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Nov 30
Big I NY Testifies on the Impact of Extreme Weather on the Insurance Market

SWH Testifying Assembly Insurance Committee.pngThis week, Scott Hobson, Big I NY's AVP of Government Relations, testified before the NYS Assembly Committees on Insurance and Environmental Protection on the impact of extreme weather on the state's property and casualty insurance market. In the hearing, lawmakers sought testimony on the impact that these types of weather events have had on the New York property and casualty insurance market, including premium rates, policy cancellations and renewals, and explore what steps the Legislature can take to ensure a robust and affordable property and casualty insurance market in New York State going forward.

“Put simply, the impact of extreme weather events on the resiliency of the property and casualty insurance market is enormous and far reaching," Said Hobson.

“The market is increasingly strained, and New York homeowners are facing dual challenges of rising costs and dwindling availability. The challenges are most acute on Long Island and in New York City. Driven by rising claim costs, carriers' appetite to write coverage in New York is diminishing. This reduces competition and leaves consumers and businesses with fewer options."

Hobson identified the key drivers of instability in the market, including increasing extreme weather events, rising reinsurance costs, inflation, the legal climate, and supply chain disruption. He urged the legislature to avoid passing new laws that would destabilize the market and drive up premiums, such as expansions of liability, underwriting restrictions, and coverage mandates. He called for measures to fortify communities against losses from extreme weather, and to promote innovation in underwriting.

“If you had a legislative magic wand," Asked Assemblyman Blumencranz (R, Oyster Bay), “which legislation would you remove to affect premiums in a positive direction for consumers?" Hobson replied, “I'd say comprehensive tort reform would do that."

Watch the hearing here (testimony begins at 7:03)​

Read Big I NY's testimony here​

Nov 30
Three Elevated Risks When Buying an Agency in a Hard Market
​By: Colby Allen

Going through the process of buying an agency can require a high amount of effort in a stable market, so trying to make an offer now can change how you perform due diligence. Many agencies are trying to manage threats to their operations such as client retention, staff retention, and even carrier retention.

Although these risks are a normal part of evaluating the agency many agency owners are struggling to manage one, if not multiple, of these important factors of their business. This article will dive into each of these risk factors in more detail while also providing some questions you should consider when performing due diligence on an agency acquisition.

Client and Revenue Retention

Insurance routinely goes through hard market cycles where carriers adjust rates as they try to balance between competing for business and adjusting for market conditions. Because independent agents are paid commission on written premiums agency income is directly affected by these cycles.

A soft market can present opportunities for agencies to increase their client count as the market competition is high for carriers. The primary way to increase written premiums is by earning new policyholders. As rates decrease and carriers are more competitive agencies must thrive on writing new clients to increase revenue, and agency commission on renewals can decrease correlated to rate decreasing on renewal policies.

A hard market often will require agencies to pivot their strategy to defense to retain clients. This is influenced by less competition among carriers to write new clients to increase premiums, and clients change behavior to procure quotes because their rates are increasing. Many carriers routinely try to adjust rate with the consumer pricing index (CPI) to keep up with economic factors of claims, but if the CPI and cost factors that contribute to claims continue to inflate it can present market conditions difficult for agents.

How does this affect retention? Retention has three major measurements. Client Retention, Policies in Force (PIF), and Revenue Retention. Client and policies in force is often the common way that carriers represent retention on a production report, but we would propose the most important for the agency to track is revenue retention. Why? Because commission revenue is what shows up on the agency's profit and loss and is the largest factor for valuing an agency.

The current hard market poses a unique situation in that many agencies are experiencing decreased client retention and PIF, but if they are maintaining enough then revenue retention is the same if not higher than normal. For some agencies we have performed valuations we found their PIF or client count retention in the mid 80%, but their premium retention was 95% or greater because the rate increases on retained clients have outrun lost business.

Questions to ask about retention:

  • How is the agency measuring and presenting retention?
  • In due diligence are you able to analyze client retention, PIF, and revenue retention?
  • Are there any current retention issues with the agency's top markets? If yes, what is causing business to be moved or lost?
  • Does your agency have comparable alternatives to offer clients that would boost retention?
  • What communications or efforts are planned to maintain client retention through a transition?

Having a strategy to secure client and revenue retention is oftentimes an oversight for many new buyers. If available, seek to work with the current owner on a formal plan to communicate with the clients and ensure their confidence.

Employee Retention

The Great Resignation has been widespread, and although the wave of job turnover has slowed agency owners across the country still say one of the top issues they face is recruiting and retaining talent. Another factor that contributes to an agency's value is the staff. Good people attract and retain clients. Wages and employment terms have shifted more in favor of employees which also means employers have become more selective of who and when they hire.

The other side of this situation is many employees are expressing their sentiment of wanting more and openness to consider other employment opportunities. Gallops State of The Global Workplace 2023 report found that nearly 6 in 10 employees feel disconnected from coworkers, their supervisor, or the company they work for.

