Main Street Industry News - July 2014

Happy 4th of July INSIDE Senate Anti-Hobby Lobby Vote Goes Down »8 Senate Passes TRIA Extension — Doubtful in House »12

Cover Photo Credit: Jim - Centennial Bridge, Iowa

AIG & Bank of America Settlement & More »16 Update: Cyber Security — Law & Insurance & More »20

July 2014 | Published Monthly

Insuring the Midlands Since 1891 Andy Kraus, CPCU Regional Director of Agencies 800-742-7433 akraus@fmne.com

Did you know that PIA has figured out a way to make selling flood insurance easier?

PIA has entered into an exclusive partnership with Floodbroker.com which allows PIA members’ clients and prospects to learn about their flood risks and request a quote for flood insurance from their local, participating PIA member agency.

Floodbroker has automated the process of obtaining a flood insurance quote through the National Flood Insurance Program (NFIP) and makes this technology available to participating PIA member agents through their very own agency-branded, flood insurance microsites.

Agents direct their clients and prospective insureds to their Floodbroker microsite where they can learn what flood zone they are in and request a flood insurance quote. After answering a few simple questions the quote is emailed to their agent who completes the sale offline using their agency’s regular flood insurance carrier.

Even in cases where an actual quote cannot be generated online, the prospect can still submit the information they have input into the form so that their agent can get back to them and continue the flood insurance sale offline.

Learn more about this program at www.pianet.com/floodbroker.

Not a PIA member? Please consider joining the association that arms agents with the tools they need to succeed. Contact us for a membership application or visit us online at www.pianet.com/joinpia.

National Association of Professional Insurance Agents 400 N. Washington St., Alexandria, VA 22314-2353 www.pianet.com | membership@pianet.org | (703) 836-9340

Top Stories Iowa Outstanding CSR of the Year | 7 Rebecca J. Plagge, CSR First Gabrielson Agency Clear Lake, IA Senate Anti-Hobby Lobby Vote Goes Down | 8 ObamaCare — Some Insurers will Seek Subsidies | 9 To help the Affordable Care Act get off on solid footing once the ObamaCare exchanges opened.

ObamaCare — Reaching the Uninsured | 9 J.D Power and Associates did a study of how well the government did reaching individuals and families about how to sign up for the Affordable Care Act on the federal or state exchanges.

PIA’s 2014 Agency Marketing Guide — Focusing on Success Stories | 10 The fifth edition of the 2014 PIA National Agency Marketing Guide has mailed to PIA members across the country.

Senate Passes TRIA Extension — Doubtful in House | 12 Late last week the U.S. Senate passed an extension of the Terrorism Risk Insurance Act. NARAB II Amendment Included in TRIA Extension Legislation | 14 The U.S. Senate passed a bill extending the Terrorism Risk Insurance Act (TRIA).

A Federal Gas Tax Hike? | 15 Refilling the Highway Trust Fund | 15 Financial Oversight Council Secrecy — It’s Time for a Change | 16 Democrats and Republicans in both houses

of Congress aren’t happy with the Financial Stability Oversight Council (FSOC).

AIG & Bank of America Settlement & More | 16 AIG and Bank of America have settled their fraud case.

A.M. Best’s First Quarter 2014 Analysis | 17 A.M. Best — who is not alone — took a long look at the property and casualty industry’s 2014 first quarter.

The General Motors Mess | 18 Customers of the recalled GM cars lines the Cobalts and Ions want compensation for the loss of value of their vehicles.

Update: Cyber Security — Law & Insurance & More | 20 The Senate Intelligence Committee has passed legislation to give companies using what are called “critical” computer systems immunity and legal protections if they share information about hacking incidents or threats with other companies or the federal government.

PIA NE IA Events Greater Metro Omaha Committees Annual Scholarship Golf Outing | 22 PIA & SAMIC Joint Rural and Town Agents Seminar | 27 Upcoming Events Calendar 2014 | 28

Advertisements Wanted, For Sale and Opportunities | 31 Contact us to place a classified ad.

May 2014 | Main Street Industry News | www.pianeia.com | 4

Education

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Register Online for PIA NE IA education: Click here or call (402) 392-1611

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(800) 336-4759 Insurance Program Administered by Lockton Risk Services

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We pledge to always conduct ourselves in a manner that enhances the public image of PIA and adds real value to our members.

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Top Stories

Iowa Outstanding CSR of the Year Rebecca J. Plagge, CSR First Gabrielson Agency Clear Lake, IA The Outstanding CSR of the Year Award is one of the most prestigious honors that a customer service representative can achieve. The award recognizes the commitment of those CSRs who go above and beyond to provide exemplary service to their agencies, their clients and their communities.

Rebecca J. Plagge, CSR

First Gabrielson Agency Clear Lake, IA

Each state winner receives a framed certificate and is eligible to compete for the national title which includes a $2,000 cash award, a gold and diamond pin, a $1000 cash award for their nominator and a scholarship to any National Alliance program. Iowa’s recipient, Rebecca Plagge will go on to compete for the National Outstanding CSR of the Year.

All 2014 candidates submitted an essay on the following topic: “It is generally agreed that both new and renewal business are crucial to the success of an agency. Explain whether new business or renewal business is more important to the long-term value and profitability of an agency. Identify four ways a CSR, Account Executive, or Account Manager can have a meaningful impact on the new and/or renewal business written by their agency.”

