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FUTURE-PROOFING AT SWISS RE
Corporate Solutions CEO Ivan Gonzalez talks growth, innovation and technology
NO LONGER OPTIONAL
Cyber insurance is now a must-have – so how can brokers capitalize?
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UPFRONT 04 Editorial
Making sense of cyber insurance
WHOLESALE E&S MARKET
CAN YOU HEAR ME?
Why your technology vendor needs to listen to your feedback
WHOLESALE E&S REPORT
IBA takes a look at the current state of the wholesale excess & surplus market: hidden challenges, growing sectors and regional market rundowns PEOPLE
08 Head to head
Are insurance company CEOs overpaid?
10 News analysis
Big changes could spell big opportunities for brokers
14 Workers’ comp update
INSIDE THE CYBER BOOM
More companies than ever are realizing the benefits of cyber insurance – so how can brokers capture their business?
Swiss Re Corporate Solutions’ Ivan Gonzalez discusses how his division of the reinsurance giant is positioning itself for future success
China dominates the list of the world’s largest insurers
This month’s big movers, shakers and new products
How brokers can help address issues before they become claims
16 Technology update
The fraud-fighting powers of technology
Embracing the industry transformation brought about by the Internet of Things
FEATURES 42 Agency insight
Gillis, Ellis & Baker chairman Parke Ellis on how his agency has reimagined its sales and training processes
PEOPLE 47 Career path
BEING THERE FOR CLIENTS WHO CARE
Long-term care is a complicated sector, but the rewards are plenty for dedicated brokers
Ross Dik put his own spin on the family business
48 Other life
Facing the music with wedding singer Frank Zuccarello
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31/08/2017 9:30:13 PM
30/08/2017 7:37:11 AM
Chasing an evolving threat
f there’s one word rolling off the tongues of insurers in 2017, it’s ‘cyber.’ Whether through global attacks like WannaCry and Petya or breaches at firms like Yahoo and InterContinental Hotels, cyber insurance has been grabbing headlines daily. However, while everybody is talking about cyber insurance, how many brokers actually grasp its many complexities? The concept of cyber insurance, it seems, is more head-scratching than the many phishing and ransomware scams unsuspecting businesses are falling for. “The way organizations need to address cybersecurity is changing,” says Tracey Malcolm, leader of the Future of Work practice at Willis Towers Watson. “They’re moving from a technical, executionfocused space to a prevention-focused mindset, which requires much more planning and consultation at the offset.” It’s that planning and consultation that brokers are expected to play a key part
Cyber insurance needs to show a level of flexibility unheard of with the typical annual auto insurance policy most consumers are used to acquiring in as clients increasingly turn to them for advice about mitigating risk. Yet unlike traditional areas of insurance, in which brokers often boast decades of experience, cybersecurity is an entirely new concept made all the more complex by the fact that each business faces unique risks. Then there are the policies themselves, which could be out of date as soon as they’re written. With new malware emerging every minute, cyber insurance needs to show a level of flexibility unheard of with the typical annual auto insurance policy most consumers are used to acquiring. Peter Erceg, SVP of global cyber and technology at Lockton, insists that the industry must be a driving force behind global cyber standards. “It’s not going to happen from governments and regulators – they will always be looking at what’s important for that country,” he says. “The companies themselves aren’t going to do it, so it needs to be a central point that can drive it, and I think insurance has a part to play in that.” Regardless of the wider industry issues, however, it’s clear that cyber is no longer just insurance’s internal hot topic – it’s the problem clients need solutions for now. There’s no standardized direct-to-consumer offering that can drive price-focused cyber insurance purchases, so brokers’ reassuring voices and educated minds are very much in demand. If you’re not yet sure what this cyber business is all about, make sure you get up to date – and fast. The team at Insurance Business America
www.ibamag.com MAY 2017 EDITORIAL Managing Editor Paul Lucas Journalists Sam Boyer, Jordan Lynn, Bethan Moorcraft , Lucy Hook, Ryan Smith News Writers Lyle Adriano, Louie Bacani, Krizzel Canlas, Terry Gangcuangco, Mina Martin, Gabriel Olano Staff Writers Tim Garratt, Hannah Go, Libby McDonald, Joe Rosengarten, Heather Turner Copy Editor Clare Alexander
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30/08/2017 6:26:22 AM
“Recipe for Success”
Rosemarie Marshall Vice President AmWINS Group, Inc Aspiring Chef General Star Broker
“I love to cook for my friends. My grandmother told me to always use authentic Italian ingredients with her recipes. She also encouraged me to be creative… to have fun expanding my own culinary repertoire. “As a General Star appointed broker, I’m encouraged to draw on that same creativity to solve challenging risk management problems. Sure, their financial security is important, but it’s General Star’s flexibility that allows me the freedom to really excel. “Whether I’m solving unusual risk management problems for my clients or creating a sumptuous Italian feast for my friends, I’ve found my recipe for success.” To find the General Star broker nearest you, visit our website at www.generalstar.com.
© 2017 General Star National Insurance Company is licensed in all states, the District of Columbia and Puerto Rico. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star companies by licensed producers and, for risks that qualify, by licensed surplus lines brokers.
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30/08/2017 6:26:43 AM
Around the world
Industry momentum is shifting eastward as China’s insurance companies continue to boom
THE WORLD’S largest insurer isn’t located in the US, UK or Europe – it’s in China. Ping An Insurance Group rocketed to the top of Forbes’ list of the world’s largest insurance companies, beating out industry stalwarts such as Allianz (which fell to number two) and AXA (number three). In fact, Asia-based companies occupied four of the slots on the list of top 10 insurance companies, which was rounded out
People employed by Ping An, the world’s largest insurance company
$106.6 billion Revenue recorded by Ping An for the most recent fiscal year
by European and British multinationals. US companies, meanwhile, failed to crack the top 10; the largest American insurer, MetLife, came in at number 16, just behind China Pacific and Tokio Marine. The increasing dominance of Asian insurers demonstrates the rapid growth of the industry in the region, in contrast to more mature markets in Europe, Britain and the US.
Insurance spending as a percentage of GDP within OECD countries between 1996 and 2015
METLIFE (#16) TRAVELERS (#17) AFLAC (#20)
LEADING THE WORLD The 25 largest insurers in the world are scattered across the globe, but Asia is now on equal footing with the traditional insurance stronghold of Europe. Each region lays claim to 40% of the group; North America is home to the remaining 20%.
Insurers named among the top 100 most valuable brands globally Sources: Forbes, OECD, Brand Finance
MOST VALUABLE BRANDS
TOP INSURERS BY ASSETS
Chinese insurer Ping An ranks as the highest-value insurance brand, with a brand value of $16.3 billion, overtaking Allianz, which is valued at $15.1 billion. 1 Brand value rank
Ping An Insurance Prudential Financial Japan Post Insurance Nippon Life Insurance Co. Berkshire Hathaway
9 Prudential PLC
Legal & General
Ping An Insurance
Source: Global 500, 2017; Brand Finance
France’s AXA Group holds the position of world’s largest insurance company by total assets. The top 10 also includes three US companies and three based in Asia.
$784 billion $691 billion $621 billion $621 billion
Source: Relbanks.com, as of 12/31/16
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PRUDENTIAL (#6) LEGAL & GENERAL (#18) AVIVA (#23)
JAPAN POST HOLDINGS (#4) TOKIO MARINE HOLDINGS (#14) DAI-ICHI LIFE INSURANCE (#19) MS&AD INSURANCE (#22)
ALLIANZ (#2) MUNICH RE (#10)
GENERALI GROUP (#13) France
AXA GROUP (#3)
ZURICH INSURANCE GROUP (#7) CHUBB (#8) SWISS RE (#11) China
PING AN INSURANCE GROUP (#1) CHINA LIFE INSURANCE (#5) CHINA PACIFIC INSURANCE (#15) PEOPLE’S INSURANCE COMPANY OF CHINA (#24)
AIA GROUP (#9) Taiwan
CATHAY FINANCIAL (#25)
Source: The World’s Biggest Public Companies, Forbes; 2017
TOP INSURERS BY MARKET CAP
American multinational conglomerate Berkshire Hathaway, which operates in both the insurance and reinsurance space, vastly overshadows other insurance companies in terms of market capitalization.
The highest-ranking insurance broker among the world’s biggest public companies is UK-based Aon, which came in at number 444.
$200 billion $150 billion $61 billion $74 billion
Berkshire China Life Ping An Hathaway Insurance Insurance 1
Source: Relbanks.com, as of 12/31/16
Assets: $27 billion
Marsh & McLennan Assets: $18 billion
Arthur J. Gallagher Assets: $11.5 billion
Source: The World’s Biggest Public Companies 2017, Forbes
30/08/2017 6:27:51 AM
HEAD TO HEAD
Is the distribution of pay in insurance fair? A recent study suggests those at the top of the industry are being richly compensated for doing a mediocre job
President Glatfelter Program Managers
President and CEO Andrew Barile Consulting Corporation
“In the public market, exceptional CEO talent is hard to find, and the competition is fierce. As in any economic model, CEO compensation is driven by supply and demand. Many industries’ CEOs are grossly overpaid. It’s not insurance; it’s the public company model and competitive market forces at work. The real issue is the disparity of compensation from top to bottom, which affects morale. It’s hard to justify the earnings gap between a CEO paid $20 million, line underwriters making $70,000 or a product line manager making $150,000, based only on performance. Bottom line: The public company compensation model is broken.”
“The compensation structure within insurance companies has been criticized for paying unusually large bonuses to CEOs whose companies’ financial performance had been a failure. This criticism stems from boards not playing an active role in compensation policy. The appointment by the board of so-called ‘compensation experts’ to provide paid-for competitive compensation surveys to justify the CEO’s outrageous compensation continues. The gap between an underwriter’s annual salary and the chief executive’s $3.5 million annual salary will continue to widen. Without a revolt by concerned company shareholders, don’t expect to see any changes in the future.”
“The answer depends on what you measure, how you measure it and what you compare. Insurance company CEOs were awarded pay – cash and non-cash remuneration – last year ranging from $21.3 to $24 million. That looks like a tight range. Broaden the study to include CEOs at financial services companies generally, and the range widens to $19.5 to $124 million. But were these CEOs worth their pay? When their pay is evaluated relative to their companies’ three-year operating performance, the insurance CEOs ranked poorly – at or near the bottom. That’s true even when you include the other financial services CEOs.”
