Insurance Business America issue 1.02

IBAMAG.COM JANUARY/FEBRUARY 2014

On top of their games—these pros left a mark on 2013 WHAT MAKES HANK WATKINS TICK? PEEK OVER THE HORIZON WITH LLOYD’S US CHIEF

DUELING THE DIRECTS SOFTWARE TOOLS YOU NEED TO WOO ONLINE BUYERS

STORMS SURGE THE INDUSTRY AND THE WORLD WRESTLE WITH NEW RISK PARAMETERS

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CONTENTS

20

COVER STORY

The Hot 100 Roadblocks, hurdles and headwinds don’t bother these folks. They meet ’em and beat ’em. Check out our inaugural list of the Hot 100 industry pros who met the challenges of the year and left their businesses, their industry and their communities better off

42

FEATURE

FEATURES 6 | The Big Interview How Lloyd’s top man in North America Hank Watkins eyes the future—and keeps everyone pulling together 42 | Catastrophe insurance: Batten the hatches Colorado Springs. Joplin. Sandy and Katrina.

From the mountains to the sea—and everywhere in between—the new normal is not pretty. Insurers (and governments, planners and builders) are recalibrating.

It could be a long road 46 | E&S, anyone?

Surplus lines are big business. Is it time for you to get into the space—or expand your presence? Insurance Business America explores the terrain 54 | Construction: Going up Construction spending is finally coming out of the doldrums. What does it mean for the insurance marketplace today and what is coming in 2014?

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JANUARY/FEBRUARY 2014 | 1

CONTENTS 50

BUSINESS STRATEGY

SERVICE It costs six to seven times more to get a new customer than to keep an old one. Want to pay attention to your clients and offer exceptional service? Here’s how

COPY & FEATURES MANAGING EDITOR Kevin Eddy SENIOR JOURNALIST Stewart Huntington JOURNALIST Caitlin Bronson CONTRIBUTORS Nikki Heald, Julia Palmer, John Pickering, Marjorie Preston, Erwann O Michel-Kerjan PRODUCTION EDITOR Roslyn Meredith

ART & PRODUCTION SENIOR DESIGNER Rebecca Downing GRAPHIC DESIGNER Marla Morelos, Loiza Caguiat

SALES & MARKETING NATIONAL SALES DIRECTOR Cathy Masek NATIONAL SALES MANAGER James Donnellan MEDIA SALES MANAGER Molly Hummel COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Anna Farah

CORPORATE

REGULARS 4 | TRIA’s trial The fate of the terror insurance federal ‘backstop’ is hanging in the breeze. What does that mean for your business?

63 | Favorite things An agent dreams of being anywhere and doing anything—and finds there’s no place like home

BUSINESS STRATEGY 58 | Networking Don’t be afraid. Networking is not a four-letter word, and indeed, it can be vital to your success. Here are the tips you need

64 | The last word Catastrophic events expert Erwann O Michel-Kerjan lays out a strong case for extending the federal government’s role in terrorism insurance

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

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OFFBEAT What do goats, chickens and bras have in common? We didn’t know either

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NEWS / TERRORISM INSURANCE

Industry warily eyes fate of federal terror risk ‘backstop’ The Terrorism Risk Insurance Act (TRIA) is up for renewal at the end of 2014, but policies have to be written now The best warning for insurers is to be prepared.

Added exposure looms for policies if TRIA is not renewed. Uncertainty could drive rates up for the insured and even drive companies out of the marketplace.

TERROR: THE SENTIMENT IN CONGRESS HOUSE

Rep. Michael Grimm, R-NY, introduced a bill to reauthorize TRIA through 2019. It has received hearings in the Financial Services Subcommittee on Housing and Insurance.

The chairman of the Financial Services Subcommittee on Housing and Insurance, Rep. Randy Neugebauer, R-Texas, indicated he was not in favor of reauthorization. “Since the last reauthorization of the program in 2007 we have seen encouraging developments that lead me to believe that this committee can finally begin to take off the training wheels and transition to a terrorism risk insurance market that is less dependent on a taxpayer-funded backstop.”

SENATE

Sen. Tim Johnson, D-SD, the chairman of the Senate Banking, Housing and Urban Affairs Committee, has called for bipartisan support to extend the law.

“While a few may seek dramatic changes or even try to eliminate the program, we should remember that taxpayers have not lost any money on the program,” said Johnson. “It is my hope that once again we will be able to find bipartisan consensus for the reauthorization of TRIA well before the program expires at the end of 2014.”

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TERRORISM INSURANCE—VIEWS FROM INSIDE THE INDUSTRY PETER J BESHAR EVP AND GENERAL COUNSEL OF MARSH

“We consider TRIA to be a model public-private partnership. TRIA restored insurance capacity at a critical time after 9-11 and continues to be the backbone of a healthy terrorism insurance market” JIMI GRANDE SVP OF FEDERAL AND POLITICAL AFFAIRS FOR NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES

“Allowing this program to expire or materially altering the trigger or deductibles would lead to higher costs for the insured and less coverage in the market, which increases the ultimate burden on taxpayers” ROBERT P HARTWIG III PRESIDENT OF THE INSURANCE INFORMATION INSTITUTE

“Failure to institutionalize a permanent plan to protect the nation’s financial infrastructure leaves the country unnecessarily vulnerable to economic instability and risk of recession” LEIGH ANN PUSEY PRESIDENT AND CEO OF THE AMERICAN INSURANCE ASSOCIATION

“TRIA protects more than just policyholders—it protects taxpayers too”

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TERRORIST ATTACKS SPREAD NATIONWIDE

WHAT IS COVERED UNDER TRIA Commercial P&C Workers’ comp Surety

WHAT IS NOT COVERED UNDER TRIA Number of attacks 1

10 50 100 Source: Hot Spots of Terrorism and Other Crimes in the United States, 1970 to 2008. National Consortium for the Study of Terrorism and Responses to Terrorism, January 31, 2012

TERRORISM INSURANCE TAKE-UP US companies that now have terrorism insurance 80% 70% 60%

stays historically high 58%

50%

20%

59%

57%

61%

62%

Source: Risk and Insurance Management Society, Inc

62%

49%

40% 30%

59%

64%

For the LAST WORD on TRIA, see Dr Erwann O Michel-Kerjan’s opinion piece on page 64 of this issue. “The debate about TRIA is not just an insurance issue,” he says. “It is as much a national security and economic competitiveness issue, too.”

27%

10% 0%

Crop insurance Private mortgages Title Financial guaranty Medical malpractice Health or life Flood Reinsurance Commercial auto Burglary or theft Professional liability (except for D&O) Farm owners multiple peril

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: Marsh Global Analytics

WORST TERRORIST ACTS BY INSURED PROPERTY LOSSES RANK

DATE

LOCATION

EVENT

PROPERTY INSURED LOSSES ($ million)

FATALITIES 2,982

1

Sep 11, 2001

New York, DC, Pennsylvania

Hijacked airliners crash into World Trade Center and Pentagon

$24,384

2

Apr 24, 1993

London, UK

Bomb explodes near NatWest tower in financial district

$1,176

1

3

Jun 15, 1996

Manchester, UK

IRA car bomb explodes near shopping mall

$966

0

4

Apr 10, 1992

London, UK

Bomb explodes in financial district

$870

3

5

Feb 26, 1993

New York

Bomb explodes in garage of World Trade Center

$810

6

6

Jul 24, 2001

Colombo, Sri Lanka

Rebels destroy 8 military aircraft and heavily damage 3 civilian aircraft

$517

20

7

Feb 9, 1996

London, UK

IRA bomb explodes in South Quay, Docklands

$336

2

8

Jun 23, 1985

Irish Sea, North Atlantic

Bomb explodes on board Air India Boeing 747

$209

329

9

Apr 19, 1995

Oklahoma City

Truck bomb explodes outside government building

$189

166

10

Sep 12, 1970

Disused RAF airstrip in Jordan

Hijacked Swissair DC-8, TWA Boeing 707, BOAC VC-10 dynamited on ground

$165

0 Source: Swiss Re, 2012

JANUARY/FEBRUARY 2014 | 5

THE BIG INTERVIEW / HANK WATKINS

HANK WATKINS: CHANGE IS HERE —EMBRACE IT To Lloyd’s US chief, the biggest mistake is standing still

From top to bottom, the industry must act “boldly” in the face of the fast-paced changes that define our times, says Hank Watkins, president of Lloyd’s North America.

Property and casualty agents have to recognize and seize new opportunities—and undertake a clear-eyed re-evaluation of the long-term prospects of their premium base.

Large carriers need to move swiftly to take on the new risks that accompany evolving industries —and address other challenges such as security threats, changing weather patterns and even demographics.

STANDING PUT IS NOT AN OPTION “One of the biggest opportunities [for the Lloyd’s excess and surplus marketplace] is to reach out to the … retail folks,” says Watkins. “Surplus lines is a great opportunity for them to provide a bespoke product to their customers.”

But it has often been a hard sell as E&S can involve hard work and be a little more time consuming, he concedes—though change is coming.

Electronic exchanges that will allow the small retail agent “sitting in South Dakota to jump onto an electronic platform” and find E&S quotes are already evolving, says Watkins, who was named to his current post in 2009.

Consumers and retail agents can go soup to nuts online with car insurance purchases and there’s no reason that can’t happen in the commercial arena.

“Watch this space in the next year or two,” he says.

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“It’s going to happen’’—and open up opportunities for retailers.

But the outlook is not all rosy. Take driverless cars, for example.

“Think about what the personal auto insurance industry is going to be like in 10 years when cars are self-driving and you no longer have to worry about collisions as much,” says Watkins. “That’s billions of dollars of premiums that’s going to be gone.

“I don’t know when autopilot was first put in a jet,” he says. “But if someone told you a generation ago that the pilot gets in a plane, pushes a button and the plane takes off and lands by itself, you’d freak out. But now we live that way.”

And, predicts Watkins, we’ll see that same perception arc with self-driving vehicles.

“If you are a personal lines guy writing home and auto and that’s your future, I suggest maybe it’s going to change a bit,” notes the San Diego native.

“Not this year, not next year, but [a decade] down the road. It’s not here yet but we’re all thinking about it.”

FOR CARRIERS: A CALL TO ACTION “There’s a lot of excess capital in the market,” Watkins says, citing estimates that there is $500bn of capacity in pension, hedge and other funds.

“My hope is that that capital can be used to help companies in emerging fields get more comfortable taking [new] risks by buying insurance” so they can build new industries, hire people—and grow global economies.

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“We’re traditionally very conservative, but there’s got to be a way to become a little bolder” Hank Watkins HANK WATKINS: PERSONAL FILE AGE 54 ROLE Oversees the Lloyd’s operations in Atlanta, Boston, Chicago, Frankfort, Kentucky, Los Angeles, New York, the US Virgin Islands and Canada. In 2012, Lloyd’s North America accounted for $12.3bn in premiums—35% of the Lloyd’s global total.

CAREER A 30-year industry veteran with stops at Chubb, Barney & Barney, Johnson & Higgins, Marsh and HRH. Started current role with Lloyd’s in 2009.

EDUCATION BA from the University of California at Berkeley. Studied at the Wharton School.

FAMILY Married with two sons in college and one still in high school. Raised in San Diego and today lives in Connecticut.

FAVORITE SPORTS Skiing and golf. (“I can’t hit the ball as far as my boys these days”)

THE BIG INTERVIEW / HANK WATKINS

“Rowing is a metaphor for my life,” says Watkins. It teaches the value of teamwork, accountability, hard work—and never letting up. “If you’re three boat lengths ahead, make it four” Insurers are traditionally very conservative but “there’s got to be a way to become a little bolder,” says the New York-based executive. And he’s not alone in this mission of, as he puts it, “shouting from the mountaintops.”

XL Group CEO Michael McGavick is vocal on the subject. “The insurance industry has to try to come up with solutions to the world’s newest risks,” he said at the 2013 Property Casualty Insurers Association of America annual meeting.

“We must become more daring.”

But not profligate. “We don’t want to do stupid things with our capital, but I think there is a lot of room for innovation,” says Watkins, pointing to cyber-crime insurance as a positive example.

The 2013 Lloyd’s Risk Index showed that the threat of cyber crime rose from the 19th biggest concern in 2011 to third in a global survey of 580 top executives. “We’re all affected by cyber risk,” says Watkins, a University of California at Berkeley graduate. But the costs associated with insuring such risks are still not fully understood, and that makes carriers cautious.

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Bolstered by a peek into history, though, Watkins maintains a bullish outlook on the lines and he expects the industry to eventually flourish writing cyber-crime policies. The space has parallels with employment practices liability in the mid-1990s, he believes. Back then “few companies really knew how to treat employees and there was a lot more discrimination based on race, sex and other things,” Watkins says.

Practices began to change as it became clear that there was massive liability for employers, but it was initially difficult for insurers to understand the risk. Eventually carriers developed products— employment practices liability lines—that today are ubiquitous.

“I think that cyber ultimately could be very similar,” says Watkins, who predicts a day when online crime policies—already the source of an estimated $1.3bn in US premiums in 2013 according to Betterley Risk Consultants—are commonplace.

“Not next year,” he says. “But I bet it’s going to come.”

NATURAL AND MANMADE CATASTROPHES Understanding the trend toward more—and more severe—natural and manmade disasters is key for the industry, although Watkins sounds a note of caution against making assumptions. “Are we living in a riskier world?” he asks. And if so, “Compared to what? If we were in a covered wagon trying to cross the continent … we would probably think the world was pretty risky.”

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LOOKING DOWN THE LINE WITH HANK WATKINS

So in an effort to remain evidence-based in assessing changing risk parameters, Lloyd’s convenes an Emerging Risk Panel about once a month in London and brings together underwriters, academics and other experts to identify new and changing global liability factors.

They call it “horizon scanning.”

“And we ask, ‘What are the new risks coming down the pike?’” Watkins says.

It is this empirical approach that Watkins—who credits his years of rowing in college with honing skills that set him up for success—believes will best guide carriers as they chart a path through the planet’s evolving risk parameters.

LESSONS FROM SPORT Watkins, who graduated from college in 1980, spent much of his undergraduate time on the water with an oar in his hands.

It was transformative. “If I had to pick one activity that set my world view, it had to be rowing,” he says, citing the long hours—he rose at five o’clock every morning to make it to practice—and the intense teamwork needed to propel a racing shell. The experience fostered a capacity for hard work and an appreciation for accountability.

“Rowing is a metaphor for my life,” he says.

Watkins’ coach, Steve Gladstone, instilled key tenets he still leans on. “As Steve would always say, ‘If you’re three boat lengths ahead, make it four,’” because you never know what snags loom ahead.

“Hank was a really thoughtful, sturdy young man,” remembers Gladstone, who today is head crew coach at Yale. “Mature beyond his years and a great team guy.”

Watkins brings that team-first approach into his work week. “We have offices [in six cities across the country] and every Monday we get together on a call. There are no stripes [meaning rank], even though I’m the president. Everyone comes prepared and everyone contributes and we’re all accountable to each other.”

BUILDING A BASE FOR THE FUTURE The lessons learned as a young man inform Watkins’ efforts to inspire a new generation of underwriting professionals, and he devotes

E&S EXCHANGES A dramatic shift. Retailers who today face daunting logistical hurdles to placing surplus lines will soon easily access surplus quotes online.

“Watch this space in the next year or two. It’s going to happen” COLLISION PREMIUMS They’ll crash.

Self-driving cars will drastically reduce the rate of collisions—and the need for billions of dollars in premiums.

“It’s not here yet, but we’re all thinking about it” DON’T GET LEFT BEHIND Inertia kills. Insurers have to get “bolder” to help new industries develop by underwriting some of their risk.

If not, the businesses will move ahead anyway and leave insurers empty-handed.

KNOW YOUR HISTORY It repeats itself. Thirty years ago insurers didn’t grasp employer risk.

Now everyone carries employment liability lines. Cyber-crime lines fit this head-scratcher to ubiquity model.

“Not next year. But I bet it’s going to come” GENERATION NEXT Are demographics destiny? If so, the industry needs a boost.

An aging workforce is retiring and young talent is scarce.

“It’s a challenge, but imperative, to get the best and the brightest”

significant time reaching out to university students and speaking on campuses.

His message: “Come to the E&S space and build specialty products. … Insurance is a fascinating industry. You can learn a lot about lots of new businesses.”

But it is an uphill battle. Demographically we’re on the “back end,” he says.

“There are a lot people retiring and we don’t have the right number of 20- and 21-year-olds coming into [the field]. We all wrestle with how to make it more attractive to young people. It’s a challenge to get the best and the brightest.”

JANUARY/FEBRUARY 2014 | 9

FEATURE / PRODUCER SOFTWARE

10 | JANUARY/FEBRUARY 2014

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The directs are using all the new software, technology and data and marketing tools available to win market share. Agents should, too. Here’s how to get up to speed

Fifteen minutes can save you 15 percent. Fifteen minutes can save you 15 percent. Fifteen minutes can save you, well, you know. You’ve heard the ads before. A lot.

For consumers they can be a mild irritant. For insurance agents they are more odious. They are a constant reminder that a tiny reptile armed with disruptive technology is challenging their business model.

In November McKinsey reported seeing cracks in that model. Because carriers are interacting more directly with customers online, at a lower cost and sometimes with more consistent service levels, some are asking themselves what role agents should play in the system, the study said.

