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IBAMAG.COM ISSUE 7.07 | $12.95

THE CYBER EVOLUTION What brokers need to know about the latest cyber trends and exposures

FINANCIAL INSTITUTIONS

A closer look at their biggest risks, from data privacy to D&O

NAVIGATING MARINE

How to win business in a notoriously difficult segment of the industry

CHAMPIONING DIVERSITY Sedgwick CEO David North on how he’s built an inclusive culture Lorem ipsum

FIVE-STAR WHOLESALE BROKERS ON CARRIERS 2019 BROKERS & MGAs

AR RS

Where did carriers exceed expectations – and where did they fall short?

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ISSUE 7.07

CONNECT WITH US Got a story or suggestion, or just want to find out some more information? twitter.com/InsuranceBizUS

CONTENTS

plus.google.com/+Ibamag facebook.com/InsuranceBusinessUS

34 Lorem ipsum

UPFRONT 04 Editorial

Autonomous vehicles are coming – is insurance ready?

06 Statistics

Key data that should be on your radar this month

AR RS

Head to head FIVE-STAR08 WHOLESALE Which insurance line is poised to grow during remainder of the year? BROKERS &theMGAs GETTING FEATURES

SERIOUS ABOUT CYBER

SPECIAL REPORT

24

The newest cyber threats your clients should be aware of – and how to provide cover for them

10 News analysis

Checking in on insurers’ digital transformation journeys

12 Intelligence

This month’s big movers, shakers and new products

14 Workers’ comp update

Examining the peaks and valleys of the US workers’ comp market

16 Technology update

Brokers reveal how their carriers are performing in eight key areas, from underwriting expertise and quote turnaround to rates and product range

38 FEATURES

Building a strong agency brand starts with your people

PEOPLE

RIGHT ON THE MONEY

FEATURES

BROKERS ON CARRIERS 2019

INDUSTRY ICON

In his 24 years at the helm of Sedgwick, David North has grown the company into a global behemoth that remains committed to diversity and inclusion

20 2

How to use cyber risk modeling to cater to clients’ needs

18 Opinion

Higginbotham’s John Huggins and LaJean Walton outline some of the biggest risks facing financial institutions today

44 How to do one thing at a time Seven tips for honing your focus in today’s distraction-filled world

PEOPLE 47 Career path

Her innate empathy made Melissa Hill a natural fit for claims

FEATURES

40

SINK OR SWIM

Despite a decreasing loss trend, the marine insurance space remains challenging for insurers and brokers

48 Other life

On the mound with insurance VP and former MLB pitcher Mike O’Connor

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Put partners first.

We do. Collaboration with partners to take their business to the next level. Partnerships that span 35 years.

E&S/Specialty nationwideexcessandsurplus.com A.M. Best rating of A+ (Superior), FSC XV Fortune 100 company Nationwide and the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company. Š2019 Nationwide

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UPFRONT

EDITORIAL

Driving changes in insurance

R

emember when CDs replaced the cassette tape? When the DVD supplanted the VCR? Or the birth of the iPod? All of these technologies have subsequently been usurped, too – and now change is coming to the seemingly ultra-modern cars we drive. In April, during Tesla’s Autonomy Investor Day, CEO Elon Musk told attendees that the company planned to have more than a million self-driving “robotaxis” on the road by next year. Coinciding with this autonomous push, Tesla has also dipped its toes into insurance circles, outlining plans to launch its own insurance product and announcing a partnership with Markel subsidiary State National Insurance Company. “As new technologies [develop], particularly around self-driving … there is [an opportunity] to jump into the insurance space in some way, shape or form and offer that product, and potentially soak up some of the market share for Tesla,” Ian Sweeney, general manager of mobility at insurtech startup Trov, told Insurance Business America in June.

It’s clear that autonomous vehicles are coming. What’s less clear is the impact this will have on insurance and claims Regardless of what Tesla does next, it’s clear that autonomous vehicles are coming. What’s less clear is the impact this will have on insurance and claims. In theory, autonomous vehicles are designed to make driving safer and reduce claim numbers – but that might not always be the case. “There is some evidence already that the technology that’s being used to drive the vehicles autonomously ... is quite expensive, so when you have a collision, that technology is damaged and is very, very expensive to replace,” Karl Gray, Zurich’s global head of motor and retail lines, told IBA. Then there’s the cyber risk issue. “New vehicles will be connected to the cellular network, they’ll be connected to GPS, they’ll be connected to other vehicles, and probably to some extent, [they’ll] be connected to the infrastructure,” Gray said. “That will lead to a substantial increase in the potential risk to cyber exposure because if someone has the ability to hack into the networks, then there’s a risk because they could control the vehicle.” Simply put, autonomous driving has the potential to reinvent auto insurance, transferring liability from the driver to the organization behind the technology. As a broker, it’s time to start educating yourself on this emerging risk topic now – because as history proves, technology doesn’t wait for anyone. The team at Insurance Business America

www.ibamag.com MAY 2017 EDITORIAL

Managing Editor Paul Lucas Journalists Alicja Grzadkowska, Lauren Ingram, Nicola Middlemiss, Bethan Moorcraft, Ksenia Stepanova News Writers Lyle Adriano, Krizzel Canlas, Terry Gangcuangco, Mina Martin, Gabriel Olano Staff Writers Tom Goodwin, Libby MacDonald, Joe Rosengarten, Ryan Smith, Heather Turner Copy Editor Clare Alexander

CONTRIBUTORS Lindsey Elias, Aytekin Tank

ART & PRODUCTION Designer Joenel Salvador Production Manager Alicia Chin Traffic Manager Ella Dayandante

SALES & MARKETING Vice President, US Market Cathy Masek Vice President, Sales John Mackenzie Media Sales Managers Chris Anderson, Desiree McCue Global Head of Communications Lisa Narroway

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley President Tim Duce Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil Editorial Inquiries paul.lucas@keymedia.com Subscription Inquiries subscriptions@keymedia.com Advertising Inquiries cathy.masek@keymedia.com, chris.anderson@keymedia.com, desiree.mccue@keymedia.com Key Media 78O7 E. Peakview Ave., Suite 115 Centennial, CO 80111, USA tel: +1 720 316 0151 www.keymedia.com Offices in Denver, London, Toronto, Sydney, Auckland, Manila, Singapore, Seoul

Insurance Business America is part of an international family of B2B publications, websites and events for the insurance industry Insurance Business Canada john.mackenzie@kmimedia.ca T +1 416 644 874O Insurance Business UK luther.rahman@keymedia.com T +44 20 7193 0935 Insurance Business Australia peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business NZ peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business Asia peter.smith@keymedia.com.au T +61 2 8437 47OO Printed in Canada Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.

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18PH


UPFRONT

Let’s Let’s talktalk niches. niches.

EDITORIAL

SpecialSpecial events events and business and business services. services. Transportation Transportation and fuel. and fuel.

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UPFRONT

STATISTICS SHIPPING LOSSES DECLINE

16

IRELAND

88.2 13

CANADA

90.2

10

UNITED KINGDOM

91

46

19

Number of large ships lost worldwide in 2018

BELGIUM

86.8

SCANDINAVIA LEADS THE WAY IN RESILIENCE

98

Number of large ships lost worldwide in 2017

10

Weather-related shipping losses in 2018

The Nordic nations beat the field when it comes to the resilience of their business environments, according to the FM Global Resilience Index, which scores countries on a scale of 0 to 100 based on factors such as economic productivity, political stability, corporate governance and natural hazard exposure. Haiti, Venezuela and Ethiopia came in at the bottom of the list. In the US, the central and eastern regions (which came in at numbers nine and 11, respectively) scored better than the West, which ranked 21st.

Weather-related shipping losses in 2017

UNITED STATES CENTRAL

92.4 11

UNITED STATES EAST

91

INSURANCE LINES WITH THE BIGGEST RATE INCREASES In its mid-year update of its 2019 rate forecast, USI predicted that rate increases in certain lines, including property, auto, D&O, management liability and aviation, will be even higher than estimated at the beginning of the year.

Property, non-catastrophic with

15% poor loss history

10% to 40%

CAT property with minimal loss history

5% to 20%

Umbrella and excess liability

10% to 40%

CAT or non-CAT property with poor loss history

10% to 30%+

Public company D&O

Flat to 15%

Primary general/ products liability

5% to 10%

Private company management liability

5% to 10%

Primary automobile liability with good loss history

10% to 25%

Aviation

10% good loss history

20

9

Primary automobile liability with

Source: Safety & Shipping Review 2019, Allianz Global Corporate & Specialty source: Commercial Property & Casualty Market Outlook Mid-Year Market Forecast, USI

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M&A CLAIMS BECOMING MORE SEVERE

NETHERLANDS

89.1 5 1

The number of $10 million+ claims in M&A insurance has more than doubled in the past year (from 8% to 15%), according to AIG’s latest analysis of warranty and indemnity claims. At the same time, the sector has seen declining rates and broadening terms and conditions, which has presented challenges for insurers.

FINLAND

94.3

NORWAY

100 4

GERMANY

96.6 2

M&A WARRANTY AND INDEMNITY CLAIMS BY SIZE

DENMARK

97.2 20

15%

CZECH REPUBLIC

$10 million+

86.7 7 6

18 LUXEMBOURG

94

HONG KONG

88

44%

SWEDEN

94.1 8

3

AUSTRIA

SWITZERLAND

97

93.6 14

12

$1 million to $10 million

NEW ZEALAND

90.4

FRANCE

91.1 17

41%

AUSTRALIA

88.2

$100,000 to $1 million Source: Taxing times for M&A Insurance, AIG, 2019

Source: FM Global Resilience Index, 2019

LINES WITH FALLING RATES Workers’ comp, commercial construction and environmental pollution were among the lines that USI’s mid-year rate forecast predicted would continue to see flat or falling rates or modest increases.

10% to

5%

Workers’ comp, guaranteed cost

3% to

3%

Workers’ comp, loss sensitive

WHAT’S DRIVING M&A CLAIMS? The most common claims in the M&A space revolve around financial statements, tax and compliance, although AIG’s analysis of the sector found some regional variations: Tax tends to dominate in Europe and the Middle East, while litigation is a major driver of claims in Asia-Pacific.

M&A WARRANTY AND INDEMNITY CLAIMS BY TYPE 20%

5% to

5%

Commercial construction

Flat to

5%

Network security and privacy (cyber)

10%

5% to

5%

Environmental pollution legal liability

5%

Flat to

10% Environmental contractors pollution source: Commercial Property & Casualty Market Outlook Mid-Year Market Forecast, USI

15%

0%

19%

18%

Financial statements

Tax

15%

13%

9%

7%

7%

6%

4%

Compliance Material Employee- Intellectual Litigation Operations- Environwith laws contracts related property related mental

1% Fundamentals

Source: Taxing times for M&A Insurance, AIG, 2019

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UPFRONT

HEAD TO HEAD

Which line will grow the most during the rest of 2019? Property & casualty has enjoyed healthy growth during the first six months of the year, but can it keep the momentum going?

Mike Quigley

Head of property underwriting, reinsurance division Munich Reinsurance America “As a property underwriter, I would like to say that personal and commercial property lines will grow fastest due to rate increases attributable to the severe drag that natural catastrophes have had on results over the last two years. However, commercial auto is most likely to grow fastest due to the continued need for material rate increases, as well as rising demand for coverage due to a strong US economy. For example, the Council of Insurance Agents & Brokers’ first-quarter 2019 survey found that 39% of respondents observed an increase in demand for commercial auto coverage during the period.”

Martha Bane

Managing director, property practice Gallagher “With hurricane season following hot on the heels of unprecedented spring flooding, I predict we will see tremendous growth in flood insurance in the second half of 2019. Flooding is the most common and costly natural disaster, with more than $54 billion in losses to the US economy predicted this year. Most surprising is that a quarter of insurance claims actually come from outside high-risk flood areas. So there is urgency now to review risk for damage caused by flooding, either through private-market flood solutions or the NFIP, where a 30-day waiting period may apply.”

