2025 January PIA New England

January 2025 • New England

PAGE 18

What’s written in the stars for 2025?

Exploring economic trends and policy impacts shaping the industry’s next chapter

IN T HIS IS S UE 9

Navigate pregnancy discrimination

13

It’s a great time to sell

25

Outlook for the p/c marketplace

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DEPARTMENTS

January 2025 • New England

COVER STORY

18

What’s written in the stars for 2025?

Exploring economic trends and policy impacts shaping the industry’s next chapter

4

In brief

9

Legal

13

Trends

29

E&O

31

Ask PIA

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NH officers and directors directory

34

CT officers and directors directory & advertising index

FEATURE

25 P/C marketplace review and outlook for 2025 Lines of business, E&S and the post COVID-19 business environment

Statements of fact and opinion in PIA Magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents. Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services.

President and CEO Jeff Parmenter, CPCU, ARM; Executive Director Kelly K. Norris, CAE; Communications Director Katherine Morra; Editor-In-Chief Jaye Czupryna; Magazine Advertising Sales Representative Adam Wolfe; Magazine Layout Designer Nate Voellm; Communications Department contributors: David Cayole, Jeana Coleman, Patricia Corlett, Darel Cramer, Matthew McDonough and Damon Whimple.

Postmaster: Send address changes to: Professional Insurance Agents Magazine, 25 Chamberlain St., Glenmont, NY 12077-4835.

“Professional Insurance Agents” (USPS 913-400) is published monthly by PIA Management Services Inc., except for a combined July/August issue. Professional Insurance Agents, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 1207 7- 4835; ( 5 1 8 ) 43 4 -31 1 1 or toll-free ( 8 0 0) 4 24 - 4 24 4 ; email pia@pia.org; www.pia.org.

Periodical postage paid at Glenmont, N.Y., and additional mailing offices. ©2025 Professional Insurance Agents. All rights reserved. No material within this publication may be reproduced—in whole or in part—without the express written consent of the publisher.

COVER DESIGN David Cayole Vol. 69, No. 1 January 2025

IN BRIEF Trending in the insurance industry Traditionally, insurance buyers stay with the same insurance carrier for years. However, double-digit premium increases are making people more willing to shop around for new insurance. Let’s look at why premiums are on the rise in some insurance markets, and ways agents can address their clients’ concerns.

The personal auto insurance market Drivers with electric vehicles are less satisfied with their auto insurance compared to drivers of gasoline-powered vehicles. This is probably because EVs are more expensive to insure.

Tip for agents: If you have insureds who are looking for ways to lower their auto insurance, without sacrificing their coverage, talk with them about: reducing the amount of driving they do taking a safety course for a possible premium discount increasing their collision coverage deductibles

4

The commercial auto insurance market According to a report from the Insurance Information Institute, the commercial auto insurance market has struggled to achieve underwriting profitability for years. Factors that contribute to this trend include: Accidents and the cost of repairs to the commercial vehicle, and the other vehicle involved in a collision Economic and social inflation While claim frequency remains below pre-pandemic levels, their severity rose 78% from 2014-23 Tip for agents: Talk to your commercial auto insureds—who are concerned about higher premiums—about the possibility of higher deductibles, self-insurance and other risk-retention measures. Asset-tracking technology—which monitors location, status and usage—can help reduce insurance costs by improving security.

Quick stats:

Quick stats:

The average cost of auto insurance jumped more than 20% in the last year.

Commercial auto net underwriting profit has decreased steadily since 2009.

PROFESSION A L I NS U RANCE RANC E AG E NTS M AG AZI AZIN NE

The homeowners insurance market

The commercial insurance market

A growing trend in the homeowners insurance market is that many insurance companies have stopped writing policies in high-rise areas (e.g., areas affected by climate change and severe weather) or where state insurance departments have declined to approve rate increases.

In the workers’ compensation market, rising medical costs have started to concern underwriters.

Tips for agents: Keep updated with the actions of the carriers with which you do business. That way, if one of your carriers decides to stop writing insurance in a particular area, you can respond more quickly, and help your clients find a different insurance policy with another company.

Most single-family houses in the U.S. (75%), have asphalt shingles, which accounts for a sizable amount of windstorm losses in North America.

Damage potential is caused by age, siding of materials and water intrusion.

Tip for agents: Purchasing a new roof is one of the biggest financial decisions homeowners can make. You can help your clients plan for this purchase by asking questions about their roofs so they can anticipate when a new roof will be needed, as well as how much money will be needed for the replacement. You can let them know that they may qualify for state grants, which could help them defer the cost.

Some industries (e.g., real estate, habitational and hospitality, public entity and education) have started to see higher general liability rates.

In the umbrella and excess liability markets, insurance companies tend to limit capacity on individual risks to $25 million (maximum)—the average is $15 million. And, while traditionally viewed as low risk, recent premises-exposure lawsuits—which involve someone who has health issues related to exposure to hazardous substances—have led to large verdicts, which puts pressure on pricing.

Tip for agents: Some insurance companies are limiting or excluding coverage in some areas (e.g., biometric, sexual molestation liability, endocrine disruptors and conflicts, such as Israel/ Palestine and Russia/Ukraine), be sure to review your insureds’ policies carefully and check for the exclusions.

Quick stats: Globally, commercial insurance rates declined 1% in the third quarter of 2024.

Quick stats: Across the nation: homeowners insurance costs increased 10-12% last year.

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NEWS TO USE

Market withdrawals and insolvency impact Amid growing concerns about the financial health and stability of the insurance marketplace, the personal-lines sector has experienced significant disruption, driven by carrier withdrawals and a rise in insolvencies.

These developments are further constricting an already hardened market, reducing capacity, raising premiums and complicating efforts to secure coverage for clients.

Here is an overview of recent carrier exits affecting markets nationally, and in the PIA Northeast footprint.

Carrier departures Providence Mutual. Providence Mutual announced its intention to exit the personal- and commercial-lines auto insurance business in the four states where it offers the coverage, Connecticut, New Hampshire, Rhode Island and Maine. Providence Mutual will transfer some of its business to Plymouth Rock Assurance, and Plymouth Rock will spearhead auto insurance renewal offers to eligible policyholders in Connecticut and New Hampshire. Auto insurance policies with renewal dates at the conclusion of March 2025 or early April 2025, would be the first to go through the process.

Main Street America Insurance. Main Street America has exited the personal-lines market for admitted carriers nationwide. The company plans to focus on commercial lines, where it sees more growth potential. Agents working with this carrier will need to start transitioning clients to other insurers. The shift in strategy adds to the pressures on available capacity in the personal-lines market.

AmGUARD Insurance. Effective July 8, 2024, AmGUARD Insurance Co., stopped accepting new submissions for homeowners and personal umbrella policies nationwide and it will begin nonrenewing existing policies in accordance with state laws, as it shifts its focus to commercial lines. AmGUARD has pledged to provide further details on state-specific timelines to ensure full compliance with state regulations throughout the withdrawal process.

Adirondack Insurance Exchange and Mountain Valley Indemnity Co. Adirondack Insurance Exchange and Mountain Valley Insurance exit in the New York state insurance market started in October 2024.

AIE’s departure is driven by ongoing financial struggles, including rising loss costs and unmet rate increases, which have made it difficult for the company to remain competitive. AIE began nonrenewing policies in October 2024: any

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PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

remaining policies were to be canceled by the end of 2024.

Due to AIE’s deteriorating financial health, which no longer meets the requirements of many mortgage lenders, agents are encouraged to transition policyholders to alternative carriers as soon as possible.

