Insurance Business America issue 2.05

NOT ALL RISKS ARE BLACK AND WHITE.

The chameleon is well known for its ability to change color and adapt to its surroundings.

It is nature’s solution to surviving in a challenging environment. Risk comes in every color —it’s rarely black and white. The risk management world is always changing.

RSG Underwriting Managers’ specialty MGU facilities excel in this world by using experience, creativity and expertise to provide unique solutions to challenging risks.

Contact RSG Underwriting Managers at (855) 201-2000 or visit www.ryansg.com.

RSG Underwriting Managers, LLC, is a Delaware series limited liability company and a subsidiary of Ryan Specialty Group, LLC, specializing in underwriting management and other services for insurance products distributed through agents and brokers. In California: RSG Insurance Services, LLC, Lic. #0E50879. Direct Group Limited (Registered No. 2461657) and Millennium Insurance Brokers Limited (Registered No. 3566382) are insurance distribution businesses and are authorized and regulated by the Financial Services Authority. © 2014 Ryan Specialty Group, LLC

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SMALL BUSINESS INSURANCE BUILT BETTER

ACE Commercial Risk Services® for Small Business | acegroup.com/smallbusinessinsurance

ACE Commercial Risk Services - competitive products, low minimum premiums, broad risk appetite, fast and efficient placement and consultative partnerships that allow our brokers to maximize their success. For more information, visit acegroup.com/smallbusinessinsurance or call 888.762.9223.

© 2014 ACE Group. Coverages underwritten by one or more companies of ACE Group. Not all coverages available in all jurisdictions. ACE®, ACE logo® and ACE insured.® are trademarks of ACE Limited.

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PROD Prime Insurance doesn’t shy away from the tough cases

40 | What’s trending in E&O?

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Professional liability insurance is a necessity – especially in these sectors

Paul Felsen has built his business on the things he loves – including pro athletes

NEWS 8 | News analysis

55 | Favorite things Joseph L. Boren of Ironshore

12 | Industry intelligence This month’s movers, shakers and new products

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50 | 7 deadly sins of business

Gutter in Spread: NA

A look at the growing risks of cyber crime

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STRATEGY 48 | Exit planning

56 | The last word Ways to keep a lid on workers’ comp litigation costs

SPECIAL REPORT Producers on carriers Producers tell us how carriers really measure up on everything from claims processing to technology

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PEOPLE Industry icon Stan Galanski reveals the secrets to the Navigators Group’s unprecedented growth

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PEOPLE 32 | Providing prime protection

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FEATURES 34 | The cyber war

What the future might hold if TRIA isn’t renewed

16

November/December 2014

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Contents

PROOF

CONTENTS / 2.5

CHECK IT OUT ONLINE: InFocus: Environmental InFocus: Cyber liability

InFocus: Hospitality

Special reports: Women of Influence Latest jobs ibamag.com

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PROD

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THERE ARE SOME RISKS ONLY A SPECIALIST CAN HANDLE.

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Boston | New York | Chicago | Atlanta | Dallas | Houston | Denver | Los Angeles | San Francisco | Miami | Baltimore | London | Europe | Asia | Australia | Canada | Latin America | Middle East Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. Š 2013 Liberty Mutual Insurance.

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EDITORIAL

STATE OF FLUX Perhaps more so now than at any other time, the dynamic between producer and carrier is changing. The advent of technology and the changing needs of today’s ‘instant gratification’ consumer have shifted the priorities producers hold when assessing carriers, both as partners for themselves and as insurers for their clients.

Major events like the Great Recession and ensuing bailout of AIG have made producers more wary of financial ratings, and the everincreasing $41.5 billion advertising budget of carriers has producers rightly anxious over their role in the insurance distribution process of the future. Add to that the offerings of roadside claims reporting and downloadable policy forms, and the industry as a whole represents a great unknown for many.

With these anxieties and a staggering 2,758 property/casualty insurers currently licensed in the United States, it is imperative that carriers and producers create a twoway dialogue to address some of the more pressing issues affecting both.

That’s one of the reasons Insurance Business America reached out to producers nationwide. By discovering, first, what producers are looking for in a carrier, and second, how carriers are performing in those areas, IBA hopes to create an opportunity for its readers to have more open and meaningful discussions with their carrier partners.

This issue represents the culmination of those efforts.

While it appears producers are mostly satisfied with their carriers’ performance – including in the areas that count most – we discovered a number of anxieties shared by independents across the country.

First and foremost is the changing role of the independent agent. Where carriers once relied exclusively on producers to market and sell their products, an increasing number of companies have taken to either selling many products directly or hiring a staff of captive agents to compete with independents. Adding insult to that perceived injury, different commission schedules and pricing sometimes apply to captives and independent agents, and consumers may benefit financially from buying direct. These apparently mixed messages place great stress on producers and cause them to doubt carrier intentions toward the distribution channel.

Another common theme is the availability – or lack thereof – of competitively priced products. In a financial landscape where many insurance policies are beginning to be seen as a commodity, reasonable rates are a must for producers.

However, that doesn’t mean carriers must bow to market pressure. Most independents say they are comfortable selling on more than price, and artificially low rates only make their jobs harder. Instead, what’s necessary are rates “within the hunt” of other, similar products.

IBA hopes that through this survey, producers can make the most of their meetings with carrier marketing representatives. By pointing to their concerns and demonstrating that these concerns are shared, producers stand to turn what is generally a one-sided conversation into an ongoing dialogue that will improve the businesses of both carrier and producer, and – ultimately – benefit the end consumer.

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COPY & FEATURES SENIOR JOURNALIST Caitlin Bronson JOURNALISTS Brent Harrison, Tim Garratt, Donald Horne, Ryan Smith CONTRIBUTORS Allison Landa, Craig West, Jamie Thomas PRODUCTION EDITOR Clare Alexander EDITORIAL ASSISTANT Kendall Greenwood

ART & PRODUCTION DESIGN MANAGER Daniel Williams SENIOR GRAPHIC DESIGNER Joenel Salvador

SALES & MARKETING VICE PRESIDENT Cathy Masek NATIONAL SALES MANAGER James Donnellan MEDIA SALES MANAGER Molly Hummel COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Alex Carr

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial inquiries Caitlin Bronson caitlin.bronson@keymedia.com Advertising inquiries 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: (720) 452-2600 Offices in Sydney, Auckland, 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

The team at Insurance Business America

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CNA-BR

Needle found.

Haystack avoided.

Construction • Education • Financial Institutions • Healthcare • Manufacturing Professional Services • Real Estate • Retail • Technology • Wholesale Distribution

Keep clients of any size from getting lost in the weeds.

Guide them to insurance knowledge at the new CNA.com Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2014 CNA. All rights reserved.

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NEWS ANALYSIS

VIEWPOINT: THE PRIVATE MARKET NEEDS TRIA Leigh Ann Pusey, president and CEO of the American Insurance Association, calls for responsible renewal of TRIA in the absence of private market capacity Terrorism risk insurance is widely available today because of the successful approach provided by TRIA. It protects our nation’s economy from potential disruption while providing for an orderly recovery following an event. TRIA has served our nation well and deserves a timely reauthorization.

As Congress considers TRIA’s reauthorization, lawmakers rightly want to explore whether the private sector has the financial ability to cover large-scale losses that result from a terrorist attack absent the partnership with the federal government established under TRIA. The simple answer is no.

Private reinsurance capacity for terrorism remains in the $6 billion to $10 billion range. This is far short of the approximately $30 billion in exposure retained by insurers writing terrorism coverage. TRIA’s public-private ‘shared loss’ partnership has made it possible for commercial insurers to provide commercial property-casualty coverage to U.S. businesses and to individually manage terrorism exposures without compromising financial solvency.

TRIA protects more than just policyholders; it protects taxpayers, too, because any federal funds expended on terrorism losses can ultimately be repaid under TRIA’s recoupment mechanism.

AIA will be working in the weeks ahead to achieve broad bipartisan support for the reauthorization of TRIA. The program’s successful partnership enables a stable terrorism risk insurance market and deserves prompt renewal.

TRIA: September

A TIMELINE

2001

Attacks carried out

by Muslim extremists kill nearly 3,000 civilians, destroy the World Trade Center and damage The Pentagon

SeptemberNovember 2001 Letters tainted with anthrax, targeted at politicians and media officials, kill five across the U.S.

ANALYSIS

INSURING AGAINST TERROR Terrorism remains one of the most difficult risks to insure, and the ongoing battle in Congress over a critical piece of legislation is forcing many in the industry to improvise

November 2002

February 2005

December 2005

Congress passes the Terrorism Risk Insurance Act (TRIA)

Federal Reserve Chairman Alan Greenspan says he has yet to be convinced the private market alone can insure against terrorism

TRIA is amended and extended

September 2006

U.S. Government Accountability Office releases a study concluding nuclear, biological, chemical and radiological risks are not insurable by the private market

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IBAMAG.COM

Time is running out for Congress to act on a critical piece of legislation affecting every member of the insurance industry, from reinsurance corporations to the smallest independent agency on Main Street.

The Terrorism Risk Insurance Act (TRIA), originally passed in 2002, is set to expire on December 31. Unless the U.S. Senate and House of Representatives can agree on a way to responsibly extend this federal program, insurers will be facing the daunting task of writing terrorism risk without any semblance of federal assistance.

Granting a “backstop” of taxpayer cash in the event that an act of terrorism exceeds $100 million in insured losses, TRIA has allowed insurers and reinsurers peace of mind and the ability to write terrorism risk while keeping prices affordable. No event has yet triggered this governmental support of the industry.

While the program has been renewed twice – in 2005 and 2007 – congressional support for TRIA is waning. Despite having active renewals in both the House and the Senate, Congress has

“Our members’ clients need terrorism coverage for their businesses and homes, and that concern is particularly acute for commercial clients” December 2007 TRIA is extended again

November 2009 A U.S. Army major kills 13 and wounds 29 in a shooting at Fort Hood, Texas, claiming his motive as jihad to fight “illegal and immoral aggression against Muslims”

VIEWPOINT: TRIA NEEDS TO BE LIMITED Congressman Jeb Hensarling, chairman of the House Financial Services Committee, explains why he supports a more limited and scaled back extension of TRIA Before the end of this year, Congress should reauthorize the Terrorism Risk Insurance Act [TRIA] and pass needed reforms.

At its core, the debate over TRIA primarily speaks to one issue: After an unthinkable act of terrorism, who pays the bill – property owners, insurance companies or taxpayers?

Far too many costs are involuntarily socialized by government today. This is unfair to hardworking taxpayers and helps drive our unsustainable national debt.

By the industry’s own admission, taxpayers are currently forced to bear incalculable amounts of risk with only a fig leaf’s promise that they might someday get a portion of their investment back.

The beneficiaries of TRIA will say that without it, costs to taxpayers will go up as insurance coverage goes down, forcing the government to make all the post-disaster payments without insurers as a private sector financial intermediary.

This argument ignores the fact that Congress is apt to do exactly that anyway, as it does in the face of most large-scale tragedies.

A fair question, then, is: “Why extend TRIA?” Because, regrettably, the insurance industry is not ready in developing the systems and products necessary for a viable market without TRIA. There remains a need for a federal backstop against the most damaging and heinous acts of terrorism – those that cannot be reasonably modeled or reasonably mitigated and whose size truly impacts our economy.

Fortunately, Congress has an opportunity to pass the TRIA Reform Act, sponsored by Rep. Randy Neugebauer. Supporters of the status quo think the bill makes too many changes. TRIA skeptics believe it does not make enough. While not perfect, the bill offers reasonable reforms that improve a needed but temporary program. It prepares stakeholders for the future by realistically assessing the true benefits and costs of TRIA’s current framework. Such an analysis is not an obstacle to the reauthorization process; it is the entire point of it.

August 2012 A gunman linked to white supremacist groups killed six people and wounds three others during a shooting at a Wisconsin Sikh temple

April 2013

The Boston Marathon bombings kill three and injure more than 180 people

May 2013

The RAND Corporation releases a study confirming TRIA ensures the availability of workers’ comp coverage

December 2014 TRIA is set to expire

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NEWS ANALYSIS

“If TRIA is not renewed, you’ll have a lot of smaller companies that may have to redefine their appetite and disengage” failed to agree on language that would extend the program further into the future.

At issue is how much risk the private sector can take on. Members of the House are pushing for a shorter renewal period – just five years – with a larger program trigger, while the bill in the Senate would extend the program through 2021 with a lower threshold for government assistance.

Leaders in the insurance industry are generally more supportive of the Senate version of the renewal, but at this juncture they’re happy to see anything passed.

