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January 2019

In This Issue 2020 Insurance Outlook New Year’s Resolutions for Insurance Agents Insurance Technology: What’s Happened? What’s Coming? 5 Things to Know About Cyber in 2020 A New Decade Brings New Risks

Texas PIA P.O. Box 700877 Dallas, TX 75370 (972) 862-3333 www.piatx.org

12 New Year’s Resolutions for Insurance Agents

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Insurance Technology: What’s Happened? What’s Coming?

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5 Things to Know About Cyber in 2020

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2019 Insurance Industry Employment by Sector

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Recruiting the Next Generation of Insurance Talent

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Review: 2019 and the Flood Insurance Industry

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Facing Off Against Flooding in 2020

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2020 Insurance Outlook

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Eight Steps to Sales Greatness

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How Can Leaders Become Authentic?

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A New Decade Brings New Risks

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Texas News Round-Up

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Welcome New Members Mario A. Bucio, Owner

Mint Insured


Ann Collins Campbell, Owner

Approach Insurance Agency


Rick Guest, Principal

Guest Insurance Agency


Alex Hernandez, Owner

The Insurance Shop LLC


Jamie Hernandez, Owner

ASAP Insurance Agency LLC

El Paso

Maria Del Rosario Martinez, Principal

Texas Insurance Bureau Services LLC


Sergio S. Santamaria, 365 Insurance Agency LLC Principal


Pam Slovak-Howard, President

Professional Insurance Resources, LLC


Tommy Stamps, Owner

Texas Sun Insurance Agency Inc.



David Gorman

Welcome to 2020. To get where we want to go, we need to review where we’ve been. In this issue, we take a look back to get a sense of what factors influenced our industry over the past year. We also share insights from industry leaders on the trends that are most likely to impact us in the coming months (and years), and what we as independent agents can do to maximize the opportunities ahead. All of us at Texas Professional Insurance Agents wish you a prosperous and happy new year. We continue to strive to provide you tools to make your business a success. Yours,

David David (Red) Gorman Office: 214-374-9997 Email: david@redgormaninsurance.com


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12 New Year’s Resolutions for Insurance Agents by Andrew G. Simpson, InsuranceJournal.com Here are 12 ideas in no special order that, if you are so inclined and resolved, could be borrowed and followed to help shape your new year. Here’s to a happy and prosperous New Year to you all!

1. Embrace It: Insurance Is NOT a Commodity. Insurance coverage guru Bill Wilson is adamant: You must know the policies you sell and service and the differences between them. Being able to read, understand and apply policy form language is a critical skill that is a fundamental prerequisite for successfully resolving coverage and claims disputes. Read Wilson’s first installment in his series: Once Upon a Time … Resolving Insurance Coverage and Claims Disputes.

2. Conduct an E&O Audit An errors and omissions claim can take its toll on an agency. The financial burden can be a huge blow and individuals involved will face tremendous stress, which can impact the morale of the agency. Agencies should hire an independent consultant to do an E&O audit of agency practices. But if that is not in the cards, learn how to conduct a self-audit. Bill Schoeffler and Catherine Oak discuss: How to Conduct an E&O Self Audit.

3. Attract Young Talent Young 20- and 30-years-olds have their own ideas about what they want from their employers. Many will sacrifice salary for more freedom and the right culture. They aspire to be part of a company’s larger vision. Jason Walker, managing partner at Smart Harbor, offers advice for appealing to this demographic: Taking a Page from the Insurtech Playbook.

4. Do Your Job Agents are the translators between two people speaking different languages. Silence is a message that says an agent does not care yet silence is what small commercial and personal lines TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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clients hear from agents over and over. Many agents think they can’t make money spending time with small customers. But that is the agent’s job. Outspoken consultant Chris Burand argues for figuring how to make money serving these customer and his solution is simple: The Need for Agents (to Do Their Jobs).

5. Improve Your Hiring Results There’s a lot of money to be gained or lost in an agency’s hiring process. But most agencies still use a process that doesn’t work because it says: “He seems like a good guy. Let’s give him a shot!” Expert Randy Schwantz offers a system that does work for improving results. It starts with two people: a good cop and a bad cop: The 5-Step Evidence Based Hiring System.

6. Invest in Training Employees are on the frontlines and should be able to solve problems on their own. But they need the confidence and skills to do so. This also helps managers by reducing time spent on dealing with customer complaints. One way to train employees is to have them spend time at the desks of other employees in the firm. Catherine Oak and Bill Schoeffler discuss other training tips: Good Training: Why Agencies Should Invest in People.

7. Achieve At Least 10% Organic Growth How much did your agency grow last year? If your agency grew less than 10% last year, then Randy Schwantz has a solution for you: three keys to organic growth. The steps are simple, but actually doing them is the hard part: 3 Steps to Building an Agency Growth Machine.

8. Speed Up Response Time Consumers consider timeliness to be not just one factor but indeed the most important differentiator — above efficiency, professionalism and knowledge. With increasing pressure from insurtechs coupled with rising consumer expectations, response time must now be measured in minutes, not hours or days. Tom Wetzel, insurance marketing consultant, notes that emphasizing speed does not mean shortcutting risk management. He suggests agents follow a two-step process: Why Agent Response Time Is More Critical Than Ever.

9. Run Agency as a Business, Not a Lifestyle Chris Burand says he has learned that most agencies are not run as businesses; most are run as a lifestyle. Lifestyles are personal, so perpetuation is not possible. Only true businesses can achieve internal perpetuation. If internal perpetuation is important in your agency, Burand reminds that perpetuation is always, foremost, a people puzzle: Why Agency Perpetuation Does Not Usually Work.

10. Develop an Agency Sales Strategy Sales are the lifeblood of any business, yet most insurance agencies have, at best, only a general outline of a sales strategy. More often than not, agencies are filled with individual producers doing their own thing. The only control is to fire poor performers. Catherine Oak and Bill Schoeffler explain how to develop an agency sales strategy: What Is Your Agency’s Sales Strategy?

11. Build a Recruiting Plan Insurance agencies too readily accept that the job market is tight and there are not many good candidates. They treat the process the same for every position. But consultant Mary Newgard believes that recruiting is sales and, like sales, it needs a structure and a plan: Lacking StrucContinued on page 42 ture: My Agency’s Biggest Recruiting Problem. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Insurance Technology: What’s Happened? What’s Coming? Overview: The Last Decade Over the past decade technology has become increasingly interwoven into our daily lives and work. Back in 2010, tablets, battery-powered cars, augmented reality, smartwatches, consumer drones and smart speakers were hard to imagine. To say technology has transformed throughout the decade is an understatement. Drones transform claims Back in 2010, drones and AI were hard to imagine. Now they're essential to insurance. Expect even more tech enhancements going forward.

The same could be said of how technology has impacted the insurance industry in the 2010s. It has enhanced how damage is assessed and claims are adjusted. Aerial imagery and data-capture by drones is now one of the quickest and safest ways insurance companies can estimate structural damage and determine the appropriate claim. Over the course of the last decade, drones have helped reduce the claims adjustment period from 11 days to 5 or 6, almost cutting the time in half. In order for drones to be fully accessible for insurers, we need to take a step back and mention the regulations that have moved both the drone and insurance industries forward. When the Federal Aviation Administration (FAA) first developed airspace in the Fifties, it wasn’t done so with technology in mind, just airplanes. Drones were unthinkable. Regulatory leadership More recently, however, the FAA has made major updates with the Part 107 program and Low Altitude Authorization and Notification Capability (LAANC). The Part 107 program provides a license for commercial pilots to fly drones, increasing the drone pilot pool from a couple of thousand to over 120,000 in the U.S. and expanding the amount of pilots for insurers to hire. LAANC opened up roughly 25% to 30% of airspace for temporary clearance within restricted airspace, say five miles of a local airport. LAANC has enabled insurers to rely on drone pilots 99% of the time. Reliability in insurance is important, especially when a disaster strikes. Drones and disaster Throughout the decade, commercial drones have helped communities devastated by natural disasters — such as Hurricane Harvey, Hurricane Irma, and wildfires in California — receive their claims faster. By leveraging a drone service provider, such as DroneBase, insurers can hire and dispatch a trained local pilot to capture the structural damage from above. With tens of thousands of addresses to asses, drone operations companies help expedite claims and allow clients to get back to whole quicker. Additionally, drone technology has vastly improved over the decade, which enables adjusters to have higher resolution images and data. The drones today are much more reliable with safety features such as obstacle avoidance, extended battery life, and better cameras. More advanced drones are also more affordable for drone pilots to purchase, which allows them to spend less investing in the hardware to have a better result. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Insurance Technology Trends to Watch Here’s a look at the factors that will continue to drive this movement in 2020 as carriers continue to show confidence in an industry truly realizing its potential through digital transformation. Accelerated SaaS adoption Just as mainframe solutions and home-grown software gave way to web-based on-premises systems, Software as a Service (SaaS) truly arrived in 2019 as the chief next-generation delivery model for insurance.

