Dr. Jack Nordhaus – News of the Day

Latest insurance industry news, with commentary.

NEWS OF THE DAY April 25, 2014

Author JackNordhaus , 4/25/2014

"When all think alike, then no one is thinking."
Walter Lippman



Business Insurance
April 21, 2014 

The U.S. Property/Casualty insurance industry's net income for the fourth quarter of 2013 soared to $20.76 billion from $7.25 billion during the same period a year earlier, according to a survey released Monday. [TRIPLING!]
Net written premiums for the fourth quarter of 2013 for the industry rose 5.8% year over year to $114.24 billion, according to the survey, which was undertaken by Verisk Analytics Inc.'s Insurance Services Office unit and the Property Casualty Insurers Association of America. Net underwriting gains for the quarter reached $5.02 billion compared with a loss of $9.19 billion during the same period a year earlier.
The survey found that for the fourth quarter, the industry's combined ratio improved to 97.1% from 109.6%.
For 2013 as a whole, the industry's net income rose 81.9% to $63.78 billion, while net written premiums increased 4.6% to $477.68 billion. The industry posted a net underwriting gain of $15.51 billion compared with a $15.37 billion loss during 2012.
The combined ratio for the year improved to 96.1% from 102.9%.
Policyholder surplus for the year rose 11.3% to a record $653.35 billion.

Swing to net gains welcomed by industry

“The $66.3 billion increase in policyholders' surplus to a record-high $653.3 billion at year-end 2013 is a testament to the strength and safety of insurers' commitment to policyholders. Insurers are strong, well-capitalized and well-prepared to pay future claims,” said Robert Gordon, PCI's senior vice president for policy development and research, in a statement accompanying the results.
“The U.S. marketplace emerged relatively unscathed from the hurricane season last year. But advanced risk models show that losses from catastrophic events will continue to increase, and insurers will need to keep on building their financial resources to protect policyholders and bolster economic resiliency before the next major event like Hurricane Katrina or the Sept. 11 terrorist attack occurs.”
“The swing to net gains on underwriting in 2013 is certainly welcome news for insurers, whose net investment income — primarily interest on bonds and dividends from stocks — peaked at $55.1 billion in 2007 but totaled just $47.4 billion last year as a consequence of the historically low investment yields brought about by the financial crisis, the Great Recession, and the economy's slow recovery from those events,” said Michael R. Murray, ISO's assistant vice president for financial analysis, in the statement.
“Insurers earned net gains on underwriting in just 12 of the 55 years from the start of ISO's data in 1959 to 2013, with insurers posting cumulative net losses on underwriting amounting to $485.9 billion during that period,” added Mr. Murray.
“But with much of the improvement in underwriting results last year attributable to special developments including relatively benign weather, a sharp drop in catastrophe losses and increases in reserve releases, one has to wonder just how sustainable the net gains on underwriting will prove to be,” he said. 
The figures are consolidated estimates for all private U.S. Property Casualty insurers based on reports accounting for at least 96% of all business written by private insurers



National Underwriter

By Jack Burke

April 23, 2014 •  

The typical agency’s relationship with its CSRs and AEs is dysfunctional. Here’s how you can heal the pain.
 Back in the early days of computers in our industry, the main problem we encountered with them was “us.” Rather than use this power to grow our business and serve our clients, we turned it inward to the business of our business. It took many years before we actually began to use our automation systems to improve service to clients and better market to prospects. But today, computers truly do drive our business, inside and out.
Now let’s talk about your sales support teams. Are we making the same mistake that we did with computers? Are they truly serving clients, engaging prospects, creating revenue, and helping to grow the business—or are they glorified data processors? Judging by comments I continually receive from back-office personnel, I fear the worst is still true.  The most frequent comment goes something like this: “They hired me to service the clients, but I’m buried with menial tasks and my annual performance review is more about processing paper than growing the business.”
Your Account Executives and Customer Service Representatives are the most overpaid, underutilized assets in your organization. We expect so much from them, but we create roadblocks that make it impossible for them to perform. It’s truly the definition of a dysfunctional relationship. No wonder there’s so often friction between producers and support staff

The insurance industry is data intensive, and that means a lot of data to be input and processed. Most agencies dump this work on CSRs and AEs because they are there and because “that’s the way we’ve always done it.” If we continue to allow the past to dictate the future, the only changes forthcoming will be disastrous. 
Does it really make sense to have a $25 per hour employee spend most of her working hours doing $10 per hour work? Is that a good return on your investment in people and space?
Producers generally think in “ones.” They focus on a client or prospect until they achieve agreement. Then they hand over whatever paperwork was accumulated for the staff to clean up and process, so they can go on to the next renewal or new prospect. Unfortunately, the staff can’t think in “ones”; they’re forced into extreme multitasking, which has been proven to be inefficient, unproductive, costly, and a breeding ground for E&O errors.
Consider something as basic as policy checking. Most support staffers have a pile of backlogged policies waiting to be checked, and we accept this backlog as normal. When they do begin checking a policy, they are continually interrupted with phone calls and producers checking status on their projects. When the staffer finally gets back to the policy they were checking, they either have to start all over, or try to remember where they were. As a result, the task takes two to three times longer to accomplish and mistakes often slip through. I know of one agency that lost one of their biggest clients because the policy checking failed to pick up the fact that the automobile fleet information had not been updated from the prior year’s policy.
The solution is to consider moving data processing elsewhere. There are numerous options, from outsourcing the work to hiring specific processing people at a reasonable wage in relation to the work. If the processing can be accomplished by others with more efficiency, fewer errors, and less cost, why do we fight transferring it? 
For agencies that have engaged this solution, the results are far-reaching, as the support staff begins to focus on the higher value work for which they were hired. There’s also less frustration among support staffers, which translates into lower turnover as well.
There is a misconception in our industry that the producers “own” the client relationship. In actuality, although the producers do have a viable relationship with the clients, the true and deep relationship is actually “owned” by the servicing staff. They’re the ones who have regular contact and interaction with clients; the producers generally grease the relationship annually at renewal time. 
There’s a direct correlation between the movement of processing and improved service to the growth of an agency. Aside from cross selling, account rounding, and better service, there is also a higher value that comes into play: the quality of prospects. When the back office is already swamped, producers innately limit the scope of their prospecting. The attitude is that they shouldn’t waste their time on the big-fish prospects because they know the staffing doesn’t have the bandwidth to provide the necessary service. Most producers will deny this, but it's a subconscious reality. Why waste time bringing in a whale if you know that it will capsize the boat and eventually be lost, along with all the other fish that were already caught? Increasing the capability and responsibility of the support team will overcome this self-defeating mindset.
Because client loyalty and retention are directly proportionate to the quality of the relationship, doesn’t it make sense to free up your back-office staffing to really serve, nurture, and manage the client relationships?  When you free them from the data processing tasks, you have the opportunity to better serve your clients and prospects, as well as allowing time for cross selling and account rounding. 
Such redeployment of efforts doesn’t happen automatically. It takes a concerted effort by management and producers to help instill a new culture of service within your staff.

Here are five ways you can start:
  1. Rethink the mindset. Lose the “drop box, gofer, dumping ground” attitude about your support staff. They aren’t your cleanup team; they’re your partners in success. Treat them as such.
  2. Shine the spotlight on your team. Integrate them into personal relationships with your clients and extol their virtues to those clients. Require your producers to allocate time and effort to bring support staffers on client visits. Nothing improves relationships more than one-on-one, face-to-face interaction, which is far superior to phone and email re
  3. Revamp support staffers’ job descriptions and performance evaluations to reflect their new responsibilities
  4. Share the spoils. As your ROI increases, spread some of the profits among the support staff. Producers are compensated for the revenue they bring into an agency, but without support, that revenue will be decreasing. 
  5. Educate. Conduct formal and informal educational meetings to help the staff restructure their efforts to this higher value work.
Successful agencies build their back office with room for growth, instead of micro-managing staff to service the existing book. A culture based on working to the highest value will generate more revenue, and more efficient operations will drop more of that revenue into the net profitability column. Current trends are proving that the immediate growth associated with mergers and acquisitions must be partnered with increased organic growth.
Change is always difficult, but these changes can position your agency for a very successful future with a motivated and enthusiastic attitude among your entire employee base.


By Phil Gusman,

April 24, 2014 •

Auto insurance consumers are bombarded with advertisements promising savings—and most who shop for coverage do indeed tend to choose the cheapest option—but more customers are beginning to feel they’re not getting quite the amount of savings they should, a study says. 
New-buyer satisfaction scored 821 on a 1,000-point scale, says J.D. Power in its 2014 U.S. Insurance Shopping Study, down from 828 in 2013. The biggest driver for this decline was a 17-point drop in satisfaction with the new price for customers that switched.
It’s not that shoppers aren’t saving: J.D. Power says customers who switched insurers in the past 12 months saved $300 on average. In fact, Colleen Cairns, research manager at J.D. Power, tells PC360 that this is virtually unchanged from recent years when satisfaction was higher. But the savings are not meeting customer expectations. “What we see is more of a customer perception,” Cairns says.
Jeremy Bowler, senior director of the insurance practice at J.D. Power, expands on that thought in a statement,:“The insurance industry spends billions of dollars each year on advertising, and during the past seven years many of those ads have tried to entice customers with big savings. While switching to a new insurer usually results in savings, the ads make promises of savings that a growing number of new customers don’t believe they’ve received.”
Cairns says rate increases in general in the Auto insurance space have also contributed to the drop in satisfaction among shoppers who feel the overall cost for insurance, even after saving some money by switching, is too expensive.
Customers who were with their prior insurer for 11 years or longer saw the greatest savings—an average of $426 compared to $291 for customers who were with their insurer for less than two years before switching. J.D. Power says this is likely because the longer-tenured customers had been experiencing rate increases for a greater period of time.
According to the study, 30% of Auto customers shopped for a new provider in 2013. Of that number, 36% switched. Eight in ten customers that switched picked the insurer that offered the lowest price.
Customers did show a willingness to absorb a premium increase from their current insurer. J.D. Power says customers receiving a premium increase shopped at a rate of 13%. By comparison, customers who had a poor experience with their insurer—the leading reason customers shop— looked for a new provider at a rate of 28%.
Cairns tells PC360 the amount of the increase has a lot to do with whether a customer will shop. She says for those receiving an increase of $50 or less, only 9% switched carriers. For those getting an increase of $50 to $100, the figure doubles to 18%. Those receiving an increase of more than $200 switched at a rate of 33%.

Insurer rankings

Erie Insurance led all Auto insurers in satisfaction, with a score of 843. MetLife and State Farm were second at 839, followed by American Family and Ameriprise at 835. The industry average was 821. Mercury (774), Travelers (788), and 21st Century (800) scored the lowest among the insurers J.D. Power ranked.  
USAA was not included in the rankings because its only open to U.S. military personnel and their families, but the insurer earned a score of 876. 

NEWS OF THE DAY April 18, 2014

Author JackNordhaus , 4/18/2014


“We make a living by what we get, but we make a life by what we give.”

Winston Churchill



 Insurance Journal

By Andrew G. Simpson 

 April 16, 2014

The middle-aged white woman told the audience of mostly older white male business owners that much of the country and many of their future customers don’t look like them or necessarily share all their values.

While whites make up 64% of the U.S. population today, by 2041 whites will be a minority in the country, multicultural marketing expert Kelly McDonald told agents at the recent legislative conference of the Independent Insurance Agents and Brokers of America (Big “I”) in Washington.

The numbers of minorities and women owners in the agency system are low. The 2010 Big “I” Agency Universe Study found that the number of agencies with principals who are women, Hispanic and/or African-American had increased since 2008. The proportion of independent agencies with African-American principals grew from 1% in 2008 to just over 4% in 2010.
There has been more progress for women. More than a third of new small and medium small agencies have women as principals, according to the Big “I.” New agencies appear to be the main driver of this change, according to Quincy Branch, chairman of the Independent Insurance Agents & Brokers of America’s National Young Agents Committee, writing for Insurance Journal recently.

But McDonald was not in Washington to lecture agents on increasing minority ownership. She was there to help them learn to market to diverse populations so that they have an agency fit for the future.

Communities, customers and the workforce are changing and independent agents need to know this and lead, she said in her presentation titled, “How to Market to People NOT Like You.”

“You will have minority customers,” McDonald said.

She said America is “no longer homogenized.”

“We are no longer a melting pot, we are a salad,” she said. “The tomato doesn’t look like the radish.”

McDonald, president of New Mexico-based McDonald Marketing, works with IIABA and its Diversity Task Force that is trying to increase diversity within the agency ranks and improve agencies’ capacity to serve diverse populations.

McDonald had plenty of figures at her fingertips to drive home her point that America has changed and will continue to change:

One in three Americans is not white, although this varies by state. Four states and the District of Columbia have majority minority populations and across every major market, the majority child population is non-white.

The country’s multi-racial population is growing three times faster than the overall population. 

The biggest shift is the “browning” of America—the rise of Hispanic population.

One in six Americans is Hispanic, and one in four children is Hispanic.

Even rural areas are growing in their diversity.

“These are your future customers and workers,” she said.

 Generation Y’s Values

In addition to recognizing that America is changing color, agencies need to learn to understand the younger generation — Generation Y or Millennials (born between 1982 and 2004).

Agents might want to start by bringing some young people into the agency business, suggested Tom Minkler, Big “I” chairman. Minkler said the independent insurance agency force is one of the oldest industries in the country. “Look around,” he told attendees. “Fifty % of people in the system will not be here in five to seven years.”

The younger generation has different attitudes about family and marriage than the older agents may, according to McDonald.

“We need to redefine family,” McDonald said, noting that Generation Y has been raised by a variety of different families including unmarried parents, divorced parents, single parents, gay parents and grandparents.

“They value parenthood over marriage,” she said.

“It’s not just Hollywood liberals either,” she said, citing Sarah Palin’s pregnant unwed daughter Bristol as an example.

Implications for Agents

As America changes so does the customer base for agencies. So how should agents relate to their new customers?

For one, McDonald said agencies should know there will be more women owning businesses. Women are more about customer service than men and they tend to place trust in other women, she said.

As for members of the younger generation, they don’t need more information—they can get that on the Internet, according to McDonald. “But they will want advice, guidance, counsel,” she said.

“Helping beats selling” when it comes to appealing to Generation Y, she said.

How the younger generation builds relationships is different “but they still believe in relationships,” said McDonald. Agents have always valued face-to-face contact whereas younger people prefer to use social media to build relationships.

Millennial’s relationships regarding family are different. Younger people define family more broadly and they expect their insurance policies to do this as well, McDonald said.

In terms of recruiting, the younger generation likes cities and likes a progressive work environment. They like “green and community values” in the businesses they patronize — which she said is a reason they should also like independent agencies that are involved in their communities.

Regarding marketing, customers respond to images that look like them, she said, pointing out that 40% of 18 to 35 year-olds have multiple tattoos. [A TELLING STATISTIC]

Minkler reminded agents how much of today’s insurance shopping experience takes place online as opposed to in the agency or over the phone.

Minkler said 75 % of Personal Lines buyers started their purchase online. Online shopping is the “new normal,” he said. 

He said online shoppers like “customization and choice” —which he said is exactly what independent agents have to offer. “That is the independent agent’s value proposition,” Minkler said.

However, individual agencies can’t conquer the internet alone; to do so requires a collective approach, Minkler said, putting in a plug for the updated website that provides customers with comparative quotes and agencies with leads.