“The agents are up against the direct writer,” says Jeff Yates, executive director at the IIAB’s Agents Council for Technology. “But the agents have an advantage in that they can get multiple quotes.”

Nag Rao, CEO of EZLynx, a technology company with a track record of innovation in the independent agent space, agrees.

“The internet is all about choice,’’ he says, “and so the independent agent has the advantage there.

The direct writer can only give one quote. The situation inherently benefits the independent. The key question is: can they execute on this?”

Rao and a host of other talented technology guys are working to provide agents with the tools to compete. “We can create some disruption in the industry and make sure that the agent will not fail for want of technology,” says Rao. “The directs have certain advantages, to be sure. They only have one system for one company and can build it smoothly and perfectly.”

JANUARY/FEBRUARY 2014 | 11

FEATURE / PRODUCER SOFTWARE

“An agent’s strength is counseling. They should be spending 80% of their time doing that” Nag Rao, CEO of EZLynx

On the independent’s side there is a mosaic of operating platforms and a patchwork of systems and cultures that block efficiencies and scale.

“We have data islands that don’t talk to each other. There are some challenges for the independents on the execution side,” says Rao. But in the long run, if you look at the internet’s guiding force—the primacy of choice—Rao thinks the agents should win.

The McKinsey report, Agents of the Future: The Evolution of Property and Casualty Insurance Distribution, identified three pillars that will underpin successful agents in the new environment. The winners will: • deliver tailored and relevant expertise • excel at multichannel marketing • increase their scale and efficiency This is not a new observation but rather a reiteration of a message with many fathers.

The agent’s core job is to provide counsel and expertise. If he or she is tied up doing paperwork or lost in the weeds of a marketing plan or data analysis, then that is time ill spent. The agent needs modern agency management systems and up-todate web, mobile and marketing tools in order to be free to focus on what will really grow a business.

There are options in the marketplace for agents and agencies on any budget—or any spot on the technology adoption curve.

“Our clients are on widely different planes,” says Valerie Jordan, president of AgenciesOnline, a onestop resource for integrating an agency’s marketing, communications, and technology. “Some are using rocks and chisels, and some are very advanced.”

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TECHNOLOGY: WHAT THE PROS SAY YOU NEED A DEDICATED AGENCY MANAGEMENT SYSTEM

You need to be able to access all of your documents any time and anywhere. You need to be able to track the data points that are crucial to your business—lead conversion ratios, policies per customer, round-out opportunities, etc. If you can’t afford a system on your own, go virtual and find others in your same boat—anywhere—and explore options.

A GREAT WEBSITE Your website is the end point of all your marketing. Be sure it is tailored to your niche. The customer says, “I need an agency that can serve my needs.” Your website has to say, “We are that agency.”

PROPER MARKETING TOOLS The directs are great

with these and always getting better. Agents have to employ new tools that will keep you in contact with leads and create new ones. Hoping a person will buy is not the same as getting the person to buy. Some details: slick e-mails; social media integration. Make sure there are automated options to send messages to folks at appropriate junctures. And don’t forget to use the new functionality. Make sure it responds, and you do too, in ‘internet time.’

THE RIGHT OUTLOOK

Change is hard but it’s better to break a leg leaping than digging in your heels.

There are soup-to-nuts solutions for operations that don’t yet have an agency management system or website. And there are top-end bolt-ons to improve even the most technologically thoroughbred of companies. Following are some solid examples.

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JANUARY/DECEMBER 2014 | 13

FEATURE / PRODUCER SOFTWARE

INSURANCE TECHNOLOGIES CORPORATION

Laird Rixford

Insurance Technologies Corporation’s (ITC’s) marketing products can help you grow an agency online through a quality insurance website, effective e-mail marketing, strategic search engine optimization, smart social media marketing and custom content and design. The secret to successful marketing, says ITC VP of products Laird Rixford, is that you don’t have to do it yourself.

The company’s Insurance Website Builder, TurboRater online quote tool and AgencyBuzz marketing tools can give your agency a real digital boost. AgencyBuzz manages e-mail, text and social media marketing campaigns so that agents can concentrate on working leads.

“E-mails must go out immediately,” says Rixford, who created the AgencyBuzz software. “After the quote you have to follow up to explain the value

proposition. Market on price but sell on value,” he says. “We see folks who use the technology properly can improve their closing ratios by 25%.”

ITC offers a full suite of products, including a complete agency management system, InsurancePro, that can handle everything from tracking commissions and updating policy data automatically to reconciling payment transactions.

The software automates your daily tasks and gives you key information points so you can make solid business decisions. It’s a niche product aimed at the entry-level customer and starts at $150/month.

“There’s a fundamental shift underway right now,” he says. “And that’s the ability to access information from anywhere. You can write a policy at Starbucks... It’s the era of the virtual agency.”

EZLYNX EZLynx pioneered the concept of real-time quoting in the IA market and today is the leading real-time rating vendor in the space. EZLynx processes more than four million auto, home and package transactions every month, covering more than 150 insurance companies in 48 states.

EZLynx also offers agents powerful solutions to manage the entire life cycle of a customer and is fully committed to automating the exchange of information between insurance company, independent agent, and the end consumer. “We are by no means experts,” says Nag Rao, CEO of EZLynx.

“Compared to some of the veterans we are absolute kids. But the kids are ruling the world these days.

“Our industry is archaic, outdated and insular,” he says. To change that, EZLynx is trying to enable the customer to do things on the agent site but keep the agent as part of the process. “It’s a balancing act,” Rao says. “An agent’s strength is counseling. They should be spending 80% of their time doing that. Up until buying the policy, everything can be done online.”

Brady Polansky, EZLynx VP agency relationships, uses an art analogy to explain the company’s approach: “We’re trying to give the agents a paint-by-number set,” he says, “so they can create a

14 | JANUARY/FEBRUARY 2014

masterpiece without having to take time from their core competencies.”

• EZLynx’s Agency Pulse product gives a quick analytic readout on nine key performance metrics such as mix of personal to commercial, policies per account, and closing ratios. “The agents might be able to get that information from their systems today, but it would take too long to compile,” Rao says.

• E-signature functions are fully integrated into the entire document workflow and are compatible with multiple third-party e-signature formats.

• Communication with consumers is automated at every appropriate juncture. The agent gets notified as soon as a quote is given. “We can send out an automated ‘thank you for visiting the agent’s site’ message to the visitor,” says Rao. “We want to keep up a constant drip of communication.”

• The system can search public data and prefill a lot of the forms for the site visitor if an agent wants that functionality. “There are some privacy issues on the consumer-facing side so agents may decide to disable the prefill functions,” says Rao. Whether to turn it on is “a decision each agency can make for themselves.”

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JANUARY/DECEMBER 2014 | 15

FEATURE / PRODUCER SOFTWARE

ASTONISH

John Boudreau

Astonish is a leader in providing digital marketing solutions for the insurance industry.

Over the past 15 years, the company has built a complete digital marketing system founded upon its FIND, SELL, and KEEP methodology. The Astonish system has been successfully installed in over 3,500 businesses across the country in three different industries. In 2007, Astonish had incredible success in the insurance industry and decided to move exclusively to serve this industry. It has over 750 agency clients of all types, sizes, and product specialties.

In addition, Astonish is one of the fastest-growing private companies in the US. “The local agent who is our customer is under a lot of pressure,” says Astonish CEO and co-founder John Boudreau. “You can’t go a day without seeing a marketing message from Geico. It’s challenging for the agent to retain their customer and find new customers. We’re committed to providing the best platform.”

Astonish offers its clients a hands-on approach that includes the tools, technology and training to take on a transformation. “Change is hard,” says Boudreau. “How do we get the culture of the agency to accept the new technology? Well, we’ve done this so many times we know when to bring people back on the path.”

And the Astonish team doesn’t fade away after a brief period. “We’re with you for the life of the contract,” says director of marketing Chad Troutman.

“If we see one of your agents hasn’t changed the status of a lead in the system for three days, we can let you know you might be missing something.

“It’s not a fit for everybody,” he says, but it works for many. “As a company our mission is to change our clients’ lives by changing their businesses,” says Boudreau.

Their chief tool for doing that is their insurance marketing and sales platform. The system sits on top of any agency management system and gives the agent everything he or she needs to manage their book. The platform: • routes site visitors to the nearest office if the agency has multiple outposts • delivers an instant text message alerting the agent to activity on the site • highlights customers that can be rounded out, customers that are most engaged (what e-mail they’ve opened, etc) and other functions • shows data on agents and holds the team more accountable “We look for agencies from $150,000 in revenue all the way up to $10m. There is a starter product we call Ignite—a stripped-down version so the small shops can get their feet on the ground and get going,” says Boudreau.

“We’re trying to show them the realities. The landscape is changing. They need specific tools and technology to address that change.”

AGENCIESONLINE For the independent insurance agent, marketing has become more complex—and expensive. Time is consumed by selling and servicing existing clients, and agents find it increasingly difficult to keep ahead of the technology curve.

Through membership of AgenciesOnline, best-of-breed marketing, communications and technology resources are available on a single platform at an affordable price. It’s a one-stop resource for integrating marketing, communications, and technology. The company has assembled a single platform to help agents serve clients better and further grow their businesses.

“Most agencies don’t have time to do marketing,” says Valerie Jordan, president of AgenciesOnline, LLC. “Some don’t do any at all.”

And that’s not a recipe for success in a competitive environment. To help agencies get started, Jordan

16 | JANUARY/FEBRUARY 2014

says, her team comes up with a whole marketing plan. “We have a consultancy that allows the agent to keep focused on the client.”

Her target client is the shop with 15–30 agents, says Jordan. And she tells them, “Start with the website—that’s where your credibility lies,” but cautions that a website is “never done.”

Jordan says that if agents are going to survive they are going to have to compete with the direct writers and other agents, and to do this they must both take advantage of the new technology (“or someone else will”) and look for opportunities to take on new roles.

“Migrate from being a product seller to a needs fulfiller,” she says, suggesting agents help manage customers’ risks on the safety, workers’ comp and loss control fronts. “These are the things that can separate you from the direct sellers,” she says.

SUPERPOWERS WITHOUT THE RADIOACTIVE SPIDER BITE

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Online marketing services from ITC are the superpowers that make it easy for agents to get more customers while having more time to focus on what they do best… selling insurance.

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JANUARY/DECEMBER 2014 | 17

FEATURE / PRODUCER SOFTWARE

VERTAFORE Vertafore offers a full line of software solutions to boost productivity for insurance professionals—from producers to MGAs to carriers. The company has a 40% market share and enjoys a nice view from the top of the hill. But this isn’t a story about complacency or caution.

“It’s self-evident that times are changing,” says Vertafore VP for industry relations Bruce Winterburn.

And the company knew it had to be bold.

About two years ago, an industry working group was formed that set a goal of trying to see what an agency would look like in 2020. “One of the things they came back with was the notion that agency management systems as they existed are obsolete,” says Winterburn, acknowledging that that was a bitter pill to swallow for someone who made his living in the agency management system field.

So Vertafore set out to reimagine its core product.

That process ultimately led to the company’s new Agency Management Platform, an overhaul of its previous products that is—importantly—built to readily adopt new features and add-ons.

Officially released in September, the platform includes rating, pipeline management, e-forms and

download, paperless document management, producer licensing and commissions, reporting and more.

“The sexiest new features are probably the mobile ones,” says Winterburn. Using the platform, agents can access customer data and documents and get quotes from anywhere. And customers can log in and access their accounts from their devices.

“It’s a sea change,” says Winterburn.

But the most revolutionary features might be hidden in the background. Dashboard analytics can now give an agent a snapshot of important aspects of the business and data can now be pulled instantly from third-party public databases to prefill forms.

Agents can see driver and vehicle information down to the VIN automatically pulled into quote forms.

“We’re at a tipping point,” says Winterburn.

A lot of the advancements in mobile and data connectedness have been evolving. “But now we’re at the point where we can pull it all together.”

And that gives Winterburn a sense of optimism.

“There’s a lot of doom and gloom out there about the industry,” he says. “But these new technologies give the IAs a chance to compete.”

APPLIED SYSTEMS

Reid French

18 | JANUARY/FEBRUARY 2014

For more than 30 years, Applied Systems has been a leader in agency management system technology.

The University Park, Ill.-based company delivers solutions designed for the ways independent agents do business with technology that enable them to streamline their workflow and focus on doing what they do best—working with their customers and prospects.

With more than 12,000 agency customers, Applied is a giant in the industry but isn’t interested in standing still, says CEO Reid French. “We want to always be the innovation leader. We want to introduce things first.”

Applied brings a slate of solutions—established, new and upcoming—to the table.

Applied has website products and agency management systems that automate operations, such as communications with carriers, document management, accounting and other functions. “We serve single-agent businesses all the way up to the largest insurance brokerages in the world,” says French.

Agents need to be cloud-based and mobile. “The time when an agent is busiest is during a natural disaster. The agent needs to be able to be in the field with his customers and access all his data,” he says.

Some 60% of Applied customers now host their agency’s data on Applied servers—and are increasingly adopting Applied’s new iOS and Android app product, Applied MobileProducer, says French.

The app allows an agent to take everything—the whole office—into the field. “We’re very proud of that,” he says.

Agents also need to better understand all of the data generated by their business and customers.

In beta testing now and due for commercial release in Q1 2014 is a new analytics product called Applied PerformanceManagement. It analyzes data in the agency management system to allow an agent to see how efficient and profitable their business is against performance indicators such as carrier growth, customer retention and a host of other metrics.

An agent’s number one asset is his or her ability to act as a guide. “People need advice when buying insurance,” says French. “Those agencies that focus on advice and the trusted-partner aspect of their business are going to do well. Our message: Let us handle the transactions. Let us automate and optimize the way your business runs so that you have more time to be the trusted adviser to your client.”

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JANUARY/DECEMBER 2014 | 19

SPECIAL REPORT / HOT 100

Insurance professionals of 2013 Quick. Describe the last year in five words or less.

How about “Cold and nasty”? Think Superstorm Sandy, the tempest that slammed the East Coast in 2012, tearing life from limb. It is still putting a chill into balance sheets a year later. You could also cite the frosty state of discourse on Capitol Hill.

Or perhaps “lukewarm and listless”? Like the teeny-weeny yields on US Treasury Bonds or the drip, drip, drip of the jobless recovery. And don’t forget the public’s initial reaction to the Affordable Care Act. But what about “Hot”? Just plain “Hot”?

That’s how we like it.

In this issue, Insurance Business America has compiled its list of “The Hot 100”—insurance professionals from around the country who put their stamp on 2013. How did they make the list?

They brought the heat!

Some hit business home runs, like David Lockton 20 | JANUARY/FEBRUARY 2014

and John Lumelleau, who helped push Lockton, Inc, over the $1bn revenue bar. Some made bold moves, like Patrick Gallagher, who pulled the trigger on a bigger-than-ever-before acquisition.

Some created a new product or line, like LeConte Moore, who is ensuring that the Super Bowl will get played as scheduled—outdoors in a coldweather city. Others have earned a major industry award, like David Nadler, who made the boardroom hall of fame; or led the way in giving back, like Michael Heffernan, who raised $850,000 for charity; or urged the industry to look at issues from a fresh perspective, like Evan Greenberg, who saw private sector solutions where others did not.

The common denominator is that each and every person on the Hot 100 list brought their A-game to the job—and then gave a little more.

Who will make next year’s list?