OUTSTANDING

Here is Rebecca’s Winning Essay:

“One customer well taken care of could be more valuable than $10,000 worth of advertising” – Jim Rohn I believe there needs to be a balanced focus within every agency between new business and renewal business. It would not be fair to say that any one group of customers is less important than another; however, my opinion is that the primary focus of an agency should be retaining the existing book of business. There needs to be a common goal for each employee of the agency to create loyal, lasting relationships.

Customers do not do business with you solely based on price. It is important for each customer to see the value in your business relationship and the service you provide, in addition to the product.

Within any industry it takes time to build trust. That is the reason why it is so important to maintain that relationship once it is established. The goal within our agency is for customers to respect May 2014 | Main Street Industry News |www.pianeia.com| 7

Top Stories and trust the expertise and professionalism of each employee.

Loyalty

I truly believe that a satisfied customer will ultimately result in referrals. Shiv Singh said it well, “The purpose of a business is to create a customer who creates customers”. When a customer feels that they are important to the agency and that they receive the product and service they expect, they are more likely to refer others to the agency. It is important to continuously grow with the needs of your customers (i.e. technology), while preserving the business practices that have been successful in retaining loyal customers.

Customer Service

Customer Service Representatives play a critical role in servicing and retaining business.

They are many times they are people who are regularly communicating with the customers and are generally the face of the agency. The quality of service that is offered after the sale by the agent or support staff is a direct reflection of the agency and affects future business that may result.

CSRs are able to go the extra mile by anticipating what customers will need and providing that information before the insureds have to ask. One example within our agency is Renewal Certificates. I have recently implemented a new Standard Operating Procedure to provide copies of certificates to an insured at the renewal appointment as opposed to them having to request each certificate throughout the year. The feedback from our customers has been overwhelmingly positive. They are commenting that this process is saving them time by not having to request each individual certificate from us when they get the request.

“Always do more than what is required of you” – George S Patton. This is and always has been my professional motto. If each person is doing more than what is expected of them it will show and ultimately result in a satisfied customer base. I truly believe that hard work will pay off.

It is important to keep customers happy, with the ultimate goal of converting them into loyal customers. n

Senate Anti-Hobby Lobby Vote Goes Down Reacting to the U.S. Supreme Court’s Hobby Lobby decision, some Democrats in the U.S. Senate tried to pass a bill that requires any for-profit company to provide birth control insurance coverage even if they object based on religious grounds.

“Women should call the shots when it comes to their health-care decisions: Not their boss, not the government, not anyone else — period.”

It went nowhere.

When it went down Murray said the push is not over. Senate Majority Leader Harry Reid agreed.

“We are going to vote again on this issue before this year is out,” he said.

To advance the bill it had to get 60-votes and only managed to get 53 on the yes side. That’s seven short.

The bill got the support of three Republicans: Susan Collins of Maine, Lisa Murkowski of Alaska and Mark Kirk of Illinois.

One of the sponsors was Washington Sen. Patty Murray. On the floor of the Senate she said,

Democrats pow-wowed with the Obama administration before crafting the legislation. n

May 2014 | Main Street Industry News | www.pianeia.com | 8

Top Stories

ObamaCare ObamaCare

ObamaCare

To help the Affordable Care Act get off on solid footing once the ObamaCare exchanges opened, the law allows insurers to get financial assistance from the federal government if their claims costs are 3% more than premium revenue.

J.D Power and Associates did a study of how well the government did reaching individuals and families about how to sign up for the Affordable Care Act on the federal or state exchanges.

Some Insurers will Seek Subsidies

Reaching the Uninsured

Not very well is the conclusion.

Those dollars will come from those insurers who make 3% or more in premium profit from premium payments. So it is technically not a taxpayer bailout. Technically. The program is one of three that protect consumers and that are designed to stabilize the law’s launch. Reinsurance and risk adjustment are the other two.

Critics say it is a bailout of the insurance industry but supporters say that’s not exactly the case. It only runs through 2016 and makes sure insurers can survive signing up a sicker, more medically dependent populace. And since it has been hard to get younger, healthier people into the pool, the plan makes sense.

That was anticipated in the law’s formulation and that’s why the plan exists.

J.D. Power spokesman Rick Johnson who handles health insurance issues for the company said: • 55% of those surveyed say they first heard about the exchanges — also called marketplaces — from the media.

• Just 4% learned about it from a state or the federal government.

• That leaves a very high percentage not knowing at all.

Johnson’s conclusion is that the insurance industry is going to have to pick up the slack because media interest is waning and government communication is fairly ineffective.

Or so says Clare Krusing of America’s Health Insurance Plans. She points out other government programs have used that strategy like Medicare Part D. “As the transition to the new marketplaces continues, the temporary premium protection programs are essential to holding down premiums and ensuring that consumers have affordable coverage choices.”

“The exchanges have benefited from millions of media impressions derived from the ACA advertising and news coverage. When the dust finally settles later in 2014 and in 2015, for health insurance providers to thrive in this new environment, they will need to retool their marketing, information and enrollment efforts toward a new generation of uninsured to serve their needs,” he said.

So far two insurers — Humana and WellPoint — have hinted that they’ll need that assistance. n

All J.D. Power surveys rank satisfaction on a 1,000 point scale. According to the 1,632

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Top Stories people surveyed, the satisfaction survey averages 615. And satisfaction also varies depending on how a person registered.

