Page 1




Features News 5



Kim Komando


Inside Track




Insider Advisor


AIA Strongly Against Reckless RI Auto Body Legislation


Stop Loss Insurance is Not Re-Insurance By Barry Zalma, Esq.


Accu-Auto Offers Ideal, Affordable Agency Website Solutions


Leader of Massive Florida P.I.P Fraud Ring Sentenced





Say What?



Back Issues

Florida Announces Arrest of Senior Scammer for $2M Investment Fraud All 50 States & D.C. Reach $100M Settlement With A.I.G.

Table of Contents Continued...


The Underwriter’s Insider

News 22 23 24 27 32

Healthcare Futurist: Supreme Court Can’t Stop Healthcare Reform Most Dangerous Job in the Military? It’s Not Combat!

The Perfect Ice Breaker By Matthew A. Treskovich

AIA Position on House Passage of NFIP Extension Property Casualty Insurers’ Profitability Rose in First Quarter 2012

Sponsors 4 6 7 8 11 15 16 17 18 24 25 27 34 36 37

The Agency Advantage Modern Insurance Consultants Florida Insurance School Broadway Premium Funding Broadway Premium Funding St. James Insurance Company Aggressive Insurance

United Automobile Ins Company NASA - Eclipse Agency Mgt. Accu-Auto

Encore HR Personnel Solutions Orrin R. Beilly, Esq. Kingsway - Amigo Barry Zalma The Towing & Rental Group



The Underwriter’s Insider

Shocked by the rising cost of advertising? Relax... Reach tens of thousands of industry eyeballs for as little as $89 per month.

EZine (Online) Per Issue Rates All advertisements include a 200X600 pixel banner ad on The Underwriter’s Insider home page - as well as appearing on our weekly magazine announcement. All ads will link to the advertiser’s home page unless other instructions are given.



Ad Size









1/2 Page





1/3 Page





1/4 Page





1/8 Page






Ad Specs

Insider Rate Chart


Full Page 1/2 Page 2/5 Page 1/3 Page 1/4 Page 1/8 Page

Option 1 8.00” X 10.50” 4.00” X 10.50” 4.00” X 8.60” 8.00” X 3.25” 4.00” X 5.25” 2.50” X 4.60”

Option 2 8.00” X 5.25” 8.00” X 4.20” 5.30” X 5.25” 2.30” X 9.00” 4.60” X 2.50”

Full-Bleed 8.50 X 11.00

Banner Ads: 200X60 pixels, JPEG, PNG or GIF Format

The Insider can accomodate advertisements submitted in almost any format - but best results can be achieved with a 300DPI TIFF image. If your ad is in PDF, EPS, PSD, JPG or PNG format - send it in. Ad creation is usually free with agreements of 3X frequency or better. There will be a small charge for stock images when needed.


➨ Modern Insurance Consultants is a nationwide insurance agents E&O specialist and the #1 writer of agents E&O in Florida (FSLSO 2004 through 2010) ➨ Serving independent agents since 1994 ➨ One application gives you access to 18 markets writing agents E&O ➨ Modern Insurance Consultants has the E&O coverage you need • Limits available up to $10,000,000 • Premiums starting at $1,200 and deductibles as low as $1,000 • Exclusive E&O programs from A rated carriers • Insolvency, Defense Costs Outside the Limit and First Dollar Defense coverages available • 24 hour quote turnaround with our exclusive 2 page QuickQuote Application for agents and brokers available on our website

Have you been declined, non-renewed or rate increased? Apply now at 1348 Old Dixie Highway Homestead, FL 33030 ph: 305.248.9495 fax: 305.248.9496


The Underwriter’s Insider



ASHINGTON, D.C., June 13, 2012 – The American Insurance Association (AIA) views the passage of H. 7782A, adverse legislation which allows for nationally unprecedented private rights of action for auto body shops directly against insurers, by the Rhode Island General Assembly as poor public policy. The bill enables auto body shops to unilaterally set rates and sue insurers who do not agree to pay a shop’s rates and related repair costs.

Rhode Island is already one of the most expensive states in the nation for auto body repairs. Currently, drivers pay the sixth highest collision insurance premiums in the nation due in large part to higher than average claim costs including labor costs which exceed the national average by 26.7 percent.

AIA urges Governor Lincoln Chafee (I) to veto this legislation.

“Rhode Island’s drivers should say ‘no’ to increased litigation and increased repair costs,” said Henning. “H. 7782A “No other state in the nation allows auto pads the wallets of auto body shops body shops to set non-negotiable rates at the expense of consumers.” and attempt to force them on third H. 7782A was passed by the House party payers under threat of litigation,” on June 11 by a vote of 38 to 20 with said Gary Henning, AIA Northeast 17 members not voting. It passed region vice president. “This legislation the Senate late last night by a vote of represents poor public policy which 24 to 11 with 3 members not voting could lead to an explosion of litigation. just prior to the General Assembly’s It should be vetoed when it reaches adjournment. It now heads to the the governor’s desk.” governor for consideration.

Table of Contents


CONTENTS 2012 • Issue 6

A Publication of AdMax Media Corp Corporate Offices P.O. Box 31551 P. Beach Gardens, FL 33420

Ron Manera Editor/Publisher


© Entire Contents 2012


Table of Contents

To best navigate The Insider, begin with the Table of Contents and select your topic. On the bottom of most pages is a Table of Contents link that will immediately return you for your next topic selection. EVERY SPONSOR AD LINKS DIRECTLY TO THE SPONSOR’S WEBSITE. CLICK ON ANY AD TO VISIT OUR FINE SPONSORS!

The Underwriter’s Insider



by Kim Komando

very day, millions of Americans buy electronic gadgets and other products in stores. They dine out at new restaurants they’ve wanted to try. They visit salons to get massages. Chances are, a few hundred shoppers will get stuck in checkout lanes that won’t move. A few hundred diners will be served meals that are cold and distasteful. A few hundred massage clients will get rubbed the wrong way. When that happens, you can bet that many of these frustrated customers will visit online review sites and social media platforms to vent their frustrations. Occasionally, some of these incidents turn into feuds a n d

flare into lawsuits and major news stories. Bad reviews affect all kinds of businesses and services. Just last month, a pastor in Oregon filed a $500,000 defamation suit against a former member of his congregation who blogged some unflattering opinions of him. When reviews cross the line into libel or cause monetary damage, it can become costly to the poster. So discretion is always advisable. Additionally, as a small business owner, what should you do when the assault is on you? This calls for a refresher in Online Reputation Management 101. Studies conducted by consumer behavior and search experts say 7 out of 10 consumers trust online reviews just as much as they do

recommendations from friends and family members. So this is important. In our increasingly mobile and social world, reviews posted to Yelp, TripAdvisor and other sites can have a tremendous impact on local businesses. Whether you’re a business owner, a professional, or a hard-working barista, everyone spends a lot of time being a customer. And no business is perfect. When you’re the victim of poor service or a bad product, it’s all too easy to fire up the Web browser and start pounding the keyboard in a fit of rage. As a reviewer, take a deep breath and think about what you’re trying to accomplish with a review. Mainly, you want to make management aware of your experience in a calm, honest and rational manner. Who knows - maybe the restaurant will change the way it handles reservations, or the shop will begin offering a more liberal return policy. That’s a bonus. It’s a win for the business and also for folks who are researching online reviews a few weeks or months down the road. One thing is sure: There’s no chance you’ll bring about a positive change like that if you’re ranting, misspelling every other word and planting an exclamation point (or several) at the end of every sentence. On the other hand, when you

See Kim Komando Pg 37

Table of Contents


STOP LOSS INSURANCE IS NOT REINSURANCE By Barry Zalma, Esq. purchasing stop-loss insurance.

Self-Funded Employee Health Plan is Not Insurance


Lower Court Decisions

American National Insurance Company and American National Life Insurance Company of Texas (collectively American) are licensed to sell insurance in Texas. American sells stoploss insurance to self-funded employee health-benefit plans, among other types of policies. Under a self-funded benefit plan, an employer assumes the risk of providing health insurance to its employees, instead of ceding the risk to a third-party insurance company. The employer then either sets aside funds for its employees’ covered medical expenses or Barry Zalma, Esq., CFE is a California attorney pays for such expenses out of its specializing in insurance coverage, insurance general accounts. Self-funded claims handling and fraud who serves as plans typically hire third parties a consultant and expert for insurers and policyholders. He founded Zalma Insurance to administer the plan and often Consultants in 2001 and serves as its senior purchase stop-loss insurance consultant. He recently published an e-book, to limit financial exposure to “Insurance Fraud,” which is available at his Web catastrophic losses. site, Go to Zalma Books at

he Supreme Court of Texas was asked to resolve whether stop-loss insurance sold to self-funded employee healthbenefit plans is “direct health insurance” or “reinsurance.” The distinction was important because, in Texas, direct insurance is subject to state insurance regulation, while reinsurance is not. Reinsurance is not regulated because it typically involves the reallocation of risk between two insurance companies rather than a consumerinsurance transaction. In Texas Department of Insurance, Honorable Mike Geeslin v. American National Insurance Company and American National Life, No. 10-0374 (Tex. 05/18/2012) the parties disagreed about whether an The court of appeals concluded that employer who self funds a healthan employer’s self-funded plan was clearly an insurer under the Texas Join Barry Zalma’s new Blog: Insurance Code and that a plan’s purchase of stop-loss insurance was also clearly reinsurance beyond the regulatory scope of the Texas benefit plan for its employees is an Department of Insurance. “insurer” under the Texas Insurance Code, and therefore should be treated as a reinsured when



Table of Contents

During a routine audit, the Texas Department of Insurance discovered that American had sold stop-loss policies between January 1998 and December 2002 without paying taxes or complying with other regulatory requirements applicable to insurers. The Department later formally found that American had violated article See Zalma Pg 33 The Underwriter’s Insider


Table of Contents



ebsites have always been problematic for agents. Every agent knows having a website is mandatory. But where to start? How much to spend? Where to host? What about a domain name? How to drive traffic? Is an online business card sufficient or does the website need real functionality? The answer to these questions is often outside the experience realm of the insurance business person. And web consulting can be time consuming and expensive.

