced one new form and 12 new endorsements; • Revised 120 forms and endorsement; and • Withdrew 11 forms and endorsements.

New Forms and Endorsements

ISO created one new homeowners’ (HO) form and 12 new endorsements.

New Form! HO 00 14: Homeowners 14 – Contents Comprehensive Form

ISO has introduced a new renters coverage form. Renters now have the option of the traditional HO-4 (Contents Broad Form) or the new HO-14 (Contents Comprehensive Form).

Two major difference between the HO-14 and the traditional HO-4 are: • The new HO-14 extends coverage on an open-perils basis while the HO-4 provides property coverage on a named peril basis; and; • The new HO-14 extends coverage at replacement cost. The HO-4 provides coverage on an actual cash value basis but can be endorsed with the HO 04 90 to provide replacement cost coverage.

Also, the HO-14 offers many coverages not offered by the HO-4 or other HO forms to include: • Automatic coverage for Home-Sharing Host activities; • Additional coverage for bed bug remediation ($500 limit per policy period); and • Hard drive data recovery ($300).

One limitation unique to the HO-14 is 24 | INSURANCE JOURNAL | JUNE 21, 2021

the “Special Limits” coverage is that unlike all other HO forms which list specific dollar amounts for certain property, the HO-14 extends 10% of the Coverage C limit to the listed property types. Additionally, some property specifically listed within the Special Limits in other HO forms is not found in the Special Limits section of the HO-14.

In some ways, the HO-14 is broader than the HO-4, but in some ways, the coverage is more limited. Deciding which to use depends on the specifics of the insured.

Limited Cannabis Property Coverage – HO 06 01

Because states are beginning to allow medical and even recreational possession and use of marijuana, ISO feels the need to address the exposure. The HO 06 01 Limited Cannabis Property Coverage, if allowed by the underwriter, extends coverage for direct property loss to “Cannabis” caused by nine named perils.

Cannabis Liability Coverage – HO 24 01

The HO 24 01 addresses the liability exposure from cannabis. With this endorsement, the carrier can extend bodily injury and property damage protection for legal liability arising from the cannabis exposure when used in accordance with the law. Illegal possession, use, sale, etc. remains excluded.

Specified Other Structure(s) Exclusion – HO 06 21

This exclusion allows the underwriter to exclude property coverage on a specified other structure(s). This gives the underwriter the ability to exclude undesirable other structures so they can write the account that is otherwise acceptable.

Limited Theft – Coverage A and B – Dwelling Under Construction – HO 06 67 The unendorsed HO policy excludes theft to any property when/if the

dwelling is under construction. This new endorsement allows theft coverage for real property covered under Coverage A or Coverage B.

Coverage B – Other Structures Away From The Residence Premises – Replacement Cost Loss Settlement For Buildings – HO 06 91

Presently insureds can endorse the HO policy to extend coverage to other structures away from the residence premises only on an actual cash value (ACV) basis.

The HO 06 91 changes the valuation method to replacement cost for all building structures (walled and roofed) located at a premises that is not the residence premises.

Specific Structures Away From The Residence Premises - Replacement Cost Loss Settlement – HO 06 92

This is the companion to the HO 06 91, but requires the building structure to be specifically listed to garner replacement cost coverage.

Broadened Water Back-Up and Sump Discharge or Overflow Coverage – HO 06 95 ISO’s newly created HO 06 95

Broadened Water Back-Up And Sump Discharge or Overflow Coverage requires only that the water: • Backs up through sewers and drains; or • Overflows or is discharged from a sump, sump pump, or related equipment.

The “within the dwelling” requirement found in the HO 04 95 is removed when this endorsement is attached. Both the HO 04 95 and the HO 06 95 will remain available for use.

Other Insured Locations(s) – HO 24 02

ISO introduced the Other Insured Location(s) – HO 24 02 endorsement to give insureds the ability to extend liability coverage to specifically scheduled locations.

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Motorized Bicycle and Motorized Scooter Liability

Motorized bicycles, motor-assisted bicycles and motorized scooters have become more common over the last few years.

Riders/renters have taken on a liability risk that was not covered by either the HO or the personal auto policy (PAP). ISO altered one endorsement and created two new endorsements for this exposure.

• HO 24 13 - Incidental Low Power Recreational Motor Vehicle Liability Coverage has been revised to provide coverage for owned and non-owned vehicles meeting certain requirements, including motorized bicycles, motor-assisted bicycles and motorized scooters.

• HO 24 03 - Non-Owned Motorized Bicycle And Motorized Scooter Liability Exclusion excludes coverage when the insured rents or borrows a motorized scooter or motorized or motor-assisted bicycle. Protection is still in force for other types of non-owned and owned vehicles, such as Barbie Jeeps, etc., on and off the premises subject to speed and use requirements.

• HO 24 04 - Motorized Bicycle and Motorized Scooter Liability Exclusion fully excludes the use of motorized bicycles and scooters whether owned or non-owned.

Personal Injury Coverage (Aggregate Limit Of Liability) – HO 24 49

Essentially provides the same coverage as the HO 24 82 – Personal Injury Coverage endorsement; however, this endorsement allows the insured to pick an aggregate limit for personal injury claims.

Personal Injury Coverage – HO 24 89

Designed for use with the HO 00 14. This endorsement provides personal injury protection but is not subject to an aggregate limit.

Revised Forms and Endorsements

ISO revised 120 forms and endorsements with this filing. Following is simply a listing of the changes.

• Revising Definition of “Motor Vehicle Liability”: Intended to give back coverage for host liability INSURANCEJOURNAL.COM

unintentionally removed in the 2011 filing.

• Definition of “Business” Revised to Address Mineral Rights: Redefined

“business” to include the insured’s leasing of mineral rights to third parties.

• Increasing Dollar Threshold for Business: Increased the dollar limit exception to the business exclusion to $5,000 from the current $2,000.

• Coverage C Special Limits and Sub Limits: ISO has not increased certain sub-limits within the HO form in more than 20 years. The new filing increases many current sub-limits.

• Model or Hobby Aircraft and Watercraft: ISO is revising both property and liability coverage related to model or hobby aircraft and watercraft.

On the property side ISO is reducing coverage limits; and on the liability side, ISO is expanding coverage to include model or hobby watercraft.

• Revision to Lack of Coverage for Motor Vehicles Within Property Not Covered: In a previous filing, ISO “over drafted”

exclusionary wording regarding auto equipment and parts. The wording was used to exclude damage to and destruction of auto parts not attached

•

to the vehicle. ISO revised the wording to clarify that the exclusion applies only to parts in or upon the vehicle. Parts not attached to the vehicle are covered like all other personal property.

Virtual, Digital or Electronic Currency: Virtual currencies have been added to

•

•

the list of property not covered.

Additional Living Expenses: Current

Coverage D policy states that the policy will cover additional living expenses “incurred by you.” ISO is revising the Additional Living Expense provision to state that is applies to expenses incurred by the you and resident relatives or others who are under 21 and in the care of the you or resident relatives.

Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Coverage: Coverage

•

•

for loss from use of these forms of payment has been completely removed from the base HO forms.

Renovation, Remodeling or Repair: ISO has added wording to clarify and reinforce that “being constructed” was intended to include property being renovated, remodeled or repaired.

Loss Settlement – Deductible: ISO

continued on page 26 JUNE 21, 2021 INSURANCE JOURNAL | 25

Spotlight: Homeowners continued from page 25 reintroduced the phrase, “after application of any deductible…” to clarify that the deductible is applied before payment of a loss, especially when the insurance-to-value provision applies.

• Replacement Cost Threshold Provision: New HO form wording will state that replacement cost is paid whether the property is replaced or not if damage to real property is $5,000 or less. If the HO 04 90 is attached, the same provision applies to personal property if the damage is $1,000 or less.

• Riding Lawn Mowers Off Premises: ISO reworded the motor vehicle exception to extend coverage to a riding lawn mower that is being used to mow a lawn.

The requirement that the loan be that of a residence is removed.

Watercraft Liability Exclusion and Exceptions Revised: The watercraft exceptions have been simplified.

Coverage for watercraft is excluded unless the: Watercraft is a sailing vessel less than 26 feet in overall length (owned or not owned).

Watercraft is a sailing vessel more than 26 feet in overall length provided the insured does NOT own it.

Watercraft is not a sailing vessel and has engines or motors of 25 horsepower or less whether they owned or non-owned.

Watercraft is not a sailing vessel with engines or motors of more than 25 horsepower that are not owned by the insured.

The watercraft is newly acquired with outboard engines or motors with 25 horsepower or more provided such engines or motors are reported to the insurer.

• Subrogation Waiver: ISO revised the language to specify that subrogation can be waived against a person or organization.

• Earthquake Deductibles: Both the HO 04 36 - Loss Assessment Coverage For Earthquake and the HO 04 54 Earthquake Coverage endorsements will now allow the dollar deductible 26 | INSURANCE JOURNAL | JUNE 21, 2021

to be entered along with the percentage deductible.

• Home-Sharing Host Activities Endorsements. Exclusionary wording found in the six ISO home-sharing host activity endorsements introduced in 2016, will be incorporated into the appropriate HO coverage forms.

Withdrawn Forms and Endorsements

As part of this filing and due also to many of the changes made in this filing, ISO is withdrawing 11 endorsements.

All six Home-Sharing Host Activity Endorsements.

• HO 04 14 – Special Computer Coverage.

• HO 04 62 – Scheduled Personal Property

Endorsement.

• HO 04 85 – Fire Department Clause.

• HO 12 45 – Change Endorsement.

• HO 12 76 – Homeowners Rating Information.

March 2022 Will Be Here Soon

ISO has made a lot of very good changes within this filing. Although March 2022 sounds like a long way off, it’s closer than it seems. Get ready for the change.

Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS, is a veteran insurance educator. He is Executive Director, Big I Virtual University of the Independent Insurance Agents and Brokers of America.

He can be reached at chris.boggs@iiaba.net.

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News & Markets Close Calls in Colorado Spark Push for Wildfire Mitigation

By Shannon Mullane

A

s the Missionary Ridge Fire raged in 2002, the Valley Fire, a second fire, broke out and destroyed six homes within hours near the Falls Creek Ranch subdivision north of Durango, Colorado.

When residents returned after the Valley Fire, they saw red and green ribbons hanging on trees next to driveways and houses.

Red, they learned, meant firefighters were not able to defend their homes during the fire. The brush and trees were too overgrown for firefighters to access safely, said Paulette Church, a resident of 22 years, recalling a community discussion with fire officials after the fire.

“When we came home from the meeting that day, you could hear chainsaws all over the ranch,” Church said. “People were trimming up their junipers and oak brush. … Everyone was looking at what they had around their house very differently.”

Close calls with wildfire have spurred several La Plata County communities into action on wildfire risk mitigation. But getting a community to keep that momentum can be a puzzle — one that takes years, even decades, to solve.

About 3,500 structures burn each year in the United States by wildfire. Reducing risks, such as hazardous plant life near buildings, before a fire can help communities adapt to living with fire, according to the U.S. Forest Service.

