IBAMAG.COM ISSUE 4.05 | $12.95
MGAs Producers gave us the scoop on what they're looking for in an MGA – and which MGAs are meeting their expectations THE BUSINESS OF AGRICULTURE
What coverages do farmers need that brokers might be missing?
AN INDUSTRY IN CRISIS
How uncertainty in the oil & gas industry is affecting producers in the sector
THE LATEST CYBER SHOCK
The importance of cyber insurance in the wake of the Panama Papers
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ISSUE 4.05
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CONTENTS
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UPFRONT 04 Editorial
How MGAs are helping brokers thrive
MGAs COVER STORY
24
06 Statistics
FEATURES
A SHIFTING LANDSCAPE
Farms and ranches are becoming increasingly complex – and so are their coverage needs
18
50
CORPORATE RETREATS
Investing in a getaway for your leadership team could pay dividends – if you plan it correctly
10 News analysis
What a recent court decision means for small businesses and cyber coverage
Why more health professionals are classifying cases as workers’ comp
16 Technology update
What traditional insurers can learn from the new crop of startups
FEATURES 52 Feedback is broken
How to get – and receive – helpful feedback
44 Agency insight
Lechner & Stauffer’s John Kauffman on the importance of shared values
54
IN THE PIPELINE
Despite the ongoing turmoil in the oil & gas industry, there are opportunities to be had for brokers
www.ibamag.com
The keys to attracting (and retaining) millennials
PEOPLE
FEATURES
2
09 Opinion
14 Workers’ comp update
FEATURES
Richard Robin of NAS Insurance details how his company’s culture has driven its success
Varied viewpoints on a new Labor Department regulation
This month’s big movers and shakers
We asked producers to rate their MGAs in seven key areas – and the results are encouraging
INDUSTRY ICON
08 Head to head
12 Intelligence
FIVE-STAR MGAs
PEOPLE
46
Will the latest data leak be the cyber wake-up call your clients need?
55 Career path
Dorothy Gjerdrum is reshaping the face of public sector risk management
56 Other life
Hitting the ice with Paul Pustovar
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TRUST MATTERS MOST with what
We know you place your best customers with carriers you can truly depend on. That’s why The Hanover works hard to retain and reward your trust, providing industry specialized product lines, local underwriting expertise and responsiveness, and an unwavering commitment to the success of our agents. It’s because of these distinctive capabilities, and this unique value proposition, that we are able to work exclusively with people we trust. The very best independent agents across the U.S. Trust. We wouldn’t be an industry leader without it.
THE HANOVER Earning trust since 1852
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Personal Lines
Small Commercial
Middle Market
Technology
Specialty Industrial
Surety
Healthcare
Management Liability
E&S - Merit
Marine
Professional Liability
Chaucer/Lloyd’s
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UPFRONT
EDITORIAL
Stepping up their game
J
ust a few years ago, many in the insurance industry thought managing general agents would have a minor part, if any, to play in the business. Today, MGAs are more popular than ever with carriers and agents – and agents’ estimation of those MGAs has increased as well. In our third annual survey examining the vital relationship between MGAs and their producer partners, agents and brokers thoughtfully rated seven key areas of proficiency. By all measures, things are looking up – MGAs improved their ratings in every metric in the 12 months since Insurance Business America last addressed this topic. Underwriting responsiveness and claims service, in particular, both made huge gains. This is welcome news, as both categories ranked as the most important to producers for the third year running.
Today, MGAs are more popular than ever with carriers and agents – and agents’ estimation of those MGAs has increased as well Beyond those two points, however, producer preferences have shifted slightly over the last year. In 2015, premium pricing was the fourth most important consideration when choosing an MGA; this year, it’s moved up to the third slot. It’s not a huge jump, but it is indicative of market conditions that are continuing to affect producers. As the property & casualty market continues to soften, price becomes more important than ever. The increased competition has caused a large number of carriers across to board to institute premium decreases of 5% to 15% for accounts with a good loss history – and clients are expecting to reap the benefits of that. Perhaps that’s the same reason producers continue to express anxiety over MGAs that also run retail operations. At a time when many distribution channels are fighting for continued relevance – and even survival – producers are understandably anxious about doing business with MGAs that also compete directly with them for client business. If there’s one thing the survey results suggest, however, it’s that there are enough MGAs – and, most important, quality MGAs – out there for producers to partner with to advance their business goals. The team at Insurance Business America
www.ibamag.com JUNE 2016 EDITORIAL Senior Journalist Caitlin Bronson Journalists Ryan Smith Tim Garratt Libby Macdonald Donald Horne Editorial Researcher Heather Turner Copy Editor Clare Alexander
CONTRIBUTORS Mike Shannon Nikki Fogden-Moore Georgia Murch
ART & PRODUCTION Design Manager Daniel Williams
SALES & MARKETING Vice President Cathy Masek Media Sales Managers Chris Wills Chris Anderson Justin Faull 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
Designer Joenel Salvador Randy Pagatpatan Production Manager Alicia Salvati Traffic Manager Kay Valdez
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ADVERTISING INQUIRIES
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UPFRONT
STATISTICS
Cyber hacks sell coverage The Panama Papers have further underlined the need for businesses to carry cyber insurance IN APRIL, it was revealed that 11.5 million confidential documents from Panamanian law firm Mossack Fonseca had been leaked, revealing how the firm’s clients had been hiding their money offshore. Overall, the documents contained 2.6 terabytes of data and covered records spanning 40 years – dwarfing even the WikiLeaks controversy of 2010.
140
Public figures had their financial records exposed in the Panama Papers
500+
Banks used Mossack Fonseca to create offshore tax havens
The leak emphasized the importance of cybersecurity, particularly when dealing with large sums of money. The SEC recently revealed that 74% of financial advisors had been the target of a cyber attack, but they’re hardly alone. As the many high-profile data breaches over the last few years have shown, no business is immune to growing cyber threats.
4.8 million
Emails were exposed in the Panama Papers, accounting for nearly half of the leaked documents
DATA BREACHES ON THE RISE The Panama Papers are by far the biggest data leak in history, and a harbinger of just how large and frequent cyber attacks are becoming. According to Beazley’s recent annual insights report, the company saw a 60% surge in data breaches from 2014 to 2015.
WHAT’S CAUSING DATA BREACHES?
2014
2015
214,000
Offshore shell companies were created by Mossack Fonseca
Source: ICIJ
ASHLEY MADISON HACK
THE ATTACK AGAINST ANTHEM
In what The Economist dubbed a “wake-up call” for modern business, the 2015 attack on extramarital dating site Ashley Madison revealed that commercial clients are no longer safe in the digital age.
In February 2015, still-unidentified hackers accessed the personal records (including birthdays, addresses and social security numbers) of health plan users who were members of Anthem subsidiaries such as Amerigroup and Anthem Blue Cross Blue Shield.
9.7 GB Of members’ personal data compromised
39 million Ashley Madison users exposed
Personal records hacked
$578 million Class-action lawsuit brought against the site’s owner Source: IBAMag.com
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80 million
15,000
Boeing workers in Missouri among those affected
$100 million
Limit on Anthem’s cyber policy, which experts suggested wasn’t nearly enough to cover the costs of the breach
Source: Tech Insider, Bloomberg, CNet
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6%
32%
18%
third-party vendors
unintended disclosure of records
hacking or malware
16%
loss of non-electronic physical records
24%
32%
unintended disclosure of records
hacking or malware
16%
18%
loss of non-electronic physical records
third-party vendors
Source: Beazley Breach Insights 2016
BIGGEST BANK ROBBERY EVER
TARGETING TARGET
Many think of bank robberies involving a stick-up, but the worldwide one that was uncovered in July 2015 was completely digital. For nearly two years, criminals used information hacked from banks in countries such as Russia, China, Germany and the US to dispense cash from ATMs or transfer cash digitally to accounts they controlled.
In one of the first big retail cyber attacks, Target stores were hacked in 2013; the payment information of some 40 customers was stolen from every cash register in every Target store across the US.
40 million Credit card numbers stolen
1,797 Target stores affected
100
Banks compromised
30
Countries targeted
$1 billion In cash stolen
90
Lawsuits filed against the company
Source: Tech Insider
Source: Bloomberg
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UPFRONT
HEAD TO HEAD
Are regulations strict enough for brokers and advisors? A new Labor Department rule would impose tighter standards on brokers and financial advisors who work on retirement accounts
Bill Kline
Cathy Weatherford President and CEO Insured Retirement Institute
President National Association of Insurance and Financial Advisors
“We welcome the new rules. The DOL’s efforts will bring greater clarity to services and fees. Many advisors and service providers already make it a priority to provide services and advice that are in the best interest of the client. These firms will not need to materially change their business model and related operating procedures. Some firms are not in such a position and will either revise their approach or exit the business. Ultimately, it will be up to each firm to demonstrate value. And as a result, plan sponsors and individuals should be able to build a deeper level of trust and confidence in our financial industry.”
“We support a best interest standard for financial professionals when recommending investment products, as we believe the vast majority of advisors already act in their clients’ best interest. Such a standard would not need to be unnecessarily burdensome to those already serving their clients appropriately, and more importantly, should not make it harder for savers to prepare for retirement. This was our main concern regarding the Department of Labor’s proposed rule. Throughout the rule-making process, we expressed concern the rule would harm those saving for retirement by limiting their access to advice and lifetime income products. We are still determining if our concerns were addressed.”
“It remains to be seen how the practical application of the rule will affect middlemarket consumers who need retirement planning advice and services. NAIFA will continue to provide training and education to help our members deal with the rule’s new requirements and restrictions. We will educate our members and use our grassroots advocacy strength to push for legislation that would best serve consumers. There is a retirement crisis brewing in our country with large swaths of the population financially unprepared for the future. We need to find a way to continue to provide advice and support for those who are trying to ensure the financial security of their families.”
National practice leader, Retirement Plan Consulting Team Arthur J. Gallagher
Jules O. Gaudreau Jr.
RESISTANCE FROM THE INDUSTRY The Labor Department’s new rule would expand the types of investments covered by fiduciary protection. It has been adamantly opposed by the industry, which claims it would endanger a business model based on commissions and revenue sharing. Recently, executives at four insurance companies – Lincoln National Life Insurance Co., Jackson National Life Insurance Co., Transamerica Corp. and Prudential Financial – made statements that the rule would cause significant problems for their businesses. However, when speaking with investors, all four companies said they were well prepared to deal with the new regulation, according to the Wall Street Journal.
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UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email iba@keymedia.com
Recruit the next generation – or else The industry can no longer ignore the need to get (and keep) millennials interested in insurance careers, writes Mike Shannon “WHERE HAVE all the Boomers gone?” That will be the question 10 years from now when half of the insurance industry retires. If you have made your career helping businesses and individuals manage risk, you understand the importance of this noble industry. When a fire occurs, or a weather-related loss, an accident, or some other incident beyond the control of people or the commercial enterprises in which they work, insurance is the vehicle that puts them back on their feet. Without it, no one would be able to drive, own a business or even afford medical treatment. Commercial insurance greases the wheels of our economy. In terms of a career, insurance is the most fundamentally sound industry I have ever been exposed to in my 40 working years. In that time, I have seen entire industries come and go. I tell every college student and recent graduate I meet that they should consider working in the industry. I know of no other business where: • Buying the product is not optional – people and businesses need insurance. • The annual expiration date gives you a yearly opportunity to write new business. • The 80% or higher renewal rate allows you to build a recurring “book” of business. • The product itself constantly evolves, which keeps you learning. • The end client is basically in the dark regarding both their needs and the details
of the product they are buying, leaving them dependent upon a trusted advisor. • You do not need a degree to get started, though many excellent undergraduate programs exist if you choose to invest in one.
company’s bottom line. And then there is the issue of turnover. Millennials do not automatically feel committed to stay with their first employer for a long time. Insufficient training, mentoring and the lack of a clearly defined career path can quickly lead to their searching for a better work environment. So why should you hire them and live through their learning curve, only to have them leave once they become productive? The answer is because you have no choice. If you want to have sufficient staff to continue growing your company 10 years from now, your only option is to bring in new blood. This is a great business – stand up and shout it to everyone you meet! And not all millennials will jump ship in three to five years if they are properly managed. The key is to not hire just anyone. The science now exists to swiftly identify recruits with the right DNA for your company. Between sales DNA, behavioral style and driving forces assessments, you can place the
“If you want to have sufficient staff to continue growing your company 10 years from now, your only option is to bring in new blood” • Job opportunities are limitless since multiple functions are required, including marketing, underwriting, claims handling, human resources, actuarial science, IT, administration, accounting, management – you name it. You can pretty much find a job, regardless of your degree or background. Colleges and universities that are graduating students with insurance-related degrees have a 95% placement rate but fill only 10% of the demand. That means the responsibility falls to every person working in the industry today to actively recruit the next generation. No matter how recruits get here, however, few small and medium-sized businesses have the necessary programs to train new recruits. Each employee faces years of learning until they can be a productive contributor to their
right people in the right seats straight out of the gate. Furthermore, you can accelerate their learning by giving them both insurance and customer service training in their first six months. That cuts a year off their learning curve. Faster productivity for them means a quicker return on your investment, greater job satisfaction and accelerated career pathing, which will keep those millennials around longer – and keep you in business longer.