The independent agency force has about 30% of the Personal Lies market, which means there is 70 % out there for agents to get, Minkler told the Big “I” crowd.




Insurance Journal


By Prashant Gopal, Christopher Condon and Jack Fairweather 

For landlord Peter Zagorianakos, Terrorism insurance wasn’t a necessity until the bombs went off last April at the Boston Marathon and revealed a frightening pattern.

Two buildings he owns stand within a half-mile of the race’s finish line on Boston’s Boylston Street where two explosions killed three and injured 264. Another is within blocks of the Cambridge, Massachusetts, home of the two brothers suspected of plotting the attack. 

He also owns an industrial property in Watertown, about 100 feet from the boat where the younger suspect, Dzhokhar Tsarnaev, was found hiding after a police manhunt.

“They circled us,” Zagorianakos said of the suspects. It didn’t take long for the 50-year-old commercial developer, like thousands of others, to pony up for the extra protection.

Terrorism insurance, designed for large businesses and corporations, suddenly seemed wise for more mid-sized and smaller firms. Broken windows and a 10-day closure at restaurants and mom-and-pop businesses spurred owners of similar operations across the U.S. to think, “hey, this could happen to me,” said Philip Edmundson, co-founder of William Gallagher Associates, a Boston-based national brokerage firm.

New Calculus

Eighty percent of Edmundson’s 5,000 small and midsized customers now have terrorism coverage compared with 50 % before the blasts. Next week, Marsh & McLennan Cos. will report an increase in sales to midsized and large companies. Tarique Nageer, a senior vice president for the insurance broker, attributes part of the gain to businesses responding to Boston.

“The Marathon attack changed the calculus,” Edmundson said. “It taught us terrorism is a risk to businesses of every scale and size.”

Before 2001, damage from terrorism was typically covered in policies without additional charges because the possibility of an attack seemed remote. The insurance industry paid $31.6 billion after that year’s Sept. 11 attacks, and providers began excluding acts of terror from commercial contracts. Coverage became expensive if it was offered at all, according to a March report from the Congressional Research Service.

In the next 14 months, $15.5 billion of real estate projects in 17 states were stalled or canceled as lenders shunned assets that lacked terrorism coverage, according to a Real Estate Round table survey. Enter the federal government and the Terrorism Risk Insurance Act (TRIA), which provides a U.S. backstop for insurers after a major attack.

Temporary Fix

TRIA, enacted by Congress in 2002 as a temporary fix, was reauthorized in 2005 and 2007. Last week, a bipartisan group of senators agreed after months of debate on a third renewal, a seven-year extension. A House subcommittee is expected to draw up its own version in May.

“I don’t like TRIA,” Massachusetts Representative Michael Capuano said in an interview. The eight-term Democrat’s district includes the Marathon bombings site, and he was a House co- sponsor of TRIA’s latest renewal. “I just don’t know any other way around it.”

Absent the government commitment, Capuano said, the cost of coverage would skyrocket and the U.S. economy would falter. Fellow Massachusetts Democrat, Senator Elizabeth Warren, labeled TRIA a “giveaway” to insurers at a February Senate hearing, pointing out that providers pay no up-front fees for the federal backing that keeps their prices attractive.

‘Free Lunch’

In Europe, countries facing terrorist threats have created government-backed reinsurance bodies that charge insurers a premium. The U.S. should do the same, said Erwann Michel-Kerjan, a professor who studies risk at the University of Pennsylvania’s Wharton School.

“That way we stop having the debate about the insurance industry getting a free lunch,” he said.

Robert Hartwig, president of the Insurance Information Institute, an industry group, said the program counters a key goal of terrorists, which is to disrupt commerce. TRIA also establishes limits on what the government will pay, he said.

“There’s no question the program is clearly part of the national economic security of the country,” he said. “What the terrorists want to do is debilitate the U.S. economy.”

Under TRIA, insurers cover losses up to $100 million for a single attack. U.S. reimbursement begins after that threshold is met and individual companies pay a deductible of 20 % of the previous year’s commercial insurance premiums.

The federal annual liability is capped at $100 billion and the government is required to recoup losses of as much as $27.5 billion through a surcharge on commercial policies.

Property Coverage

The average cost that an insurance buyer pays for Property Terrorism coverage ranges from $19 to $49 per million of insured value, depending on the size of the company, according to a 2013 report from Marsh & McLennan, the largest insurance broker by market value. Companies in the U.S. Northeast pay the highest rates. The expense generally represents 3% to 5 % of a company’s Property insurance bill, according to the report.

Zagorianakos, the Boston landlord, pays about 1 % more to add terror protection for existing buildings and 2.8 % for projects in development, according to his agent, Michael Regan of Regan Cleary Insurance in Boston. Regan said most clients turned down the coverage before Boston. “Now everybody is saying, ‘I think I need it,’” he said.

For some of those in Boston who had purchased coverage before the Marathon bombings, seeking reimbursement was an exercise in confusion. One hundred and sixty companies near the explosions submitted claims for property damage or business losses. Just 14 % had coverage for terrorism, according to the state’s insurance regulator.

Candy Shop

As it turns out, they didn’t need it. The Boston attack was never officially labeled by the U.S. Treasury Department as an act of terrorism, even though President Barack Obama described it as such in a press briefing.

Under the law, an incident can be defined as an act of terror for insurance purposes only if it causes at least $5 million in total covered losses. Payout on $2.5 million in claims filed after the attack reached $1.9 million near the end of January, according to Massachusetts Division of Insurance data.

The fact that most businesses didn’t have the terrorism coverage turns out to have worked for them. If claims were high enough to trigger payments the law, businesses without the extra coverage would have lost out.

Recording Studio

Robin Helfand, 54, who had the Terrorism protection, wasn’t able to benefit from it. The owner of a high-end candy shop on Boston’s Newbury Street, a block over from the blasts, she had lived through Sept. 11 in New York. Moving to Boston and opening her store, Helfand figured the insurance would give her peace of mind. She said she had to throw away merchandise when streets were closed by the shop for 10 days, and it took months for business to return to normal.

Perry Geyer, owner of Cybersound recording studio on Newbury Street, said he had $9,000 in losses and was so frustrated by the denial of his claim that he canceled his terrorism coverage.

Even though Terrorism insurance didn’t help Helfand or Geyer, the lawyer who worked with them said he’d still advise business owners to buy the coverage.

“It’s not that expensive and it might make a difference,” said Jon C. Cowen of Posternak, Blankstein & Lund LLP.

Tightened security and global surveillance make large-scale attacks less likely, said Gordon Woo, catastrophist for Newark, California-based Risk Management Solutions Inc. And while plots involving a lone wolf, or a pair like the Tsarnaev brothers accused in Boston, have the best chance of succeeding, they are also unlikely to cause large insurance payouts, he said.

Meg Mainzer Cohen, of the Back Bay Association, a business support group, said her members were confused about whether they had adequate protection.

“The lesson from Boston bombing is you need to sit down with an informed carrier and work out whether you’re covered,” she said.



Insurance Journal

By Kimberly Tallon 

 April 16, 2014

Privatization of the National Flood Insurance Program (NFIP) would present a huge growth opportunity to the Property/Casualty market, allowing insurers to tap into about $3.3 billion of yearly premiums. But the Flood insurance market has a long way to go before it becomes viable for profit-driven carriers and investors, says Deloitte in its newest white paper.

The Deloitte report, “The Potential for Flood Insurance Privatization in the U.S.: Could Carriers Keep Their Heads Above Water?”,  concludes that despite the opportunities flood insurance presents, most insurers will likely pass on taking a piece of the risk unless the obstacles that undermined the NFIP’s solvency and put it $30 billion in debt are dealt with first.

Among those obstacles:

FEMA estimates that 20% of insured property owners pay subsidized premiums, and many of those properties are in high-risk areas. Under pricing of flood insurance to make coverage affordable might actually be encouraging construction in high-hazard areas.

Repetitive loss properties account for a large share of all flood insurance exposures.

Convincing property owners to purchase flood insurance remains a challenge. Indeed, only 18% of properties in flood zones are believed to have coverage.

Many homeowners believe recently updated flood maps might be overstating their flood risks.

Property owners with lower flood exposure often pass on the coverage, while those in flood-prone areas  might assume that federal disaster assistance will help them if a major flood event occurs.


Congress tried to address many of these issues with the Biggert-Waters Flood Insurance Reform Act of 2012, which reauthorized the NFIP for five additional years. The act included measures to gradually increase rates to match risk as well as to update flood maps, but both the rate increases and revised flood maps have already been challenged by consumers.

Exposure to flood losses across the United States is expected to increase due to climate change, according to FEMA. Having the private market take on some of the risk could be a win-win for taxpayers as well as the insurance industry, Deloitte says, but the challenge is ensuring that any public-private partnership in flood risk is mutually beneficial.

Deloitte suggests some solutions:

Private carriers could write a certain level of primary coverage while re-insuring catastrophic levels with the ]federal government.

The NFIP could purchase reinsurance from the private sector, spreading the risk and limiting exposure in high-catastrophe years.

The capital markets could help spread risks through the sale of catastrophe bonds.

Private insurers could combine their resources and diversify risk through a flood insurance pool.

Private insurers could pick up more moderate flood risks, leaving the NFIP in place as the insurer of last resort.

No matter which privatization option is adopted, most industry leaders queried by Deloitte believe the government should retain a role in flood-hazard assessment and mitigation, including mapping flood zones, as well as enforcing zoning laws and building codes to limit flood-related exposures.

NEWS OF THE DAY April 11, 2014

Author JackNordhaus , 4/11/2014

"If you have nothing to say, say nothing."

 Mark Twain


Insurance Journal

April 8, 2014

A newly discovered bug in widely used Web encryption technology has made data on many of the world’s major websites vulnerable to theft by hackers in what experts say is one of the most serious security flaws uncovered in recent years.

The finding of the so-called “Heartbleed” vulnerability, by researchers with Google Inc. and a small security firm Codenomicon, prompted the U.S. government’s Department of Homeland Security to advise businesses on Tuesday to review their servers to see if they were using vulnerable versions a type of software known as OpenSSL.

It said updates are already available to address the vulnerability in OpenSSL, which could enable remote attackers to access sensitive data including passwords and secret keys that can decode traffic as it travels across the Internet.

“We have tested some of our own services from attacker’s perspective. We attacked ourselves from outside, without leaving a trace,” Codenomicon said on a website it built to provide information about the threat,

Computer security experts warned that means victims cannot tell if their data has been accessed,which is troubling because the bug has existed for about two years.

“If a website is vulnerable I could see things like your password, banking information, and healthcare data, which you were under the impression you were sending securely to your website,” said Michael Coates, director of product security for Shape Security.

Chris Eng, vice president of research with software security firm Veracode, said he estimates that hundreds of thousands of web and email servers around the globe need to be patched as soon as possible to protect them from attack by hackers who will rush to exploit the vulnerability now that it is publicly known.

The technology website Ars Technica reported that security researcher Mark Loman was able to extract data from Yahoo Mail servers by using a free tool.

A spokesperson for Yahoo Inc. confirmed that Yahoo Mail was vulnerable to attack, but said it had been patched along with other main Yahoo sites such as Yahoo Search, Finance, Sports, Flickr and Tumblr.
“We are working to implement the fix across the rest of our sites right now,” she said on Tuesday evening.


Insurance Journal

 Chris Burand  

April 10, 2014

A myth is sneaking into the industry that insurer insolvency isn’t important today. Belief in this myth is important to many entities. To put it more simply, a number of companies, agencies, and other firms benefit if less attention is paid to insolvency issues.

Insurer insolvency is important – and, barring complete statutory and case law reversals, will always remain a paramount issue, particularly from an E&O perspective. Because insurance is primarily state regulated (though less so than many agents think), agencies need to know their state’s laws. What follows is partially generic; each agency would be well served to study this issue relative to every state in which it does business, rather than the state in which it resides. Insolvency issues generally follow the client, not the agent.

One issue with which many agents are mistaken is how their E&O policy treats insolvencies. For reasons I can’t fathom given that this is the business agency owners are in, many agency owners, producers, and CSRs think that all E&O policies have the same insolvency clause. In reality, this clause varies significantly from one carrier to another. Every agency owner needs to read and understand their policy’s insolvency clause.

In particular, make sure that you understand insurance company rating requirements. The requirements are often specific to the rating company and the specific rating scale used. Furthermore, the rating is usually specific down to the plus or minus. I see too many producers, CSRs – and even agency owners – that think any “A” or any “B” qualifies; in reality, this is rarely accurate. In some cases, writing with a company rated an A- might not qualify and rarely does writing with a “B” versus a “B+” qualify using the A.M. Best rating scale.

Size requirements are also common. So not only might a carrier have to have a B+ rating, it might also have to be a size XIII (for example only). There might also be organizational requirements. For example, some governmental entities without ratings might qualify under some policies.
Also, determine whether coverage truly exists for any insolvencies. Although most of the time it does, I wouldn’t not take this for granted with all policies.

A second significant issue is that, whether or not coverage exists, agencies still have strict responsibilities to notify insureds regarding financial stability, admitted status, how client size affects qualification for the guaranty fund, and lack of carrier ratings. Again, for reasons I fail to understand, agents are assuming that if they think they have coverage under their E&O policy, they don’t have to notify clients about this. The two really have no connection. The courts are clear on this.

For example, in the 1987 landmark Higginbotham case in Texas from 1 (Higginbotham & Associates, Inc. v. Greer, Tex. App. 1987), many agents read what they wanted to read:  that agents are not liable for discerning the financial stability of the carrier if the carrier is solvent at the time the policy is procured. However, the case also stated that if the agency knew, or should have known, that the insurer was not financially stable, it had a responsibility to advise the client appropriately.

Also, consider these quotes from related cases:

The attorney for the IIABA of Wisconsin, Tim Fenner, wrote:  “Under Wisconsin law, an insurance agent or broker has a duty to the prospective policyholder to exercise reasonable skill and ordinary diligence in selecting the carrier in question and in ascertaining that the carrier is of good credit and standing.”
The Michigan Association of Insurance Agencies wrote this in 2003: “When an agency learns that a company’s rating has dropped or it is involved in some regulatory action because of a financial problem, the clients placed with the company should be advised.”
“Brokers court trouble by placing coverage with insurance companies that A.M. Best or Standard & Poor’s considers vulnerable and, on the other side of the coin, somewhat insulate themselves against liability by placing coverage with insurers that such rating companies deem to be secure.” Wyrick v. Hartfield, 654 N.E. 2d 913, 915-16 (Ind. Ct. App. 1995).
“A few courts hold that brokers have a duty to investigate insurers’ financial condition before placing coverage with them. Even these courts, however, recognize that a broker’s duty is only to refrain from placing coverage with an insurer that she knows or reasonably should know to be financially unsound. In jurisdictions that impose a duty to investigate, or that occasionally view the existence of such a duty as a fact issue, a broker’s duty apparently requires him only to check an insurer’s A.M. Best or Standard & Poor’s rating or to check the insurer’s status with state regulatory bodies.“ (Fort Trial & Insurance Practice Law Journal, Fall 2004 (40:1) Insurance Agent & Broker Liability.)

Notice that these cases cite not only A.M. Best but Standard & Poor’s. This is important because, although S&P rates more than one insurance company at less than investment quality, almost no insurance agency ever checks the S&P ratings.

Some highly positioned people are telling agent that if the carrier is admitted, they need not worry about its poor rating or lack of rating. This is poppycock. The case law cited above says otherwise. Notice that none of these rulings allows this exception.