Kyle Samuel

President M&T Insurance Agency “The answer is contingent upon whether you define growth as premium increases driven by rate or total policy count. In terms of policy count, cyber will grow the fastest. Recent ransomware attacks have made national news, prompting businesses to take notice. Furthermore, many businesses don’t currently purchase cyber, and the increased awareness and maturity of the coverage, along with technological innovation, will impact demand. Regarding rate, while not a hard market yet, there is a continued push from carriers to focus on underwriting profitability and deploying capacity more efficiently. We’re seeing hardening of markets in property, auto and excess casualty.”

P&C ON THE RISE As of mid-June, the P&C sector was enjoying strong performance due to a lull in catastrophes, among other factors, according to Yahoo Finance. P&C insurance recorded a gain of 3.1% during the first six months of the year, putting it well ahead of the finance sector overall, which saw just a 0.2% bump. Following several years of soft pricing, insurers began hiking rates late last year – in the first quarter of 2019, both personal and commercial lines saw increases of around 2%, while commercial auto experienced a 7% rate increase. Yahoo Finance predicts that most commercial insurance lines will continue to see rate increases throughout the remainder of the year.

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UPFRONT

NEWS ANALYSIS

Digital upheaval Taking the first step on an often multi-year path toward digital transformation pays off in the end – but for each insurance company, that journey will look a little different

THE NEED to retire legacy systems, combined with the pressure of changing consumer expectations and the rapid pace of technology innovation, is pushing insurers to undertake digital transformation journeys to serve clients better and improve behind-thescenes efficiencies. That journey will look a little different for each company, depending on what pain points they have and what they hope to accomplish at the end of the day. At StarStone Insurance, the focus has been on artificial intelligence. “Brokers are entering data in our systems, they’re classifying risks, and we’re relying on their expertise to properly classify a risk,”

For instance, StarStone’s AI capabilities will catch if a broker classified a ‘family’ restaurant as one that doesn’t serve alcohol. However, that same restaurant could serve alcohol on the weekends, which means the risk hasn’t been accurately captured. “Understanding that nuance through AI has been transformative for us. It’s allowed us to cull our book of many risks that we otherwise would have written,” Cadet says, adding that the new capabilities haven’t changed StarStone’s broker-facing interface, which remains as seamless as ever. Another step in StarStone’s transformation has been getting a better understanding

“[Artificial intelligence] has allowed us to cull our book of many [inaccurate] risks that we otherwise would have written” Kardiner Cadet, StarStone Insurance explains Kardiner Cadet, senior vice president of StarStone’s e-commerce division. “At times, either because they’re moving very fast or because they don’t have enough knowledge of how to classify a risk, they may misclassify a risk. We’ve implemented artificial intelligence to confirm what they’ve entered in the system.”

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of the data the company has in its systems. “Having access to the data has allowed us to have insights that we otherwise would have never even thought of,” Cadet says, pointing to a statistic unearthed by data analysis, showing that within three days of when a broker starts binding, a deal often falls off the table, which means the broker can get more out of an

account within those first few days. It’s been three and a half years since StarStone embarked on its digital transformation, and the company has learned a ton during that time. “Initially when we started doing the AI work, we opened the floodgates,” Cadet says. “I wanted to know everything there is about these risks, which is good to know, but does it really matter? All of this extra information was flooding us, and it was preventing us from actually looking at what really matters.” Axis Capital has gone through its own transformation, which Darryl Catts, Axis’ CIO of insurance IT, presented on in detail at Duck Creek’s Formation ’19 conference earlier this year. The past four years have been full of change for Axis as it upgrades its platforms, looping in various applications and allowing its partners to write more profitable business

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DIGITAL TRANSFORMATION IN INSURANCE

90%

of insurance executives believe they have a coherent technology plan in place

63%

believe cloud-based technologies designed to improve operational efficiency are having the most impact on insurance companies today

53%

think customer-facing blockchain is the technology that will have the most impact on insurance companies in three years Source: Digital Transformation Is Remaking Insurance, Accenture, January 2019

while also being more efficient. “One of the major things we’ve seen with our underwriting is that we’re able to shift

with the brokers directly, write more business and do the things they really need to do to expand their book even more profitably.”

“One of the major things we’ve seen ... is that we’re able to shift work from underwriters ... to our operations group” Tim Bibler, Axis Capital work from underwriters in the system, who are keying in things and generating policy documents, to our operations group,” says Tim Bibler, VP and North American IT business lead at Axis Capital. “We have the operations folks now doing those tasks that they were doing in the legacy applications, which is freeing up the underwriters to go out and deal

When undertaking such a big transformation program that necessitates multiple work streams, Bibler admits that challenges are inevitable. “We knew we were going to have, being in the specialty business, pretty complex custom specialty products,” he says. However, Axis was able to build out its technical and

marketable products “and then take things like coverage for cyber and very quickly apply it to other marketable products.” Before starting a digital transformation journey, it’s crucial that all team members are on board, from the top of the organization all the way down. “When you have these great ideas, you assume that people will immediately buy into this fantastic idea, but quite often, they don’t understand what you’re doing and they may not even trust that it’s coming from a good place because there have been so many people who’ve implemented technology with the approach that they’re going to cut out humans,” Cadet says, adding that it’s important for executives to communicate to their teams that there’s nothing to fear. “We just want them to make decisions faster with better data and more consistent data.”

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

AmWINS Group

Atlantic Risk Specialists

AmWINS will pick up two ARS entities: Atlantic Risk Specialists and ARS-Latiff

Gallagher

MDV Wealth Planning

MDV sells and places life insurance products and provides wealth planning

The Hilb Group

Pfister Insurance

Delaware-based Pfister offers business, auto and home insurance to Mid-Atlantic clients

Hub International

In-Fi

The deal gives Hub access to In-Fi’s insurance distribution platform for financial institutions

Integrity Marketing Group

Emrick Insurance Marketing Group

The Illinois-based Emrick Group markets Medicare Advantage and Medicare Supplement products

Risk Strategies

Creative Insurance Solutions

The deal expands Risk Strategies’ Mid-Atlantic footprint and expertise in high-net-worth insurance

Red Shield introduces flexible auto insurance

Red Shield Protection is giving drivers more flexibility over coverage and rates by sorting its auto protection plans into three basic programs. The first two provide coverage to vehicles according to mileage (below or above 100,000 miles), with options to cover some or all of the parts and components not specified in the car’s warranty package. Customers can manage their insurance premiums according to their chosen options. The third program is designed to give car owners an option to take out short-term insurance policies for their vehicles.

Risk Strategies scoops up DC area firm

National insurance brokerage and risk management firm Risk Strategies has acquired Creative Insurance Solutions, which specializes in providing insurance and risk management programs to successful individuals and families. Founded in 2006 by Steven Bender, Creative Insurance Solutions has offices in Potomac, Maryland, and Washington, DC. The firm offers customized insurance solutions in a range of areas, including primary and secondary residences, private collections, identity theft, lost income, and kidnap and ransom. “When evaluating potential partner organizations, we seek out specialization, expertise and a smart, entrepreneurial spirit,” said Bob Courtemanche, national private client practice leader for Risk Strategies. “Steven and his organization ticked all of those boxes and will be great additions to our efforts in the region and the practice.”

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Travelers adds wildfire endorsement in California

Travelers has augmented its home and landlord policies in California with a wildfire defense services endorsement. The endorsement is included at no additional cost and provides an extra layer of wildfire protection for policyholders. Travelers is working with wildfire mitigation firm Wildfire Defense Systems [WDS] to help provide loss prevention services for homeowners, including reducing potential fuel sources, taping vents and applying fire retardants. WDS also uses proprietary forecasting and threat analysis to identify Travelers customers who could be impacted by a wildfire.

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PEOPLE Aon devises crypto insurance for banks

A panel of London insurers arranged by Aon has agreed to offer a crypto asset crime insurance product to financial institutions that use Metaco’s SILO wallet-management solution to protect digital assets from losses resulting from damage, destruction or theft. The arrangement will simplify the underwriting process for both insurers and SILO users. “Aon is pleased to have pioneered the formation of an insurance solution covering theft of crypto assets for the benefit of Metaco’s customers while utilizing the SILO platform,” said Jeff Hanson, a director for Aon’s UK financial services team.

Aspen Insurance launches broad cyber platform

Aspen Insurance has launched SSIMPLE, a new cyber risk management platform. Designed to serve as a holistic solution for the firm’s cyber insurance clients, the platform includes existing components of Aspen’s Apex insurance policy and incident response capabilities, with added pre-incident services. According to Josh Ladeau, Aspen’s global head of tech E&O and cyber, SSIMPLE gives clients “a comprehensive breadth of services, ranging from data leakage identification to zero-day protection and vendor assessment.”

Zurich offers hurricane deductible buy-back

Zurich North America has launched a hurricane deductible buy-back program for Florida homeowners. Born from the insurer’s partnership with Vertus Insurance Partners, the Cat4Home program covers 100% of the hurricane deductible and is available on homes with a value of up to $5 million and hurricane deductibles ranging from $1,000 to $100,000. “After experiencing a hurricane, the last thing homeowners need to worry about is how they will come up with enough money to cover their hurricane deductible,” said Greg Massey, Zurich North America’s head of programs.

NAME

LEAVING

JOINING

NEW POSITION

Tom Fadden

N/A

Allianz Global Corporate & Specialty

Kris Hill

N/A

QBE North America

President of alternative markets

Ulrich Kadow

N/A

Allianz Global Corporate & Specialty

Global head of marine

Conny Kalcher

MindFolio

Zurich Insurance Group

Chief customer officer

Leah Koontz

Arrowhead General Insurance Agency

Worldwide Facilities Marine

Senior associate broker

Alan Lange

Homesite and Universal North America

SageSure Insurance Managers

Vice president and homeowners pricing actuary

Steve McMurray

BGC Partners

Liberty Special Markets

Chief financial officer

Elizabeth Schenk

Keystone Insurers Group

Agency Network Exchange

CEO

Tawana Scott

DTRIC Insurance

Lockton Midwest

Senior vice president and employee benefits consultant

Andrew Souter

Willis Re

Pioneer Underwriting

Head of capital

Brian Specht

Aon Affinity US

Coalition

Head of affinity

Joe Sweeting

Vibe Syndicate 5678

AXIS Re

Head of Lloyd’s casualty reinsurance

Kirt Walker

N/A

Nationwide

CEO

Global head of aviation

Worldwide Facilities adds new marine broker

Worldwide Facilities Marine has named Leah Koontz as a senior associate broker. Koontz has more than two decades of experience in marine insurance, starting out as a yacht underwriter for Inamar. She also served as a commercial ocean marine broker for Arrowhead General Insurance Agency and Trafalgar Insurance Agency, where she managed commercial books of business and formed relationships with brokers and carriers across the country. “I plan to continue servicing my past relationships and to bring many of them to Worldwide Facilities,” Koontz said. “I am so excited to be part of their marine team and look forward to a successful future.”

Liberty Specialty Markets names new CFO

Liberty Specialty Markets [LSM], a division of Liberty Mutual, has appointed London-based Steve McMurray as its new chief financial officer. Prior to joining LSM, McMurray served as CFO for BGC Partners, a global brokerage business. Before that, he spent nine years as director of finance at MS Amlin. “I’m delighted that Steve is joining Liberty Specialty Markets,” said Matthew Moore, president and managing director of LSM. “His experience will be used to drive our finance capability across the LSM group, and he will make a significant contribution in ensuring LSM achieves its ambition to become a high-performing financial services organization of the future.”

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UPFRONT

WORKERS’ COMP UPDATE NEWS BRIEFS Texas Mutual funds safety courses at state colleges

Texas Mutual Insurance Company has announced that it is awarding $1.1 million in grants to 11 colleges across the state. The grants will be used to fund workplace safety courses for employers, workers and the general public. Since 1999, Texas Mutual has awarded $7.7 million in safety education grants, enabling more than 30,000 people to attend free safety institutes at various colleges. “We are happy to continue our support to these colleges,” said Texas Mutual VP Eric Bourquin. “These safety courses demonstrate our commitment to creating a stronger, safer Texas.”

Florida pain clinic owner gets jail time for Medicare fraud scheme

The owner of two pain clinics and a pharmacy in South Florida has been sentenced to 78 months in prison for his role in a $2.2 million Medicare fraud scheme. In addition to jail time, Scott Novick of Hollywood, Florida, was ordered to repay approximately $1.4 million to Medicare. Novick was the owner of American Pain Management, which had locations in Broward and Palm Beach counties, as well as Pacific Pharmacy, located in Miami. 