No longer a technology laggard, Today’s savviest carriers are applying new strategies today’s insurance businesses and technologies that business users (as opposed to are committed to truly evaluate developers) can work with to make innovative concepts and strategize around digital-first reality in short order. All of this is done without the strategies. need for massive IT investments. These insurers are launching new products, expanding into new geographies, and introducing entirely new business models faster than ever. According to a recent report from Novarica, the average speed to market is now seven months for new products, and three for modifications. These times are broadly similar across lines of business, and they’re shrinking fast. Carriers are realizing that this speed is opening the doors to possibilities and necessary innovations to forge ahead with the products and experiences that customers demand. This trend will continue in 2020, as carriers pursue new opportunities, create differentiated customer experiences, and deliver innovative insurance products that require speed and agility that legacy systems simply have not been able to deliver. Growing the InsurTech ecosystem From motor vehicle reports and address validation to bureau circular content, replacement cost estimates, and flood hazard metrics, there is a staggering amount of third-party data now available to carriers. Accessing and applying this growing volume is critical, but also means carriers have more to integrate and maintain. To assist carriers with this volume, SaaS vendors have productized third-party integrations and bureau circular updates, removing the time and risk of developing custom integrations inhouse. For carriers, this also means that vendors handle ongoing support and maintenance; whenever a third party makes a change to its offerings, the vendor promptly triages the issue and updates the integration, so core systems stay up to date and calling the latest data. What this means (and what is truly exciting) is that carriers no longer need to pick and choose a select few partners to integrate with. This will be an increasingly interesting area to watch as carriers truly expand the boundaries in which they operate – and the data each is able to leverage to solve emerging industry problems and insure new lines that could not have been imagined even a few years ago. Increased reliance on touchless claims The modern insurance claims process is increasingly complex; more variables and data are constantly coming into play, and carriers must determine appropriate settlements and flag potential fraud faster than ever. On top of technical challenges, insurers are dealing with their customers during stressful and vulnerable moments; times when the delicate balance of empathy and automation must be struck in order to give insureds the peace of mind they seek. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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“Insurers are doing a great job at the critical customer touch point of claims reporting, but the end-to-end claim process is still costly and not as fully integrated as it needs to be,” said David Pieffer, Property & Casualty practice lead at J.D. Power, while introducing a recent report. “The challenge for insurers is to seamlessly transition the claims reporting function to more cost-effective digital customer care solutions.” Today, handling claims is a mostly manual process that relies on adjusters’ individual experience and expertise to manage customer experiences and vendor networks. But as carriers continue to invest in digital experiences, data analysis capabilities, and technology ecosystems, the claims process will become more automated and pattern-driven. As a result, it’s predicted that carriers will make significant improvements in the realms of customer satisfaction, operational efficiency, and accuracy. PaaS: Insurance innovation accelerates Platform as a Service (Paas), or a cloud computing service that lets developers create applications using built-in software components like search functionality, has captured the attention of many folks in the industry. PaaS opens the door to cloud features such as scalability, high-availability and multi-tenant capability. This is important, as it allows vendors to introduce or upgrade the functionality of their platforms faster than ever, reduces the amount of coding that developers must do to create P&C insurance applications, features, and updates, and allows their IT teams to focus on truly differentiating features that set them apart from their competitors. For example, Microsoft Azure’s PaaS services provide a framework that developers can build upon to develop or customize cloud-based applications rapidly by focusing exclusively on nonstandard functionality unique to the insurance industry. These are the technologies and trends to keep your eye firmly fixed on in 2020, as carriers challenge all of us to rethink the possibilities of delivering and servicing insurance in the digital age. See source material on page 42


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UPDATE: PIA National will still Provide ACORD Forms Access to Member Insurance Agencies Beginning January 1 ACORD has started charging agents and brokers a new fee and requiring an End User License to utilize ACORD forms. PIA has extended their support for independent insurance agents. To assist agents with the new imposed fee, PIA will cover the agent fee for the End User License for all qualifying PIA members under $50,000,000 in gross P&C revenue as part of their PIA membership. ACTION REQUIRED: Email membership@pianet.org and we will provide your information to ACORD. That’ll enable you to create an ACORD account and sign the end user agreement. There are a couple of important details in which you should be aware:

The End User License will allow agents to utilize ACORD forms. In order to obtain these forms for free, agents and brokers will still need to access the forms from a distributor. In most cases, the "distributor" will be your existing agency management system. On January 1, 2020, you should be able to use your AMS as normal.

PIA members not using a form distributor (i.e. no AMS) who have gross P&C revenue under $1 Million may access ACORD forms directly from ACORD for a $20 PIA member discount.


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5 Things to Know About Cyber in 2020

More Attacks Are Coming from PropertyCasualty360.com From Capital One to city municipalities, we’ve seen the devastating effects of cyberattacks in 2019. These will only continue in 2020. In fact, many security experts believe that all businesses will at some point experience a cyberattack. This is not a question of if they’ll experience a cyberattack, but when. Breaches of well-known companies may dominate the headlines, but small- and mid-size businesses are facing the largest risk since an attack for them can be a company-ending event. In the coming year, I predict that certain types of attacks and certain tools to combat those attacks will reign supreme. As budgets become finalized for the new year, these are five topics that businesses need to be aware of and work into their cyber strategy.

1. 2019 was the year of ransomware — 2020 will be too Ransomware attacks became more prevalent this year, with a 118% rise in attacks in the first quarter alone. Because of the debilitating effects of ransomware on the United States economy, school districts, municipalities and more, cyberattacks are starting to be viewed as more common and personal.

This form of attack has become more accessible for criminals and more devastating for businesses as attacks become more sophisticated and ransom demands skyrocket. We’ve seen this firsthand from our policyholders with six-figure ransoms for BitPaymer, and Ryuk Attacks have also evolved from targeting one device to network-wide attacks to the ubiquitous use of ransomware-as-as-service. In 2020, we will continue to see the pervasiveness of these attacks. However, by having the right basic security measures in place, businesses are far less vulnerable to an attack. Nearly 80% of ransomware attacks could be avoided if companies implement multi-factor authentication across all business services, and remove any remote access to their corporate network. It’s common to look at a major breach like Capital One’s incident over the summer and think TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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it will never happen to you, but with this year’s prevalence of local incidents, many businesses are starting to take a more serious look at their cybersecurity protection.

2. Find the “unknown, unknown” The average cybercriminal is in a network 200 days before they’re identified, and those are just the ones that are discovered. Cybercriminals are increasingly spending extended periods of time infiltrating and expanding across corporate networks before they launch cyberattacks, which makes the eventual attack even more damaging. There is an unknown number of cyberattacks happening daily, and perhaps the broadest threat to small businesses is the “unknown, unknown” that could impact their operations. As we see an increase in attacks, the demand for cyber monitoring and cyber insurance will continue to grow.

3. Have a backup plan Security software alone isn’t fixing the problem, and something must be done to protect small businesses. Unlike security software providers, insurers’ incentives are directly aligned with their customers since the insurer pays out in the event of a loss. In this way, insurers serve as a true risk management partner for their customers, rather than just peddling more security software. With continuous intelligence on the entire risk ecosystem, cyber insurance companies will make protection for businesses in 2020 easier and more accessible, while making hacks more difficult and more expensive for attackers. Cyber insurance is headed toward an inflection point. There is a robust amount of capital going into cyber insurance, and policy language is improving, which will lead to an increase in buyers and claims. But, at some point — possibly in 2020 — this trend will meet an inflection point as is typical in the insurance industry. As cyber coverage becomes more common, scopes of coverage will converge. Furthermore, as losses become more pervasive, the average cost for a policy will increase.

