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Opening Note
DEI Changes and Support
Legal and social issues have put corporate America’s diversity efforts on defense like never before. But despite the scrutiny, diversity, equity and inclusion programs continue to receive high marks from employees, according to a recent survey from The Conference Board.
The survey, which polled employees and executives on DEI initiatives and their concerns, found that some 58% of U.S. workers believe their organization devotes the “appropriate level” of effort and resources to their DEI initiatives; while 21% don’t believe their organization’s efforts go far enough.
Nearly half of women (49%) and Black (56%) respondents say they wouldn’t work for a company that does not take DEI seriously.
Employees also shared that initiatives which emphasize the importance of DEI and fair pay are the most impactful. Some 63% reported a positive impact from executive leaders communicating the importance of DEI, and 62% say the same for initiatives that promote equitable compensation and benefits.
“DEI values and initiatives are essential for many U.S. employees and continue to receive strong, positive feedback,” said Allan Schweyer, principal researcher, Human Capital, The Conference Board. “Leaders should focus on what really matters for their workforce amid the noise, as these initiatives are crucial for attracting and retaining current and future talent.”
Even with employee support for DEI initiatives, the political and legal landscape for corporate diversity efforts continues to be contested, pushing some organizations to make changes.
The survey found that 63% of executives view the political climate for DEI as very or extremely challenging, and some 63% say the 2023 Supreme Court decision on affirmative action negatively affected their DEI efforts.
Executives are bracing for more scrutiny of their diversity initiatives next year, The Conference Board said. Some 69% of executives responding to the survey expect scrutiny over DEI efforts will persist or possibly increase in the next three years.
The pressure has caused some companies to make changes. More than half (53%) of companies have revised their DEI terminology both internally and externally over the past year, with another 20% considering similar changes.
‘Leaders should focus on what really matters for their workforce amid the noise, as these initiatives are crucial for attracting and retaining current and future talent.’
The survey found that companies are adjusting language to broader concepts like “inclusion,” “belonging,” and “engagement,” which are less prone to legal challenge.
The Conference Board survey polled 1,345 U.S. workers and executives during August 2024.
Andrea Wells V.P. of Content
Chairman of the Board Mark Wells | mwells@wellsmedia.com
Online Training Coordinator George Jack | gjack@ijacademy.com
18th Annual Northeast Benefit
Wednesday, December 4, 2024
Cipriani 42nd Street, New York City
6:00 PM Reception, 7:00 PM Dinner and Program
Honoring
Your support provides significant help for our neighbors in need through the IICF Community Grants Program. The Insurance Industry Charitable Foundation Northeast Division has awarded over 400 grants totaling more than $13 million to charitable organizations throughout the Northeast. with the 2024 IICF Double I Award for Influence in the Industry and Impact in the Community
Accepted
by Christine Williams Northeast Region Leader
Insurance Industry Charitable Foundation
For further information, please contact the IICF Benefit Office at 347-545-1579, email: iicf@cmevents.net
h ps://northeastbenefit.iicf.org/
News & Markets
Allstate Says It’s Ready to Grow Homeowners Line With All 3 Distribution Channels
By Chad Hemenway
Allstate said it sees opportunity where others may not — in homeowners insurance. And the insurer plans to use all three distribution channels to do it.
Due to rising trends in the frequency and severity of weather-related losses and in inflation, some insurers have elected to either pull away from some geographies or leave the homeowners business entirely.
based insurer has repositioned every aspect of its homeowners book — underwriting, policy terms, pricing and claims management. He said Allstate’s agents “are really good at bundling” but there is room to grow.
Allstate said during a recent earnings call that it is ready to step in where margins are good.
“We view homeowners as a growth opportunity,” said Mario Rizzo, president of Allstate’s property-liability business. “There’s just a few competitors out there that are wanting to write new business, and we want to take advantage of that opportunity. We feel good about where our pricing is.”
Rizzo said Allstate homeowners insurance net written premiums increased almost 11% and policies-in-force grew 2.5% during the third quarter, and the business turned in a 98.2 combined ratio with $60 million of underwriting income compared to a loss of $131 million for the third quarter last year.
Allstate CEO Tom Wilson said that over the last 10 or so years the Northbrook, Illinois-
“We do think there is more growth potential there,” Wilson said during the call. “Some of that is many people have decided not to grow in homeowners. And that gives us more opportunity, not just through Allstate agents, but in particular through independent agents. And I think we should be able to crack the code on direct.”
On its distribution channels, Wilson said Allstate for the first time has all three functioning.
“We’ve got three horses here, all ready to run,” he said.
Wilson said no one has been able to really sell homeowners insurance via the direct channel but there is “great potential there” and he said he thinks Allstate “can be an industry leader.”
“People buy houses off the web,” Wilson said. “If you buy a house off the web, you should be buy your homeowners insurance off the web. We’ll have to sort that one out. We’re feeling good about it.”
Rizzo said Allstate can maintain its underlying combined ratio in the homeowners business — about 62 in Q3 — and grow across all distribution channels and write
new business at an attractive margin.
Independent agents, Rizzo said, have been getting good traction leading with homeowners and bundling auto insurance, especially as the insurer’s profit improvement
plan in auto has improved margins. Auto insurance booked a Q3 combined ratio of 94.8, an improvement of 7.3 points.
Still, Allstate won’t be looking for homeowners market share in Florida and California, and will continue managing probable maximum loss (PML) and coastal exposure.
“But once you get away from that — really the rest of the country, particularly the middle part of the country — there’s real opportunity for us to continue to grow homeowners,” Rizzo said. “I think that is where our our capabilities from a product, pricing, and risk management perspective really enable us to take advantage of the disruption in the market and grow pretty broadly, geographically.”
Mario Rizzo, president of Allstate’s property-liability business
OPTIS: Insurance Agency M&A Down 10% This Year
By Chad Hemenway
The total number of insurance agency mergers and acquisitions as of the end of September was down 10% from the same period in 2023, according to investment banking and financial consulting firm OPTIS Partners.
OPTIS Partners’ M&A database counted 535 announced insurance agency mergers and acquisitions nine months into 2024, down from 594 as of September 30 a year ago.
Deal count during Q1-Q3 was 13% below the average from the last five years, OPTIS said. However, deal count for the third quarter 2024 was up 14% compared to the second quarter, to 198.
Steve Germundson, partner, said there have been two consecutive quarters of increasing deal counts following six straight quarters of falling counts.
“While two quarters do not a trend make, we believe that
we’re at or near the bottom of the deal-flow trough,” Germundson added in a statement.
OPTIS said it expects “significant transactions” in the next 12-15 months, and highlighted Marsh & McLennan’s deal to acquire McGriff Insurance Services for $7.75 billion and IMA Financial’s acquisition of
Quarterly M&A Activity
Wallace Welch & Willingham as recent Q3 examples.
BroadStreet Partners recorded the most transactions yearto-date with 68 — up 50% from the same period a year ago. Hub International and Inszone followed with 39 and 38 deals, respectively. Patriot Growth was next with 32 deals, and nearly doubled its transactions over the prior year.
Of the 87 different buyers through nine months of 2024, 25 made their first deal. About 70 did fewer than 10 transactions.
Chicago-based OPTIS noted that private equity-backed/ hybrid buyers had 73% of all acquisitions for the last 12 months. Publicly held brokers and all others accounted for 10% of deals.
Source: Optis Partners
Chubb Continues ‘Record’ Year With 13.8% Jump in Q3 Net Income
Chubb recorded an 11.7% increase in P/C underwriting income with a combined ratio of 87.7 as part of third quarter net income of about $2.2 billion, up 13.8%.
CEO Evan G. Greenberg said the Whitehouse Station, New Jersey-based insurer is “having a record earnings year.”
Net income for 2024 as of the end of September was up nearly 17% to a record of about $6.7 billion.
Results for the third quarter
included pretax catastrophe losses of $765 million, including $250 million from Hurricane Helene.
Pretax favorable prior year
development was $244 million in Q3 compared to $200 million a year ago during the same period.
Consolidated net premiums written were about $13.8 bil-
lion, up 5.5% compared to Q3 2023. Global property/casualty net premiums excluding agriculture were up 7.6%. Property/ casualty net premiums were
5.4% over Q3 2023. Greenberg, in a statement, said premiums in North America were up 7.8%, with 10% growth in high net worth personal insurance and a 7.2%
increase in commercial. He said commercial P/C aggregate pricing in North America “improved over prior quarter and pricing is ahead of losscost inflation.”
North America commercial P/C turned in a Q3 combined ratio of 85.5% with net premiums written up 7.2% to $5.5 billion.
The insurer’s personal insurance business in North America logged a Q3 combined ratio of 81.3 — nine points better than the year prior.
$6 Billion
The amount that had been sought by a Missouri mother in a case against Abbott ABT.N and Reckitt’s RKT.L Mead Johnson, claiming the companies’ formula for premature babies caused a severe intestinal illness in her child. Abbott CEO Robert Ford told investors it may pull its premature infant formula from the market because of litigation, according to Reuters. More than 1,000 lawsuits have been filed alleging the formulas can cause necrotizing enterocolitis. The St. Louis jury in this case ruled in favor of the companies, Bloomberg reported.
The number of years in federal prison to which Dallas pharmacy owner, Ivor Jallah, 37, has been sentenced for routinely billing insurance companies for headache sprays, pain creams and scar creams that were never dispersed to patients, according to U.S. Attorney for the Northern District of Texas Leigha Simonton. Ivor Jallah also was ordered to pay $41,494,313.97 in restitution.
The number of firearms detected by a pilot program testing AI-powered weapons scanners inside some New York City subway stations this summer. The program did not detect any passengers with firearms — but through nearly 3,000 searches, the scanners turned up more than 118 false positives, as well as 12 knives, police said. They declined to say whether the positive hits referred to illegal blades or tools, such as pocket knives, that are allowed.
$5.2 Billion
The amount a Nevada jury awarded in a lawsuit against a former Las Vegas-based bottled water company whose product was found responsible for causing liver damage in customers before it was recalled in 2021. The verdict came in the negligence and product liability case against AffinityLifestyles.com Inc. and its Real Water brand, according to Clark County District Court records. The jury awarded about $230 million in compensatory damages and $5 billion in punitive damages to Hunter Brown and several other plaintiffs, according to the Associated Press.
Declarations
‘Growth Opportunity’
“We view homeowners as a growth opportunity. … There’s just a few competitors out there that are wanting to write new business, and we want to take advantage of that opportunity. We feel good about where our pricing is.”
— Mario Rizzo, president of Allstate’s property-liability business, said during an earnings call. While Allstate sees opportunity in the homeowners market, the insurer won’t be looking for market share in Florida and California and will “continue to manage PML (probable maximum loss) and coastal exposure,” Rizzo said.
Jaywalking in the City
“Let’s be real, every New Yorker jaywalks. People are simply trying to get where they need to go. … Laws that penalize common behaviors for everyday movement shouldn’t exist, especially when they unfairly impact communities of color.”
— Council Member Mercedes Narcisse, a Brooklyn Democrat, said regarding a new law in New York City that permits pedestrians to cross a roadway at any point, including outside of a crosswalk. Narcisse noted that more than 90% of the jaywalking tickets issued last year went to Black and Latino people.
Flood Insurance Woes
“This report confirms what Louisiana homeowners already know — the National Flood Insurance Program is broken. … This report clearly lays out why flood insurance premiums are out of control, but also why there is reason to hope.”
— Louisiana Senator Bill Cassidy said after releasing a report on the National Flood Insurance Program’s adoption of Risk Rating 2.0 that shows the average flood insurance cost rose in every state after Risk Rating 2.0 went into effect in October 2021. NFIP premiums in Louisiana have increased by 234% over the last three years, the report found.
Elegance of Cash
“There is an elegance to cash that allows individuals in these types of circumstances to resolve their unique needs, which are sure to be very different from the needs of their neighbors.”
— Said Laura Keen, a senior program manager at GiveDirectly, a disaster aid non-profit that is sending cash payments of $1,000 to some hurricane-impacted households in North Carolina and Florida. Keen said getting money into people’s hands fast can protect them from predatory lending and curb credit card debt. The organization uses a Googledeveloped artificial intelligence tool to identify areas with the most need.
Pure Prairie Closure
“We know that our difficulties are causing real hardship for our growers and for others. … And for that we apologize without reservation.”
— Jon Austin, a spokesperson for Minnesotabased organic broiler chicken producer Pure Prairie, said in an email about the impact the company’s bankruptcy filing is having on farmers in Iowa, Minnesota and Wisconsin who are scrambling to feed their flocks after the struggling organic broiler chicken producer abruptly closed. Pure Prairie had provided farmers with chicks and feed to raise until the birds were ready to be prepared for sale.
Plastic Pollution Lawsuit
“Coke and Pepsi need to stop the deception and take responsibility for the plastic pollution problems your products are causing.”
— Los Angeles County Board of Supervisors Chair Lindsey Horvath said in a statement regarding the county’s lawsuit against beverage makers PepsiCo and Coca-Cola, accusing them of polluting the most populous U.S. county with plastic bottles and misleading the public about the environmental impact and recyclability of their containers. The suit seeks to require Pepsi and Coca-Cola to pay penalties for engaging in unfair and deceptive business practices.
News & Markets
NFIP to Begin Taking Monthly Flood Insurance Payments
By Chad Hemenway
The National Flood Insurance Program will soon start to accept monthly payments for flood insurance premiums, ending 55 years of requiring full payment upon application or renewal.
The Federal Emergency Management Agency (FEMA), administrator of the NFIP, said the change was made to adhere to language within the Homeowner Flood Insurance Affordability Act, passed a decade ago. The federal statute amended earlier language regarding payments to allow for annual or monthly installments. NFIP has accepted full payment only since its inception in 1968.
In addition to following the statute, FEMA said allowing monthly payments will “reduce barriers to purchasing flood insurance.” The rule is set to become effective December 31.
“Providing an option for monthly
installments will expand access to flood insurance to meet the evolving needs of the nation,” said FEMA in comments in the Federal Register. “The option to pay in installments may also increase policyholders’ budgetary flexibility by alleviating cash flow pressure, as they could use the deferred payment to address other monthly needs.”
As of April 30, there are about 4.7 million NFIP policies-in-force, including about 3.2 million residential dwelling and 1.1 million condominium policies.
In a separate FAQ document, FEMA said any NFIP policyholder not required to escrow premiums is eligible to pay in monthly installments, which will be offered to new buyers as well as those renewing with no additional payment fees. However, standard fees will apply and will need to be paid at the time of the first monthly premium payment.
The agency said about 45% of potentially eligible policyholders and mortgage
holders already pay NFIP premiums, usually monthly, into an escrow account. Condo associations are not expected to utilize the installment plan because they already have cash reserves set aside for a yearly premium payment, FEMA said.
This leaves nearly 1.8 million residential policyholders who do not have a mortgage or belong to a condo association, according to FEMA data.