Similarly, Mountain Valley Insurance—while maintaining its financial stability—also is exiting the market. The expiration of MVIC’s reinsurance agreement with AIE on July 1, 2024, raises concerns about potential future impacts from AIE’s instability. MVIC also started nonrenewing policies in October 2024, and all policies were set to be terminated by the end of the year. Agents are advised to transfer their clients to other carriers to avoid potential risks associated with AIE’s financial constraints.

Carriers facing insolvency American Transit Insurance Co. The New York State Department of Financial Services has ordered American Transit Insurance Co., New York City’s largest insurer of taxis, Uber and Lyft vehicles, and other for-hire vehicles, to take immediate steps to resolve its insolvency.

In a letter to the company, the DFS instructed ATIC to explore all possible options for securing additional capital, including a potential sale, and to submit a detailed remediation plan within 90 days. ATIC’s financial reports have long indicated a steady decline in the company’s financial health.

PIANY continues to monitor ATIC’s efforts to address its insolvency—whether through securing additional capital or exploring a potential sale.

Agents will be kept informed of any significant developments, ensuring they have the latest information to guide their clients through this challenging period. As ATIC navigates this financial instability, PIANY remains committed to supporting its members with timely updates and resources to mitigate the impact on their business.

Keep up with the latest PIA Northeast is monitoring these developments, and the association remains available to assist its members during this period of transition.

To keep up with the most recent carrier announcements, including recommendations from PIA Northeast, visit PIA Northeast News & Media (blog.pia.org).

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LEGAL

DANIELLE CASWELL, ESQ. Associate counsel, PIA Northeast

Bump in the road: Navigate pregnancy discrimination While a pregnancy announcement at work can be welcomed and exciting, sometimes it can stress the relationship between employer and employee. Surprisingly, pregnancy discrimination often is one of those awkward discussion topics that tends to be avoided, or it gets tucked neatly away within the company handbook to be dealt with by Human Resources.

Pregnancy discrimination is illegal, and the last thing that you want to do as a business owner is find yourself amid a pregnancy discrimination claim. It’s a serious issue that can leave employers more anxious than the expectant parents were during their first ultrasound. But fear not! Equipping yourself with the right knowledge of the law can better prepare you to run your business and not infringe on anyone’s right to nondiscriminatory treatment in the workplace.

Federal law The U.S. Equal Employment Opportunity Commission enforces three federal laws that protect job applicants and employees who are pregnant. These three laws are Title VII of the Civil Rights Act of 1964 (as amended by the Pregnancy Discrimination Act), the Pregnant Workers Fairness Act and the Americans with Disabilities Act. Title VII (as amended by the Pregnancy Discrimination Act of 1978). This law prohibits discrimination on the basis of pregnancy, childbirth or related medical conditions.1 Under this law, pregnancy discrimination is described as treating an individual unfavorably in any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoffs, training, fringe benefits (e.g., leave and health insurance), and any other terms or conditions of employment.2 This discrimination can be based on a current, past or potential pregnancy, a medical condition related to pregnancy or childbirth—including breastfeeding/lactation—having or choosing not to have an abortion, and birth control.3 For example, refusing to hire a job applicant solely because she is pregnant is in violation of this law. Another example is

terminating a pregnant worker’s employment upon learning of her pregnancy or directly after she takes medical leave.

Title VII requires that every employer, employment agency and labor organization post and maintain a notice in the customary location(s) in the workplace detailing these rights, as well as directions on how to file a complaint under the law.

Pregnant Workers Fairness Act. The PWFA is a federal regulation that requires a covered employer to provide “reasonable accommodation” to a qualified employee’s known limitations related to, affected by, or arising out of pregnancy, childbirth or related medical conditions, unless the accommodation would cause such employer an “undue hardship.”4 This regulation applies to accommodations only. An example of a potential PWFA violation (and quite possibly a violation of the ADA, if the condition is serious enough) is if an employer rejects a pregnant worker’s request for a later start time due to her experiencing severe morning sickness when it would not cause the employer undue hardship.

Another example may be if an employer fails to reasonably accommodate a pregnant employee’s request for additional bathroom breaks.

The PWFA requires that employers place posters to notify employees of their rights under this law in conspicuous locations in the workplace where notices are customarily located.5 Americans with Disabilities Act. The ADA is a federal law that prohibits discrimination against an applicant or employee based on a disability, including a disability related to a pregnancy, such as diabetes that develops during pregnancy.6 Pregnancy is not itself categorized as a disability under the ADA, however, some pregnant workers may have one or more impairments that develop and are related to their pregnancy that will then qualify as a disability under the ADA.7 This may lead to an employer being required to provide a reasonable accommodation for the pregnancy-​ related disability.8

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L EG A L Under the ADA, employers are required to keep all medical records and information, including that which is related to pregnancy, confidential and in separate medical files.9 To be compliant with the ADA, employers must post a notice in an accessible format to applicants, employees, and members of labor organizations, describing the law’s provisions.10 Nursing mothers. Laws that protect the rights of nursing mothers in the workplace are just as important, and they can be associated with pregnancy discrimination. Under the Fair Labor Standards Act, employers are required to provide reasonable break time for an employee to express breast milk for a nursing child for one year after the child’s birth each time such employee has need to express the milk.11 Nursing employees also are entitled to a place to pump at work—other than a bathroom—that is shielded from view and free from intrusion from co-workers and the public.12 These rights were extended on Dec. 29, 2022, when President Joe Biden signed the Consolidated Appropriations Act of 2023 into law, which includes the Providing Urgent Maternal Protections for Nursing Mothers Act.13

State law In addition to the federal laws that protect pregnant workers, each state in the PIA Northeast footprint has its own state law(s) that mirror or exceed federal protections. Some states also have laws that create paid family and medical leave programs to offer job protection in connection with pregnancy.

To avoid a pregnancy discrimination claim, it is important to review the laws of each state in which you employ workers to make sure you are abiding by them.

10

... it is essential to implement strong policies and training to minimize the risk of any pregnancy discrimination claims occurring in the first place.

How employers can protect themselves from claims If this issue makes you nervous, as a precaution you may want to consider employment practices liability insurance to protect your agency against claims of pregnancy discrimination, among other employment-related issues. Typically, EPLI covers claims made by employees (or former employees) regarding wrongful termination, discrimination, sexual harassment and other workplace-related issues.

While EPLI can provide financial protection for legal fees, settlements and judgments, it’s important to note that having this insurance doesn’t prevent discrimination claims from being made. Make sure you understand the specifics of coverage, and how it can best serve your agency.

While having this insurance is great financial protection for your agency, it is essential to implement strong policies and training to minimize the risk of any pregnancy discrimination claims occurring in the first place.

And, if you ever find yourself wondering if what you might be doing as an employer could constitute as pregnancy discrimination, it is always wise to consult your agency attorney to discuss the matter and work toward solutions,

PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

so you and your agency remain compliant with the law and your employees feel supported.

Here’s to making workplaces better for everyone, one baby step at a time!

Caswell is PIA Northeast’s associate counsel.

U.S. Department of Labor (tinyurl.com/53asam36) 1

2

Ibid.

U.S. Equal Employment Opportunity Commission (tinyurl.com/46w85fmr) 3

4

U.S. EEOC (tinyurl.com/mr3pxby4)

5

U.S. EEOC (tinyurl.com/y2tz29z5)

6

U.S. EEOC (tinyurl.com/46w85fmr)

7

Ibid.

8

Ibid.

9

Ibid.