Finding an affordable web developer that understands the unique needs of the P&C agent has always been a challenge until now. Long-time agency software solutions provider Accu-Auto has introduced a package of scalable web services, AgencyThrive, that provides attractive, turn-key functional websites to fit any agency budget. With a basic 5-page, professionally created, server-hosted, key-word optimized, form-enabled website starting at only $20 per month and no setup fee, how can you go wrong? Choosing this basic website is a nobrainer for any agency currently without, and, critically, the package is scalable. What happens when you outgrow the basic website - or if you just need more pages, more content, such as staff photos? Just upgrade to the Premium 12

package at $35 per month - and still no setup fee. Still want more? The $60 per month Elite Website Package includes many more extras and hands-on weekly content changes if necessary for a custom-designed, content-rich website including “custom submission forms for your preferred lines.” Although a great, functional website is a real agency asset, it’s the next step that will really begin to make the agency’s cash register start ringing. The greatest website on the Internet has only limited value if it can’t be found by people searching for what you have to sell insurance. That next step is Web Marketing, often called search engine optimization (SEO). The experts at AgencyThrive know the secrets of driving traffic to your website by creating visibility on the major search engines (Google, Bing, Yahoo, Yelp, etc) and social medial sites such as Facebook and Twitter. Google Adwords campaigns will be managed and run based on your monthly budget. You will be given monthly analysis of your website search engine ranking and visibility. According to AgencyThrive, adding Web Marketing to your package will give you a world-class website that not only provides real functionality to your clients and prospects - but becomes a magnet for insurance shoppers in your area. For more information, contact: Gordon Ragan at 800.229.2009 Ext. 212 or email

Table of Contents

DO YOU KNOW A KEY PERSON IN THE CIGAR MFG. BUSINESS? National brokerage seeks individual with connections in cigar manufacturing and distribution. Exclusive business opportunity! Call John or Matt 1-800-359-5102 The Underwriter’s Insider



ifredo A. Ferrer, United States Attorney for the Southern District of Florida, Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRSCID), John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and Jeff Atwater, Florida Chief Financial Officer, announced that defendant Oscar Luis Franco Padron was sentenced today in West Palm Beach, Florida, before U.S. District Judge Kenneth A. Marra on charges of conspiracy to commit mail fraud, conspiracy to commit money laundering, and conspiracy to structure financial transactions, for his role in a staged accident fraud scheme. Franco Padron was the latest and highestranking member of the scheme to be sentenced. Padron, who managed several clinics and recruited patients, had pled guilty on January 11, 2012 to conspiracy to commit mail fraud, conspiracy to commit money laundering, and conspiracy to structure transactions. Padron was sentenced to 96 months in prison, to be followed by 3 years of supervised release, along with restitution in the amount of $4,351,082.13. Over the past several weeks, U.S. District Judge Marra has also imposed sentences on defendants Joaquin Ross, Aureliano Diaz, Lisbet Leon, Yida Bello, Gloria Cintron, Veronica Riofrio, Ketty Gonzalez, Ernesto Miralles, Julio Fernandez Delgado and Zachary Keith Stuhler for their roles in the same fraud scheme.

U.S. Attorney Wifredo A. Ferrer stated, “This massive ring orchestrated phony automobile accidents and made a living by defrauding insurance companies of millions of dollars. Auto insurance fraud is not a victimless crime. Not only were the insurance companies defrauded, but this scheme also hurt consumers as our insurance costs continue to soar because of fraud.” Jose A. Gonzalez, Special Agent in Charge of IRS Criminal Investigation Division said, “Those who think that staged insurance fraud scams are the perfect “get-rich-quick” schemes, need to think again. As uncovered in these investigations, structuring cash transactions in order to evade currency reporting requirements is a crime that will not go undetected by our investigators. The sentences imposed on these defendants illustrate that fraudsters will be put out of business and will not be allowed to enjoy their ill-gotten gains.” “Oscar Luis Franco Padron staged car accidents in order to defraud insurance companies,” said John V. Gillies, Special Agent in Charge of FBI Miami Division. “His unethical and illegal actions motivated by personal greed ultimately led to a jail cell, not riches.” Jeff Atwater, Florida Chief Financial Officer stated, “Fraudsters and criminal enterprises have learned how to game Florida’s auto insurance system and every honest Floridian with a car on the road ends up paying. Through partnerships with law enforcement and state attorneys, we will go after

Table of Contents

these criminals, put them in handcuffs and deliver them to justice.” In their guilty pleas, the defendants admitted they and others would find individuals who owned automobiles and had car insurance from insurance companies that scheme participants preferred in order to participate in staged automobile accidents. In recorded conversations, the recruiters, co-defendants Franco Padron, Ross, Cintron, and Riofrio, have referred to the individuals whom they recruit as the “Perro” and the “Perra.” The “Perro” is the person who causes the staged accident; the “Perra” is the purported victim of the staged accident. To execute the scheme, the recruiters seek out drivers and their friends/family members to participate because, under Florida’s “No Fault” insurance law, insurers must provide Personal Injury Protection (PIP) coverage of $10,000 per person. Thus, if the recruiter finds a Perro with a wife and two children and a Perra with two friends, for a total of seven (7) participants, the maximum PIP benefit is $70,000. Once the recruiters found the participants, they coached the participants on how to perform the staged accident, what to say to the police officer who responded to the scene, and on how to claim that they have been injured. Thereafter, the accident was staged. After impact, a police officer was called, and a police report was filed. After the staged accident, the Perro and Perra filed false claims with their insurance See P.I.P. Fraud Busted Page 14 13

Continued From Page 13


companies, alleging that they and their family members were injured.

a way to avoid the $10,000 Currency Transaction Reporting requirement – a requirement that was known to the co-defendants by virtue of prior bank notifications orally and in writing. Two of the co-defendants would write a series of checks, typically for $9,000 each, made payable to different individuals, including Franco Padron and Ross, that would be cashed on the same day, or made payable to the same individual that would be cashed on successive days, even though there were sufficient funds available in the account to allow for a single check to be cashed. Oftentimes co-defendants would go to the bank together to cash

Vasquez or Quinito, Lisbet Leon, aka Lisbet Leon Machado, Aureliano Diaz, Carmen Venegas, Yida Bello, aka La Gorda, Gloria Patricia Cintron, aka Patty, and Veronica Riofrio, aka Vero. Lopez and Vigoa Mauri are fugitives. In the second indictment, defendants Ketty Gonzalez, Ernesto Miralles, Julio Fernandez Delgado, Alex Anoldo Flores, and Zachary Keith Stuhler were charged with one count of conspiracy to commit mail fraud, and nine counts of mail fraud. Each charge carries a maximum sentence of 20 years’ imprisonment.

The accident participants were then directed by the recruiters to chiropractic clinics that were controlled by co-defendants. The staged accident participants filled out paperwork falsely asserting that they suffered injuries during the staged accident. The defendants advised the participants on how to fill out the paperwork Defendant Ross, who served as and what to say if an insurance “The staged accident participants a clinic manager, pled guilty on investigator interviewed November 4, 2011 to one count were instructed to sign numerous them about their injuries or of conspiracy to commit mail blank treatment forms that would treatment. The staged accident fraud, one count of conspiracy participants were instructed to later be submitted indicating that they to commit money laundering, had visited the clinic on a number sign numerous blank treatment and one count of conspiracy to forms that would later be of separate occasions for treatment, structure financial transactions. submitted indicating that Ross was sentenced to 51 although they may have visited the they had visited the clinic on a months in prison, to be followed clinic only once or twice.” number of separate occasions by 24 months of supervised for treatment, although they release, along with restitution in may have visited the clinic only once or checks simultaneously, but each check the amount of $715,937.81. twice. During their visits, some staged would be written for less than the accident participants received no $10,000 currency transaction reporting Defendant Bello, who served as an LMT, treatment at all, or may have received amount. previously pled guilty on November only a short exam or treatment from 29, 2011 to one count of conspiracy to the Chiropractic Physician, Licensed The clinics involved in this scheme commit mail fraud. Bello was sentenced Chiropractic Assistant, or Licensed included Chiropractic Office of South to 60 months in prison, to be followed Massage Therapist (LMT), but the Florida, located in Palm Springs, Florida, by 36 months of supervised release, paperwork completed by the LMTs New York Medical and Rehab Center, along with restitution in the amount of and chiropractors indicated that a located in Lake Clarke Shores, Florida $2,233,409.56. full and lengthy exam and treatment and Healthcare’R Us in Palm Springs, was given. Co-defendants Leon, Diaz, Florida. Defendant Cintron, who recruited Bello, and Gonzalez are all LMTs who patients to participate in staged will lose their licenses due to the fraud Fifteen individuals have been charged accidents, and defendant Leon, who convictions. in two federal cases involving the served as an LMT, each previously scheme. In the first case, in addition to pled guilty on December 2, 2011 to Co-defendants Franco Padron and Padron, the Superseding Indictment one count of conspiracy to commit Ross also admitted that, when charges defendants Vladimir Lopez, mail fraud. Cintron was sentenced to converting the deposits of the mail Lazaro Vigoa Mauri, aka Lazaro Vigoa, fraud proceeds to cash, it was done in Joaquin Ross, aka Joaquin Ross See P.I.P. Fraud Busted Page 16 14

Table of Contents

The Underwriter’s Insider



ALLAHASSEE—Florida Chief Financial Officer Jeff Atwater announced today the arrest of former insurance agent Neal Seth Smalbach, 49, of Palm Harbor, for grand theft in misrepresenting details of financial products to multiple senior clients who allegedly suffered losses of more than $2 million in unsuitable financial investments. “Florida’s seniors have worked hard for many years to earn their money and

prepare for retirement,” CFO Atwater said. “Criminals who choose to prey on the elderly for their own financial gain will be caught and they will be brought to justice.” An investigation by the Department of Financial Services Division of Insurance Fraud revealed that Smalbach allegedly misrepresented the factual details of investment products to multiple senior citizens for personal gain. As a result of Smalbach’s

Table of Contents

misrepresentations, an estimated $4.6 million was invested by seniors in product that were unsuitable for them. The Division of Agent and Agency Services also conducted an investigation of Smalbach and alleged that he falsified two applications for insurance to an insurer. On March 22, 2012, the division entered into a settlement with Smalbach providing for the surrender of his licenses with the same force and effect as a revocation and his permanent ban from the insurance industry. Smalbach was booked into Pinellas County Jail and is awaiting bond. If convicted, he faces up to 54 years in prison. The Office of Statewide Prosecution will prosecute the charges against Smalbach. 15

Continued From Page 14

P.I.P. FRAUD RING BUSTED 16 months in prison, to be followed by 24 months of supervised release, along with restitution in the amount of $53,558.90. Leon was sentenced to 40 months in prison, to be followed by 24 months of supervised release, along with restitution in the amount of $718,325.14. Defendant Riofrio who recruited patients to participate in staged accidents and also participated in an accident herself, and defendants Diaz and Venegas, who worked as LMTs and office staff, each previously pled guilty on December 20, 2011 to one count of conspiracy to commit mail fraud. Riofrio was sentenced to 16 months in prison, to be followed by 24 months of supervised release, along with restitution in the amount of $53,558.90. Diaz was sentenced to 60 months in prison, to be followed by 36 months of supervised release, along with restitution in the amount of $1,495,187.31. Venegas was sentenced to 60 months in prison, to be followed by 24 months of supervised release, along with restitution in the amount of $1,891,228.42. Defendant Gonzalez, who worked as an LMT, previously pled guilty on February 24, 2012 to one count of conspiracy to commit mail fraud. Gonzalez was sentenced to 30 months in prison, to be followed by 24 months of supervised release, along with restitution in the amount of $273,226.24.

on February 24, 2012 to one count of conspiracy to commit mail fraud. Miralles was sentenced to time served (approximately 3 months in prison), to be followed by 24 months of supervised release, including 6 months of home confinement, along with restitution in the amount of $14,617.