FEMA said Write-Your-Own (WYO) insurance companies are required to offer the premium plan. The agency said WYO companies have had the ability to offer payment installments but none have chosen to do it. WYO companies are likely to incur additional costs to update or modify systems and infrastructure to handle monthly NFIP payments, FEMA acknowledged. Based on feedback from eight WYO companies, FEMA expects each to incur $200,000 in costs and hire two additional staff members for support and operation of installment-plan systems.
News & Markets
GAO Urges OSHA to Address Ergonomic Hazards in E-Commerce Warehouses, Deliveries
The federal Occupational Safety and Health Administration (OSHA) must do more to address ergonomic hazards at warehouses and delivery companies, where the number of injured workers in the growing sector are on the rise, a new report advises.
The Government Accountability Office (GAO) conducted a report on workplace safety in e-commerce workhouses and last-mile delivery companies. The office reviewed the types and causes of injuries and how OSHA identifies and addresses ergonomic hazards in these workplaces.
To quickly fill orders, e-commerce warehouses and delivery companies use technology to increase productivity and monitor worker performance. Questions have been raised about whether this use of technology, along with performance expectations, increases the risk of injuries in this growing sector.
The GAO was asked to review how technology affects worker safety at e-commerce warehouses and last-mile delivery companies. The office reviewed federal laws, regulations and guidance,
data from the Bureau of Labor Statistics from 2018 through 2022 on injuries, and OSHA inspection data. The office also interviewed headquarters officials and staff at six area offices, and it conducted non-generalizable surveys of workers and interviewed 15 stakeholder groups and five employers.
Three major hazards were found to be the cause of most of the injuries and illnesses experienced. These were identified as falls, slips and trips; objects or equipment, and overexertion.
Overexertion was found to be the most frequent cause of injury, with nearly 60,000 estimated serious injury cases for last-mile delivery, and more than 60,000 for general warehousing respectively.
The transportation and warehousing sector had the highest serious injury and illness rate of all 19 sectors in 2022. OSHA cited last-mile delivery and warehouse employers for over 2,500 workplace violations between the fiscal years of 2018-2023. Eleven of these citations were related to ergonomic hazards, the report shows.
The GAO report states that efforts by
OSHA to address ergonomic hazards in warehouses and last mile-delivery are limited due to problems such as outdated guidelines and insufficient training.
GAO recommendations include:
• Ensure that OSHA officers can easily obtain data during inspections on when musculoskeletal disorders occurred.
• Increase training on identifying and assessing ergonomic hazards for compliance officers who inspect worksites.
• Review and make changes to OSHA’s internal and publicly available guidance that compliance officers and employers use to identify, assess and address ergonomic hazards.
• Conduct timely follow-up with establishments that were issued an ergonomic hazard alert letter to determine if establishments have taken corrective actions.
• Evaluate how well OSHA’s national emphasis program for warehouses and distribution centers helps compliance officers identify, assess, and address ergonomic hazards; and determine and document next steps to correct any deficiencies detected.
Avondale Insurance Associates has joined Unison Risk Advisors’ (URA’s) non-retail division.
Established in 2006, Avondale Insurance Associates is an excess and surplus lines underwriting management company operating across all property and general liability classes.
Avondale only writes business through appointed wholesale brokers. It does not trade directly with retail brokers.
The firm has full underwriting authority on behalf of a number of U.S. domestic, Bermudian, European and Lloyd’s of London capacity providers. It serves both domestic and international clients and markets.
Avondale, headquartered in Boston, also has offices in Chicago, Tampa and Manchester, New Hampshire. Daniel Hinchliffe serves as Avondale chief executive officer.
Avondale had been part of Avoca Insurance Holdings (AIH), a privately held, independent company founded in Bermuda in January 2009 that owns and operates specialized underwriting management companies.
Unison Risk Advisors was formed in December 2020 with the merger of Cleveland-based Oswald Companies and RCM&D of Baltimore, followed by the addition of Florida’s NSI Insurance Group in June 2023. It now has more than 1,000 employees in more than 20 offices.
The acquisition of Avondale marks the URA’s 19th transaction overall. MarshBerry acted as exclusive financial advisor for Avondale and Avoca Insurance Holdings.
Risk Strategies, George W. Blaisdell Insurance
National specialty insurance broker Risk Strategies reported it has acquired George W. Blaisdell Insurance, an employee benefits agency based in Hampton Falls, New Hampshire. The acquisition expands the Risk Strategies Employee Benefits Practice in its New England region.
Terms of the deal were not announced.
Founded in 1988 by its principal, George W. Blaisdell, the agency specializes in group benefit plans for employers of all sizes. It also offers individual health and Medicare supplements, as well as 401k services.
Blaisdell is the second benefits-focused addition to the Risk Strategies benefits team in the New England region this year. In June, Risk Strategies acquired Baker Benefit Group, with operations in Maine and Connecticut.
Additionally, Risk Strategies made two other benefits-focused acquisitions in 2023: Connecticut-based May, Bonee & Clark in April and Massachusetts-based Strategic Benefit Solutions in September.
Risk Strategies, part of Accession Risk Management Group, has more than 200 offices including those in Atlanta, Boston, Charlotte, Chicago, Dallas, Grand Cayman, Kansas City, Los Angeles, Miami, Montreal, Nashville, New York City, Philadelphia, San Francisco, Toronto, and Washington, D.C.
King Risk Partners, Suzio Insurance Center
Florida-based insurance broker King Risk Partners reports it has acquired Suzio Insurance Center Inc., an independent insurance agency based in Meriden, Connecticut.
Suzio Insurance Center was started in 1974 by the late Franklin Suzio and is currently headed by James Suzio. The agency serves Meriden, Wallingford, Cheshire, Southington, and other communities, offering personal, commercial, life and health insurance.
Terms of the sale were not disclosed.
Suzio is King’s fourth agency in Connecticut. It also has locations in Wethersfield, Avon and Essex.
Midwest
NFP, Miller Insurance Group
NFP, an Aon company and property/ casualty broker, benefits consultant, wealth manager and retirement plan advisor, acquired Richard S. Miller & Sons Inc. dba Miller Insurance Group (MIG), a property/casualty and benefits agency with multiple offices in Indiana.
Greg Miller, chairman of MIG, will join NFP as a senior vice president and report to Amanda Ruback, P/C managing director in NFP’s Central region. MIG co-owners Christian Barnes, Joe Stiles, Chad Miller and Ben Nehls will join as vice presidents and report to Greg Miller.
NFP said the acquisition aligns with its strategic growth strategy, which includes Indiana. NFP acquired Indianapolis-based First Person, an employee benefits brokerage firm, in 2021, and City Securities Insurance, a full-service commercial P/C insurance consultant, in 2017, and has made significant hires in Indiana.
Founded in 1937, MIG offers commercial property/casualty insurance and employee benefits to corporate clients and personal lines insurance in Indiana.
Ryan Specialty, EverSports & Entertainment Insurance
Ryan Specialty announced it completed the acquisition of certain assets of EverSports & Entertainment Insurance,
Inc. (EverSports) from the Everest Group Ltd. group of companies.
EverSports is a managing general underwriter focused on sports, leisure and entertainment (SLE) risks, and is based in Carmel, Indiana.
Founded in 2013, EverSports is a leader in the SLE insurance industry with broad diversification across the various SLE sub-classes (amusement facilities, amateur sports, touring artists, etc.).
The relevant business will join Alive Risk, Ryan Specialty’s existing SLE facility.
First MainStreet, Kozlowski Insurance Agency
First MainStreet Insurance L.C. (FMSI), based in Cedar Rapids, Iowa, has added Kozlowski Insurance Agency, headquartered in Pipestone, Minnesota, with two satellite offices in Luverne, Minnesota, and Brookings, South Dakota.
Founded in 1970, the Kozlowski family has grown the business for over five decades. The agency is currently led by Jon and Shelly Kozlowski.
The addition of Kozlowski Insurance brings 19 employees and marks the largest deal to-date for the First MainStreet team.
South Central
Inszone, San Antonio Insurance Services
Inszone Insurance Services acquired San Antonio Insurance Services, a Texas-based agency known for its strong focus on trucking insurance and a broad array of property/casualty solutions.
Founded in 2012 as a mother-daughter agency, San Antonio Insurance Services, was acquired in February 2015 by Greg Stevens. In 2018, Greg’s son, Aaron Stevens, joined the family business.
Both Greg and Aaron Stevens will continue their leadership roles under Inszone Insurance Services.
Southeast
Oakbridge Insurance Agency, Hull & Associates
Oakbridge Insurance Agency has acquired Tuscaloosa, Alabama-based Hull & Associates, an agency that specializes
in finding coverage for student housing in and around the home of the University of Alabama.
Richard Hull is principal at Hull & Associates, which was founded in 1999. The firm’s book consists of 80% commercial lines, including apartments, hotels, restaurants and contractors, and 20% personal insurance, according to its Linkedin page. It works with clients in Alabama, Mississippi, Georgia, Tennessee and Florida.
As an Oakbridge partner, Hull & Associates will maintain its office in Tuscaloosa and continue its service to the area, Oakbridge reported.
Oakbridge, founded in 2020, has followed a steady growth and expansion plan, offering a partnership model with local and regional agencies around the country.
West
Inszone, Dan Davis Insurance Solutions, Schmoekel Insurance Agency
Inszone Insurance Services acquired Dan Davis Insurance Solutions in San Jose, California.
Dan Davis Insurance Solutions is an insurance agency that specializes in serving the homeowner association board members, HOA members and community managers segment.
Inszone also has acquired Schmoekel Insurance Agency Inc. in Sacramento, California.
Founded in 1948 by Max Schmoekel, Schmoekel Insurance Agency was initially known as a non-standard insurance agency, specializing in finding coverage for high-risk clients. In the early 1960s, Max’s son, Mark Schmoekel, took over the agency, and expanded its services and continued its growth.
Sacramento-based Inszone is an insurance brokerage firm that provides property/casualty insurance and employee benefits services.
ALKEME, Pinnacle Insurance Consultants
ALKEME acquired Pinnacle Insurance Consultants in Scottsdale, Arizona.
Pinnacle Insurance Consultants special-
izes in errors and omissions insurance for real estate firms.
ALKEME, based in Ladera Ranch, California, is an insurance agency providing businesses and individuals with commercial and personal insurance, employee and executive benefits, retirement and wealth management services.
Arthur J. Gallagher & Co., Adept
Benefits
Arthur J. Gallagher & Co. acquired Snoqualmie, Washington-based Adept Benefits LLC.
Adept Benefits is a health and benefits consulting firm serving clients in the greater Seattle area. Megan Narrance and her team will remain in their current location under the direction of Charlie Isaacs, head of Gallagher’s West region employee benefits consulting operations.
Arthur J. Gallagher is an insurance brokerage, risk management and consulting services firm headquartered in Rolling Meadows, Illinois.
InterWest Insurance Services acquired McDermott-Costa Insurance Brokers in San Leandro, California.
McDermott-Costa Insurance Brokers is an employee owned, regional independent insurance brokerage firm. John Johnson and Mike McDermott will remain in leadership roles.
InterWest is headquartered in Sacramento.
Renaissance, United Agents of Arizona
Renaissance has acquired the agency network business of United Agents of Arizona (UAA).
Chicago-headquartered Renaissance is a network of independent insurance agencies. It is ranked No. 5 on Insurance Journal’s 2024 Top Agency Partnerships list.
UAA is an agency group based in Mesa, Arizona.
The transaction follows Renaissance’s 2023 acquisition of Agency Partners Inc., which brought 54 new agencies in Alabama and Georgia into the network’s fold.
News & Markets
Economic, Social Inflation Influence Drop in Commercial Auto UW Profits: Triple-I/CAS
Commercial auto insurance has struggled to achieve underwriting profitability, even before inflationary conditions affected property/casualty lines in recent years. The trend has been accompanied by steady growth in net written premiums (NWP), according to the Insurance Information Institute (Triple-I), an affiliate of The Institutes.
In its “Commercial Auto: Trends and Insights,” Triple-I indicates the declines in underwriting profitability, despite relatively steady growth in premiums written, have been driven by several causes including that vehicles have become increasingly expensive to repair.
Litigation trends have also had an impact, the report noted.
Excessive injury and fatalities contribute to increased attorney involvement leading to higher claim-related expenses due to larger settlements and protracted litigation.
Nationally, commercial auto defense and cost containment (DCC) expenses — a key measure of the impact of litigation on insurers — has nearly tripled over the past decade, the report stated.
A recent study, “Increasing Inflation on Auto Liability Insurance – Impact as of Year-End 2023,” conducted by Triple-I and the Casualty Actuarial Society (CAS), found that between 2014 and 2023, increasing inflation drove auto liability losses and DCC up by a range of $118.9 billion to $137.2 billion, or 9.9% to 11.5% of the $1.2 trillion in net losses and DCC for the period.
The estimates for 2014 through 2019 occurred in a period of stable economic inflation, providing strong evidence that the inflationary total for those years, $21 billion, is attributable to “social inflation” — excessive inflation in claims caused by, among other factors, policyholder or plaintiff attorney practices that increase the costs and time required to settle insurance claims to the detriment of consumers, the report noted.
personal auto insurance plus the goods and services consumers buy every day,” said Porfilio, a co-author of the Triple-I/ CAS whitepaper.
For commercial auto liability, the increase in losses and DCC was in a range of $42.7 billion to $55.8 billion, or 20.7% to 27% of the total, higher than the previous study’s range of $35 billion to $44 billion.
According to the study, claim severity rose 78% from 2014 to 2023, a compound annual growth rate of 6.6%.
By comparison, the CPI for All Urban Consumers rose less than half as fast in that time — 29% — a compound annual inflation rate of 2.8%, the report added.
“Increasing economic and social inflation continues to profoundly influence escalating insurance costs,” said Dale Porfilio, chief insurance officer at Triple-I.
“This contributes to higher prices for
“The decrease in frequency shows that the accident rate is not contributing to the increase in commercial auto liability losses,” said Porfilio. “If anything, it is a mitigating cause. The fact that claim severity is rising faster than economic inflation indicates that insurers have faced inflationary factors that far outstrip general inflation trends.”
News & Markets
Global Reinsurers’ ROE Jumps to 22% in 2023 but Market Softening Unlikely: AM Best
By L.S. Howard
AM Best’s population of global reinsurance companies posted a return on equity (ROE) of 22% in 2023 — a five-year high that was driven mainly by favorable investment income and strong underwriting performance. The fundamentals are excellent, but Hurricanes Helene and Milton “will probably stall any softening of the market cycle,” AM Best said.
Net investment income in 2023 led the contribution to surplus growth, followed closely by underwriting gains and unrealized capital gains — all components that pushed ROEs well above the cost of equity capital, said AM Best in an analysis of reinsurers in its Top 25 Global Reinsurance Composite.
“In 2023, a year in which premium rates continued to move up, interest rates remained high, and capital markets performed well, the composite recorded its highest ROE in five years,” said the composite report, “Significant Increase in Global Reinsurers’ ROE Due to Investment and Underwriting Results.”
