Insurance Business America issue 2.03 by Key Media

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IBAMAG.COM ISSUE 2.3

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GENERATION People Cut-throat Mediocre

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HARNESS THE POWER OF THE NEXT GENERATION OF INSURANCE PROFESSIONALS BY:

• PREPARING GENERATION X TO INHERIT MANAGEMENT RESPONSIBILITIES

JOSH MOFFITT ON SMART GROWTH AND FINDING THE

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E V ' O H W N E M O W 0 5 K R A M R I E MADE TH

E WO M T I L M

URAN

BRANCH DEVELOPMENT HOW TOP NETWORKS HELP THEIR

• TRAINING EMPLOYEES TO SUCCESSFULLY BRIDGE THE WIDENING TALENT GAP

• CONNECTING WITH YOUNG WORKERS AND IMPROVING INDUSTRY IMAGE

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NICHE UNDERWRITING PHARMACEUTICALS MEDICAL DEVICES Complex RiskS TRANSACTIONAL RISK REQUIRE COMPLEX CONSTRU INNOVATIVE RENEWABLE ENERGY PR THINKING. LONG-TERM AND HEALTH Navigating your way in ENERGY AND MARINE the world of complex risks is challenging. NICHE UNDERWRITING RSG Underwriting Managers’ ADMINISTRATION DISTRIBUTION MGU facilities offer the expertise, intellectual EXCESS SURPLUS LINES capital and creativity to guide you along the path to INNOVATIVE PROFESSIO solutions. You can count on RSG UM to deliver unique, and LINES DISTRIBUTION sometimes unexpected, solutions to your challenging risks. For PUBLIC PHARMACEUTICALS more information, contact RSG Underwriting Managers NUTRITIONAL SUPPLEMENTS at (855) 201-2000 or visit www.ryansg.com. MEDICAL DEVICES TRANSACTIONAL RISK COMPLEX CONSTRUCTION ENERGY AND MARINE

RSG Underwriting Managers, LLC, is a Delaware series limited liability company and a subsidiary of Ryan Specialty Group, LLC, specializing in underwriting management and other services for insurance products distributed through agents and brokers. In California: RSG Insurance Services, LLC, Lic. #0E50879. Direct Group Limited (Registered No. 2461657) and Millennium Insurance Brokers Limited (Registered No. 3566382) are insurance distribution businesses and are authorized and regulated by the Financial Services Authority. © 2014 Ryan Specialty Group, LLC

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There are numerous qualities required to succeed in the insurance business.

None of them have anything to do with gender.

Congratulations to all our female executives for winning the Insurance Business Americaâ&#x20AC;&#x2122;s Elite Women In Insurance Award.

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EDITOR’S LETTER / 2.03

A CRUCIAL CONVERSATION It’s certainly not, ahem, the oldest profession in the world, but selling insurance comes pretty close. The truth is insurance agents were helping people in the colonies before this country was formed. But that history may be part of the problem when it comes time to attract young players to the industry. Statistics identify the average age of the American insurance agent at 53—that’s well above the 20-something target for an industry desperate to connect with the next generation of homeowners, drivers and small business owners. But the question remains: How can the industry convince Generation Y that there are career opportunities in insurance? That dilemma has given rise to this issue’s Next Generation special feature. After administering a nationwide survey of insurance professionals, we were able to identify the unique pain points of independent agencies trying to weather this “talent crisis.” The top struggles identified by readers? The expense of recruitment, generational conflicts in the workplace and young people’s lack of interest in a career in insurance. It seems that despite the country’s lingering unemployment rate, insurance companies are struggling to engage that critical next generation. That’s why we tasked ourselves with getting to the heart of the matter. By polling young people on their career goals and identifying innovative recruitment and training solutions throughout the industry, we’ve matched those pain points with real answers. From exploring exactly what your company is up against to training new recruits once you find them, this feature is your guide to bridging the industry’s widening talent gap and emerging even stronger.

COPY & FEATURES MANAGING EDITOR Vernon Jones ASSOCIATE EDITOR Caitlin Bronson CONTRIBUTORS Jill Gregorie, Donald Horne, Rick Dennen, Jill Fraser, Deborah Gregory, Kevin Mooney PRODUCTION EDITORS Roslyn Meredith, Moira Daniels

ART & PRODUCTION DESIGN MANAGER Daniel Williams GRAPHIC DESIGNER Joenel Salvador

SALES & MARKETING VICE PRESIDENT Cathy Masek NATIONAL SALES MANAGER James Donnellan MEDIA SALES MANAGER Molly Hummel COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Alex Carr

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial inquiries Brian Anderson Brian.Anderson@keymedia.com Advertising inquiries James Donnellan james.donnellan@keymedia.com Molly Hummel molly.hummel@keymedia.com Subscriptions subscriptions@keymedia.com Key Media 7807 E Peakview Ave Suite 115 Centennial CO 80111 United States of America tel: +1 720 452 2600 Offices in Sydney, Auckland, Manila, Toronto ibamag.com Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as IB magazine can accept no responsibility for loss

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Contact the editor:

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© 2014 ACE Group. ACE®, ACE logo®, and ACE insured are trademarks of ACE Limited. Insurance is provided by ACE American Insurance Company (Philadelphia, PA) or, in some states, other insurers within the ACE Group of Companies or its allied distribution associates. All products may not be available in all states and surplus lines products can only be offered through licensed surplus lines brokers. Not all applicants are eligible for a policy.

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PROD PROOF

CONTENTS / 2.3

O E W ME

ELIT

08 | All in the family Coryn Thalmann on balancing old with new, integrity with fun, and work with family

BUSINESS STRATEGY 42 | Preparing for the right exit Your book of business won’t disappear the day you walk out of the oﬃce, so make sure your legacy doesn’t either, writes Rick Dennen 46 | Answering the call for uniformity Agencies, carriers, regulators, broker/ dealers and vendors unite to simplify business

AE CW

COLUMNS 54 | 15 months of hell Brokers were all ears when kidnapsurvivor Amanda Lindhout shared her story with them at a conference this spring. The account is highlighting the need to better acquaint and so protect clients with kidnap and ransom insurance. Donald Horne reports

SPECIAL REPORT Elite Women Insurance Business America showcases notable female leaders who are shattering molds, stereotypes and the industry’s longstanding glass ceiling

FEATURES 06 | Stats Insurance agents and social media

58 | Favorite things Kurt Bingeman, owner and president, Russell Bond & Co. CODY Artist: nb Job Colors: 4

48 | Getting inside our heads Taking your team to the next level means understanding your employees and yourself. Jill Fraser reports

60 | The Last Word Relevance in the Digital Age

T X E N Sales ing

Gutter in Spread: NA

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COVER STORY The power of the next generation One-quarter of the insurance industry’s workforce is expected to retire by 2018, but a negative industry perception, a lack of career awareness and generational prejudices are preventing many from harnessing the talent needed to propel future growth

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Client: LIBERTY Job Name: LIU_121596_REVKID_P4A L: 7 x 10 T: 7.875 x 10.75 B: 8.5 x 11.125 Fonts: Arial Reg/Arial Narrow Reg

2 | Editor’s Letter A crucial conversation

CHECK IT OUT ONLINE: InFocus: Environmental InFocus: Cyber liability

InFocus: Hospitality Special reports: IBA Hot 100 Latest jobs ibamag.com

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THERE ARE SOME RISKS ONLY A SPECIALIST CAN HANDLE.

Weâ&#x20AC;&#x2122;re LIU, the global specialty lines division of Liberty Mutual Insurance. To meet our underwriters and learn more about how they can help you and your clients handle unique risks, visit www.LIU-USA.com.

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INSURANCE AGENTS AND

STATISTICS

SOCIAL MEDIA

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PLATFORMS BEING USED BY INSURANCE AGENTS (%):

YOUR CLIENTS LIKE YOU! THEY REALLY LIKE YOU!

200 likes

Website

Facebook

(broker avg.)

Facebook

Email blasts

440 followers Twitter (broker avg.)

49 Blog

46 LinkedIn

34 Twitter

Google AdWords

YouTube

Google+

DISTRIBUTION OF INSURANCE-RELATED CONSUMER POSTS 48.9%

Twitter 25.6%

Facebook Blogs

10.3%

Forum replies

9.5%

Comments 2.4% Forums 2.0% Videos

1.0%

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TOP 3 NETWORKS BY MEMBERSHIP 66% 23%

21%

20% 65%

71%

25%

21%

19%

35%

72%

Facebook Google + Twitter

56%

81%

39%

LinkedIn Blogger Pinterest

Odnoklassniki

1.540 11.209 Orkut

Qzone

81% 80% 77% 50% Leads

Build relationships

Social media web demographics

usage among 18-29 year olds

usage among 30-49 year olds

usage among 50 to 60 year olds

usage among those 65 and older

of users access social media from a mobile device

72%

30%

10%

67%

20%

14%

34%

27%

WHAT ARE AGENTS TRYING TO ACHIEVE THROUGH SOCIAL MEDIA?

of all internet users are now active on social media

22%

23%

39%

*The rank is calculated using a combination of average daily visitors to this site and page views on this site over the past 3 months. The site with the highest combination of visitors and pageviews is ranked #1

Brand recognition

22%

24%

72%

19%

Improving service

FACEBOOK

TOP 3 SOCIAL NETWORKS BY MEMBERSHIP U.S.

71% Facebook

25% Twitter

24% Pinterest

TWITTER

Sources: B.H. Burke & Co., Inc. – Social Media and Online Marketing – What’s the real deal?

Pew Research Center BDC Study,“Mapping your future growth,” Oct. 2013 Celent, Realizing the ROI of Social Media in Insurance, 2013 Alexa.com, vincos.it IIABA/ACT “Great Agency Websites”

GOOGLE+

• 1.19 billion monthly active users

• 215 million monthly active users

• 359 million monthly active users

• 23% of Facebook users login at least 5 times per day

• Over 550 million registered users

• Over 1 billion Google+ enabled accounts

• 47% of Americans say Facebook is their #1 inﬂuencer of purchases • 70% of marketers use Facebook to gain new customers

• 34% of marketers use Twitter to successfully generate leads • Fastest growing network with a 44% growth from 2012-2013

• Growing at 33% per annum • 56%: increase in usage by 45- to 54-year-olds since 2012

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INDUSTRY ICON / CORYN THALMANN

ALL IN THE FAMILY

Coryn Thalmann on balancing old with new, integrity with fun, and work with family FAMILY MATTERS

Coryn Thalmann is an accomplished businesswoman, having worked in surplus lines for 20 years and currently serving as co-CEO and COO of Jimcor Agencies. While her entrepreneurial acumen and insights are unparalleled, she makes it clear that enterprising leaders in insurance do not need to be dictatorial to succeed. On the contrary, Thalmann has become an industry leader by prioritizing such virtues as family, balance and altruistic endeavors. Alongside her brother, she runs the business founded by her father Frank Mastowski back in 1986. The firm now operates in seven offices across the Northeast, and specializes in writing property/casualty risk using admitted and non-admitted markets.

“I feel that we are very blessed to have a family business where my brother Jim and I have really been allowed to take over the company and move forward with it,” Thalmann said. “I think the trust you have when working with your family and the communication helps us excel.” She admits it can be difficult to juggle the balance between family life and business life, but working on those communication skills has helped build a foundation for the siblings to work together and create long-lasting results. “Because we work hard on that – getting along well and working together well – I really rely on my brother, who is definitely my business partner. I feel safe sharing my thoughts – whether it’s ideas, or suggestions, or anything like that; we honestly work together and I never think ‘maybe I shouldn’t be saying this or doing that’.”

ACHIEVING BALANCE Thalmann admits this family-based approach to Jimcor’s business model can be hard to maintain as it grows in size and scale, but insists that certain traditional values will always have a role in their opera-

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tions. “We pride ourselves on doing the right thing, being trustworthy, creating an atmosphere where people feel valued and want to be part of a team and something larger than ‘we’re employees who have to come here every day,’ having integrity, and a warm reputation,” Thalmann said. It is this balance between personality and professionalism that Thalmann insists helps her firm to thrive. “We’ve created a professional atmosphere where people know there’s an expectation of hard work and dedication, but we also like to have fun. We want people to want to come in every day – if they’re unhappy and don’t enjoy coming to work, they should work somewhere else.” This is not the only aspect of her career where Thalmann seeks a healthy equilibrium. After she graduated from American University, she spent time in the UK working in the Lloyd’s of London marketplace. While there, she made personal connections and fostered professional relationships that she would still rely on decades later in New Jersey. Although she understands the importance of embracing new technology and innovative ways of conducting business, she knows old-fashioned skills like networking will always prove invaluable. “I think our industry, like all industries, is going on a technology voyage. Everyone is focused on technology and what it can do for you. We are here at Jimcor as well – technology continues to be a tool to help get the job done more effectively and efficiently,” she said. “Surplus lines will always have a certain place, though, in relationships and knowledge and expertise. You’re never going to be able to take complicated accounts and put them online.”

hours, involvement with associations – whatever it was, you had to go the extra mile, get involved with things and follow through to prove yourself,” Thalmann said. This changed when she realized she couldn’t maintain that level of professional commitment with raising children and spending quality time with them at home. “You have to make good decisions, learn how to say no, and when you do make a decision, stick with it and get rid of the associated guilt. If I need to be at a work event, I’ll be in the moment with that and not worry about my kids,” she said. “Conversely, when I’m with my children, I won’t constantly be on email and the phone, taking time away from them. I’m not always good at it, it’s defi-

We pride ourselves on doing the right thing, being trustworthy, creating an atmosphere where people feel valued and want to be part of a team and something larger than ‘we’re employees who have to come here every day’

SELFISHLY GENEROUS In addition to her full workload, Thalmann also volunteers time to a host of charitable causes. She has served in leadership positions for such organizations as the Young Insurance Professionals of New Jersey, Professional Insurance Agents of New Jersey, and the Under Forty Organization of AAMGA. While she enjoys being active in the profession and using her years of experience to mentor young, upcoming talent, she isn’t afraid to put limits on work life in order to spend time with her husband and children. “The obstacles early on in my career prior to having a career were: you had to prove yourself, you had to work hard at what you do by putting in extra

nitely easier said than done, but it’s all about making good decisions and choices, and being able to say no. “You can’t say no all the time, but pick and choose wisely, and don’t overextend yourself into areas where you’re going to sit there getting ready for a long-distance trip and think ‘Why did I do this? I shouldn’t have done this.’” “Right now, my main hobby is playing with my kids,” she said. “In about 10 years, my kids are going to be out of the house – if not sooner than that – and I want to take advantage of every moment I can where they want to climb in my lap and give me a hug.” JULY/AUGUST 2014 | 9

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COVER STORY / NEXT GENERATION

WINNING OVER

THE NEXT

GENERATION Self-obsessed. Self-indulgent. Lazy. Entitled. Millennials are certainly a different breed, but they’re also critical to the future of the insurance industry. And perhaps those perceptions aren’t so accurate after all.