“We’re very concerned about getting TRIA renewed and would like the Senate version to receive hearing in the House, but frankly we’re just looking to see either passed now,” says Ted Besesparis, senior vice president with the National Association of Professional Insurance Agents. “Our members’ clients need terrorism coverage for their businesses and homes, and that concern is particularly acute for commercial clients.”

In the absence of a current renewal, several insurance companies are resorting to unique underwriting tactics to keep terrorism insurance affordable to those who need it – particularly contractors and others working on construction and public works projects.

AAMGA Executive Director Bernd Heinze pointed out that because insurers and underwriters are tackling renewals of multi-year policies, tough decisions have been made regarding premium rates and specific terms of coverage.

“Quite frankly, with the January 1 renewal season being quoted, the industry has already missed out on having multi-year discussions with the consumer,” he says. “And for those policies

being renewed through 2016 and 2017, underwriters have said, ‘Okay, we’ll renew for a year, depending on what Congress does on TRIA, and then we’ll have to look again.’ Premium rates may increase if Congress does not renew.”

And the market as a whole may shrink, limiting producers’ access to some key coverages. Arthur Pletz, senior vice president at Detroit-based Meadowbrook Insurance Group, anticipates withdrawal of several companies in the excess workers’ compensation and even the standard workers’ compensation markets.

“If TRIA is not renewed, you’ll have a lot of smaller companies that may have to redefine their appetite and disengage,” Pletz says. “Liability for contractors will also be a problem, because carriers won’t want to entertain the risk of having equipment or property damaged on a build site.”

As for the chances of TRIA passage by the end of the year, Heinze says he is “cautiously optimistic” that an agreement will be reached before the program sunsets at the end of the year – and preferably before Congress recesses again before mid-term elections. “If it’s not done before Congress goes out of session in November, there’s going to have to be special session work done,” he says.

If not? Members of the public may eventually pay the price.

“There will be tremendous repercussions with regard to building and construction, trade securities, building stocks and bonds – those all need to have terrorism coverage,” Heinze stresses.

“We can’t be so myopic as to think [not renewing TRIA] will just have an impact on insurance companies and policyholders – a bank, school or bridge could end up not being built because of the lack of a federal backstop.”

10 | NOVEMBER/DECEMBER 2014

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INDUSTRY / INTELLIGENCE

INDUSTRY INTELLIGENCE Insurance Business America’s CORPORATE MOVES Acquirer

Target

PRODUCT NEWS

Comments

Arthur J Gallagher

Everett James

Top risk management and benefit solutions provider acquires employee benefits broker and consultant

Arthur J Gallagher

Hagedorn

Top risk management and benefit solutions provider acquires retail insurance broker

Arthur J Gallagher

Parmia

Top risk management and benefit solutions provider acquires Australian brokerage

Dezelan Insurance Agency

Top risk management and benefit solutions provider acquires Indiana insurance agency

Aon eSolutions

Aon sells its risk management information systems business unit to private equity outfit

Digital Benefits Advisors

Benefits Resource

Employee benefits provider acquires benefits consultant

HW Kaufman Financial Group

Kaufman expands its reach into European Oval International Ltd. markets through the purchase of the London-based marine and energy broker

R&R Insurance Services

Snyder Insurance Agency

Independent Midwest agency announces merger with Wisconsin-based family agency

Sedgwick Claims Management Services

T&H Global Holdings and its subsidiaries

Pprovider of claims and productivity management solutions acquires provider of specialized claims services

Willis Re

SurePoint Reinsurance Industry giant acquires a Portland, MaineAdvisors based reinsurance broker

York Risk Services Group

Donald K. Sams & Associates

Arthur J Gallagher Risk Management Services (Affiliate of) Symphony Technology Group

Provider of insurance and claims management solutions acquires independent claims adjusting company

Aon’s infosys unit picked up by private equity player An affiliate of private equity outfit Symphony Technology Group has acquired Aon’s eSolutions risk management information systems unit.

In a statement, Aon Risk Solutions CEO Michael O’Connor said the deal with Symphony, a private equity firm that specializes in acquiring and investing in software companies, would ensure the ongoing evolution of the eSolutions risk and claims management software platform.

“As the risk management technology space evolves and integration with enterprise software systems continues to expand, it made sense to transition the eSolutions business to owners that focus exclusively on the unique aspects of the software sector in order to continue to empower the best results for our clients,” O’Connor said.

> Allied World North America added a new product to its ForceField suite of professional liability products. This new directors & officers (D&O) and corporate liability policy will be available for U.S.based publicly traded companies and addresses a wide range of liability exposures currently facing corporations and their executives, including coverage for pre-claim inquiry costs, facilitation costs, liberty protection costs, crisis event coverage and e-discovery services. > Brit PLC developed an insurance service to protect companies operating critical infrastructure and industrial machinery from terrorist and other malicious attacks, such as sabotage, espionage and theft. > Ironshore International will enhance its current representations and warranties insurance for merger and acquisition transactions by providing supplemental coverage for political risks in a number of volatile territories. The program is designed for those transactions where the buyer faces key asset risk, such as loss of extraction rights or operating licenses, or other natural resource risks that pose potential obstacles for completion of the transaction. > Marsh launched a new cyber insurance policy that provides catastrophic protection for large companies seeking to better manage the growing threat of a cyber-related data disruption or unplanned technology outages. > Picwell developed the first predictive recommendation engine for health plan selection that asks individuals four to five questions and is then able to run algorithms to search through a massive database, placing subjects into particular subsets. After placement, the software matches healthcare plans to needs and presents meaningful predictions aligned with what is available. > Travelers announced the addition of Healthcare Exchange and Civil Money Penalties coverages to its management liability portfolio. > Vertafore DaaS aims to eliminate the high costs of maintaining existing PCs as well as alleviate numerous IT challenges associated with on-premises hardware. Desktop-as-a-Service (DaaS) allows users to access cloud-based desktops and programs from virtually any computer, browser or device – including the ever more popular tablets and smartphones.

12 | NOVEMBER/DECEMBER 2014

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’s

HARD TO PLACE PROGRAMS? IBAMAG.COM

regular wrap of all the important industry moves and plays

MOVERS & SHAKERS Name

Leaving

Joining

New position

Philip Fasano

Kaiser Permanente

AIG

Executive VP, CIO

Keren von Schmidt

Wells Fargo Insurance Services

Integro USA

Principal

David Unsworth

Guy Carpenter & Co.

JLT Reinsurance

Senior VP

Florence Levy

Lockton

JLT Specialty

Cyber team

Lauren Cisco

Lockton

JLT Specialty

Cyber team

Shannon Groeber

Lockton

JLT Specialty

Cyber team

Tom Ryan

Marsh Risk Consulting

Marsh USA

Researcher

Carey S. Roberts

Covington & Burling

Marsh & McLennan

Dep GC

Gerald Purgay

Right Management

Mercer

Global talent mktg ldr

William Manuel

NGA HR

Mercer

Talent growth leader

Simon Holt

Travelers Insurance

Pioneer Underwriting

Fin Inst Underwriter

Brain Feldman

Allstate Dealer Services

Spencer Capital

Executive VP

Beth Fitzgerald

ISO

Verisk Analytics

President, ISO programs

Scott P. Thomas

AIG

Victor O. Schinnerer

Senior VP

David Walker new chairman of the IIABA David Walker, president of Hartland Insurance Agency in Hartland, Michigan, has been appointed as chairman of the Independent Insurance Agents & Brokers of America. Walker started his insurance career in 1979; he joined Hartland Insurance Agency as a producer and rose through its ranks.

Walker has served on the Michigan Association of Insurance Agents (MAIA) Young Agents Council, Education Committee, Legislative Affairs Committee and Agency-Company Relations Committee. Additionally, he has served on the board of directors and as president of MAIA and the Genesee County Independent Agents. At the national level, he has served on the boards of the Big “I,” CAP and Big “I” Advantage, and as a member of the Big “I” Professional Liability Committee.

HW Kaufman adds to London presence “Our continued strength in London — the epicenter of the global insurance market — has a direct and significant impact on our business in the U.S., Canada and the rest of the world,” said Alan Jay Kaufman, chairman, president and CEO of the Kaufman Financial Group, in a statement following his company’s acquisition of the London-based Lloyd’s brokerage Oval International. “The acquisition of Lochain Patrick,” he said, using the business’ original name that Kaufman has decided to resurrect, “adds an important dimension to our company and signals our ongoing interest in adding like-minded, independent and entrepreneurial brokerage teams to our London operation.”

Oval specializes in marine and energy.

Kaufman acquired another Lloyds broker, the Chesterfield Group, back in 2012.

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STATISTICS

CYBER CRIME Why is it happening?

TOP CAUSES OF DATA BREACHES:

Cyber crime is booming – but brokers are

Which industries are most at risk?

29% system glitches

35%

Gas

Pharmaceutical

Energy

Mining

Chemical

Electronics

human error

37%

47 (only Alabama, South Dakota and New Mexico do not). Laws vary, but generally spell out requirements for notification and who must comply (businesses, information brokers, governments, etc.).These notification costs can be covered under a cyber liability insurance policy.

4,366

Number of reported data breaches in the U.S. between 2005 and March 2014

624,493,173 Number of records compromised during those data breaches

malicious or criminal attacks

Number of states that require notification following a data breach:

How big is the problem?

Agriculture

Oil

What is it costing us? $445 BILLION

$300,000

$3.7 MILLION

$188

Annual cost to the global economy

Average cost per company

38%

Increase in cyber attacks between 2011 and 2012

Average cost per breach

Average cost per record in the U.S.

2m

Number of cyber attacks happening every week

Then there’s the cost to brand identity and reputation:

75%

of firms surveyed by IBM said that IT risks have negatively impacted their brand

156 m

Number of phishing emails sent every day

Sources: CISCO; IBM; Center for Strategic and International Studies; Ponemon Institute; Cyber Risk Solutions, a division of H.U. Dove & Company, Inc. 14 | NOVEMBER/DECEMBER 2014

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IBAMAG.COM

still having a tough time convincing business clients it can happen to them

KNOW YOUR CYBER RISKS A new report by the Zurich Insurance Group and Atlantic Council highlights 7 different ‘aggregations’ of cyber risk – how many are your clients vulnerable to?

1

INTERNAL IT ENTERPRISE The risk: The cumulative set of an organization’s (mostly internal) IT Examples: hardware, software, servers, and related people and processes

2

COUNTERPARTIES AND PARTNERS The risk: Dependence on or direct interconnection (usually non-contractual) with an outside organization Examples: University research partnerships, relationship between competing/cooperating banks, corporate joint ventures, industry associations

3

OUTSOURCED AND CONTRACT The risk: A contractual relationship with external suppliers of services, HR, legal or IT Examples: IT and cloud providers; HR, legal and accounting consultancy; contract manufacturing

4

SUPPLY CHAIN The risk: Traditional supply chains and logistics, plus supply chains for the IT sector Examples: Exposure to a single country, counterfeit or tampered products, risks of disrupted supply chain

5

DISRUPTIVE TECHNOLOGIES The risk: Unseen effects of or disruptions either to or from new technologies – either those that already exist but are poorly understood, or those due soon Examples: Internet of Things, smart grid, embedded medical devices, driverless cars, the largely automatic digital economy

6

UPSTREAM INFRASTRUCTURE The risk: Disruptions to infrastructure relied on by economies and societies, especially electricity, financial systems and telecommunications Examples: Infrastructure like internet exchange points and submarine cables, some key companies and protocols used to run the internet (BGP and Domain Name System; internet governance)

7

EXTERNAL SHOCKS The risk: Incidents outside the system, outside of the control of most organizations and likely to cascade Examples: Major international conflicts, malware pandemic NOVEMBER/DECEMBER 2014 | 15

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INDUSTRY ICON / STAN GALANSKI

The importance of giving back Stan Galanski used his trust, expertise and generous spirit to steer The Navigators Group to serious growth Little did Stan Galanski know when he decided to cover an interview for his college roommate in 1980 that he was starting down the path to becoming the CEO of one of the U.S.’s fastest-growing insurance companies, The Navigators Group, Inc. Oddly enough, Galanski had already accepted a job with Proctor & Gamble when he walked into an interview with Chubb in Pittsburgh, Pennsylvania. Immediately after the interview, the then-recent University of Pittsburgh graduate knew he had found his calling.

“I was so fascinated with the underwriting business that I called up Procter & Gamble to tell them I had changed my mind. I took a third less salary and gave up a company car to take a job with Chubb,” Galanski explains.