At the same time, the report added, retained earnings were bolstered by strong underwriting and favorable net investment income, while unrealized capital gains, muted dividends, and share buybacks
also propelled increases in surplus, strengthening balance sheets.
Reduced Frequency Exposures
While secondary natural catastrophe events were the norm in 2023, reinsurers helped to reduce exposures when they “adjusted their policies to move away from lower layers close to the primary peril, posting the lowest combined and operating ratios in five years,” AM Best indicated.
AM Best said a significant proportion of the potential incurred insured losses from Hurricanes Milton and Helene is likely to be transferred to the global reinsurance market. “However, stricter reinsurance terms and conditions, which led to higher attachment points, are expected to make reinsurers’ losses manageable.”
The impact of the two hurricanes is more of an earnings event than a capital event for the composite reinsurers, AM Best said. “Fourth-quarter 2024 results will be negatively affected, but full-year earnings should still be favorable. Further reinsurance market hardening is unlikely, but Helene and Milton will probably stall any softening of the market cycle.”
Hurricane Helene hit Florida, Georgia, South Carolina, North Carolina, Virginia and Tennessee in late September, while Hurricane Milton hit Florida in early October. Milton caused private insured losses of about $36 billion, according to catastrophe modelling firm Karen Clark & Co., which further estimated that insured losses from Hurricane Helene will be about $6.4 billion — from wind, storm surge and inland flooding in nine states.
“Based on FY2023 results for the global reinsurance companies, and ignoring tax implications, it would take net claims losses of around $15 billion for the composite’s ROE to equal the cost of capital in excess of 15% …,” AM Best said.
“Given the nature of the investment allocations over time and risk profiles, as well as the fact that companies’ actions to earn higher interest rates generally have a limited impact on investment income, AM Best continues to see underwriting profitability as the essential in the composite’s operating performance assessments and analysis,” the ratings agency said.
ROEs are likely to continue to exceed the cost of capital over the medium term, AM Best explained, “as new capital seeks enterprises with established track records or with the liquidity of the insurance-linked securities market, which provides investors quicker entry and exit points in the reinsurance industry.”
AM Best’s Global Reinsurance Composite
AM Best’s Global Reinsurance Composite is composed of global reinsurers, leveraging group financial statements for the 25 largest reinsurers groups. The composite is reviewed annually to reflect M&A and other events. To keep data consistent year over year, previous years’ data is adjusted when companies are added or removed from the composite.
The Top 25 reinsurers’ gross premiums written represented almost 90% of total reinsurance industry gross premium written (as measured by the Top 50 reinsurers) in 2022.
Homes lie in a debris field in the aftermath of Hurricane Helene, Thursday, Oct. 3, 2024, in Pensacola, North Carolina. (AP Photo/Mike Stewart)
People
National
Former Scottsdale Insurance
of AM Best’s rating methodology and rating tools.
President Mike Miller will serve as president and CEO of the excess and surplus managing general agency, Pivix Specialty Insurance Services.
Based in Scottsdale, Arizona, Pivix is an E&S platform offering property/casualty coverages for targeted segments. Products will be distributed exclusively through wholesale brokers.
The company’s management team are all alumni of Nationwide. Other than Miller — who also started the specialty P/C company Ategrity Specialty Insurance Co. in 2018 — Ken Levine, Joe Griffith, and Sandy Vertuno are involved in Pivix’s founding.
Levine is Pivix’s chief financial officer and chief actuary. Griffith will be chief information officer. Vertuno is now chief underwriting officer-contract binding.
AM Best, headquartered in Oldwick, New Jersey, named James A. Gillard
Jr. as president of A.M. Best Rating Services Inc., succeeding Matthew C. Mosher. Mosher is retiring as president and CEO, effective at the end of the year.
Gillard most recently served as executive vice president and chief operating officer of AMBRS. He joined AM Best in 2008 and spent nearly the past decade leading enhancements
Zurich North America named Nora Hattauer head of financial lines for Zurich’s U.S. national accounts and middle market businesses.
Based in Atlanta, Hattauer is responsible for the direction, management and performance of Zurich’s Financial Lines strategic business unit. Hattauer most recently served as head of management liability for national accounts at AIG.
operations in New York. Sherwin, U.S. FSG leader of the firm’s mountain/west region, is responsible for Aon’s teams in Denver and Dallas, overseeing insurance companies and agents and broker-dealer errors and omissions operations.
East
Alliant Insurance Services hired Scott Davis as senior vice president within its Alliant Americas division in Farmington, Connecticut. Davis has more than two decades of experience in the insurance industry. Before joining Alliant, he was with WTW in Hartford for 22 years.
Group Inc., where he served as regional vice president.
Lockton, headquartered in Kansas City, Missouri, added Michael Walsh to the company’s Northeast region team as its New England market leader, property/casualty, focusing on the greater Boston market.
Walsh has over 20 years of experience in various brokerage, client management and leadership roles, most recently serving as managing director at Marsh.
Irwin Siegel Agency, headquartered in Rock Hill, New York, named Nick Greggains as president.
Aon promoted Anna Digel to chief broking officer for Aon’s U.S. financial services group (FSG). Collin Breeney and Joe Reynolds have been promoted to co-leaders for the greater New York region, also for Aon’s U.S. FSG. Kary Trocchia was promoted to lead the east region and Jay Sherwin to lead in the Mountain West.
Digel leads broking operations, which includes strategic collaboration with Aon Inpoint and Aon’s broking hubs in Bermuda and London. Breeney oversees the public company commercial team in New York. Reynolds leads the public company financial institutions
ISA is a managing general underwriter and part of Ryan Specialty Underwriting Managers.
Greggains brings 35 years of insurance industry management experience. Most recently, he served as CEO at Ethos Specialty Insurance Services LLC.
Plymouth Rock Assurance, headquartered in Boston, appointed Andrew Fornari as senior business development representative.
Fornari will develop partnerships with Massachusettsbased agents. He joins Plymouth Rock from the Satellite Agency Network (SAN)
Midwest
Applied Underwriters, headquartered in Omaha, Nebraska, named William Barvick vice president, healthcare, and Davis Isinger vice president of healthcare, hospitals and allied health, in the company’s Applied financial lines division.
James Davenport has been appointed corporate chief financial officer, succeeding Bob Stafford, who retired from the post after over 25 years of service.
Justin Smith, who has been with the firm for over 20 years, was promoted to chief economist and is succeeded by Jing Hong. Hong has been with the firm for over 15 years and remains chief actuary.
Jeffrey Leach has been appointed chief investment officer.
Zach Brightweiser, with the firm for over 17 years, has been promoted to vice president, brand communications.
In Applied’s united risk division, Jay Cahill has been
Mike Miller
James Gillard
Nora Hattauer
Anna Digel
Kary Trocchia
Joe Reynolds
Nick Greggains
Michael Walsh
Andrew Fornari
appointed chief financial officer and Paul LaPorta, vice president of finance and controller. Additionally, the firm has added key managers, including: Crispin Hodges, head of political risk; Sean Redden, general counsel and head of claims; Christophe Meurier, head of credit, Applied entertainment and sports; Brett Basten, director of operations, Applied financial lines; Suzanne Delio, vice president and underwriting counsel, Applied home national underwriters; Robert Courtemanche, chief executive officer, Applied specialty underwriters; Marge Milano, head of underwriting quality; Jacqueline Surguine, head of product innovation; Jessica Gregory, national product manager, Applied surety underwriters; Nate Hutchison, regional underwriting officer, contract surety; Nolan Steele, executive underwriter; Mark Atkins, senior vice president, national underwriting officer; Patrick Benedict, vice president, surety; Nicholas Green, assistant vice president, regional underwriting officer; Mark Neal, assistant vice president, regional underwriting officer; Samantha Canterino, head of surety claims; Nicholes (Pierce) Pontikes, assistant vice president, regional underwriting officer; MyBinh (Mimi) Nguyen, director of surety operations; Bryan Mortimer, vice president, head of mining engineering; Mary Ellen Ross, senior vice president, surety operations; Jason Kilpatrick, senior vice president, national underwriting officer; Lars LaBere, vice president, regional underwriting officer; Kevin White, vice president,
regional underwriting officer; Matthew Nowaczyk, senior vice president, commercial surety; James Bluzard, chief underwriting officer, large contract surety; Christopher Raines, vice president, national underwriting officer; Kendall Meyers, senior vice president, petro engineering; David Rose, vice president, regional underwriting officer, applied underwriters aviation; Deanna Pease, executive underwriter; Jeffrey Sheets, vice president, Applied warranty and insurance services; Juan Albuja Freile, actuarial and product director, Treadwell; and Stephen Bitterman, senior vice president.
Risk Strategies, headquartered in Boston, appointed Tom Panos as managing director of its Chicago office.
Panos has over 15 years of experience in the insurance industry.
Ryan Specialty, headquartered in Chicago, hired Michael F. Albian as president, group captives, Ryan Alternative Risk. Albian most recently served as senior vice president at Captive Resources LLC.
analytics at BMS Group.
Eric Quinn was promoted to executive vice president – capital and product strategy within the specialty underwriting segment, Ryan Specialty Underwriting Managers (RSUM).
Brian Lillis is promoted to executive vice president – finance and corporate development at RSUM. Lillis has been with Ryan Specialty since 2013.
Joseph Hartigan is now a broker in wholesale specialty insurance distributor CRC Group’s Dallas office. He previously was an executive vice president of business development with a specialty insurance carrier.
CRC also named Kara Talley an underwriter in Dallas. She has worked as an account executive and team lead for energy and environment business with an international specialty lines underwriting manager and wholesale brokerage.
Southeast
Melissa Waters joined CRC Group in its Tampa office as an underwriting team leader. She was recently a flood underwriter with a property/casualty insurance wholesaler
JM Wilson, headquartered in Portage, Michigan, hired Savana Musolf and Lisa Hudson as assistant property/ casualty underwriters. Musolf works with independent insurance agents and company underwriters in Michigan and Texas. Hudson supports underwriters with new and renewal P/C risks and works with independent insurance agents and company underwriters in Wisconsin and Minnesota.
Thomas Cranley joins RSUM as chief operating officer. Cranley has 30 years of industry experience.
Kama Moseley has joined Alliant Insurance Services as senior vice president, producer with Alliant Private Client. Moseley is based in Kansas.
South Central
The Insurance Office of America, an independent brokerage based in Longwood, Florida, has named Kenny Main to its Florida team. He will work in IOA’s new office in Naples as a risk management consultant.
West
The Workers’ Compensation Insurance Rating Bureau of California governing committee selected Andrea Coleman, WCIRB executive vice president and chief operating officer, president and CEO.
Starwind Specialty Insurance Services, headquartered in New York City, named Kirk Conrad as chief underwriting officer.
Based in Dallas, Conrad most recently served as global head of
Coleman’s promotion takes effect Feb. 1, 2025. She is succeeding President and CEO Bill Mudge, who will assume the role of CEO Emeritus until his retirement on April 1, 2025.
Coleman joined the WCIRB in May 2022 as executive vice president and chief operating officer.
Savana Musolf
Lisa Hudson
Eric Quinn
Brian Lillis
Kirk Conrad
Spotlight: Homeowners
Homeowners Insurance Does Not Cover Cryptocurrency Theft, 4th Circuit Affirms
By Andrew Simpson
Afederal appeals court has affirmed that a homeowners insurance policy does not cover the theft of cryptocurrency because the loss of a digital currency does not involve a “direct physical loss” as required by the policy.
The Fourth Circuit Court of Appeals held that a physical impact to covered property is required for a “direct physical loss” to have occurred and no such physical impact to cryptocurrency is possible because it exists wholly virtually.
The three justice panel of the appeals court in Richmond upheld a February 2023 ruling by the federal district court for Eastern Virginia in a win for the insurer Lemonade Insurance.
Ali Sedaghatpour owned substantial amounts of various cryptocurrencies that he stored on a hot wallet server known as APYHarvest, which is physically located in Ireland and England. APYHarvest’s hot wallet, like other hot wallets, was always
accessible to him via the internet. On Dec. 31, 2021, he discovered that all of his cryptocurrency stored in the APYHarvest hot wallet — worth $170,424.67 at that time — had been stolen.
On Jan. 3, 2022, Sedaghatpour made a claim under his Lemonade homeowner’s insurance policy for the policy’s limit of $160,000. Lemonade denied the claim on the ground that the policy protects plaintiff’s “stuff,” or property, only when that property is “damaged directly” by one of the “specific losses” contemplated in the policy, including theft.
Lemonade further reasoned that, even if the loss were covered by the policy, the policy’s limitation of $500 for loss “resulting from theft or unauthorized use of an electronic fund transfer card or access device used for deposit” limited coverage for the loss of cryptocurrency to $500. Accordingly, Lemonade paid Sedaghatpour $500 to cover the lost cryptocurrency.
Sedaghatpour brought suit against Lemonade. In May 2022, the district court
dismissed the original complaint without prejudice, giving Sedaghatpour an opportunity to amend his complaint to identify the types of cryptocurrencies allegedly stolen, when and how the cryptocurrencies were stolen, and the place from which they were stolen. Sedaghatpour filed his amended complaint in May 2022, which Lemonade asked the court to dismiss.
The amended complaint identified the 11 specific cryptocurrencies that Sedaghatpour said were stolen after he transferred them from his laptop or smartphone while sitting at home to the APYHarvest hot wallet. The amended complaint alleged that APYHarvest was itself the thief that stole his cryptocurrency, first by moving it to a company in the Cayman Islands — Binance.com — and thereafter by selling the cryptocurrency to an unidentified third party. According to the Sedaghatpour, Binance.com informed him that his cryptocurrency had been sold. He claims his loss totaled more than $170,000.
In moving for dismissal, Lemonade again argued that the policy does not cover loss of cryptocurrency or, in the alternative, that the policy limits coverage for loss of cryptocurrency to $500, an amount that it had already paid out.
In opposition to the dismissal, Sedaghatpour argued that the policy insures against loss of cryptocurrency and that no provision in the policy limits coverage for loss of cryptocurrency to $500.
‘The principal issue for the district court was whether theft of cryptocurrency is a “direct physical loss” within the policy’s coverage.’
The principal issue for the district court was whether theft of cryptocurrency is a “direct physical loss” within the policy’s coverage.
The justices found that various dictionaries and governmental agencies define cryptocurrency as existing wholly virtually or digitally and the Internal Revenue Service defines cryptocurrency as “a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.” Thus, the district court stated: “[I]t is clear that cryptocurrency, by its nature, exists only virtually or digitally and has no physical or tangible existence.
It follows, therefore, that the policy does not cover loss or theft of cryptocurrency because the loss or theft does not constitute a ‘direct physical loss’ to plaintiff’s property.”