Another important point is that the guaranty fund is not a cure. State guaranty funds usually have limitations by client size. For example, if a client has more than $X in assets, it will not qualify for payment from the fund. Because some of these limits are low, agents need to know them.

Additionally, even if the guaranty fund does provide coverage, in my experience, these funds don’t always pay claims immediately. Unless you’re 100% sure that the state’s guaranty fund can pay all the claims from a large catastrophe, can you really promise your clients that they don’t need to worry about the guaranty fund paying them fully and quickly?

A final point: some carriers are telling agents that the lack of a rating isn’t important. It’s true that, in some states, some of the largest health carriers have no ratings. Whether this lack indicates financial instability or not is beside the point in regard to an agency’s exposure. Without a rating, the agency has no third party verification of the carrier’s financial stability and thus owes its clients notice.

I’m not going to argue with those who say that state ratings are too difficult or expensive to acquire, or that ratings aren’t that important or don’t prove anything. Although these points might or might not be correct, the case law is clear: Agents must notify insureds about a carrier’s financial stability (judged by their ratings or lack of rating), regardless of whether there’s a state guaranty fund or if the company is admitted.

I advise you not to buy into these myths promulgated by self-interested parties. Protect yourself, your agency, your employees, and your insureds!



By Tom Hodson

April 8, 2014 

For years, independent agents have been aiming to extend the reach of their presence and expertise with social networking. Some are just starting out on this road, some are cruising along, and others feel like they’ve turned down a dead-end street.

Here are four reasons that social media campaigns don’t work:

Reason 1: You’re talking about insurance. Although it sounds counter intuitive, the independent agents who discuss insurance least get the most engagement with consumers. “When’s the last time you checked your Flood insurance policy?” as a social media post simply isn’t a way to engage on a sustained basis. Insurance posts get little traction because they’re usually not that interesting to consumers. Insurance agents have to remember that what they find interesting and relevant in their industry isn’t necessarily going to interest  consumers and business owners.

Is the source interesting? That’s the No. 1 question an agent should think about when creating social media posts.There are three criteria for interesting social networking posts: 
  1. humorous 
  2. intellectually engaging 
  3. emotionally appealing

If your posts don’t have one or more of those attributes, they will drop way down on the scale of engagement for consumers. Social media sites are not a soapbox to talk about yourself, your business and your knowledge. Rather, they’re a way to connect with people on a human level  -- talk with people, not at them.

Agents should also get content from other sources and share it. If you found an interesting article or video on a website that you spent five minutes reading, chances are someone else will find it of interest, too. It’s easy to copy this web site URL and put it on your own social networking sites.

Thousands of sites are dedicated to finding interesting articles, photos, videos, info-graphics and so on. Try sites like Mashable, a local newspaper or TV station site, and/or sites for local events, organizations and businesses. A few carrier, wholesaler, trade association and vendor websites have interesting material that agents can tap into and use.

Another way to engage and show interest in your community and your peer businesses is by reminding your followers about local businesses that you like. For example, if there’s a local restaurant you enjoy, post a link to its menu and mention a dish that you like to order. Or you can point out local charities and activities that make your community special.

Your social networking site should have an occasional post – I call it a “maintenance post,” and it’s done once a month or so – related to your industry, brand, and agency. This reminds your followers and contacts about your professional bona fides. It invites them to post a comment, share one of your posts, or review your professional services.

Reason 2: You don't represent yourself as human. Independent agents sometimes act as if their social networking should solely be intellectual, financial, or professional. Actually, it should be balanced and represent you as a person. Instead of constantly talking about insurance and financial services, engage as a person within your community. Interact on a human level, not merely a technical level. Remember the adage: If you want “likes,” be likable.

You have built-in advantages over the big-box direct writer and captive-agent carriers with multi-million-dollar advertising budgets:
you’re independent
you’re local
consumers can actually meet and interact with you as an individual, instead of the remote call centers of the billion-dollar competitor brands

Arthur Blaszczyszyn of Arthur Blaszczyszyn Insurance Agency (Colorado Springs, CO), has balanced the personal and the professional in his agency social networking on Facebook. Although it might seem as if his Facebook page isn’t doing anything special, Arthur is thinking visually. He posts photos regularly and mixes in personal observations, information for homeowners, and links to items of interest – along with a dose of insurance information.

His agency Facebook page doesn’t have an overwhelming number of likes, but those who do like his page are highly engaged. In fact, his one-producer agency is getting engagement that agencies with thousands more clients are missing out on.

To generate positive reviews for his business, Blaszczyszyn rewards each review with a free movie from RedBox. His invitation  says something like: “I build my business on referrals from people that I serve. Please stop by my site and leave me a review.” After the review is published, the client gets a code for a free movie rental,courtesy of the agency. By reminding your contacts that you need their assistance and offering something in return, you can raise your profile and engage them to help you in a way that rewards them.

Reason 3: You stick with one social media platform for simplicity. Project CAP recommends independent insurance agencies create and build four to six  social media presences. We call these important social networking sites “The Holy Four”: Facebook, LinkedIn, Google+, and Twitter.

The reason: Google and other search engines “index” all of these sites (they “crawl” and add them to their database of information about the agency’s local area and the agency’s site’s information). 
The more your agency is present on these social networks, the more you'll be added to the search engine’s store of knowledge –and be found by web users searching the topics and locales covered by your social media sites.

 Each social site has its own characteristics:

  1. Facebook has a massive base of 1.9 billion users and provides an easy means to combine visual, video and text elements in posts. LinkedIn is the business network for connecting with people you already know from your career experience, and is especially relevant for agencies active in Commercial Lines. Google+ might be less popular than Facebook, but it’s owned by Google – which has committed the money, people power and creative expertise to attract users and advertisers going forward. Google+ is also a pipeline for an independent agency to make itself known to Google, the world’s biggest search engine, for indexing. Twitter amalgamates posts that can be read quickly, allowing users to find out what’s going on in the world at large, in their areas of interest, and in their local area.

Reason 4: You’re spreading yourself too thin. Some agents set themselves up well – even creating presences on “The Holy Four” – but then let them lie fallow. Effective social networking requires regular posting and interacting.  Experience shows that agents who get traction in social media (gaining views, reviews, followers, likes, and interactions) post three times per week. If you don’t do this, you won't get the attention as someone who does. It’s a common objection: “I don’t have time to create the content for one social site, much less four!” Of course you don’t.

This is all the more reason to tap existing content – not only  from industry sites but, even better, from interesting non-insurance, non-financial sites. Once you have this content, you can package it as a link and a brief introduction for one of your sites. Then adapt this  packaging for the other three sites.

For example, you might have a photo and a three-sentence introduction or commentary on an article for your agency Facebook page, You can adapt it as a Twitter post (much shorter and with no photo). Then, you might craft a LinkedIn post with more of a business angle. Finally, your Google+ posting could look much like your Facebook posting, because these two sites have a  similar user interface.
Commit to posting on social sites on Monday, Wednesday and Friday, even during weeks with holidays – and stick with this commitment.

Regular care and feeding of your social  network sites will help the human (and computer) visitors see what you’re all about as a person and a business. This means that they’ll probably be more likely to be receptive to you, be aware of your expertise, and turn to you when they have a question that’s  relevant to their insurance needs.

NEWS OF THE DAY April 4, 2014

Author JackNordhaus , 4/4/2014

"Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don't quit."  

Conrad Hilton
Hilton Hotels  


April 1, 2-14

By Dina S, Schultz

Editor's note: Dina S. Schultz is vice president of sales and marketing, Society Insurance

What should you look for when trying to match a customer with a carrier?

We all know that relationships are essential when it comes to business insurance. Price is always a factor, but when it comes right down to it, I know as a carrier that our policyholders ultimately trust their agents. In situations where the price is at least in the same ballpark, an agent can guide an insured to the carrier he or she believes is the best choice.

But what carrier gets thus distinction as the best choice? It’s not the same for every customer; if it were, you’d only have one carrier. So what factors should be considered? What should you look for when trying to match a customer with a carrier?

If you’re interested in growing your renewal and referral business (and who isn’t?), it’s important to consider the carrier you’re recommending carefully based on these components: approach, coverage details, and, last but not least, the ability to cultivate a positive relationship.

Although not all of your customers will ultimately fall under this umbrella—let’s be real, some will decide on price alone—your best customers will be worthy of further consideration based on these criteria:

1. Approach: How does my customer approach the industry in which he or she works? Do I have a carrier that shares the same passion for an industry as the customer?

Let’s say you have a restaurant owner in front of you. She works long hours and faces innumerable challenges in the hopes of not being yet another local news story about a restaurant closing its doors for good.

Why does she do this? It’s pretty safe to say that she, like most restaurant owners, isn’t in it for the money. Owning a restaurant is a lifelong dream for her, and it’s not because she thinks she’ll become a millionaire by doing so.

She’s in the business because she takes a certain pride in her ownership of the restaurant. She tells you that the most satisfying part about owning a restaurant is seeing people who come to her establishment have a great time with friends and family, and then keep coming back again because they enjoyed the experience so much.

The point centers on this concept: If you’re looking to insure a restaurant owner who takes a clear pride in ownership, you want to match her with a carrier that has a similar passion for the restaurant industry. This goes even beyond specialized programs and coverages and straight to the core of who the company is. Whether preparing a dining experience or putting together a high-quality insurance program, it takes a deep passion to stand out and be among the best.

The important distinction to make in this example is that all restaurant owners that come to you looking for insurance might not fit with your “best” restaurant carrier. They’re not a good match if they have different priorities. A restaurant owner with a passion for the industry isn’t likely to be happy with being insured by a company that only dabbles in this market and doesn’t understand it. 

 2. Coverage Details: Do the coverage offerings match the coverage needs? This is a simple one, right? You know what your customer needs and that’s that? Maybe not.

With so many carriers and so many messages, it can sometimes be difficult to isolate what’s best for each business. While most carriers offer something as simple as Business Interruption insurance, individual coverages often vary in small but important ways.

Imagine that the power at a hotel goes down on Friday before a busy holiday weekend. All of its events are canceled, causing it to lose tens of thousands of dollars. Your carrier of choice at this point could make or break the future of that hotel. Although Business Interruption is a standard policy, most carriers require a 72-hour waiting period before coverage kicks in.

In this instance, your knowledge of customer and carrier becomes paramount. If your customer can afford to take the risk of losing three days’ worth of business, you might be able to save a few bucks up front with Carrier A. But if you know the bottom line is tight, you’ll want to match your customer with Carrier B, which doesn’t have a waiting period for Business Interruption 

3. Cultivating a relationship: Deep down, do you trust this carrier to form its own relationship with your customer?

In the end, it comes down to relationships: in the same way you nurture a relationship with your customer, fostering a strong relationship between your customer and a carrier is the best way to maintain renewal business 

Of course, you can only do so much. Ultimately, the carrier you choose should provide more than just coverage to your customer. To maximize your renewal business, choose a carrier that will make your customer feel valued.

When bad things happen to your policyholders, every company will respond in some fashion; that’s the base expectation. Claims service and expertise come into play here, and are not to be ignored.  Carriers with strong claims representatives focused on taking care of your customers in a quick, responsive, and caring manner are key to your success.

However, the best carriers make an effort to be there when things are going well, too. These companies use cutting-edge technology to provide services that are both informative and selling tools to teach your customer why the company you’re trying to sell is the carrier of choice.

What does a company’s field representative or underwriter say when he or she stops by your office? What’s the tone of their communication with you? Does the representative or underwriter point you to things like blogs, case studies, and social media posts that you can share with your customers? Carriers that go the extra mile to give you this kind of information provide thoughtful leadership and are more likely to leave an impression with your customers.

Policyholders are the ultimate reason we’re in business. Without the policyholder, there literally is no business for any of us—and no reason to exist. Sharing the same beliefs with a carrier goes a long way in ensuring a solid and smooth relationship between the carrier, yourself, and your client. By taking a few extra minutes to consider the need to connect your customer to the right carrier, you can make the future a lot brighter for everyone involved.


By Laura Mazzuca Toops, 


April 1, 2014

More than 20 million start-up businesses need the expertise only an experienced agent or broker can provide.

In a sign that the. economy is finally on the (gradual) upswing, the entrepreneurial rate in the U.S. is now higher than it was at the height of the bubble of 15 years ago, according to the Kaufman Index of Entrepreneurial Activity (KIEA)—which currently lists more than 20 million non-employer businesses, with more starting every day.

The U.S. Census Bureau defines non-employer businesses as those that have no paid employees, have annual receipts of at least $1,000 and are subject to federal income taxes. These new businesses can range from part-time consultants to billion-dollar startups backed by big private-equity money.

However, no matter the size of the business, the journey to successful entrepreneurship can be treacherous. According to the Census Bureau, 16% of companies fail their first year of operation, and 32% fail within their first three years. Most of those failures are due to incompetence and lack of experience, according to a January 2014 study in Entrepreneur Weekly by the Small Business Development Center at Bradley University and University of Tennessee Research.

Based on a series of national symposia for agents and insureds hosted by the Travelers Institute, the public policy division of Travelers Insurance, the top issues for small businesses are regulatory concerns, licensing and OSHA compliance, health care, access to capital, and disaster and business continuity planning.

“Small businesses are hard to run and insurance products can be life or death for them,” says Joan Woodward, president of the Travelers Institute and executive vice president of public policy at Travelers. “Our agents are trying to raise their awareness of that.”

However, But although most start-up business owners understand the need for basic coverage, they also underestimate how just one cyber breach, natural disaster, or nuisance employment lawsuit could decimate their business.

“Most small business owners think insurance is something they can put off until they get bigger,” says Tom Hammond, EVP of Farmington, Conn.-based Bolt Insurance Agency, which targets home-based businesses with 25 employees or fewer. “What becomes valuable is when you can explain coverage and match it with a price point that makes sense to them. We’re selling policies for between $300 and $700 all the time. When you tell someone what the coverage provides, most owners know it makes sense to buy if they have the exposure.” 

Spotting the Indicators

Although government initiatives like Startup America and the 2012 JOBS Act provide small businesses with additional support and easier access to capital, most insurance experts working with start-ups haven’t seen a correlation between the programs and new companies seeking insurance.

Rather, market supply and demand is the biggest driver of new business ventures, which are directly tied to the economic activity in a particular area—whether it’s a town, city, state or region, says Mike Berry, CEO of Specialty Insurance Managers, an Austin, Texas-based managing general agency. In his region, that means big growth in the oil and gas industry: These businesses attract new employees, around whom spring up supporting businesses such as hotels, restaurants, convenience stores and health clinics—which in turn spur new venture business.

Start-up businesses have always been a staple in the Excess & Surplus market because standard insurers prefer insureds with a minimum of three years in business, says Roger Ware, CEO of Genesee General, an MGA/wholesaler based in Alpharetta, Ga. Although 40% of Genesee’s business is start-ups, he says, “we didn’t target it; it’s always been there. We’ve just taken advantage of it.” 

Ware has seen an increase in start-ups beginning in about 2011, along with growing sales and payrolls of existing accounts, especially in construction—all of which points to a rebounding economy. “From 2007 from 2010, this was nonexistent,” he says. Ware he spotted the recession as far back as 2007 in shifts in the trucking industry, which he calls the “biggest indicator on the economy.” Transportation insurance requires filings on the number of units (trucks) a business operates, so when Ware began seeing trucking accounts going from 30 units to three, he knew trouble was coming

Today, the pendulum is swinging in the other direction. Case in point: Genesee had an industrial painting firm client with 30 years in business and $100 million in sales that went out of business during the recession, taking a number of subcontractors along with it. Today, this same firm is relaunching as a new business.