4. Double-check your deals Thinkful, an online education company, notified users this past September that it had experienced a data breach. To add insult to injury, this announcement happened just days after the site had been acquired by Chegg for $80 million in cash. No business wants to acquire a business, only to immediately learn that they’ve also inherited a data breach and all of the damage that comes with it. Cyber vulnerabilities are increasingly being considered in the due diligence process for mergers and acquisitions, but for many businesses, cyberthreats are still a blind spot. In 2020, business leaders absolutely need to take cyber due diligence as seriously as they do financial, market, and employee analysis. In an ideal situation, decision-makers would conduct a penetration test on the network of a selling company before signing any contracts. This helps the acquiring company more fully understand a company’s potential cyber vulnerabilities. A penetration test creates a simulated cyberattack and can signal technical deficiencies across a company’s network.

5. Prepare for CCPA just like you did for GDPR Earlier this year, Google, one of the largest technology companies in the world, was fined $57 million for a General Data Protection Regulation (GDPR) breach in France. What is unique about this scenario is Google didn’t expose any customer data — rather, they were fined for failing to comply with their stated privacy policy. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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In January 2020, the California Consumer Privacy Act (CCPA) goes into effect. As with GDPR, this doesn’t just affect California-based or EU-based companies — it impacts any business with customers that reside in that location. Now more than ever, U.S.-based businesses need to understand and adhere to privacy law, or else risk massive exposure. If companies with as many resources as Google are facing fines, how can far smaller businesses address this risk? One effective solution is to mitigate the risk through cyber insurance policies that address both loss of customer data due to a security failure or data breach, and failure to comply with the regulation (as was the case with Google). Insurance helps businesses self-regulate their actions and acts as the last line of defense in the event of a major fine.

Looking forward Cyberattacks aren’t just a top news story of 2019 — they’re here to stay. Businesses that have watched from the sidelines how breaches have affected other companies and organizations will need to take preventative action in 2020. As ransomware continues to wreak havoc and the number of hackers continues to grow, business leaders need to get serious about investing in cyberattack prevention and securing a risk management partner.

Cyber 101 A PIA member benefit, Cyber 101 was created to help educate agents and their clients about the most common cyber risks faced by small and mid-sized businesses as well as the business practices and insurance coverages that can reduce those risks. Members log on here.


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2019 Insurance Industry Employment by Sector by Danielle Ling, from PropertyCasualty360.com The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) released in mid-December revealed an unexpected jump in the number of U.S. job openings in October. Surpassing the median forecast of 7 million, national job openings increased by 235,000 in October to reach 7.27 million, while the quits rate held at 2.3%. For the insurance market, a new report from insurance recruiting firm The Jacobson Group reveals industry-focused employment statistics for 2019. According to Jacobson, the insurance industry added 34,700 new jobs in 2019, reaching a total of 2.7 million jobs. Jacobson broke down 2019 labor data for the insurance industry sector by sector. In general, the health and title sectors saw strong continued growth, and despite employment decreases in life and claims, 2019 was a good year for the industry as a whole. On a year-to-year basis, October’s insurance industry employment numbers saw job increases across various sectors, including:

Health (+3.9%),

Agents/brokers (+2.7%),

Reinsurance (+2.4%),

Title (+1.4%),

Property and casualty (+1%) and

TPAs (+0.7%).

In the opposite direction, job decreases were seen for life (–1.8%) and claims (–14.5%). On a year-to-year basis, Jacobson reports October saw weekly wage increases in:

Claims (+9.5%),

Agent/brokers (+5.8%),

Life/health (+3.8%),

TPAs (+4.4%),

Reinsurance (+5.4%) and

Property and casualty (+0.7%).

Meanwhile, weekly wage decreases were seen for title at –1.5%.


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Recruiting the Next Generation of Insurance Talent by Mary Ann Cook, CPCU , PropertyCasualty360.com We’ve been talking about it for years, yet the problem still exists: Our industry needs more talented workers to join its ranks, with the skills to help solve increasingly complex business problems. According to a recent survey of insurers, 95% currently have job openings, and 56% are planning to hire more than 50 employees within the next year. Add to this the challenges of an aging workforce. Approximately 25% of insurance professionals are expected to retire in the next several years, which will leave nearly half a million job vacancies by 2020.

The dual challenges of an aging workforce and a need for more talent are particularly acute with insurance agents and brokers. According to McKinsey & Co., the average insurance agent is 59 years old. Meanwhile, the U.S. Bureau of Labor Statistics estimates that employment of insurance sales agents will increase 10% faster than most occupations by 2026, resulting in almost 50,000 new jobs. Clearly, the insurance industry must look to the upcoming generation of workers to bridge a widening talent gap. However, locking down millennial talent for the long haul has proven to be a difficult task for many businesses. For starters, this group maintains a completely different set of values than their predecessors. They’re also not afraid to change jobs if they’re left feeling unfulfilled. Gallup recently dubbed millennials the “job-hopping generation,” given that 21% of millennials have changed jobs within the past year. Gallup also reported that 60% of millennials are open to changing their career, but with the caveat that it must be a better opportunity. Insurance companies that want to close the talent gap need to step up their recruiting game in order to effectively target, land and retain millennial talent. Here are a few ways to grow a robust pipeline of young talent:

No. 1: Promote corporate citizenship. Roughly 64% of millennials say they wouldn’t take a job if the company didn’t practice corporate responsibility, and 88% of millennials say that a job is more fulfilling when employers provide opportunities for them to make a positive impact.

To attract millennial applicants, companies must make a stronger commitment to their communities and their employees’ involvement by rolling out voluntary community service initiatives. But just encouraging participation isn’t enough. Insurance companies must make community service part of their culture, and carve time out of the workday for employee participation.

No. 2: Provide career growth and development opportunities. While millennials often have a reputation for “job hopping,” 59% of millennials in a recent survey had been in their current job for more than three years. Approximately 86% of millennials said that TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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providing career training and development would keep them from leaving their job. As noted above, the insurance industry has no shortage of seasoned professionals, who are often eager to pass on their wisdom to junior employees. By instituting structured mentorship programs, insurance companies can create a pathway to prosperity for their younger workers that leaves them satisfied with their careers in the process. Sending younger workers to industry conferences and providing developmental learning programs will also encourage personal growth and make them feel valued.

No. 3: Establish a strong corporate culture. Millennials value the culture that they experience at work. They want to feel engaged with their coworkers and enjoy their working environments. However, many corporations today aren’t building corporate cultures that resonate with this generation, considering a Gallup survey showed that only 29% of millennials feel engaged at work.

The insurance industry has an opportunity to differentiate itself from the sea of corporate culture sameness by adding team-building events, activities and contests for employees, and morale-boosting reward systems to help increase engagement. Along with the greater employee satisfaction these efforts can produce, these additions can even benefit the company’s financials. Approximately 50% of c-suite executives say that corporate culture influences productivity, creativity, profitability, firm value and growth rates.

No. 4: Embrace technology. It’s widely known that technology — from telematics and big data to drones and mobile customer apps — is revolutionizing insurance. Insurance companies looking to incorporate more technology into their business need a younger generation of talent to help envision, build, and implement it, and can use this need as a selling point for recruitment. Continued on page 42


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Review: 2019 and the Flood Insurance Industry by John Dickson, PropertyCasualty360.com 2019 was a landmark year for the flood insurance industry — the NFIP underwent multiple short-term extensions, a new regulation took effect regarding lender acceptance of private flood insurance, and a growing wave of technology transformed the industry with new market entrants and modeling capabilities. Out of all of the milestones and moments, three factors, in particular, have influenced the evolution and growth of the industry this year.

Increasing competition in the private industry Historically, many insurers have shied away from entering the flood insurance market, largely because it has been difficult to get an accurate view of flood risk. However, advancements in catastrophe modeling, technology, and data and analytics have enabled insurers to better understand flood risk and, as a result, we’ve seen multiple new market entrants over the past year. According to the National Association of Insurance Commissioners (NAIC), private flood insurers reported direct written premium of $644 million in 2018, up 9% from 2017 direct written premiums and up 71% since 2016. These new entrants are coming online faster than we’ve ever seen before and are looking at admitted products at a scale that’s unprecedented. With a more competitive landscape represented by reputable, responsible underwriting organizations, consumers and agents enjoy greater options and customization. As the marketplace responds to customer needs with innovation and increasing competition, property owners truly have the ability to find solutions that work.

Giant leaps forward with new technology There are few aspects of the world of private flood insurance that technology has not touched, from improvements in customer experience to greater claims efficiency to expanded and more accurate pricing and underwriting capabilities. Technology that is now commonplace, which wasn’t necessarily fully adopted even a few short years ago, includes: •

Probabilistic models that estimate risk and potential losses.

Better mapping capabilities that provide a more detailed understanding of topography.

Image capture and machine learning applications capable of estimating the elevation of the first floor of structures.

