Friday, April 24, 2015

Tague Alliance 10th Annual Awards Event - Poker Face Masquerade

A huge thank you to those who attended our 10th Annual Awards Event! Here are a few fun photos from the night! Click the DropBox link below for more photos, and to find your guest photos as well!

Tuesday, April 21, 2015

Independent Insurance Agents Defying Doomsayers

Independent Insurance Agents Defying Doomsayers

By Andrew G. Simpson | March 12, 2015

According to analysts, technologists, aggregators and others, the independent agency system is in trouble.

Somebody forget to tell independent agents

Or more to the point, the doomsayers perhaps didn’t notice that independent agencies have been adapting and getting more into specialization. Or that they are employing technology along the lines suggested in order to succeed in the changing market. They may have dismissed the notion that not all trends are working against agents, including the finding that a majority of those who buy direct eventually return to their independent agent. Or the critics may be unaware how young agents are changing the business.

They may also have missed the latest agency profitability report.

The reality is that independent insurance agents and brokers continue to dominate property/casualty commercial lines and are also doing just fine in the competitive personal lines marketplace against direct response writers and captive carriers, the latest market report shows.
Market Share
Independent agencies (IAs) grew faster than the overall market and thus increased market share in about half of the states and the District of Columbia, according to the 2015 Market Share Study by the Independent Insurance Agents & Brokers of America (IIABA or the Big “I”). The study is based on 2013 data from A.M. Best.
IAs still control a majority of the entire P/C market, writing nearly 57 percent of all premiums; they write nearly 35 percent of all personal lines premiums; and they still dominate commercial insurance sales, writing nearly 80 percent of a market that has grown by more than $35 billion over the last three years, says the report.
The findings show that the independent insurance agency system continues to be “stable, strong and growing,” said Bob Rusbuldt, Big “I” president and CEO.
That may come as a surprise to some.
Warnings Aplenty
Agents are still upset about a 2013 report by McKinsey that they took to suggest that their demise was imminent.
A successful aggregator has suggested that the only way for smaller agencies to survive is to merge, although there is no doubt smaller agency mergers are an issue.
A leading technologist has warned that agencies will become extinct unless they follow its lead into online sales.
Others appear convinced that direct writers like GEICO have a huge advantage over agency carriers.
A respected CEO has suggested independent agents should be very scared about Google’s entry into the insurance business.
‘Good News’
Meanwhile, the latest market share numbers aren’t so scary for agents or their carrier partners.
Rusbuldt pointed to the “good news” in the study that all property/casualty insurance premium lines grew for the third year in a row, bouncing back from their recession‐driven low points in 2010. And after three years of growth, both personal and commercial lines have exceeded pre-recession volumes to where combined they are now generating $532 billion in annual premiums.
Combined, the market grew by $25 billion in 2013 over 2012 levels.
The Market Share Study revealed that at both the state and carrier level, independent agents and brokers were well poised to capture their share of the market or more. Furthermore, several IA carriers increased their market shares by substantial amounts. However, there was a significant divergence between the national and regional carriers in terms of growth, according to the Big “I.”
Other findings from the Market Share Study released by the Big “I” include:
  • IAs grew market share in 23 states and the District of Columbia. In many states, they dominate both personal and commercial lines. That suggests IAs in other states have an opportunity to add share in more lines if they put a renewed focus on it.
  • IAs can be as efficient as other models. In the personal auto market, both regional and independent insurance agency writers average better expense ratios than the captive agency model. What’s more, nearly a dozen IA companies rival or beat direct response writers on this key expense efficiency metric.
  • Personal auto premiums written by IAs grew nine times more in both 2013 and 2012 than they did in 2011. IAs increased premiums by $1.8 billion in both 2012 and in 2013—versus the mere $200 million growth figure reported in 2011.
All of which is not to say independent agencies face no challenges. A recent survey of agents by Accenture found that agents recognize that their strengths could be challenged by changing consumer behaviors, new technologies and the evolving competitive landscape. But their biggest concern is online competition from their own carriers.