But not everyone is ready or willing to invest the time, effort or money to mitigate. Three La Plata County community mitigation leaders say a mixture of knowhow, a sense of community and neighborly persuasion can help.

“Changing attitudes is the most difficult thing you can do,” said Church, who has been nationally recognized for her role in the Falls Creek community mitigation effort.

More than 70,000 communities and 44 million homes nationally are at risk from wildfire in the wildland urban interface, or WUI, where vegetative fuels and the built environment meet.

W2 | INSURANCE JOURNAL | JUNE 21, 2021

That includes communities in La Plata County, like Durango. On wildfire risk maps, the city is surrounded by seas of reds and oranges indicating higher-than-average wildfire risk.

There are many ways to reduce that risk, such as creating community wildfire protection plans, defensible spaces around structures like homes and businesses, and carefully chosen construction materials and building codes, according to the Forest Service.

Many people move to subdivisions in the WUI, such as Falls Creek, Rafter J Association and Elk Stream Ranch, because they want to live within a wildland environment.

The residents value seeing wildlife inhabiting nearby trees or wandering through bushes, and they want to protect the “natural” forest landscape. Some resist cutting down plant life, even when it’s limited to hazardous fuels, according to mitigation leaders in some communities.

Several communities have bylaws prohibiting tree removal to preserve the forest and worry that assessing risks might deter people from moving to the area or negatively impact insurance rates.

Removing hazardous plant life can be too time-intensive or costly for some residents. Others are interested but do not know where to start.

“I think a lot of people are concerned that if they take too many trees out, it’s

not going to have that forest feel or it’s not going to be healthy for the forest,” said Charlie Landsman, La Plata County coordinator for the Wildfire Adapted Partnership, a nonprofit that connects communities to mitigation resources.

In La Plata County, 85 community volunteers with the Wildfire Adapted Partnership, called firewise ambassadors, in 61 communities are trying to get their neighbors involved in pruning back hazardous plant life.

For three of those communities interviewed by The Durango Herald, it was a brush with wildfire that ultimately motivated residents to take action.

The Rafter J Association, about 7 miles southwest of Durango, is a subdivision within the Rafter J Ranch. Its 170 homes are built on ridgetops with views of gullies and ravines, said Lou Fontana, a firewise ambassador and resident of 21 years.

In 2017, the Lightner Creek Fire burned 412 acres within sight of Fontana’s home.

“You could see what was going on down there for most of the people on Ridge Road,” Fontana said. “At one point, they did a pre-evacuation order for Rafter J.” Before the fire, fewer than 10 people in the Rafter J subdivision were regularly mitigating their land.

“The most we’ve had participate is 90 — which is good, but it’s still not 100% participation,” Fontana said.

continued on page W4 INSURANCEJOURNAL.COM

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News & Markets $3.25M in Medical Malpractice Death of Washington Prisoner

T

he Washington Department of Corrections has agreed to pay $3.25 million to the family of a man who died at Monroe Correctional Complex after not receiving adequate medical care.

A lawsuit filed by Julia Kleutsch said her husband, John Kleutsch, 57, died of an abdominal wound that staff failed to properly treat, while offering him only Tylenol.

The settlement filed in early June in King County Superior Court is the latest fallout from the tenure of former prison medical director Dr. Julia Barnett. Barnett, who was hired in 2017, was fired in 2019 after an internal investigation found the medical care she provided and supervised contributed to

the suffering and deaths of several men at the prison, including Kleutsch.

The lawsuit said Kleutsch was recovering from outpatient cancer surgery when he was sent to the prison infirmary to recover but failed to receive proper care.

It says Kleutsch asked staff to help when his wound became puffy, oozing and tender and reported excruciating pain in the 26 days before his death.

The lawsuit alleges at least one nurse asked Barnett to transfer him to a hospital but she refused.

Kleutsch, who was serving a sentence for child molestation, died on Aug. 28, 2018, of septic shock, acute pancreatitis and a perforated intestine — conditions

never diagnosed at the prison, according to the lawsuit.

“John was treated inhumanely and suffered terribly before he died,” Julia Kleutsch said.

Marta O’Brien, an attorney for Julia Kleutsch, called the case “one of the worst medical malpractice cases I have encountered.”

As a result of the complaint, the Washington Medical Commission indefinitely suspended Barnett’s medical license.

“Our deepest sympathies go out to the Kleutsch family for the pain they suffer over the loss of a loved one,” said newly appointed Department of Corrections Secretary Cheryl Strange. “We know a settlement can never truly compensate for the pain of losing a family member and hope this resolution will bring some solace in the years to come.”

Copyright 2021 Associated Press.

continued from page W2

state and federal partnerships to address the area’s wildfire risk.

“There’s an incredible amount of work being done on pretty much every level, from homeowners to the city, county, state and federal level,” Landsman said.

Falls Creek residents have volunteered thousands of hours since 2002 to mitigate fire risk on their land and roads. In 2018, that work helped firefighters redirect the 416 Fire.

After nearly two decades, about 80% of the 96 households in Falls Creek remove plant life from communal property each year and about 90% of the landowners mitigate their own properties.

It’s a high percentage, but there are still “hold outs” who don’t want to mitigate, Church said.

The neighborhood mitigation leaders found success through a mix of community-building events, continuous outreach, financial assistance and results.

At community meetings, Rafter J brought in fire experts from the Durango Fire Protection District, the Bureau of Land Management, the Forest Service and Wildfire Adapted Partnership. Their first

step: drafting a community preparedness assessment, Fontana said.

They focused on road improvements, then clearing the ignition zone around homes. They used grants to pay for mitigation projects, such as cutting and chipping scrub oak, which went over budget because of higher-than-expected participation, Fontana said.

“I would like to see it codified that you couldn’t sell property in any community in Southwest Colorado without proper mitigation being included,” he said.

In Elk Stream Ranch, ambassadors speak at annual meetings and hand out literature, continually bringing information back to the community. The association used a cost-share program to create fuel breaks along roads and is seeking grant funding to continue the project, said Ganje-Boone.

When it comes to creating a community consensus, Ganje-Boone said she focuses on the idea of “when,” not “if,” a wildfire will come.

“Being better prepared is key to saving lives and property,” she said.

Copyright 2021 Associated Press.

Elk Stream Ranch, made up of 35 lots and 15 homes, sits in East Canyon along the border between Montezuma and La Plata counties. The residents created a community wildfire protection plan in 2008.

“I remember hearing about the local fire department saying they might not come into our canyon if they cannot safely do so,” said Gertine “Gem” Ganje-Boone, a firewise ambassador for Elk Stream since 2012. “Well, that’s a pretty good wake-up call. Then of course, there is nothing more convincing than an actual fire.”

In 2012, the Weber Fire swept through the area, burning 10,000 acres. Then came the 2,905-acre East Canyon Fire in 2020.

“I would say everyone that has a home participates in some form of fire mitigation,” Ganje-Boone said. “It’s much harder to convince vacant landowners to participate in fire mitigation, but we have had success with about half of the lots.”

In Durango, it was only after the 416 Fire burned 52,778 acres in 2018 that city and La Plata County leaders began several concerted efforts to leverage community, W4 | INSURANCE JOURNAL | JUNE 21, 2021

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News & Markets

Central Oregon Farmers Struggling in Drought

C

ate Havstad-Casad, co-owner of Havstad-Casad Family Farms in Jefferson County, Oregon, didn’t hold back while speaking on a recent Zoom call with state representatives about the drought conditions affecting farmers in Jefferson County.

During a meeting of the House Water Committee chaired by Rep. Ken Helm, D-Beaverton, Havstad-Casad told the legislators in stark terms that Jefferson County farms are starving for water while farms in other parts of the Deschutes Basin have more water than they need.

“What is happening through the forced dry up of this district, because we are junior water rights holders, is a massive ecological and a social disaster that not many people truly understand is happening,” said Havstad-Casad, a patron of the North Unit Irrigation District.

Havstad-Casad, a first-generation farmer, was highlighting concerns raised by others in Jefferson County, whose water allotments this year are so small that roughly half the county’s farmland is fallow. When the wind kicks up, the exposed ground creates clouds of dust in the Central Oregon sky as topsoil gets blown off the landscape.

“We watch it happen. We stand in W6 | INSURANCE JOURNAL | JUNE 21, 2021

the middle of it. It’s like watching your children’s future blow away,” she said.

She had been invited to speak to the legislators by the Coalition for the Deschutes, a nonprofit that works with both farmers and environmentalists to protect the Deschutes River.

Her stirring testimony compared the topsoil loss in Jefferson County to the Dust Bowl of the 1930s. Havstad-Casad asked legislators to support farmers to plant cover crops, which help to reduce the dust storms.

“The farmers must be supported to cover that topsoil,” she said. “It is securing our futures.”

In addition to topsoil loss, said HavstadCasad, farmers are facing financial hardship because their costs remain just as high as a normal season, but their profits are slashed due to the lost acreage.

“While we maintain 100% of our overhead costs, we are only able to farm 40% of our land because of the 40% allotment we have been given,” said Havstad-Casad, who practices regenerative agriculture on 200 acres of land. She has been farming near Madras since 2017 after moving there from a smaller property near Bend. The farm’s products include organically grown potatoes, onions and winter squash, as

well as cattle and turkeys.

Drought and low reservoirs are the primary reasons behind the drop in water allotments. Wickiup Reservoir, the source of water for the North Unit Irrigation District, was just 31% full in early June. In an average year, the reservoir would be 79% full in early June.

At its current pace, the reservoir will be empty by early August. A similar scenario played out last year when the water dried up in early September, forcing some irrigation districts to shut off their water prematurely.

The reservoir is draining quickly even though North Unit patrons are getting just 1 acre foot of water. Water patrons of other irrigation districts, including the Central Oregon Irrigation District, are getting three times that amount. That’s because districts like COID have older (senior) water rights, so when water resources are restricted due to drought, junior rights holders have to curtail their water usage. Junior water rights holders get cut off in times of shortages.

Gail Snyder, founder of Coalition for the Deschutes, backs Havstad-Casad, saying that too much of Central Oregon’s water is being wasted and more of it needs to be shared.

INSURANCEJOURNAL.COM

“From watering sidewalks in the city to flooding fields in the county, our current use of water is wasteful and unsustainable,” said Snyder. “We need a cultural paradigm shift that leads to better stewardship by all of us.”

Farmers are asking Oregon’s legislators to eliminate red tape that makes sharing water difficult.

Tod Heisler, director of the rivers program for Central Oregon LandWatch, said the barriers to sharing water are the result of a lack of legislation.

“In response to drought, COID offered to allow patrons to share their water with farmers in Jefferson County,” said Heisler.

“But without a program in place to do this, and a concerted communications effort to recruit patrons into the program, it is questionable what can actually happen.”

Greg Mintz, legislative director for Rep. Ken Helm, D-Washington County, said state legislators are actively working to resolve the water crisis faced by Jefferson

County farmers. House Bill 3103A could make a difference, he said. This bill seeks to “fix Oregon’s broken statute for transfers of stored water,” said Mintz.