• 13% of those registering did so in person.

They had the highest satisfaction rating at 719.

• 17% used a navigator. The satisfaction rating was 631.

• 67% enrolled online. The satisfaction rate there was the least at 597.

• Second best was the 14% who registered over the phone and that hit 623.

Those younger than 30 gave the rating a 647 and those between 50 and 64 a 591.

J.D. Power’s survey also pointed out what made people satisfied in the enrollment process: • 23% said the amount of time it took to enroll.

• 21% pointed to the ease of enrollment.

• 15% cited the variety of information about the plans.

• 15% said the ease of understanding benefits and coverage.

• 14% said the ease of navigating a website.

• 13% said clarity of instruction.

Johnson concluded: “No doubt that ensuring a technologically error-free experience, along with streamlining the online enrollment process will be most impactful to future marketplace shoppers. While the uninsured are now a smaller group, they continue to be underserved, just as they were prior to the exchanges, and continue to need more information delivered in an easy-to-understand and personal way.” n Source: PropertyCasualty360.com & HIX Exchange

PIA’s 2014 Agency Marketing Guide Focusing on Success Stories The fifth edition of the 2014 PIA National Agency Marketing Guide has mailed to PIA members across the country and is now available to PIA agents online at www.PIAAgencyMarketingGuide.com.

The guide contains hands-on marketing advice from insurance agents and from some of the insurance industry’s premier experts. It focuses on the strategies and tactics that working agents are using successfully in markets across the country.

The guide emphasizes their use of new technologies and how they are transforming their marketing efforts to take charge of their futures.

These agents demonstrate how they are using new technologies to capitalize on the inherent strengths that local, independent insurance agents bring to customers.

PIA National President John G. Lee said, “Like all business owners, PIA members want to feel confident that the time and money they allocate to new marketing efforts is well spent. That’s why this year’s Agency Marketing Guide focuses more on real success stories told by agents.

May 2014 | Main Street Industry News | www.pianeia.com | 10

Top Stories Because agents continue to have questions about social media — how to use it effectively, does it work — we made sure to talk to agents about their use of social media and have them share their successes and also some failures.”

In addition to discussing agents’ successful use of social media, the 2014 PIA National Agency Marketing Guide provides eye-opening tips for incentivizing and training employees, utilizing digital marketing tools, rethinking cross-selling and referral marketing, maximizing sales meetings and many other sales and marketing topics critical to the success of modern insurance agencies.

PIA National Vice President of Marketing and Affliiate Relations Alexi Papandon said, “PIA’s Agency Marketing Guide is full of practical advice that can benefit any agency. My hope is that every independent insurance agent will take some time to read it. Those who do will certainly come away with at least a few ‘aha’ ideas that will improve their agency marketing efforts and their bottom lines.”

Current and past issues of PIA’s Agency Marketing Guide can be read online at www.PIAAgencyMarketingGuide.com. The latest edition of the publication is currently restricted to PIA members, but insurance professionals who have not yet joined the association can read previous editions.

The 2013 edition focused on how agency owners can get the most out of their people, processes and systems, so that they can increase sales and improve their bottom line.

The 2012 PIA National Agency Marketing Guide focused on how agents can make personal lines insurance a profitable and valuable part of their agency’s offerings. The 2011 publication included an Agents’ Guide to Internet Marketing. The inaugural PIA National Agency Marketing Guide — published in 2010 — contained a soup-to-nuts guide on how independent insurance agents can use social

media to support their agency’s sales strategy.

Past issues of the PIA National Agency Marketing Guide have received numerous awards, including the MarCom Gold Award, presented by the Association of Marketing and Communication Professionals, and the APEX Award of Excellence.

The 2014 PIA National Agency Marketing Guide is the latest offering from PIA National’s award-winning PIA Branding Program, Local Agents Serving Main Street America SM (www. piabrandingprogram.com). Through the PIA Branding Program, PIA provides its members with marketing tools and services, including internet marketing services as well as print and radio advertisements, in both English and Spanish.

PIA National wishes to thank the sponsors of the 2014 PIA National Agency Marketing Guide: • Allied Insurance/Harleysville Insurance • EZLynx • ITC • Rough Notes Lee concluded, “The success stories outlined in this year’s Agency Marketing Guide demonstrate that independent insurance agents who are committed to growing their businesses can be tremendously successful. The challenge is that most cannot continue to operate without making some modifications. The good news is that many modern marketing techniques are more affordable and accessible than some might think. By adopting these modern marketing techniques, independent agents can nullify the advantages of other sales channels and let clients focus on the strengths that independent agents bring to the table.” n Digital Edition: PIA members may download the 2014 PIA National Agency Marketing Guide here.

May 2014 | Main Street Industry News |www.pianeia.com| 11

Top Stories

Senate Passes TRIA Extension Doubtful in House Late last week the U.S. Senate passed an extension of the Terrorism Risk Insurance Act (TRIA). Now it’s on to the House where it faces an uncertain future. A much more restrictive bill is in process there and some members say they’ll refuse to consider what the Senate has passed.

Your association — Professional Insurance Agents — is happy with the Senate bill and prefer it to the more restrictive House bill. PIA National Director of Federal Affairs Jon Gentile said, “PIA applauds the Senate for passing legislation Jon Gentile, National Director of Federal Affairs that reauthorizes this vital program that provides for a financial backstop in the event of a terrorist attack.”