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A hiring crisis in the insurance industry is imminent. Most in the workforce are now older than 40, and among independents, the numbers are even more startling. According to MarshBerry data, more than 40 percent of agency staff members are older than 51, and maintaining the same number of producers through the end of the decade means taking on three young hires for every current employee. At the same time, a Department of Labor report predicts demand for insurance agents will skyrocket a full 21 percent by 2020. Itâ&#x20AC;&#x2122;s a picture of urgency with which most in the

industry are intimately acquainted. Despite the writing on the wall, however, just 18 percent of agency employees say they are adequately prepared for the demands of an impending talent gap, according to results from a new Insurance Business America survey. Respondents nationwide answered questions asking them to name some of their greatest challenges in attracting and retaining young employees. Agency owners and staff laid blame to the expense of recruiting and training, a scant supply of qualified talent and a perceived lack of work ethic in younger employees. JULY/AUGUST 2014 | 11â&#x20AC;&#x201A;â&#x20AC;&#x201A;

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COVER STORY / NEXT GENERATION

Millennial Viewpoint

“As a new generation of insurance professionals, we are excited to learn about insurance—if you can believe that. If you have people willing to mentor us and involve us in work that actually adds value to the company, that makes all the difference in the world. ” Alyssa Bouchard Bouchard, Associate broker, AmWINS Age: 23

The end result, however, is the same: independent agencies are struggling to adapt their business models to attract and retain the next generation of insurance professionals.

UNDERSTANDING THE PROBLEM Ask the average insurance professional how he or she got into the business, and the answer is almost eerily predictable: “I just fell into it.” In some ways, that explanation says far more

about the industry’s hiring crisis than any one set of statistics. Even the industry’s elite, like Lloyd’s North America President Hank Watkins, weren’t planning on a career in insurance. “When I started in the industry, it wasn’t my original plan. I went into it because my goal was to work in San Francisco right after college, and the banks were in trouble at the time,” Watkins says. “I think very few of us had any initial interest in insurance as a career.” To Scott Culler, president of Markel West Region and co-chair of NAPSLO’s Career Awareness and Internship Committee, that’s largely a failing of the industry itself. “I don’t know that we’ve done a good enough job selling just how great insurance is—just how solid and how exciting it is,” Culler says. “We kept it a secret more so than promoting it, and some of us may even have felt guilty about the industry we work in. Now there’s a perception of insurance as not very glamorous and it’s one of the biggest hurdles we face in attracting new talent.” Nowhere is that lack of career awareness and overall disengagement with it more apparent than in the one generation the industry most desperately needs to impress. Aged 33 and younger, millennials—sometimes called Generation Y—are 77 million strong and boast some of the highest levels of education yet.

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IT’S THEIR FAULT! What is the main reason your agency is not adequately prepared to address the oncoming talent gap? LACK OF WORK ETHIC AMONG YOUNG PEOPLE

25%

EXPENSE/LACK OF RESOURCES

21%

NO QUALIFIED CANDIDATES IN MY AREA YOUNG PEOPLE ARE NOT INTERESTED IN AN INSURANCE CAREER

20.5% 20%

TOO SMALL/RURAL TO ATTRACT STAFF

NO PLAN IN PLACE TO ADDRESS THE ISSUE

Source: Insurance Business America survey

Ambitious, innovative and tech-savvy, these young people will be critical in adopting new automation advances and building bridges with younger members of the workforce. In fact, given that millennials are predicted to comprise 75 percent of the labor force by 2025, choosing not to engage this generation would be tantamount to an industry suicide mission. Yet several problems hedge up the way. A 2012 survey from The Griffith Insurance Education Foundation and The Institutes reveals that just 5 percent of millennials say they are familiar with the insurance industry, and fewer than one in ten expressed interest in working in insurance. When asked why, 52 percent said they did not want to sell insurance and 44 percent said insurance sounded “boring.” Displaying a fundamental failing in industry understanding, however, 61 percent of respondents said they would personally like a job that includes analyzing risks and recommending solutions. Furthermore, when asked to name their priorities in a career, millennials identified competitive salary, work/life balance, career

advancement opportunities and helping others as their most important considerations—all aspects answered by a role in insurance. Stability is another unique selling point and one that should particularly appeal to millennials, who have had difficulty finding positions in the stilltroubled financial sector. “When you look at 2008 going forward, there were over 200 community banks in the US that failed. I can’t even think of two or three insurance companies that did,” Watkins says. “As far as a resilient industry goes, insurance is one of the better ones out there. That’s definitely going to appeal to young people.” The challenge, then, is bringing that message to where millennials are likely to hear it.

TAPPING EXISTING RESOURCES In some ways, the industry’s goal of an educated, engaged and enthusiastic young workforce is already taking shape. Risk management and insurance (RMI) programs, as well as other insurance-focused curriculums, are now offered to students in more than 100 universities. To Brian S. JULY/AUGUST 2014 | 13

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COVER STORY / NEXT GENERATION

Cohen—former president of Pacific Specialty Group in Anaheim, Calif.—they represent a talent pool akin to the famed farm systems of professional athletics. “You have a lot of people in the industry that look back at their own experience of ‘falling into’ insurance and they believe that because it worked for them, that’s the way it will work for everyone else. I believe that’s fundamentally unsustainable,” Cohen says. “Instead, I approached California State University-Fullerton, which is right in our backyard, and decided that that was going to be my farm system.” Cohen entered into a partnership with the university and began giving guest lectures, deploying younger staff to job fairs and offering a summer internship program to students. Of the 12 interns Pacific Specialty has hosted in the past two-and-a-half years, several have started with the company on a full-time basis. CSU-Fullerton offers a fully functional Center for Insurance Studies and is the latest university to open a chapter of Gamma Iota Sigma, a collegiate fraternity dedicated to risk management, insurance and actuarial sciences. According to Noelle Codispoti, executive director of Gamma, the fraternity boasts roughly 2,400 students eager to start their insurance careers.

All that remains is for companies interested in these students to reach out, Codispoti says. “I still believe companies need to put a greater emphasis on actually recruiting at the entry level,” says Codispoti. “They know they face a talent shortage in a few years, but they’re still trying to get other companies’ trainees.” That is especially true of independent agencies and brokerages. In Codispoti’s experience, many in the producer sector are quick to write off the talent pool provided by groups like Gamma because they believe students are simply not interested. Not true, she says. “Our students do want to go into that segment of the industry, but they are not the companies offering them jobs right now,” says Codispoti. “I think sometimes agents and brokers—especially those on the smaller side—don’t realize they have just as much of an opportunity to get involved in hosting an internship or speaking on campus. “I think the more they do get involved, however, the greater the likelihood students will be to get into their side of the house.”

CONNECTING WITH YOUNG TALENT ON THEIR TURF While the growth of RMI programs and organizations like Gamma Iota Sigma is heartening, it’s not quite enough to keep pace with today’s demand for talent. Analysts at The Institutes

Millennial Viewpoint

“Millennials are looking for employers who confide in their employees and provide us with the freedom to make a difference. It is crucial to provide feedback about our progress towards goals and encourage creativity when setting goals.” Ali Rosenburg, student, The University of Iowa Age: 21 14 | JULY 2014

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predict the industry will need to fill 400,000 positions by 2020 and to meet that mark, prospective employers must cast a far wider net. They must also overcome the added difficulty of not only selling young people on their company, but on a career in insurance as well. One-fifth of Insurance Business America survey respondents said lack of interest in an insurance career is their biggest obstacle in acquiring new talent, and professional recruiters don’t disagree. “If you lead with the word ‘insurance,’ it’s very difficult to get responses from younger talent,” says Art Betancourt, vice-president at MarshBerry. “Instead, we talk about things like communicating with C-level executives, working in risk management and being a consultant to business owners. After researching the company, people do realize it’s an insurance position, but they are much more inclined to reply.” Highlighting the industry advantages spelled out by Watkins is also vital, as is communicating the long-term income opportunities and work/life balance of an insurance career. And when it comes to advertising an open position, the potential magnitude of an industry talent crisis means posting online job listings and sorting through hundreds of resumes just isn’t going to cut it. Today’s managers need to be much more strategic about their recruitment efforts, and they can start by connecting with potential hires in their own playground. For young, entry-level candidates, that means kicking social media engagement up a notch, says Trey Hugley, a veteran insurance recruiter and president of Genesis Resources. “Putting a job listing on Monster is not going to help. I use a lot of social networking because that’s where millennials are,” says Hugley, who has successfully placed young talent with agencies of all sizes. “We do work with Facebook, Twitter and LinkedIn to connect with recent graduates.” When considering who to target through these platforms, Hugley says factors like college major matter far less than how a young person presents themselves online—particularly on LinkedIn.

“You’re not going to attract a 25-year-old unless you differentiate yourself from the tried- and-true granddaddy’s insurance agency.”

Trey Hugley, Genesis Resources

TYPES OF WORK MILLENNIALS SAID WOULD INTEREST THEM 60 50 40 30 20 10 0

45% Work 52% 45% 57% 46% I can Work Helping Working Solving problems

do on my own schedule

that is challenging

others

with people

Source: “Millennial Generation Attitudes About Work and the Insurance Industry,” The Institutes and the Griffith Insurance Education Foundation (2012)

“I look for people who are proud enough of what they did in college to list it on their resume,” he says. “If they’re not proud of what they did for themselves in muscling through those four years at school, who’s to say they will take pride in anything they do for your agency?” Of course, online engagement is a two-way street. Young people can and will research any company within a matter of seconds, and may form an opinion of it just a few minutes later. In order to attract young people online, an agency’s own Internet presence needs to be air-tight. That includes high levels of social media engagement, JULY/AUGUST 2014 | 15

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30131 N

COVER STORY / NEXT GENERATION

THE ATTRACTIONS OF THE INSURANCE INDUSTRY BY GENERATION

The Greatest Generation (ages 64-81)

“I love helping people. I love being able to have my own oﬃce and build my own business in my own town.” –Patrick Freeman, president, Freeman Insurance Services

Baby Boomers (ages 45-63)

“It’s never the same day twice. You can learn so much about so many diﬀerent types of businesses, and ﬁgure out just what makes a business successful.”

“It’s important to these students to meet people who have been in their career for a while, so they can see that you’re just as excited as you were when you started.” Brian S. Cohen, former president of Pacific Specialty Group

–Deb Lauerson, president, York Insurance Agency

Generation X (ages 34-44)

“What I like about our industry is that you have control of your life. I feel like I can make the money I want to make and learn interesting things. I have control over my own income.” –Kip Ulmer, commercial broker, Burns and Wilcox

Millennials (ages 33 and younger)

“What really intrigued me about the risk management and insurance industry is its strategic importance to overall continuity, not just business. If not for risk transfer methods such as insurance, no bridges or skyscrapers would be built and no new medicines would be concocted. Our industry is dynamic and touches all aspects of any organization.” –Cathleen Gabriel, underwriting analyst, Financial Lines group, AIG

an effective display of company values and a website that is streamlined, modern and highly functional. “You’re not going to attract a 25-year-old unless you differentiate yourself from the tried-and-true granddaddy’s insurance agency,” Hugley says. “If all they see is a dead website and information on insurance, they’re going to rule you out pretty fast.” Instead, Hugley suggests highlighting an agency’s community involvement and “sense of fun,” which appeals to millennials’ desire for a positive, well-defined company culture.

YES, FACE-TO-FACE ENGAGEMENT MATTERS TO MILLENNIALS But it isn’t all about the virtual world. As Cohen learned in his partnership with CSU-Fullerton, face-to-face engagement is paramount to making the kind of inroads a company needs in order to start developing a real talent pool. Universities, with their guest lecturer platforms and myriad job fairs, are a good starting point.

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60 50

52.6 52.2 51.8 51.9 2006 2004 2005 2007 200352.8

30131 NAPSLO IBA Fullpg_Ins Bus America 6/12/14 12:53 PM Page 1

Insurance is risky if you don’t know the ropes

NAPSLO members know the ropes NAPSLO members are specialists who create innovative solutions for nonstandard insurance risk. Count on them to deliver custom, cost-eﬀective solutions that are expertly tailored to meet your speciﬁc insurance needs. NAPSLO members...where complex risk meets innovative solutions.

National Association of Professional Surplus Lines Oﬃces

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COVER STORY / NEXT GENERATION

DEALING WITH THE ‘RURAL’ FACTOR Nearly 10 percent of independent agency employees told Insurance Business America their biggest challenge in recruiting young talent could be boiled down to the old real estate motto: location, location, location. These small-to-midsize agencies say that as a rural, small town operation, they lack the appeal of an agency in a big city like Boston or New York. Consequently, they have an added layer of diﬃculty in ﬁnding new hires—especially those coming straight out of a four-year university or RMI program. To combat that problem, Dottie Chalmers Cutter—vice-president of operations at Chalmers Insurance Group in Bridgton, Maine—started to shift her gaze toward those even younger. “Where I think I’ve been most successful is in building a great relationship with our local high schools, including one that is my alma mater,” Chalmers Cutter says. “I sent out letters to all the business teachers in the area asking if they would be interested in my coming in and doing a presentation on insurance as a career opportunity. Students have come up to me afterward and asked to intern, and that’s just the result of a simple presentation.” Chalmers Cutter has since gotten involved with Project InVEST, and seven employees with her agency today came as a direct result of her participation in the program.

Further south in Nashua, N.H., Eaton & Berube Insurance Agency’s Beth Needham has also had success working with Project InVEST. In order to cast an even wider net, however, her agency makes a point to get involved with community non-profits and the local chamber of commerce. That’s how they found their latest hire—a young journalism student who was looking for her first post-college position. Today, that student is employed full-time with Eaton & Berube, building up their social media presence and widening their potential client base. “You get involved in these organizations and learn about people and they learn about you,” Needham says. “Those personal connections are how you build your business—especially for rural agents—so it’s natural that you would build your staff the same way.”

Still hitting a dead end? At Work at Home Vintage Employees (WAHVE), CEO and president Sharon Emek says remote work solutions are some of the best options for rural agencies. “Today, you can work from anywhere. Certain industries lend themselves to remote work, and insurance is one of them,” says Emek. “After all, you can’t always find talent in your backyard and you can’t just move your business to follow that talent.” WAHVE specializes in matching older, retired workers with agencies in need, but Emek says the lesson is universal. After a few years of employment, even relatively young staff members can start working from home. “In an agency office, there is a lot of process work so outsourcing some of that, or having people work remotely, is actually more advantageous,” she says.