The district court noted that its result is consistent with a Fourth Circuit case in 2003 involving Hartford Insurance that applied Virginia law in the computer context, albeit not in the cryptocurrency context. In this case, the Fourth Circuit concluded the plaintiff suffered a “direct physical loss” because a hacker’s deletion of files on the plaintiff’s own computers caused damage to the plaintiff’s property. In Hartford, had the deletion of files not damaged the computer system, there would not have been a physical loss. Also,
deletion of files stored on a non-insured’s computer systems would not have been a “direct physical loss” to the plaintiff’s property. In the Lemonade case, the deletion of files did not occur on the plaintiff’s own computer and there were no facts demonstrating that Sedaghatpour suffered a “direct physical loss” when his wholly-virtual cryptocurrency was stolen, a requisite condition of recovering under the insurance policy.
The Fourth Circuit’s decision in Hartford, although not directly applicable to the cryptocurrency context, “persuasively suggests” that the theft of his cryptocurrency did not involve a “direct physical loss” as required by the policy, the district court added.
After the district court sided with Lemonade, Sedaghatpour appealed that dismissal. The Fourth Circuit panel upheld the district court ruling and dispensed with oral argument because further “argument would not aid the decisional process.”
Don’t let hard-to-place risk slow you down. Our in-house underwriting team delivers instant answers and quotes, and we can typically bind in just 24 hours. Win more business with broader coverage at better rates - fast. Get an instant quote at aiu-usa.com.
Changing the Focus of Claims, Data When Talking About Nuclear Verdicts
By Ezra Amacher
The topic of nuclear verdicts took center stage at this year’s Target Markets Annual Summit in Scottsdale, Arizona, where a panel of carriers and reinsurers discussed rising settlement costs amidst an uncertain litigation environment.
Panelists representing Lloyd’s, Markel, MunichRe and TransRe shared how the insurance industry can combat social inflation through early identification of potentially severe claims and working together to share settlement data.
Nuclear verdicts, which are defined by the industry as a verdict of at least $10 million, reached an all-time high in 2023 with a median average value of $44 million, according to a report by Marathon Strategies. While the overall frequency of nuclear verdicts hasn’t risen dramatically, panelists said, the severity of bad claims has, catching insurers off-guard.
“The nature of a nuclear explosion is the person who is launching [the suit] knows it’s coming. The person that gets it has no clue,” said Carey Bond, head of U.S. claims, Lloyd’s. “In a similar fashion, when we see nuclear verdicts happen in the insurance industry, it’s a matter of in some cases a claim that seems run of the mill and the next thing you know you’re staring down a multimillion-dollar verdict.”
Types of Claims
The types of claims that develop into nuclear verdicts have changed in the last six years, said Mia Finsness, managing director, global casualty underwriting and claims, Markel. In the past, enormous verdicts usually were mass tort cases with hundreds or thousands of plaintiffs. Now it’s not uncommon for a single plaintiff to receive $100 million.
Claims that would have historically been captured in a primary layer are now into the umbrella layers. “You’re seeing especially for excess and umbrella lines, those really are the lines that are being
most affected here, not only because of that increase in severity but also because those lines have the most limits deployed,” Finsness said.
It can seem that almost any bad claim now has the potential to reach a nuclear verdict, said Richard Henderson, senior vice president, TransRe. The reinsurer has tracked claims severity for the last 20 years and seen verdicts skyrocket during that time. Henderson, who manages TransRe’s medical malpractice claims team, said the unit was averaging one $10 million verdict per week by 2019.
After the Covid-19 pandemic, there was a theory that the public would gravitate towards having greater empathy towards medical professionals, said Henderson. “That lasted about 30 seconds,” he said.
Not only did the frequency of nuclear verdicts return to pre-pandemic levels but the severity of those verdicts also grew. Henderson said the proportion of medical malpractice verdicts to reach at least $25 million is now over 50%, whereas verdicts used to land around $10 million.
As the median nuclear verdict continues to increase, “definitionally it almost doesn’t make sense to call the threshold $10 million anymore,” said Bonnie Guth, head of government affairs, MunichRe. Marathon Strategies this year introduced the term “thermonuclear verdicts” to define verdicts of at least $100 million, of which there were more than two dozen in 2023.
Venues
Another
change in how insurers and reinsurers now view nuclear verdicts is looking past the venue of a
claim, according to Finsness. Cities or states that previously might have been considered favorable places to fight a case are difficult to predict.
“You can’t rest on your laurels,” said Finsness.
Claims teams are spending more time focused on the nature of injuries and whether they’re the type of claim that warrant more nuclear verdict potential. Finsness said casualty underwriters similarly need to do their due diligence writing risks and not rely on the reputation of a particular jurisdiction.
past 20 years while others are saying “we need to change this up, we need to think outside the box,” said Henderson.
“The companies that reach out and say, ‘Have you seen this attorney? Have you seen this pattern?’ Basically, they’re asking questions with us, and that’s something that’s very important.”
“What you’re putting on the books today, you won’t know what the litigation environment affecting that claim is until years down the road,” Finsness said.
“It’s very hard to know underwriting something today, ‘Okay based on this litigation environment in these states I feel comfortable writing this’ because they could change. The laws could change. There could be a bad Supreme Court decision.”
Combatting Nuclear Verdicts
Panelists agreed that insurance companies face an uphill battle in their effort to push back against nuclear verdicts as the plaintiff’s bar becomes better skilled and well-funded. Plaintiff’s attorneys will often persuade jurors to award enormous verdicts by arguing insurers are threats to the public that need to be punished. The tactic, known as the reptile theory, taps into people’s worst perceptions of insurance companies, said Bond.
“You as a plaintiff, you have a duty to protect everybody else from this very bad insurance company,” said Bond. “That’s the battle we have to fight as we go into the defense of a possible nuclear verdict.”
Reinsurers often get a close-up view of the different ways insurers approach the same case whether it’s insurers as co-defendants or on the same tower, said Henderson.
Some insurers follow a checklist of what they’ve done for the
Henderson added, “The plaintiff’s bar has adjusted, and we haven’t adjusted a lot of the time on the defense.”
The fight in the court room can happen well before a case makes its way to trial, according to panelists. Insurers are often competing against plaintiff’s attorneys that benefit from third-party litigation funding and mass advertising.
MunichRe’s Guth said the industry has been engaged at getting third-party litigation funding disclosure and developing rules for how plaintiff’s attorneys can advertise.
“Having early attorney involvement, even if they’re hidden, seems to be driving the claims” said Guth. “A lot of that early attorney involvement, especially for some of the bigger firms, is coming from the vast amount of advertising that they’re doing.”
Furthermore, the plaintiff’s bar is successful at collecting and sharing data from cases, whereas the insurance industry is still finding ways to tap into available analytics.
Information is out there but not easy to find.
In the casualty space, insurers face the challenge of limited information coming from confidential settlements.
“As an industry, you see what you see in your own little world, but I think getting all this data collectively is really important so that we can really evaluate what true loss trends are,” said Finsness.
Ending the panel on an optimistic note, Lloyd’s’ Bond pointed to the number of insurtechs capable of supporting the industry with third-party products.
“All these whiz kids can gather data from wherever they get it and synthesize it into a product that we can use within the industry,” said Bond. “I think that is one of the best avenues we have to get to the data that will help us make better underwriting and claims decisions.”
Special Report: Wholesale Brokers
Insurance Journal asked E&S wholesale brokerages what makes their firm a great place to work. Here is what they had to say.
Value Employees at Every Level
I feel genuinely valued as an employee at Brown & Riding. The positive workplace culture here is inspiring; it’s a space where everyone — from management to senior brokers to production staff — is invested in supporting one another. There’s a real sense of collaboration and teamwork, and we don’t just work together; we celebrate our successes together, too. Knowing that I have a team willing to support me, no matter the challenge, motivates me to give my best every day.
Rob Alvarez, assistant vice president, broker, Brown & Riding
XS Brokers is a larger company, however, there hasn’t been a single moment where I felt forgotten or lost in the shuffle. Every single person who has helped train me or answer my many questions has been not only impressively knowledgeable of the subject matter but also incredibly happy to help. This is a brokerage filled with kind people looking out for one another and their clients. Being a military spouse, a remote career is my best option, and XS Brokers fulfills that need. However, I still feel a sense of camaraderie with my fellow coworkers and have never felt like I was alone in my job. I look forward to continuing my career with XS Brokers.
Katie Jensen, account executive, XS Brokers
We are valued and treated with respect and appreciation for our individual contributions to RT Specialty; not a single employee is considered simply a cog in the wheel. We are empowered to use our strengths and talents to succeed with integrity and teamwork as our watchwords.
Cheryl McLeod, senior underwriter, RT Specialty
Embrace Work/Life Balance
I’ve never had an employer that was so encouraging or vocal about prioritizing your personal time with your family and keeping work second to that. They encourage vacation time to be used, to log off at the end of the day and to spend long weekends relaxing rather than logging on. It is much appreciated and a beautiful reminder that I think we all need, especially in this fast-paced, demanding insurance world.
Amanda Mercier, account executive, XS Brokers
Promote Growth and Opportunity
Brown & Riding is a place where growth from within is truly prioritized. Hard work is recognized and rewarded — I’ve experienced it firsthand. I started as an entry-level Production Assistant five years ago, and now I’m working as a Client Executive on a team of eight. What makes this possible is the collaborative, supportive culture. There’s no competition here; instead, teamwork and a willingness to help each other succeed are at the core of what we do. I can reach out to anyone in the company for advice or assistance, knowing that I’ll be met with open minds and a shared commitment to finding solutions. At Brown & Riding, I feel empowered and fully in control of my own success.
Grace England, client executive, Property, Brown & Riding
We don’t just grow. We thrive as a whole team, and that is what makes XS Brokers one of the best places to work.
Wholesure is a rapidly growing company that not only provides opportunity for growth, but also a work environment that is collaborative and promotes career advancement. Wholesure’s entrepreneurial spirit allows employees at any level to make their mark on their business and be a part of the decision-making process by letting our voices be heard. Wholesure also emphasizes work-life balance and a positive employee experience so we can reap the rewards of our hard work.
Rob Souza, marketing representative, Wholesure
(Wholesure offers) a great deal of opportunity in many different options.
Matt Meadows, marketing representative, MJ Hall / Wholesure
Thrive As a Team
AmWINS is not just the best wholesale firm to work for; it is the best place I have ever worked. AmWINS has an enterprising, supportive culture where people have mutual respect, shared goals and tremendous management support of growth and development. I am SO happy to work for AmWINS!
Nancy L Timmons, assistant vice president, AmWINS Specialty Casualty Solutions
It is a great group of people, and the owners truly care about the team members. There is just the right mix of motivated and goal-oriented people who can joke with each other and have fun. Every day I come to the office, I learn something new and laugh.
I work with USI Insurance Services in Ohio. USI takes personal risk seriously and has invested the resources to make the client experience superb. My team is the best part. Recently, I went on an 11-day trip to England. My clients’ needs were addressed quickly and efficiently by everyone on my team. I returned to a few follow-ups, but mostly FYIs.
Tony Mariani, client advisor, USI Insurance Services
Special Report: Wholesale Brokers
Foster a Positive Culture
CRC is the best wholesale brokerage because they have attracted the industry’s strongest producers. Being surrounded by leaders who are at the top of their game raises your own personal bar. In addition, CRC does so much to ensure that the women of this company are encouraged, supported, mentored, & promoted. That is really important to me, especially having 2 daughters of my own. Finally, the tools & technology have been a game-changer. CRC has spent years collecting data to power our REDY platform and its analytics give me the edge to better service my clients. CRC is a forward-thinking company that has invested in their staff and all of our future. That is exciting & I am proud to be a part of that vision!
Mary Roy, senior underwriting team leader, CRC Group
AmWINS is the best because of our people, our culture, our technology, and our 150-year vision. We all share a mission of building the broadest coverage at the most competitive terms to our retail clients and facilitating efficient distribution for our carrier partners, providing them a wide range of vetted opportunities. Each of us internally is also aligned given the employees are the majority shareholders of the firm. That common ownership bonds us across all geographies to win together. My only complaint is that I didn’t come here sooner!
Matt Brott, executive vice president –property, AmWINS
Wholesale brokerage is one of the best places to work because the industry is super fun and always changing. You see new risks all the time, and it never gets old. Everyone in the industry loves what they do and is always willing to help out! - Anonymous
CRC Group is innovative and allows brokers to operate independently. We are provided with great analytical tools and have multiple sources for sharing information. CRC supports communities and encourages volunteering.
Tammy Little, broker, CRC Group
Working for a small, family-owned company offers a unique and fulfilling experience. We have been in business for over sixty years! Because of our size, we are a more close-knit environment. This has fostered the opportunity to make a tangible impact and see the results of your hard work first-hand. Overall, this is a supportive atmosphere where everyone feels like a part of the family.
Angela Hutchinson, assistant vice president - human resources, Southern Insurance Underwriters
News & Markets
Washington Commissioner: Most Homes in 2023 Wildfire Were Underinsured
An analysis of the claims paid out after the Gray and Oregon Road fires in Washington last year found that most of the homes destroyed were underinsured.
The fires destroyed 366 homes, burning more than 20,000 acres outside of Spokane in August 2023.
Washington Insurance Commissioner Mike Kreidler’s office initiated a data call in June to collect information from insurers
that had a loss associated with the fires. The results showed 355 significant dwelling claims ($10,000 in dwelling loss and $10,000 in personal property loss), and 244 had paid out 100% of their coverage for damage and 162 are still open and ongoing.
“That’s a sign that in most cases, the coverage limits were reached,” Kreidler said in a statement. “It’s a tragic loss for the people involved in these fires and
an unfortunate situation to not be made whole after a life-changing event.” Kreidler urged homeowners to review their policies regularly to ensure coverage meets the costs to fully replace their home and possessions should a loss occur.
The data call showed:
• 737 claims were made relating to the wildfires, and 664 of those claims resulted in a payment. Companies paid out $212 million as of July 31, for an average payment amount of almost $320,000.
• Of the 244 claims that paid out 100% of their coverage, 75 did not have extended replacement loss coverage. The 169 homes with extended replacement loss coverage were able to recover more than their policy limit.
• 111 claims had personal property damage, outbuilding damage or loss of use coverage.
• 32% of the people filing the claims that had significant loss were dropped from their previous insurance company; 36 policies were nonrenewed, while 79 were cancelled mid-term.
• The limits on loss of use coverage varied among claims: 154 had a dollar amount limit, with no time restrictions; 73 claims had a time limit (12 to 36 months), with no dollar amount restrictions; 98 claims had both a time limit and dollar amount restriction, the most common being 24 months.
Washington Farm Labor Contractor Fined $140K for Withholding Info From Workers
APasco farm labor contractor faces nearly $140,000 in fines for violations uncovered during a Washington State Department of Labor & Industries investigation that include withholding information from worker.
According to the L&I, there are more than 250 licensed farm labor contractors in the state providing labor for agricultural employers that recruit, employ and transport an estimated 50,000 domestic and foreign workers in Washington each year. State law requires contractors to pay at least minimum wage, provide safe transportation, and ensure meal and rest breaks for workers. The contractors are
also required to have a license.