Mike Shannon is the founder and CEO of TriFit Business Development, which helps insurance companies grow organically through recruiting, developing their staffs and accelerating the learning curve of new hires.
www.ibamag.com
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UPFRONT
NEWS ANALYSIS
Cyber insurance goes to court A recent decision by a circuit court may leave commercial clients with more cyber coverage than they thought they had
A FEDERAL court decision in April has cast doubt on how best to insure commercial clients against cyber risk. In an unpublished opinion, a panel of the Fourth Circuit ruled on April 11 that Travelers must defend its client, medical records company Portal Healthcare, against a claim that Portal’s failure to properly secure servers led to a data breach in which hackers were given access to private records. Travelers must settle the claim under the commercial general liability policy it extended to Portal Healthcare, the three-judge panel said. The ruling echoed the verdict of a Virginia district court in August 2014. Portal held two policies with Travelers covering electronic publication of certain materials from
shoehorned” into standard CGL policy terms and that a “separate, robust” market exists for problems like those faced by Portal. The trade groups warned that, by affirming the district court’s decision, the Fourth Circuit would “undermine the certainty and predictability” intrinsic to the functioning of insurance markets. Attorneys defending Portal, however, argued that the existence of a cyber insurance market is irrelevant because the district court found room for coverage in the language of the Travelers policy. “If a [general liability] insurer wants to push this type of risk into the cyber insurance realm, it needs to be clearer,” says attorney Tyler Gerking. The case marks a departure from the
“A CGL policy has many gaps as it relates to cyber risk and was not written to cover cyber events” Christine Marciano, Cyber Data-Risk Managers January 2012 to January 2014, court documents show. The American Insurance Association and the Complex Insurance Claims Litigation Association both spoke out against the decision, saying coverage for cyber claims “can’t be
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traditional understanding of cyber risk, which holds that cyber-specific policies, rather than CGL policies, are needed to cover a data breach. Now, some are saying that small businesses that may not be able to afford cyber liability insurance do in fact have some
coverage after all. This could be big news for small businesses. Although a recent Advisen survey suggests 61% of businesses now have cyber-specific coverage, a number of smaller breaches often fall below policy deductibles, leaving companies on the hook for the bill. Others in the industry, however, say the supposed victory is not so clear-cut. The Portal decision is likely only to apply to companies holding older CGL policies, because newer ones often contain specific exclusions related to data breaches. “What you see now in most standard liability insurance policies like CGLs is that insurance companies are excluding coverage for liability that arises from a data breach,” says attorney Alex Purvis of Bradley Arant Boult Cummings. “What’s unique about the Portal decision is that the policy did not have that type of exclusion. It may be one of the few remaining policies without that exclusion.” Yet the court’s decision was more nuanced than a simple finding of data breach coverage
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CYBER INSURANCE IN PRACTICE More and more companies are choosing to insure against data breaches and other cyber-related losses, but not all understand the limits – or the benefits – of a cyber policy.
61%
The percentage of companies that have purchased cyber insurance, according to a 2015 Advisen survey
39%
The percentage of private companies that went without cyber coverage because they felt adequately covered by their CGL policy, according to a 2013 Chubb survey
$3.8 million
The average consolidated cost of a data breach
through CGL policies. Collin Hite, an insurance recovery attorney with Hirschler Fleischer, told industry reporters that the court only ruled on whether Travelers had to pay Portal’s legal costs for defense in the case. “The court is not saying that Travelers has to pay the verdict or not [if Portal lost]. All it’s saying is Travelers must pay for the insured’s
to “forget some of your standard liability policies” in the wake of a data breach, it appears cyber insurance is still the best option for risk management. Christine Marciano, president of Cyber Data-Risk Managers in New York, is already concerned about the overlap between CGL and cyber policies and how it may influence companies – and perhaps even agents – to rely
“If a general liability insurer wants to push this type of risk into the cyber insurance realm, it needs to be clearer” Tyler Gerking, Farella Braun + Martel defense counsel and to defend the case,” Hite said. “A lot of times, though, the defense of the case is the most expensive component of the lawsuit because the plaintiffs may not be able to prove any damages.” While Purvis urged companies’ agents not
too greatly on CGL. For example, advertising injury liability covered under cyber liability policies is also present under the CGL policy. From that, many assume cyber attacks are also covered. In fact, the misconception is so popular
23%
The percentage by which that cost has increased since 2013 Source: Advisen, Chubb Corp., IBM
that 39% of companies told Chubb in 2013 they felt they had adequate protection in their CGL as to make cyber unnecessary. This percentage has likely fallen with time, but some still subscribe to this view – and after this court decision, they may feel validated in their mistaken belief. “A CGL policy has many gaps as it relates to cyber risk and was not written to cover cyber events,” Marciano says. “Several breaches within recent years have been battled out in court with insurers versus CGL policyholders.” Jeremy Henley, director of breach services at ID Experts, agrees. “A cyber policy is a prudent step,” he says. “It’s frankly much safer for a policyholder to look at and consider a stand-alone cyber policy. It’s really in their best interest.”
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UPFRONT
INTELLIGENCE CORPORATE ACQUIRER
TARGET
PRODUCTS COMMENTS
Arthur J. Gallagher
Charles Allen Agency
The Minnesota-based retail broker offers commercial surety bonding and insurance services
Arthur J. Gallagher
KDC Associates
KDC provides insurance for automobiles, manufacturing, commercial construction, hotels and other industries
The Hilb Group
Clark-Mortenson Insurance
Based in Northern New England, Clark-Mortenson specializes in hospitality, eldercare, residential health facilities and technology
Prime Risk Partner
Old National Insurance
ONI provides business, personal and employee benefits insurance, as well as claims administration services
USI Insurance Services
Brooks Insurance
The nearly 100-year-old agency provides services in Ohio, Michigan and Indiana
USI Insurance Services
Forest Sherer Insurance
Forest Sherer employees will continue to operate from their current locations in Terre Haute and Evansville, Indiana
Zurich American Insurance Company
Rural Community Insurance Services
Zurich completed its $1.05 billion purchase of the US agriculture and crop insurer
General Star Management expands E&O program
Overseas insurance acquisitions aren’t done yet
The swell of insurance acquisitions by foreign companies didn’t reach its apex last summer, according to banking industry dealmakers. The US is “the biggest place to go shopping,” said Meir Lewis, managing director of Morgan Stanley’s insurance investment banking group. Japan, in particular, has continued to show interest. Japanese insurers made more than $18 billion worth of acquisitions in the US last year, and the economy still boasts a number of large insurers facing dim growth prospects at home. The country’s aging population, devalued currency and low rates pressuring returns are all stunting domestic development, so companies have set their sights back on North America. Lewis stressed that Japanese acquirers are looking to buy “high-quality companies run by competent managers that can oversee expansion into the US.” They also have shown willingness to pay high prices to close a deal. Tokio Marine, for example, paid a premium of more than 30% to acquire HCC Insurance Holdings last October, in a deal worth close to $7.5 billion.
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General Star Management has launched a new errors & omissions program for title agents. The policy will include specialized enhancement coverage for employee dishonesty, as well as privacy security and technology. Each enhancement is offered with a separate $25,000 limit of liability. A $200,000 limit is included when reimbursing defense costs that arise from suits brought by the Consumer Financial Protection Bureau. The program targets small to mid-size title agent professionals, and is available in all states except Alaska, Hawaii, Louisiana and West Virginia.
Insurer offers nonprofit D&O coverage
Privilege Underwriters Reciprocal Exchange [PURE], the insurer best known for catering to high-net-worth individuals, is now offering directors & officers liability coverage for nonprofit organizations. The coverage will protect the personal assets of board members when that individual can be held personally liable. It is available to PURE policyholders who sit on the boards of co-ops or nonprofit organizations with less than $50 million in assets. Premiums start at $500 for $1 million of protection, with coverage limits of $1 million and $5 million available.
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PEOPLE Programs provider to offer drone insurance
Willis Programs has partnered with the Association for Unmanned Vehicle Systems International [AUVSI] to offer insurance coverage to association members. Willis’ DroneGuard program will protect unmanned system owners and operators, and will provide comprehensive coverage, including third-party liability and personal injury, protection from physical damage, and risk management services. DroneGuard is designed to enhance AUVSI members’ operations, industry reputation and consumer safety.
Ironshore adds new product recall coverage
Ironshore Pembroke Managing Agency has expended its offerings for the food industry with a critical new policy. The company’s product contamination recall insurance places emphasis on risk exposure in the food and beverage industries. The coverage will provide protection for communication and rehabilitation costs, as well as expenses related to product withdrawal. Business interruption coverage will cover losses up to 12 months after an actionable event. Policy limits of up to $15 million are available with underwritten pricing minimums of $10,000 per $1 million of coverage.
Farmers expands rideshare insurance to Southeast
Farmers Insurance has introduced new rideshare insurance coverage in Georgia. Farmers worked with the legislators and representatives of Transportation Network Companies [TNCs] and representatives of the Georgia Office of Insurance and Safety Fire Commissioner to develop coverage designed for ridesharing drivers that complies with insurance coverage required by Georgia’s recently passed ridesharing law. The Farmer product will provide coverage from when a person turns on their ridesharing application until they accept a ride. At that point, their TNC’s insurance coverage will apply.
NAME
LEAVING
JOINING
NEW POSITION
John Burkhart
N/A
QBE North America
Senior vice president and head of management liability and professional lines
Robert Capicchioni
N/A
Liberty Mutual Holding Co.
Vice president, US railroad product line
Michael J. Casella
Travelers Insurance
The Navigators Group
President, international insurance
Mike Crabtree
AIG
Tokio Marine Kiln Group
Product recall underwriter
Drew Feldman
Chubb
CNA Financial Corp.
Senior vice president, marine and equipment breakdown
Scott Fischer
N/A
New York Department of Finance
Executive deputy superintendent for insurance
Philippe Gouraud
Concordia Employment Services
XL Catlin
Head of strategic client and broker management
Craig Landi
Freedom Specialty Insurance
Argo Group International Holdings
President of Argo Pro US
Tim Northrop
N/A
Adventist Risk Management
President and CEO
Paul A. Quaranto Jr.
N/A
Boston Mutual Life Insurance
Chair of the board of directors
Bryan Rettman
AIG
Chaucer Insurance Group
Head of development, freight forwarder and logistics insurance unit
Kieron Russell
Tokio Marine Kiln Group
Novae Group
Senior class underwriter, crisis management
Lorraine Seib
XL Catlin
Aspen Insurance Holdings
Global head of excess casualty
Mark A. Smith
Samsung Fire & Marine Insurance
Victor O. Schinnerer & Co.
Chief underwriting officer
Kathleen M. Tierney
N/A
W.R. Berkley Corporation
Senior vice president, high-networth personal lines
QBE North America taps ex-AIG exec
A former AIG executive will take the reins as the next CEO of QBE’s North American operations. Russell Johnston will succeed David Duclos as QBE’s CEO starting May 31. Johnston is an industry veteran with 25 years of experience; he most recently served as president of AIG’s $6 billion Casualty Americas operation from 2011 through 2015, where he presided over casualty underwriters in the US, Canada, Bermuda and London. He also has served as executive vice president and COO of AIG’s commercial insurance unit, in addition to roles as CEO of AIG Environmental and president of AIG Risk Management.
New insurance commissioner for Florida
Following a drawn-out impasse between Florida governor Rick Scott and chief financial officer Jeff Atwater, the Sunshine State finally has a new insurance commissioner. Current Florida Insurance Department executive David Altmaier will serve as the state’s senior insurance regulator. Altmaier has been with the department since 2008, serving most recently as deputy commissioner for property & casualty insurance, where he provided regulatory, legislative and policy support, in addition to overseeing the product review and financial oversight business units.
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UPFRONT
WORKERS’ COMP UPDATE NEWS BRIEFS Texas DOI sets workers’ comp discount rate The Texas Department of Insurance has announced that beginning April 1, any interest and/or discount offered in workers’ compensation claims will be at the rate of 4.14%. The new rate will be in effect until June 30. The rate was calculated using the treasury constant maturity rate for one-year treasury bills issued by the government. An extra 3.5% was accounted for, taking into consideration the state’s Labor Code. The previous interest and discount rate was 4.19%, which ran until March 31.
New York court nullifies workers’ comp amendment The Appellate Division, First Judicial Department, of the New York Supreme Court ruled that a provision in a 2013 amendment to the New York Workers’ Compensation Law is unconstitutional. The provision in question retroactively imposed an additional $62 million in liabilities under the state-mandated coverage. The contract clause provides that “no state shall pass any law impairing the obligation of contracts.” In a statement, Justice David Saxe commented that “[the amendment] retroactively impairs an existing contractual obligation to provide insurance coverage where the insurer does not have the right to terminate the policy or change the premium rate.”
Reforms decrease California’s comp rates
An April 12 report by the Workers’ Compensation Insurance Rating Bureau detailed that employers’ average insurance premiums in California have dropped from $6 per $100 in 2003 to
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$2.86 in 2015. The drop is attributed to legislation changes in 2004 and again in 2012, when lawmakers pushed to increase cash benefits while offsetting medical cost reductions. However, California could still improve further; a 2014 survey by the Oregon Department of Consumer and Business Services revealed that California’s costs were almost double the national median for that year.
Oklahoma Supreme Court removes WC provisions
The Oklahoma Supreme Court voted 7-2 to invalidate parts of the workers’ compensation statutes of 2013, including the provision on permanent partial disability deferral. Under the provision, “an injured employee who returns to work receives no compensation for the physical injury sustained and no compensation for a reduction in future earning capacity, upending the entire purpose of the workers’ compensation system.” The justices argued that deferring permanent partial disability payments to injured workers when they return to work is unconstitutional.
Workers’ comp rates falling in the Southeast According to Ramsey Brock, vice president of marketing and operations at Brock Insurance Agency, which is one of the bigger players in the construction space Tennessee and Georgia, workers’ comp rates are down in the markets his agency serves. He attributes the drop to increased safety measures on construction sites. “Construction owners are getting smarter; they don’t like the bad press that comes with workplace accidents,” he said. “They are taking safety more seriously than ever.”
