FLORIDA SPECIAL REPORT 2021 - Rough Notes
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A supplement to the June 2021 issue of Rough Notes magazine
FLORIDA
SPECIAL
REPORT
2021
992
A BETTER
YOU
Personal growth is arguably the biggest needle mover for any career and organization
By Brett Young
In
put in on improving yourself with your kids, your friends,
and your family are the most transferable skills to being a
an industry occupied by technical knowledge, policy successful insurance professional.
language expertise, fancy acronyms, and E&O The Florida insurance marketplace changes every day.
paranoia, have we lost touch with the engine of progress? It is as volatile as any market anywhere in the world. What
Do we pride ourselves and our staff on letters after our was true yesterday is not true today, and what is true today
names rather than books on our end table? Or what tech will not be true tomorrow. This change is constant in our
stack we use for maximum productivity rather than how world and we are required to keep up with these shifts in
we plan our day? Do we boast of how many hours we work order to be a true insurance professional these days.
rather than what our morning routines look like? Or what Yes, a lot of this includes professional improvement
our continuing education schedule consists of rather than and we lean on many resources to stay up to date with our
what our personal development plans include? professional education. Halcyon and its team, for example,
The art of mastering the self has no place in a world are one of the top resources that we leverage to keep a
that is focused on the science of mastering insurance, right? pulse on the marketplace. They are more than a partner
Oh, what a shame it would be to land in the best industry to help us place business, and they are an advisor for our
on the planet and be forever distracted from the only thing many questions: What has changed in the marketplace?
that moves our personal progress forward: becoming a What are they consistently seeing with underwriting
better version of ourselves. tolerances and exceptions? What are some of the things
The gift of personal development is not only the greatest that we should be aware of while marketing in the field?
gift we can give to ourselves, but it is the biggest asset we I’ll be the first to say that having such resources readily
have—and can provide to our clients. Whether you are available is essential to competing in this ever-changing
working to resolve a claim, navigate an underwriting issue, market.
secure a renewal, or bind a new piece of business, you are Nevertheless, what kills more careers is not what is
the product. You, in its entirety. No, not just your insurance required, but rather what is not.
acumen or your experience in the business. You; your Over the last decade of observing, teaching, and mentor-
energy, your communication, your problem-solving, your ing insurance professionals from different backgrounds,
creativity, your patience, your ability to connect with people, walks of life, and positions within the agency, I found that
your ability to listen to people, and (perhaps of increasing the single greatest predictor of success comes down to one
importance) your ability to influence people. key thing: the consistent practice and study of personal
The list of personal skills and qualities far outweighs development.
any professional inventory. Furthermore, and more import- The individuals who rise among the ranks, close the
ant, the education you subscribe to and the work that you biggest accounts, and serve customers at the highest level,
3
The gift of personal development
are deeply rooted in personal growth
activities. In fact, I’d contend that they
work much harder on becoming a better
human being than they do on becoming
a better insurance professional. How
can that be? In short, they understand
that to earn more, they must become
is not only the greatest gift we can
more. They are less concerned with
the “how’s” and much more focused
give to ourselves, but it is the biggest asset
on the “how to approach the how’s.”
Another way to articulate this would we have—and can provide to our clients.
be, “how to think rather than how to
do.” They have grown to understand the call that week. This teaches import- and with it might come an outdated
that the principles that guide personal ant skills that are transferable to knowledge of “how to do things.”
progressi n any craft are universal becoming a more well-rounded profes- One agent’s “problem” is another
and not industry specific. Although sional: public speaking, organization, agent’s opportunity. Simply by a shift
the problems we face in this turbulent preparation, getting comfortable with in thinking, we can become problem-
Florida market will change, the process being uncomfortable, the art of edifica- solvers instead of problem-prisoners.
of finding solutions does not. tion, and bringing energy to the group. Widespread cuts in Florida home-
The weekly leader (who rotates owners insurance commission rates
The “personal development book” every call) will lead us in a discussion of will not be the end of an industry. But,
Now, whether you are an employee the chapter, what they liked, and what it can be an opportunity—for those
of a larger firm, work on a small team, they did not. Questions are posed and who are positioned—to take market
or are an agency principal, there are illustrated, vibrant discussion and occa- share. You can’t possibly teach or learn
many ways you can systematically sional debate take place, and we even all these “how to’s” for every scenario
encourage and practice personal develop- address applicability to our daily work- that may come up, but you can teach
ment within your organization. One place. For example, “How does this the universal laws for “how to think.”
powerful way to do this is to start a vol- concept in the chapter apply to our Make no mistake, other unknown
untary, discussion-based personal activity as insurance professionals?” challenges will emerge for the future
development book phone call. I’m proud Oftentimes, these conversations continue Florida independent insurance agent.
to say we’ve run a conference call such as throughout the week and into the break Yet, the more problems that arise and the
this for 15 years; I’ve seen first-hand the room, on our way to lunch, and away more challenges we face, what I am
power of this simple, consistent discipline. from the office. reminded of—and even more convicted
Over and over again, we’ve witnessed Although there are many ways to of today than ever before— is that the
new team members come into our organ- encourage personal growth outside of true power is in personal development.