10

U.S. EEOC (tinyurl.com/4ypnx6va)

U.S. Department of Labor (tinyurl.com/mbhrbjxb) 11

12

Ibid.

13

Ibid.

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TRENDS

STEVEN GERMUNDSON Partner, OPTIS Partners

It’s still a great time to sell your agency Recently, a client asked me, “Did I wait too long to sell?”

Since the number of deals has generally been in decline since mid-2022, some agency owners may wonder if they missed the boat. They haven’t.

In the second quarter of 2022, there were 1,206 deals announced for the prior 12-month period. While activity has since slowed to the current pace of about 760-800 deals per year, we have reasons to believe that the deal environment is healthy.

Why the market will remain robust Demand is high, with many buyers. The current pace is higher than the 600-650 deals per year prior to the bubble, which began December 2020. Since the start of 2022, we have identified 203 unique buyers—82 of which have done more than one acquisition, and 46 of which have done more than five deals.

In this same period, 48 distinct private equity-backed firms have made at least one deal, and 29 have done more than five deals. There also has been a rise in the number of acquisitive privately owned firms. In this same period, there have been 120 privately owned agencies that have acquired other agencies. Seven publicly traded companies have made acquisitions since the beginning of 2022.

It’s true that a lot of good firms have been sold. Nevertheless, a healthy supply of quality firms remains—some that arose as new firms in the last decade, and others that have managed to perpetuate ownership to the next generation successfully. They may not be as large, or have the same name recognition, but many good firms are out there.

What about the large firms? Since the start of 2022, there have been 22 brokers in excess of $25 million of revenue that have sold—including $1 billion-plus firms NFP to AON, and McGriff Insurance Services to Marsh McLennan Agency. Larger firms are going to have to complete larger deals to move the growth needle. Looking at Business Insurance top 100 firms over the last few years gives insight into the quantity of large firms. In 2020, the 100th largest firm was just over $23 million in revenue, and in the most recent publication the 100th largest firm was just over $31 million. Many of these top 100—regardless of ownership—are acquisition targets, and we would not be surprised to see at least five $25 million-plus revenue deals announced each year.

Private equity continues to dominate, bringing more capital into the space. Since 2020, the private equity-backed firms have consistently done seven-out-of-10 deals. Yet among them, there are some interesting developments, such as the consolidation that has taken place since 2020. Each

The supply of sellers still is large. Many people would say supply is shrinking, and we have tracked over 9,000 firms that have sold since 2008. Yet, statistics indicate that there around 36,000 independent agencies in business currently.

Those who have managed true organic growth and These seemingly opposing statistics point to an industry that has an ability to regenerate itself to a certain degree.

During this period, many firms were started by producers maintain relative youth who sold to large brokers, and they wanted to get back to the entrepreneurial environment that they once enjoyed. in the organization will So, while we expect continued consolidation and the 36,000 total agencies to shrink some, we think that there will be command top-dollar. noticeable offset to the shrinking from startups. The net result is ample supply for the foreseeable future.

PIA .ORG

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TRE ND S year since then there have been 30-40 private equity-backed buyers, but in total during this time there have been a total of 63 distinct buyers. Some have been purchased and quite a few never materialized into anything meaningful.

Looking back a little farther in time, there were an additional 46 private equity firms that have done at least one deal since 2015, but nothing in the last

three years. Again, many firms have sold and some continue to languish on the vine.

There are 20 private equity-backed firms that are consistently active acquirers—typically completing more than five deals per year. So, while consolidation has taken place, there is more capital looking to enter the

“FOALING” AROUND WITH THE WRONG COVERAGE? NOT FURLONG!

industry: among those 20, six firms did their first deal in 2024, and another four firms entered the market in 2023. Investors are interested in the insurance distribution space and late entrants continue to emerge.

Regarding the private equity side of our industry, we have heard from several firms that have plans to recapitalize by the end of 2025, and at least two others with plans to go public, like the Texas-​ based Woodlands Financial Group that held a successful IPO in mid-2024.

Valuations remain high. Based on anecdotal evidence, what we see in our own database, and what has been reported in the press, valuations remain persistently high. While they may have declined somewhat for the less-attractive firms, the better firms are getting top-dollar. We think this is largely a demand-driven result since valuations remained lofty even when interest rates began to rise, which is counterintuitive.

Is it too late to sell?

Absolutely not. Generally, we do not think values will rise above current levels, but we also do not see them falling off a cliff.

TM

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PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

There is a healthy demand among buyers, and the limiting factor is likely to be the supply of sellers—especially top-quality sellers. Those who have managed true organic growth and maintain relative youth in the organization will command top-dollar.

A long-time partner of the consulting firm OPTIS Partners (optisins.com), a financial consulting firm specializing in the insurance industry, Germundson is a former independent agency owner. He co-founded NSIA Inc., a Minneapolis-based insurance agency. Later, he joined the high-growth startup insurance broker, Prime Risk Partners.

Reach him at germundson@optisins.com.

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What’s written in the stars for 2025?

Exploring economic trends and policy impacts shaping the industry’s next chapter

here was high optimism for the U.S. economy heading into 2024.

After a challenging few years, post-COVID, which saw rampant inflation and aggressive monetary tightening, 2024 was to be a pivotal year. It was a year that would determine whether the U.S. would fall into recession or have a soft landing and get back on track.

The year started slow. Inflation lingered, unemployment remained low, and the Federal Reserve balked on interest rate cuts. And, the specter of a fierce presidential election hovered over everything. Eventually, the promise of easing monetary policy and high hopes of multiple interest rate cuts all came to fruition, late in 2024.

Despite the economic rollercoaster, 2024 proved to be a favorable macroeconomic climate for the insurance brokerage sector, helping drive consistent revenue growth and profitability that should support strong tailwinds in 2025.

Milestone moments in 2024 Midway through the year, inflationary pressures started to trend down. Both the Personal Consumption Expenditure index and core PCE index—which removes food and energy price impacts—are within reach of the Fed’s target of 2% with the current full year 2024 estimates at 2.3% and 2.6%, respectively. Inflation, while slowing, still will contribute to increased loss-cost trends. Fed officials are forecasting the PCE at approximately 2.1% in 2025. However, there are concerns around resilient high housing prices and wages contributing to inflationary pressures, and some experts say the incoming administration’s proposals on immigration and tariff policies also could add to inflation.

Next, after deliberating for nine months, the Federal Reserve’s Open Market Committee finally reduced the Fed Funds rate from 5.5% (at the upper bound) to 4.75% after a 50 basis-point cut in September, and 25 basis-point cut in November. Although not official at the time of this article, the expectation is the FOMC will further reduce the federal funds rate to 4.5% in December, and target a series of moves to reduce the benchmark rate by an additional 100 basis points through 2025.

Finally, perhaps the biggest moment in 2024—the Republican Party took back control of both the presidency and Senate, while maintaining its control of the House. The pro-business polices that the Republican ticket campaigned on included lowering taxes, reducing regulations, and increasing U.S. first policies (e.g., tariffs and onshoring manufacturing).

The expected net-result of these important moments from 2024 is continued GDP growth in 2025. The following chart shows the equity market’s response to the presidential election and monetary easing during the first full week of November, where share prices for the publicly traded brokers (collectively called the “Broker composite” by MarshBerry) increased by nearly 5% over the five-day period.