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Large (1,500+)

23% MILLENNIALS’ PREFERRED COMPANY SIZE Medium (100-1,499)

30%

Small (less than 100)

47%

Source: Geekwire.com (2012)

Sending younger employees who look and speak like current students is good practice, but even more seasoned executives can make a positive influence—provided they ditch the suit and tie. “Sometimes it’s not necessarily about how old you are, it’s more what your disposition is,” Cohen says. “When they meet you, are you tired? Do you look old? Do you give short answers? “It’s important to these students to meet people who have been in their career for a while, so they can see that you’re just as excited as you were when you started.” Insurance agencies have also found high schools to be an effective, though relatively untapped, source of talent. Communicating insurance career awareness to high school students may be even more effective in solving the talent gap, given that many are still undecided on their future. That’s just what insurance

agencies working with Project InVEST hope to benefit from. A 501(c)(3) organization launched through the Independent Insurance Agents and Brokers of America (IIABA), Project InVEST has a twofold mission: to increase insurance literacy among high school students and to communicate the advantages of a career in insurance. Though Project InVEST made its debut in 1970, InVEST Executive Director Diane Mattis believes the program’s benefits are greater now than ever before. “High schools are no longer primarily interested in getting students college-ready—they want students to be career-ready,” Mattis says. “These students are making career choices in high school and we’ve got to be in there as an option.” Through InVEST, local insurance professionals can visit schools, speak to students about a career in the industry and even offer summer internships and part-time jobs. Students set up

Insurance is risky if you don’t know the ropes NAPSLO members are specialists who create innovative solutions for nonstandard insurance risk. Count on them to deliver custom, cost-effective solutions that are expertly tailored to meet your specific insurance needs. NAPSLO members...where complex risk meets innovative solutions. National Association of Professional Surplus Lines Offices

www.napslo.org

NAPSLO members know the ropes

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COVER STORY / NEXT GENERATION

Millennial Viewpoint

“Recruit students straight out of college that majored in low-correlating, entry-level careers. Give them a steady and entry-level flat salary, and instead of a salary increase based on their commission, it can be directly tied to the percentage of student loan repayments the company will subsidize. If they increase the percentage monthly in correlation with sales, then that monthly incentive will satisfy the instant gratification that our generation loves.” Michael Cain, second-generation agency employee

Age: 26

mock insurance agencies during the program and get a chance to converse with local agency representatives—and it’s all free for the agency. Mattis describes the response of students as “overwhelming.” “Once we get the volunteer agencies and schools connected, both teachers and students are amazed at the different career options within the industry,” she says. “I think it’s a very ‘aha’ moment for them.” InVEST currently works with 518 teachers in 45 states, and is just shy of 19,000 student graduates. A significant portion of those students have even gone on to a career in insurance right out of high school.

GETTING INTERNSHIPS RIGHT For agencies not quite ready to hire millennial employees, hosting an internship is an effective opportunity for both student and agency to take a “test drive.” In fact, 42 percent of all new hires went through internships, according to data from The Institutes. “Employers who offer internships can use them

as month-long interviews,” says The Institutes’ executive vice-president, Anita Bourke. “They’re able to choose highly qualified candidates from the beginning and determine, at the end of the internship rather than an hour-long interview, if the interns are good fits before committing to hire them.” One of the best industry models of an effective internship program comes from NAPSLO. Dating back several decades, the trade association’s competitive internship program allows students across the country to spend five weeks with an insurance company and four weeks with a broker. During that time, host companies give interns a project designed to give meaningful work to the intern and complete an important task for the company. Interns also rotate through several departments within the host company and work with a variety of high-level professionals. “Having an opportunity to work on ensuring that NAPSLO has a strong internship program and is supporting the development and growth of our younger people is very rewarding,” says Mike Miller, president and COO of Scottsdale Insurance and Culler’s co-chair on NAPSLO’s Career Awareness and Internship committee. “We are helping a young person get involved in our industry and also having the opportunity to hire them, or at least learn from them. Who knows who you might hire someday that started as an intern?” Alyssa Bouchard, a recent RMI graduate who just accepted an associate broker position with AmWINS, credits her participation in the NAPSLO internship program with her ultimate decision to work excess and surplus lines. “I completed the NAPSLO internship last summer and it’s a huge part of the reason I decided to go into E&S,” says Bouchard. “There’s a lot you can learn in the classroom, but when I saw the terms and concepts I was using on a day-to-day basis in action, it made all the difference in the world.”

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A FAIL-PROOF METHOD FOR TRAINING NEW HIRES At MarshBerry, vice-president Art Betancourt has helped develop a regimented training approach for new independent agency hires that—when followed—has a 71 percent success rate. The typical agency also sees a dramatic increase in production within the first year of hiring the new employee, gaining more than $50,000 in revenue. “You can hire the right person, but if you don’t implement the right process post-hire, you’re not going to be successful,” Betancourt says. The first step is a competitive compensation structure. Offering a base salary plus commision “attracts the right individuals” and also incentivizes them to improve, he notes. MarshBerry gives new producers the opportunity to earn commission immediately, though they still have to validate their compensation through activity. The company sets a minimum number of appointments for each new hire, and if that number is missed, compensation is reduced. Betancourt also calls for a four-tiered mentorship program. In the first days of an employee’s hire, he or she will be partnered with a closing mentor that offers advice on making a deal. Then, a sales management mentor is brought in to advise on topics like pipeline management and setting goals for meetings. A marketing mentor helps the new hire understand an acceptable submission process, while an education mentor assists the employee in getting licensed within two weeks of hire. “Most agencies don’t come up with this kind of systemic model on their own,” Betancourt says. “When it’s not followed, we only see a 34 percent success rate.”

30131 NAPSLO IBA 3rdpgH_Layout 1 6/12/14 12:50 PM Page 1

Insurance is risky if you don’t know the ropes

NAPSLO members are specialists who create innovative solutions for nonstandard insurance risk. Count on them to deliver custom, cost-eﬀective solutions that are expertly tailored to meet your speciﬁc insurance needs. NAPSLO members...where complex risk meets innovative solutions.

NAPSLO members know the ropes National Association of Professional Surplus Lines Oﬃces

www.napslo.org

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COVER STORY / NEXT GENERATION

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WORLD WIDE SPECIALTY PROGRAMS: FROM STAFFING INDUSTRY PIONEER TO TRENDSETTER HIRING THE RIGHT CANDIDATE When the time comes to hire a young employee full-time, careful interviewing practices are of the utmost importance. After all, only one out of every five hires eventually becomes a successful producer, according to The Middleton Group, and the average cost of a hiring mistake is 10 times the employee’s compensation. To avoid that fate, Genesis Resources’ Hugley advises agencies to take their time in considering young candidates. “My suggestion is a minimum of three in-person interviews,” he says, “and the first one should be conducted by the agency owner. They know the most about the business and can rule people out straight away.

Millennial Viewpoint

“Risk management and insurance firms should continue reaching out and supporting new talent from the university and even high school levels. To do this, the insurance industry needs to establish and strengthen relationships with faculty who serve as gatekeepers to valuable talent pools. Without connections to insurance, most of my peers would not have considered pursuing opportunities within insurance.”

When Eileen Lesberg founded World Wide Specialty Programs almost 50 years ago, she had a singular purpose: to design, develop and provide insurance products for staffing firms, long before industry-specific policies were available. Even though insurance carriers at the time had virtually no knowledge of the staffing industry, the word “no” was never an option for her. Five decades later, president Dorothy Taylor guides World Wide by those same simple but powerful principles: track industry changes, listen to clients’ needs, and respond quickly, especially when that means originating new products. Having issued in excess of 100,000 policies to staffing firms — and worked with thousands of insurance brokers — World Wide knows this industry better than any other, hands-down. World Wide is neither a broker nor a wholesaler, but a team of underwriters who sculpt and adjust coverage to meet shifting circumstances — with no learning curve or lag time, just immediate and informed response. Brokers often juggle multiple industries and lack time to track the legal changes specific to an industry. World Wide specializes so they don’t have, have to work with carriers to analyze loss trends and track the growth of industry segments, from vendor management services and virtual offices to data security issues and client risk-transfer requests. World Wide explains the intricacies of coverage to brokers so they can understand the unique risks the industry faces — and how their staffing firm clients can avoid them. The profile of today’s staffing company is very different from the company of decades ago. Placements, delivery, contract requirements and the types of services offered have all changed dramatically, constantly driving new coverage needs. What are the associated risks for a staffing firm when an employee on assignment is serving liquor? Are staffing firms responsible for the actions of placed employees? Will a staffing firm be covered if a vacant office is vandalized? How responsible is a firm for a data security breach? Sometimes firms don’t discover that they lack the proper coverage until they file a claim. For instance, if a firm hasn’t performed a thorough background check on employees placed or potential staff, some errors & omissions policies might not respond when liability arises. Such an oversight can translate to thousands of dollars in judgments and fees against a staffing firm. World Wide knows those risks, evaluates those risks, and offers the coverage to guard against those risks — whether it’s the negligence of temporary or in-house employees, data breaches, or other factors that firms hadn’t even considered. Insurance coverage is only as strong as its underwriter. Under the mantle of leadership that began with Eileen Lesberg and continues with Dorothy Taylor, World Wide Specialty Programs continues to be the singular, leading source for staffing industry insurance. Service may be World Wide’s mantra and unique insurance coverage its history — but cutting-edge insurance policies is and will always be its future.

Cathleen Gabriel, underwriting analyst in the Financial Lines group, AIG Age: 22 22 | JULY 2014

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COURAGE.. ..TO DO WHAT OTHERS WON’T THE INSURANCE SOURCE FOR THE STAFFING INDUSTRY

World Wide Specialty Programs provides the staffing industry with superior insurance programs and support to help the Staffing Industry grow. Look to World Wide for your Staffing Client’s customized coverage and complete protection packages. For more information contact WW at 866-927-2005 or visit the WW website – wwspi.com

World Wide Specialty Programs, Inc. · World Wide New York Insurance Services, Inc. - CA, NH, TX

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COVER STORY / NEXT GENERATION

IN ONE WORD: MILLENNIAL PERCEPTIONS OF THE INSURANCE INDUSTRY

Stagnant

Slea

Complicate

Boring People

Pushy

Good

Cut-thro

Mediocre Dull Mone Sales

Source: Insurance Business America survey

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leazy

ated

ng ple

-throat

“It also means [candidates] have to show patience—they’re not going to get the job right away. If they leave after two interviews, let them walk away even if you like them. The ones who get frustrated are the ones you let go.” Proper vetting is particularly important when hiring producers, says MarshBerry’s Betancourt. “At a certain point in the interview process, we tell the candidate why they’re not going to be a good fit for the agency. We’re trying to put them in a sales environment and see how they handle rejection,” he explains. “A blank stare means there is a red flag.” Wrapping up the interview process with a long lunch or dinner is also a winning strategy, according to Christine Peterson, head of human resources at The Hanover. With more than 15 years’ experience in talent acquisition, Peterson has found that taking that extra step allows her to decide whether a candidate will jive with Hanover culture. “Really assessing talent on how they will fit into the culture of the organization is very important,” Peterson says. “I usually like to have lunch with someone and try to understand who they are as a person and what’s really important to them. “At the end of the day, you want to create a winwin environment where it’s a good opportunity both for that person and for the company.”

TRAINING AND WORKING WITH MILLENNIALS

oney

Perhaps the most difficult aspect of closing the industry talent gap is training and working with younger employees. Thanks to their tech-fueled, highly rewarded upbringing, millennials have a different outlook on work, life and career trajectory than older generations. Already, that’s causing some friction in the industry. A full 25 percent of survey respondents blamed a lack of work ethic among young people for their hiring woes, frequently using words like “entitled,” “lazy” and “irresponsible” to describe new employees. Before insurance professionals can even begin to facilitate the knowledge transfer between these two disparate groups, they must first overcome those generational prejudices, says Dan Epstein,

CEO of ResourcePro. “I don’t for one second doubt that there’s a strong work ethic among young people,” says Epstein, who has helped bring 1,500 millennial employees to ResourcePro. “At the same time, I think the way they go about that may be a bit different, so we need to be more flexible about what time they arrive, what time they leave and how they’re dressed.” Growing up alongside technology, millennials may require more access to cell phones and social media. This doesn’t make them disengaged employees, however. Millennial attitudes toward work and personal life have started to bleed together, facilitated by constant access to both friends and coworkers through email and smartphones. In other words, the producer down the hall surfing Facebook is also likely to be developing a new sales strategy at home during dinnertime. Working with millennials also means providing greater guidance and more frequent feedback than baby boomers themselves received when first entering the industry. Epstein believes “flat management systems” that highlight transparency and open communication will be the most effective in attracting, training and retaining young hires for that reason. “Having forums for established agency employees and younger employees and managers to talk about the business will make them feel valued, listened to and an important member of the team,” says Epstein. That’s something Peterson says has made The Hanover’s young employees particularly successful and satisfied. After being hired with The Hanover, new employees enter a two-week orientation program with their peers during which they learn about company culture and receive individual assignments. However, unlike similar industry orientations, Frederick Eppinger—CEO of The Hanover—makes a point to speak to the young hires and engage them in meaningful dialogue. “The first comment out of their mouths is, ‘Wow,’” Peterson says. “He really opens up the JULY/AUGUST 2014 | 25

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COVER STORY / NEXT GENERATION

YOUNG PRODUCERS BRING VALUE TO INDEPENDENT AGENCIES In 2009, Reagan Consulting followed 91 young producers under the age of 30. In the following years, the company tracked their progress through median total book size. 2009

$520,259

2010

$597, 597

2011

$662,193

2012

$750,000

PROJECTED IN 5 YEARS

$1,150,000 0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Source: The Young Producer Study, Reagan Consulting 2009

floor to questions and dialogue, and talks about all kinds of things with them. They love the fact that not only is he so open on their first day, but they also see him all around the building and know he is open to new ideas—and that those ideas will be implemented quickly.” The Hanover has also found success partnering new hires with more seasoned employees who can show them the ropes, answer any questions about the company and generally serve as a mentor during the first years of their employ. That setup facilitates a natural, two-way knowledge transfer, says Peterson. “Our new talent is really eager to learn from these individuals who have been around for 20 or 30 years, and by working together they actually strengthen each other and the organization as a whole,” she says. “They’re both getting a very different view on how to do business, and we’ve seen some great, creative solutions on both sides.” The best mentorships evolve naturally, says Peterson. As long as mentors and mentees meet regularly and maintain an open flow of dialogue, a partnership can be successful. That kind of high-level engagement and opportunity to contribute may also satisfy millennials’ famed yearning for quick promotion. Sometimes negatively described as “wanting

something for nothing,” today’s young workers do expect to contribute meaningful work and be recognized for it. While Gamma Iota Sigma’s Codispoti believes companies should be more open to promoting young people in general, she also suggests there are other ways to recognize good work from millennials. “We’ve been telling people within the industry to have patience and wait your turn,” Codispoti says. “If that mindset is continued through boomers and Gen Xers, our millennials well get fed up before we even have the opportunity to keep them. “I’m not suggesting we promote those who are not ready, but I don’t think anyone has ever broken the bank by giving a young person an extra $500 or throwing them a new title.”