ization (some who have never opened a work, it’s been an invaluable reminder Those who are deeply rooted in this
personal development book before) and that growth is the biggest needle mover practice will rise to the surface as
slowly become a completely different for any career and organization—let industry leaders, key problem solvers,
person through this cultural exposure. alone, insurance. It’s proven to have and future thinkers of tomorrow. n
The act of consistently reading opened such an enormous impact that I often
up a whole new world of possibility for ask myself the same question: What
them. With time, closing ratios would our organization look like if
improved, record-breaking production every person read 10 pages of a good
months became the norm, and deliver- book every day for the next five years?
ing extraordinary customer experiences I am convinced there is no greater
became fluid and standard. progress leverage point within any
Whether weekly or bi-weekly, we jump organization than this.
on a 30-minute call to discuss the latest Yes, things are changing rapidly
chapter of the book we read together as a in our industry: processes, insurance
team. The call is not presentational, carriers, technology, underwriting,
but instead discussion-based. One team distribution, consumer behavior, and
member runs a “check-in,” if you will, legislation. All this means is a
to introduce and edify the person leading different tomorrow for us as agents,
The author
[T]here are many ways you
Brett Young is CEO of Erb and Young,
a local Florida-based independent
insurance agency that focuses on
personal development as the primary
driver to innovation and creating
can systematically encourage and extraordinary customer experiences.
Brett started his professional career
practice personal development within your
in late 2006. He was introduced to the
insurance industry through a direct
sales company while finishing up a
organization. One powerful way to do this is to bachelor’s degree at the University
of Central Florida. Moving into the
property and casualty space in late
start a voluntary, discussion-based personal 2009, Brett and two other business
partners opened Erb and Young in
development book phone call. early 2011.
4
5
THE STATE OF PERSONAL LINES
IN FLORIDA: THE TRUE COST OF
A FREE ROOF
Skyrocketing premiums and dwindling coverage
send market into state of disarray
By Allyson Olver
F
owner to adjust the claim. In many cases the first notice
of loss is coming from an attorney’s office, rather than
lorida’s personal lines market is experiencing sky- the claim being filed and reviewed under the appropriate
rocketing premiums and dwindling coverage for channels. The result? Homeowners are getting a new roof.
customers. It has been described as a complete state of How could this be bad news? Central Florida homeowners
disarray. There is cause to sound the alarms. Without were paying an average of $1,000 in annual premiums to
some major changes to policy, the market may be heading cover a $350,000 home. If you factor a guarantee for the
towards collapse. insurer to replace the roof within the next 10 years, that
We have seen a rapid increase in frivolous and math is not feasible.
fraudulent claims since 2015, and the effects of those are Our insurers are also facing rising expenses due to
destabilizing the market. The roofing companies move door- water losses. Water damage remains the leading cause
to-door in neighborhoods. They offer to inspect the roof and of loss, and payouts have increased in both severity and
determine what damage is present, while telling the home- frequency. In addition to the overall cost of the claims
owner that they can get them a brand-new roof for just the surging, if the claim goes to court there is a fee multiplier
cost of their deductible. The contractors and attorneys know and attorneys can make double their fees as it is not tied to
exactly what damage will be covered and how to submit billable hours. We have often seen attorneys receiving more
the claim. To the unsuspecting homeowner, this seems of a payout than the actual homeowner is given to recoup
reasonable and convenient when they are told the company their losses.
will file on their behalf and they unknowingly sign over the All the promises for a “free” new roof and a complete
rights of their policy to the contractor. restoration sound great to homeowners on the surface, but
In a recent report, we learned that Florida accounts one thing that is not disclosed is that they will be paying for
for 8% of property insurance claims nationwide but a it in the long run. And that is exactly what we are seeing
staggering 76% of all property insurance lawsuits in the with the market in response to these large claims that are
entire nation. Typically, upon first notice of loss, the insurer not always in response to legitimate damage. The claims
would have the opportunity to review and contact the home- will be costly to consumers in more ways than one.
6
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7
[F]lorida accounts for 8% of
The down side
Clients are feeling the effects
of this surge in claims with fewer
choices of coverage. The combination
of fraudulent claims and high rate of
litigation have made it unsustainable
for insurance providers. We have property insurance claims nationwide
lost a number of markets in the
past 24 months due to insolvency or but a staggering 76% of all property insurance
acquisition by other companies. We
have seen an influx of non-renewals
from insurers forced to reduce their
lawsuits in the entire nation.
exposure to stay in business. As
hurricane season approaches, without
any sort of reform or legislation, there Many times, limited coverage is paired the issue, being an advocate for our
may be additional companies unable with an increase in premium, so clients clients, and partnering to meet their
to weather this storm. Fewer options just pay more for less. needs the best way possible is part
and availability to customers will lead The current crisis in the market of the mission of serving our
to a crisis in the market. In 2019, if a does have a glimmer of hope, with customers well. n
customer shopped for home insurance, two pieces of legislation circulating
they may have had up to 15 companies which could help burst inflated costs
to choose from, but now some are lucky of claims and ensure that customers
to have two or three. are taken care of. The legislation has
Carriers have implemented fallen flat in the past; nothing has been
stringent underwriting guidelines able to get pushed through for review.