An L&I investigation reportedly found that Eagle Labor Contractors operated without a license, failed to provide workers with complete disclosure statements, transported workers without a license and failed to provide a surety bond to give workers a recourse if a contractor fails to meet its obligations.
As a result, the contractor faces L&I fines of $138,250.
Disclosure statements spell out the work location, the type of crops, what the work is, specifics about transportation and housing and what workers will earn. Without a disclosure statement, a worker might not know the agreed upon wages or may be paid below the state minimum wage, according to the L&I.
Under an agreement with L&I, Eagle Labor Contractors will be licensed to perform work in Washington as long as the company pays off the fines in by March 31, 2025.
My New Markets
Cyber & Tech E&O Insurance
Market Detail: SeedPod Cyber, a managing general agent, is a specialized provider of cyber insurance and tech errors and omissions (E&O) coverage, designed to help businesses mitigate the financial impact of cyber incidents. With the increasing prevalence of data breaches, ransomware attacks and other cyber threats, SeedPod Cyber offers tailored coverage options that address the unique risks faced by organizations in today’s digital landscape. With a commitment to transparency and customer support, Seedpod Cyber empowers businesses to confidently navigate the complexities of cyber risk while safeguarding their assets and reputation. SeedPod Cyber also provides education, collateral, and instant quotes to their broker partners. Has pen. Available Limits: Not disclosed.
Carrier: Not disclosed.
States: Available in all states plus the District of Columbia.
Contact: Ryan Windt; ryan.windt@ seedpodcyber.com; 610-241-9434.
Micro-Businessowners and Businessowners Insurance
Market Detail: Berkley Small Business Solutions, a member of W. R. Berkley Corporation, is offering a program for micro-business owners and businessowners insurance. For micro-businessowners — highlights: Home-based and shared space businesses; business personal property limit between $2,500 to $25,000; annual revenue up to $500,000. For businessowners — highlights: Up to 10 locations; total property limit $15 million; annual revenue up to $10 million. ISO Forms: retail or service endorsements for micro-BOP; hired and non-owned auto liability for BOP: employee benefits liability; professional liability coverages — beauticians, barber and hair salon, funeral directors, optical and hearing aid, veterinarian, printers errors and omissions (E&O). Proprietary forms -Technology E&O (Tec-Guard) for micro-BOP; computer system includes telephone system, data storage devices, networking equipment; technology incident means error, act or omission, actual or allegedly made, by
any insured; rendering or failure to render technology service to others, or failure of technology products to perform the function or serve the purpose intended. Automatic extended reporting period — 12 consecutive months.
Available Limits: Business personal property limit between $2,500 to $25,000; businessowners total property limit $15 million.
Carrier: W. R. Berkley Corporation. States: Available in Arizona, Arkansas, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Michigan, New Hampshire, New Mexico, Tennessee, Wisconsin.
Contact: Ronnie Odell; rodell@berkleysmallbusiness.com; 818-818-1081.
Mileage Based Insurance
Market Detail: Risk Partners Inc. offers a mileage-based insurance program that gives fleets control and visibility of their premium. Insureds receive real-time updates on premium changes, which are influenced by mileage and driver behavior. Driving events like speeding and harsh braking can be monitored through the driver dashboard, giving insureds the tools to correct negative driving habits and save even more premium. The program is targeting the following classes: artisan contractors (HVAC, roofing, solar, janitorial, etc.); non-emergency medical transportation; cannabis delivery; transportation network companies (TNC); on-demand delivery network companies (ODNC).
Available Limits: Not disclosed. Carrier: Not disclosed. States: Available in most states and District of Columbia. Not available in Alaska, Kansas, Kentucky, Massachusetts, Nevada, New York.
Retail Stores - Clothing, Gift Shop, Handicrafts, Specialty/Ethnic Foods
Market Detail: Coterie writes general liability and businessowners policies for this appetite. With Coterie Insurance, enjoy
data at your fingertips and insurance at a click. The only prefill small commercial experience on the market means we answer our own underwriting questions. Bindable quote available in seconds based on two pieces of information: business name and address. Available to micro small businesses, start-ups and new businesses.
Available Limits: Not disclosed.
Carrier: Spinnaker Insurance Company, Benchmark Insurance Company and Clear Spring Insurance; rated A-(Excellent).
States: Available in all states, plus the District of Columbia.
Contact: John Poucher; john.poucher@ coterieinsurance.com; 855-566-1011.
Construction - Monoline Workers’ Compensation
Market Detail: Jencap - Workers’ Compensation Division has a monoline workers’ compensation product for construction, which is its largest class code for workers’ compensation business. Jencap said it is seeing success placing new venture construction companies; artisan contractors — electricians, plumbers, carpet and tile installation; janitorial; heavy construction — steel erectors, roofers (commercial and residential), foundations, masonry; railroad contractors. Available Limits: Not disclosed.
Carrier: Not disclosed.
States: Available in most states plus the District of Columbia. Not available in North Dakota, Ohio, Washington, Wyoming.
Contact: Tom Wold; tom.wold@jencapgroup.com; 714-430-7687.
This section brought to you by
Special Report: Agency Business
Agency Growth in 2025: Stay Focused on Prospecting, Cross-Selling
& Employee Benefits
By Andrea Wells
Predictions of a softer insurance pricing market are on the horizon.
Perhaps not in early 2025, but there’s no question the market is stabilizing from the high prices the sector has seen
in recent years. Relying on higher revenue from higher prices in the property/casualty market is not a sustainable way to keep pace with agency growth. Now is the time to make plans for future agency growth. This report highlights a few recommendations on
how agencies can grow in the changing market.
Employee Benefits
Cross-selling employee benefits for commercial business is not new but most insurance agencies continue to struggle with crossing depart-
ment lines when it comes to agency growth opportunities, according to Randy Schwantz, author of three previous books on selling insurance, and CEO/ president of The Wedge Group, a business performance and sales consulting firm. Even the largest agency orga-
nizations find low percentages of cross-selling happening between the P/C side of the house and the employee benefits side of the house, he said.
Agencies focused primarily on P/C business will cross-sell other P/C products. For example, an agent with a small commercial lines client might ask for an opportunity to quote that insured’s personal lines coverages. But not all agencies will cross-sell employee benefits products if they do not sell them directly.
“For example, I was working with one of the huge private equity firms — a $3 billion company — and they said that their accounts were only between 3% and 6% cross-sold across their platform. That means they probably had the P&C business but only up to 6% were cross-sold with employee benefits,” he said.
Schwantz says there’s a “boat load” of money to be made when an agency makes it commonplace to cross-sell their commercial lines P/C insureds with employee benefits.
But why don’t more P/C agents seek out cross-selling opportunities with the life/ health and benefits side of the business? Schwantz says it has a lot to do with the competitive nature found in a typical profile of an agent. Agents are protective of their business. “The fact that we work for the same company doesn’t mean I’m going to let you in on my accounts,” he said.
“It’s a trust issue, a competence issue, but when you look at opportunities the money is there,” he said. “You can see the gold pot at the end of the rainbow.”
Schwantz says even the
agencies that do cross-sell benefits products have room to grow. “A lot of agencies that are really proud would say that they’re probably 30% crosssold, but that’s still a huge gap.”
Stay Focused on Prospecting
There’s no better time to grow the agency than in today’s market because everyone wants to shop, says David Carothers, principal of Florida Risk Partners, who also founded the Killing Commercial Insurance Sales Training program. He counsels his own agency producers and others on how to grow their book of business. Growth is more than waiting for new business to walk in the door; it’s critical for agents to stay mindful of prospecting even during these busy times, he says.
“The problem is, with all of the inbound coming in right now, producers aren’t staying focused on what they know they’re good at and what they’ve been successful with in the past, and they’re allowing these other opportunities that seem like low hanging fruit to come in and distract them,” Carothers says. The problem with that is that those people seeking new business are only reaching out for price.
“The reality is, if you start running the numbers, the close rates are much higher. The retention on that business is going to be much lower because these are people that are reaching out because pricing changed and there’s no loyalty there.”
He challenges producers to come up with an ideal prospect profile. “And we want them to have three to five ideal prospects that they’re going
after every single day,” he said.
Carothers doesn’t believe in producers limiting their prospecting to one niche market, either. “I’m not a big believer in getting so niched down that you’re only going after one class of business, because then you’re not diversifying your book and you’re not spreading your risk,” he said.
But getting “really good” at three to five niches and finding ideal prospects in those niches can be a great way to grow.
“You’ve got to stay focused in your prospecting and stay true to what built your business to this point,” he added.
But don’t confuse activity with productivity, Carothers said. New business activity doesn’t always mean growth, he added. Agents should be measuring the hours they are investing to quote some of the incoming activity and compare it against their return on investment, he suggests.
“One of the things we talk about all the time is knowing your hourly rate,” Carothers said. “You should not touch anything on your desk that’s not going to pay you your hourly rate. So, if you start working on things outside of your hourly rate, you’re going to diminish your own income and the income of the agency at the same time,” he said. “You’re going to end up wasting your time on a bunch of bad business.”
Pay Attention to Gaps
One area that could help agencies grow — and protect agencies from potential errors and omissions claims — is paying close attention to coverage changes during this time of rapid movement, says Chris Burand, president of Burand
& Associates. For more than 30 years, Burand has offered consulting services for the P/C insurance industry.
“Absolutely make sure you are checking the renewals to make sure coverage hasn’t been removed, or diluted,” he said. “You will increase sales if you do that, and you will reduce your E&O exposures.”
Burand says while carriers have re-structured their underwriting criteria for certain lines of coverage, they have also re-structured some policy forms with more restrictive coverage terms. It’s important to pay attention as some changes can be difficult to identify, he says.
“I’m seeing pretty sneaky wording creep into policies that materially reduces coverage,” he said. “A lot of it has to do with ‘silent exclusions,’” he said. “They’re silent because there should be wording in the form that says, ‘This is the coverage and here’s the exclusions.’ But now instead of, ‘Here’s the coverage and here are the exclusions,’ it says, ‘Here’s the coverage for X,’ but it’s worded in such a way that the exclusions are automatic and don’t have to be listed,” he said.
For example, a recent policy he reviewed asked for the insured to go online to answer some additional questions. “What it doesn’t say is that if you don’t go answer those additional questions, your coverage will be reduced,” he said.
As rates and pricing begin to moderate there will continue to be movement of accounts because of these changes. Carriers will continue to adjust their underwriting criteria, continued on page 30
Special Report: Agency Business
continued from page 29
and some may leave certain markets entirely, Burand says.
“Agents may even see some interesting mergers for small mutuals,” he adds. “You still have some carriers that have to shrink; they just have run out of operational surplus, and
so business is going to have to find new homes.” Agencies have an opportunity to capture more business as result of these ongoing changes, he said.
“It’s going to be another couple of years of changes,” he said. Accounts are going to be moving at a faster pace than
normal and they’re going to go somewhere. “So why not you,” he said. “It’s a matter of thinking it through and being ready and making sure that you’re the first agency that clients call.”
Capturing this movement could be a lucrative strategy
10 Sales & Marketing Tips to Help Agencies Grow
1. Get Out of the Office. Attend events where you can mingle and meet people.
2. Be a Guest. Reach out to local organizations that may be looking for guest speakers for luncheons and meetings. Demonstrate your expertise in front of an audience of potential clients or partners. Talk about it on social media.
3. Network! Get out of the insurance bubble and attend other professional events that are open to the public. Get to know the real estate agents, builders, small business owners, aspiring leaders, philanthropists and other active groups in your community.
4. Dog Park Prospecting. Visit dog parks and trails. Hand out poop bags or treats with your business cards.
5. Testimonials. If you have a happy client, get a testimonial! Testimonials can be key to winning over skeptical potential clients. Feature testimonials on your website, social media, e-news or direct mail marketing. (Make clear to the client that you would like to use their testimonial as a promotion and ask how they would prefer to be identified.)
6. Know the Pros. Get to know and be trusted by local car salespeople so they will refer buyers to you. Get to know and be trusted by local mortgage brokers so they will refer buyers to you.
7. Stay Up to Date. The old adage says it’s less expensive to keep a client than to land a new one. So, make sure your current clients are kept up to date on the information and changes that could impact their policies. Check in to see if they have had any life changes and could benefit from a reassessment of their insurance needs.
8. List the Qs. Did a client call with a question? Chances are more people are out there asking the same thing. Keep a running list of client queries to use as content for blog and social media posts.
9. Repurpose Your Content. Did you give a presentation? Turn it into a blog post and a video. Did you write a blog post? Put it in your e-news and promote it through social media. Don’t reinvent the wheel if you can get three to five touchpoints out of one piece of content.
10. Social Media Calendar. It can be too easy to fall into the trap of posting on social media based on whenever things pop up. Instead, be purposeful. Plan blog posts and social media posts that relate to the changing needs of clients throughout the year. Does your agency participate in fundraising or 5Ks or food drives? Make sure those events get on the calendar before, during and after. Create the content in advance so it is ready to post. If changes occur, tweaks can be made on the deadline.
for agencies. “And so, as an agency, are you set up to take advantage of that?” he said.
Cross-Selling, Again
Cross-selling is key to growing in 2025 and that’s not always a primary focus for agencies even for P/C lines of business, Carothers said.
“If I wanted to grow right now, I would be looking at every single account that I have on the personal line side and make sure I’ve offered them flood and umbrella,” he said. “And on the commercial side, I would make sure I’ve offered flood, umbrella, employment practices and cyber.”
Not only are agencies not offering these coverages, they are not offering the right limits of coverages and are setting themselves up for a disaster when it comes to an E&O scenario, he said.
They are also not maximizing revenue. “Agents aren’t maximizing revenue because we’re not fulfilling our duty to offer as agents,” Carothers said. “We have a duty to offer that coverage or get that client to reject it.”
The independent insurance agency and brokerage channel achieved an organic growth rate of 10.3% in 2023, according to a Reagan Consulting survey. But Carothers hears that many agencies have grown by as much as 25% organically over the past year or two due to rate increases. “Is next year going to bear the same thing? And if it doesn’t, what are we going to do to offset that?” he said. “We need to continue to make prospecting and cross-selling a priority even though everybody’s fat and happy right now, because as the market will start to soften; we need to ready.”
Closer Look: Personal Lines Leaders
Personal Lines Leaders
Editor's Note:
About the Personal Lines Leaders: The 2024 Personal Lines Leaders in this special feature are taken from Insurance Journal’s Top 100 Property/Casualty Independent Agencies as reported in August. This list utilizes only the 2023 personal lines property/ casualty revenue numbers of the independent agencies and brokerages that submitted data to the Top 100 agencies report. For more information on Insurance Journal’s Top 100 Property/Casualty Independent Agencies list, contact: awells@insurancejournal.com.
Spotlight: Hurricane Deductibles
What to Know About Deductibles After Multiple Florida Hurricanes
Deductibles serve several purposes. They provide some premium relief for the insured. They make insureds less likely to file smaller claims because either damage falls within the deductible, or is so close to it that the policyholder would rather not file the claim. Sometimes, deductibles help to motivate an insured to change behavior.