March 1, 2012 to one count of conspiracy to commit mail fraud. Delgado was sentenced to time served (approximately 4 months in prison), to be followed by 24 months of supervised release, including 6 months of home confinement, along with restitution in the amount of $34,158.73.

Defendant Stuhler, who participated in a single staged accident, previously pled guilty on February 24, 2012 to one count of conspiracy to commit mail fraud. Stuhler was sentenced to 36 months of probation, including 6 months of home confinement, along with restitution in the amount of $14,617.

r. Ferrer commended the investigative efforts of the IRSCID, FBI, Florida Department of Financial Services, and Florida Department of Insurance Fraud, and issued a special thanks to the National Insurance Crime Bureau (NICB) for its assistance in this investigation. The cases are being prosecuted by Assistant U.S. Attorney A. Marie VillafaĂąa.

Defendant Miralles, who served as a Defendant Delgado, who served as a patient recruiter, previously pled guilty patient recruiter, previously pled guilty on 16

Table of Contents


The Underwriter’s Insider

Table of Contents



he F.Y.I. Express reports that Georgia’s recently passed SB385 will allow a combination invoice and cancellation notice on monthly policies. The provision becomes effective July 1, 2012 View SB 385 HERE.


ccording a recent report by PEW Research, “A majority (55%) now say that they are hearing mostly bad news about the job situation. While that is up sharply from March (38%), it is closer to the numbers recorded late last year: 51% said this in early December and 64% in November. This measure hit a peak last August (74% mostly bad news), amid increased concern about an economic slowdown. Nearly half (47%) say they are hearing mostly bad news about the financial markets. Again, that is up sharply from March (29%), but about where it stood last November (50%). Last August, about seven-in-ten (69%) said they were hearing mostly bad news about the markets.”

by the Taliban in support of Islamic tradition and the “religion of peace.”


ccording to a recent PEW Research report: “Asian Americans are the highest-income, best-educated and fastest-growing race group in the U.S., with Asians now making up the largest share of recent immigrants. A new report finds Asian Americans are more satisfied than the general public with their lives, finances and the direction of the country, and they place a greater value on marriage, parenthood, hard work and career success.” MORE


he American Insurance Association reported the Oklahoma Self-Audit Privilege Bill will allow insurers to complete selfaudits, and confidentially report any relevant compliance-related matters

to the Oklahoma Department of Insurance. Insurers could then work with the Oklahoma Department of Insurance to ensure compliance with state codes and regulations. The bill also guarantees that self-evaluation documents shall remain confidential and not be subject to the Oklahoma Open Records Act. A common sense, non-adversarial piece of legislation...


niversal Insurance Holdings, Inc. (“Company”) (NYSE MKT: UVE) announced the pricing of the previously-announced resale by its President and Chief Executive Officer, Bradley I. Meier of 1,500,000 shares of the Company’s common stock previously registered for resale with the U.S. Securities and Exchange Commission (SEC) at a price to the public of $3.30 per share. The offering is expected to close and settle on June 27, 2012, subject to market and other customary conditions.


ccording to a recent survey by Connecture, the company that builds the systems brokers, carriers, and exchanges use to provide insurance


U Insurance watchdog reports that European insurers’ solvency collapsing as a result of low interest rates and choas in the marketplace all triggered by the “euro zone debt crisis.”


ove “Diversity?” The very populur singer Ghazala Javed and her father, leaving a beauty parlor in NW Pakistan where shot down and killed by men on motorcycles. The Taliban has banned music, singing and dancing as it is inconsistant with Sharia law. Several other muscians and singers have been murdered


Table of Contents

The Underwriter’s Insider

to more than 25,000,000 Americans, • More than half (56%) of insurance executives believe that most health insurance will be sold through exchanges within five years. Nearly a third believe they will be government-run exchanges. • Nearly two-thirds (61%) believe that, five years from now, the majority of small businesses will not offer health insurance to their employees. • Among respondents, 28% say they would most trust privatesector stalwarts like Walmart to drive down the cost of healthcare (as opposed to the government or the health insurance industry itself ). • More than half (61%) believe President Barack Obama will benefit more from the upcoming Supreme Court ruling than presidential candidate Mitt Romney. • Only 4% of health insurance executives say they believe the country is on the right track when it comes to health insurance. More than 40% say something has to “fundamentally change”and 40% say the current course “isn’t sustainable over the long term.” • Nearly half (49%) of respondents believe that unhealthy living habits are most responsible for the increase in healthcare costs, while more than 20% believe healthcare providers are most responsible. 16% cite government regulations as being most responsible.


EW Research reports: “Less than five months before Election Day, voters are not as engaged with the presidential campaign as they were at this point four years ago, but engagement generally equals or exceeds levels from the four campaigns prior to 2008. The horserace between President Barack Obama and former Gov. Mitt Romney is nearly even. Republicans hold the edge on several turnout measures, but Democrats are more enthusiastic about their candidate.” MORE


nternational Risk Management Institute, Inc. (IRMI), recently established the Personal Lines Insurance Forum as a group on LinkedIn to focus solely on personal lines issues. Personal lines insurance agents, brokers, underwriters, or adjusters are invited to exchange ideas and information when they join this community at The Personal Lines Insurance Forum already has more than 200 members. IRMI President & CEO Jack Gibson said, “While there are many insurance groups on LinkedIn, we are unaware of any that focus specifically on personal lines property and casualty insurance. This new group gives these insurance professionals a place to exchange knowledge and network.”


omebody has finally compiled the 10 fastest speeds ever achieved on the Autobahn - and the slowest of them is a ZR-1 Corvette at 192 MPH. You won’t believe the fastest speed. Click HERE


he new Trusted Choice mobile application is for use on smartphones and tablet computers. It provides consumers with the ability to keep an inventory of their insured personal possessions, document a car accident with photos, read consumer insurance tips, and communicate with their Trusted Choice agent. The Trusted Choice mobile app was released in March in two versions: 1) A co-branded version that can be customized for Trusted Choice agencies with their logos and color schemes. 2) A “Trusted Choice” version that includes a “find an agent” feature that helps consumers find a local Trusted Choice independent agent. The mobile app is available in the iTunes store for use on iOS devices such as iPhones and iPads, and in the Google Play store for use on Android phones and tablet computers. It is a free download for consumers.

Table of Contents


. Roy Bridges, Regional President of Brown & Brown, Inc. (NYSE: BRO), together with Brian W. Cruden, the president and sole shareholder of Insurcorp, and Georges G. Maalouf, manager and sole member of GGM Investments LLC d/b/a Maalouf Benefit Resources, both located in Las Vegas, Nevada, today announced that Brown & Brown Insurance of Nevada, Inc., a subsidiary of Brown & Brown, Inc., has acquired certain assets of Insurcorp and Maalouf Benefit Resources, which recently combined under the name “Insurcorp.”


New York appellate court found that workplace assaults aren’t compensable under New York law if they are “motivated by purely personal animosity.” The ruling concerned a NY State clerk who was injured after engaging in fisticuffs with another passenger on a shuttle bus to a parking lot.


he Florida Office of Insurance Regulation signed a Consent Order that allows the nineteenth reinsurer, Endurance Specialty Insurance, Ltd. (“Endurance”), to post reduced collateral and operate in Florida as an eligible reinsurer. This Consent Order makes Endurance the seventeenth Bermuda reinsurer to operate in Florida with similar terms. The other two eligible reinsurers were from Germany and the United Kingdom.


. Carolina Insurance Commissioner Wayne Goodwin announced the arrest of Nell Marie Griffin, 34, of 140 Douglas Drive, Holly Ridge; she is charged with one count of embezzlement by an insurance agent. Department of Insurance criminal investigators allege that between Nov. 1, 2011, and Feb. 15, 2012 — while working as an agent for SFI Group Insurance in Surf City — Griffin embezzled $7,853.77 that was submitted by customers for auto insurance premium payments. 19

Marketplace Recently Announced P&C Markets


Agent’s E&O

odern Insurance Consultants - #1 writer of Agent E&O in Florida 18 markets - 24 hour quote turn-around. 305.248.9495 -


LB Insurance Group has recently added Agent’s E&O to an extensive list of professional liability risks that can be written through the brokerage. Contact Darren Marsh at 954-724-7014 for a quick app. [12-6]


rofessional Underwriting Group - $974 min premium - $1K to $10K ded. New Agencies OK - Association discount. 800281-4234 -


ational Ins Underwriting - Limits $300K to $2M - Premiums starting at $1400 with low ded. Available most states. Discounts for loss-free experience and losscontrol efforst. Call Craig Calver - 800-3382680 X 507.



viation Products & Liability Insurance from Arlington/Roe & Company - MGA - representing mulitple markets. Contact: 800.878.9891 X 2401. Cfrench@ [11-6]


Chemical Mfg & Distribution Risks

uel additives, Industrial gases, paints, varnishes, lacquers, enamels, solvents, adhesives, sealants and a multitude of other chemical manufacturing and distribution risks. Min Prem $20,000 and other underwriting criteria. See Sloan Mason: Contact Grant Kanamori @ 619814-2488 or [117]


Commercial Auto

ational Ins Underwriting - Light, medium & heavy up to 66,000 lbs. up to 500 mile radius, Up to $1M CSL or $1/$2M split, Phys Dam up to $100K - Med Pay, Hired and NOL. Contact: Call Craig Calver - 800-338-2680 X 508.


ingsway/Amigo Competitve commercial auto program. Any size fleet, - all types of cars, light trucks and vans - specialty services, like landscaping, electrical, plumbing, lunch trucks and other various occupations. info@


Condo Assoc Program

rident is offering tailored coverage designed for condominium town home and single-family community associations claiming competitive rates and terms. Coverages available include property, including flood, earthquake and coastal windstorm, general liability, D&O, umbrella, worker’s comp, auto, crime and property mgrs E&O. Trident Community Association Program - 5100 N. O’Connor Blvd, #200, Irving, Texas 75039 or email to 877590-0775 [11-6]



eavy construction risks including steel erection contractors, concrete contractors, roofing contractors, bridge, street & road contractors, etc. Norman Spencer - Contact Brian Harrold p: 937.432.1469 [11-7]