and the practice of re-underwriting However, with so many companies on
existing policies to remain viable. This the brink, there is finally some light
has led to thousands of non-renewals being shed on the issue. Companies
issued to Florida property owners, have become very vocal about the
and with fewer companies available it matter, urging the entire industry, as
leaves consumers without affordable well as consumers, to speak up about
options for the comprehensive coverage the issue so that legislators will take
they need. The loss of coverage in some this seriously. The legislation is being
cases means if a client has a legitimate discussed right now, so we have been
claim, they will now get a fraction paid working hard to get the message out
out to cover losses, whereas before to consumers that if they don’t like the The author
they may have had replacement on 50% to 80% increases that they are Allyson Olver has worked in the
the policy. There is a growing stigma seeing on their premiums, or the loss of independent agent channel since the
following these types of claims, and coverage on their policies, the time has beginning of her insurance career
many customers with valid claims and come for them to take action. in 2001. She served as COO at the
suffering actual loss are having it held As the legislation is being reviewed, AssuredPartners Personal Lines
against them or being turned away we at AssuredPartners are compelled Agency in Lake Mary—formerly known
completely. to be strong advocates for customers, as Florida Insurance Specialists—
Clients are realizing the price and ensuring that they have the cover- for 14 years prior to being named
for these new roofs directly from age they need is part of that advocacy. national personal lines practice
their wallets as the premiums have We want to take care of customers, leader. Throughout her tenure
increased exponentially. Premiums but options are limited, and prices are representing personal insurance,
for Florida policyholders have risen climbing in the current market. Allyson has held key leadership roles
anywhere from 50% to 80%, and The bottom line: Customers need in production management, new
customers could see that number go to know the true cost of a free new business development and marketing
up. An increase in the price does not roof and how they are paying for it strategies, including direct-to-consumer
translate to the same quality coverage. in other ways. Raising awareness on marketing.
More than At FCCI, we’ve been working with businesses for more
an account. than 60 years. Our financial strength, expertise and claim
handling help businesses thrive, manage risks and face
A relationship. the future with confidence.
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9
WHY REINSURANCE AND
INNOVATION ARE THE ROOTS OF
POLICYHOLDER PROTECTION
Pressure points
continue to
challenge carrier
resiliency
By David Howard, Kate Friday and
Kyle Menendez
T
reinsurance market (statistics provided by TigerRisk, a risk,
capital and strategic advisor to the global insurance and
homas Carlyle, the 19th century Scottish historian reinsurance industries):
and essayist, is famous for declaring “no pressure, • In 2017, the United States witnessed multiple
no diamonds,” meaning we rarely experience great success landfalling hurricanes, including Hurricane Harvey and
without a little bit of despair. As we collectively think about Hurricane Irma, as well as record wildfire destruction.
the sources of discomfort that the property insurance/rein- The total natural catastrophe bill for catastrophe
surance industry has felt over the past five years, we have insured losses in the United States topped $100 billion,
experienced a series of pressure points that have challenged which likely makes 2017 the most devastating year on
carrier resiliency and forced many to adapt to changing record.
social, economic and atmospheric conditions. • Hurricane landfall activity continued in 2018 with
As continuously seen in history, it is those who innovate Hurricane Florence impacting the Southeast and the
and evolve that go on to become pillars of strength in their Mid-Atlantic. Furthermore, adverse development or
respective industries. claims inflation related to litigation and assignment
of benefits stemming from Hurricane Irma led to
Natural catastrophe challenges insurance carriers increasing their loss estimates by
The past five years have brought forth a series of more than $10 billion. This adverse development in itself
immense challenges within the property insurance/ is comparable to the insured losses related to the most
10• This year, an unprecedented winter value offered to end consumers, our
storm in Texas caused many to insureds. Carriers want to be viewed
estimate around $10 billion or as a sustainable, multi-state insurance
more insured losses. This came as source for insureds. Thus, providers
a result of the catastrophe events continually search for ways to refine
that took place in the month underwriting and risk management
of February alone. TigerRisk craft with a laser-focus on delivering
estimates that insured loss from value and innovation through
the same storm was $8 billion to product offerings. With this, it’s
$13 billion. critical for carriers to recognize that
The series of natural catastrophe property owners have myriad choices
challenges, coupled with uncertainty in regarding coverage options, and as the
the financial markets, which put strain reinsurance community has provided
on many insurance and reinsurance for carriers, carriers must look to
carriers’ invested assets, have caused provide to insureds.
numerous providers to reevaluate
their own views of risk and, in the face Reinsurance as the ultimate
of increasing costs, begin to wonder protection
if innovation is once again the tool to So, what comes next in the 2021
lean on. insurance marketplace?
[T]he evolution of reinsurance
has played a pivotal role in positioning
primary insurance as paramount to the homeowners
insurance market’s continued viability and success.
The evolving reinsurance Carriers throughout the Southeast
landscape have begun to reevaluate their entire
Luckily, the historians among us portfolios and, ultimately, their risk
don’t have too far to look for good appetite on a home-by-home basis.