Average premiums for start-ups are 25% to 30% higher than the standard market, which translates into higher premiums for agents, Ware notes. The downside is lower retention rates when those businesses either leave for the standard market or simply don’t survive 

The Educational Hurdle

Small start-ups need more than insurance. Because the owners wear many hats and can’t afford internal risk managers, they need a hands-on insurance agent who can act a resource to help establish formal safety programs and other risk management tools, says Linc Trimble, executive vice president, Torus eCommerce, at Torus Insurance. The needs are different for mid-sized and larger start-ups, which require customized solutions and more detailed evaluations, he. Basic coverage for a small start-up can be as simple as a BOP policy, or stand-alone General Liability and Property coverages, Commercial Auto, and workers compensation.

However, insurance requirements for new businesses can vary by state or class of business, so agents should know the laws and regulations for the type of business being underwritten, says Jason Belanger, senior broker at Burns & Wilcox. States and municipalities often require health care or recreation businesses to have proof of insurance before they are issued a permit to operate, he adds.

New businesses of any size face exposures that aren’t covered under the basics, including Environmental Liability, Professional Liability, D&O, Employment Practices Liability, Fiduciary Liability, Cyber Liability, Employee Dishonesty, Media Liability and International Travel, says Maura Verrone, vice president/underwriting for ACE Commercial Risk Services. Some of these policies might offer overlapping or limited coverage, which can cause more problems for small-business owners.

However educating small start-up owners about the importance of this coverage can be frustrating. “We sell and recommend E&O, EPLI and Cyber Liability, but they don’t buy it,” Ware says. “Many have gone from the private sector to consulting and are now independent contractors, such as construction managers. They have huge Professional Liability exposures, but they’re not asking for this. Agents explain it, but it doesn’t sink in. There’s never an issue until there’s a claim.”

Particularly for new small businesses, such losses can be catastrophic. “Start-ups face similar risks as established businesses, but the potential impact of any claim is much more devastating for a start-up that hasn’t generated much revenue yet,” Belanger says. “The defense costs for one frivolous Employment Practice Liability claim could potentially wipe out a new business’ cash reserve, which is crucial to its survival. So it’s important to work with a retail agent to ensure adequate and comprehensive coverage for all risk exposures.”
The independent agent advantage

As with most lines, direct writers have made inroads into the start-up specialty, although they currently only control about 4% of the market, says Hammond at Bolt. Part of the reason why independent agents own this segment of the business market is because of the wide variance in types of businesses insured. “No direct writer has a product that can span from a management consultant down to a contractor or carpenter,” he points out. “The product needs to be diverse.”

Bolt actually partners with direct writers to underwrite start-up businesses. “We’ve seen partnerships with direct writers as being very valuable to us because we’re able to take any business they can’t write and fill that gap and maintain their brand,” Hammond says.  [CREATIVE!]

On the whole, however, independent agents deliver more bang for the buck, including access to multiple carriers in various industry groups in both the standard and wholesale marketplace; a grasp of the complex nature of insurance as applied to each individual business; and understanding of regulatory requirements, Trimble says.

“Independent agents and small business have a long history of doing business with each other,” says Woodward at Travelers. “Agents offer ‘concierge services’ that are critically important with for small businesses, and bring years of experience; they have seen it all, every type of claim. Small businesses need that expertise and understanding of problems before they happen.”

There are big benefits for agents, too: a portfolio of smaller risks lessens the notion of only working with one or a handful of larger accounts, says Trimble. Smaller businesses are also less subject to market volatility, and their need to use an agent for risk management functions adds to the strength of the relationship.

Knowing your client’s business is essential for any agent, but it’s especially resonant for those who want to specialize in start-up businesses, because in many cases you’ll be acting as that business’ risk manager, disaster planner and main mitigation advisor, Ware says. “Know your risks and coverages,” he advises.
It’s also important to protect yourself. “Get it in writing if they choose not to buy something you’re recommending,” adds Ware. “Retail agents must understand their business and act as their consultant, but if they choose not to buy what you recommend, for God’s sake, get it signed off on.”


 New York Daily News

April 1, 2014 

Television star Tina Fey was hit with a $79,000 judgment by the New York State Workers Compensation Board in court documents posted this week in Manhattan court – but the “Bossypants” author insisted Friday that she’s up to date with her payments to the state, according to the New York Daily News.

Court papers show that the state sent Fey a bill in February indicating that she owed the $79,000 for a period covering Nov. 20, 2012 through Feb. 2, 2014.

Fey’s spokeswoman Cara Tripicchio said the “30 Rock” star “has proper and current insurance covering all employees and at no time has worker's compensation payment lapsed. “The confusion seems to be a result of a clerical error with the NY WC Board,” she said. “They have been sending notifications to an old address for an accountant that moved offices almost six years ago."

NEWS OF THE DAY March 27, 2014

Author JackNordhaus , 3/28/2014

"Only those who risk going too far can possibly find out how far they can go."

T.S. Eliot   



By Sam J. Friedman

March 25, 2014 

As a growing number of insurance carriers attempt to sell small-business coverage direct to consumers, agents will need to be more than mere policy peddlers and price shoppers to remain relevant for their customers.

That’s the message I delivered to the “2014 Organic Growth Exchange,” a conference for independent agents held earlier this month in Arizona. I realized early on that I was preaching to the choir with this assembly, made up largely of members of the Beyond Insurance Global Network, described on its website as an “exclusive peer-to-peer group of best-in-class independent agencies and brokers that serve their clients as diagnostic, consultative Trusted Risk Advisors.”

The group was launched by Scott Addis, president of The Addis Group in King of Prussia, Pa., who invited me to deliver the keynote address at his event. I met Scott in 2003, when, as Editor in Chief of National Underwriter, I profiled him and outlined his agency’s loss-control emphasis. In that story, I highlighted the fact that NU had chosen The Addis Group as the year’s “Commercial Insurance Agency of the Year” even though Scott insisted his firm did not sell insurance for a living. Instead, he positioned Addis as the risk manager for its clients.

After the profile appeared, Scott started getting calls from agents all over the country, seeking more details and advice about his consultative-brokerage approach. He went on to build a solid agency consulting business based on that philosophy, culminating with the launch of his Beyond Insurance network and the creation of his “Certified Risk Architect” certification program.

Ultimately, the majority of Commercial Lines agents are likely going to have to offer risk management as a core service if they expect to ward off the threat of disintermediation. Indeed, Small business clients are starting to resemble Personal Lines consumers more and more, a price-driven market with policies increasingly commoditized. As that trend plays out, agents who have little else to offer except quote and coverage comparisons will find themselves being marginalized and often elbowed out of the transaction.

This isn’t some far-off concern. There is a market segment already keenly interested in buying their Small Business insurance direct from carriers, without an agent or broker to help them or advise them. A survey by Deloitte of 751 small-business insurance buyers last year found that 16% were “very likely” to buy direct if given the opportunity, while 35% were at least “somewhat likely” to do so. Together, that means half of the market may be at risk for agents.

However, this certainly doesn’t mean all Small Commercial agents are doomed. Deloitte’s research found that many independent agents still have a strong foundation on which to fortify their relationships with small-business clients.
For one, trust in agents among the respondent pool was quite high, in the neighborhood of 80% for a number of service categories, such as guiding clients through the claims management process and serving as their advocate with a carrier if a claims dispute arises. Nearly three-quarters surveyed also said they trusted their agent to serve as their loss control advisor and offer tips on how to mitigate their exposures.

The trust issue is significant, because among the 48% of respondents who said they were “not very likely” to buy Small Business coverage without an agent, two-thirds said it was because they “don’t trust an insurance company to deal with me fairly,” which was far and away the biggest reason cited.

Satisfaction levels among the survey respondents were also positive, with 31% “very satisfied” with their agents, and another 52% at least “satisfied.” Given such high ratings, it’s no wonder that more than half hadn’t changed their agent in over a decade, including 28% who had never done so.

Still, even agents with strong client relationships can’t afford to take their Small-Business customers for granted. Insurance consumers remain very price-sensitive, and the Small Business market is no exception. Indeed, Deloitte’s survey found that nearly half said a price hike by their current insurer or a lower price offered by a competing carrier would be “very influential” in deciding whether to move their account.
Meanwhile, 40% of respondents who had changed agents said they did so because they didn’t get the best price available from their prior producer. Combine that with the 84% who said they expected to get a price discount if they abandoned their agent and bought Small Business coverage direct from an insurer, and you can see the makings of a market disruption.

So, what should agents do to differentiate their value proposition and maintain their place in the distribution chain?

Don’t panic. At first blush, those who seem most inclined to buy direct are smaller accounts that may be difficult for independent agents to serve profitably. They are also very price-driven, which is not the niche targeted by consultative brokers emphasizing the value of long-term savings generated via loss control and risk management advice.

Perhaps a segment of this market is simply destined to transition to the direct sales channel. But if that’s the segment your agency happens to serve, you might have to go after bigger clients with more complex needs, or find another line of work.

If you can’t beat ‘em, join ‘em. Carriers selling direct to consumers might try to avoid channel conflict with their existing distribution force by referring clients to agents for service and cross-selling—although likely at a lower commission rate, since the acquisition costs are being absorbed by the carrier. In that case, a direct sale could be a win-win-win for the insurer, the agent, and the buyer.

Added-value is the key. No matter how an agency conducts its business, remember that every client is in play—if not vulnerable to being solicited by direct writers, then certainly by other independent agencies. What will your agency do to stand out and make its services unique and essential to clients? If direct-to-consumer insurers offer a sizable discount for discarding the intermediary, that means agents are going to have to earn that extra premium to remain in the distribution chain.

Holistic service is crucial. To convince policyholders that an agent is worthy of retention, they are likely going to have to be more than just a sales intermediary. Deloitte’s survey found that only four in 10 small-business respondents characterized their agents as taking a consultative approach—that is, offering advice on risk identification, loss control, and claims management. More agencies will need to go this route to preserve their clientele, especially as direct selling expands.

• Consider a new compensation model. Truly consultative agents and brokers may want to wean themselves off pure sales commissions and consider charging a fee for their value-added services. In this way, their expense can be more transparent and their value more easily compared against the savings they generate as risk managers, measured in terms of lower loss costs and smaller insurance premiums.

Try cross-selling. Agents who have multiple policies with clients are usually at far less risk of losing accounts than those who fill only a single coverage or service need. Beyond Property and Casualty insurance, more small-business agents might expand their offerings to include life and health insurance, disability coverage, and retirement planning, as well as loss control and safety services.

Fight fire with fire! What’s your digital strategy for sales and service? Independent agencies should build their own robust tech capabilities, delivering information and services via multiple platforms, including mobile devices and social media. Meanwhile, nothing is stopping an agency from starting up their own aggregator website to sell coverage online for multiple carriers.

Most importantly, know your customer inside and out, target your services (as well as the medium through which they’re delivered) to meet your clients’ specific needs, and be able to document the added value your agency provides. The future is now


By Phil Gusman 


March 27, 2014   

Hiscox USA has been selling Commercial Insurance products direct to small businesses since 2010; and while the company has bet on a bright future for this distribution method, CEO Ben Walter still believes in the value of agents and brokers as well.

“What I caution against is thinking of [the direct and broker channels] as mutually exclusive competitive segments,” Walter says. “I think they’re complimentary.”

Some business, he says, lends itself to the direct channel while other business does not. If it’s all done the right way, says Walter, selling some Commercial Lines direct frees brokers up to become true risk advisors for the businesses that really need it.

Determining the right business for the direct channel doesn’t come down to a particular line of insurance, but rather the complexity of risk, says Walter. The best candidates for the direct channel have “fairly homogeneous” risks that can be rated in a “fairly simplistic way.” This, says Walter, is more closely, but not always, related to the size of the business and the industry in which it operates, rather than the line of insurance.

Although large corporations might have more robust risk-management capabilities, Walter says as a company gets bigger and more complex, exposures grow, and larger companies will generally want a broker.

Walter says some businesses should have a broker to advise them on their risks and their needs. “We’re not saying the whole world should go direct,” he points out, adding that it is not right for everyone.

In fact, he says some customers with complex businesses and insurance needs that approach Hiscox through the direct channel are referred to brokers. Walter also says Hiscox offers its wholesale distribution partners access to its direct platform so businesses can “get coverage through broker partners as well.”

However, he adds, “Some prefer going direct, and we support that.” He says Commercial Insurance buyers should have options and should be able to buy coverage how they want. “The more pipes the better.”

Do agents and brokers view this strategy as a positive for the world of Commercial Insurance or as a threat to their business? “It’s been a journey,” Walter says of his conversations with distribution partners. “In the beginning, they saw it as a solid threat.” He adds, “They were tough conversations at first.” 

Walter says, though, that agents and brokers grew more comfortable with the idea once they saw the type of business Hiscox was targeting for its direct channel, and how much business there was to go around. He says Hiscox and its distribution partners have grown together and that a successful tide “has lifted all boats.”  
Still, he says, “I don’t want to oversimplify it,” noting that “none of the conversations [with distribution partners] were or are easy.”

He says the industry tends to be slow to change, but he maintains there’s a mindset shift occurring. Walter points out that there’s some competition in the direct Commercial marketplace now from an insurer backed by American Family. The Hartford, too, is entering the market, he says. “We welcome the competition,” says Walter, because he feels it validates Hiscox’s bet on selling commercial insurance direct in the U.S.

He says the concept has been slower to catch on in the U.S. in part because “it takes a lot of courage to look distribution partners in the eye and tell them about this.”
As competition moves into the direct space, Walter says Hiscox will leverage its experience in this area to win customers. The company sold Commercial insurance direct in Europe before launching it in the U.S. Walter also says Hiscox has spent time and money on technology, on understanding customers and on marketing.

Walter says Hiscox has seen growth in its direct channel, with about 50,000 policies in force now. He says many risks come with small premiums though, “so it takes a lot of customers to build up the business.”

Walter believes it will take time—at least 10 years—for the idea of Commercial insurance sold direct to really get going. “It’s a long burn,” he says, noting that generations will turn over before the business really starts to shift. Still, with some big insurers entering the space, Walter says the concept will catch on. “I think the Commercial space is ready for this,” he says.

As for brokers, Walter says he believes they will survive and succeed. He points to changes in the travel industry, noting that travel agents have changed, but have not died off despite competition from online services. Walter states that insurance brokers who understand that they can provide value-added services beyond the sale will be the most successful in a world where selling commercial insurance direct becomes more common.



INN Breaking News

March 28, 2014

by Laura Goodenow

Carriers, including Safeco, are joining an effort to increase the online presence of individual agents and bolster awareness of the independent agency channel as a whole.

Carriers continue to battle each other for business with independent agents. Meanwhile, consumers continue to flow into the direct channel. “Consumers are shopping and learning more about insurance than they ever were in the past,” says Safeco Insurance president Matt Nickerson.

U.S. consumers still overwhelmingly prefer doing business with agents, according to a recent Accenture survey.   Most insurers continue to struggle with establishing a strong agency value proposition, i.e., the ability to increase loyalty among independent agents in order to achieve “preferred carrier” status with a larger number of agencies, says the consulting firm’s report, “Creating Value in the Independent Agency Channel”. 