The bill passed out of the House Committee on Water in April with bipartisan support and it is now awaiting consideration of necessary funding in the Joint Committee on Ways and Means, said Mintz.

“We hope to see the bill pass out of Ways and Means and move to the House and Senate floor for votes,” said Mintz.

While North Unit farmers like HavstadCasad are hoping for a better way to move water around Central Oregon, it’s still going to take a fair amount of campaigning to get other irrigators interested in sharing their water.

Shon Rae, the deputy managing director for COID, said just two out of 3,600 of the irrigation district’s patrons have expressed interest in sharing their water.

“That is approximately 17 acres out of

our 46,000 acres of irrigated land,” said Rae. Havstad-Casad said sharing water is the only short-term option, as current canal piping projects, which will also save water, are years away from completion.

“We don’t have time. The piping projects will take years to unroll,” said Havstad-Casad. “We are excited to see those projects send water this way, but I promise you, based on last season and the realities of this season, people who are seventh-generation farmers in this district are seriously considering throwing in the towel.”

She also offered the legislators a message of hope and a warning.

“We have the opportunity as a region to improve our management and share water more equitably,” she said, “because the farmers of North Unit do not have one more season in them like this one or the one last year.”

Copyright 2021 Associated Press.

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JUNE 21, 2021 INSURANCE JOURNAL | W7

News & Markets Takeaways from Talk About Regulators and Cannabis Insurance

By Don Jergler

T

here’s a shortage of carriers offering insurance to cannabis businesses in numerous states, causing these businesses to pay more for policies or go underinsured.

Regulators in several states are stepping in and putting some time and resources into encouraging more insurers to get into the business of insuring cannabis. States like California, Colorado, New Jersey and New York, are looking for ways to incentivize insurers to offer products and services to cannabis businesses.

In the latest Insuring Cannabis Podcast, we spoke to an insurance and legal matter expert and a regulator to find out what regulators are doing to encourage carriers to get into the market.

Following are some takeaways from that conversation.

The Colorado Division of Insurance is one regulatory body that’s throwing out the welcome mat. The division sponsored Colorado Cannabis Business Insurance Forum, a series of four virtual webinars.

The forum kicked off in April with a presentation by Colorado’s cannabis regulatory agency, the Marijuana Enforcement Division, to talk about the state’s regulatory structure.

They’ve also had presentations offering data from the state’s seed-tosale tracking system, and panels on insurance products and forms.

‘What we have found is that there is coverage for cannabis in the excess and surplus lines market. But at this point we only have admitted carriers in Colorado providing coverage for very narrow single line aspects such as workers’ compensation.’

W8 | INSURANCE JOURNAL | JUNE 21, 2021

Recordings of all the sessions from the forum are on the department’s website (doi.colorado.gov). Scroll over the top “Insurance Industry” pulldown menu at the top of the page, and then click on “Cannabis Business Insurance.”

“The intent behind the webinars is to bring together the insurance industry and the cannabis businesses,” said Brown, Colorado’s chief deputy insurance commissioner. “Because we understand that there is a need for insurance for cannabis businesses, and at this point the insurance industry has been a little reticent to jump in and provide coverage. What we have found is that there is coverage for cannabis in the excess and surplus lines market.

But at this point we only have admitted carriers in Colorado providing coverage for very narrow single line aspects such as workers’ compensation.”

Former California Insurance Commissioner Dave Jones as far back as 2017 had encouraged more admitted market participation in cannabis, going so far as to say that the California Department of Insurance would “pretty much accept” any rates filed by insurers offering products to cannabis businesses.

Regulators have also been a bit more flexible in approving insurance forms for carriers, according to Phil Skaggs, assistant counsel for the American Association of Insurance Services, a national insurance advisory organization.

“It’s kind of an unofficial incentive that a lot of regulators apply, they’re anxious to see quality programs in their market,” Skaggs said. “So, during maybe like a pre-filing conference, that point will be expressed that ‘We’re going to review your forms, we’re going to review your rates, but the amount of scrutiny that we are placing on that review is not as much as it would be for an established program like homeowners or other business owners’ or something like that.”

Skaggs has been trying to spread the word within the industry about the potential in cannabis, and he has been

Peg Brown, chief deputy commissioner of Colorado Department of Insurance

Phillip Skaggs, assistant counsel of American Association of Insurance Services. speaking on this subject to insurance departments in a number of states.

He said regulators are doing more than just educating carriers on the cannabis space.

“Another area is addressing financial barriers,” Skaggs said. “There are financial incentives such as tax exemptions that they offer or lowering minimum financial requirements, reducing amounts that must be paid into state guarantee funds, et cetera.

There’s operational barriers that can be removed by providing flexibility and controls that might apply in distribution channels or the content of disclosure notices, the availability of payment tools or electronic policies, various reporting mechanisms, or even claim settlement practices and audits.”

Podcast Listen to the full podcast at insurancejournal.tv.

INSURANCEJOURNAL.COM

Closer Look: Umbrella

What Is Umbrella Coverage and Why Should Your Customers Buy It?

I

came across this comment in a social media group that I subscribe to. Someone was lamenting that their personal umbrella premium went up. As I read the post, I noted that even with the premium increase, that person was

By Patrick Wraight paying a fairly reasonable amount of money for plenty of coverage.

All in all, anyone that shops for umbrella liability (especially personal umbrella) policies should find that they are not very expensive and significant limits are available.

Have you ever wondered INSURANCEJOURNAL.COM

why umbrella policies can be less expensive? It has much to do with the reason that

other insurance can be very expensive. It’s the claims. Most primary policies (the personal

auto and homeowners, for example) are priced in part based on the claim history for the class of insured and the policy type and limits.

Umbrella insurance normally works in the same way, but the opposite direction. The lack of claims makes them less expensive.

Businesses often purchase umbrella liability. They might buy it because of a contractual obligation, or simply to get higher limits than are available in their primary liability layer.

But why should individuals consider an umbrella liability policy? Should only those ultrarich customers consider buying umbrella liability? The answer speaks to the needs of the individual customer and the

continued on page 28

JUNE 21, 2021 INSURANCE JOURNAL | 27

Closer Look: Umbrella continued from page 27 purpose of an umbrella policy.

What is an Umbrella Policy?

Contrary to the comments in the social media post, an umbrella policy doesn’t cover damage to your umbrellas, but the image works. An umbrella is intended to cover a range of policies and exposures.

An umbrella policy first provides coverage over other lines of insurance.

Most liability policies provide specific coverage, such as the liability portion of the personal auto policy only provide coverage for the liability associated with the operation

of an auto that is covered by the policy. The liability portion of the homeowners’ policy provides coverage for those personal liability exposures that a person has, not including the exposures related to the ownership, use or maintenance of an auto.

Umbrella policies provide coverage over all of these policies. You know that you need to examine and read the insurance policies that your clients have and those that they are considering to understand how their coverage might apply, but let’s look at ISO’s Personal Umbrella Liability Policy (DL 98 01 02 15).

The insuring agreement and a few definitions show us how coverage might apply. We are not examining the whole policy, just the insuring agreement and a few definitions.

Insuring Agreement We will pay damages, in excess of the “retained limit”, for: 1. “Bodily injury” or “property damage” for which and “insured” becomes legally liable due to an “occurrence” to which this insurance applies; and 2. “Personal injury” for which an “insured” becomes legally liable due to one or more offenses listed under the definition of “personal injury” to which this insurance

applies.

The first thing that we note about the insuring agreement is that coverage applies to damages in excess of the retained limit. This is telling us that this policy takes up coverage after a certain point above this retained limit as it is defined in the policy. Let’s look at (part of) that definition.

“Retained limit” means: 1. The total limits of any “underlying insurance” and any other insurance that applies to an “occurrence” or offense which: a. Are available to an “insured”; or b. Would have been available except for the bankruptcy or insolvency of an insurer providing “underlying insurance”; or…

You caught me. I didn’t give you the whole definition, but that was on purpose. We’ll get to it, but this first part serves our initial purpose. The retained limit includes the limits of something that the policy calls “underlying insurance.” If we weren’t insurance people, we would already assume that we know what that means. But we are, so we don’t. We look.

“Underlying insurance” means any policy providing the “insured” with primary liability insurance covering one or more of the types of liability listed in the Declarations and at limits no less than the retained policy limits shown for those types of liability listed in the Declarations.

As we look at these provisions, we see that the umbrella liability policy is designed to pay damages that exceed the underlying insurance limits.

continued on page 48

28 | INSURANCE JOURNAL | JUNE 21, 2021

INSURANCEJOURNAL.COM

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Personal lines Nationwide Express® allows you to quote home and auto in under two minutes. It also integrates with comparative raters.

Commercial lines ClearQuote® lets you complete a business owners, business auto, workers’ compensation, general liability or umbrella quote in minutes.

Swift, simple quoting tools. That’s the advantage of partnering with Nationwide.

Special Report: Construction

INSURANCE

Contending with labor shortage, rising costs, project delays and tough insurance market

By Andrea Wells

I

t is not the best of times for the construction industry and its insurers. But neither is it the worst of times.

The construction industry continues to face labor shortages, rising costs, supply chain woes and lingering effects of the pandemic yet it is managing to stay on a growth path.

Signs of recovery are most notable in the building of single-family homes, healthcare and communication industry facilities, and some infrastructure segments such as water and wastewater infrastructure, which has increased 9% in 2021 so far, according to FMI’s 2021 North American Engineering and Construction Outlook.

Meanwhile construction projects for multi-families, lodging and hospitality, and office space have shown considerable declines, the report revealed.

Almost all areas of the construction industry are experiencing project delays.

Despite the market pressures of today, contractors remain somewhat optimistic about their short-term future.

According to the Associated Builders and Contractor’s Construction Confidence Index confidence for sales increased modestly in May, but confidence fell when it came to profit margins and staffing levels. “Contractors can expect healthy growth in activity through the balance of 2021,” said ABC chief economist INSURANCEJOURNAL.COM

Anirban Basu.

Associated General Contractors of America noted that many contractors are having a hard time finding qualified workers. Construction employment fell by 20,000 in May. It’s this lack of skilled labor that is top-of-mind for construction firms and their insurance partners, which is leading to delays and concerns over safety.

“Steadily worsening production and delivery delays have exceeded even the record cost increases for numerous materials as the biggest headache for many non-residential contractors,” said Ken Simonson, the AGC’s chief economist in their June release. “If they can’t get the materials, they can’t put employees to work.”

‘We are still pushing for some rate on umbrellas, trying to get adequate premium there and have taken another look at the underwriting standards.’

Simonson added that contractors are being told they must wait nearly a year to receive shipments of steel and 4-6 months for roofing materials. Supply chain delays mean contractors are unable to keep workers employed because projects are put on hold, he added. Those skilled workers will leave for a new job if there is a delay. Labor shortages are holding back what should otherwise be a much stronger recovery for the construction sector, Simonson added.