Interested in becoming an Independent Agency? Contact Tague Alliance at 760-201-0923, or visit our website at for more info on how to join.

Wednesday, April 8, 2015

Uber and Lyft - One Insurance Agents Month Long Experiment

This is an interesting article about a month long experiment that was done by an insurance agency in Texas to figure out how much the drivers for Lyft and Uber knew about their insurance exposure.  At Tague Alliance we want our members to be informed and educated about emerging trends that affect our clients and industry.

Rent A CarJosh Waldrum knows from firsthand experience that most of the folks who drive for rideshare services like Uber and Lyft are not well informed about the insurance issues that insurance professionals see as problematic, such as coverage gaps and the amounts and types of coverage needed.
Waldrum is the director of search engine optimization (SEO) at Austin, Texas-based The Zebra, a digital auto insurance agency and online auto insurance comparison site. As a member of his company’s marketing team, he took the challenge of foregoing driving his car for the month of January in favor of getting around exclusively through the services of rideshare companies Uber and Lyft. He wrote about the experience in a blog on his company’s website.
Asked why he did this, Waldrum said: “We talked about it a lot. It somehow just naturally came up. I think I first mentioned, ‘What if we found somebody to give up their car for an entire year and document all the stuff?’ That was way too much. Then, ‘I think a month could make sense. I could do this. It’s not that hard.’
“It came from that. I blindly signed up for it. When it actually came January I was like, ‘Oh man, what was I thinking?’” But he said all was well in the end.
In all, Waldrum took 50 rides during the month: 25 with Uber in the first half of January and 25 with Lyft in the last half.
While his survey was in no way scientific, it was revealing. In conversations with drivers during his rideshare experiment, Waldrum found that a very large percentage of the drivers who work for these companies didn’t really know much about insurance requirements or about the coverage their respective companies provide. In addition, most didn’t tell their personal auto insurance companies that they were doing this.
Specifically, he found that 72 percent of the drivers he spoke with were not familiar with the coverage offered by Uber and Lyft, and 92 percent of the drivers had not told their own insurance companies that they were driving for these companies.
“Definitely all the drivers were an open book when I asked about this,” Waldrum said.
Waldrum said he believes companies like Uber and Lyft probably do communicate to their drivers about the insurance coverages the companies provide. But, he said, “I don’t think they do a good job of telling them the other piece of it, which is that their personal insurance company would want to know” that their insureds are driving other people around for a fee.
One of the main concerns of personal auto insurers has been the coverage gap between the time a driver is logged into the online rideshare service application as being available to pick up a customer and when a customer is actually in the vehicle.
Waldrum said the rideshare drivers he spoke with generally were confused about such coverage issues.
“I’d taken a lot of Uber before this whole experiment. Since I started working here I always found myself asking the drivers about insurance because I’m learning about it here and it was interesting,” Waldrum said.
“There was confusion all around the board. When I’d ask them, ‘How does Uber’s insurance work?’ or ‘How does Lyft’s insurance work?’ I got a lot of confused responses, where people really weren’t totally sure when they were covered and what was covered by Uber and Lyft,” he said.
Cheaper Rides