Drones that enable an evaluation of property attributes remotely rather than by an engineer or survey assessor on site.

High-resolution property images that can help understand the proximity to risk and flood resilience.

Digital quoting experiences that streamline the process to quote and purchase coverage.

The above list offers only a glimpse of the many advancements relevant to this industry; many other examples exist, such as mitigation work that makes properties better equipped to withstand floods. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Technology benefits the entire flood insurance industry. The NFIP’s Risk Rating 2.0 — which calculates flood insurance rates based on the risk profile of an individual location over a blanket map — is largely made possible by the same developments the private industry actively employs. In fact, for many, the sophistication of flood modeling technology, the advent of Risk Rating 2.0, and the countless investments made into understanding flood signals that perhaps it is time flood zones be eliminated entirely. Without these hardline and somewhat arbitrary lines removed from the flood insurance conversation, more property owners can access broad protection.

An active legislative docket The flood insurance industry also saw continued regulatory and legislative changes. The federal authority for the NFIP was extended multiple times. With the act currently scheduled to expire on December 20, it appears likely that additional action is on the horizon. Other key developments include: 

New lending regulations: This rule requires certain regulated lending institutions to accept policies that meet the statutory definition of ‘private flood insurance’ in the Biggert-Waters Flood Insurance Act. By providing certainty and clarification, these institutions have the ability to more reliably and consistently determine the acceptability of flood insurance.


Export list additions: This year, Texas joined a growing group of states by adding flood insurance to its list of cleared surplus lines products, allowing agents and property owners better access to the private market. Continued on page 42


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Facing Off Against Flooding in 2020

Flooding can happen anywhere. But the costliest and deadliest flooding events still happen near coastal communities. In 2019 there were 10 weather and climate disaster events with losses exceeding $1 billion each across the United States. Texas’ flood premium potential is over $2 billion. by Elana Ashanti Jefferson, PropertyCasualty360.com There are 62 million homes in the United States with a moderate to extreme risk of flooding, according to “Sizing the Personal Flood Insurance Market,” a recent analysis published by Verisk Analytics, the insurance data analytics provider. The report echoed communications from the Federal Emergency Management Agency (FEMA), which houses the National Flood Insurance Program (NFIP). According to those agencies, flooding is now the most frequent and expensive natural disaster in the U.S. What’s more, 90% of all natural disasters in the U.S. involve flooding, according to the National Association of Insurance Commissioners.

Despite all of that, the Insurance Information Institute (I.I.I.) says only about 15% of U.S. homeowners carry flood insurance. And some research indicates that percentage is much lower. ValuePenguin.com conducted a study in May 2019 that determined 9 out of 10 American families aren’t adequately insured against flood damage, and that just 7% of U.S. homeowners have a flood insurance policy, based on U.S. Census Bureau statistics. “The need for flood insurance far exceeds the current take-up rate,” Marc Treacy, managing director of flood insurance at Verisk, said in an August 2019 statement about his team’s flood insurance market report. “Our study shows just how many homeowners are at significant risk for flooding and how big the opportunity is for insurers looking to find a new avenue for growth.” Why are so few homeowners and businesses buying flood coverage? And what can agents, brokers and carriers do to make it more appealing? TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Neptune Flood Insurance CEO Jim Albert says the reason for the vast flood insurance coverage gap is “misunderstanding of the product or just a real, difficult user experience that drives people away from it.” The misunderstanding stems from many homeowners believing that flood coverage is included in their standard homeowners’ insurance policies, which it isn’t. Consumers may also find it difficult to navigate the NFIP’s website or the vast amounts of often irrelevant information and statistics they must wade through to determine their coverage needs. Others rely too heavily on the government’s floodplain research, which is not always current.

Olvera Street in Roma, Texas on Saturday, July 24, 2010. This home was flooded after Hurricane Alex.

“Recent flooding events have challenged the long-held FEMA/Daniel Llargues perception that flood insurance is only for those homes in FEMA high-hazard zones or along the coast,” says Verisk’s Marc Treacy. “The perspective on protecting against flood loss, for both insurers and homeowners, needs to shift toward this: If it rains where you live, you are at risk of flooding. And it’s critical to understand the level of risk for each property, so homeowners can obtain the coverage they need and insurers can underwrite policies with precision.”

Pinpointing the problem The bottom line: The vast majority of U.S. residents and business owners failed to understand their flooding risk. It doesn’t help that FEMA’s 100-year flood maps cover territories inhabited by roughly 13 million people but nearly 41 million people are now estimated to live in locations with an elevated flood risk. There also was a time when flooding was considered an acute risk in only a few states: Texas, Louisiana and Florida. But 2019 proved that flooding can happen virtually anywhere in the U.S. For instance, nearly 14 million people were affected by what The New York Times dubbed “The Great Flood of 2019.” That event features especially severe flooding in Midwestern U.S. states along the Missouri and Mississippi Rivers. According to The Weather Channel, 42 different locations recorded record-high water levels. At least a million acres of farmland were waterlogged during that event, but the U.S. Department of Agriculture has few resources to address catastrophes. Elsewhere in 2019, Hurricane Dorian spurred flooding in the Carolinas after devastating the Bahamas, and Tropical Storm Imelda became the fifth-wettest cyclone on record, spurring flooding throughout south Texas. “Flooding has always been the most common and costliest type of natural disaster in the U.S., and I don’t see that changing anytime soon,” says Phil Wills, vice president of business development for Colonial Claims. He adds that flooding is likely to increase due to climate change and land development. “Flood waters don’t care if you’re a homeowner, tenant, residential condominium owner or occupant, or a commercial business owner,” Wills says. “Flood waters don’t care where humans draw a line on a map that tries to identify the areas of highest flood risk (especially as our landscape is changing every day). Everyone should consider buying flood insurance. Homeowners, renters, houses of worship, school buildings, restaurants — everyone needs to seriously consider protecting themselves with a flood insurance policy.”


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Politics as usual Some private-market flood insurance agencies lament the challenges to both carriers and consumers of working with the NFIP, a program created by Congress in 1968 to provide property owners with flood risk mitigation and insurance coverage, of which there was very little available then. The I.I.I. reports that as of September 2019, 59 insurance companies participated in the NFIP’s Write Your Own program, which allows insurers to issue policies and adjust flood claims on behalf of the federal government. On the other end of the debate are insurance professionals such as Phil Wills with Colonia Claims, who believes the private flood insurance market and the NFIP enjoy a “very amicable, even a supportive relationship.” He says both camps are open to innovation and the product improvements that new data and modeling mechanisms are ushering into the flood market. “The NFIP has the long, historical experience and the ability (Congressional mandate) to take on all risks,” Wills says. “For the most part, the private flood marketplace is newer — using newer technologies to underwrite and manage the risks they wish to take on. I think both marketplaces are learning from each other and are trying to grow their respective books of business and protect more people and businesses from the risk of flooding.” Linda Sullivan concurs. “The National Flood Insurance Program is unique in that the NFIP flood policy is considered an insurance product, but it’s better characterized as a government aid program with elements of insurance,” says Sullivan, president of Administrative Strategies, a business strategy and solutions company that’s involved in the insurance claims processing space. The NFIP has worked cooperatively with the broader insurance marketplace for years through its Write Your Own (WYO) program, which allows insurers to offer the NFIP policy through their own brand using their existing agents. The single most significant characteristic of the NFIP is that it’s a government-run program, with all the power and baggage that comes with federal bureaucracy. Beyond the fact that Congress must periodically reauthorize the NFIP, which in itself can be arduous, a great deal of debate exists between lawmakers from different states regarding how well or poorly the program serves their constituents. Wills concedes that the ongoing reauthorization drama is something lawmakers must address sooner than later. “Typically, the NFIP has been reauthorized for five years at a time. But lately it’s become common to reauthorize the program for only weeks or months at a time. When, as has happened occasionally, the program is not reauthorized timely, it creates a lapse when no new policies can be issued and no renewal bills can be sent. Every time there is a lapse in the program, it impacts mortgage closings, creates confusion for agents and homeowners, and requires significant IT and underwriting efforts for the NFIP and the carriers and vendors in the NFIP’s Write-Your-Own program,” he says. A Houston neighborhood in the aftermath of Hurricane Harvey.

The Trump administration announced plans in 2019 to reform the NFIP with a shift toward fully risk-based pricing.