Fee schedules impacting comp rates More injuries are being classified as workrelated – and some say it’s because physicians want to take advantage of higher fee schedules In physics, every action has an equal and opposite reaction. The insurance industry also operates with this principle in mind, offering policies with premium rates adjusted to offset the total risk associated with consumers. Most insurers are typically careful enough to provide just enough coverage to their clients without affecting premiums. So what happens when profit and convenience are prioritized without thought for client risk? A recent report from the Workers’ Compensation Research Institute [WCRI] revealed that injuries of an uncertain origin are more likely to be classified as workrelated injuries, qualifying them as workers’ compensation cases rather than under group health insurance. WCRI researchers observed that this trend popped up most often in states where fee schedules are significantly higher. Indeed, the report found that a 20% increase in workers’ comp reimbursement rates for physician services was enough to cause a 6% increase in the likelihood of soft-tissue injuries being classified as workrelated. By classifying an injury as work-related, physicians and other healthcare professionals attending the patient enjoy the
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higher reimbursements associated with such cases. Patients of work-related injuries are also free from having to settle deductibles and co-pays. “The doctor gets paid more, and the patient doesn’t take out his wallet, so everyone wins,” says Michael Gavin, president of Prium, a firm that handles medical cost management. While it might seem like everyone benefits whenever a soft-tissue injury gets treated as a work-related case, an unintended consequence – the industry’s opposite reaction – is rearing its ugly head. The WRCI observed that in states with large populations, like California, if just 1% of group health cases are reclassified as workers’ comp cases, costs would surge by more than $80 million. Smaller states, like Iowa, would experience an increase of around $9 million – still a significant number.
To pay for these costs, workers’ comp insurers will have no choice but to raise their premiums, ultimately hurting all clients. The WCRI had previously anticipated this trend last year in
“The doctor gets paid more, and the patient doesn’t take out his wallet, so everyone wins” another study, holding accountable care organizations potentially responsible for pushing regular group health cases to workers’ comp to take advantage of higher fee schedules. Despite these allegations, some professionals don’t think the trend will inevitably
lead to higher workers’ comp premiums. Health Strategy Associates principal Joseph Paduda suggested that physicians do not necessarily “know how to purposely benefit financially” from pushing claims to workers’ comp. Paduda cited a RAND study that suggested physicians do not like filling out workers’ comp forms, and would rather forfeit the incentives from treating workrelated injuries than go through all the required paperwork.
.®
There can be no doubt that all our knowledge begins with experience. – Immanuel Kant
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Policies are underwritten by Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company, authorized insurers in AL, AR, FL, GA, IN, KY, LA, MS, NC, SC, TN and TX; BusinessFirst Insurance Company, authorized in FL, GA, KY, NC, SC and TN. RetailFirst Insurance company, authorized in FL; Retailers Casualty Insurance Company, authorized in AR, LA, MS and TX. ©2016 Summit Consulting LLC | 2310 Commerce Point Drive, Lakeland, FL 33801
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UPFRONT
TECHNOLOGY UPDATE
The big startup shakedown Insurance tech companies are sprouting up across the country, ready to change the way the game is played
The insurance industry has been slow to adapt to new technologies, but all that is set to change. Insurance startups are finding new and creative ways to fully utilize today’s technology, and older, more established companies might want to pay attention. These startups range from simple policy comparison platforms to direct sellers that reach out to their consumers via online services. Health and auto insurance lines are the most popular targets for startups. And the most innovative ventures are
NEWS BRIEFS
receiving a healthy injection of cash. Since early 2010, more than 290 investors have lent their support to tech-savvy insurance companies; tech insurance startups have raised an impressive $1.39 billion since the start of 2014, according to a report by CB Insights. While startups and traditional insurers both offer the same types of policies, it is the convenience offered by the former that wins them more customers. Most startups use the direct online distribution system, allowing consumers to easily shop for insurance
Technology already influencing how risk is calculated
Technology is helping insurers accurately calculate risk. Companies such as Metromile are using telemetry devices to monitor consumers’ cars. The opt-in program tracks the number of miles a vehicle has driven, giving the insurer basis for calculations. Other companies, like Vitality, are using fitness tracking devices to calculate health insurance risk. Startup Trov is offering what it calls “on-demand insurance”; the company’s app allows users to take pictures of any object and send them to the insurer, who then offers then appropriate coverage.
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without the need for a broker. Many startups are also developing other technologies, such as smartphone apps, to improve consumer experiences. Some industry professionals don’t see the online distribution of policies as an immediate threat to traditional sales. “Incumbent carriers cannot turn their
“New carriers will be born, and incumbent carriers will hopefully wise up” backs on the agent and go direct-to-consumer without the risk of offending their agent networks,” said Ovid CEO Peter G. Colis in an opinion piece on TechCrunch. “So much existing and referral-based business is at stake that most carriers do not allow consumers to purchase insurance online – they make consumers purchase through an agent.” Despite this view, Colis believes insurance agents can be ultimately replaced with software. He also thinks that, with time, “new carriers will be born, and incumbent carriers will hopefully wise up.” Fortunately for brokers, current statistics show that agents are still the go-to for all things insurance – for now. More than a million insurance agents are currently operating in the US, selling 100% of all commercial policies, 95% of home policies and 70% of auto policies.
California legislature pushes for paperless insurance
The California Assembly Insurance Committee has approved a bill allowing policyholders to opt into the electronic delivery of insurance documents. If enacted, the law would make California the 35th state to offer the electronic distribution of insurance policy documents. “Consumers increasingly prefer conducting their personal business on the web or through their email,” said Armand Feliciano, vice president of the Association of California Insurance Companies. “[This bill] gives consumers the option to be completely paperless.”
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Q&A
Andrew Rose CEO
A brave new tech-enhanced insurance world
COMPARE.COM
Years in the industry 13 Career highlight “Founding Compare. com and influencing fundamental changes to a $200 billion market”
What changes are you seeing in insurance consumers’ needs and preferences? Fifteen years ago, online shopping was very simple. Amazon just sold books. Now, we’ve gotten more comfortable. These days, 75% to 80% of all insurance shopping starts online. Two years ago, that would have been on a desktop, but now they start on their phone. With millennials, and especially with Generation Z, we’re going to see more of those transactions taking place on their phone – while the phone is in the palm of their hand. They would rather be bitten by a dog than talk on the phone.
Many critics say the online model commoditizes insurance and asks customers to focus merely on price. What do you say to that? For consumers who already shop only on price, we’re not changing their behavior. For those who won’t shop only on price, we’re not changing their behavior. Nonstandard customers who need insurance only want to shop by price. They look at the lowest down payment option and choose it. That consumer would have behaved that way whether they were on our site or not. Standard customers, or the average American, don’t want to over-spend, but they don’t necessarily want an insurer they’ve never heard of. They compare price, brand and product features. They will often go with carriers in position two, three, four or five because the combination of those factors was right with them.
Driverless cars continue to threaten auto insurance
Driverless cars are posing unique challenges to the auto insurance industry – ones INGUARD CEO Parker Beauchamp believes the industry must conquer. New risks could arise from the use of driverless vehicles, and they need to be covered by savvy insurers, Beauchamp said, adding that, depending on how automated a car’s functions are, drivers might need a policy tailored accordingly. According to Beauchamp, driverless cars could also raise accountability issues in terms of who should be held responsible for accidents.
Based on your experiences, are customers interested merely in comparative quotes, or are they looking for something more? Insurance is not a simple product – it’s the only product that both the buyer and seller hope is never used. When you’re buying something like that, you want a combination of education, consultation and a clear presentation of information. What we’ll do is look for more ways to connect with customers. That could be via chat, phone call or through connections with agents. Or we’ll enable natural language search – think of it like Siri on our site. You can say ‘What kind of bodily injury limits should I get?’ That’s where it’s going long-term.
What do you see as the largest impact to the auto insurance industry as a whole moving forward? I think comparison sites will have the biggest near-term impact on the industry. If you look at growth in the UK, Spain, France or Germany, this is an irresistible force for shopping. The one I get asked about all the time is autonomous vehicles. I say, “You should absolutely be freaking out about it, and then you should relax.” You should freak out because 40 years from now, if you aren’t driving, what are you insuring? It’s very scary for personal lines. Then you should relax, because it’s going to take 30 to 40 years to mature in the market. That’s why we can’t just be auto insurance – we don’t want to be beholden to that.
Purchase of cyber policies shows significant increase
A study performed by brokerage giant Marsh revealed that there has been a 27% increase in the take-up rate of cyber liability insurance policies in the US. The study also noted that the increase in take-up rates was even across the board. Although insurers had reservations toward industries such as retail and healthcare for their losses, critical infrastructure industries like chemical, communications, energy, healthcare and transportation displayed a strong interest in purchasing cyber liability policies.
Vertafore to be acquired by two private equity firms
Insurance software firm Vertafore will be acquired by two private equity firms, Bain Capital Private Equity and Vista Equity Partners. The two firms will jointly buy the firm from TPG Capital. The deal, which is expected to close in the third quarter, comes just a month after Vertafore expanded its reach and capabilities by acquiring Keal Technology in Canada, and less than a year after the purchase of QQSolutions in Florida, both providers of cloud software to independent insurance agencies.
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PEOPLE
INDUSTRY ICON
SPECIALIZING IN SUCCESS Richard Robin, CEO of NAS Insurance, discusses the underwriter’s product innovation and its essential organizational culture
THE MOST talked-about exposure in today’s emerging risk landscape is cyber liability – but according to Richard Robin, it’s been on NAS Insurance’s radar for almost two decades. “We’ve been playing a role in cyber liability since 1998,” he says. So how does Robin think brokers can better assist their business clients to secure appropriate coverage? “The key to bringing on more insureds and really penetrating the market and managing the risk is education,” he says. “Markets should be educating brokers and providing tools for brokers to educate their clients. “Some compare cyber to EPLI because it’s an ever-changing product,” he continues, “and that’s how EPLI was in the early days. But the major difference is that there’s no moral hazard really to cyber. There are negligence claims, but insureds aren’t buying cyber because they know that a claim’s about to happen. They’re buying cyber because they’re becoming aware of an exposure that, in the scope of time, has really come on quite recently.”
Standout successes Robin joined NAS Insurance in 1994. Headquartered in Encino, California, the organization was founded in 1975; Robin’s father, former attorney Ed Robin, was the company’s original leader, and he remains
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the chairman of NAS Insurance more than four decades on. Talking about why he embarked on an insurance career himself, Robin says, “I think I really decided to join the family business, and the family business happened to be underwriting insurance.” In his 18 years with NAS, Robin says there have been two achievements that stand out above the rest. The first is the development of the company culture.
what’s going on in the world.” Bringing the right people on board is the second accomplishment Robin singles out during his years at NAS. “A lot of places say that they work hard and play hard,” he says. “I would say that we work hard and play hard, but we also embrace responsibility. We’re always trying to improve our business, and we’re trying to make things better for the market, and in order to deliver on all of those things,
“While we’re growing and vibrant and really exciting, we’re also a family business. People care about each other here, and they care about what’s going on in the world” “The NAS culture really means sticking to our core principles of specialty insurance products, innovation, profitability for all and excellent service,” he says. “When we blend that with our strong London orientation and the fact that we’re a family business that has a legacy of giving back, our culture is really defined. “You can see it and feel it within the walls here at the business that, while we’re growing and vibrant and really exciting, we’re also a family business. People care about each other here, and they care about
we’ve really needed to hire the right people.”
The best and the rest When it comes to how the company sets itself apart from its competitors, Robin points to product orientation. “We don’t put ourselves out as owners of a specific distribution platform, but rather we manage a portfolio of products that you can only find at NAS,” he says. “I think about 65% of the premium we’ve produced is on products that NAS innovated and
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PROFILE Name: Richard Robin Company: NAS Insurance Title: CEO Years in the industry: 22 Fast fact: Outside of insurance, Robin enjoys spending time mountain biking, as well as surfing along the California coast
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PEOPLE
INDUSTRY ICON developed. Having an orientation toward products and then … cross-infusing NAS products makes our whole menu of products very distinct. “If you buy a miscellaneous E&O policy from NAS, you’ll receive a sub-limit for cyber liability and a sub-limit for reputation harm that might result from a claim on the miscellaneous E&O. It distinguishes the product and puts the producing broker in a position where they really need and want to present our product.” Discussing the current insurance climate, Robin mentions the significant amount of consolidation and the discussions around disruption that are occurring in the marketplace. “Everyone in the chain is being asked
the best opportunities going forward.”
2016 and beyond Robin says his focus over the next year will be on helping to make NAS the best insurance employer by institutionalizing the success the company has seen in recent years and scaling for the future. Additionally, he says NAS will continue its pursuit of a nationwide presence. “A year and a half ago, we had one office. We now have four offices,” Robin says. “That nationwide presence started with our cyber division, but now we’re expanding it into our specialty division so that we really are closer to the business than we have been. We’re also strongly committed to our online product, NAS Online, which is
“We’re spending a substantial amount of time looking at enterprise risks. Right now, cyber liability is the key exposure being underwritten by enterprise risk departments” to prove their value,” he says. “A few years ago, there was a standard commission for whoever was sitting at some place in the chain. That’s opened up.” So how is NAS responding to those changes? “We’re working with our production sources to develop in-house facilities for them,” Robin says. “For example, in our reinsurance division, we have reinsurance intermediaries who produce a substantial amount of ceded reinsurance into NAS, so we’ve worked with their London counterparts to place the business into Lloyd’s. So now, they’re involved in two steps in the chain rather than one, and I think by having these in-house facilities, it gets us greater attention on the corporate level. And so far, they’ve proven successful. “On top of that, we’re investing in our systems and people to make sure that we continue to be nimble enough to pursue
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a distribution model for all of our products that makes it very efficient.” NAS will also continue looking at new products. “We’re spending a substantial amount of time looking at enterprise risks,” Robin says. “Right now, cyber liability is the key exposure being underwritten by enterprise risk departments or being produced by those same brokers. “But there are other products involved such as product recall or IP products [and] reputation harm, and we’re spending a lot of time looking at those because we think that there’s a future there. There’s got to be some supply chain products that will be developed over the next decade that are responsive to just-in-time inventories. We’ve seen some claims in the marketplace that would legitimize products that would prevent some of those claims, or at least alleviate some of them.”