NCCI takes a closer look at closed drug formularies

As states battle against high prescription drug costs and an ongoing opioid crisis, several have turned to closed drug formularies as a pharmacy utilization tool for their workers’ comp programs. A recent study by the National Council on Compensation Insurance [NCCI] examined the implementation of such formularies in

14

two states, Arizona and Tennessee, and found that prescription drug utilization decreased across all categories of drugs, regardless of whether they required prior authorization. However, the NCCI noted that formularies had limited impact on opioid utilization in the early period after implementation.

MEMIC awards scholarships to injured workers’ children

MEMIC Group of Portland, Maine, has awarded $20,000 in scholarships to three children of workers who suffered serious workplace injuries. The Mainebased recipients – Dylan Collin of Trenton, Benjamin Ruest of Madawaska and Henry Laurita of Hope – received the 2019 MEMIC Harvey Picker Horizon Scholarships at the firm’s annual meeting of policyholders. “While it’s MEMIC’s mission is to protect lives and prevent workplace injuries in the first place, the resilience of these students is truly impressive, and we hope these scholarships will lead to a brighter future for them and their families,” said MEMIC president and CEO Michael Bourque.

Sign installer convicted of double-dipping fraud

Ricky Allen Martinez of Sugar Land, Texas, has been convicted of workers’ compensation fraud by a Travis County district court. Martinez had reported a job-related injury while working as a sign installer for Houston-based Graphtec. He claimed the injury prevented him from working and began receiving benefits from Texas Mutual Insurance Company, which later discovered he was working as an installer for another company. The court sentenced Martinez to state jail with five years deferred adjudication and ordered him to pay more than $26,000 in restitution to Texas Mutual.

The ebbs and flows of workers’ comp Workers’ comp is enjoying an extended period of stability, but the sector will remain cyclical The workers’ compensation system in the US is in good shape. Insurers have been enjoying favorable returns for the past seven years, mirroring the country’s post-financial crisis recovery. Bill Donnell, president and CEO of the National Council on Compensation Insurance [NCCI], describes the market as “stable, solvent and performing very well.” In 2018, the workers’ comp sector recorded a combined ratio of 83%, and the frequency of claims continues to decline as workers and workplaces become safer and new technology enables better decision-making. “Insurers have enjoyed seven straight years of positive financial performance, which is an unprecedented record, but it’s not just a sevenyear trend when it comes to loss frequency,” Donnell says. “It’s really more of a 20+-year trend, where loss frequency has declined nearly every year. “On top of that, the industry has done a pretty good job of controlling the medical side of the equation – and that includes prescription drugs,” he adds. “Relative to opioids, there are now some relatively good controls around when opioids should be prescribed. It’s still not perfect, but I would say the workers’ compensation industry is probably in front of group health, and that’s playing out in muted medical costs. Fewer losses coupled with medical claims where the inflation rate is muted – that’s all contributing to these positive results.”

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So will this declining loss frequency lead to the end of the industry’s cyclicality? Donnell says there will always be ebbs and flows in competitiveness, capital and interest in writing business. Some years will reap greater profits, while others will be less profitable – and that’s not going to change.

“There are things that could potentially mitigate the severity of peak-totrough results” However, “in terms of big market swings, while I can’t predict the future, I can say there are things that could potentially mitigate the severity of peak-to-trough results,” he says. “Most of it revolves around technology. The speed of data that’s available relative to feedback loops on pricing has accelerated. Technology has enabled shorter and faster feedback loops, which means insurers can react to data and make decisions much quicker.” When the market is soft and premiums are stable, it can sometimes be difficult for brokers and carriers to differentiate their offering. This is where advocacy for the injured worker really becomes important, Donnell says. “Employers really know when brokers put them front and center. This industry exists to help injured workers and restore their lives. Our aim is to get injured workers back to health and back into work as quickly as possible, and it’s important for brokers to keep that top of mind. “Employers also want expertise,” he adds. “It’s an important to be as knowledgeable about the business as possible so that you can bring that expertise and value to the employer.”

Q&A

Melissa Burke Head of managed care and clinical AMTRUST FINANCIAL

Years in the industry 5 Fast fact Chronic pain affects more than 100 million Americans every year

Oppressing opioid use Tell us about AmTrust’s partnership with Optum to reduce opioids prescribed to injured workers. It’s been successful so far. We started the program in June 2018, and we’ve already reduced the number of prescriptions containing opioids by 13,000 compared to the prior year. The percentage of workers’ compensation claims with prescriptions containing opioids went down from 60% in Q4 2017 to 25% in Q4 2018.

How have you achieved these reductions? We’ve done this with multiple proactive tools. One is having a preferred alternative drug list, and another is the nurses that we have onboard. At AmTrust, we value our adjusters immensely, but they don’t all have the same pharmaceutical background and education that a trained nurse would have. Our adjusters are partnering with licensed nurses at Optum to review prescriptions to determine if medications are safe and necessary. This ensures appropriate medication management for our injured employees and has had a powerful effect on reducing the amount and duration of opioid use among the employee populations of the companies we insure.

What are some of the wider impacts of the opioid epidemic on the workers’ compensation industry? The workers’ compensation industry has been vulnerable to the opioid epidemic from the start. Unfortunately, the use of opioids tends to lead to the use of additional opioids. Tolerance grows to the pain relief, so injured workers up their dosage, and then the more opioids they take, the more medications they need to take to counteract the side effects associated with opioid usage. It’s a bad cycle, and it leads to injured employees spending more time out of work, which has a negative impact on claim outcome.

How much progress has been made in terms of alternative care options? As a pharmacist, I think it’s wonderful to see the focus that has been put on addressing the opioid epidemic. It’s taking the stigma away from medication-assisted treatment because everyone’s agreed that we need to get people off opioids. I think it’s our responsibility as an insurance carrier to address the opioid epidemic in order to help improve society. What’s most important, in my opinion, is that we develop person­ alized care programs for each employee. The drivers of pain are different for everyone. We can’t offer a ‘one size fits all’ solution, which is what happened with opioids in the past, because every injured worker’s situation is unique. While acupuncture might work best for one person, cognitive behavior therapy might work best for another, and we want to provide a personalized plan to help each injured employee through their chronic pain in the best way possible.

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4/07/2019 9:03:14 PM


UPFRONT

TECHNOLOGY UPDATE

How to quantify cyber risk Cyber risk modeling allows brokers to tailor their benchmarking to the individual client

Brokers often use benchmarking as a comparison tool in order to show clients what similar companies are spending on their cyber risk transfer. This gives companies a guide for what the market is willing to expect, and people are often willing to follow market trends. “Analytics models are also used for benchmarking,” Harvey says. “We often debate about whether the technical rate that comes out of a model is the exact rate you want to

“It helps brokers to clearly articulate the value of cyber insurance as a risk transfer measure”

Despite the industry-wide education push around cyber insurance, many brokers and agents have struggled to bring adequate cyber expertise to the table, often relying upon limited benchmarking tools to sell policies. But today, more and more brokers are tapping into the cyber risk modeling market for additional data insights. “If brokers are able to enter discussions with clients armed with data around risk quantification, including the potential economic loss that clients could face if they

NEWS BRIEFS

suffer a cyber event and the probability of an event happening, that could be a very useful tool,” says Tom Harvey, head of cyber risk solutions at catastrophe modeling firm Risk Modeling Solutions [RMS]. “With the insights from a cyber risk modeling solution, brokers are able to say: ‘This is the risk you hold on your balance sheet. Here’s your best option of insurance.’ It becomes much more of a black-and-white decision for the client, and it helps brokers to clearly articulate the value of cyber insurance as a risk transfer measure.”

New ACORD platform digitizes insurance life cycle

Global standards-setting body ACORD has launched a global data-exchange service known as ACORD iConductor, which operationalizes ACORD standards to transform, orchestrate and validate all bureau and non-bureau messaging data, allowing insurance companies to move data more swiftly and accurately between stakeholders. “This platform is designed and built to address the current and future scale of the insurance market,” said ACORD president and CEO Bill Pieroni.

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use for pricing. There are lots of reasons why you might want to change the rate. Maybe the average market rate is higher, which means you can charge more, or maybe the model doesn’t incorporate everything it needs to. “There are many reasons why a model may not truly reflect the actual technical price that you want to sell,” he adds. “And that’s not just true for cyber risk; it’s the same across all natural catastrophe lines of business. But models can give you a consistent view. This is very helpful because if you suddenly see a risk with a premium that’s 20% below the average ratings coming out of the model, you can take a closer look at that risk. You’re constantly benchmarking against a consistent view and looking for outliers within that.”

Duck Creek launches reinsurance tool

Duck Creek Technologies has rolled out Duck Creek Reinsurance Management, a reinsurance management tool for primary P&C insurers. The softwareas-a-service product allows primary carriers to manage reinsurance partners, contracts, bills, recoveries and payables. It also supports all reinsurance structures, automates payment calculations and bill production, provides full audit trail and analytics, and produces statements, bordereaux, cover letters, footnotes, and supporting details.

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Q&A

Jim Wetekamp CEO RISKONNECT

Years in the tech industry 23 Fast fact Riskonnect’s platform integrates risk management solutions by consolidating data, connecting risks and illustrating risk correlation

Breaking down silos in risk management Why should brokers be interested in Riskonnect? Riskonnect enables organizations to understand their operational and strategic risks at a level they can’t get anywhere else. The risk space today is very segmented, particularly from a technology standpoint. At the same time that organizations are seeking more holistic end-toend relationships with their insurance brokers, they’re also looking for broader risk management technology. They want to knock down silos in their data, connect their internal departments in different ways and piece together end-to-end processes. Riskonnect is able to do that at an enterprise scale.

Tell us about Riskonnect’s acquisition of Marsh ClearSight. We were really excited about the acquisition of ClearSight for a couple of reasons. One was the complementary nature of the types of clients we both serve in the enterprise space. Following the acquisition, we now serve more than 900 customers across 45 countries, and close to 30% of the global Fortune 500. We were also excited about the complementary capabilities ClearSight had in risk management information systems, particularly in the area of claims administration.

What do large enterprise organizations want from an integrated risk management solution? Large organizations want to get their data into one integrated solution. They want to combine different data inputs as they relate to their business, and they want to

Lemonade expands into the European market

Lemonade has officially entered Europe, commencing operations in Germany on June 11. Lemonade will provide contents and liability insurance to the German market, as well as its new consumer-friendly Policy 2.0. Germany is the first country to offer Policy 2.0, which Lemonade describes as “an easy-tounderstand document designed for laymen instead of lawyers.” Lemonade’s entry into the German market was made possible by AXA Germany, which has a multi-year reinsurance agreement with the startup.

correlate those inputs from a risk standpoint. Whether it’s incident intake, regulatory or policy updates, vendor or third-party financials, or enterprise performance data – whatever those attributes are, they’re looking to get them all in one place. Once that’s done, they’re looking to use the insights gained from that integrated risk data to make operational and strategic decisions that will improve their organizations. Integrated risk management solutions help companies to bridge the gap between their insurable and non-insurable risks, and they also help them to increase their risk appetites because they have a greater understanding of how their risks correlate. That’s a pretty compelling value prospect, and it’s also a useful tool for insurance broker partners looking to provide value-added services and end-to-end packages.

What’s next for Riskonnect? From a solution standpoint, there are a couple of different things we’re looking at. One is artificial intelligence and predictive modeling, and looking at how we can provide companies with data insights, particularly rich claims data, that will tell them what risk management changes they should be making proactively. We will also continue to focus on the different aspects of risk management and how we can break down silos. There’s an increasing desire to see all stakeholders integrated, even functions like assurance and internal audit, which used to work in vacuums. Our efforts will continue to focus on integrating use cases across our solution.

InsuranceHub rolls out millennialfocused website

Atlanta-based InsuranceHub has launched a new website targeted at millennials and young entrepreneurs. The agency’s InsuranceTL;DR site was designed to provide shorter and more direct content that reflects the website’s acronym, which stands for ‘too long; didn’t read.’ Users can submit questions via subreddit and click a button to get an insurance quote. “InsuranceTL;DR is targeted specifically to an up-and-coming generation that knows they need insurance and wants answers quickly,” said InsuranceHub’s Jason Marlowe.