By 1995, he had risen through the ranks at Chubb and was running U.S. field operations for commercial insurance. He left Chubb to become president of the New Hampshire Insurance Company for AIG. After about two and a half years, Galanski was recruited to run a small-cap specialty insurer in suburban Chicago called Intercargo Corporation.

Soon after taking over Intercargo in 1999, Galanski sold it to XL Capital, who stipulated that he stay with the business for two more years.

“Once you’re running a small-cap specialty company, working in a bigger company is a different animal,” Galanski notes. “I was actually quite anxious to get back to a business where you could really touch it and feel it and really have much more intimate relationships not only with your people, but your customers as well. At that point in time, our founder, Terry Deeks, was looking for a successor – it was a marriage that was exactly

what I was looking for.”

Galanski took over for Deeks as president and COO of the Navigators Group, Inc. in March 2001, and was promoted to CEO on January 1, 2003.

After about 10 years with Galanski at the helm, the company has expanded its employee base to approximately 630 from 110, and the business has grown from $200 million to $1.5 billion. The company also has expanded its reach beyond the U.S., opening new offices in Belgium, Denmark, France, Italy, Sweden and the Netherlands. This undoubtedly contributes to Navigators Group’s stellar ratings of ‘A’ (Excellent) and ‘A’ (Strong) by A.M. Best and Standard & Poor’s, respectively.

LEADING BY EXAMPLE The Navigators Group was named by Forbes as one of ‘America’s 50 Most Trustworthy Financial Companies’ in 2014 and one of ‘America’s 100 Most Trustworthy Companies’ in 2013.

Galanski attributes these successes to a corporate structure and long-term perspectives that allow sound underwriting expertise to trump shortterm profitability.

The company’s successful formula revolves around its management. For instance, the board of directors has a special ‘underwriting committee’ specifically for the purpose of discussing the latest trends, philosophies and emerging risks.

“Referring back to Pittsburgh,” he continues, “the Steelers have had a pretty good run at it over the years, and one of the things they haven’t done is flip their coaches with any high degree of regularity. That’s something we can relate to. We’re celebrating our 40th anniversary, and we’ve had two CEOs during that time. I think two CEOs in 40 years is a pretty good track record.”

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“More and more insurers take authority away from their field offices … We tend to think we hire really good people in the field, and we hire them because we want them to make decisions”

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INDUSTRY ICON / STAN GALANSKI

Board Memberships • St John’s University’s School of Risk Management and Insurance, which has developed an apprenticeship program and continually interacts with students on a regular basis • St. Joseph’s Parenting Center, which aims to promote safe and healthy families through providing education on parenting skills to those who have lost their children or are at risk of losing their children • PCI, an insurance industry trade organization • National Association of Corporate Directors

CHARITABLE ENDEAVORS Navigators thrives on personal interaction and face-to-face communication, as well as charitable events that build camaraderie while giving back to the community.

For the last five years, Navigators has put together a team to participate in the Connecticut Challenge, a charity bike ride dedicated to cancer survivors. During that time, the company’s delegation has expanded from five members to 28 (including one broker from as far as Rotterdam), and they’ve raised more than $250,000 for the charity.

Fun company events like these helped Navigators Group earn a spot as one of the ‘Best Places to Work in Insurance’ in 2014. Above all, the company believes in hiring good people and letting them do their jobs.

“It seems like in the last decade, more and more insurers are taking authority away from their field offices and trying to centralize it in regional hubs or in their corporate headquarters – the assumption being that one very smart person in the corporate headquarters is much better than the 500 people they have in the field,” Galanski observes.

“We tend to think we hire really good people in the field, and we hire them because we want them to make decisions.”

This year, the Navigators Group’s charitable profile expanded as they signed on as a title sponsor for a regional event now called the Navigators Stamford KIC-IT triathlon. KIC, or Kids in Crisis, is a charitable organization that has existed since the 1970s, providing free, round-the-clock crisis counseling and temporary shelter for infants, chil-

dren and teens.

Galanski’s alma mater, the University of Pittsburgh, is the source of another of Navigators’ long-term charitable initiatives. One of Galanski’s lifelong friends, Ludwig Picarro, was a victim of the terrorist attacks on the World Trade Center in 2001. Following his death, Galanski, with the support of Navigators founder Terry Deeks, worked to establish a scholarship program in Picarro’s memory.

“For the last six or seven years now, a Pitt student has been a recipient of the Ludwig Picarro Endowed Scholarship,” Galanski says. “That’s one of the things we’re really proud of starting [to remember] a truly remarkable individual and selfmade man.”

DOMESTIC BACKING Galanski doesn’t take credit for either his career triumphs or altruistic nature, instead attributing his successes to his family.

“Anybody who thinks they can be successful without the support of their family is really kidding themselves,” he says. “When I look at the sacrifices that my wife, Susanne, has made for me to be able to be successful in my career, not the least of which has been moving around the country – it’s as much work, if not more, for her as it has been for me. I don’t think anyone who has ever been successful as an executive and has managed to maintain their marriage can do anything else but say it is truly a partnership and mention how indebted they are for the support they get.”

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CLAIMS PROCESSING In no situation does a carrier prove its worth more thoroughly to both producer and policyholder than when a claim is filed. Identified by respondents as the single most important aspect of a carrier’s offering, efficient claims processing demonstrates the value of the insurer and – vicariously – of the producer.

“Claims is not something an agent really wants to deal with because there is no good claim. A loss is a loss,” says Bud Trice, vice president of Crawford & Company’s catastrophe services group and a nearly 50-year claims handling veteran. “Bad service during a claim can only hurt the agent tremendously.”

Fortunately, carriers seem to be following through on this promise. Claims processing garnered the second-highest rating of all areas of carrier performance, bringing in an average 3.87star review, with 15 carriers receiving five stars. Fewer than 5% of carriers rated received two or fewer stars.

One standout among carriers that generated positive reviews is the availability of claims download services. Download and real time services allow producers to track the status of a client claim and communicate updates between both parties.

“Access to online forms and to knowledgeable claims specialists to educate the agent and create carrier value draws me to work with a carrier,” says one respondent.

On the opposite end of the spectrum, carriers that haven’t embraced automation in terms of claims handling were more likely to receive complaints about wait times, lack of communication and unknowledgeable claims representatives.

According to Trice, this last piece of information is the most poignant.

“By and large, it’s the avoidance of bad claims services that I think is more important for the agent,” he says. “You need to be able to depend on somebody.”

At the same time, however, Trice feels it’s necessary to foster greater understanding and empathy between all parties.

“Agents should realize that, especially in a catastrophic situation, we’re all doing our jobs the best way we know how,” he says. “Speaking for the industry, no one is out there intentionally making mistakes. Even a fool, in his own eyes, is right.”

“Bad service during a claim can only hurt the agent tremendously”

Five-star carriers ACE Group AIG AmTrust Financial Arch Insurance Group Berkshire Hathaway Chubb Group of Insurance Companies Cincinnati Insurance Companies Fireman’s Fund Insurance Companies Great American Insurance Group The Hanover Insurance Group Markel Corp RLI Corp. and Subsidiaries Scottsdale Insurance Company Selective Insurance USLI Vermont Mutual Insurance Group

How much of a priority is it to producers?

8.31 0

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Average carrier rating 3.87 0

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Producers speak out: 3 ways carriers can improve “Claims are extremely slow, and to find someone friendly and knowledgeable to talk to me is nearly impossible.”

“They do not communicate with the agent or give them regular updates.”

“I can’t get claims documents online, which really slows down the entire process.”

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COMPETITIVE RATES If there’s one area where insurers need to step up, it’s in their efforts to provide competitive rates to their producers and policyholders. Rated as the second most important aspect of a carrier’s offering, actual performance by carriers scraped just 3.67 stars out of five—the largest disparity between what producers want and what they’re being given.

“Rates are huge,” opines one respondent. “While I don’t personally sell on price, many consumers buy on price. I’d like to be able to offer clients a very solid insurance policy while at the same time being as competitive as possible. I don’t care how many bells and whistles the policy has – if it’s 15% to 20% higher than the client’s current premium, it just won’t sell.”

Several producers agreed that “competitive” should not mean “lowest market price” – just within the realm of affordability for consumers who are increasingly viewing some forms of insurance as a commodity.

Respondents also expressed irritation with carriers who exercise an unsustainable “balancing act” when it comes to pricing – that is to say, charge inflated rates for one product in order to offer artificially low rates for other, more competitive ones.

A degree of underwriting expertise may help with attaining competitive pricing. Producers rated underwriting expertise as a relatively high priority when selecting a carrier, but mentioned that many underwriters are too constrained by new modeling practices to really analyze risk and offer appropriately priced options.

“Too often underwriters can’t see past the four walls in their office to know how operations truly run,” one respondent says. “Get out and look at a risk without your insurance hat on, and try to put yourself in the shoes of the business owner. Once you’ve done that, then take a look at the account from the insurance aspect and see how the two views can blend together.”

“I’d like to be able to offer clients a very solid insurance policy while at the same time being as competitive as possible”

Five-star carriers AmTrust Financial Arch Insurance Berkshire Hathaway Cincinnati Insurance Companies CNA Great American Insurance Group The Hanover Insurance Group Ironshore Philadelphia Insurance Company Selective Insurance SECURA Insurance USLI Vermont Mutual Insurance Group

How much of a priority is it to producers?

8.29 0

1

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Average carrier rating 3.67 0

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Producers speak out: 3 ways carriers can improve “They need to work on better rating structures if they want to take more market share from State Farm and other captive insurers.”

“I would like to see carriers defend against legislative burdens that cause our products to not only lose competitive value as opposed to other economic outlays, but also cause insurance to be destabilized by a smaller marketplace.”

“Modeling is killing the old-school, out-of-the-box way they used to underwrite risks.”

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CARRIER REPUTATION & FINANCIAL STABILITY Reputation and financial stability was the most highly rated performance category among carriers, and the third most important quality for producers.

It’s hardly surprising why. Though the insurance sector remained largely unaffected by the 2008 financial crisis, the troubles of a few major players like AIG shook many producers.

It appears carriers have taken this post-recession urgency just as seriously. Producers gave carriers 4.25 stars out of five for reputation and financial stability. This was the only category in which more than three-quarters of respondents gave their carriers a four-star rating or higher.

Several survey respondents noted they refuse to do business with carriers boasting anything less than an A+ rating. “My reputation is always on the line – especially now,” says one producer. “Working with a reputable carrier is helpful.”

Producers also noted that length of operating time is one way carriers demonstrate their reputation and stability. “Two hundred years in business speaks volumes,” one producer noted.

Five-star carriers ACE Group AmTrust Financial Arch Insurance Berkshire Hathaway Catlin Group Chubb Group of Insurance Companies Cincinnati Insurance Companies CNA Fireman’s Fund Insurance Companies Great American Insurance Group The Hanover Insurance Group The Hartford Ironshore Liberty Mutual Markel Corp

How much of a priority is it to producers?

Navigators Group Philadelphia Insurance Companies

8.14 0

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9

QBE Republic Group

Average carrier rating

RLI Scottsdale Insurance

4.25 0

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Producers speak out: 3 ways carriers can improve “Their reputation is awful, but they have the market cornered and they know it.”

“New, fly-by-night companies are sprouting up in the field to take individuals through choosing an insurance plan with little background in the industry.”

“Clients often research the company they are with.

It is important to us to only represent A-rated or higher-rated companies.”

Selective Insurance Travelers Insurance Companies USLI Vermont Mutual Insurance Group

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COMMITMENT TO THE BROKER DISTRIBUTION CHANNEL Changing consumer preferences have given rise to widespread concern over the future of the independent agent role, and producers are looking to their carriers for greater evidence of commitment to the broker distribution channel.

As such, that commitment was rated the fourth most important feature of a carrier – and the second most important among smaller agencies reporting less than $1 million in annual policy volume.

Fortunately, many carriers seem to be meeting producer expectations on this front. With an average 3.83-star rating, commitment to the broker distribution channel was the third most highly rated quality among carriers.

When performing their assessments, producers noted things like instruction on new products, competitive commission schedules and exclusive broker distribution as evidence of the insurer’s commitment to the continued success of the channel. “[This insurer] really embraced brokers by keeping us informed and getting rate and benefit information out very quickly,” one respondent says. “No one else is even close to them in supporting us.”

That’s not to say there isn’t still work to be done.

Several respondents noted they distrust their carriers’ intentions, given the expansion of insurers to direct selling or the use of captive agents in addition to independents. Different pricing between direct and independent agents also ruffled some feathers.

Alicia Igram, a local leader of the Insurance Office of America in Aliso Viejo, Calif., probably expressed it best: “It seems as if many of our standard markets are welcoming any distribution channel.