 “We only win if our independent agents win,” said Safeco Insurance president Matt Nickerson. “Part of that is that the independent agents need to evolve and change.”
Safeco sells insurance products exclusively through independent agents, and, along with Westfield Insurance, Central Insurance Companies, The Main Street America Group, State Auto Insurance Companies, and Selective, is a founding investor of Project CAP.

Founded by the Independent Insurance Agents & Brokers of America (IIABA) and the six carriers, Project CAP—Consumer Agent Portal—offers online marketing solutions to independent agents and manages TrustedChoice, the IIABA’s advocacy website. “CAP is one of many levers—but an important lever—in responding to the changing consumer,” Nickerson says. The site’s quoting capabilities for participating carriers should be nationwide this summer.

Home and Auto insurance shoppers in 18 states can now request online insurance quotes through Project CAP, and then find nearby agents to write those policies. Capabilities should span the nation by mid-year. Currently, 33 carriers have signed up or are in the process of signing up to provide quotes, with at least a dozen more carriers in the pipeline.

Carriers agree to present rates on TrustedChoice through a real-time data connection to the EZLynx rating vendor in each state it is licensed. They then pay monthly fees based upon state and per-quote fees each time a quote is presented.
Project CAP works with carriers and its rating vendor to balance a need for quoting information with the number of questions a consumer must answer. It also provides business intelligence reporting, such as where the carriers ranked in the listings, how many times they showed up, and how many times they were selected.

Because the site leads customers only to agents who can write policies, can’t track how much actual business is generated. Additional opportunities for data sharing, as well as carrier promotion and spot placement, are in discussion.

According to IIABA, many independent agents and brokers are competing locally with the direct response companies and captive agencies by combining customized service and advanced technology in their personal lines marketing. And, online advertising and rate quoting capabilities are cited as successful ways to obtain customers.

“Many agents are receiving multiple leads and quotes, and from our early sampling, it appears that about half of those leads are turning into written policies,” Bacciocco says.

Last year, independent insurance agency Southern Financial Insurance Group took the plunge. “Part of our growth model was to have a presence on the Web,” says agency manager Stephen Copeland. “We had considered doing it ourselves but quickly nixed that idea when we saw what Project CAP could offer.”
Copland attributes an increase in sales to its efforts on the Web - updating its website, adding an online quoting option, and creating a Facebook page.

In addition to its more than 1,200 agency clients, Project CAP looks at the entire independent agency channel as its charge. “We have a branding challenge at an industry level,” Bacciocco said. “That's what Trusted Choice is supposed to be about.“




By Stephen Vagus 

 March 26, 2014

Insurance companies are beginning to look to technology  to help them connect with consumers. Although many insurers are using social media to increase their engagement, having a presence on sites like Twitter and Facebook is no longer adequate. Many companies have begun to develop and release their own mobile applications  to appeal more effectively to consumers who are becoming heavily reliant on smartphones and tablets.

Apps might be able to help insurers connect with consumers more effectively
Many of the applications from insurance companies provide consumers with quotes. Applications are also being used to begin the claims process, highlighting convenience and automation. Applications that allow people to pay premiums from their mobile devices are becoming more popular .as well.

Some insurers are releasing applications designed to present a certain image that will connect with consumers more effectively. 
Progressive has the Flo-isms application, which provides users with sayings from the insurance company‘s popular “Flo” spokesperzon. GEICO has a similar application that acts as a mobile game, tasking users with directing vehicles safely to a destination.

These applications have managed to make insurance companies seem more human rather than large, faceless corporations that are concerned with nothing more than profit. In
surers are working to dispel this stigma by showing consumers that they can be more personable. Given that most of the applications insurers offer are free, a stronger focus on mobile technology might help  accomplish this goal.



 March 27, 2014 

by Julie Campbell

The devastating recent news for homeowners who have suffered tremendous losses – or even who lost everything – in the deadly Washington disaster, could become much worse because these people probably don’t have mudslide coverage to protect them.'
Unfortunately, standard Homeowners and Business policies don’t include mudslide insurance. Additional coverage is usually needed for damage caused by movements of the earth, such as earthquakes, landslides, rock slides, and mud flow. Heartrendingly, the majority of people – including most in Snohomish County, Washington – assume that they’re covered against this type of catastrophe until disaster strikes.

Landslides and mud flows can occur anywhere. While many happen in uninhabited regions, this most recent – which killed at least 24 people – is a reminder that they can strike populated areas, as well.

If a property is located on steep ground or near a cliff, added coverage could be a worthwhile investment. It might not be cheap, but the home is typically the largest and most valuable asset in a person’s life, and the added coverage could make the difference between the financial ability to recover, or a devastating loss owns.

Although  federal disaster aid can provide some assistance, it usually comes in the form of a low-interest loan, rather than a cash payment.


By Reuters

March 28, 2014  

BEIJING (Reuters) - Chinese insurance companies have started to pay compensation to the families of passengers aboard a missing Malaysia Airlines plane presumed crashed in the southern Indian Ocean.

China Life, the country's largest insurance company, has provided the families of seven passengers with a total compensation of 4.17 million yuan ($671,600), Chen Honghao, an official from China Life's department of planning, told Reuters by telephone on Friday.

China Life had 32 clients on the flight and estimates its total compensation would be 8.94 million yuan, Chen said.

Flight MH370 is believed to have crashed with the loss of all 239 people aboard after flying thousands of miles off course on March 8 during a routine flight from Kuala Lumpur to Beijing. More than 150 of the passengers were Chinese.

Shanghai-based China Pacific Insurance Co., Ltd. compensated the family members of one of its clients with 525,000 yuan on Wednesday, Yan Liping, an executive from the firm's branding division, said in an emailed statement.China Pacific Insurance estimates that it will have to pay out a total of 4.04 million yuan to the families of 12 clients on the flight, Yan said.

New China Life Insurance Co. Ltd. will compensate the families of nine clients on board the flight with a total of about 1 million yuan, Zhang Hongxia, a public relations official from the firm, said on Thursday.

Sunshine Insurance will provide 500,000 yuan in compensation for the family of one of its clients, a woman with the surname of Zhang, from the firm said on Thursday.

NEWS OF THE DAY March 21, 2014

Author JackNordhaus , 3/21/2014

“If we had no winter, the spring would not seem so pleasant.”

Ann Bradstreet


Insurance Journal

By Laird Rixford 

 March 10, 2014

The end of the world is coming. The world of Windows XP that is.
A significant event is happening in the technology industry that will affect insurance agents. On April 8, 2014, Microsoft will no longer support Windows XP.
Yes, that Windows XP, the operating system that was launched more than 12 years ago – the same operating system that still commands more than 40% of all business computers – will come to an end.

Why is Microsoft cutting support for Windows XP?

It’s so old that it predates 9/11. Though it’s clearly still popular, the operating system is consuming a large amount of Microsoft’s resources that they would rather use on their newer operating systems Windows 7 and 8.
If you feel surprised by this news, you should know Microsoft announced in 2007 they were planning to end support of Windows XP. They also pushed back the date after originally planning to end it in 2010.
The end of support for Windows XP means that Microsoft will no longer provide technical support to vendors, integrators and end users.
In other words if you use Windows XP, you will no longer receive security updates or product fixes. Essentially, the operating system will be taken off life support.

The Death of Windows XP in Agencies

Why is this end of Windows XP’s life important to insurance agents?
First, with a lack of updates and fixes, your agency’s computers will no longer be secure. This puts your clients’ data at risk because cyber attackers can target Windows XP vulnerabilities without worry of security updates or patches.
If you’ve been following the recent stories of the data breaches at Target and other companies, you know data security is extremely important to consumers. Many E&O policies and compliance departments require agents to run up-to-date supported software for this reason.
Second, as the technology in modern operating systems advances, so do the programs that use this technology For example, many agency automation systems use the latest technologies available through modern operating systems – like newer browsers, updated API libraries and more – to provide agents the best experience and features.. These systems might require you to upgrade from Windows XP so they can start using the newer abilities available in the latest operating systems.
On April 8, your computer should still work fine, but it will be at risk of becoming infected with viruses, spyware or other malware that might result in crashes or, even worse, the theft of your clients’ personal information.
The size of the risk has not been calculated. However, when it comes to protecting your clients’ data from hackers and yourself from potential E&O claims, the size of the risk doesn't matter. Because your system will be vulnerable, you need to protect it.

What Can You Do?

Upgrade! You can install an updated operating system or upgrade the computer completely.
You might choose to switch to web-based programs for rating and management systems so you can access data from anywhere with an Internet connection and a web browser. By migrating to all web-based systems, you can even move past the desktop altogether aa to use tablets and smartphones, thus avoiding the next operating system apocalypse.
You can upgrade to the Windows 7 or Windows 8 operating systems. Windows 7 has the familiar interface and is more budget-friendly than Windows 8; however, it’s the older of the two operating systems. Windows 8 might require some getting used to because the interface has significantly changed from the Windows look you’re used to.
Don’t wait until April, and potentially expose your clients to hackers. The end of Windows XP is inevitable. Upgrade now!


By Andrew Taylor |

Insurance Journal

 March 16, 2014

President Barack Obama is set to sign a bipartisan bill relieving homeowners living in flood-prone neighborhoods from big increases in their insurance bills.
The legislation, which cleared Congress on Thursday, reverses much of a 2012 overhaul of the government’s much-criticized Flood Insurance program after protests from angry homeowners facing sharp premium hikes. 
The Senate’s 72-22 vote sent the House-drafted measure to Obama. White House officials said he’ll sign it.
The bill would scale back big Flood insurance premium increases faced by hundreds of thousands of homeowners. The measure also would allow below-market insurance rates to be passed on to people buying homes in flood zones with taxpayer-subsidized policies.
Critics say Washington is caving to political pressure by undoing one of the few recent overhauls it has managed to pass.
“While politically expedient today, this abdication of responsibility by Congress is going to come back and bite them and taxpayers when the next disaster strikes,” said Steve Ellis, vice president of Taxpayers for Common Sense, a Washington-based watchdog group. “Everyone knows this program is not fiscally sound or even viable in the near term.”
The hard-fought 2012 rewrite of the Federal Flood Insurance Program was aimed at weaning hundreds of thousands of homeowners off subsidized rates, and required extensive updating of the flood maps used to set premiums.  However, its implementation stirred anxiety among many homeowners along the Atlantic and Gulf coasts and in flood plains, many of whom are threatened with unaffordable rate increases.
The legislation offers its greatest relief to owners of properties that were originally built to code but subsequently were found to be at greater flood risk. Such “grandfathered” homeowners currently benefit from below-market rates subsidized by other policyholders; the new legislation would preserve this status and cap premium increases at 18% a year. The 2012 overhaul required premiums to increase to actuarially sound rates over five years and required extensive remapping.
Many homeowners faulted the Federal Emergency Management Agency’s implementation of the 2012 law. In some instances, homeowners from areas that had never been flooded were shocked and frightened by warnings of huge, unaffordable premium increases. The resulting uproar quickly got the attention of lawmakers and peppered them with complaints.
“In many cases, these are people with $100,000 homes that are getting (Flood Insurance) bills that are more than their mortgage payments,” said Rep. John Fleming, R-LA. “You had certainly a significant number of people who were really going to be hurt seriously through no fault of their own.”
The top leaders of both parties came on board, overcoming resistance from defenders of the 2012 overhaul like House Financial Services Committee Chairman Jeb Hensarling, R-Texas, whose turf was trampled along the way.
“Members on both sides of the aisle and a broad geographic distribution got involved. When you get enough members involved, it’s going to get the attention of the leadership, and that was a major factor,” said Rep. Charles Boustany, R-La.
Another provision, eagerly sought by the real estate industry, would allow sellers of older homes built before original Flood insurance risk maps were drafted to pass taxpayer-subsidized policies on to the people buying their homes instead of requiring purchasers to pay actuarially sound rates immediately, as required by the 2012 law. The new rates are especially  high in older coastal communities in states such as Florida, Massachusetts, and New Jersey, and have put a damper on home sales as prospective buyers recoil at the higher, multifold premium increases.
The measure also would give relief to people who bought homes after the changes were enacted in July 2012, and thus faced sharp, immediate jumps in their premiums; they would see those increases rolled back and receive rebates. Separate legislation by Sen. Mike Lee, R-Utah, would make sure that rebates would not go to recent buyers of beach houses and other second homes. It passed the Senate Thursday and is likely to get a vote in the House.
“While it’s important to put this program on sound financial footing, middle-class families should be able to afford the insurance they need to stay in their homes,” White House spokesman Bobby Whithorne said.
Thursday’s bill was written by House Majority Leader Eric Cantor, R-Va., and Rep. Michael Grimm, R-N.Y., with input from Democrats like Rep. Maxine Waters of California, whose votes were critical to House passage last week.
“We’ve solved a very short-term problem and made it a long-term problem,” said Sen. Tom Coburn, R-Okla. “We didn’t really do our work because we were in such a hurry to take the political pressure off of the increases in the flood insurance rates.”
People whose second home is in a flood zone and those whose properties have flooded repeatedly would continue to see their premiums go up by 25% a year until reaching a level consistent with their real risk of flooding.



By Staff Writer

March 19, 2014  

Esurance added a new video feature to its Esurance Mobile app that enables policyholders to talk to appraisers in real time to get a damage estimate on the spot, says the Chicago Tribune.
Using the app, consumers with eligible Auto insurance claims can video-chat with an Esurance appraiser using their iPhone or Android smartphones. During the video appointment, the appraiser shows the policyholder how and where to video the damage, and gives an estimate. The app even allows the appraiser to send an electronic payment to settle the claim on the spot, says the Tribune.
The new feature is similar to QuickFoto Claim from Esurance parent Allstate, which allows people to send smartphone pictures of their damaged vehicle to the insurer


By Reuters

March 19, 2014 

Frankfurt (Reuters) - Allianz has started to make payment on claims linked to the disappearance of a Malaysian airliner earlier this month, the German insurer said Tuesday.
Allianz confirmed last week it is the lead insurer covering the Malaysia Airlines jet that disappeared over the Pacific Ocean on March 8, while Willis has emerged as broker.
Flight MH370, a Boeing 777-200ER, vanished from civilian air traffic control screens off Malaysia's east coast less than an hour after take-off.
An international land and sea search for the jetliner and the 239 people aboard is now covering an area the size of Australia but police and intelligence agencies have yet to establish a clear motive to explain its disappearance.
"Allianz Global Corporate & Specialty and other co-reinsurers of the Malaysia Airlines aviation hull and liability policy have made initial payments," the insurer said in a statement.
"This is in agreement with the insurance broker, Willis, and is in line with normal market practice and our contractual obligations where an aircraft is reported as missing."
German business daily Handelsblatt earlier reported payment in the case would amount to around 100 million euros ($139.13 million) for the aircraft and the people aboard.
It’s unclear how much of the claim will be passed on to other insurers in the consortium.
Allianz declined to comment on the financial details.

NEWS OF THE DAY March 14, 2014

Author JackNordhaus , 3/14/2014

“Never let the fear of striking out get in your way."  
Babe Ruth


Here are some steps you can take to keep your agency--or a client’s business--running in the event of a divorce, death, disability or other life event.

By Laura Mazzuca Toops,  


March 11, 2014

It’s a sad but true statistic: 50% of U.S. marriages end up in divorce court, a number that has held steady over the past decade in spite of bad economic times, according to the CDC’s National Vital Statistics System. Although the numbers represent a decline in overall divorce rates from the high of the late 20th century, it’s rising in some demographics--specifically, among baby boomers.