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“What we’re going to do is change an insurance-rating structure that hasn’t fundamentally been changed since the 1970s,” David Maurstad, FEMA’s deputy associate administrator for insurance and mitigation, told The Wall Street Journal. “We’re going to consider more flood risk than we currently do now.” According to the I.I.I., FEMA said at that time that it would begin to assess properties individually, instead of calculating rates based on whether a home falls in a designated flood zone. This could drive more flood risk into private reinsurance and risk markets. FEMA plans to announce new rates on April 1, 2020, and it will implement the new system on Oct. 1, 2021. Any shift in FEMA’s flood rating approach will likely boost the already growing competitive landscape within the flood insurance market. Private market insurers increasingly offer flood protection now, and often at a more affordable price than NFIP policies. Other challenges facing the NFIP and its partners include ongoing political maneuvering. “The rating mechanism used by the NFIP applies such a broad brush, that they take an area called the floodplain, which undulates, and they treat it like everybody within the floodplain is at the same elevation,” says Craig Poulton, president of Poulton Associates LLC, a managing general agent and wholesale insurance brokerage that is among the largest privatemarket purveyors of flood insurance. The NFIP considers its historical flood data to be proprietary information and declines to make that information public. Poulton believes the result is an overly bureaucratic system that is “anti-consumer, anti-taxpayer and anti-flood insurance buyer.”

It’s all about the data Poulton believes that best practices for today’s flood insurance agents and brokers include providing prospects and clients with as much property data as possible and as many flood insurance policy options as possible. “Agents and brokers who have a flood insurance policy for their clients through the NFIP or are using the NFIP as their exclusive provider of flood insurance, are probably doing their clients a disservice,” Poulton says. “They are ignoring what would likely be a lower rate from the private market, because the private market is very active in the flood space now.”

Interactive flood maps are available from the National Weather Service and FEMA.

He adds that discussing flood risk and policy options must become part of any insurance producer’s “normal interface” with existing and potential clients, regardless of how impacted the surrounding community might be by floodplain mapping. “Frankly,” Poulton says, “it can flood anywhere.” The good news is that catastrophic modeling tools have improved dramatically in recent years, says Sullivan. “Location is the major factor in determining flood risk, but additional considerations can be key,” she adds. “Factors such as homeowner efforts to mitigate risk through the use of different building materials, detection devices and other methods. FEMA is taking all of these factors into consideration as they look toward developing improvements.” TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Public education around flood risk also must become a top priority. “The most successful agents and companies that sell flood insurance are those that truly understand and focus on developing their expertise in the product,” says Sullivan, who is not directly involved with policy sales (as a claims servicing firm) but interacts with client-facing agents and brokers. “Agents that see flood as just an add-on product or sell it because their customer tells them, ‘My lender says I need it,’ generally don’t find real success in growing their flood policy base,” she says. “With a single peril policy like flood insurance, the consumers need to see the value, and agents that are not experts find it difficult to explain all the benefits and protection that flood insurance offers.” Jim Albert agrees. “What we have is an opportunity to help solve a tough problem,” says the chairman of Neptune Flood Insurance, which is in the process of patenting its flood-risk data analysis program, the Triton Rating Engine. “We can bring technology to (consumers). We can make it easier to understand. We can make it easy to design, and then we can provide coverages that are cheaper and more expansive than the National Flood Insurance Program. We think that will bring a significant new element to the market that will hopefully help solve this coverage gap.”

Looking ahead Besides the ongoing political push and pull that will continue to impact the flood insurance market, two trends are likely to become even more pronounced in flood as well as the broader P&C insurance industry in 2020: the ongoing digitization of insurance customer experiences, and the entrance into the market of fresh brands and players — particularly those that are rising to the expectations of today’s digitally savvy consumers. “The industry is focused on improving the complete policyholder experience — from rating/ quoting to paying claims — and implementing solutions that help make every transaction and client interaction easy and accurate,” Wills concludes. “To a large degree, this customer experience is what differentiates the various competitors and can directly impact a company’s brand reputation. I have no doubt that focus on the customer experience will continue through 2020 and beyond.”


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2020 Insurance Outlook

by Sam J. Friedman and Gary Shaw, PropertyCasualty360.com Each year, individual threats and opportunities come and go. But looking at the bigger picture, insurers are likely to face several fundamental challenges in the decade ahead as many companies strive to reinvent their products, technology systems, and business models to cope with emerging exposures and changing customer expectations. Deloitte’s 2020 insurance outlook, “Insurers Adapt to Grow in a Volatile Economy,“ primarily focuses on four key drivers likely to dominate C-Suite strategy sessions and budgetary decisions in terms of how to grow and run insurers more efficiently and profitably. They are: •

Enhancing customer experience for a digital economy;

Achieving transformational innovation;

Bridging the generational and skills divide on talent; and

Evolving the industry’s culture to enable the insurers of the future.

Here’s a closer look at them all. Enhancing customer experience: Many carriers are still struggling to satisfy consumers who have grown accustomed to online shopping and self-service, especially in personal lines. But that doesn’t mean most customers won’t want human interaction at some point in the process. For example, agents and brokers are unlikely to be eliminated in the sale of more complex insurance products — including commercial insurance for middle market accounts, or for individuals buying complex annuities or advanced life insurance products. Even small commercial and many auto and homeowners insurance buyers will at least want the option of working with a live person. As a result, more carriers are likely to move towards a hybrid model, allowing consumers to choose whether to self-serve, work through an agent or advisor, or enjoy some combination of the two. That means in addition to improving online and robo-advisory capabilities, insurers should be helping their agents and brokers raise their game to compete in the digital age.


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Insurers also should be better prepared to take advantage of expanding connectivity in servicing customers — especially in terms of how to leverage all the alternative data for pricing and claims generated by wearables, smart cars, and sensor-equipped homes and commercial buildings. Continuous connections provide insurers with an opportunity to engage more frequently and proactively with policyholders, but more advanced analytics and predictive models as well as more agile core systems will likely be needed to make practical use of new types of data. At the same time, privacy regulations and consumer sensibilities about use of personal data will have to be addressed. Bolder innovation required: Chief innovation officers at insurance carriers are often fighting a dual battle for funds and authority, according to those interviewed by Deloitte for a recent report, “Accelerating insurance innovation in the age of InsurTech.“ Our research found that 10% or less of innovation resources are generally going towards reinventing the business, with the rest dedicated to making incremental improvements in status quo operations. A more balanced approach is likely needed over the next few years if insurers are to keep up with changing consumer demands and new InsurTechdriven competition. To meet this challenge, we’re likely to see a change in thinking among many carriers when it comes to the business objectives behind projects to upgrade existing operations. Core transformation to modernize legacy infrastructure should therefore be increasingly driven by a carrier’s future digital ambitions. For example, insurers developing new products to cover those using vehicles or homes for both personal and commercial purposes may need to be able to start, pause, and stop coverage at the click of a button on their policyholder’s mobile apps. Providing agile functionality will likely only be possible if core functions are equipped to handle such advanced requirements. Many insurers are also shifting gears when it comes to cloud strategies, with conversations transitioning from IT-centric topics (such as where to more efficiently house data) to business -driven considerations (such as how cloud can enable system modernization and business model transformation). A maturing InsurTech ecosystem may help legacy carriers jump start and accelerate their innovation efforts. Venture Scanner data analyzed by Deloitte shows that while the number of new InsurTechs launched has plummeted over the past couple of years, the amount of money invested set a new high of $3.26 billion in 2019, with fourth quarter figures yet to be determined, as investors focus on later stage funding of those showing the most tangible progress and ability to scale. However, the majority of InsurTech investment continues to come from parties outside the industry, meaning that most insurers remain passive spectators and consumers of InsurTech, rather than actively engaging in their development. That has begun to change, with more carriers becoming investors and collaborators with InsurTechs to innovate and take control of their own digital destinies. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Bridging the generational and skills divide: Insurers are coping with three pressing, concurrent talent challenges: •

How to mitigate the looming retirement of Baby Boomers;

How to attract enough young talent to replace them; and

How to recruit those with the advanced technology and data skills needed to succeed in the digital economy.