Gentle said the PIA prefers the Senate bill for several reasons. “We are pleased that the Senate bill extends TRIA for a full seven years and that it seeks to ensure the widest possible availability and affordability of terrorism insurance for consumers. We urge the House to quickly follow suit so that Congress can get to work resolving differences between the Senate and House versions of the legislation.”

The Obama administration is also very high on the Senate bill. In a statement issued just before the vote, the White House said, “Reauthorizing the Program will ensure that the

American economy remains resilient against the threat of terrorism. The Administration supports swift passage of this legislation and looks forward to working with Congress on this reauthorization and reform process.”

It also appears that the administration prefers the bill in the Senate to that of the House.

The Senate bill keeps much of the current law and — as noted earlier — extends TRIA for seven-years. Federal government reinsurance kicks in when combined losses — injuries and property damage — hits $100 million. And losses to the federal government tops out at $100 billion.

It also ups the ante for insurers and sets copayments at 20% instead of the current 15%.

The House bill is a five-year extension and — like the Senate bill — sets the co-pay for insurers at 20%. It increases the trigger to $500 million from $100 million for conventional weapon attacks. That change happens gradually over five-years but it keeps the trigger for nuclear, biological, chemical or radiological attacks at $100 million.

Many in the House want TRIA to be done away with permanently. So do some consumer groups who see it as unnecessary and claim that private insurers can handle the load.

Private insurers — as you know — disagree.

TRIA to them — and to other business and consumer groups — is considered critical.

Jimi Grande of the National Association of Mutual Insurance Companies (NAMIC) said, “Before TRIA, the risk of terrorism and the lack of available coverage ground commercial development almost to a halt, costing billions of dollars and thousands of lost jobs.”

TRIA — Grande said — has allowed more than 60% of the companies in the U.S. to

May 2014 | Main Street Industry News | www.pianeia.com | 12

Top Stories purchase terrorism risk insurance. Without it, many construction projects and real estate transactions would not take place.

NAMIC President and CEO Charles Chamness agrees. “The overwhelming, bipartisan support we’ve seen for this reauthorization demonstrates how much it has done for our nation, and how important it is to our economy.”

Property Casualty Insurers Association of America (PCI) Senior Vice President Nat Wienecke also pointed out the bipartisan cooperation in the senate. “It is great to see members of both parties come together in a broad bipartisan fashion to support America’s economic resiliency plan to recover from terrorist attacks.”

Leigh Ann Pusey is the president and CEO of the American Insurance Association (AIA). “We commend the Senate Banking Committee for

producing a bill that could garner such broad, strong bipartisan support, and urge the House to pass TRIA reauthorization legislation before the August recess.”

Passage before the August recess — unfortunately — doesn’t look likely.

House Financial Services Committee Chairman and Texas Republican Jeb Hensarling threw cold water on any idea that the House would quickly follow suit and take up TRIA reauthorization. Immediately after the Senate’s 93-4 vote last week, Hensarling issued a statement sharply criticizing the Senate bill.

Hensarling said it won’t come to the House floor and that it “is going to take several more months” to reauthorize the program.

Weekly Industry News will keep you posted. n

Nat Wienecke, Senior Vice President for Federal Government Relations at Property Casualty Insurers Association of America May 2014 | Main Street Industry News |www.pianeia.com| 13

Top Stories

Senator Jon Tester, Chairman of the U.S. Senate Indian Affairs Committee

NARAB II Amendment Included in TRIA Extension Legislation The U.S. Senate passed a bill extending the Terrorism Risk Insurance Act (TRIA). It has been sent to the House where it faces an uncertain future. Attached to the bill is an amendment that creates NARAB II — the National Association of Registered Agents and Brokers. It creates a simplified licensing process for agents and brokers doing business in multiple states.

The NARAB II was introduced by Montana Democrat Sen. Jon Tester and insurers and agent associations hope the amendment does not face an uncertain future as the TRIA bill does.

PIA National’s Jon Gentile said the association supports NARAB II and urges the House to pass this as well as the TRIA legislation. “PIA supports NARAB II, as it addresses our long term priority of aiding the agent licensing process.”

of Hanover Excess & Surplus said NARAB II is an idea whose time has come. “We will continue demonstrating the benefits vibrant competition provides to policyholders in a streamlined national producer licensing system where agents can achieve full reciprocity of their licensing requirements in the states in which they write business on behalf of their customers.”

Property Casualty Insurers Association of America (PCI) Senior Vice President Nat Wienecke also thinks NARAB II should be passed. “NARAB II is common sense legislation that creates a streamlined agent and broker licensing system that strengthens the competitive insurance market and protects consumers. We call on Congress to come together and send a TRIA bill with NARAB II to the president’s desk before the August recess.” n

American Association of Managing General Agents — AAMGA — President Matt Letson May 2014 | Main Street Industry News | www.pianeia.com | 14

Top Stories

A Federal Gas Tax Hike?

We all drive and we all know this. Roads and bridges and other auto transportation sources are deteriorating. It’s growing to crisis levels. Congress will soon look at a big hike in the federal gas tax to try to replenish depleting coffers.

Currently the federal gas tax is 18.4 cents per gallon. It has not been raised since 1993 and Sen. Charles Murphy — a Democrat from Connecticut — and Tennessee Republican Sen. Bob Corker want to fix that.