GENERATION X, GENERATION NEXT While millennials represent the newest generation of insurance professionals, insurance companies should not overlook the promise of Generation X. Both Xers currently employed (who will soon be taking over management roles) and those outside the industry represent a prime resource for agencies. Ann Fishman has been studying generational

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differences for decades, having received four U.S. Senate Research Fellowships and founding her own consulting firm, Generational Targeted Marketing. She describes this group, now aged 33-53, as entrepreneurial, open-minded, honest, tech-savvy, and creative. “This is a generation of individuals,” said Fishman. “They had to become individuals in order to survive – family units were broken, religious units were broken, public schools were broken - so they had to focus on themselves in order to survive and get through childhood.” Rather than falling prey to victim status, though, Fishman notes that Generation X used these setbacks to become stronger and more resilient. This is precisely why the insurance industry needs them now more than ever. Recognizing the impending talent gap, Lloyd’s North America has launched a program specifically for US producers with five to 10 years of experience—a group that includes those valuable Xers. Through the Andrew Beazley Broker Academy, Lloyd’s hosts 40 producers during a two-week to the Lloyd’s market in London. They are taught by Lloyd’s underwriters and brokers about specific classes of business such as marine, energy, professional liability and management liability. Watkins emphasized this means of outreach will help Lloyd’s not only prepare its own market for the future, but assist the industry as a whole. “We have a need to make sure the next generation in the US starts off with the right quality,” says Watkins. “We have nearly 1,000 MGA offices that represent us here, and those are the folks bringing business back to us in London. So, we’re heavily invested in training them up. Anything Lloyd’s can do to help the industry in training is very much in our interest.” But it’s not just promoting educational opportunities insurance companies need to be thinking about. Retaining their current Gen X employees is just as important. Fortunately, there are several undertakings that companies can pursue to bring the best and brightest of this age group into their agencies to stay.

The Jacobson Group, along with Property Casualty Insurers Association of America (PCI), Valen Analytics, and The Institutes, has outlined a plan entitled “Tomorrow’s Talent Challenge,” designed to recruit and retain much-needed midlevel professionals to the field of insurance. “The industry has to recognize that it doesn’t put a lot of focus on bringing people even with a couple of years of business experience into the industry to learn about insurance. Generally, our industry is focused very much on experience, sometimes over skills,” said Greg Jacobson. Jacobson says seeking Gen X talent outside the industry is one way to overcome this prejudice and prosper.

“If that [wait your turn] mindset is continued, our millennials will get fed up before we even have the opportunity to keep them.”

Noelle Codispoti, Gamma Iota Sigma “Organizations are saying, ‘We want somebody with experience doing exactly what we’re doing,’ and that limits the opportunities and focus to bring in people from outside the industry,” he says. “Our competition has changed – it used to be the competition for insurance was always high finance. That’s still true, financial services is still a competitor – however, I think based on the changing way business is being run and how business has to adapt to changes in how people want to be serviced, there is a need for people with certain backgrounds that’s putting us in strong competition with the technology industry.” Ann Fishman also has several suggestions on how to cater to this generation’s unique characteristics, given their background and the

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COVER STORY / NEXT GENERATION

DID YOU KNOW…? According to Insurance Business America’s survey of independent agencies:

The average age of an insurance agency employee

The average number of employees under age 35 in an agency of 100

16%

of respondents had no employees under age 35

The age of most producers when they entered the industry

socio-historical context of their upbringing. “They value a sense of belonging, a sense of family which was missing from their childhood,” says Fishman. “This generation is looking for companies with benefits: repayment of student loans, health benefits, dental insurance, pet insurance – what I like to call peace of mind benefits,” said Fishman. “If two companies want the same person, the one that gives them better peace of mind benefits is the one that will get them.”

LOOKING TO THE FUTURE The challenges of an aging workforce are trying all segments of the insurance industry, but the most innovative individuals see the talent gap not as a crisis but as an opportunity. Harnessing the

power of millennials and reinvesting in the development of Gen X will only make the industry stronger. “I’ve seen young people change the culture of an agency all the time,” Betancourt says. “People that haven’t produced for a long time have all the excuses in the world for it, but then they bring in a 28-year-old who is closing 10 deals a month and that really supercharges the culture in an agency. Suddenly, everyone is excited and profitable again. “You can’t just give up after you hire one person that doesn’t work out. Bringing on new talent and having a system in place for investing in top performers has got to be a part of an agency’s culture, and that’s going to be the difference between those who make it through the talent gap and those that don’t.”

Millennial Viewpoint

“In order to make themselves attractive to millennials, insurance companies must become better at promoting and cultivating the variety of career paths available within the profession. More importantly, though, they must ensure that those job opportunities are meaningful, allow for personal growth, and provide upward mobility within their respective organizations.” Scott Bouchard, Transportation & Logistics Practice, Aon Risk Solutions Age: 26

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NEXT G

25% of the insurance agency sector is expected to retire by 2018.

ARE YOU PREPARED? LOOK FOR OUR NEXT GENERATION DIGITAL SERIES IN OUR DAILY E-NEWSLETTER, FEATURING ONGOING COVERAGE OF: • • • • •

Recruitment of millennials, gen-x and professionals from outside the industry Training , mentoring and managing through generational conflict Retention strategies Development of GenX for leadership and management roles Succession planning

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O ME W E

INSU

ELIT

SPECIAL REPORT / ELITE WOMEN IN INSURANCE

A R

Insurance Business America showcases notable female leaders who are shattering molds, stereotypes and the industry’s longstanding glass ceiling

hen Sharon Emek, President and CEO of Work At Home Vintage Employees (WAHVE), entered the world of insurance, she was treated as an outsider – and quite often, she was one. “When I started my insurance agency in the late 1980s, I would attend meetings and be asked if my boss sent me, if my father sent me, or if my husband sent me,” says Emek. “It didn’t occur to them that I was building and running my own insurance company.” And while a Saint Joseph’s University study notes that still only six percent of top executive positions are held by female officials, progress has definitely been made.

Emek notes that although women may not represent senior management just yet, they demonstrate remarkable talent and virtuosity in the field. “Women bring the ability to change the strategic thinking that impacts the industry,” she says. “We bring a prospective to propel the industry forward that nobody else has thought of in embracing the future.” Thus, Insurance Business America celebrates the accomplishments of these 50 extraordinary women who are defying convention and paving the way for future female executives through their skills, expertise, and commitment to exemplary leadership.

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SURAN

Sharon Emek

Inga Beale CEO, Lloyd’s of London Named the first female CEO in Lloyd’s of London’s 325-year history, Inga Beale will succeed Richard Ward, who steps down in July. Beale was most recently the CEO of Canopius Group, Ltd., and will start at Lloyd’s, the world’s oldest insurance market, in January. “This unique market has an extraordinary opportunity to increase its footprint and to cement its position as the global hub for specialist insurance and reinsurance,” says Beale. “I’m looking forward to working with the Lloyd’s team and the wider market to deliver a strategy for profitable and sustainable growth.”

President and CEO, Work at Home Vintage Employees (WAHVE) Sharon Emek is an innovator in insurance. Founding WAHVE in 2010, Emek created a system that combines the old and the new. Through her company, seasoned insurance employees can use current remote technology to continue working while phasing into retirement—a process she calls “pretirement”. Emek simultaneously galvanized the Baby Boomer employee market while addressing the industry’s talent shortage. “She has maximized the business opportunity created by a perfect storm—agencies need help, aging employees want greater work-life balance, and technology can unite the two,” said Amy Skidmore, senior consultant at Aaritrijk. “Sharon is energetic, engaged and has taken one of the industry’s most valuable resources—its experienced workforce—and extended its lifespan.”

Gaby Hernandez Vice-President, SullivanCurtisMonroe Insurance Services Described by her coworkers as endowed with a “take charge” attitude, Gaby Hernandez has been in the industry for more than 20 years. She is a strong advocate for her clients and excels in the challenges the Affordable Care Act has thrown her at SullivanCurtisMonroe. Throughout the years, she has taken time out of her schedule to mentor other women in the industry.

Gwen Taylor Corporate Services Manager, Ironshore Insurance Company With more than 30 years of experience at her disposal, Gwen Taylor is a one-stop-shop in the insurance industry. Taylor’s knowledge and leadership skills have inspired those that work with her to achieve bigger and higher dreams.

Rebecca Larsen Vice-President of Underwriting, Occidental Fire & Casualty Co Rebecca Larsen has been a success powerhouse since she started in the industry. With her roots as an underwriter at Northern Star General Agency, Northland Insurance, and Great West Casualty, Larsen has developed successful transportation insurance programs for Trans Guard, CNA and Occidental. More than 25 years of experience has fueled her problem-solving skills for her customers and company. “At Occidental, she took over a trucking program that had been unprofitable for each of the last 20 years and made it profitable in 2013,” said Douglas Hathaway, Southeast Region VP at Great Lakes General Agency. “Rebecca is an innovator and is interested in helping her customers develop.”

Donna Decina SVP of Underwriting Operations Donna Decina uses her 20 years of industry experience to propel underwriting operations at Ironshore. She manages global Underwriting Operations with a focus on growth and spearheads the global policy administration system strategy. Her global team delivers consistent processes, metrics and quality. Decina also drives the Underwriting Transformation Program into efficient workflow and roll-out.

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SPECIAL REPORT / ELITE WOMEN IN INSURANCE

Fanci Worthington Partner, Capital Financial Group/ MassMutual Fanci Worthington is an advocate for the insurance industry. In addition to her supervisory role at Capital Financial Group, Fanci maintains a prosperous personal practice. She serves on boards for the National Association of Insurance and Financial Advisors, as well as for the Accounting and Financial Womenâ&#x20AC;&#x2122;s Alliance. Passionate about diversity and bringing the next generation to the financial industry, she leads in creating opportunities for newer advisors and develops deliberate resolutions for tenured insurance representatives. In addition to her career experience, Fanci obtained the Certified Financial Planner and Accredited Investment Fiduciary designations. She has been distinguished in insurance by qualifying for MassMutual Management Council, Sales Manager Summer and was named the 2011 Manager of the Year at Capital Financial Group.

Doreen Spadorcia Vice Chairman, The Travelers Companies, Inc. With 28 years of experience, Doreen Spadorcia oversees one of the largest property/ casualty insurers in the country. From her start at Travelers 20 years ago, Spadorcia has tackled industry challenges and operated for the betterment of the company. She began her Travelers career as an attorney in the Claims Department, but rose to Bond Claim Operation Manager and General Counsel for Bonds within eight years. In fewer than 10 years she rose to assume the role of Vice Chairman and Chief Executive Officer of Personal Insurance and Bond & Financial Products.

Martha Rochester-Gant Agency Owner, Insurance Agent and Broker, Cascade Insurance Pros Martha Rochester-Gant formed Cascade Insurance Pros for one main reason: to help others. Her passion for successful industry women and the best health benefit solutions has inspired her every day of her 10 years of industry involvement. Her staff sees her dedication to helping them succeed while developing honest, knowledge-driven solutions for clients. 32 | JULY/AUGUST 2014

Janet Trautwein CEO, National Association of Health Underwriters (NAHU) Named as one of the 100 most powerful people in the insurance industry, Janet Trautwein is a vital component to the employee benefits industry. As CEO, she currently manages and represents more than 100,000 employee benefit professionals. She frequently testifies before Congress on health insurance markets and health plans of all sizes. Her governmental relationships were cultivated when she served as head of NAHUâ&#x20AC;&#x2122;s government affairs department, where she is considered an expert in the field. In 2004, Trautwein received the Harold R. Gordon Memorial Award, which is considered to be the most prestigious award in health insurance.

THE INSURANCE SOURCE FOR THE STAFFING INDUSTRY

LEADERSHIP..

Congratulations Dorothy Taylor for this outstanding acknowledgement to you for your long standing commitment to World Wide and the staﬃng industry. World Wide would not be where it is today without your foresight, tireless work ethic and dedication to continue World Wide’s success as the leading provider for staﬃng insurance. As your employees, we are so proud to witness this recognition so deserved.

World Wide Specialty Programs, Inc. · World Wide New York Insurance Services, Inc. - CA, NH, TX

631-390-0900 · 800-245-9653 · fax 631-390-0922 · wwspi.com

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SPECIAL REPORT / ELITE WOMEN IN INSURANCE

Joni Waldych

Jessica Kramer Customer Service Representative Manager, The Insurance Shop, LLC In just seven years of industry involvement, Jessica Kramer has overcome challenges only the most seasoned insurance professionals could tackle. In 2010, she created and launched The Insurance Shop’s Customer Service Representative Department from scratch. Her system, unlike any other agency system, has created an eight percent increase in policy renewals and a 10 percent jump in total book retention. “Jessica has also taken on the responsibility as the HR Manager in our office and has been able efficiently running the CSR Department while handling the additional HR workload,” said Tim Davis, Sales Manager at The Insurance Shop. “To put it simply, our agency would be nowhere near its current level of sutccess without Jessica.”

Susan Denise Brignac Chief of Staff, Louisiana Department of Insurance (LDI) Described by her coworkers as having a leadership style “few can replicate”, Susan Denise Brignac’s breadth of knowledge and customer service qualities leads her team to success. When she accepted the Chief of Staff position in 2008, Brignac came equipped with a desire for uncompromising service. However, her leadership has exemplified more than that. In 2011, the LDI experienced tragedy when two colleagues were killed during a fraud investigation. Brignac gracefully guided her team through the aftermath of grief and created an understanding environment. Her expertise in the industry is recognized by her staff and those they regulate. The National Association of Insurance Commissioners selected Brignac for specialized training at Lloyd’s of London in 2009, after different organizations brought up her name to the association. Her staff emulates her values of objectivity, honesty and empathy.

President/Owner, Innovative Benefit Solutions Joni Waldych is an expert in the healthcare industry. Her 25plus years of experience and unrelenting dedication to researching healthcare changes has helped her agency attain its 98.9 percent retention rate. Even as president of Innovative Benefit Solutions, she takes the time to help each of her clients succeed. Waldych is also active in her community. She currently serves as a Board Member for the Greater Ocean City Chamber of Commerce and was previously the Health Care Task Force Chair for the Salisbury Area Chamber of Commerce.

Sarah Washburn President, Wilson Washburn & Foster Insurance Since joining Wilson Washburn & Foster Insurance, Sarah Washburn has built a reputation of trustworthiness. After graduating college, Washburn came to the family company ready to work and help its client-base grow. Her coworkers know her as someone who produces loyal clients and mentors those around her. Two years ago, she was promoted to become President of the company, where she proceeded to mentor three new producers, two customer service representatives and an operations manager. Washburn is also enjoying new family life, having had her first child within the time of being named President.