Many Baby Boomers are rapidly nearing the traditional retirement age of 65, including as much as one-third of agents and one-quarter of underwriters. To buy time and keep valuable institutional knowledge and experience in house for as long as possible, insurers should look to retain older professionals with more flexible staffing arrangements — such as encouraging semi-retired employees to keep working at least on a part-time basis, allowing them to work offsite or even out of state if they choose, or engage them as independent contractors for short-term assignments. Still, while such efforts may help stem the tide and impact of retirements, they will only postpone the inevitable departure of Boomers. Insurers should therefore also step up efforts to raise awareness about the changing nature of the insurance business among students and young job seekers. Outreach programs should emphasize the high-tech, data-driven work insurers are doing to engage connected customers, especially to attract those with the technological and data science skills insurers will increasingly need, and who are often entering the industry through the proverbial back door via InsurTech startups. Carriers also should be reshaping job descriptions and training programs to reflect the evolving nature of insurance work. Actuaries, for example, are among those seeing their jobs redefined by technology, leveraging the power of automation and artificial intelligence to move beyond the role of data steward and model builder and become business strategists, according to Deloitte’s report on “The Rise of the Exponential Actuary.” The day-to-day work, skill sets, and technological capabilities of underwriters, claims managers, and agents are similarly evolving. Changing the industry’s culture: Last but not least are the organizational and cultural obstacles that could inhibit insurer innovation, growth, and profitability over the coming decade. Adopting new technology is one way to spur and enable change, while upgrading skills and capabilities among the talent pool is another. However, the effectiveness of such initiatives is likely to be blunted unless accompanied by more fundamental shifts in insurance company strategy, operating models, and culture. For example, even if insurers manage to convince younger, more highly skilled data and technology enabled recruits to work in the legacy insurance industry, the bigger challenge may be integrating newcomers into what has often been a change-resistant culture. This is akin to the potential for tissue rejection in a transplant: Will legacy personnel wedded to how insurers have historically conducted business accept the different attitudes, approaches, and ideas of more forward-thinking newcomers, and work together to create the insurer of the future? Despite all the talk and emphasis on emerging technologies, insurance is likely to remain a people business, both in terms of how it is sold and bought, as well as how insurers are managed. Resolving this ‘synthesis challenge’ — how to integrate new tools, technologies, and techniques with legacy systems, while reconciling bold new ideas from InsurTechs, ecosystem partners, and new hires with time honored status quo practices — may be the biggest success factor for insurers in the decade ahead. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Eight Steps to Sales Greatness

by John Chapin

1) Do what the top salespeople do. This is arguably the most obvious, most basic, and most important step to becoming a top salesperson. It’s simple: If you take the same actions as the top salespeople, you will eventually also be a top salesperson. If you do the same things as a mediocre salesperson, you will be a mediocre salesperson. Find the top salespeople in your company and pick their brains. In addition to top salespeople in your company, get advice from top salespeople in other industries.

2) Learn everything you possibly can about the subject of selling. Read, listen to programs, watch videos, and study everything you can get your hands on that relates to selling. Whether you are new to sales, or you’ve been in sales for a while, there are always new ideas coming out on handling objections, cold calling, and all other aspects of selling. Be a sponge and absorb as much information as you can. Be open and curious and realize that no matter how much you know, there’s always more to learn.

3) Learn everything you can about your industry and your prospects. Read industry publications, newsletters, magazines, and the like. Pay attention to on-line sources along with “local” sources such as newspapers, Chamber of Commerce letters, and other news in the geographic proximity of the companies you’re interested in. Look for breaking news, new products, new laws, regulations, or changes in legislation, interesting articles, stories on people making an impact in the industry, and other pertinent information. Stay on top of the latest innovations and technology within your industry. Study the companies and individuals to whom you’re selling. Obtain annual reports, look in Who’s Who, and tap the Internet and company websites for information. Information is power. The more information you have on selling, on the industry you’re in, and on the people to whom you’re selling, the more confident and successful you’ll be.


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4) Work on yourself. To be a top salesperson, you must constantly improve personally as well as professionally. Make it a habit to think positive and stay motivated by using books and audio and video programs. Put as much positive information into your brain as you can and keep negatives out. Hang out with the right people, people who are getting better and moving forward. In order to stay motivated in the long term, you need to be growing and improving. You must be working toward something that is meaningful to you. Your highest values and ideals must be reflected in your daily life. Discover what you ultimately want to do with your life and what you have a passion for. How does your present job serve as a stepping stone to get to the place you ultimately want to be?

5) Set goals. Goals give you direction. Your goals can be as simple as doing 120 percent of quota and making the annual awards trip, or as complex as a list of daily, weekly, monthly, and annual goals in all the major areas of your life. Some people find a complete list of complex goals overwhelming. If this is the case, simply set one or two major goals at a time. Make sure your goals inspire and motivate you. Your goals must be clear, measurable, and believable. “More cold calls” isn’t measurable. “Ten percent more cold calls” is. Note: While it’s nice to have material goals, it is more important to have goals in which you become something. “Becoming” goals such as becoming more self-confident, creative, or knowledgeable in a certain field do much more for your happiness, self-confidence, and selfesteem. Yes, becoming more self-confident will give you even more self-confidence. These qualities build upon themselves.

6) Look for new sales ideas and use them as soon as possible. Find new ideas in books, audio programs, seminars and in other salespeople. Take sayings, closes, and other new information you like and make them your own. Practice them on other salespeople, family members, friends, and practice them on yourself. Most important, once you’ve mastered them privately, look for places to use these new ideas in real-world selling situations.

7) Review motivational and educational information often. Actively listening to audio programs while taking notes is the optimal way to learn. However, this is not always possible, and when it’s not, passive listening in the car or elsewhere will also work well. To absorb the audio programs through passive listening, listen to them sixteen times. To retain them after the 16 times, listen to them once a month. With books and other written material, read them, take notes, highlight sections, flag pages, and then review your notes and highlighted sections sixteen times. With videos, watch them, take notes, and then review. Again, you also want to be looking for ways to apply the new information you’re learning. Continually look for new material on selling and motivation, while also reviewing resources you’ve already studied. As you need help in particular areas, you can return to several resources and get different ideas.

8) Work hard and smart. Obviously if you’re given a choice, it’s much better to work smarter than harder. At the same time, when you are just starting out and don’t know anything about the business, you simply must work hard until you figure things out. But even in the beginning, there are some basic rules you can follow that will ensure you get the most out of your hard work and understand things as quickly as possible. They are: one: do what the top people do, as discussed, two: make more calls than everyone else, three: be persistent, and four: use your time effectively. TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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How Can Leaders Become Authentic? from AIMS Does your team believe in you as their leader? If they didn’t, would you know? In the last decade, EY Global (formerly Ernst & Young) conducted three separate surveys among nearly 10,000 adult full-time employees of all ages (plus an additional 3,200 teenagers) living in eight countries, including the U.S. The goal of each study was to understand the issues affecting both trust and a lack of trust in the workplace. The conclusion? Today’s workforce does not believe in its leaders. Fewer than half of employees said they trust their boss. One of the main reasons was an absence of leadership. So, what actually makes a leader trustworthy? The EY surveys show that two key qualities earned trust among employees: “Delivers on promises” and “communicates openly and transparently.” In her book, Yours Truly: Staying Authentic in Leadership and Life, Margarita Mayo says, “Leadership scholars agree that authenticity — or the lack thereof — lies near the heart of the crisis in contemporary corporate leadership.” She reflects on the role of leaders in business and uncovers what makes an authentic leader. Three traits that distinguish authentic leaders, says Mayo, are heart, habit and harmony. She explains that great leaders follow their heart and cultivate passion. They make learning a habit and develop a growth mindset. And they develop harmony in the workplace. “Authentic leadership is not just about being yourself, but also about growing into your best self and being true to others,” writes Mayo. “Authentic leaders reinvent themselves and their organizations to address the emotional and social demands of their followers, while staying true to their authentic self.” If you’re looking to improve your authenticity, Mayo offers the following advice:  Lead with a social purpose. Find a meaningful cause that offers clarity and direction.

Mayo provides the example of “helping people and businesses prosper” as a strong and energetic mission.  Walk the talk. Always match words and actions. This sets a strong example and validates

your leadership. What’s important is serving a cause instead of a personal interest.  Sense and feel situations. Understand the importance of listening and responding to the

needs and desires of your team. This is vital because “their level of enthusiasm and satisfaction is the fuel that sparks your leadership.”  Be present, especially in difficult times. Layoffs, reorganizations and economic crises

require greater leadership. Always keep this in mind. The bottom line is that authenticity is vital in today’s business world. “Leaders are the glue holding our companies together and are part of the fabric of our society,” writes Mayo. “Once, leaders acquired trust based on formal positions, but today they must rely on authentic relationships.”


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A New Decade Brings New Risks by Joyce ty360.com





Most of the emerging risks facing property & casualty insurance customers today ultimately center on business interruption. Whether it’s climate change and extreme weather, transportation supply chain issues, or cyber attacks and resulting system failures, business interruption — potentially with far-reaching and catastrophic financial effects — is often the result.

