Insurance Business America issue 3.11

IBAMAG.COM ISSUE 3.11

LLOYD'S GLOBAL CEO Inga Beale's vision for 2025

BEST OF THE BEST FROM CONSULTANTS TO LAW FIRMS, THE TOP INDUSTRY PROVIDERS CHOSEN BY YOU

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LEADERSHIP DON'T BE FEARLESS –WHY TO EMBRACE FEAR AS A DRIVER OF POSITIVE CHANGE

SURETY BONDS BUSINESS IS BOOMING – BUT MOST PEOPLE DON'T KNOW ABOUT THEM

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ISSUE 3.11

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CONTENTS

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UPFRONT 04 Editorial

Agencies can learn a lot from Best of the Best recommendations

FEATURES

34

AGENCY INSIGHT

18

COVER STORY

INDUSTRY ICON

Inga Beale is determined to bring more diversity and modernization to Lloyd’s

FEATURE

BEST OF THE BEST

Your top picks – our compilation of the best insurance industry providers, from AMSs to E&O

Synergy and family atmosphere are the foundations of this MGA built to help condo associations

06 Statistics

Why brokers should heed the rise of ridesharing on a business-growth path

08 Head to head

Are the current CE-hour requirements enough?

09 Opinion

Embrace automation when more clients are going online for quotes

10 News analysis

California wild fires are leaving many homeowners with coverage in ruins

12 Intelligence

FEATURES

38

OUT OF THE DARK AGES

They’ve been around for centuries and pervade modern society, but most people don’t know about surety bonds

New coverage for drones, construction projects and law enforcement

14 Workers’ comp update

Producers must establish medical marijuana standards or employers could get smoked by liabilities

16 Technology update

Industry insiders speak out about Google getting into P&C insurance

PEOPLE 36 Producer profile

22 2

47 Career path

NESS FIV USI ES EB C

artners 20 RP 15 TA

INSUR AN

Lalita Mohabir underwrites kidnap and ransom – and she’s passionate about it

FEATURES

42

WHY FEARLESSNESS CAN LEAD TO FAILURE

Be a better leader – embrace fear

From car salesperson to independent agent, Tiffany Nolan was driven to succeed

48 Other life

Horsing around has changed Kathleen Pittman’s life and grown her business

IBAMAG.COM CHECK IT OUT ONLINE

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Beyond Security®

“It Takes Discipline”

Marty Hacala Fitness Enthusiast General Star President & CEO

“Rolling out of bed at 5am every morning to work out requires discipline. It’s my way of getting the very most out of my busy day.

“At General Star, we strive to get the very most out of our wholesale broker relationships. As a member of the Berkshire Hathaway family of companies, our financial strength is unsurpassed. But it’s our disciplined approach to building and maintaining profitable partnerships with a select group of brokers that drives us.

“Discipline: Whether sticking with an early morning exercise regimen or standing firm with a limited number of valuable wholesale broker relationships, it remains the cornerstone of our success.”

To locate the General Star broker nearest you, visit our website at www.generalstar.com.

© 2015 General Star National Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. Insurance is placed with General Star National Insurance Company by licensed producers. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star Indemnity Company by licensed producers and, for risk that qualify, by licensed surplus lines brokers.

Atlanta 404 239 6777

Chicago 312 267 8600

A.M. Best A++ XV

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Los Angeles 213 630 1930

S&P AA+

New York 212 859 3950

Stamford 203 328 5700

A Berkshire Hathaway Company

13/11/2015 7:46:09 AM

UPFRONT

EDITORIAL

Best of the best at supporting the rest

D

espite the fondly embraced moniker, independent insurance agents and brokers are not entirely independent. In an age of increasing specialization, the modern agency relies on any number of third-party service providers to free up staff time and allow everyone from principals to account managers to focus on the most important business of insurance.

In recognition of that reality, Insurance Business America asked readers to rate their third-party service providers and tell us who is truly the best of the best.

The survey, which went out nationwide, asked agents to rate companies in the following seven areas: agency management systems, comparative rater/ quoting tools, banking and finance, marketing, consulting, E&O coverage and legal services.

The market pressures on the agent/ broker channel are now such that mergers and acquisitions have become a way of life These areas were chosen for their relevancy to agency life. Technology, for example, is an increasingly important lifeline for agencies, connecting them to their books of business not only from the office but increasingly in a mobile platform.

Comparative raters, too, are growing in relevancy as consumers seek to do more of the initial shopping themselves before turning to an agent to complete the process.

Reaching customers also requires a deft hand in marketing, and companies that cater to the unique needs of independent agencies are imperative.

The market pressures on the agent/broker channel are now such that mergers and acquisitions have become a way of life. Interested companies need the services of consultants and banking firms to help them reach their goals.

Finally, no matter how eagerly agencies strive for protection, everyone falls short at some point. That may require solid errors and omissions coverage, and potentially the services of an attorney.

It’s our hope that other agencies can learn from these recommendations and tailor their shopping accordingly. As for service providers, these ratings should inform further development and customer support to the agency channel.

The team at Insurance Business America

www.ibamag.com DECEMBER 2O15 EDITORIAL Senior Journalist Caitlin Bronson Journalists Ryan Smith Tim Garratt Donald Horne Olivia D’ Orazio Copy Editor Dean Askin

CONTRIBUTORS Samantha Wright Abel Longoria Nikki Heald Dan Waldschmidt

ART & PRODUCTION Design Manager Daniel Williams

SALES & MARKETING Vice President Cathy Masek Media Sales Managers Chris Wills Chris Anderson Marketing and Communications Manager Lisa Narroway

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

Designers Joenel Salvador Production Manager Alicia Salvati Traffic Manager Kay Valdez

EDITORIAL INQUIRIES caitlin.bronson@keymedia.com

SUBSCRIPTION INQUIRIES subscriptions@keymedia.com

ADVERTISING INQUIRIES

cathy.masek@keymedia.com chris.wills@keymedia.com chris.anderson@keymedia.com

Key Media 78O7 E. Peakview Ave., Suite 115 Centennial, CO 80111, USA tel: +1 720 316 0151 www.keymedia.com Offices in Denver, Toronto, Sydney, Auckland, Manila

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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 the magazine can accept no responsibility for loss.

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BURNS &

PARTNER, NOT COMPETITOR

WILCOX

WHOLESALE IS OUR MIDDLE NAME. Free of retail divisions, ownership or even affiliations, we never cross the line between wholesaler and competitor.

Your best interests always come first, keeping the focus on growing your business. Don’t compromise. Partner with the leader who works with you instead of against you — Burns & Wilcox.

800.521.1918 burnsandwilcox.com Commercial | Professional | Personal | Brokerage Binding | Risk Management Services

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UPFRONT

STATISTICS

The burgeoning sharing economy Businesses like Uber, Airbnb and Lyft are now commonplace across the country. Should brokers take notice as a route to future growth?

THE SHARING economy has rarely left the front pages this year as the growth and challenges of companies such as Uber, Airbnb and Lyft continue captivating the country. With companies now given multi-billion-dollar valuations, it’s safe to say that, while regulatory issues remain, the sharing economy is here to stay.

As the line between personal and commercial insurance continues to blur around

this space, savvy brokers should be looking to the sharing economy as a key strand to the future of their businesses. Small business has been the backbone of many broker businesses for decades. As renting a spare room on Airbnb begins falling into that bracket, it’s time for brokers to learn the ins and outs of the sharing economy – and how its meteoric rise can add to your business.

THE SCOPE OF THE SHARING ECONOMY

$26 billion

the global estimated worth of the consumer peer-to-peer rental market

44%

the percentage of US consumers who are familiar with the sharing economy

3x

how much more Uber makes than the taxi industry collects in revenue each year in San Francisco

$335 billion the estimated worth of the global sharing economy by 2025

From lowly beginnings in 2008 and 2009 respectively, Airbnb and Uber have risen to become genuine global powerhouses, and their rapid rise looks set to continue both at home and abroad.

Sources: IPA.org, PwC The sharing economy – sizing the revenue opportunity; PwC The Sharing Economy –Consumer Intelligence Survey, Business Insider Australia

NEW DRIVERS KEEP FLOCKING TO UBER Each month, more drivers across America become Uber partners as insurance solutions for the ridesharing economy become readily available

An analysis of the 7% of the US population that are sharing-economy providers reveals the trends are here to stay, with young people using the services across a wide spread of home incomes

40,000

AGE

32,000

18 – 24: 14% 25 – 34: 24% 35 – 44: 24% 45 – 54: 14% 55 – 64: 8% 65-plus: 16%

19,000 6,000 1,000 0

HOUSEHOLD INCOME Less than $25, 000: 19% $25,000 – $49, 999: 24% $50, 000 – $74, 999: 16% $75, 000 – $99, 999: 16% $100, 000 – $149, 999: 11% $150, 000 – $199, 999: 3% $200, 000-plus: 11%

January January June November December 2013 2014 2014 2014 2014

Source: Uber: An Analysis of the Labor Market for Uber’s Driver-Partners in the United States

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SHARING ECONOMY - THE PROVIDERS

Source: PwC - The Sharing Economy –Consumer Intelligence Survey

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Founded in 2008, Airbnb reached five million nights booked by 2012.

• Airbnb is now valued at $24 billion.

• 40 million-plus total guests

• 34, 000-plus cities • 190-plus countries • 1.5 million-plus listings worldwide • 1,400-plus castles

Founded in 2009, Uber is now valued at $50 billion.

• 290 cities • 60 countries • one million rides every day • more than 8 million users

• $650 million – Uber paid out to driver partners in the US in the last quarter of 2014 • Provided 2.5 million rides in Austin, TX in the first year of operation

Sources: Globaldeliveryreport.com, Airbnb, Uber, Forbes.com, DMR - expandedramblings.com, Wall Street Journal,

REGULATORS STILL BEHIND ON RIDESHARING As the march of Uber and Lyft is being held in check by regulators around the world, American cities, states, and territories are grappling with the changing nature of the transport industry

SUSPENDED OPERATIONS

BANNED

SHARING ECONOMY TO OUTPACE TRADITION RENTALS Sharing-economy growth over the coming years will far outstrip that of traditional renting markets, presenting new opportunities to brokers Traditional rental markets

Revenue CAGR (compound annual growth rate) growth 2013–2025 car rental

Anchorage, AK

Portland, OR

Auburn, AL

Nevada

+2%

B&B and hostel rental

+4%

equipment rental

+5%

Sharing-economy markets

Revenue CAGR Growth 2013–2025

San Antonio, TX

Tuscaloosa, AL

Panama City Beach, FL

car sharing

Peer-to-peer accommodation +31%

Online staffing

Peer-to-peer lending and crowdfunding +63%

+23% Eugene, OR

+37% Source: BusinessInsider.com

Source: PwC The sharing economy – sizing the revenue opportunity

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13/11/2015 7:34:24 AM

UPFRONT

HEAD TO HEAD

Are the current CE-hour requirements enough?

Continuing education should be more than a task on brokers’ to-do lists, but many insiders don’t see it that way

Senior vice president The Whitmore Group

Ira Zapin

Amanda Hohenbery

Agent Rick Bailey & Company Insurance

Dennis Powers

“A broker could spend a lifetime studying – and some do. A dual licensee must take 30 hours of continuing education (CE).

Crossover courses, which can reduce that to 15 hours, have little to do with understanding coverage, and incentivize us not to study.

CE should focus on coverage.

Understanding coverage is key to providing for our customers’ needs. The maze of administrative regulations we are required to study does nothing to educate us.

I would say ‘no’ to increasing our hours of study. The hours required to maintain our license(s) should focus on coverage, not regulations.”

“We all have the same goal: improve the client experience and do better jobs as advisers. But increasing CE credit requirements probably won’t do that.

With CE courses now, we’re not getting information we need to help clients day-to-day. We need a kind of balance.

Topic-specific courses covering technology systems or various areas of compliance would be more beneficial.

For instance, I think there should be a required Affordable Care Act course for advisers selling employee benefits.

Our marketplace is evolving; client expectations are increasing. To stay relevant, we really need to take the initiative on CE.”

“The number of CE hours now is appropriate – not too much, not too little. I seek out courses that will make me better at what I do, as opposed to waiting until the last minute then taking whatever’s out there.

Agents must be proactive. You can find great courses if you really want to. You might have to travel, but with a two-year window there’s plenty of time.

The marketplace is constantly evolving, so you have to keep up. A lot of veteran agents are coasting on their knowledge from 10 or 20 years ago, and they’re out of date.”