Coryn F. Thalmann CEO, Jimcor Agency, Inc. As the CEO of Jimcor Agency, Inc., Coryn F. Thalmann is responsible for more than 150 employees at seven branches – yet she still finds time to be deeply involved in the industry. Thalmann serves as a director of the Derek Hughes NAPSLO Educational Foundation and vice-president of the AAMGA’s operations committee. She’s also served on AAMGA’s marketing and membership committees and is a former director and vice-president of AAMGA’s Under Forty Organization.

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Sarah Kelly President, Nickerson Insurance Agency “Sarah Kelly was instrumental in helping to establish a mock insurance agency class in the local high school in the late 1970s,” says Pam Absher of Frye Claims Consultation and Administration. “I attended this class for two years, and during one of the summers I worked part time for the agency. After high school I began working in the claims department at Allstate Insurance, advancing to the position of unit claim manager. Years later when I became involved in the National Association of Insurance Women, I found that Sarah is a founding member of the local association. When she realized I had worked for her years earlier, she willingly helped me progress in the organization. I ultimately advanced to the position of president. Sarah is the epitome of a strong and caring woman. She mentors other women, which is rare to find. She loves life and is a joy to be around. The industry needs more women like Sarah Kelly.”

Jennifer Taylor EVP and branch director, Senn Dunn Insurance Jennifer Taylor started in the insurance business in a time when it was definitely a “man’s world” – but she was determined to change that. Beginning her career at the age of 18 in customer service, Taylor rose through the ranks from account rep to marketing rep to account executive. Finally, she became one of 22 owners of the largest independently-owned agency in North Carolina. “Her positive spirit and light-hearted personality keep her grounded when things get tough,” says Senn Dunn colleague Michele Taylor. “She is an inspiration to all, proving that anything is possible when you believe in yourself and your abilities and dare to dream that you can make a difference.”

Darlene McGehee Producer, Iroquois Insurance With more than a decade of experience, Darlene McGehee is one of the powerhouses of the Illinois insurance industry, serving as Education Chair on the board of the Illinois branch of the Independent Insurance Agents and Brokers of America. “Leadership isn’t about giving out orders—it’s about paving a way and taking a younger generation under their wing,” says colleague Tess Fleming. “Darlene has done just that with me, and I am forever grateful.”

Gillian McCarron Angelyn Treutel-Zeringue President, SouthGroup Insurance Services – Gulf Coast A 17-year industry veteran, Angelyn Treutel-Zeringue has been recognized as one of the top 50 businesswomen in Mississippi and one of the top insurance professionals under 40. The chair of the Southern Agents Conference Technology Committee, Treutel-Zeringue is also a sought-after public speaker on technology, insurance and business issues. Active in her local church, Treutel-Zeringue also works tirelessly for the local chamber of commerce, the American Heart Association, United Way and other charities.

Betty Salter Owner, Salter Insurance Agency When Betty Salter opened Salter Insurance Agency in 1985, she’d already set still-unbroken records at Farm Bureau. After opening her own company, Salter quickly became one of her community’s most respected business owners. “She is one of the hardest working women and most respected women in our town. Despite the battles of working with a handicapped son and going through breast cancer herself, she has always been able to manage her time and business despite the obstacles put before her,” says Salter Insurance employee April Smith. “Betty is devoted to her employees and provides them with the knowledge and tools needed to help each employee succeed.”

Vice-president, Lakeside Insurance Center, LLC Gillian McCarron will be the first female president of the Professional Independent Insurance Agents of Colorado in more than a decade. She also serves on the University of Colorado Business School’s risk and insurance management program advisory board. She’s been an advocate for the industry in Washington and has developed working relationships with most of Colorado’s congressional delegation. JULY/AUGUST 2014 | 35

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SPECIAL REPORT / ELITE WOMEN IN INSURANCE

Leslie Bergland Principal, Trade Acceptance Group, Ltd. An industry veteran with more than 30 years of experience, Leslie Bergland is the co-founder and principal of Trade Acceptance Group, a boutique firm specializing in trade finance and trade credit insurance. Bergland draws on her vast experience in international banking and trade finance to structure the best solutions for her clients, U.S.-based enterprises and financial institutions doing business on a global scale.

Laura Staller Account executive, Unum Laura Staller joined Unum right out of the University of Miami in 2009. The first female rep hired at Unum’s Tampa office in several years, Staller quickly gained the respect and admiration of more senior reps. Bringing a creative streak and a unique viewpoint to her work, Staller consistently delivers – which convinces even more senior professionals to abandon outdated industry practices. “We expect much out of Laura as she continues growing in her career,” says Unum Florida sales manager Matt Krug. “Though our industry currently struggles to attract young talent, Laura is a prime example of how luck and aptitude can intersect to create a prime opportunity for someone in her demographic.”

Irene Blumberg SVP, Head of Private Bank Insurance & Offshore Investment Linked Solutions, HSBC A veteran of the industry, Irene Blumberg is dedicated to client service and delivering sustainable results. That enthusiasm spills over to Blumberg’s team; their dedication to their clients has resulted in a more than 95 percent retention rate. “As a colleague and client I am repeatedly left in awe of her passion and pride for her work - traits that are recognized by colleagues, clients, carrier partners, and senior leadership at the firm,” says fellow HSBC exec Robert Rotondi.

Jan Noffsinger VP of health insurance operations, LifeStore Insurance An insurance professional since 1983, Jan Noffsinger began her career with Liberty Mutual. After moving to Orlando in 1995, Noffsinger worked with several independent agencies before founding her own agency, Parkway Custom Insurance Associates, in 2006. In 2012, Noffsinger sold Parkway to LifeStore and came on board to help the company prepare for PPACA and open enrollment in October of 2013. Noffsinger has earned the National Association of Health Underwriters Golden Eagle Award for top sales five years running, and this year earned the Soaring Eagle Award.

Debra C. Newman President and founder, Newman Long Term Care Of Debra Newman’s 30 years in the insurance industry, 24 have been dedicated solely to longterm care planning. Beginning with only herself and one employee, Newman has built Newman Long Term Care into one of the nation’s top LTCI-only companies. A nationally recognized expert, Newman’s perspective has been sought by publications like USA Today, the Wall Street Journal and Money Magazine. She’s also a sought-after speaker, appearing at more than 20 state NAIFA conferences and speaking to industry and consumer groups and government panels in more than 40 states. “Deb’s passion had helped take long-term care planning from the fringes of financial planning to the mainstream,” says colleague Craig Roers. “From educating thousands of advisors and planners, to working with consumers, to advocating for the industry on a national level, she has dedicated over two decades to helping families plan for their future long-term care needs.”

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Laurie A. Branch President, the Iroquois Group After graduating from Dartmouth and working a stint at Proctor and Gamble, Laurie A. Branch joined her father’s company. Soon she was given the reins to the business, and she quickly whipped it to a gallop. Under Branch’s guidance, the Iroquois Group has grown from a small cluster of agencies to one of the largest networks in the country, boasting more than 2,250 member agencies in 39 states. Branch also has a passion for education. She teaches finance at St. Bonaventure University, where she also serves on the board of trustees. She’s served as the president of her local board of education and is currently pursuing a PhD.

Tam Duong

Michelle Marquez VP of sales, PCG Agencies, Inc. When Michelle Marquez took the reins as vice-president of sales for PCG Agencies, Inc., only 40 percent of the production force was making its annual goal. Under Marquez’s leadership, that number has spiked to 90 percent. In addition to pushing her team to excel, Marquez consistently hits her own annual sales goal. “Michelle is also an outstanding trainer and mentor to all sales people in the organization,” says CEO Bruce Humphrey. “Michelle’s firm belief is that leaders must have credibility. If she is not selling, she has little credibility with her sales team.”

Charlotte Moscardelli Director of marketing and communications, Ironshore When Charlotte Moscardelli began her career at Ironshore in 2005, the company was still considered a startup and had virtually no marketing apparatus in place. Moscardelli soon built a robust brand for the company, spearheading a marketing initiative that helped to create a global brand for the company. Moscardelli is also committed to women’s leadership and advancement in the workplace, attending several conferences for women in business each year and personally providing guidance to women in the Ironshore family as they advance in their careers. “With Charlotte’s industry experience, commitment to women’s leadership and ability to inspire, she embodies a true female leader in the marketplace,” says Ironshore COO Joe Boren.

Assistant Vice-President of Commercial Lines, Networked Insurance Agents Tam Duong’s collaborative goals have set the bar for the insurance industry. Her attainable initiatives and constant team-building allows Duong’s team to excel in gaining skills and increasing productivity. “She has motivated individuals to challenge themselves and to discover skills they didn’t know they had, like cross-selling or data analysis,” said Natalie Flightner, Corporate Marketing Director at Networked Insurance Agents, “while taking overall customer service to a whole new level.” Per Duong’s recommendation, the Small Business Unit (SBU) was created to offer targeted marketing for small BOP and workers’ comp accounts. Duong’s research into staffing, operational needs and service benefits shaped the implementation of the entire unit. The online submission tool allows an average of a three-hour turnaround for quotes for complete applications. Launched in February of this year, the program has increased the company’s quote ratio by 25 percent.

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SPECIAL REPORT / ELITE WOMEN IN INSURANCE

Linda Reed

Dorothy Taylor

President, AUI, Inc. A 30-year industry veteran, Linda Reed has owned and operated AUI, Inc. since 1985. Despite the CSR turnover issues seen throughout the industry, AUI’s Austin, Texas office is on track to have a banner year, projecting a total of $12 million in written premiums – all with just nine employees.

CEO, World Wide Specialty Programs As CEO of a company that focuses exclusively on the staffing industry, Dorothy Taylor’s No. 1 priority is innovative insurance solutions for staffing. An insurance veteran of 30-plus years, Taylor has witnessed firsthand the changes the industry has faced – and as CEO of World Wide, she’s spearheaded the development of the staffing industry’s most comprehensive insurance program, a banner taken up from World Wide founder Eileen Lesberg. “I can remember Eileen telling 25 years ago, ‘You wait and see. The staffing industry is going to be one of the top employers in the country.’ And she was right,” Taylor says. “It’s a true American success story.”

Debra Moore Owner agent, Moore Insurance Advisors (branch of The Woodlands Financial Group) Debra Moore has a passion for the life insurance industry, making sure all her clients not only understand their options, but have every question answered to their satisfaction. She’s also passionate about the future, taking time to mentor and train the next generation of insurance agents. “What sets Debi apart from other agents is her confidence and knowledge of the products she offers,” says Donald Moore. “She continually stays updated on not only insurance products, but also the changes and needs of her clients’ lives.“

Tracey Allen Director of internship development, Northwestern Mutual As director of internship development for Northwestern Mutual, Tracey Allen has introduced more than 4,000 students to possible careers in financial services, and has personally recruited more than 175 students to the firm. Under Allen’s leadership, Northwestern Mutual’s Indiana office has developed the No. 1 internship program in the company. “She has an optimistic approach to life that is immediately contagious to everyone she mentors and develops,” says Northwestern’s Justin Ruetz.

Lindsey Waters President, First National Brokerage Company Lindsey Waters came up through the ranks the old-fashioned way, starting at First National Brokerage Company when she was just 17-years-old. Now a veteran insurance pro, Waters has worked her way up to become FNBC president. “I have watched her grow from a kid into one of the go-to people in Virginia when you have a question about health insurance or the Affordable Care Act,” says colleague Allan Jones. “[She’s a] class act on all levels.”

Lara Mowery Managing director, head of global property specialty, Guy Carpenter As the head of Guy Carpenter’s global property specialty practice, Lara Mowery specializes in finding solutions for the most difficult risk scenarios. She’s created several best practice tools and contract clauses, and played a key role in the development of i-aXs, Guy Carpenter’s award-winning data management platform, and ROLePlay, its global catastrophe transaction and analysis platform.

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Christie Belue Agent, Acceptance Auto Insurance With just four years in the industry, Christie Belue is still a relative newcomer to the insurance game – but she’s already made her mark. Starting as a CSR, Belue was quickly promoted to agent. In less than a year, she had increased her book of business by 35 percent. Belue was also placed in charge of training many of the service reps, managers and agents in her region. Belue received Acceptance’s JumpinOut Award from the company’s senior vice-president of agency operations and has been nominated for the National Leadership Conference and the President’s Council. “I have worked with Christie for a little over a year and a half now,” says colleague Christy Cornelius. “She is by far one of the most dedicated agents I have ever seen. She goes above and beyond in every aspect. Christie doesn’t just do her job – she takes care of her customers and her business.”

Susan Preston Owner/president, Professional Program Insurance Brokerage Susan Preston is an innovator in crafting insurance programs for emerging industries. She’s designed coverage programs for businesses as diverse as medispas, laser centers, tattoo shops and medical marijuana centers. Preston has also worked with government bodies to develop regulations for tattooing, body piercing, permanent cosmetics and laser services, as well as co-founding the Society of Permanent Cosmetic Professionals, an organization that set international standards for the industry. Preston’s knowledge of emerging industries has brought her company, Professional Program Insurance Brokerage, to the forefront of niche market insurance. The agency experienced 50 percent premium growth last year, and is on track for another 30 percent in 2014. Her expertise has also made her a sought-after speaker, both at insurance events and in the industries PPIB insures. Preston has spoken at permanent makeup conferences, tattoo conventions and laser training programs, as well as appearing on panels at insurance industry events.

Erin Calvey EVP of small and medium enterprises, Ironshore Thirteen-year industry veteran Erin Calvey began her career at Ironshore as the head of global broker relations. She singlehandedly started the company’s Strategic Broker Relations Group and oversaw the hiring and training of a team that provides strategic and analytic support to Ironshore’s top executives. She’s also launched and managed a company-wide sales training program. In her new role as executive vice-president of small and medium enterprises, Calvey is spearheading the drive to develop a technology-driven platform and expanding Ironshore’s footprint in the small and medium enterprise space. Calvey also mentors many Ironshore employees, along with members of the NY RIMS Young Risk Professional Mentoring Program. She’s also a leading voice for women’s issues in the company, successfully proposing the creation of a company budget for women’s executive initiatives. So far this year, the initiative has sent more than 80 women from Ironshore across the country to attend conferences, leadership programs and networking events.