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The Insurance Business America HOT 100: A-Z by surname Kaufman

Alan Jay

CEO

Albo

Pina

President

Munich Re

Keck

Nicole

Commercial lines coordinator AW Welt Ambrisco Insurance

Angelina

Mike

Executive director

St Joseph's Academy of Risk Management and Insurance

Kelley

Brady R

Executive director

NAPSLO

Kempsey

Steve

Casualty leader

Marsh US Casualty

Klonk

Robert J

CEO

Oswald

Kratchman

Eden

Executive director

ACE Group's Charitable Foundation

Last name

First name

Position

Organization

Burns & Wilcox

Bach

Steve

Mayor

(Colorado Springs)

Bates

Mark

President

Pinnacle Insurance Group

Becker

Mike

EVP & CEO

National Association of Professional Insurance Agents

Lamm-Tennant

Joan

Global chief economist and risk strategist

Guy Carpenter & Co

Lanier

D Gaines

Chairman and CEO

J Smith Lanier & Co

Benmosche

Robert H

CEO

AIG

Lee

Peter

Executive director

Covered California

Berkley

William R

Chairman and CEO

WR Berkley

Levin

Matthew

Aon

Beshear

Steve

Governor

(Kentucky)

EVP and head of global strategy

Lockton

David

Chairman

Lockton

Bill

Michael H

CEO

MJ Insurance

Lumelleau

John

CEO

Lockton

Bingman

Brian

Senate president pro tem

(Oklahoma)

McGavrick

Michael

CEO

XL Group

Braner

Jodie

VP

Hays Companies of Georgia

McGee

Liam

CEO

Hartford Insurance Group

McKenna

Frank

President of healthcare

Beecher Carlson

Catlin

Stephen

CEO

Catlin Group

Michel-Kerjan

Erwann

Managing director

Wharton Risk Center

Cawley

Bob

President

RCM&D

Minkler

Thomas J

Chairman

Insurance IIAB

Chaney

Mike

State insurance

(Mississippi)

Moore

LeConte

Managing director

DeWitt Stern

Moreno

Lou

SVP

Risk Strategies

Motamed

Thomas F

Chairman and CEO

CNA

Murphy

Michael R

President

Arch Insurance Group US

commissioner Davis

Scott

President of property and

Beecher Carlson

casualty DeWalt

George

SVP

Risk Strategies

Nadler

David

Vice chairman

Marsh & McLennan

Dickerson

Michael

Site reliability engineer

Google

Neugebauer

Randy

Representative

Republican, Texas

Dinshaw

Behram M

SVP of personal insurance

Travelers

Nichols

John

President

Disability Resource Group

Noonan

Ed

Chair

Validus Re

product management Duclos

Dave

CEO

QBE North America Operations

Paduda

Joe

Principal

Health Strategy Associates

Eastwood

Peter

President

Berkshire Hathaway Specialty Insurance

Pitts

Johnny

Chief manager

Lipscomb & Pitts Insurance

Finnigan

John

Chairman and CEO

Chubb Corp

Preston

Gary

Teacher

Fleet

Samuel H

President, Group Benefits

AmWins

St Petersburg Catholic High School

Pusey

Leigh Ann

CEO

Fouche

Lori

President and COO

Prudential Group Insurance

American Insurance Association

Putnam

John

Consultant

Francis

Dan

Co-founder and CEO

EPIC

Putnam Assurance & Risk Services

French

Reid

CEO

Applied Systems

Rehnberg

Kevin J

President

Argo Group US

Gallagher

J Patrick

CEO

Arthur J Gallagher

Rios

Manny

CEO

American Modern Insurance

Gallagher

Patrick

Director

National Institute of Standards and Technology

Robertson

Thomas S

Dean

Wharton School

Ross

Bill

President

Insurance Industry Charitable Foundation

Division

Ganz

Mark B

President and CEO

Cambia Health Solutions

Gershman

Greg

Innovation director

Mobomo

Ross

Mike

CEO

Insurica

Grange

Jeff

President of specialty

QBE North America

Rothberg

Mordy

President

Confie Seguros

Greenberg

Evan

CEO

ACE Group

Sanders

Bryan

President

Markel Wholesale

Greenberg

Maurice “Hank”

CEO

Starr Cos

Scott

David

Representative

Democrat, Georgia

Senn

Martin

CEO

Zurich Insurance Group

Shannon

TW

House speaker

(Oklahoma)

Sitkins

Roger

CEO

Sitkins International

Smith

David C

VP

Ebenconcepts

Smith

Sean

CEO

Keenan

Sodaro

Frank J

CFO

Kemper Corp

Stevens

Neil

Director of Space Division

Pembroke Managing Agency

Tolman

Gary

President and CEO

Esurance

Waked

Joe

CEO

Confie Seguros

Hahn

John

President

EPIC

Harrell

Don

SVP, marine

Liberty Insurance Underwriters

Harte

Tom

President

Landmark Benefits

Hartwig

Robert

President

Insurance Information Institute

Hayes

Ted

Senior risk manager

M3 Insurance

Hecht

Michael

President and CEO

GNO

Heffernan

F Michael

CEO

Heffernan Insurance Brokers

Hickenlooper

John

Governor

(Colorado)

Westrope

Kevin T

President

NAPSLO

Hoberman

Gary

SVP

MetLife

Wild

Trei

Consultant

Plano, Texas

Hughes

Martin

CEO

HUB

Willis

Brandon

Ignagni

Karen

President and CEO

AHIP

Administrator for Risk Management Agency

USDA Farm and Foreign Agriculture Services

Johnson

Seth

COO

Atlantic Specialty Lines

Witcher

Doug

CEO

Smart Choice

Johnson

Jeremy

President and CEO

Lexington Insurance

Yates

Jeff

Executive director

Jones

Todd

CEO

Willis North America

Big "I" Agents' Council for Tech

Joost

Eric

COO

Willis North America

Ziegler

Brooks

Producer

Morris & Templeton

JANUARY/FEBRUARY 2014 | 21

SPECIAL REPORT / HOT 100

STEVE BACH Mayor of Colorado Springs PINA ALBO President Munich Re, Munich WHY HOT: Won IICF Luminary Award Albo was awarded the inaugural Women in Insurance Luminary Leadership Award that recognizes an individual for leadership and contributions to the development of future leaders, particularly women. “Albo has encouraged and inspired all of us,” said IICF’s Bill Ross.

WHY HOT: Leader in disaster aftermath Bach organized “Colorado Springs Together,” which helped address the needs of the community following devastating wildfires two years in a row.

The group included insurance industry heads who gave advice on the claims process to people who had lost their homes. It also helped rebuild homes.

MARK BATES President Pinnacle Insurance Group, Crown Point, IN WHY HOT: Burnished industry image Bates received Indiana’s Harry P Cooper Industry/Public Image Award, which was developed to recognize people who enhance the image of the profession through their professional activities, public image and personal integrity. He was past president of the Independent Insurance Agents of Indiana and also served as president of the local YMCA.

MIKE BECKER Executive vice president, CEO PIA, Alexandria, VA

MIKE ANGELINA Executive director St Joseph’s Academy of Risk Management and Insurance, Philadelphia WHY HOT: A voice for diversity Angelina has been a constant outspoken voice for equality and diversity in the profession. He has published a key research paper showing that the insurance industry lacks gender diversity, and was a keynote speaker at IICF’s global conference on women in insurance.

22 | JANUARY/FEBRUARY 2014

WHY HOT: Takes reins at industry organization Becker was named EVP and CEO of the National Association of Professional Insurance Agents.

He heads day-to-day lobbying efforts on Capitol Hill. He began his career at the association in March 2007, rising to assistant VP of federal affairs, and then was appointed to his immediate past position of VP of federal affairs in February 2013.

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STEVE BESHEAR Governor, Kentucky WHY HOT: State launches smooth health exchange site Kentucky Kynect rolls out seamlessly and signs up individuals under the ACA—in stark contrast to the federal site, healthcare.cov. The governor touts it as the smoothest rollout in the country and a national model.

ROBERT H BENMOSCHE CEO AIG, New York WHY HOT: Steers company clear of US bailout Benmosche got himself into hot water for ill-considered Jim Crow comments and is now backpedaling on some goals he set for the company, but the fact remains that AIG is no longer in debt to the Treasury Department after its historic $180bn bailout. “We appreciate the opportunities [the bailout] allowed and are proud to have returned to America every cent,” said Benmosche.

MICHAEL H BILL CEO MJ Insurance, Phoenix WHY HOT: Firm posts record revenue MJ Insurance, one of the nation’s more substantial privately held insurance agencies, reported double-digit year-over-year growth for fiscal 2013, with an 11% increase across all business lines.

The agency also reported record all-time-high revenues of $25m. Even as the economy has struggled, MJ has recorded revenue gains over the past five years.

JODIE BRANER VP Hays Companies of Georgia

WILLIAM R BERKLEY Chairman and CEO WR Berkley, Greenwich, CT WHY HOT: New units—steady results Rolling with its strategy of forming new operating units to capitalize on opportunities, Berkley expanded in 2013 into areas including Berkley Fire & Marine, which will focus on inland marine risks, and Berkley Design Professional Underwriters, to focus on coverage for architects and engineers.

“We bring talented people together with capital and allow them to focus in areas where they have a particular expertise,” Berkley said.

WHY HOT: Wins two key awards Jodie Braner received two prestigious awards from the National Association of Health Underwriters. Braner was awarded the highest honor, the Patty Murphy Lifetime Achievement Award, to recognize her career achievement, professional stature and civic, cultural and humanitarian involvement.

Braner also accepted the Distinguished Service Award for her significant contributions to volunteer service at the local, state and national level. In addition, she has been named president elect to the Executive Committee Board of Directors for the Georgia Association of Health Underwriters, effective 2013–14.

Braner exemplifies leadership and provides top-notch service to Hays clients, said Grant Norwood, practice leader for Hays Companies of Georgia.

“It is her dedication to help clients live healthier that allows us to partner and grow our business,” he said.

Hays is a privately held risk management and employee benefits firm headquartered in Minneapolis, with 700-plus employees in more than 35 offices across the US. JANUARY/FEBRUARY 2014 | 23

SPECIAL REPORT / HOT 100

STEPHEN CATLIN CEO Catlin Group, Bermuda WHY HOT: Eyes rising sea temps — and revenues Company has dedicated itself to crucial oceanic research to help scientists and underwriters better understand future risks associated with climate change. And while Catlin-sponsored researchers monitor sea temperatures rising, company managers oversee financial performance heating up. Through the first three quarters of 2013 gross premiums written were up 8% to nearly $4.2 billion while the US division posted a muscular 17% uptick to nearly $1 billion.

BOB CAWLEY President RCM&D, Towson, Maryland WHY HOT: Success on many levels When you think of Cawley, think “well rounded.” President of a $26 million brokerage. Co-founder of a charity that provides scholarships to disadvantaged students. Top Scout, an honor that goes to the person who best exemplifies Boy Scout ideals. And now chairman of Assurex Global, a partnership of the independent agents and brokers that covers over $28 billion in premiums annually. RCM&D is one of two firms that have been Assurex partners since the organization was formed in 1954. Cawley, tapped for the post in 2013, is the third chairman to come out of RCM&D.

SCOTT DAVIS President of property and casualty Beecher Carlson, Atlanta WHY HOT: Heads up key division Davis joined Beecher Carlson in 2004 with the responsibility of growing operations in Nashville and the large account casualty practice. The practice has grown to be the largest division in the company. In 2013 he was picked as new president of property and casualty. As part of his new role, Davis focuses on the expansion of Beecher Carlson’s West Coast operations.

MIKE CHANEY Mississippi State Insurance Commissioner WHY HOT: Fought flood insurance rate hike An opponent of the steep flood insurance hikes under the 2012 Biggert-Waters Act, Chaney filed a lawsuit against the federal government in an effort to stop the increases from taking place, claiming FEMA was violating the law by not completing an affordability study before raising rates. The suit was joined by insurance regulators from Florida, Alabama, South Carolina and Massachusetts.

24 | JANUARY/FEBRUARY 2014

GEORGE DEWALT AND LOU MORENO Senior vice presidents Risk Strategies, Boston WHY HOT: Vets tapped to lead new group SVPs George DeWalt and Lou Moreno were picked to spearhead the new Professional Practices Group, which specializes in D&O and E&O insurance, P&C insurance and employee benefits programs for architectural, engineering and law firms. Risk’s “highly consultative model fits perfectly with our methodology,” said DeWalt.

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MICHAEL DICKERSON AND GREG GERSHMAN WHY HOT: Outsiders recruited to help ACA rollout Dickerson, from Google, and Gershman, from Mobomo, were called upon to help the Obama Administration try to fix the federal healthcare exchange website. The White House launched a “tech surge” in October to try to cure the massive software errors underlying healthcare.gov that prevented people from enrolling in coverage and insurers from collecting data.

BEHRAM M DINSHAW SVP, Personal Insurance Product Management Travelers, New York WHY HOT: Sticking with the independents Many carriers are moving away from IAs in the auto sector, but not Dinshaw’s Travelers. In 2013 he helped develop and launch Quantum Auto 2.0, a sophisticated auto insurance product Travelers believe will help agents and brokers compete with direct sales platforms from competitors like Geico and Progressive.

DAVE DUCLOS CEO QBE North American Operations, NY WHY HOT: Putting in the miles — and reaping rewards Experience counts and Duclos has it — 30 years of it, many at the top of the field. Twenty-one years with INA/CIGNA rising to a number of regional and national management roles. Next up, XL where he oversaw all global operations as chief executive of insurance. In 2013 he was picked to join QBE as CEO of North American Operations, where he helped launch a new D&O line for the global company that wrote $18.4 billion in gross premium in 2012.

JOHN D FINNEGAN Chairman and CEO Chubb Corp Warren, NJ WHY HOT: Rewarded for consistently strong results Finnegan’s run of financial success at the helm of Chubb has lasted more than a decade. The annual total return to shareholders (market price plus reinvested dividends) from January 1, 2003, through September 30, 2013, averaged 14.8%, compared to 8.4% for the S&P 500 and 7.0% for the S&P P&C Insurance Index. The company’s board voted to waive its policy that senior executives retire at age 65, which would have prompted Finnegan to step down at the end of 2014, and extended his position through the end of 2016.

PETER EASTWOOD President Berkshire Hathaway Specialty Insurance, Boston WHY HOT: Launches Buffett into E&S With Berkshire’s balance sheet behind him, Eastwood heads a new concern that at inception became a force in the marketplace. Eastwood spent more than two decades at New York-based AIG and was CEO of the company’s property-casualty operation in the Americas. He is president of the Berkshire unit that he started in mid-2013 with former AIG executives David Bresnahan, David Fields and Sanjay Godhwani.

JANUARY/FEBRUARY 2014 | 25

SPECIAL REPORT / HOT 100

LORI FOUCHÉ President and COO Prudential Group Insurance, Newark WHY HOT: Named to a top post at Prudential Fouché joined Prudential in a newly created role that gives her overall responsibility for the life, disability and voluntary product offerings, sales and account management, as well as service delivery and marketing. Fouché previously served as president and CEO of Fireman’s Fund Insurance Company, a subsidiary of Allianz SE.

SAMUEL H FLEET President, Group Benefits Division AmWins, Warwick, RI WHY HOT: Group benefit innovator Considering self-funding can be tricky for employers—and brokers guiding them—the AmWins Group Benefits Division saw an opening and created a platform that, among other things, can more easily rate a group’s risk profile, a key data point in the process. “That decision … can be a difficult one,” said Samuel H Fleet, president of the division. “Our Alternative Risk Transfer Practice platform helps.” Fleet was also installed as president of the Professional Insurance Marketing Association. The association gave Fleet’s division a first place award for best use of new media.

DAN FRANCIS AND JOHN HAHN Co-founder and CEO, President–EPIC, San Mateo, CA WHY HOT: Duo leads fast-growing firm Founded in 2007, EPIC has been honored as a top 40 US retail insurance broker, the eighth largest broker in the US, one of the nation’s “most productive” brokers, and a “Best Place to Work in the Insurance Industry.” EPIC has grown an impressive 26% over the last three years.

(L-R: Hahn, Francis)

REID FRENCH CEO Applied Systems, University Park, IL WHY HOT: On top but always moving Applied is a world leader in insurance software but French makes sure that the company’s products keep improving. In beta now is a new tool to allow agencies to analyze data in their agency management system and seize efficiencies and opportunities. “We want to be the innovation leader,” said French, who in November helped usher in the $1.8bn purchase of Applied by Hellman & Friedman LLC.

26 | JANUARY/FEBRUARY 2014

PATRICK GALLAGHER Director National Institute of Standards and Technology Gaithersburg, MD WHY HOT: Helping bring cyber risk insurance to mainstream Gallagher released the framework for federal cyber-security regulations, which boosted business for cyber-security providers as proper security needs to be in place in order for businesses to meet recommendations. In doing so he was instrumental in drawing more attention to the need for proper cyber-security insurance.

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J PATRICK GALLAGHER CEO Arthur J Gallagher & Co, Itasca, IL WHY HOT: Pulls trigger on largest acquisition—yet J Patrick Gallagher stepped out of a pattern he’s established over nearly two decades as CEO of the brokerage Arthur J Gallagher & Co: he made a large acquisition.

The CEO has been steadily executing the company’s long-time strategy of rolling up smaller firms—450 total deals in the firm’s history and 60 deals in 2013 alone. But most of the transactions bring in less than $5m in new annual revenue.

That changed in August when Gallagher bought Bollinger, Inc for $312m in cash and stock.

Bollinger, the nation’s 21st largest insurance broker ranked by US revenue, is based in Short Hills, NJ, and places more than $1bn in insurance premiums into the marketplace annually. It is expected to add $132m in annualized gross revenue to Gallagher.

“Because Bollinger’s growth strategy, operating structure and sales culture are very similar to Gallagher’s, I’m confident that the integration will be extraordinarily successful,” said Gallagher, 61, who has stressed that culture is a key data point in his acquisition strategy. “Ninety-nine-point-nine percent of our due diligence is on culture,” he said.

“Our strategy is to find people we like and talk them into selling to us.”

Gallagher is chairman, president and CEO of the firm his grandfather started in 1927 and which is now—at almost $2.5bn in 2012 revenue—the nation’s third largest brokerage. Though off its torrid pace of 60 deals closed in 2012, Itasca, Ill.-based Gallagher had acquired 17 new firms by the end of the third quarter—and had announced four additional deals by mid-November.

Oh, and if all that weren’t enough for one year, Gallagher was also tapped as Insurance Broking CEO of the Year by the London-based insurance magazine Reactions.

EVAN GREENBERG CEO ACE Group Philadelphia

MARK B GANZ President and CEO Cambia Health Solutions Portland, Oregon WHY HOT: Elected chair of AHIP board America’s Health Insurance Plans named Ganz chair of its board of directors from January of this year. AHIP’s board comprises CEOs of leading health insurance plans from across the nation.

It actively participates in the national policy discussion on health reform implementation.

WHY HOT: Nabs Free Enterprise Award Greenberg, who argues that insurers should resist the temptation to accept government involvement in difficult areas including terrorism, cyber risk and flood insurance, was given the Insurance Federation of New York Free Enterprise Award.