By Patrick Wraight
This hurricane season, deductibles have been the top of mind for Florida insureds because three hurricanes have made landfall in Florida so far, with the Tampa Bay area having suffered two direct strikes. This means some people could have to deal with the prospect of multiple hurricane deductibles if their house or building was damaged twice.
Since 2006, Florida law requires insurers of residential buildings to use a calendar year hurricane deductible. The change was made following the 2004 and 2005 hurricane seasons when eight storms
made landfall in the Sunshine State.
Imagine your home was damaged by more than one storm. It would be hard enough trying to attribute damage to each storm, but multiple claims mean more than one deductible to pay. This was a nightmare situation for Florida homeowners, and they made sure the legislature did something about it.
A Look at the Past
Before 2006, the available ISO hurricane deductible endorsement for an HO-3 was HO 03 51 07 01 – Hurricane
Percentage Deductible –Florida.
Here’s how it worked. The first paragraph provided coverage for damage to the inside of a building if the outside is damaged due to the windstorm, and anything from outside – like rain – came inside. The second paragraph defined a hurricane as any storm the National Hurricane Center called a hurricane — from the first hurricane watch or warning in Florida until 72 hours after the last watch or warning expired.
But let’s look at how the hurricane deductible applied.
Hurricane Deductible
1 We will pay only that part of the total of all loss payable under Section I – Property Coverages that exceeds the hurricane percentage deductible stated in this endorsement. The dollar amount of the hurricane percentage deductible is determined by multiplying the Coverage A limit of liability shown in the Declarations by the percentage amount shown in the Schedule above. A minimum deductible of $500 applies.
2 No other deductible in the policy applies to loss caused by windstorm during a hurricane. Refer to the policy declarations for the deductible that applies to windstorm loss if the circumstances of the loss described above do not apply.
‘This hurricane season, deductibles have been top of mind for Florida insureds because three hurricanes have made landfall in Florida so far, with the Tampa Bay area having suffered two direct strikes.’
The hurricane deductible is not a specific dollar amount, and it changes whenever the Coverage A limit changes, but let’s use a house with a $250,000 Coverage A limit with a 2% hurricane deductible. Hurricane A came through the state and damaged the house.
Here’s how we calculate the hurricane deductible: $250,000 x 2% (0.02) = $5,000.
That tells us the hurricane
must do at least $5,000 in damage to the house before any payment is due. That’s significantly more than a standard $500 deductible for fire.
Now a second hurricane, Hurricane B, comes through and the home is damaged again. That’s right. The same $5,000 deductible would apply to the second loss as well. If this was 2004, instead of 2024, the insured would have two hurricane claims with a total deductible of $10,000.
The Present
Since it is 2024, the calendar year deductible applies. ISO updated HO 05 31 and renamed it Calendar Year Hurricane Deductible (Percentage) With Supplemental Reporting Requirement – Florida. This revised endorsement (and several others that work slightly differently but are all calendar year deductibles) made it possible that the hurricane deductible would no longer apply per occurrence. It applies once in a calendar year.
Let’s see how it works, keeping in mind the whole endorsement is not reproduced here. Read it yourself for all of the details.
Calendar Year Hurricane Deductible Described
A hurricane deductible issued by us or another insurer in our insurer group:
1 Can be exhausted only once during each calendar year; and Applies to loss to covered property caused by one or more hurricanes during each calendar year.
2 The dollar amount of the calendar year hurricane deductible is determined by multiplying the Coverage A Limit Of Liability shown in the Declarations by the percentage amount shown in
the Schedule above. A minimum deductible of $500 applies.
This paragraph explains how the hurricane deductible is calculated and it’s calculated the same way as it was under the other edition of this endorsement, with one key phrase that did not exist before: “A hurricane deductible … (c)an be exhausted only once during each calendar year …”
The hurricane deductible only applies once. How is that possible? Let’s take a look at some more policy wording. Application Of Calendar Year Hurricane Deductible
1 In the event of the first windstorm loss caused by a single “hurricane occurrence” during a calendar year, we will pay only that part of the total of all loss payable under Section I – Property Coverages that exceeds the calendar year hurricane deductible stated in the Schedule.
A distinction must be made between a calendar year, which is likely different than the policy year. A single deductible during the policy year would mean that if the policy expired during hurricane season, the hurricane deductible could reset, causing the policyholder to have multiple hurricane deductibles again, making this endorsement less effective in helping a homeowner.
When the first hurricane comes, the policy promises to pay only the amounts above the hurricane deductible. Keeping the same example as above, a 2% deductible is $5,000. But it is possible that a $3,000 loss happened that did not exceed the deductible. This is important to note.
Let’s work with the $3,000
loss that was below the hurricane deductible. Why does it matter? Let’s look at the next sentence in the endorsement.
2 With respect to a windstorm loss caused by the second, and each subsequent, “hurricane occurrence” during the same calendar year, we will pay only that part of the total of all loss payable under Section I –Property Coverages that exceeds the greater of:
The remaining dollar amount of the calendar year hurricane deductible; or
The deductible that applies to fire that is in effect at the time of the loss.
Here’s the reason to report a small claim that did not exceed the deductible. If the company knows about the prior loss, and knows that it was less than the deductible, it reduces the hurricane deductible by the amount of that prior loss. So if the same home suffers a $10,000 loss in hurricane number two, the deductible looks like this:
2% of $250,000 is $5,000
$5,000 – $3,000 = $2,000
$10,000 – $2,000 = $8,000
This does not make the trauma and uncertainty of being impacted by multiple hurricanes go away, but it does help people who are looking around and wondering how they are going to deal with hurricane deductibles make more sense of that part of the equation. Maybe it makes rebuilding a little easier, and getting back to normal a little quicker.
Wraight, CIC, CRM, AU, is director of Insurance Journal’s Academy of Insurance. He can be reached at pwraight@ ijacademy.com.
Spotlight: Homeowners
The Data Behind Rising Homeowners Premiums: By Peril and By State
The U.S. home insurance industry has experienced an upward trend in all-peril loss costs over the past seven years, according to a new report released by LexisNexis Risk Solutions. The ninth annual LexisNexis U.S. Home Trends Report found that all-perils lost costs and all-perils frequency increased by 4.1% and 11%, respectively, from 2022 to 2023. Since 2019, all-perils loss costs rose 52%, with frequency climbing 16.9%.
Although severity has declined 6.3% since 2022, it remains 29.8% higher than 2019 figures, the data showed. For the purposes of the report, the all-perils figures
combine data for hail, wind, water, fire and lightning weather perils, as well as non-weather related claims such as water leaks, thefts or liability.
Catastrophe claims represented 46% of claims across all perils combined in 2023, the highest in seven years.
By peril, some of the data breaks down as follows:
• Hail loss costs increased 57.9% from 2022 to 2023, along with frequency (up 53.6%) and severity rising 2.8% year over year from 2022. States with the highest impact of hail-related perils include Colorado, Nebraska and Wyoming.
• Loss costs for other weath-
er-related perils declined from 2022 to 2023, with fire and lightning costs down 11.1%, and weather-related water down 51.4%.
• Non-weather-related water loss costs decreased by 11.2% in the same period but remained on an upward trend over the past seven years.
“In the last year, the U.S. saw several historic-level weather disaster events and the highest level of catastrophic claims across all perils we’ve seen in the past seven years, which contributes to rising premiums that consumers across the country face right now,” said Cole Winans, vice president,
home insurance, LexisNexis Risk Solutions.
“As home insurance carriers continue to contend with seasonal and geographic variabilities related to climate — in addition to rising inflation, material and labor cost — understanding by-peril and macro level home insurance trends, coupled with maintaining extensive data and imagery on current house conditions over an extended period of time is imperative to remain nimble in today’s volatile and dynamic market,” he added.
“Even as more insurers are likely to see rate increases approved in certain states in the coming months, they will
need to be discerning in writing new business only in those pockets where they can do so profitably and that will be on a carrier-by-carrier and state-bystate basis,” Winans said.
Despite the all-perils severity reduction in 2023 (6.3% down from 2022), the elevation in severity above 2019 (up 29.8%) points to the importance of long-term trend data when evaluating risk and pricing, the report stated.
Colorado ranks highest in loss costs from catastrophic claims (274% above 2023 U.S. average catastrophic loss cost), while the severity of claims (dollars lost, on average, per claim paid) was highest in the state of Hawaii in 2023 (63% above 2023 U.S. average severity).
‘In
the last year, the U.S. saw several historic-level weather disaster events and the highest level of catastrophic claims across all perils we’ve seen in the past seven years, which contributes to rising premiums that consumers across the country face right now.’
U.S. states with the highest combined catastrophe and non-catastrophe loss costs include Colorado, Minnesota, Nebraska, Louisiana and Iowa. Lowest ranking states include Massachusetts., New Hampshire, West Virginia, Vermont and Maine.
In 2023, the data indicated
the U.S. experienced 6,962 hail events, up 57.3% from 2022, with 71% of hail claims deemed catastrophic. With 28 weather and climate disasters in 2023, each surpassing the billion-dollar damage threshold, 17 were attributed to severe weather or hail events.
Hail peril seasonality over the past seven years continues, with April, May and June observing the highest frequency and loss cost in 2023.
Wind peril frequency rose 14.8%, along with a loss cost increasing 0.7% from 20222023. Severity, by comparison, fell 12.3% year-over-year, the report found. Despite seasonal loss cost averages peaking in August and September over the past seven years, 2023 loss cost and frequency were highest in March. In 2023, 62% of wind claims were deemed catastrophic claims, up from 52% the year prior.
Fire and lightning perils in 2023 saw decreases in loss costs
(-11.1%), frequency (-8.6%) and severity (-2.7%) from 2022. However, catastrophic claims rose 7% from 2023, with the Maui, Hawaii, wildfire considered one of the most damaging and deadly events in 2023.
Weather-related water perils declined in 2023 with a reduction in loss cost (-51.4%), frequency (-25.5%) and severity (-34.8%). In 2023, 61% of weather-related water claims were catastrophic.
Claims stemming from non-weather-related water perils decreased across loss cost (-11.2%), frequency (-10.3%) and severity (-1.1%) in 2023.
While theft loss cost and frequency decreased by 14.2% and 15.8%, respectively, in 2023, severity rose by 1.9%, partially attributed to the rising cost of consumer goods such as high-end kitchenware.
Liability saw a marginal increase in severity (0.2%) in 2023, with an 18.3% drop in frequency driving down overall
loss costs (down 18.2%).
Other perils, including physical damage claims not included elsewhere, extended coverage, damage to property of others, etc., saw a frequency increase of 9.3% year-over-year. Loss costs, along with severity, both declined 10.7% and 18.3%, respectively, from 2022 to 2023.
“When we look at peril data over a seven-year span, it’s increasingly clear that home insurers cannot rely on shortterm trends alone to make fully informed decisions about their books of business and operational strategies,” said George Hosfield, associate vice president, home insurance, LexisNexis Risk Solutions. “For example, while hail loss cost surged by 57.9% in a one-year observance, the longer-term trend shows consistent increases across all perils yearover-year. This emphasizes the need for carriers to consider broader historical data when evaluating risk.”
Idea Exchange: Transportation
The Impact of California’s AB5 Law on the Transportation Sector: A National Perspective
The reclassification of independent contractors has become a major national issue, and California’s AB5 law has positioned itself at the center of this conversation. This legislation has brought significant challenges to the transportation industry in particular, leading to a ripple effect across the country as other states explore similar legislative pathways.
By Colby Waltenburg
AB5 has broad implications for the transportation industry nationwide. This isn’t just about regulatory compliance; it’s about anticipating and strategically preparing for a future defined by evolving legal and market realities.
Understanding the Essence of AB5 and Transportation Sector Implications
The central pillar of California’s AB5 law is the “ABC Test,” which outlines three cri-
teria to determine whether a worker is an independent contractor or an employee:
1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work.
2. The worker performs tasks outside the usual course of the hiring entity’s business.
3. The worker is customarily engaged in an independently established trade, occupation, or business.
On the surface, the criteria seem straightforward. However, their application has exposed a complex and disruptive reality for transportation companies, particularly within the commercial trucking industry. Since drivers are often central to the usual course of business in transportation, many fall outside the safe harbor created by the ABC Test.
The implications extend far beyond California’s borders. With states like New York and New Jersey eyeing similar measures, transportation businesses across the United States must stay vigilant.
AB5’s stringent reclassification standards could serve as a model for nationwide reforms, fundamentally shifting the contractor-based model that many in the industry rely upon.
Practical Strategies for Compliance and Business Protection
For transportation companies, staying compliant with evolving worker classification laws like AB5 involves proactive risk management. But compliance doesn’t have to come at the expense of business sustainability. There are several strategies companies can deploy to align their operations with these regulations without sacrificing their competitive edge:
1. Conduct an internal audit of contractor relationships. The first step towards compliance is understanding the scope of exposure. Conducting an internal audit helps identify independent contractors who may be at risk of reclassification. Examine the nature of each working relationship in light of AB5’s ABC Test.
Where gaps exist, take proactive steps to restructure these engagements or explore alternative models.
2. Shift toward a dual-model approach. Companies can explore a dual approach — maintaining a pool of employees for core functions and engaging independent contractors for specialized tasks. By clearly distinguishing between the two, businesses can mitigate the risk of non-compliance while preserving the flexibility that contractors bring to the table.
3. Leverage partnerships with brokerage and leasing firms. One compliance strategy gaining traction is leveraging partnerships with driver brokerage and leasing firms. This model utilizes third-party entities to contract drivers, insulating companies from direct liability. However, businesses must ensure that their contracts and operational practices align with state-specific compliance requirements to avoid inadvertent violations.
4 . Invest in legal counsel and ongoing training. Regulations like AB5 require
more than just an initial compliance effort; they demand constant vigilance. Companies should allocate resources to ongoing legal counsel and training programs for managerial and operational staff. This approach helps avoid inadvertent missteps that could lead to costly reclassifications, fines or legal action.
The Future of AB5
The legal landscape surrounding independent contractor classification is still fluid, and transportation companies must remain prepared for further developments. While California has taken the most aggressive stance, other states are starting to view AB5 as a template for reform.
Here’s what to watch for:
• Broader adoption of AB5-like legislation. States such as New York, New Jersey, and Illinois are actively considering their versions of the ABC Test. While some states may opt for slight modifications, the direction is clear — greater scrutiny of independent contractor relationships.
Businesses should stay abreast of these developments and be prepared to implement compliance strategies in multiple jurisdictions.
• Federal legislative efforts and the PRO Act. On the national level, the Protecting the Right to Organize (PRO) Act poses significant implications for independent contractor relationships. This federal bill seeks to implement the ABC Test nationwide. Although its passage remains uncertain, it signals a growing federal interest in this issue. Transportation companies with multi-state operations must monitor developments at both the state and federal levels.