Manager Bruder Capital
WORST BANG FOR THE BUCK A recent analysis from Bruder Capital singled out the insurance industry as the field in which poorly performing CEOs are most likely to be well rewarded. The investment banking firm based its conclusion on a Bloomberg pay-for-performance study that compared CEO compensation (including salary, bonuses, stocks and other incentives) in 2016 to the company’s three-year average profit, concluding that “the worst pay-for-performance offenders are in the insurance sector ... in fact, insurance company CEOs dominate the bottom of the survey results, occupying seven of the 10 worst CEO pay-for-performance slots.”
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The shifting landscape Despite regular warnings that the end is nigh, it’s not all doom and gloom for brokers – a changing world is bringing about new markets and new opportunities
WITH THE global business landscape in a state of flux, the warning has been issued time and again that insurance brokers are under threat from myriad challenges, both internal and external. From aggressive consolidation trends to the digital revolution and insurers edging toward direct offerings, there are certainly obstacles in the road ahead. But for some, those challenges are nothing more than veiled opportunities that could herald the rise of a new era for brokers. The explosive growth of technology has undoubtedly been one of the most talkedabout potential threats to the intermediated
many of which are focusing on direct models of business. Major insurers, too, have been emboldened by new digital platforms that allow them to cut out the middleman and communicate directly with consumers, a trend that is not music to brokers’ ears. But while the plates may be shifting beneath them, brokers continue to provide an invaluable service, according to José Manuel Fonseca, CEO of global firm Brokerslink. “Brokers have a great asset, which is the knowledge of the client and the relationship with the client, and that is critical,” he says. “If brokers can integrate tech-
“Brokers have a great asset, which is the knowledge of the client and the relationship with the client” José Manuel Fonseca, Brokerslink channel. Digital transformation itself has been inescapable across almost all industries but has presented a specific set of challenges for insurance. While technology has had a positive impact in areas such as productivity, efficiency and analytics, it has also brought with it a stream of new entrants to the industry –
nology and form some partnerships with new entrants, I think there is a lot to do, and I see this as a huge opportunity.” The accusation often thrown at insurance – that’s it been too slow to adapt to the fast pace of digital change – is an unfair one, Fonseca adds. “We are not the fastest industry
to change,” he admits, “but I think there is some explanation for that. Insurance is very much related to nature, to ‘acts of God.’ You cannot predict or always understand that. I think insurance is much more complex than, say, banking. We deal with nature; we deal with people; we deal with lots of different lines of business.” The fast-changing world has not just created new technologies, but new risks, too, many of which are opening up new markets for brokers. The cyber market, for example, was nonexistent 15 years ago but is seeing huge growth globally as cyberattacks on businesses increase in frequency and impact. “That’s one of the beauties of insurance – we are always adapting to new risks and to the new behaviors of society,” Fonseca says. “From natural disasters to terrorism to cyber, they
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NEW THREATS, NEW OPPORTUNITIES
According to Clyde & Co., there were 170 M&A deals in the global insurance industry during the first six months of this year
More than $1.97 billion has been invested into insurtech worldwide since 2016
The global cyber market is expected to generate $20 billion in premiums annually by 2025
Four-fifths of Airmic members do not think insurers are innovating enough to cope with new risks such as cyber and reputational damage Sources: Clyde & Co., Tällt Ventures, Allianz, Airmic
are all becoming more and more important and require a lot of consulting. Brokers have an important role there.”
continuing to add irreplaceable value. “While [going direct] might herald some benefits in pricing for the insured, when it
“Brokers need to establish a niche and their own distribution platforms to avoid missing out on these opportunities” David M. Dickson, Safeonline Lloyd’s cyber broker David M. Dickson, head of technology, cyber and media at Safeonline, says it’s no secret that a number of insurers and MGAs are now going direct to clients, but he adds that in those emerging and niche lines, where “coverage and appetite continuously change and evolve,” brokers are
comes to specialist or technical lines of business, such as technology E&O, cyber, media and intellectual property, I am confident about the role of the London broker and the value we continue to add,” he says. “As an industry, insurance is ripe for disruption, and with an increasing number of ways in which
insurance products are distributed, clients are undoubtedly benefiting from more options to access the market and coverage. Brokers need to establish a niche and their own distribution platforms to avoid missing out on these opportunities.” Ultimately, they are left with two options, he adds: accept and adapt, or deny and die. Given all that change, is the environment for brokers today more challenging than it was 20 years ago? “I wouldn’t say so – we are still growing; we are still relevant,” Fonseca says, pointing to the continued interest in the industry from the equity world as evidence that there is still more growth to come. In fact, the need for knowledge, consulting and advice is even more important today as the world faces up to some increasingly complex risks. “I would not dramatize,” Fonseca says, “but I think [these are] very challenging times.”
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INTELLIGENCE CORPORATE ACQUIRER
Brown & Brown
Shenkel Insurance Agency
The deal will allow Brown & Brown to expand its property & casualty portfolio in the Greater Boston area
Genpact will gain access to advanced digital inspection technologies for claims management services
Heritage Insurance Holdings
NBIC is a specialty home insurance underwriter in states along the Eastern seaboard
Bianci & Associates
Bianci & Associates is a New Mexico insurance firm specializing in employee benefits
RightSure Insurance Group
Arizona Economy Insurance
Arizona Economy represents RightSure’s 13th book-ofbusiness acquisition
Ryan Specialty Group
NSO is now part of RT Specialty, RSG’s wholesale brokerage unit
International Catastrophe Insurance Managers
ICAT will retain its strategic relationship with Syndicate 4242 at Lloyd’s
The Travelers Companies
UK-based Simply Business will give Travelers access to more than 430,000 microbusiness customers
Travelers acquires Simply Business for $490 million
Travelers has completed its acquisition of UK-based distributor Simply Business from Aquiline Capital Partners. Travelers agreed to purchase Simply Business for about $490 million, and it will take on the repayment of debt and other obligations. Travelers hopes the deal will help advance its digital and innovation agendas to best serve customers. An online business insurance broker, Simply Business will continue to partner with its panel of carriers – which includes AXA, Hiscox and Zurich – under its brand name. It has more than 430,000 microbusiness customers and covers more than 1,000 classes of business.
ProSight’s new marine package sets sail
ProSight Specialty Insurance has introduced a Longshore+ Marine Contractors product, which offers comprehensive insurance for marine contractors. The program is designed to unify all lines of insurance under one carrier, streamlining what used to be a complicated process to determine where the employee injury should be filed and which policy would respond. “When all of your marine insurance needs are handled by a single carrier, it eliminates gaps and takes the guesswork out of compensation claims,” said Mark Engel, ProSight’s marine and offshore energy program executive.
Plymouth Rock finds homeowner’s insurance fix
Plymouth Rock Assurance has developed a new homeowner’s insurance product that leverages Big Data to quote and bind policies in less than five minutes. The company launched the product in Pennsylvania, where it has pre-rated 3.92 million homes for immediate quote and bind. “The business hasn’t really been approached with the same level of sophistication that personal auto or even small commercial lines has, so there’s a lot of opportunity to do a better job in that segment,” said Bill Martin, CEO of Plymouth Rock’s Pennsylvania home business.
30/08/2017 6:31:11 AM
PEOPLE XL Catlin launches general liability wrap-up
XL Catlin’s North American construction business has launched a new general liability program, GL Only Plus, designed to provide contractors and select owners with cost savings and greater control over their GL coverage. “Wrap-ups can help contractors take control of critical elements of a project’s risk,” said XL Catlin’s Michael Simone. “GL Only Plus gives our clients the opportunity to reap the benefits of the XL Catlin platform by taking advantage of our full breadth of services, from claims management to risk engineering.”
Generali launches new travel insurance plans
The travel division of global insurance giant Generali has launched three new plans with enhanced coverage for consumers. The Standard, Preferred and Premium plans all include access to the firm’s network of medical providers, trip cancellation coverage, no-out-of-pocket medical, identity theft resolution services, and access to ‘virtual doctors’ and a concierge. In addition, the Preferred and Premium plans cover for loss, theft, damage or delay of sporting equipment. The Premium plan also includes coverage for rental car damage and preexisting conditions.
ISO introduces commercial flood insurance program
Verisk Analytics unit ISO has launched a new commercial flood insurance program that enables insurers to set their own limits of insurance and provide optional coverage for risks not typically covered by the National Flood Insurance Program. “Underwriting commercial flood coverage is still new to many insurers, and they don’t have the tools needed to cover and price the wide range of risks that businesses face,” said ISO’s Maroun Mourad. “Our new program can help insurers address complex coverage needs and achieve profitable growth.”
Brit Global Specialty USA
Executive vice president of professional lines
Burns & Wilcox
Vice president and managing director, San Antonio
Senior vice president and chief claims officer
Vice president and chief underwriting officer
Underwriter for trade credit and political risks, Greater Chicago area
Tokio Marine Kiln
Underwriter for P&C division’s motor team
Crystal & Company
JLT Specialty USA
Vice president, global services team
EPIC Insurance Brokers and Consultants
Vice president and assistant general counsel
Regions Insurance Group
Vice president of sales and distribution
JLT Specialty names VP for global service team
Jardine Lloyd Thompson Group subsidiary JLT Specialty USA has appointed Rupal Patel as vice president of its global service team. Patel joins JLT as an international specialist “with a focus on supporting JLT’s existing clients and new business opportunities requiring global servicing expertise and international insurance program management and placement,” the company said in a release. Patel boasts more than a decade of domestic and international insurance experience, and has spent the past two years as an international practice leader at Crystal & Company.
Canal Insurance appoints chief underwriting officer
Jarrell Hall has been promoted to vice president and chief underwriting officer at Canal Insurance Company. In his new role, Hall “will be responsible for the overall development and implementation of strategy, business plans, expense management, goals, and results in the company’s underwriting business units.” Prior to his promotion, Hall served as assistant vice president of marketing and business development. Hall joined Canal Insurance in 2014 and has more than 25 years of diverse insurance industry experience, including four years at CNA insurance and 19 years at Chubb, where he held progressive leadership roles in underwriting and marketing.