MAURICE ‘HANK’ GREENBERG CEO Starr Cos, New York WHY HOT: Industry titan building new empire The 88-year-old former AIG chief is busy building another insurance powerhouse. In 2012 Starr’s various units wrote more than $2.5bn in gross premiums in industries including construction, marine and aviation, and in 2013 opened up new markets, including the Philippines. “I like building things,” he said. Under Greenberg, AIG grew into one of the largest public companies in the world before he was forced out.

JEFF GRANGE President of specialty QBE North America New York WHY HOT: Industry vet picked to launch D&O unit Grange brings 25 years at Chubb and Torus to bear at QBE and spearheads its new directors and officers liability division.

JANUARY/FEBRUARY 2014 | 27

SPECIAL REPORT / HOT 100

RICHARD HALPERN Chairman Daniel and Henry Co, St. Louis WHY HOT: Community spirit You can’t stay on top if you don’t reach down to help. That’s a message Halpern, a pillar of the Midwest insurance industry and tireless philanthropist, stresses in ways big and small. The firm — one of the top 80 independent P&C brokerages in the country — organizes teams of employees that offer themselves as work crews for charities.

DON HARRELL SVP, Marine Liberty Insurance Underwriters, Americas, Boston WHY HOT: Sees rising tide in maritime sector Harrell’s division of Liberty Mutual Insurance created a new position for a marine transportation expert and made a splash with a survey of marine and exploration & production risk managers that revealed a lack of property insurance capacity for windstorm risks and cost-effective cover for supply chain exposures. “Tug and barge is an important and growing segment for LIU,” Harrell said.

TOM HARTE President Landmark Benefits Hampstead, NH WHY HOT: Named president of NAHU Harte, who does extensive legislative work on behalf of the health insurance industry, was named for the top post of the National Association of Health Underwriters Board of Trustees. Harte has also held leadership positions at the National Association of Insurance and Financial Advisors and the Society for Human Resource Management.

28 | JANUARY/FEBRUARY 2014

ROBERT HARTWIG President Insurance Information Institute, New York WHY HOT: Let us count the ways…

Hartwig is considered the ‘go to’ authority on insurance implications for anything. He’s available at night and on weekends to speak on the effects of natural or manmade disasters. He has testified multiple times before Congress in favor of TRIA. And more.

TED HAYES Senior risk manager M3 Insurance, Milwaukee WHY HOT: Expert shares his knowledge — to keep a lid on claims It’s a never-ending quest: get your insureds to pay closer attention to safety and prevention. Hayes knows this inside and out. He’s logged 27 years working with school districts on managing safety issues specific to their worlds. Now his expertise is available to anyone. In 2013 he published “If It’s Predictable, It’s Preventable,” for school administrators, teachers and staff. Something for anyone who sells to schools.

MICHAEL HECHT President and CEO GNO, New Orleans WHY HOT: Working for flood insurance solutions Hecht led the fight for delaying hikes in flood insurance premiums. He held a roundtable with FEMA to discuss alternatives to Biggert-Waters, and continues to sound off about economically responsible solutions to the flood insurance crisis.

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GARY HOBERMAN Senior vice president MetLife, New York WHY HOT: Made major technological leap with amazing speed MetLife had 70 software systems and databases that were not integrated, making it hard for the company to talk to policyholders who called in during times of crisis. ‘The Wall’ fixed that. It is a Facebook-like application that provides service reps and sales reps in call centers with an overview of customers. The application was developed and installed in 90 days under the supervision of SVP Hoberman.

MARTIN HUGHES Chairman and CEO HUB International, Chicago F MICHAEL HEFFERNAN CEO Heffernan Insurance Brokers, Walnut Creek, CA WHY HOT: Raised $850k for charity The firm’s 25th anniversary shindig brought in more than $850k for the Heffernan Foundation, which supports non-profits that provide direct support and services to local communities in the areas of shelter, food, education, and preservation of the environment. Heffernan said: “Together we can make a difference in our communities.”

JOHN HICKENLOOPER Governor of Colorado WHY HOT: Drove wildfire insurance task force The governor’s Wildfire Insurance and Forest Health Task Force called for developing a map of the Wildland-Urban Interface, calculating risks for individual properties in high-hazard areas, and facilitating mitigation and prevention measures at the local level.

WHY HOT: M&A tiger bagged by private equity firm All eyes were on HUB International this past summer as the hunter became the hunted and US private equity firm Hellman & Friedman snatched up the world’s 10th largest brokerage outfit (by 2012 brokerage revenue). But eyes were also trained—and still are—on HUB’s chief, Martin Hughes, in an attempt to track his plans for the company, and by extension the industry. He’s agreed to stay on board for five years and plans to stay aggressive. Some of his observations: Mergers: “There continues to be broker consolidation. We’re not the only company out there doing acquisitions. The carriers have to recognize that their world is shrinking; they will be dealing with fewer but larger brokers, and it will cause them to shift their strategy a little bit.”

Selling: “Clients are becoming much more value-proposition oriented.

When I started in the business, it was completely a relationship business.

People didn’t need to have a lot of skills; they just had to be likeable. Today, clients still want to do business with who they like, but you’d better have expertise. Selling insurance today is a proposition-driven strategy as opposed to just pure price or relationship.”

Outlook: “Companies that I see doing well outperforming everyone else are the ones that specialize. If you specialize in a segment, and speak intelligently about it, know the plusses and minuses—you have an advantage over others who can’t. Specialization for brokers is really important.”

Lessons: “The thing that we’ve learned about M&A, the greatest challenge, is that if you do bad acquisitions, you put the whole culture of the company at risk. You can screw up the financials, you can screw up the company, the culture. … You can do a lot of damage. I’ve found we’ve made mistakes when we fell in love with geography instead of falling in love with people. If you decide ‘I have to be in this specific geographic area’ you may end up with something that will become a liability.”

Two bits of advice: “One—get comfortable talking in front of large groups, and learn to be articulate. If you can speak well, and you are comfortable in front of groups, you are more than halfway there. Not everybody is going to be a great speaker; I get that. And not everybody is comfortable speaking in front of a large group—I know I wasn’t. But you make yourself get good at it.

“Two—you need to specialize. Learn how to present your value proposition and the solutions you can provide. But again, that is part of being articulate.”

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TODD JONES CEO Willis North America, New York

KAREN IGNAGNI President and CEO AHIP, Washington, DC WHY HOT: Pressing for transparency in health payments Ignagni trumpeted a message from the America’s Health Insurance Plans board that said, “Action must be taken to eliminate barriers that prevent stakeholders from understanding how markets are (or are not) working.” The American Medical Association is echoing the call for cost transparency.

SETH JOHNSON COO Atlantic Specialty Lines, Richmond, Virginia WHY HOT: Tapped for new management post Johnson, who has been with ASL for all of its 16 years, was picked to lead all profit center leaders in the new post of COO on the corporate level. He previously served as COO of the firm’s Florida operation.

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JEREMY JOHNSON President and CEO Lexington Insurance, Boston WHY HOT: Top dog The can-do executive.

“There’s always a solution for hard-toplace risks,” says the seasoned pro, who earned his stripes in the D&O trenches with Sedgwick and Marsh. Johnson was rewarded in 2013 when he was chosen for the No 1 executive post at Lexington. He previously served as specialty product line executive, US and Canada, for AIG Property Casualty overseeing business lines such as aerospace, marine and political risk and surety.

WHY HOT: Rising star tapped to lead Willis’ largest unit Jones rose in 2013 to the rank of CEO of Willis North America, the largest business unit of Willis Group Holdings, the global risk adviser, insurance and reinsurance broker. Appointed in July, he is responsible for leading the business segment that in 2012 reported revenues of more than $1.3bn. It has more than 100 local offices across the US, Canada and Mexico, offering a full range of insurance and risk management services, specialist expertise and global resources to large corporate, middle-market and small-business clients. The business unit has over 6,000 employees.

“We are seeing the evolution of the importance of information and analytics, the insight and decision-making support that can be created out of them,” said Jones, 48. “How do you really get at that data, and when you do, how do you parse through it in a way that is meaningful?”

The strong trend toward analytics and a deepening global connectivity mean that Willis has had to adapt fast. “When you have floods in Thailand, you think, ‘What does that have to do with my business in lower Manhattan?’ But where does your supply chain emanate from? It may have a very real impact,” said Jones.

“We want to respond to technological changes in the industry,” he said.

From 2010 to 2013, Jones served as president of Willis North America, where he was responsible for the day-to-day operations of the unit’s retail brokerage business.

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ERIC JOOST COO Willis North America, New York WHY HOT: Picked for senior post with Willis Joost was named to the newly created post of COO of Willis North America from his position as chief executive of Willis North America’s Specialty Practices. He will continue to lead the North American Specialty Practices, which serves key sectors, including construction, healthcare, financial services, real estate and life sciences. He has more than 25 years of industry experience and has held leadership positions at Allianz and Aon.

ALAN JAY KAUFMAN CEO Burns & Wilcox, Farmington Hills, MI

BRADY R KELLEY Executive director NAPSLO, Kansas City WHY HOT: Steady voice for wholesalers Since 2011, Kelley has tirelessly promoted the wholesale model of distribution. As chief of the National Association of Professional Surplus Lines Offices, Kelley unveiled a new messaging thrust built around the group’s members’ commitment to integrity and professionalism. He also introduced a new logo and graphics package for the organization.

Prior to joining NAPSLO, Kelley was CFO of the National Association of Insurance Commissioners.

WHY HOT: What does he see? The big picture The demographics are clear. The industry’s executive ranks are graying. Action is needed to make sure the next year’s growth industries have capable risk transfer partners. Kaufman is delivering on that need. The legal and financial worlds assiduously develop new talent, Kaufman said, but in insurance “there simply is not the same level of commitment.” Kaufman is expanding his firm’s proprietary — and successful — in-house training and continuing education program and making it available to the entire industry online.

NICOLE KECK Commercial lines coordinator AW Welt Ambrisco Insurance Iowa City WHY HOT: Named customer service rep of the year Keck was named the 2013 National Outstanding Customer Service Representative of the Year. The Society of Certified Insurance Service Representatives and the Society of Certified Insurance Counselors selected Keck as the winner from a field of 49 state winners. In her winning essay, Keck cited four communication barriers she has faced and how she has overcome them: finding a common language; communication style differences; e-mail pitfalls; and time management.

STEVE KEMPSEY Casualty leader Marsh US Casualty, New York WHY HOT: Takes reins at key division of industry titan Steve Kempsey, a 20-year Marsh veteran, was tapped in 2013 as the international heavyweight’s new US casualty leader. Based in New York, Kempsey is responsible for oversight of Marsh’s primary and excess casualty operations in the US, its International Casualty Practice, and its Workers’ Compensation Center of Excellence.

Kempsey has spent his entire 20-year insurance career at Marsh. Earlier this year, he assumed responsibility for the International Casualty Practice, in addition to his role as East Zone casualty leader, which he was appointed to in 2011. Prior to that, he held leadership roles in the West Zone as a client executive and within Marsh’s casualty and FINPRO practices. He began his career at Marsh as a nuclear adviser in the Power and Utilities Practice.

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ROBERT J KLONK CEO Oswald, Cleveland WHY HOT: Doing well by doing good Klonk is one to give — and keep giving. Serves on the boards of Assurex and the CIAB. Chairs the Council of Employee Benefits Executives. Co-chairs the CIAB PAC where he meets frequently with legislators to lobby on behalf of the industry. Sits on the National MS Society board. It’s Klonk’s way — and the Oswald way — to look out for others. On Oswald’s “Day of Caring,’ employees (en masse) spend a day painting, cleaning or making other onsite improvements at a local charity. The results of all this? The company’s revenues jumped nearly 14% to more than $52 million in the last full financial year.

EDEN KRATCHMAN Executive director ACE Group’s Charitable Foundation, Philadelphia WHY HOT: Supporting cancer research Kratchman launched ACE’s 2013 campaign to raise funds for City of Hope’s cancer research, treatment, and prevention efforts. This year, ACE also supported City of Hope’s diabetes research.

ACE foundations donate more than $4m annually.

JOAN LAMM-TENNANT Global chief economist and risk strategist Guy Carpenter & Co New York WHY HOT: Named industry woman of the year Lamm-Tennant was tapped as the Association of Professional Insurance Women’s Insurance Woman of the Year. She was chosen in recognition of her outstanding achievements and leadership within the industry, as well as for her commitment to the advancement of women. In addition to her job responsibilities, Lamm-Tennant leads a joint industry Microinsurance Initiative. Prior to joining Guy Carpenter in 2007, she was the founding president of General Reinsurance Capital Consultants. Before joining the business world, Lamm-Tennant was a tenured scholar at Villanova University. Today, she remains on the faculty of the Wharton School.

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D GAINES LANIER Chairman and CEO J Smith Lanier & Co, West Point, Georgia WHY HOT: In life — and golf — it’s all in the follow through Lanier, who traces his business and family roots back to two Lanier brothers and their startup insurance outfit in the wake of the Civil War, lives by the company credo: “We do what we say we’ll do.”

Deliver for customers?

Here’s one: “We moved the business to JSL 17 years ago, and have never regretted it since.” Deliver for stakeholders? The $80+ million company consistently ranks among the nation’s leading brokerages.

Deliver for charity?

The firm’s annual golf tournament in 2013 netted more than $200,000 and since 2005 has raised more than $1.6 million.

PETER LEE Executive director Covered California, Sacramento WHY HOT: Leader among ACA exchanges Lee heads the most successful state healthcare exchange set up under ACA in terms of numbers.

By mid-November, the California state exchange had signed a third of the country’s total enrollees.

MATTHEW LEVIN Executive director EVP and head of global strategy Aon, Chicago WHY HOT: Honored by World Economic Forum Levin was selected as a 2013 Young Global Leader by the World Economic Forum. He was picked for his record of professional accomplishments and his potential to contribute to shaping the future of the world. “In our increasingly complex, interconnected global society, the decisions that organizations and governments make today have widespread implications for the future,” said Levin, who works to identify new risks and develop new solutions in markets around the globe.

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MICHAEL MCGAVRICK CEO XL Group, Dublin WHY HOT: Putting calls for action to work in US XL under McGavrick is on the move in the States. In 2013 the company’s executive ranks swelled in Atlanta, Chicago, Dallas, New York and elsewhere.

And the maverick McGavrick is walking the walk on his bold challenge to the industry. “We can’t just stand on the sidelines … we have to be out in front, spotting the risks and providing the solutions,” he said. “We must become more daring.” In the US in 2013 XL introduced new war and political risk lines and brought new big data capabilities into its construction.

FRANK MCKENNA President, healthcare Beecher Carlson Atlanta

DAVID LOCKTON AND JOHN LUMELLEAU Chairman, CEO Lockton, Inc, Kansas City WHY HOT: Brokerage tops $1 bn in revenue Lockton hit a significant milestone in its latest fiscal year, topping $1bn in revenue for the first time. The world’s largest privately held insurance broker posted revenue of $1,016,751,000, an increase of 11% year over year. Revenue has grown by 36% over the past five years.

“It’s kind of like shooting a good score in golf.

It’s really the individual strokes that count. In other words, it’s the individual achievements we’ve made for clients along the way. The $1bn is just the scorecard at the end, after playing a good round,” said executive chairman David Lockton.

President and CEO John Lumelleau gave credit to the team: “Lockton is well positioned around the world to serve the best interests of our risk management and employee benefits clients. Our growth is a direct result of our associates building trust with our clients,” he said.

Lockton, whose revenue has increased every year since its founding in 1966, provides risk management and employee benefits consulting to more than 35,000 clients around the world. It has 4,950 associates in 64 offices in North America, Europe, South America, Asia, and Australia.

LIAM MCGEE CEO Hartford Insurance Group Hartford, Connecticut WHY HOT: Rebound master, corporate citizen McGee rebuffed concerted calls to split up the company in 2012 after the stock price plummeted. He executed less drastic strategies and got results. The stock rebounded in 2012 and in 2013 jumped more than 50%. In November Hartford announced it would donate $100,000 to the American Red Cross disaster relief efforts in support of those affected by Typhoon Haiyan.

WHY HOT: Veteran lands top health post McKenna was promoted to president of healthcare at Beecher Carlson after previously serving as executive managing director of the healthcare practice, serving large hospital chains. He brings a wealth of experience to the post: prior to Beecher Carlson, McKenna served as Aon’s national healthcare practice leader and before that he built up his own agency, McKenna & Associates, into a healthcare force before selling it to—and joining—Aon.

ERWANN MICHEL-KERJAN Managing Director Wharton Risk Center, Philadelphia WHY HOT: Provides insight on disaster risk Sandy, floods, wildfires – now you realize why carriers carry aspirin. The industry needs a brilliant mind working on risk transfer solutions in a riskier world. Enter Michel-Kerjan. The globetrotting academic star’s deep understanding of the costs of catastrophic events provide clear insight to help governments, business and underwriters from going underwater. Michel-Kerjan has authored or coauthored more than 70 publications on catastrophe risk management and testified before Congressional committees urging lawmakers not to throw TRIA under the bus. His clarion call: “Unless we start to get serious about making the country more resilient to natural disasters, we won’t be prepared for what the 21st century has in store for us.”