Lockton partners with employee benefits platform

Lockton has announced a partnership with tech company Benefex that will allow Lockton’s clients to access OneHub, Benefex’s HR technology platform. Clients will be able to deliver their employee benefits plans through the online system. “Lockton’s experience in international markets, combined with OneHub’s agility, means that our mutual customers will have a robust multinational offering, centrally operated but mindful of regional laws and needs,” said Benefex CEO Matt Macri-Waller.

www.ibamag.com

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4/07/2019 9:03:49 PM


UPFRONT

OPINION

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

A standout brand Cutting through the noise in a flooded market is key, writes Lindsey Elias, and it starts with your agency’s brand AGENCY LIFE is busy, and there often isn’t time to step back and evaluate your overall brand. But if you think your branding doesn’t directly impact your success, you’re wrong. Branding is the first thing prospective customers see. It provides the first clues about who you are. More importantly, it tells people what you’re capable of doing for them – or it should. Observers form initial impressions around the way they perceive your agency’s brand – and everyone knows that you get just one chance to make a first impression. Insurance is a flooded market – in 2016, the National Association of Insurance Commissioners reported that there were almost 6,000 insurance agencies across America. This makes it difficult for your agency to stand out. When branding your agency, you need to keep two key goals in mind: being unique and disruptive in a busy marketplace, and being memorable to your target audience. Effective branding has to start from within. It isn’t just about your agency’s name and tagline or what typeface you use on advertisements. It’s about your people. Your agents each bring unique talents and perspectives to the table, which is wonderful and important. When it comes to representing your brand, however, it’s essential that everyone be on the same page. This creates a strong and consistent presence. All who reach out to your agency should leave with the same impression. They should feel the company culture and be immersed in it. This can only occur if all agency employees have a firm understanding of your mission,

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goals and point of difference. Truly, they need to have more than an understanding – they need a complete buy-in, agreement with and passion for all that your agency represents. This is what will fuel success and grow your book of business. It’s true that something as simple as your logo’s color can boost overall brand recognition by 80%. Imagine incorporating that power of perception into the agency culture your employees represent. Your brand and

space where they interact with prospects – whether on social media, over the phone or in person – they should be. Consider your future customer base, too: millennials. The way that brands represent themselves online almost completely drives the loyalty of this group. They also care more about giving back to their communities than previous generations. Does your agency have a strong online presence? What does it say about you? Are your agents active on social media? Do they volunteer? Does your organization sponsor any local events? These are all important things to consider. In your quest to gain a larger customer base, it’s important to avoid neglecting your most important stakeholders: the agents themselves. You likely spend a majority of your time educating consumers on your product offerings and your agency’s brand – but this education needs to be conducted equally from the inside. Only employees who are encouraged, engaged and well informed can contribute their very best. For this reason, your agency’s external and internal brand initiatives are deeply connected and

“Effective branding has to start from within. It isn’t just about your agency’s name and tagline or what typeface you use on advertisements. It’s about your people” the way you each live it should be as carefully and strategically considered as the accounts you choose to underwrite. Your employees – from those just starting out to senior managers – are your brand builders. They represent the values, ethics, commitments and qualities of your agency. They establish credibility and help to build and foster important relationships. They determine the quality of customer service that you’re able to provide. According to Salesforce, 80% of consumers named the authenticity of a brand as their largest influencer. This is a powerful starting point to consider. Are your agents focused on being authentic? In every

dependent upon each other. Your agency has a purpose and exists for a reason. Communicating that internally and building company culture from the inside out will help your agents become your strongest brand ambassadors. Essentially, these important individuals keep your brand alive. Empowering them to best represent it will drive your reputation – and ultimately your bottom line. Lindsey Elias is the content marketing manager at Glatfelter Insurance Group, where she uses specialized marketing initiatives to encourage best practices and support the success of niche insurance programs and agents.

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UPFRONT

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

IT’S BUSINESS

OPINION

© 2019 Burns & Wilcox. All rights reserved.

IT’S PERSONAL

Breadth & Depth: For Commercial, Professional and Personal coverage—from the most complex risks to the most demanding timelines—Burns & Wilcox is the leader in wholesale specialty insurance. Our comprehensive solutions give you the power to meet your clients’ needs. burnsandwilcox.com

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PEOPLE

INDUSTRY ICON

SETTING THE INDUSTRY ABLAZE Only the second CEO to lead Sedgwick in its 50-year history, former firefighter David North is passionate about the claims business and all that it does for people across the globe

PART OF a CEO’s job is to put out fires. Luckily for Sedgwick, David North has some experience in that department. Growing up in a suburb of Detroit, North was surrounded by a family of firefighters, including his dad, uncle and grandfather. His mom was also in the business, working as a dispatcher even before 911 became the official national emergency phone number. Naturally, North thought this would be his path, too, so he pursued a career in firefighting. “When I graduated high school, the best place to get training as a firefighter at the time was in the United States Air Force,” he says, “so I enlisted in the Air Force, went to fire protection training school and spent four awesome years as a firefighter.” Somewhere along the way, North decided that there might be a better way to help extinguish flames than running into buildings when they were on fire. He got a degree in fire protection engineering, which ultimately led him to the insurance industry, where companies were looking for fire protection expertise. After working for an insurance company

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in Chicago as a fire protection specialist, North was offered a role with Gallagher Bassett, launching his career in the claims business. It’s become clear to him over time that claims professionals bring a ton of value to the table.

Inspired by icons As only the second CEO in Sedgwick’s 50-year history, North took up the reins from Sedgwick’s founder in 1995. While he never aspired to the top job, now that he’s at the helm of the company, North says he’s found

“The entire insurance industry is based on a series of promises to be there when something goes wrong, and what’s amazing to me … is that the claims industry is where those promises are kept” “[Without] insurance, almost nothing happens – you don’t get to buy a car; you don’t get to drive that car; businesses don’t open their doors; products don’t get manufactured,” North says. “The entire insurance industry is based on a series of promises to be there when something goes wrong, and what’s amazing to me … is that the claims industry is where those promises are kept.”

it to be a “truly amazing job” that keeps him busy with something new every day. “The thing I will spend the most time on today will probably be something that yesterday I didn’t even know was coming,” he says. “It’s not on my calendar; it wasn’t a planned event – it’s something that’s occurred with a customer, a colleague or in the business, and the last person that’ll get

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MORTGAGEBROKERNEWS.CA

PROFILE Name: David North Title: President and CEO Company: Sedgwick Based in: Memphis, Tennessee Years in the industry: 30 Fast fact: Under North’s leadership, Sedgwick has grown to be the largest third-party administrator in the insurance industry

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PEOPLE

INDUSTRY ICON

that issue is me. I’ll have some number of minutes to evaluate it and understand it the best I can, and then I will have to make a decision. I just love that aspect of the CEO job, especially when you get a chance to represent such amazing people as there are at Sedgwick.” To ensure that team members have ample opportunity to succeed at the organization, Sedgwick is committed to diversity and inclusion initiatives. Women comprise almost 70% of the company’s staff, and there is diversity across the board, whether it’s in gender, race or generational differences. North personally became even more attuned to the importance of D&I when

gets incredibly strong,” he says. “You get a significant competitive advantage when you recruit, embrace, and then work with and hear from individuals from all walks of life. I have never had the opportunity to meet Gloria Steinem, but I would credit her with changing my perspective on that and helping it become one of the great strategic advantages of Sedgwick.”

Keeping customers close From its origins as a California-based workers’ compensation third-party administrator for self-insured employers to now, as a global company spread across 65 countries, Sedgwick has proven its value to customers,

“We’re proud of not only how we are advancing [D&I] issues within the company, but also how we are helping lead the conversation in our industry about how incredibly important inclusion is” he saw Gloria Steinem speak in 2011. “Her message was about how you see the world through your own lived experiences,” he recalls. “That moment changed my point of view about diversity and, more importantly, inclusion. At Sedgwick, we’re proud of not only how we are advancing those issues within the company, but also how we are helping lead the conversation in our industry about how incredibly important inclusion is. We make it a priority to hire colleagues of all genders, races and ages.” No matter if someone is classified as a millennial or a baby boomer, Sedgwick’s role as a company is to see each of its employees as unique individuals, North adds. “If we find a way as a corporation to tap into each individual’s strength, the company

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some of whom have been loyal to the company for decades. Sedgwick developed an integrated disability management program for a Fortune 10 customer 26 years ago, and that client is still working with the company. Twenty-three years ago, a major employer outsourced its claims handling processes to Sedgwick – and it’s still a Sedgwick customer today. “Those are the kinds of moments that, when you get that opportunity with customers who have a chance to choose amongst many competitors, and they put their faith in the value proposition that your company articulates, that’s a proud moment,” North says. “It’s not just a sale – it’s an opportunity and a trust that employer has given you about something very significant to them, and we get a chance to deliver that.”

SEDGWICK BY THE NUMBERS

1969

Year Sedgwick was founded as a regional claims administrator

21,000+

Number of Sedgwick employees working across the globe

65

Number of countries where Sedgwick has offices

$22 billion

Claims payments delivered by Sedgwick annually

3.8 billion

Number of new claims handled by Sedgwick each year

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6/6/19 1:53 PM 4/07/2019 9:05:24 PM


SPECIAL REPORT

BROKERS ON CARRIERS

BROKERS ON

CARRIERS How well are carriers meeting industry expectations? IBA polled brokers to find out where carriers are excelling and where they have room to improve FOR THE sixth year in a row, IBA’s annual Brokers on Carriers survey gave brokers the chance to speak out about their carriers’ services by rating their performance in eight key categories, from underwriting expertise and range of products to claims service and their commitment to the broker channel. Brokers were asked to rate their carriers on a scale of 1 (poor) to 10 (excellent). In comparison to last year’s results, carrier performance has generally improved. The most significant increases in performance were found in range of products, quick quotes, and technology and automation, which all saw their scores rise by at least 0.3 points. Carriers’ rate

performance, meanwhile, was largely stagnant between this year and last, and claims processing was the only category to see a dip in its score. The results suggest that carriers’ efforts to improve have not gone unnoticed by brokers. Considering the improvements in scores across the board, it’s no surprise that 25 carriers managed to receive a five-star rating from brokers by scoring an average of 8.0 or higher in at least one category. Of those, five carriers earned five-star ratings in seven of the eight categories, while one received five-star ratings in all eight categories. Read on to find out which carriers are exceeding brokers’ expectations.

CARRIER PERFORMANCE: YEAR-OVER-YEAR COMPARISON 10.0 2017

2018

2019

9.0

8.0

7.0

6.0

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Claims processing

Competitive rates

Underwriting expertise

Commitment to the broker channel

Technology and automation

Quick quotes

Range of products

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BROKERS ON MGAs 2017

BROKERS ON MGAs 2017

Lorem

BROKERS ON MGAs

FIVE-STAR CARRIERS 2019

FIVE-STAR 2017 FIVE-STAR WHOLESALE BROKERS & MGAs CARRIERS

FIVEBR

Lorem

2019

2019

FIVE-STAR CARRIERS 2019

2019

FIVE BR

Saving the Chemical Industry Money on their Insurance Premiums

2019

WHAT QUALITIES ARE BROKERS LOOKING FOR IN A CARRIER? 2019

Lorem ipsum

2018

Competitive rates

Consumer Specialties Insurance, RRG (CSI) is an exclusive Risk Retention Group providing agents with customized General Liability and Umbrella coverage (including Products Liability) for their specialty chemical manufacturer and distributor clients.

88% 77%

Underwriting expertise 50% 53%

Claims processing

Program Highlights

49% 39%

Limits Available up to $5,000,000 on either Occurrence or ClaimsMade Basis;

Can Add Limited Pollution Coverage up to $1,000,000;

$250,000 of Product Withdrawal Expense Provided; Hired and Non-Owned Auto Liability (includes primary liability and

Quick quotes 34% 13%

Range of products 32% 28%

Commitment to the broker channel

24% n/a

primary hired physical damage)

Technology and automation 13% 24%

Product training and marketing support 9% n/a

BROADENING ENDORSEMENT includes blanket waivers of subrogation and blanket additional insureds; JUST ADDED—Cyber Security/Crisis Management Endorsement provides valuable crisis management, cyber liability, privacy breach/notification protection on a sublimited basis.