Gary Kaplan, president of construction for AXA XL, says

the sector’s labor shortage concerns are not new but the effects of the shortfall are beginning to show up in insurance claims. He says unskilled workers are showing up as the number one cause for subcontractor default insurance claims, Kaplan said.

Kevin Libeg, vice president, construction, middle market business leader at Argo Construction, says builders have not been able to keep up with demand due to skilled labor shortfalls. “That raises concerns about the quality of work being done on construction sites,” Libeg said. “And the current supply chain issues, everything from material shortages to scarce shipping containers, to a shortage of truckers, everything in that supply chain has a significant effect on construction.”

All of that is leading to significant delays on projects.

“We are getting requests for extensions at three to four times the rate that we normally see,” Libeg added.

Costs for construction continue to rise. The price for softwood lumber jumped 154% over the past year.

On top of the cost, the unavailability of building materials also makes it difficult for contractors to budget and plan.

That can be worrisome from a risk management perspective, Kaplan says.

Contractors operate on “thin margins” on a normal basis, Kaplan said. “They only make 2-3% and they can’t really afford to have something cost five times what they thought it was going to cost.”

Planning is difficult because supply shortages are quick to change in today’s construction industry. “It seems like it’s something one week and then it’s something else the next week,” he said. “We’ve been worried about the supply chain throughout the whole pandemic and it’s really kind of weird that it’s showing up now.”

Insurance Market

The insurance market is yet another challenge for the construction industry, according to Danette Beck, National Construction Practice leader, USI Insurance Services.

“It’s kind of a perfect storm — it’s the availability of labor and what that cost is, it’s the availability of materials and what that is,” she said.

And then there is the cost of insurance which is “definitely transitioning into a harder market,” Beck added.

For years, construction saw a competitive insurance market, almost too competitive. “We kept saying that the market needed to get hard because it was so competitive, and at some point in time there was going to be a tipping point,” she said. “The pandemic certainly was that tipping point.”

But the pandemic didn’t cause the hard market pricing, Beck says. “We had some slowdowns and maybe some projects shuttered for an inter-

continued on page 32

JUNE 21, 2021 INSURANCE JOURNAL | 31

Special Report: Construction continued from page 31 im period, and maybe some funding of projects that got pushed off but the pandemic didn’t cause the problem of increases in pricing.”

The pricing is the result of continuing deterioration in auto losses, general liability losses and umbrella losses.

“Umbrella has taken a hit,” Beck said.

According to USI’s 2021 Commercial P&C Market Outlook, Mid-Year Update, the contractor umbrella/excess market continues to be the single most impacted line of business for a construction account outside of frame builder’s risk. The report noted that umbrella/excess “losses due to social inflation, third-party litigation financing, nuclear judgements, and distracted driving continue to deteriorate and cause profitability issues for insurance carriers.”

Andy Kurszewski, underwriting portfolio manager at Sentry Insurance, agreed, adding that social inflation and large verdicts particularly in the auto claims arena continue to pressure insurers in the umbrella markets. “I think much like our competitors, we still have concerns over the excess layers, umbrella layers,” he said. “We are still pushing for some rate on umbrellas, trying to get adequate premium there and have taken another look at the underwriting standards.”

Kurszewski says Sentry continues to offer umbrella policies in the construction sector but with tighter underwriting. “We are making sure we have the right answers and the exposures.”

Construction firms are finding an umbrella market

that needs more attention to complete a project’s portfolio, says AXA XL’s Kaplan. The tough market has meant additional layers of coverage are needed to complete projects, he says.

‘I think the pandemic forced contractors to do their work differently and I think that was an improvement.’

Carriers that remain in the construction umbrella market have significantly reduced their capacity, sometimes from a $25 million limit down to $5 million to $10 million, he said. “So, when you do that across the whole tower, all of a sudden in your $300 million tower, you’ve only got $150 million or less of renewing capacity,” he said. “Brokers have been stressed out mightily as are the customers trying to find replacement capacity to get those limits back to where they think they need them,” he said. “In general, the excess market, which we’re not part of, received 80% increases as standard.”

Overall, Kaplan says most liability lines in construction are experiencing similar trends although not as severely as in the excess market. “The only liability line where the limits came up was in primary casualty — the GL and auto — because the excess markets were refusing to attach, where they had in the past,” he said.

Beck says she no longer sees insurers pricing umbrella on the underlying exposures and underlying premiums, which is historically how it was done.

32 | INSURANCE JOURNAL | JUNE 21, 2021

“Now they’ve got umbrella underwriters that are pricing out what they need to make for that risk and so it’s changing the way that you approach umbrella,” she said. “You almost have to reverse engineer how you approach the market and go to the umbrella markets first and talk about what you need … wildfire coverage, or a $10 million lead, or whatever you need from and underlying [limit or policy] … in order to get to where pricing is adequate.”

Another line experiencing challenges in some regions is builder’s risk, where, according to USI’s 2021 Commercial P&C Market Outlook, project delays requiring extensions have become increasingly difficult.

Frame construction projects are very difficult for the builder’s risk market.

“Requirements for water and fire mitigation technologies as well as site security are becoming mainstream, even for noncombustible projects,” the USI report said. “Market support and capacity for frame remains volatile, especially for larger frame projects located in urban environments or cities that saw an increase in social unrest.”

Transitioning Contractors

In a construction industry like today, where labor shortages, supply chain issues and consumer demand are changing, construction insurance

specialists worry about how contactors will change, too.

One concern underwriters and brokers share is making sure contractors stick to what they know best.

“We are seeing the phenomenon, again, of commercial contractors moving into residential work, which always makes me nervous because it’s just a different product type,” Beck said. “It’s a different subcontractor base, different philosophy, different types of construction.” And a different type of insurance, she added.

“There are markets that do not write residential and so when I start seeing that type of phenomenon happening, I think that they may be getting into trouble.”

The same concern arises when she sees new projects where in the past there would have been three or four bidders, but now there are 15 for one project. “We don’t see it often, but when it starts happening where there’s multiple bidders, and they’re all scrambling to get the one project … they may be desperate and are just doing it to keep their payroll going but they are not necessarily capable of doing the work.”

Todd Germano, managing director of North America of Optio, the group company that includes Cove Programs, Ascent and Bay Risk, shares Beck’s concerns.

“We’re on the lookout for contractors that are trying to overreach and do things that they don’t have competency in,” INSURANCEJOURNAL.COM

Germano said.

“That’s a big piece of our underwriting component: geography and type of business familiarity.”

When contractors move into a new geographical territory or move into a different sector of the construction industry, that could be a red flag, Germano said. “We typically don’t want that, and we would underwrite around it and basically say, ‘we’re not comfortable’ and ‘you don’t have enough experience.’”

For instance, if a construction firm that is used to building in Pennsylvania suddenly shows up in Texas, that is a potential red flag.

“There’s a whole host of things that you would be concerned about because, extensively the contractors that are stable players in that market already have the better subcontractors tied up,” he said. “So how are you going to get the work done? Who do you have to hire to do the work?”

Plus, there are state-specific regulatory and building codes contractors need to consider.

“There’s a lot of things that can go wrong if you’re not familiar with the territory,” he said.

One recent example is the collapse of the construction firm Katerra Inc., which has filed for bankruptcy protection.

Large investments from SoftBank Group Corp. and others helped Katerra grow fast but that growth proved difficult for the company as it faced building delays and issues in trying to perfect its construction modules, which include prefab parts and modular construction units.

Beck says some analysts

say Katerra grew too fast.

“They were trying to do too much, too quickly. That can get even the largest companies in trouble.”

Beck says today’s construction market is seeing project owners pushing more risk to their contractors during a time when contractors are having to do more with less. “But when you talk to the good contractors that will make it through this economic downturn, they are staying focused on the simple things … getting back to basics and not overextending.”

Good News

The good news for contractors is that insurance capacity remains available unlike in other hard market times, Beck said. “During the last true hard market there was a capacity issue; there were contractors out there that could not find insurance,” she said. That is not the case in today’s hard market. “It’s still competitive and there are alternatives like private equity and other alternative types of markets coming into the marketplace.”

That is not to say there are a lot of new options entering the construction insurance world either, she said. “But you’re seeing some carriers that only offered traditionally guaranteed cost programs and [now] they’re expanding into deductible programs,” according to Beck. “They’re looking at ways to shift their underwriting philosophy to match what the marketplace is starting to dictate, which means taking a little bit more risk in order to keep prices affordable instead of just relying on the insurance company to give you a first dollar cover.”

Also, the pandemic in conjunction with a difficult insurance market has pushed contractors to reevaluate their normal ways of doing business, Kaplan says. “I think the pandemic forced contractors to do their work differently and I think that was an improvement,” he said.

“They brought in technology to automate some stuff that was pretty clunky.”

The adoption of technology by construction firms tended to be lower priority for operations prior to the pandemic, according to Kaplan. But COVID forced the sector to adopt newer innovative tools which improved safety, he said.

Michael Teng, assistant vice president of regional pricing, products, and underwriting at Sentry Insurance, says the pandemic has put the spotlight on workplace safety.

“In general, and a lot more so in the retail and the service industries like hospitality, but also in the construction industry, as far as just being aware of contagions, COVID and other communicable diseases,” he said. “And

especially for contractors, that tend to have public exposures.

They go into nursing homes, they go into private residences to do work. Certainly, there’s elevated awareness of the safety practices needed when you work in those public areas, and I think that’s a positive thing for the industry.”

That includes the use of telemedicine, which picked up significantly in construction, Kaplan added.

“We began to see a lot of contractors starting to utilize electronic badging so that they didn’t have to manually do logs when they’re checking people in,” he said. Contractors improved processes for how they sequenced workers entering jobsites.

“I think it is more efficient than it was before,” he added.

He also saw an uptick in wearables — wearable technology tools such as monitors so workers knew they were socially distanced or so that management could conduct back-tracing should a worker get sick. “The monitoring of the employees’ health overall, all those things they were forced to do to during COVID, continue to work and I think will stay because they’re seeing the benefits of doing them.

That’s a good thing.”

At the time of this interview, Kaplan himself had just returned from an AGC in-person conference in Florida where he met with several hundred contractors. The general feeling was positive, he said.

“I think contractors are pretty optimistic, at least through next year,” Kaplan said. “I’m feeling pretty good, too.” After 42-years in the business, that’s good, he said.

Idea Exchange: Construction How Agents Can Help

Construction Clients Prepare for Post-Pandemic Growth

N

early a decade of continuous construction industry growth was halted in 2020 as the industry battled direct and collateral effects from COVID-19.

According to

By Peter McMurtrie Nationwide’s recent Agent Authority research, seven-in-10 construction business owners were negatively impacted by the pandemic, experiencing the biggest hits to their company’s total revenue, ability to bid on new projects, and workforce or employee headcount.

However, despite these impacts and many lingering challenges ahead, business owners are confident about the 2021 peak season and a near-term rebound for the industry and their business. Eighty-four percent of business owners are optimistic about the strength of the 2021 peak season and about half anticipate higher demand compared to 2020.