NAS INSURANCE BY THE NUMBERS
8
Number of team members at NAS Insurance in 1994
136
Number of employees NAS Insurance had as of the company’s 40th anniversary
40 Number of years in business NAS celebrated on September 1, 2015
2009
Year when Richard Robin became CEO of NAS Insurance
91436
ZIP code of Encino, California, where NAS Insurance is headquartered
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90 Since 1926, the AAMGA has empowered a diverse network of underwriting insurance specialists and improved access to worldwide insurance markets. Networking, Education & Advocacy for the Global Specialty Distribution Marketplace
www.aamga.org
EXPANDING GLOBALLY RESPONDING LOCALLY www.ibamag.com
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Exceptional ExceptionalPartnerships. Partnerships. Extraordinary ExtraordinarySolutions. Solutions. NotNot many many companies companies cancan boast boast of aofbusiness a business built built on on a foundation a foundation of partnership. of partnership. WeWe can. can. Whether Whether it’s it’s working working with with ourour Agents’ Agents’ Advisory Advisory Board Board or collaborating or collaborating with with ourour agents, agents, brokers, brokers, andand program program managers, managers, thethe relationships relationships we’ve we’ve fostered fostered have have fueled fueled ourour growth growth andand helped helped us us to become to become a leading a leading excess excess andand surplus surplus carrier. carrier. WeWe offer offer a collection a collection of solutions of solutions unrivaled unrivaled in the in the marketplace, marketplace, andand pride pride ourselves ourselves on on ourour strength strength andand expertise. expertise. We’re We’re reaching reaching higher higher to grow to grow profitably profitably andand take take ourour mutual mutual success success to the to the next next level. level.
E&S/Specialty E&S/Specialty nationwideexcessandsurplus.com nationwideexcessandsurplus.com A.M. A.M. Best Best rating rating of A+ of A+ (Superior) (Superior) FSC FSC XVXV Fortune Fortune 100100 company company
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Agents’ Agents’ Advisory Advisory Board Board (Standing, (Standing, fromfrom left):left): WestWest McAdams, McAdams, Southern Southern CrossCross Underwriters; Underwriters; Jim Roe, Jim Roe, Arlington/Roe Arlington/Roe & Company; & Company; BrettBrett Weigers, Weigers, Colonial Colonial General General Insurance Insurance Agency, Agency, FrankFrank Powell, Powell, FTP, FTP, Inc.; John Inc.; John Wood, Wood, Specialty Specialty Risk Risk Associates; Associates; David David Nelson, Nelson, Senior Senior Vice Vice President, President, Nationwide, Nationwide, E&S/Specialty, E&S/Specialty, Contract Contract Underwriting; Underwriting; Deb Deb Murphy, Murphy, Boston Boston Insurance Insurance Specialists; Specialists; Bob McGrew, Bob McGrew, Hull & Hull Company; & Company; ChrisChris Peterson, Peterson, Chris-Leef Chris-Leef General General Agency Agency (Sitting, (Sitting, fromfrom left):left): KevinKevin Tromer, Tromer, MacNeill MacNeill Group; Group; Wes Wes Duesenberg, Duesenberg, Southern Southern Insurance Insurance Underwriters; Underwriters; Len LoVullo, Len LoVullo, LoVullo LoVullo Associates; Associates; Tom Tom Clark,Clark, President, President, Nationwide Nationwide E&S/Specialty; E&S/Specialty; Tom Tom Rogan, Rogan, TBR TBR Consultants, Consultants, AAB AAB Permanent Permanent Secretary Secretary
Nationwide Nationwide and the andNationwide the Nationwide N andNEagle and Eagle are service are service marksmarks of Nationwide of Nationwide Mutual Mutual Insurance Insurance Company. Company. ©2016 ©2016 Nationwide Nationwide . .
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FEATURES
COVER STORY: FIVE-STAR MGAs
MGAs Producers share what they love – and what they hate – about the current state of MGAs FOR THOSE of us in the managing general agents’ distribution network, this has been a year of continued opportunity and growth – in terms of size, sophistication and specialty in the respective lines of business delegated to us by the markets we represent. The composition and mission of today’s MGAs, program administrators and managers, brokers, aggregators, and managing general underwriters are anything but ‘general’ anymore. The culture and expectations of the domestic and international markets are higher than ever. A specialty/ wholesale underwriting professional needs to be up-todate on industry changes, forms, manuscript wordings, regulations, market solvency and the data that under-
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lies every transaction. And we are. You can’t be focused on underwriting integrity and expertise unless you have the tools and resources at hand to work with your markets and retail producers in binding risks from Main Street to Lime Street. If your goal is to maintain relevancy and advance a sustainable enterprise, you need to respond locally – while constantly looking for opportunities to expand in the global distribution marketplace. The results of Insurance Business America’s annual MGA survey underscore the validity and success of those efforts. This is another year in which we have seen the relationship between MGA underwriting insurance specialists and their retail producers become
WHAT ARE PRODUCERS LOOKING FOR MOST FROM THEIR MGA?
HOW WELL ARE MGAs PERFORMING, ON AVERAGE?
Underwriting responsiveness/turnaround time
Underwriting responsiveness/turnaround time
9.1 Claim responsiveness/turnaround time
8.54 Premium pricing
8.42 Range of carriers
8.4 MGA reputation
8.16 Automation
7.32 Marketing support
7.16
stronger and mutually beneficial. The results show the access we provide to the broad array of domestic and international markets with quality products and services, competitive premium pricing, and responsiveness, all of which are not only improving, but also lie at the core of every trusted relationship. As in every business partnership, there is always room for improvement. Advancements in automation, new thinking on how to actuarially price and underwrite emerging risks, attracting young professionals coming into the industry, and retaining the top performers in our ranks – these are issues we all face. However, the most important issue is that we continue communicating on these areas and thereby foster the trusted relationships integral to binding common and specialty risks. The AAMGA has championed these values and commitments for more than 90 years. And we will continue doing those things that bring value to our retail producers and markets. Our members have under-
8.48 Claim responsiveness/turnaround time
8.02 Premium pricing
8.58 Range of carriers
8.48 MGA reputation
8.74 Automation
7.22 Marketing support
7.42
written more than $30 billion in annual premium in the last underwriting year, and have operations in all 50 states, all Canadian provinces, across the United Kingdom, Europe, Australia and New Zealand. And we are continuing to afford the unique tools and resources of networking, education and advocacy to specialty underwriters around the world. MGAs and program professionals are listening and constantly refining the value proposition they offer to those who depend upon us. The reason is simple: Bringing continuity to the MGA and retail insurance segment takes an emboldened partnership that empowers a diverse network of underwriting insurance specialists and improves access to worldwide insurance markets, now and for future generations. That is what we do.
Roger Ware Jr., ARM President American Association of Managing General Agents www.ibamag.com
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FEATURES
COVER STORY: FIVE-STAR MGAs WHICH MGAS EARNED FIVE-STAR RATINGS? COMPANY NAME
MGA REPUTATION
PRICING
RANGE OF CARRIERS
UNDERWRITING RESPONSIVENESS/ TURNAROUND TIME
CLAIM RESPONSIVENESS/ TURNAROUND TIME
AUTOMATION
MARKETING SUPPORT
All Risks, Ltd. AmWINS Group, Inc. Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Bass Underwriters Berkley Specialty Underwriting Managers Burns & Wilcox Cochrane & Company Commercial Insurance Underwriters, Inc. (CIU) CRC Insurance Services, Inc. Donald Gaddis Co. Genesee General Hull & Company, Inc. J.M. Wilson Corp. Johnson & Johnson, Inc. Midwestern Insurance Alliance Monarch E&S Insurance Services NIF Group NSM Insurance Group RIC Insurance General Agency, Inc. Risk Placement Services S&H Underwriters, Inc. SeaCoast Underwriters Southern Cross Underwriters (SCU) Swett & Crawford TAPCO Underwriters U.S. Risk Insurance Group, Inc. USG Insurance Services Worldwide Facilities, LLC
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MGAs have come a long way in the last decade, from playing a minor role in the insurance industry to becoming a vital part of the business. But what advantages do MGAs offer individual agents – and how well are they performing? IBA asked thousands of producers to rate the importance of key aspects they look for in MGAs, including premium pricing, underwriting turnaround and responsiveness, market access, and more. We also asked producers to rate the performance of their MGAs and provide specific details about how MGAs could improve their services and offerings. Producers also rated program managers,
“Responsiveness and turnaround time on quotes are the most important aspects of an MGA”
HAS MGA PERFORMANCE CHANGED? In a bit of welcome news, survey respondents rated their MGAs more highly across every single metric this year than they did in 2015. In several cases, the improvement was dramatic. 10 9 8 7 6 5 4 3 2 1 0
8.74
8.58
8.48
8.48
8.02 7.63
7.05
7.42
7.83
6.89
Underwriting Claim Premium responsiveness/ responsiveness/ pricing turnaround time turnaround time 2015
Range of carriers
MGA reputation
7.42
7.22 6.82
Automation
6.17
Marketing support
2016
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Voted a 5 Star MGA by IBA Readership
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FEATURES
COVER STORY: FIVE-STAR MGAs FIVE-STAR MGA REGIONS & SPECIALTIES COMPANY NAME
NORTHEAST
SOUTHEAST
MIDWEST
SOUTH
WEST
TOP SPECIALTIES
All Risks, Ltd.
Contractors, restaurants/bars/taverns, special events, habitational, vacant buildings/land
AmWINS Group, Inc.
USL&H worker's coverage, public entities, waste haulers, long-term care facilities, woodworking plants and operations
Appalachian Underwriters, Inc.
Workers' comp, contractor’s general liability, garage
Arlington/Roe & Co.
Commercial, professional & medical liability, transportation, workers’ comp, aviation
Atlantic Specialty Lines
Coastal properties, habitational, vacant buildings, general liability, marine
Bass Underwriters
(only OH & MI)
(except NM)
(no AK or HI)
Commercial property, general liability, garage/transportation
Berkley Specialty Underwriting Managers
Entertainment, sports, environmental
Burns & Wilcox
Property, casualty, professional & management liability, cyber, transportation
Cochrane & Company
+ Alaska
Contractors, trucking, security & patrol agencies, inspection/appraisal, apartments
Commercial Insurance Underwriters, Inc. (CIU)
Contractors, habitational, products, lessor’s risk, homeowners/dwellings
CRC Insurance Services, Inc.
Transportation (hired/non-hired) , healthcare, cyber
Donald Gaddis Co.
Hard-to-place commercial property & casualty, professional liability, D&O, liquor liability (IL only)
Genesee General
Transportation, garage, general liability, environmental, professional liability
Hull & Company, Inc.
Commercial lines, professional liability, marine
J.M. Wilson Corp.
Commercial transportation, professional liability, commercial property & casualty, surety
Johnson & Johnson, Inc.
Coastal commercial property coverage, construction, professional liability, commercial transportation, manufacturing
Midwestern Insurance Alliance
Workers’ comp (national, trucking businesses, wood products, consumer recycling)
Monarch E&S Insurance Services
Contractors, vacant buildings, builder’s risk, large property schedules, LRO
NIF Group
Nonprofits and social services, construction, habitational, liquor liability, commercial lessor’s risk
NSM Insurance Group
Social services and nonprofits, behavioral healthcare, professional liability, sports & wellness, breweries & wineries
RIC Insurance General Agency, Inc.
Workers' comp, general & product liability, property, nonprofits, lessor’s risk
Risk Placement Services
Transportation, tech & cyber, executive lines, healthcare
S&H Underwriters, Inc. SeaCoast Underwriters
High-value commercial, hospitality, garage, contractors, habitational
+ Mid-Atlantic + NJ, PA
Excess flood, garage, monoline gas, property & casualty
Southern Cross Underwriters (SCU)
Coastal property, convenience stores, restaurants, habitational, contractors
Swett & Crawford
Healthcare, accident/healthcare, transportation, professional liability, industrial
TAPCO Underwriters
Contractors, general liability, property, professional liability, product liability
U.S. Risk Insurance Group, Inc.
Healthcare, professional liability, staffing services, energy/oil/gas, entertainment
USG Insurance Services
Contractors, habitational, hospitality, garage, medical/healthcare
Worldwide Facilities, LLC
General liability, property, inland marine, garage, auto
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ALL-STAR MGAs These seven MGAs got top marks from producers across the board, earning a five-star rating in every category. Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Johnson & Johnson, Inc. Midwestern Insurance Alliance Risk Placement Services Worldwide Facilities, LLC who we’ve included in the results since they serve much the same function for producers. The results of the survey were encouraging. MGAs rated very well overall in most categories – and signifi-
MGAs rated very well in most categories – and significantly improved their performance from last year cantly improved their performance from last year. On average, in fact, producers rated their MGAs significantly higher than last year in every single category. But even with impressive overall scores, some MGAs rose above the rest. We’ve awarded these companies – the ones survey respondents said excelled – five-star status. Thirty companies earned five-star status in one or more of the seven categories in which they were rated – and seven MGAs earned five-star status across the board.