*NEW LOWER MINIMUM PREMIUM STARTING AT $3,500 for Small Businesses! 15% Commission on New Business!! 10% Premium Credit Available Upon Completion of HCPA “Product Care” Stewardship Program

HOW WELL DID CARRIERS PERFORM ON AVERAGE IN EACH CATEGORY? Range of products 8.15 Claims processing 8.11

Go To www.csiplus.com for our PROGRAM APPLICATION, FAQs, PROGRAM BENEFITS AND E-BROCHURE.

Commitment to the broker channel 8.11

CSI is the chemical industry’s leading risk retention group, providing chemical manufacturers and distributors with a financially stable source of liability insurance for over 25 years. We are the exclusive partner of The Household & Commercial Products Association (HCPA - www.thehcpa.org), the industry’s leader for education and legislative advocacy. With membership in the HCPA, your clients can participate in HCPA's Product Care stewardship and best practices program. CSI Policyholders that participate receive additional premium discounts. CSI is endorsed by HCPA and administered by Ames & Gough.

Underwriting expertise 8.07 Quick quotes 8.06 Product training and marketing support 7.94 Technology and automation 7.94 Competitive rates 7.54

Contact Ames & Gough at 703-827-2277 or email us at csiplus@amesgough.com for more information. www.ibamag.com

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8300 Greensboro Drive l Suite 980 McLean, VA 22102 l www.amesgough.com

4/07/2019 9:06:30 PM


SPECIAL REPORT

BROKERS ON CARRIERS WHICH CARRIERS EARNED FIVE-STAR RATINGS? Carrier

Range of products

Claims processing

Commitment to the broker distribution channel

Underwriting expertise

Quick quotes

Product training and marketing support

Technology and automation

Competitive rates

Acuity AIG Allianz AmTrust Financial Auto-Owners Central Mutual Insurance Company Chubb EMC Insurance Companies Grange Insurance Great American Insurance Group Great West Casualty Company Liberty Mutual Markel Corp. Nationwide E&S/Specialty Navigators (The Hartford) Penn National Insurance Philadelphia Insurance Companies Selective Insurance The Cincinnati Insurance Companies The Hanover Insurance Group The Hartford Travelers United Fire Group Insurance Westfield Insurance Zurich All-Star Carrier 26

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BROKERS ON MGAs 2017

Lorem

FIVE-STAR CARRIERS 2019

FIVEBR

2019

RANGE OF PRODUCTS

CLAIMS PROCESSING

Carrier performance 8.15

Carrier performance 8.11

FIVE-STAR CARRIERS

FIVE-STAR CARRIERS

Acuity

Liberty Mutual

Acuity

Liberty Mutual

AIG

Nationwide E&S/Specialty

AIG

Markel Corp.

AmTrust Financial

Navigators (The Hartford)

Allianz

Nationwide E&S/Specialty

Auto-Owners

Selective Insurance

AmTrust Financial

Navigators (The Hartford)

Chubb

The Cincinnati Insurance Companies

Chubb

Penn National Insurance

EMC Insurance Companies

Selective Insurance

The Hartford

Grange Insurance

Travelers

Great American Insurance Group

The Cincinnati Insurance Companies

Grange Insurance Great American Insurance Group Great West Casualty Company

Westfield Insurance Zurich

After years of mediocre performance in this area, carriers have seemingly stepped up their game in offering a wider selection of products to brokers. Seventeen carriers garnered a five-star rating for the range of products they offer, while the average performance score shot up from 7.51 in 2018 to 8.15 this year. “They have an excellent array of products” and “excellent carrier for appetite” were just a few of the positive comments from brokers, who also praised niche carriers for servicing specialty risks. “They do a nice job with offering an array of products pertinent to the transportation space,” one respondent said of their carrier.

Brokers are looking for carriers to be more innovative and active in developing new products Even though most brokers gave their carriers satisfactory ratings for product range, they still had feedback on areas where carriers can provide better service. One broker appreciated the range of products at their carrier but was annoyed with the “nitpicking” of risks. Brokers are also looking for carriers to be more innovative and active in developing new products. “Diversify into manufacturing and distribution classifications,” one broker requested. Another broker noted that “some products are too basic in comparison to top carriers – expand commercial products like [you do] personal lines.” In addition, brokers want more breadth within existing classes of business, including the ability to place extra-large accounts and umbrella policies.

Great West Casualty Company

The Hartford Travelers

Claims processing remains a top priority for brokers – nearly half of respondents rated it as one of the most important things they consider when choosing a carrier. Carriers’ performance in this area dipped slightly from 2018, however, sliding from an average score of 8.32 to 8.11. Overall, respondents noted that while claims services have improved in recent years, frequent communication is key to success for all involved. “Claims service has gotten better since 2017, but we still have occasional issues with getting adjusters to respond [in a timely manner] to the insured,” one broker reported. Others mentioned that there’s always room for improvement in turnaround times, quicker responses and generosity toward customers, which helps to create clear lines of communication and healthy relationships between carriers and clients.

When claims are handled in-house and clients are kept up-to-date on the process, brokers noticed more positive growth in relationships There also seems to be some disconnect when outside adjusters are used. “More communication is needed between the claims department and the customer,” one broker said. “When the claim is subbed out to a contractor, it seems that’s when our customers are the most dissatisfied with the claims process and how slow it can be.” In contrast, when claims are handled in-house and clients are kept up-to-date on the process, brokers noticed more positive growth in relationships.

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4/07/2019 9:06:38 PM


SPECIAL REPORT

BROKERS ON CARRIERS COMMITMENT TO THE BROKER DISTRIBUTION CHANNEL

UNDERWRITING EXPERTISE Carrier performance 8.07

Carrier performance 8.11

FIVE-STAR CARRIERS

FIVE-STAR CARRIERS

AIG

Navigators (The Hartford)

Acuity

Liberty Mutual

Allianz

Allianz

Navigators (The Hartford)

Auto-Owners

Philadelphia Insurance Companies

AmTrust Financial

Penn National Insurance

Auto-Owners

Selective Insurance

Central Mutual Insurance Company

Central Mutual Insurance

The Cincinnati Insurance Companies

Company Chubb EMC Insurance Companies Great American Insurance Group Great West Casualty Company

EMC Insurance Companies

The Hanover Insurance Group

Great American Insurance Group

Travelers

Great West Casualty Company

United Fire Group Insurance Westfield Insurance

Consolidation and technological advances in the industry have many brokers feeling like their carrier partners are leaving them in the dust. “[Commitment to the broker channel] is getting worse, not better,” said one respondent. “They compete with us – they should fully support the independent agent system and not be in retail,” another frustrated broker chimed in. Yet, despite the overwhelmingly negative tone of their comments, brokers gave carriers slightly higher marks this year on their commitment to the broker channel; carriers’ average score rose from 7.95 last year to 8.11 this year.

Brokers feel that their carriers are increasingly infringing on their bread-and-butter business Carriers with retail operations were the main concern for brokers, who feel that their carriers are increasingly infringing on their breadand-butter business. “I see new direct-to-consumer from them every month,” one respondent said of their carrier. For others, carriers’ lack of commitment is a consequence of having too many partners. “They were a much more valued partner when their broker distribution network was limited to agencies that believed in and adhered to their exclusive partnership and the value that was the major part of the relationship,” one broker said. It wasn’t all bad news, though – a few brokers commended their carriers for being “truly committed to independent agents.”

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Chubb

Selective Insurance The Cincinnati Insurance Companies The Hanover Insurance Group The Hartford Travelers

Markel Corp.

United Fire Group Insurance

Nationwide E&S/Specialty

Westfield Insurance Zurich

Underwriting expertise is essential to delivering great products and pricing them competitively – so it’s no wonder that brokers named it the second most important thing they look for when choosing a carrier. Carrier performance in this category experienced a slight increase from last year, rising from a score of 7.96 to 8.07, and many respondents commented on the value of an underwriter’s friendly demeanor, creativity and knowledge of their field. “Underwriters make all the difference,” said one broker. “Most of our underwriters are insurance experts and have the desire to write business.” Another noted that an underwriter’s expertise is “probably their strongest trait and is critically important now that the market is hardening.” Other brokers pointed out the need for underwriters to receive thorough training on all elements of the market and apply common sense to their decisions. “Underwriters with all of my companies should have to train in the field at an agent’s office to see how real insurance sales happen,” one broker suggested. “Sometimes [underwriters] need to do more common-sense underwriting and not just by the book,” another broker said. Others found underwriters’ limited or inconsistent risk appetite to be a big hurdle. “Agents aren’t here to practice and give a company a look at 10 risks so you can quote two of them, especially when it is in your appetite,” ranted one broker, while another complained that their underwriter’s “default reaction to nontraditional risks is no.” Staff turnaround is also in need of attention, according to brokers. “Stop turning over underwriters every year. [It is] very difficult to build a relationship,” one broker said, while another urged their carrier to “hire quality people and give them authority to write business.”

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4/07/2019 9:06:37 PM


BROKERS ON MGAs 2017

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FIVE-STAR CARRIERS 2019

FIVEBR

2019

FIVE-STAR CARRIER PHILADELPHIA INSURANCE COMPANIES Headquarters: Bala Cynwyd, PA

Number of offices: 50

Year founded: 1962

Leadership: Bob O’Leary, CEO

Employees: 2,000 Headquartered in Bala Cynwyd, Pennsylvania, Philadelphia Insurance Company [PHLY] has spent nearly 57 years providing specialized expertise and unsurpassed customer service on premier national property & casualty and professional liability carrier designs, markets, and commercial underwriting products and services for more than 120 niche markets. Backed by a strong corporate culture and distinguished values, PHLY understands the unique needs of its customers and provides superior financial performance with passion, exceeding expectations by doing what’s right for customers and their communities. By maintaining a team of motivated high achievers who are committed to delivering innovative products, maintaining positive relationships, staying accountable and acting with integrity, PHLY has a 96% overall satisfaction rating from its customers. It also received an A++ (Superior) rating from A.M. Best, an A+ for counterparty credit and financial strength from Standard & Poor’s, has been a member of Ward’s Top 50 for 15 consecutive years and has been named one of the Best Places to Work in Insurance since 2011.

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4/07/2019 9:06:49 PM


BROKERS ON MGAs 2017

Lorem ipsum

SPECIAL REPORT

BROKERS ON CARRIERS

FIVE-STAR CARRIERS 2019

FIVE-ST BRO

2019

QUICK QUOTES

PRODUCT TRAINING AND MARKETING SUPPORT

Carrier performance 8.06

Carrier performance 7.94

FIVE-STAR CARRIERS Acuity AmTrust Financial Auto-Owners Chubb Great American Insurance Group Great West Casualty Company Markel Corp.

Philadelphia Insurance Companies

FIVE-STAR CARRIERS Acuity

Penn National Insurance

Selective Insurance

AIG

The Cincinnati Insurance Companies

Allianz

Philadelphia Insurance Companies

The Hanover Insurance Group The Hartford Westfield Insurance

Penn National Insurance

Being able to obtain a quick quote is important to brokers – 34% named it as one of the top qualities they look for in a carrier. The good news is that carriers have improved markedly in this area over the past year, earning an average score of 8.06, compared to 2018’s 7.60. In their comments, brokers noted improvements in timeliness, quoting ability and turnaround. This crucial process requires efficiency, knowledge and strong communication, and one broker praised their carrier for being “very efficient in getting back to you after a submission is made as to anything missing,” while another noted that their carrier’s “turnaround time is pretty good.”

Auto-Owners Chubb Grange Insurance Great American Insurance Group Great West Casualty Company Markel Corp.

Selective Insurance The Cincinnati Insurance Companies The Hanover Insurance Group The Hartford United Fire Group Insurance Zurich

Navigators (The Hartford)

When it comes to product training and marketing support, the consensus from brokers seems to be that there’s plenty of room for improvement – and carriers’ overall average score of 7.94, which tied for the second lowest in this year’s survey, backs that up. Some brokers praised their carriers for providing adequate training and marketing support, but others pointed to the need for “better communication as to what their product portfolio has changed to” and a desire for “more technical information from field reps.”