As post-pandemic demand surges for construction services, insurance agents can play a key role in ensuring clients have adequate preparation and protection in place to keep operations on track.

Challenges Ahead

Although business owners weathered 2020’s tests, few see an easy path forward.

In fact, 58% of construction owners surveyed expect it to be even more difficult to account for the health and safety of their employees compared to 2020 and 55% 34 | INSURANCE JOURNAL | JUNE 21, 2021

expect it to be harder to access the resources needed to complete jobs. The pandemic also further strained the construction labor market and roughly half of business owners anticipate greater difficulty finding reliable subcontractors or enough workers to meet project demand.

Insurance is also top-of-mind for business owners — 85% changed at least one of their insurance policies in the past 12 months and three-quarters still worry about having the right policies in place to protect their business.

Construction owners need highly specialized agents and carriers who understand their operations and are prepared to react to the unique challenges they face.

Here’s how construction-focused agents can help their clients prepare for the post-pandemic demand surge.

Recognizing New and Shifting Exposures

Many construction business owners

were forced to change the way they managed their business to account for the pandemic’s impacts and the changing needs of customers. Eight-in-10 business owners report they adopted different strategies or changed their operations in the past 12 months for continuity or efficiency.

More than three-quarters also expect their company’s peak season to start or end outside of its typical season.

Agents are vital in helping construction clients understand the impacts evolving operations may have on their coverage or risk management needs.

By regularly checking in with clients and asking the right questions, agents can ensure they have a full picture of client operations and any changes that may need accounted for.

For example, many contractors had work in progress when the pandemic first hit and much of that work is now wrapping up. What work are they now bidding? Is it INSURANCEJOURNAL.COM

safety and risk transfer; and • Helping clients implement a successful return to work program.

One-third of business owners are also interested in guidance from their agent on the latest trends in their industry. With more than 30% of business owners feeling underprepared to meet demand in 2021, these efforts could go a long way.

Drive Fleet Safety with Telematics

‘Agents are vital in helping construction clients understand the impacts evolving operations may have on their coverage or risk management needs.’ similar to their normal operations or is it new or different?

Highlight the Importance of Planning

The pandemic emphasized a need for increased business planning among construction owners to prepare for the unexpected. More than one-in-five owners lacked plans to help their businesses account for a potential recession, navigate jobsite shutdowns and re-openings, or have enough workers to meet project demand.

Agents can reaffirm their value and build stronger, long-term relationships with clients by proving they’re a trusted business advisor, not just an insurance advisor. A few ways to do this could include: • Partnering with clients and carriers to create business continuity plans; • Building up clients’ safety and loss control efforts with information or resources on ladder alternative programs, trench INSURANCEJOURNAL.COM

The safety of employees driving company vehicles is a top concern for 77% of business owners and more than a quarter experienced fleet vehicle accidents in the past 12 months.

At the same time, the survey revealed about six-in-10 are missing opportunities to improve fleet safety and reap operational benefits with vehicle telematics systems.

Agents have a prime opportunity to engage construction clients about the benefits offered by telematics and dash cams.

Initially developed for the trucking industry, telematics systems have evolved to a point where it feels like they were built for construction.

Today’s systems allow business owners to easily monitor vehicle usage and condition, as well as track the location of powered and non-powered equipment like bulldozers, skid loaders or air compressors.

Additionally, telematics can help improve the driving behaviors of employees by monitoring speed, hard braking, cornering, and harsh acceleration events to reduce the risk of an accident or injury while on the road.

Reinforce Smart Hiring Practices

For many years, the industry has faced challenges associated with a workforce shortage and high demand for skilled tradespeople, and COVID-19 has exacerbated these issues for many construction firms. Three-quarters of the business owners we surveyed are concerned about not having enough employees to meet demand, and as a result, 70% say they have, will or may relax new hire screening criteria and drug practices to account for a lack of qualified candidates.

While laxed screening may ease a company’s strain for labor, these steps may

also open the business up to a multitude of costly exposures including injury liability or work quality issues. Agents should reinforce the importance of maintaining stringent hiring practices and following hiring best practices, such as developing a strong and clear job description and taking time to evaluate a prospective worker’s skills. Agents can also share resources to help construction clients find good subcontractors.

Counsel Clients About Use of Technology

With an increased reliance on virtual technologies in the past year, many construction business owners have invested more in technology to strengthen their business and meet changing needs.

Ninety-two percent invested in technology within the past year to meet changing client needs and 83% did so to keep their business going.

As cyber threats become more and more prevalent with both in-office and on-site technology, agents should also be counseling construction clients about the safe and efficient use of technology in their operations and ensuring employees are properly trained to recognize and defend against cyberattacks.

About a quarter of construction owners report they experienced a cybersecurity threat in the past 12 months and that cyberattacks are a top concern for their organization.

Construction owners have a high level of trust in the guidance they receive from their insurance agents, but 87% say it’s difficult to find an agent who specializes in their industry. As construction clients get back on their feet and prepare for a busy season ahead, it’s important for agents to find opportunities to share their expertise through proactive and consultative counseling. About nine-in-10 construction owners look to build long-term relationships with their agents over time and these steps are a great way to ensure those relationships have a solid foundation.

McMurtrie is the president of Property & Casualty Commercial Lines at Nationwide, where he leads all aspects of Commercial Lines P&C, including product, underwriting, claims, service, sales and distribution.

JUNE 21, 2021 INSURANCE JOURNAL | 35

Idea Exchange: Agency Management The Impact of Commercial Lines Raters on Independent Agencies

F

or many years independent agencies waited anxiously for a practical multi-company rating system in commercial lines.

By Tony Caldwell Now, several easyto-use products are available to agencies with quoting capability among a growing number of standard market commercial carriers. Companies like Tarmika are poised to bring independent agencies the promise of convenience, lower cost and broader choices for their clients.

As these products promise to revolutionize agency operations in ways similar to those that occurred with personal lines comparative raters, it’s helpful to look at both this promise and the pitfalls. Let’s begin by looking at what personal lines comparative rating systems (from companies like EZLynx) did in the independent agency system.

Lessons from Personal Lines

A top reason for consumers to choose an independent agent rather than a captive is their ability to offer choice in both carrier and coverage. Yet, independents were always faced with low-cost policies like homeowners and auto insurance, which do not pay large commissions and take considerable time when quoting multiple options. Then came rating systems, which reduced from hours to minutes the time needed to give consumers the choices they wanted. These systems reduced agency costs dramatically, increased competitiveness and helped agency operations by standardizing coverages and making employee training simpler.

Standardization had a downside, though: a renewed and increased focus on price. When the product became standardized, the number one issue in consumer decision-making became cost.

This forced agents to focus further on speed and standardization and, in some cases, robbed them of their historical 36 | INSURANCE JOURNAL | JUNE 21, 2021

in-depth knowledge of their clients. Today, many agencies no longer ask clients and prospects detailed questions beyond those required by the application. This, in turn, diminished relationships, and agencies began to lose the distinctiveness of the advice they offered.

All of this led to an increasing commoditization of personal insurance. When a product or service becomes commoditized it means that the only relevant distinction among competing providers is price.

This also had some negative impact for insurance companies.

For decades, independent agency carriers invested in differentiating themselves on product, claims service and other factors. But as agents increasingly focused on price, the speed to issue and technological seamlessness grew to be of paramount concern.

‘Agencies should build sales systems for small commercial that mirror personal insurance, allowing them to sell policies with lower-cost employees.’

In turn, carriers realized that winning often meant being nothing more than the cheapest product. And so they began to focus on data analysis (flow, hit rate, etc.) to manage their relationships with their agents. They were also enabled, and to some degree, forced, to broaden their agency appointments because they could no longer rely on the depth of real relationships with a select few agents to produce the sales they needed in a commoditized marketplace.

This broadening of appointment criteria had another impact. It made it easier to create a new independent agency which, in turn, increased competition among small agencies and made it more difficult for some to attract prospective customers.

To succeed, agencies now needed to

become effective marketers, as well as sales organizations. The agencies that became excellent marketers with assembly line like processes for both selling personal insurance and servicing it were able to achieve strong and sustained growth in personal lines. They also gained an advantage over traditional agencies that remained focused on developing one relationship at a time using only salespeople.

Enter Commercial Lines Raters

As this commoditization has taken place, many in the industry have looked to small business as their growth and profitability salvation. But now comes the commercial lines multi-company rater with the same promises to speed operations and lower agency costs. If it does, then will it not also increase the rate of commoditization among commercial lines products and sales processes?

I believe it will, which raises the question of how agents should respond: Should they exit the small commercial segment or change their business practices?

I think most will choose to change business practices, and the most obvious move is to treat small commercial in the same way as personal insurance. This means a focus on marketing, spreadsheeting of products and carriers, a de-emphasis on the use of producers to make sales, and an increased rate of product standardization, as well as an increased emphasis on price as the primary decision point for the purchaser.

As rating systems grow in small commercial, commoditization is likely to happen. Yet, there also will be benefits to some agencies. Cost and speed are two we have already mentioned, but another opportunity exists for agencies to focus on building business marketing systems.

Agencies should build sales systems for small commercial that mirror personal insurance, allowing them to sell policies with lower-cost employees. It will also allow them to focus on marketing more broadly and further expand geographic INSURANCEJOURNAL.COM

markets beyond their traditional limited areas.

I also think the widespread adoption of commercial lines rating systems may favor larger agencies that have more sophisticated marketing operations and can maximize the benefits of systems with size and scale. This will be an increasing challenge for small agencies that write much of small business premiums today.

If these small agencies do not adapt by lowering their cost structures, they may find the size of their books is eroded by the aggressive marketing of both larger agencies and direct sellers.

Answers for Small Agencies

What is the answer for small agencies?

An obvious one is not to stand in the way of history. Be among the early adopters and masters of these new rating systems.

Here is how to do it: INSURANCEJOURNAL.COM

• Adapt your business practices to these systems, which means boosting your investment in marketing to broaden your sales funnel.

• Increase your target market area to further increase the number of prospects entering your sales funnel.

• Develop even deeper industry niches to increase the quality of leads entering your system.

• Double down on the training of internal salespeople and customer sales agents for rapid, efficient closing of prospects.

• Modify your compensation model to afford increased marketing efforts and maintain profitability.

By taking these steps early, you have an opportunity to get a jump on the market and establish your agency as a strong new business engine in the marketplace.

Comparative rating systems fundamentally changed the way personal insurance is marketed and sold. They will be the genesis of similar changes in the small commercial market. For those independent agencies that continue to market and sell products one at a time, on a customized basis, using high-cost methods, the result will likely be loss of market share, profitability and growth. But those that take the time to understand market changes and adapt rapidly will ensure their relevance and success.

Caldwell is an author, speaker and mentor who has helped independent agents create over 250 insurance agencies. Website: www.tonycaldwell.net.

Email: tonyc@oneagentsalliance.net.

JUNE 21, 2021 INSURANCE JOURNAL | 37

Idea Exchange: Surety

Why Agents Should Specialize in the Commercial Surety Space

A

gents with clients who need license and permit bonds, miscellaneous bonds, court bonds or any number of bonds classified as “commercial,” should think twice about letting this business

By Kathryn Truman go to a competitor.