Contractor’s Pollution

ost contractors - including those with mold exposures and cleanup contractors. Program includes CPL - Occurrence or Claims Made form - mold coverage available - Annual & Per Project policies. Highly competitive rates claimed. All Risks, Ltd - Lou Ann Cook - 800-3665810 X 3030 email: [12-4]


Convenience Store

rgo Insurance announces expanded program and competitive rates for convenience store accounts. Company is looking for stores open until 11PM, fuel sales up to 90%, alcohol sales up to 30% with no fuel hauling exposure. Not available in Florida at this time. Email 877590-0775 [11-6]


Design & Construction Industry


rchitects, engineers & surveyors, construction managers, contractors, environmental consultants, landscape architects, specialty construction consultants. Contact Jeff Grigsby 877.453.2071 - [116]


Energy & Utility Risks

il & Gas Companies, pipeline operations, utilities, HVAC contractors and water & sewer contractors. Contact Victor O. Schinner & Co., Inc. Jeff Grigsby - 877-453-2071 or jeffg@ [12-1]


ropane Dealers - PowerWrap is an endorsed insurance program offering specialized, full spectrum coverage. Contact Alteris: 877-590-0775 [12-1]


Entertainment & Sports

&K Insurance claims “over 75 programs available on admitted paper with no prior approval or appointment needed to submit applications for quotation. “ The MGA can be reached at 800-637-4757 or www. [11-6]


Group Homes

roup Homes Programs for such risks as Hospice, Agencies for Aging, Homeless Shelters, Rehab Facilities, Adult Day-Care Facilities, etc. Comprehensive packages available - limits up to $1M/$3M - customize with many optional coverages. AFC Insurance - Toll Free: 877-456-5323


Hair & Beauty Insurance Program

ASS - Salon & Spa Specialty Insurance administered by Brownyard Group open to agents seeking access to program. 888-823-9380 or Email: sassi@brownyard. com [11-7]

The Underwriter’s Insider

Table of Contents


Health & Human Services

FC Insurance - Package programs or ala carte. Contact: 877-456-5323 [12-2]


Kidnap & Ransom

cademic institutions, energy companies, engineering firms, hospitals and healthcare, houses of worship, manufacturing firms, etc. Contact Victor O. Schinner & Co., Inc. Jeff Grigsby - 877-453-2071 or jeffg@ [12-1]


Life Agent E&O

ife agent E&O from Rockwood Programs. Coverage limits from $250K to $1 Million. Base rates from $400 to $550. Individual policies. Indentity theft included. No shared aggregates. Includes mutual fund placement. Call 877-242-2487 or email [12-4]

Marine Risks Worker’s Comp & Longshore & Harbor Workers’ Comp


eaBright Insurance Company offers high quality workers’ compensation coverage for your clients who are small maritime employers and other marine-related businesses. SeaBright provides seamless cov All Risks, LTD 410-828-5810 rlang@allrisks. com or Appalachian Underwriters, Inc. – Oak Ridge, TN 865-425-1051 warren. or Peachtree Special Risk Brokers – Metairie, LA 504830-7347 [11-7]


Send your press release or one-paragraph announcement to


ational Ins Underwriting -Webbased quick quotes, most protection classes & zip-codes OK - $40K - $750K dwelling values with replacement cost available. No credit scoring. Renters policies available. Contact: Craig Calver - 800-338-2680 X 508.


Have a P&C Product Announcement?

Martial Arts

&K Insurance announces expanded coverage & lower minimum premiums on martial arts coverage. General Aggregate Limit increased to $5M - Participants Med Pay to $150K. The MGA can be reached at 800-637-4757 or www.kandkinsurance. com. [11-6]


Ocean & Inland Marine

prdwode Facilties, Inc. Contractors doing: piers, docks, wharfs, bridges, breakwaters, cranes, dredging, etc. 6455 East Johns Crossing, Suite 115 Johns Creek, GA 30097 (678) 736-6720 • Facsimile: (678) 736-6726 - Carter, Kimberly - 678 736-6720, Ext. 1000 - kcarter@ [11-7]

Privacy/Data Breach Coverage


irst party expense and third party liability coverage available for many E-Threats and E-Exposures. Contact RPS, Inc. at 800-336-5659 or 11-7]


Professional Liability

echnology & Cyber, Architects & Engineers, RE Agents, Insurance Agents E&O, Misc. Pro Liability - and more: Contact Atlantic Specialty Lines 877545-9100 [12-1]


LB Insurance Group has an extensive list of professional liability risks that can be written through the brokerage. Very competitive rates and easy apps. Contact Darren Marsh at 954-7247014 for quick app. [12-6]


ictor O. Schinnerer - A-rated carriers -Real Estate Agents, Healthcare Consultants, General & Artisan Contractors, Architects, engineers & consultants, public entities such as school leaders and public officiials. Contact: 877-4532071 jeffg@


Real Estate E&O

overage for open houses, mold, network risks and privacy claims are now part of

Victor O. Schinnerer & Company’s Real Estate E&O policy. Schinnerer includes the three new coverages at no additional premium. Call to ck on your state: Starr Crusenberry - 301-951-6904 [11-6]




Security Guard

rgo Insurance announces lower rates filed on restaurant coverage including food spoilage coverage. Full commission and no agency appointment necessary. Company is looking for family style, family grills, casual style, fine dining and limited cooking restaurants such as pizza and sub shops. Email 877-590-0775 [11-6]

rownyard Programs announces coverage for security guards, claiming to insure 15 of the top 40 security guard companies in the U.S. Brownyard Programs or [12-4]

Tech Consultants E&O


odern Insurance Consultants - website design, software development, database admin, web hosting, software/hardware sales and more. IT consultants up to $15M in annual sales. Contact Andrew Lawrie - 305-248-9495 X 9108 [12-2]

Vacant Property Coverage


he Atlantic Risk Specialists announces commercial package policies up to $3M limit - higher limits available. Target States -- NY, NJ, PA, CT, MD, DE, OH, MA, VT Dan Capone 201-661-2419 - dcapone@ [12-6]


Table of Contents



ALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty today announced that a settlement agreement between the American International Group, Inc. (AIG) and its affiliates with all 50 states and the District of Columbia has become fully effective. The settlement is a result of AIG misreporting $2.12 billion of workers’ compensation premium as other lines of insurance. As part of the settlement agreement, AIG agreed to pay a national penalty of $100 million, and $46.5 million in additional premium taxes and assessments. The Office of Insurance Regulation (Office) will receive $5.6 million in fines and penalties with an additional $8.7 million split between the Department of Financial Services (DFS) Division of Workers’ Compensation, Department

of Revenue (DOR) and the Florida Workers’ Compensation Insurance Guaranty Association (FWCIGA). "AIG systematically underreported workers' compensation insurance premium by putting this premium into the general liability or commercial automobile liability categories,” stated Commissioner McCarty. "The practical effect of this misreporting was to report premium in lines of business with lower residual market obligations or premium tax rates and assessments. I am pleased by the collaborative multi-state investigative effort that will yield millions of dollars in unpaid taxes owed to the states." The lead states issued their multi-state examination report in December 2010 and entered into a related regulatory settlement agreement. The agreement

was subject to several conditions, all of which have now been resolved. One of those was a $450 million residual market settlement that was approved by the U.S. District Court in February 2012. The remaining open condition, a settlement with insurance guaranty associations, was satisfied on May 30, 2012 when a $25 million settlement agreement was signed. Florida was one of the lead states in this multistate examination along with Delaware, Indiana, Massachusetts, Minnesota, New York, Pennsylvania, and Rhode Island. As part of the agreement, AIG entered into a compliance plan concerning the financial reporting of its workers’ compensation premium, and going forward agreed to be monitored and subject to a follow-up examination by the lead states in two years.




AUSALITO, Calif., June 20, 2012 -- With the Supreme Court's decision on the healthcare reform act expected within the week, both hope and fear are building that the Court will stop healthcare reform in its tracks. But a healthcare futurist argues that the real reforms in healthcare will survive with or without the law.

on the legislation. They are driven by economics," according to Joe Flower, a healthcare industry analyst and futurist who has worked with the World Health Organization, the U.S. Defense Department, and many Fortune

"The really big changes already happening in healthcare aren't riding

Better healthcare costs less. It has to. Some in the industry have figured this

100 corporations. "The big secret inside the industry is:

Table of Contents

out, and others are just hoping no one will notice." According to Flower, "We can expect a very different, and quite a bit smaller industry over the coming years. But this is not really about cutbacks or rationing. The industry is just now realizing that the only way to do healthcare for significantly less money is to do it better, smarter, leaner, to get to people with more help, earlier -- especially the five percent of the The Underwriter’s Insider

population who consume half of all the healthcare resources," he says. "The changes we are seeing are fundamental, they are growing, and there's really no going back." Flower is a frequent healthcare speaker (http:// and consultant for groups like the American Hospital Association, Blue Cross Blue Shield, and numerous hospitals, health plans, employers and pharmaceutical companies across the industry. Flower's new book, Healthcare Beyond Reform: Doing It Right For Half the Cost, tells the stories of aggressive experiments and rapid change in America's largest industry. "The industry is huge. If it were a country, U.S. healthcare would be the sixth largest economy in the world. And it's been very stuck," he says. "With all the political noise, people have assumed that the only way to change healthcare is to pass a reform act in Congress. In fact, we are at a tipping point. Companies, health systems, states, Native American tribes, the VA, business coalitions, even some health plans, have been trying practical new ways of paying for healthcare, new ways of bringing it to people. And some of those experiments have been succeeding -- driving down costs while helping people be healthier. These new programs are changing the industry from the inside out." Flower, who helps businesses and the healthcare industry prepare for change, estimates that the U.S. could get better healthcare for all Americans for half as much as it pays today. "That's a conservative estimate. Smarter healthcare is so much cheaper. Do it right, and we could save $1 trillion per year. In fact, that is the only real answer to reducing the federal deficit."

MOST DANGEROUS JOB IN THE MILITARY? NIGHTTIME CARRIER LANDINGS! Add a pitching deck and 30 knot gusts and you have moments of sheer terror...


ombat flying is stressful and dangerous - but most Navy pilots would consider a bombing or support run into Afghanistan less risky than a night time carrier landing.

What can be daunting in a Cessna can be flat overwhelming, at night - in a jet fighter careening at 150mph towards a massive, often pitching hulk of an aircraft carrier - where pilot error or an unfortunate equipment malfunction can spell instant death.