So, what does this mean in action?
news. The reinsurance industry has
The process varies by carrier but
proved resilient in the face of pressure
includes a keen focus on research and
in the past. For example, in 1992,
development initiatives, some of which
Hurricane Andrew made landfall in
include the development of what is
Florida as a Category 5 hurricane.
coined as the Ideal Risk Profile. The
After devastating Southern Florida, goal of creating an Ideal Risk Profile
it proceeded to churn across the is to harden, mitigate, or reduce a
Gulf of Mexico and make landfall portfolio of insured homes against loss
again in Louisiana as a Category 3 from the ever-increasing catastrophic
hurricane. In its wake, the industry weather trends of the last five years.
found itself questioning whether Understanding the ultimate return
the tools and resources in place on investment is to reduce total costs
were sufficient enough to face a new incurred, including inspections to
and evolving view of catastrophic reinsurance, legal defense and more,
recent winter storm that left much weather risk. Thus, a year later in to insure a home and pay out claims. If
of Texas and surrounding states 1993, came RenaissanceRe, which this activity is done right, the results
without electricity and water. introduced improved analytics and will enable carriers to identify what its
• Compared to just above 50 recorded probabilistic catastrophe models. Today, ideal risk homes look like, and in turn
events the previous year, 2019 RenaissanceRe is one of the largest begin prospecting.
saw a new record of more than 60 property catastrophe reinsurers in As mentioned, innovation is and
natural catastrophe events declared the world. will continue to play a key role in
in the United States. This activity Despite the challenges of 2020, how carriers survive and adapt to
continued to add to the pressure capital that has flowed into the the volatile weather cycles affecting
the primary insurance market reinsurance industry is meaningful; the property insurance marketplace.
felt following the severe, natural and similar to what RenaissanceRe However, reinsurance is just as critical.
catastrophes of 2017 and 2018. was able to achieve and consistent In sum, reinsurance is the ultimate
• The number of natural catastrophes with Carlyle’s principle of “no pressure, protection for a carrier and its policy-
recorded in the United States set no diamonds,” the reinsurance space holder surplus. It’s also one of a carrier’s
yet another record in 2020, with continuously evolves. most significant expense components.
more than 70 events being recorded, Innovators are adapting their Consequently, reinsurance comes at a
including nine landfalling hurricanes views of risk and, more important, hefty price in the Southeast. To get a
or tropical storms in the Southeast. their product offerings to increase the sense of what this looks like, consider
11that about $0.30 of every premium co-participation, their minimum
dollar taken in is used to cover deductible, is trending in the form of
reinsurance costs. Simply put, carriers higher deductibles in wind and all
cannot exist without it. other perils. To mitigate billions in roof
losses, carriers are making changes
Carrier and reinsurer in roof coverage from replacement
co-participation cost to actual cash value based on roof
As expected, innovation is also materials.
occurring in the reinsurance structures In essence, the homeowners policy
that carriers place on an annual is going back to its roots of protecting
As continuously seen in history, it
is those who innovate and evolve which equates to added security.
This concept reigns true through
that go on to become pillars of strength added coverages, discounts and
endorsements.
in their respective industries. Innovation as essential
Since 1993, the evolution of
basis. As an example, a carrier’s the insured against catastrophic and reinsurance has played a pivotal role
annual reinsurance placement is now devastating loss from fire, damaging in positioning primary insurance
filled with traditional reinsurance, wind and hail, instead of acting as as paramount to the homeowners
collateralized reinsurance, insurance- a home warranty or maintenance insurance market’s continued
linked securities, catastrophic product. However, in this same regard, viability and success. Future forward,
reinsurance bonds, parametric in order to serve as a home protection if property reinsurance/insurance
insurance and other non-traditional policy, many carriers will need to be carriers want to continue to provide
forms of protection. more selective in insuring homes that homeowners with a quality and
Another form of innovation fit their Ideal Risk Profile. An ideal financially secure product, innovation
happening in a unique way is risk, or home, tends to model better will be essential. n
co-participations. To help reduce a from a reinsurance perspective, and
carrier’s overall reinsurance spend, thus has a lower cost, due to its risk
the strategy of co-participation attributes, which in turn has a lower
with reinsurers on certain layers projected annual average loss.
of their reinsurance program is
gaining interest. However, if an Added protection for
event reaches a loss layer that the policyholders
carrier and reinsurer co-participate Howard Friday Menendez
To encourage the quoting and
in, co-participation increases the binding of ideal risks, carriers are The authors
overall out-of-pocket dollar costs of rejigging their underwriting guidelines David Howard, president of Lighthouse
claims for the carrier. Thus, in effect, and promoting these changes to Property Insurance Corporation,
co-participation increases a carrier’s the agency force. Coupled with the has more than 30 years of executive
net retention on a catastrophic event if promotion of these risks, carriers are leadership experience. Previously,
the losses reach a certain level. hoping to provide substantial credits or Howard served in roles as CEO,
On the homeowners policy front, discounted rates to insureds for homes COO, EVP and president at AmRISC,
for many years we saw only minor that are protected against severe Edison Insurance Group and
changes to the traditional ISO weather. Credits for newer homes, Bankers Insurance Group/Insurance
homeowners policy form that most newer roofs, composition of roofs, Management Solutions Group.
carriers issue on paper. However, hurricane mitigation devices, distance Kate Friday, Partner at TigerRisk
current weather trends and other loss from water and water loss protection Partners, joined the firm in 2010
factors became the impetus for carriers devices, like water sensors and water as part of the analytics team and
to reassess coverages, territorial shut-off valves, are among the most transitioned to the broking team in
restrictions and deductible changes. prevalent credits available. 2015. She has extensive experience in
Additionally, recent catastrophic For primary carriers operating using catastrophe models, analyzing
weather events have led to innovation in regions with a high propensity for structure options and assisting clients
in policy design and coverage, which weather events like tornados, hail and in evaluating and selecting the optimal
is an absolute must for carriers in the hurricanes, reinsurers are the lifeline strategy.