Commercial surety is a great supplemental product that can be added to an agent’s portfolio to meet the needs of clients and further cement a customer relationship.

Too many agents view surety as a narrow specialty best left to larger firms. But selling commercial surety isn’t difficult, and there are lots of surety companies that would jump to be an agent partner. All it takes is a phone call to a bond representa38 | INSURANCE JOURNAL | JUNE 21, 2021

tive at one of the carriers an agent already does business with.

A Good Market to Be In

Why is commercial surety such a good market to be in right now? Here are just a few reasons: Commercial surety is universal to all industries. For many occupations and trades, a license and permit bond is required to do business. There are also bonds tailored to specific industries and professions. That means there are clients in every agent’s book of business that need bonds.

The commercial surety business is hyper-competitive. The market has been quite soft for many years, which means surety companies want business. Agents shouldn’t have any problem finding a

surety company to meet a clients’ bonding needs.

Many commercial surety bonds are highly automatable. License and permit bonds, which make up nearly half the commercial surety market, can often be written with very little underwriting and issued the same day. The ease of writing these bonds has improved markedly with the advent of electronic applications and signatures.

Commercial surety commissions are lucrative. Commissions start at 25-30% and often go higher. For agents, that’s a high rate of return on business that doesn’t require a huge investment of their time.

Many commercial surety bonds renew automatically, providing a steady stream of income for an agent year after year.

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Difference Between Surety & Insurance

There are a few things agents need to know about surety if they haven’t sold it before. One is the unique aspect of a surety contract. Surety is an agreement between three subjects: the bond principal (the client), the obligee (a government entity) and the surety (the bond underwriter). A surety bond is a guarantee on the part of the surety to make good on a promise the client has made.

The surety company must make the obligee whole if the bond principal does not perform as promised, but the principal is responsible for the losses. The surety is entitled to repayment from the principal for a claim and will often confirm and bolster this right by requiring principals to sign an indemnity agreement saying they will reimburse the surety.

Surety is much like an extension of bank credit. The surety is providing the client the benefit of its credit standing.

Depending on the type of bond, sureties will prequalify their applicants, which may include reviewing the principal’s financials, net worth and experience. The surety wants to minimize its exposure to claims.

As a result, commercial surety losses are quite low. In fact, they have been in the single digits for about 10 years now. You’d have to go back to the Great Recession of 2007–2009 to find losses above 10%.

Transactional vs. Account Surety

Commercial surety business can be divided into two categories: transactional and account.

Transactional bonds can often be written easily and quickly, sometimes requiring little if any underwriting.

Account underwriting requires a review of the client’s financials and experience.

We call this account business because the risk is being assessed at the principal level.

The agent is facilitating a relationship between the surety and their client, and the client is establishing bond credit that can be used as needed — in essence, setting up an account.

As you might imagine, account business has greater stickiness. Clients seldom seek to change sureties once they’ve secured INSURANCEJOURNAL.COM

the bond capacity they need. Agents can easily build a book of business that provides recurring commission income.

Looking Ahead

Overall, the commercial surety sector has weathered the pandemic fairly well, although certain industries such as hospitality, travel and entertainment have suffered downturns. But there is ample surety capacity, and the industry remains quite competitive.

‘A surety bond is a guarantee on the part of the surety to make good on a promise the client has made.’

It remains to be seen whether losses will increase due to the pandemic or if sureties will tighten their underwriting requirements. Many industry observers believe we are due for a reset of sorts, with a return to more conventional terms and conditions.

One favorable consequence of the pandemic is the wider acceptance of electronic bonds. Surety has been slow to modernize in this area, and many obligees still require paper bonds that are signed and sealed. During the pandemic, a number of governments agreed to accept electronic signatures and seals. Hopefully, more obligees will move in this direction.

The future looks bright for commercial surety bonds, and there are many opportunities for agents. Find a surety partner you can work with, one who can guide you through the process and has a presence in your markets. You will provide a helpful service for your clients and create additional, renewable income for your agency.

Truman is commercial surety leader at Westfield in Westfield, Ohio, where she oversees the company’s commercial surety business. Westfield, a property/ casualty carrier founded in 1848, ranks 22nd among surety providers in the U.S. Prior to her current position, Truman served as surety services and governance leader, and senior surety claims counsel.

She earned a J.D. degree from the University of Akron School of Law.

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JUNE 21, 2021 INSURANCE JOURNAL | 39

Idea Exchange: The Competitive Advantage

What a Winner is Doing and What You Can Learn from Them

A

recent whitepaper, “The Insurer’s Customer Acquisition Playbook” offered

by Data Axle, covers the Four

By Chris Burand Phases of Program Development. It is a pretty good read. One of the carriers they highlight in the paper is Progressive. One of the four phases is, “Define Your Audience.”

Absolutely no one with a brain can contest Progressive’s success in acquiring customers and doing so cheaply.

According to A.M. Best, Progressive’s net premiums written were $14 billion in 2009.

Progressive finished 2019 at $38 billion. For context, their growth over 10 years was $24 billion, there are only five other carriers that even have $24 billion in written premiums, and much less have grown by $24 billion.

I hear many agents, carriers, and association executives retort, “But they spend so much money for that growth!”

They do not spend all that much money.

According to A.M. Best, their expense ratio

40 | INSURANCE JOURNAL | JUNE 21, 2021

as a percentage of NWP in 2019 was only 20.5%. The industry average was 27.2%.

Progressive is a good example to include in any research on how to grow and how to grow profitability. Progressive is also one of the most profitable carriers averaging about a 92% combined ratio over the last five years.

One of Progressive’s most impressive achievements is its high profit margins in commercial auto. Not only are they the most profitable carrier, but they are now the largest commercial auto carrier according to A.M. Best. On an unweighted basis, their six-year combined ratio is about 89%. The industry average is about 109%.

Progressive is outperforming the industry by about 18 full percentage points.

When I have pointed this out to agents over the last two years, the response has been almost universal: “But that is not a fair comparison because Progressive only writes what they want to write.” Well, duh.

Is that not underwriting?

According to the white paper, Phase 2, the key to success is to Define Your Audience. Progressive has grown faster than almost any insurance company in

history and outperformed the industry by 18 full percentage points in what is considered the worst line of business and has become the market leader in that line. The reason for their success is because they have defined their market so well. Does it then seem reasonable to think the formula for success has been presented and it is worth following rather than fighting?

Lack of Focus

We know that when developing new producers, giving them focus greatly improves their probability of success.

Telling new producers to just go and sell to anyone is a recipe for failure. Help them define their audience. They will not know how to do this and will need your help.

This strategy works especially well when the agency overall has defined its audience. Focus works so well for many reasons. Some reasons are operational because with alignment an agency needs fewer carriers, procedures can be streamlined and knowledge is enhanced, resulting in customers getting better results and costing the distributor less money.

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‘The tendency, when hunting for success, is to focus on finding the sale. A better place to begin is by eliminating all the noise and distraction of what is not the sale.’

At the carrier level, the first rule should be to make sure your underwriters and marketing representatives have the same focus. Carriers have not improved one iota in 40 years in getting their underwriters and marketing representatives aligned.

Every once in a while, like sign waves, the two intersect and agents think underwriting and marketing are on the same page, but usually this is just an accident.

This panacea is always short lived. The phenomenon would be funny if it was not so sad. Underwriters know the problem exists. Some marketing representatives know the problem sometimes exists, and executives are usually oblivious.

Nothing good comes from this lack of focus. Agents get frustrated, carriers spend money (in the form of time) for nothing, and sales are lost. As a word of warning to carrier executives, if you do not get your act together soon, you will really begin to feel the pain because the software your distributors are just now beginning to use is going to force you to make decisions regarding your focus. In some ways, this software is dangerously oversimplifying the situation for all parties, but your agents INSURANCEJOURNAL.COM

and brokers are going to use it anyway.

Some carrier or other will bite and if you are at the back half of the line, you will get only adverse selection.

Define the Audience

The fear of agents and carriers in choosing a focus is, “What if I choose the wrong market segment?” A different way of putting it is, “By choosing a specific market, I am limiting myself and I do not want to do that!” One factor that puts smaller agents and carriers at a distinct disadvantage is they know they are small and are compelled to make every sale possible. A large carrier or agent does not need to have this fear, though many do.

Small agents and carriers need a big dose of courage to commit to Defining Their Audience. It is scary. However, the reality is that their audience is already most likely quite defined. It takes some work to learn exactly what it is, and this is where the software limitations will endanger identification of the right audience. The right audience is rarely a line of business unless it is a specialty line. The right audience is based more on buying decision mentality.

This is Phase 3 in the white paper: Identify Your Audience’s Needs, Motivations, and Preferences.

A simple example is that small business owners often like to purchase insurance from smaller agencies. They relate to them and think their chances of receiving better treatment is greater than if they are a small fish in the big ocean of large agencies and brokers. They have good reason to believe this is true given the quality of some large distributors’ service centers. For small agencies, begin defining your business by deciding what size of clients you should focus upon.

Then go down the list relative to what kind of motivations match your agency best. As an example, are price shoppers best for your agency? Are customers who are more concerned with obtaining the best coverage most appropriate?

Then work on that audience’s preferences. Do they prefer phone calls? In person meetings? Email communications? Virtual meetings?

One of the most difficult aspects of building these programs for carriers and distributors, large and small, is that it is human nature to look for solutions in the wrong places. A human analogy is in the old country song title, “Looking for Love in All the Wrong Places.”

A longtime client describes the situation by using a fishing analogy as an example: “Being successful at fishing (he’s pretty good) starts with identifying where the fish aren’t.” The tendency, when hunting for success, is to focus on finding the sale.

A better place to begin is by eliminating all the noise and distraction of what is not the sale.

Working through all the pieces is part of building your successful focus. Start with reading the above-mentioned white paper.

Then, if you would like help, contact me. I have a pretty robust program. The audience I’ve defined are those who are proactively willing to work hard to build their focus, including building a long-term relationship.

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com.

JUNE 21, 2021 INSURANCE JOURNAL | 41

Idea Exchange: Minding Your Business How to Find New Producers

M

ost of our agency clients tell us they have a hard time finding producers.

They want to know where to look and how to bring them

By Catherine Oak in. It is not an easy task to find someone with experience from another agency and with an established book of business that can come in free and clear and easily fit into the agency’s culture. Every agency is different. The following are a few ways that an agency can find good people and be successful in this endeavor based on our experience working with thousands of agencies during the past 35 years.

Promote from Within

We have interviewed many agency staff in countless agencies that feel resentful

that owners and managers often look outside the agency to bring in managers and new producers. They may be CSRs or account managers that have worked in the agency for a long time and know the agency’s customers, underwriters, processes and procedures well.

Often, we are told that they do not have an avenue to move up in the organization nor are they ever asked about their desire to do so even at performance review time. It is just assumed that they are not interested or willing to move up.