After a gut-wrenching 3-4G turn to final approach, the pilot, now about 500 feet over Click Image To View the waves, must focus intently Any pilot will tell on three things: you that landing is Angle of attack the most stressful (the angle at and dangerous which the wing segment of any intersects the flight. Take off is prevailing air so easy that a first mass), line-up time pilot could with the carrier’s manage it with only a little help - if no wind. The landing strip (10 degrees off center cruise portion of flight is even easier if from the heading of the ship) - and one is only considering control of the the “meatball.” aircraft. It’s the landing that’s the trick - and that’s the same in a Cessna 152 The “meatball” is a specialized light off the back of the ship, giving the or a F/A-18 Super Hornet. pilot exact glideslope reference. The In the landing phase of flight, simply meatball moves up or down against navigating into the landing pattern another stack of lights - telling the can be a challenge. On approach, a pilot if he is high or low on approach. pilot must manage his speed, altitude, angle of attack, fuel supply, rate of While a land-based aircraft is flared descent and heading very precisely just before touching down, the - while monitoring other aircraft carrier-landing pilot literally flies his and instructions from tower or LSO aircraft directly into the deck - often (Landing Signal Officer). Engine power called a controlled crash - where with must be constantly monitored as well the engines now at full-throttle in the as flaps or speed brakes. Landing event of a miss - a tailhook hopefully gear must be down and locked - and grabs an arresting cable and slows if visibility is low, landing lights must the jet from 150mph to a dead stop in about 1 second. Wow. be on.

Table of Contents




t public (state) institutions, financial aid is still primarily based on a determination of “need” that is derived from the Free Application for Federal Student Aid (FAFSA) form. Exceptions include athletic scholarships, small honors programs and, sometimes, the “best” out-of-state students are offered the in-state rate. Many private colleges and universities now offer “merit aid” that a Philadelphia-based firm has turned this into a business venture – a unique client rewards program that financial advisors can now use through insurance marketing organizations. SAGE Scholars, Inc. was founded in 1995 by the former Director of


Admissions Families are loving the and Financial program. Agents can Aid at The showing parents how to W h a r to n use Life Insurance and Graduate SAGE to help pay for a Division of the child’s college education University of -- as well as providing a Pennsylvania. tax free death benefit The Tuition just in case. The best part Rewards® is the client doesn’t pay p r i v a t e anything for the SAGE college & Scholarship, and the university agent doesn’t give up enrollment Matthew A. Treskovich any commissions. This is marketing simply a win, win! consortium, is a growing enterprise that has expanded to 292 member colleges The diverse Tuition Rewards college (as of 4-30-12) in 45 states, from Maine to Hawaii. See Treskovich Page 34

Table of Contents

The Underwriter’s Insider


“The Final Authority on Everything!” Hazard-On-Wheels


y husband was hell-onwheels when he was young, but now it’s a challenge for me to even get him up to the speed limit. He likes to smugly cruise 5mph under the limit and thinks he’s the safest driver on he road. Mostly, it’s just annoying because we are late to every function, but it gets downright dangerous when he insists on hanging in the left-lane off I-275 at exactly the speed limit. He says if he is going the speed limit, then nobody should be legally passing him anyway. I am just tired of the horn blowing, headlight flashing and one-finger salutes and I’m afraid that someone is going to one day do something really stupid. How can I get this guy to wake up? - G.E. Douglasville, GA


lane of a limited access highway, things can get really interesting as all good drivers understand this lane is reserved for passing (in the presence of other vehicles) and are smart enough to yield the lane when a faster vehicle approaches from behind. Some states (including Florida) are even considering laws or have passed laws prohibiting the practice of cruising in the passing lane. Show this Q&A to your husband. If that doesn’t cure his passive/aggressive behavior, hide his keys. And have his testosterone levels checked. Real guys like to drive fast!

Space or Waste?


elp me out on this one: My boss is upset because we

Have a question for The Advisor?

Click HERE!

have spent spend billions on NASA when there are many people going without basic necessities here on Earth. He knows Velcro and Teflon were spin-offs of the space program, but he says he’d trade the elimination of poverty for either one. I tend to think the money is well spent. What’s the truth? B.H. Mosely, TN If the only commercial products to be born from the space program were Velcro and Teflon, the answer would be a simple one: Our space program is still well worth the cost for the pure science we derive and to satisfy our native human need or exploration. See Space or Waste? Page 38

Your husband is a very real road hazard and should be removed from the left lane by a Hellfire missile strike if necessary. Well, that may be a little aggressive, but most traffic authorities agree that keeping up with traffic is far safer than attempting to slow the flow by blocking a lane - as is the habit of your husband - and many more like him. Lane blockers frustrate following drivers who will often take great risks in order to get around the impeding driver, endangering themselves and others, including the lane blocker. When a driver operating at a speed less than the prevailing traffic insists on holding position in the left

Table of Contents



FREE CLASSIFIED RULES: Submit all ads online at: www.underwritersinsider. com/classifieds. Ads must be less than 501 characters plus a title line. Eligible free classifieds include help wanted, position wanted, personal ads, agency for sale/purchase, or the one-time sale of an item or items. REGULAR CLASSIFIED RULES: Submit all ads online at: www. Only $1.00 per word, including title line and response info. Payment must be received prior to print date. Nationwide Agency Owner Wanted - Chicago SW Burbs!

Let’s combine... Agency looking to Merge

Business is expanding so rapidly and we need talented, business-minded individuals. What We Offer

Don’t just sell your book of business and loose income. Why not merge and keep your client base. Contact: Peralta Insurance We have been in business for over twelve years, and have a large book of business and looking to expand. We carry all forms of insurance including; Health, Life, Commercial, Auto, Home, and many more. 12039 sw 132ct Miami Fl 33186 305-969-6960 peralta_ins@ 9-5

- Base salary, commissions and limited benefits for the first 18-24 months - Up to $95K in financial support upon graduation to offset agency start-up costs - Brand name recognition of a Fortune 500 company - Extensive sales and product training opportunities - Dedicated support from a team of agency development specialists 9-3

Coral Springs, FL Experienced 2-20 Agents Experienced P & C Agents required for a Coral Springs office. Good commission and renewal offered. Contact:

Independent Agency For Sale or Merger Location is in North Florida area. $150,000 Firm. Email For More Info:

Very profitable Personal & Commercial Lines agency for sale in southwest Florida. Owner re-locating and very motivated to sell. Close to $300,000 in commissions with over 2500 clients. Good mix of auto,homeowners and commercial clients. Call Raj at 239-699-7047 9-4 26

free insider subscription! sign up yourself or any associate at this link

HERE 2-20 Producers Wanted - Miami Westchester Area

Looking for Personal & Commercial Lines producers. Salary plus commission!!! Rapidly expanding ageny. Please contact us via email or call Yudanis or Luis @ 305-225-955 or:






220 Producer Anywhere in Florida Well established commercial agency specializing in the realm of workers’ comp seeks producer. You can be located anywhere in Florida. Excellent commission splits - training and leads. Other commercial markets also available - GL, etc.Contact: 9-5

Table of Contents

Looking to Expand Book of Business

Looking to buy independent books in Hillsborough County, Florida, full or in part. Please contact me for a confidential discussion. 9-4 The Underwriter’s Insider


W Nationwide Agency Owner E.Bay Area, CA We need talented, businessminded individuals interested in our Future Agency Owner opportunity located in San Ramon OR Walnut Creek, CA market. What Nationwide Offers • Base salary, commissions and limited benefits for the first 18-24 months • Up to $95K in financial support upon graduation to offset agency start-up costs • Extensive sales and product training opportunities • Dedicated support •To apply: 9-5

"Socialism is the philosophy of failure, the creed of ignorance and the gospel of envy. Its only inherent virtue is the equal sharing of misery." - Winston Churchill

ASHINGTON, DC, May 31, 2012 – Tom Santos, vice president for federal affairs at the American Insurance Association (AIA), issued a statement following last night’s vote in the U.S. House of Representatives to extend the National Flood Insurance Program (NFIP) for 60-days. Last week, the U.S. Senate favorably voted to amend

Foreign Insurance Organization Wanted Part-time position wanted to represent, administrate or manage London or other foreign insurance organization in any U.S. states. I have all state insurance licenses required. 9-6

Franchised Insurance Agency For Sale Well Est. Florida 2-20 Licensed and Franchised General Insurance Agency. Owner consolidated 2 locations into one in 2012 reducing expenses & increasing profits as a result. Pre-qualified for SBA Lender Financing w/ $81,250 Down. Terms are approximate. Asking $325K. Contact Corporate Investment Business Brokers | (239) 936-1718 | 9-5

Table of Contents

H.R. 5740, a previously passed House measure to originally extend the NFIP for 30-days beyond its May 31 expiration, to include a 60-day extension. The program is now set to expire on July 30. Mr. Santos’ statement follows: “Members of the House and Senate are to be commended for coming together in a bipartisan manner in order to extend the NFIP and avoid yet another lapse. The program’s 5.6 million policyholders across 21,000 communities can breathe a sigh of relief as they will continue to be protected at the start of hurricane season. “With overwhelming bipartisan support to reform and reauthorize the NFIP, the 60-day extension should allow enough time for Congress to hammer out and adopt a final longterm reauthorization bill. “The House has previously passed its version, H.R. 1309, of NFIP reform and reauthorization legislation. It is now time for the Senate to move forward on S. 1940 before the clock runs out on this latest short-term extension.”

Commercial P&C Ins Sales Position Wanted Tampa,FL Area Recent FSU grad with insurance-related class work seeking full-time opportunity in local agency. I already hold a 4-40 license enrolled in 2-20 class. Great work ethic - fast learner anxious to begin my insurance career! I would also consider the West Palm Beach area. Please email:



Daughters Really Senior Staff - or More Fraud on the Taxpayers?

“ First lady Michelle Obama’s family trip to South Futurist: Better Healthcare Costs Less


really big changes already happening in healthcare aren’t riding on the legislation. They are driven by economics. The big secret inside the industry is: Better healthcare costs less. It has to. Some in the industry have figured this out, and others are just hoping no one will notice. We can expect a very different, and quite a bit smaller industry over the coming years. But this is not really about cutbacks or rationing. The industry is just now realizing that the only way to do healthcare for significantly less money is to do it better, smarter, leaner, to get to people with more help, earlier -- especially the five percent of the population who consume half of all the healthcare resources. The changes we are seeing are fundamental, they are growing, and there’s really no going back.” - According to Joe Flower, a healthcare industry analyst and futurist who has worked with the World Health Organization, the U.S. Defense Department, and many Fortune 100 corporations.

Divider in Chief ?