Vice president Lamb, Little & Co.

CALLING FOR A QUALITY-OVER-QUANTITY CE OVERHAUL A proposal in Kansas to increase continuing education (CE) hours is creating controversy elsewhere in the country. Brokers, of course, need to stay abreast of industry changes to properly advise clients on the best insurance products for them. The question is whether current CE requirements are doing the trick.For many, CE has become a box to check – not a value-add to brokers. And many industry members don’t believe increasing required hours or course credits will change things much.Insurance brokers point to quality over quantity. They’re calling for overhauled courses directly affecting day-to-day business as opposed to general, often abstract topics.

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13/11/2015 7:34:47 AM

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email iba@keymedia.com

Brokers shouldn’t fear automation The insurance industry should embrace automation, writes underwriter Shonna Rosenberg – especially as clients turn more to click-and-cover carriers HOW MANY commercials do you see every day about going to a website to get a quote and save money on insurance? Thanks to automation, customers can click on a few links, put in some personal information and receive a quote for an auto or homeowners’ policy. After this, they may be entered into a never-ending marketing loop of promotional offers, but they can easily access and purchase insurance products from the comfort of their own homes.

Automation of both products and processes has heavily impacted the insurance industry.

Product automation is more prevalent in standard markets such as auto and homeowners’, where forms are standardized and rates are more rigid. As technology advances, I see automation playing an even larger role in the standard and surplus lines markets. The question is, how far will carriers push their boundaries? Some carriers will over-automate the product, suffer in losses and then re-evaluate the process to ultimately pull back after realizing not every account can be treated exactly the same.

There are always exceptions to the rule.

Even the most standardized products will evolve to fit the changing risks. For example, I think this is a really exciting time for auto insurance. The introduction of different fuel sources; the development of autonomous cars; and speed monitors on vehicles, will cause the industry to accommodate these new technologies. Making product automation something we can utilize only after the

emerging technology is completely understood.

That said, I do think there’s always going to be much heavier automation in the personal lines market because of the lack of risk and policy complexity compared to commercial lines.

But I don’t think brokers should be worried.

Certainly it was easier to get business before

but brokers should cut their losses and target another consumer group or expand their product offerings.

Brokers should be automating their own businesses to keep up with carrier requirements. Since the format of delivering data is not standardized in the insurance industry, streamlining this process is more difficult. Evaluating your business processes to determine where most time is lost and gains are marginal, is a great way to start.

The quicker and easier it is to get necessary information to carriers, the sooner they can deliver products to consumers. Using different web programs can help make sure efforts are streamlined and not duplicated. Sales- and document-management programs can be a crucial for keeping your office organized and optimizing your resources. You don’t want individuals on your sales team spending hours filing leads. They should be out there getting more leads or following up on ones that were automatically prioritized.

Automation is and will continue playing a critical role in cutting costs, and in keeping

“The quicker and easier it is to get necessary information to carriers, the sooner they can deliver products to consumers” consumers had the ability to go online and get quotes, but a large element of service is lost in all this computerization. I think a lot of consumers get frustrated with the lengthy processes because they don’t understand the lingo. They want a more personalized explanation of what they’re purchasing.

Even with a completely automated product, I have customers asking me to walk them through an entire application – which defeats the intention of automation. These are very educated people who just don’t understand insurance terminology and need assurances they’re getting what they’re paying for. There will always be a segment of the market buying coverage only because of a legal obligation; they don’t care what coverage they purchase.

Most people using fully automated sites are in this market segment. It’s a substantial one,

the industry competitive. So it’s essential to have it in our office operations and our products. Will automation spell the end of insurance as we know it? Definitely not. As the industry changes, it’s important to embrace our changing roles as underwriters, brokers and agents. At some point, what used to work won’t work anymore, and embracing this change is important. I think the key is a fine balance between what should and shouldn’t be done manually – a balance we’ll be constantly adjusting.

Shonna Rosenberg is a surplus lines marketing underwriter who graduated from Appalachian State University with an MBA in International Business and a Bachelor degree in Risk Management & Insurance and Computer Information Systems.

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13/11/2015 7:35:08 AM

UPFRONT

NEWS ANALYSIS

Insurers under fire As wildfires rage across the West Coast, an increasing number of insurance companies have canceled property insurance policies, driving risks into the surplus lines market

INDEPENDENT INSURANCE agents and brokers are having difficulty sourcing property risk after record-breaking wildfires that ravaged Northern California and parts of the Pacific Northwest this year.

The fires are anticipated to cost insurers as much as $2 billion in claims. Many major carriers in the area have stopped writing homeowners and business policies for almost two million households considered high fire risks. Homeowners have found themselves with no other choice but to seek expensive coverage in the excess and surplus lines market.

has had to shift more than $250 million to other accounts to pay for firefighting costs – which are now $700 million over appropriation.

Many area agents are increasingly placing accounts with the non-admitted market.

The Surplus Line Association of California estimates 91% more homeowners policies were written by this market in 2014 than in 2011.

Andy Fletcher of wholesale broker Scottish American already writes about 2,500 policies a year. He expects to write more than 3,000 next year following this round of wildfires.

“There are currently no laws in California that prohibit an insurer from non-renewing a homeowners insurance policy” Dave Jones, California insurance commissioner California Insurance Commissioner Dave Jones expects that trend to continue.

“There are currently no laws in California that prohibit an insurer from non-renewing a homeowners insurance policy,” Jones told local news station KCRA-TV. Making those costs soar even higher is the dearth of firefighters. More than 32,000 are working to contain fires in California and the Pacific Northwest. But the US Forest Service

10

About 80% of those policies are for homes in high-fire areas, where homeowners can expect to pay about twice what they would for a standard policy.

It all leaves independent insurance agents with a hard message to deliver to clients.

Dave Mellinger, an agency owner in Colorado Springs, CO, urges greater sympathy from agents. Mellinger advised clients when 2011 wildfires ravaged the area.

“Be caring and understanding, and know the people who are taking these losses just lost everything,” he said. “They just want someone to talk to, and brokers are the first person to listen to them.”

It’s a lesson more insurance agents may have to learn as large portions of the US face greater wildfire risk.

According to new research from Nevada’s Desert Research Institute and the University of Tasmania, fire-weather season length increased 18.7% from 1979 to 2013.

As well, the amount of area each year impacted by wildfire is larger than ever. A report from property research group CoreLogic suggests almost 21,000 Pacific Northwest homes are at “very high” risk of destruction.

However, not everyone is at equal risk and agents need to be aware of some important trends.

Businesses and homeowners in the Southern Rockies and South-Central US are at the greatest risk of wildfire damage. Together, the two regions contain more than 145,000 properties categorized as “very high risk” and another 915,000 at “high risk.”

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13/11/2015 7:35:43 AM

RED HOT RISK The 2015 wildfire season has taken California by storm, outstripping both last year’s figures and the state’s five-year average.

Fires

6,000 5,000 4,000 3,000 2,000 1,000 0

5,942 4,065 January – October 2015

January – October 2014

4,183 5-year average

Acres 400,000

The Northern Rockies and Pacific Southwest are also more in danger of out-ofcontrol flames than other regions in the US. The data also reveals new homes and businesses are especially exposed to wildfire damage, according to Dr Thomas Jeffrey, senior hazard scientist at CoreLogic.

He said agents assessing quotes for homes and businesses in “urban” areas should check whether the buildings are close to high fuel concentrations outside the actual urban or parcel boundary. If they are, this could affect policy premiums.

One thing it should do is influence the

“The fact that newly constructed homes are likely to be in areas in close proximity to wildfire risk is an important consideration for agents” Dr. Thomas Jeffrey, senior hazard scientist at CoreLogic “New-home construction in and around urban areas tends to occur on the outer edge of current development,” Jeffery said. “The fact that newly constructed homes are likely to be located in areas that would be in close proximity to wildfire risk is an important consideration for brokers and agents.”

coverage agents offer. Home and business owners at risk of wildfire damage would do well to purchase comprehensive property or homeowners policies. They cover some unique damages inflicted by flames.

John Putnam, a Colorado insurance professional who experienced wildfire destruction

300,000 200,000 100,000

307,435

191,038

108,256

January – October 2015

January – October 2014

5-year average Source: CAL FIRE

firsthand when devastating fires ripped through the state two years running, said it’s important to check for smoke and heat exclusions when selling commercial or privateproperty coverage.

“Smoke claims are just a plain nightmare.

Insurance companies are all over the place on it, and some carriers don’t cover it at all,” Putnam said. “Heat damage is another. They create a lot of angst when people call in to file claims.”

Jeffrey said no one should write off wildfire risk simply because they don’t sell insurance in the generally acknowledged hotspots. “It is clear from this report that all of the western states have areas of higher wildfire risk,” he said.

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13/11/2015 7:35:50 AM

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Marsh

Dawson Insurance Agency

Dawson, founded 98 years ago, will continue operating under its own name. This acquisition gives Marsh a presence in North Dakota and Minnesota.

Arthur J Gallagher & Co

Sigma II Insurance Agency

The deal marks the 27th completed acquisition by Gallagher through the end of the third quarter.

Anbang Insurance Group

Fidelity & Guaranty Life

The $1.6 billion deal marks the Chinese company’s entrance into the US market.

Ameritas Life

Security Life

Ameritas will operate the existing dental and vision insurance business through Security Life’s agent network.

Tenecom

Cardrow Insurance and Beech Hill Insurance

The acquisition of two insurance units of Charles Taylor will expand Tenecom and Berkshire’s presence in the UK.

Nassau Reinsurance Holdings

Constitution Life Insurance Company and The Pyramid Life Insurance Company

The $43 million deal involves several traditional insurance units of Universal American.

Catalina

Allianz Swiss Re

The deal is being completed through Catalina’s Glacier Reinsurance unit. It’s expected to complete in the fourth quarter of 2015.

Ironshore constructionsector endorsements

Full integration of Chubb could take years, ACE says

During a conference call in October, Evan Greenberg, CEO of ACE, said fulfillment of the merger between insurers ACE and Chubb will take about two years.

In July, New York- and Zurich-based company ACE announced it would acquire Chubb, the New Jersey-based insurance group, for $28.3 billion. It will be one of the largest deals between life and property-casualty insurers. The combined company will control a total shareholders’ equity of almost $46 billion, and cash, investments and other assets totaling $150 billion.

A shareholder vote in early November approved the proposal that both companies operate under the Chubb name with Greenberg at the helm.

Following the vote, the CEO said the company is already “deep into integration planning. This is something you want to get done reasonably quickly, you can’t linger on it,” he said.

However, Greenberg acknowledged that with a merger of this size it’s the execution that takes time “and when you run the cycle, it takes you two years to get all of the mop-up done.”

“But you have to be relentless. You can’t lose your focus. Because you’re doing it for the greater good, for efficiency, and to be the best,” he added.

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New endorsements from Ironshore Specialty Casualty’s construction unit are available for wrap (OCIP and CCIP), project-specific and owner’s- interest developments. They provide coverage options for project owners, general contractors, joint venture entities and real estate developers. The Owner’s Interest Integrated Coverage Endorsement (OIICE) offers primary limits of up to $2 million per occurrence and $4 million on an aggregate basis. OIICE is underwritten on the standard ISO general liability policy form.

BHSI introduces homebuilders’ liability

Berkshire Hathaway Specialty Insurance is expanding its construction-focused capabilities with a new homebuilders’ liability insurance policy.

It’s meant to provide flexible protection for tract homebuilders. It offers coverage for bodily injury and property damage, personal and advertising injury and construction defects and completed operations – the latter included with a specialized coverage. The coverage is customizable, with self-insured retentions tailored to individual operations.

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13/11/2015 7:36:14 AM

PEOPLE RPX launches volatility risk coverage RPX Corporation has announced the availability of volatility risk coverage, meant to provide coverage for companies facing variable frequency and spikes in patent litigation costs from suits brought by nonpracticing entities. The coverage is triggered when a company faces a year with increased litigation activity or unexpected jumps in litigation costs. It reimburses after a selfinsured retention is met – generally set at an average year’s costs. RPX says insureds can reduce litigation expenses on patent troll-related cases by as much as 80%.

RLI adds jewelry insurance to niche portfolio

RLI Insurance Company has launched a new, online jewelry insurance product. RLI will provide customized coverage of fine jewelry; diamond and engagement rings; and watches against damage, theft and loss through a new website (RLIjewelryinsurance.com). Individuals can get quotes, apply for coverage and manage their policies online. Coverage will be available in all 50 states. The program will be led by Michael Maley as assistant vice president. He has more than 25 years of experience in commercial and personal jewelry insurance.