They also have a fear that if they did move into sales, they would have to go on straight commission. Even if they have a sales personality and could handle most of the commercial lines or benefits call-ins, they may not accept the job because of this concern.

The answer can be a different role that some agencies have created called an account executive. These AEs can handle

existing books as producers do and are not expected to bring in new clients. They are usually expected to cross-sell the existing account with other coverage lines, such as umbrellas, EPLI, fiduciary responsibility coverages, business interruption, cyber, etc. Most can do this if they have taken some CSR and CIC courses and have a good manager to lean on.

The key is how to properly compensate them. Most AEs that have that position are compensated on a percentage of the book they handle as a salary, usually in the 20% to 25% range. Usually, AEs have CSRs to delegate to for clerical tasks and operate more as a producer on the accounts. If they cross-sell or bring in new accounts, they should receive commission for this outside of their salary.

In most agencies the personal lines sales are handled by the CSRs/account managers and not specific producers.

Hire Community Professionals

This was an avenue taken by one California firm. They would hire people in their community that were coaches and teachers. These professionals knew everyone and had a desire and drive to win.

They are usually also unable to make a lot more money in their current profession so feel dead-ended by their careers.

Over the years, this agency hired about 40 of these professionals and they rarely ever left. They were extremely hardworking and grateful for the opportunity and were quick studies.

Salespeople Connected to Agency Niches Another source is to look at people that sell in the niches that the agency likes to write and already knows that specialty well. An example would be a lumber salesperson or equipment dealer salesperson and the agency has a specialty in contractors or dealers. The salesperson already knows people to connect with that are contractors and subcontractors and can easily talk to them about their insurance needs. Another example would

42 | INSURANCE JOURNAL | JUNE 21, 2021

INSURANCEJOURNAL.COM

be a car salesman where the agency writes dealerships, or an attorney who can easily write law firms.

College Marketing Projects & Internships

One of our clients has found two great long-term employees through this idea, including a producer and a marketing manager. They started as college business students needing to do a marketing project for a business. They were invited in and got to know what the agency does, what its marketing efforts were, and concentrated on assisting with their website, mailings, ads, social media, etc.

After making recommendations for their project to the agency, they both ended up impressed with the owner, managers and the firm. After finishing their internships and graduation they were both offered jobs and are still there today.

Many people do not really understand the jobs in an insurance agency and how challenging and exciting it can be to work with a wide variety of clients, especially in commercial lines and employee benefits.

When I was in college we had an insurance degree at the University of Wisconsin, Madison, called Risk Management & Insurance. After graduation, the college would have recruiters from insurance firms come to the school to interview students. It helped students get a big picture view of all the roles available in the insurance industry and that led me to a job C with St. Paul Fire & Marine as a marketing M trainee.

Y Prior to that, a risk management professor recommended a summer CM internship program to both my sister and MY I at Employers of Wausau. That internship opened our eyes to all the possibilities CY CMY for careers in the insurance industry.

Insurance agencies should consider this K approach and contact local universities and community colleges to pitch their firms and explain the opportunities they have available. Often an agency can also post openings on the college website, which can help students find great jobs in insurance.

Today, there are many colleges with risk management and insurance degrees, which is a good place to look for prospecINSURANCEJOURNAL.COM

tive employees. But the high school level is also a way to pique student’s interest in the industry.

The National Association of Insurance Women for years has tried to get high school students interested in the insurance industry, both at the carrier and agency level. Insurance veterans are encouraged to participate in high school career days to introduce students about the opportunities in insurance.

Non-Owner Producer Competitors

their personalities or knowledge worth exploring for your own firm?

Always remember that it is much easier to teach someone insurance, than how to close. The key is to make sure they get the insurance training necessary to succeed from the agency, carrier partners, or other educational organizations.

Summary

This article provides agency owners with ideas on how to find or grow your own producer talent. They have worked well for other agency owners and may just work for your agency, too.

There are many producers that come up against someone on an insurance sale and lose to them. If the owner or non-owner Oak is the founder of the consulting firm, Oak & producer find out they are not the owner, Associates, based in Northern California and Central and they were great, the client may be Oregon. Oak & Associates specializes in financial and willing to give you their information. Then management consulting for independent insurance your agency can reach out to see if they agencies, including valuations, mergers acquisitions, might be interested in a job. sales and marketing planning as well as perpetuation Lastly, recruit those you come across planning. Phone: 707-935-6565. Email: catoak@ that impress you. For instance, a waitress A&M IJ Contractors PRINT.pdf 11:52 AM gmail.com. in a restaurant or a clerk in a store. Are 1 6/3/21

JUNE 21, 2021 INSURANCE JOURNAL | 43

Idea Exchange: Ask the Insurance Recruiter The Gig Economy Offers a Fresh Take on Talent Acquisition permanent solution because the time you get to watch them in action and solidify the scope of the role is invaluable.

Seasonal Hires

T

he number one question I receive from all types of retail agencies, wholesale brokers, insurance companies and intermediaries of every shape and size is, “How do we source and hire experienced insurance talent?”

By and large, the insurance industry’s hiring strategy is focused on full-time, W-2 employees. However, I think the convergence of two trends — the mass retirement exodus and COVID-19 pandemic layoffs — offer an opportunity to tap into a new type of talent pool.

You’re familiar with the gig economy through services like Uber, Door Dash and Instacart. As an insurance professional, you’ve dealt with risk management and compliance issues for 1099 employees.

But, as an employer have you considered how gig workers can benefit your business? Peek behind the curtain, and you’ll find a rich talent pool of experienced insurance professionals who can and want to participate in the gig economy. Here’s how you can plug them into your hiring strategy.

Independent Contractors

According to MetLife’s report, The Gig Economy: Opportunities, Challenges, and Employer Strategies, “85% of gig workers are interested in continuing contract work 44 | INSURANCE JOURNAL | JUNE 21, 2021

in the next five years as opposed to a traditional work role.”

Technical, Highly Skilled Insurance Positions. With so much pressure on insurance organizations to create flexible environments like work-from-home and telecommuting, gig arrangements may be the perfect solution to meeting your staffing needs and an individual person’s desires. A lot of account managers, underwriters and IT professionals have worked as long-term, 1099 contractors within the insurance industry for years.

Project Consulting. Rapidly growing and expanding insurance organizations have special, short-term needs but are not certain if it’s enough work for a permanent role. Common examples include hiring consultants with insurance experience to lead M&A due diligence and integration as well as agency management systems conversion.

Interim Executive Leadership. I described one broker’s year-long process to replace a retired leader in my 2018 Insurance Journal article titled, “It Took an Agency How Long to Hire a Commercial Lines Manager?”

Twelve to 24 months to complete an executive hire is not uncommon. Interim executives are immediately available to carry the baton before or during a search.

They may even turn out to be your

By Mary Newgard

“Approximately 57 million Americans do some type of work in the gig economy,” according to Great American Insurance which also describes the gig economy as an “On-Demand Workforce.” Isn’t that an interesting phrase given how at different points in the year insurance organizations face huge influxes in workloads? This is your opportunity to consider gig workers when you need them at a reduced expense compared to offshore outsourcing or permanent employment. A few examples include: • Q4 benefits enrollers; • Year-end accounting and finance; and • Backroom processing and data entry.

Freelancers

This type of arrangement works great when you have projects that aren’t tied to the insurance portfolio but benefit from insurance expertise. Professionals with client service, operations and human resources experience are great gig workers because they infuse insurance lingo into situations like: • •

• • •

Creating a new marketing brochure; Redesigning the functionality of the company’s website; Writing training manuals; Updating the employee handbook; Mapping workflows for agency manage- ment system utilization.

Newgard is partner and senior search consultant for Capstone Search Group, a national recruiting firm dedicated to the insurance industry.

Email: asktherecruiter@ csgrecruiting.com.

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INSURANCE INDUSTRY CHARITABLE FOUNDATION

Helping communities and enriching lives, together.

Insurance Industry Charitable Foundation (IICF) is a unique nonprofit that unites the collective strengths of the insurance industry to help communities and enrich lives through grants, volunteer service and leadership. Having contributed $42 million in community grants and over 300,000 volunteer hours, to hundreds of charities and nonprofit organizations, IICF continues to reinvest locally where funds are raised for greatest community impact. #insurancegivesback

Join your industry colleagues and make a difference. Get involved today!

Midwest Division Kelly Hartweg Phone: (773) 991-2149 khartweg@iicf.com

Northeast Division Betsy Myatt Phone: (917) 544-0895 emyatt@iicf.com

Southeast Division Sarah Conway Phone: (214) 228-2910 sconway@iicf.com

Western Division Melissa-Anne Duncan Phone: (714) 870-1084 maduncan@iicf.com

Insurance Industry Charitable Foundation Helping communities and enriching lives, together.

UK Division Wendy Wilder Phone: +44 (0) 7469 392 453 wwilder@iicf.com

Insurance Industry Charitable Foundation contact@iicf.com www.iicf.org FEIN: 20-1240972 Visit www.IICF.org to learn more and follow us on social media @doubleicf

My New Markets Crisis Management Insurance

Market Detail: Risko Strategies LLC (www.

crisisbulwark.com) offers a Lloyd’s-backed, multi-cover insurance package with a single crisis response, mitigation and duty of care technology provider.

The crisis management insurance product allows the insured to select up to five coverage lines as described below while integrating a response/mitigation technology subscription, offered by the underwriter-retained crisis response service provider, included in the coverage procurement.

Insurance coverage lines available: 1) Sabotage and terrorism property damage and business interruption with a broad terrorism definition that includes political, religion, ideology; acts certified U.S. TRIPPA (not requiring certification). 2) Strikes, riots, civil commotion malicious damage, property damage and BI; broader coverage than standard sabotage and terrorism; protects assets against acts from riots, strikers, and labor dispute disturbances. 3) Active assailant/shooter event with coverage for property damage, gross earnings loss, third party liability and crisis response; debris removal, bodily injury denial of access and additional expense also available. 4) Terrorism liability with property damage coverage; BIN, employers’ liability and lenders coverage as well. 5) Full political violence plus BI that expands coverage for strikes, riots, civil commotion malicious damage to include insurrection, revolution, rebellion, Coup d’état and civil war. Risk mitigation and technology service included in the insurance procurement: 1) Pre-incident/ risk mitigation support for the five covers; duty of care, specialty consulting and intelligence services; disaster recovery and rapid response preparedness; access to industry experts for vulnerability assessments; 2) Customized technology for risk avoidance/duty of care that includes a starter subscription package for insureds with a crisis management smartphone application and admin dashboard, customized mass-message alerts, two-way communication via private dashboard environment, geo-fencing/ fixed asset-tracking, and mobile device check-in/ 46 | INSURANCE JOURNAL | JUNE 21, 2021

assist command linked to crisis center.