Paid Profile
Since 1930, Johnson & Johnson has built a strong business foundation by establishing long-term relationships with independent agents and insurance carriers. Johnson & Johnson is committed to providing the very best customer service in the industry. We do this by ensuring that our underwriting, sales, and support teams have the latest technology and the best training. Personal Lines: Our customers have many convenient ways to place business with J&J; quoting online, quoting over the phone, and sending submissions via fax and email. J&J has products for High Value Homes, Habitation, Manufactured Homes, Excess and Primary Flood, and Marine & Recreation. Commercial Lines: J&J has products for Property & Casualty, Professional, Work Comp, Transportation and Brokerage. Our customers have many convenient ways to place business with J&J; quoting online, quoting over the phone and sending submissions via fax and email. Premium Financing: Johnson & Johnson Preferred Financing (JJPF) finances all policies, not just J&J policies. In addition, we offer multiple payment options and a convenient, live online chat utility. Our online premium financing software is an “easy to use” solution for our partner agencies. Peter M. Burrous • Chief Marketing Officer • 800-487-7565 ext. 3014 • Peter.Burrous@jjins.com
www.ibamag.com
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FEATURES
COVER STORY: FIVE-STAR MGAs UNDERWRITING RESPONSIVENESS/TURNAROUND TIME FIVE-STAR MGAs AmWINS Group, Inc. Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Bass Underwriters Berkley Specialty Underwriting Mangers Burns & Wilcox Commercial Insurance Underwriters, Inc. (CIU) CRC Insurance Services, Inc. Donald Gaddis Co. Genesee General Hull & Company, Inc. Johnson & Johnson, Inc. Midwestern Insurance Alliance Monarch E&S Insurance Services NIF Group NSM Insurance Group RIC Insurance General Agency, Inc. Risk Placement Services S&H Underwriters, Inc. SeaCoast Underwriters Swett & Crawford TAPCO Underwriters U.S. Risk Insurance Group, Inc. USG Insurance Services Worldwide Facilities, LLC As they did last year, survey respondents rated underwriting responsiveness and turnaround time as far and away the most important thing to look for in an MGA. “Responsiveness and turnaround time on quotes are the most important aspects,” wrote one producer. Overall, producers rated the importance of underwriting responsiveness and turnaround time at 9.1 out of a possible 10. However, MGA performance in the category didn’t quite match up. Underwriting responsiveness and turnaround time tied with range of carriers as the third best-performing category for MGAs. On the bright side, MGAs did drastically improve on their rather lackluster score from last year. In 2015, producers rated their MGAs
Importance to producers MGA performance
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3rd
1st
(tie)
PRODUCERS SPEAK OUT We asked producers how MGAs could improve their service. Here’s what they had to say: They don’t answer emails or return messages for days. They could improve by answering the phone and returning email messages, at least in the same day or within 24 hours Responsiveness and turnaround time are key More communication of new products Most MGAs only care about the sale, and once the policy is sold, they disappear. Far too many times, I have had to second- and third-request endorsements or quotes – and sometimes more My top two [MGAs] are fine. The third needs to communicate much better. Don’t just take a submission and log it in and forget about me. This has happened too many times; therefore, I do not use them if I have other choices Treat agents like customers, not numbers In this business, timing is very important. We are in the service business. We have a client who wants a quote, and we need it now; we need it 10 minutes ago More carriers, faster quotes, more competitive premiums Train underwriters better in both technical knowledge and customer service
“MGAs have improved their response time tremendously in the past two years. This is a must for getting renewals and quotes” at 7.05 out of a possible 10 on underwriting performance. This year, that score shot up to an 8.48. And 26 MGAs got top marks in the category – second only to reputation. Indeed, individual survey respondents noted the improvement. “MGAs have improved their response time tremendously in the past two years,” wrote one. “This is a must for getting renewals and quotes.”
OUR TEAM IS THERE FROM THE START TO THE FINISH NSM Insurance Group Comprehensive Insurance Coverage for: Social Services I Addiction Treatment I Professional Liability Staffing Firms I Workers' Compensation I Collectible Vehicles Coastal Condo Associations I Breweries and Wineries Sports and Wellness I Specialty Aviation
888-235-3525 www.nsminc.com
FEATURES
COVER STORY: FIVE-STAR MGAs PREMIUM PRICING FIVE-STAR MGAs AmWINS Group, Inc. Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Bass Underwriters Berkley Specialty Underwriting Managers Burns & Wilcox Commercial Insurance Underwriters, Inc. (CIU) CRC Insurance Services, Inc. Donald Gaddis Co. Genesee General Hull & Company, Inc. Johnson & Johnson, Inc.
Midwestern Insurance Alliance Monarch E&S Insurance Services NIF Group NSM Insurance Group Risk Placement Services SeaCoast Underwriters Swett & Crawford TAPCO Underwriters U.S. Risk Insurance Group, Inc. USG Insurance Services Worldwide Facilities, LLC MGAs were a bit closer to producers’ expectations when it came to premium pricing. While producers felt it was a close third in importance behind underwriting and claim
responsiveness – rating it at 8.42 out of 10 – they felt that MGAs posted their second-best performance in this category. MGAs showed a decent improvement over last year’s performance, too, if not quite as dramatic as the improvements in other categories. In 2015, producers rated MGAs’ pricing performance at 7.63 out of 10. This year, that score has risen to 8.58, and an impressive 24 MGAs achieved five-star status in the category.
Importance to producers MGA performance
3rd
2nd
Paid Profile
LEADER IN Industry-specific
INSURANCE
NSM Insurance Group is a full service insurance facility that manages industry-specific insurance programs for 13 niche industries. As one of the premier program administrators in the U.S., NSM has been providing expert underwriting and risk management services for niche markets and select lines of business for over 25 years.
NSM Insurance Group has continued to expand through organic growth, new program development and acquisitions over the past 15 years. NSM currently has niche insurance programs serving the following industries: social services and behavioral health; education; CAT driven property; collector cars; workers’ compensation and staffing; transportation and aviation; sports and fitness; breweries and wineries; specialty construction and professional liability for architects and engineers. NSM has strong, longstanding relationships with some of the top carriers in the industry, and carefully selects a carrier partner for each program. Our underwriters are experts in the industries they serve and they serve as trusted partners and advisors for their partner agents. Our premier products, comprehensive coverage, and competitive pricing coupled with our superior customer service result in a client retention rate over 90%. Today, NSM Insurance Group has more than $500 million in annual premium and employs more than 300 professionals in insurance, IT, marketing, accounting and operations. NSM’s home office remains in Conshohocken, PA and it has established nine other offices 888-235-3525 that are strategically located across the United States to serve the info@nsminc.com company’s geographically diverse agent base. www.nsminc.com
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RANGE OF CARRIERS FIVE-STAR MGAs All Risks, Ltd. Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Bass Underwriters Berkley Specialty Underwriting Managers Burns & Wilcox Cochrane & Company Commercial Insurance Underwriters Inc. (CIU) CRC Insurance Services, Inc. Genesee General Johnson & Johnson, Inc. Midwestern Insurance Alliance
NSM Insurance Group RIC Insurance General Agency, Inc. Risk Placement Services S&H Underwriters, Inc. Southern Cross Underwriters TAPCO Underwriters U.S. Risk Insurance Group, Inc. USG Insurance Services Worldwide Facilities, LLC While there were aspects of MGA performance producers felt were more important, they still felt that access to a broad range of carriers was a fairly vital benefit of MGAs, rating its importance at 8.4 out of 10.
MGAs earned the same score – 8.48 – in this category as they did for underwriting responsiveness. Again, producers seem much happier with MGAs’ performance in this area this year. In 2015, survey respondents’ estimation of MGAs’ range of carriers was more than a full point lower; producers scored MGAs at just 7.42 out of 10 last year in this category. Producers’ satisfaction with MGAs was also reflected in the 22 MGAs that earned five-star status for their wide access to carriers.
Importance to producers MGA performance
3rd
4th
(tie)
Paid Profile
YOUR INSURANCE WHOLESALER OF CHOICE Risk Placement Services (RPS) is a national wholesale insurance broker with a primary focus on National Brokerage, MGA/Binding, Programs and Standard Lines. RPS collaborates with the most respected providers in the industry to offer customized solutions that meet the business needs of independent retail agents and their customers. We pride ourselves on partnering with independent retail agents on an individual basis to design, negotiate and tailor risks and customized solutions each and every time. Our exceptional service and support does not end after binding coverage. We continue to provide the resources you would expect from a leading national wholesaler, as well as regional knowledge and expertise. A History of Growth RPS opened for business in May 1997 with four employees. Since then RPS has completed dozens of acquisitions across the United States, and acquired top talent in all aspects of insurance. Today, our more than 1,300 associates stand ready to be your strategic partner in marketing new and renewal business. We possess the local knowledge, regional presence and national reach to provide the best options to your clients. RPS places over $3.2 billion of premium annually, so we know the best markets and coverage terms, while adhering to the highest professional and service standards. Our focus is on smart and strategic growth, as well as the needs of our retail partners, in order to remain “your wholesaler of choice”. Contact one of our practice leaders below to learn how RPS can help grow your business! Curtis Anderson (MGA/Binding) – Curtis_Anderson@rpsins.com, 480.860.5547 John Head (Wholesale Brokerage) – John_Head@rpsins.com, 770.829.3370 Scott Treiber (Standard Lines) – Scott_Treiber@rpsins.com, 516.622.2550 Bobby Owens (Programs) – Bobby_Owens@rpsins.com, 859.685.6200
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FEATURES
COVER STORY: FIVE-STAR MGAs CLAIM RESPONSIVENESS/TURNAROUND TIME FIVE-STAR MGAs All Risks, Ltd. AmWINS Group, Inc. Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Berkley Specialty Underwriting Managers Cochrane & Company Commercial Insurance Underwriters, Inc. (CIU) CRC Insurance Services, Inc. Donald Gaddis Co. Genesee General J.M. Wilson Corp. Johnson & Johnson, Inc. Midwestern Insurance Alliance Monarch E&S Insurance Services NSM Insurance Group Risk Placement Services S&H Underwriters, Inc. SeaCoast Underwriters TAPCO Underwriters U.S. Risk Insurance Group, Inc. USG Insurance Services Worldwide Facilities, LLC
Importance to producers MGA performance
4th
2nd
Claim responsiveness was another crucial factor for producers when choosing an MGA. As they did last year, survey respondents rated the importance of claim responsiveness and turnaround time as the second most important factor in MGA performance, giving it a score of 8.54 out of 10. MGAs fared pretty well when it came to claim responsiveness. It was their fourth-best performance, up one slot from last year. And in terms of raw numbers, MGAs once again saw a dramatic improvement from 2015. Last year, producers rated MGAs at a paltry 6.89
“They could improve their case tracking and response time to make my life easier. However, they do a great job for the most part” when it came to claim responsiveness – not even a ‘C’ grade. This year, producers were apparently far more impressed with MGA performance, giving their MGAs an aggregate score of 8.02 out of 10. And 23 MGAs earned five-star status in the category. That’s not to say there’s no room for improvement. Even producers who were quite happy with their MGA’s performance admitted that claim responsiveness could be better. “Everything is great, but they could improve their case tracking and response time to make my life easier,” wrote one respondent. “However, they do a great job for the most part.”
Paid Profile
USG Insurance Services, Inc. is a national wholesaler and managing general agent (MGA) celebrating 15 years in the insurance industry. USG continues to expand operation with 19 offices across the country, access to 260+ brokerage and 16 MGA markets; writing in all 50 states. USG believes that the success of the company ultimately lies within the employees and is completely dedicated to building an environment that allows them to maximize their potential. Continually, USG actively seeks people who demonstrate insight, creativity, motivation, and integrity. 34
www.ibamag.com
EXPANSION & FUTURE: • Independently Owned Wholesaler, Outpacing Average Industry Growth Metrics • Development of New Offices, Programs, and Products • Continuously Looking for Talented Individuals to Join the Team
WHY USG: • Known for Innovative Solutions for Hard-To-Place Accounts • Cutting Edge, State-of-the-Art Proprietary Technology • Maximize Your Potential within the Industry of Change, Challenge, and Competition
COMMITMENT IS OUR MIDDLE NAME Burns & Wilcox would like to thank all of our clients for awarding us 5 Stars in the categories of: MGA Reputation, Claims Responsiveness, Pricing, Automation, Range of Carriers, Marketing Support, and Underwriting Responsiveness.
burnsandwilcox.com
www.ibamag.com Commercial | Professional | Personal | Brokerage | Binding | Risk Management Services
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FEATURES
COVER STORY: FIVE-STAR MGAs MGA REPUTATION FIVE-STAR MGAs All Risks, Ltd. AmWINS Group, Inc. Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Bass Underwriters Berkley Specialty Underwriting Managers Burns & Wilcox Cochrane & Company Commercial Insurance Underwriters, Inc. (CIU) CRC Insurance Services, Inc. Donald Gaddis Co. Genesee General
J.M. Wilson Corp. Johnson & Johnson, Inc. Midwestern Insurance Alliance Monarch E&S Insurance Services NIF Group NSM Insurance Group RIC Insurance General Agency, Inc. Risk Placement Services S&H Underwriters, Inc. SeaCoast Underwriters TAPCO Underwriters U.S. Risk Insurance Group, Inc. USG Insurance Services Worldwide Facilities, LLC
MGA reputation was important to producers – they scored it at 8.16 out of 10 – but they didn’t consider it as vital as other benefits. Indeed, producers didn’t seem to think MGA reputation was as important as they did last year, when they rated its importance at 8.35. However, MGAs performed better in this category than in any other. More MGAs earned five-star ratings for reputation than for any other category – a whopping 27 took top marks. Overall, MGAs earned a score of 8.74 out of 10 in the category, besting their 2015 score of 7.83.
Importance to producers MGA performance
5th
1st
Paid Profile
THE DEPTH AND BREADTH OF EXPERIENCE TO DELIVER THE RIGHT SOLUTIONS RIGHT AWAY. Tens of thousands of companies are impacted by the global power of Burns & Wilcox. Our wideranging and comprehensive solutions serve retail insurance brokers and agents of all sizes, from the large multinationals to the more than 30,000 independent brokers and agents worldwide. Fueled by its complete freedom and independence, Burns & Wilcox is privately held with no ties to Wall Street, private equity or affiliations with retail
operations. Burns & Wilcox has a standard of service, depth of market relationships and outstanding talent that are unsurpassed in the specialty insurance sector. Burns & Wilcox Brokerage has a team of experts exclusively focused on large wholesale brokerage. This team delivers comprehensive solutions founded in quality outcomes, precision, agility and knowledgebased results.