New Kinsale law enforcement offering

Kinsale Insurance is now offering a law enforcement/police professional product through its public entity division. Target accounts include law enforcement/police professional risks such as police departments, sheriff agencies, alcohol beverage control boards, college/university housing authorities and other law enforcement departments.

Eligible accounts include boroughs, cities, counties, townships and villages’ law enforcement departments serving populations of 100,000 or less.

NAME

LEAVING

JOINING

NEW POSITION

Walter Grote

Allianz Global & Corporate Specialty SE

QBE North America

senior vice president, commercial lines

Morgan Kendrick

N/A

Anthem

president, national accounts business

Dan Bolgar

Axis Accident & Health Reinsurance

PartnerRe

head of health

David Cohen

Liberty International Underwriters

Aspen Insurance Holdings

president and chief underwriting officer

Rick Zorman

Pennsylvania Lumbermen’s Mutual Insurance

The Swett & Crawford Group

lumber underwriter, Insurance Center for Building Materials

Glenn Skrynecki

Fireman’s Fund Insurance

QBE International Group

vice president of agriculture, QBE North America

Lisa Foley

Scottish American Insurance Services

The Swett & Crawford Group

vice president

Despina Buganski

N/A

Willis Group Holdings

chief operating officer, personal lines

Laetitia Roney

Zurich Financial Services Australia

Berkshire Hathaway Specialty Insurance

manager of transport & logistics liability insurance

Yan Jun

Willis Group Holdings

Argo Group International Holdings

marine underwriting manager

Jeff Slivka

N/A

New Day Underwriting Managers

president

Andrew Hersh

Aon PLC

Jardine Lloyd Thompson Group

senior vice president, JLT Specialty USA

David Lang

Lloyd’s of London

Argo Group International Holdings

chief operating officer, ArgoGlobal

Michael Jedraszak

N/A

Hiscox Re

chief investment officer

DeAnna Slater

Arthur J Gallagher & Co

Edgewood Partners Insurance Center

principal and property/casualty insurance broker/producer

ACE names new claims leadership positions post-Chubb merger

ACE continues announcing appointments to future leadership teams that will be established in the wake of the company’s $28 billion acquisition of rival insurer Chubb. They include two key positions in its North America Insurance claims division. Jeffrey J Miller and Douglas Poetzsch are both named as executive vice presidents and senior claims officers.

Berkshire Hathaway grows professional liability team

Berkshire Hathaway Specialty Insurance (BHSI) is expanding its executive and professional lines unit with four new appointments. BHSI named Danielle Librizzi senior vice president, head of professonal liability; Will Fahey senior vice president, head of commercial executive lines; Joe Schrancz vice president, head of architects and engineers professional liability; and Maura Verrone vice president, head of private and not for profit, executive and professional lines.

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13/11/2015 7:36:22 AM

UPFRONT

WORKERS’ COMP UPDATE

The ‘train has left the station’ on this WC issue Producers need to act on this public policy initiative, before litigation and liabilities become rampant

and 81% of company owners say they are unconcerned about the issue – even though nearly one in 10 indicated that employees have shown up for work under the influence of a controlled substance like marijuana or narcotic painkillers.

The issue of medical marijuana in the workers’ comp arena is approaching a crucial tipping point.

“It’s definitely a concern—especially given these stories that tug at the heartstrings

“In many cases the train has already left the station.”

The nation’s small-business owners are still divided in their opinions on medical marijuana, but new poll results suggest at least one in five are willing to allow the drug in the workplace with a doctor’s note.

The survey, conducted by small-business insurance specialist EMPLOYERS, raises questions about workplace safety and the role of workers’ compensation coverage in an era of legalized cannabis use.

“We encourage all small businesses to maintain drug-free workplaces because

NEWS BRIEFS

employees who are under the influence of illicit substances, or misuse or abuse prescription drugs, can put themselves, other employees or customers at risk of injury or other harm,” said Dr. Dwight Robertson, medical director for EMPLOYERS. “The most important step employers can take is to have a clearly documented workplace safety policy that specifically addresses drug use in the workplace.”

Yet a full 42% of small businesses do not have a written policy regarding marijuana,

Washington workers’ comp premiums could rise

Workers’ compensation insurance premiums may rise an average 2% in the state of Washington, the Washington State Department of Labor & Industries (L&I) announced. The L&I takes a close look at expected workers’ compensation payouts, the size of the reserve fund, wage inflation and other financial indicators to determine the proposed base premium rate. The L&I has worked to create new programs that incentivize injured workers to remain on duty, and reducing long-term disability.

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about seizures that can only be controlled by marijuana,” said PRIUM Senior Vice President Mark Pew in an earlier interview. “The question is, should there be constraints around it, or should it just be locally legalized?”

If producers don’t take the first step of establishing consistent standards when it comes to medical marijuana, employers could be left open to both federal lawsuits and workplace liabilities in which an employee using marijuana paid for by the employer injures themselves or another worker.

“Medical marijuana is a societal inevitability, and workers’ comp professionals need to figure out how they’ll deal with it,” he said.

“In many cases, the train has left the station and you’ll either be riding the train or driving the train, or you’re going to get run over by the train.”

Cuts in workers’ comp rates pushed in two states

The National Council on Compensation Insurance wants workers’ compensation rates to drop an overall 2.2% in Arizona, and a loss cost level decrease of 7.8% in Mississippi. If accepted, the Arizona recommendation would go into effect Jan. 1. It would follow rate decreases of 6% in 2015 and 3.2% in 2014. In Mississippi, the proposed 7.9% cut would take effect March 1. It would follow two previous rate decreases including a 3.8% decrease in both the voluntary and assigned-risk markets in 2014.

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13/11/2015 7:36:50 AM

Q&A

Dr Richard Vector Executive director WORKERS COMPENSATION RESEARCH INSTITUTE (WCRI)

Fast fact Will the Affordable Care Act Shift Claims to Workers’ Compensation Payors? is a study released Sept. 29 by the Cambridge, MA-based Workers Compensation Research Institute

Workers’ compensation and the Affordable Care Act What were the key aims of the study?

The question we’re addressing in this study is to what extent do the financial incentives facing providers and their health care organizations that arise out of capitation (given that workers’ compensation pays fee for service) influence whether or not a case is deemed to be work-related?

What were the key findings to emerge from the research?

A significant under-appreciated effect of the Affordable Care Act (ACA) is case-shifting from group health to workers’ compensation. The ACA seeks to greatly expand the use of ACOs – where providers are rewarded for meeting cost and quality goals. This will expand the use of capitated health insurance plans.

Under these, providers are paid a fixed insurance premium per insured regardless of the amount of care provided to a given patient during the year. Under traditional fee-for-service insurance plans, providers are paid for each individual service rendered.

The study found a back injury was as much as 30% more likely to be called work-related (and paid by workers’ compensation) if the patient’s group health insurance was capitated rather than fee-for-service.

When a patient’s covered by a capitated group health insurance plan, the doctor and the health care organization to which that doctor belongs have very different financial incentives about key decisions, compared with treating a patient covered by a fee-for-service plan. For example, when the capitated patient has back pain, the provider and his or her health organization generally

Peace Corps spent $40 million for volunteers’ benefits

The Peace Corps distributed $40 million worth of benefits to 3,305 returned volunteers over a five-year period, according to the U.S. Government Accountability Office. Common servicerelated maladies included mental and emotional turmoil, dental mishaps, infectious diseases and other illnesses, including ones caused by parasites.

Meanwhile, USAID released $67 million between July 1, 2009 and June 30, 2014 for contractors’ premium costs for other Americans working overseas.

don’t get paid for additional care since they were paid a fixed amount for that patient at the outset of the policy year. By contrast, if a group health fee-for-service patient has back pain, the provider and health care organization are paid for each new service rendered.

Case-shifting was more likely in states where a higher percentage of workers were covered by capitated group health plans. In a state where at least 22% of workers had capitated group health plans, the odds of a soft-tissue case being called work-related were 31% higher if the patient was covered by such a plan compared with similar workers covered by fee-forservice group health plans. By contrast, in states where capitation was less common, there was no case-shifting seen. This is more than just the result of having fewer capitated patients seeking care. It also appears that when capitation was infrequent, providers were less aware of the financial incentives.

What are the most serious potential ramifications for the workers’ comp markets?

As more workers are covered by capitated group health plans or plans that reward health care providers for meeting certain cost targets, more cases are likely to be shifted to workers’ compensation. For self-insured employers, this means they may be understating the savings achieved on the group health side because they’ll often be paying more when the claim is shifted to workers’ compensation since medical costs tend to be higher, as do income replacement benefits and litigation costs.

Louisiana workers’ comp rates continue decline

In October, Louisiana Insurance Commissioner Jim Donelon said workers’ compensation rates in the state will go down by 2.7% in 2016. Rates also declined last year. The announcement marks continuation of a trend running strong for years. Rates in the state are down 38% since 2006 and 51% since 1996. The number of companies writing policies in the state is going up even as rates go down. In 2007, 197 companies were writing in Louisiana and today that number is 235, an increase of 19%.

Amazon drivers sue for workers’ comp coverage

Several delivery drivers are suing Amazon.com over their employment status. They say the retail giant should have provided benefits such as minimum wage and workers’ compensation coverage while they contributed to Amazon’s Prime Now service. The drivers allege Amazon, Scoobeez and ABT hired them to work regular shifts and wear a uniform labeling them representatives of Amazon Prime Now. The drivers believe they were still treated as independent contractors and denied benefits owed under California law.

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13/11/2015 7:36:57 AM

UPFRONT

TECHNOLOGY UPDATE NEWS BRIEFS Homeowners’ “telematics” causing privacy concerns

The usage-based insurance model is coming to homeowners’ policies, raising serious privacy questions along the way. In the past year four leading home insurers have announced deals with companies providing “smart” products for homes. These devices monitor and control certain major appliances.

“If properly controlled for privacy and only installed with the policyholder’s permission and total transparency, they can make a home safer and reduce the likelihood of death and destruction, but without strict protections, these could be a threat to a family’s privacy and intimacy,” said Bob Hunter, insurance director for the Consumer Federation of America.

AIG enters commercial drone space

American International Group (AIG) is taking on the emerging risk as more US retailers – including Amazon and Wal-Mart – seek and are granted Federal Aviation Administration approval to operate drones. The policies are offered through AIG’s excess and surplus subsidiary, Lexington Insurance Company. They bear similarities to auto insurance plans, covering “broad physical damage” and providing “third-party liability coverage.” Written especially for drones, however, the policies cover drone operators; groundcrew members; electronic malfunctions; and component failures. Problems such as hijacking, unlawful seizure and hacking.

Lyft/Uber drivers in Kansas now covered

In Kansas, Farmers Insurance is now offering the state’s first rideshare insurance. Farmers also offers

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the coverage in California, Utah, Colorado and Arkansas. It’s designed for drivers with companies such as Lyft and Uber.

The insurance lets drivers who use their own personal vehicles seamlessly shift to greater liability protection from personal coverage after picking up passengers.

To make sure its ridesharing insurance conformed to both a new Kansas ridehailing law and drivers’ needs, Farmers consulted with Kansas Insurance Department officials, state legislators and leaders of the transportation network companies, including Lyft and Uber.

Linking in to build producer profits

A new report from Putnam Investments reveals one social media tool is bringing in more clients – and more revenue – than others: LinkedIn. According to the report, 95% of financial advisers – including producers – used LinkedIn in the past year for business purposes. Advisers’ reasons for doing so included improving their referral networks, building brand identity and expanding their professional networks.

And when it comes to finding new clients, 66% of respondents said LinkedIn was their go-to tool because most of their target audience is active on the site.

New productivityboosting IVANS search engine

IVANS Insurance Solutions launched a new search engine Oct. 19 allowing property/ casualty agents and brokers to identify carrier appetite for commercial lines risks. It lets agents see a list of US carriers ranked by market appetite at the moment of opportunity. The search engine is designed to improve agency productivity by reducing time spent accessing carrier websites; referencing carrier risk guides; and directly contacting underwriters individually. The system utilizes realtime capabilities to ensure accuracy.

What could Google the insurer look like?