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U.S. Publicly Traded Brokers (percent change within the week) 4.8%

3.6% Broker Composite

11/4/2024

11/5/2024

11/6/2024

11/7/2024

11/8/2024

Source: Yahoo Finance. Data as of Nov. 8, 2024. Broker Composite consists of six public brokers: Marsh & McLennan Cos. Inc., Aon PLC, Arthur J. Gallagher & Co., Brown & Brown, Willis Towers Watson and Baldwin Insurance Group.

Trends that may impact insurance The Republican party’s promise of less taxes, less regulation, and business-friendly policies. Even before the Republican Party trifecta win, the U.S. economy was expected to experience continued growth in 2025, with projected GDP growth of 2.2%—compared to the 2.8% seen in 2024, according to the International Monetary Fund. In October, the IMF increased its 2025 projection for U.S. GDP from 1.9% to 2.2%, citing strong productivity growth and progress on inflation in the U.S. With Republican control of the executive and legislative branches of government, let’s consider the potential impacts of less regulation. When measuring economic activity via new business formations, the final two years of the first Trump Administration saw new business starts increase by approximately 16%. This compares to the final two years of the Biden Administration, where new business starts decreased by approximately 2.3%.1 The impacts are forecasted to be even greater than new business starts, with housing starts, new home sales, and building permits all expected to increase over 2023 and 2024 with less regulatory hurdles to consider.

Additionally, the incoming administration has declared its intention to extend or make permanent certain sections of the 2017 Tax Cuts and Jobs Act that are set to expire at the end of 2025. The two most relevant tax cuts to independent agents and brokers are the Qualified Business Income deduction and the Estate and Gift Tax exclusion amount.2 In both cases, independent business owners have benefited, either directly or indirectly since this legislation was enacted.

However, the threat of inflation may continue to persist.

While inflation is expected to stabilize, there are potential risks around the new administration’s policies regarding tariffs and immigration that could reignite inflation and slow growth. The possible new tariffs on imported goods and other policy proposals to deport immigrant workers could drive consumer prices higher. Furthermore, the American Immigration Council, an immigration policy group, projects that the proposed deportation plans could decrease GDP by $1.1 trillion to $1.7 trillion.

The anticipated impacts should translate into moderate increases in Direct Written Premium across most lines—albeit at a slower pace since the economy emerged from the COVID-19 pandemic. In a recently published study, Swiss Re forecasts property/casualty DWP to increase by 4% in 2025, below its 9.5% increase forecast for 2024.3 This follows DWP increases of 9.4% in 2021, 9.8% in 2022, and 10.5% in 2023.4 While the market is shifting, insurance producers are likely to experience continued, yet slower, organic growth, driven by: • increased exposure caused by new business formations, accelerated new construction, increased threats in cyber and other newer risk classes, and anticipated increases in the workforce—all of which align with a strengthening economy.

• carriers continuing to take rates when available. As losscost trends are expected to move with the PCE, a continued, albeit slower pace of rate increases is expected.

Rate increases have had varied results in 2024, and continuing to rely on the expectation of premium increases

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to drive organic revenue should be reconsidered as there still are some unknown factors in 2025. When reviewing future projections by line of business for commercial lines, consider these insights: • directors & officers and cyber liability premiums have decreased throughout 2024, with cyber seeing continued intense competition driving down premiums from past years’ high increase of more than 20%;5 • high rates are expected to continue in the commercial liability segments, with ongoing nuclear verdicts and social inflation; and • extreme weather incidences (e.g., hurricanes and tornadoes), combined with increased frequency in catastrophe-prone areas of the country, likely will support elevated property rates, despite the recent stabilization in the market.

Interest rate cuts could spur increased economic activity and industry mergers & acquisitions. The median Fed funds projection for 2025 is 3.5%, which represents a 200 basis-point reduction in the key rate since 2023.

Strategic buyers in M&A are sensitive to the increased cost of capital created by high interest rates. This has played out in the soft M&A dealmaking environment in 2024 so far. The first half of 2024 saw an estimated $1.47 trillion in deal volume, 41% off the two-quarter peak of $2.47 trillion in the fourth quarter of 2021 and the first quarter of 2022.

If the projection for continued rate cuts proves correct, this may lead to an uptick in borrowing for everything from auto loans, to home mortgages, to borrowing debt capital to fuel M&A opportunities. As the cost of debt goes down, leveraged acquisitions tend to become less expensive, with a positive impact on the return on investment for buyers.

In addition to lower interest rates driving increased demand for the acquisition of insurance producers, demand is expected to remain high for attractive firms that are performing beyond market-driven premium growth. There will likely be continued interest from private equity firms and corporate buyers. Insurance producers who are investing in effective technology, including those who use data analytics and artificial intelligence tools to improve operations and sales, could see higher valuations and demand.

To understand how the impacts of lower rates may fuel additional consolidation activity in the U.S., M&A transactions in Europe saw a lift following interest rate cuts in the second quarter of 2024 by the European Central Bank, Swiss National Bank, and Sweden’s Riksbank. Following these interest rate changes, overall M&A deal value increased by 17% compared to the previous quarter.

Growth strategies While 2025 could see some volatility around the economy, agency and brokerage owners can proactively grow their firms in any climate. Here are some strategies to consider no matter what changes 2025 brings.

Fed Funds Rate (percent) 6%

5% Forecast range of 3.5–3.75% by end of 2025

Percent (%)

4%

3%

2%

Fed Funds Rate

Fed Funds Rate Forecast

1%

0%

2021

2022

2023

2024

2025

Year

Source: Board of Governors of the U.S. Federal Reserve System, MarshBerry Analysis. Data as of Nov. 8, 2024.

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PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

Reassess your talent and strategic capabilities. While a complete overhaul of recruitment practices may not be necessary, many firms can benefit from strategic refinements. As we are expecting a prolonged labor shortage and competitive talent market, a long-term commitment to certain recruiting enhancements can lead to significant improvements in attracting high-performing insurance professionals, ultimately, driving greater performance and client value.

As I published in the April edition of this magazine, a relentless focus on predictable, profitable, organic growth is a key driver in creating intrinsic value for your agency.

Understanding your sales velocity is only the beginning. As inflation continues to stabilize, agencies may not be able to count on the hard market rates to help drive revenue and growth. It is important to review your own quality of growth to understand if you are truly growing or simply continuing to ride the anticipated tailwinds.

It starts by improving your employer brand and value proposition. Today, competitive job seekers prioritize experiences that contribute to professional growth and a healthy worklife balance, rather than simply attractive amenities or a family atmosphere. What truly differentiates your business’s culture? Ninety-two percent of workers are open to opportunities with exceptional company cultures.6 Articulating yours will unlock more doors than anything else.

[EDITOR’S NOTE: To access a copy of the April 2024 issue of PIA Magazine, visit PIA Northeast News & Media’s Media Gallery at blog.pia.org/media-gallery.]

Also reevaluate your compensation strategy. To attract and retain high-performing employees, you must move beyond solely offering competitive salaries (although that is necessary). Today, comprehensive compensation strategy encompasses transparency in pay scales and decision-making processes, and use of strategic equity to aid in fostering trust and a sense of fairness.

Create an effective technology plan. Look for gaps in your business reporting and data and consider investing in effective insurance technology and data analytics.

A technology plan starts with understanding the current state of your agency’s technology. Asking key questions can help you identify your agency’s needs, strengths or existing gaps. Are you utilizing all your current technology to its fullest capability? Are you effectively integrating new technology solutions into your current technology? Do you have the right technology solutions to support your agency’s growth strategy and long-term goals? Does your tech stack support your plan to hire additional producers and support staff? These questions can help build a strategy around new technology investments.