While the personal impact of divorce can be devastating, splitting up a marriage can also disrupt a spouse’s business—especially the typical independent insurance agency, which tends to be privately held and frequently intertwined with the family.

In the case of a divorce, a privately held business can represent a major portion of the marital estate and become subject to division in the settlement. Business owners who don’t plan for this eventuality the same way they would any other personal catastrophe could seriously damage their agencies as the result of a divorce settlement.

Luckily, there are things you can do to protect your business—not just from the ill effects of a divorce, but from any other personal catastrophe, says Tim Cunningham, managing director of OPTIS Partners, a Chicago-based specialty investment banking and consulting firm focusing on insurance distribution.

Here are some steps you can take to keep your agency--or a client’s business--running in the event of a divorce, death, disability or other life event:

Pay a professional to value your business regularly—and fairly. This is a basic first step in any sort of long-term agency planning, even if you’re a single-owner agency, Cunningham stresses. Regular periodic valuation of your business by an industry-specific professional firm has the collateral benefit of establishing the value in case of a divorce. It is also essential in transactions with shareholders, to provide collateral for a lender, and in estate planning. Although there are dozens of amateur “formulas” floating around, such as multiples of revenue or commission, don’t rely on these home-remedy estimates to value your agency. “A fair valuation by a qualified professional is good business planning and it may help bulletproof you in a divorce,” Cunningham says. “Value the firm fairly and regularly, even if you’re a sole shareholder.”

If a divorce is inevitable and you’re dividing up a marital estate, the value of your business will become an issue. Both spouses will likely have their own valuation. “Then it becomes a case of dueling experts," Cunningham says. "Many judges in divorces have a very poor grasp of business issues. If you’ve had a valuation done periodically  and your method has been consistent, your lawyer can argue to the court that this is a fair value.”

Draw up a pre- or post-nuptial agreement. Although not a lot of people do prenups before tying the knot, they should, says Cunningham. Among other things, a good prenup will clearly specify that a spouse’s business is completely separate from the marital property in case of divorce. It’s never too late: For business planning purposes, spouses can have a lawyer draw up a post-nuptial agreement.   
Use shareholder or similar agreements to manage claims on the business by a spouse if there is a divorce. This approach makes sense if the agency has two or more equity owners—again, because the issue of ownership is germane not only to divorce, but also clarifies matters in the event of a partner’s death, disability or retirement, Cunningham says. If there are multiple shareholders, each should have a separate employment agreement, including non-compete language and details about agency value and how it is to be valued and treated in the event of a divorce—another reason to have the agency professionally valued regularly.   

Run your business like a business. The family agency isn’t personal property, so “treat it like a business,” Cunningham says. Make it clear that the business is your employer by paying yourself and the other owners a market salary based on their contributions and keeping business and personal finances strictly separate.


Live Insurance News

By Logan Bayan 


Flood insurance rates are expected to begin fluctuating throughout the U.S. this year. Reforms are taking hold of the National Flood Insurance Program due to new legislation which is delaying significant increases in premiums for the time being. However, the Federal Emergency Management Agency (FEMA), which oversees the program, continues to revise the flood maps that will have a dramatic impact on rates .

The legislation allows rates to increase no more than 18% a year, compared to previous annual rate hikes of up to 600% 

The bill would slowly reduce the subsidies supporting the program, which more and more lawmakers see as a financial burden that has been losing money for several years.  Congress might well eliminate the program. In some states, Flood insurance might soon be opened up to the private sector.  



By Amy Mcilwain

Business Insurance


You already know that it’s important to optimize your LinkedIn profile. But your presence on other platforms might also need optimizing.

So before you start tackling that in-depth Twitter marketing campaign or paying to promote your tweets, make sure you have your bases covered. Here’s a checklist for optimizing your Twitter profile:

1.  Profile picture. Your profile picture/avatar is going to be the first thing people see. Use a company logo or be creative and use a picture of a person or character. Just make sure that whatever image you use, represents the agency as a whole. If possible, use a colored background to help your brand stand out in your prospect’s feed.

2.  Twitter handle. Your Twitter handle is the same as your Twitter URL, so it should be an obvious choice that reinforces your brand identity. If your company name is already taken, you can be creative with abbreviations, but we recommend you stay away from underscores.

Now that you have a Twitter handle, promote it. Incorporate it into all your marketing materials so that your prospects and clients will know where to find you.

3. Agency bio. This is your chance to introduce yourself. The challenge is to use only 160 characters. Write a clear, concise bio that describes your brand, products or services. If you have an opportunity to throw in a few keywords, go for it. Twitter also gives you the ability to include live links in your bio, so you can drive traffic to a specific product page or another social profile.

Use URL abbreviations for these links, so you don’t waste precious characters.
As you strive to improve your Twitter efforts, make sure that your great content is searchable and looks professional. Optimizing your profile will make growing your audience much easier.


Insurance Journal

By Denise Johnson 

 March 7, 2014

After a catastrophe hits, mobile units filled with adjusters are on site to evaluate property damage. Flash forward five years and an insured may never meet the property adjuster handling his or her claim. Instead, a drone is sent to evaluate damage within hours. Claims are closed at breakneck speed as adjusters handle a much higher volume – and insurers see fewer Workers Comp claims because adjusters remain safely ensconced in their cubicles.

Although this scenario might seem too futuristic to imagine, according to industry experts it’s a very real possibility that insurers will be using drones in a number of ways within a few years.

Currently in the U.S., drones are used to enhance public safety, support agriculture, help the environment, monitor the climate, and mitigate and monitor disasters.  The Association of Unmanned Vehicle Systems International (AUVSI) has been lobbying the FAA to revise its regulations freeing up air space for unmanned vehicles and allowing for greater government and commercial uses of drones. Internationally, a number of countries use drones to assist in law enforcement and help monitor weather and disasters.

Grant Goldsmith,  president of Overwatch, a provider of high risk insurance for international contractors that’s a division of Avalon Risk Management, says that he has already been approached by insurers interested in using drones for claims work. One company representative told him that an ex military person now employed in the claims department suggested the use of drones, after Superstorm Sandy claims overwhelmed the carrier.

Jason Wolf, a property defense attorney and shareholder at Koch Parafinczuk & Wolf, sees drones being used for aerial surveys of property damage to insured roofs. “You get to see everything. You may not even need to go up on the roof. You can see every single inch of the entire property, just with the touch of a few buttons,” Wolf said.

He also expects insurers to use drones to after a catastrophe. “I envision a time when, after a catastrophe, an adjuster pulls up to a neighborhood, opens the trunk of his car, presses a few buttons on his tablet – and the drone does an immediate survey of everything and streams it all right to his tablet. The adjuster knows exactly where to go first and what’s most significant within minutes. The insurance company has a sense of everything that needs to be done in a very short amount of time and a minimal cost,” Wolf said.

As far as who will operate the drones, Wolf said adjusters will likely see their skills expanded again. “I think it raises a good point about how adjusters’ skill sets have had to change over the years from the days when they did everything by hand to when they had to learn how to use a laptop and so on and learn how to use computer estimating programs. I would think they would have to be well versed in using drones. I believe t the technology is going to be so simple that anyone will be able to do it, 

Goldsmith, on the other hand, thinks there will be separate, experienced drone operators. “In the companies that I’ve talked to that are thinking about introducing a drone into their claims process, that idea often comes from an ex military person who has firsthand experience operating or using a drone overseas,” Goldsmith said.

Privacy Issues

Although drones could be used in a variety of claims and underwriting functions, there are potential privacy and legal issues that haven’t been sorted out yet.

“One of the biggest concerns that people toss out there is privacy. Well, that’s not a problem with a drone survey,” Wolf said. “You’re going to have the drone survey, take a look at the entire house and record the video for you or allow you to look at it in real time. What’s the privacy concern there?”

Goldsmith thinks the privacy issue has already been addressed within the commercial aircraft industry. With small private aircraft or helicopters, if you’re doing something in your backyard that’s within public view of a passing aircraft, you don’t have a reasonable expectation of privacy – and a number of Supreme Court rulings have upheld this rule.” 

An invasion of privacy could just as easily occur with an onsite visit by a field adjuster. “If they’re looking at the exterior and they happen to peer in the window and see some sort of activity that could be construed as a privacy intrusion, I don’t know how different that is than the adjuster being there when the homeowner or the property owner is at work and whoever’s home isn’t answering the door,” Wolf said. “I think a lot of that is really just overblown, as long as there’s notice given and the insured knows what is going on.”
Both experts expect there will be a testing period for insurers to sort out issues and concerns. “Obviously, there needs to be some sort of testing, a beta testing period, and you need to get buy in from not just the adjusters but from the C suite, so to speak,” Wolf said. 

Although usage of a drone could lead to Property Damage and Bodily Injury claims,  this isn’t much different than an adjuster driving to a property inspection. “To the extent that two drones collide, see that being no different than two cars colliding. Someone’s at fault, and there might be collateral damage, so to speak,” the Florida attorney said.

Goldsmith said the risk of a collision is small. “When you’re talking about operating something hand held, within line of sight on a blue sky weather day that’s not really larger than a model aircraft and it’s not going beyond their line of sight for hours, that’s a very small risk.”
Drone Testing

The Federal Aviation Administration (FAA) has testing sites  for drones in Alaska, Nevada, New York, North Dakota, Texas and Virginia 

“I think that the next logical step for the insurance industry is to develop a platform of how you would want to use an unmanned system, let’s say, in claims, and then put that thesis of use to practical, operational practice in one of these FAA operations centers,” Goldsmith said.
He advises interested insurers to contact wan FAA testing site so they can flesh out best practices and weather conditions for drone usage. “The testing sites right now are not real busy and are looking for customers,” Goldsmith said.

Insurers contacted for this article declined to discuss whether they plan to use drones in their operations in the future.

Whether a company could operate drones for business now is up for debate.

“If you asked me today whether or not it is illegal or against the FAA’s rules to take an unmanned system out and shoot aerial photography of somebody’s roof or a loss adjustment below 400 feet, I don’t know that I think that’s illegal. I don’t know that I think the FAA is going to come down on you for that. I think you could do it today,” said Goldsmith. “If you’re using it for your own purposes, as a company or as a private individual, and you’re not out as a vendor essentially flying services for a fee, I don’t think you’re in violation of the FAA’s ruling that you are operating it under a service for fee agreement and so that’s not authorized. I never say ‘illegal’ because there’s technically not a law that says you can’t do it. There’s just a rule that says you shouldn’t do it.”

According to the FAA website, no approval is needed to fly a model aircraft under 400 feet, although these flights are not for business purposes.

“The bottom line is that you can’t get this genie back in the bottle. There are plenty of people operating drones on a pseudo authorized and unauthorized basis now,” Goldsmith said.
Experts said it’s unlikely that drones will replace adjusters.

“Could drones ever replace humans?” Wolf said “Could a drone come out to an auto accident and be dispatched from a central headquarters? That’s a little bit pie in the sky, no pun intended. Automation has replaced a lot of other things, but the human touch will always be important.. I think it’s exciting to see what’s going to happen and to see this play out.”

NEWS OF THE DAY March 7, 2014

Author JackNordhaus , 3/7/2014

“Who speaks, sows; Who listens, reaps."

Argentine Proverb


National Underwriter

By Steve Kempsey

March 5, 2014 

Early each year, Marsh’s U.S. Casualty Practice considers the key trends that it expects to drive the casualty market in the coming months. Following, Marsh presents its views on how those trends could affect risk managers' companies.

1. Average Rate Changes To Be More Stable: Insurers continue to seek rate increases, but abundant capacity helped to stabilize the market in the second half of 2013. This trend should continue in 2014.

Due to previous structure and rate corrections, some of the more difficult classes of business might also experience rate stabilization toward the year’s end. However, these tougher classes — including guaranteed cost Workers Compensation, risks with high employee concentrations for Workers Compensation, and those with adverse experience — likely will continue to see larger increases than others. 

Interest rates are improving — but unless they jump by several hundred basis points, this will not on its own cause significant market softening. Meanwhile, property reinsurers are faced with increased competition and reduced demand; their redeployment of capacity to casualty lines may further temper rate increases.

2. Your Risk Profile Matters: The standard deviation of rate changes will remain large as risk profile differentiation and loss experience drive individual results (with the best-in-class companies in desirable risk classes able to secure premium reductions). Underwriters’ continued scrutiny of risks — including the involvement of home offices on traditional underwriting issues — is lengthening the renewal process. Insurers continue to seek more historical loss information and detailed exposure data. The more data that individual insureds can provide to demonstrate favorable long-term trends, the more aggressively these insurers will be able to quote.

3. The Incumbent Advantage: After marketing their programs over the last several renewal cycles, many insureds are likely to look to establish continuity with their incumbent insurers and overall marketing activity is likely to decline. Programs will continue to be marketed, however, when incumbents are not willing to provide both a client-friendly approach to the expiration of the Terrorism Risk Insurance Program Re-authorization Act (TRIPRA) and coverage guidance. Meanwhile, lead umbrella underwriters will continue to scrutinize attachment points and limits, increasing buffer layer marketing efforts for tougher classes. Collateral can still provide an advantage for incumbents, but to a lesser degree as the marketplace relaxes requirements for financially strong insureds.

4. The Field Continues to Grow: New capacity continues to enter the US casualty marketplace, including some from Asian and European markets. As policyholder surplus increases to record levels, existing insurers will continue to reevaluate their appetite in order to drive premium growth. Unfortunately, for tougher risk classes and for excess workers’ compensation, we do not foresee an inflow of hungry capacity.

5. A Bird in the Hand: After losing some business over the last few years that they had wished to retain, many insurers will be eager to avoid further marketing in 2014 and will likely be more flexible on rates and other terms. Following rate increases over the last few years, there is less of a gap between insurers underwriting on a “technical” basis — driven by losses and other market fundamentals — and those in the “trading” market that are seeking to gain market share. Rather than simply walking away, many incumbents may take more aggressive positions to retain their accounts — especially if faced with competition. New entrants, meanwhile, will continue to be aggressive on both price and collateral in order to build their books of business, which will drive the trading market.

6. Portfolio Risk Management: Analysis of aggregate exposures across coverage lines will continue to drive insurers to modify their appetite for some risks, and to redeploy capacity. The growth in exposures and continued rate lift will increase overall premiums written in Workers Compensation and other lines, = giving insurers greater flexibility to achieve their underwriting objectives. Limit management likely will continue, and average limits deployed likely will shrink. Insurers will be able to translate and act on portfolio decisions and positions for individual risks, and will often provide insureds with clearer indications and more lead time to prepare for pricing and/or capacity changes.

7. Changes Afoot: The economic recovery will drive insurers’ strategies. With surplus at an all-time high and the economic outlook improved, consolidation in the marketplace is likely in 2014 which will result in changes to carrier appetites. In 2012 and 2013, some noteworthy underwriting talent moved to new insurers. These underwriters are expected to take aggressive positions on risks that are “new” to them, which in turn will pressure incumbent markets.

8. Coverage Matters: Consistency and clarity of coverage will have more of an impact on how individual insureds select their insurers in 2014. Multi-year deals and alternative risk financing methods likely will gain popularity this year. Coverage clarification efforts will be most crucial regarding potential TRIPRA non-renewal language, product recall coverage, professional versus general liability triggers, and gray areas between General Liability and Cyber insurance.