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WORKERS’ COMP UPDATE NEWS BRIEFS New study reveals drop in opioidrelated claims
Attempts to address the US opioid epidemic are heading in the right direction, according to a new study by the Workers’ Compensation Research Institute [WCRI]. The study found considerable decreases in long-term dispensing of opioids in a number of states, including New York, Kentucky, Kansas, Massachusetts and California. “The information in this report can help policymakers and other stakeholders compare the trend of longer-term dispensing of opioids in their state to other states, and learn what policy tools are available to reduce unnecessary opioid use,” said Ramona Tanabe, WCRI’s executive vice president and counsel.
California state worker’s comp premium increase gets green light
Workers’ compensation insurance premiums are set to rise in California after the governing committee of the Workers’ Compensation Insurance Rating Bureau [WCIRB] voted to authorize an increased advisory pure premium rate filing, effective January 2018. The filing proposes advisory pure premium rates that average $2.01 per $100 of payroll, which is 0.1% more than the average approved in July, but still 7% lower than the average on January 1, 2017.
Workers’ comp fraudster caught kayaking in the Caribbean
A Central New York Psychiatric Centre employee has been arrested on charges of defrauding workers’ compensation and falsifying documents to get time off and benefits when he was actually kayaking on a Caribbean vacation or working in California with his girlfriend,
according to the state inspector general’s office. Ryan P. Hayley was charged with first-degree falsifying business records, fourth-degree insurance fraud, fourth-degree grand larceny and two counts of the workers’ compensation crime of fraudulent practices. He was also charged with abusing a patient at the facility.
Normandy Insurance Co. expands coverage to Pennsylvania
Normandy Insurance Company is now offering workers’ compensation coverage to businesses in Pennsylvania. The expansion follows the Floridabased insurer’s authorization to provide workers’ comp insurance in Georgia and Virginia. “Pennsylvania is an especially exciting opportunity for us,” said Jayson Buechler, senior vice president at Normandy. “Normandy has underwritten to a profit for five consecutive years. We are well positioned to provide innovative and cost-effective workers’ compensation coverage to Pennsylvania’s wide array of employers.”
Florida to review law targeting undocumented workers
Florida state Senator Anitere Flores is promising a review of a state law that allows insurers and employers to turn in injured undocumented workers for deportation rather than pay workers’ comp claims. An investigation by NPR and ProPublica found that almost 800 undocumented workers in Florida have been charged with workers’ comp fraud, even though more than 560 never filed claims. An additional 130 suffered workplace injuries but were denied benefits and prosecuted. “Legitimate injuries shouldn’t be denied just because the person was an undocumented immigrant,” Flores said.
Threats hide around every corner Where can brokers step in to help clients embed better business practice? Awareness of workplace safety is on the rise, but there are still more than 3 million injuries and around 4,000 workplace fatalities in the US every year. The workers’ compensation insurance market, meanwhile, is currently “healthy, strong, aggressive and profitable,” according to Frank Pennachio, cofounder of Oceanus Partners, a training and consulting firm that provides strategies and support to help customers navigate the changing insurance industry and communicate coherently with clients. But the industry is far from perfect. Far too many employers buy workers’ compensation insurance without really understanding the risks in the system. Employees find themselves in the workers’ comp system through no fault of their own, Pennachio points out. One accident can land someone in a system plagued with inefficiency and ignorance. A worst-case scenario might involve someone who was injured at work, then sent to the wrong doctor, who inappropriately prescribed opioids, resulting in that patient suffering side effects and later addiction. This sort of train-wreck scenario can easily be avoided with a little education, Pennachio says. “Agents and brokers need to advise employers and make them aware that there are adverse financial events hiding around
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every corner,” he says. “One of the challenges employers face is helping employees get the best medical care if they get injured.” Selling workers’ compensation insurance based on price is an “exceedingly flawed and harmful” way of doing business, according
purchase in the US, says Susan Toussaint, cofounder at Oceanus Partners. “Many people don’t understand the real opportunity there is to help employers make better and more informed decisions around accurately programing workers’ compensa-
“Some people think that because it’s a mandatory coverage, there’s no opportunity to make an impact – but nothing could be further from the truth” to Pennachio. A broker who merely sells a policy without addressing key issues employers are facing is providing poor overall service, he adds. A potential cause of such industry complacency is the fact that workers’ compensation insurance is a mandatory
tion policies,” Toussaint says. “Some people think that because it’s a mandatory coverage, there’s no opportunity to make an impact – but nothing could be further from the truth.” A lot of headway has been made in the industry over the last 10 years, but there is still a culture of abdication in the workers’
compensation market, Toussaint says. Too often, nobody takes the initiative to embed better business practice – but this is where brokers can and should step in. “The best agents and brokers have found room as the willing partner between the employee, employer and the insurer,” Toussaint says. “They become that conduit of information and knowledge between the employer and the insurance company, building a relationship that will only benefit both parties.”
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Tech triumphs in ﬁght against fraud How technology is helping the insurance industry solve a pernicious problem
where opportunistic fraud is happening.” SAS’ Fraud Framework for Insurance is a popular piece of software among American insurers. It has the ability to detect, prevent and manage fraud across all lines of business by processing data through advanced analytics models. A key strength of the program is the interfaces it uses to visualize fraudulent alerts and explain them in simple terms, Hartley says.
“Technology and data analytics can help with fraud detection by looking for things that people can’t see”
Insurance fraud is an ugly beast. It has complex layers and the ability to morph and contort, making it difficult to detect. Around 10% of personal lines insurance claims contain fraudulent elements, costing the property & casualty industry up to $40 billion a year in the US alone, according to SAS. It’s a plague that reaches right down to individual policyholders, who bear the burden of higher premiums as a result of fraudulent claims. But there are companies making
headway in the fight against fraud, particularly in the technology and software sectors. “Technology and data analytics can help with fraud detection by looking for things that people can’t see,” says David Hartley, director of insurance solutions at SAS. “It can spot anomalies and outlines, and flag them up for a real person to review for potential fraudulent activity. Data analytics can be run at a number of levels. It’s now possible to highlight individuals, households or even particular ZIP codes
Nationwide to pump $100 million into insurance startups
Nationwide has announced that it will invest $100 million in tech startups in the areas of retirement planning, insurance and financial services, and consumer information protection. To date, the insurance company has made investments in six startups, including Next Insurance, Insurify and Bloom. Nationwide has also established Refinery 191, a business incubator that helps identify trends in financial and insurance services, and collaborates with other companies on initiatives.
Detecting insurance fraud is likely to get even more difficult as digitalization booms in the insurance industry. Data analytics and fraud exposure software can enable realtime detection of suspicious activity in the always-on insurance world. “It’s much easier to lie to a website than it is to lie to a human being,” Hartley says. “Digitalization could potentially make it easier for fraudsters to make bogus applications, manipulate the system and invent claims. Insurance companies need to be reviewing their fraud-detection models every six months because fraud typologies change. They also need an analytical platform that allows them to sandbox data to be able to look for new emerging trends.”
Aetna reportedly in partnership talks with Apple
Insurance giant Aetna has reportedly held secret meetings with technology titan Apple to discuss a partnership that would provide either free or discounted Apple Watches as perks for the insurer’s customers. People close to the matter told CNBC that executives from Aetna and Apple, as well as hospital chief medical information officers from across America, attended the meetings in Southern California. Aetna’s supposed timeline for the collaboration to launch is early next year.
30/08/2017 6:32:55 AM
Akshay Kerkar Director of enterprise marketing DOCUSIGN
Years in the tech industry 12 Fast fact Kerkar holds an MBA from Harvard Business School and previously worked as a product manager at Microsoft
Simple technology can break digital barriers What is DocuSign, and why should brokers be interested? DocuSign replaces printing, faxing, scanning and overnighting documents to make every approval and decision digital. For the insurance industry, both customers and employees expect a modern, fully digital experience, whether that’s signing up for coverage or processing claims quickly and easily from a mobile device. Companies that embrace this digital trend – both in the front and back office – will gain a competitive advantage by being able to better serve their customers. We count 12 of the top 15 insurance companies in the US as customers.
A lot of brokers see technology as a threat rather than an opportunity. How can that perception be changed? In today’s increasingly digital world, consumers are used to – and are often demanding – mobile experiences. Embracing this digital trend provides a big opportunity for agents to deliver on the expectations of their clients while also providing a great experience, whether it’s allowing them to sign up via email or sign claims documents on their phone.
How much time do you think DocuSign could save brokers, and what other advantages does it offer? More than 60% of all DocuSign documents are completed within an hour, and approximately 85% in
Grafﬁti could cause confusion for driverless cars
Graffiti, stickers and vandalism on road signs could potentially confuse driverless cars, according to researchers at the University of Washington, who say passengers’ lives could be endangered if the cars misread altered road signs. The team added that hackers who are familiar with the learning algorithm of self-driving cars can trick the systems by introducing simple alterations to road signs. This can cause the cars “to misbehave in unexpected and potentially dangerous ways.”
one day. That means we can help agents dramatically increase their close rates, cut down on not-in-goodorder [NIGO] errors, and eliminate the hassles and costs associated with printing, faxing, scanning and overnighting agreements for review and signature. By leveraging DocuSign as part of their workflow, agents can reduce the time they spend on administrative tasks and spend more time with their clients.
What are the main challenges facing brokers in embracing technology in general? Often, a legitimate barrier to adoption is the fact that technology can be complex to implement and use. That’s why we’ve invested in creating a simple, intuitive experience for our customers that’s both easy to use and manage. Other challenges to technology adoption include a resistance to change, difficulty to understand the ROI on a particular solution and the fact that brokers can get overwhelmed by the large variety of tools in the market.
What key developments do you expect to emerge in insurtech over the next 12 months? Some of the key developments we’re excited about include automated underwriting algorithms in life insurance, and connected devices that track and calculate customer-specific risk profiles using artificial intelligence. There will also be a big focus on improving combined ratios by digitizing and automating claims, operations, and customer acquisition.
Tech company ﬁnds rich local talent in new HQ
Insurance software service provider Vertafore has relocated its headquarters from Seattle to Denver and has amalgamated several of its national offices to reduce its office footprint by almost 50%. “We are now the largest privately held software company in Colorado already,” said BJ Schaknowski, Vertafore’s SVP and chief sales and marketing officer. “It’s helped us recruit top folks into the company. We’ve just been so impressed with the level of tech talent here in Denver.”