Sharone Menzcel VP of special risk, Ironshore A tax lawyer by training, Sharone Menzcel created and built out Ironshore’s mergers and acquisitions practice. Joining the company’s Special Risk Unit in 2013, Menzcel led the industry in creating tax credit recapture insurance, a product that helps investors in low-income housing, commercial ventures and renewable energy projects protect the value of their investments. Menzcel also actively mentors junior women at Ironshore, providing career guidance and advice on maintaining a healthy worklife balance. “Additionally, Sharone joined several other women at Ironshore in advocating for changes to Ironshore’s maternity and parental leave policies, which resulted in significant improvements,” says Ironshore COO Joe Boren. “I highly recommend this accomplished woman.” JULY/AUGUST 2014 | 39

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SPECIAL REPORT / ELITE WOMEN IN INSURANCE

Terri Chester VP, commercial lines manager, Mountain Region, NFP Property & Casualty Services, Inc. Terri Chester started in the insurance industry in 1985 as a receptionist and policy typist. Today, she’s the vice-president and commercial line manager for NFP Property & Casualty’s Mountain Region. Never feeling her gender was a barrier to opportunities, Chester has learned in her nearly 30-year career to seize opportunities as they arise. Overseeing 13 offices, Chester spearheads strategic planning, implementation, leadership development and more.

Michele Sansone

Rebecca Garcia

President of North American property, XL Group Michele Sansone was recently appointed president of XL Group’s North American property group as well as XL GAPS, its loss prevention team. In that capacity, Sansone will lead XL’s property underwriting, risk engineering and broker relationship efforts across the country. A 25-year industry veteran, Sansone has amassed unparalleled knowledge in the management of global property risk. Her passion for the industry has helped XL Group grow its Platinum book of business and extend its available capacity to $1 billion.

Vice-president, Professional Liability Insurance Services, Inc.; president, Innovative Claims Consultants, Inc. With a master’s degree in food science and safety from Michigan State University College of Veterinary Medicine, Rebecca Garcia specializes in policies dealing with foodborne illness. An industry veteran of more than 20 years, Garcia is also an expert in underwriting and claims operations for policies dealing with EPLI, business interruption, miscellaneous errors and omissions and product recall. The vice-president of Professional Liability Insurance Services and president of Innovative Claims Consultants, Garcia works closely with Certain Underwriters at Lloyd’s of London and London Insurance Company Markets.

Lorraine Seib President of excess casualty, XL Group When Lorraine Seib joined XL Group in 2011, she already had a proven track record of producing growth and bringing multiple business units together as a cohesive team. She continued that practice as XL Group’s president of excess casualty, helping to establish a fresh strategic vision for the unit and initiating a dramatic geographic shift which brought all of XL Group’s global excess casualty teams under her leadership. Seib ramped up the group’s market-facing presence with strategic expansions into key U.S. cities. Her work helped the team develop a reputation in the marketplace as both a strong lead umbrella market and a strong excess player. Her efforts helped lead to triple-digit business growth. Seib has also been named a managing director on XL Group’s Leadership Council. In that role, she is a key player in the implementation of business strategy.

Karlene Antoine Vice-president – property underwriter, Ironshore Insurance Ltd. (Bermuda) Karlene Antoine began her insurance career in London under the tutelage of property underwriting superstar Les Rock. In 2007, she followed Rock to Bermuda to join Ironshore Insurance Ltd., then a startup. Antoine started at Ironshore as the underwriting operations manager and continued to hone her skills until she became a property underwriter in her own right. Responsible for Ironshore’s entire Caribbean book of property business as well as a large – and growing – portfolio of U.S. business, Antoine is a force to be reckoned with in the Lloyd’s property insurance market, Bermuda and the U.S. 40 | JULY/AUGUST 2014

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Claudia McClain Agency Principal, McClain Insurance Services As founder of McClain Insurance Services, Claudia McClain’s innovative and value-driven actions have propelled her to the front of the industry. Her insurance business model has captured the attention of industry leaders, while her high standards for personable customer service has grown her agency to service more than 3,000 client households in Washington, Oregon and Utah. Her agency has been recognized with nine awards, including the Everett Chamber of Commerce Small Business of the Year Award and Progressive Signature Agent Travelers Award of Excellence. Along with her passion for the industry, McClain also believes in giving back. McClain dedicates her time to industry organizations like PEMCO Agents Council, Progressive National Agency Council and the Washington State Office of the Insurance Commissioner Advisory Board.

Anne Melissa Dowling Deputy insurance commissioner, Connecticut Insurance Department A former senior vice-president for Mass Mutual, Anne Melissa Dowling made “a seamless transition” from insurance industry executive to industry regulator, according to Connecticut Insurance Department Communications Director Donna Tommelleo. Arriving at the agency just as the Affordable Care Act was broadening, Dowling was charged with overseeing the department’s health insurance initiatives. She also served as an advisor to Access Health CT, Connecticut’s highly successful, much-imitated health exchange. She’s also led efforts to improve access to mental health and substance abuse treatment in the state. “The well-being of the policyholders was and remains her priority as the ACA continues to evolve,” Tommelleo says. “She is a leader who meets every challenge with fairness and balance and puts the needs of the consumer first.”

Jean Ramos Vice-president, Continental Risk Insurance Services Twenty-year industry veteran Jean Ramos got her start in the insurance business at the age of 18, filing papers and answering phones. Quickly developing into an outstanding wholesale broker, Ramos quickly began moving up through the ranks. For the last nine years, she’s been the co-owner and vice-president of Continental Risk Insurance Services.

Claudia Mandato Executive vice-president, Lockton, Inc. A Lockton loyal since 1985, Claudia Mandato has oversight over the company’s insurance and risk management areas, as well as the company itself. Mandato is also very involved with Lockton’s talent management efforts. Mandato is an outspoken advocate of women in the insurance industry, frequently acknowledging both the “conscious and unconscious” gender bias in the industry. In fact, her convictions spurred her to co-found Lockton’s Women In Leadership (WIL), an initiative aimed at fostering professional development and business networking for women.

Pamela Ritz President, Specialty Risk Management, Inc. An expert in employment practices liability, foodborne illnesses, product recalls and more, Pamela Ritz is a powerhouse in the risk management world. She holds a master’s degree in food science and safety from Michigan State University College of Veterinary Medicine, the leading university for food science and food safety toxicology. A sought-after speaker, Ritz frequently teaches and speaks at seminars for insurance professionals and private employers. She’s developed several management programs for controlling professional liability exposures, and has been recognized as one of the top 50 women in insurance worldwide. JULY/AUGUST 2014 | 41

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FEATURE / SUCCESSION PLANNING

PREPARING FOR THE

RIGHT EXIT Your book of business won’t disappear the day you walk out of the oﬃce, so make sure your legacy doesn’t either, writes Rick Dennen

You may greet every new work day with a smile, a spring in your step, and the satisfaction that you’re doing exactly what you want in life. Or you may look at that first cup of coffee as the fuel that gives you just enough energy to drag yourself into the office in the morning. Either way, you’ve probably given some thought to what comes next. There will be a day when unlocking the agency’s doors isn’t going to be part of your daily routine. When that happens, what will you do? There’s no right or wrong answer. Some insurance agency owners envision a relaxing life with a daily stroll on well-manicured fairways, or taking time to find the biggest bass in a favorite lake. Others may see the next step as a second chance to do something they’ve always wanted to do, or envision a gentle transition, with a family member or employee gradually picking up a bigger share of the responsibility. For most agencies, the best type of exit plan is a succession plan. After all, your book of business won’t disappear the day you walk out of the office for the last time. You may transition the business to a family member or a trusted employee, or you may sell it to another agency. To ensure that those actions achieve your objectives, you need a succession plan that addresses who the owner will be and how they will be chosen, how you will prepare them and transfer control, and how you’ll transfer the agency’s assets—all while ensuring you get what you need financially. Many agency owners create succession plans as a way of continuing their dreams for the business. They can enjoy the reward of passing the agency to the right people who can keep the culture and values intact. They can also be sure that their customers, who oftentimes are their friends as well, will continue to be treated well.

WHEN SHOULD YOU START PLANNING? Remember when you were in elementary school and the teacher kept imploring you to take your time and be careful so you’d make fewer errors? That advice also holds true when it comes to succession planning. Giving yourself enough time to plan means that you’ll be able to think through all of the aspects carefully. It also reduces the risk that you’ll be backed into a corner by external events, such as a serious illness in the family. Once you develop your plan, a gradual transition will protect the health of the business and reduce the 42 | JULY/AUGUST 2014

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stress of everyone involved, including your employees. When people know what is going to happen—and when—they tend to worry less, so they’re more productive and better focused on the objectives you’ve established. According to a study by NFP Advisor Services Group, merger and acquisition consultants say the ideal amount of time for transitioning ownership of a financial advisory practice can be as long as 10 years—although in practice owners assume that five or fewer years is sufficient. It takes a minimum of two to three years to properly prepare an insurance agency for a transition. There are a variety of concerns to consider, including the tax consequences of various methods for transferring the business. Should you use an ESOP or a restricted stock plan, a leveraged buyout, an earn-out, or a seller-assisted plan? In each case, there are tax consequences that should be reviewed by a team of advisers with experience in the agency business, including tax consultants, attorneys and CPAs. No matter how long your timetable may be, review it periodically to make sure that you’re accomplishing all of the goals in a timely fashion. You may need to adjust your activities as a result of changes in the business or your life.

WHO WILL SUCCEED YOU? People may tell you that you can never be replaced, but it’s a fact that someone can succeed you. That brings up two other advantages of a succession plan: you can have some say in who that successor will be, and you can build in time to prepare that person for the eventual transition. According to an American Family Business Survey (conducted by Mass Mutual Financial Group, Kennesaw State University, and the Family Firm Institute), just over 45% of the owners of closely held businesses who planned to retire within five years had chosen a successor. That number dropped to 29% among those who expected to retire in the next six to 11 years. No two agencies are exactly the same. That’s why it’s important to take the time to envision the future you want for your agency. Should it stay in the family? Should you sell to employees? Your situation will help you narrow your options.

FAMILY MEMBER? It’s common to look at a child or other family mem-

ber as the logical successor, but as some agency owners have discovered, children may have plans of their own. Or, it may be that your child’s personality or skills may not be well suited to the tasks associated with running an agency. (And trying to force the development of those skills by throwing an unprepared individual into the proverbial fire rarely ends successfully or pleasantly.) So it’s important to be sure that the family member is both qualified and eager. A caution: only about 30% of family-owned businesses survive in the second generation’s hands, and less than 15% make it to a third generation.

PARTNER? If your business is already a partnership, one of your partners may be interested in acquiring your share. In fact, your partnership agreement may already include language that facilitates a transition.

No matter how long your timetable may be, review it periodically to make sure that you’re accomplishing all of the goals in a timely fashion! EMPLOYEE? Perhaps there are one or more employees who have served you and your clients well. Giving them the opportunity to become owners is a way to reward them for their commitment and a way to ensure your clients will continue to be served by familiar faces. As with family members, it’s important to ensure that employees are both qualified and interested.

OUTSIDER? Another local agent may have an interest in expanding his or her business. Or you may find a complete stranger who wants to buy you out. Some agents contract with qualified business brokers.

WHAT’S YOUR ROLE IN THE PLAN? The fact that you’ve been able to sustain (and maybe even grow) your business in a tough economy JULY/AUGUST 2014 | 43

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FEATURE / SUCCESSION PLANNING

says a lot about the leadership you’ve provided. As you implement your succession plan, that leadership will continue to be important, whether that’s in terms of making sure your successor develops the knowledge he or she needs to succeed, helping employees through the inevitable changes, or making sure that current clients continue to be comfortable. But be careful about how much value you attach to yourself and your professional reputation. Your business should be able to survive and thrive without you. That’s why part of your succession plan involves increasing the value of your company while simultaneously reducing its dependence upon you. For example, you may want to diversify your customer base, sustain cash flow, and develop your team’s management skills—all steps most businesses should already be taking.

ASSEMBLE YOUR EXPERT TEAM Successful business people usually become that way because they know how to tap into knowledge and advice from a variety of experts. That’s especially important when it comes to creating and implementing a succession plan. Build a team of experts you trust, including your CPA and attorney, and keep them involved throughout the entire process. They will provide additional viewpoints and identify issues you may not have considered on your own. Your CPA is a particularly valuable member of that team, because the income tax-related implications of a business transition can vary widely. A good CPA can offer guidance on the best way to structure the transition and ensure you get the greatest benefit from the proceeds.

CREATE A TRANSITION STRATEGY Once your succession plan is in place and you know your timing, it’s time to start moving towards making that transition a reality. The first step is to do an honest assessment of your agency’s strengths and weaknesses. For example, do you have stateof-the-art technology? Strong producers under contract? Great carrier relationships? Exceptional customer service? An excellent reputation? Look for ways to enhance what you already do well, and develop strategies for resolving other issues. Next, develop a clear understanding of your agency’s fair market value—not what you might want to sell it for but what it’s actually worth in

today’s marketplace. Even if you’re planning to transition ownership to family members or employees, you need to know the underlying value. Today, most agencies are sold at a price that’s driven by projected earnings, risk and availability of financing, according to Michael Mensch of Agency Brokerage Consultants. EARNINGS. The common benchmark for earnings is EBITDA, which refers to earnings before interest, taxes, depreciation and amortization. To reach this important number, add your net profit, interest on debt, income tax paid, depreciation and amortization, non-recurring expenses and your salary and benefits. Next, subtract projected expenses such as rent, employee compensation and any costs associated with your departure. Mensch reports that the average small agency may sell for up to four to five times its adjusted EBITDA. RISK. As an insurance agent, you have a better- than-normal appreciation of the role of risk. To a prospective buyer, understanding the inherent risk in a purchase is critical. Among the risk factors that today’s buyers may consider are the following: • Declining revenue or earnings • Revenue concentrated in a few carriers, producers, or accounts • Revenue concentrated in non-rated carriers or substandard markets • Low account retention or renewal commission base • Employee issues • High loss ratios • Poor recordkeeping FINANCING. Few potential buyers (including employees) will have the full purchase price close at hand. If you can help the buyer access thirdparty financing, you stand a better chance of receiving the full value for your agency. Financing also opens up the sale to a larger pool of prospective buyers, which is essential for competitive bidding. Typically, the more money that can be borrowed to finance an acquisition, the more likely it is that you will obtain the best price and terms for your agency. PROFITABILITY. Another important factor in assessing the value of your agency to a buyer is how your profitability and performance compares to that of your peers. Joseph Totah, a former agency principal who now heads AgencyEquity.com,

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recommends developing a confidential summary that includes information such as: • Reports by client and carrier on the book of business • Average policy count per household • Average premium per policy • Breakdown by line of business • Location of accounts • Accounts by premium size and by revenue size • Largest clients • Supporting documentation from carriers, such as loss ratio reports, commission state ments and schedules You’ll also need to provide pro forma financials, which project future revenue and profitability. Be sure that these numbers don’t include one-time (non-recurring) transactions.