[They’re] even working with payroll companies that are notorious for telling employers that most of the employees should be classified as 8810 Clerical.

This is a slap in the face to those of us who have spent our career support them.”

Overall, however? Many producers described the current situation with their carrier partners as “wait and see.”

Five-star carriers ACE Group AIG AmTrust Financial Berkshire Hathaway Fireman’s Fund Insurance Companies The Hanover Insurance Group Ironshore Markel Corp RLI Corp. and Subsidiaries Vermont Mutual Insurance Group

How much of a priority is it to producers?

7.99 0

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Average carrier rating 3.83 0

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Producers speak out: 3 ways carriers can improve “It’s a work in progress. They need to increase their commission schedule ... and stop making you jump through hoops to get an extra point.”

“Too much direct and aggregator competition. Sad to see them in Wal-Mart.”

“I’m OK with carriers offering multiple distribution channels as long as there isn’t different pricing in each channel.”

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UNDERWRITING EXPERTISE Producers deemed underwriting expertise the fifth most important quality in a carrier, with an overall rating of 7.95 out of nine. In terms of overall performance, producers gave carriers an average rating of 3.78, making it the fourth highest-performing category for insurers. Three out of every four producers gave their carriers’ underwriters four or more stars.

However, some producers did have issues with the rigidity of some underwriting standards.

“I feel underwriting is more combative with this carrier than any other. They only think within their rules and guidelines, and rarely use their authority to make any accommodations for agents and their specific situations,” says one respondent.

Another agrees, “It would be better if underwriters would let go of the book just a little. They are very strict and do not like to make decisions in a timely manner.”

Turnover rates at some carrier offices was also a sore spot, with producers noting that a revolving door of underwriters isn’t conducive to building trust or long-term relationships. Likewise, several respondents expressed frustrations with the time it takes to get service. “[The carrier] has a general mailbox that they have 24 hours to respond to. Most e-mails are backand-forth, question-and-answer conversations, so inquiries can literally take a week or more to get a final answer,” explains one producer. “Expertise is good, although very slow.”

Despite this critique, many producers were quite happy with the effort put forth by their carriers.

“While filling out the application, I was able to ask questions to the underwriters via live chat, or when I chose a class code from their drop-down menu, it would automatically give a brief description of the class.”

“As with most carriers, perpetuation is an issue. They could focus more on tomorrow’s underwriting talent”

Five-star carriers ACE Group AIG Berkshire Hathaway Catlin Group Cincinnati Insurance Companies CNA The Hanover Insurance Group Ironshore Markel Corp Philadelphia Insurance Companies QBE RLI Selective Insurance USLI Vermont Mutual Insurance Group

How much of a priority is it to producers?

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Average carrier rating 3.78 0

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Producers speak out: 3 ways carriers can improve “Getting to an underwriter is often a long wait time.”

“This company is hurting to keep seasoned underwriters. Our agency is like a revolving door of new ones underwriting for us – leaves us to question what management is thinking.”

“They do not comply with DOI’s standard regulations.”

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TECHNOLOGY AND AUTOMATION The technological offerings and automation capabilities of insurance carriers ranked near the middle of the pack when producers considered their priorities in choosing insurers, but the topic still drew the most discussion from respondents – and ranked near the bottom in grading.

Producers gave carriers just 3.65 stars, commenting that everything from billing processes to online raters needs improvement and to be streamlined with their own agency management systems.

The uneven availability of comparative rating tools was one major pain point. Thanks to the changing expectations of today’s “instant gratification” consumer, producers need to be able to turn around quotes quickly and give a basic overview of a client’s options. Without widespread comparative raters, this task becomes difficult.

Dealing with endorsements was another sore spot. Many carrier systems lack the capability to process endorsements, respondents said, leaving producers to spend time on the phone connecting with the appropriate underwriter to make changes and update policies accordingly.

Still, several producers noted improvement. “Five years ago, they would have gotten one star,” one respondent said. “Today, things are getting better.”

Popular features include online tools that allow producers to secure quotes in less than 20 minutes, as well as ‘live chat’ windows that connect producers directly to underwriters in order to get their questions on coverage and risk placement answered without the hassle of a phone call and potential rerouting in the insurer’s system.

As vice president of product management at IVANS – a technology provider dedicated to improving efficiencies between carrier and agency management systems – Paul Warga is encouraged to see such improvements.

Although the insurance industry is rarely at the forefront of technological change, Warga believes carriers are invested in improving automation, such as download and real time capabilities for their agent partners.

“There’s a myth that commercial lines doesn’t work when it comes to download,” Warga says. “But carriers recognize the value here, and 17,000 unique agents are now taking commercial lines download.”

In fact, the biggest issue when it comes to connecting carriers and producers isn’t the willingness

Five-star carriers Chubb Group of Insurance Companies The Hartford Liberty Mutual RLI Corp. and Subsidiaries Selective Insurance USLI Vermont Mutual Insurance Group

How much of a priority is it to producers?

7.94 0

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Producers speak out: 3 ways carriers can improve “Their online quoting systems are clunky. Choosing the program code can be a nightmare, and it has a significant impact on pricing, so I’m never confident I’ve quoted something properly.”

“There are a lot of endorsements, like lender changes and flat cancels, that you can’t do online.

You have to call.”

“Downloads, billing and online rating capabilities still have a long way to go.”

of both sides to change – it’s getting producers to recognize the potential that is already there. According to data from technology vendor Applied Systems, roughly 43% of commercial download connections are not ‘turned on’ within agency management systems. Once producers are aware of the capabilities, it’s a quick fix to establish that connection.

In future, Warga anticipates that claims downloads – another item high on producers’ wish lists – and activity notes will become more widely available from the carrier community.

Ins co Ind No

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OVERARCHING

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Insurance coverage is underwritten by one or more member companies of Arch Insurance Group in North America, which consists of (1) Arch Insurance Company (a Missouri corporation, NAIC # 11150) with admitted assets of $3.11 billion, total liabilities of $2.35 billion and surplus to policyholders of $757.06 million, (2) Arch Specialty Insurance Company (a Nebraska corporation, NAIC #21199) with admitted assets of $527.36 million, total liabilities of $240.68 million and surplus to policyholders of $286.68 million, (3) Arch Excess & Surplus Insurance Company (a Nebraska corporation, NAIC # 10946) with admitted assets of $63.30 million, total liabilities of $3.77 million and surplus to policyholders of $59.53 million and (4) Arch Indemnity Insurance Company (a Nebraska corporation, NAIC# 30830) with admitted assets of $23.27 million, total liabilities of $(0.092) million and surplus to policyholders of $23.36 million. All figures are as shown in each entity’s respective Quarterly Statement for the quarter ended June 30, 2014. Executive offices are located at One Liberty Plaza, New York, NY 10006.

Not all insurance coverages or products are available in all jurisdictions. Coverage is subject to actual policy language. This information is intended for use by licensed insurance producers. © Arch Insurance Group 2014

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SPECIAL REPORT / PRODUCERS ON CARRIERS

QUICK QUOTES

“I know I can count on my underwriter to respond within a few hours on the few submissions that aren’t autoquoted”

Quick quote capabilities ranked toward the bottom of the pack in terms of what producers consider important when choosing carriers, but the topic still drew a lot of discussion from respondents, who graded carriers right in the middle.

Surprisingly, given the quantity of comments on the topic, quick quotes only ranked higher than three other areas: range of products offered, marketing support, and education and training.

In terms of performance, producers gave carriers an average rating of 3.76 out of five in quick quoting, which placed the category tied for fifth with marketing support.

Some respondents did express concerns with the turnover time for quotes. “Takes forever to get a quote or any kind of contact,” one respondent complained. “Still waiting on one I put in last month.”

Others reiterated sentiments about getting up to speed with modern connectivity: “Consumers in today’s age of technology expect a certain speed in handling quotes.”

Another respondent added, “The faster I can get the quote to the applicant, the more business I will sell – plain and simple.”

Some respondents were quick to praise auto-quoting tools, while others valued the responsiveness of their underwriter.

“Quick if agent is doing the quote online. Slow if sent into UHC to produce the quote,” said one respondent.

“I know I can count on my underwriter to respond within a few hours on the few submissions that aren’t auto quoted,” raved another.

Perhaps the reasoning behind quick quotes ranking toward the bottom of most important qualities for carriers is because of the overall level of satisfaction with them.

One respondent stated, “In a quick-paced environment working exclusively with contractors, the ease/speed of their process is fantastic. In some cases, if I had enough information, I was able to receive a policy/binder within 20 minutes.”

“Turnaround time is consistently with 24 hours,” said another agent. “I can set expectations with my clients based on FirstComp’s consistency.”

“And RLI actually quotes everything for us! Now that’s what I call a true carrier partner!” added an enthusiastic respondent.

Five-star carriers ACE Group AIG CNA Great American Insurance Group The Hanover Insurance Group Nationwide Navigators RLI Selective Secura USLI Vermont Mutual

How much of a priority is it to producers?

7.82 0

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Producers speak out: 3 ways carriers can improve “Quick is only if the agent enters all the information – very slow to send into SHP to produce the quotes (group or individual).”

“Staying old school; this is a downside. Quotes must be approved by field reps, who are out in field and can take hours to days to approve pricing. More straight-through underwriting needed.”

“The easier it is to quote a company, the more we want to quote them. Too many questions when quoting (i.e., how many baths, when the home was purchased, mortgage/loan, etc.) frustrates us every time when quoting that company, which does not promote ‘feel good’ feelings for the company.”

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RANGE OF PRODUCTS OFFERED The range of products offered by carriers ranked near the bottom in terms of producer priorities, with a rating of 7.60. Ratings for actual performance were similarly low.

Producers gave carriers 3.71 stars for their performance in range of products offered, with some commenting that carriers need to extend beyond conservatism and expand their palate in relation to risk.

“Carriers better have a broad menu of options available to compete in this market,” says one respondent. “Numerous products are a must.”

On the other hand, more respondents seem to favor the niche market approach currently being embraced by more carriers.

“Range is less important than providing strong, quality products,” explains one respondent.

Another adds, “Some companies are better because they do a few products really well. Just like we can’t be all things to all consumers, we don’t expect our carriers to be able to offer every product.

The value of an independent agent is that we can seek out other partners if needed.”

Five-star carriers ACE Arch Insurance Chubb Group of Insurance Companies Cincinnati Insurance Companies Great American The Hanover Insurance Group Ironshore Liberty Mutual Markel Corp Philadelphia Insurance Companies Republic Group RLI Selective Insurance Travelers Insurance Companies USLI

Producers speak out: 3 ways carriers can improve

Vermont Mutual

“Too conservative of an appetite in commercial.”

“It always helps when you can keep a client who may have business and personal insurance with the same carrier. There are times when the client wants it this way.”

“Range of products and appetite are something that is very important. More often lately, business owners are diversifying their businesses to capture more customers. If a company doesn’t have the ability to provide coverage for a new exposure that is rather minimal to the entire account, then there is an issue.”

How much of a priority is it to producers?

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Average carrier rating 3.71 0

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“It’s more important that a carrier recognizes and emphasizes its strengths”

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SPECIAL REPORT / PRODUCERS ON CARRIERS

MARKETING SUPPORT It may be a relief to carriers that marketing support was such a low priority to producers – a rating of just 6.85 out of nine – because insurers scored an unremarkable 3.76 stars on average, with just two carriers earning five-star rankings.

While a vocal portion of respondents say they believe it’s the carrier’s duty to help market the products they expect producers to sell, a larger number say they increasingly rely on marketing materials and support from agency network systems, third-party vendors or trade associations like The Big “I.” State associations are also helpful for comparing marketing experiences – both successes and failures, respondents say.

These resources, often tailored by independent agents for independent agents, were typically rated as more helpful and widely available than those supplied by carriers.

Of those producers who do rely on carrier-provided marketing materials, many are disgruntled by the lack of online or mobile options. The ability to download brochures, white papers or other supporting materials still has not been embraced by many major carriers.

This is undoubtedly a vital component of a carrier’s offering in a culture in which more than half of consumers (51%) used the internet before making an insurance decision and in which online searches for insurance information grew 15%, according to data from Verdict Research.

More positively, several producers expressed gratitude for webinars and continuing education classes explicitly designed to explain new carrier products and to help producers advertise and sell them. Pointing out cross-selling and co-op opportunities is also particularly helpful to independent agents, respondents said.

At the top of producers’ wish list is more insight into local markets and opportunities – something carriers should be able to provide with their access and ability to manipulate big data.

“Any input from a marketing standpoint and what [the carrier] is seeing in my marketplace helps me close sales,” a respondent says.