In his blog post, Waldrum said that factoring in the cost of car payments, gas, personal auto insurance and auto maintenance, ridesharing—at least for him for one month—was cheaper than driving his own car. Waldrum estimated his personal auto expenses for a month amounted to $640, while the cost of his 50 Uber/Lyft rides for the month of January came to $527.
He recognized that the results were subjective and that his commute to work was only 3.25 miles. A longer commute obviously would have translated into more expensive rides, as would a larger number of total rides taken.
He also acknowledged the limitations in exclusively using rideshare services versus driving one’s own vehicle. “After doing this experiment, I realized that having the flexibility to go anywhere at any point in my own car was something that’s hard to put a price tag on,” Waldrum wrote.
He said his experiences with both Uber and Lyft were “completely satisfying,” however. The average wait time for both was just over four minutes, and though he had expected he might have a harder time getting a ride in the morning when it was time to go to work, that did not occur.
Uber was somewhat cheaper than Lyft (Uber lowered its prices during the time of Waldrum’s experiment); the 25 rides with Lyft cost Waldrum $60 more than the 25 rides with Uber.
He found that more than half of the drivers he used (60 percent) drove for both Uber and Lyft and that there was a wide range in the age of the drivers—from college students to retirees.
The Insurance Challenge
Local communities, states and the insurance industry all are grappling with the issue of finding workable solutions that provide public protection while allowing for innovation and growth in new ventures like TNCs.
Legislation is pending in at least 35 states addressing the insurance challenges that TNCs present, according to the National Association of Insurance Commissioners (NAIC), which recently adopted a white paper on transportation insurance coverage issues in the sharing economy.
The NAIC’s paper, Transportation Network Company Insurance Principles for Legislators and Regulators, outlines insurance considerations to help state and local policymakers who are crafting TNC laws or regulations.
In the paper, the NAIC points out that “though the largest TNCs provide commercial coverage, those TNC’s policies may not provide the same uninsured/underinsured motorist (UM/UIM) coverage, medical payments coverage, comprehensive coverage or collision coverage that the drivers had purchased in their personal auto policies.”
The NAIC also acknowledged that many drivers are unaware that their personal auto policies have livery exclusions, under which coverage is disallowed for activities such as driving people around for a fee. Other TNC drivers may know about the exclusion but “simply hope for the best,” the NAIC said.
Some say the insurance industry has been slow to respond to the needs of the growing TNC industry with new products that address issues such as the coverage gap, but companies now are beginning to create new offerings for this industry.
In November 2014, Erie Insurance introduced rideshare coverage in Indiana and Illinois that provides coverage for every part of the trip—before, during and after the hired ride—by removing the “business use” exclusion in its policies, the company said.
In response to a new law in Colorado that requires rideshare drivers to have insurance for the “gap” period, in January Farmers Insurance created a rideshare coverage endorsement to meet that state’s mandate. Other companies like MetLife and USAA also have rolled out TNC products in Colorado.
In February, GEICO said it was launching a product that provides coverage both for personal and ridesharing use. The product is offered through GEICO Commercial at a price that is significantly lower than taxi and commercial rates, according to the company.