Industry insiders are warning against a fierce new competitor in the P&C insurance marketplace Google’s announcement earlier this year that it would accept liability for injuries or damages caused by design flaws or faulty components in its autonomous vehicles is a move one industry insider says “nobody noticed,” but should be considered a giant red flag to brokers.

“They’re trying to demonstrate confidence in their product, which is great,” said Blake Corbet, managing director at PI Financial Corporation. “But knowing what I know about Google, I immediately assumed this a way for it to get into the insurance business.”

Many analysts have commended the tech giant for willingness to take on risks accompanying emerging technology. Some, however, like Corbet, have pointed out this could be a “Trojan Horse.”

Corbet argues, Google’s launch of an insurance-comparison site earlier this year indicates its intention to move into the P&C insurance market. He feels driverless cars are the perfect launching point for Google to become a coverage provider.

This would be a particularly strategic plan.

The nature of autonomous vehicles allows their auto insurers to operate with a higher profit margin than traditional insurers can.

It’s unlikely Google will be as concerned about claims as traditional P&C insurers are.

So far, all its driverless car collisions were the fault of human drivers – a statistic verifiable by video and data sensors.

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13/11/2015 7:37:26 AM

This impeccable driving record, combined with the fact that Google could potentially mass produce these cars, has striking ramifications for the insurance industry.

“They’re effectively insuring the best cars on the road, the cars which they also design and manufacture,” Corbet said. “When they sell these cars or provide them to a distribution network, they can presumably require the purchaser to bundle insurance with the cost of the car.”

This also has the potential to create a two-tiered insurance market.

“Google can presumably charge lower insurance rates for their cars, and higher insurance rates to the vehicles that are driven by humans, since we’re not good drivers,” Corbet said.

“They’re effectively insuring the best cars on the road, the cars they also design and manufacture” The shift to driverless cars will undoubtedly affect the broker and agent role – but there will still be a need for niche advisers. In addition, in a sharing economy where autonomous vehicles only serve to pick up and drop off customers (similar to a driverless Uber), Americans will still have insurance needs.

“Industries adapt, and there’s probably an angle here for people to have their own personal insurance. What happens when you leave personal belongings in the vehicle, for example?,” Corbet said.

Corbet feels it’s a waiting game to see how insurance evolves for meeting consumer demand.

Q&A

Jay Patel

The global cyber insurance market

Insurance analyst TIMETRIC

Fast fact Timetric’s The Future of Cyber Risk Insurance report examines the state of the global cyber insurance market and includes insights on key trends in market size, growth opportunities, premium pricing and claims payout

According to to your recent report on cyber risk insurance, how rapidly is the market growing?

The cyber insurance market has grown very quickly to $2.5 billion in 2014 from $850 million in 2012. The market is expected to grow to $7.5 billion by 2020. The use of technology such as cloud computing and the collection of consumer data means businesses are much more dependent on technology to operate on a daily basis. This also means they have greater liabilities in the event they lose consumer data, or the value of business lost because of IT systems failure is likely to be very large.

What were the key findings with respect to how significantly the cyber threat is growing?

The total number of reported cyber incidents growing to an astonishing 42.8 million by 2014 from 3.4 million in 2009. There are two types of cyber threat: malicious and non-malicious.

Non-malicious threats include failure of IT systems or accidental loss of property. Malicious threats include hacking of databases and intellectual property (IP) theft from companies, committed with the intent to steal or damage property. Malicious threats such as IP theft will be expected to drive growth in cyber threats.

This is because cyber criminals will increase the sophistication and severity of their attacks as the value, IP and customer data increases.

How quickly are US insurance firms responding to the cyber threat, when compared to their counterparts in international markets?

The US accounts for 90% of global cyber insurance premiums, so this indicates that US insurance firms have been able to market cyber insurance more effectively than their peers in other developed insurance markets. The European cyber risk insurance market is much smaller than the US one, primarily because businesses lack awareness of the scale of the cyber threat.

An interesting graphic in the insight report shows across all industries in the US, there has been an increase in the purchase of standalone cyber insurance policies, highlighting the effectiveness of US insurers in increasing awareness of cyber threats and the benefits of insuring against them.

What key messages should insurance brokers take away from the report?

One message for insurance brokers to take away from the report is a strategy to overcome the lack of standardization with the cyber insurance market. The terminology and policy wordings used by insurers in the cyber risk policies they offer, differ greatly. This makes it harder for brokers to market these products to clients.

Marsh is an example of a broker that has played a role in promoting cyber insurance. In the UK, they have developed a product called Marsh CyberSmart, which helps small and medium enterprises purchase cyber insurance policies.

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13/11/2015 7:37:35 AM

PEOPLE

INDUSTRY ICON

TRANSFORMING LLOYD’S OF LONDON Global CEO Inga Beale talks about increasing diversity at Lloyd’s in both its capital base and workforce

ON NOV. 4, Inga Beale officially opened Lloyd’s new expanded specialist underwriting platform in Singapore, which Kent Chaplin, head of Lloyd’s in the Asia-Pacific region, described as “an exciting new chapter” for Lloyd’s.

“Lloyd’s is now up to 24 syndicates in Singapore and we’ve had two new ones just start in the last six months,” Beale says. “The competitive environment here is very tough, but Lloyd’s is actually the number-one writer of offshore insurance premiums from around the region into our Singapore hub.”

Beale shares excitement at the ever-growing contribution Asia-Pacific is making to the total business the market writes worldwide. “Globally, Lloyd’s wrote about $40 billion in business last year and $4.7 billion was from Asia-Pacific,” she says.

“Between 2010 and 2014, we’ve seen 27% premium growth from Asia-Pacific.”

Asia-Pacific is also becoming a bigger part of the Lloyd’s story through its role in helping diversify the market’s capital base. “If the latest Japanese acquisitions go through via MSIG (Mitsui Sumitomo Insurance Group) and Tokio Marine Kiln, Japanese insurers will be providing 16.5% of the entire capital to Lloyd’s globally. I think that’s a really interesting number and goes to show how much things have changed in Lloyd’s history

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from the days of the thousands of individual investors we used to have.

“Today 11% of our capital is provided by the individual names and nearly 90% is now corporate capital. Couple this change with the interest from countries that haven’t traditionally been a big part of Lloyd’s, I think it’s a real transformation and I’m pleased with it.”

The soft market In September, Lloyd’s announced its results

strated Lloyd’s success “despite challenging underwriting and investment conditions” and predicted pressure on insurance pricing would continue.

So what advice would she offer to brokers about standing out and surviving in the current climate? Beale points to Lloyd’s research highlighting particularly significant under-insurance in 17 countries. “To me, that presents an enormous opportunity, and I’d encourage any broker to go out, look for the

“We’re embarking on a massive five-year modernization program across the entire market. I’m going to be spending quite a lot of my time in the next six to 12 months on the modernization piece” for the first half of 2015.

Among the highlights was a pre-tax profit of £1.19 billion ($1.8 billion), down from £1.65 billion ($2.5 billion) for the same period last year.

Total gross written premium was £15.51 billion ($23.56 billion), up from £14.48 ($22 billion) reported for the first half of 2014.

At the time, Beale said the results demon-

gaps in insurance coverage right now and seize the opportunity. “ She adds, “We’ve conducted research with risk managers of businesses around the world – so this is also true in mature economies – which shows that less than 10% of risks they face are covered by insurance.

My encouragement to brokers is to work with us to increase awareness, using the

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13/11/2015 7:38:32 AM

PROFILE Name: Inga Beale Company: Lloyd’s of London Title: Chief executive officer Age: 52 Years in the industry: 33

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13/11/2015 7:38:44 AM

PEOPLE

INDUSTRY ICON CAREER TIMELINE

studies Lloyd’s publishes around specific risks.”

Vision 2025 Over the next year, much of Beale’s own focus will likely be on Lloyd’s modernization agenda, which is encapsulated in its Vision 2025 strategy. “A lot of what Lloyd’s does in the way it trades is paper-based. There’s lots of multiple entry of the same information throughout the process.

“So we’re embarking on a massive five-year modernization program across the entire market. I’m going to be spending quite a lot of my time in the next six to 12 months

from brokers to Lloyd’s syndicates to other company insurers,” Beale explains. “We’ve been working at getting people to understand the benefits of having a diverse workforce.

We know there are lots of facts and figures to support why diverse teams are more successful.”

More recently – in October – Lloyd’s staged the inaugural Dive In Festival in the London market. “We had four days of celebrations focused on gender, ethnic and cultural differences, the LGBT community, and also WorkAbility, which is an area focused on people with disabilities.”

“We wanted to celebrate and educate people on the benefits of diversity, and the impact on productivity when people are able to bring their whole selves to work” on the modernization piece.”

Modernization of both its systems and the make-up of Lloyd’s market are both high on the list of priorities. A key Vision 2025 pillar is, ensure Lloyd’s diversifies its market by gender, age and ethnicity.

Talking about women in insurance, Beale says there certainly has been progress since she began her career 33 years ago; however, some of the statistics continue to be disappointing. “At the director level, on boards, I think we’ve made great progress,” she says.

“And if you look around at the Fortune 500 companies, we’ve got something like 18% representation of women, so the stats are improving.

“But it’s when you look further down organizations, and at executive management positions, that’s where we need to improve the representation of women.”

In its own efforts to address the gender gap, Lloyd’s launched its Inclusion@ LLoyd’s initiative last year. “This is a crossmarket gathering of all sorts of individuals,

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The festival’s aims extended to trying to remove some of the stigma attached to mental health issues. “People often don’t want to talk about it, and it can really affect them at work. We wanted to celebrate and educate people on the benefits of diversity, and the impact on productivity when people are able to bring their whole selves to work.”

The next generation Turning discussion to attracting new talent to the industry, Beale says, “We know we’ve got to do something to improve the industry’s appeal.

“I’ve been to career fairs and spoken to students, and when I start informing them about how we support not only individuals to get back on their feet, but businesses, communities, cities, and countries too after a disaster, and how insurance and innovation can stimulate economic growth and investment, I think they see insurance then in a very different light.

“We’ve got to do a much better job of … telling the fabulous story of insurance.”

2014

Joins Lloyd’s as global CEO in January. Also serves as an external board member to the UK government’s Financial Services Trade and Investment Board

2012

Becomes group CEO of Canopius, a significant Lloyd’s managing agent

2009

Becomes global chief underwriting officer of Zurich

2008

Joins Zurich Insurance Group as a member of the group management board with responsibility for mergers and acquisitions, organizational transformation and internal consulting

2006

Becomes group CEO of Switzerlandbased reinsurance company, Converium

1992

Joins GE Insurance Solutions, going on to hold several underwriting management roles and gain experience across London, the US and France

1982

Begins career at the Prudential Assurance Company in London

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13/11/2015 7:38:49 AM

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13/11/2015 7:38:58 AM

FEATURES

COVER STORY: BEST OF THE BEST

BEST OF THE BE IBA readers rate the companies that provide outstanding support to the insurance industry 22

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INSURANCE AGENTS can’t do it alone. From technology solutions to legal advice, even the best independent agents need expert assistance to help their businesses hit their full potential.

We wanted to spotlight the leaders in industries that help independent agents and brokers take their businesses to the next level. With that in mind, we asked IBA readers to tell us which companies and products they felt were the best of the best. We surveyed readers, asking them to tell us which companies and products they used in the following areas:

• agency management systems • comparative rater/quoting tools • banking and finance • marketing • consulting • errors and omissions (E&O) coverage • law firms We asked survey respondents to rate those companies’ performance. Then we sifted through the survey results to find the companies that received top marks from their clients. Here, then, are the best of the best – chosen by you.

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13/11/2015 10:48:58 PM

FEATURES

COVER STORY: BEST OF THE BEST AGENCY MANAGEMENT SYSTEMS

APPLIED EPIC The industry’s fastest-growing agency management system (AMS), Applied Epic got rave reviews from our readers. The system offers its users a single application with integrated capabilities. With it, they can efficiently manage customer relationships; policy and benefits administration; and financial accounting processes.

Epic enables users to manage benefits and P&C business within one application, automate workflow and standardize data. It also integrates seamlessly with other Applied systems and many third-party applications.

IBA readers loved Epic. “Wonderful functionality and speedy procedures,” said one. “Epic is absolutely the best for our agency,” said another. “Service is streamlined, and processes are easier to manage.”

“Epic is absolutely the best for our agency. Service is streamlined, and processes are easier to manage”

“Epic is absolutely the best for our agency.