9. Data-Driven Decisions: The use of data will further influence the decisions of risk managers and insurers on Primary and Excess Casualty. The development of advanced loss control analytic tools will revitalize insureds’ focus on claim reduction, and potentially lead to increased investments in loss control. Meanwhile, insurers are relying more on data to make important portfolio decisions, including exiting some businesses because of modeling results. Insurers are also placing even greater emphasis on state-specific Workers Compensation trends,  General Liability jurisdictional anomalies, and the severity of recent Auto Liability verdicts. Predictive modeling pricing parameters will have greater influence on individual risks.

10. Innovation by Necessity: Insurers and brokers will continue to innovate in order to remain relevant and competitive. Legislative changes, unfavorable court rulings, and greater complexity of risk drive the development of new products, services, and analytical tools. Industry-specific offerings will broaden and as a result buying philosophies will evolve. In health care, for example, provider stop-loss usage will increase to combat capitation risk post-health-care reform. Globalization will lead to further alignment of international exposures and coverages with core casualty programs. Meanwhile, although most market participants expect that TRIPRA will be reauthorized — with more risk being borne by insurers — novel strategies will likely emerge in 2014 to combat the “worst-case scenario” of non-renewal.



National Underwriter

By Gary Irvine

March 6, 2014 

Insurance industry recruitment is becoming more urgent as the Baby Boomer generation retires. According to McKinsey & Company, nearly 500,000 insurance professionals will retire between 2008 and 2018. As a result, insurance companies will face major shortages in top talent. In many cases, they are now turning to candidates from the younger generation (ages 18 to 27), often referred to as Millennials—or Generation Y—to fill these gaps.

Insurers are focused on attracting this new talent, yet they struggle to find ways to appeal to this generation. Although the industry is relatively recession proof and offers interesting opportunities and growth potential, there is generally a lack of interest among young professionals in pursuing a career in insurance. As a result, insurance companies must communicate the rewards of a career in the industry to help combat these misconceptions and close this talent gap.

First, carriers must understand the Millennial workforce. According to a report by the Griffith Insurance Education Foundation, Millennials are looking for a work environment that offers:

Meaningful, satisfying and challenging work they will enjoy.
Collaborative work environments.
Employers that demonstrate social responsibility through workplace efforts.

By understanding Millennials’ work preferences, carriers can then implement strategies that both attract and retain young talent. Here are a few examples of what we’re doing at Columbus, Ohio-based Grange Insurance to achieve this goal:

Strategies to Attract Millennials

1. Onsite recruitment fair: Millennials need to know that there’s a lot more to insurance than meets the eye. By offering an onsite recruitment fair, hiring managers have a chance to educate them about the benefits of a career in the insurance industry, the employment perks and the variety of jobs available. Hiring managers from every area of the business should be represented in order to showcase the rich mix of employment options available. This includes managers from actuarial, claims, commercial lines, call centers, finance, human resources, information technology, legal, life, personal lines, project management office and sales and marketing.

2. Internship program: A summer internship program is another initiative companies should use to attract young job seekers. The internship program should include four crucial areas: corporate projects, networking, work experience and professional growth. Through an internship program, Millennials will receive an opportunity to network with each other, meet with senior leaders and connect with young professional groups. This internship structure gives Millennials a much more positive, engaging and meaningful employment experience, which they are seeking.

3. Relationships with local high schools/colleges: It's essential to introduce the industry to young students and connect with young talent who are already interested in joining the insurance industry. This can be accomplished by building relationships with local high schools and colleges. By helping schools develop insurance curricula students will then have an opportunity to learn how their skills can lead to a rewarding career in insurance. This ultimately makes recruiting the next generation of insurance employees easier, since these students will be exposed to the industry early on.

Strategies to Retain Young Talent

Once insurance companies have hired Millennials, it is important to offer additional benefits that will make them want to stick around. For example:  

1. Associate Resource Groups (ARGs): The Griffith Insurance Education Foundation has found that Millennials want to continue to learn and that these programs, including mentoring, are expected from employers. By offering employees an option to join Associate Resource Groups (ARGs), such as women in leadership and young professionals, this will help create an environment that fosters learning, innovation and growth, which is essential to Millennials. ARGs give employees an opportunity to learn from one another on a personal and professional level, contribute to the business outside of their current role and feel vested in the business as they foster new and innovative ideas that will help move the company forward. 

2. Emerging leader and future executive programs: Griffith also reports that Millennials expect ongoing opportunities for training and development. For this reason, it's important to offer an emerging leader program. This program should involve senior leader mentor-ship, business simulation, community outreach projects and internal business projects. A future executive program should also be available to those who are already on the leadership track, but want additional exposure to elements of business simulation, executive mentor-ship and project management. These programs will appeal to Millennials who want a broader immersion into leadership and are necessary tools for professional development and employee retention
3. Community service opportunities: Millennials are not only examining a company for its professional development opportunities, benefits and salary, but are also interested in an employer who values social responsibility. In fact, a new report by Nielsen found that 70% of Generation Y says a company’s commitment to the community would influence their decision to work there. As a result, it is important for carriers to have a philanthropic focus. The first step in adopting the “do the right thing” principle is by offering company-sponsored volunteer opportunities that help charitable organizations in the community, such as Meals-on-Wheels and Big Brothers/Sisters. To encourage volunteerism, companies can also set-up a recognition program to acknowledge employees’ volunteer efforts. In addition to community service opportunities, agencies can help retain employees by offering flexible work environments, free fitness centers and fun employee events such as chili cook-offs and volleyball tournaments.
With thousands of baby boomers retiring each year, the need for new talent has never been greater. That’s why it’s critical for insurance companies to start dedicating both time and energy into attracting and retaining new talent to avoid this serious employment shortage. By investing in young professionals now, agencies will help close this talent gap and ensure the insurance business thrives in the future as Millennials take the helm.



Live Insurance News

By Stephen Vagus

March 7, 2014

Despite its volatility, Bitcoin continues to grow as an attractive currency for those in the digital world. As the digital currency gains more momentum, the need to provide it with some form of security is becoming greater, Bitcoin insurance is gaining popularity among firms that deal in the digital currency. 

Falcon Global Capital has launched a new insurance fund  to protect Bitcoin holders against the financial implications of the sudden disappearance of the digital currency. Several thousand consumers have fallen victim to this problem in recent months due to problems with Mt. Gox and Flexcoin, two prominent Bitcoin exchanges. Both exchanges were targeted by hackers who exploited their lackluster security protocols to steal millions. 

The fund is backed by Elliptic, a firm based in the United Kingdom that provides insurance coverage tailored to Bitcoin. Elliptic is reportedly backed by Lloyd’s of London, The coverage offered by Elliptic is meant to provide Bitcoin holders with a financial safety net that could mitigate the damage caused by theft and exploitation, as well as providing some stability to the digital currency.

NEWS OF THE DAY February 28, 2014

Author JackNordhaus , 2/28/2014

"Only those who risk going too far can possibly find out how far they can go."

T.S. Eliot


Live Insurance News

February 26, 2014

Extreme weather this winter has led to more than$1.4 billion.
With continual snow and below-average temperatures, the insurance industry is starting to feel the same winter blues that are being experienced by the cabin feverish residents of the icy and snowy regions of the country.
As much as snowplows and two truck drivers are frustrated, the losses by insurers are even greater.
According to the data that was issued by Impact Forecasting, the extra wave of severe winter weather that gusted its way across the nation in January led to more than$1.4 billion in insured losses. This hit was a direct result of the so-called "polar vortex" that blasted its freezing temperatures and seemingly never-ending snow and ice across the nation. Even cities that are farther south, such as Atlanta, were not immune to Jack Frost’s latest strike.
As the temperatures occasionally ease, the insurance industry is now seeing heavier snowfall than usual.
Although temperatures have been staying quite cold – lower than average – overall, the occasional milder day or two (relatively speaking) has been breaking the frigid trends on the mercury. However, instead of bringing weather relief and a chance to melt away the tremendous accumulation of snow that already exists, it has only opened up the door to even greater snowfall, leading to more need for exhausted snowplow and tow truck drivers, and further insurance claims from homeowners, motorists, and business owners.
Vehicle accidents – particularly those involving multiple cars and trucks e – have become commonplace in many areas that are experiencing treacherous highway conditions. Frozen pipes and falling trees have meant that property and building damage has skyrocketed.
The data taken into account by Impact Forecasting for its damage report is for a period that does not include the latest harsh winter blasts that made their way through many parts of the country last week, particularly in the areas of the Northeast and the Great Lakes.
With another possible full month of winter yet to come, the nation and the insurance industry are bracing for what's  to come. It's easy to believe that these were not the last storms of the season.


Insurance Journal

February 26, 2014

By Andrea Wells  

More than half of insurance companies responding to a recent survey say they plan to increase staff in 2014, although hiring for the most-in-demand positions may prove difficult.
That’s according to the latest Semi-Annual U.S. Insurance Labor Outlook Study conducted by The Jacobson Group and Ward Group. Ward Group Partner Jeff Rieder says that when analyzing the historical pattern of the survey’s results the predictions for both increasing and decreasing employment levels at insurance companies are at record highs and lows, respectively.
Nearly 62% of companies polled intend to increase staff in 2014 — the highest rate in the history of the survey. While only 4% of carriers responding to the survey expect to decrease staff over the next 12 months — the lowest rate in the history of the survey.
Since April 2011, 26,400 jobs have been added by insurance carriers, the study says.
“There are not many people looking for work in the insurance industry right now,” says Gregory P. Jacobson, co-chief executive officer of Jacobson. In Jacobson’s view, the industry is seeing a return to its pre-recession state, bringing increased confidence, optimistic staffing and robust revenue forecasts.
According to Jacobson, there;s a widening gap between the general economy and the insurance industry, which appears to be outperforming the economy when it comes to job growth. The Bureau of Labor Statistics has reported the unemployment rate for the insurance industry is at 2%, the lowest since March of 2007. The overall U.S. employment rate stands at 6.6%, according to the BLS.
The survey also revealed that projections for increasing insurance company staff in the next 12 months directly correlates to the industry’s expectations to also increase total revenue.
Some 61.9% of insurance carriers responding to the survey plan to increasing staff in the next 12 months, while 87.3% of those carriers also expect to increase revenue during that same time.
The anticipated job growth in insurance companies is good news for the industry overall, but filling open positions also is proving challenging. The study shows that many carriers are experiencing difficulty recruiting for open positions.
“The war for talent is getting very, very hot,” says Jacobson. “With the diminishing unemployment rate and the severe skills gap throughout the industry, companies are struggling to find experienced individuals to fill their open positions.”
Though product line has a significant impact on the ease of filling positions, companies responded that most roles are still moderately difficult to fill.
According to Rieder, the two areas hardest hit during the recession were claims related positions and human resource positions.
“Dating back to the 2008 time frame there was a lot of reduction-in-force, particularly around the claims operations,” Rieder says. “We also saw many of the human resource training departments depleted. What this caused is that for certain positions, particularly insurance training and experienced claims adjuster roles, there are fewer of those [job candidates] because they found jobs in other industries.”
That has led to tough recruiting challenges for those sectors, he says.

National vs. Regional Carriers

When it comes to revenue growth in the next 12 months, national Property/Casualty carriers appear to be more confident in gaining market share, the study found.
“The difference between the national and regional carrier findings was pretty stark,” Rieder says.
The survey showed that 85% of all P/C companies surveyed expect an increase in revenue growth with less than 3% expecting a decrease in revenue. However, 73% of national/multi-national companies expect market share to drive revenue changes compared to 49% of regional carriers.
One important study trend that caught the eye of Rieder and Jacobson this year is the more aggressive plans by national carriers to boost revenue and hiring in the next 12 months. .
“We saw that generally the national carriers were much more aggressive in both their hiring expectations as well as their anticipated growth,” Rieder says. “Many of the national carriers are anticipating much larger growth when compared to their regional peers.”
That’s important when considering compensation plans, he says.
“It’s important for those regional companies to have compensation plans that are competitive and attractive to retain staff,” he says. “We are finding that many quality staff are being plucked away by their national counterparts.”

Other Findings

67% of Commercial P/C companies are expecting to increase staff during the next 12 months.
Of the companies who plan to add staff during the next 12 months, 92% expect an increase in
        revenue with almost 68% responding that it will be due to a change in market share.
Technology, underwriting, sales/marketing and claims positions continue to be the most in demand.
Actuarial, analytics, executive and technology positions continue to be the most difficult to fill.
If the industry follows through on its plans, overall the carriers will see a 0.89% increase in industry
       employment during 2014, creating new jobs.



Insurance Journal

By Dhanya Skariachan and Jim Finkle 

February 26, 2014

Target Corp. shares made strong gains after it reassured investors that customers were beginning to return to its U.S. stores, suggesting that the impact of a massive data breach might not be as severe as some had feared.
The third-largest U.S. retailer said on Wednesday that customer traffic had started to improve this year after falling significantly at the end of the holidays when news of the cyber-attack and theft of payment card data spooked shoppers.
Chief Financial Officer John Mulligan said on a conference call he expected first-quarter sales at its established U.S. stores to be flat to down 2%; so far in February, they have been running within that range and nearly flat to last year.
Target shares, which had fallen 11% since news of the breach broke before Wednesday, were up 6.8% at $60.37, their highest level for almost six weeks.
It was the first time the Minneapolis-based chain had faced Wall Street since the breach, which led to the theft of about 40 million credit and debit card records and 70 million other records with information such as addresses and phone numbers of shoppers compromised.
Earlier on Wednesday, Target warned that costs tied to the cyber attack could hurt its results in the first quarter and beyond.
Still, its shares rose, as its full-year outlook was better than some investors had expected. Mulligan said on the call that the outlook did not include potential additional costs related to the data breach.
The retailer now sees 2014 buyback capacity at $1 billion to $2 billion as it sets aside money to cope with the breach and tries to stay away from borrowing more to preserve its credit rating. It had originally planned to buy back up to $4 billion of shares this year.
Target reported a 46% drop in net profit in the crucial holiday quarter and reported $61 million in costs related to the breach, much of which was covered by insurance. It did not provide an estimate on future expenses related to the cyber-attack, though it said they “may have a material adverse effect” on results of operations through the end of the current year and beyond.
“It‘s going to take some time for this to heal,” said Sean Naughton of Piper Jaffray, who estimates that transactions were down “in the high single digits” in the weeks after the breach was disclosed.
Target said it sees first-quarter profit of 60 cents to 75 cents, excluding expenses related to the data breach and other items. Analysts expect the company to report quarterly profit of 85 cents, according to Thomson Reuters I/B/E/S. For the full year, Target sees earnings of $3.85 to $4.15 a share on that basis, compared with the analyst forecast of $4.15 per share.
Naughton said that Target’s reputation for having a top-rate shopping experience had been tarnished by the fact that many customers have either had to have payment cards replaced or find themselves checking their monthly statements more closely, giving them a negative association with the retailer.
He noted that Target posted a 5.5% drop in transaction count during the quarter, the worst he had ever seen, even steeper than the 4.8% drop reported when the U>S>was in the midst of a financial crisis in the fourth quarter of 2008.
Sales fell 3.8% to $21.52 billion in the fourth quarter, missing the already lowered estimate of $22.37 billion, according to Thomson Reuters I/B/E/S. Sales at U.S. stores open at least a year, fell 2.5%.
The data breach “took the wind out of Target’s sails – and unfortunately sales,” said Sandy Skrovan, U.S. Research Director at Planet Retail.
Net earnings fell to $520 million, or 81 cents a share in the three months that ended on Feb 1, from $961 million, or $1.47 a share, a year earlier. Excluding its losses in Canada and a host of items, it earned $1.30 a share. That was at the high end of its lowered forecast from January.
The retailer had already lowered expectations for the fourth quarter. News of the breach has hurt its reputation and stock, and made many on Wall Street take down their profit and sales estimates on Target.