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LECONTE MOORE Managing director DeWitt Stern, New York WHY HOT: Pioneers Super Bowl disruption policy LeConte Moore, managing director at DeWitt Stern, the New York City based insurance broker specializing in entertainment and sports, got to thinking after Super Storm Sandy and the blackout that disrupted the Super Bowl in New Orleans. What would happen if something catastrophic happened to the NFL’s title game when it was held in February— outdoors—at New Jersey’s MetLife Stadium?

So DeWitt Stern, a New York risk management firm specializing in business, personal, fine art, entertainment and media, employee benefit and executive liability insurance, teamed up with HCC Insurance Holdings’ Houston Casualty Co and offered a unique policy insuring businesses against loss of revenue they would incur if Super Bowl XLVIII was cancelled or moved out of area. This game is the first Super Bowl to be held in an open-air stadium in a northeastern cold-weather state in its 48-year history. Previous Super Bowls have been played in warm-weather cities or domed stadiums.

NFL commissioner Roger Goodell has said the league thought about weather when it picked the New York area for its showpiece event. “Some of our most memorable games are played in unusual weather circumstances. Winter and cold [are] part of football,” Goodell said at a press event two years ago.

“A little snow would be great for us.”

The coverage DeWitt Stern designed provides the broadest business interruption policy available, according to the company. It covers policyholders if for any reason, such as an extreme winter storm or acts of terrorism in New York or elsewhere in the country, Super Bowl XLVIII is cancelled or relocated. Clients can protect their revenue even if their revenue figures are only projections. Typically, estimates of revenue are not insurable unless they are proven and there is a long revenue track record.

The policy is unique in this way, the company says.

“Major American sports organizations and television networks always buy business interruption insurance to protect against losses in the event that something, God forbid, happens,” said Moore. “This policy is available for any businesses countrywide that stands to benefit economically from the Super Bowl coming to the New York-New Jersey area.”

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THOMAS J MINKLER President Clark-Mortenson Agency, Keene, NH WHY HOT: Always willing to help the industry Minkler keeps himself pretty busy as president of his firm. He oversees the operation of three divisions (personal lines, commercial lines and financial services) in five offices with 53 employees in two states. But he still finds time to put his shoulder to the wheel for the greater good. He frequently speaks on behalf of the industry and has provided testimony before Congress on several occasions. He is a past recipient of the highest IIABA government affairs award and has served his peers as chairman of the New Hampshire Association of Insurance Agencies and president of the Massachusetts Association of Insurance Agents. In 2013 he was voted chairman of the IIAB of America.

THOMAS F MOTAMED Chairman and CEO CNA, Reading, PA WHY HOT: Caring for the community—and the P&Ls CNA donated its 260,000-square-foot office building in downtown Reading to a public charity for use as a charter school as part of the company’s support of the city and its downtown revitalization efforts. CNA, which plans to move into leased space in Reading in 2014, also posted an 18.5% uptick in third-quarter year-over-year net income.

MICHAEL R MURPHY President Arch Insurance Group US, New York WHY HOT: Keeping eyes open for opportunities Under Murphy there is little time to stand still. The company launched innovative blogger coverage in 2013 called BloggerShield™, which covers libel, slander, defamation, copyright infringement, and privacy violation.

The company also rolled out a new side D&O line to expand the level of personal protection available to executives and board members.

Prior to coming to Arch, where he is also chief underwriting officer of Arch Worldwide Insurance Group, Murphy spent eight years at Zurich and before that held senior positions at both Marsh and AIG.

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REP. RANDY NEUGEBAUER, R-TEXAS, AND REP. DAVID SCOTT, D-GEORGIA

DAVID NADLER Vice chairman Marsh & McLennan Companies, New York WHY HOT: Inducted into boardroom hall of fame Nadler, Marsh’s vice chairman, was inducted into the National Association of Corporate Directors Directorship 100 Corporate Governance Hall of Fame, a list of the most influential leaders in the boardroom and corporate governance community.

WHY HOT: Sponsored the agents and brokers reform act Neugebauer and Scott introduced the National Association of Registered Agents and Brokers Reform Act of 2013 in the US House of Representatives.

The bill will allow multistate licensing for insurance producers and has deep support in the industry. It passed overwhelmingly by a 397–6 vote in September. It was introduced in the Senate by Sen. John Tester, D-Mont, and Sen. Mike Johanns, R-Neb, and is awaiting a committee hearing.

JOHN NICHOLS President Disability Resource Group, Chicago WHY HOT: Raised money for spinal cord injury work Nichols, who suffered a massive spinal cord injury 20 years ago, raised more than $43,000 for the Spinal Cord Injury Association of Illinois while running in the Chicago Marathon. The title sponsor, Bank of America, honored Nichols with an award for the participant who raised the most money. Not one to sit on his laurels, Nichols was also elected in 2013 as president of the National Association of Insurance and Financial Advisors’ representative governing body, the National Council.

In 1993, a tragic waterskiing accident left him paralyzed from the neck down. Through six years of physical therapy he reached a level of recovery that less than 1% of all spinal cord injury patients attain. In 2009 he finished the Chicago Marathon and has completed the last four Chicago Marathons, recording a personal best of 4:32:08 in 2012.

JOE PADUDA Principal Health Strategy Associates, Tampa

ED NOONAN Chair Validus Re, Bermuda WHY HOT: A pioneer in writing terror risk Noonan balked at industry consensus that terrorism risk is impossible to write, and led Validus Re to develop a functioning model for assessing terror risk. As a result, Validus Re will become one of the first private insurers to write terror risk without use of the federal backstop program established by the Terrorism Risk Insurance Act.

WHY HOT: Shines a light for work comp pros Paduda’s popular weblog, Managed Care Matters, attracts more than 1,500 unique visitors a day and provides a key online stop for executives in the field.

But more significantly he has provided the industry with a detailed survey of practices in areas such as managing pharmacy costs within workers’ compensation and tailored claims systems, since 2004. His annual exploration of management and technology specific to the workers’ comp filed assists companies in setting cost-effective courses.

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JOHNNY PITTS Chief manager Lipscomb & Pitts Insurance, Memphis WHY HOT: Pitts picked to lead CIAB, works for ‘good’ Pitts was named the 2014 chairman of the Council of Insurance Agents & Brokers. Pitts, an Eagle Scout, is also the founder of the Lipscomb Pitts Breakfast Club, which works with local, regional, and national government to help create change for the Mid-South. The Breakfast Club’s stated mission: To be a force for good.

GARY PRESTON Teacher at St Petersburg (FL) Catholic High School WHY HOT: Helping to train the next generation of producers Industry education program InVEST renamed its Teacher of the Year Award in honor of Preston, who has introduced thousands of high-schoolers to the field over his 20 years of teaching InVEST courses.

WHY HOT: Industry’s tiger on the Hill Many thought it couldn’t be done but Pusey led the charge and kept Dodd-Frank from goring the commercial property insurance industry—and then didn’t let up. She serves as a member of the US Chamber of Commerce’s Committee of 100 and sits on the board of the Business Industry Political Action Committee’s Prosperity Fund. Oh, and she was named among the Top Association Lobbyists for 2013

by The Hill.)

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WHY HOT: Taking the reins Rehnberg was named to the top US post for Argo Group International Holdings, Ltd., the international underwriter of specialty insurance and reinsurance products. Previously, Rehnberg served as EVP for specialty lines at OneBeacon Insurance. He held similar senior executive positions at The St Paul Travelers Companies, Liberty International and Chubb Corporation.

MANNY RIOS CEO American Modern Insurance, Cincinnati

JOHN PUTNAM Consultant Putnam Assurance & Risk Services, Colorado Springs LEIGH ANN PUSEY CEO American Insurance Association, Washington, DC

KEVIN J REHNBERG President Argo Group US, San Antonio

WHY HOT: The volunteer’s volunteer Putnam was the insurance representative for the “Colorado Springs Together” task force. He logged more than 200 volunteer hours, advising people on how to file insurance claims for homes damaged/lost during two years of devastating wildfires in Colorado Springs.

WHY HOT: Keeps focus on three pillars of success 1. Performance. Serving mass markets and niches such as vacation homes and antique cars, American Modern chalked up revenues of more than $1.1 billion in 2012 with an ‘A+’ AM Best rating. 2. Sharing. Company leveraged its expertise by launching a P&C claims management and training service to help the broader industry. 3. Service. American Modern also set the pace by raising $530,132 — a $78,647 increase over last year — for the Greater Cincinnati United Way

THOMAS S ROBERTSON Dean, Wharton School, Philadelphia WHY HOT: Taking the lead on research The school’s Risk Management and Decision Processes Center entered a multiyear academic cooperation with Zurich Insurance Group to develop initiatives and research focused on flood resilience. Funding for this initiative will be provided by the Z Zurich Foundation. The project will advance scholarship on this topic of critical global importance, as floods impact more individuals worldwide than any other natural disaster.

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BILL ROSS President Insurance Industry Charitable Foundation Walnut Creek, CA

literacy among young children—particularly those in low-income communities.

As part of the initiative, Ross and the IICF worked with the Sesame Workshop to launch “Every Day is a Reading and Writing Day.” When WHY HOT: Diversity, the program kicked off in October, IICF members literacy — and Cookie were joined by Grover, Cookie Monster and other Monster! popular Sesame Street characters to help children Ross (on right in photo) from the St Aloysius School in New York City sets out every day to put the industry’s best foot explore new digital materials and crafts designed forward. As president of the Insurance Industry to promote the love of literacy.

Charitable Foundation (IICF), he has orchestrated “I have been with the foundation for just shy of 10 years’ worth of charitable acts using donations 10 years,” said Ross. “Not a day goes by that I’m not collected by IICF members and the insurance overwhelmed by the generosity of the people who community at large. wake up and lead in this industry. In every In 2013 he really outdid himself. community and every organization large and small Rueing a lack of gender diversity plaguing that represents insurance, group events are industry boardrooms, Ross coordinated with happening through personal time, funds, researchers from St Joseph’s University to detail knowledge and expertise. It’s an amazing industry the problem. As a result, the IICF organized the when you look at the [charity] work it engages in.” first Women in Insurance Global Conference. This Looking forward, Ross said his focus in 2014 two-and-a-half-day event featured 425 women from would be to increase the visibility of the IICF, eight nations, discussing, debating, and challenging helping people know the organization does exist issues involving diversity and gender in the industry. and that it’s there to “help communities in Ross also headed the IICF’s Early Childhood enriching lives, and doing it by and with the Literacy Initiative, a $750,000 project to increase insurance industry.”

BRYAN SANDERS President Markel Wholesale, Richmond, VA WHY HOT: Selected to run key division Sanders, who has held leadership positions at Alterra Specialty, Max Specialty and Hobbs and MacDuff Underwriters, brings 32 years of industry experience to his new post. The former NAPSLO president rose from EVP of the wholesale division and helped guide its reorganization and expansion through the integration of Alterra’s E&S operations. Markel acquired Alterra in 2013.

MARTIN SENN CEO, Zurich Insurance Group, Zurich

MIKE ROSS CEO Insurica, Oklahoma City WHY HOT: Back acquiring after two-year hiatus After doubling in size with the acquisition in 2011 of Guaranty Insurance Services in Plano, Texas, the multistate broker was quiet on the acquisition front for a spell. But this year the company is back in M&A mode and announced five new acquisitions in Oklahoma, Arizona and Texas, including the Kenderdine Agency, which can trace its lineage back 100 years in Palestine, Texas. “We will continue looking for agencies that fit our plan,” said Ross, whose firm now boasts a No. 17 ranking among brokers in the country, based on P&C revenue.

MORDY ROTHBERG AND JOE WAKED President, CEO Confie Seguros, Huntington Beach, CA WHY HOT: Making big moves in Hispanic market Private equity-backed insurance broker Confie made more than 23 acquisitions in the past year in its strategy to roll up brokerages that primarily serve Hispanic markets. A highlight was the more than $100m purchase of the retail auto insurance unit of Affirmative Insurance Holdings.

WHY HOT: Investing for tomorrow—and today Zurich announced it would put up to $1bn into green bonds issued by the World Bank, and others—the largest investment in green bonds globally. Green bonds fund projects that help mitigate climate change and assist communities to adapt to its consequences. The company also reports strong performance.

“We delivered a solid operating profit in all core segments for the first nine months of 2013,” said Senn.

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ROGER SITKINS CEO Sitkins International, Ft Myers, Florida

TW SHANNON AND BRIAN BINGMAN Oklahoma House Speaker Senate President Pro Tem WHY HOT: Overhauled state workers’ comp law Rep. Shannon and Sen. Bingman sponsored a bill that revolutionized workers’ comp in Oklahoma, changing the system from a judicial system to an administrative one. “For too long, workers and businesses have been subjected to an archaic and inefficient workers’ comp system,” said Shannon.

“This monumental shift … will lower costs for businesses and get injured workers the quick relief they need.” The bill became law and is now, after being challenged, before the state’s supreme court.

WHY HOT: Consistent voice for the IA Everyone needs an advocate and in these days of increased competition the IA especially needs support. Sitkins works to answer that call with a tireless positive message to independents: Specialize and prosper.

“Prospects know very quickly whether you know their business,” he says. Follow through with your plans to innovate. “Vision without execution is a hallucination,” he says quoting Thomas Edison. Small business lines can be profitable.

“It’s within reach if you take the right approach.

As always, it’s your choice,” said Sitkins.

DAVID C SMITH VP of Ebenconcepts, Fayetteville, NC WHY HOT: Named Adviser of the Year Smith was tapped by the National Association of Health Underwriters as its Adviser of the Year for 2013. Smith has worked for the association at the local, state and national levels for over 10 years. He was president of the North Carolina Association of Health Underwriters from 2008 to 2009.

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SEAN SMITH CEO of Keenan, Torrance, CA WHY HOT: Firm lauded for humanitarian works Keenan president and CEO Sean Smith (on left in photo) recently accepted recognition on behalf of the company for its efforts to curb bullying and create safe and healthy school and community environments.

Keenan, the 17th largest insurance consulting and brokerage firm in the US, was honored at the 42nd Annual Humanitarian Awards Dinner held by Peace Over Violence in Beverly Hills. Each year, the organization recognizes those who have helped further its mission of building healthy relationships, families and communities free from sexual, domestic and interpersonal violence.

Keenan was honored for significant contributions it has made around issues of bullying, violence prevention and workplace safety through its Keenan SafeSchools corporate and school-based training programs.

“Keenan is strongly committed to the safety of our communities, especially preventing bullying, sexual abuse and violence in our schools,” said Smith in accepting the award. “Schools should be a secure environment where children can learn and grow. But, as we too often see in today’s news headlines, that security can be broken. But at Keenan we strongly believe that each and every one of us can make a difference.”

Through the online training capabilities of Keenan SafeSchools, over one million school safety, abuse and harassment prevention courses have been delivered to more than 600,000 school staff throughout California without additional public funding and while reducing disruption to classroom schedules. Keenan risk control professionals, on site at more than 850 school districts, prepare staff to respond to violence and implement measures to help prevent it.

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GARY TOLMAN President and CEO Esurance, San Francisco

FRANK J SODARO SVP and CFO Kemper Corp, Chicago WHY HOT: Steady and loyal win the day Some say you have to move out to move up. That the corner suite always goes to the fair-haired darling from the outside. Don’t tell that to Sodaro. Working counter to hopscotching generational trends, Sodaro has spent more than 20 years at Kemper — which specializes in P&C, life and health — at posts including assistant corporate controller, investment accounting manager and senior auditor.

His reward? A hot new post for 2013 as CFO. And what do the number say? Net income for the first three quarters in 2013 jumped to $70.1 million compared to $55.6 million a year ago.

WHY HOT: Breaking ground with online bundling What do you do when your competitors flood the airwaves with — give or take — $1 billion marketing budgets? If you’re Tolman, you innovate. Esurance is betting on bundling with a pilot project in Wisconsin that gives customer an online avenue to shop for — and buy — homeowners insurance. Other car insurance companies can’t underwrite home policies in-house which gives Esurance an edge, says Tolman who plans to take the strategy to other states. Is online bundling a winning play? Time will tell. Is Flo watching? You’d have to think so.

NEIL STEVENS Director Space Division Pembroke Managing Agency, London WHY HOT: Helping secure satellite financing Stevens worked on the push to offer insurance coverage for lenders engaged in the financing of satellite projects. It provides coverage for banks and export credit agencies against the risk of non-disclosure and misrepresentation by the borrowers in a satellite financing transaction. The Pembroke Syndicate 4000 will lead a group of Lloyd’s syndicates to provide capacity of up to $100m to underwrite coverage.

KEVIN T WESTROPE President NAPSLO, Kansas City WHY HOT: Elected to lead national association A leader in the surplus space since 1985, Westrope has served on the National Association of Professional Surplus Lines Offices board since 2007 and was elected to the Executive Committee in 2010. This year he was tapped to serve as president.

TREI WILD Consultant Plano, TX WHY HOT: ‘The best of the industry’ A tireless volunteer, Wild has filled most roles at the National Association of Health Underwriters (NAHU), from his first days of editing the newsletter at the Dallas chapter in 1985, to 2004 when he was elected national president. “Trei embodies the best of the health insurance industry with his incredible compassion and willingness to share,” said Janet Trautwein, CEO of NAHU. For all that, the organization named him its Person of the Year in 2013—the health insurance industry’s highest honor.