Service is streamlined, and processes are easier to manage”

APPLIED TAM Overall, IBA readers seemed to love Applied Systems products, rating them at a nine or 10 pretty much across the board. With that in mind, it’s not surprising that Applied Systems makes a second appearance in the category with TAM, the most widely-used agency management software in the industry. TAM users can fully automate their back offices and focus on the core business of selling insurance. The latest version of the software, TAMOnline, enables customers to leverage the advantages of the cloud. It eliminates worry about software upgrades, hardware and IT issues.

AT-A-GLANCE COMPARISON APPLIED EPIC Single application with integrated capabilities Seamless integration with other Applied systems and third-party apps APPLIED TAM TAMOnline – cloud-based QQCATALYST 100% cloud-based – accessible anywhere, any time, any device Open API Modular pricing plan

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QQCATALYST More than 2,000 agencies use QQCatalyst to power their businesses every day. With more than 5,500 agency clients in total, QQSolutions focuses on creating the best and most innovative AMS on the market.

QQCatalyst is 100% cloud-based. Agents can access their information from any device, anywhere. The system has an open application programing interface (API), allowing users to bolt on the best third-party applications, such as QuickBooks, E-Signature and more. And the company’s pricing plan is modular.

Agents pay only for what they need, and QQCatalyst can grow as their agencies grow.

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13/11/2015 10:49:10 PM

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COMPARATIVE RATER/QUOTING TOOL VERTAFORE PL RATING Vertafore’s PL Rating got high marks from IBA readers.

It’s a multi-carrier, real-time rating application that dramatically reduces the time spent visiting carrier websites. PL Rating services more than 4,000 agencies and helps 30,000 agents every day. The system is available in 48 states and features more than 170 carriers – with more than 37 million real-time transactions so far in 2015. PL Rating is the only rater that automatically quotes flood insurance at the same time as homeowners insurance. It also lets users easily price packages for auto and home quotes while reflecting multi-line discounts from carriers.

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13/11/2015 10:49:24 PM

FEATURES

COVER STORY: BEST OF THE BEST COMPARATIVE RATER/QUOTING TOOL

EZLYNX Readers also sang the praises of the EZLynx comparative rater. The system allows one-time data entry to yield dozens of quotes in seconds, from 169 carriers in 48 states. It generates pricing for up to four sets of coverages from each carrier, including auto and home packages. The rater integrates with more than 20 agency management systems (AMS) and compatible lead generators. The cloud-based system also records user activity to help agents avoid erros and omissions (E&O) claims. The EZLynx rater even lets agents log in from their mobile devices to get quotes on the go.

AT-A-GLANCE COMPARISON EZYLYNX one-time data entry for multiple quotes pricing for up to four sets of coverage per carrier cloud-based, accessible on mobile devices integrates with more than 20 AMSs APPLIED RATER provides quotes from more than 500 insurance carriers – broadest coverage of any US rating provider integrates with most AMSs, agency websites, Facebook pages multiple quotes with single data entry; client data sent directly to carriers’ websites VERTAFORE PL RATING multi-carrer, real-time application features more than 170 carriers quotes flood and home insurance simultaneously

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“Applied Rater provides the industry’s most accurate rates for more than 500 insurance carriers nationwide – the broadest coverage of any rating provider in the United States today”

APPLIED RATER (SEMCAT) Applied Systems makes its third appearance in “Best of the Best” with its Applied Rater. The rater is an insurance-quoting solution for independent agents that provides the industry’s most accurate rates for more than 500 insurance carriers nationwide – the broadest coverage of any rating provider in the United States today. Applied Rater integrates with most agency-management systems (AMS), as well as agency websites and Facebook pages. Through an agency’s customer-facing website and Facebook integration, an agency’s prospective clients can enter their own information to request a quote, which enables agencies to drive new business. With Applied Rater, agencies’ client information is sent directly to the carriers’ websites, generating multiple quotes with a single data entry within seconds. Applied Rater enables agencies to enhance their competitive value in today’s ever-evolving insurance market with fast, accurate quoting to provide better customer service and grow your business.

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BANKING AND FINANCE

PREMIUM ASSIGNMENT CORPORATION Premium Assignment Corporation (PAC) was founded in 1961 in Tallahassee, FL. Serving the insurance industry for more than 50 years, PAC is now the fourthlargest premium finance company in the country. A commercial lines insurance finance company, PAC is licensed to do business in all 50 states. And as a wholly owned subsidiary of SunTrust Bank, PAC is backed by one of the nation’s top banking institutions, with more than $180 billion in assets. PAC customers are highly satisfied, consistently giving the company top marks in service and satisfaction.

OAK STREET FUNDING Oak Street Funding was formed in 2003 to provide commission-based loans to help insurance agents and brokers maximize their book of business value and grow their agencies. The company has grown from a concept by founder Rick Dennen to become the nation’s top insurance lender. Over the years the firm has expanded, becoming a family of companies that provides a whole suite of services including lending and servicing. Oak Street Funding was one of the first lenders to develop the concept of commission-based lending for insurance agents and agencies. The company focuses solely on serving the capital needs of insurance agents and brokers. Since 2003 Oak Street has made available hundreds of millions of dollars in capital to agents and agencies in 46 states. The company has also garnered praise for its corporate culture. Oak Street Funding has named one of the best places to work in Indiana for three years running, and in 2012 was named an “Indiana company to watch.”

INSURBANC InsurBanc specializes in insurance agency perpetuation, acquisition and debt consolidation transactions. The company has successfully structured agency financing programs to help insurance agents across the country prosper and grow. In addition, InsurBanc offers a customer cash management system with a range of products and services that maximize value with total flexibility.

“Dedicated entirely to the financial needs of the insurance business, InsurBanc was founded with input from insurance agents and the Independent Insurance Agents and Brokers of America” AT-A-GLANCE COMPARISON PREMIUM ASSIGNMENT CORPORATION $180 million in assets, backed by a top US banking institution OAK STREET FUNDING top US insurance lender; provides commission-based loans INSURBANC $180 million in assets, backed by a top US banking institution

www.ibamag.com

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INSUR AN

COVER STORY: BEST OF THE BEST

artners 20 RP 15 TA

FEATURES

NESS FIV USI ES EB C

MARKETING AGENCIESONLINE Our survey respondents raved about AgenciesOnline, a marketing firm serving the insurance industry exclusively.

AgenciesOnline’s marketing team has decades of experience in the insurance industry, so they know how to craft marketing strategies that help independent agencies thrive.

“Our secret weapon is that we consult with our clients on a monthly basis. We talk about what’s going on at their agency, what they’re trying to achieve,” says AgenciesOnline President Valerie Jordan. “…We try to build a circle. We want to make sure we close that circle – that we’ve touched all the various media that we possibly can.”

While developing interactive websites for independent agencies is the cornerstone of AgenciesOnline’s philosophy, that’s just the beginning. The company has a robust approach to marketing, including e-mail campaigns, professional coaching and harnessing the latest technologies.

“I really think we’re in some exciting times,” Jordan says. “The independent broker is the best-kept secret, and a secret weapon. They have the expertise and the knowledge to be able to get to know the client, know their needs and being able to recommend products that are going to meet those needs.”

AGENCY REVOLUTION Readers also loved Agency Revolution, a firm that automates marketing for insurance agents and brokers.

One of Agency Revolution’s most popular features is the Trigger Point Platform. The system sends personalized communications to customers automatically, based on life-cycle changes. Agents can run the right campaign at the right time. The company also features a system that enables managers to automate workflow. Team Task Management automatically assigns tasks to the right people based on relationship, geography and more.

Agency Revolution founder Michael Jans has coached,

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trained and consulted with more than 11,000 agency principals, with clients in North and South America, Europe, Asia and Africa. Jans has authored more than 37 different courses, programs and workshops for insurance agents. He’s also the author of three books: The P&C Marketing Bible, The CSR Money Bible and The Agents Road Map. “Agency Revolution completely transformed our agency,” one client said. “We now have more sales, more customer loyalty – more of everything. It’s brilliant marketing and powerful technology.”

AT-A-GLANCE COMPARISON AGENCIESONLINE works exclusively with the insurance industry AGENCY REVOLUTION agents can run perfectly timed campaigns with system

“The independent broker is the best-kept secret, and a secret weapon. They have the expertise and the knowledge to get to know the client, know their needs and recommend products that are going to meet those needs”

www.ibamag.com

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13/11/2015 10:49:47 PM

IBW INSURANCE BUSINESS WHOLESALE

E-NEWSLETTER  MOBILE  WEBSITE

Dedicated news for the E & S Wholesale Market

To subscribe, email lodia.tipon@keymedia.com insurancebusinesswholesale.com

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FEATURES

COVER STORY: BEST OF THE BEST CONSULTING

REAGAN CONSULTING

MARSHBERRY

Founded in 1995, Reagan Consulting gained instant recognition with the creation of its annual Best Practices Study, developed in conjunction with the Independent Insurance Agents and Brokers of America. The company has specialized expertise in the valuation, enhancement and marketing, and acquisition of large, privately held brokers.

Its collaborations with companies such as Assurex Global, InterSure, RiskProNet and the Council of Insurance Agents and Brokers, have expanded Reagan’s reach into that segment of the industry.

The company has also garnered notice for its work with banks pursuing insurance strategies. Reagan has helped more than 150 financial institutions develop, design and implement those strategies. The company’s clientele includes a majority of the nation’s top 100 agents and brokers, as well as more than a quarter of the country’s largest financial institutions.

Since 1998, Reagan Consulting has researched and authored the American Bankers Insurance Association’s Study of the Leading Banks-in-Insurance, a highly respected survey of the industry.

Since its founding in 1981, MarshBerry has become a top growth consultant to insurance agents, carriers, brokers and banks throughout the country. It has also grown to become the top insurance brokerage M&A advisory firm in the nation, according to SNL Financial.

The company offers its clients management and growth consulting, M&A advisory, peer-to-peer exchange and information services. MarshBerry’s M&A advisory services are offered through Marshberry Capital. The affiliate firm is a broker-dealer registered with the Financial Industry Regulatory Authority.

“I’m so honored that MarshBerry has been recognized by Insurance Business America and its readers as the ‘Best of the Best’ in the consulting category,” said John Wepler, chairman and CEO of MarshBerry.

“We pride ourselves in the relationships that we build with our clients. The key to this is the exceptional team we’ve built. Their hard work and innovative spirit is what truly makes our organization the best of the best.”

NETTLES CONSULTING NETWORK Nettles Consulting Network focuses on maximizing independent agency performance. The company believes simply purchasing an agency management system isn’t enough to maintain a competitive advantage; proper implementation and workflow planning is vital for an agency to reach its full potential. Nettles works with independent agencies of all sizes to kick their operations into high gear through services such as operational assessment; benchmarking agency operations against industry best practices; and helping agencies develop and implement workflow plans.

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www.ibamag.com

“We pride ourselves in the relationships we build with our clients” AT-A-GLANCE COMPARISON REAGAN CONSULTING specializes in working with privately held brokers NETTLES CONSULTING NETWORK works with independent agencies of all sizes MARSHBERRY works with insurance agents, carriers, banks

INSUR AN

artners 20 RP 15 TA

NESS FIV USI ES EB C

E&O PROVIDERS

UTICA NATIONAL INSURANCE

LIBERTY MUTUAL

Utica National Insurance Group has the second-largest errors and omissions (E&O) in the United States. In 2016, the company will celebrate 50 years as a continuous leader in the E&O market. It has also been voted the best commercial lines carrier in New York State by the Independent Insurance Agents and Brokers of New York. Utica National was named one of the top 100 super-regional property and casualty insurers. Founded in 1914, the company sells its products through more than 2,300 independent insurance agents and employs 1,300 people nationwide.

Readers also gave Liberty Mutual’s E&O coverage top marks. The company offers policy limits up to $10 million, as well as deductibles as low as $2,500. Liberty Mutual’s comprehensive coverage includes consent-tosettle; contractual and vicarious liability; personal and advertising injury for professional services; and more.

The company also offers additional coverages exclusively to Liberty Mutual-appointed agents. These include reduced E&O deductibles for claims arising from Liberty Mutual placements.

“Thanks for being willing to help,” said one satisfied Liberty Mutual client. “Keep the independent agency system alive!”

WESTPORT/SWISS RE Swiss Re provides errors and omissions (E&O) coverage for insurance agencies across the country. With more than 30 years of experience, the company currently covers more than 10,000 firms. Swiss Re offers coverage for independent insurance agencies of all sizes, with a program endorsed by the Independent Insurance Agents and Brokers of America (IIABA) and the federation of IIABA state associations. Swiss Re offers E&O limits up to $20 million; competitive pricing; and a broad policy form with tailored coverage and premium credits exclusively for IIABA members.