Tuesday, April 7, 2015

Understanding Commercial Property Underwriting and ‘COPE’

Understanding Commercial Property Underwriting and ‘COPE’

By Christopher J. Boggs | February 3, 2015

Construction, Occupancy, Protection and Exposure (COPE) are the same four basic elements of underwriting data that real property underwriters have used for nearly 300 years.

So what are these time-honored elements? The following paragraphs briefly explain each element of COPE.

Construction (C)

For underwriting analysis, construction is broken down into three sub-parts:
  • Construction materials;
  • Square footage; and
  • Age of the structure.
Construction Materials
Insurance Services Office (ISO) defines six construction classifications (from “1” to “6”) based on the combustibility and damageability of the materials used to construct the structures “major structural features.” The lower the number, the more susceptible the structure is to damage by fire. Construction class codes are a function of the “major structural features”: exterior load-bearing walls combined with roof and floor(s).
Assigning a construction class code is first a function of the load-bearing wall material and secondarily a function of the floor and roof materials. Four exterior, load-bearing wall types are considered along with four floor and roof types. Combining the wall type with one the floor/roof types produces the structure’s construction class.
Mixed Construction Problems
What effect does a combination of building materials and assemblies have on a commercial property’s construction classification? Factually, mixing construction material can be detrimental to the building’s ultimate construction class and loss cost/rate.
Simply, to qualify for a higher construction class rating, the superior construction must equal or exceed 66 2/3 percent of the ratable structural feature. This 2/3 requirement applies first to the walls and separately to the combined area of the floors and roofs.
Square Footage
Structure size influences many aspects of the underwriting process related to the “construction” element of “COPE.” Square footage also factors into the “protection” section of COPE (i.e. the need for a sprinkler system, etc.). But the main aspect of structure size from the underwriting aspect is in the comparison of the building’s “maximum possible loss” (MPL) versus its “probable maximum loss.” (PML)
Essentially, it is “possible” that the entire structure may be destroyed in any one loss; thus the MPL is the entire structure (100 percent). However, the chances that the building will suffer a total loss are inversely proportional to the size of the structure. Basically, the larger the building, the less likely the entire structure will be destroyed in a single event. Thus, the PML percentage decreases as building size increases (subject to the protection (“P”) used in the building).
Age of the Structure
Aging structures create concerns and questions in the underwriter’s mind. Specifically, underwriters concern themselves with the building’s major systems (roofing, plumbing, HVAC and wiring) when underwriting an older structure. The older the structure, the more likely a major system will malfunction, leading to a possible claim due mostly to an internal issue rather than caused by an external force.
Have the systems been maintained and updated as necessary? When were the last updates? What was the extent of those updates? Who did the updates? These are all questions underwriters may ask when evaluating older structures.
Agents should concern themselves with the age issue as well. Many construction-related ordinances and laws may have been updated or enacted since the building’s original construction. Any increased cost related to bringing a structure into compliance with local building codes following a covered cause of loss is specifically excluded in the un-endorsed commercial property policy.
Importance of ‘Construction’ Information
Taken on its own, “construction” may ultimately be the most important element in property underwriting. Although the second element, “occupancy” (what the insured does), is often seen as primarily important among the four elements; occupancy really is secondary to construction when the risk is a class of business the underwriter normally writes.
Granted, construction and occupancy can each be seen as a function of the other in regard to underwriting decisions, often times the decision comes back to construction. For example, an underwriter may offer coverage to a restaurant in a masonry/non-combustible building (construction class “4”); but may not be willing to offer coverage to the same operation located in a joisted/masonry building (construction class “2”).

Occupancy (O)

“Occupancy” information is comprised of two parts: 1) what the insured does; and 2) how the insured manages the hazards associated with what they do. Determining what the insured does is rather simple; determining how they manage their “hazards of occupancy” requires closer investigation (either by the agent, insurance carrier staff, or independent inspection firm).
Each class of insured (retail, office, wholesale, manufacturing, service, etc.) presents its own relative risk of first party property loss. The greater the risk of loss, the more closely the underwriter analyzes the operations (occupancy) and the higher the relational cost of coverage. An office, for example, presents less of an operational hazard than does a paint and body shop; resulting in a lower property occupancy rate factor for the office.
Beyond merely knowing the insured’s operations/occupancy, the insurer must also investigate how the insured manages those operations (part two of the occupancy review). Similar insureds do not necessarily manage operations in the same manner. Since each insured manages its exposures and hazards differently, each has its own “hazards of occupancy” that must be considered in the underwriting process.

Protection (P)

Underwriters and building code officials are often jointly interested in the property protection aspects of structures, but for different reasons. Property underwriters view property protection measures in regards to their ability to lessen the amount of property damage; building code officials generally view protection from a general public and personnel protection angle.
Sprinkler systems, fire extinguishers, alarm systems, fire doors and fire walls, and public fire protection are the primary protection mechanisms evaluated by underwriters. A particular structure’s construction and occupancy may dictate which property protection mechanisms are required or desired by the underwriter.

Exposures (E)

Is the insured property exposed to any external hazards? Not all hazards are related to the insured structure or operation; some come from outside the premises or are simply geographic in nature. A few external exposures relevant to property underwriters include:
  • The insured structure’s proximity to a high-hazard operation;
  • The local wildfire risk;
  • The possibility for damaging winds and/or water;
  • The structure’s flood zone location (located in or near a special flood hazard area (SFHA));
  • The structures earthquake exposure; and
  • The jurisdictions building code requirements.
Understanding COPE fosters better planning during the property underwriting process. Knowing what to provide and why to provide specific information makes the underwriting process smoother and, hopefully, quicker. Also, knowing COPE can assist clients when planning upgrades to current structures or constructing new buildings.

Questions about writing construction exposures? Contact your Agency Specialist. Or, if you'd like more information on joining Tague Alliance to obtain access to multiple markets, please contact our office at (760) 201-0923, or visit our website at