JANUARY/FEBRUARY 2014 | 39

SPECIAL REPORT / HOT 100

JEFF YATES Executive director Big “I” Agents Council for Technology BRANDON WILLIS Administrator for Risk Management Agency USDA Farm and Foreign Agriculture Services, DC WHY HOT: Revised government regulations Willis helped revise prevented-planning rules for crop insurance, making it easier to satisfy certain provisions to make claims for prevented planning.

According to producers, the revisions “helped eliminate some disconnect between carriers, brokers and policyholders.”

WHY HOT: Honored with eponymous award Yates, executive director of the Big “I” Agents Council for Technology (ACT) and long-time national staff member, received the inaugural Jeff Yates Lifetime Achievement Award at the 2013 Big “I” Legislative Conference.

“This new award is the highest recognition a non-agent can receive for a lifetime of work in the independent agency system,” said Big “I” Chairman Bobby Bramlett while presenting the award, which is named after Yates.

Yates has been executive director of ACT since 2001 and works with independent agents, companies, vendors, user groups and industry associations to advance effective technology solutions and improved business processes within the independent agency system. He previously held the roles of general counsel, executive vice president and CEO industry and state relations during his nearly 38-year tenure with the Big “I.” “Everything I’ve done, it’s been working with a lot of people and trying to facilitate,” Yates said when accepting the award. “I think all the staff would tell you here, the reason they’re here is because of the agents and the willingness of agents to commit themselves to work and make a difference in the industry.”

Over the past 12 years with ACT, he said he’d been working with agents on innovative technologies. “I think your future is brighter than it’s ever been.

A lot of these tools now level the playing field, and you’ve got a bright, bright future ahead of you if you want to use those.”

DOUG WITCHER CEO Smart Choice, Greensboro, NC

BROOKS ZIEGLER Producer Morris & Templeton, Savannah, GA

WHY HOT: Philanthropy takes center stage A self-proclaimed former “Ebenezer Scrooge,” Witcher heads the Smart Choice network of some 3,500 independent agents that cracked the top 50 list of the nation’s largest independent P&C brokers as recently as 2012. Once one to shun charitable pursuits, he said he had only recently got the philanthropy bug. In the past three years, he said, Smart Choice has given away $790,000.

Witcher also works with United Way of Greater High Point, NC, and St Mary’s Episcopal Church.

WHY HOT: State nabs two national awards Ziegler has shown years of dedication to his work with Independent Insurance Agents & Brokers of America (IIABA)—and has reaped rewards for it. The IIABA National Young Agents Committee presented Georgia with two 2013 awards of excellence, which Ziegler, who chaired the state YAC committee, dubbed an “unprecedented occurrence.”

40 | JANUARY/FEBRUARY 2014

IBAMAG.COM

The Insurance Business America HOT 100: A-Z by organization name Organization

Last name

First name

Organization

Position

Last name

First name

Position

ACE Group

Greenberg

Evan

CEO

Keenan

Smith

Sean

CEO

ACE Group's Charitable

Kratchman

Eden

VP

Kemper Corp

Sodaro

Frank J

CFO

(Kentucky)

Beshear

Steve

Governor

Landmark Benefits

Harte

Tom

President

Lexington Insurance

Johnson

Jeremy

President and CEO

Harrell

Don

SVP, Marine

Foundation AHIP

Ignagni

Karen

President and CEO

AIG

Benmosche

Robert H

CEO

American Insurance

Pusey

Leigh Ann

CEO

Liberty Insurance Underwriters

Johnny

Chief manager

Manny

CEO

Lipscomb & Pitts Insurance

Pitts

Rios

Insurance

Lockton

Lockton

David

Chairman

AmWins

President, Group Benefits Division

Lockton

Lumelleau

John

CEO

M3 Insurance

Hayes

Ted

Senior risk manager

EVP and head of global strategy

Markel Wholesale

Sanders

Bryan

President

Marsh & McLennan

Nadler

David

Vice chairman

Marsh US Casualty

Kempsey

Steve

Casualty leader

MetLife

Hoberman

Gary

SVP

(Mississippi)

Chaney

Mike

State Insurance Commissioner

Association American Modern

Aon

Fleet Levin

Samuel H Matthew

Applied Systems

French

Reid

CEO

Arch Insurance Group

Murphy

Michael R

President

Argo Group

Rehnberg

Kevin J

President

Arthur J Gallagher

Gallagher

J Patrick

CEO

Atlantic Specialty Lines

Johnson

Seth

COO

MJ Insurance

Bill

Michael H

CEO

AW Welt Ambrisco

Keck

Nicole

Commercial lines coordinator

Mobomo

Gershman

Greg

Innovation director

Morris & Templeton

Ziegler

Brooks

Producer

President of property and casualty

Munich Re

Albo

Pina

President

NAPSLO

Kelley

Brady R

Executive director

NAPSLO

Westrope

Kevin T

President

NAPIA

Becker

Mike

EVP & CEO

National Institute of Standards and Technology

Gallagher

Patrick

Director

Insurance Beecher Carlson

Davis

Scott

Beecher Carlson

McKenna

Frank

President of healthcare

Berkshire Hathaway

Eastwood

Peter

President

Specialty Insurance Big "I" Agents' Council

Yates

Jeff

Executive director

(Oklahoma)

Bingman

Brian

Senate President Pro Tem

Burns & Wilcox

Kaufman

Alan Jay

CEO

(Oklahoma)

Shannon

TW

House Speaker

Cambia Health Solutions

Ganz

Mark B

President and CEO

Oswald

Klonk

Robert J

CEO

Catlin Group

Catlin

Stephen

CEO

Stevens

Neil

Director of Space Division

Chubb Corp

Finnigan

John

Chairman and CEO

Pembroke Managing Agency

CNA

Motamed

Thomas F

Chairman and CEO

Pinnacle Insurance Group

Bates

Mark

President

(Colorado)

Hickenlooper

John

Governor

Plano, Texas

Wild

Trei

Consultant

(Colorado Springs)

Bach

Steve

Mayor

Fouche

Lori

President and COO

Confie Seguros

Rothberg

Mordy

President

Prudential Group Insurance

Confie Seguros

Waked

Joe

CEO

Putnam Assurance & Risk

Putnam

John

Consultant

Covered California

Lee

Peter

Executive director

Democrat, Georgia

Scott

David

Representative

QBE North America

Grange

Jeff

President of specialty

QBE North America

Duclos

Dave

CEO

DeWitt Stern

Moore

LeConte

MD

RCM&D

Cawley

Bob

President

Disability Resource Group

Nichols

John

President

Republican, Texas

Neugebauer

Randy

Representative

Ebenconcepts

Smith

David C

VP

Risk Strategies

DeWalt

George

SVP

EPIC

Francis

Dan

Co-founder and CEO

Risk Strategies

Moreno

Lou

SVP

EPIC

Hahn

John

President

Angelina

Mike

Executive director

Esurance

Tolman

Gary

President and CEO

St Joseph's Academy of Risk Management and Insurance

GNO

Hecht

Michael

President and CEO

Sitkins International

Sitkins

Roger

CEO

Google

Dickerson

Michael

Site reliability engineer

Smart Choice

Witcher

Doug

CEO

Guy Carpenter & Co

Lamm-Tennant

Joan

Global chief economist and risk strategist

St Petersburg Catholic High School

Preston

Gary

Teacher

Hartford Insurance Group

McGee

Liam

CEO

Starr Cos

Greenberg

Maurice “Hank”

CEO

Hays Companies of Georgia

Braner

Jodie

VP

Travelers

Dinshaw

Behram M

SVP of personal insurance product management

Health Strategy Associates Paduda

Joe

Principal

Brandon

Heffernan

F Michael

CEO

USDA Farm and Foreign Agriculture Services

Willis

Heffernan Insurance Brokers

Administrator for Risk Management Agency

Validus Re

Noonan

Ed

Chair

HUB

Hughes

Martin

CEO

Wharton Risk Center

Michel-Kerjan

Erwann

MD

Insurance IIAB

Minkler

Thomas J

Chairman

Wharton School

Robertson

Thomas S

Dean

Insurance Industry Charitable Foundation

Ross

Bill

President

Willis North America

Jones

Todd

CEO

Insurance Information Institute

Hartwig

Robert

President

Willis North America

Joost

Eric

COO

WR Berkley

Berkley

William R

Chairman and CEO

Insurica

Ross

Mike

CEO

XL Group

McGavrick

Michael

CEO

J Smith Lanier & Co

Lanier

D Gaines

Chairman and CEO

Zurich Insurance Group

Senn

Martin

CEO

for Tech

Services

JANUARY/FEBRUARY 2014 | 41

FEATURE / CATASTROPHE INSURANCE

Tornadoes descended on Moore, Oklahoma, on May 20, 2013 and left a trail of destruction Credit: Oklahoma Insurance Department

Time to RECALIBRATE

String of disasters has industry looking for best ways forward

By Marjorie Preston

Mike Barry

42 | JANUARY/FEBRUARY 2014

When Hurricane Sandy aimed at the northeastern United States in October 2012 it eventually caused 117 deaths in six states, destroyed hundreds of homes and businesses, forced the redrawing of municipal flood maps and introduced a new word to the vernacular: superstorm.

With $35bn in insured losses, Sandy was the sixth costliest event in global insurance history, reports the Insurance Information Institute (III).

Along with other epic disasters—Hurricane Katrina in 2005; the ‘100-year flood’ that hit Colorado in September; and the tornadoes that pummeled Illinois and Indiana in November, and

others—it has government officials, insurers and the insured recalibrating the risks of dealing with Mother Nature.

“I went to a lot of post-Sandy hearings, and a lot of people were unaware of the flood exclusion,” says III spokesman Mike Barry. “They lived in flood zones but didn’t have flood insurance. Why? Because their properties were paid for and the lender no longer required it.”

After the deluge, the underinsured appealed for aid to FEMA, the Small Business Administration and other government agencies. When FEMA’s National Flood Insurance Program (NFIP) burned

IBAMAG.COM

TOP 10 MOST COSTLY WORLD INSURANCE LOSSES, 1970–2012* (INSURED LOSSES, 2012 DOLLARS, $ BILLIONS)

$50

2012 insured CAT losses totaled $60b; economic losses totaled $140b, according to Swiss Re

$40

Hurricane Sandy is now the 3rd costliest event in global insurance history

$30

$48.7 $38.6 $35

$25.6 $23.9 $24.6

$20 $11.1

$13.4 $13.4 $13.4

$10 $0

PRIVATE SECTOR APPROACH

*Figures do not include federally insured flood losses **Estimate based on PCS value of $18.75b as of 4/12/13 Source: Munich Re; Swiss Re; Insurance Information Institute research

US THUNDERSTORM LOSS TRENDS, 1980—JUNE 30, 2013 30 Thunderstorm losses

Insured losses ($ billion, 2012 dollars)

Is more private insurance the answer? Florida Sen. Jeff Brandes thinks so. The St Petersburg Republican is drafting legislation to lure more private insurers to the Sunshine State so that consumers have alternatives to high-priced federal flood insurance. His plan would bring new statutes to the residential surplus lines market, enabling homeowners to avoid the sticker shock coming with NFIP hikes.

Oklahoma insurance commissioner John Doak agrees with a free-market approach. “File-and-use states like ours are in better shape because we enable insurance companies to compete for consumer business,” he says. “We’re dealing with more than 100,000 claims in Moore and a 16-county area, and they know not to give Oklahomans a hassle now.

As more and more Americans deal with catastrophic losses on a more regular basis, insurers will have to be more competitive to remain in the marketplace.”

A recent infusion of private equity into the global reinsurance market has enabled providers to absorb more catastrophic losses, Doak adds, “affording more capital in this last cycle than is true historically.”

RLI Corp has a mix of commercial business in Florida, the Gulf Coast, California and the Northwest,

4 of the top 10 most expensive catastrophes in world history have occurred within the past 3 years (2010–12)

W ilm Th a ai (2 la 00 nd 5) flo od Ne s w (2 Ze 01 al 1) (2 an 01 d 1) qu ak e Ik e No (2 00 rt hr 8) id ge (19 94 at WT ) ta C ck te r An (2 ro dr 00 r ew 1) (19 Sa 92 nd ) y (2 J 0 ts a 12 un pa ) am n q i ( ua 2 Ka 01 ke, tr 1)* in * a (2 00 5)

through much of its reserves post-Sandy, Congress borrowed almost $10bn from the Treasury to shore up the program. As a result, the Biggert-Waters Act, enacted in 2012 to pull the program back from the brink, will raise premiums for NFIP customers, possibly beyond their ability to pay.

But keeping rates artificially low is bad for everyone, particularly in high-risk regions, says Mike Stone, president and COO of RLI Corp, a specialty insurance company in Peoria, Illinois.

“Insurance commissioners think they’re doing people a favor by holding down rates, but if regulators only approve an 80-cent increase, it’s not actuarially sound,” says Stone. “You can get lucky for a while but you can’t get lucky forever.”

But when premiums go from $1,000 to $10,000 per year, “people don’t like it, and those people vote,” says Stone. “So the government chooses to subsidize, either overtly or covertly, which is why the flood program has been running at a loss.”

25 20 15

5-year running mean

Average thunderstorm losses are up sevenfold since the early 1980s. The 5-year running average loss is up sharply

Hurricanes get all the headlines, but thunderstorms are consistent producers of large-scale loss. 2008–12 are the most expensive years on record First half 2013 thunderstorm losses totaled $6.325b; the system that included the EF-5 tornado in Moore, OK, accounted for $1.575b

10 5 0

1980

1985

1990

1995

2000

2006

2010

Source: Property Claims Service, MR NatCatSERVICE

JANUARY/FEBRUARY 2014 | 43

FEATURE / CATASTROPHE INSURANCE

Credit: Oklahoma Insurance Department

Credit: Oklahoma Insurance Department

A tornado system that struck Moore, Oklahoma, on May 20, 2013 stripped this tree of its bark and reduced the surrounding neighborhood to kindling

Oklahoma insurance commissioner John Doak surveys the devastation in Moore, Oklahoma, after tornadoes struck the town on May 20, 2013.

Damage from the tornado could exceed $1.5bn

“You’re going to have hurricanes, earthquakes, tornadoes and floods.

We have to make sure the rate we charge makes sense” Mike Stone, president and COO of RLI Corp plus other regions like the area around Missouri’s New Madrid fault line. The company writes few policies in the Northeast, says Stone, adding that some carriers limit their exposure even more— Florida-only or Texas-only, for example.

“You’re going to have hurricanes, earthquakes, tornadoes and floods. They’re going to happen and all we can do is hope they don’t all happen at once or in the same place,” says Stone.

“So what we try to do is manage our exposure, manage our accumulations and make sure the rate we charge makes sense.”

He sees a need for more stand-alone policies such as RLI’s personal umbrella coverage, but adds that not enough consumers go for it. “That’s a need we’re filling and it’s grown quite a bit over the last 10 years, but it’s underutilized,” he says.

Doak believes insurance companies should play 44 | JANUARY/FEBRUARY 2014

a greater role in raising risk awareness. “Consumers need to be more aware, whether they’re buying a home on a golf course and not expecting a ball to hit them, or buying on the Florida or Louisiana coast and not thinking they’ll get tornadoes. The industry needs to do a better job of educating the general public on what they do, especially after a catastrophe.”

Stone calls the criticism unfounded. “We drive this all the time through our agents who are out in the marketplace every day selling policies. That’s how they get paid.

“We’d like to drive more demand, and if people say it’s too expensive, well, these are by and large admitted rates with forms filed and approved by the state. It’s prudent to protect your property, but if people are willing to take the risk, at the end of the day there’s not much we can do about it.”

IBAMAG.COM

NO PLACE IS COMPLETELY SAFE

Credit: Oklahoma Insurance Department

This car was no match for the EF5 tornado, which killed 23 people and injured hundreds more on May 20, 2013. Winds peaked at 210 miles per hour

WHAT ARE WE DOING TO BETTER FORECAST? While he does not care to debate climate change, Stone agrees it’s time for a broader discussion about improving building codes and limiting development in disaster-prone areas.

“We can’t bet the ranch that climate change isn’t true, so we must be ever mindful,” he said. “Is it changing loss costs and, if so, how? What are we doing to better forecast and prepare? How are we helping consumers and businesses mitigate their exposure?”

In November the World Bank released a report advocating for “climate- and disaster-resilient development” that could reduce losses from natural disasters. It would come at a price, requiring design changes that would increase construction costs by 10% to 50% more, “even more if transport or water networks need to be relocated,” according to the report.

The Chinese term for crisis is said to be made up of the symbols for both ‘danger’ and ‘opportunity.’

It could be a fitting metaphor for today’s insurance industry. More risk, more opportunity.

In November, Ravi Menon, managing director of the Monetary Authority of Singapore, told the Singapore International Reinsurance Conference

Coastal communities may seem more vulnerable to economic losses because of flooding; Katrina caused $49bn in insured losses, almost twice the damage caused by Hurricane Andrew in 1992. And floods are expected to increase with changes in the global hydrological cycle. But rising losses have less to do with apocalyptic climate change than migration: more people live in harm’s way, and their homes and businesses are not always built to withstand the severest weather.