“Thanks for being willing to help. Keep the independent agency system alive”

FIREMAN’S FUND Fireman’s Fund is an industry leader in errors and omissions (E&O) coverage for brokers and agents. With an A rating from A.M. Best, Fireman’s Fund E&O coverage is available nationwide. The company boasts a dedicated claims staff focused exclusively on E&O claims; policy limits up to $10 million; coverage for expert witness testimony; and more. It also offers protection for agents when they train, manage or supervise clients in the selling of insurance products.

As well, Fireman’s Fund provides supplementary payments of $500 per day for expenses incurred while aiding in the defense of a claim.

AT-AGLANCE COMPARISON UTICA NATIONAL INSURANCE voted best commercial lines carrier in New York State by the Independent Insurance Agents and Brokers of New York WESTPORT/SWISS RE coverage for independent insurance agencies of all sizes program endorsed

by Independent Insurance Agents and Brokers of America LIBERTY MUTUAL policy limits up to $10 million plus deductibles as low as $2,500 FIREMAN’S FUND industry leader in E&O coverage for brokers and agents; A rating from A.M. Best

www.ibamag.com

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INSUR AN

COVER STORY: BEST OF THE BEST

artners 20 RP 15 TA

FEATURES

NESS FIV USI ES EB C

LAW FIRMS AT-A-GLANCE COMPARISON

SIMPSON THACHER & BARTLETT Simpson Thacher & Bartlett is known as the go-to firm for complex coverage and reinsurance disputes.

The firm has deep expertise on issues including bad faith, excess insurance, data breach and crime coverage. Its client list includes such luminaries as AIG affiliates, Travelers and Berkshire Hathaway.

Simpson Thacher & Bartlett represented Travelers in a pollution-related dispute against Northrop and won six summary judgments in 2014. It has also recently won litigation for Nuclear Electric Insurance Limited, Syncora Guarantee and The Standard Fire Insurance Company.

SIMPSON THACHER & BARTLETT known as the go-to firm for complex coverage SIDLEY AUSTIN experts in reinsurance, appeals and complex cases CAHILL GORDON & REINDEL experts in reinsurance, bad faith and political risk

CAHILL GORDON & REINDEL SIDLEY AUSTIN

Cahill Gordon & Reindel covers a wide range of litigation, with expertise in reinsurance, bad faith and political risk. The firm currently represents National Union Fire Insurance in an appeal following the successful reversal of a Supreme Court decision in 2010. It also obtained a dismissal for XL Insurance in a case against Amtrak. Other clients include Ironshore Insurance, AIG affiliates and reinsurance companies.

Sidley Austin boasts expertise in reinsurance, appellate capabilities and complex cases like mass torts and environmental matters. The firm recently represented Amerisure Mutual, successfully collecting reinsurance billings worth more than $14 million. Other clients include the American Council of Life Insurers, Liberty Mutual, The Hartford and Validus Re.

THE CHOICE IS YOURS WITH

M AG.CO IBAM 2.2 ISSUE

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WEBSITEENEWSLETTER -MULTIMEDIA

www.ibamag.com

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FEATURES

AGENCY INSIGHT

New Empire Group At this MGA founded to offer umbrella coverage for condominium associations, staff synergy and family atmosphere rule

IBA: What do you think makes you stand out as an agency?

Deborah Mackoul: We truly are a family.

My belief is that you have to love what you do and where you are doing it, because you generally spend more time at work during waking hours than at home. We want this to be our happy place. We can train anyone to become knowledgeable about our business, but we’re really striving to create a team with synergy among staff members that’s doing business in a family atmosphere. We are only as good as our employees. So we look to hire really nice people who share the same values we have.

We provide a professional environment, and encourage them to grow. The sky’s the limit here. Our staff responds, and over the years we’ve built a great company that’s nationally known and respected. We love what we do, and it shows.

IBA: How important is it for an agency to have a commitment to specialization? Why does it matter?

Bob Mackoul: I think it’s very important for agencies to specialize. Insurance agencies that specialize in niche areas are more successful and profitable than the ones that don’t. There are several reasons why. First, over years of experience and repetitive underwriting, everyone in the agency gains knowledge and ultimately becomes an expert in the field. It may take a long time to build on that expertise, but eventually it does pay off. Client retention

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is higher in specialist agencies than generalist agencies, and press and PR occur naturally as the media seek to interview those considered experts in the field.

IBA: Can you talk about your various specializations? How have you been able to build them and offer true value to your customers?

Bob Mackoul: The agency is real estate based. Our umbrella program is our largest program, but we’ve leveraged that over the years to create different products for the real estate industry. Our newest product is “Condopak,” a program for condominium associations and fine apartments. We launched the program in the New York metropolitan area in 2014, and we’re now spreading our wings to take it out into the rest of the country on a measured basis.

The program has been very successful; it’s only 18 months old and we’ve written about $5 million in premiums. We’ll be at $10 million by the end of 2016. As we grow “Condopak,” we’ll be able to offer our broker clients true one-stop shopping that

will bundle other vital coverages such as our umbrella, cyber, environmental, and directors and officers liability.

IBA: What are you doing to attract and grow talent?

Deborah Mackoul: All our staff members have come aboard as a result of referral from our existing employees, for which we offer a bonus program. Most staff members started out as associates and have grown into underwriters. The training is ongoing, by supervisors who began as associates and became underwriters themselves. Everyone in the agency is a licensed insurance broker within a year. Additionally, we probably have one of the best employee benefit plans offered by any organization, including group insurance and a profit-sharing plan. We celebrate each employee’s birthday and other special occasions such as anniversaries or the birth of a child. We do a lot of team-building to keep us all together in fun atmospheres such as comedy clubs, day trips to wineries and trips into the

SUPER RESPONSE TO SUPERSTORM SANDY Deborah Mackoul was the Long Beach Lions 2014 “Woman of the Year” for all she and New Empire Group did after Hurricane Sandy. “When Sandy struck, not only did we lose the office, but many of us also lost our homes and cars,” she says. “It was devastation all around, and yet everyone chipped in to help those less fortunate people here on the island that didn’t have the money to rebuild.” Mackoul and others helped demolish a wrecked home; helped with a food drive; and donated direly needed supplies to the local animal shelter.

www.ibamag.com

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FAST FACTS

Top 5 specializations Commercial umbrella coverages for real estate Condo associations Errors and omissions for property managers Cyber liability for real estate owners and property managers Environmental pollution coverage for real estate Contractors inland marine Year founded: 2002 No. of employees: 27 No. of brokers: More than 2,500 licensed nationally; about 800 active Headquarters/location: Long Beach, NY 2014 premiums: $27 million Management structure: Robert E. Mackoul, CLU, chief executive officer; Deborah K. Mackoul, president and chief operating officer; Robert G. Mackoul, chief underwriting officer; James F. O’Neill, executive vice president for business development

city to see a play. The agency also sets individual, department and agency goals which, when reached, lead to awards, time off, clothing and year-end bonuses. If our annual agency growth goals are reached, we take the entire staff away on a cruise or

vacation to an exotic location for five days.

We’ve done that seven times in the last 12 years, going to such places as Jamaica, Cancun, the Mexican Riviera, Punta Cana DR, and the Bahamas. All in all, everyone knows they’re valued.

Kudos: IBA “Elite Agency” in 2015; Target Markets Best Practices Award 2013; Insurance Journal’s “Best Places to Work” 2013; Long Beach “Business of the Year” 2010 Territory: Licensed and doing business in all 50 states

www.ibamag.com

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PEOPLE

PRODUCER PROFILE

Insuring for the darkest hour wherever it comes Underwriter Lalita Mohabir helps mitigate emotionally and financially devastating risks, including kidnapping and ransom. Samantha Wright reports WHEN LALITA Mohabir was growing up in Guyana, her father – a postmaster – instilled in her a love of reading and a passion for politics. Today, those twin loves converge daily when she sits down in her Toronto office to review high-level intelligence reports about the dangers – from corporate kidnappings to disease outbreaks to political uprisings – fomenting in far-flung corners of the world.

Mohabir is the national product leader, personal accident, offering worldwide accidental death and dismemberment coverage at Burns & Wilcox Canada. She’s also a highly regarded expert on kidnap and ransom (K&R) insurance. It’s Mohabir’s job to keep tabs on such things, along with all sorts of other fascinating information streaming in from companies with footholds around the globe.

“You see where employees or individuals are traveling, what they are doing, what their occupations are,” Mohabir says. “Most people would never realize that we have so many Canadians and US citizens traveling and working in all of these politically volatile countries.”

A growing number of these globe-trotters risk being abducted and held for ransom. Fueled by war, terrorism, economic crisis and political unrest, kidnapping occurs around the globe with unnerving frequency. “It’s the stark reality of doing business abroad,” Mohabir says.

“Anywhere there is political or civil unrest, these workers can get caught up in the middle.”

Often, as the saying goes, it’s a matter of being in the wrong place at the wrong time. Top targeted business classes for abduction include aid organizations, journalists, and mining and gas companies in highly volatile countries.

Mohabir helps brokers and agents help their clients (companies and individuals) mitigate the risk of these emotionally and financially devastating events by underwriting highly customized K&R, accidental death and dismemberment (AD&D), disability and medical insurance policies. Coverage ranges from $500,000 to $20 million and can last from two days to two or more years.

“Most people would never realize that we have so many Canadians and US citizens traveling and working in all of these politically volatile countries”

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A unique background

As a young adult Mohabir immigrated to Canada from Guyana with her parents and nine siblings. Coming from a poor, politically volatile Latin American country in which ethnically based parties frequently clash made her appreciate, from an early age, how important it is to be aware of what’s going on around you at all times.

This awareness has enhanced her skill as an underwriter and helped her appreciate the value of K&R, AD&D, disability and medical coverage. She has made it

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SEPTEMBER WAS A CHILLING K&R MONTH In September alone, according to a monthly kidnapping digest published by Unity Resources Group, significant K&R events included: abduction of Egyptian construction workers and southeast Asian medical staff in Tripoli and Sirte by the Islamic State abduction of a Norwegian and two Canadian tourists in the Philippines by criminals suspected of working for Abu Sayyaf Group the release of American, one British and three Saudi nationals in Yemen after Houthi rebels illegally detained them for six months a ransom demand for $151,000 for the son of a local businessman kidnapped by criminals in Hyderabad, India the execution of the father and brother of a well-known filmmaker in Tamaulipas, Mexico by a suspected drug cartel (despite the family having paid ransom) abduction and subsequent rescue of a six-year-old in Rawalpindi, Pakistan, for whom kidnappers had demanded a $980,000 ransom her mission to share this appreciation with others.

“K&R is an undervalued, underestimated insurance coverage,” Mohabir explains. “Even high-net-worth individuals frequently fall prey to the ‘It can’t happen to me’ syndrome.”

Unfortunately, she says, this mindset leads to many individuals, organizations and companies not taking the proper precautions. This makes them natural targets for terrorists and criminal enterprises, while exposing themselves to the financial and political repercussions of an uncovered K&R event or accident.

“It baffles me how many people are out there – clients and even some brokers – who still do not fully comprehend the importance and value of the K&R insurance coverage,” Mohabir said. This attitude is beginning to change, however, as the threat of kidnapping, extortion and detention has dramatically increased at home and abroad.

As an underwriter, Mohabir isn’t part of any crisis negotiations – but she’s kept abreast of their conclusions.

In all the cases Mohabir has covered, the outcomes were positively resolved and the K&R policyholders were reimbursed.

It takes a special calling to do this type of work.

“When you do K&R, AD&D, disability and medical insurance, you have to ask all of the right questions,” Mohabir says. “It is what I enjoy doing and I can’t see myself doing any other kind of insurance. I don’t consider it a job. I get to do what I love every single day.”

www.ibamag.com

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SPECIAL PROMOTIONAL FEATURE

SURETY BONDS

SURETY BONDS: BOOMING BUT MISUNDERSTOOD Ages-old surety pervades modern society, but the average person’s understanding of it is still stuck in the dark ages. Samantha Wright reports SURETY HAS been around since the dawn of human commerce, back when contracts were literally written in stone.