Brokers commented on the Respondents suggested offering frequency of declines, delays while more broker, client and on-site waiting for underwriter approval commercial training in order to and the need for further education increase producer expertise However, not all carriers are meeting brokers’ expectations in this area, resulting in more than just delays. “They have lost some of my business due to [being] slow to approve quotes,” one broker said. Others commented on the frequency of declines, delays while waiting for underwriter approval and the need for further education. “The labor shortage is impacting the timeliness of quotes,” one respondent added. When asked what they’d like to see improved about the quoting process, brokers requested “expedited approvals on quotes,” “renewal quotes sent out earlier,” “rating software that is quick and easy,” and “a simpler workflow.”

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Many brokers specifically commented on the need for better training, advising carriers to provide “webinars on demand” and “better training materials,” particularly for new agents. Others added that they “could use more brokerage support on product” and commented that “training is weaker than marketing support,” exposing the need for further investment in quality training resources. Broker support is key in this area. Respondents suggested offering more broker, client and on-site commercial training in order to increase producer expertise.

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4/07/2019 9:06:53 PM


BROKERS ON MGAs 2017

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ONE SIZE FITS ONE. FIVE-STAR CARRIERS 2019

FIVEBR

2019

Selective is committed to working with our independent agency partners to get it just right for each unique customer, who is unlike any other. It’s how we deliver on our promise...

© 2019 Selective Ins. Group, Inc., Branchville, NJ. Products vary by jurisdiction, terms, and conditions and are provided by Selective Ins. Co. of America and its insurer affiliates. Details at selective.com/about/affiliated-insurers.aspx. INST-19-021

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SPECIAL REPORT

BROKERS ON CARRIERS TECHNOLOGY AND AUTOMATION

COMPETITIVE RATES

Carrier performance 7.94

Carrier performance 7.54

FIVE-STAR CARRIERS

FIVE-STAR CARRIERS

Acuity

Nationwide E&S/Specialty

AmTrust Financial

Penn National Insurance

AmTrust Financial

Navigators (The Hartford)

Auto-Owners

Selective Insurance

Auto-Owners

Philadelphia Insurance Companies

EMC Insurance Companies

The Hanover Insurance Group

Central Mutual Insurance Company Chubb Grange Insurance Great West Casualty Company Markel Corp.

Grange Insurance

Selective Insurance

Great American Insurance Group

The Cincinnati Insurance Companies

Westfield Insurance Zurich

Liberty Mutual

The Hartford

Markel Corp.

Travelers

Nationwide E&S/Specialty

Westfield Insurance

Carriers’ average score in technology and automation jumped from 7.60 in 2018 to 7.94 this year, suggesting a solid improvement in this area. In addition, 16 carriers received a five-star rating for technology and automation this year, compared to 10 in 2018. Brokers commented that their carriers’ tech offerings are “fair and improving and “much better than in years past.” But this was still one of the lowest-performing areas for carriers, indicating that there’s plenty of room for improvement. Brokers called out difficult-to-use rater systems and urged carriers to “make the broker’s life easier” by keeping current on technology options, adding that less complicated systems can help brokers “turn quotes, binders, policies [and] endorsements” more quickly. Brokers also asked for carriers to add endorsements and efficient billing options to their systems. One respondent also stressed the need to find a balance between privacy and efficiency. “Privacy is trumping efficiency – try to find a way to do both,” the broker said. “Workflows have slowed due to new releases.”

Competitive rates was the lowest-scoring category in this year’s survey, yet carriers’ average score of 7.54 was virtually unchanged from last year’s 7.51. In their comments, brokers urged carriers to “get more competitive commercially” and be “more competitive [in order] to have something else to sell.” Overall, brokers expressed a desire for consistent rates and renewals. One broker wished for “more flexibility in renewal pricing,” as “one size increase does not fit all.” Another noted that “a lower trend rating at renewal would be a plus, especially come fourth quarter.” Brokers also pointed out the need for rates tailored to specific geographical markets. “Refine the pricing to better fit the area,” one respondent suggested. While brokers acknowledged that some elements of rate-setting are out of carriers’ control, many wished for more consistency, “more knowledge in the area they serve” and help in “managing the expectations of our customers.” Others suggested that carriers could “start using credits where they are warranted to write good business” and “increase credits to good drivers.”

HOW CAN CARRIERS IMPROVE?

IBA asked brokers what carriers can do to improve their service. Here’s what they had to say: “More competitive rates” “Figure out who you want to be and then stay that course” “Easier access to product overview and better information on the products” “Focus on growing wholesale relationships instead of adding new channels for retail distribution”

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“Take a more common-sense approach to underwriting – be willing to look at the big picture and not just one item when evaluating accounts”

“Stop the constant organizational change – it’s very difficult to determine strategic direction of the organization when it seems to change every 12 months”

“Allow broker ‘specialists’ in certain spaces, such as transportation, preferential treatment over generalists”

“More marketing material – present the dynamic range of appetites as they change”

“Improve utilization of technology”

“Reps should be out in the field more”

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BROKERS ON MGAs 2017

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FIVE-STAR CARRIERS 2019

FIVEBR

2019

ALL-STAR CARRIER SELECTIVE INSURANCE Headquarters: Branchville, NJ Year founded: 1926 Employees: 2,313, plus 44 interns and seven co-ops

Number of offices: 24 Leadership: Gregory E. Murphy, chairman and CEO (right); John J. Marchioni, president and COO (left)

Founded in 1926 and headquartered in Branchville, New Jersey, Selective Insurance Group is a holding company for 10 property & casualty insurance companies rated A (Excellent) by A.M. Best. Selective operates with a customer-centric focus and a culture of underwriting discipline that enables it to stand out as a truly unique company in the industry. Through independent agents, Selective’s insurance companies offer standard and specialty insurance for commercial and personal risks, as well as flood insurance through the National Flood Insurance Program’s Write Your Own program. For nearly a century, Selective has remained competitive by providing true franchise value with ‘Ivy League’ distribution partners, as well as a unique field model enabled by sophisticated underwriting and claims tools, and superior customer service delivered by best-inclass employees. Selective’s commitment to the collaborative model between its employees, independent agency partners and customers helps the company deliver on its promise for customers to “be uniquely insured” by understanding, anticipating and providing for the unique needs of every policyholder. Selective’s position as both a leading insurance group and an employer of choice has been recognized with a wide variety of awards and honors, including a spot in the Fortune 1000 and being named one of America’s Best Mid-Size Employers by Forbes.

www.ibamag.com

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4/07/2019 9:07:13 PM


It’s Not IF, It’s

WHEN

FEATURES

SECTOR FOCUS: CYBER

Getting serious about cyber IBA examines the latest trends in the cyber market and discovers that the burgeoning space still has plenty of room for growth

No organization is immune to cyber crime.

IT’S NEVER a good time to take your eye off the ball when it comes to cyber risks. Whether it’s the latest in a string of high-profile breaches or the emergence of a new trend, the cyber insurance market is being forced to evolve at a rate not seen in any other segment. One recent troubling trend is the growth of ransomware extortion demands. In addition to an increase in the number of ransomware incidents, hackers’ monetary demands are also rising rapidly and are higher than they’ve ever been. According to the NAS Insurance 2019 Cyber Claims Digest, which analyzed data from 2018 claims, ransomware was the second most common cause of cyber claims last year, just as it was in 2017. But NAS has already witnessed a significant shift in its cyber claims data from early 2019. In three separate events, ransomware demands have ranged from $100,000 to $1.2 million. Cyber criminals are feeling emboldened and confident enough to ask for a lot more money, and those costs ultimately fall onto the insurance industry. “There are very troubling signs when it comes to the costs associated with resolving a ransomware claim,” says Jeremy Barnett, senior vice president of marketing at NAS Insurance. “It’s not so much that IT costs or the forensic costs are up that much – it’s simply that the ransomware demands themselves are much higher.” In response to the ransomware trend, insurance companies like NAS are focusing more of

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their efforts on promoting prevention. One key area of prevention is training employees to not click on things that might trigger a download of the ransomware virus. Another key is helping organizations with their backup and restoration capabilities, allowing them to wipe the computer systems clean and reinstall the software from a recent backup without having to pay the ransom. “Both sides of that – preparedness, not clicking on things and educating the workforce, and also having a more robust and frequent system – help to negate the impact of a ransomware attack,” Barnett says.

WHAT CYBER LIABILITY INSURANCE COVERS Loss or corruption of data Notification costs Business interruption Multiple types of liability Identity theft Cyber extortion Reputation recovery

www.ibamag.com

4/07/2019 9:07:42 PM


Cyber Risk Insurance Forensic files Any broker who’s ever managed a cyber claim knows that costs run much deeper than just the ransom payment itself. One area that has remained consistent over the past two years, according to the recent NAS report, is the costs associated with cyber claims. Across both healthcare and non-healthcare claims, the largest costs were IT forensics and breach coach/legal expenses. “IT forensics expenses are those related to the investigation of a breach, examination of what data may have been exposed or exfiltrated, crypto­ currency procurement and payment, and data decryption and/or system restoration,” Barnett says. “Breach coach/legal expenses are related to the legal fees incurred in managing the breach response, coordination of vendors and defense costs, where applicable.”

to work out how broadly they invaded and if the ransomware is the full extent of the attack or part of an overall broader infiltration.” The growth and evolution of cyber risks is being reflected in policy buying habits. Although it is estimated that fewer than 20% of SMEs currently have a cyber policy, the amount of companies purchasing cyber coverage has doubled in the past three years. The market is growing rapidly, and most of that growth is coming from the SME segment. The increased demand in smaller-limit policies with low premium is creating what Barnett describes as “a race to the bottom on price.” “Some of these upstart companies are offering cyber coverage but don’t necessarily have the expertise in resolving claims,” he says. “Once they get hit with a couple of big claims, that might be the end of their run as a cyber provider. We see a lot of upstart

“There are very troubling signs when it comes to the costs associated with resolving a ransomware claim” Jeremy Barnett, NAS Insurance As complications from cyber attacks increase, IT firms brought in to resolve issues and estimate the depth of a breach are having to spend more time trying to figure out what happened and how. In some cases, ransomware attacks and demands are being used as a distraction from, or a component of, a larger attack. Automated ransomware attacks are now, in some situations, purely a diversionary tactic as the hacker attempts to exfiltrate data or penetrate a network on another vector. “It means the cyber criminal can distract the team with the ransomware remediation, but meanwhile they are actually stealing data or capturing other information within the network,” Barnett says. “We are seeing a growth in this type of multifaceted attack – that is why the costs are up. The criminals are getting more sophisticated, and once they are inside an environment, IT forensics has

companies funded with venture capital or private equity enter this space. They’ve got technology and they’re spending money on marketing, and they are selling policies, but they haven’t been tested on claims. The industry will have its shakeup, but right now, it’s a bit of a gold rush, and a lot of people are getting into it without necessarily having the expertise to manage it.”

Educating employees Helping organizations of all sizes grow both their awareness of cyber and their day-to-day cybersecurity is a top priority for most of the leading insurers in the space. Education is critically important and is a low-cost way for companies to improve their cyber resilience. “A great place to start is with a human firewall – businesses need to make sure their employees

Pre-incident readiness and postincident response services to ensure that a cyber event will be managed properly from the very start. SafetyNational.com

www.ibamag.com

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A MEMBER OF THE TOKIO MARINE GROUP

4/07/2019 9:07:47 PM


FEATURES

SECTOR FOCUS: CYBER

GROWTH POTENTIAL IN CYBER INSURANCE According to a study on small businesses’ cyber insurance purchasing habits released late last year by the Insurance Information Institute and J.D. Power:

31%

of small businesses currently have cyber insurance

70%

of respondents said they don’t plan to purchase a cyber insurance policy in the next 12 months

42%

of respondents believe their current risk profile doesn’t warrant cyber insurance are trained to spot potential cyber threats,” says Neil Lipuma, senior vice president and deputy chief underwriting officer of financial products at Hiscox USA. “To help prepare our insureds, we launched Hiscox CyberClear Academy, an online interactive suite of cybersecurity training modules included as part of our cyber and data insurance policies. Designed to help mitigate and manage their cyber risks, we offer these training modules to our customers for use with their employees.” It’s also critical for brokers to learn to ask the right questions. If conversations about cyber risk don’t happen, the client might end up with an inadequate policy. “Talk to your clients and identify their operational cyber exposures,” advises Gary Mann, regional head of professional indemnity and cyber liability for North America at Allianz Global Corporate & Specialty. “Also, consult with your cyber underwriters and provide

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coverages that are most suitable for the risks. Clients should buy adequate limits, along with a robust policy. Not to follow that age-old advice would be risking an uncovered loss or a loss greater than the limits purchased.” Informing clients about the prevalence of cyber attacks, the cost of recovery and the fact that no industry is immune is an important first step for any agent or broker who wants to become a go-to for all things cyber. “Executive buy-in and a clear cyber strategy are critical,” Lipuma says. “Cyber awareness training throughout the workforce and a fit-for-purpose cyber insurance policy are the best defenses. A cyber attack can require a range of expert services, including lawyers to notify data protection regulators and defend claims, IT professionals to investigate breaches and restore IT systems, and PR consultants to manage communications with the media and the wider world.”