On the coasts, barrier islands that once buffered the mainland are now residential; in the heartland, amber waves of grain have given way to housing developments. And between 2000 and 2010, 10 million new homes were built in or near fire-prone wilderness, according to the US Forest Service.

“If you go back 10 or 20 years, Florida, Louisiana and Texas have been the most disaster-prone states. But there’s no place where you’re completely safe,” says Insurance Information Institute spokesman Mike Barry. He points to the tornado outbreak that battered the south for three days in 2011, causing $11bn in total damage and killing more than 320 people, and the EF5 twister that cut a 1.3-mile path of destruction through Moore, Oklahoma, in May, killing dozens. Damages from that system could exceed $1.5bn.

A tornado in Joplin, Missouri, in May 2011 had a price tag so steep— about $2.4bn in insured losses—that three farm mutuals couldn’t make good on customer claims, which ultimately exceeded premiums by $19m. Those companies were forced into receivership, but policyholders didn’t lose out; a coalition of insurers led by the Missouri Farm Bureau picked up the tab.

Flooding may be the most common of natural disasters, but thunderstorms are a consistent factor in many large-scale insurance losses; 2008–12 were the most expensive years on record. Wildfires, too, are taking a higher economic toll. Through November, catastrophic fires charred almost four million acres across the US in 2013, and in 2012 wildfires caused $595m in insured losses, according to Munich Re; a single event, the Black Forest fire in Colorado, could result in insured losses for 2013 of more than $100m.

What’s more, one natural disaster can contribute to a cycle of devastation. Wildfires exacerbated by drought contributed to the Colorado flood: years of forest fires left burn scars that led to erosion that turned heavy rains into surging rapids. Of course the losses are not only economic: 19 Arizona firefighters died on the job last June in the deadliest event for firefighters since 9/11.

that Asia’s insurance business is projected to grow at about 8% per year in the next decade due to that continent’s vulnerability to natural disasters.

“The Asian risk landscape is transforming rapidly, generating robust demand for insurance and reinsurance,” Menon said. “The prospects in Asia are especially bright.”

Barry would have framed that comment a little differently. “Insurance companies are seen as economic first responders,” he says.

“I don’t think the industry ever looks at natural disaster as an opportunity, unless it’s an opportunity to serve their policyholders when an emergency arises.”

(CRISIS) = danger = opportunity

JANUARY/FEBRUARY 2014 | 45

FEATURE / EXCESS & SURPLUS

SURPLUS LINES MAINTAIN

STEADY RISE

IN MARKET SHARE Sandy deals sector a setback but long-term trend line remains strong

46 | JANUARY/FEBRUARY 2014

IBAMAG.COM

Over the past two decades or so, the surplus lines market has transformed from a relatively sleepy outpost of the total property and casualty market to a robust sector in its own right.

“When I moved to the brokerage side in 1985, the surplus lines business was about 3% of the total property and casualty market,” says Kevin Westrope, founder and CEO of the nation’s seventh largest wholesale broker that bears his name.

Today the surplus lines market has more than doubled its relative size and is now a powerful engine that in 2012 generated almost $35bn in direct premiums written.

“It’s gone from mom-and-pop firms to the more national, highly sophisticated firms,” says Westrope, who is also president of the National Association of Professional Surplus Lines Offices (NAPSLO). And the growth presents possible openings for retail agents working traditional lines—that are under increasing pressure as their products become more and more commoditized—to expand their business.

“They should definitely look to get into surplus,” says Danielle Wade, COO of Jackson Sumner & Associates, a Boone, NC-based MGA. “They can round out their accounts and find new customers.”

The E&S market is “where the innovations come from,” says Brady Kelley, executive director of NAPSLO. “We are the innovators.”

Bread-and-butter sectors of the surplus space include tougher casualty risks, professional conduct policies and executive liability.

“Certainly with the number of extreme catastrophes we’ve had over the past 20 years, property has become an important piece of the overall marketplace,” says Westrope.

Looking back two decades ago, the country had experienced a relatively long period without any catastrophic natural events—only two Category 5 hurricanes hit the US in the first nine decades of the 20th century—and property underwriters didn’t incur crippling claims.

“Then came Hurricane Andrew in 1992,” says Westrope. “And then the Northridge and Loma Prieta earthquakes.”

Standard carriers suffered serious losses and pulled back from some markets and sectors. There needed to be another option for the insured.

“The specialty lines market has always been the

“The E&S market is where the innovations come from ...

We are the innovators” Brady Kelley, executive director, NAPSLO alternative when the standard market either couldn’t or wouldn’t respond,” says Westrope. And the surplus space started off on a growth path.

Of course, natural disasters—and their attendant wave of claims—will affect any carrier, be it standard or surplus. When Superstorm Sandy struck the eastern seaboard in October 2012 it caused what one commentator said was “among the worst years in recent memory for surplus lines insurers.”

The storm that hit on October 29 was devastating, smashing New York and New Jersey in particular.

Homes and businesses were destroyed, infrastructure snarled. And worse, it was a long time before the region got back on its feet, with businesses and government entities shut down for weeks and even months. The latest estimates put the insured losses tied to Sandy at $25bn, ensuring its place among the most costly natural catastrophes in US history.

Before Sandy, 2012 was shaping up as a solid year for the surplus lines industry. Prices were firming up and weather-related losses were below average.

These two factors seemed potent enough to counter the continued drag of the slow economic recovery, with its high unemployment and stimulus-aided low interest rates. But the storm changed that.

HISTORICAL GROWTH OF SURPLUS PREMIUMS In billions 1992 3.1%

Total DWP: $240,140 Surplus lines DWP $7,549

2002 6.0%

Total DWP: $422,703 Surplus lines DWP $25,565

2012 6.7%

Total DWP: $523,360 Surplus lines DWP $34,808 Source: NAPSLO

JANUARY/FEBRUARY 2014 | 47

FEATURE / EXCESS & SURPLUS

For the first time in more than a decade, underwriting performance of US surplus lines companies dropped to under that of the total P/C industry. Aside from in 2012, surplus lines firms have fared well when compared with the overall P/C industry.

AM Best attributed the consistent relative strong performance to “surplus lines insurers’ freedom of rate and form, customization, innovation and ability to adapt quickly to insureds’ needs as they arise.

Since surplus lines companies typically underwrite coverage for tougher risks that are hard to place in the admitted marketplace, there is a greater focus on tighter underwriting that correlates to the nature of the risk exposures being covered.”

But top-line growth remained strong for surplus lines companies. Direct premiums written for surplus lines increased by 11.8% in 2012 compared to 4.3% for the total P/C industry, according to the study. And there was evidence of DPW increases through Q1 2013 and predictions that the surplus lines market would produce an underwriting profit

in 2013—making it a good space to be in.

“In today’s world, every agent ought to be exploring the specialty lines market,” says Westrope. “At the end of the day their job is to bring the best product to their insureds.”

For the retail agent, that can start by forging a relationship with a wholesale broker who specializes in surplus lines.

“By their nature, retail agents are generalist,” says David Johnson, managing partner at Citadel Insurance Services in American Fork, Utah. “By their nature, surplus brokers are specialists.” And when you start looking at the unique forms and parameters of a surplus policy, expertise pays off.

“What I say to my retailers is, ‘You don’t need a guy like me every day. But when you need me, you need me,’” says Westrope.

“Because all I do every day is this piece of business. I speak with the carrier every day and it stands to reason that I’ll get a better product for the insured.”

DAVID JOHNSON: E&S WORKED FOR ME For a producer, it’s hard to find a rut with specialty insurance David Johnson wasn’t looking for a typical 9-to-5 gig.

“I liked that things weren’t always going to be the same,” he says about the time he was looking at changing careers from a sales position at GE to a post at an E&S MGA. “I liked that there weren’t going to be lots and lots of people doing exactly what I did,” he says.

Johnson took the plunge and helped launch Citadel Insurance Services in 2005, and he has no regrets. He offers some insights for others looking to get into the space or expand their retail business into some surplus lines.

The E&S world rewards those who “really like to dig in and ask the right questions,” he says.

Every policy, every customer brings unique elements. You really have to dedicate yourself to reading policy forms. “You can’t operate by assumption,” he says. “If you enjoy predictability and want to come in at 9 and leave at 5, this might not be a fit.”

Johnson stresses two key points: become an expert in a particular field and align yourself with the right wholesaler.

“Pick something you are interested in. Attend

48 | JANUARY/FEBRUARY 2014

industry events and conferences and trade shows,” he says. “Building a knowledge base helps bring credibility when trying to recruit customers. It’s a better way to fish.”

And reach out to a surplus broker who knows the industry you are exploring. He or she can help bring you up to speed and be efficient.

Johnson says he works with retailers all the time. “I help them know which questions to ask and which questions the carriers are going to want answered,” he says.

“If you enjoy predictability...

E&S might not be a good fit” David Johnson, Citadel managing partner Johnson says he’s met some of the most talented people working in the non-admitted sector and it helps if you are really curious about new things. He speaks of spending a few days at a dietary supplement industry convention “just walking around talking to people about the newest products and trends”–all part of building his practice and helping folks in that industry find the right insurance.

“It pays to be inquisitive,” he says.

FEATURE / PRODUCT FOCUS

USG branches out into security and alarms A fast-growing wholesaler is finding new business with RLI Security’s guard and alarm systems line For every company that has an edge in business there’s only one thing left to do: find another.

That’s a principle that USG Insurance Services follows.

The E&S wholesaler based in Tampa connects retailers with a full range of lines and has carved specialty niches in coverage for pawnbrokers, fire and water restoration contractors, and hood and duct cleaning contractors. And now they’ve added a security and alarms line.

“It’s a nice opportunity for us,” says USG director of branch development and operations Troy Fornof.

“It’s a limited space. There are really only a few players, so it presents us with an opportunity to get … into a large market.”

The new specialty grew out of a long-term relationship Fornof has had with Mitchell Bombet at RLI Security, a unit of RLI Corp. When RLI Security launched its new Security Guard and Alarm Systems Liability line, the carrier chose a limited number of distribution partners. Both Fornof and Bombet saw it as good fit for USG, a privately held company that projected it would book more than $135m in premiums in 2013. “I’ve known Mitch before and we naturally moved over into that opportunity with him,” says Fornof.

Bombet, the managing director at RLI Security, brought a background as a private investigator with him to the insurance business, so it was only natural that he chose to introduce a security guard and alarms line.

RLI Security offers comprehensive general liability and excess/umbrella coverage for alarm system, security guard, janitorial and private investigation companies. The policies’ commercial general liability coverage goes up to $1m per occurrence, to a general aggregate limit of $5m.

And the company offers a rare-for-the-sector nodeductible product.

When RLI Security entered the space, Bombet decided to limit his distribution channel to just a few partners. “I wanted to keep it to the brokers that I knew,” says Bombet from his offices in Baton Rouge.

And one of those brokers was Fornof.

“Fortunately, we’re one of the ones that can help them grow this product,” Fornof says, noting that the target customer for the coverage ranges from smaller one- or two-person shops to large national franchises.

USG, which has 15 branch offices across the country, has hit the street with direct campaigns aimed at retail producers and those in the security industry—and is getting traction. “We’re getting requests from all over the country,” Fornof says.

“We don’t want to be the largest player on the block; we want to be the most trusted player on the block” Troy Fornof

Working with a carrier in a limited distribution environment fits nicely with USG’s overall philosophy. “Our core focus is not to be all things to all people,” Fornof says. “We want to find independent agent partners and carrier partners that want long-term relationships. We don’t want to be the largest player on the block; we want to be the most trusted player on the block.”

JANUARY/FEBRUARY 2014 | 49

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How to deliver

EXCEPTIONAL SERVICE SERVICE It’s the little things you do that create a great customer experience, explains Nikki Heald Often we’re so intent on making the sale that we have a transactional view of our clients, rather than taking time to build relationships or demonstrate service excellence. We use them (to increase our profits), abuse them (by giving them inferior service), and then treat them like a one-night stand—attentive today, neglectful tomorrow!

Sounds silly? Well, complaints such as “you never call,” “you’re always too busy,” and “why were you late?” are legitimate gripes made by disgruntled clients. In today’s competitive market,

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DID YOU KNOW?

6–7

It’s times more expensive to gain a new client than it is to retain an existing one

It’s not safe to work on the premise of “no news is good news.” Chances are, if your client is not happy they’ll walk, and won’t even forewarn you of their departure

client service expectations have increased. Clients are savvy, realize they have a multitude of choices, and expect to be treated exceptionally by their insurance brokers.

So what is exceptional service? Exceptional client service is about going beyond what is realistically expected of you. It’s about surprising and often delighting clients, turning them into enthusiastic referral sources who will stick with you not only because you do great work but also because of the value you bring. Imagine if you could get existing clients to tell others about how wonderful you are. It would certainly save on all of those marketing and networking costs.

Great service is not about just doing your job, it’s also about establishing connections on an emotional level. It’s about value-adding and finding ways to be unique. Interestingly, research suggests that emotion influences purchasing decisions six times as often as rationale. Think about it: when something makes us feel good, we are more inclined to buy.

Unfortunately, many businesses believe that delivering standout service will cost them too much in staff time, in training and developing service standards and procedures. These in-focused organizations are only concerned with company profit and cutting costs, and little thought is given to how to make clients happy. Additionally, staff recognition and retention are low, which can also impact significantly on growth and profit.

When you think about it realistically, bad service is actually more costly to your brokerage than great service. Bad service creates more than just a negative customer experience—it reduces revenue and drives up costs. It damages public perception, credibility and market reputation. As we all know, a dissatisfied client is more likely to

93%

of customers indicated that quality customer service was vital to maintaining brand loyalty

spread the word about a poor service experience than a positive one.

Providing exceptional service is not overly difficult, and it’s important to recognize that even little things count with clients. So what are some simple things you can do to ensure your service is exceptional?

1

RESPOND AS SOON AS YOU CAN

Speed is everything, so try to reply to your clients as soon as you can and keep them in the loop as to your progress. Procrastination doesn’t help anyone, and you’re going to have to respond sooner or later.

May as well do it now!

2

LISTEN TO YOUR CLIENTS

Avoid speaking, and really listen to what they’re saying. It’s important you understand what your clients are communicating to you. That way, you will be able to meet their needs successfully and provide the correct product or cover.

Exceptional client service is about going beyond what is realistically expected of you. It’s about surprising and delighting clients, turning them into enthusiastic referral sources

JANUARY/FEBRUARY 2014 | 51

FEATURE / BUSINESS STRATEGY

If you say you’re going to do something, then make sure you do it.

It enhances your professionalism and personal brand, and demonstrates that you value your client SERVICE EVALUATION What systems do you have in place to determine whether your clients are happy? Try to gather feedback—but remember, feedback is only useful when acted upon

3

KEEP PROMISES

One of the biggest gripes in business today is that people simply don’t do what they say they are going to do. If you say you’re going to do something, then make sure you do it. It enhances your professionalism and personal brand, and demonstrates that you value your client.

4

KNOW YOUR STUFF

The perception of your client is that you are the paid expert. That’s why they have come to you. So it is imperative that you keep yourself up to date and top of the game within your profession. Be ready to

DELIVERING EXCEPTIONAL SERVICE  Lower cost to manage and service client base—higher profits  Increased customer loyalty—raises revenue, lowers marketing fees  Increased staff loyalty—better service culture

52 | JANUARY/FEBRUARY 2014

answer client questions—unfortunately, if you convey a lack of knowledge, then you risk ruining your credibility.

5

GIVE A LITTLE

If a client asks you to do something that really won’t cost you a lot in time or money, then treat it as an opportunity to go the extra mile. By doing so, you will not only have a contented and indebted client but someone who is more than happy to refer others to you.

6

USE YOUR KNOWLEDGE

Once you’ve built an emotional connection with your client, you will have figured out how they prefer to communicate. Some clients are not detail driven and won’t require excessive information. On the other hand, some prefer to know every step of the process. Learn to gauge your client’s preferences and use this knowledge appropriately in the service experience.

Finally, within the insurance and financial services profession, brokers really should view their book of clients as their most valuable asset and take good care of them.

More than that, they should take the time to develop long-lasting relationships by keeping in touch regularly, both in good times and bad. It’s not sufficient to wait until renewal time to contact your client; instead, the communication should be ongoing.

Remember, you’re not just selling a product but providing expert advice that can significantly impact on people’s livelihood.

So, if you haven’t given much thought to your service levels, then perhaps it’s time to conduct a self-audit.

Remember, if you don’t make the client feel valued, respected and important, your competitors will!

FEATURE / CONSTRUCTION

Signs of light shining on CONSTRUCTION INSURANCE MARKET

More activity in sector as economy rebounds—but hurdles remain

54 | JANUARY/FEBRUARY 2014

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“We have to get better at what we’re in the business of doing” Craig Fundum, president of commercial markets at Zurich North America

The outlook for the construction insurance market looks to be brightening as the construction industry revives to levels not seen since before the recession began in 2007, builders and insurance experts say.

But the sector still faces headwinds in the guise of an uptick in work-related injuries and the overarching specter of low interest rates.