Southeast to continue to write. required to provide the necessary Kyle Menendez, CPCU, ARe, AAI, an
protection that carriers sell to associate at TigerRisk Partners, joined
The homeowners policy goes back homeowners. Thus, reinsurance serves the firm in 2017 on the current client
to its roots as a key financial stability factor for team. He began his career in a market
As carriers look to co-participate independent agencies to watch. To strategy and product development role
or retain more loss, they also write new business and retain current at Chesapeake Employers’ Insurance
look for insureds to participate in customers, understanding how carriers Company, a regional casualty insur-
protecting, for the most part, their and reinsurers co-exist in the space ance carrier located in Maryland,
largest asset, the home. An insured’s allows agents to sell added protection, in 2011.
1213
PRIVATE FLOOD POLICY OPTION
SOMETIMES A CHEAPER CHOICE
With so many new alternatives, agents can focus on coverage instead of price
By Dwayne LeBlanc
T
consumer prefers choice; however, not every consumer
understands insurance, much less the latest flood options
he axiom from customers when it comes to flood that are available.
insurance often revolves around two, unfortunately As professionals, we need to understand the consumer’s
common phrases. flood risk, the related laws that impact the consumer, flood
The first: “I thought my homeowners insurance covered insurance coverage forms and the flood insurance markets
that.” And the second: “We didn’t have flood insurance that are available to our clients. Sell your customers on the
because we thought we didn’t need it where we lived.” But benefits they deserve, educate them on their flood risk and
with larger, damaging storms becoming more and more help them purchase a flood policy they understand—and
commonplace, it’s not uncommon now to hear, “When I one that meets their specific needs.
bought flood insurance, I didn’t realize there was so much
that was not covered.”
As a response to such client needs, offering private flood Emerging markets
insurance choices can alleviate many heartaches down the For decades, the National Flood Insurance Program
line. Additionally, they also resolve looming concerns about (NFIP) was the only provider of flood insurance to property
errors and omissions. owners. The standard policy offered by the NFIP—unlike
Do you write private flood? If so, what is your duty to most property insurance policies—was not intended to
your clients? Your role as an agent should be to help your return insureds to pre-loss conditions, but to “assist” them
clients make the best choice for their individual risk. Every in repairing their home and getting back on their feet. With
14As professionals, we need to
cooperation and coordination between
FEMA and the private insurance
industry with the intent of providing
consumers with real choices.
Closer to home, 35% of Florida’s
understand the consumer’s flood risk, the 8.9 million homes are at risk of at least
minor flooding right now and 10% of
those—or 900,000 homes—are at risk
related laws that impact the consumer, … of severe or extreme flooding. Yet,
across Florida’s 38 coastal counties,
and the flood insurance markets that are only 42% of these homes are covered.
Meanwhile, Florida’s overall flood
available to our clients. insurance rate for hazard-zone homes
is 41%.
that goal in mind, NFIP coverage that • Single deductible of $2,000 The more you know about the
can be purchased on a residential • Annual premium: $525 ever-increasing risk of flood, the better
building is capped at $250,000, with As illustrated, the private option equipped that you will be able to sell
$100,000 of residential contents offered better coverage at a smaller the proper coverage. With statistics
coverage available as an add-on. premium. Surprisingly, this tends to like that, there should be no question
However, in recent years, we have often be the case. If that’s not enough that you should offer every property
seen flood insurance from private to convince a client, my policy dictated owner the opportunity to at least
insurers emerge, primarily in the that, to be compliant with mandatory explore a private alternative. Providing
excess and surplus lines markets, purchase requirements: “If the your clients with options that can
offering more choices in flood coverage National Flood Insurance Program for meet their flood insurance needs is a
and amounts available. Private flood insurance to dwellings provides no-brainer. And with so much on the
insurers now offer everything from broader coverage than that provided line, your clients deserve the chance to
coverage that mirrors—sometimes under this insurance, that broader make an informed choice.
for a lower premium—the NFIP cover will automatically apply to this Are you currently offering flood
policy, up to a special form (HO3) for policy without additional premium insurance to your clients? And if so, are
only the peril of flood with similar or charge.”
higher limits available. The special you selling based on coverage or price?
As they say, a picture is worth The way you address these questions
form flood policy was designed with a thousand words. If you or a client
expanded coverage to put insureds could have a tremendous impact
were impacted by one of the recent on your client, your agency and the
back where they were prior to the loss. hurricanes, could the NFIP coverage
In other words, it covers the structure resilience of your community. n
that you’re currently selling paint
for all perils except those specifically a picture as attractive as what the
excluded in the policy. private alternative would provide?
So, the crucial question is: If you The author
are selling coverage, do you want to You, the professional
put your clients in a basic habitat or Dwayne LeBlanc, is vice president of
restore them to the condition they The latest flood reform efforts by business development for Wright Flood,
were prior to the loss? Congress have the potential to provide the largest flood provider in Florida
additional momentum in the private and in the United States. For more
Multiple opportunities marketplace by authorizing significant information, visit www.wrightflood.com.
Private flood insurance gives
customers a decision to make where
previously they did not always have
one: Choose the customary NFIP flood
insurance policy or pick a private flood
alternative.