36%

said the options currently available in the marketplace are too expensive

19%

said there are too many exclusions

27%

believe they can sufficiently handle cyber risks internally

46%

said their business isn’t fully equipped to handle cyber threats Source: Small Business, Big Risk, Insurance Information Institute and JD Power, October 2018

www.ibamag.com

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4/07/2019 9:07:54 PM

Wome


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PEOPLE

BROKER INSIGHT

Right on the money How are blockchain, cyber terrorism and other trends affecting today’s financial institutions? IBA spoke to Higginbotham’s John Huggins and LaJean Walton to get the inside scoop

IBA: How are emerging technologies such as blockchain and cryptocurrency impacting how financial institutions are being insured? John Huggins: Given the generally conservative approach that traditional financial institutions take with emerging technologies like blockchain, these insureds have not been greatly impacted from an insurance standpoint. To the contrary, the fintech firms, and the private equity and venture capital firms that invest in them, have seen a direct impact on their insurance programs. While most market participants and observers agree that blockchain is here to stay and will at some point be heavily deployed in financial services, insurance underwriters in the D&O and professional liability realms are taking a reserved and measured approach to extending coverage and limits. At this point, there seems to be a very limited insurance market for firms involved with cryptocurrencies, given the persistent questions about the regulatory environment surrounding these new financial instruments.

IBA: Are there other trends affecting how financial institutions are insured? LaJean Walton: The #MeToo movement has affected FIs just as it has most other types of businesses. There has been an uptick in EPLI-related claims, [and] judgments and settlements also seem to be on the upswing,

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especially in the most egregious cases. Also of concern is that even when statutes of limitations preclude an EPLI lawsuit being filed, D&O lawsuits can still be brought as part of what are becoming known as ‘eventdriven’ lawsuits. Cyber terrorism and data security issues are perhaps the biggest areas of concern for FIs these days. FIs are realizing that there is very little standardization in the cyber insurance market, and they need to review the various options that are available. Of particular concern is coverage for vendor-driven exposures, contingent property damage, contingent bodily injury, business interruption and more. FIs are also taking a closer look at the wording of war exclusions and negotiating narrower wording and broader coverage in this area, given the active role that foreign governments have played in recent ransomware events. Mergers and acquisitions in the FI arena are happening at an all-time record pace. While this is most noticeable in banking, it

also persists in fintech and other FI classes. When one or both of the parties involved in an M&A transaction is publicly traded, a merger objection investigation or lawsuit almost always quickly follows the announcement. While most of these types of lawsuits never result in any negative findings, it can still cost a great deal to respond to them.

IBA: How do external factors like regulations impact FI clients and their insurance policies? JH: Today, with all 50 states having data security legislation on the books, FIs are seeing an increase in the diligence their regulators are employing when reviewing their data security stance, as well as their insurance purchases. It is also clear that as more millennials enter their client base, FIs must respond by offering more technology-based services. Often, placing a tech E&O product in addition to the traditional professional lines for these firms is recommended, depending on the particulars of their offerings.

FINANCIAL FINESSE Based in Fort Worth, John Huggins and LaJean Walton serve Higginbotham’s commercial clients, focusing primarily on financial institutions. As managing director of business insurance, Huggins is a broker and risk consultant with a focus on FIs. Walton has concentrated experience in insuring FIs and serves as a senior marketing executive in business insurance, responsible for preparing marketing submissions on large accounts to place coverage for commercial risks.

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FAST FACTS: HIGGINBOTHAM

Headquarters: Fort Worth, Texas

Year founded: 1948

Number of offices: 37

“[Financial institutions] are realizing that there is very little standardization in the cyber insurance market”

Number of employees: 1,070

John Huggins (left) and LaJean Walton (right)

Also, FIs need to consider how they may be directly subjected to additional privacy laws such as HIPAA. FIs such as banks that are involved in healthcare payment lock-boxing, or those that work with health insurers and managed care organizations, should consult with their legal counsel and IT experts to ensure that they are in compliance with HIPAA and other healthcare-related regulations. Likewise, insurance companies should consider their exposure to HIPAA-related data and be certain that they have adequate coverage based on the type and volume of data they have on hand. GDPR also seems to be an area that deserves more consideration from FIs to understand and manage their exposure. FIs that actively do business with European

nationals should consider working with legal and IT experts to ascertain the applicability of the law to their operation.

IBA: Are there areas where you find financial institutions to be commonly underinsured or misinformed? LW: Lending organizations, banks and others seem to still be somewhat uninformed about the availability of broad mortgage protection/ impairment coverage. Non-standard lending organizations should also be aware of their exposure to allegations of lending-related wrongful acts, similar to a more typical bank. Cyber coverage also still needs more discussion in FI circles. All cyber coverages are not equal, and there is still a wide disparity in coverages that are available from

Number of specialty programs: 20+ a wide range of insurance carriers. FIs of all types should insist on being provided several options from several carriers and be provided with a concise description of the differences between each. In the vast majority of cases, we counsel insureds not to accept cyber coverage that is bolted onto their D&O policies, given the breadth of coverage and services available from the specialty markets. While often considered exclusively a concern of publicly traded firms, options for excess Side A DIC D&O coverage should be reviewed by most FI firms, given the potential for personal liability that can be attached to managers and directors of these organizations.

www.ibamag.com

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4/07/2019 9:08:39 PM


FEATURES

SECTOR FOCUS: MARINE INSURANCE

Sink or swim Significant losses are on the decline in the shipping industry, but the waters remain choppy in the marine insurance space

IN A WORLD fueled by consumption, the shipping of food, raw materials and manufactured goods is an essential part of the global economy. Seaborne trade, with its competitive freight costs and continually improving efficiencies, is the massive cog at the heart of the shipping industry. According to the International Chamber of Shipping, there are over 50,000 merchant ships from more than 150 countries trading internationally, employing approximately a million

MGL policy can include broad contractual liability coverage and a worldwide coverage territory,” says Robert Riske, senior vice president of worldwide marine at Worldwide Facilities, who adds that standard MGL policies cover a range of exposures, from general aggregate and premises/operations to personal injury, fire damage and even advertising injury. But Riske stresses that MGL is often only a starting point for many shipping entities. “To

“We’ve always looked at shipping losses and used those as training platforms, but now with the rise of technology, we can begin to utilize successful voyages to model our behavior” Andrew Kinsey, Allianz workers and generating an annual income of over half a trillion dollars in freight rates. Add to that the fact that the ships themselves can cost upwards of $200 million, and any company operating in the space faces an overwhelming host of exposures, making a comprehensive marine general liability [MGL] policy imperative. “Some key coverage features built into the

40

address the particular marine exposure, additional policy forms are added, depending on the situation,” he says, including legal liability coverage for ship repairers, terminal operators, stevedores and charterers. Riske’s son, Ryan, also an executive with Worldwide Facilities, adds that it’s not only shipping companies that require coverage. “Ferry operators, research vessels and

SHIPPING INDUSTRY EXPOSURES AT A GLANCE Total losses in 2018 fell significantly in accident hotspots such as Southeast Asia Weather losses halved last year due to a quieter storm year Machinery damage was responsible for $1 billion worth of marine insurance industry claims in five years Challenges for the shipping industry include political threats to vessel security, the impact of 2020 emissions rules and growing number of fire incidents Source: Safety & Shipping Review 2019, Allianz Global Corporate & Specialty

marinas are just a few of the dozen or so outfits facing risks that lend themselves to an MGL,” he says.

Smooth sailing? In its recently released Safety & Shipping Review 2019, Allianz Global Corporate & Specialty revealed that large shipping losses are at their lowest level this century. In 2017, 98 vessels were lost; in 2018, that number plummeted to 46. Captain Andrew Kinsey, a senior marine risk consultant at Allianz and a US Coast Guard Licensed Master who spent 23 years in the US Merchant Marine and US Naval Reserve, says changes to how crew members are trained have had a tremendous impact on marine safety. In particular, new safety procedures, working practices and an evolving view on rest and alertness have provided the greatest benefits. New technology, such as automation and the leveraging of a ship’s metadata, is also having positive effects, allowing mariners to

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ORDINARY PEOPLE GETTING THE EXTRAORDINARY DONE

evaluate risk on a real-time basis and improve decision-making. “We really need to start using this metadata to be proactive rather than reactive,” Kinsey says. “We’ve always looked at shipping losses and used those as training platforms, but now, with the rise of technology, we can begin to utilize successful voyages to model our behavior.” But even with noticeably improved safety measures, maritime shipping companies are still facing considerable exposures. According to Allianz, the number of shipping incidents declined by 1% year-over-year in 2018, but still totaled almost 2,700. And that

Other risks faced by large-scale shipping entities can simply be chalked up to the gargantuan size of the undertaking. The sheer volume of goods being shipped often leaves containers unscreened, meaning misdeclared or hazardous goods regularly skip detection. “In many cases, the economy of scale of these vessels is overwhelming the infrastructure within the rest of the supply chain,” Kinsey says. A large percentage of maritime incidents are also due to traffic density. “If we look at the South China Sea, if we look at the Mediterranean, these are confined waters

“Know your clients and understand their needs and business. While price is obviously important, you will provide a greater service by providing proper coverages and limits” Ryan Riske, Worldwide Facilities doesn’t take into account the risks facing crew members. “There’s still a number of crew injuries and passenger injuries,” says Ronnie Adcock, senior vice president at Sedgwick. “I’m not sure I’ve seen a lot of reduction in that.” Companies using some of the world’s most contentious waterways are facing increased threats to the safety of both their vessels and the cargo on board. Kinsey identifies the South China Sea – particularly the disputed Spratly Islands – and the Strait of Hormuz, where tensions between Iran and its regional rivals have already resulted in violent disruptions, as places where conflicts can have a direct impact on maritime commerce. “From a risk standpoint, these are all things that come into our evaluation,” he says.

that have tremendously high density of ocean cargo, coasters and, in many cases, fishing traffic and small vessels,” Kinsey says.

Low tide In many ways, marine insurance is the high seas’ antithesis. Whereas the planet’s open waters are dynamic, flowing and unpredictable, marine insurance is experiencing an extended period of stasis. “Depending on the class of marine, we generally are in a harder market,” Robert Riske says. “London has exited or is rewriting many lines and classes of business because they were unprofitable, generally due to pricing and lax underwriting. Cargo stock through-puts and first layer excesses have been hit especially hard. Loss-free and basi-

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FEATURES

SECTOR FOCUS: MARINE INSURANCE

SHIPPING LOSSES IN FOCUS TOTAL LOSSES BY REGION, 2009–2018 250 200

cally good business will not have any issues on renewal, but underwriters are requesting modest increases even on those accounts. There is still plenty of capacity available.” Any insurance company hoping to make a splash in the space needs to employ expertly trained cargo surveyors, marine adjusters and recovery specialists, Adcock notes. They should also expand their focus and assist clients with small-ticket, under-deductible claims that often get ignored – after all, he points out, small losses are still losses, and they add up quickly for a company making hundreds or thousands of deliveries a year. “That’s like found money to a company,” he says. “Sometimes a company may not have enough claims to dedicate an expert to doing that, so they either don’t do it or halfway try and just go on down the road.”