“He promised that he would bring us together. He

promised that he would not be partisan. He promised that he would reach out to the other side, the Republican side. Instead, he and his small little group of people in the White House hunkered down, have not reached out, not compromised, making it impossible for Washington to work. It’s not Republicans who are at fault here, it’s the president, who does not know how to use the leverage of power and his powers of persuasion. He’s the anti-Lyndon Johnson in that he doesn’t know how to get things done. And so he’s been more divisive, more partisan than any president we’ve seen in modern history.” - Former editor-inchief of the New York Times Magazine, former foreign editor of Newsweek, and a contributing editor to Vanity Fair and best selling author of the new book on the Obama presidency, The Amateur. Truly, it is impossible to find a president that more purposely set out to divide America - by race, by income, by religion and by political party - and for no other purpose than to further his grand, over-reaching political ambitions. 28

Africa and Botswana in June ‘11 cost taxpayers well over $424,000, according to new accounting based on Air Force manifests obtained by Judicial Watch, a taxpayer watchdog group. The use of Air Force aircraft alone for the June 21-27 trip cost $424,142, said the group, and that doesn’t include the food, lodging, and ground transportation for the 21 family and staff members. The daughters were listed as senior staff.” As reported by Washington Whispers in an expose on abusive overuse of public funds by the Obama family. Judicial Watch was forced to sue under the Freedom of Information Act to obtain this information.

Czech This...

“ The danger to America is not Barack Obama, but a citizenry capable of entrusting a man like him with the Presidency. It will be far easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president. The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails America . Blaming the prince of fools should not blind anyone to the vast confederacy of fools that made him their prince. The Republic can survive a Barack Obama, who is, after all, merely a fool. It is less likely to survive a multitude of fools, such as those who made him their President.” - From an

article from a non-fan of President Obama. Translated into English, from the Prager Zeitungon - a Prague newspaper in the Czech Republic. Perhaps it’s easier for one in a formerly communist country to realize the end-game of one so enamoured with big, growing and intrusive government.

Ironic Disconnect of Wealthy Comedians

“ It’s hypocritical to mock Romney’s wealth when

you’re a millionaire, too. Even Obama is a millionaire, you don’t see media people complaining about his wealth. Journalists and Hollywood all want to pretend they were one with the common man. They aren’t. Sure some of them might have paid their dues long ago, but those dues have been paid back with a mighty interest. They are part of the elite in both wealth and access, they don’t care about Romney’s wealth. They care that he is not on their team.” - Dan Gainor, VP of Business and Culture for MediaResearch Center.

Table of Contents

The Underwriter’s Insider

FREE! free insider subscription! sign up yourself or any associate at this link


To Visit Insider Sponsors, simply click on the Sponsor’s ad!





2012 Issue 5


2012 Issue 4

2012 Issue 3

2012 Issue 2

2012 Issue 1

2011 Issue 7

2011 Issue 6

2011 Issue 5

2011 Issue 4

Table of Contents

The Underwriter’s Insider


2011 Issue 3

2011 Issue 2

2011 Issue 1

2010 Issue 8

2010 Issue 7

2010 Issue 6

2005 Issue 9

2005 Issue 2

Table of Contents

2005 Issue 5 31



Increase Propelled By Improvement in Underwriting Results

HICAGO—Private U.S. property/casualty insurers’ net income after taxes rose to $10.1 billion in first-quarter 2012 from $7.8 billion in first-quarter 2011, with insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus climbing to 7.2 percent from 5.6 percent. Driving the increases in insurers’ net income and overall rate of return, net losses on underwriting receded to $0.2 billion in first-quarter 2012 from $4.5 billion in first-quarter 2011. The combined ratio—a key measure of losses and other underwriting expenses per dollar of premium— improved to 99 percent in first-quarter 2012 from 103.3 percent in first-quarter 2011, according to ISO, a Verisk Analytics company (Nasdaq:VRSK), and the Property Casualty Insurers Association of America (PCI). The improvement in underwriting results is primarily attributable to a drop in net losses and loss adjustment expenses (LLAE) from catastrophes. ISO estimates that insurers’ net LLAE from catastrophes fell to $3.4 billion in first-quarter 2012 from $6.6 billion in first-quarter 2011. Those amounts exclude LLAE that emerged after


insurers closed their books for each period but do include late-emerging LLAE from events in prior periods. Partially offsetting the improvement in underwriting results, net investment gains—the sum of net investment income and realized capital gains (or losses) on investments—dropped $1.2 billion to $12.3 billion in firstquarter 2012 from $13.6 billion in first-quarter 2011. Also limiting the improvement in insurers’ overall results, insurers’ miscellaneous other income receded to $0.4 billion in first-quarter 2012 from $0.5 billion in first-quarter 2011, and insurers’ federal

and foreign income taxes rose to $2.3 billion from $1.8 billion. Pretax operating income—the sum of net gains or losses on underwriting, net investment income, and miscellaneous other income—grew

Table of Contents

to $11.8 billion in first-quarter 2012 from $8.6 billion in first-quarter 2011. Reflecting insurers’ net income after taxes and unrealized capital gains on investments (not included in net income), policyholders’ surplus— insurers’ net worth measured according to Statutory Accounting Principles — increased $20.4 billion to a record-high $570.7 billion at March 31, 2012, from $550.3 billion at December 31, 2011. The 7.2 percent annualized rate of return for first-quarter 2012 is insurers’ highest first-quarter annualized rate of return since the 13.3 percent for first-quarter 2007. Since the start of ISO’s quarterly data in 1986, insurers’ firstquarter annualized rate of return has ranged from as low as negative 2.6 percent in 1994 to as high as 17.9 percent in 2005 and has averaged 10 percent. The figures are consolidated estimates for all private property/ casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers. “The insurance industry’s recordSee P&C Profits Rise Page 39 The Underwriter’s Insider

Continued from Page 10

ZALMA 3.10(a) of the Insurance Code by “improperly recording the direct stop-loss policy premiums obtained from the self-insured employers as ‘assumed reinsurance,’” rather than as “direct written premium.” After exhausting its administrative remedies, American sued the Department, seeking declaratory and injunctive relief. American contended that its stop-loss policies were reinsurance over which the Department lacked regulatory authority. The trial court granted the Department’s motion and denied American’s. American to appealed. Argument

benefit plan may in some ways act like an insurer with respect to the plan’s participants, the Insurance Code does not regulate it as one. Insurance purchased by the plan is therefore not reinsurance, according to the Department. It is instead direct insurance in the nature of health insurance because the stop-loss policies are purchased by the plans to cover ultimate claims associated with their healthcare expenses.

Analysis Under a stop-loss policy, the insurer agrees to reimburse a self-funded plan for healthcare costs that exceed a contractually predetermined amount. The obligation generally takes one of two forms: specific or aggregate. Specific stop-loss policies cover

premium. Both direct insurance and reinsurance reallocate risk with the principal distinction being the nature of the purchaser. Insurance consumers reallocate their risk by purchasing direct insurance, both primary and excess, while insurance companies reallocate the risks they assume by purchasing reinsurance. The Supreme Court noted that employers who self fund their employee health-benefit plans are clearly not insurance companies. However, the self-funded employee health-benefit plans perform a service similar to that provided by an insurer. The Texas Legislature broadly defined the terms “insurer” and “business of insurance” to capture all unauthorized activity.

The Supreme Court concluded that without question, “selffunded employee health-benefit American argued that an employer plans operate much like who self funds a healthinsurers. Their activities benefit plan for its not surprisingly then fit employees is an “insurer” in the definitions of ‘insurer’ the “business of insurance” and ‘business of insurance’ under the Insurance Code found in the chapter and therefore a reinsured designed to prohibit the when purchasing stopunauthorized business of loss insurance. According insurance.” Most private selfto American, the plan’s funded plans also qualify as purchase of stop-loss “employee welfare benefit insurance is a redistribution plans” under the federal of the risk assumed by Employee Retirement the plan in the same sense as a reinsurance contract claims over a certain dollar amount Income Security Act (ERISA). ERISA is a redistribution of risk from one per employee, while aggregate prohibits states from deeming insurance company to another. stop-loss policies provide a cap for these self-funded plans “insurance The Department responded that an employer’s overall liability for all compan[ies] or other insurer[s]” or “to be engaged in the business of reinsurance is the redistribution of covered persons. insurance” for purposes of state risk between sophisticated insurers in the business of insurance and Reinsurance has been described insurance regulation. Simply put, that an employee health-benefit as the transfer of all or part of one states cannot regulate private selfplan is neither as a matter of law. insurer’s risk to another insurer, funded insurance plans. The Department also argued that which accepts the risk in exchange See Zalma Pg 35 although an employee health- for a percentage of the original

Table of Contents


Continued From Page 24

TRESKOVICH: THE PERFECT ICE BREAKER consortium includes some of the nation’s top engineering and science schools: Clarkson, Embry-Riddle Aeronautical, Florida Institute of Technology, Illinois Institute of Technology, Rensselaer Polytechnic Institute, Rochester Institute of Technology, Worcester Polytechnic Institute. Arts leaders include Pratt Institute and Savannah College of Art & Design. Some national universities known for NCAA Division 1 sports participate: DePaul, Drexel, Duquesne, University of Dayton, University of San Diego.

Bank; and, a 200,000-member credit union, SEFCU of Albany, NY. Insurance agents and agencies can participate as a way to get in front of audiences, to differentiate themselves, and to focus the conversation on college savings – a relatively “new market” for the insurance industry. For insurance marketers, Tuition Rewards is a proven lead generation program. Unlike traditional lead generation tools like mortgage

There have been families in the program who have saved as much as $40,000 on tuition bills. Further, savings under the Tuition Rewards program are income tax free, so the real economic benefit of the program is much greater. Financial aid calculations take into account a family’s assets. Currently, colleges are not asking for insurance policy cash values when determining financial aid. So, money moved to a permanent life policy from a mutual fund, for example, can result in an increase in financial aid eligibility.

Advisors can promise prospective clients or seminar attendees a 500-point bonus ($500 value) just for listening – no purchase necessary. Meeting face-toface with an advisor can lead to another 500-point bonus – no purchase necessary. Prospects and clients receive 500 more points for activating their account online (at www. – and 500 more for each student enrolled. Remember 1 point equals $1 tuition dollar. If the prospect purchases a qualifying life policy, he/she can receive 4,000 points in the first-year of the policy and 2,000 every year as long as the policy is in force and also as long as the client logs into his/her account at least once annually). The reward is ultimately given by the college – not by the insurance carrier, the agency, the agent or by SAGE Scholars. Many P&C and health agents who are now cross selling with the SAGE program and have become life professionals using this program. Agencies can use this program to recruit new agents and create new lead generation programs.

Among SAGE’s financial partners are the 529 Plans of Pennsylvania and Wisconsin; a 100-branch bank, First Midwest 34

protection leads and final expense leads, very few agents and agencies are working in the college planning market and promoting the Tuition Rewards program. Smart advisors can use the SAGE Program to help families afford a better education – and create their own lead generating machine using this program.