Need a digital model? Try Africa, says Allianz CEO
At the 44th annual Insurance Conference in South Africa in July, Allianz SE CEO Oliver Bäte urged companies looking to enhance digital capabilities to consider Africa. “While traditional markets, such as Europe, are struggling with their digital transformation process, Africa is digital by nature,” Bäte said. “African customers will rightfully demand and drive insurance innovation in Africa, as they expect offerings and channels to be fully digitalized.”
30/08/2017 6:33:05 AM
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Transforming the world as we know it The Internet of Things has the potential to transform insurance from a grudge purchase to the consumer’s best friend, writes Mark Evans WITH THE evolution of machine learning and artificial intelligence, we’re moving from a world focused on products enabled by the Internet of Things [IoT] to a world of IoT-enabled smart cities, households and lives. It’s estimated that by 2020, there will be more than 50 billion connected devices worldwide. To thrive in the coming decade, most organizations need to be prepared for the rise of connected devices. In the insurance industry, never has it been more important to reassess our traditional offerings in order to remain relevant. The IoT offers an unrivaled opportunity that insurers can’t afford to ignore. Let’s face it – nobody really wants to buy insurance. It’s a purchase made begrudgingly, and one that’s certainly not helped by a clunky, often time-consuming path to purchase. Today’s consumers want digital interaction. They want personalized shopping experiences. The problem lies in the fact that, unlike a consumer’s favorite brand, which they might actively opt in to hear from with the latest news and discounts, typically people only want to hear from an insurer when they need them to solve a problem – and even then, they want to be speaking to them for the shortest amount of time possible. So there’s still very much a ‘what’s in it for me’ attitude when it comes to sharing data with insurers. The solution is to offer something valuable in exchange for data that goes beyond traditional expectations. Apps that use GPS
technology to track car journeys and score the user’s driving ability appeal to young drivers – all the more if they can earn points based on their overall personal performance, as with the app Shotgun. These points can then be used to unlock rewards this demographic values, such as Starbucks vouchers. Health insurers are giving customers free fitness trackers and offering lower premiums
which can help insurers to prepare customers for upcoming incidents, helping to reduce damages and, in some cases, remove the need for a policy payout. Using telematics, we can offer coaching for poor decisions behind the wheel and prevent customers from needing to make claims. As these technologies become adopted more widely, there’s no doubt that before too long, the number of accidents on our roads will plummet. While this is a good thing for society, it also fundamentally changes the premise of insurance from the process of restitution to the service of prevention. Insurers are going to need to be even stronger agents of change in order to remain relevant. One example: Fleetlights, a prototype service of drones to light the way for travelers on unlit roads. The technology behind it is controlled via a bespoke app, meaning users can use their phone to order a drone to light the path for the duration of the journey. This can combat the threat that comes with darker autumn nights – serious pedestrian casualty incidents peak in November at a rate that’s 42% higher than the average low in August. There is no doubt that the IoT will completely transform the way customers
“Interacting with consumers and collecting first-party data from their devices allows for much more frequent, personalized contact” or other benefits for meeting daily exercise goals. We have already seen this with companies like Vitality Health, which was one of the first insurance companies to offer policies based on data gathered directly from policyholders via wearables. Interacting with consumers and collecting first-party data from their devices allows for much more frequent, personalized contact with customers. Better yet, it gives customers more control over their premiums, affording them superior service. The IoT also gives us the opportunity to provide a proactive service and assume the role of consultants. IoT-based analytics can be used to predict future events, such as boiler breakdowns or major weather patterns,
interact with their insurance provider and viceversa; never has there been a better chance to understand consumers through their personal devices and be proactive in meeting their personal expectations and needs. For insurers quick to adopt a customer-centric approach, IoT devices will allow for deeper, longer-lasting relationships with consumers. Those that don’t will risk extinction when hyper-connectivity means customers may no longer need traditional services at all. Mark Evans is the marketing director of Direct Line Group, responsible for several household brands, including Direct Line, Churchill and Green Flag, and one of the highest-spending advertisers in the UK.
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TAKING THE LEAD Ivan Gonzalez talks about becoming North American CEO of Swiss Re Corporate Solutions and why his business unit remains steadfastly focused on growth and innovation
IT’S BEEN just over 12 months since Ivan Gonzalez became Swiss Re Corporate Solutions’ CEO for North America. He took the reins of the North American business at a challenging time for the industry, characterized by a continued downward trend in commercial insurance rates and a persistent low-interest-rate environment, which, along with a fiercely competitive climate, have tested carriers’ ability to make profits and generate shareholder returns. “It’s a very challenging time, for sure,” Gonzalez says. “At the same time, it’s one that is very stimulating because I think it tests your abilities as a leader and manager. I also really endorse the idea that you don’t let a soft market go to waste. You need to take advantage of the current challenging environment to make decisions and position your company for future market conditions that will be more attractive. We need to make sure that we’re ready to capitalize.” A Colombian national, Gonzalez joined Swiss Re 17 years ago and has undertaken roles in Switzerland, the US and Brazil. He was appointed CEO of Latin America for Swiss Re Corporate Solutions in 2011, and under his leadership, the business achieved exponential, high-quality growth. The Swiss Re Group established its Corporate Solutions business in 2010. Today,
it’s one of the top players in the excess layer market in North America. “Naturally, the fact that we have become such a prominent player in the excess layer market means that we need to find other avenues for growth,” Gonzalez says. “We’re now trying to move from the excess layer market and complement our offering with the next segment, which is the primary lead market.”
in Canada,” he says. “That segmentation is very important to us.”
Standing out In addition to the reputation of the global Swiss Re brand, its impressive financial strength and its capacity, Gonzalez singles out claims commitment as a key distinguishing attribute of Corporate Solutions. “We have made a conscious decision to be
“You don’t let a soft market go to waste. You need to take advantage of the current challenging environment to make decisions and position your company for future market conditions that will be more attractive” Gonzalez’s mandate is to determine how Corporate Solutions can expand its primary lead presence in the US and Canada. “In order to do that, I’m focused on the segmentation of our business – making sure that in the US, we have a good product offering and service quality for each segment: excess layers, primary lead, excess & surplus, MGAs, or the East, Central, or West regions … and that we have a fully dedicated operation
very transparent and clear with our clients about what they should expect in the event of a claim,” he says. “We are determined to be recognized as the number-one company in terms of claims processing quality and have consistently received top industry honors in this category.” Gonzalez cites innovation as another integral differentiating feature. “I think the industry talks a lot about inno-
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PROFILE Name: Ivan Gonzalez Company: Swiss Re Corporate Solutions Title: CEO, North America Based in: New York City Years in the industry: 18 Fast fact: Gonzalez holds a masterâ€™s degree in business and international affairs from Columbia University
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vation, but at the end of the day, when you look at the amount of capital that it’s invested in research and development, I think that Swiss Re is – by a very large margin – the company that invests the most in [R&D],” he says. “Through the Swiss Re Institute, we pride ourselves on being at the forefront of innovation within the industry, and I think the industry recognizes that.” Gonzalez says the Swiss Re Group is fully cognizant of the current insurtech landscape and the potential for disruption to different parts of the insurance value chain. “We spend a lot of time trying to understand how we can leverage some of the different ideas that are coming up on the technology
clients, and we also partner with a number of third-party insurtech firms. For the cyber segment in particular, we have a partnership with IBM.” However, Gonzalez also stresses the need to be conscious of the white noise in insurtech. “We really want to distinguish what is hype and what is reality,” he says.
The way forward Now beginning his second year as North American CEO, Gonzalez’s focus for the next 12 months includes examining the efficiency of Corporate Solutions’ operations. “How do we go to market?” he says. “How do we process the information and requests
“We spend a lot of time trying to understand how we can leverage some of the different ideas that are coming up on the technology side and apply that to our business model” side and apply that to our business model,” he says, adding that the goal is to find technologies that will make Corporate Solutions more efficient, more effective and more sustainable in terms of its ability to offer solutions that address clients’ risk-management needs on a consistent basis. “The whole digitalization of our business and the ability to leverage electronic broker platforms is definitely something that we are focused on at this point in time,” he says. Gonzalez also believes the fact that Corporate Solutions is only seven years old gives it an advantage on the tech front. “We don’t have the legacy systems that a lot of our competitors have,” he says. “Big data is something that we can definitely leverage from our underwriting, and you see a lot of that in our innovative risk solutions segment. We do a lot of tailor-made solutions for our
from our clients and brokers? It needs to be significantly enhanced because the market conditions are such that cost becomes one of the key variables for you to manage the cycle. [Also], making sure that … when the market turns, we’re in a better position than our competitors. “Point number two,” he continues, “is making sure that … we’re also focused on innovation and the ability to work with our clients to address [increasingly sophisticated] risk-management needs … and making sure that we can develop the products they need.” Clients can rest easy, though – Gonzalez is confident that Corporate Solutions isn’t going anywhere. “We will not be subject to the volatility of a number of our competitors,” he says. “We really are here to stay.”