Five-star carriers The Hanover Insurance Group Vermont Mutual Insurance Group

How much of a priority is it to producers?

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Average carrier rating: 3.76 0

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Producers speak out: 3 ways carriers can improve “They could focus more on local marketing and give agents more marketing money to help offset costs.”

“Cannot find forms or basic brochures on the internet. Many of the items are not in PDF format to send electronically.”

“Most carriers’ marketing is very ‘blah’ and doesn’t work well with an independent agent’s message of choice. We do value generous and flexible co-ops from carriers that allow us to think outside the box.”

“We value generous and flexible co-ops from carriers that allow us to think outside the box”

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EDUCATION AND TRAINING Education and training offered by carriers was not only the least important consideration for producers, but was also the second-weakest category in terms of carrier performance.

About 30% of respondents gave their carriers a four-star rating in education and training. An additional 32.18% rated carriers at a four-star level, meaning that roughly six out of 10 respondents felt their carriers were performing well – still a majority, but less impressive than other areas.

Several producers commented on the lack of access to training and the ambiguity of the topics covered. One participant explains, “[Their] 30-minute webinars are mediocre at best.”

“Not enough relevant training,” says another respondent. Similar sentiments were expressed with regard to the structure of training sessions and, in some instances, complete disregard for education and training all together.

“They offer no education and training opportunities, not even webinars,” says one respondent.

Other producers were not as concerned with the availability of educational resources, but rather with the effort required to access these services. On top of having to go out of their way to get the training available, some producers were deterred by the fees charged by carriers.

“They need to better support agents financially for education expenses,” says one respondent.

Nevertheless, some producers were quite satisfied with the opportunities provided by carriers.

Comments like “useful,” “solid programs both online and through high-quality classes” and “always offering us educational and continuing education opportunities” also peppered the survey.

Five-star carriers AIG RLI USLI Vermont Mutual Insurance Group

How much of a priority is it to producers?

6.69 0

1

2

3

4

5

6

7

8

9

Average carrier rating: 3.36 0

1

2

3

4

“Lots of training and education is available, but you kind of have to seek it out—or they charge for it”

5

Producers speak out: 3 ways carriers can improve “Very slow in training – mostly done after the fact and when the group or individual has already called to find out more information.”

“They do training on their products, but no education, and you have to keep up with the changes on the agent site. Not really into e-mails.”

“Thirty-minute webinars are mediocre at best.”

IMPROVING THE PRODUCER/CARRIER RELATIONSHIP

Working relations between producers and carriers continue to improve in most areas, but several pain points still exist – particularly in regard to technology and ongoing carrier support of the independent agent distribution channel.

Communicating these frustrations continues to be a challenge for producers. As business issues director for the Professional Insurance Agents of Connecticut, New Hampshire, New Jersey and New York State, Jim Pittz has assessed agent-carrier relationships through a region-wide report for several years. One thing he’s found is that meetings between producers and carriers are often a “one-sided conversation.”

However, if producers can support their positions with data and similar experiences from other agencies, a conversation can be much more productive.

“When marketing representatives meet with agents, it often turns into a conversation about wanting more business,” says Pittz. “What is better is if agents can come back and say, ‘Yes, we will provide you with business, but you’ve got to enhance your service.’”

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SPONSORED FEATURE / PRIME INSURANCE

PROVIDING

PRIME

PROTECTION Prime Insurance takes on difficult cases

Not everyone is easy to insure. There are always going to be some clients who are challenging to take on – and that’s where Chicago- and Salt Lake City-based Prime Insurance Company steps in. The firm has made a professional niche of securing coverage for specialty, hard-to-place property and casualty risks, including business, professional, wrongful acts coverage and personal lines.

“Prime Insurance Company provides unique solutions for risks that are denied by other markets,” Chief Marketing Officer Frank Lukacs wrote in a letter to the members of the Professional Liability Underwriting Society, whose conference Prime will attend next month. “Many have found Prime to be a valuable resource when it comes to writing new business.”

An excess and surplus lines carrier providing underwriting, claims, risk management and financing services nationwide, Prime offers customized professional liability insurance to professionals in a number of industries, including accounting, architecture, law, engineering, healthcare, human resources, public service and real estate.

Coverage options include errors and omissions, assault and battery, sexual abuse and molestation, and wrongful acts. Additionally, personal liability insurance is available and may be customized for such cases as volunteering, serving on boards and committees, or personal activism.

The company says that its unique approach to underwriting, risk management and claims offers its clientele significant advantages. Risk management services include on-site inspections and evaluation of current practices and emergency procedures.

“We provide fast, flexible underwriting and a partnership approach to specialty liability, professional, property and casualty insurance coverage,” says Barbara Malkowski, Prime’s marketing manager. “Prime has a proven partnership approach to underwriting, risk management and claims, which makes us one of the most recognizable, memorable and preferred carriers of specialty insurance. We do not compete with other markets, but will provide solutions for the business you are turning away today.”

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Prime has a wide range of potential clients for its employment practices liability products, according to Malkowski. “It can be anyone who is considered to be a professional who has an operation – even a contractor, because they consult and give information to clients.”

That includes such professions as performers-for-hire who come to clients’ homes, and midwives, who may very well find themselves on the hook should a delivery result in a tragic outcome.

Prime was founded in 1992, and since that time, its in-house legal staff has successfully managed more than 30,000 specialty liability, professional, property and casualty claims. In 2013, Prime wrote more than $36.4 million in premiums. The company currently holds an A- rating from A.M. Best. In addition to being a member of PLUS, Prime is also a member of The National Association of Professional Surplus Lines Offices, Ltd., a professional trade association that represents the surplus lines industry and the wholesale insurance distribution system.

Lukacs summed up the company’s niche in his letter to PLUS: “We have a longstanding track record of providing solutions that simply can’t be found anywhere else.”

WHAT’S COVERED? In general, employment practices liability insurance provides coverage for a wide range of potential exposures, including: Discrimination based on gender, race, national origin, religion, disability or sexual orientation Sexual harassment or other unlawful harassment in the workplace

Failure to adopt adequate workplace or employment policies and procedures Employment-related defamation or invasion of privacy

Wrongful termination

Negligent evaluation of an employee

Failure to employ or promote

Wrongful discipline of an employee

Retaliation Employment-related misrepresentation

Employment-related infliction of emotional distress

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FEATURE / CYBER LIABILITY

THE CYBER WAR

Target. Home Depot. Dairy Queen. JP Morgan. Thousands of much smaller organizations. All have been the victims of data breach, a risk that is continuing to both challenge the insurance industry and provide significant opportunity for producers – if they take it

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Nearly a year ago, Target’s holiday season came to an abrupt halt as cyber thieves executed one of the most successful hacking operations in recent memory. Intruders gained access to the retail giant’s computer network and 1,800 stores nationwide, successfully obtaining the credit and debit card information of nearly 40 million customers.

Today, news of such data breaches is almost commonplace. Since the Target incident, Neiman Marcus, Home Depot, Michaels, Dairy Queen and countless other, smaller organizations have either been the victim of cyber attacks or have unwittingly exposed customer information through employee error or system glitches.

And that makes for intriguing prospects in the growing yet changeable market of cyber liability insurance.

THE MARKET AT A GLANCE Thanks to almost daily data breach headlines, ‘cyber’ is a ubiquitous industry buzzword, and with that comes a mandate for producers to ‘sell, sell, sell.’

The demand is certainly there. While many producers have shied away from discussing a coverage that is still new to them, several prominent cyber insurance carriers report that interest from buyers is picking up.

“We’ve definitely seen an uptick in inquiries about coverage in the last year,” says David Hallstrom, information risk practice leader with CNA Insurance. “Our book of business includes everything from very small companies to large corporations, and even the smallest groups are now concerned about their potential exposure and are buying up to the limits.”

Along with that interest comes a measurable change in commercial purchasing habits. In a testimony before a Senate committee in March, Marsh executive vice president Peter Beshar revealed that the number of clients purchasing stand-alone cyber insurance increased by more than 20% last year.

It seems employers both large and small are no longer just window shopping when it comes to cyber insurance. They are ready to buy.

For the most part, the industry is there to meet them. A market that was initially barren in the mid1990s, cyber liability now enjoys nearly 2,500 products or endorsements meant to address cyber risk specifically, according to Matt Cullina, chief

executive officer of Identity Theft 911, a third-party service that addresses data breaches and advises companies on digital risk.

“The marketplace is really responding to the sudden increase in breach events,” Cullina says.

“There are about a dozen good carriers providing cyber products for the marketplace, which are first-rate. They provide details on crisis management, reputation management and a remediation plan for data breach.”

One innate challenge the industry faces in this rush to market, however, is downward pressure on pricing created by high demand and multiple new entrants. While some business classes – including retail and healthcare – are seeing a degree of hardening in pricing behavior, the majority of the market is soft as carriers compete for business.

The lack of significant loss data on which to

“All industries are growth markets now” Michael Palotay, NAS Insurance

THE HOLE IN PROFESSIONAL LIABILITY ANOTHER CASE FOR CYBER INSURANCE As data breaches become an increasingly common occurrence, it’s hardly surprising that affected consumers are taking action through the courts. Home Depot, for example, already faces 21 federal lawsuits relating to its recent incident.

If this legal action, complaining of a lapse in professional duties, were directed at a corporation without cyber liability insurance, there’s a very good chance that company would be left with a staggering sum of uncovered legal fees.

Though there is no specific exclusion in most professional liability insurance policies relating to cyber loss, attorney Greg Podolak with Connecticut-based Saxe, Doernberge & Vita recommends taking no chances.

“This is definitely a key question for professionals,” Podolak says. “Professional liability insurance is really geared more toward services you provide, not the preservation of data, so it wouldn’t surprise me if existing policy language is considered insufficient in courts.”

While the matter has not yet arisen in courts, similar cases have ruled professional liability insurers are not required to cover policyholders who are sued after releasing confidential customer information.

As such, producers should not rely on professional liability policies to cover clients in the event of any legal action stemming from a data breach.

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FEATURE / CYBER LIABILITY

base rates is also concerning. Actuaries with many carriers are doing some degree of guesswork when forming cyber insurance rates, meaning a major loss could easily lead to financial insolvency.

Jeremy Barnett, director of marketing with Encino, Calif.-based NAS Insurance, concedes the cyber marketplace is currently “a bit of a land grab” but points out some features that may help producers discern the most trustworthy offerings.

“The experimentation in pricing cyber coverage is disconcerting, but I know many companies are trying to spread the risk among diverse classes of business to insure against a major loss,” says Barnett. “I think the key is to look beyond the product – be educated, understand what the client’s real risks are and focus in on the insurance agreement.”

A CHANGING RISK PROFILE The data breaches affecting chains like Home Depot or Dairy Queen are not isolated incidents, and they certainly aren’t leveled exclusively against major brands.

For the first time in its 12 years of studying commercial data breaches, the research-based Ponemon Institute noted that the leading cause of data breach last year was malicious or criminal attacks, as opposed to system glitches or employee negligence. A full 41% of organizations say the main cause of their data breach incidents were attacks against the organization, outstripping the 33% who blame employee errors and the 26% who fault their own computer systems.

Malicious or criminal attacks also account for the highest loss per record of any form of data breach. According to the same research, while the average lost record costs an organization $194 in remediation, a record affected by a criminal breach can mean a $277 loss. At those rates, just a few breached records can easily trigger financial disaster.

New technologies aimed at changing the way companies collect and store information could be behind this uptick in cyber crime. Social media and mobile payment services offer a goldmine of company and customer information to an enterprising hacker, and the flocking of small- to medium-sized businesses to the cloud has insurers reconsidering their approach to insuring cyber risk.

“With the cloud, there’s an aggregation issue there,” says Hallstrom, who is considering ap-

SIZE DOESN’T MATTER Small business clients may feel they’re not in the line of fire when it comes to cyber risk, but statistics show that’s not the case

31% of all cyber attacks occur at companies with fewer than 250 employees

85% of data breaches occur at the small business level

41% of small business owners have no secure data protocols

44% of small businesses do not have a contingency plan should data loss occur

60% of small businesses will shut down after a cyber attack Source: New Agency Partners, 2014

proaches to insuring cloud-based risk at CNA. “If you have multiple insureds using the same cloud provider, there could be a breach in which multiple policies are triggered.”

And while the cloud is generally acknowledged to be the safest place for company information, Hallstrom concedes that “it’s obvious cyber criminals are pretty nimble. They can discover flaws and take advantage of them.”

Beyond the criminal aspect, employee error continues to be a leading cause of data breach – particularly among small businesses. Failure to discern this risk explains why more businesses don’t carry this coverage.