Historians have sleuthed out evidence of individual surety bonds in the legendary Code of Hammurabi. (A well-preserved Babylonian law code, chiseled into a 2.3-meter-high stone column dating to about 1754 BC.) They’ve also found evidence of surety bonds in Persia, Assyria, Rome and Carthage; among the ancient Hebrews; and (much later) in England.

Surety is just as pervasive in our world today. It finds its expression through a vast array of surety bonds – legally binding mechanisms that financially guarantee the performance of an individual or a business.

Surety bonds represent $5 billion worth of premium annually. The average person’s understanding of surety, however – and how it fits into the wider world of insurance – seems stuck in the dark ages.

Perhaps that’s because surety bonds are unique – part insurance, part financial product – with an intense underwriting process that sets them apart from the rest of the insurance industry.

“Surety represents a small portion of the overall insurance world that not many people know about, and we’re okay with that,” says Bill Krumm, who heads up Arthur J Gallagher & Co’s national commercial surety practice. But as more public entities and private companies require guarantees that products will be delivered and services will be performed,

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“Being bonded can mean the difference between being invited to bid on a contract and reading about the award in the newspaper,” Krumm says.

How bonding works A surety bond is essentially a third-party guarantee.

“It’s a three-way agreement between a principal who has some duty or responsibility he or she has to fulfill, an obligee that the principal is obliged to, and a surety – the third party that wraps the promise of the principal with a credit-worthiness and the good name

THE BASIC FOURS Contract surety bonds: bid bond performance bond payment bond maintenance bond Commercial surety bonds: license and permit bonds court bonds fiduciary or probate bonds public official bonds

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of the surety company,” explains Constantin Poindexter, managing general agent, chief underwriter at Surety One. Surety bonds come in two major categories: contract and commercial. Most premium in the surety market is in the contract surety area – “sticks & bricks” and heavy-construction projects such as highways, bridges, dams, dredging, public infrastructure, schools, local parks and recreation.

The federal government (under the Miller Act) and most states mandate that publicly funded projects over a threshold dollar value – which varies from state to state – must include some form of “guarantee” protecting the public’s interest.

“This guarantee, usually a contract bond, assures that the selected contractor and its team of subcontractors and suppliers will complete the project as specified – on time, on budget and without lien,” explains Krumm.

“Surety isn’t jsut for publicly funded projects.

We’re seeing sophisticated private owners require bonds to protect their construction projects.”

Some of the most common forms of contract bonds are: • Bid bonds, requiring contractors to enter into the contract if their bid for a project is chosen and allowing the project developer to recover the difference between that bid and the next-lowest bid if a contractor refuses to accept the contract.

• Performance bonds, providing project owners and developers with financial protection in the event that a contractor doesn’t finish the project according to contract.

• Payment bonds, ensuring that contractors will pay subcontractors, suppliers and laborers as outlined in the contract.

Other miscellaneous bonds commonly written to support the construction industry include wage and welfare bonds, license and

permit bonds, highway and roadway access bonds, and various preservation bonds.

Commercial surety bonds, meanwhile, are generally required by state laws and statutes rather than by contract, and guarantee some aspect of a principal’s occupation.

“They’re used to regulate markets and keep working professionals from taking part in fraud and other unethical business practices,” explains Danielle Rodabaugh, director of education at SuretyBonds.com. “Most commercial bonds are license and permit bonds ... which are required before government agencies issue a license or permit. Their purpose is usually to safeguard the public and keep the government from losing money.”

There are thousands of different types of commercial bonds that surety companies offer.

Among the most frequently purchased are contractor’s license bonds, tax preparer bonds, notary bonds, and judicial and fiduciary bonds such as probate bonds.

The difference between surety and insurance When a business obtains a surety bond, it pays a fraction of the whole sum of a surety bond to the surety bond company. Payment ranges from 1% to 3% of the bond amount for well-qualified applicants, all the way up to 25% for applicants with less-than-stellar credit or limited financial history.

If the principal fails to fulfill the bond’s obligations, the harmed party can make an indemnity claim. If the claim is valid, the surety will provide compensation up to the bond amount.

“Surety is more like banking than insurance,” Poindexter says. “The big difference is that, in insurance, there is always an expected level of loss, and they build that into the premiums and expenses. Everyone knows there will be car accidents, house fires, illnesses, etc. In surety,

“Being bonded can mean the difference between being invited to bid on a contract and reading about the award in the newspaper” Bill Krumm , Arthur J Gallagher & Co

THE WHOS OF SURETY BONDS WHO NEEDS THEM? A few professions that almost always require surety bonds: auto dealers real estate brokers construction companies collection agencies durable medical equipment providers health clubs auctioneers travel agencies The three parties in a surety guarantee: principal – person or entity required to post bond obligee – government entity or person requiring principal to be bonded surety – provides financial guarantee to obligee on behalf of principal there is no acceptable loss level. You write them based on the theory that there will be zero loss.

When you underwrite a bond, you are guaranteeing the person will fulfill their word. And most people do.”

A bank line of credit is generally secured with equipment or other assets such as real estate. Surety, however, is typically supported in an indemnity agreement stating the bonded company will reimburse the surety for any and all losses and costs.

Underwriting surety bonds Bonded principals must therefore take every action possible to avoid claims.

“The surety is only extending you credit, and therefore will expect to be reimbursed if a valid claim is paid,” stressed Victor J Lance, president of Lance Surety Bond Associates. “Having a paid surety claim may make it very difficult for the principal to become bonded again in the future, as it is a standard question on all bond applications, and is usually a cause for declination.”

Just as surety is more like banking than insurance, surety underwriting is more finan-

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SPECIAL PROMOTIONAL FEATURE

SURETY BONDS cially driven than other insurance classes. “It’s underwritten very similarly to what a bank would go through to extend a line of credit,” Krumm says.

For smaller clients such as a family held construction company, surety writers take a very hands-on underwriting approach underscored by a thorough vetting of the “Three Cs of Surety”: character, capital and capacity.

“As a surety company, I’m going to check you out, make sure you pay your bills, have established a pattern of adult financial responsibility, have sufficient working capital and a healthy debt to equity ratio, that would lead me to feel you’re a good risk,” Poindexter says. “If a contractor carries a surety bond, you can guarantee they’ve been vetted and pre-qualified for that work. It’s a protection, provided to the obligee or public owner.”

Such consideration is not taken when a person underwrites more traditional insurance products. Indeed, “In many cases you’d be skirting close to discrimination if you did so,” Poindexter says. “You can’t deny a person auto insurance because they failed to pay child support, but you can deny surety credit.”

Publicly traded Fortune 1000 companies seeking surety bonds require quite a different underwriting approach. “While the financial strength of the company may not be at issue, a key difference may be understanding various uses of surety,” Krumm says. “A great example would be using a surety bond in lieu of a letter of credit – something something more readily supported by surety in recent years.”

Reclamation bonds are among the most difficult to place. They guarantee restoration of

“As a surety company, I’m going to check you out, make sure you pay your bills” Constantin Poindexter , Surety One land to its original condition after an extractive industry – such as mining, oil or natural-gas development – scars the landscape. They’re required by the Bureau of Land Management and various state environmental agencies.

Market update These bonds represent long-term surety obligations that generally cannot be canceled; adequate performance can be highly subjective and bond losses, if incurred, can be large.

“Most sureties require collateral to issue a reclamation bond due to the duration for which most of these bonds have to stay in effect, and the onerous nature of the obligations is placed to the principal,” Poindexter says.

Surety experts agree business is trending upward in their sector.

“The economy has rebounded, which means more construction, more money spent on infrastructure, and when construction, building, maintenance and supply increase, there’s a commensurate increase in the need for bonding capacity,” Poindexter says.

Specifically, as the real estate sector continues to recover, “We have seen a robust uptick from regional and national homebuilders for new subdivision bonds,” said Robert F Thomas, president of Hanover Surety.

Thomas predicts upcoming regulatory

FAST FACTS

$5 billion

Annual premium in the surety bond market

$1.2 billion

2013 surety underwriting profit

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MAJOR SURETY CARRIERS: ACE Group American Contractors Insurance Group Chubb CNA Hanover HCC Insurance Holdings International Fidelity Insurance Company Liberty Mutual The Hartford Travelers

changes for bonds required in the oil and gas sectors will also result in a higher demand for surety in challenged sectors that are struggling with low fuel prices.

The recent growth of the bonding industry means there’s now a significant premium base. It’s about $5 billion annually in the US, and also growing in overseas markets. On the flip side, there’s also increased competition for that premium. There are new entrants into the marketplace, capacity is plentiful and inevitably, price wars have started.

“When that happens, premiums can start getting driven down to the point where they are unstable, and it is no longer an attractive sector,” Poindexter says.

Reinsurance is another concern in the surety sector.

“I feel reinsurance is less available on favorable terms today than it was 10 years ago,” Poindexter said. “I can’t say why the appetite has changed – whether it’s increased losses in a particular class of business or not enough of that premium to make it worth their while.”

Meanwhile, the ample capacity means surety brokers typically will be able to find a home for most opportunities.

Great opportunities Thomas sees tremendous opportunity for producers to sell value by establishing surety lines of credit for their clients.

“For qualified businesses, a surety line of credit through an independent agent often is a much better alternative than working with a bank,” he says.

Great opportunities exist for producers when it comes to partnering with the right surety insurance carriers.

“With the market moving out of a recession and beginning to grow more steadily, the right carrier can help producers provide effective surety solutions for their clients,” Thomas says.

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FEATURES

LEADERSHIP

Why fearlessness often leads to failure Dan Gregory and Kieran Flanagan reveal how being fearless – while idealized to a great extent – can lead to sloppy mistakes and poor decisions in this extract from their book Selfish, Scared & Stupid

to settle within a short drive from where we grew up. Also, we are mostly inclined to base our judgment on past experience instead of speculating with the new, however compelling.

In truth, we love to look at the adventurous road, but mostly from the comfort of the safe path. But is that such a bad thing?

Can fear be a factor in achievement? And is the favoring of heroism and persistence over contrary data and good judgment actually a formula for success or simply a way to have stories told about you in the past tense?

As is the case with many such questions, it kind of depends.

Fear is one of the reasons we have survived THROUGHOUT HISTORY, the headlines and accolades have always belonged to the fearless. We celebrate the heroic souls who dismiss personal safety and stride forth into the fray against odds that seem insurmountable. St. George and the dragon, Jason and the Argonauts, Odd and the Frost Giants – almost every culture has its myths and legends lionizing bravery and self-sacrifice.

So, what is it that we find so enticing about bravery and fearlessness when most of us, in reality, prefer lives of relative safety and comfort?

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Certainly, part of it has its origins in our evolutionary history: Adrenaline in correct doses is a highly addictive substance, hence our obsession with horror films and roller coasters.

However, one of the more significant reasons the fearless are so admired is that they very much represent the outliers in the human experience. Few of us regularly seek out truly risky situations. For instance, most of us prefer job security to the unknown of the entrepreneurial lifestyle, and though many of us do travel, most of us prefer

Fear, it turns out, is actually quite a useful emotion when it is appropriately applied. An overly curious nature mixed with naivety and overconfidence can be a recipe for disaster.

Sending a canary into a mine to test for the presence of gas, while cruel, is actually a pretty savvy thing to do. In this case, fear not only ensures the survival of many miners, it also increases the chances of eventual success while reducing costs – miners are rather more expensive than songbirds.

What’s more, many of our latent fears – spiders, heights, water – are based on our survival; all have their origins in some pretty

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rational concerns.

Where fear can undermine leadership is when it becomes paralyzing, when judgment is replaced by constant evaluation and data-seeking.

The truth is, in any decision we make, we never have the complete picture or enough information. This, it turns out, is why good judgment is so critical to good leadership.

order to generate the behavioral change we so desire? How can we generate an opposite fear, one that is linked to not changing?

TEDx speaker Kelly McGonigal and other health psychologists assert that, contrary to popular belief, not all stress (which is essentially a fear of possible outcomes) is necessarily bad. They further state that stressful experiences can be used to promote adaptive responses, and that individuals can be

Rebalance the fear This is perhaps the most important point. We are not advocating that you ignore your fears or throw yourself at them as part of a midlife extreme-sport crisis, nor are we suggesting they are all irrational and imaginary. What we are suggesting is that they can be useful for driving change and shifting behavior, and this relies on shifting the balance of the fear equation from one side to the other.

Fear can be an aid to judgment One of the things that particularly defines leadership is a willingness and ability to make decisions and back them up. What this really means is embracing ownership of the results. One of the burdens of leadership is that when you do achieve success, it’s your team who won, but should failure be the outcome, only you lost.