Their cure is another 12-cents added to the tax in the next two-years.

How bad is the need? Murphy and Corker point out — as does the federal government’s Highway Trust Fund — that recession and more fuel-efficient cars are draining the trust. In 2006 it had $30 billion available for highway projects.

The cost of building and maintaining roads has

risen steadily in the last 21-years while gas tax revenue has fallen.

In a few weeks the Highway Trust will be — literally — running on empty.

To make sure the fund does not completely run out of gas, Murphy and Corker want to tie an increase in the tax to inflation. Speaking for both senators, Corker said, “As a conservative, I learned that if something was important enough to have, it was important enough to pay for. Congress should be embarrassed that it has played chicken with the Highway Trust Fund and allowed it to become one of the largest budgeting failures in the federal government.”

Support for the tax increase is running on empty and not much enthusiasm has been generated in Congress. However, President Obama and business groups like the U.S. Chamber of Commerce like the hike. n

Refilling the Highway Trust Fund President Obama and the administration want to replenish the Highway Trust Fund and do a better job of funding highway repair in the future. It’s a worthy goal considering the Council of Economic Advisers and National Economic Council did a study that shows over 66% of the nation’s roads and highways are in need of repair.

The 27-page report concluded that poor conditions — crumbling roads and bridges — are hurting the U.S. economically. “A well-performing transportation network keeps jobs in America, allows businesses to expand, and lowers prices on household goods to American families.”

Unless something is done Transportation Secretary Anthony Foxx said 700,000 jobs will

be lost and more than 112,000 projects will be stalled. The White House is slowing payments to states for road projects as the funds begin to run out. This will allow the stretching of funding to make the Trust’s funds last as long as possible.

The House and Senate both have proposals to refund the Trust and both will generate about $11 billion. The solution is fees, pension changes and some other fixes but no hike in the federal gas tax.

The president has introduced a four-year $302 billion plan but no action has been taken on it yet. He wants a hike in the tax on motor fuels. n

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Top Stories

Financial Oversight Council Secrecy It’s Time for a Change Democrats and Republicans in both houses of Congress aren’t happy with the Financial Stability Oversight Council (FSOC). It’s the Dodd-Frank Act created group charged with determining which firms are “too big to fail.”

Those receiving a systemic risk designation must follow certain and quite restrictive rules to insure that they do not harm the entire U.S. economy if they run into major financial troubles.

The FSOC — which is headed by the U.S. Treasury Secretary — has been very secretive as to how those designations are made and who is going to be investigated.

The nation’s banks with $50 billion or more in assets have automatically received the designation according to Dodd-Frank. Other companies are being checked a firm at at time. Insurers AIG and Prudential have received the designation and MetLife is appealing its designation.

A bill has been introduced in the U.S. House to make changes to FSOC powers and to give those companies that might be designated as a risk more notice that they’re on the list.

Rep. Dennis Ross — a Florida Republican — said, “Decisions by the Financial Stability Oversight Council dramatically affect the operations of companies that are designated as systemically important financial institutions.”

Ross has introduced the legislation along with Democrat colleague Rep. John Delaney of Maryland.

What got people thinking a change needs to be made is when Black Rock — with $3.8 trillion in managed assets and Fidelity Investments

— with $1.9 trillion in managed assets — were informed they’d be checked by the FSOC. Both firms are asset managers and other firms doing the same function have complained that the FSOC is too secretive in how and why a designation is given.

Treasury officials say that is deliberate because discussing the financial figures and workings of these firms ought to be kept confidential and Treasury Secretary Jack Lew said the FSOC is being transparent. “The council has voluntarily adopted a robust transparency policy and put in place a comprehensive, deliberative approach to its evaluation of risks. It solicits public input and carefully considers all points of view.”

Delaney disagrees. “There are some tweaks that might actually allow FSOC to achieve its objectives even better. That’s what we’re trying to do. We’re not coming at it that FSOC is a poorly conceived idea.” n

AIG & Bank of America Settlement & More AIG and Bank of America have settled their fraud case. The insurance firm originally sued for $10 billion and is settling for $650 million.

The bank is alleged to have packaged and sold housing mortgages — through Countrywide Financial — to investors and is said to have lied about their value.

The company has also released figures for the salary of its soon to be new president and CEO Peter Hancock. He’ll get $11.8 million a year. That’s $3.2 million in cash over the short term and $7 million and change for hitting performance targets long term. Hancock will also collect $1.6 million in salary.

That’s a nice raise from his $9 million salary as the head of AIG’s P&C division. n

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Top Stories

A.M. Best’s

First Quarter 2014 Analysis A.M. Best — who is not alone — took a long look at the property and casualty industry’s 2014 first quarter. Like the other reports we’ve seen, the results are mixed.

The ratings agency in its A.M. Best Q1 Financial Review said all is still in positive territory — as an overall assessment — but the industry is not as robust as we saw in the first quarter of 2013. Up front, A.M. Best said weather-related losses and rate increase slow downs are the reason for the report’s down signs.

Starting with the good news. We saw an underwriting profit for the fifth straight quarter and we saw them in almost all lines. Those profits moderated, however. BTW, the last underwriting loss was quarter four of 2012 when Superstorm Sandy hit the East coast.

Here are some stats: • Net income was $13.9 billion — down 38.9% from the first quarter of 2013.