SWISS RE CORPORATE SOLUTIONS AT A GLANCE
FOUNDATIONS One of three business units of the Swiss Re Group, which is currently the world’s second largest reinsurer
PREMIUMS Earned net premiums of $3.5 billion in 2016
PRESENCE Has more than 50 offices around the world in over 20 countries
PRODUCTS Offers more than 40 insurance products, with a focus on customized solutions
STRENGTH Swiss Re Group’s ratings include AA- (Very Strong) from Standard & Poor’s, Aa3 (Excellent) from Moody’s, and A+ (Superior) from A.M. Best
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30/08/2017 6:36:41 AM
WHOLESALE E&S MARKET REPORT 2017 As premium surges nationwide for surplus lines in the US, IBA takes a look at what’s driving the market and what lies ahead for the wholesale E&S industry
ALTHOUGH THE future of the US economy is still in question less than a year into a new presidential administration, a changing regulatory landscape on the state and federal levels is expected to gain momentum in the latter months of 2017. Despite economic shifts and uncertainties, the surplus lines market has experienced impressive growth in premiums so far this year, indicating a healthy market for the sector charged with insuring the world’s hardest-to-place risks. While the overall market remains soft, select markets around the country are firming up as the entire wholesale industry becomes more competitive than ever and new and unique products continue to rattle the state of the market. According to the US 2017 Mid-Year Surplus Lines Growth Report conducted by the Surplus Lines Stamping Office of Texas [SLTX], the 15 service offices nationwide reported total premium of $14.3 billion, a
6.6% improvement over 2016. E&S policy items and filings rose almost 11% from last year. Arizona, Utah, North Carolina and Minnesota experienced the greatest premium growth, attributing their successful increases to market changes in property and construction, new and improved business technology platforms, and policy premium increases. The nation’s four primary markets in California, Florida, Texas and New York, which collectively made up $10.9 billion of the total mid-year value, also saw increased premium volume ranging from 5% to 8%. “Across the United States, we are seeing premium increases, with some states even having double-digit increases,” says Norma Carabajal Essary, CEO and executive director of SLTX. “That kind of growth shows me a couple of things: One, it shows an improvement in the economy in terms of purchasing power. But even more so, it demonstrates more of an understanding by
the consumers who actually buy this type of coverage.” While there is no contention that surplus lines is growing steadily throughout the country, Pennsylvania was the only state to note a decrease in premium (0.9%) compared to 2016. However, the Keystone State still has time to reach or surpass its previous year’s volume; in fact, this time last year, four state offices reported premium decreases. The positive change across the board this year is yet another indication of a strong and growing surplus lines market.
Challenges and opportunities Despite the favorable direction the industry is moving in, challenges still exist in this vast market – namely, the challenge of accurately depicting the purpose and function of E&S coverage to consumers. “Just by its name – surplus lines – it can be really hard for people to understand that
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2017 MID-YEAR WHOLESALE PREMIUMS BY STATE WASHINGTON
$398 million 58, 212 items $172 million 27,353 items
$ 1.99 billion 163,689 items
$257 million 22,477 items
$51 million 9,192 items
West: $4.4 billion
$133 million 16,724 items
Mid-year premium by region
$614 million 98,578 items
$131 million 12,064 items
$737 million 70,854 items
Personal Lines l Commercial Lines l Agri-business South: $6.3 billion
$3.2 billion 348,498 items
$357 million 61,188 items
Midwest: $994 million
$269 million 37,456 items
$2.77 billion 516,114 items
$210 million 72,114 items
$2.99 billion 552,510 items
Northeast: $2.6 billion Source: US 2017 Mid-Year Surplus Lines Growth Report
it is insurance,” Essary says. “Our industry is trying to make itself better understood by consumers, and part of that is being more transparent in terms of what surplus lines means, what it does and what it is for. We try to explain it as specialty lines insurance, and people seem to understand that a little
bit better. You really have to explain what surplus lines insurance is, and that is one of the challenges.” Other challenges Essary singles out include the delay in technology pursuits and strategies, and increased merger and acquisition activity. According to Deloitte’s 2017
Insurance M&A Outlook, more than 520 deals were closed in the industry in 2016, totaling $27.3 billion in value. In the final months of 2017, M&A deals are expected to mirror the lively activity that typified the second half of 2016. “During any M&A, one of the things you
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MID-YEAR PREMIUMS: 2016 VERSUS 2017 AZ
$269 million $3.2 billion $3.05 billion $2.99 billion $2.82 billion
CA FL $51 million $47 million
$737 million $712 million
IL $257 million $222 million $210 million $201 million
MN MS NC
$133 million $133 million
$1.99 billion $1.87 billion
NY $172 million $163 million
$614 million $619 million
$2.77 billion $2.57 billion
TX $131 million $103 million
$398 million $379 million
Mid-year premiums 2017
Mid-year premiums 2016 Source: US Surplus Lines Service Offices Mid-Year Assessment
have to be really mindful of is the technology platforms that are present and how to merge technologies and ultimately make advances in the area,” Essary says. “There is an opportunity for the industry to begin using better data and technology that provides a better user and customer experience. I think that if we can bring that value to the buyer, then there’s less to have to really sell at the end of the day.” Another prominent challenge is the growing trend of consolidation by retail brokers. According to Timothy Turner, chairman and CEO of RT Specialty, “[Retailers] are consolidating their use of wholesalers, MGAs, MGUs and binding authorities; that is a very strong and consis-
“Our industry is trying to make itself better understood by consumers, and part of that is being more transparent in terms of what surplus lines means, what it does and what it is for” Norma Carabajal Essary, Surplus Lines Stamping Office of Texas tent trend in the marketplace today. Today, data and analytics are available to most retailers, and as a result of that, they can see the cost of being inefficient and using
too many wholesalers, so they are moving quickly and consistently to consolidate their use of intermediaries in the specialty space.” So how does the industry keep up with the
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trend? Turner advises wholesalers to participate in the consolidation, which has had a positive impact on national wholesalers in particular, as they are able to win new business as retailers move business from smaller intermediaries to larger national platforms. To survive this trend, smaller intermediaries must look into becoming more specialized and developing proprietary products to stay relevant in this marketplace, Turner says. What is clear, however, is that as new risks emerge and new product opportuni-
appetite for risk, they are also increasing limits and continuing to drop rates,” she says. “Capacity is at an all-time high for [earthquakes], although the rate drops have slowed to under 10% in most cases.” In contrast to the neighboring Midwest, the West possesses little worry in the realm of weather exposure, with one notable exception. “We don’t see some of the wind and hail exposures that are relevant in the rest of the country,” Randall says. “This makes the ‘all risk’ that much more appealing to the stan-
“Retailers are consolidating their use of wholesalers, MGAs, MGUs and binding authorities; that is a very strong and consistent trend in the marketplace today” Timothy Turner, RT Specialty ties continue to arise in existing markets, the surplus lines industry will continue to be challenged, but will remain a necessity to the insurance industry overall.
REGIONAL PERSPECTIVES West Out of the 15 surplus lines service offices around the nation, seven are located in the Western states. Because the majority of reported wholesale volume is concentrated in this area, the region provides a window into the current state of the market. The West is also home to the two states with the greatest premium increases this year: Arizona and Utah reported the largest mid-year gains at 28.82% and 26.83%, respectively. Kim L. Randall, executive vice president and property director at Worldwide Facilities, mentions that the West is also experiencing plenty of competition, specifically in the property space. “In addition to the standard markets expanding their
dard markets. We do have flood exposure, but again, not as relevant as in many other parts of the US. Our saving catastrophic exposure here is earthquake, and that keeps the wheels spinning.” Earthquake risks have been a major driver of market competitiveness, Randall adds, and as a result, “premiums continue to go down, but [more] clients [are coming] into the market, as they are getting good limits for premiums acceptable to them.” When it comes to regional trends, Randall says she’s seeing a slight hardening in the large-frame builder’s risk arena, in line with the same trend nationwide. “Carriers are reducing their limits or exiting these projects,” she says. “In some cases, cheaper coverage can be obtained, but this is where the form knowledge comes in – one has to be careful not to be losing significant coverage in exchange for a few pennies. There are a lot of these types of projects being built in the West, so we do see an impact on placements.”
Midwest The Midwest experienced impressive premium growth last year – Minnesota in particular garnered large gains thanks to increases in property and construction liability, according to Essary. Both Illinois and Minnesota collectively experienced a 19% growth in premiums and a 13.3% rise in items in mid-year 2017 compared to 2016. “Generally speaking, the market remains fairly soft, and the conditions are fairly soft,” Turner says. “However, there are some pockets of business that are firming. One of them is clearly commercial auto – the commercial auto market is firming rapidly, as it continues to be a loss leader in the reinsurance world. That has affected almost every commercial standard market and the E&S marketplace.” Other classes of business showing signs of hardening include habitational, long-term healthcare and New York construction, the latter of which, Turner explains, “is a very, very firm marketplace with a very limited group of markets that will entertain those risks.” Although the market is hundreds of miles away, New York construction has an impact on the Midwest because a high percentage of construction business also resides in that region. In addition, national habitational and transportation portfolios affect the Midwest, especially considering the concentration of trucking business in the region. Overall, while the market remains quite soft in most other segments of the business, “the percentage of non-admitted business in the commercial property & casualty space remains quite strong at 10% of the marketplace,” Turner says. “So while it is soft, the flow of business into the channel remains steady.”
South In line with the rest of the nation, the South’s surplus lines premium is continuing its upward trajectory this year.
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r tspecialty.com R-T Specialty, LLC (RT), a subsidiary of Ryan Specialty Group, LLC, provides wholesale brokerage and other services to agents and brokers. RT is a Delaware limited liability company based in Illinois. As a wholesale broker, RT does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from surplus lines insurers. In California: R-T Specialty Insurance Services, LLC License #0G97516. ÂŠ 2017 Ryan Specialty Group, LLC www.ibamag.com 31
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TOP 20 WHOLESALERS, 2017 Working closely with state stamping offices in California, Florida, Illinois, Minnesota and Texas, IBA compiled this list of 20 companies that dominate the nation’s wholesale market from coast to coast. All Risks Ltd. AmWINS Group Inc. Arlington/Roe & Co. Brown & Riding Insurance Services Inc. Burns & Wilcox CRC Swett Crouse and Associates Insurance Services Hull & Company Integro Group Monarch E&S Insurance Services Partners Specialty Group Risk Placement Services Inc. RT Specialty LLC Scottish American Socius Insurance Services Inc. US Risk Insurance Group Inc. Wells Fargo Insurance Services USA Inc. Willis Towers Watson Worldwide Facilities LLC Wortham Insurance
Gary D. Pullen, executive director of the Florida Surplus Lines Service Office, shared in the US 2017 Mid-Year Surplus Lines Growth Report that “the primary factors of [Florida’s] 6% growth for the first six months of 2017 are an improving economy, particularly in housing, and the fact that more policies written are being renewed rather than re-entering the admitted market at the end of the period.” Altogether, the property insurance market in the South continues to be a competitive space, as it encompasses everything from commercial property to coastal and personal homeowner dwellings. “As with most places, [the South] is ultra-competitive,” says Jim Epting, senior vice president and managing director at Burns & Wilcox’s Atlanta office. “I think
to continue to be able to handle that business, considering that the cost continues to rise. The increased commoditization of certain lines of business will also present a major challenge. “I think that’s a big challenge for everyone – just trying to get their arms around what needs to be automated and what needs to be touched by human beings, and ultimately what the best way to handle business is,” Epting says.