“What potential insureds don’t understand is that the biggest risk isn’t necessarily outside groups,” Barnett says. “A lot of what’s happening is caused by employees making mistakes – downloading files they shouldn’t, improperly disposing of private client information or opening emails that contain software viruses.”

Though less costly to remediate than criminal hacks, at an average $159 per record, data breach due to human error continues to be a leading source of loss for CNA. Anything from lost flash drives to stolen laptops – even misplaced paper documents – generate far more claims, says Hallstrom.

“Portable devices have been much more of an issue for us historically than have breaches of networks,” he says.

DECIDING WHERE TO MAKE A BUSINESS PLAY For insurance industry professionals, the 2013 Target breach was a clarion call. It was, according to Randy Maniloff of industry law firm White & Williams, “the equivalent of 10 free Super Bowl ads” for insurers and agents.

“All industries are growth markets now,” says Michael Palotay, vice president of NAS Insurance.

“We have gone from something like 20 percent of insureds buying cyber a couple of years ago to closer to 40 percent today—and these are insureds with an obvious exposure. We’re still early on in a very young marketplace.”

Yet in the widespread growth, a few industries are leading the pack in terms of purchasing patterns. According to a report from Marsh & McLennan, the financial sectors, retailers and healthcare companies showed the most growth last year and

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“The marketplace is really responding to the sudden increase in breach events” Matt Cullina, Identity Theft 911 will continue to flourish in 2015.

Despite the high increase in product uptake, however, there is some volatility in the market producers should be aware of. The retail industry, for example, faces declining limits in the post-Target era.

According to industry reports, carriers are scaling back their cyber risk capacity from an average $300 million before the breach to about $200 to $250 million currently – a roughly $100 million decrease in less than a year.

At the same time, increased regulation means things are moving full steam ahead in the technology service provider industry. Greater contractual requirements, as well as self-actualization, have led to record highs for New York-based brokerage Cyber Data-Risk Partners.

“While I have a broad and very diverse range of clients, as of late I am getting many more inquiries from technology service providers, especially those in healthcare,” observes brokerage owner Christine Marciano. “Some are being required by contract to purchase the insurance for contractual indemnification, and others realize they need insurance coverage in place to protect themselves when the inevitable occurs.”

MAKING THE CASE TO CLIENTS Given the shifting nature of cyber crime, an influx of new products and changing policy language, independent agents are a vital conduit to connect businesses with the right carrier. However, too many agents are ignoring that role and the potential payoff out of fear of the ever-changing market.

“A lot of brokers still don’t understand the product, and the broker mentality is if they don’t understand the product, they won’t talk about it with their client,” Marciano says. “They should start looking at the product, taking a look at the coverages that are offered and bringing the topic into conversation with their clients.”

In this pursuit, agents are not left wandering blind. Several carriers offer train-

Average per capita cost of a data breach now in decline

$202 $182

$204

$214 $194

$197

$188

$138 2005

2006

2007

2008

2009

2010

2011

2012

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FEATURE / CYBER LIABILITY

“What potential insureds don’t understand is that the biggest risk isn’t necessarily outside groups” Jeremy Barnett, NAS Insurance ing programs to producers, allowing them the advantage of the insurer’s expertise and the opportunity to earn continuing education credits at the same time.

Other tools include online scoring tools or software that helps producers assess risk and current coverage needs through a series of basic questions.

Materials that come with a solid cyber policy also help the producer relate to clients on a risk management level.

Beyond coming to grips with the coverage, Palotay recommends producers illustrate risk with real numbers – something a business owner can relate to.

Based on the event, NAS typically assumes $10 or $15 per record for adequate breach response.

Through cyber liability insurance, that includes protection like forensics, continued credit monitoring and reporting of the breach to the proper authorities.

“If the insured stores 10,000 records and you assume that estimate, we’re talking $100,000 to $115,000 just to fulfill your regulatory requirements,” Palotay says.

And thanks to the soft market, pricing – once a producer’s biggest roadblock in selling cyber insurance – is no longer a concern. In fact, it is one of the virtues of the product.

Malicious attacks are costing businesses the most MALICIOUS OR CRIMINAL ATTACK SYSTEM GLITCH HUMAN ERROR

$277 $174 $159

Source: The Poneman Institute Research Report, 2014

WHO’S BUYING? The short answer is everyone, but companies in these industries are leading the pack in cyber liability insurance purchasing patterns

FINANCIAL INSTITUTIONS

RETAIL/ WHOLESALE

29%

19%

ALL OTHER

EDUCATION

14%

3%

HEALTHCARE

11%

PROFESSIONAL SERVICES MEDIA AND TECHNOLOGY

13%

11%

Source: Marsh Global Analytics, 2013

“For small- to medium-sized enterprises, the current cost structure is not that onerous, quite frankly,” Cullina says.

THE FUTURE OF THE MARKET The cyber insurance market will continue to evolve, with clients like small law firms, rural electrical utility companies and mobile merchants increasing their purchases. Until the market hits at least 80% saturation – which Palotay estimates won’t happen in the next five to 10 years – producers must be at the top of their games to understand the exposure and reach those at risk.

And, according to increasing amounts of research, that’s everyone.

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FEATURE / PROFESSIONAL LIABILITY

What’s trending in

E&O?

Industry experts weigh in on where agents, brokers and carriers are most at risk and highlight some common mistakes made in professional liability Some of the professional suits filed these days can be quite entertaining to an outside bystander, but to America’s most affected industries, professional liability claims are no laughing matter.

Large businesses aren’t the only ones at risk – even small, family-owned mom-and-pops have grown increasingly aware they are not safe from being taken down by legal action.

Americans spent roughly $251 billion on civil litigation in 2012, resulting in an average $80,000 payout to plaintiffs, according to data from the think tank Pacific Research. Therefore, it’s extremely important for modern businesses to protect themselves with errors and omissions (E&O) coverage that’s perfectly in tune with the business’ unique risk profile.

Steven Marks, executive vice president and COO at Aon, explains: “In order to get a low price, sometimes you end up with low coverage. One of the key things agents and brokers need to do is to make sure they know what the clients’ needs really are. If they don’t need a lot of coverage because they don’t do certain things, that’s great, but if they do, then providers need to match it.”

Generally speaking, claim, premium and coverage trends in professional liability insurance are dictated by business cycles and the overall economic climate, as evidenced by the recent mortgage collapse and corresponding recession.

The real estate, legal and banking industries were hit particularly hard – agents, appraisers,

attorneys, lenders and even accountants all saw dramatic increases in claim activity, producing higher premiums and diminished underwriting capacity.

“Claims from this era are still coming in,” says Brian Ahern, CEO of Ahern Insurance Brokerage.

As insurance carriers reacted to the negative economy, the complicated world of E&O insurance grew even more complex. Insurers dropped in and out of markets; underwriting guidelines changed; and MGAs, administrators and agents worked overtime on behalf of their clients to provide the best combination of coverage and pricing available.

“This is an ever-changing market – you see carriers coming and leaving all the time,” says Jenny Olsen, senior business development specialist at Aon. “A lot has happened over the last four years in terms of carrier turnover.”

“Clearly the insurance professional liability market is competitive,” adds Marks, “so you always have to keep a lookout for new coverage enhancements.”

Professional liability was never simple to offer in the first place. With its unique features – like a claims made form, retroactive coverage, loss-only deductibles, claim expenses in or out of the limits, and extended reporting periods – offering this coverage presented a bit of a learning curve for many agents.

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WHERE YOUR CLIENTS ARE VULNERABLE Breach of contract: Businesses and individials often are sued for not fulfilling their end of a contract, no matter how valid the claim.

Breach of duty: Many business sectors have a fiduciary duty to clients, implying a special trust and confidence in the business or employee.

Negligence: Allegations of failure to exercise due care toward others can result in a payout, whether reasonable or not.

Cyber liability: Court cases have allowed plaintiffs to sue over increasingly common cyber breaches under the E&O heading.

On a positive note, agents working with professionals for their personal or business P&C needs are perfectly situated to help their clients and grow their book of business. Here are some important points for providers in the professional liability industry:

FASTEST-GROWING SECTORS FOR E&O The professional liability industry is expanding, and has been for some time.

“Technology services and consultants in general have seen an uptick,” says Lisa Doherty, president and CEO of Business Risk Partners. “I think people are more aware of the availability of professional liability, so it’s finding its way into contracts more. It’s not uncommon for us to see a guy who’s retired from a business for 20 years; they bring him on as a consultant, and part of his contract is that he has to have E&O.” But this doesn’t necessarily mean agents and brokers should jump into the market anywhere – instead, they should target business sectors where they already feel strong.

LAWSUITS ARE COMMON AND COSTLY $251 billion The amount of money Americans spent on civil litigation in 2012

$80,000 The average award given to plaintiffs suing businesses and their owners

33% The chance most Americans have of being sued in their lifetime

10% The chance Americans face of being named in a lawsuit in any given year

16% The shockingly low number of people who trust the legal system to protect them from frivolous lawsuits Sources: Pacific Research, Towers Watson, BJS

“Identify industries you have some type of influence in, and then align yourself with a specialist, because professional liability is very specific, very quirky,” explains John Torvi, vice president of sales and marketing for Landy Insurance Agency.

1

Real Estate In the aftermath of the housing crisis, real estate professionals are facing more scrutiny than ever before. That makes a viable E&O policy from an educated agent extremely important, particularly for those in appraiser roles.

According to Business Risk Partners, 20% of all real estate agents/brokers will be involved in a lawsuit at some point during their career.

“In terms of emerging risk [in real estate liability], it was always out there, but I’m not sure the legal profession viewed it as one of the riskier things they did,” says Aon’s Steve Marks. “Over the last five years, it has been one of the most significant causes of claims for insurance companies and legal professionals.”

John Torvi says he’s also watched this trend emerge.

“Someone will complain that the given value of a property was too low, which caused the owner to sell the house at too low of a value. Or, the appraiser gave too high of a value, and someone ended up paying too much,” he says. “That happened a lot after the mortgage meltdown. Real estate prices were out of sight, with people paying $500,000 for $300,000 homes and then suing pretty much everybody involved.”

2

Mortgage On a similar note, mortgage professionals are finding themselves the subject of more E&O lawsuits as financially strained consumers seek redress.

For example, if a company forgot to sign and date a mortgage loan application on behalf of a client, causing the client to lose out on the chance to purchase a desired home, it could result in a suit for the company.

Depending on the scope of the liability policy, this coverage can pay for litigation expenses and time lost from work, as well as pay settlements and awards to clients when necessary.

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FEATURE / PROFESSIONAL LIABILITY

THE WORST STATES FOR E&O LAWSUITS Based on particular court rulings and attitudes, the following five states are considered the worst for businesses faced with lawsuits

Illinois

West Virginia

California

Mississippi

Louisiana Source: Forbes

While mortgage litigation has decreased since its high (264 lawsuits) during the second quarter of 2012, the business sector is still experiencing more than 200 cases of legal action per quarter – a 440% leap from the early days of 2008, when lawsuits numbered in the low 40s.

3

Accounting Given their high-net-worth clients and access to sensitive data, it’s no surprise accounting firms are prime E&O prospects. The commission rates for accountants are high-yielding; successful E&O litigation can bring in as much as $300 million in awards, according to data from McGraw-Hill.

“Lawyers, when they file a lawsuit, will go for the deep pockets, where they can get a settlement for a plaintiff client,” says Ralph Summerford, president of Forensic Strategic Solutions in Birmingham, Ala. “Accountants are a natural.”

4

Law As American litigiousness heats up, so do professional lawsuits against attorneys. No matter which area an attorney practices in, liability has grown.

“LPL is always important, but after 9/11, the

industry hit a hard market,” says Shawn Royle, executive vice president of Ahern Insurance Brokerage. “Where there were once five or six carriers willing to write LPL, now there are more than 40, and capacity has grown thanks to private equity.”

Events such as a firm’s breakup or bankruptcy often lead to professional liability complications, requiring a savvy insurance agent to plug all potential holes in coverage.

“It’s not simply a straightforward lawyer’s E&O policy anymore – they’re starting to add on a bunch of bells and whistles, including a cyber piece, risk management pieces, PR pieces, crisis management, workplace violence, etc.,” explains Laura Zaroski, vice president of management and employment practices liability at Socius Insurance Services, Inc. “I think there’s a lot more flexibility and creativity in the market then there has been.”

Although not quite to the level of medical liability, lawyers now face the same level of liability as real estate brokers or insurance agents, says Peter Kochenburger, executive director of the Connecticut State Insurance Law Center.