STRUCTURING THE TRANSITION Before you negotiate a price and terms, it’s time to work with your attorney and CPA to identify and develop the sale/transition structure that best fits your objectives and tax situation. Three common approaches are: LEVERAGED BUYOUT/RECAPITALIZATION. A recapitalization strategy is the change of company ownership, value or stock from an owner to relatives, employees, management, key producers or others. It provides the seller with cash needed to exit for retirement or other reasons while leaving the business in the hands of people who see that it continues operations. In a leveraged recapitalization, the buyer or buyers borrow funds from a lender in order to purchase ownership, utilizing the assets of the agency as collateral. A leveraged recapitalization as part of a succession plan can provide many benefits to both buyers and sellers. Some companies have added succession loans that are structured to handle a recapitalization. EARN-OUT. The buyer typically pays 60% to 80% of the purchase price up front, with the remaining 20% to 40% paid over time as the agency achieves certain levels of revenue or profitability. SELLER-ASSISTED. The buyer makes a sizeable initial payment and gives you a note to cover the rest. You can choose to receive the buyer’s regular payments on the note, or resell it at a discount to a company that specializes in note purchases.

The buyer may need assistance in locating funding for the transaction, and your business expertise may make the process easier (which ultimately benefits you). While many prospective owners look to local banks as their first potential funding sources, most banks are hesitant to lend money to insurance agencies. Banks normally base their lending on balance sheet financials and collateral, such as real estate and inventory. An insurance agency’s primary asset is the future cash flow that’s embedded in its book of business.

MAKING THE ACTUAL TRANSITION The work doesn’t end once the papers have been signed. The transition between owners is full of make-or-break moments involving carriers, customers, and employees. Employees who aren’t buyers will want to know that their jobs are secure and that they’re not facing significant changes in the work environment. The more time you devote to sharing your plans throughout the succession process, the less uncertainty they’ll face. That’s important, because their moods and statements will have a significant effect upon what your loyal clients think of the new owner. Overall, clients want to be assured that their protection will not suffer any disruptions, and that the acquisition won’t create any hassles for them. If the employees are well liked, customers will also want to be reassured that they’ll continue to deal with the same friendly faces. In addition, be aware that successful transitions often take less time than anticipated. Before you know it, your former agency may be a well-running machine that doesn’t need much of your time or advice. While it’s a common reaction to feel unwanted and depressed, don’t. It simply means you did a great job of planning for the succession, your plan succeeded, and you can now focus on your dreams!

The materials in this paper are for informational purposes only. They are not offered as and do not constitute an offer for a loan, professional or legal advice or legal opinion and should not be used as a substitute for obtaining professional or legal advice. The use of this paper, including sending an email, voicemail or any other communication to Oak Street, does not create a relationship of any kind between you and Oak Street.

Rick Dennen is president and CEO of Oak Street Funding, which provides commission-based lending for insurance agents that need capital to buy, build or sell their agencies. Dennen is a licensed agent in the state of Indiana for life, accident and health products and a licensed Certified Public Accountant in the state of Indiana. In addition, he is an instructor in venture capital and entrepreneurial finance at the Indiana University Kelly School of Business. He can be reached at rick.dennen@ oakstreetfunding.com

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FEATURE / SUCCESSION PLANNING

Answering the call for

UNIFORMITY

Agencies, carriers, regulators, broker-dealers and vendors unite to simplify business Competitors don’t often collaborate, let alone swap war stories and best practices. But the insurance industry’s culture started to change about three years ago, when SILA (Securities & Insurance Licensing Association, Inc.) opened the lines of communication by creating subgroups to tackle common issues and simplify burdensome processes. Today, these volunteer groups include professionals from agencies, carriers, regulators, broker-dealers and vendors across the country—all determined to streamline processes in an industry known for complex regulations that vary from state to state. “We’re building a partnership among insurance companies, agencies and regulators. We’re focused on creating a simpler and more consistent licensing and securities registration process,” says Diana Capes, executive vice president of SILA. Now celebrating its 25th anniversary, SILA provides a forum at which members exchange ideas for achieving compliance in this tightly regulated industry. SILA also actively works to improve the licensing process on behalf of its 1,500 members. Above all else, there is a call for uniformity to make it simpler for insurance agents, brokers and carriers to serve their mutual clients. SILA is working to answer that call. Currently, there are four subgroups with active participants representing more than 25% of SILA’s membership. These subgroups include: • SILA Agency/Carrier Subgroup • SILA Adjuster Licensing Subgroup • SILA Surplus Lines Subgroup • SILA Continuing Education Provider Subgroup As an example of the work these subgroups do, SILA recently conducted a member poll that

revealed a number of ‘pain points’ related to agency- carrier communications. The SILA Agency Carrier Subgroup (SACS) then formed various task groups to explore the issues, work towards resolution and develop best practices. The task groups are addressing topics such as: • Producer appointment process • Commissions-related issues • Designated responsible producer • Branch licensing • Continuing education • Background check requirements • eSignature • Agency/company contracting “Through our task groups, SILA is giving agencies and carriers a voice in the industry. We’re joining meetings with the Producer Licensing Work Group [PLWG] of the National Association of Insurance Commissioners [NAIC]. Our teams are calling attention to issues that otherwise might go overlooked, and we’re proposing changes for commissioners to consider,” says Capes. State regulators are listening and are actively involved in SILA and several of the SACS task groups. Already, SACS has enabled key changes in the industry. For example, the group worked with the Association for Cooperative Operations Research and Development (ACORD), a non-profit insurance standards development organization, and the NAIC to create a uniform Producer Information Form that brings consistency and efficiency to the appointment process. The multipurpose ACORD 821 is an alternative to the hundreds of different producer application forms that exist nationally. Why so many? Every carrier has their own form requesting essentially

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the same information. By creating a standard form, SILA helped streamline the appointment and contracting process. Adoption of ACORD 821 is increasing steadily and the form is now available electronically to anyone, which further boosts overall efficiency in an industry that uses more than its fair share of paper. “The ACORD 821 form is a great benefit for producers and carriers,” says Yolanda Austin, ACORD Life & Annuity program manager. “This multipurpose form allows a producer to submit a standard form to multiple carriers whenever they’re doing any type of changes, terminations or appointments.” Another group of SACS volunteers is led by Paul Willis, assistant vice president, underwriting and client services, at AXIS Insurance. This task group is charged with trying to eliminate repetitive requests to share personal information, including a licensee’s social security number (SSN). “With the recent security breaches that have received national press coverage, individuals are understandably more concerned than ever about sharing personal information, especially their SSN, and agencies and carriers share those same concerns,” says Willis. “We are working with the NAIC, PLWG and NIPR to move away from use of the SSN in as many transactions as possible.” SILA encourages vendors to participate in the subgroups, too, and they are helping create solutions that meet the need for uniformity. Vertafore is among them. According to Tim Owen, vice president of product management for Vertafore’s regulatory and compliance products, the company actively participates in every SILA subgroup because it helps them identify and address the most important industry topics. “SILA provides an essential service to the industry because it is the only organization focused solely on these compliance and operational issues,” Owen says.

When asked about the traction SILA has gained during the past three years, Capes says it’s the result of breaking down barriers and replacing them with teamwork. “We are making progress, thanks to the efforts of our problem-solving volunteers to help move the industry toward a simpler way of doing business,” Capes says. Last year, as a result of the subgroups’ work, SILA introduced the SILA Best Practices Handbook. It is a compilation of research, reference materials, industry surveys and papers. Agencies and carriers quickly put the handbook to use, and it has become a valuable reference guide that continues to expand. “Before we formed the subgroups, agencies and carriers didn’t talk to each other. Now they do, through their involvement in SILA,” Capes says. “They recognize that they share the same issues. I often hear our members say, ‘Exactly—that’s the problem, and we’ve got to fix it.’ ”

Deborah A. Gregory chairs the SILA Agency/Carrier Subgroup. She serves as vice president and director of producer licensing and contracting for Lockton Companies, the world’s largest privately held insurance brokerage firm. For more information about SILA, visit www.SILA.org or contact Diana Capes at 800-428-8329

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BUSINESS STRATEGY / LEADERSHIP AND MANAGEMENT

GETTING INSIDE OUR

HEADS

Taking your team to the next level means understanding your employees and yourself. Jill Fraser reports

“A good leader possesses two key attributes, the ability to set direction and the skill to drive people towards that direction, motivate and align them and ensure that the direction appeals to their hearts as well as their heads.” Their hearts? Twenty years ago, an article on leadership would have reflected the domination of boardrooms by alpha males who believed that emotions and feelings in an office environment were about as relevant as children’s storybooks and as welcome as T-shirts, and probably kicked off with something like: “A good leader recognizes that business strategy is a highly rational process of eliminating variables and maximizing opportunities.”

Leadership in 2012 is a much more holistic concept: leadership training institutions such as Deloitte’s Leadership Academy use the analogy of children’s stories to encourage business leaders to tap into their own stories in order to become more open, honest, transparent and real—whereas employees wearing T-shirts is now a universal sign in major corporations around the globe, showing that a relaxed dress code lifts staff morale, acknowledges individuality, and potentially increases creativity and productivity. Today, as expressed in the opening quote by Deloitte’s Leadership Academy chief and founder, Tom Richardson, good leadership engages the heart as well as the intellect, and encompasses a number of key qualities. Richardson established the Deloitte Leadership Academy to expand the capabilities of leaders after recognizing that ‘people, not PowerPoint’ drove organizational performance. He has years of experience in the leadership stratosphere— working intimately with 15,000 top business leaders—and so is uniquely placed to explain why leadership is a people game. “The characteristics and capabilities of good leadership are universal across almost all industries,” he says. “But it’s become more and more important in the finance industry because of the pressure around bonuses and remuneration. “People will only stay in an organization if they feel connected and engaged. They’re not being paid to stay there with bonuses anymore. The need for leaders in the financial services industry to build up their people skills has become increasingly important.” Andrew Henderson, a veteran of leadership management, introduces the term ‘leadership charisma.’ “It’s to do with connection: a connection that makes me feel that my leader is charismatic and the only way that connection will be established is if my leader has the emotional intelligence to understand me—what motivates me, why I’m here, how I react. “Unless leaders understand and invest in their people, they will not be able to influence them because when they want to rally their team to do something, the reaction will be ‘you only want us to do this because of what you will gain,’” he adds. “But, if each individual knows from experience that their boss is invested in them, listens to them

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HARD TO PLACE PROGRAMS?

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LEADERSHIP: KEY QUALITIES

EMPATHY COMMUNICATION PROCESS & TACTICAL ORIENTATIONS LOGIC

EYE FOR DETAIL

INSPIRATION

EMOTIONAL INTELLIGENCE & SELF-AWARENESS

‘BIG PICTURE’ VISION AUTHENTICITY

Source: Deloitte Leadership Academy

(consultative leadership) and honestly cares about them, they will trust the leader’s decision on behalf of the team. That’s leadership charisma,” Henderson maintains.

NEUROSCIENCE IN ACTION A high-trust factor is paramount in the leader-employee equation in the insurance industry, says John Toohey, professor of business psychology at the Graduate School of Business and Law, RMIT University, because of the nature of the business and the fact that a culture initiated and practiced at the top is mirrored down the line and will eventually shape customer relations. Toohey familiarizes his graduate MBA students with neuroscience to add weight and credibility to the argument that the most effective, charismatic leaders function from their emotions. “Through neuroscience, which looks at how the brain operates, we have come to realize that decision-making is primarily emotion-based,” explains Toohey. “The emotional parts of our brain kick in long before the rational parts. The rational parts follow and try to make sense and contextualize. “A lot of men in business are afraid of that component, and don’t want to know about it. The executive education I’ve done in this area is fascinating: people have quite bemused smiles when I first tell them this, but as they dig into it and I show them the research they begin to look more bewildered than amused.” Toohey contends that an area of critical importance in business education is the nature of beliefs and biases. He teaches that the brain is highly plastic/durable. Beliefs belong to the irrational/emotional world, and a strongly held belief can change the neural pathways of the brain (thus the plasticity). “Leaders usually don’t understand this and therefore don’t get the impact,” he says. The significance of all this, Toohey says, is to highlight the relevance of selfawareness (what we believe, how we behave, and why) in what he refers to as the “psychology of strategy” for leaders to “inspire people to act in predictable ways.” “I challenge managers and executive MBA students because usually they are very good at identifying biases in others, and very poor at identifying them in themselves,” adds Toohey. “I tell them, ‘If you don’t understand yourself, go and grow cabbages or do some other solo job.’ “Don’t pretend that you can go into a business and take a leadership role, because you’ll only make a mess of it. If you don’t understand yourself you’re never going to understand others; you’re never going to be able to motivate them.”

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FEATURE / HOSTAGE & RANSOM

months of hell

Brokers were all ears when kidnapping survivor Amanda Lindhout shared her story with them at a conference this spring. The account highlighted the need to better inform clients about and protect them with kidnap and ransom insurance. Donald Horne reports “I had lost a lot of my hair; I was missing seven teeth that my captors had knocked out, and I was missing toenails due to malnourishment. Those were my days living in what I called ‘The Dark House’; forbidden to speak, wondering if I could survive the next 10 minutes.” Those were the powerful words of Alberta-born Amanda Lindhout, who was describing her experience when she and another man were taken hostage for 15 months by Islamic militants on a hot and dusty day in August 2008 near Mogadishu, Somalia. “I remember thinking to myself, ‘I’m only 27 years old. What have I done to deserve this?’” she told a hushed group gathered at a Chubb office in the Northeast, her trembling voice betraying those months of torture and anguish. “My faith in human decency was lost—what had led me to travel around the world was lost. I became consumed by anger and self-pity.” Lindhout’s story begins as a wide-eyed 19-year-old. “Growing up, travelling was not something I did,” she says. “I kept a stack of National Geographic [magazines] by my bed, dreaming of faraway, exotic places. Then one day I bought a ticket to Venezuela for a six-week trip.”

Over the next seven years Lindhout travelled to more than 50 countries, “with a backpack on a shoestring budget,” she smiles. While in India, she helped out at a clinic where Mother Teresa once worked, and she went on numerous safaris in Africa. “I went to many places that are considered ‘off-limits,’ like Lebanon, Pakistan and Ethiopia,” she says. “It is easy to believe nothing bad is going to happen until it does.”