Northeast Rounding out the US regions is the Northeast, where the New York and Pennsylvania stamping offices provide insight into the market. While Pennsylvania was the only state in the mid-year assessment to report a year-over-year decrease of
“I’ve been in this business for a few years now, and it’s probably never been more competitive than it is right now in the property marketplace” Jim Epting, Burns & Wilcox when you are talking about the Southeastern part of the country and you are talking about wholesale excess & surplus, you tend to think about wind-exposed property. I’ve been in this business for a few years now, and it’s probably never been more competitive than it is right now in the property marketplace. With all the capital in the industry and the robust data and analytics, it has driven property rates to what I think are historical lows.” Consistent with national industry trends, Epting says the trends he sees in South from month to month are almost a bellwether for what is happening in the surrounding economy. Yet, the big question on his mind is small business and distribution, and how
just under 1%, the New York office experienced a 6.49% increase in premium and a 10.56% increase in items over the same period. “We have been in a soft market for quite some time, and while there may be spurts of growth here and there, the Northeast excess & surplus market continues to soften,” says Elmer Rivera, area president with Risk Placement Services. Namely, Rivera points to transportation and constriction as limited markets where historically high claim activity and state laws have created a legal environment that prevents new markets from coming into the space – however, he adds that there are plenty of opportunities “if you know where to look.”
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In a region that is home to the nation’s oldest infrastructure, replacing the old with the new produces a domino effect in the economy, Rivera says. “Developers reimagine whole neighborhoods, giving birth to a renaissance in areas where 10 years ago, the average person would run away. This rebirth requires building supplies, creates construction jobs, invites high-end and fashionable business startups, and attracts people who look to live in these neighborhoods [and] are willing to pay the high rents that doing so requires.” Right now, more and more standard markets are chasing excess & surplus business, Rivera says, which has resulted in property rates dropping and new competitors coming into play. To keep up, wholesalers are attempting to stay relevant with clients by offering the best products, better commission levels and an improved ease of doing business. With a reported $3.7 billion in excess lines premiums for 2016 in the New York region, Rivera reminds brokers that there is “an abundance of opportunities for the wholesale E&S market. The fastest-growing consumer group – people from diverse cultures – present a virtually untapped opportunity for the insurance industry … wholesalers who are able to tap into these revenue streams will benefit from the fruit of their labors.”
TOP COVERAGES BY PREMIUM VOLUME FOR 2017 FLORIDA
Primary general liability
Commercial general liability
Homeowner’s Commercial package
Excess liability/umbrella/ medical malpractice
$169 million $92 million
General/commercial premises liability
Property – package
$100,000 $200,000 $300,000 $400,000
Average premium amount per policy in rolling 12 months Source: Florida, New York, Texas and California surplus lines stamping offices
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SPECIAL PROMOTIONAL FEATURE
Can you hear me? Does your technology vendor listen to your feedback? If not, Brett Burchett of EZLynx outlines why you should care
LET’S TAKE a trip back to the summer of 2011. Netflix is at the top of its game, taking down industry behemoths like Blockbuster, pioneering video streaming and becoming one of the most disruptive companies of the last decade. However, Netflix was on the precipice of a major decision to increase subscription costs by splitting its DVD and streaming businesses, despite plenty of negative feedback from customers. Netflix chose to ignore its customers’ early reaction and forged ahead with the new subscription model. Within just three months, the company had lost more than 800,000 subscribers, saw its stock value cut in half and became one of the most despised companies in America. Netflix found out the hard way that there’s a fine line between hearing your customers and listening to your customers. As one of the product managers at EZLynx, I have to be consistent in actively listening and never losing my focus on learning from the customer. We try to approach every day with two questions in mind: “What will make modern agencies more successful?” and “How can we help today’s agents solve their day-to-day issues?” I want to take a dive into the product devel-
opment life cycle to help you understand how we approach your feedback and why you should care.
Why it is important to under stand how we approach your feedback? Two of the most influential innovators of our generation famously shared perspectives on the value of listening to customers. Apple’s Steve Jobs said, “A lot of times, people don’t know what they want until you show it to them.” And Akio Morita, the founder of Sony, said, “Our plan is to lead the public with new products rather than ask them what kind of products they want. The public does not know what is possible, but we do.” The problem with this philosophy is that many software companies run with that ideal without seeing the true meaning behind the words. Jobs and Morita weren’t saying companies should completely ignore customer feedback, but rather that they should take a different approach. EZLynx product managers emphasize problem-solving by learning from customers and focusing on three important types of feedback.
1. Feedback. Just like in your agency, customer feedback can come in at any stage of the customer life cycle and from multiple avenues. Our product management team gathers data from all areas of the business, including sales, marketing, customer service and onboarding. 2. Observation. This entails making sure our product team actually spends time talking to and observing customers. In fact, we require our product managers to visit at least one agency per quarter to sit back and listen. It helps us understand what the product means to the agencies who use it most so we can find opportunities to improve the product. 3. Metrics. Customers often jump into solutions, or they do not truly know how to articulate their pain points. Understanding how they use the software from a data standpoint goes a long way in understanding the customer.
When has EZLynx listened to customers? Many companies tout their customer feedback loop, but few actually take any real action on it, and the end result produces cynical customers who have the perception that technology companies don’t care. The product team at EZLynx wants to change that perception one customer at a time by making sure all feedback is actively listened to. 1. Feedback. EZLynx hosted its first-ever user conference this year, called AgentLynx, and we took advantage of the face-toface interaction to better understand our customers’ needs. During the conference, we heard that users wanted ways to save them more time on day-to-day tasks. Based on that feedback, along with other inputs, we are redefining commission tracking, automation and service workflows. 2. Observation. We constantly noticed agents struggling to find ways to improve customer retention rates. Based on that observation, we released a tool called Retention Center, which has raised retention
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There’s a fine line between hearing your customers and listening to your customers rates for our customers by an average of 8%. 3. Metrics. A vocal group of users disliked a major change to managing tasks inside of EZLynx, which had us considering a full rollback of the feature shortly after its release. However, we started looking into the data for how that group was using the feature. We found they were saving time managing tasks and using it more often than the old version. After a short period of time, the complaints turned into adoption and excitement. Without that view, we might never
have kept that feature overhaul in place for our customers.
Why should you care? Every technology vendor will experience a situation on some scale where they didn’t truly listen to customer feedback. The product management team at EZLynx works to balance the three types of feedback as we work to make modern agencies more successful and help today’s agents solve their day-to-day issues.
It’s important to understand that a good technology vendor believes the customer is their most important collaborator and understands the value of continually listening throughout the entire development process. One of the most frustrating things in business – or, for that matter, life in general – is not feeling heard and valued. Frank Eliason summed this up perfectly: “Truly listening is hearing the needs of the customer, understanding those needs and making sure the company recognizes the opportunities they present.” Take a step back and re-evaluate if your technology vendor truly listens and reacts to your feedback, or if the feedback simply goes in one ear and out the other.
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SECTOR FOCUS: CYBER
Inside the cyber boom
The most worrying reality is that highly publicized cyberattacks like WannaCry and Petya only represent a tiny percentage of the attacks that occur every day. Companies of all sizes in every industry are being targeted, and insurers in the cyber space have been forced to rethink their approach in order to keep up.
More organizations than ever are buying coverage, thanks to growing awareness of the impact of a cyber breach IT SEEMS hardly a day goes by without some sort of cyber-related crime or incident grabbing the headlines. The sheer scale of high-profile hacks has piqued the public interest and is starting to raise awareness around an issue that has the potential to cause catastrophic damage to governments, corporations and individual consumers. Whether it’s the Yahoo breach that resulted in the theft of 500 million email addresses, the
leak of then-candidate Emmanuel Macron’s emails days before the French presidential election, or the wide-ranging and multitargeted WannaCry and Petya attacks, there is a growing realization that a cyberattack really does have the potential to significantly impact our lives. The infrastructure and systems that underpin our societies are becoming increasingly vulnerable as cybercriminals hone their methods and sharpen their tools.
NORTH AMERICAN ATTITUDES TOWARD CYBERSECURITY In a study conducted earlier this year by CIGI and Ipsos, respondents were asked how they have changed their online behavior compared to a year ago. 50% 40% 30% 20% 10% 0%
Avoiding opening emails from unknown addresses
Avoiding certain websites
Doing Changing Making Closing Using the SelfUsing Changing Avoiding Cutting fewer fewer Facebook Internet antivirus passwords certain down censoring who you financial communicate online and other less often what software regularly web on the with transactions purchases social applications amount of you say online media online information accounts divulged online Source: 2017 CIGI-Ipsos Global Study on Internet Security and Trust
Responding to today’s threats Ransomware – when a computer or network’s systems and data are encrypted until a ‘ransom’ is paid – remains a favored technique of hackers. As with other hacking strategies, ransomware attacks are growing in severity, and modern variants are now able to not just encrypt data, but also access and exfiltrate it. “That is resulting in the need for more breach notifications – when an organization is mandated to report a breach that could cause significant harm to affected parties and regulators – than before,” explains Kari Stern, senior claims manager at NAS Insurance Services. “With older variants of ransomware, once a system was unencrypted, everyone would be back up and running. But now we have to determine whether or not information was accessed or exfiltrated and if there is the obligation to notify the consumer.” Whether an organization actually has to pay the ransom depends on a combination of factors, including the computer system affected, the company’s backup capabilities and the variant of ransomware virus. Typically, a claims department will put the organization in touch with a vendor who specializes in ransomware and maintains a Bitcoin balance just in case a ransom has to be paid promptly. The vendor will also delve a little deeper into how damaging and how restrictive the breach has the potential to be. In some cases, a company has no other choice than to pay the ransom. A ransomware virus usually enters a computer or network when the user clicks on a link on a website or in an email. Ransomware attacks don’t always involve extortionate
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sums. In the recent Petya event, hackers only demanded $300 for stolen data. Although $300 is nothing to huge organizations, the costs of an incapacitated system can easily climb into the millions. As a result, business interruption coverage has become a common feature of cyber policies; the payout is usually based on net profit loss suffered during the outage, although most policies have different provisions on how those losses are calculated. The emergence of high-profile business interruption induced by ransomware attacks has been a new development in 2017, notes Pascal Millaire, vice president and general manager of cyber insurance for Symantec Corporation. Although Symantec has observed the creation of eight or nine new ‘ransomware families’ each month, the company has identified financial threats as being far more prevalent, although they tend to get less news
“There is a growing awareness from highprofile outbreaks ... that no organization is immune to an attack, and carriers are looking at ways to meet that demand with insurance” Pascal Millaire, Symantec Corporation coverage than ransomware, possibly because they have a less visible impact. “With over 1.2 million annual detections in Symantec’s footprint,” Millaire says, “the financial threat space is 2.5 times bigger than that of ransomware, and some of these attacks can result in substantial insurance claims.” Coverage for notification and breach response costs is a key component of the modern cyber policy. This feature covers the
legal fees of attorneys who will be brought in to assess whether the organization is obliged to notify clients of the incident. If so, the attorney will draft a breach notification that is compliant with the laws and regulations of the state or province where each consumer lives – not where the company is based. It’s likely that a broad cyber policy will provide coverage for a range of costly vendors and services, including credit monitoring,
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SECTOR FOCUS: CYBER
FAST FACTS: THE CYBER INSURANCE MARKET
Cyber insurance volume for the P&C industry grew by 35% in 2016 to $1.35 billion
IT forensics and PR services. Regulations in certain states stipulate that the targeted organization must send out a media release if the data breach or hack surpasses a certain threshold. “Another common type of coverage is related to regulatory defense, which provides coverage in the case of a government investigation into the cause of the breach,” Stern says. “The investigation will determine whether or not an insured was compliant with security protocols, which can also get expensive.”