“I understand lawsuits against lawyers have been going up over the years,” he says. “That doesn’t really surprise me.”

Ahern’s Shawn Royle agrees: “We saw an uptick in claims. Lawyers were seen as a potential piggy bank, especially those who worked in real estate. Most claims come from unhappy clients without any real malpractice on the part of the attorney involved.”

5

Cyber It seems like every day brings news of another data breach. Considering that E&O coverage is rapidly changing, it comes as little surprise this is one of the biggest areas of expansion.

“We’re seeing a big uptick in technology services,” says Doherty. “I think that if [businesses] start to understand and be more aware of the data breach exposures that they have as a third-party service provider, it also ties into their own E&O. Perhaps they’re doing the network work for a company, and they leave vulnerability in the network, now their E&O is exposed because their client had a data breach.”

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BUSINESS SECTORS ESPECIALLY AT RISK Data breaches involve an intricate amount of expertise. First, you have notification responsibility, which is more legal and compliance. After that, you need to understand the extent of the beach, what has happened and who is impacted.

Finally, you need the crisis management for the recovery process.

“Right now there are so many carriers that are jumping into the market that the prices are ridiculously low in certain classes,” says Zaroski.

“I think it’s an excellent time for people to purchase it and have it in place. As everything moves forward, they can start tweaking coverages for what they want and don’t want, but to not have it at the pricing right now is crazy. If there is a breach, you can look at your clients and say, ‘Hey, look, we cared’ rather than ‘Oops, we didn’t do anything.’”

Doctors/Surgeons: 42.2% of physicians faced lawsuits from 2007 to 2008.

Attorneys: Law firms with two to five lawyers recorded the highest number of claims: 2.2 lawsuits a year per attorney.

COMMON MISTAKES IN PROFESSIONAL LIABILITY

1

Thinking it’s all about price It’s vital for agents and brokers to understand that building a book of business based on placing large quantities of clients with some of the smaller carriers offering lower rates is not necessarily the best way to go.

“We do see carriers coming in all the time offering very low pricing to build up business,” says Olsen, “but unfortunately, after a couple years, they seem to leave for the same reason.”

Adds Zaroski, “The biggest mistake I see being made is probably law firms that jump from carrier to carrier each year to save a few dollars.

I tell anyone I deal with, don’t be penny wise and pound foolish. Staying with your carrier may be a good idea because then you avoid coverage gaps.”

2

Not revisiting coverage strategically Several industry professionals weighed in on the appropriate time to evaluate E&O coverage.

• On an annual basis: Policies are generally annual rather than multi-year.

• When a company first purchases E&O or changes carriers: Prior acts coverage provides retroactive insurance to the date when the previous policy ended, and is essential for any E&O policy.

Real Estate and Mortgage: These professionals are easily sued for misrepresenting property value, particularly in the wake of the housing crisis.

Accountants: Accounting firms represent an attractive target because they have high net worth are believed to have “deep pockets.”

Report: American Medical Association, The Washington Times, Accounting Today

• After a claim event or when assessing limits: Claims inside the limit use liability limits to pay the insurance company whatever it costs to defend the client. Claims outside the limit don’t touch liability limits. Deciding on claim expenses in these two areas is important when considering E&O policies.

• When companies merge, change their name or shut down: Something surprising to many producers is that a merger between two companies and a resulting name change demands revisiting of any E&O policies in place. Businesses still need to protect all of their prior work, meaning that exposure still exists under the previous company or previous company name.

3

Giving up on potential clients too easily Establishing a client base is not easy to do and always something agents can improve upon.

Moreover, relationship-building takes time, and gaining trust is not something that happens overnight. It is vital for providers to remain persistent and prove to clients that not only will your product benefit their business, but also that they can feel comfortable with you personally.

“I read it can take, on average, up to seven attempts to actually make contact with a prospect, whether that is through emails, telephone calls or face-to-face,” Olsen says.

“The first phone call doesn’t necessarily get you the opportunity,” Marks adds. “On average, you’ll need maybe 10 phone calls per prospect to either get in touch with them, get all the information and get a response. Again, most of the law firms we deal with aren’t huge law firms, so every hour they spend on the phone talking about insurance is a billable hour they can’t bill out.”

4

Not being upfront about coverage Issues can arise if policyholders don’t know what exactly is and isn’t covered by their policy.

“We’re always very upfront about what the policy covers so the agent can be very clear with the end user of what’s being covered and what the exposures are,” says Doherty. “We don’t want to be the cheapest policy – we want to be the policy that responds, because no one wants a fight when the claim comes in.”

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PRODUCER PROFILE / FELSEN INSURANCE

Relying on

RELATIONSHIPS

Felsen Insurance Services makes a profession out of personal connection. By Allison Landa In November 1971, Paul Felsen was seeking a career on the heels of his graduation from the University of Miami and a short-lived stint in his father’s import-export business. He decided to take a position at a mid-sized insurance agency in Orange, New Jersey, owned by the father of one of his friends.

“I majored in insurance in college, as it was the only business area where I didn’t have to take a foreign language, which was an area of weakness for me,” Felsen says. “I had an uncle who owned an insurance agency in New York City, specializing in high-profile entertainers. It seemed so interesting.”

The rest, as they say, is history. Today Felsen is the owner of Felsen Insurance Services, a Denville, New Jersey-based insurer that offers a wide suite of comprehensive products, including both the personal and commercial, and he’s entering his 45th year in the insurance industry with a continued passion for his avocation.

“I think I’m as effective as ever at what I do; I’m good at it!” he says. “I like what I do, and I feel I’m at a stage in my career where I can pick and choose who I want to do business with.”

At the same time, Felsen also enjoys educating his clients, and particularly appreciates those who understand that insurance isn’t simply about price: “It’s about what’s between your agent’s ears and the quality of what he or she brings to the table in the way of service and quality of insurance carrier.”

SPECIALIZATION IN SPORTS, SYNAGOGUES Felsen says his areas of specialization were organic outgrowths over the years, tracking with his own personal interests and areas where he saw a need to create something that it appeared no one else was doing.

His work with professional athletes is one of these specializations. An NFL Players Association Registered Player Financial Adviser, Felsen has for three decades provided homeowner’s, auto, jewelry and umbrella liability insurance for professional athletes and coaches, a niche that is not without its challenges.

“For the most part, you’re working with ‘kids’ in their early twenties who suddenly have a lot of money,” he says. “They’ve been more or less coddled their entire life; all of a sudden, they are men and have adult responsibilities. They own multiple homes, fancy cars, lots of jewelry and are targets for lawsuits as people perceive them to be overflowing with money.”

Athletes often consider themselves bulletproof and don’t understand the need for insurance, even in the most extreme cases. He’s seen players buy million-dollar homes with cash and leave them uninsured for months since there was no bank involved to require evidence of coverage.

Players need solid coverage, particularly in the liability area, according to Felsen. However, covering them can sometimes be difficult, as communication can be stymied by constantly changing contact information.

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These professional athletes, coaches and staff have all come to Felsen Insurance Services over the years for their insurance needs: > Erik Ainge > Will Allen > O.J. Anderson > Jessie Armstead > David Barrett > Mike Barrow > Eric Barton > Jim Bouton > Larry Bowa > Mark Brunell > Marcus Buckley > Vince Carter > Jehuu Caulcrick > Jason Collins > Marquis Daniels > Tony Delk > Ron Dixon > Reuben Droughns > Percy Ellsworth > Sam Garnes > Barrett Green > Pat Hanlon > Marcus Henry > Evander Holyfield > Tommy John > Daryl Jones > Danny Kanell > Jason Kidd > Tim Lewis > Walter McCarty > Shaun O’Hara > Mike Piazza > Kenyon Rasheed > Paul Raymond > Gary Reasons > Robert Royal > Jason Sehorn > Ron Stone > Michael Strahan > Dave Szott > Lawrence Taylor > Antoine Walker > DeWayne Walker > Mike Waufle > Charles Way > Corey Widmer

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PRODUCER PROFILE / FELSEN INSURANCE

“I try to always have backup information in the form of parents or agents,” he says. “I am very careful about who I take on as a client – I want to know them and ascertain what type of individuals they are. We’re not looking for problems.”

His involvement with insuring synagogues dates back to 1981, a time at which there was nothing unique about insurance coverage for temples – until Felsen was able to work with a carrier to help design a program to address their individual needs.

“I truly feel that I’m giving something back by helping synagogues with their insurance, offering them the best program at the best possible price. I want to help them,” he says. “As for the athletics niche, it’s more of the 12-year-old in me. I love all sports – except hockey! – and I find it fun to work with professional athletes.”

A SELECT CLIENTELE Relationships and knowledge of the niches Felsen targets are what he believes separate his business from the competition. Last year, his firm took over a technology account with a premium close to $500,000 from a worldwide broker who barely had any contact with the client. Felsen was appalled at that.

Paul Felsen with former Giants player Jessie Armstead and wife Sandy

PAUL FELSEN’S KEYS TO MAINTAINING RELATIONSHIPS Establish a rapport. “We work to educate our clients about what we do that’s different, as well as our insurance companies as to the quality of our book of business and how we select our clients,” Felsen says. “The bottom line is that we are still in a people business.”

Take a personal approach. “My name is on the door,” Felsen says, “and you get me – any time you need and want me.”

Go deeper with clients. Felsen enjoys getting to know his clients’ families – another aspect he believes sets him apart from his peers in the industry.

The relationships at home matter just as much to him. “Without question, family comes first,” Felsen says. “Obviously, my work/family balance is more even now than it was when I was first beginning my career – and every client has my home and cell phone numbers – but if you don’t have a solid family life and understand that’s why you’re working as hard as you do, you’ll never be successful or really enjoy what you do.”

Given his emphasis on relationships, Felsen doesn’t want just any client – he wants those who understand and appreciate what he does.

“Looking for just the cheapest price? I’m not your guy,” he says. “I want someone who knows and understands how much we know about them and their business or profession and how hard we will work for them, 365 days a year, 24/7.

Felsen is proud of his intelligent and hardworking staff, who care about the clients and the business – and says that without him he would be nothing.

“The strength of our service is our staff,” he says. “Our core unit is all highly experienced and responsive, and has been together for more than 25 years. Our clients know them and feel comfortable with them, and my people really care about our clients like family.”

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BUSINESS STRATEGY / EXIT PLANNING

Exit

planning

Get the best price for your brokerage

higher multiples than their smaller counterparts.

While I’m not in favor of growth for growth’s sake, designing your business to grow to at least this level of turnover will maximize value.

Achieving the scale required might include making acquisitions of complementary businesses/ opportunities, expanding to other states or looking for baby boomer business owners desperate to exit and retire.

Interestingly, the research clearly shows the top two outcomes baby boomers look for in a successful exit are not about dollars; rather, they want assurance that the business will continue after their exit (legacy) and that the new owner will look after the staff.

BUSINESS MODEL

BUSINESS SIZE

Clarity and sense of purpose and belonging are the next important factors.

Are the business owner and all the members of the team on the same page with their understanding of the business model?

Does every aspect of the business actually match the business model?

Is it a boutique or scale business and, even more important, are all aspects of the operation – customer service, online presence, the people employed, the pricing strategy, office location (even its layout and fittings) and marketing materials – aligned to ensure they reflect the business model?

This is further supported by a key finding in a Pitcher Partners 2013 survey, which discovered that the overall price of the business was rated less important than its continuity and ongoing jobs for employees, with 69% of respondents believing continuity of the business was important before they engaged in succession planning, and 89% afterwards.

I met a financial adviser recently who told me that he looked after high-net-wealth individual clients and was extremely good at what he did, and as a result, he charged a premium. When he gave me a business card on very flimsy paper that looked like it had been printed as cheaply as possible, it clearly highlighted a misalignment within his business model.

Is the size of my business right for my industry or market in order to maximize sale value?

Simply put, size does matter! There is plenty of research to support the fact that businesses with a turnover of $5m or more nearly always sell at

The ease of reading and understanding the business revenue is the next factor that has a significant bearing on sale price. Is it an annuity-style

When it comes to maximizing business value and sale price, size does matter, argues Craig West For many SMEs, a succession and exit strategy is the proverbial elephant in the room. And, irrespective of the countless books, seminars and newspaper columns devoted to the subject, business owners continue to ignore the basic principle that their enterprise needs to be prepared well in advance for sale in order to maximize value, price and successful exodus of the principals.

As with all things in life, there is a series or sequence of steps that must be adhered to in order to ensure a business is valuable, attractive and saleable.

The following factors have a heavy influence on the value of a business for sale, and owners need to ask themselves these key questions to determine the sale readiness of their businesses:

REVENUE

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income based on long-term contracts, or does it depend on continually deriving new sales?