INTRODUCTION TO JOURNALISM It was in 2004 that she met Nigel Brennan, a handsome bearded man from Australia. “He was a journalist, and it was Nigel who piqued my journalistic interest,” she remembers. “I bought a camera and a ticket to Afghanistan. And it was hard going.” The following year she set her sights on

another international hotspot, Baghdad, Iraq—but soon her attention was diverted to the displacement refugee camps in Somalia. “I wanted to tell their story,” she says. “It was to be a one-week work plan, with the rest of my time spent on the beach. Kidnapping was always a possibility, but I did not give it enough thought.” Upon arriving in Somalia with Brennan, she immediately felt the difference. “This was a war zone, different from Baghdad,” she says. “The markets in Mogadishu were empty; the streets were absolutely desolate.” It was on the third day of her stay that the two decided to travel through the countryside to see one of the displacement camps for themselves. And Lindhout wants to stress that it wasn’t through a lack of planning or

“I went to many places that are considered ‘off-limits,’ like Lebanon, Pakistan and Ethiopia,” she says. “It is easy to believe nothing bad is going to happen until it does”

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BROKER TAKEAWAYS Who to sell this to: - Clients who travel on business frequently, regardless of destination - Clients who work in foreign countries for extended periods. Also, foreign workers hired by US companies, who want protection from compensation claims, employee theft or robbery of corporate assets - Ordinary people who travel to hotspots for terrorism and kidnapping How to sell it: - Share the kidnapping statistics with clients, from websites like Havocscope, or recent headlines on kidnapping cases - For corporate clients, have an expert speak to the executives on his/her experience in the ﬁeld of hostage taking and negotiation—a ‘tough love’ seminar - Include it as an add-on product for travellers, as part of overseas medical coverage Who covers it: - Liberty International Underwriters - Chubb Insurance - Global Underwriters - AIG - Travelers

precautions that she and Brennan were taken hostage. “We set out with the three security personnel we had hired, leaving the relative safety of Mogadishu,” says Lindhout. The countryside was under the control of various tribal warlords. “At one checkpoint,” she says, “we had to leave our security behind and cross a stretch of no man’s land before we could get our next security detail. That is when we saw a car pulled over at the side of the road.” And that is where her descent into hell began.

TAKEN HOSTAGE, RANSOM DEMANDED Dragged out of the vehicle and forced to lie spreadeagled on the ground by a dozen or so men—really teenagers—armed with AK-47s, the pair were thrown into another vehicle and driven to a house, where they were placed in a concrete room. “They demanded to know our families’ contact information, and they demanded $1.5m from my father,” she says. “I was told that I was rich.” Most Western countries have a no-pay policy when it comes to international

kidnapping and ransom situations. Instead, governments may offer to build a school or help pay for a hospital in return for the release of citizens held against their will abroad. But the hostage-takers were in business for themselves. They weren’t associated with the Somali government and certainly weren’t interested in building a school, says Lindhout. “The days became weeks, then became months, and we were always moved from house to house,” she says. “They told us they would behead us.” Lindhout now travels with kidnap and ransom insurance wherever she goes, and it is an important coverage that is driven home to her audiences when she explains that she would have been freed within days or weeks, had there been insurance to pay out to the kidnappers. JULY/AUGUST 2014 | 51

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FEATURE / HOSTAGE & RANSOM

HOSTAGE HOTSPOTS AROUND THE WORLD

SYRIA & IRAQ

MEXICO

AFGHANISTAN PAKISTAN & INDIA

LIBYA & EGYPT YEMEN

GUATEMALA ECUADOR

NIGERIA

COLOMBIA

KENYA

MALAYSIA PHILIPPINES

BRAZIL

“My parents didn’t have that kind of money,” she says. “After 10 months of working with Ottawa, the government finally recommended that they explore ‘other options,’ meaning to hire a private company to negotiate with the kidnappers.” That company, AKE Group, eventually secured the deal that freed Lindhout for a quarter of the ransom amount that the kidnappers had been asking for.

SEPARATION, FLIGHT AND MURDER While in captivity, Lindhout and Brennan had been separated and were forbidden to speak to one another after a few months. But that didn’t stop them. “We took great risks to communicate, usually in whispers in the hallway,” she says. “Then one day we talked of escape.” Brennan had a background in construc tion, and had noticed that the mortar around the bathroom window was crum bling. With a pair of nail clippers provided

by his captors, he loosened the bars on the window. And then one day they made their dash for freedom. “We ran to a mosque, and we were chased all the way,” Lindhout says. “Then our captors started to fire at us—it was complete chaos.” Instead of finding sanctuary inside the mosque, they only found more men with weapons who were all too eager to ransom them too. After the failed flight to the mosque, she never saw Brennan again, and her 10 months in ‘The Dark House’ began. “Everything was punishment from that day forward,” Lindhout says.

THE DARK HOUSE Ten months of total darkness ensued, during which she was forbidden to speak or have contact with another human being –10 months with a thick metal chain around her ankles.

“I had lost the sky; I had lost laughter,” Lindhout says. “At any moment, I knew this ‘snap’ was going to come eventually. My snap from reality, from sanity.” The only human contact she had was with a man named Abdullah, who would bring her food and daily beatings. It was during one of those beatings that Lindhout experienced that ‘snap.’ “Abdullah was hurting me, and I had my hands pressed up against his chest. I wanted him to die,” she says. “Time had stopped, and I felt detached from the excruciating pain—I had become an observer in the room.” It was at this point that Lindhout went back in her mind to the days and weeks before the Dark House and the daily torture, when Abdullah and the other captors, all orphans of war, would share their stories of childhood tragedy. “I remember Abdullah telling me of when he was a little boy, finding his aunt’s leg and hiding behind a truck after an

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explosion, living his days on the streets as an orphan,” she says. “He was driven to make someone hurt more than he had been hurt. That was my snap. But it was a snap that gave me the power to forgive.” Lindhout made a vow to herself, allowing a tiny seed of compassion to grow for these young people who were hurting her. “No matter what they do to me, I am going to choose forgiveness.”

DELIVERANCE AND FORGIVENESS While Lindhout was being held in an animal shed, one of her entered with a small saw, cutting off her rusty chain. She began to cry. “This wasn’t a good sign. I thought they were going to sell me to another group, or they were taking me out to die,” she says. Instead she was taken to a vehicle, then driven out into the desert to rendezvous with another vehicle. “We were surrounded by 40 armed Somali men, and I started sobbing again,” she says. “I didn’t want to know what was going to happen. Then I was handed a phone. It was my mother, telling me, ‘You are free.’” Now living in Canmore, Alta., Lindhout has written a book on her experience, A House in the Sky: A Memoir, which made the New York Times bestseller list in 2013 and was named one of the Globe Books 100 Best Canadian non-fiction books by the Globe and Mail. “Over the last few years, I’ve talked a lot about forgiveness,” says Lindhout. “I’ve chosen not only to forgive those teenage boys who kidnapped and tortured me, but myself, which hasn’t been easy.” Aside from a very harsh lesson in learning to take out hostage and ransom insurance coverage, Lindhout does feel that those 15 months in captivity have made her appreciate some of life’s simpler pleasures. “I can experience those moments when the sun lights up the mountains near my home,” she says. “There is much beauty to behold.”

PROTECTING YOUR CLIENTS Amanda Lindhout’s harrowing story highlights the often-missed opportunity for brokers to service niche areas of their client base and also grow their corporate customer numbers, say experts. In fact, a recent survey shows that terrorism needs to be given a higher insurance priority. “We’re not just talking about presidents and CEOs anymore,” says Mike Ackerman, president and CEO of the Ackerman Group. “We are seeing plant managers, plant foremen in Mexico, being kidnapped and held for ransom. These aren’t rich people —they are ordinary, everyday people.” A recent survey of captive directors, released by Aon Risk Solutions, shows that as the expiration of the Terrorism Risk Insurance Act (TRIA) approaches, the majority of respondents agree terrorism should be ranked higher. Aon Risk Solutions, the global risk management business of Aon plc, notes that the findings, detailed in the 2014 Underrated Threats report, highlight concerns over the top 50 key risks ranking in Aon’s 2013 Global Risk Management Survey (GRMS). More than half of respondents to the underrated threats survey said a ranking of 46 was too low for terrorism risk, given the pending expiration of TRIA. “Sadly, it is a growth area of insurance,” says Roberta Zurrer, a commercial lines broker at McDougall Insurance & Financial. “With more employees travelling abroad, kidnappings are becoming more prevalent.” The survey gathered input from 1,415 respondents—including risk managers, chief financial officers and CEOs—from 70 countries and from companies of all sizes. GRMS ranked the top five risks as follows: • economic slowdown/slow recovery • regulatory/legislative changes • increasing competition • damage to reputation/brand • failure to attract or retain top talent Terrorism/sabotage was ranked 46. “It is barely conceivable that a little over a decade after one of the most impactful risk events in recent world history, the ranking for terrorism is so low,” states the report. “The sad truth is that terrorism

attacks are not confined to politically or economically unstable regions. They can happen anywhere, anytime and without reason, but their horrible commonality is that the results are almost always devastating.” When asked if they were surprised that terrorism/sabotage was ranked at 46, 52% of respondents said yes, absolutely; 40% said no, not really; and 7% were unsure. According to the website Havocscope, the kidnapping statistics show average ransom demands in 2012 of $2m, with a total of $1.5bn extorted. In Mexico, a favourite vacation destination for many Canadians, the average kidnapper earnings amount to $50m per year. Havocscope is a website that collects and analyzes data from around the world on black-market activities, and has supplied information to the World Economic Forum for the Global Risks Report 2011. Mining operations in Central and South America, as well as companies with interests in Africa, Asia and the Middle East, are all vulnerable to kidnapping and extortion, with particular hotspots including Mexico, Nigeria, Venezuela and Pakistan. “We are seeing more cases of kidnapping and ransom demands,” says Zurrer. “Just look at the news. We offer coverage in the event of kidnapping or ransom for our commercial clients, which can be part of the Business Continuity Planning package.” It is a conversation brokers need to have with clients who travel, or those whose work takes them to countries like Mexico that pose a security risk. One way to start the conversation with a client would be to suggest a training seminar, suggests Ackerman. “We do a lot of training seminars. Training is the most cost-effective way of dealing with risk. It stays with people,” Ackerman told Insurance Business. “Unfortunately, we are in a society today that is very taken with technology. Technology has its place, but it doesn’t replace training. And if you do end up being taken hostage, ransom insurance is absolutely essential.”

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PEOPLE / FAVORITE THINGS

Favorite things... Kurt Bingeman, owner and president, Russell Bond & Co. As head of Buffalo-based wholesaler Russell Bond & Co., Kurt Bingeman, has been assessing particularly hard-to-place risk since he began his career with the group in 1972. Bingeman is active in prominent trade groups like NAPSLO and the AAMGA, and currently serves on a regional advisory panel of the professional insurance agents of New York. Vacation spot: One of my favorite vacation spots is Phoenix—although not so much during the summer! In the winter, though, it is not only a weather change, but a complete change of scenery. I love going from the forested green north to the desert sand. Aspect of working in insurance: I think it’s been the opportunity to find solutions for a variety of risks. A lot of what I have worked on over the years hasn’t been run-of-the-mill surplus lines. It’s been some of the tougher things that require learning a lot about other people’s businesses in order to find the solution. I love knowing a little bit about everybody’s business. Place to be: One of the things I’d say is my family has a place we call “The Farm.” It’s a couple hundred acres outside of Buffalo, down in the hilly, mountainous areas. It’s very peaceful—no neighbors and lots of hiking trails. My dad who is 99 still lives there by himself.

Book: Books like The Firm and The Client by John Grisham are great because you start reading and you don’t go to sleep, and suddenly you realize it’s one or two in the morning.

Favorite sport: Actually, part of my career story is that when the Buﬀalo Sabers got going in 1971, I was just entering the business and I ended up doing a lot of insurance for them in the early years. We got a lot of tickets to attend games with their insurance broker, and now I make sure I have four tickets to every game. They’re now my favorite team.

Favorite food: Anything that combines seafood and pasta. Whatever you call that, it’s my favorite.

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IBAm_Y

Insurance Business America is seeking nominations for Insurance Professionals under the age of 40, whose contributions are shaping the industry.

DO YOU KNOW A YOUNG GUN? Email Caitlin Bronson at caitlin.bronson@keymedia.com and tell us why they should be recongized in our September edition.

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LAST WORD

Relevance in the Digital Age:

Four ways a digital e-commerce approach is beneficial for insurance brokers

Kevin E. Mooney is Senior VicePresident of Torus eCommerce. Torus eCommerce centralizes the delivery and development of the company’s online ESCAPE broker portals

Business has entered the second signiﬁcant revolution in its history - the digital revolution. Markets and industries are changing rapidly from advancements in technology and the use of the Internet. Owners and leaders of businesses who are reluctant to embrace this new way of doing business risk the health and possible future of their company. In this new world, the days of having advanced notice that sales are declining or more importantly, having the time to be able to react and correct the situation are over. In this new digital revolution, sales will be there one day and gone the next. You either stay relevant with technology or you fall behind. In particular, the insurance market is going through radical changes. The way submissions and risks are processed and underwritten is evolving on a daily basis. Brokers have to change their approach when dealing with customers and need to prove their importance and relevance on every account. Here are four ways a digital e-commerce approach will be beneficial for insurance brokers: Controlling your carrier markets: The traditional method for getting a quote from a carrier is to send out a mass email submission to your top markets (with a wish and a prayer) in the hopes the underwriter is in the office and can process your submission before your competitors. The really frustrating aspect of sending out mass email submissions is finding that the markets you are contacting are already blocked by a competitor. The other frustrating aspect is waiting days by your computer, only to find out that the carrier is no longer a market for this particular type of risk. Using an online portal allows you to select and reserve with the markets that best fit your account. You know instantly that the account is reserved and that you control the market. Quoting when you want to: One of the biggest factors that draws brokers to internet portals is that these systems provide a freedom to

brokers they traditionally haven’t experienced before with online carrier portals. It allows brokers the flexibility to quote accounts from anywhere, and it also releases them from the normal time constraint of 9AM to 5PM, Monday through Friday that they experience when working directly with traditional underwriters. Most online systems are Internet-based and can be accessed from any computer with online capabilities. This revolutionizes the way brokers can access insurance carriers and drastically cuts the time between when a broker submits an account and when they receive a quote, putting the power back in the hands of the broker. Speaking to your underwriter in real time: Most online portals have a “chat” feature that allows clients to conduct an “instant chat” discussion with an underwriter while still working on their application. If the user gets stuck while filling out their application, some systems have built in software that allow the underwriter to take control of the user’s curser and help the user identify problems in the application. The chat feature can eliminate uncertainty about risk appetite and gives brokers the peace of mind that the broker has placed the right piece of business with the right market. Policy documents when you want them: At the time of binding an account with an online portal, the user instantly receives a copy of the policy and invoice so they can send the documents out to their client. Another valuable feature is that these documents are in a permanent depository, which can be accessed at any time to retrieve or replace lost documents. This helps to do away with the added time of sending emails and calling carriers to get or replace documents. The new business environment contains many new challenges and opportunities. The speed of online underwriting allows brokers to obtain efficiencies and enables them to concentrate on growing their book of business. Brokers who build a digital e-commerce strategy into their business model are going to work faster, turn more submissions around and thrive as part of the new digital revolution.

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Expect big things in workersâ&#x20AC;&#x2122; compensation. Expect to save a third of your clients 30% or more. Most classes approved, nationwide. For information call (877) 234-4450 or visit auw.com/us. ÂŠ2014 Applied Underwriters, Inc. A Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected under U.S. Patent No. 7,908,157.

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