Next, examine your agency’s current capabilities and possible challenges. Budget considerations, ability to provide training, demands on your time, or other barriers could be deal-breakers in implementing new technology or upgrading systems. This also may involve assessing the build versus buy versus partner dynamic as you review costs and ROI. Ensure your agency’s long-term planning team is adaptive and responsive to changing conditions.

Refici joined MarshBerry in 2021 as a vice president within MarshBerry’s Financial Advisory team. His current responsibilities include acting as a client-facing lead on merger & acquisition and financial consulting projects, developing strategy and implementation of client deliverables, and recognizing opportunities for growth that enhance client satisfaction. Founded in 1981, MarshBerry is a global leader in financial advisory and consulting services serving the insurance brokerage and wealth management industries to help clients grow and advance their business strategies. With locations across North America and Europe, MarshBerry market-sector expertise includes property/ casualty agents & brokers, employee benefit firms and specialty distributors, partners in InsurTech, capital markets and insurance carriers, as well as registered investment advisers, retirement planning and life insurance firms. Clients choose MarshBerry as their trusted adviser for every stage of ownership to help them build, enhance and sustain value through Financial Advisory solutions (investment banking; merger & acquisition advisory, debt & capital raising, business consulting), growth advisory solutions (organic growth, aggregation, leadership, sales & talent solutions) and market intelligence and performance benchmarking.

1

Bloomberg Market data as of Nov. 9, 2024

2

Thomson Reuters, 2024 (tinyurl.com/42d54pjs)

3

Swiss Re Institute, 2024 (tinyurl.com/5bjpaca8)

4

S&P Capital IQ data as of Nov. 11, 2024

5

Willis Towers Watson, 2024 (tinyurl.com/phzzttnr)

6

EY Americas, 2022 (tinyurl.com/3nh8xtrh)

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24 2270-D-2022

PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

ROSALIE DONLON Managing editor, Aartrijk

P/C marketplace review & outlook for 2025 Lines of business, E&S and the post COVID-19 business environment

Fluctuating market conditions and the pace of innovation provide both challenges and opportunities for the insurance industry in 2025. Our marketplace always has had a cyclical nature, with catalysts driving change on both sides of the equation. Capital is being injected into insurance from various sources, such as insurance-linked securities and private equity. The result is a heightened focus among insurance distributors on using technology in innovative ways to create new products, drive operating efficiencies, and fund mergers & acquisitions.

COVID-19’s ripples created disruptions to the supply chain resulting in shortages and production delays and adding inflationary costs to the system. In turn, post-COVID fiscal policy drove large deficit spending for infrastructure and other projects, which further aggravated inflation. That led the Federal Reserve to increase interest rates until September 2024, when it reduced rates for the first time in four years.

These inflationary costs—coupled with increased catastrophe activity and resulting property claims—as well as increased liability claims, resulted in operating losses for carriers in 2022 and 2023. The U.S. property/casualty industry recorded a net underwriting loss of $21.2 billion in 2023—a slight improvement from 2022’s $24.9 billion loss.1 The personal-lines

segment—particularly homeowners—was primarily responsible for weak underwriting results. Carriers responded by seeking rate increases and limited coverage for certain exposures and locations, such as wildfires in California.

What’s next for personal lines?

During 2024, carriers continued to seek personal-lines premium rate increases, to add policy exclusions, and to trim their geographic footprint in catastrophe-prone states where they could not attain desired rate approvals. On average, auto insurance premium rate increases were still in the double digits following 2023’s average increase, which ranged from 15% to 17% nationwide.2 The premium hikes were driven by higher auto repair and replacement costs and increased frequency and severity due to a return to pre-pandemic miles driven.

The increase in auto rates may lead more consumers to unbundle their personal-lines policies, leaving homeowners with their current carrier, but seeking a monoline auto policy with another carrier, forgoing the packaged policy discount. It appears that more consumers are open to leaving homeowners insurance where it is and moving auto insurance to mitigate rate increases.

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Consumers have felt the pain of premium increases coupled with overall inflation. Adding to consumer budget woes, homeowners rates increased 11% to 13% nationwide, and catastrophe-prone areas experienced larger rate increases—due in part to rising reconstruction rates. Consequently, independent agents, who were scrambling to provide service to their clients’ needs during 2023, are feeling pressured to find more affordable options. In catastrophe-prone areas, agents increased their use of the excess-and-surplus markets for flexibility in price and coverage.

This rate activity resulted in more consumers shopping for insurance according to a home insurance study.3 The study found that, among home insurance customers who receive a rate increase, 37% are likely to shop for a new policy. So far, the shopping has not necessarily led to switching. However, given the level of shopping activity, agents should be aware of consumers’ growing interest to confirm their current pricing and coverage.

The effect on the industry from the devastation caused by Hurricane Helene in late September 2024 is still uncertain, although the storm caused at least 233 deaths and $88 billion (and climbing) in damage. Hurricane Helene’s impact on western North Carolina and eastern Tennessee was unprecedented, as these areas were not perceived as prone to catastrophe. This has resulted in heightened concerns about the reliability of flood maps and the lack of flood insurance carried by affected residents.

E&S and specialty boost share Since 2020 independent agents have maintained their auto insurance market share at 33%, homeowners at 51%, and commercial insurance at 87%, according to AM Best data.

Some regional insurers are emphasizing commercial lines, allowing the independent agent channel to take on even more importance. The largest traditional exclusive agency and direct writer insurers—except for State Farm and USAA as direct writers—are using independent agents for distribution. For example, now GEICO is offering independent agent contracts in several states.

Post-COVID, the E&S marketplace has increased significantly.

E&S direct premiums rose 32.3% in 2021, and 20.1% in 2022.

The increase was substantial, rising to 9.2% of total direct premiums by the end of the year.4 And, AM Best indicates that 59% of cyber insurance policies are written on an E&S basis.5 According to the U.S. Surplus Lines Service and Stamping Offices 2024 Midyear Report, E&S premiums reached $39.5 billion.6

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PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

The hard market further ushered in an era in which the agent-business line client relationship is more dynamic. Agents have learned more about their business clients’ risk exposures—especially supply-chain concerns.

“Independent agents are seeing increased market share due in large part to their having choices in their solutions,” says Paul Buse, CPCU, ARM, principal of research firm R.I.S.C. “As one carrier’s appetite changes, the marketplace moves to fill the void, and independent agents can readily access different insurers. The E&S marketplace represents an important choice for independent agents to turn to when the standard markets don’t fit, which is occurring more frequently since the hard market.”

Social inflation (including Nuclear Verdicts®) has driven up liability claims in the U.S. by 57% over the past decade. In 2023 alone, it accounted for 7%, a 20-year high according to a recent study.7 There has been a growing chorus among the insurance industry and business to take action to introduce transparency in the use of private litigation funding, which is seen as another factor driving up the cost of claims.

Post-COVID business environment The post-pandemic environment also has challenged carriers. While large and small insurers experienced unprofitable combined ratios and operating margins, smaller carriers were whipsawed by their 2022 reinsurance renewals. The reinsurers’ impact varied, depending on the size, geographic footprint and lines of business of the primary carrier. Aside from reinsurance rate increases, the other ripples were more

policy exclusions, higher retention levels for carriers, and the exiting of certain lines of business and geographic areas.