See Treskovich Page 38

Table of Contents

The Underwriter’s Insider

Continued from Page 33

ZALMA For more than a decade, the Department has categorized stoploss coverage as direct insurance (not reinsurance) subject to assessment by the Texas Health Insurance Risk Pool. The question faced by the Texas Supreme Court does not involve the extent of coverage under the group health-benefit plan, either directly or indirectly, or the contractual relationship between a plan and its stop-loss insurer. Instead, the questions to be resolved are: Whether the state can regulate stop-loss insurers who contract with such plans, as it does other direct health-care insurers by requiring them to contribute to the Pool and to submit their policies for approval, and Whether it has chosen to do so. The answer to the first question is clearly yes under ERISA’s “insurance savings clause.” The answer to the second question is less clear, but the Supreme Court resolved that the Department’s longstanding interpretation of the statute is entitled to serious consideration. The Legislature chose not to define the terms “stop-loss insurance” and “reinsurance” in the Insurance Code. American, however, identified provisions in the Code where the term “reinsurance” is used in connection with self-funded plans in support of its argument that

loss insurance is reinsurance. Because the Insurance Code does not define these terms or use them consistently, the parties are left to emphasize the provisions most favorable to their respective interpretations. Those provisions yield competing plausible interpretations but no definitive answer under the Code. The Supreme Court, therefore, concluded that the Insurance Code is ambiguous on how stop-loss insurance should be treated. Since the Department concluded that stop-loss insurance purchased by a plan does not involve two insurers and is not reinsurance the Supreme Court concluded that stoploss insurance is direct insurance in the nature of health insurance because the stop-loss policies are purchased by the plans ultimately to cover claims associated with their health-care expenses. Finding that the Department’s construction was reasonable, was formally promulgated, and was not expressly contradicted by the Insurance Code, the Supreme Court agreed with the Department’s construction and held that stop-loss insurance sold to a self-funded employee health-benefit plan is not reinsurance, but rather direct insurance subject to regulation under the Insurance Code.

Commercial P&C Ins Sales Position Wanted Tampa,FL Area Recent FSU grad with insurance-related class work seeking full-time opportunity in local agency. I already hold a 4-40 license - Enrolled in 2-20 class. Great work ethic - fast learner - anxious to begin my insurance career! I would also consider the West Palm Beach area. Please email:

FREE! free insider subscription! sign up yourself or any associate at this link


ZALMA OPINION This dispute resulted from the failure of the Texas state legislature to define terms important to the obligation of the Texas Department of Insurance to regulate insurance. The failure was resolved by the Supreme Court in a manner that allowed for regulation and the taxing of stop-loss insurers.

Table of Contents


Experts and Consultants for Insurance Disputes 4441 Sepulveda Boulevard Culver City, California 90230 310-390-4455

Consultation from Zalma Insurance Consultants (ZIC) can save you or your client thousands of dollars in the defense or prosecution of an insurance dispute. ZIC provides expert advice and counsel insurers and plaintiffs’ counsel find indispensable. Consultation from ZIC can save you, your counsel or client hundreds of hours of investigative and legal work. ZALMA INSURANCE CONSULTANTS is a service of Barry Zalma, Inc. a California professional corporation. Barry Zalma is an internationally recognized expert on insurance coverage, insurance claims handling, insurance bad faith, insurance fraud detection, the defeat of false and fraudulent claims, Barry Zalma, Esq. insurance claims handling, and the resolution of insurance disputes. As a consultant, expert witness, lawyer, author, mediator or arbitrator he serves all parties who need consultation or expert testimony on matters relating to insurance coverage, insurance claims handling, insurance fraud and the tort of bad faith. Barry Zalma founded Zalma Insurance Consultants to help resolve any insurance claim problem faced by you or your clients that do not need Mr. Zalma’s services as a lawyer. His experience and skill as a consultant and expert witness can make the difference before a jury or other trier of fact. For more than 44 years as a claims person and insurance coverage attorney, Barry Zalma has represented insurers, advised insurers on claims handling, interpreted coverages and testified as an insurance coverage, insurance bad faith, insurance claims handling and insurance fraud expert on behalf of insurers and policyholders in state and federal courts.

Expert Testimony

Zalma Insurance Consultants serves insurers, policyholders, underwriters, brokers, agents, adjusters, public insurance adjusters, lawyers and any person involved in an insurance dispute. Because he is an attorney licensed to practice law in the state of California M r. Zalma may be prohibited by California case law from acting as a consultant or expert witness and, therefore, refuses to serve in any situation where a past client of his law firm, Barry Zalma, Inc. is adverse to anyone seeking his services.

Y ou can obtain M r. Zalma’s C.V . at and his e-book publications and blogs daily at Zalma on Insurance,


Table of Contents


The Underwriter’s Insider

Continued From Page 9

KIM KOMANDO get a bad review as a business owner, what should you do? It’s important to respond quickly. Offer your apology in public comments. Explain how you will take steps to ensure that the situation doesn’t happen again. Don’t be argumentative, and no matter how justified you feel, don’t be defensive.

positive reviews will also help bury negative comments in search results.

you’ll have a much worse PR problem on your hands.

Don’t cheat, however, and have friends and relatives suddenly write a barrage of glowing reviews. They sound like exactly what they are. And don’t offer customers discounts or coupons in exchange for upbeat reviews. Online community members will quickly sniff out ploys like that. Then

Copyright 2012, WestStar TalkRadio Network. All rights reserved. Kim Komando hosts the nation’s largest talk radio show about consumer electronics, computers and the Internet. To get the podcast, watch the show or find the station nearest you, visit: To subscribe to Kim’s free email newsletters, sign-up at: newsletters.

This will show current and future customers that you care about your customers and your business’s online reputation. It may even win you some ardent online supporters. Additionally, send the offended customer a private message and offer a discount or an exchange if the situation warrants it. It’s true: Many reviewers update two- and three-star reviews to four- and five-star reviews after being contacted by the business owner. Legitimate criticism about your business is like free - but invaluable - market research. You can get ideas about how your procedures, operations and employee-training can be improved. Choose to view it as a positive opportunity. Set up Google Alerts to monitor what customers are saying about your business. The quicker you’re able to catch people talking about your business, the more quickly you can join the conversation. When customers have a great experience with your service or product, encourage them to write online reviews. A steady stream of

Table of Contents


Continued From Page 34



This gives agents a complete turnkey platform to help clients with life insurance as well as an exclusive college savings plan. Email blasts/campaigns, brochures, presentations and customized agent websites are available.

(Well, some of us anyway...) Yet the real list of products and processes spun off from the space program, which extends far beyond what is typically assumed, would fill this magazine a dozen times over. Just begin with the miniaturization of electronics - which made not only the hand calculator but the personal computer possible — as well as all things digital.

We strongly encourage agents and advisors to sign up all of their current clients. It’s good business for advisors to stay in touch with their clients and reward them. Advisors can reward clients with 500-point bonuses for annual review meetings – and for a referral. People are sometimes suspicious to hear that a group of colleges will give away scholarships – ‘lots of money’. But, it IS credible when an advisor says that some colleges might choose to give discounts to attract more and or better students. The term ‘tuition discounts’ is a proven conversation-starter. The Tuition Rewards program encourages referrals. After a sale to parents of young children, an advisor can ask about grandparents, aunts and uncles who could also earn points -- and direct them to the same beneficiaries. Grandparents can become involved in the program and guarantee that their grandchildren have the funds needed to go to college, whether or not the grandparent lives to see it. For more information on the college savings marketing program, contact 38

Continued From Page 25

Without the spin-offs from the space program, your world would hardly be recognizable, lacking CDs, DVDs, cell phones, beepers, smartphones, satellite and digital cable TV, Mylar, Kevlar, 20-year pacemaker batteries, UV block sunglasses, GPS navigation systems, halogen lights, laser check-out scanners and bar-codes, MRI, CAT and PET medical scans, enriched baby food, water purification systems, air quality monitors, virtual reality simulations and games, improved golf ball aerodynamics, advanced athletic shoe materials, solar energy collectors, forest management and fire monitoring, dozens of environmental controls, telemetry systems, the Hubble Telescope, SETI...

(Take a breath...) Fire-resistant material, radiation insulation, sewage treatments, superefficient A/C, hydrogen fuelcell technology, medical ultra-sound technology, automotive electronic

Table of Contents

ignition, micro lasers, advanced engine lubricant, fuel vapor recovery, wireless communications, lightweight firefighter air tanks, self-righting life rafts, carbon-fiber technology, advanced lubricants, advanced aircraft wing designs, Doppler radar, improved NFL football helmets, structural analysis and advanced metallurgy. Bottom line: for every dollar that NASA spends, we get $25 back into the economy — reportedly the highest turn-a-round of a dollar in any organization in the world, Still, the NASA budget is less than 1/2 of 1% of the federal budget! Now let’s look at war on poverty: We’ve spent about $7.6 trillion since President Johnson initiated the program in 1964. While the raw poverty rate has declined slightly, many analysts believe the improvement was more due to overall economic growth than federal hand-out programs. Poor African-Americans, for example, actually had a faster rate of improvement in the years before the war on poverty began. Savvy analysts know that our “war on poverty” was much more about buying votes with taxpayer money than it ever was about helping the poor. Once an entire segment of society has become addicted to government hand-outs - you’ll never get them to vote for the side calling for personal responsibility and selfreliance. Unfortunately, there will always be the poor - no matter how much or how little we spend on the space program.

The Underwriter’s Insider

Continued From Page 32 Partially offsetting the growth in premiums and the decline in LLAE, other underwriting expenses—primarily acquisition expenses; expenses associated with underwriting, pricing, and servicing high $570.7 billion in policyholders’ insurance policies; and premium surplus as of March 31 is a testament taxes—rose $1.5 billion, or 5 percent, to the resilience of property/casualty to $32 billion in first-quarter 2012 insurers throughout the financial from $30.5 billion in first-quarter 2011. crisis and the strength and safety of In addition, dividends to policyholders our commitment to policyholders,” rose 12.8 percent in first-quarter 2012 said Robert Gordon, PCI’s senior vice to $0.5 billion. president for policy development and research. “The $20.4 billion increase in The decrease in overall LLAE reflects policyholders’ surplus in first-quarter the decline in catastrophe losses. 2012 underscores that insurers ISO estimates that private insurers’ are strong, well capitalized, and net LLAE from catastrophes fell $3.2 well prepared to pay future claims. billion to $3.4 billion in first-quarter Policyholders and regulators can rely 2012 from $6.6 billion in first-quarter on the insurance industry to fulfill its 2011. Other net LLAE was virtually obligations when catastrophes strike, unchanged at $72.2 billion in both even if the economy remains difficult.” first-quarter 2012 and first-quarter 2011. U.S. insurers’ $3.4 billion in net LLAE from catastrophes in firstUnderwriting Results quarter 2012 is primarily attributable to catastrophes that struck the Underwriting gains (or losses) equal United States. Though estimating U.S. earned premiums minus LLAE, insurers’ LLAE from catastrophes that other underwriting expenses, and struck elsewhere around the globe dividends to policyholders. Net losses is difficult, the available information on underwriting shrank $4.3 billion to suggests that U.S. insurers’ net LLAE $0.2 billion in first-quarter 2012 from from catastrophes overseas dropped $4.5 billion in first-quarter 2011, as to near nil in first-quarter 2012 from premiums rose and LLAE declined. between $3 billion and $5 billion in first-quarter 2011. Net written premiums increased $3.3 billion, or 3.1 percent, to $112.4 billion Based on new information and in first-quarter 2012 from $109 billion updated estimates for the ultimate in first-quarter 2011, as net earned cost of old claims from prior accident premiums rose $2.7 billion, or 2.6 years, insurers’ results for first-quarter percent, to $107.9 billion from $105.2 2012 benefited from $3.9 billion billion. in favorable development of LLAE