Available limits: Minimum $1 million, maximum $20 million Carrier: Lloyd’s of London States: All states Contact: David Mace at 713-332-6390 or e-mail: contact@crisisbulwark.com

Commercial Marine Packages

Market Detail: Alan R. Mott Agency Inc.’s (www.boat-ins.com) coverage is specifically designed for a wide range of commercial marine operations requiring a package product. Businesses that fit this program include boat builders, commercial vessel owners, landing owners, marine contractors, ship repairers, stevedores, terminal operators and wharfingers. This is full ranging and includes products and contractual liability along with coverage for real and personal property such as business income, unexpected expenses and equipment breakdown.

Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Kathy Gryski at 631-549-2628 or e-mail: kathy@boat-ins.com

Hotels, Resorts and Casino Umbrella Program

Market Detail: Distinguished Programs (www.distinguished.com) specializes in hospitality risks, offering financially secure markets, broad coverage, high

limits, service from industry experts, and group purchasing power. Eligible classes include: luxury full-service hotels; full-service resorts; casinos and gaming hotels; midscale business class hotels; limited service hotels; boutique hotels; hotels with theater and entertainment venues; independently-owned hotels with limited amenities and stand-alone casinos.

Available coverages/services include: general liability; liquor liability; auto liability; marine operators legal liability; protection and indemnity; specialized, dedicated hospitality claims management team; umbrella limits up to $180 million ($175 million for resorts and casinos); broad form named insured coverage; crisis response; no exclusion for legionella.

Available limits: Maximum $180 million Carrier: Unable to disclose, admitted States: All states Contact: Tara Hughes at 425-213-1259 or e-mail: thughes@distinguished.com

Small Business Binding Programs

Market Detail: One80 Intermediaries Inc. (www.one80intermediaries.com) offers coverage for small commercial businesses that includes market expertise, best in class service standards, and access to leading carriers in the U.S. and U.K. In-house binding authority and wholesale brokerage services are available across all lines of coverage.

Available limits: Minimum $500 Carrier: Various, admitted and non-admitted States: All states except Alaska and Hawaii Contact: Ron Keller at 312-957-4041 or e-mail: rkeller@one80intermediaries. com.

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Closer Look: Umbrella continued from page 28 The umbrella carrier will require that certain limits be maintained, but if the client needs an umbrella policy, they should already be interested in maintaining those underlying coverages at the level required.

Umbrella liability policies can also provide coverage beyond the coverages provided by the underlying insurance.

There was a part of the definition of retained limits that we didn’t look at yet.

Now’s the time.

“Retained limit” means: 2. The deductible, if any, as stated in the Declarations, if the “occurrence” or offense: a. Is covered by this Policy; and b. Is not covered by “underlying insurance” or any other insurance.

The rest of the definition of retained limit provides us with coverage for other exposures that are not covered by any other insurance as long as it isn’t excluded in this policy. This is the biggest difference between an umbrella policy and an excess policy. An excess policy provides only excess coverage over the underlying insurance while an umbrella may provide broader coverage than the underlying insurance.

Why Buy an Umbrella Policy?

The simple answer to this question goes back to why we buy insurance in the first place. We buy insurance to protect assets that are at risk and that we cannot absorb those losses and maintain operations at their current level. That sounds like a business answer but consider a family or an individual like a business.

A family has a budget. There is money coming in and money going out for different things. There is money that goes out for regular expenses, such as a mortgage, vehicles, insurance and food.

There is money that gets set aside for a rainy day, because the rain comes. There is also money that goes out for debt service and for future expenses, like college for the kids or retirement.

In making these budgets, families must decide what kind of losses they can absorb. That’s where insurance in general 48 | INSURANCE JOURNAL | JUNE 21, 2021

and the umbrella policy specifically come into play. Someone should buy an umbrella policy to protect their assets from their liability exposures. Keep in mind that liability policies are designed to pay money that the insured becomes legally liable to pay. Without insurance, the insured has to come up with that money somewhere.

Who Needs an Umbrella Policy?

At this point, you might be thinking that only those people who have a big pile of money need an umbrella policy, but let’s think this out a little. Anyone that has assets should want to protect them, including the one asset that we all have, but none of us can quantify, our time.

It’s easy to quantify the assets of an individual or family when you look at the balance sheet of their lives. If you take what they own and subtract what they owe, you end up with their net worth in that moment. That simple measure is an indicator of where they might start selecting liability limits.

Yet, this is also the place to take into account the lives of the client. Is their

income increasing? Consider the possibility that a child starts driving and with their new license in hand, takes a car out for a ride to enjoy the freedom of the open road.

Then the unthinkable happens and she causes an accident where there are several damaged vehicles, and many people are seriously injured or killed. The liability from that could easily extend beyond the limits of the primary auto policy. Once those limits are exhausted, the liability isn’t just erased, the money has to come from somewhere. That could be a personal umbrella policy.

While that situation might seem unlikely, the point is that the umbrella policy, like the primary liability policies, is designed to protect assets in the event of an unlikely situation. So the question comes back to who needs an umbrella policy? Don’t only look at the current assets and situation but look ahead five to 10 years into the future to see what might be out there and then answer the question about what assets need to be protected.

What Should You Watch For?

5 Reasons to Purchase Umbrella Insurance

By Jim Hyatt 1. We live in a litigious society and the costs of insurance claims are rising.

According to statistics from Current Award Trends in Personal Injury, half of personal injury liability awards and settlements were $100,000 or more; some 19% were $1 million or more.

This is a result of increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, and larger compensatory jury awards.

2. Your primary policy is not enough.

The reality is that your primary insurance policy such as homeowners, auto or boat may not have enough coverage in the event you are sued. Most umbrella claims happen as a result of a car or boating accident or with a dog bite.

3. People need to protect their assets.

Regardless of age and wealth, if you have property, savings and an immediate family, an umbrella policy will help protect what you have worked hard to build

4. People need to protect their futures. Court judgments can follow

insureds around for many years, not only taking their current assets but any assets they might gain in the future.

Umbrella insurance can ensure that your financial health and stability is maintained throughout your lifetime.

5. It’s not that expensive. The cost of the policy is minimal for the amount of protection an insured receives.

According to the Insurance Information Institute, the average $1 million umbrella policy is $150 to $300 per year.

Hyatt is senior vice president of personal lines at Arbella Insurance Group.

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No two policies are the same so it’s worth paying attention to the details.

Without discussing specific details of policies I haven’t read yet (but I am willing to read them), here are a few thoughts about what to watch for in an umbrella policy.

Watch for a form-following umbrella.

This is really what it sounds like. To be fair and to the point, the rise of excess policies has made form-following umbrellas a little less easy to spot. In short, a form-following umbrella will follow the exclusions of the underlying insurance policies. It should

June 21, 2021 Nutmeg Insurance Company One Hartford Plaza Hartford, CT 06155 The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

closely mirror the exclusions of the underlying insurance so that when a loss is covered on the underlying, the umbrella doesn’t have an exclusion that applies.

Watch for the underlying insurance requirements. Here’s where limits of insurance can turn around and bite the client. If they fail to maintain the proper amount of insurance, the umbrella may not cover the losses until the loss gets to a required level.

An umbrella policy is not just a requirement of the rich and famous, or big business. Find out whether someone

June 21, 2021 Homeowners Choice Property & Casualty Insurance Company Inc. 3802 Coconut Palm Drive Tampa, FL 33619 The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

June 21, 2021

June 21, 2021

Centurion Casualty Company 2717 N.118th Street, Suite 300 Omaha, NE 68164

American Agricultural Insurance Company 1501 E. Woodfield Road, Suite 300W Schaumburg, IL 60173

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

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needs it or not and for the money, err on the side of caution and get it.

Wraight is director of Insurance Journal's Academy of Insurance. Email: pwraight@ijacademy.com.

June 21, 2021 Pinnacle National Insurance Company 1900 Don Dodson Drive Bedford, TX 76021 The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

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JUNE 21, 2021 INSURANCE JOURNAL | 49

Closing Quote Preparing Policyholders for Catastrophic Events

I

By Tara Kelly

‘Now is an excellent time for agents to plan and prepare themselves, their processes, and their policyholders for catastrophic events.’

n 2020 alone, Aon estimated that insured property losses from natural disasters in the U.S. climbed to around $74 billion in losses, much higher than the 10-year average. The only year that beats 2020 in terms of losses is 2017, with three major hurricanes recorded impacting the U.S. mainland and territories.

Climate-driven catastrophes caused by extreme temperatures and droughts, like the deep freeze Texas experienced this year, seem to be increasing.

But the random distribution of these catastrophes from one year to the next demonstrates how hard they can be to predict, even by experts.

We don’t know what the rest of 2021 will bring, but the hard freeze in Texas in February has already been estimated to cost a record $90 billion — and that’s just one single event.

We’re also learning that most of those losses could have been avoided, according to Enki Research disaster modeler Chuck Watson, who says that about 90% of the damage could have been averted with preventive actions.

The situation in Texas, and arriving spring weather, should be a wake-up call for agents. While we don’t often know what tomorrow holds, proactive communication with policyholders can ensure preventive measures are in place to prevent losses, improve the customer experience, and — most importantly — save lives. Here are four tips that agents can use to prepare policyholders for catastrophic events.

50 | INSURANCE JOURNAL | JUNE 21, 2021

Reach out early to confirm

basic information and preferences. To lay the groundwork

for successful catastrophe communication, contact policyholders early and often to make sure you have up-to-date information, including whether a residence is a primary or secondary home. Make sure your list of mobile numbers, email addresses and preferred communication channels is current, and ask for customer opt-in for ongoing digital communication.

Make the outreach relevant to customers by offering something of value in exchange, including information and tips on how to stay safe and how to file a claim.

Provide mitigation and

prevention to reduce overall losses. Offering specific mitiga-

tion and prevention programs for the most common or high-spend catastrophe claims helps to reduce overall losses from natural disasters and catastrophe events. Providing an option for those eligible to properly secure or protect their assets will make your insured feel valued and safe while also decreasing the severity of claims from a disaster.

Tailor the information you provide to the customers’ risk exposure, i.e., tips on wildfire mitigation for people in vulnerable areas, including coverage for flame-retardant sprays to protect homes or safe storage tips.

Communicate when a catastrophe is imminent. If a storm or other natural disaster threatens, let policyholders know how best to be prepared

and what you can offer to support them.

Offer tips on how to document property and possessions for claims and give policyholders an overview of how you’ll respond to help them, including how to reach out to file claims, reminders about coverage amounts, anticipated wait times, temporary structure availability and preferred vendors.

Plan your post-catastrophe communication. Once the physical danger is past, policyholders will be focused on recovery, so post-catastrophe communication will be critical.

Create a process to reach out to affected policyholders with updates on claims status and offers to assist by communicating with the carrier on the policyholder’s behalf for a claims issue. Be sure to have an electronic payment option since the insured may be displaced.

Be ready to provide information on temporary facilities located in their area, adjuster availability and any community outreach. Fine-tune your process for notifying policyholders when payments are made so they can access needed funds as soon as possible.

Now is an excellent time for agents to plan and prepare themselves, their processes, and their policyholders for catastrophic events. It starts with opening communication channels, and opt-in automated messaging can be ideal in this scenario.

Kelly is the president, CEO and founder of SPLICE Software.

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