Climate change heats up Climate change news is grim. The latest assessments of the “emissions gap” between the amount of planet heating gases countries agreed to cut and where the current projections are headed shows that global temperatures are on pace to rise as much as 3.2 degrees Celsius by the end of the century — more than double what scientists projected to be a “safe” range. Yet the results of Deloitte’s recent “Insurance Regulator State of Climate Risks Survey” reveal the insurance industry appears unprepared for the risks of climate change. One-third of the 27 respondents, from the National Association of Insurance Commissioners, said they did not know how well insurers are prepared to deal with the potential aspects of climate-related risks on financial stability. Similarly, one-third of the regulators surveyed didn’t know whether current insurer risk models are sufficient to capture and test climate-related risks.

“It’s a myth that the insurance industry doesn’t care about climate change,” stresses Rob Newbold, executive vice president at AIR Worldwide. “The effects of climate change can take decades, and insurance policies are typically one-year contracts.” Newbold has found that the majority of reinsurers want to understand the effects of climate change on a 5-to-10-year time horizon — or longer. He points out that many reinsurance companies are taking a holistic approach to climate change, addressing the physical, transition and liability risks. Particularly in non-industrialized parts of the world, the insurance industry is taking such actions as providing micro-insurance to low-income entities at high risk from climate change, issuing catastrophe bonds for climate change-related perils, and working with governments to enable their knowledge and expertise to manage risk to the fullest extent possible, he says. Newbold advises decision-makers to use scenario testing to evaluate potential financial effects. “Catastrophe models are a great tool for conducting such test,” he says. The insurance industry must adapt, as it always does, when significant impacts like the financial risks presented by climate come along, says Bill Gatewood, corporate senior vice president of Personal Insurance at Burns & Wilcox. “There are many good lessons we can take from the last few years.” The way the insurance industry approaches managing the financial risks and identifying solutions will need to be multifaceted, he stresses. Initiatives will need to involve changing the rating structure and the review process for comprehensive coverages that are offered. Carriers will also need to strengthen their loss-prevention activities to provide homeowners with more tools to make their homes more defensible against wildfires. According to Patrick Barco, manager of Ocean Marine at Burns & Wilcox, extreme weather


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conditions compounded with large losses in recent years have led many insurers to review their underwriting philosophy and apply adequate premium for the risks in the transportation industry, particularly in shipping. “We are seeing that most losses in the shipping industry are due to on-board vessel fires, voyage casualties and weather-related losses with containers that are lost overboard,” he explains. He notes that inland shipments handled by road or railroad could also be affected by extreme weather-related losses and are tied to such exposures as tornadoes, windstorms, fires and derailment. Extreme weather risks also are growing in the construction industry. People in risk-prone areas are weighing the options of rebuilding or moving elsewhere. With high demands on materials and labor, some people are waiting to get contractors and home builders lined up to begin their rebuild projects, Gatewood says.

Transportation troubles Whether by land or by sea, the primary risks for the transportation and shipping industry revolve around business interruption and supply chain issues, which can be caused by everything from extreme climate events to catastrophic system failures. On land, business interruption can be caused by accident claims taking place hundreds of miles away from the home terminal, says Steve Shepard, underwriting manager of Transportation at Burns & Wilcox. The insured must get any undamaged cargo to its destination in a timely manner, which necessitates finding a replacement vehicle to pick up and continue to transport the load quickly to mitigate further interruption. He notes that without the correct policy, the insured might not be afforded temporary or substitute coverage for the liability or cargo. “Ultimately, they could lose a contract because they can’t fulfill the shipment,” Shepard cautions.


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Theft is also a risk for transportation; however, technology to mitigate pilfering has come a long way in helping prevent incidents, he says. “We’ve written several accounts where the client implemented GPS tracking on the units, as well as external and internal tracking devices to help track shipments should they be stolen. Additionally, using team drivers and not leaving the shipments unattended helps mitigate theft concerns.” One risk-reducing trend in the transportation industry is the declining costs of safety-enhancing technology. “The costs of lane departure, GPS, and forward and rear-facing camera systems have dropped, and we anticipate this will continue to be the case,” says Shepard. As a result, most insureds will see savings on their insurance premiums when they invest in and implement reputable technology. Part of a safety-conscious culture is ensuring that drivers are trained and qualified to handle the risks that “come with the territory” — literally. “There are situations where drivers with varying experience levels have to drive through multiple types of weather events in the same day, or drivers who are used to local routes are newly responsible for hauling a load through the mountains,” Shepard points out. If the drivers are inadequately trained, accidents could result. For severe accidents resulting in loss of life, juries are awarding “nuclear verdicts” that can put a smaller transportation company out of business, warns Craig Dancer, Transportation Industry practice leader at Marsh USA Inc. As an example, in August 2019 a jury in Georgia returned a $280 million verdict against Schnitzer Southeast, a trucking company whose driver crossed the center line and killed a five-person family traveling in an SUV.

All at sea The shipping industry is prone to a unique set of losses. “Marine insurance is designed to cover transit risk on both import and export products, to ensure the goods are covered for any physical loss or damage during the transit period. It is important to consider all the parties that are involved within the supply chain process and their exposures,” Barco says. “Insurance companies are actively involved in scrutinizing the risk and charging the appropriate premium. As a result, rates are increasing based on the hard market conditions.” Globalization is making supply chain management more complex than ever. A failure of critical infrastructure on one side of the world can cause catastrophic supply-chain losses on the other, notes Newbold. “The 2011 Tohoku earthquake and Thailand floods, and the 2015 Tianjin port explosion in China — which massively disrupted global supply chains — highlight the complex interdependencies that exist in today’s supply chains and the far-reaching consequences of their failures,” Newbold says. According to the World Bank, the Thai floods alone had a global economic impact of more than $45 billion. Another “seismic” change affecting supply chains in the transportation industry are the transition from a B2B to B2C business cycle, he notes. “It’s the ‘Amazon effect,’ and it’s affecting logistics,” he says. Amazon made a “big splash” when it introduced drones as a delivery vehicle, Dancer says. “The application of drones is going to be huge, in terms of that ‘last mile’ from the distribution center to the consumer’s house. The efficiency will be another seismic change in the B2C supply chain.” This, of course, will bring about such risks as privacy issues due to drone cameras TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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coming into close proximity with private homes, distractions to drivers, and crashes in heavily populated areas. “The good news is that drones are regulated by the Federal Aviation Administration, with its own set of safety regulations, so risk issues will be delineated in terms of the regulatory licensing process,” Dancer says. “A commercial liability policy can cover businesses using drones for deliveries.” Whatever segments of the transportation industry they serve, it’s crucial that underwriters be able to differentiate the risks, Dancer says. “The most important thing is to sit down and spend time with underwriters, helping them understand their clients’ needs and how to differentiate within the transportation market space.”