Getting the word out
demand with insurance.” The surge in cyber claims and the increasingly sophisticated nature of data exfiltrating ransomware variants are, together, pushing up the cost of claims. More notification and credit monitoring expenses are being incurred as the occurrence and severity of incidents escalates. However, the rise in claims costs has been offset somewhat by the specialist vendors and service providers who are flocking to the cybersecurity industry. There are more companies than ever doing credit monitoring and attorneys specializing in breaches. Vendor pricing has become more competitive as a result, which has helped to contain the cost of cyber insurance to a certain extent. However, demand for cyber insurance
The statutory direct loss ratio for cyber insurance improved in 2016 from 50% to 45%
Historically, buyers of cyber insurance were predominantly large organizations in high-profile sectors, such as healthcare and financial services, which understood the risk
The largest cyber insurance writers are AIG, XL Group and Chubb. These three companies had a combined market share of approximately 40% at the end of 2016
“With older variants of ransomware, once a system was unencrypted, everyone would be back up and running. But now we have to determine whether or not information was accessed or exfiltrated” Kari Stern, NAS Insurance Services
The top 15 writers of cyber insurance held approximately 83% of the market in 2016
More than 130 insurance organizations reported writing cyber premiums in 2016 Source: Reuters
of their data being breached. Regulations on electronic health records forced the healthcare sector, in particular, to become an early adopter of cyber insurance. But awareness of cyber risks has spread rapidly in recent years, and organizations in all types of industries are now seeing the value of cyber insurance. Millaire believes that two main factors are driving the boom in cyber insurance adoption. “First, adversaries are increasingly targeting small businesses, which make up over 43% of all spear-phishing attacks, up from 18% in 2011,” he says. “Second, there is a growing awareness from high-profile outbreaks like WannaCry and Petya that no organization is immune to an attack, and carriers are looking at ways to meet that
shows no signs of abating, and market premiums are growing by around 35% per year in the US, Millaire says. In international markets, where cyber insurance policies are being introduced for the first time, growth rates are even higher. Predictably, more carriers are entering the space, hoping to cash in on the cyber boom and relatively low attritional loss ratios. As a result, it’s an increasingly competitive space, with more than 100 insurance organizations selling cyber insurance and more carriers entering the space each year. “The concern is that many carriers are not quantifying aggregation risk with probabilistic cyber catastrophe models,” Millaire says, “and therefore there may be hidden financial risk to the balance sheets of insurers.”
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THEREâ€™S A STRANGER IN YOUR HOME.
And in your computer, your email and even your bank account. Cyber criminals are becoming more aggressive and their attacks more sophisticated.
Introducing Personal Cyber Protection from NAS Insurance. Personal Cyber Plus from NAS Insurance enhances personal lines policies to keep you a step ahead of cyber criminals. This add-on coverage offers cyber risk management, insurance protection and unmatched claims expertise to keep you and your family secure. Thatâ€™s Cyber Strong.
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Gillis, Ellis & Baker Armed with a unique process and a global network, Gillis, Ellis & Baker has thrived for more than eight decades. Chairman Parke Ellis explains how
IBA: In general, what have been some of the biggest challenges your agency has faced in recent years? Parke Ellis: The obvious one is overcoming Hurricane Katrina in 2005. It was a challenge from a claims standpoint; every single one of our clients had a claim. The city was a wreck â€“ we couldnâ€™t get to our office, and we had to work from another city. That will always be a challenge for us; our entire life in New Orleans is now viewed as pre- and post-Katrina. Today, our biggest challenge is perpetuation. We get a lot of phone calls from a lot of interested buyers that are looking to acquire a solid agency. Our commitment to remaining independent has led us to hire nine young producers over the past five years in an attempt to develop [the next generation of ownership].
IBA: What is Gillis, Ellis & Bakerâ€™s process when working with clients? PE: One of the things we learned from Katrina is that getting it right is more important than getting it cheap. We began to structure our sales process around helping clients understand what their insurance policy really provides them. As such, we have a pretty detailed audit process that we put our prospects through. They share with us complete information: financial data, copies of policies, loss runs and more so we can make assessment of
their current insurance program. At the end of the audit, they get back a report that gives them our view of how we would provide and manage their coverage. There are seven steps in our process: introduction, information, evaluation, planning, signing on, management and assessment. Since we started this process 10 years ago, it has significantly increased our hit ratio on the prospects we file proposals with.
IBA: How does your agency approach training and education? PE: When we hire new producers, we generally hire in pairs. While each new producer is also paired with a senior producer to help them learn the ropes, we want new producers to be able to rely on each other as they are going through the learning and training process. We also have a series of seminars for our clients and prospects called GEB University, which covers different topics monthly. Each topic is presented and led by a team that
includes young producers, so it really puts them in a position where they have to stand up in front of a group and talk about technical topics. To do so, they must understand the coverage well enough to explain the topic to a group of people, and that can get a little nervewracking for the young producers. But by doing this, it has dramatically improved their presentation skills, has made them better on their feet and has helped them understand the technicalities of different policies.
IBA: How has being an Assurex Global Partner benefited your business? PE: Assurex is a corporation owned by shareholders throughout the US and internationally, from London to Shanghai and beyond. We are by no means one of the largest agencies in Assurex, but being a partner has allowed us to sit down on a regular basis throughout the year with some of the largest and best-run independent agencies in the country and hear how they are doing things
ABOUT PARKE ELLIS The grandson of founder Gary Gillis, Parke Ellis joined Gillis, Ellis & Baker in 1981. As chairman and producer, Ellis focuses on the entire spectrum of insurance and risk management for his clients, with a specialty in policy audit. In 2016, Ellis received the Lou Daniel Award, the highest honor given by the Independent Insurance Agents and Brokers of Louisiana [IIABL]. The award recognizes an individual who has contributed to IIABL and the Louisiana insurance industry over many years and who clearly rises above the contributions of other valuable association volunteers. Ellis is also the founder of the Louisiana Insurance Academy at Delgado Community College.
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FAST FACTS: GILLIS, ELLIS & BAKER
Founded in 1933
Headquartered in New Orleans
“One of the things we learned from Katrina is that getting it right is more important than getting it cheap. We began to structure our sales process around helping clients understand what their insurance policy really provides them” and incorporate that information into what we are doing here in New Orleans. Because there are so many partners around the world, we have a network of partners we can reach out to if we ever have an issue or question regarding a different nation’s regulation or coverage we may not be familiar with.
IBA: What’s one lesson you’ve learned in your 36 years in the business? PE: The thing that has resonated most for me is that I do much better when I don’t sell
insurance, and instead really help people buy insurance. I know that sounds like semantics, but for me, selling means I will go into the boxing ring with five or six other agents and slug it out, and whoever comes out with the best price or product is going to get the business. I would much rather go talk to a client and say, “I would like to consult with you on your current insurance program and help you make better decisions as an insurance buyer.” For me, helping people buy insurance is better than just trying to sell a policy.
Named the Top Workplace in New Orleans (under 100 employees) by the Times-Picayune in 2017
Established the first Louisiana-based captive insurance company in 2010
IIABA Best Practices Agency
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SECTOR FOCUS: MEDICAL LIABILITY
Being there for clients who care Long-term care facilities are facing many challenges â€“ but, for dedicated brokers, the space represents untapped opportunity 44
MEDICAL MALPRACTICE insurance plays a fundamental role in enabling medical professionals and facilities of all types and sizes to carry out their jobs, safe in the knowledge that any genuine mistake or error will not end in personal or organizational ruin. Various types of individual medical professionals and healthcare organizations require medical malpractice insurance, and the coverage differs significantly depending on the insured. Few groups rely on the specific coverage features as much as longterm care facilities. Itâ€™s fair to say that long-term care facilities are going through a tough period. The aging population is creating a demand for beds and resources that, in many cases, simply arenâ€™t available. In addition, regulations are tightening, competition is increasing, and public perception of long-term care remains neutral at best as high-profile scandals and exposes tarnish the image of the entire industry. Add into the mix the uncertainty surrounding the future of Medicare and Medicaid, and it becomes clear just how challenging a time this is for long-term care facilities. For these organizations, having access to comprehensive and robust insurance policies goes some way toward alleviating the stress of the unknown. For brokers, long-term care represents a good opportunity to grow a book of business in a rapidly expanding space and make a real difference in the lives of the caregivers who are so integral to the comfort and wellbeing of the elderly and infirm. Flexibility, understanding and the ability to deliver customized products are essential skills for any broker eager to achieve success in long-term care.