Judicial Challenges, Potential Revisions
Legal challenges to AB5 continue to emerge, particularly from the trucking industry. While some have been unsuccessful, the courts’ interpretations of AB5 remain a key factor. Continued litigation could lead to modifications or exemptions specific to the transportation industry. Business leaders should actively engage with industry groups and stay informed about ongoing legal battles that may reshape compliance strategies.
A Strategic Approach to the Future
Transportation companies face significant risks and opportunities in navigating the evolving landscape of worker classification laws. The implications of California’s AB5 are already being felt beyond state borders, and it’s only a matter of time before other states enact similar measures.
To stay ahead, businesses must comply with current regulations and strategically prepare for what’s on the horizon.
Transportation companies can protect their interests by conducting comprehensive audits, adopting flexible models, staying informed about state and federal developments, and complying with new legislation.
Waltenburg is president of Transatlantic Underwriters and a leading expert in transportation insurance, specializing in risk management and strategic compliance for commercial trucking and other transportation industries. Website: tau-usa.com.
Idea Exchange: The Competitive Advantage
Reading the Fine Print
Just because a carrier’s form shows the policyholder has XYZ Coverage does not necessarily mean they have XYZ Coverage in the real world. And yet, I find that few agents understand or know this. And even when they read the words on the form, they don’t understand the implications, especially if they don’t know enough about working capital, loans and finance — knowledge which most agents are lacking.
“reimbursement” from the insurance company and maybe the bank would use that expected payment as collateral.
By Chris Burand
A great example is coverage where the carrier only pays reimbursement. Traditionally, a carrier pays the claim less the deductible and the insured only must pay the deductible. However, with reimbursement clauses, the insured must pay the full claim first. Then, in theory, the carrier will “reimburse” the insured.
If you are selling such coverages and not advising the client appropriately, you are opening yourself and your agency up to errors and omissions (E&O) exposures.
For example, let’s say a claim is $250,000. The insured must have or find $250,000 and pay the claim. Whether that is the full amount, or if more must be paid in the future, is another potential problem.
How many of your clients have that much extra cash sitting in the bank? If they have all that extra cash, they might consider a more sophisticated insurance plan anyway so it’s a good guess that if they’re buying a reimbursement policy from you, they are not cash rich.
If they don’t have the cash, where do they get it? As the old saying goes, banks only want to lend you money when you don’t need it.
A business has a loss and must find $250,000 in cash. They go to the bank and request a loan. Whether they get the loan depends on their balance sheet and income statement. If they already have a lot of debt, getting a loan may be problematic. They could pledge the
If the insured’s business is at a standstill until the claim is covered, getting that loan will be tougher. How fast do banks typically provide loans? Are they going to put the money in your client’s account that same day? So now, the insured is bleeding working capital that is not going to be reimbursed, unless that is also covered, until they get the cash. The loss is now materially larger, potentially necessitating an even larger loan.
How quickly do insurance companies generally pay? And how long will it take to verify all the coverage requirements apply? At the least, there will likely be some delays. These delays may be no worse than under a regular indemnity form, but the difference is your client has written a $250,000 check, perhaps borrowed money upon which they are paying interest, and is likely unhappy with you for selling them a reimbursement form.
There is no promise the carrier will reimburse the insured for all the expenses the insured incurs and perhaps the client is already thinking they will be fully reimbursed. Plenty of room exists for misunderstanding exactly for what your client will be reimbursed, causing even more friction.
Fortunately for professional agents, there is a solution:
1. Read the forms. Know and fully understand what you are selling.
2. Then advise the insured accordingly. Give them options.
3. Then, if you and the insured think a reimbursement form is acceptable, it should be mandatory that you and/or the insured complete a financial analysis of their balance sheet and cash flow to determine how large of a loss the insured can incur and pay for, prior to a reimbursement arriving. Learn whether a line of credit is required or should be considered.
If you do not know how to read financial
statements, don’t sell reimbursement insurance policies or learn to read financial statements. It is unethical to sell reimbursement forms without knowing how a reimbursement situation might impair a client’s cashflow because if they don’t have the money, the carrier likely never pays the claim. Have you advised your client of this scenario?
Why do carriers use reimbursement forms/clauses? In workers’ compensation, there are some legal reasons based on filings and such.
But in other coverages, they use reimbursement clauses to save money. They do not have to pay claims as quickly. They may be better able to shut the door on future claims, making their reserving more certain. And, because so many agents do not know what they are selling, and insureds don’t know enough about insurance to understand the implication of reimbursement clauses, they almost certainly will pay fewer claims.
Nothing unethical exists relative to reimbursement forms at the carrier level
providing they pay covered claims without delay upon receiving adequate proof of the insured’s payments.
Some people might think these forms are a little sleazy, but I do not see it that way. The carrier has found an alternate method for covering claims, and it is the agent’s job to know and understand what they are selling.
The form may have the best, broadest most comprehensive coverages on the market. But if the insured does not have the cash with which to pay the claim
initially, there is minimal to zero coverage. And if you are prospecting clients that have reimbursement coverages, odds are high the incumbent agent has not explained the situation to the insured. These situations should be prime low hanging fruit for making new sales. Use your professional knowledge to capture those new sales.
Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colorado. Phone: 719-4853868. E-mail: chris@burand-associates.co.
Idea Exchange: Is It Covered?
Logic & Language and Forms & Facts
Named vs. Open Perils
This column is written primarily for insurance professionals, though I hope that the information I include is helpful to practitioners when communicating with prospects and insureds. In this month’s column, I’d like to discuss a topic addressed specifically to insurance buyers.
By Bill Wilson
One issue I have written about regularly is the inarguable fact that insurance is not a commodity differentiated solely by price. If you search the Insurance Journal website for “bill wilson commodity,” you’ll find over a dozen columns that have, at least in part, discussed this issue with numerous coverage or claim examples.
One of the aspects of property insurance policies that support the contention that insurance is not a commodity deals with causes of loss that are or are not covered. Not only are there often dramatic differences between policies among insurance companies as to what perils are or are not covered, within a particular insurer there are usually variations in policy form options.
Broad Named vs. Open Perils
For example, using ISO forms to illustrate, an ISO HO 00 02 homeowners forms covers damage to property only if caused by certain listed broad named perils. The ISO HO 00 03 covers damage to dwellings and certain other structures on an open perils basis, but only broad named perils for personal property. The ISO HO 00 05 can be used to extend open perils to both real and personal property.
For the benefit of consumers, “open” perils means that virtually all damage to property insured on an open perils basis is covered, usually after the application of a deductible, unless specifically excluded.
Sometimes this coverage is referred to as “named exclusions,” though all policies, open or named perils, have some exclusions. A “named” perils policy means only the causes of loss listed are covered if they result in damage to property.
The same is true for commercial exposures. Again, using ISO forms, the three main types of perils covered by the most common ISO causes of loss forms are the ISO CP 10 10, which covers a limited number of basic perils; the CP 10 20, which covers an expanded list of broader perils; and the CP 10 30, which is an open perils form. These forms can be mixed so that,
for example, building damage is governed by a CP 10 30 but business contents are covered by a CP 10 20.
So, why would an insurance buyer want to insure property on an open perils basis versus a named perils basis? In other words, what more do you get for the added cost of the open perils coverage?
We can probably agree that open perils coverage should almost always be offered to a customer. The question is, what do you tell the customer when they ask for examples of claims that are covered by open perils forms but not named perils forms?
The rest of this article is devoted to specific illustrations that you may use when addressing these questions. But first, here’s an important caveat. Be sure to get the prospect or insured to confirm that they understand that these are just generalizations and that the specific policy form they are buying will determine which, if any, of these examples are covered by that form. This list, again, is just a “big picture” generalization to give the customer a feel for what a small increase in premium often gets them.
So, without further ado, below is a partial list of losses that often are covered by open perils policies but not named perils policies.
• You leave on a two-week vacation and inadvertently leave a window open, resulting in damage to carpet, furniture, and your black velvet Elvis painting collection from one or more rainstorms.
Some policies require that the windstorm damage the dwelling before interior damage is covered.
• A diamond ring you left near the sink disappears. Even though you’re convinced your daughter’s worthless boyfriend stole it, you can’t prove it and it’s just as likely that the ring fell down the sink drain or was mistakenly discarded into the trash. Most named perils forms only cover theft, not mysterious disappearance.
• A large diamond vanishes from a ring and the loss is certainly not from theft.
• A chandelier falls from the ceiling and breaks a glass table set with expensive and fragile dinnerware. Most named perils policies only cover interior damage caused by a falling object that originates outside the dwelling and most don’t cover damage to the falling object itself.
• Similar to the previous example, you drop your $1,500 laptop on the tiled kitch-
en floor. Again, most broad named perils forms that include a “falling object” peril don’t cover damage to the falling object itself.
• At a party, your arctic white carpet is damaged by someone who spills wine. This is not a named peril under most named perils policies.
• Someone dies in a house and their remains are not discovered for several days or longer. Absent an applicable exclusion, the resulting property damage may be covered by an open perils policy but likely not by a named perils policy and the cleanup cost of such an event can easily be five figures.
• A very large aquarium breaks and results in water damage. Most broad named perils policies cover plumbing breaks, but not a loss due to water damage from aquariums, waterbeds, or other non-plumbing appliances.
• An airline loses your luggage, which contains some expensive items whose value far exceeds any recovery you may get from the airline. Again, most broad named perils cover theft of personal property but only if it’s “likely” that theft occurred … whatever that means.
• You mail an expensive item that you did not specifically insure to someone and they never receive it. Once again, theft is not necessarily likely to have occurred.
• On a cruise, your $1,500 iPhone falls overboard. Good luck finding a listed peril under a named perils policy that covers this.
Again, consider the caveat that these loss examples are general in nature and not necessarily specific to the policy forms you are selling. Some open perils policies will cover these types of claims but others won’t. Also, many open perils forms cover far more examples than those in this abbreviated list.
Do you have other illustrations, especially those involving actual claims?
Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of six books, including “When Words Collide…Resolving Insurance Coverage and Claims Disputes.” He can be reached at Bill@InsuranceCommentary.com.
Idea Exchange: Agency Management
Missteps and Mistakes: 5 of the Scariest Moments of My Insurance Career
Iremember 1994 when I was running for the United States Senate. My campaign consultants thought I should publish my tax returns and challenge my opponent to do the same. He had a very checkered business career. I was unenthusiastic about the idea, but thought I should take the advice of the “experts” I was paying. It was embarrassing. Not because there was anything wrong with my financial records, but because exposing my income made me feel like I was walking down the street naked – which ought to embarrass anyone!
By Tony Caldwell
I share this story to demonstrate the point that mistakes can be uncomfortable. But I believe that when you learn from your mistakes, you turn failures into successes. I hope that you may learn something from some of my scariest moments and take heed so that you can avoid that exposed and naked feeling yourself.
Counting My Mistakes
1. A Costly Accounting Blunder. When we put our agency together, we divided management responsibilities. One of mine was to manage our accounting operations. A couple of years after we started, our accountant was out on pregnancy leave and our CPA firm had someone filling in for her. I came into
the office early one day to find that person eagerly stop me to say, “I have to speak to you urgently.” She explained that she made a mistake in reconciling our bank accounts and said, as a result, “you are $80,000 overdrawn and your check for the Account Current to XYC Insurance Company is going to bounce.”
A mistake like that could very well have cost us the contract under which half our agency’s business was written. And, I didn’t have $80,000 on hand and didn’t know if my partner could come up with that amount on command. So, we combed through our current account statements and identified payments we could put on hold for that month. This allowed me to write a replacement check to the company that I promptly delivered.
I learned a lesson I’ve never forgotten — manage cash carefully.
2 . A Forced Culture Shift. In a different business venture of mine, I bought out a partner after a number of years. To do this, I took on a large debt with scary payments every month. Every day as I went to work at that business, I came to recognize that I hated the culture we’d allowed to take hold in the business. I decided to change it. I went to work to create a new culture based on values I felt strongly about.
Unfortunately, many of my employees didn’t like the changes I was making. They preferred things as they were. And as I stuck to my guns, they began to leave. Eventually, we had 100% turnover in a short time, which led customers to question if they should stay with us.
It was a tough couple of years for this business. I made a number of mistakes in how I managed my team. But, in the end, we grew over 300%, which validated my original decision.
From this experience, I learned how important business culture based on shared values is, but also that it’s critical to foster collaboration and participation in developing those values rather than dictating them.
3. An Unrecognized Dependency. Early in my career, we developed a customer relationship with a nonprofit organization that owned considerable property in our area. As they grew, our business with them grew as well — until their account represented over 50% of our revenue. When they grew to a certain point and recognized just how much they were paying us, they decided they should do it themselves and cancelled our agreements with 30 days’ notice.
As a young service business without much working capital, bankruptcy loomed rather quickly. We had no choice but to reduce staff immediately and take other actions to lower overhead expenses. I ate a lot of Ramen noodles, and we survived.
In the end, I learned it’s a huge risk to allow a single customer or line of
business to be such a large contributor to your revenue that their loss threatens your survival. I often see a corollary to this in insurance agencies that put more than half of their business with one insurance company.
4 . A Bad Bet. Dan Sullivan the founder of the Strategic Coach program for entrepreneurs tells his clients to “test your ideas on check writers, not friends and employees.” His point is that although we may have ideas that seem like sure successes to us, they may not be things people will actually pay for.
I learned this lesson the hard way when I saw a friend’s national driver’s club with tens of thousands of members and thought we could build an insurance agency to focus on selling insurance to their members. Instead of following Dan’s dictum, we poured money into creating an agency licensed to do business everywhere, recruited lots of people, invested an incredible amount of money and failed in spectacular fashion.
From this failed investment, I learned to listen more closely and to not make assumptions, and to “test” small as Dan suggests before making big financial bets.
‘You can’t dictate culture; you can only nurture it.’
5 . A Failure to Listen. I was on the way to a board meeting one day and running late when my assistant told me a key employee needed to speak to me but wouldn’t offer details as to what it was about.
I knew it was trouble and it was. She was quitting. And another key person was, too. They were leaving because of problems and concerns they had with the person I’d hired to run the business.
As I dug into my team and their collaboration and working style, I found problems with employees, culture and customers that I had previously been too distracted to notice.
In the end, we lost several important people, but more importantly, we lost
the trust of our team and a good amount of business momentum.
While we eventually regained both, I learned that as the senior leader in an organization you must always pay attention to your environment. You can’t ignore your gut instincts because you are busy or distracted, and you cannot put barriers up that prevent people from telling you about problems that you don’t see.
Moving on From My Mistakes
As I reflect on these avoidable, self-inflicted, near disasters, I’m grateful to have survived them. Often, other business leaders are not as fortunate. I learned lessons that I could have learned in less painful ways, but they are ones I’m not likely to ever forget.
Consider these takeaways:
1. Pay attention to the details of your finances. Know how much cash you have. Double check and ask questions. Know how much real working capital you need for contingencies and build that as fast as you can when your business is still young. Have a line of credit in place for when all else fails.
2. You can’t dictate culture; you can only nurture it.
3. Don’t put too many eggs in one basket by allowing any customer, carrier or supplier to threaten your survival should they make a decision to leave you.