• Underwriting income hit $2.2 billion — down 67.1% from the first quarter last year.

• Catastrophe losses rose to $1.8 billion from $772 million in 2013.

• Net written premiums grew by just 2.7% compared to 4.6% a year ago.

• Direct written premiums were up 3.8% from 5.3% in the first quarter of 2013.

• Catastrophe losses added 3.4% to the combined ratio compared to 2.1% a year ago.

• The average combined ratio was 96.4% — up from 92.7%.

The report said, “Growth rates have declined across the board, with premium reductions accelerating sharply in the accident and health line.”

A.M Best added that the slower premium growth is because “market conditions are becoming more competitive, driven by reinsurance capacity, capital availability and customer resistance to price increases, particularly in more desirable classes and for more desirable insureds.” n

2013

2014

% of change year

Net premiums written

$52.0 million

$51.0 million

-1.8%

Underwriting gain/loss

$3.5 million

0.6 million

-83.5%

Net income

$15.4 million

$6.8 million

-55.6%

Policyholder surplus

$263.3 million

$274.6 million

+4.3%

After tax return on surplus

5.8%

2.5%

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The General Motors Mess Customers of the recalled GM cars lines the Cobalts and Ions want compensation for the loss of value of their vehicles. It stems from the faulty ignition switches and the failure of the car company to recall those cars.

GM does not want them to be allowed to sue.

U.S. Bankruptcy Judge Robert Gerber is hearing the case. He’s the guy who did the bankruptcy and who — at that time — did not give the owners of recalled vehicles the chance to have their say in court.

Maybe they’ll get it this time or maybe not.

No one knows when the judge will make his decision. At issue is 2.59 million cars. GM is likely on the hook for about $3 billion for the customers injured or killed by the faulty switches. The car company has already been fined $35 million for failing to issue a recall when it knew the switches were bad.

This year alone GM has recalled 25.7 million cars. It’s just one manufacturer with recalled vehicles in a year full of them. The National Highway Traffic Safety Commission says the U.S. has recalled 37.5 million of them so far in 2014 besting 2004’s previous record of 30.8 million. And that’s for a whole year. The 37.5 million is for just six-months.

Usually 10 million to 20 million vehicles are recalled in a year. Last year we saw just 22 million and there were 16.4 million in 2012.

The website buzzfeed.com disagrees with GM’s total of 25.7 million and says it’s more like 29 million. And to prove the point at how serious this problem has become, the website produced a webpage with graphics that show what 29 million cars look like. n Check it out: Buzzfeed

May 2014 | Main Street Industry News | www.pianeia.com | 18

Top Stories

Top Stories

Cyber Security UPDATE Law & Insurance & More

The Senate Intelligence Committee has passed legislation to give companies using what are called “critical” computer systems immunity and legal protections if they share information about hacking incidents or threats with other companies or the federal government.

Opponents — as we’ve heard argued before — say the Cybersecurity Information Sharing Act is a dangerous move that lets the National Security Agency (NSA) pick up information it doesn’t need about innocent Americans.

The legislation now goes to the full Senate.

And it has a lot of support in the House so if it passes the Senate it has a good shot there. Or so House Intelligence Committee Chair and Michigan Republican Mike Rogers.

The top Democrat on that committee — C.A. Dutch Ruppersberger of Maryland — also

wants to see the Senate bill passed and sent to the House.

It’s not a cakewalk. There is opposition in the Senate and will likely be some in the House.

Oregon Senator Ron Wyden — who is on the intelligence committee — opposes the bill. He and Sen. Mark Udall of Colorado both voted against the bill and issued a statement. Neither see this improving cyber security.

“We have seen how the federal government has exploited loopholes to collect Americans’ private information in the name of security.

Without these protections in place, private companies will rightly see participation as bad for business,” they said.

If passed by Congress the law will protect these companies from prosecution and from anti-trust

May 2014 | Main Street Industry News | www.pianeia.com | 20

Top Stories violations and it doesn’t require the companies to actually share anything. Experts and those on the committee who voted for the measure say there is clearly a need.

McAfee — the computer security application firm — paid for a study on cyber attack costs. It was done by the Center for Strategic and International Studies and found cybercrime costs banks, energy companies and retailers large and small $575 billion a year.

And that cost is expected to go up in the future and not down.

Sen. Saxby Chambliss of Georgia is the committee’s ranking Republican. He said we have to do something. “If we take no action then cyberattacks are going to continue to occur. There is the potential for the American economy to be severely interrupted.”

Committee chairwoman Sen. Dianne Feinstein of California agrees with Chambliss.

Something needs to be done — and quickly. “This is the first bill in a very difficult arena. It’s very much a first step. Later on there may be other steps that need to be taken.”

While the nation’s largest companies want something done, many are leery of this one and the potential costs of sharing that information. It means more paperwork. More

costs. And then there’s the potential for fines for noncompliance and on the list of worries goes.

Here’s another angle.

Cyber attacks may be good for business and for entrepreneurs. More and more companies are upgrading security but often their systems aren’t strong enough.

Those designing such systems have a bright future.

The bottom-line: there is money to be spent.

Some of that will be spent on insurance. Peter Foster who is the executive vice president of Willis North America and handles global network security and privacy said the need and popularity of cyber insurance — as you know — is growing. It has grown 20% annually in the last five-years.

Foster notes — no surprise — the demand is rising from banks and other financial institutions, health care related businesses, retailers, manufacturers and those doing business in technology.