Leading liabilities Policies in the long-term care space generally include separate limits for a range
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WSIA members take the guessing out of the game. Choose a WSIA member to help you deliver cost-effective, innovative solutions for specialty and nonstandard insurance risks. So cost-effective, in fact, that a recent of relevant and unique exposures, including professional liability, general liability, employee benefits liability, public relations, loss of property and disinfection event expense. Long-term care is filled with complex liability exposures, and insurance plays an important role in providing stability to facilities and giving nurses, doctors and directors much-needed peace of mind. Unlike typical errors & omissions policies, which insure a financial loss component, medical malpractice for physicians and surgeons is more focused on physical harm and long-term disability. “The types of claims are all over the map in the long-term care space, but the primary claims we see are related to bed sores and negligence,” says Jordan Connelly, senior vice president at Worldwide Facilities. “A negligence claim may occur if a patient is left in bed for too long, is administered the wrong drugs or is
Conning analysis of distribution costs concludes that wholesale distribution does not increase the cost of the transaction to the insured. Count on WSIA members to create expertly tailored insurance solutions. Find a WSIA member at wsia.org
“A year ago, I would have received five or six quotes back after sending out what we would deem to be a difficult E&S space risk. A members take the guessing out of WSIAthe membersgame. take the guessing out of the game. This year I am receiving se a WSIA member to help you deliver Choose a WSIA cost-effecmember to help you deliver cost-effecnnovative solutions for specialty and tive, innovative nonstandard solutions for specialty and nonstandard only one or two quotes for ance risks. So cost-effective, in fact, insurance that risks. Soa cost-effective, recent in fact, that a recent the same type of risk” ing analysis of distribution costs concludes Conning analysis of distribution that costs concludes that
N THE IN THE WEEDS? WEEDS?
esale distribution does thedistribution cost does of not increase the the cost of the Jordan Connelly, Worldwide Facilities not increasewholesale
action to the insured. Count on WSIA transaction members to the insured. Count on WSIA tomembers to
e expertly tailored insurance create expertly tailored insurance solutions. dropped when being transferred from a wheelchair or out of bedsolutions. to go to the restroom.”
Find a WSIA member at wsia.org Some of the broader policies on the market include coverage for
Find a WSIA member at wsia.org
defense costs in addition to the limit of liability, punitive damages and a consent-to-settle option. Most carriers who offer the consentto-settle feature place a hammer clause into the agreement in order to protect themselves should the policy be triggered. Coverage for evacuation expenses is also a key consideration for long-term care facilities, which can face hefty bills if they are forced to move patients, their belongings and healthcare equipment in a hurry. “These features are all commonly being offered in the marketplace, but to get all of those together in one policy, you have to work a little harder,” Connelly says. “Brokers have to negotiate to the get GA and NAPSLO have merged to create AAMGA and NAPSLO the havenew merged to create the new esale & Specialty Insurance Association Wholesale & Specialty (WSIA), Insurance Association (WSIA), g the entirety of the wholesale, specialty serving the and entirety of surplus the wholesale, specialty and surplus45 www.ibamag.com ndustry. lines industry.
AAMGA and NAPSLO have merged to create the new Wholesale & Specialty Insurance Association (WSIA), serving the entirety of the wholesale, specialty and surplus lines industry.
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SECTOR FOCUS: MEDICAL LIABILITY
the broadest terms possible.” The biggest concern for long-term care facilities is a lack of beds. Organizations are forced to meet stringent tests and requirements before they can open the doors of a new facility, and although there are new assisted-living facilities opening every day, certain states have a moratorium on new long-term care facilities.
KEY POLICY FEATURES FOR A LONG-TERM CARE FACILITY Occurrence coverage (based on location) Professional liability Defense costs
General liability Consent-to-settle option Employee benefits liability Coverage for punitive damages Public relations Evacuation Property Disinfection event expense Retention options
BEST AND WORST STATES FOR MEDICAL MALPRACTICE CLAIMS STATES THAT PAY OUT THE MOST New York $35.95 Massachusetts
West Virginia $27.22
Amount spent per capita
STATES THAT PAY OUT THE LEAST Hawaii $4.38 Alabama $4.15 North Dakota $3.67 Texas $2.74 Wisconsin $2.46
Amount spent per capita
Source: Diederich Healthcare
Medical malpractice laws vary by jurisdiction, and so does the way insurance is structured and sold. Brokers operating in the long-term care space need to develop a deep knowledge of each state’s rules if they want to grow their business outside their own state’s borders. The litigious nature of certain states makes them a tough place to operate for both long-term care facilities and insurance carriers. “Carriers have been forced to pull out of some states due to of the lack of tort reform and just the increased frequency and severity of claims in the space,” Connelly says. “If carriers don’t have the proper retentions and performance on their book of business in a certain venue, they are pulling out to protect their book. The more difficult states to insure for longterm care would be New Mexico, West Virginia, Kentucky and Florida. Louisiana is also tough, but not as challenging as the other four.” The rise of litigation across the board has made carriers more selective about which coverages they are prepared to write. Although Connelly says she wouldn’t describe the market as hard, she does recognize it’s a difficult space to specialize in. Losses are not trending in a good direction for carriers, and even though new markets are starting to offer medical malpractice insurance, Connelly sees more markets exiting the space. “We do see new markets entering and
trying to fill the void, but carriers are being very selective,” Connelly says. “A year ago, I would have received five or six quotes back after sending out what we would deem to be a difficult E&S space risk. This year, I am receiving only one or two quotes for the same type of risk.” The terms and conditions of long-term care policies are getting tighter, retentions are up for more challenging accounts, and the price of premiums is spiking. Although broad forms are available, insureds are being forced to pay a premium to secure them. “The biggest players in the space are Axis and Ironshore,” Connelly says. “RLI is selective in what they write, but they will step up on some difficult risks. CNA is still in the space, but their appetite is changing. Then you can go down to OneBeacon, TDC Specialty and Medical Protective. There are plenty of insurers willing to write the coverage, but the more difficult venues tend to be a little tricky.” Although the policy documents offered by certain carriers have been standardized, customization is not uncommon, and brokers need to be ready to manage each client on a case-by-case basis. Medical malpractice insurance in the long-term care space has the potential to be rewarding in many ways, including financially, but those rewards are often accompanied by unexpected complexity. If brokers lack experience and knowledge in the space, they run the risk of overlooking some key coverages for their clients. “Find your underwriters who specialize and have expertise in this area, and learn from them,” Connelly advises. “If other brokers in your company specialize in long-term care facilities, go and learn from them; it’s the easiest way to do it. Dig through policy forms, and figure out the differences and how they could impact a client.”
GOING HIS OWN WAY Insurance has always been in his blood, but Ross Dik has left his own mark on the industry
Raised in an insurance family, Dik’s childhood was punctuated by going out on client calls with his father after dinner and – in the days when all policies renewed on January 1 – pitching in to help stuff envelopes during the Christmas season “That was my first taste of the business, and I got it. Going to the office was a treat”
IS RAISED IN THE BUSINESS
CRASHES ON DAY ONE Dedicated to technology, Dik was the driving force behind the agency’s purchase of a new computer, which came with a $78,000 price tag “It was a big deal; we spent months prepping for it – and we crashed on day one. We were trying to be innovative; we were on the early edge of it. This was me, putting my stamp on things. This was where the industry was going”
1995 GETS THE WORD OUT In the years leading up to the new millennium, Dik and his team expended considerable energy spreading the word and adopting new technology “We got pretty good at tech and marketing. We figured out how to message who we are and how to get people to respond to that. Before that, a lot of our marketing was old-time marketing like direct mail. We were early adopters of email and websites; we tied that all together. We developed a full marketing platform”
2011 WELCOMES THE NEXT GENERATION After investigating other careers, Dik’s son decided to carry on the family legacy and join the business “There was no expectation – if he wanted an opportunity, he could have it, but at first he went and did his own thing. Then one day, he showed up and said he wanted to give it a try. It was a slow start, but he’s been working on a specialty, a new branded division, and it has taken off ”
FINDS HIS OWN SPACE After college, Dik went into the family business, but he chose to forge his own path within it “Much to my father’s dismay, I didn’t start until two weeks after graduation – I was meant to start the Monday after graduating on Saturday! My first three weeks at the office helped me find my own place and space. What we did – workplace personal lines – was new; we got in early. We did one thing, and we did it really well”
REINVENTS HIMSELF After seeing the workplace program wane over the years, Dik realized a change was in order
“We realized we had to work hard at being more traditional, more producer and salescentric. It really was disruptive at the time; it wasn’t easy to get new partners. We had to hire more salespeople, and that wasn’t in our wheelhouse – we had our bumps and bruises, but we turned it around” 2002 JOINS AN AGGREGATOR Signing on with the aggregator network Insurance Services of New England opened up new paths for Dik “I was fortunate. I was offered the opportunity and ultimately selected to be part of the aggregator ... we gained considerable access to a lot of carriers and the support of 48 other agents”
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Z uccarello owns 12 guitars – he buys one a year
Estimated number of weddings Zuccarello has played
THE WEDDING SINGER On weekends, it’s not unusual to find Frank Zuccarello crooning love songs to brides and grooms
FRANK ZUCCARELLO, a partner at New Jersey-based Exceptional Risk Advisors, traces his love of entertaining to winning the lead role in the school production of Fiddler on the Roof at the age of 11. As a teenager, Zuccarello – who started playing guitar when he was 8 – performed in bars around his native New York, despite being so young he was not legally permitted on the premises. While simultaneously building his insurance career in the ’90s, Zuccarello discovered that the wedding circuit was far more lucrative. Zuccarello and his band, The Frank Terris Orchestra, typically played four weddings per weekend, during which he
100 to 150 Weddings Zuccarello would play annually at his peak
Performances of perennial favorite “Brown Eyed Girl”
witnessed many excruciating best man speeches, numerous guests passing out at the reception, and once, tragically, the father of the bride being wheeled out of the reception on a gurney after having a heart attack on the dance floor. “It’s very intimate when you’re the wedding singer,” he says. These days, Zuccarello only plays with the band occasionally, but he makes a point of joining them for the father/daughter dance at a Westchester, New York, school every year. “That’s the one thing I don’t want to retire from,” he says. “I’ve never missed a year. I’ve been doing it so long, the girls that were born the year I started playing that dance are now seniors at the high school.”
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