The Breach Effect

Target said of the $61 million in expenses related to the breach during the quarter, $44 million were offset by an insurance payment, bringing the impact to $17 million.
Mark Rasch, a former cyber crimes prosecutor who worked on some of the biggest U.S. payment card breach cases, said that it was too early to estimate how big the bill would be, but it would certainly be in the hundreds of millions of dollars and could top $1 billion. “We know it is going to be big. We just don’t know how big,” he said. [$1 BILLION PAYOUT]
Target has declined to discuss exactly what sorts of costs its cyber insurance will cover or identify its insurers.
Insurers offer cyber policies that cover costs for items such as investigating breaches and repairing networks, compensating credit card issuers for fraudulent activity, fighting lawsuits and responding to regulatory probes.
Target said breach-related expenses might include costs for reissuing cards, lawsuits, government probes and enforcement proceedings, legal expenses, investigative and consulting fees, and capital investments.


By Phil Gusman, 


February 27, 2014 

In the wake of the healthcare-reform law, cost shifting of non-work-related injuries to the Workers Compensation remains a potential issue, and potential stress on the healthcare system could lead to delays and drive up Workers comp costs says broker Marsh in a briefing. However, the law’s focus on improvements in standards of care could reduce the use of costly procedures that produce questionable results, and employers could see premium refunds if they maintain better-than-expected performance in their healthcare programs, Marsh says.
In its analysis, “Health Care Reform and Workers Compensation Programs,” Marsh says, “Employers have long been concerned that injuries from non-work-related causes will be shifted to Workers Compensation” due to higher reimbursement rates for medical providers and the lack of deductibles and co-payments for employees. While some speculated that the greater access to health insurance under the Affordable Care Act would reduce cost shifting to Workers Comp, Marsh says it has “become clear that the law will not result in all Americans having health-insurance coverage.”
One in ten large companies plan to cut back on hours for at least a portion of their workforce to avoid providing coverage for employees working 30 or more hours per week, Marsh points out, citing a Mercer survey;  other employers are using higher co-payment and deductibles to help offset cost increases. “It appears, therefore, that the financial incentive for employees to shift treatment toward workers’ compensation will continue under the ACA,” Marsh says.
Regarding access to care, Marsh notes that the law is designed to increase the number of individuals in the U.S. with health insurance, which “could put additional stress on a healthcare system that is already short on doctors.”
Marsh says this could particularly impact specialists, leading to delays in obtaining diagnostic tests and scheduling elective surgeries and other procedures. “Longer periods of disability and complications as a result of such delays would ultimately drive Workers Compensation costs up,” says Marsh.
Employers, therefore, must develop medical networks “that focus on quality of care and outcomes—even if it means paying more on a fee-for-service basis.”
Although the healthcare industry has traditionally focused on volume—more patient admissions, tests, and procedures to drive higher revenues—Marsh notes that post-reform, the industry has shifted focus to improving standards of care and achieving better patient outcomes.  Marsh says, “If this transition results in less emphasis on costly procedures, which often produce questionable results, Workers Compensation costs could be reduced.”
The law also “provides for insurers to rebate premiums to employers that have better-than-expected performance with their healthcare programs,” says Marsh, which employers can either pass on to workers or use to offset future premiums.
Marsh warns though, that the National Council on Compensation Insurance (NCCI) has already “indicated that if premium refunds are given to employees, this would be considered payroll under the workers’ compensation premium calculations.” As Workers Comp premiums are tied to payroll, costs could rise for employers that pass the refunds on to workers.


Live Insurance News

February 26, 2014

The celebrity feels that her bottom requires coverage worth $21 million.
The star of Keeping Up with the Kardashians has decided that her curves are worth protecting with an insurance policy, and has followed up by covering her derriere for $21 million. 
Kardashian is well known for her figure- hugging clothing which requires a fabulous fanny.
Apparently, it wasn’t Kim,herself who made the decision to buy insurance;. Instead, it was her fiancé, Kanye West, who though that her posterior was so important that it needed its very own protection. According to an insider quoted in a U.K. magazine publication Grazia, the star’s bottom has always been a matter of discussion and hype. For this reason, Kanye recommended that she take out the policy to make sure that its value is protected.
Between the two celebrities, this isn’t the only body part that will have its own insurance policy.
It has also been rumored that West has started the initial steps to purchase protection that will cover his voice. It looks as though the couple, who are going to be married later in 2014, feel that their bodies are worth quite a bit of money. The British magazine’s source stated that the coverage for West’s voice is a more challenging process than insuring Kardashian’s rear end.
The insurance process has been slow for West’s voice because he feels that his voice is worth more than any of the valuations that have been obtained,s o far. When Kardashian’s buttocks were insured, a number of factors were taken into consideration, including how much of her work is actually based on this part of her body, and the impact on her work if she should experience damage in that area.
These are far from the only celebrities who have purchased insurance for their body parts. As reported on Live Insurance News, Jennifer Lopez has insured her backside,for $300 million. Bruce Springsteen had covered his voice in the 1980s for $5.7 million (which would would be far more in today’s dollars).


Author JackNordhaus , 2/21/2014

“Not everything that counts can be counted, and not everything that can be counted counts."
Albert Einstein



Insurance Journal

By Alexandria Baca

 February 21, 2014

Allstate Corp., the largest publicly traded U.S. Home and Auto insurer, increased its agency count for the first time since 2007 as the company targeted growth beyond the U.S. East Coast to diversify risk.
The insurer had 11,600 Allstate-exclusive agencies and financial representatives in the U.S. and Canada as of Dec. 31, an increase of 400 from a year earlier. Locations served by exclusive agencies increased to 9,300 from 9,000, according to a filing with the Securities and Exchange Commission yesterday. 
Chief Executive Officer Tom Wilson has turned his focus to expansion after spending years reducing sales to homeowners in states such as New York and Florida. Allstate had as many as 15,000 exclusive agencies and financial representatives in 2007.
“They see opportunities now where there’s really parts of the map, or areas within certain regions, where they feel like that’s a good underwriting environment,” Mark Dwelle, an analyst at RBC Capital Markets, said in a telephone interview before the annual filing.
Allstate plans to add 120 agency owners in Texas this year, including about 36 in the Houston region, where the company also intends to recruit about 240 people to its licensed sales staff, the insurer said in a Feb. 18 statement. The insurer has also targeted growth in Utah and Nevada. Building business in such states may allow the company to increase sales in coastal regions where growth was constrained amid concern that risk was too concentrated, the company has said.
Allstate had 6.08 million homeowner policies in force at its namesake brand as of Dec. 31, the same figure as three months earlier. It was the first time the company avoided a quarter-over-quarter decrease since at least 2010.

‘Selling Everything’

Wilson sees agency locations as a way to build relationships with customers who need multiple insurance products and prefer face-to-face interaction. For years, Allstate lost market share in the Auto market to Progressive Corp. and Berkshire Hathaway Inc.’s Geico unit, which focus on sales through the Internet.
“We’re more interested in selling everything we can sell to you,” the CEO said Feb. 6 in a conference call with analysts. “So, if you thought of us as a retail store, we don’t just want to sell shirts, we want to sell shirts, pants, shoes, socks, whatever you need.”
The insurer has been highlighting coverage for renters and commercial clients. Wilson bought Esurance in 2011 to target customers who prefer to shop online.
Allstate gained 15% in the past year through yesterday, compared with the 26% rally of the 21-company Standard & Poor’s 500 Insurance Index. The insurer jumped 3.2% yesterday after announcing late Feb. 19 that it authorized the repurchase of as much as $2.5 billion in shares, the company’s biggest buyback plan since 2006.



Live Insurance News

 by Julie Campbell

February 18, 2014

Following the latest tremendous data breach – the one that struck Target, giving hackers access to debit and credit card account information from about 40 million people – a growing range of types of organizations are looking into Cyber Liability insurance to protect them
Ann Arbor Public Schools is the latest to join this flood of non-retail groups that are covering themselves.
While Target fights to recover from the breach and is now paying for free credit monitoring for all the affected customers, other organizations are looking into the difference that Cyber Liability Insurance could make in case they should experience a data breach 
Cyber liability insurance was once rare but is now becoming a standard part of doing business.
The Ann Arbor Public School (APPS) district has decided that this coverage is especially important as it transitions its human resources department onto a web based platform. Officials from the district felt concern that this could increase some security vulnerabilities regarding the student, parent, and employee personal information when it comes to cyber attacks and theft.
The policy that the APPS purchased provides coverage for up to $1 million for annual premium of $21,407.
Thousands of organizations are reading about data breaches companies that had previously been considered  highly secure. The  Financial Times reported that in the past year, there has been a notable jump in the number of companies an d organizations buying Cyber Liability coverage. 
Organizations of all sizes are vulnerable to data breaches and a Cyber liability policy can ensure that the massive expenses from this type of occurrence will be manageable.


INN Breaking News

 February 21, 2014

Allstate, Chubb Group of Insurance Companies, The Hartford and Travelers reported an aggregate combined ratio of 79% for full-year 2013, according to Fitch Ratings' latest report.
Operating fundamentals in the Homeowners market have improved over the last three years and in 2013, the sector will generate its first statutory underwriting profit since 2007, according to a recent report from Fitch Ratings.
In its report, “Homeowners' Insurance Underwriting Trends - Benign Catastrophe Losses and Higher Prices Boost Results” examined GAAP Homeowners results from 2011-2013 for The Allstate Corp., Chubb Group of Insurance Companies, The Hartford Financial Services Group Inc. and The Travelers Companies Inc.
These four large, publicly traded Homeowners insurers, which Fitch said serve as a leading indicator of industry wide results for 2013 that are not yet available, reported an aggregate HO combined ratio of 79.6% for full year 2013, substantially improved from 92.7% in 2012.
None of them reported an underwriting profit in 2011, but Chubb reported essentially break-even results for the year. In 2012, despite losses from Superstorm Sandy, all four reported underwriting profits.
In 2013, the group reported their strongest underwriting performance of the three-year period. Fitch attributes the favorable results to favorable pricing, stricter underwriting, and a sharp decline in natural catastrophe losses, which represented 12.2% of earned premiums in 2013 versus 22.8% in 2012.
The group aggregate combined ratio, excluding catastrophe losses, was 67.4% in 2013, nearly 10 points better than the 2011 result, reflecting rising premium rates and stricter underwriting standards. Fitch expects homeowners' insurance prices to flatten, but still trend positively in 2014, promoting further ex-cat underwriting improvement.



Insurance Journal

by Andrew G. Simpson 

 February 21, 2014

The Property/Casualty insurance industry is likely to face cost shifting by hospitals, physicians, and other medical providers due to the Patient Protection and Affordable Care Act (ACA), according to an insurance industry white paper.
In addition, P/Cc insurers might see an overall increase in claims and in some types of fraud, predicts “Affordable Care Act and Property/Casualty Insurance,” a study by the Insurance Research Council (IRC) 
However, the industry could also benefit from there being fewer uninsured Americans, which could result in lower medical damages in liability claims and reductions in fraudulent Workers Comp and Auto claims, 
The white paper suggests several ways that the ACA could impact the industry, but makes no specific estimates of potential cost implications, 
The shifting of costs and claims to Property/Casualty could have the most impact. The claims hike could come if individuals look to the first-dollar coverage provided by P/C insurance as an alternative to the higher deductibles and other cost-sharing requirements of many Health insurance plans
The report also says that there could be an increase in fraud, due to the diversion of career criminals to the P/C business.
On the other hand, the ACA could reduce fraud due to fewer uninsureds and a decrease in future medical damages. The fraud reduction is likely to have a minor impact and the medical damages, an uncertain impact, according to IRC.
The report also identifies a healthier population and more appropriate utilization of medical services as possibly affecting the P/C industry, but ventures no estimate of their cost impacts.

Cost Shifting

The industry analysis says cost shifting will occur in response to “increased cost containment efforts by public and private health insurers” and will show up in higher charges and a higher volume of billed services. It will be “particularly severe” in states with the greatest differences between public and private Health insurance reimbursement levels and those of P/C policies.
edical providers will be tempted to shift costs to replace lost revenues from Health insurance providers, according to the IRC, which says this is already happening in the Private Passenger Auto marketM. A 2010 IRC report estimated that hospital cost shifting for auto liability claims resulted in $1.2 billion in excess charges in 2007. The total of cost-shifting in all property/casualty claims with medical expense is likely much higher, says this latest white paper.
The IRC recommends that P/C insurers consider ways such as market-based fee schedules and bill review to ensure that the prices they pay are consistent with those by public and private Health insurers. They should also make sure that only medically necessary treatment is provided to P/C claimants by employing tools such as utilization review authority and evidence-based treatment guidelines.
The IRC also addresses whether more people without Health insurance will file fraudulent Workers Comp or Automobile claims to secure medical treatment, as the healthcare law goes into effect. According to the paper, there is “substantial evidence that fraudulent claims of this nature are fairly common.” In a 2008 study, the IRC found suspicion of fraud in approximately one in 10 first-party No-Fault Auto claims. In 29% of these claims, the claimed injury was unrelated to the accident reported in the claim.
By reducing the number of the uninsured, the ACA could potentially reduce the number of fraudulent claims previously submitted under these circumstances. However, the IRC said it could not estimate the magnitude of this effect.
If the ACA reduces the uninsured population significantly, P/C claims frequency could benefit, as well. A RAND Institute for Civil Justice study in 2012 on the impact of Health insurance reforms in Massachusetts similar to ACA found a 40% decrease in the number of uninsureds visiting emergency rooms, which translated into a 5% to 7% reduction in Workers Comp emergency room bill volume.
Finally, the white paper finds that the ACA might reduce future medical costs in third-party liability claims.
“With this analysis, we hope to highlight the fact that Property/Casualty insurers are in a changed environment, where the medical providers with whom they engage and the claimants they serve are themselves confronted by major changes as a result of the ACA,” said David Corum, IRC vice president. “By exploring how providers and potential claimants are affected by the ACA, we can begin to anticipate how the act will ultimately affect the property/casualty industry.”
The white paper is available as a free download from the IRC website at

The Casualty Actuarial Society addressed the impact of the healthcare law on the Property/Casualty industry in a March, 2013 seminar. The actuaries noted that some of the biggest changes in the law have not gone into effect, including the individual mandate, but that the P/C industry will be affected.

The changes could significantly affect Property/Casualty insurance, Anne M. Petrides, a director and consulting actuary with Towers Watson, said during the CAS seminar, although what impact the reforms will have on liability and costs is difficult to know at this stage.
The changes could either increase or decrease liability and costs in Medical Malpractice and Workers Compensation, but the impact will differ by state as both lines are sensitive to state laws and regulations, Petrides said.
An increase in the number of people who have Health insurance could reduce Medical Malpractice liabilities if new insureds get care earlier. Early treatment could lead to better medical outcomes and help prevent the adverse outcomes that can trigger malpractice lawsuits,.
However, the increase in the insured population could raise liabilities, as more patients per unit exposure would imply more potential risk.
Other lines could be affected, too. If reform triggers a wave of mergers and acquisitions, Directors and Officers (D&O) coverage could be at risk, according to actuaries.