In 2023, nine severe storms resulted in losses of $1 billion or more.8 Reinsurance renewals (or nonrenewals) resulted in more than 100 small mutual carriers that merged, went into receivership or closed.9 The past four years have seen the creation of about 20 reciprocal insurance exchanges to write property insurance, particularly in catastrophe-prone areas.10 Regional carriers with a dim long-term outlook for personal lines sold their personal-lines book to focus on commercial lines. The challenge for smaller companies is to maintain market share in personal lines—particularly auto—as the top 10 carriers capture 75% of the market.11 And, the challenge for all companies is to achieve profitability in the homeowners market, given the increase in secondary perils, such as wildfire, severe convective storms and flooding.

Most lines of business have rebounded since 2023, but commercial auto continues to face profitability challenges, having lost $5 billion in 202312—primarily due to the impact of

social inflation and the cost to replace the advanced technology that commercial vehicles use. Cyber security insurance is another line of business that attracts agents’ attention, as dependent business interruption and contingent business interruption policy provisions continue to evolve.

View from business clients The hard market further ushered in an era in which the agent-business line client relationship is more dynamic.

Agents have learned more about their business clients’ risk exposures—especially supply-chain concerns. “As a small construction business, our commercial insurance plays an essential role in our ability to bid for business and on our operating margins,” says Bruce Becherer, president of WB Becherer Inc., Boardman, Ohio. “Post-COVID, insurance has taken on heightened importance, and we communicate regularly with our broker to convey our needs.”

As carriers and agents ramp up the ability for commercial clients to use self-service through agency and carrier portals, technology makes it easier for clients to issue their own certificates of insurance, review billing, add a commercial vehicle, and review claim status. This allows the agents and customer service representatives to allocate their time to interacting with their clients, rather than getting bogged down with transactional tasks.

Industry talent concerns Like other industries, insurance has been concerned about demographic trends and the brain drain of baby boomers and even the older Gen Xers.

A related concern is recruiting the next generation with the skill set to match future industry requirements. As agencies have focused on building technology capabilities for operational and marketing needs, and the ever-evolving role of artificial intelligence, this means attracting the right type of talent that often must wear multiple hats, as most agencies do not have the budget for separate marketing, sales and IT staff. At the same time, the variety of work in an entrepreneurial setting that is focused on merit more than solely academic background can

PIA .ORG

27

appeal to talented individuals—if they can learn about the opportunities that insurance agencies provide.

From a carrier perspective, the hard market has led several companies to exit some lines of business—resulting in layoffs. During 2024, AIG CEO Peter Zaffino announced a $500 million cost-cutting initiative using a voluntary early retirement program as part of its plan to sell its life and retirement businesses.13 It has been reported that in 2024, Nationwide Insurance planned to eliminate 1,200 jobs in p/c and technology units, representing 5% of its workforce.14 Other insurance carriers have had staff reductions in targeted areas such as claims and new business, as drones, cellphone apps and AI have eliminated some tasks formerly performed by employees.

Still, company CEOs say their main concern is attracting the right talent in a variety of disciplines. Smaller carriers in rural areas have an even larger challenge. To attract talent, they must be more open to remote work—and the outlook for remote work is mixed, as many agencies and carriers prefer a hybrid approach. Some carriers have attempted a full-time, in-office policy. However, they have found that employee resentment meant returning to a hybrid policy.

Inflection points For 2025 and beyond, the situation could be described as a point of inflection for the industry, based on how the following questions are answered: • Will social inflation and nuclear verdicts be reined in?

Or get worse?

• Will catastrophes and secondary perils continue to disrupt profitability and accessibility?

• What will AI’s continued role look like for operational efficiencies? And, for disruption to employment?

• Will private equity funding in insurance distribution continue to drive M&A? • Will the insurance industry be able to capture a fair share in the war for talent?

Stay tuned, as the answers to these questions develop throughout 2025.

Donlon is managing editor of Fairfax, Va.-based Aartrijk, a marketing-communications firm dedicated to serving the insurance industry (Aartrijk.com). As a former practicing lawyer, Donlon was editor-in-chief of PropertyCasualty360 and Reference Solutions for ALM. Reach her at rosalie@Aartrijk.com.

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PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

1

AM Best, 2024 (tinyurl.com/y37bmpzy)

2

Wall Street Journal, 2024 (tinyurl.com/mtfny583)

3

JD Power, 2024 (tinyurl.com/mrxz9fwm)

4

S&P Global, 2024 (tinyurl.com/4wkp2e3x)

5

AM Best, 2023 (tinyurl.com/yc3cx3nj)

6

WSIA, 2024 (tinyurl.com/4ns395uh)

7

Swiss Re, 2024 (tinyurl.com/wxx2zvhm)

National Centers for Environmental Information, 2024 (tinyurl.com/ynrw9bj9) 8

9

S&P Global, 2024 (tinyurl.com/bdeh7xuz)

10

Investopedia, 2023 (tinyurl.com/y4wne2kw)

National Association of Insurance Commissioners, 2023 (tinyurl.com/365yws2r) 11

12

AM Best, 2023 (tinyurl.com/yc3cx3nj)

13

AM Best, 2024 (tinyurl.com/4u6ydtb8)

14

The Columbus Dispatch, 2024 (tinyurl.com/343pxz5b)

UTICA NATIONAL INSURANCE GROUP

E&O

Choosing the right limit for your agency E&O coverage A common question that we deal with is “What limits should I buy?” The adage “buy until it hurts” is perhaps too simple and not very helpful.

Often, they can look up after several years of growth and acquisitions to find their value at several million dollars with limits of $1 million per claim and $2 million aggregate.

However, there are processes that can be useful. They include the following methods: The “what’s the worst thing that can happen?” method.

Here it is important to know your book of business. When your normal policy is a personal home and auto, the limits can be predictable and gauged by a review of your agency management system for property/casualty limits. Keep in mind the potential for umbrella policies and other lines (i.e., workers’ compensation and health insurance).

While most of our claims are settled for under $1 million, this does not mean agents should not consider higher limits for their agencies. Why buy something that probably will not be used? To begin, there’s always a first time—we have had $5 million-plus awards. The other thing to consider is that we don’t generally get to the end—settlement or other resolution—quickly in large claim cases. Having a high-dollar claim over your head for years can be unnerving without adequate limits.

Failure to procure coverage is the most common cause of action against agents. For example, what is the potential loss if you fail to place a health policy or enroll a member who contracts a serious illness or sustains an injury? Focus on what you may have failed to write or place. When you include umbrella policies, this leads to very high limits for the policy that your office failed to place. This should be kept in mind when choosing a limit for your errors-and-omissions coverage.

Settlement of professional liability claims is a different process. All the underlying coverage issues must be decided before the E&O damages can be assessed properly. Sometimes, this process can take years. In most cases, the plaintiff’s attorney has taken special pains to push up the damages as high as possible. You can be looking a multiple-million-dollar damage potential for years. While the defense can assure you that the result will most assuredly be a fraction of that monstrous sum, you’re the one who has to sleep at night.

A commercial agency has more things to consider. Property schedules can be complex, and a serious error in valuation or difference of opinion can reach into the millions of dollars.

What’s more, incorrectly reported business income can be costly. Don’t neglect looking at bond penalties, either. Any of these areas, in addition to the usual items such as umbrellas, can lead to claims of up to tens of millions of dollars.

Another consideration of the “what is it worth?” method is the matter of whether you really will be ready to self-insure the portion of the risk that is not insured. This is true especially if the cost of some additional limits of E&O can be reasonably obtained.

The “what is it worth?” method. In these instances, the agency uses a limit in proportion to its worth.

Agents who believe their agencies’ worth to be no more than a million dollars in the early years set their E&O limits, and then often neglect to update it as the years pass. With the pattern for renewing their E&O established, the tendency is to look at price on an apples-to-apples basis each year.