This makes good judgment one of a leader’s key accountabilities, and fear must necessarily be a part of this equation. It has us identify and weigh risks, and consider more than just the possibility of success and account for it.

One of the criticisms we often make of strategic business plans is that the margins allowed for error are so slim. In other words, success is only guaranteed if everything goes exactly according to plan.

Of course, this is statistically unlikely, and a far better approach is to stack the odds of success in your favor by implementing systems and processes that allow for success, even on those days when not everything goes as it should.

Failure is often cited as being critical to success. But this is far more than a twee catchphrase of the eternally optimistic; it is a recognition that failure, rather than being a result, is a constant feature of the results we produce daily, and should therefore be accounted for.

See fear as a lever for positive change If we accept that fear has a lot of downsides, how can we turn this around and use fear as an asset in achieving positive change, in

One of the burdens of leadership is that when you do achieve success, it’s your team who won, but should failure be the outcome, only you lost trained to think of stress arousal as a way of maximizing performance.

The long and short of it is that reframing fear as an asset can not only remove impediments to performance, but can actually serve to heighten and lift it. Fear (and its close cousin, stress) is suffering from some bad PR and really needs some rebranding.

We all need reminding that sometimes fear has been the good guy, and it has certainly been a considerable asset in the armory of social change. Rory Sutherland, vice chairman of Ogilvy Group UK, famously tells the story of Atatürk, a military leader in the then Ottoman Empire and later the first president of Turkey, who, in an effort to stabilize the food supply, added an additional carbohydrate to the mix – in this case, potatoes – flipping the fear of eating potatoes into a fear of not eating them. In fact, by decreeing them a ‘royal’ vegetable that no commoner was to eat, he ensured that not only was the fear flipped, but a desire to eat them was achieved.

Rather than seeing fear as one-sided, these examples show that, by seeking to defeat or decrease the fear that was limiting them, people found that a better, or more compelling, strategy was to increase the fear on the other side of the equation.

For instance, if you are afraid to go for a jog because you’re looking a little soft around the middle and are scared that people might laugh at ‘the fat guy in tight-fitting exercise gear,’ that’s one side of the fear ledger. But if a chainsaw-wielding madman were storming through your house, you would not only jog, but hurdle, parkour, long-jump and sprint, all while dialing for the emergency services.

(And if anyone did choose to criticize you at this juncture, you would happily use them as an obstacle to slow down the chainsaw-wielding maniac.)

Next time you’re quaking in your boots and wishing you had picked up that ‘clinical strength’ antiperspirant, stop to consider fear not as a barrier to success but possibly as one of the most overlooked and underutilized motivators we have for driving us to success.

Then set about reframing your fear.

The trick is to see fear – when appropriate – as a useful tool of leadership rather than as something to avoid.

Kieran Flanagan and Dan Gregory are behavioral researchers and strategists. Flanagan is chief creative officer at The Impossible Institute, while Gregory is president and CEO of The Impossible Institute.

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FEATURES

VOLUNTEERING

Does corporate volunteering really work?

Does letting staff go out and volunteer one day a year really create value for the charity? Peter Baines outlines a different approach to corporate volunteering – one that all parties can truly benefit from I OFTEN get asked the question: Does corp­orate volunteering really work? To put it simply, it can, but it often doesn’t – and even if it is working, it’s very unlikely to be reaching its full potential.

As a senior executive, partner or director of a business, setting the strategy for the organization is part of your duty. Maximizing returns for the partners or shareholders is also part of your fiduciary responsibility. Getting your corporate social responsibility strategy right can and should be a profit center back to your company, and how you deploy your resources in this area is very much part of that strategy.

Corporate volunteering, in the traditional sense, is when businesses give their staff one work day to volunteer with their charity of choice – a tactic that is probably wasting both the company’s time and that of the charity partner.

You may ask, “How can this be a waste of time for the charity? We are skilled professionals working for free to make a difference.”

Put yourself in the charity’s shoes, and consider that you have a well-meaning, highly qualified individual turn up for the day to help. Just for one day. Once a year.

After you get the introductions out of the way, have shared a coffee and arranged a

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security pass, the charity has approximately six hours worth of productive time left before you leave their office and return again, perhaps, in a year’s time. No one stands to get much value out of this type of relationship because, really, how can they?

One of two things is likely to happen when staff members participate in corporate volun­ teering. Those who take the day off and work productively with a charity have most likely been doing some sort of volunteering for

several years, and it is already part of their life. The business giving them the day off just allows them to go on company time. The other likely scenario is that the employee’s volunteering day is spent at the beach, where they’ll be working hard on catching waves or getting a tan.

So, can it work?

The answer is yes, it can work. Just like any other initiative the company takes, if there

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is a considered strategy behind the program, there is a greater chance of success and a meaningful value exchange between both parties.

In Doing Good by Doing Good, I share a number of examples as to how corporate volun­teering can work, from large firms down to small businesses and even sole prac­titioners.

Often the most effective resource you can offer a charity or nonprofit is those skills you use on a daily basis and get financially rewarded for. If you are an accoun­tant, lawyer

volunteering really for?” If the honest answer is the charity partner, then the provision of professional services they are in need of will achieve that outcome. If it is more akin to a team-building exercise, and the charity is the vehicle for that program, then the direction of the program is different. The latter is not wrong, just a different approach with a different outcome.

It’s about getting the strategy right, and this is where the opportunity to create a mean­ingful experience really exists.

Often the most effective resource you can offer a charity or nonprofit is those skills that you utilize on a daily basis and get financially rewarded for or provider of professional ser­vices, there is a strong chance that you are better at providing those services than you are at building houses or mending leaking roofs.

Sashi Veale of Sashi Veale and Associates is an accountant who, for years, has been sup­porting charity by preparing the financial accounts for a select number of charities on a voluntary basis. She does this above and beyond her commercial work, and, although I haven’t seen Sashi on the end of a hammer, I have a strong suspicion that the value she brings to the charities she supports is far greater through her provision of ‘voluntary’ pro­fessional services. After all, this is what the charities she supports need.

Part of the argument around corporate volunteering is, if the firm that I’m a partner of only offers our professional services on a pro bono basis, do we miss out on the engagement and the shared experience of actually ‘getting our hands dirty?’

After all, isn’t part of a good corporate social responsibility program the shared experience that leads to higher levels of staff engagement, improved morale and increased staff retention, and if so, how is doing more of what they do, but for no fee, achieving that outcome?

This is where a strategic approach is re­quired. Ask those internally who are par­ ticipating in the program: “Who is this

Is one day per year helpful?

Let’s return to the concept of volunteering one day per year. You might be the senior executive or director of an organization with 400 people. You offer each of them one day off a year to volunteer with their charity of choice, or perhaps with the charity your business supports.

The first question to ask is how many of those 400 staff actually avail them­ selves of the day and use it for the intended purpose? Of those, how many are providing meaningful assistance to the charity they are working with? And finally, how many of those who don’t take it would be happy to see it used by someone who was interested and did have the relationship? This is where we can leverage some real value.

If two-thirds of the staff donated their day back to the organization, and those days were taken consecutively by one person to work at one organization, this would give the charity a dedicated full-time worker for the entire year. Now we start to see real value to the charity.

What flows back to your business? A story of meaningful change – one person working full-time leading a project within a charity can bring about real change.

So, does this mean there is no place for the group volunteering days when we all put

on overalls and insert a paint brush into our right hand? No, it does not.

One of the most memorable days I have had working with a corporate team was when I led 103 members of AIA Insurance into the Khlong Toei slums of Bangkok in Thailand. For close to eight hours, they toiled away in a place they had never been and were unlikely to ever return, for people they had never met nor were likely to meet again, but they had one of the richest shared experiences you can imagine.

KEY QUESTIONS If you have volunteering as part of your CSR platform or you are looking to introduce it, ask yourself a number of questions: Is there a strategy behind our corporate volunteering?

Is it aligned to our values?

Who is it really designed to benefit, and are those who are meant to benefit from the program in fact doing so?

Can we re-engineer our volunteering to create a multiplier effect or shared experience?

What is the return to our business, and how are we measuring it?

If you can answer the last of the questions above in the affirmative and clearly articulate the program’s positive return to your business, then you are well ahead of 90% of organizations who are engaged in corporate volunteering.

If your answer to the final question is in the negative, then you are missing opportunities and are failing to capitalize on the returns you could be bringing in.

It’s not only in the communities’ interests for you to get this right – it is in your interests as well.

Peter Baines, OAM, became passionate about sustainable leadership after he was part of the natural disaster response team for the 2004 Boxing Day Tsunami. Today, he helps businesses build effective sustainable leadership. He is the author of Doing Good by Doing Good.

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Insurance Business America is the independent voice for the insurance industry, encompassing news analysis, expert opinion, exclusive interviews and business strategy advice for today’s sophisticated insurance brokers, agents and advice professionals.

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PEOPLE

CAREER PATH

DRIVEN TO SUCCEED

She may have got her start as a car salesperson, but Tiffany Nolan, the owner of i.e. insurance, sped up the professional ladder 2015 STARTS I.E. INSURANCE Independent since April, Nolan controls the companies she writes for and the carriers she uses. Her 22% closing rate at Liberty Mutual turned into 77% as an independent. She recently hired her first employee.

“He [started] three months ahead of schedule.”

2014 SELECTED TO JOIN MANAGEMENT TEAM Nolan was one of eight agents selected to join the Liberty Management System. For six months she traveled to Liberty Mutual offices nationwide, helping them find solutions to any sales gaps.

“After seeing all those offices and sales people, I realized my dream of opening an independent agency was absolutely achievable.”

2010 ENTERS THE INSURANCE INDUSTRY Nolan didn’t like the long dealership hours working 100% on commission. At the behest of her clients, Nolan left and started selling car insurance, joining Liberty Mutual.

“In a car dealership you sit there for a 12-hour day and if someone walks in 10 minutes before closing, you have to stay. I loved my job but I hated not having a life.”

“I loved my job but I hated not having a life.”

2015

NAMED ONE OF IBA’S HOT 100 Last January, Nolan’s decision to open her own insurance company was solidified with her inclusion on Insurance Business America’s Hot 100 list.

She left Liberty Mutual the same month.

“I knew I would start my own agency when I was accepted into the Hot 100.”

2012 JOINS PITTSBURGH PROFESSIONAL WOMEN

A few years after joining Liberty Mutual, Nolan became the corporate liaison within Pittsburgh Professional Women.

“It’s a great organization that, really, their entire focus is to help business women succeed. I was privileged to attend the leadership academy [and] as I continued, the connections I’ve developed have been instrumental in business to me.”

2002 BECOMES A CAR SALESPERSON

After graduating from the Western School of Health and Business, Nolan became a quickly disillusioned pharmacy technician at Allegheny General Hospital.

“I saw people working beside me working a quarter as hard, getting paid twice as much. I decided I’d get a job where the amount of work I’m willing to do directly impacts my income.”

2001

FINDS WORK AS A PHARMACY TECHNICIAN

Nolan answered a newspaper ad for car salespeople. Figuring she could marry her love for cars and people, Nolan took the job selling Hondas in Butler, PA – and loved it even though the first few months were frustrating.

“Within five years, I was in the top 15% in the country.”

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PEOPLE

OTHER LIFE

TELL US ABOUT YOUR OTHER LIFE Email iba@keymedia.com

12.5%

minimum proportion of Arabian blood that Anglo-Arab horses must have

TO THE RESCUE Whether she’s protecting her clients or rescuing a former racehorse, Kathleen Pittman is here to help

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FOR KATHLEEN Pittman, adopting her first rescued horse – Sunny – five years ago and her involvement in the equine world have opened new doors in her insurance business.

“There aren’t a lot of companies willing to write farm, stable or things of that nature,” Pittman says. She meets many clients at rescue and horse-related events. “I know all these people with horses and it just so happens they need insurance.”

Pittman now keeps two rescues

50mph

the top speed, in miles per hour, recorded by an American quarter-horse

205

the number of bones in an average horse’s body

that were once champion barrelracing horses but given up for adoption after passing their primes.

Along with 26-year-old Sunny there’s Lady, a 10-year-old Pittman took in two months ago.

One owner’s loss is Pittman’s gain. The horses have helped her become more patient. “They learn a lot from you, of course, but they end up teaching us way more than we teach them,” she says. “[Adopting the horses] has changed my life, I know that.”

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