Looming cyber threats The list of cyber risks is growing and includes ransomware and malware attacks, identity and data theft, and digital currency scams. Data theft from malicious or unintentional security breaches have been some of the most publicized forms of cyber incidents to date. “Worldwide types of data at risk include credit-card numbers, names, emails, passwords, health or financial records, and intellectual property. Hackers use a variety of techniques to steal data, including social engineering, phishing and deploying malicious internal agents,” he explains. Breaches can result in direct losses when intellectual property is stolen, data is destroyed, operations are interrupted, or systems suffer physical damage. Indirect losses can include thirdparty liability from the compromise of proprietary data and reputational losses. One attractive target for cyber criminals is a credit-card payment processor or acquirer. A successful attack could yield millions of credit-card numbers. For an insurer, the financial consequences could be catastrophic, Newbold says. Cyber-related business interruption losses result when a company experiences a disruption to its operations as a direct result of a cyber event. Contingent business interruption (CBI) losses result when a company suffers downtime because its vendor or supply chain is affected by a cyber event. Scenarios that could result in business interruption and CBI losses include attacks on a payment processor, domain name system provider, email server, content delivery network, or ad network. An attack on the power grid (run by a utility company that drives electricity through a common network of power lines) could lead to business interruption losses across a large geographic area. Although no blackout in the U.S. or the UK has yet been publicly attributed to a cyberattack, it has happened in Ukraine, demonstrating that the types of malware and viruses capable of causing a blackout already exist, Newbold warns. “The cyber-threat landscape and the exposures companies face due to malicious activity such as ransomware are rapidly evolving,” says Michelle Chia, head of Professional Liability and Cyber for Zurich North America. “Underwriters need to collaborate with clients to understand their challenges in order to develop coverages and risk-mitigation services that will protect them from emerging threats.” It’s important to have a standalone cyber policy because the underwriters who write them are aware of the trends, keep pace with emerging threats, understand how threats differ by TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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industry, and collaborate with risk engineers to make sure they can provide needed protection, Chia explains. In evaluating cyber risks, it’s important to be aware of the entire ecosystem of the business and how it affects the larger economy, Chia adds. “When a cyber event causes a business interruption, upstream and downstream are all impacted. Understand the various parties and how they interact.” “Over the last year or so we’ve been seeing an increasing trend toward ransomware attacks,” observes Bob Parisi, leader of US Cyber Products at Marsh. “It takes many forms, but the simplest is ‘We have your data, and we’ve encrypted it so you can’t access it.’” When a cyber event such as a ransomware attack does occur, Chia recommends contacting the appropriate experts immediately. “Not only do we engage with law enforcement, we engage with professional negotiators and professionals that can convert real currency into cryptocurrency such as bitcoin, which is most often the form of ransom malicious actors demand.” Parisi advises carriers and underwriters to keep an open mind and be aware that the information they need to evaluate cyber risks might not come from traditional sources. “You might get a better sense of the risk companies face by talking to cloud vendors” and other tech service providers, he says. From a cyber-risk perspective, cryptocurrency is a challenge in several ways, warns Jacob Ingerslev, head of Global Cyber, The Hartford. “One impact cryptocurrency is having on cyber risk is the way it’s fueling ransomware attacks. Beyond that, there is the evolving threat of cryptojacking and the ongoing cybersecurity problems with the currency itself.” It’s difficult to determine the extent of cryptojacking in terms of annual costs to companies whose networks have been hijacked for crypto-mining purposes, but it is an issue that is growing in parallel with the adoption of cryptocurrency overall, Ingerslev notes. “The more measurable cyber risk aspect of cryptocurrency is the theft of funds from wallets and exchanges,” he says, referring to a report by Ciphertrace that states theft of crypto funds reached a total of $1 billion in 2018.

Cannabis risks are flowering The changing legal status of marijuana in the U.S. is prompting insurers to begin offering coverages, despite having extremely limited loss data to inform them. “While marijuana remains illegal at the federal level, action is being taken on the state level to change laws on its consumption,” Newbold says. More than half of U.S. states and the District of Columbia have legalized the use of medical marijuana. Many also allow recreational marijuana use. “The growth of this industry has led to the development of a nascent insurance industry to support it,” Newbold says. “However, these carriers often find themselves faced with tough choices to make on appropriate premiums to charge and coverage limits to offer because the risks associated with businesses related to this industry are still being defined.” The rapid growth in market size of the marijuana industry and activity has engendered concern due to the limitations of available scientific evidence regarding potential benefits and harmful effects, Newbold says. Continued on page 42 TEXAS CONNECTION - TEXAS PROFESSIONAL INSURANCE AGENTS DIGITAL JOURNAL

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Continued from “12 New Year’s Resolutions for Insurance Agents”, page 5

Newgard believes that recruiting is sales and, like sales, it needs a structure and a plan: Lacking Structure: My Agency’s Biggest Recruiting Problem.

12. Eliminate Agency Silos Among carriers, the silo model with departments operating independently and not easily collaborating is well-known. Silos can also create problems for agencies and generally fall into three broad categories: data, service and communications. Tom Wetzel talks with agent Brian Bartosh, and tech consultant Deborah Smallwood, for advice on what to do: Agent Silos: It’s Not Just a Problem for Carriers. Continued from “Recruiting the Next Generation of Insurance Talent”, page 17

It’s no secret that younger generations have an affinity for technology in their daily lives. Millennials are skilled digital natives, and many are interested in using technology in their careers. The insurance industry needs to promote its need for tech talent and recruit with this angle in mind. By bringing drones, telematics, other analytics demo devices to career fairs, adopting a more modern-looking brand and developing the sleekest customer applications on the market, insurance companies can better align themselves with a technology-forward image that’s attractive to young applicants. Continued from “Review: 2019 and the Flood Insurance Industry”, page 23

3. State model legislation: The National Association of Insurance Commissioners has commenced the process to consider adopting a model act specific to flood insurance. Such model acts may then be submitted as legislation in states interested in following the model guidance, creating a framework of consistent policy for the industry. With rapid industry growth and an ever-changing peril of flood, regulators will continue to be active in this space. At the intersection of these factors — competition, technology, and regulation — lies the future of the industry and space in which flood insurance that works for all stakeholders resides. The insurance industry must position itself as a desirable destination for younger talent if it wishes to survive this talent crisis. Millennials can fill the industry need for fresh talent, but employers need to look inward and disrupt their own policies, culture, and recruiting efforts in ways that will fit this new set of needs. Continued from “A New Decade Brings New Risks”, page 41

Thinking ahead Staying on top of the vast array of emerging risks is daunting but essential for insurance professionals who wish to provide optimum service and remain competitive. Dancer advises insurance professionals to update their mindsets on what “business interruption” means in today’s world. Newbold recommends that insurers use liability accumulation models to help quantify the potential impacts of events on a supply chain. Parisi stresses that while you look to the future, don’t neglect past lessons. “There is a lot to be learned from how the insurance industry has previously addressed risk,” he says. From “Insurance Technology: What’s Happened? What’s Coming?”, page 10 Source Materials: “How This Decade’s Tech Changed the Insurance Industry”, by Dan Burton, December 9, 2019, PropertyCasualty360.com “P&C Insurance Technology Trends to Watch in 2020”, by Andy Dey, December 30, 2019, PropertyCasualty360.com


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Texas News Round-Up Texas Governor Warns of 10K per Minute Attempted Cyber Attacks from Iran Gov. Greg Abbott is warning Texans to be “particularly vigilant” regarding potential cyber terrorism from Iran, suggesting that heightened tensions with the country have caused an increase in attempted attacks on state agencies....more Texas’ System for Mediation, Arbitration of Medical Billing Disputes Now Available The Texas Department of Insurance says its Independent Dispute Resolution portal for medical billing disputes went live on January 1. Employees and authorized representatives for health care providers and health plans can now set up accounts....more

Refusing to Dismiss Lawsuit, Texas Judge Orders Alex Jones to Pay $100K in Sandy Hook Case Jones is being sued for defamation in Austin, Texas, by the parents of a 6-yearold who was among the 26 people killed in the Newtown, Connecticut, attack at an elementary school. Similar lawsuits against Jones have been filed by other Sandy Hook families in Connecticut courts….more Texas’ New Surprise Medical Bill Law Went into Effect on Jan. 1 Some Texans will have new consumer protections against surprise medical bills. Patients get surprise medical bills when they get care from a doctor, lab, or other provider outside their health plan’s network. …more Texas Surplus Lines Association Warns of Fake Email The Texas Surplus Lines Association is warning its members of a fake email that has been sent out under the name of TSLA President Jennifer Mier. TSLA is urging members not to respond to the email....more

Company Fined $26K for Fatal Dallas Crane Collapse A federal agency has imposed a $26,000 fine against the owner of a crane that slashed through an apartment building near downtown Dallas, killing one resident and displacing hundreds...more Convicted of Workers’ Comp Fraud, Houston Medical Facility Must Repay $30K The Texas Department of Insurance, Division of Workers’ Compensation says EME International, owned by Christine Caldwell of Marblehead, Massachusetts, was convicted of a 3rd degree felony. Her facility billed Texas Mutual Insurance Co. for two- to four-hour Functional Capacity Evaluation exams that did not take two to four hours to perform....more Texas Business Owner Must Pay $50K in Restitution in Work Comp Fraud Case James Russell Williams owns George West Truck Stop pleaded guilty in a Travis County District Court, according to the Texas Department of Insurance, Division of Workers’ Compensation’s (DWC)....more U.S. May Be on the Hook for $1 Billion to Cover Harvey Damage The U.S. government may be on the hook for as much as $1 billion after a federal judge found it responsible for the flooding of thousands of homes and businesses in Houston during Hurricane Harvey in 2017. U.S. District Judge Charles F. Lettow in Washington ruled Monday, Dec. 16, 2019, that the government failed to buy enough land to hold water that engineers knew could accumulate in a pair of reservoirs during a record-breaking storm, making it liable for the flood-related damage....more Do you have news to share? Email vicki@piatx.org with your story.


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Profile for Texas Professional Insurance Agents

Texas Connection January 2020  

Texas Connection January 2020