Clients and partners continue to trust in the Burns & Wilcox commitment to the wholesale business. They seek the company’s global expertise and rely on the team’s counsel and unmatched vertical depth. In turn, Burns & Wilcox is tenacious about delivering exemplary results.
burnsandwilcox.com
Commercial | Professional | Personal | Brokerage | Binding | Risk Management Services
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A NAME RECOGNIZED FOR EXCELLENCE At Risk Placement Services (RPS), we are proud to have earned the 5-Star/Excellence recognition from our customers. It’s a testament to our commitment to understanding the intimate needs of you, your customers and providing access to the top markets and producers while offering customized solutions designed, negotiated, and tailored to each unique risk. It’s a 5-Star commitment our customers across the country value! To learn more how you can access 5-Star products/services, call 866-595-8413 or email Contact_Us@RPSins.com www.RPSins.com www.ibamag.com
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FEATURES
COVER STORY: FIVE-STAR MGAs AUTOMATION
MARKETING SUPPORT
FIVE-STAR MGAs Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Donald Gaddis Co. J.M. Wilson Corp. Johnson & Johnson, Inc. Midwestern Insurance Alliance Monarch E&S Insurance Services NIF Group NSM Insurance Group Risk Placement Services TAPCO Underwriters USG Insurance Services Worldwide Facilities, LLC
FIVE-STAR MGAs Appalachian Underwriters, Inc. Arlington/Roe & Co. Atlantic Specialty Lines Donald Gaddis Co. Genesee General Hull & Company, Inc. Johnson & Johnson, Inc. Midwestern Insurance Alliance Monarch E&S Insurance Services RIC Insurance General Agency, Inc. Risk Placement Services S&H Underwriters, Inc. U.S. Risk Insurance Group, Inc. Worldwide Facilities, LLC
While producers felt that an MGA’s automation capability was fairly important, it just wasn’t on their radar as much as most other categories. Producers rated its importance at 7.32 out of 10 this year – a significant slide from last year, when they rated automation’s importance at 8 out of 10.
“Staying up with the latest technologies and clientfacing products is vital” MGAs performed decently in this category, if not as impressively as they did in others – producers rated MGAs’ automation capabilities at 7.22 out of 10. Still, 14 MGAs received five-star status for their automation, and the overall score is a marked improvement over MGAs’ 2015 performance of just 6.82 out of 10. Despite the improvement over last year, however, some producers still see room to grow in this category. “Staying up with the latest technologies and client-facing products” is vital, one survey respondent insisted.
Importance to producers MGA performance
38
www.ibamag.com
6th
6th
Producers were somewhat lukewarm about how much of a role marketing support plays in choosing an MGA. Last year, survey respondents rated the importance of marketing support at 7.58 out of 10. This year, that number slid to 7.16. Still, MGAs performed fairly well here. Producers rated their performance in the category at 7.42 out of 10 – slightly above their performance in automation. Producer sentiment about MGA marketing support has also seen a drastic improvement over last year, when MGAs earned 6.17 – essentially a ‘D’ grade – in the category. And once again, producers felt that more than a dozen MGAs deserved top marks in the category, awarding 14 MGAs five-star status.
“Offer more sales and marketing training” Still, some producers said they would like more MGA support in this area. “Offer more sales and marketing training,” one respondent requested.
Importance to producers MGA performance
5th
7th
Insurance Business America is looking for the industry’s best young agents and brokers aged 40 or under. Tell us why they deserve to be recognized.
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FEATURES
OIL & GAS INSURANCE
IN THE PIPELINE Reviewing the challenges that have recently impacted the oil & gas industry and contemplating what’s perhaps yet to come OVER THE course of 2014, oil prices dropped from approximately $90 to $100 per barrel to around $60 per barrel. And then last year, as detailed in Deloitte’s 2016 Outlook on Oil and Gas, prices continued to trend lower, moving down toward the $40-a-barrel mark in summer and then dropping below $40 per barrel in December. “The oil & gas industry has been in decline
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due to the reduced price of oil,” says Michael Hill of Hill Program Managers, which serves a segment of the market primarily made up of small and medium-sized firms that provide service to the major producers. “This has caused many small oil & gas operations to go out of business. Operations that have been able to stay in business are experiencing declines in gross revenue across the board.”
According to the Deloitte report, upstream oil & gas companies faced a 50% drop in revenues in less than a year. “The impact on insurers and brokers has been a series of non-renewals and cancellations,” Hill says. “Industries under stress react by reducing expenditures, laying off employees and pushing suppliers for better pricing. The brokers and insurers are
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Beacon Hill_January 2016sized:Layout 1
Providing quality
Environmental Insurance
from trusted carriers for over 25 years
tion claims and equipment and property claims frequently increase in situations like this.” According to Deloitte, 2015 saw the exploration and production sector cut capital expenditure and defer major capital projects while reducing operating expenditures and headcount. If the deterioration of premium levels continues, in tandem with no withdrawal of capacity, how profitable will carriers’ oil & gas portfolios remain? Will we see some insurers exit the space?
The environmental aspect
suppliers, and they are being pushed for reduced premiums. For the brokers, this results in reduced brokerage income, and for the insurers, this may result in higher loss ratios resulting from reduced rates.
Talking about developments on the regulatory front that will impact the space, Hill brings up the work currently being undertaken by the Environmental Protection Agency. Recently, the EPA began a formal process of collecting information from oil & gas companies to assist in the development of comprehensive regulations, aimed at reducing the industry’s methane emissions. According to the EPA, nearly 30% of methane emissions in the US come from oil production, as well as the production, processing, transmission and distribution of natural gas. The plans have been met with expressions of concern, particularly from the American Petroleum Institute. Those concerns have centered around the potential of the proposed reductions to reduce oil & gas activity in the US, which in turn has the potential to lead to more job losses and
“The price of oil is currently about $45 per barrel. My perception is that economic forces at work will not allow the industry to recover in 2016, and perhaps not in 2017”
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Michael Hill, Hill Program Managers “When an industry is under stress like the current oil and gas industry, insurers frequently see an increase in claims reporting,” Hill adds. “Workers’ compensa-
higher energy costs, and a possible greater reliance on foreign oil. Whatever shape the EPA’s proposed regulations ultimately take, this will obvi-
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1/14/2
FEATURES
OIL & GAS INSURANCE ously continue to be key regulatory activity that industry players will need to remain informed about. Additionally, according to a US Geological Survey report, studies suggest that the increase in the frequency of earthquakes in certain parts of the country is potentially linked to fracking-related activities. “Carriers we trade with all seem to be looking at how each state will rule on seismic activity ‘linked’ to the production of hydrocarbons,” says Thomas Blanquez of Quirk & Company. “Oklahoma has led the way in respects to this topic, and there seem to be rumblings that there are other states to follow. The impact of this will also carry over to the disposal of produced water and owners of wells who allow others to dispose their produced water at these sites.”
Tech and cyber exposures Deloitte reports that, throughout last year, the oil & gas industry continued to employ new technologies and innovation, and that this was a successful vehicle for cost-cutting. One technology generating considerable conversation – and already being used – in the oil & gas space is the unmanned aerial vehicle (more commonly referred to as a drone). Drones today are commer-
OIL PRICES PER BARREL: A TIMELINE
April 15, 2016 $40.36
March 4, 2016 $35.92
February 12, 2016 $29.44
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December 4, 2015 $39.97
November 6, 2015 $44.29
October 2, 2015 $45.54 Personal Lines l Commercial Lines l Agri-business
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cially applied in an increasingly wide range of industries, for purposes from counting fruit on trees to tracking Malaria-ridden monkeys in Africa by the heat of their heads. Use within the oil & gas industry has concentrated on the inspection and monitoring of oil & gas facilities and infrastructure. In place of human surveillance, high-quality images and videos of plants, platforms and pipelines can safely and quickly be collected by drones. The key benefits include safety and speed, higher-quality inspections and cost savings. Of course, while new technologies can deliver a range of bene-
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fits, they can also bring their own issues and challenges. The energy industry has become increasingly reliant on GPS and networks that can be interrupted by natural disasters and are prone to cyber attacks. “The [oil & gas] industry in general has a heightened cyber risk due to the introduction of IP-enabled equipment,” Hill says. “The major companies have serious cybersecurity issues.” According to a report released earlier in the year by security vendor Tripwire, 82% of oil and gas industry respondents reported that their organizations experienced an increase in cyber attacks over the previous 12 months. Additionally, 53% of respondents stated that the rate of cyber attacks had increased between 50% and 100% during that same period. Further, almost seven out of 10 respondents indicated a lack of confidence in their organizations to detect and stop attacks. “I think certain areas of the space may be more susceptible to [cyber threats], such as midstream asset owners, refiners and processing plants, in regard to terrorist attacks, foreign and domestic,” Blanquez says. As connectivity continues to increase in the oil & gas businesses, cyber attacks will pose an increasingly significant threat, and the need for strong cyber insurance solutions will become even greater. Damage from energy-related cyber attacks can include property damage, pollution, loss of confidential information and business interruption. Therefore, the need for oil & gas companies to have appropriate cyber insurance protection is crucial.
disposal wells create some interesting hazards, including frequent earthquakes. Risk management is a big job in this industry.”
Times ahead Looking ahead, Hill isn’t very optimistic in his outlook for the market. “The price of oil is currently about $45 per barrel. My perception is that economic forces at work will not allow the industry to recover in 2016, and perhaps not in 2017. As a result, we will continue to see cancellations of policies put in force over the last several months, and about 25% of our renewals will not purchase coverage this year. The firms that continue in business are going to have much lower gross revenue than in previous years, so premiums will continue to be depressed. “Interestingly, the oil & gas industry is swimming in debt, [with] overall borrowing of something like $2.5 trillion. This debt actually works against the price of oil by causing over-indebted companies to pump more oil in an effort to service their loans. If the price of oil continues to be depressed for an extended period of time, we may start to see an increasing rate of defaults and more pain in the industry in general.”
Opportunities for producers Given the soft rates in the oil & gas marketplace, one might assume that companies would take the opportunity to purchase a wider variety of insurance products and take additional risk off their balance sheets. But according to a recent Marsh Insights article, oil & gas organizations are not yet taking advantage of lower prices in a benign market to secure greater protection in uncertain times. Does that potentially provide an opportunity for brokers in the space? Taking the chance to educate their clients on the benefits of seizing on the soft rates to transfer more risk off their balance sheets could represent a valuable opportunity for brokers to demonstrate their value in the chain. On top of those opportunities, Hill cites a number of workplace concerns that potentially afford brokers a chance to assist on the risk management side. “The oil & gas industry presents some real health and safety concerns for employees and subcontractors,” he says. “The work exposes these people to struck-by, caught-in and caught-between hazards. Explosion and fire hazards are always present. Falls from equipment are not uncommon. There are confined space concerns. And the work also presents chemical exposures. The industry has a unique exposure to hydrogen sulphide [H2S], or what is sometimes called ‘sour gas.’ This is a very serious hazard that can result in death. “Additionally,” he continues, “workers may be exposed to silica during hydraulic fracturing. The industry uses a lot of water, and water
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FEATURES
AGENCY INSIGHT
Lineage, liability and lions Insuring everything from personal wildlife museums to small businesses, Lechner & Stauffer succeeds as a generalist by going against the trend, according to agency principal John Kauffman IBA: Tell us a little about Lechner & Stauffer. How did it get its start? John Kauffman: Lechner & Stauffer is a family affair and is in its second generation. Don Lechner is my father-in-law – he started the business in 1956, and I have owned the agency now for about 12 years.
IBA: What role does specialization play at your agency? JK: We are definitely against the trends … as an agency, we have been very successful in being a generalist. Today, I can write an injection molding shop, this afternoon I can be writing a car dealership, and later I can write a shopping center. The nice thing about that is if you wrote only supermarkets, there is always going to be somebody that is better than you. If you write a book of business for supermarkets and somebody comes in with a program and they want to buy that book of business, it makes the agency vulnerable. What we have been able to do as generalists is write all classes of business, in all areas. We are writing from Philadelphia to Allentown, and that spread gives us tremendous security with the accounts that we have.
IBA: What are you focused on for the future? JK: Well, I don’t think commercial insurance is going to go away at all. The smaller
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commercial lines accounts – which we call the select business unit or small business unit – those accounts are probably going to go the way of homeowner’s and automobile insurance, that it is just a commodity. But the normal mid-sized commercial lines account, that person needs an independent agent, that person values an independent agent, and that is where we spend our time. The business has been fabulous for me, and my son just finished his freshman year at Lehigh University. Our goal is to have him take over the family business, and I am pretty confident that is going to happen. I wouldn’t be steering him in that direction if I didn’t think the future was just incredibly bright for the type of business [that we do].
IBA: What has been the agency’s secret to success? JK: We did something really unique a
number of years ago. I gave everyone a two-page list with every value that you can possibly think of. There were several hundred values listed on this sheet of paper – values such as honesty, hard work, family, spirituality and loyalty. One sheet was a page of stickers with the values, and the other page had a very small section on the top for ‘critically important values to you,’ then at the bottom it had ‘values that are not important to you at all,’ and in the middle it had ‘values that are somewhat important to you.’ We had every person in the agency take off the stickers and put them on the sheet according to where they would fit based on their personal values. I made a chart and charted out the common values that everybody had, and there were five values that were common for all of us: spirituality, family, financial security, loyalty and honesty. That has actually made our lives so much easier [in terms of ]
BIG GAME HUNTERS After a hunting trip in Tanzania, John Kauffman returned home with a lion he now proudly displays in his home. As a big game hunter, Kauffman is familiar with the personal value of hunting trophies. “I thought to myself, if there is a fire in my house, I’m getting my wife and child out first, but after them it’s the lion head,” he says. For the past 30 years, Lechner & Stuffer has insured trophy rooms all across the United States and is the insurance agency for Safari Club International, an organization made up of more than 50,000 big-game hunters. Kauffman says the unique aspect of the program is that in the event of a loss, it will pay the cost for the insured to go out to hunt a similar animal.