42

234

150

153

100

117 77

50 0

South China, Indochina, Indonesia, Philippines

East Mediterranean and Black Sea

Japan, Korea, North China

58

British Isles, Arabian Gulf and North Sea, approaches English Channel, Bay of Biscay

46

28

26

West African Coast

Bay of Bengal

Russian Arctic and Bering Sea

Source: Safety & Shipping Review 2019, Allianz Global Corporate & Specialty

Ryan Riske sees the challenging marine insurance market as an opportunity for ambitious brokers. “Know your clients and understand their needs and business,” he advises. “While price is obviously important, you will provide a greater service by providing proper coverages and limits. The marine insurance market has been driven by low pricing, but now is the time to show your value as a broker under

tougher market conditions.” The sea, they say, is a cruel mistress. While brokers and agents are unlikely to feel the full brunt of her power, they do face a struggle similar to that of the companies they insure: staying afloat. “Traditionally, the marine line of business has been difficult for marine insurance companies to make profit in,” Adcock says. “It’s a tough business.”

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FEATURES

PRODUCTIVITY

How to do one thing at a time In today’s distraction-fueled world, multitasking seems to be a way of life. Aytekin Tank explains how narrowing your focus can actually allow you to achieve more

IN HIS 2013 book, The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results, author Gary Keller reminds us that everyone has 24 hours in a day. So why do some people earn more, achieve more and get more done? They “go small.” “When you want the absolute best chance to succeed at anything you want, your approach should always be the same. Go small,” Keller wrote. “‘Going small’ is ignoring all the things you could do and doing what you should do. It’s recognizing that not all things matter equally and finding the things that matter most. It’s a tighter way to connect what you do with what you want. It’s realizing that extraordinary results are directly determined by how narrow you can make your focus.” Going small to follow one path sounds easy, but there are fresh opportunities and shiny objects around every corner. Distraction is everywhere. There are times when you want to test the waters, and creativity often requires

44

sampling. But if you truly want to move the needle, that demands a narrow field of vision. For example, at JotForm, we always choose an annual focus area. Last year was about data. Across all our teams and functions, everyone worked to boost user productivity by leveraging data. That task looked different for each employee, but we’re aligned with a single, shared goal. When you focus on what’s important, the results can be incredible. Lay out all the options and pick what really, truly matters. Set your focus area and stick to it.

Start as small as possible The advice to “go small” works on multiple levels. Choosing your goal or main project is the first step. Then, once you know what you’re trying to achieve, zoom in closer. When we’re working on a major project, I always try to step back and ask: “What’s the smallest version we could create that would still produce results?” Once you have that

mini version, gather feedback. Refine and work your way up to a bigger, better model. Keep going, and you’ll achieve more than you thought was possible.

Create automated systems Technology is far from foolproof, and until recently, our admins were constantly tackling server issues at 3 a.m. Every time it happened, I reiterated the need to find a real solution – one that didn’t require midnight wake-ups. Eventually, we installed automated tools that tell us, for example, when our servers are 80% full. They notify us again when the servers reach 85% capacity. Now we never hit that 95% panic zone. We’ve automated an issue that drained our focus. Systems aren’t exciting, but they are essential. Create efficient processes and automate as many steps as possible. You’ll free up valuable time and energy to stay focused on your “one thing.”

Designate a leader Sports teams need coaches and captains. Orchestras need conductors. Group activities almost always function better when someone’s leading the way, even if the work is highly collaborative. At JotForm, all of our cross-functional product teams have leaders – and good ones dramatically increase both focus and productivity. So what makes a strong leader? In my experience, it’s someone who can make quick, smart decisions. They listen closely, gather information and make choices that move the group closer to its goals. If you’re working solo, it’s equally important to step back from your daily tasks and measure what matters. Be your own leader. You can always reach out for help, too. Whether it’s a friend, colleague, mentor or

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team has gone off the rails, we can gently bring them back on track. Usually, though, we’re excited about what they’ve accomplished. You can set up markers on your own as well. Think of your project as a large circle that contains lots of smaller circles or checkpoints. Once you have those boundaries in place, you’re free to wander.

Set tech limits In a 2010 study published in the journal  Science, Harvard University psychologists Matthew A. Killingsworth and Daniel T. Gilbert discovered that people spend almost 47% of their waking hours thinking about something other than what they’re currently doing. Even more striking? Distractions make us unhappy. As Killingsworth explained, “Mind-wandering is an excellent predictor of people’s happiness. In fact, how often our minds leave the present and where they tend to go is a better predictor of our happiness than the activities in which we are engaged.” That’s a stunning thought: being focused advisor, a different perspective is often highly valuable – but remember that the final decisions are always yours.

Explore – within your boundaries All this talk of single-minded focus can sound really dull, especially if you’re a creative person. I get it. But doing one thing at a time isn’t about boring yourself into efficiency. There can still be room for exploration if you create clear boundaries. Build your sandbox, and then you can play in it. Because we spend a full year chasing one big goal, our teams are welcome to follow some tangents along the way. There’s no rush to the finish line. I also realize that off-the-wall

Doing one thing at a time isn’t about boring yourself into efficiency. There can still be room for exploration if you create clear boundaries. Build your sandbox, and then you can play in it ideas can spark innovation, so we encourage experimentation. If your team is eager to explore, set some markers so you don’t get lost. For example, our Friday ‘demo days’ are the time when everyone checks in and shows what they’ve done. If a

can actually make you feel better, regardless of what you’re doing. From starting a business to finishing a spreadsheet (without checking Instagram), single-tasking will not only help you achieve great results, but you’ll enjoy the process a lot more.

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FEATURES

PRODUCTIVITY

Startup gurus and productivity experts have endless suggestions to help you stay focused, but here’s what consistently works for me: Box your time. Creating time limits is oddly motivating (and effective). Whatever you want to do, try ‘boxing’ it into a set time period and ignore distractions, including emails, calls, texts, making coffee, alphabetizing your bookshelf or grooming the cat. Get laser-focused for that set period of time and then take a break. Repeat as needed. You can apply this same principle to projects, teams, products or just about anything else that requires true focus.

greens and do what I can to stay relaxed. I’m ‘boxing’ my energy toward an important goal.

Make a clean break In 2018, the makers of a message board app surveyed more than 11,000 employees at 30 of the biggest technology companies. They asked: Are you currently suffering from job burnout? More than 57% of participants said yes. Many people are struggling to stay on what can feel like a treadmill without a ‘stop’ button. The tech-fueled blur between work and personal time can be difficult – and confusing. And if you’re an entrepreneur or

Even if you’re working hard to accomplish great things, downtime is not optional. Your body needs to recover, your brain needs to consolidate all those inputs, and you’ll be infinitely happier and more productive if you give yourself a break Box your energy. We all have energy limits. Even the so-called “sleepless elite” (high performers like Pepsi CEO Indra Nooyi and fashion designer Tom Ford) will eventually run out of fuel. Doing one thing at a time will preserve your precious energy. And just like time-boxing, you can get even more intentional about shifting your energy toward what matters. For example, if I have a big interview or presentation on my calendar, I’m careful about what I schedule around it. I try to avoid meetings. I get more sleep. I eat more leafy

46

business owner, it’s all in your hands. The solution? Create as many boundaries as you can within your sphere of influence. As much as possible, separate work from your personal life. I know this might sound overly simple, but it’s up to you to create real limits. Set office hours, for example, and don’t clock in outside those periods. When I leave the office, I do everything I can to leave work there, too. I want to be present for my family. I want to enjoy my time with them – and I need to rest and recover. I don’t work on the week-

ends, either. If I do have a new idea on Sunday afternoon, for example, I’ll send a quick note to myself (but I won’t dig into it). If I want to share something with a team member, I will send them an email, but I’ll write ‘FOR MONDAY’ in the subject line. If I see emails at night, I remind people that they should wait until the next morning (and then I try to take my own advice).

Take real time off I can’t say it enough. Even if you’re working hard to accomplish great things, downtime is not optional. You need to rest. Your body needs to recover, your brain needs to consolidate all those inputs, and you’ll be infinitely happier and more productive if you give yourself a break. The data confirms it: After taking time off work, 64% of people say they’re “refreshed and excited to get back to [their] job”. Hiking in nature and staying disconnected from all devices for four days can lead to a 50% spike in creativity. If employees took just one extra day of paid leave each year, the result would add $73 billion in output to the US economy. So, whether you’re crafting a business plan, writing a novel, lifting weights or perfecting your Bolognese sauce, give it everything you have. Do that one most important thing and then move on. It’s that simple – and that powerful.

Aytekin Tank is the founder and CEO of JotForm, an online form creation software with four million users worldwide and more than 100 employees. A developer by trade but writer by heart, Tank shares stories about how he exponentially grew his company without any outside funding. For more information, visit jotform.com.

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PEOPLE

CAREER PATH

A KINDER APPROACH Melissa Hill’s career in claims has been marked by a desire to help people and encourage empathy

Hill set out to become a public defender before an entry-level insurance position caught her eye. “My mom worked three jobs; I paid for college myself – I was the first person in my family to graduate college. Safeco Insurance had a position open for a claims trainee – it meant I could dabble in the law and help people. When bad things happened, we could come to the rescue.”

1992

DISCOVERS INSURANCE

1995 GOES COMMERCIAL Hill moved into the commercial insurance world with a position at Liberty Mutual, where she oversaw claims for clients ranging from small businesses to Fortune 500 companies. “I was intrigued by the commercial world and how that worked; I was fascinated by the law and how litigation would develop out of these sometimes horrific incidents. It was my goal to come to resolutions as quickly as possible.”

2005 DIVES IN On the recommendation of a past manager, Hill’s next stop was AIG, where she oversaw the Defense Base Act Claims Centre, dealing with workers’ comp for civilian contractors overseas. “It was a highly emotional, tragic operation – a big operation to dive into, in a line of business I was relatively new in. I loved what I did and was able to teach people by mentoring my team along the way.”

2019 JOINS HISCOX Earlier this year, Hill took on the position of head of claims at Hiscox USA, drawn by a company culture that embraces the entrepreneurial spirit. “They’re very open to allowing that creativity to flow – they put people first. I hope to bring some efficiency to the process, but I want to ensure we don’t forget the people. Claims is a people business. We have to have empathy for our customers when they need us the most.”

1993

HANDLES COMPLEX CLAIMS Less than a year into her time in the industry, Hill became the go-to person for handling complex claims freighted with emotion. “I thrived on that; I would volunteer and throw myself into it. We were helping people, but it was a contentious process – it wasn’t easy for people to understand what a policy was, and the process was very adversarial. I stayed because I wanted to help people. I was mesmerized by the process.”

2002 BECOMES A LEADER Headhunted by Zurich into a team manager position, Hill stepped into her first leadership role, running the company’s complex major case unit. “I learned that leadership was a lot harder than I anticipated. Much of it was about trying to transfer down knowledge to my staff. Delegation was a struggle; I had to learn to step back – it was much harder than I thought it was going to be.”

2015 GETS A CLEAN SLATE A move to Hamilton USA – which was later sold to AIG and renamed Blackboard Insurance – gave Hill an opportunity to create her ideal claims department.

“I was intrigued by the startup culture and by being able to build claims from the floor up. This was my opportunity to make my mark and make a kinder, gentler process”

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PEOPLE

OTHER LIFE

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

O’Connor went pro in 2002 a nd joined the majors in 2006, ultimately playing professionally for 12 seasons

91 mph Speed of O’Connor’s fastest pitch

71

Number of strikeouts O’Connor pitched in the majors

1,000+ Total number of innings O’Connor has played

PITCH PERFECT Before his insurance career, Mike O’Connor was a major-league pitcher for the likes of the New York Mets and the Washington Nationals ALWAYS AN athletic child, Mike O’Connor realized early on that he had a particular skill for – and enjoyment of – baseball. His dedication to the sport paid off when he was drafted to the Montreal Expos straight out of high school and went on to an enjoy a major-league career that lasted for more than a decade. As a pitcher, O’Connor got a particular

48

thrill from the mental aspect of America’s favorite pastime. “There’s a lot of strategy involved – identifying the hitters’ weaknesses and throwing the right pitch at the right time,” he says. “For 95% of my career, I was in charge of what pitch I would throw.” Although he no longer plays professionally, today serving as VP of the premier

client group at Early, Cassidy & Schilling, O’Connor strives to pass on his experience, returning regularly to his former high school to advise players and offering pitching instruction at baseball camps and clinics in the Washington, DC, area. “It’s been a huge part of my life,” he says of baseball. “I’m glad to be able to give back to some of the places that helped me.”

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