Marsh & McLennan Companies did a report on cyber insurance. It found the market earned $1 billion in 2013. Gross written premiums could be double that in 2014 to $2 billion. Most of that money this year — 29% — will be spent by financial institutions.

The average limit purchased for that insurance is $11.5 million.

Allianz looked at cyber risks, too and found them to be one of the top-10 most worrisome business risks. In 2013 there were 614 breaches: • 43.8% — or 269 of the 614 — were on medical and health care firms.

• 23 attacks — or 3.7% — were on financial institutions.

• Information loss hit businesses for 43% of loss costs.

• Business disruption and lost productivity accounted for 36% of external costs due to a cyber attack.

• Revenue loss cost those attacked 17%.

• Equipment damages accounted for 4%.

Back to the Senate bill. Dr. Robert P. Hartwig who is the president of the I.I.I. said this bill has a chance. “Clearly, given that there is bipartisan support for cyber-related action, and there is also support within the Obama administration for legislation, this issue will be with us for a long time.” n

May 2014 | Main Street Industry News |www.pianeia.com| 21

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PIA NE IA Events

Upcoming Events Calendar 2014 For information and to register Click Here or call (402) 392-1611.

Date

Topic

State

Location

July 9 - 11, 2014

CIC: Commercial Casualty Institute

Omaha

Omaha Marriott Hotel

July 10, 2014

CISR: Insuring Personal Auto Exposures

Des Moines

Hilton Garden Inn Des Moines/Urbandale

July 17, 2014

CISR: Personal Lines Miscellaneous

Davenport Saint Ambrose University

July 21 - August 29, 2014

MERG: Personal Lines Coverage Basics

Online

Online Course

July 21 - September 5, 2014

MERG: New Agency Employee Orientation

Online

Online Course

July 22, 2014

CPSR: Residential Property

Columbus Dusters

July 30 - August 1, 2014

CIC: Personal Lines Institute

West Des Moines

Holiday Inn Hotel & Suites

August 12, 2014

BIP(idy), BOP(idy), Boo(ze): Turning 3 Mundane Coverages into Magic

Nebraska

Webinar: 12:00PM - 3:00PM

August 12, 2014

CPIA 2: Implement for Success

Des Moines

Hilton Garden Inn Des Moines/Urbandale

August 12, 2014

BIP(idy), BOP(idy), Boo(ze): Turning 3 Mundane Coverages into Magic (IA)

Iowa

Webinar: 12:00PM - 3:00PM

August 13, 2014

CPIA 3: Sustain Success

Omaha

Omaha Marriott Hotel

August 14, 2014

Changes to the Homeowners Program

Iowa

Webinar: 10:00AM - 12:00PM

August 14, 2014

FMO: Personal Line Claims, Cyberliability & Ethics

Grand Island

MidTown Holiday Inn

August 15, 2014

National Healthcare Reform (NE)

Nebraska

Webinar: 8:00AM - 11:00AM

August 15, 2014

National Health Care Reform

Iowa

Webinar: 8:00AM - 11:00AM

PIA NE IA Events

August 18, 2014

CYBERTECH- Recognizing and Insuring Electronic Risk

Nebraska

Webinar: 12:00PM - 3:00PM

August 18 - October 10, 2014

MERG: Commercial Lines Coverage Basics

Online

Online Course

August 18, 2014

CYBERTECH- Recognizing and Insuring Electronic Risk (IA)

Iowa

Webinar: 12:00PM - 3:00PM

August 18 - October 3, 2014

MERG: New Agency Employee Orientation

Online

Online Course

August 19, 2014

Ethics for Insurance Professionals - A (NE)

Nebraska

Webinar: 8:00AM - 11:00AM

August 19, 2014

Ethics for Insurance Professionals

Iowa

Webinar: 8:00AM - 11:00AM

August 21, 2014

CISR: William T. Hold: Advanced Learning Seminar

Des Moines

Hilton Garden Inn Des Moines/Urbandale

August 21, 2014

Seven Ways to get Sued and How to Avoid Them

Nebraska

Webinar: 8:00AM - 11:00AM

September 4, 2014

National Healthcare Reform (NE)

Nebraska

Webinar: 8:00AM - 11:00AM

September 4, 2014

National Health Care Reform

Iowa

Webinar: 8:00AM - 11:00AM

September 5 - October 31, 2014

MERG: New Agency Employee Orientation

Online

Online Course

September 9, 2014

2014 Annual Scholarship Golf Outing - Golf & Dinner Registration

Ashland

Iron Horse Golf Club

September 9, 2014

2014 Annual Scholarship Golf Outing Dinner ONLY Registration

Ashland

Iron Horse Golf Club

September 10 - 12, 2014

CIC: Life & Health Institute

Lincoln

Holiday Inn Lincoln Downtown

September 10, 2014

CISR: Insuring Personal Residential Property

Des Moines

Hilton Garden Inn Des Moines/Urbandale

September 12, 2014

E&O and the Legal & Ethical Duties of Agents/Brokers

Nebraska

Webinar: 8:00AM - 11:00AM

September 15 - October 24, 2014

MERG: Personal Lines Coverage Basics

Online

Online Course

September 17 - 19, 2014

CIC: Commercial Casualty Institute

Cedar Rapids

DoubleTree Hilton

September 22, 2014

ISO General Liability - 2013 Revisions

Iowa

Webinar: 12:00PM - 3:00PM

September 23, 2014

Business Income - How Much is Enough?