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FAST FACTS
Top 5 lines of coverage
Workers’ compensation
General liability
Auto
Property
“Hard work, honesty, passion and persistence are the keys to success. You put those things together, whether it is insurance or anything else, and you will be successful” From left: Dave Kauffman, Tim McCane, John Kauffman, Carol Kress and Cheryl Kauffman
running a business. We have a brochure we give to clients, and we will say to those clients, “Here are our values. Markets will change and economies will change, but our values will never change. So if our values don’t align with your values, we shouldn’t do business together. If they do, then you should consider working with Lechner & Stauffer.” We did that, and that was a tremendous thing for both our clients and our employees.
IBA: What is your advice for brokers
Umbrella
Year founded: 1956 Number of employees: 29 Headquarters/location: Pennsburg, PA
who are starting off in the industry? JK: Education is definitely the key to success in our business. The two things you need to do to be successful are education and creating a consistent flow of activity by guarding your pipeline [and] keeping that pipeline full. What I tell my children and each of the young men who work for me is that hard work, honesty, passion and persistence are the keys to success. You put those things together, whether it is insurance or anything else, and you will be successful.
Territory: 30 states 2015 revenue: $5 million+ Leadership team: John Kauffman, agency principal; David Kauffman, vice president; Carol Kress, vice president; Tim McCane, production manager; Cheryl Kauffman, office manager
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FEATURES
FARM AND RANCH INSURANCE
A shifting landscape What developments are currently impacting farm and ranch insurance? And what coverages are essential for farm and ranch operators? RIGHT NOW in the farm and ranch space, there’s much to keep up with. “Farm and ranch insurance is having to adapt to changing conditions as rapidly as ag producers themselves,” says Ken Patrick, assistant vice president of the agribusiness division of Great American Insurance Group. “It’s a very interesting time to be in the industry.” He says the pace of technological change is probably having as much impact as the technology itself. “Drones are often the most talkedabout technological change,” he says, “and their use is certainly expanding rapidly, but large ag producers have been embracing technological advances in many other areas as well, whether it’s semi or completely automated tractors and implements, to highly sophisticated animal husbandry techniques, to urban farm factories that produce customizablef lavor leafy greens in soil-less tubs. All of these advances create various coverage challenges.” Diana Trachier, farm and ranch department manager at South & Western General Agency, says that farm equipment also has become much more sophisticated in recent years. “Similar to automobiles, computer technolog y has been integrated into almost every aspect of the equipment’s operation,” she says. “This obviously has resulted in much higher insurable values carriers must consider when assessing overall exposures.”
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Environmental pressure Turning the topic to the environmental issues currently impacting farmers’ insurable exposures, Trachier says, “Those providing the food on our tables are under pressure from many different concerns. Governmental agencies, ranging from local county officials to the EPA, are seeking to enforce regulations on almost every aspect of farming and ranching. This could put pressure on carriers to defend exposures never intended to be covered or priced for in the typical farm package policy.” Patrick says that because the industry is experiencing more regulation all the time, there will be added costs as farmers comply.
“Governmental agencies… are seeking to enforce regulations on almost every aspect of farming and ranching. This could put pressure on carriers to defend exposures never intended to be covered or priced for in the typical farm package policy” Diana Trachier, South & Western General Agency “Unfortunately for many farmers, the market hasn’t absorbed these additional costs in the form of higher prices, and so this is just another factor that impacts the margins farmers are trying to achieve,” he says. “From an insurance perspective, this
additional environmental scrutiny does create the potential for increased liability exposures.” And, he adds, even the latest technology can’t aid farmers in overcoming some age-old challenges.
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“Despite the rapid adoption of sophisticated technology, farmers are still subject to the historic bane of farmers around the globe – the weather,” he says. “The increase in frequency of extreme weather events is having an impact on our industry, one which we probably haven’t fully realized or adapted to.”
Economic concerns The current economic climate is also presenting plenty of challenges for US farmers. “Commodity prices … continue to be depressed, which puts pressure on ag producers to look for savings wherever they can find them, which in turn puts downward pressure on insurance premiums,” Patrick says. “Given the challenges of current economic conditions, farmers often look to increase scale and efficiency in order to maintain revenue. “Because there’s all this pressure on revenue generation,” he continues, “many of our producers are also looking for ways to bring their product closer to market – vertical integration is happening everywhere as farmers are trying to take advantage of the higher price that finished/packaged goods bring. This, in turn, is creating additional product exposures for many producers, and there can often be a steep
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13/05/2016 5:07:30 AM
FEATURES
FARM AND RANCH INSURANCE learning curve when a producer starts to bring an ag product directly to market.” Despite increasing industrialization of the agricultural sector, Patrick thinks there remains a heavy reliance on farm labor. “We’re seeing signs that the future pool of farm laborers is likely shrinking. Lack of willing workers is going to impact a lot of producers, which in turn will put pressure on increasing automation.” Trachier says that, just as has been the case in other industries, farmers and ranchers have been affected by far-reaching regulations. “Compliance management now takes up significant resources in the agribusiness sector, and many farmers are reaching out for help,” she says. “Those insurance carriers
transfer is a critical issue when third parties are present at an insured’s location. Having proper hold harmless agreements with indemnification language along with certificates of insurance are essentials.” Patrick says he thinks farmers increasingly underestimate product exposure as well. “As many larger ag producers try to get more value for their efforts by bringing their products directly to consumers, all kinds of risk factors rise,” he says. “Putting your name on the label brings additional responsibilities that aren’t just tied to product safety – though that’s the biggest concern, as our ability to identify and locate pathogens within the food industry is growing all the time. “A labeled product also means having to deal directly with the general public,
“Farmers often underestimate the scope of a typical farm policy, not realizing that their entrepreneurial drive often creates new exposures that may or may not be contemplated in their farm policy” Ken Patrick, Great American Insurance Group and MGAs focused on the farm segment continue to assess how new regulations affect the exposures faced by farmers and ranchers and how they can help. For example, ranchers trying to comply with state regulations on signage related to equine exposures will find their insurance partners a valuable resource.” Then there are those exposures that farmers (and their insurance agents) don’t immediately consider. “It’s not new, but estate planning and taxation remains a major concern for the family farm,” Trachier says. “Retail agents are uniquely positioned to assist in this area with multiple financial tools to help finance and protect the family assets when the business is perpetuated. “In addition, third party contractual risk
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something many farmers haven’t generally done outside of roadside stands. Consumers tend to be demanding, and this leads to a need for farmers to think about customer service issues, marketing strategies, and product placement and development – all of which place additional demand on time and resources and create additional opportunities and/or gaps for liability exposures.”
Coverage essentials Like agribusiness itself, he farm and ranch insurance sector continues to battle widespread misconceptions. “It seems that the general public often knows very little about how their food is produced,” Patrick says. “I think the image in most people’s minds is still that pre-
industrial farm with two or three red barns, maybe a silo and a little white farmhouse. Most of the farmers we work with are highly sophisticated, very entrepreneurial business owners. They watch their balance sheets, often daily, just like any business manager, and they’re very good about driving efficiencies and improving production outputs. “That said,” he continues, “farmers often underestimate the scope of a typical farm policy, not realizing that their entrepreneurial drive often creates new exposures that may or may not be contemplated in their farm policy. Farm policies generally are not as broad as CGL forms with regard to commercial liability exposures; it’s imperative the farmers use their insurance broker as a business advisor to ensure that they have a policy that’s expanding with their operations.” Trachier also stresses the inadequacy of a homeowner’s policy to address all the exposures inherent to even a gentleman or hobby farm. “Don’t expect the CPL section of a typical homeowners to respond to farming or ranching activities,” she says. A farm owner’s and homeowner’s [policy] are not the same.” In terms of essential coverages, Patrick says that while Great American continues to write a lot of traditional farm policies, the trend is moving toward more commercialtype coverages. “In addition to traditional property and liability coverages, all large producers should have business income, pollution, employer liability and equipment breakdown coverages,” he says. “Given my earlier comments about product exposure, a commercial GL form is becoming a more common need as well.” Trachier also points to other specialty coverages that can be packaged with a standard policy. “High-value dwelling enhancements that protect against escalating building costs, foreign objects in machinery, disruption of farming operations, livestock collision coverage, enhanced pollutant cleanup protection, equipment breakdown and iden-
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tity fraud expense are a few of the coverages that can be packaged with a farm and ranch policy,” she says. “In addition, most farm MGAs offer a farm auto product and policies for unique inland marine risks like large center pivot irrigation systems.” Patrick adds that he doesn’t see as many requests for motor truck cargo coverage as one might expect – but that doesn’t mean it’s not important. “A lot of ag producers have cargo exposures,” he says, “and there can be significant gaps in coverage without an MTC coverage form.” He also stresses the need for equipment breakdown coverage. “Equipment breakdown is an increasingly vital coverage that is too frequently missing; all farmers should have an EBD coverage
form,” he says. “Given the pricing in the marketplace, there’s no reason to not have an umbrella either.” In addition to assisting in finding appropriate insurance, brokers can help agribusiness clients by keeping the lines of communication open, Patrick says. “I think the best brokers are the ones who ask a lot of questions so that they have a very good understanding of a farmer’s scope of operations,” he says. “Having more than one conversation throughout the policy term has to be a best practice; farmers are often moving quickly in their decision-making, and their insurance broker isn’t usually top of mind. Brokers have to reach out to see what new thing the farmer’s purchased or what new revenue stream they’re pursuing in order
to make sure adequate coverage is in place.” Patrick thinks workers’ compensation is where a broker has the best opportunity to demonstrate value to a farmer. “Most WC carriers are enthusiastic about providing safety training to employees,” he says. “Brokers can be conduits to helping farmers get the resources they need to manage this exposure.” “Insuring farms and ranches can be a great business,” Trachier adds. “However, it is critical that retail agents understand the exposures they are attempting to address with their customers and that they work with companies and MGAs to focus on this market segment. Those that ‘dabble’ in this segment on the agent, MGA and company side can quickly end up in trouble.”
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FEATURES
CORPORATE RETREATS
Are corporate retreats worth it?
Nikki Fogden-Moore explains why strategic escapes are essential for creativity, performance and leadership THERE’S A shift occurring in the business world that is happening outside the office – conferences and retreats are becoming the norm. The agenda is shifting from bar voucher to spa voucher, from boardrooms indoors to holding meetings outdoors – even on surfboards. So, is this working? Despite a backlash in the US many years ago about lavish retreats (after AIG executives reportedly spent more than $400,000 on a corporate retreat after receiving government bailout money in 2008), corporate retreats are back in vogue – and rightly so, for they can provide a crucial, authentic timeout for leaders and key teams to reconnect, assess productivity and build shared purpose at even the most challenging times. The corporate retreat is a vital part of the strategic year for companies that value their team as much as their bottom line. The trick is to ensure you plan your retreat like you would your business: Who should be there, what is your budget, and do you have your purpose? With the right team running this with you, an annual break away for body and mind could be the perfect formula to keep your team healthy, wealthy and wise. After more than a decade of running corporate and boardroom retreats worldwide, I can give you three reasons why the well executed ones work.
1
Creativity
Creativity requires space to think and environments that can inspire. Providing a digital detox and fresh perspective for your team can get the brain off autopilot and
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into fifth gear with energy and vision. Like the saying goes: Keep doing the same thing, and you’ll get the same results. So instead of repainting the office walls and moving some plants around, plan in creative breaks during your strategic corporate retreats that truly allow time to reflect, think and indulge in ideas, as well as space to offer feedback. If you want to see changes in the level
of creative thinking, initiative and a fresh approach to corporate challenges, then the best thing to do is create a real opportunity for people to switch off and have time to think, talk, create and engage. Choose your location based around this thinking – get back to the ocean or nature spots. Think about the use of space and where you will stay. The creativity starts the moment you arrive.
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Close the laptops and bring out large sheets of paper. The cognitive connection to thinking and writing is incredible – it allows a flow and a dynamism that cannot often be captured by tapping away at a keypad. Bring your team back to basics by making idea generation and problem-solving larger than life on big sheets of paper that hold opportunities, as well as a page for concerns and challenges. Bring it out into the open, and tackle each area with transparency and shared purpose. Allow the conversation to continue over dinner or lunch, and be open to the idea that an agenda can flow when people are given the opportunity to open up and share ideas without a stopwatch. Take notes at lunch or dinner – and add those to the ones from the more official creative brainstorming sessions. Carry this through and identify how you will share these ideas when back in the office.
back to the office as well. Create tangible milestones for KPIs and performance during the retreat that you all agree to continue in the office. Most of all, if you’re going to take away your findings and apply agreed-upon accountability measures, make them official, and show that ideas generated on retreat can be swiftly implemented back at work.
Corporate retreats are back in vogue – and rightly so, for they can provide a crucial, authentic timeout for leaders and key teams to reconnect, assess productivity and build shared purpose at even the most challenging times Leadership
Performance Part of the purpose of a retreat is to help recharge mental and physical batteries, not deplete them any further. Integrate a yoga or fresh-air session in the morning with a mid-afternoon session outdoors or doing something that gets people moving. Engage in earlier drinks before choosing healthy, inspiring dinners at venues that understand delicious, fresh, high-quality ingredients. Encourage ‘homework’ or calibration time in the evenings, and embrace the value of sleep. View the retreat as time to share the value of bringing personal and business vitality to life and how this can be integrated seamlessly back at the office. Bring in speakers and facilitators who understand the importance of both personal and business acumen – it can make a world of difference in teaching your leadership team how to take all areas up to the next level. If you’re the CEO or the leader of this retreat, then set the scene upfront. Time out in strategy sessions, combined with fresh air, fresh food and a fresh perspective, can create an incredible shift in old-style, work-hardplay-hard thinking. Bring balance into the day, and watch this philosophy find its way
ethic inside a company – it’s essential for our increasingly virtual world. This all greatly improves productivity and accountability. Finally, whatever you do, keep it relevant and efficient, and forget about the fad gadgets and gimmicks or signature flashlights and backpacks. The best place to spend your budget is on the right location and the people hosting the retreat for you.