Net LLAE (after reinsurance recoveries) dropped $3.1 billion, or 4 percent, to $75.6 billion in first-quarter 2012 from $78.7 billion in first-quarter 2011.

reserves, with the amount of favorable development dwindling from $4.6 billion in first-quarter 2011. Excluding development of LLAE reserves, net LLAE fell $3.8 billion, or 4.6 percent, to

Table of Contents

$79.5 billion in first-quarter 2012 from $83.3 billion in first-quarter 2011, and the combined ratio improved by 4.9 percentage points to 102.7 percent from 107.6 percent. Mortgage and financial guaranty insurers continued to suffer disproportionate losses on underwriting, with their combined ratio deteriorating by 40.5 percentage points to 217.5 percent for firstquarter 2012 from 176.9 percent for first-quarter 2011. Mortgage and financial guaranty insurers’ combined ratio for first-quarter 2012 was 119.9 percentage points worse than the 97.6 percent combined ratio for all other insurers. Mortgage and financial guaranty insurers’ net written premiums fell 17 percent to $1.1 billion for first-quarter 2012 from $1.3 billion for first-quarter 2011. Their net earned premiums fell 14.2 percent to $1.3 billion in first-quarter 2012 from $1.5 billion a year earlier. Also contributing to the 40.5-percentage-point deterioration in mortgage and financial guaranty insurers’ combined ratio, their loss and loss adjustment expenses climbed 6.9 percent to $2.4 billion in firstquarter 2012 from $2.3 billion in firstquarter 2011. Conversely, mortgage and financial guaranty insurers’ other underwriting expenses fell 5.8 percent to $0.3 billion in first-quarter 2012 from $0.4 billion a year earlier. Excluding mortgage and financial guaranty insurers, industry net written premiums rose 3.3 percent in first-quarter 2012 to $111.3 billion, net earned premiums increased 2.8 percent to $106.6 billion, LLAE

See P&C Profits Rise Page 40 39

Continued From Page 39

P&C PROFITS RISE declined 4.3 percent to $73.2 billion, other underwriting expenses grew 5.1 percent to $31.7 billion, and dividends to policyholders rose 12.8 percent to $0.5 billion. As a result, the combined ratio for the industry excluding mortgage and financial guaranty insurers dropped 4.6 percentage points to 97.6 for first-quarter 2012 from 102.2 percent for first-quarter 2011. “Growth in overall net written premiums slowed to 3.1 percent in first-quarter 2012 from 3.5 percent in first-quarter

“The slowing in overall premium growth reflects changes in the economy. For example, growth versus year-ago levels in private sector wages and salaries slipped to 4.2 percent in first-quarter 2012 from 5.4 percent in first-quarter 2011, as growth in retail sales, including food services, dropped to 6.2 percent from 8.1 percent,” said Gordon. “With the seasonally adjusted unemployment rate at a stubbornly high 8.2 percent in May and other indicators also showing that economic conditions remain challenging, consumers and businesses remain under pressure to control their expenses, including their spending on insurance.” “Differences in market conditions likely contributed to differences in premium growth by sector,” said Murray. “Despite slower growth in overall net written premiums, underwriting 40

profitability improved for all three major sectors of the industry,” said Gordon. “Excluding mortgage and financial guaranty insurers, commercial lines insurers’ combined ratio dropped 10.8 percentage points to 97.6 percent in first-quarter 2012, as balanced insurers’ combined ratio receded 0.7 percentage points to 98.1 percent and personal lines insurers’ combined ratio fell 2.1 percentage points to 97.2 percent.”

during the period, insurers posted $14.4 billion in overall capital gains for first-quarter 2012—up $9.5 billion from the $4.9 billion in overall capital gains on investments for first-quarter 2011. Insurers’ overall capital gains would have risen a bit more if not for an uptick in realized capital losses on impaired investments, which increased to $1.1 billion in first-quarter 2012 from $0.8 billion in first-quarter 2011.

Investment Results

“Insurers’ $14.4 billion in overall capital gains in first-quarter 2012 reflects developments in financial markets, with the Dow Jones Industrial Average rising 8.1 percent during the quarter as the New York Stock Exchange Composite rose 9.8 percent, the S&P 500 increased 12 percent, and the Nasdaq Composite climbed 18.7 percent,” said Gordon. “Though all four of these major stock indexes fell from March 31 to June 25, they were still showing net gains year to date— suggesting insurers’ results for sixmonths 2012 may continue to benefit from capital gains, albeit less so than insurers’ results for first-quarter 2012.”

Insurers’ net investment income— primarily dividends from stocks and interest on bonds—fell 7.5 percent to $11.7 billion in first-quarter 2012 from $12.6 billion in first-quarter 2011. Insurers’ realized capital gains on investments declined $0.3 billion to $0.7 billion in first-quarter 2012 from $1 billion a year earlier. Combining net investment income and realized capital gains, net investment gains dropped $1.2 billion, or 9.2 percent, to $12.3 billion for first-quarter 2012 from $13.6 billion for first-quarter 2011. “The decline in insurers’ investment income reflects declines in market yields, with the annualized yield on insurers’ investments falling to 3.6 percent in first-quarter 2012 from 3.9 percent in first-quarter 2011, as the average yield on ten-year U.S. Treasury notes dropped to 2 percent from 3.5 percent,” said Murray. “Insurers’ average holdings of cash and invested assets—the assets on which insurers earn investment income—actually rose 0.2 percent in first-quarter 2012 compared with their level a year earlier.” Combining the $0.7 billion in realized capital gains in first-quarter 2012 with $13.7 billion in unrealized capital gains

Table of Contents

Pretax Operating Income Pretax operating income climbed $3.2 billion, or 36.6 percent, to $11.8 billion for first-quarter 2012 from $8.6 billion for first-quarter 2011. The $3.2 billion increase in operating income was the net result of the $4.3 billion decline in net losses on underwriting, the $0.9 billion drop in net investment income, and the $0.2 billion decrease in miscellaneous other income. Mortgage and financial guaranty insurers’ operating income deteriorated to negative $1.2 billion in first-quarter 2012 from negative $0.7 billion in first-quarter 2011. Excluding The Underwriter’s Insider

mortgage and financial guaranty insurers, the insurance industry’s operating income climbed $3.6 billion, or 38.6 percent, to $13 billion for first-quarter 2012 from $9.4 billion for first-quarter 2011.

Net Income after Taxes Combining operating income, realized capital gains (losses), and federal and foreign income taxes, the insurance industry’s net income after taxes for first-quarter 2012 totaled $10.1 billion—up $2.3 billion, or 29.6 percent, from $7.8 billion for firstquarter 2011. The $2.3 billion increase in net income was the net result of the $3.2 billion increase in operating income, the $0.3 billion decrease in realized capital gains, and the $0.5 billion increase in federal and foreign income taxes. Mortgage and financial guaranty insurers’ net income after taxes fell to negative $1.1 billion for first-quarter 2012 from negative $0.5 billion for firstquarter 2011. Excluding mortgage and financial guaranty insurers, the insurance industry’s net income after taxes rose $2.8 billion to $11.2 billion for first-quarter 2012 from $8.4 billion for first-quarter 2011.

Policyholders’ Surplus Policyholders’ surplus climbed $20.4 billion, or 3.7 percent, to $570.7 billion as of March 31, 2012, from $550.3 billion at year-end 2011. Additions to surplus in first-quarter 2012 included insurers’ $10.1 billion in net income after taxes, $13.7 billion in unrealized capital gains on investments (not included in net income), $0.3 billion in new funds paid in, and $2.7 billion in miscellaneous other changes in

surplus. Those additions were partially offset by $6.5 billion in dividends to shareholders. Insurers’ $13.7 billion in unrealized capital gains on investments in firstquarter 2012 was more than three times insurers’$3.9 billion in unrealized capital gains in first-quarter 2011. The $0.3 billion in new funds paid in during first-quarter 2012 was down from $1.5 billion in first-quarter 2011. The $2.7 billion in miscellaneous additions to surplus in first-quarter 2012 compares with $0.2 billion in miscellaneous charges against surplus in first-quarter 2011. Dividends to shareholders rose to $6.5 billion in first-quarter 2012 from $5.7 billion in first-quarter 2011. Mortgage and financial guaranty insurers’ surplus fell to $11.1 billion as of March 31, 2012, from $11.4 billion at year-end 2011. Excluding mortgage and financial guaranty insurers, industry surplus increased $20.7 billion to $559.6 billion as of March 31, 2012, from $538.9 billion as of December 31, 2011. Because the state insurance guaranty fund system does not protect those with mortgage or financial guaranty insurance claims in the event of insolvency, payouts on claims against individual mortgage and financial guaranty insurers are essentially limited by each mortgage and financial guaranty insurer’s own ability to pay. For this reason, ISO edited the data for some individual mortgage and financial guaranty insurers to eliminate liabilities in excess of their assets, restating

Table of Contents

surplus for the insurance industry overall and the mortgage and financial guaranty insurance sector in a manner that more correctly reflects the sector’s ability to absorb new losses.

About ISO Since 1971, ISO has been a leading source of information about property/casualty insurance risk. For a broad spectrum of commercial and personal lines of insurance, the company provides statistical, actuarial, underwriting, and claims information; policy language; information about specific locations; fraud identification tools; and technical services. ISO serves insurers, reinsurers, agents and brokers, insurance regulators, risk managers, and other participants in the property/casualty insurance marketplace. ISO is a member of the Verisk Insurance Solutions group at Verisk Analytics (Nasdaq:VRSK). For more information, visit www.iso. com and

About PCI PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write over $179 billion in annual premium, 38.3 percent of the nation’s property casualty insurance. Member companies write 44.3 percent of the U.S. automobile insurance market, 31.6 percent of the homeowners market, 36.3 percent of the commercial property and liability market, and 42.6 percent of the private workers compensation market. For more information, visit 41

The Underwriter's Insider 2012 Issue 6  

The Insider is a trade magazine (EZine) focused on P&C insurance, politics, technology and people. Reaching an email campaign base of 24,000...

Read more
Read more
Similar to
Popular now
Just for you