Some agency principals are guided solely by the contractual requirements of their agency agreements. This is certainly a basic step. Over the years, we have seen agents call to increase limits because they are taking on a new carrier with substantially higher limit requirements. Generally, this is a simple and straightforward process, but it is not an automatic. Consider if you have just had a claim—the carrier may not be in a position to increase the limits, at least not quickly.

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E &O Yet, it’s not only carriers that require higher limits. There are times when a potential client—particularly a municipal entity—may require higher limits as standard practice.

Obtaining limit proposals can be a simple process—particularly at renewal anniversary. Most E&O carriers will provide an additional $1 million or $2 million of limit. The cost can be like lobsters, that is, according to market prices. Limits likely will be more easily obtained in a soft market, and at a better price.

Discuss the availability of additional limits with your carrier to know what limits are available and what some of the considerations would be for your agency’s particular situation. A mix of business, market specialties, and agen-

cy claims history can all be factors in the decision. An agency with five to 10 employees should carry limits higher than $1 million. A simple inquiry at renewal can be valuable.

It’s your decision The limit of liability your agency chooses for its E&O coverage should be one with which you are comfortable. Review it annually using a logic that fits your situation.

Utica National Insurance Group and Utica National are trade names for Utica Mutual Insurance Company, its affiliates and subsidiaries. Home Office: New Hartford, NY 13413. This information and any attachments or links are provided solely as

an insurance risk management tool. They are derived from information believed to be accurate. Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues. © 2025 Utica Mutual Insurance Company

www.pia.org/conn

March 20-21, 2025 Foxwoods Resort Casino, Mashantucket, Conn.

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PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

PIA TECHNICAL STAFF Have a question? Ask PIA at resourcecenter@pia.org

ASK PIA

Bait and switch, teen drivers, auto recalls and more Conn.: Placement with unauthorized insurers Q. I was competing with another broker for a commercial risk. My quote was with an authorized insurer. The other broker quoted a lower premium from an unauthorized insurer. Is it lawful for the applicant to take the lower quote from the unauthorized insurer?

A. If the type of risk involved is not listed by the insurance commissioner as being generally unavailable from authorized insurers (see the Export List), the procurement of insurance will be subject to the provisions of Section 38a-741(b) as follows: There shall be executed, both by the licensee and the insured, affidavits setting forth facts showing that such insured and such licensee were unable after diligent effort to procure, from any authorized insurer or insurers, the full amount of insurance …

The Surplus Lines Statement the applicant signs limits the applicant’s search for authorized coverage to that which the broker placing the policy has conducted. Although you were able to provide a quote for an authorized insurer, the applicant is free to choose to do business with the other broker who is offering the unauthorized quote. Of course, the other broker is obligated to conduct a diligent effort, which is interpreted in the statement as obtaining three declinations from authorized insurers.

While this was the understanding of eligibility prior to the May 24, 2010, notice issued by the Connecticut Insurance Department, producers now need to comply with the following requirement to avoid sanctions by the CID: The department has been apprised of situations where a surplus-lines broker is placing a coastal risk in the surplus-lines market despite the fact that the insured received a renewal offer from their existing Connecticut-authorized insurer. The department wishes to remind all Connecticut-licensed producers, as well as Connecticut

surplus-lines brokers, that when an insured has been offered a renewal from their existing admitted insurers; any other Connecticut-admitted insurer; or any residual-market mechanism, it would be a violation of Connecticut statutes—specifically C.G.S.A. 38a-741—for the risk to be placed in the surplus-lines market.

So, you might want to advise your client about the state’s diligent-effort requirements before he or she accepts the policy written in the surplus-lines market.—Dan Corbin, CPCU, CIC, LUTC

N.H.: Bait-and-switch activities Q. I lost a client to a direct writer that offered him a lower rate on his auto policy. However, shortly after the policy was bound, the client called me to complain that the direct writer increased his premium. The direct writer did not run the motor vehicle report for the client until after the policy was bound. At which time, it discovered an accident that had not been disclosed by the client. Can the direct writer actually do this?

A. Yes. New Hampshire Statutes Chapter 417-A:4 establishes the rules for changing the terms or canceling a personal-lines policy midterm. In general, a company may make changes to the premium or coverage or cancel a newly issued policy (not a renewal) during its first 60 days by providing a notice and a reason.—Bradford J. Lachut, Esq.

Vt.: Exclude teenage son from his parents’ automobile insurance policy Q. My insureds want to exclude their teenage son from their automobile insurance. Is this permissible?

A. No. Vermont Banking and Insurance Law Section 800 allows policyholders only to reduce the coverage of a member of the household from the policy limits to the state minimum financial responsibility limits ($25,000/$50,000/$10,000).

—Dan Corbin, CPCU, CIC, LUTC

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AS K P IA Rented furniture in condos Q. Does the ISO HO 00 06 policy endorsed with the HO 17 33 Unit Owners Rental To Others form cover furniture that is rented by the insured and used to furnish a condominium that is rented to others regularly? The question arises because the furniture in question is not owned by the insured.

A. Subject to the Coverage C limit purchased, an owner of a condominium unit who rents furniture for the purpose of furnishing the unit while it is being rented to others will be covered for this property under the ISO HO 00 06 policy endorsed with the HO 17 33 form.

The HO 17 33 endorsement gives back coverage for the contents in a condo that is designated as the “residence premises” on the declarations page and regularly held for rental. In other words, the HO 00 06 exclusion of “property in an apartment regularly rented or held for rental to others by an insured” found in Item g. under “Property Not Covered” is amended to cover property contained in the condo.

The second part of your question involves ownership of the property furnished in the rental condo. The Coverage C insuring agreement broadly covers “personal property owned or used by an ‘insured’ while it is anywhere in the world.” While sub item 1.a. extends coverage to property owned by others only when located in the unit where the insured resides, there remains coverage for property “used” by the insured.

We must decide whether the context of coverage granted for personal property “used” by an insured encompasses the insured’s rental to tenants of the unit.

32

The issue then becomes a matter of what constitutes “use.” Since this word is not defined in the policy and no technical definition is appropriate, the common English-language definition will be the standard for interpretation.

Webster’s Ninth New Collegiate Dictionary defines the word as: 1a: the act or practice of employing something, and 3c: the legal enjoyment of property that consists in its employment, occupation, exercise, or practice.

Clearly, this rented furniture has been put to useful purpose by the insured in its rental to the tenant.

General Rule 508 in the ISO manual specifies a 25% upcharge for Coverage C property under the HO 17 33 endorsement. It allows for a limit less than the HO 00 06 minimum of $10,000, should a lower limit be desired.—Dan Corbin, CPCU, CIC, LUTC

Tenant performing building maintenance for owner Q. If a tenant provides all the maintenance and upkeep on a house he is renting—and, in return, the owner of the house provides a discounted rent—is there an employee-employer relationship and should the tenant be covered by a workers’ compensation policy?

A. Yes. A landlord is considered a for-profit business. Therefore, if a tenant provides any work for remuneration (this could be in the form of money taken off the rent or a lease extension), the landlord would be obligated to have a workers’ compensation policy for the tenant.

Nearly all leases include a provision that holds the tenant responsible for

PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

some general maintenance of the property, namely, retaining the condition of the property as initially received.

However, the landlord generally is responsible for keeping the premises habitable.