To illustrate this point, I considered
renewing my personal flood insurance
with a private flood alternative. Here’s
a comparison of the two plans that
influenced my decision:
Option #1—NFIP Preferred
Risk Policy Renewal
• $250,000 coverage on building
• $100,000 coverage on contents
• Deductible of $1,250 for each
• Annual premium: $572
Option #2—Private Flood
Insurance Alternative
• $393,000 coverage on building
• $196,500 coverage on contents
(replacement cost basis)
• $39,300 coverage for other We are the next-gen, hybrid wholesaler with a nationwide
structures
• $50,000 coverage for loss of use footprint with both our retail and carrier partners.
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or Law
15UNPRECEDENTED TIMES,
UNPRECEDENTED MEASURES
General contractors
see large premium
increases
By Issy Bustamante
U
that allow them to be competitive when bidding in the
construction marketplace. Larger deductibles come with a
nprecedented times call for unprecedented measures. better price tag; however, the determination of whether such
It is no secret that every general contractor who has a program makes sense takes the analysis of a few factors.
had an insurance renewal during the last 18 months has The first is the contractor’s historical losses. Loss trends
seen exceedingly large premium increases in their corpo- for each line of insurance—typically general liability,
rate insurance program. A combination of weather-related workers compensation and auto—will be able to estimate
catastrophic losses dating back to 2017, record verdict the contractor’s average number and cost of each claim per
settlements and jury awards, COVID-related litigation, and year. This will also allow the contractor to determine its own
other factors have caused a spike in insurance rates at all loss forecast. Once this has been calculated, the next step
levels impacting all lines of insurance. would be to determine if the premium savings and collateral
The days of primary general liability insurance limits requirements provide enough total cost of risk relief to
of $1 million per occurrence/$2 million aggregate, along cover the average cost per claim while still reflecting the
with primary business auto liability limits of $1 million, true risk exposure. The savings may not be sufficient for
are becoming a thing of the past; contractors now are being this new or increased deductible structure, or the collateral
required to purchase programs with increased limits in the requirements with the carrier may be too burdensome to
general liability line of $2 million per occurrence/$4 million justify such a deductible program structure change.
aggregate and $2 million in the business auto liability line. Collateral requirements, usually in the form of a letter
Guaranteed cost programs, where no deductibles apply, are of credit from a bank, require the contractor to hold said
coming to an end, with the exchange for no deductible being pre-established amount aside in case they cannot meet their
gargantuan premium increases that in some cases are cost deductible requirements with the carrier. The exact amount
prohibitive. of the collateral requirement depends on the contractor’s
In the current environment, contractors are having financial state and is established by the insurance carrier’s
to consider managing their total cost of risk by taking on actuarial loss forecasting.
larger deductible structures and putting up collateral Once a contractor commits collateral to a carrier, it is
with the insurance companies to obtain premium rates extremely important to focus on safety, loss control and
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17 WWW.P1FINANCE.COMclaims management. The more losses Think about how many times a
you have and the longer those losses contractor gets a lawsuit based on
stay open, the longer the insurance an accident that occurred years ago,
carrier will hold onto the collateral right before the statute of limitation
requirements or even increase them in runs out? Do any of these accidents
future years. get investigated thoroughly enough
As claims are closed, collateral to capture sufficient information and
can be negotiated downward. detail to help create a sound defense?
Similarly, if there are more claims As a former claims adjuster, I can
than anticipated, it is likely that the guarantee that the answer is almost
insurance carrier will make a call for always a resounding “no.”
additional collateral requirements. The benefit of a large deductible
Therefore, a large deductible program is the change from how things have
with collateral is a long-term commit- been done historically to a new way
ment because, if in the future you that can yield larger cost savings The author
decide to change insurance carriers, across the board; this will reflect on a Issy Bustamante is the insurance vice
the likelihood of receiving a return contractor’s loss history and experience president of the Florida operations for
collateral is slim, especially if there is modification rating (EMR) and help American Global. In her capacity she is
no claims management in place. rank them among the best in class in responsible for client relationships and
their field. the delivery of the company’s insurance
Risk focus What services can be hand-selected product and services. Specializing in
and predetermined? Think accident the construction industry, Issy has
After the initial analysis reconstruction, evidence preservation, experience in complex risk financing
determines that the premium savings expert investigators, first-aid and risk mitigation strategies for large
make sense and the collateral is set
I
exactly where it should be, then the
fun starts. Contractors choosing such a
program structure should look at their
exposure proactively. Since indemnity n the current environment,
contractors are having to consider
and allocated loss adjustment expense
(ALAE), or simply expense payments,
satisfy deductible requirements, a
proactive approach should be taken in
terms of where those expense dollars
managing their total cost of risk by taking on larger
are spent. Expense dollars spent
on proactive investigations can and deductible structures and putting up collateral …
should be used to help meet program
deductible requirements while when bidding in the construction marketplace.
preserving the accident investigation
and evidence should a claim arise.