I always say there are three pillars of true leadership: • leading from within • leading by example • leading others Corporate retreats are an ideal opportunity for executive teams to test elements and roll them out for a period of time before sharing with the broader teams. It may be a fourweek implementation period post-retreat that requires a regroup before rolling out. By leading by example and practicing what you preach, the element of authenticity and trust is improved, creating a real engagement with leaders across divisions as well. Often retreats are an opportunity to see other skills, characteristics and ideas from those around you – a forum where problem-solving and collaboration can show leadership in a different light. Most important, leadership teams and executivelevel management have an opportunity to explore the core commercial elements on the agenda, as well as their own personal wellbeing and goals, in a safe and constructive environment. Increasing personal connection can greatly improve the collaboration and work
You don’t want your leadership team coming back into the office on Monday, exhausted from late nights of too many drinks and not too sure about what the next steps are. This is about lifting your corporate sessions up a notch and getting engagement from the get-go. It’s the conversation, the quality connections, and well-organized time and content that allow a perfect blend of relaxation, connection and strategic thinking. Corporate retreats, if executed well, efficiently and with purpose, are a powerful tool to reignite shared purpose, engagement and a passion for performance in business and in life. Run your retreats like you do your business. Have a purpose, and define who needs to be there and what value you want in return. At the end of the day, building a culture that is healthy, wealthy and wise is the winning trifecta, and corporate retreats are an ideal place to benchmark those three elements together.
Nikki Fogden-Moore specializes in coaching high achievers to bring business and personal vitality to life. Her new book, VITALITY, is available internationally.
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FEATURES
FEEDBACK
Feedback is broken Providing feedback is vital to improving performance, yet many people receive it – and deliver it – poorly. Georgia Murch explains how to create a culture of feedback that is beneficial to the employee and the company as a whole
viduals understand the value and power of giving and receiving feedback. We are aware it builds trust and respect between our employees, customers and stakeholders. We know that great conversations lead to better outcomes and therefore productivity and profit. So we send our people to a training program in the hope they will come back a changed person. Yet we find that our people – and, if we are honest, ourselves – still avoid feedback or handle it poorly.
The history of feedback The concept of ‘performance management’ was introduced about 60 years ago as a means to determine the wages of an employee based on their performance. It was used to drive behaviors to generate specific outcomes. When employees were solely driven by financial rewards, this tended to work well. In the late 1980s, not all employees felt rewarded, nor motivated by financial gain alone; many were driven by learning and the development of their skills. From here, performance management started moving into more frequent monitoring and reviews with a focus on regular feedback outside the formal review process. As organizations put more regular conversations into the mix, there was a notable improvement in productivity and employee engagement when the conversations were handled well. In fact, the Corporate Leadership Council tells us that when informal feedback is delivered well, it can improve productivity by nearly 40%. Now that’s pretty compelling. We are now seeing an emerging trend
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zation. This is not as difficult as you might think, but it does require planning upfront to understand what you want to improve and how to measure it. Another challenge can be getting traction after the training. It can be difficult to keep the momentum up when people are either not motivated or not supported to embed what they have learned. Unless we make people accountable to implement what they have learned, it is likely to be forgotten. We also need to make it inspiring to do so. We want people to know they are gaining time, not wasting it, by focusing on improving.
in high-performing organizations where all employees, not just the leaders, are being taught how to give great feedback and also how to receive feedback with equal candour and grace. Organizations that do this are in their ‘feedback flow.’ But there are far too few that are gaining this as their competitive edge. Many are still running training programs in isolation in the hope that it will develop their people and create a new organization, which is as likely as going to the gym once and expecting a body transformation. When done well, it is a start – and a good one – but a start alone nevertheless. Nelson Jackson was onto it when he said, “I do not believe you can do today’s job with yesterday’s methods and be in business tomorrow.” So, why aren’t all organizations focusing on improving the feedback skills of their people? In a challenging economy, it’s getting harder to justify training without proving the value, both to the individual and the organi-
Training alone is not enough to drive change We need to get comfortable with pushing through the awkwardness of changing habits and processes to move to a breakthrough in the capability of people and to create improved cultures. Otherwise we have a breakdown and go back to old styles, which
STEPS TO CREATING A SUSTAINABLE CULTURE breakthrough
awkward Return on investment
MOST ORGANIZATIONS and indi-
ire Rew
tain Sus
iew Rev Do Plan
rn Lea
breakthrough
Time
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STEP 4 Review Too many times, we implement without measurement. Based on the foundations we set in the planning phase, we should consistently measure progress. Then report back to engage people and the business. We also set up ‘remembering rhymes’ so people are able to easily recall what they learned and put this into place.
STEP 5 Rewire We need to understand what’s working and what’s not and then tweak the implementation and change direction if required. There is no point pushing something that is not at its optimum. In particular, we can do an ‘appreciate inquiry’ to understand what’s working well and amplify it across the business.
STEP 6 Sustain We shouldn’t make the mistake of thinking we’ve made it and then drop all of our good work. While sustaining suggests a holding pattern, it still requires careful planning to keep people motivated and supported to be the change they seek.
often don’t serve us or the business. Many of my clients tell me that they understand the need to push through the awkwardness, but they are not quite sure how to do this. If we want the change to be sustainable and improve over time, then we should consider all the elements to creating a remarkable feedback culture. The following is a highlevel guide that takes all of those elements into account.
STEP 2 Learn For the training component to be successful, you need more than just great design. Hire remarkable facilitators and trainers. Make sure they suit your culture. Consider what methods outside the workshop you have to embed such as coaching, mentoring, online tools, etc. Make the learning highly engaging and heavily pragmatic.
STEP 3 Do STEP 1 Plan This phase is about setting the foundations for a successful rollout. What are the objectives? How do we know the program will address what we need? How can this be measured? Consider qualitative and quantitative measurements. What is the communication strategy? Who are the key stakeholders? Consider pilot programs to test the design.
It’s make or break time. Set up systems and processes where people are accountable to deliver on what they have learned. In my space, it is about having the tough conversations. Create lots of space, in and out of the initial training, for practice. Create the right conditions, and this will help people move from awkward to an outcome. If we don’t, then the return on investment is lost.
If we really want to create cultures of feedback, we need to put in place a program to embed the learning. Too often I see organizations miss this opportunity to improve their return on investment, on the dollars spent and time allocated, after the initial training – then wonder why people are not being the change they are looking for. Changing habits does not happen overnight. It is a planned and considered approach. And it’s not as complicated as we think. When we get clever about how to embed the learning, the change then becomes effortless and the culture is able to self-sustain.
Georgia Murch is an expert in teaching individuals how to have tough conversations and create feedback cultures in organizations. She is the author of Fixing Feedback and a highly engaging speaker. Visit www.georgiamurch.com or email georgia@georgiamurch.com.
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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.
KNOW ANYONE WHO SHOULD BE READING INSURANCE BUSINESS AMERICA? IBAMA G.COM
FEATUR E / THE
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about to and brokers is ates rance agents stig The world of insurm. Insurance Business inve ld g wor radically transfoto do to thrive in a changin d and Casualty nee ion of Property what you Future: The Evolut
saying of the ution. the Agency are g today is not Insurance Distrib WHA Insurance agents are playin Producers at ago, specifically “The role that comfort zones. ding , 20 to 30 years goodbye to their e, Ore., is expan ob Hartman role they played cing,” says R based in Eugen and developing in risk selection and pri The agency, ercial lines . lines: cus on comm ffocus its fo ont line of hor of the report be on the fr ffront n within those co-aut lizatio r o f fo specia buses, used to new areas of y had undery, for taxis and fo “The agent of a policy, n insurance transportatio riting and pricing tions of homes, knew very underw y, did inspec y, ity ity, rit example. gents who were ys Hartman. had agents riting authorrity ss,” s ” says writin have busine we , stayed the “Historically given that lization and they logy the customer, knew for that today, areas of specia techno used to their ’s a lot less need singly in small information y 50 “There Vince Ada, lines—and increa to more of a there,” says ys approximatel all personal g which emplo s are movin in what in task is director at WHA, ercial—carrier sit comfortably , where the You comm you can’t just r riting model or eight years. people. “But ation and answe black-box underw in the last five fill out an applic to 20 you have done to accurately business or 10 le industries.” the yees multip about emplo learn ons have to additional how you drive to 60 questi ly hired eight and the car and help the 50 WHA recent ons about you logies that will questi techno ers. enting s are it.” and is implem vely with custom it—and that’s sales by carrier t more effecti efforts direct interac or ting l ny which compa up its marke Multichanne insurance, also stepping ercial y, and auto ing al and comm The agency is increasing steadil of premiums, is becom sales in person for 70% s are also in order to grow measures to boost efficiency. says. Carrier is accounts ry d, Hartman matic of what lines, and is taking with the indust commoditize ence is emble insurance aggressively, ising. WHA’s experi and mid-size marketing more year on advert many small US. Many than $6bn a happening at carriers are across the spending more brokerages prem ms were y personal auto, logy-driven, notabl of all P&C premiu lines, techno agencies and nt, s. In some indep ndent more efficie written byy indepe lized. They agents and broker are becoming lines and specia competing with ercial ting. agents comm 2013, ches to marke focused on Shar Report rket Share Source: Market ping new approa pendent Insurance depend T CHANNEL are also develo able hole in A.M. Best/Inde okers of America little choice. the THE DIREC have punched a notice & Brokers They may have g larger Agents economics of sales hole is growin l,” Direct signs that the the are unrave to and ing “There auto, model are beginn report, Agents personal 11 MBER 2013 | Co. & traditional agent ER/DECE ER/DEC sey NOVEMB a recent McKin according to
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PEOPLE
CAREER PATH
A HIGHER STANDARD
Dorothy Gjerdrum has spent her career learning how to manage risk – and now she’s helping to set the bar for others in the industry 2015 LAUNCHES ERM PRACTICE GROUP Last year, Gjerdrum was tapped to lead Arthur J. Gallagher’s new ERM Practice Group, which focuses on public sector, higher education and nonprofit risk management opportunities “We have a specialized team that is extremely good at tailoring solutions and meeting our clients’ needs”
2014 HELPS OTHERS LEARN To aid in the adoption of the standard, Gjerdrum approached the professional associations for public sector and university risk managers with the idea of launching a three-day course to train the faculty and create opportunities for others to expand their approach to managing risk “This work engaged me on so many levels. It’s been so rewarding to hear that it helps people advance how they manage risk”
2016 TRAVELS THE GLOBE Because the International Standards Organization requires that work group meetings take place on different continents and include as many countries as possible (the current count is 46), Gjerdrum has attended ISO work group meetings in Singapore, Sydney, London, Chicago, Dublin, Istanbul, Rio de Janeiro and Moscow “These meetings are intense and very productive; they result in written standards that are used around the world. Everywhere I travel, I visit art museums, attend music or dance performances, and take in the local culture. That’s how I weave together my personal and professional interests”
2008 TAKES ON A NATIONAL ROLE A Gallagher colleague suggested that Gjerdrum join (and then lead) a group of US experts to give input to the development of a new international standard on the practice of risk management “Learning about the variations of risk management practices across the globe has been inspiring as well as practical. It has given me a deeper understanding of risk and uncertainty”
1999 JOINS ARTHUR J. GALLAGHER Gjerdrum joined Arthur J. Gallagher to help shape its newly formed public sector practice group and lead 300-plus salespeople who focus on public sector risks across the US
“Risk management has such an important role to play in the public sector! It’s a profession that requires continual learning, adaptation and forward thinking” After years of studying – first visual arts and then to become a professional clarinetist – Dorothy Gjerdrum took a pause to earn some money. She found work proofreading opinions from the New Mexico Supreme Court and Court of Appeals. That led to working at the Legislative Council Service, where she eventually became a staff member for the insurance committee
1989 HELPS FORM INSURANCE POOLS
1985
DISCOVERS A NEW CAREER
After assisting with the rewrite of New Mexico’s workers’ compensation laws, Gjerdrum left to help lead two newly formed county association insurance pools “Public entity pools were a new concept in the 1980s, born of necessity and desperation. It didn’t take long for them to become member-focused, service-driven risk management organizations that would change the way public agencies purchase insurance and manage risk”
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PEOPLE
OTHER LIFE
BREAKING THE ICE Paul Pustovar’s other life as a champion curler is what led him to insurance PAUL PUSTOVAR’S decision to become an insurance agent had less to do with the industry itself and more to do with finding time for his curling hobby. Pustovar fell in love with curling in 1969 while working as a teacher. Curling as a third under Bruce Roberts, he became the Minnesota state men’s champion in 1977. By 1980, he was a national champion and finished fourth in the World Championship – and with
TELL US ABOUT YOUR OTHER LIFE E-mail iba@keymedia.com
that came a realization that he needed a new career. “Teaching made it difficult to get the time off needed to curl at the world level,” he says, “so I decided to try a job in which I was self-employed while I was young enough to try another job.” Today Pustovar is a certified Level 11 curling instructor and coach, and continues to rack up accolades in the sport. “In the US National playdowns, I have won five gold, four silver and eight bronze medals,” he says. “In the Senior World Curling Championship in 2009, we won the silver medal in Dunedin, New Zealand, losing the final game to Canada. And the next year in Chelyabinsk, Russia, we defeated the Canadian team in the finals to win the gold medal and the World Championship in 2010. Winning the World Championship in 2010 is the greatest achievement of my curling career.”
20-25
Number of corn brooms used per season between 1977 and1991
2
Bronze medals won at the World Curling Championships
25
Number of national championships Pustovar has participated in
Photo: Matt Boltz Photography
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Expect big things in workers’ compensation. Expect to save a third of your clients 30% or more. Most classes approved, nationwide. For information call (877) 234-4450 or visit auw.com/us. Š2016 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.
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