Iowa

Webinar: 10:00AM - 12:00PM

September 23, 2014

Business Income - How Much is Enough?

(NE)

Nebraska

Webinar: 10:00AM - 12:00PM

September 23, 2014

Farm Seminar: Enhancing Your Value to the Agribusiness Buyer & Ethics

Columbus

Holiday Inn Express Columbus

September 24, 2014

CISR: Agency Operations

Davenport Saint Ambrose University

May 2014 | Main Street Industry News |www.pianeia.com| 29

PIA NE IA Events

September 25, 2014

Ethics for Insurance Professionals

Iowa

Webinar: 8:00AM - 11:00AM

September 25, 2014

Social Networking: OMG or E&O?

Iowa

Webinar: 12:00PM - 3:00PM

September 25, 2014

CISR: Personal Lines Miscellaneous

Marion

Kirkwood Training Center

September 25, 2014

Social Networking: OMG or E&O? (NE)

Nebraska

Webinar: 12:00PM - 3:00PM

September 25, 2014

Ethics for Insurance Professionals - A (NE)

Nebraska

Webinar: 8:00AM - 11:00AM

September 26, 2014

It's Personal: Home and Auto Exposures your Insured Won't Tell You

Nebraska

Webinar: 8:00AM - 11:00AM

September 26, 2014

It's Personal: Home and Auto Exposures your Insured Won't Tell You (NE)

Iowa

Webinar: 8:00AM - 11:00AM

October 6, 2014

National Health Care Reform

Iowa

Webinar: 12:00PM - 3:00PM

October 7, 2014

BIP(idy), BOP(idy), Boo(ze): Turning 3 Mundane Coverages into Magic

Nebraska

Webinar: 12:00PM - 3:00PM

October 7, 2014

CYBERTECH- Recognizing and Insuring Electronic Risk (IA)

Iowa

Webinar: 8:00AM - 11:00AM

October 7, 2014

BIP(idy), BOP(idy), Boo(ze): Turning 3 Mundane Coverages into Magic (IA)

Iowa

Webinar: 12:00PM - 3:00PM

October 7, 2014

CYBERTECH- Recognizing and Insuring Electronic Risk

Nebraska

Webinar: 8:00AM - 11:00AM

October 8, 2014

Commercial Property Issues & Answers

Iowa

Webinar: 8:00AM - 11:00AM

October 9, 2014

CISR: Commercial Casualty 2

Des Moines

Hilton Garden Inn Des Moines/Urbandale

October 14, 2014

Waivers of Subrogation/Indemnity/ Certificates (NE)

Nebraska

Webinar: 8:00AM - 11:00AM

October 14, 2014

Waivers of Subrogation/Indemnity/ Certificates

Iowa

Webinar: 8:00AM - 11:00AM

October 15 - 17, 2014

CIC: Agency Management Institute

Omaha

Omaha Marriott Hotel

October 15, 2014

Changes to the Homeowners Program

Iowa

Webinar: 10:00AM - 12:00PM

October 20 - November 28, 2014

MERG: Delivering Quality Service (to the Customer and the Employer)

Online

Online Course

October 20 - December 5, 2014

MERG: New Agency Employee Orientation

Online

Online Course

October 20 - December 12, 2014

MERG: Commercial Lines Coverage Basics

Online

Online Course

October 21, 2014

Seven Ways to get Sued and How to Avoid Them

Nebraska

Webinar: 12:00PM - 3:00PM

October 22, 2014

Ethics for Insurance Professionals - A (NE)

Nebraska

Webinar: 12:00PM - 3:00PM

May 2014 | Main Street Industry News | www.pianeia.com | 30

PIA NE IA Events

October 22, 2014

Ethics for Insurance Professionals

Iowa

Webinar: 12:00PM - 3:00PM

October 23, 2014

Patches for the Imperfect Policy - Home, Work & Auto Edition

Iowa

Webinar: 12:00PM - 3:00PM

October 23, 2014

CISR: Dynamics of Service

Marion

Kirkwood Training Center

October 29, 2014

CISR: Insuring Personal Residential Property Davenport Saint Ambrose University

November 5, 2014

CISR: Insuring Commercial Property

West Des Moines

LaMair - Mulock Condon Insurance (LMC)

November 6, 2014

CISR: Commercial Casualty 1

Marion

Kirkwood Training Center

November 11, 2014

CPIA 3: Sustain Success

Des Moines

Hilton Garden Inn Des Moines/Urbandale

November 12, 2014

FMO: Agency Management & Loss Control

Omaha

Omaha Marriott Hotel

November 12 - 14, 2014

CIC: Life & Health Institute

West Des Moines

Holiday Inn Hotel & Suites

November 17 - January 2, 2015

MERG: New Agency Employee Orientation

Online

Online Course

November 17 - December 26, 2014 MERG: Personal Lines Coverage Basics

Online

Online Course

November 18, 2014

Omaha

Omaha Marriott Hotel

CPSR: Commercial Casualty

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May 2014 | Main Street Industry News |www.pianeia.com| 31

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Underwritten by Unimerica Insurance Company, Association Administrative Address, P.O. Box 17828, Portland, Maine 04112-8828, under Policy Form ADI-4001-a (UIC).

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