ALAE dollars count towards meeting providers, defense attorneys and nurse clients and projects. Experiences include
deductible requirements on each claim case management to name a few. All leading teams and client engagements
and help reduce the frequency and post-claim mitigating services that for complex assignments in all aspects of
severity of claims. are unbundled should be presented insurance needs for owner/developers,
Managing risk entails taking to and approved by the insurer and contractors and public entities, yielding
an active role in the management then coordinated together to become expertise in coverage analysis, risk transfer,
of claims resolution. Unbundling seamless as they are deployed. risk reduction strategies, loss sensitive
claims management services can help In addition, these services are programs and wrap-up insurance plans.
contractors secure best-in-class vendor meant to fit like a lock and key with Issy has been recognized for her work in
partners who will work together to the corporate safety and loss control the industry receiving the 2012 Helen M.
seamlessly provide their services. services. Nothing replaces a safety Garvin Award for Enterprising Achiever
Hand selecting vendor partners and culture where pre-employment that made a positive impact supporting
establishing a robust post-accident screenings and ongoing training are women in the insurance industry. Most
protocol will help manage the the foundation; however, regardless recently, she was the recipient of the
contractor’s and the carrier’s exposure 2018 Business Insurance Break Out
of all the preemptive measures put in
by properly investigating the incident Award, awarded to future leaders of the
place, claims are fortuitus and they
insurance and risk management sector
and determining your liability early in are expected to happen regardless of from across the United States. She also
the process. This will aid in the early how great and robust the in-place risk holds a Construction Risk Insurance
resolution or defense position on a case management program is. This is where Specialist (CRIS) designation. Prior
should a claim be filed. proactive and aggressive post-accident to joining American Global, Issy was
This is what an integrated claims management comes in handy. a construction casualty broker, placing
risk management structure looks I encourage every contractor who intricate and comprehensive casualty
like when premium savings and is presented with a large deductible programs tailored to the unique risks of
the program’s ALAE are used in a option to not discard it right away. construction development clients at the
proactive manner to protect the post- It may be uncomfortably new, but by largest construction and development
accident investigation and hedge risk, partnering up with an experienced broker globally. Issy is a graduate of CUNY
by mitigating the claim exposures insurance broker to help analyze the Queens College with a Bachelor of Arts
instead of paying for a guaranteed cost risk/reward of this program, it can help degree in Economics in Finance and holds
program that will cost twice as much contractors take control of their risk, a Master’s in Business Administration
in premium than a large deductible save premium dollars, and change the (MBA) from the Frank G. Zarb School of
program. way business is done. n Business at Hofstra University.
18Employees are essential to a
business’s productivity and
success, so it makes sense to have
coverage that protects them.
Summit is here—not only to
provide premier workers’ comp
coverage—but to offer resources
to help educate your clients on
safe work practices and to aid in
injury prevention.
summitholdings.com
Policies are underwritten by Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company, authorized insurers in AL, AR, FL, GA, IN, KY, LA, MS, NC, OK, SC, TN, TX and VA;
BusinessFirst Insurance Company, authorized in FL, GA, IN, KY, NC, SC, TN and VA; RetailFirst Insurance Company, authorized in FL; Retailers Casualty Insurance Company, authorized in AL, AR, LA, MS, OK and TX.
19 ©2021 Summit Consulting LLC (DBA Summit, the people who know workers’ comp LLC), PO Box 988, Lakeland, FL 33802. All rights reserved.WEATHERING THE
“PERFECT STORM” Florida’s insurance market outlook
By John Bell
A
at the same time. Recent state legislation has tried to
address some of these issues impacting casualty coverage,
combination of factors is creating what could be but the impact of that legislation is yet to be realized, and
described as a “perfect storm” for Florida’s insurance carriers are seeing the development of these adverse factors
market. Programs are struggling to realign capacity, carri- continue at an alarming rate.
ers are pulling back appetite, and rate increases coupled All of this is enough to make us think that we have
with supply shortages are on the rise. Of course, we’re used trekked deep into a correction period in Florida, but this
to storms in the Sunshine State. The obvious impacts of may be just the beginning.
Hurricanes Irma (2017) and Michael (2018) have taken a
few years to digest, but even those catastrophes would have
made less impact on the current market if it weren’t for
What’s more
otherwise unrelated disasters across the globe. Wildfires in There’s additional bad news: Aggressive government
California, freezing in Texas, and other weather catastro- spending and a long-term outlook of extremely low interest
phes have combined with the hurricane-driven ebb and flow rates heavily impact insurance carriers’ ability to generate
of rate changes in Florida to create the “perfect storm.” For investment income and improve valuation across the
the first time in more than a decade, we find ourselves with firm. Interest on surplus generates a significant amount
a challenging property market in Florida. of carrier income and is often where revenues begin to
Our market has been on borrowed time for years; it’s surpass annual expenses. With the expectation that interest
just been a matter of when. The last property hard market rates will remain low well into the future, a focus on
preceded one of the longest stretches without a Florida underwriting profit will continue to take hold, ultimately
CAT event on record. We even witnessed a few years with resulting in further fuel to price increases and stringent
20% decreases in premium. As many underfunded carriers risk selection.
shored up market share, few in the industry expected As businesses continue to struggle from the pandemic’s
stability to last. The current situation was expected by economic effects—employee layoffs create uncertainty and
many, at least to some degree and at some point. claims increase in management and professional lines—the
What I don’t think many anticipated is that this market continues towards a real danger zone. Throw in
property market would be in full swing as casualty pain proposed increases of federal corporate taxes and we have
from years of third-party assignment of benefits, state- our perfect storm!
wide aggressive legal advertising, outright fraud, and an We have seen Florida companies struggle from Irma,
increasing number of nuclear verdicts in judicial hot spots and to avoid failure there was a surge of financial- sheet-
all caught the attention of major insurers across the country saving mergers and acquisitions. We are now starting to
20see a few of what we thought were with risk management, risk avoidance, wrong claim or settle too quickly, the
reputable carriers getting downgraded. and tightening risk controls. We impact to your client can be as minor
Programs that used to have companies remind them that the best-performing as higher premium or as dramatic as
that were widely recognized in their and prepared risks are likely to have making insurance unavailable.