The construction insurance market saw some firming in the first half of the year, according to a report from Marsh. Construction companies paid more for insurance on average as underwriters sought price increases across their contractor portfolios, according to Marsh’s Construction Market Update—First Half 2013. Pricing for contractors’ general liability, project-specific general liability, umbrella and excess liability, workers’ compensation, and residential construction insurance was up by between 3% and 7% on average during the first half of the year, although builders’ risk rates remained flat. At the same time, overall rates for catastropheexposed property risks increased by an average of 5% compared with 2012.

But the continuing low interest rate environment means that, even with generally rising premium rates, carriers must stick to their knitting to succeed.

“As insurers, today we’re feeling the stress of underwriting to a profit, where in the past we’ve relied so heavily on our investments,” Craig Fundum, the Omaha, Neb.-based president of commercial markets at Zurich North America, told the International Risk Management Institute’s (IRMI’s) Construction Risk Conference in November. “We have to get better at what we’re in the business of doing, which is insuring risk.”

Concern about the future of the economy held back the construction industry in the first half of 2013 but, subsequently, several areas, including single-family and multifamily home construction, began showing signs of a sustainable recovery.

Pent-up demand appeared to overcome concern about the economy and attracted capital to US projects, according to the Marsh report.

Insurers and brokers can anticipate that total US construction starts for 2014 will rise by 9% to $555.3bn, higher than the 5% increase to $508bn estimated for 2013, according to the 2014 Dodge Construction Outlook from McGraw Hill. Gains will be led by single-family housing, with multifamily housing delivering a slower yet still healthy rate of growth after four years of expansion, and commercial building ascending from low levels, according to the report.

“We see 2014 as another year of measured expansion for the construction industry,” said Robert Murray, McGraw Hill Construction’s vice president of economic affairs. “Against the backdrop of elevated uncertainty and federal spending cutbacks, the construction industry should still benefit from several positive factors going into 2014. Job growth, while sluggish, is still taking place. Interest rates remain very low by historical standards, and in the near term the Federal Reserve is likely to take

HOUSING STARTS SEASONALLY ADJUSTED ANNUAL RATE IN THOUSANDS

908

13.9% over Oct 2012 rate

October 2012

974

6.2% above Sept 2013 rate

September 2013

1,034 October 2013

Source: US Census Bureau

JANUARY/FEBRUARY 2014 | 55

FEATURE / CONSTRUCTION

GROWTH TRENDS the necessary steps to keep them low. The bank lending environment is showing improvement in terms of both lending standards and the volume of loans. And, the improving fiscal posture of states and localities will help to offset some of the negative impact from decreased federal funding.’’

The speed of recovery has varied by geography; in markets where profit margins remained tight, competition for skilled labor increased and created pricing pressures for construction firms—and some strains on the workforce. And that in turn puts strain on risk transfer models.

The construction industry’s 2012 fatality rate increased to 9.5 per 100,000 workers from 9.1 per 100,000 in 2011, according to the US Bureau of Labor Statistics. The 775 construction-sector deaths recorded in 2012 mark the first annual increase in work-related fatalities since 2006.

The data prompted Marsh, in a report on construction safety, to call for improvements in the industry. “The increase in new construction activity is bringing an influx of new, inexperienced workers,” the report states. “In this environment, some contractors are stretching their hiring standards to meet project demands.”

The report, Building Safety and Leadership in the Construction Industry, recommends a focus on training management to help build a culture of safety throughout their organizations.

“As the economy grows and the number of new construction projects picks up, now is not the time

CONSTRUCTION SPENDING - GOING UP SEASONALLY ADJUSTED ANNUAL IN $ MILLIONS 1,000,000

MCGRAW HILL SEES CONSTRUCTION EXPANSION COMING FOR 2014. A SNAPSHOT: SINGLE-FAMILY HOMES Expect growth of 26% in dollars. The growth will be spurred by a slowing pace of foreclosures, rising house prices and near-record low mortgage rates.

MULTIFAMILY HOUSING Look for an 11% uptick in dollars. These structures are a favored real estate investment target, McGraw Hill reported, leading to more high-rise residential buildings in major cities.

COMMERCIAL BUILDING Expect to see a rise of 17% in dollar value in 2014 compared to an estimated 15% increase in 2013. Leaders will be warehouses and hotels.

INSTITUTIONS Building by institutions such as universities and hospitals will rise about 2% in aggregate, the first gain since 2008, McGraw Hill said. The passage of construction bond measures in several states will spur elementary and high-school construction projects, while colleges are returning to some capital expansion plans. Health care construction is expected to be flat as the industry focuses on cost containment.

Source: 2014 Dodge Construction Outlook from McGraw Hill

to be lax on safety,” John Moore, a construction safety specialist in Marsh Risk Consulting’s workforce strategies practice, said.

Some firms are already heeding that call. “Among a lot of companies, there’s a growing awareness that for workplace safety programs to really affect behaviors, there needs to be a culture of deep concern for the well-being of employees,” Rik Kunnath, executive chairman of San Francisco, Calif.-based Pankow Management Inc, said during a keynote speech at the IRMI annual conference.

902,854

903,786

901,155

908,448

MAR

897,113

869,164

FEB

896,134

869,909

JAN

878,396

863,136

Total construction

OTHER LINES

MAY

JUN

JUL

AUG

SEP

OCT

800,000 APR

Year 2013

56 | JANUARY/FEBRUARY 2014

Source: US Dept. of Commerce

Marsh reported that the market for contractors, architects and engineers to get professional liability insurance has seen a slow hardening. In the first half of 2013 most insurers sought rate increases on renewing business—but at slower rate than they sought in 2012. Marsh predicted that rate increases would average around 5% into 2014, though the insured with material losses would potentially see higher rate hikes. Capacity for these lines remained high.

Pollution liability insurance rates remained flat or down in the first half of 2013, reported Marsh, citing competition as the primary reason as insurers did look for increases. Marsh also noted that the use of this type of insurance had increased.

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JANUARY/FEBRUARY 2014 | 57

FEATURE / BUSINESS STRATEGY

DOES YOUR NETWORK NEED INSURING? Strategic networks are built on relationships, but what type of networker are you? Julia Palmer explains how strategic networking can be your best insurance in a changing world

58 | JANUARY/FEBRUARY 2014

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Nearly every job title I have trained to network over the years has shared the sentiment that they dislike networking.

There is no escaping the fact that the word ‘networking’ has a dirty connotation in business. In my opinion, this is because most people have been taught the wrong way to network or not been taught at all! It is an expectation of each role in some capacity or another, but unfortunately most people fear, dread, or simply avoid it. Worse still are those who feel forced to network and put on a different persona to help them cope, making them quite awkward and sometimes even fake versions of themselves—never nice to meet!

The financial services industry is one of the most networked, but the last few years have seen the gaps widen and the pressure increase. Having worked closely with some of the market’s biggest banks, insurers, mortgage originators and financial planners, I know only too well how vital relation-

By taking a look at how you network and by making changes to be more strategic, you can increase your influence and operate in stronger networks

ships are to success. The good news is: by taking a look at how you network and by making changes to be more strategic, you can increase your influence and operate in stronger networks.

There is no doubt that the global financial crisis permanently altered the business environment that we work in, and the rate of change in organizations is only going to increase. With this in mind, I hope to help shine some positive light on networking and the consequent networks we produce, with a view to helping individuals and organizations get better returns from both.

Apply your networking strategy to all your relationships—organizational, industry, suppliers, stakeholders, clients, community and, of course, personal.

(MODERN-DAY) NETWORKING DEFINED Networking has a somewhat negative connotation, mostly due to how it is undertaken. But this view is changing as people realize the power that lies in having strategic connections that align with their business and personal goals.

Let’s define strategic networking by outlining what it’s NOT:  It’s not just having 500+ friends on a social networking site  It’s not getting as many business cards as you can at a social or business gathering  It’s not about knowing lots of people and wanting to have coffee with all of them  It’s not simply wining and dining clients or prospects through expensive hospitality It IS about:  Planning and establishing key connections  Knowing the right people, and knowing them well  Building a set of quality two-way relationships— and not simply collecting a large quantity of connections  Becoming a trusted ally of your connections and becoming a hub—the ‘go to’ person in a network

ARE YOU AND YOUR ORGANIZATION RELATIONSHIP FOCUSED? The highest-performing companies worldwide are differentiated by their ability to attract, leverage and retain relationships. Networks are more than just your customers; attention must also be given to

JANUARY/FEBRUARY 2014 | 59

FEATURE / BUSINESS STRATEGY

WHAT TYPE OF NETWORKER ARE YOU?

STRATEGIC

This group is the rare few who have invested in two-way reciprocal relationships.

Influence, visibility and communication are strong.

INVOLVED

This group is active and often has quite big networks. They can lack focus, which impacts the quality and outcomes from their network.

shareholders, partners, industry, the community, and employees. However, research has shown that 75% of business people find their existing networks do not support the results they need, and 99% would like specific training on networking and network management.

The questions to consider are:  Is there a gap between your intention and how you are perceived in your relationships?  How conscious or deliberate are you at creating a network that is aligned to your role?  How conscious or deliberate are you at managing a network so that it benefits you and those in it?

Networks are powerful and relationships are important. Combine these two things with thought to the future and you have strategic networks—a strong set of relationships that can deliver mutual value to those involved. Built and maintained with care, strategic networks can then go to the next level, allowing you potentially to leverage the power of other people’s networks.

WHAT TYPE OF NETWORKER ARE YOU? Given that we all network in some capacity, it pays to look at how you do this and if it is working.

Unfortunately, many people have been taught the wrong skills and may spend a considerable amount of time and effort with no return. On the flip side, we all know someone who is a ‘born’ networker as well.

Start by identifying where you fit and then look at the steps you can take to improve (see ‘What type of networker are you?’ above).

60 | JANUARY/FEBRUARY 2014

???

ACCIDENTAL

MISGUIDED

This group doesn’t really think too much about networking but may be in the right place at the right time, so get occasional rewards from it.

This group exhibits incorrect skills, and often they are detrimental to relationship building, eg pronounced card collectors.

BENEFITS OF A STRATEGIC NETWORK There is a growing body of research that correlates the importance of relationships with business outcomes. Let’s face it, every time you interact with someone (potentially new or existing in your network) you can either build or lose credibility.

The approach you take directly impacts the quality of the networks at your disposal.  A strategic network will give you access to people with knowledge and authority. As you build relationships with these people, you will build your own knowledge and also gain authority by association.  A strategic network will deliver you introductions, referrals and endorsements that will lift you above the commodity debate. But you’ll need to deliver real value.  A strategic network will help build your personal brand and allow you to be introduced as an authority, someone who delivers on commitments, someone worthy of doing business with.

In today’s ever-changing world, this is the best insurance against the winds of change that any individual can invest in. Your very livelihood depends not only on what you know but also who you know, who knows you, and, even more importantly, who is promoting you.

Julia Palmer is a respected networking strategist who provides training to create and manage networks that work.

OFFBEAT

Goats, chickens and bras Sometimes the odd coverage request is, well, odd If you could just punch anything and everything into your online rater and—presto—get three competing quotes, life would be so much easier.

And yet, so much duller.

Like when Lloyd’s was first asked to insure an automobile. There were no guidelines and the underwriters had to use the expertise they had on hand. So the first auto policy listed the vehicle as a ship navigating on land.

“There’s no class code for poison ivy” Danielle Wade, Jackson Sumner & Associates

Danielle Wade

62 | JANUARY/FEBRUARY 2014

Lloyd’s is famous as a fount of odd and unique underwritings. Of course Ugly Betty’s smile ($16m) and of course the policy against the Loch Ness Monster being found ($1.6m) came from the fabled London exchange. Wine guru Ilja Gort’s nose for $8m? Lloyd’s. Football star Troy Polamalu’s hair for $1.6m? Ditto.

But they are not alone. Plenty of specialty brokers gladly take on the challenges of finding a home for out-of-the-box risk.

“We get it all the time—‘I’ve got a unique one for you,’” says Danielle Wade, COO of Jackson Sumner & Associates, a Boone, NC-based MGA. Most of the time, she says, the enthusiasm from the agent at the other end of the line doesn’t move the needle, but every now and then a request comes in that

gets her attention. “We had a lady who hired out her billy goat to eat poison ivy,” says Wade. “There’s no class code for poison ivy.”

After a little head scratching, Wade and her team figured out a way forward and rated the goat as lawn care service. “It was a general liability cover,” says Wade. “If the goats ate the clothes off the clothes line, we’d cover it. Turns out that poison ivy is a delicacy for goats.”

And then there was the poultry pageant.

Wade says she got a call from one of her firm’s retailers saying there was an event organizer wanting to put on a chicken beauty contest and would Jackson Sumner help them get coverage for the event. “We were shocked a little by that one,” she says, adding that the team joked that the winner surely must have been Miss Chicken Little.

Wade, whose firm helps handle risk exposure for restaurants and bars, high-risk cargo and mobilehome parks, among other specialties, is asked if any other interesting coverage requests have come across her desk. “No, not really,” she says.

But what about the “Containers for Temporary Cadaver Storage” Storage” or the “Moonshine Distillery” (apparently unrelated businesses) listed on the Jackson Sumner website? Or what about the “bra fitter,” also listed on the site? “Well,” she says, “we do get a lot of comments on that one.” Perhaps from people wondering how you underwrite an underwire.

PEOPLE / FAVORITE THINGS

Favorite things...

Reneé Jenkins, Andrew A Ainslie Agency We had a chat with producer Reneé Jenkins at the four-person State Farm offices of the Andrew A Ainslie Agency in Rapid City, SD. She told us about a few of her favorite things...

Place to be: “In the mountains by Deadwood [SD]. The hiking, the fresh air, the smell.

I moved away a few times but I always came back” Best thing about working in insurance: “Helping people. Educating people about insurance. Three people in my family died without any life insurance. That was too bad.

Life insurance is the most important insurance” Reneé Jenkins

Book: “Oh, what is the name of it? The movie for it just came out. Oh, come on, Reneé!

Got it: Hunger Games”

Music: “Bruce Springsteen is my hero”

Vacation spot: “Kansas City because I am the biggest Chiefs fan”

Sport: “Football! I love watching Tony Gonzalez, the tight end. OK, so he’s with Atlanta now (and no longer with the Chiefs) but I am still a fan” Food: “Pizza. We have it every Friday night at our house. Whether it’s homemade or take out, we love it.

Supreme is my favorite”

JANUARY/FEBRUARY 2014 | 63

OPINION

THE LAST WORD

INSURERS CAN COVER MORE TERROR RISK

But federal role remains critical

Dr Erwann O Michel-Kerjan is an authority on managing the risks, financial impact and public policy challenges associated with catastrophic events.

He is managing director of the Wharton Risk Management and Decision Processes Center at the Wharton School of Business.

64 | JANUARY/FEBRUARY 2014

The Terrorism Risk Insurance Act (TRIA) of 2002 was originally aimed at providing a three-year temporary measure to increase the availability of risk coverage, but the program has been renewed twice since and is now extended up to the end of 2014.

TRIA requires insurers to offer terrorism coverage to all commercial clients (a legal ‘make available’ requirement). It also provides insurers with a federal ‘backstop’ to cover severe losses.

Contrary to what is done in other countries, the US federal government does not collect any premiums in this backstop. It provides insurers with free reinsurance for exposure that would ordinarily require a substantial amount of (costly) capital should insurers seek protection from the private reinsurance market alone.

The main policy goal of TRIA was to ensure that commercial firms could access subsidized coverage, and as a result more companies would purchase this coverage. The empirical evidence reveals that this strategy has worked. In the absence of any severe large-scale attack on national soil since 2001, the program has been successful at sustaining a robust terrorism insurance market here in the US. Market data from the two largest insurance brokers, Aon and Marsh, on their own clients (which tend to be larger firms), indicate that take-up rates for terrorism insurance by large firms has more than doubled, from 27% in 2003 to 58% in 2007, a level that has remained stable since (it is 62% today).

Our more recent work at the Center for Risk Management and Decision Processes at the Wharton School shows that the demand for terrorism insurance from medium and large corporations in the US is strong and price-inelastic (low sensitivity to price) under current conditions.

This finding has profound policy implications as Congress contemplates different design changes for TRIA. It indicates that if one would like to reduce the government’s involvement in that program by increasing insurers’ deductible (before the federal backstop kicks in) and/or charging for

Reforms should seek to increase private sector involvement without disturbing the market the federal backstop, this could be done incrementally without disrupting the market much.

Some say that to limit (or avoid any) additional financial exposure of the government, TRIA should be allowed to expire in 2014. Under this logic, market forces would lead to even more capacity being provided to the market and more firms being insured.

Losses from a terrorist attack would be covered by firms and their insurers (if they are insured).

Without TRIA, though, taxpayers might end up paying as much after a large terrorist attack through federal disaster relief (as taxpayers have become de facto the prime funding source in the aftermath of natural disasters and financial crises alike), if not much more than they would today if insurers lower the capacity they provide when the mandatory requirement expires. There will be an expectation that the federal government will pay for most of the uninsured economic losses.

The question thus is how do we best organize risk financing mechanisms ex ante so most of the loss does not fall on taxpayers; in its current design, this is what TRIA does. Reforms should seek to increase private sector involvement without disturbing the market. I think there is room to do just that.

In the end, it is how we best use the insurance infrastructure, in partnership with the government, to assure effective and equitable solutions are in place that will make our economies terror-proof.

This is why the debate about TRIA is not just an insurance issue—it is as much a national security and economic competitiveness issue, too.