4. Start small and test before making big, expensive investments.
5. Never isolate yourself from the people in your business by being too busy to listen.
We all make mistakes, but I hope that the ones I’ve made and recounted here will help you avoid at least a few. You will make a mistake, but when you do, spend the time to draw lessons from it and move forward.
Caldwell is an author, speaker and mentor who has helped independent agents create more than 250 independent insurance agencies. Learn more by visiting www.tonycaldwell.net or contacting him at tonyc@oneagentsalliance.net.
Idea Exchange: Artificial Intelligence
AI Revolution in Insurance: Opportunities and Legal Pitfalls
The insurance industry is in the midst of a digital revolution, with artificial intelligence (AI) at the heart of it. From streamlining claims processing to creating personalized policies, AI has quickly become a vital tool for insurers striving to stay competitive. But as with any disruptive technology, the rapid adoption of AI within the insurance space is introducing a new set of challenges — especially in the legal arena.
approach is not only helping insurers better understand their clients but also curbing fraud by flagging unusual behavior patterns.
By Marc Jacobs
For insurers, AI isn’t just about boosting efficiency; it brings with it an evolving landscape of regulations, ethical concerns and potential liabilities. Here’s a look at the opportunities and risks insurers should consider as they integrate AI into their operations.
Transforming Insurance Operations with AI
AI’s impact on insurance operations can’t be overstated. By automating repetitive tasks, AI enables insurers to operate more efficiently and provide better customer service. Here’s where it’s making the biggest difference:
Claims Processing: With AI-powered tools, insurers can verify documents, detect fraud, and approve claims faster than ever — improving accuracy and cutting down on human error.
Underwriting: AI allows underwriters to analyze vast datasets quickly, predicting risks more accurately and leading to more precise, personalized premiums.
Customer Service: Chatbots and virtual assistants using natural language processing (NLP) are transforming how insurers interact with customers, providing instant information and assistance.
AI is also enhancing risk assessment and pricing, pulling from data sources like IoT devices, social media and health records to refine pricing models. This data-driven
But while AI offers many benefits, insurers must tread carefully to avoid legal pitfalls. For insurers, AI isn’t just a powerful tool; it’s also a potential minefield of legal complexities. Here are the biggest issues they’re facing:
Data Privacy and Security
AI systems rely on huge volumes of data, including sensitive information like health and financial records. This brings strict data privacy laws into play, especially when third-party AI resources are being utilized to analyze or process information.
Compliance with GDPR and CCPA: Insurers need to comply with regulations like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), which require robust data protections. Any slip-ups — like unauthorized data use or a breach — could mean hefty fines.
Compliance with HIPPA: The Health Insurance Portability and Accountability Act (HIPAA) applies to the use of AI tools in healthcare, and developers must take steps to ensure compliance. When AI functions are outsourced to third party vendors, adhering to HIPAA’s privacy rules to protect individuals’ medical records and other individually identifiable health information is pivotal, and sharing that information with an outside AI vendor tool or using a non-closed AI universe raises serious concerns about compliance.
C ybersecurity Risks: Insurers are a prime target for cyberattacks due to the sensitive data they collect. Security breaches could result in legal action and reputational damage.
Algorithmic Bias and Discrimination
When AI algorithms process data, there’s a risk of inadvertently embedding biases, potentially leading to discriminatory outcomes. For example, an algorithm used for underwriting might unknowingly
penalize certain groups, raising concerns under anti-discrimination laws like the Equal Credit Opportunity Act (ECOA).
To manage these risks, insurers must keep a close eye on their algorithms and implement regular audits to ensure fairness. Regulators increasingly demand transparency in AI-driven decisions, so insurers may find themselves in hot water if customers are denied coverage or charged higher premiums without a clear explanation.
Transparency and Accountability
Speaking of transparency, AI often operates as a “black box” — its decision-making process can be difficult to interpret. This lack of clarity can be problematic under laws like GDPR, which grants individuals the “right to explanation” for automated decisions affecting them.
Moreover, insurers need to think about liability for AI errors. If an AI system
denies a legitimate claim or makes a poor risk assessment, who’s responsible — the insurer, the AI vendor, or the software developer? These are questions insurers will need to address as AI becomes further embedded in their operations.
Keeping Up with Regulatory Compliance
The regulatory landscape surrounding AI is constantly evolving, with new laws and guidelines being developed to address the unique risks AI presents. For insurers, this means staying on top of not only U.S. regulations but also international standards if they operate globally.
With each new regulation, insurers may need to adjust their AI systems to ensure compliance — particularly in areas like data privacy and algorithmic accountability.
Intellectual Property (IP) and Vendor Relationships
Many insurers partner with third-party vendors to develop or deploy AI tools, which brings intellectual property considerations into play. Insurers must ensure
they have the necessary licenses to use and modify AI algorithms and secure rights to external data sources for training these models. Missteps here can lead to disputes over IP ownership or improper use of data, so well-drafted contracts are essential.
Ethical AI and Governance
With AI’s influence expanding, regulators are placing increased importance on ethical AI practices. Insurers are expected to establish governance frameworks that promote fairness, accountability and transparency in their AI-driven decisions. This includes ensuring that AI doesn’t inadvertently infringe on customer rights or engage in unfair practices.
Insurers that fail to align with these emerging standards not only risk legal repercussions but could also suffer reputational damage, eroding customer trust.
Five Key Questions
To keep pace with AI’s rapid evolution and avoid legal risks, insurers should work closely with their legal teams. Here are
some questions insurers should ask:
How do we ensure compliance with privacy laws like GDPR and CCPA? Note that staying compliant involves setting strict data privacy protocols to avoid costly breaches and fines.
How can we prevent bias in our algorithms? Regular audits and adjustments to AI models as needed would certainly go far when it comes to compliance with anti-discrimination laws.
What are our obligations around AI transparency? Legal teams should establish clear frameworks for explaining AI-driven decisions to meet regulatory requirements.
How can we manage liability for AI-related errors? Nothing can substitute for human oversight, especially when it comes to critical decisions. Likewise, carriers would be wise to establish contracts that clarify liability with AI vendors.
What should we include in contracts with AI vendors to protect our IP and ensure compliance? To be sure, securing clear ownership rights and shared compliance responsibilities can prevent legal and operational headaches down the road.
The promise of AI in the insurance industry is vast, from enhancing efficiency to improving customer experiences. However, to truly benefit from AI, insurers must be proactive in managing the associated legal and ethical risks. This includes not only meeting data privacy and anti-discrimination standards but also fostering transparency and establishing accountability.
In this rapidly changing landscape, a collaborative approach between insurers, their legal teams and technology partners is key.
With thoughtful governance and a commitment to compliance, insurers can harness AI’s potential while safeguarding their business and customer trust in the digital age.
Jacobs is a partner at Michelman & Robinson, LLP, a national law firm with offices in Los Angeles, Irvine, San Francisco, Dallas, Houston, Chicago, and New York City. He can be contacted at 310-299-5500 or mjacobs@mrllp.com.
The insurance industry is facing a significant rise in roof-related claims. The combination of increasingly severe weather events, inflation-driven repair costs and the growing issue of roofing scams has created a perfect storm — one that is straining insurer portfolios and impacting policyholders, particularly those with high-value properties.
By Stephen Poux and
In 2022 alone, convective storms (which include hail and wind damage) resulted in $29 billion in roofing claims. For instance, severe convective storms, such as the August Midwest Derecho, caused significant insured losses across the U.S., contributing around $10.9 billion in dam-
ages, data from the Insurance Information Institute shows.
These storms have become more frequent and intense, leading to substantial impacts on insurance portfolios, especially for roofing claims. By 2023, I.I.I. data shows the total damage caused by convective storms had nearly doubled to $57 billion, underscoring the escalating challenges faced by both insurers and homeowners.
damage from hailstorms saw a significant increase.
Those who work to insure high-networth individuals know that protecting their homes requires more than standard coverage.
The Perfect Storm of Roof Claims: What’s Driving It?
Several key factors are driving the rise in roof claims. A changing climate leads to more frequent and severe storms, resulting in widespread and costly damage.
Between 2022 and 2023, claims for roof
One notable spike was reported by State Farm, where their hail claim costs jumped by over $1 billion, reflecting a substantial surge in claims numbers and the inflationary impact on materials and repairs. The number of claims rose by nearly 45,000 during this period, driven by more frequent hail events. Other reports suggest that hailstorm activity, particularly in early 2023, spiked by nearly 74% compared to the previous year, based on data from NOAA .
Roofs covered in asphalt shingles — the most common and affordable roofing material in the U.S. — are particularly vulnerable, especially as they age. Even newer luxury homes aren’t immune, as large roof areas mean higher repair costs when damage does occur.
In one case, a high-net-worth homeowner in Texas faced a claim for nearly
Diane Delaney
$150,000 after a hailstorm left dents in a newly installed asphalt shingle roof. Nature is taking its toll, but that’s not the only reason rates are climbing. Roofing scams are rising, with unscrupulous contractors encouraging unnecessary or fraudulent claims — sometimes years after a storm. These scams are driving up costs for everyone, affecting insurers and policyholders. For luxury homes, these fraudulent claims can result in non-renewal or roof coverage limitations, leaving them vulnerable.
How Insurers Are Adapting: A Changing Coverage Landscape
The growing strain on insurers has led to adjustments in how roof claims are handled. Underwriters are now more selective about the properties they insure, placing a particular focus on roof condition and age. Policies that once provided full roof replacement coverage without age limits are now subject to depreciation clauses. Roofs older than 15 or 20-plus years may no longer qualify for full replacement, with some policies only covering a percentage of repair costs based on the roof’s age. Additionally, insurers are using advanced technology to assess roof conditions remotely. Satellites and drones are capturing images of properties, so roofs must look good, because their appearance
November 18, 2024
Glencar Insurance Company
200 South Orange Avenue, Suite 1900 Orlando, FL 32801
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 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.
could directly affect how your home is evaluated.
‘For those working to insure high-net-worth individuals, taking a proactive approach to roof maintenance is no longer optional — it’s a necessity for maintaining insurability.’
In one instance, a high-net-worth client was denied coverage renewal after a drone assessment revealed extensive wear on a 22-year-old roof. The insurer insisted on immediate replacement or refused to renew the policy.
For those working to insure high-networth individuals, taking a proactive approach to roof maintenance is no longer optional — it’s a necessity for maintaining insurability. Getting them to invest in Class 4 hail-resistant roofs can reduce the risk of storm damage, potentially lower premiums and ensure smoother claims handling in the future.
A well-maintained roof signals to insurers that they are serious about protecting their home and, by extension, their risk portfolio.
The rise in roof claims has led to signif-
November 18, 2024
Cedar Insurance Company
75 Vanderbilt Avenue, Suite 311 Staten Island, NY 10304
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 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.
icant changes in the insurance industry. By staying ahead of these trends, agents and brokers can better educate and protect their client’s investments and ensure they maintain access to the coverage they need.
As fraudulent claims and roofing scams become more prevalent, advise clients that these practices jeopardize their coverage and drive up costs for everyone. Proactive education and vigilance are vital to safeguarding homes and the health of the insurance market.
Poux is executive vice president of risk management at The Liberty Company Insurance Brokers. He has more than 30 years of experience working with high-net-worth families. Poux has held leadership roles at Chubb, Fireman’s Fund and AIG. He is also a volunteer firefighter. Email: Stephen.Poux@libertycompany.com.
Delaney is CEO and executive director of the Private Risk Management Association. She spent more than 18 years in the industry as head of sales training at AIG before joining PRMA. Her experience includes building a high-net-worth sales school designed to educate brokers on advising clients better.
Closing Quote
2025 Underwriting Trends for Worship Facilities
By Jeff A. Zehr
As insurers look to 2025, several trends are emerging that affect premium and deductible costs — leading to lengthy conversations between insurance agents and brokers and their customers.
For worship facilities, some of the most prevalent trends include:
• Weather-related disasters factoring into probability modeling.
• Social inflation and nuclear verdicts are forcing insurance companies to shift the burden of a rising number of claims to all their customers.
• The increased cost of building supplies means organizations should budget more for premiums.
• Aging infrastructure may lead to insurability problems.
• Increased online offerings could cause risks to organizations’ cybersecurity.
The rising costs resulting from these trends are forcing insurance companies to rethink how they calculate risks. Here is a closer look:
Weather-related disasters. Insurance companies rely on models to determine how much they will charge for premiums. However, weather-related disasters across the U.S. — including hurricanes,
wildfires, flooding and severe storms — have resulted in more claims than usual, which have thrown off the original models.
Underwriters must now take the “new normal” into consideration when determining premiums and deciding the geographic areas where they can afford to insure. That affects individual organizations when they see their premiums rise and wonder what caused the increase.
Social inflation. Social inflation contributes to an environment in which insurance companies’ claims are increasing at a rate greater than normal economic inflation. As plaintiffs seek larger amounts for their injuries, the resulting “nuclear verdicts” require insurers to pay out much more than they anticipated.
These large payouts increase carriers’ overall costs, often resulting in higher premiums for customers.
Building supplies. Inflation has led to a marked increase in the cost of building supplies; it’s more expensive to replace a building than it was 10 years ago. While that reasoning is logical to most who work in the insurance industry, it may not be intuitive for customers, who do not understand why their premiums are rising. It is important communicate with stakeholders about the situation to avoid consequences for under-insuring a property.
Aging infrastructure. In the case of houses of worship, aging buildings could have a major effect on premiums, deductibles and insurability. Time is not usually kind to buildings — especially when
they weather years of high winds, hail, snow, ice, and normal wear and tear.
Even when a building is only a few decades old, it is likely to require repairs. Insureds must decide if those repairs are worth the cost. Some organizations may need to upgrade certain vital aspects of their facility to keep their insurance policy. Buildings must be prepared for severe weather that could cause devastating damage to their infrastructure.
In some cases, the congregation may need to consider starting over with a new, modern building. It is possible this could save them money in the long run, because a newer building would have the latest upgrades and may reduce premiums.
Cybersecurity risks. After the COVID-19 pandemic forced organizations to move their operations online, many have learned some people prefer to have only online interactions. So they have further enhanced their network capabilities to have more virtual offerings. This opens organizations up to a significant amount of risk associated with cybersecurity. Organizations should be
emphasizing efforts to protect their network and stakeholders’ personal and financial data.
Important risk management steps organizations should consider include:
1. Bringing a security vendor on board. Several firms offer data protection technologies.
2. Limiting the number of staff members and volunteers who can access confidential data. The fewer people who can access sensitive data, the better.
3. Maintaining network security. Organizations should not open their Wi-Fi network to the public or broadcast their network name.
4. Keeping a clean machine. Make sure all software is updated on internet-connected machines. If software is not being used it should be deleted.
It is important for anyone who works in the insurance industry to be aware of the above trends, as they may significantly affect interactions with customers.
Zehr is senior vice president, underwriting, admitted business, at Church Mutual Insurance Company.
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