storied sharing of risk are quickly the least dramatic impact. We focus The first step you should take to
being replaced with companies we and collaborate with policyholders weather this moment in time is to be
haven’t heard of that provide minimal to put together the best information sure you have a full grasp of why the
or questionable information on their on what they can expect moving market shifts and then start sharing
financials. These new firms come forward—well in advance of 90-day your discoveries with your team and
packaged with a significant risk renewal notices. your clients. There will be bad news to
of short-term insolvency given the A half-complete ACORD app and deliver, but if there is good knowledge
current financial conditions. three to five years of loss runs were and collaboration between insured,
Insolvency creates major issues for enough in a soft market. In a hard agent, and carrier, you will be well
insureds. They may have to replace market, we need to go the extra mile on your way to thriving through this
coverage and if that is mid-term, they to share risk management programs storm. n
may struggle to get a return premium. with insurers, provide photos, and offer
The bigger problem, especially if they a write-up explaining why an insurer
have liability insurance, is the original should want to minimize an increase
policy provider may not be around to or be more aggressive to bring this risk
subrogate or indemnify when a claim into the portfolio.
comes in. Fortunately, there is a guaran- We take the time to evaluate our
tee fund for the admitted carriers; insurers. What is their service like?
however, limits are well below what is How do they handle claims? What is
purchased and the timing can signifi- the financial outlook? Do you know
cantly impact the funding of a claim. someone there you can call in the
How can we weather this current event of an issue? Do they regularly
outlook? The best agents and insurers non-renew books of business or are
not only weather the storm but thrive they stable and consistent historically?
in it. For one, we spend time educating Most important, do they have claims
the client on what the challenges are staff prepared to handle a hurricane or
and why they are happening. This the expertise for a challenging liability
builds trust and value, reassuring claim? The worst thing we can do is The author
clients that we aren’t here only place business with carriers that do John Bell is regional vice president of
to collect premium. We focus on not understand a legal environment marketing at Philadelphia Insurance
improving our results for the client or class of business. If they fight the Companies (PHLY).
home-cooked meals before
the mortgage is paid off.
Home insurance isn’t just for the house. It’s
© Lighthouse Property Insurance Corporation 2021
for every moment around the table. It’s for
grandma’s recipes. And stories of good
days and bad. It’s for great food and better
company. It’s for the most important
things. Which is why we’ll be there through
it all to help guide the way forward.
Learn more at www.lighthouse.insurance/products/florida
Homeowners | Dwelling Fire | Private Flood | Renters | Condo
21INSURING
AVIATION-RELATED
BUSINESSES
A significant number of businesses
work directly and repeatedly with
the aviation industry
By John Bowen
H
renovations may choose to use those funds to do projects in
upcoming years. If they do, they will likely require services
ave you considered how many businesses provide from local contractors.
services to or intersect in some way with the aviation
Construction companies are not the only businesses
industry?
that provide services to airports. Paving companies are
There are the more obvious examples, including aircraft
hired to resurface runways. Sanitation companies service
mechanics who service both commercial and private leisure
both airports and individual aircraft. Painting and welding
aircraft at airports ranging from international to general
businesses use their skills to maintain aircraft.
and municipal. In Florida alone, there are over 13,500
In Florida, aviation is more than just a commercial
aircraft mechanics; the only state with more aircraft
industry; it is a personal endeavor. Because of its fair
mechanics is Texas.
year-round weather and plethora of retirees, the state is
Another example? Manufacturers who develop parts
that are used for a variety of aircraft and companies who home to numerous “fly-in” communities popular among
rent out aircraft parts. In addition, hangar operators aviation enthusiasts. Individual homes have their own
throughout the state maintain storage facilities for hangars where they can store their small aircraft, and the
airplanes not in use. The Venice Municipal Airport alone communities provide nearby runways for convenient take-
has nearly 200 private hangars for private pilots. offs and landings.
The number of companies and individuals who interact
Partial aviation exposures with and provide services to the aviation industry at any level
is surprisingly large, and this list only scratches the surface
While a significant number of businesses work directly— of clients who require specialized aviation insurance.
and repeatedly—with the aviation industry, there are many
more with partial aviation exposures. Popularity of drones
Numerous businesses provide services for the nearly 500
public and private airports across the state. Construction In addition to the businesses con-nected—even
companies, for instance, take on projects to renovate the tangentially—with the aviation industry, businesses that
interior or exterior spaces of municipal and international use drones, or unmanned aerial vehicles (UAV), also require
airports. A number of airports have hired construction specialty aviation insurance.
companies during the pandemic, taking advantage of the Drone usage has skyrocketed in the past decade.
decrease in air traffic to update their facilities. According to a 2016 study, Florida is tied with Texas for the
Because of the significant impact of the pandemic on the highest number of drones, even though Florida has about
aviation industry, airports have already received $20 billion 7 million fewer people. As of March 2021, the number of
in federal relief funds and hope to receive an additional commercial drones registered in the United States was
$27.5 billion through the current administration’s 372,000. In the next few years, the market is expected to
infrastructure proposal. Airports that have postponed grow annually by 3.7%.
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