If the tenant is compensated for performing work that is the obligation of the owner, a policy is required.—Dan Corbin, CPCU, CIC, LUTC

Parents own couple’s house Q . We insure a young couple who lives in a house purchased by their parents. The house is titled in the parents’ names, but only the couple lives there. We could write a dwelling policy for the parents and an HO-4 for the occupants, but we feel this would be an unnecessary complication. We would like to write an HO-3 with both the couple and the parents listed. Would this cover everyone’s interests?

A. The problem with writing an HO-3 policy is that this situation does not meet the ISO eligibility standards of owner/occupancy.

However, if an underwriter will write the policy, there should be no coverage problems, if the named insured(s) reside in the home. Be sure to add the HO 04 41–Additional Insured endorsement, naming the parents, to protect the parents’ interests.—Dan Corbin, CPCU, CIC, LUTC

DIRECTORY

PIANH 2024–2025 Board of Directors OFFICERS President Casey Hadlock Hadlock Agency Inc. 150 Old County Road Littleton, NH 03561-3628 (603) 444-5500 casey@bestinsurance.net Vice President Jeffrey Foy, AAI Foy Insurance-Manchester 1889 Elm St. Manchester, NH 03104-2500 (603) 641-8111 jeff.foy@foyinsurance.com Secretary/Treasurer Alex Kapiloff, CPCU, CLU, CIC, AAI Kapiloff Insurance Agency Inc. 417 Winchester St. Keene, NH 03431-3914 (603) 352-2224 akapiloff@kapiloff.com

Immediate Past President Keith T. Maglia Insurance Solutions Corp.

60 Westville Road Plaistow, NH 03865-2947 (603) 382-4600 kmaglia@isc-insurance.com

John Obrey Obrey Insurance Agency Inc. 1B Commons Drive, Unit 13A PO Box 1018 Londonderry, NH 03053-1018 (603) 432-3883 john@obreyinsurance.com

National Director Lyle W. Fulkerson, Esq. HPM Insurance 101 Ponemah Road #1 Amherst, NH 03031-2816 (603) 673-1201 lyle@hpminsurance.com

DIRECTORS

ACTIVE PAST PRESIDENTS Lisa Nolan, CPCU Cross Insurance 1100 Elm St. Manchester, NH 03101-1500 (603) 669-3218 lnolan@crossagency.com

Anthony Inverso North American Insurance Alliance 234 Lafayette Road Hampton, NH 03842-4105 (207) 831-4837 anthony.inverso@naia-consulting.com

Paul Riley Safety Insurance 20 Custom House St., Ste. 400 Boston, MA 02110-3516 (617) 951-0600 paulriley@safetyinsurance.com Lori Sherman New England Indemnity Co. 10 Corporate Drive, Ste. 2203 Bedford, NH 03110-5956 (330) 412-5534 lsherman@neindemnity.com

Erik Liguori Brown & Brown of New Hampshire Inc. 309 Daniel Webster Hwy. Merrimack, NH 03054-4116 (603) 424-9901 erik.liguori@bbrown.com

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33

DIRECTORY

DIRECTORY

PIACT 2024–2025 Board of Directors

Advertising index

OFFICERS

DIRECTORS

President Nick Ruickoldt, CPIA The Russell Agency LLC 317 Pequot Ave. PO Box 528 Southport, CT 06890-0528 (203) 255-2877 nruickoldt@therussellagency.com

Scott Burns XS Brokers Insurance Agency Inc. 225 Asylum St. Hartford, CT 06103-1516 (617) 471-7171 sburns@xsbrokers.com

President-elect Kevin P. McKiernan, CIC, CPIA Abercrombie, Burns, McKiernan & Co. Insurance Inc. 484 Post Road, Ste. A Darien, CT 06820-3651 (203) 655-7468 kmckiernan@abmck.com Treasurer Katie Bailey, CPIA, ACSR, CLCS The Russell Agency LLC 317 Pequot Ave. PO Box 528 Southport, CT 06890-0528 (203) 255-2877 kbailey@therussellagency.com Secretary Kimberly A. Tompkins, CIC, CPIA, AIS, AINS, PHM, CRIS, ACSR Prospect, CT KATompkins4@yahoo.com Immediate Past President J. Kyle Dougherty, CIC Dougherty Insurance Agency Inc. 2420 Main St., Ste. 5 Stratford, CT 06615-5963 (203) 377-4394 kyle@doughertyinsurance.com PIA NATIONAL DIRECTOR Jonathan Black, LUTCF, CPIA, CLTC, NAMSA, NSSA Curtis Black Insurance Associates LLC 57 North St., Ste. 119 Danbury, CT 06810-5626 (203) 792-3055 jblack245@gmail.com

Ryan Kelly USI Connecticut 10 Middle St. Bridgeport, CT 06604-4257 (203) 258-0834 ryan.kelly@usi.com Nicholas Khamarji Jr. New England Insurance PO Box 125 Easton, CT 06612 (203) 445-3594 NGK325@gmail.com Jeffrey A. Krar Joseph Krar & Associates Inc. 1676 West St. PO Box 580 Southington, CT 06489-0580 (860) 628-3967 jkrar@jkrar.com Patrick Walsh NFP 29 S. Main St., Ste. 300 West Hartford, CT 06107-2420 (860) 764-0555 pat@insuranceprovidergroup.com CTYIP REPRESENTATIVE Justin Sloan Nesso Group 409 Canal St. PO Box790 Milldale, CT 06467 (860) 374-4010 jsloan@nessogroup.com ACTIVE PAST PRESIDENTS James R. Berliner, CPCU Berliner-Gelfand & Co. Inc. 188 Main St., Ste. A Monroe, CT 06468-1149 (203) 367-7704 jim@berlinerinsurance.com Mark Connelly, CIC Fairfield County Bank Insurance Services 401 Main St. Ridgefield, CT 06877-4513 (203) 894-3123 mark.connelly@fcbins.com

34

PROFESSION A L I NS U RANC E AG E NTS M AG AZIN E

John DiMatteo, CPFA, CFP DiMatteo Group Financial Services 1000 Bridgeport Ave., Unit 506 Shelton, CT 06484-4660 (203) 924-5408 jdimatteo@dimatteofinancial.com Peter Frascarelli, CPIA Ferguson & McGuire 6 North Main St. Wallingford, CT 06492-3741 (203) 269-9565 pfrascarelli@fergusonmcguire.com Michael F. Keating Michael J. Keating Agency Inc. 10 Arapahoe Road PO Box 270048 W. Hartford, CT 06127-0048 (860) 521-1420 mfkeating@keatinginsurance.com Howard S. Olderman Olderman & Hallihan Agency 400 Main St. Ansonia, CT 06401-2303 (203) 734-1601 howard@oldhalins.com Bud O’Neil, CPIA C.V. Mason & Co. Inc. PO Box 569 Bristol, CT 06011-0569 (860) 583-4127ih boneil@cvmco.com Gerard Prast, CPIA XS Brokers Insurance Agency Inc. 13 Temple St., Floor 1 Quincy, MA 02169-5110 (617) 471-7171 gprast@xsbrokers.com Shannon Rabbett, CIC Rabbett Insurance Agency 233 Addison Road PO Box 665 Windsor, CT 06095-0665 (860) 688-1303 shannon@rabbett-insurance.com Augusto Russell, CIC NFP 29 S. Main St., Ste. 300 West Hartford, CT 06107-2420 (860) 764-0555 augusto.russell@nfp.com Timothy G. Russell, CPCU The Russell Agency LLC 317 Pequot Ave. PO Box 528 Southport, CT 06890-0528 (203) 255-2877 trussell@therussellagency.com

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