Put simply, recurring revenue is worth more.

Businesses with clients on long-term retainers, extended contracts, or some type of residual income trail are far more attractive and valuable than those that need to make sales continually – every day, week and month.

Astute buyers will carefully examine the sales system/process (especially to identify if it is based on a key salesperson’s skill and networks) and the supporting marketing strategy and infrastructure.

SALES AND MARKETING Sales and marketing that run independently are vital for a business and need to be able to generate new business, leads, inquiries and ultimately sales without relying on either the owner or a key person’s skill and sales ability.

SYSTEMS Businesses that are systemized and have a documented operational process will have a distinct advantage over similar operations that are on the market.

Systems save time, effort and money because they are far simpler to run, less stressful and generally far less risky – and, as a consequence, are also more valuable.

The potential that they’re performing well is greater, the level of specialized skill to run them is reduced, and the lower risk is always more valuable.

EMPLOYEES Positively engaged, motivated and incentivized employees to perform and work are also an immense asset for any business.

Incentive plans that reward based on performance can be adapted easily in an employee share ownership plan (ESOP). This simple strategy substantially reduces one of the key risks for buyers – employees exiting the business after the owner has left.

It also provides a strong incentive for performance, and their financial well-being (at least part of it) is closely matched to that of the owner.

Employees who have the same mindset as the business owner result in better performing, more profitable businesses with everyone sharing in the benefits.

RISK MANAGEMENT Far too many SMEs unwisely regard risk management and compliance as something only large businesses need to worry about.

Corporate governance and compliance are often ignored by business owners. They fail to see that it adds considerable value, as reduced risk can provide a source of the right type of buyers for the business.

In our experience, we often see deals fall over at the due diligence stage when the buyer really investigates the substance behind the business.

Those with poorly prepared accounts, badly documented processes, and little or no governance structures often fail to meet this hurdle.

OWNER DEPENDENCE The reliance of the business on the owner that often can be the deal breaker. Can the principal take time away from the business for a holiday?

A potential buyer needs to see that the business is able to operate efficiently and effectively without the owner’s involvement. It reaffirms to a prospective buyer that many of the above operational attributes are in place and functioning properly.

START EARLY Ideally, business succession should start the first day a business opens its doors and then evolve continuously until it is time for the owner to leave. However, in the real world, business owners get caught up in the day-to-day demands of running a business and pay little attention to succession and exit until they are on the eve of retirement.

Others postpone exit planning because the task seems too difficult, or it is avoided because of the emotional issues involved. For many owners, it can be quite stressful to relinquish control of what has been one of their greatest achievements in life.

Family-owned businesses have special needs, some of which can impact family harmony and relationships.

However, despite the barriers or emotional roadblocks, business succession is important to all businesses irrespective of size, market share or ownership, and is not a process that can wait to the last minute to be implemented.

The sooner owners acknowledge the need to implement an exit and succession strategy, the better their prospects are to maximize value, sale price and a comfortable exit following a lifetime of work and endeavor.

Craig West is a strategic accountant who has more than 20 years’ experience advising business owners. He has written four books on employee incentives, succession planning, asset protection and exit strategies. Visit www.successionplus. com.au.

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BUSINESS STRATEGY / MARKETING

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7

DEADLY SINS OF BUSINESS MARKETING

(that every business owner commits, even you!)

Jamie Thomas lists the cardinal sins that all business owners commit when it comes to marketing. Take heed or repent at leisure!

The ability to market your business effectively is key to delivering a stream of qualified leads to your door and ultimately determines the level of your business success.* The latest surveys suggest that the average consumer is bombarded with between 3,500 and 5,000 marketing messages per day, every day.** Therefore the challenge to be heard above all others increases daily. In such a crowded space, costly marketing mistakes will inevitably occur. So for all you sinners out there, here are the Seven Deadly Sins that every business owner commits.

How many are you guilty of?

SIN #1: LUST PLEASING THE MASSES (OR GETTING INTO BED WITH EVERYONE) “If you try to be everything to everyone, then you’re nothing to no one!” Too many business owners still target the mass market with too general a message.

The misguided belief is that a wider reach with a broader message should produce better results.

Cast your ‘net’ wide and reap the rewards? The trouble is, the rules have changed.

Today the smarter strategy requires targeting a specific market niche that shares similar needs and wants. By selecting targeted channels where your best customers are more likely to listen, you’re able to create messages that speak directly to and solve your customers’ problems. The big-picture goal?

Dominate the market gradually and build up your niches. So resist the temptation to jump into bed with any old customer; be selective and start playing hard to get.

SIN #2: GLUTTONY OVERDOING IT WITH YOUR CONTENT Content is the new king. Business owners who understand how content marketing can help build NOVEMBER/DECEMBER 2014 | 51

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BUSINESS STRATEGY / MARKETING

their business’ profits are often guilty of overindulging in the type of content generated as well as the quantity of platforms they use and the frequency of their postings online. Resist the temptation to create content for content’s sake while blitzing your client database. It’s both a sin and a crime against your brand. Always abide by the first marketing commandment: Make all content relevant, engaging and useful, and you won’t stray from the path.

SIN #3: GREED OR, PUT ANOTHER WAY, BEING SELFISH Are you always focusing on yourself and never on your customer? Not knowing your audience is a business owner’s classic cardinal sin. Absolve yourself. Put yourself in your customer’s shoes and brainstorm campaigns that target their specific interests and problems. Don’t be greedy and just promote your product or services. Share your unique IP in a way that resonates with your audience. Entertain and educate first, then learn about the best ways to reach your audience.

SIN #4: ENVY IS SOMEONE DOING BETTER THAN YOU ARE? OF COURSE THEY ARE There’s always someone doing better than you are. The likely reason they’re more successful is that they’re working smarter than you are; that’s to say you’re not leveraging your time and bringing in qualified leads. A golden rule of marketing? Get your message out to the market. With only 24 hours in any day, duplicating your messages and attracting leads using new technology and practices is smart marketing. Don’t get left behind in Biblical times.

Get up to date!

Jamie Thomas believes everyone is a marketer. He is a brand and marketing specialist at Synkd, a niche marketing, brand, communications and design agency. For more information, visit www.synkd.com.au or contact info@ synkd.com.au.

SIN #5: SLOTH LAZY, LAZY, LAZY YOU! Do you always play it safe? Do you adopt a ‘wait and see’ approach? Do you simply follow what every other business does? This only serves to help you blend into the background. Get up and stand out!

Be creative; make some noise and make a statement. How? Publish a unique video, look for a niche, or create a unique online community. Get social or be forgotten. Calculated risks all come at a

price, but they’re usually the ideas that generate the most results and ROI. Get busy; get creative; get moving!

SIN #6: WRATH ARE YOU ANGRY OVER A LACK OF LEADS? ARE YOUR CUSTOMERS ANGRY AT A LACK OF CLEAR DIRECTION? Aside from needing anger manage­ment classes, maybe you’re simply not asking for the sale. Remember, always have a clear call to action for all of your marketing campaigns – tell customers what you want them to do next! Above all, make your call to action stand out.

SIN #7: PRIDE OR AS I CALL IT, ‘ME, ME, ME’ CONTENT Pride: the most common ‘sin,’ or symptom of self-obsession. The guilty are easily identified by marketing copy that harps on “company XYZ has been around for 30 years,” or “we’re the market leader” in blah, blah, blah. You’ve lost me already as a prospective customer. It has no place in your marketing collateral anymore. The problem is we’re all masters at marketing to ourselves, and pride has a lot to answer for! Use the words ‘you’ and ‘your’ much more than you say ‘I,’ ‘me’ and ‘our company.’

Stress the benefits of what your business offers – focus on how you solve problems rather than telling customers how good you are. Here’s a wake-up call: People aren’t that interested in you, but they are interested in what your business can do for them. Always stress the benefits; don’t sell on features. Customers primarily buy solutions, but mostly they buy benefits, and invariably they buy how you improve their lives, how you give them more time and how you solve their problems.

If your marketing makes no reference to any of these pain points, you’re committing the biggest sin of all. Worst of all, they’re deadly for your business.

Learn the lessons from these seven deadly sins; change your ways, see the results, and see your business thrive. * Whatever success means to you – in this case we’re simply implying financial success ** A recent study by Yankelvich Consumer Research, NY

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FEATURE / THE

PE THE SHA N E G OF A ETS TO COM

CHANGIN G WORLD

t to brokers is abou ance agents and tigates The world of insur . Insurance Business inves d worl form radically trans to do to thrive in a changing Casualty Property and what you need

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PEOPLE / FAVORITE THINGS

Favorite things...

Joseph L. Boren, president of U.S. Field Operations with Ironshore Inc., and chairman of Ironshore Environmental Book: My favorite recent reads are “Outliers: The Story of Success” by Malcolm Gladwell and “Never Give In! The Best of Winston Churchill’s Speeches” by Winston Churchill III (Winston Churchill’s grandson)

Favorite thing about working in insurance: Collectively, the best group of people that I’ve ever worked with; plus, it offers a great opportunity to learn about so many other businesses

Music: Anything from late ‘60s rock. I haven’t understood a lyric since the 1980s

Vacation spot: Tuscany

Sport: At my age, it’s golf. When I was younger, I loved to play baseball

Food: Anything Italian

Movie: “The Godfather”

Place to be: My favorite place to spend “downtime” is in the Catskills

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LAST WORD

Putting a lid on workers’ comp litigation costs Legal defense costs are rising exponentially, and producers have an important role to play in helping clients contain costs, says Rebecca Shafer Workers’ comp legal defense expenses are increasing at an alarming rate. For instance, a study by WCIRB California revealed that allocated costs (mostly attorney payments) increased 7.3% in 2013.

Overzealous defense counsel and untrained (or spineless) adjusters can prolong litigation, increase costs and wreak havoc on the lives of injured workers. Here’s how risk managers and insurance producers can more closely manage the process.

Review outside counsel financial arrangements.

Consider capped fees, flat fees or “invoice paid upon file completion.” The latter discourages runaway fees for unnecessary hearings by having the entire fee paid at the end. With just one bill instead of monthly bills, excessive fees are more noticeable, and attorneys who are milking the claim are more visible. This is a good approach if you use the same attorney frequently, but it shouldn’t be used in a locale where the defense counsel only has one case.

You could end up with an excessive bill with little recourse other than fighting over the bill.

Conduct an independent audit to assess whether an attorney is really needed, or whether they’re just doing to work the adjuster was too busy to do. A favorite ploy of overworked or lazy adjusters is to let the defense counsel handle everything.

Rebecca Shafer is an expert in workers’ compensation cost containment and author of Your Ultimate Guide to Mastering Workers’ Comp Costs. She has worked with clients including CVS, The New York Times and Knight-Ridder.

Notice whether the same attorneys are repeatedly requesting hearings on the same issue or on issues they are likely to lose. This is one example of “churning” — any activity done for the sole purpose of increasing the legal bill. It can include unnecessary research, motions and discovery; having another attorney in the firm review the case; and having a paralegal or associate undertake an unnecessary action. Before the hearing, the adjuster

should discuss the need for the hearing, and the probable outcome, with the attorney. If you know you’re going to lose, have counsel resolve the issue with the opposing counsel instead. It will save both legal fees and unnecessary claim costs (indemnity and medical costs continue while you wait for the hearing).

Review whether “opportunities for agreement” between counsel are ignored. For example, in Connecticut, a claimant’s doctor can be changed with agreement of counsel, but defense lawyers never agree because it’s more profitable to have a junior attorney attend these hearings. Knowledgeable defense counsel will know which doctors are conservative, liberal or unbiased in their treatment and ratings.

Make sure your lawyer is working efficiently. Does defense counsel make unfounded accusations of misbehavior or wrongdoing against claimants on every claim to obfuscate issues and prolong the litigation? If your lawyer is not totally objective in assessing both the claim and the claimant, get someone else. Red flag research charges, too – very little legal research is necessary except in unusual claims.

Have an adjuster with sufficient authority attend all hearings with defense counsel. Sometimes there are opportunities to settle litigation during hearings. Often, seasoned adjusters are capable of attending hearings without a lawyer, but this is not allowed in some jurisdictions.

To determine the effectiveness of your adjusters in controlling legal expenses, have an independent claims auditor perform a litigation management review, and have an experienced legal bill auditor review legal invoices.

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Expect big things in workers’ compensation. Expect to save a third of your clients 30% or more. Most classes approved, nationwide.

For information call (877) 234-4450 or visit auw.com/us. Š2014 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best.

Insurance plans protected U.S. Patent No. 7,908,157.

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