Couple this feeling with the uncertainty that can be present through an acquisition escalates the risk that employees would consider leaving the agency. If employees are already considering other employment opportunities, then the news of an acquisition could trigger them to pursue them further or become more disengaged if there is little to no communication for a transition plan.

Most negotiations include confidentiality and non-disclosure terms until a certain stage is achieved, however, it is important to understand employee sentiment to assist with staff planning for the new owner.

Questions to ask that can assist with staff planning:

  • What has the current owner shared with staff about their plans to sell the agency?
  • At what stage of negotiations could the potential buyer meet and interview staff?
  • Does the agency utilize employment agreements? If so, what are the terms?
  • Are there employment terms in this agency that are considerably different from your current staffing model? Remote work, flexible hours, PTO schedule, etc.
  • Other than salary, what benefits are employees offered and utilizing? Will the agency incur or offer different benefits than your current program?
  • If a staffing change is planned, are you planning a severance benefit or support resources for those affected?

Navigating this process can often be challenging because there are a lot of unknowns to be solved in a short period. If you can make efforts to have a staffing plan on how to communicate and support employees through the transition process. Carey and Lindsay have a great podcast episode with Ryan Reynolds of Grimes Insurance on the steps he took to gain employee trust and collaborate on the future vision of their agency.

Carrier Retention

Another top value driver or risk factor for an agency is the list of carriers from which they earn commission. A general guide is any carrier that the agency earns more revenue than its profitability is an elevated risk. If one carrier changes their underwriting appetite or contract status the agencyʼs financial performance could be jeopardized. This is a realized risk for many agencies during this hard market with carriers ceasing new business, or in some cases canceling contracts.

​I recently spoke with an agency owner who was losing their largest personal lines carrier. They were one of the first appointments they received when starting their agency 7 years ago. Years of success and this carrier represented 25% of their agency revenue! Through the last few months, their retention plummeted as this carrierʼs rate increases were not proportionate with the local market. They were losing business to competitors and re-writing customer policies with their other carriers that were open to new business. The first call with their carrier rep was empathetic and they quickly moved to a retention program to escalate underwriting requests to maintain policies. However, within one month those efforts were unsuccessful and the carrier notified the agency their appointment was terminated, they were to move all policies at expiration.

All carrier contracts typically contain terms that the carrier is to be notified of a major change in ownership by the agency. This is usually with the intention for the carrier to plan for book consolidations if the new owner is already appointed with them, or to build rapport and develop a relationship with the new owner. In some cases, there could be reasons the carrier would not extend a contract to the new owner and terminate the appointment. This is why purchase terms often include contingencies for carrier contracts to be maintained to preserve the value of the agency.

In this hard market, these risks have shifted. Carriers are actively reassessing agency appointments to optimize their distribution strategy. So while purchasing a book of business itʼs crucial to understand the current appointment status and the carrierʼs relationship with the agency. Great risks can also pose opportunities to benefit if that agency's appointment is threatened and you maintain a good relationship with the carrier.

This is another area that is typically covered under confidentiality, but have a plan to perform due diligence around carrier relationships effectively to help you formulate a transition plan.

Questions to ask that can assist with carrier contracts:

  • What are the terms of ownership change contained in the carrier contracts?
  • What is the current appointment status of the agency's top markets?
  • Is the agency on a performance or retention plan with any carriers?
  • Does the agency maintain a current list of carrier representative contacts?
  • What carriers on the list have ceased writing new business in the area?
  • Have any carriers significantly changed their underwriting appetite within the agency's book of business that would cause non-renewals or remarketing efforts?

Summary

Although top-line revenue is the primary driver of agency value it's important to understand the operational components that support the revenue. Hard market conditions coupled with dramatic shifts in the labor market pose elevated risks for anyone who is trying to acquire an insurance agency. It's important to ask valuable questions to understand these risks during the due diligence process and how they could impact the agency's performance during and after the transition.
Nov 17
Photo Inspection Reform Bill Signed Into Law!

Ted_Video.jpgStatement from Ted Walsh, Big I NY Chair of the Board:

Today is a great day for New York auto insurance policyholders and independent insurance agents, We're thrilled to share that Governor Kathy Hochul signed into law Big I New York's "Auto Insurance Consumer Relief Act," a measure supported by both consumers and the insurance community. The bill allows insurance companies to waive pre-insurance photo inspections beginning on May 15th, 2024, until October 1st, 2027.

For too long, the photo inspection mandate has been a burden and an inconvenience for hard-working New Yorkers. Modern solutions for combatting fraud have made the regulation unnecessary and obsolete. On behalf of policyholders across New York, I applaud Governor Kathy Hochul, Senator Breslin, and Assemblyman Zebrowski for championing this crucial pro-consumer modernization bill.

Please join our Big I NY community on Monday at 4 pm for the happiest of virtual happy hours - as we join for a quick toast to this significant achievement.

As always, Big I New York is proud to have your back.
Nov 14
"Be the reason someone feels welcomed, seen, heard, valued, loved, and supported" ... unknown
Written by: Sue Keegan, Director of Education

The Samaritan Center​, a nonprofit organization that works to fight hunger in the greater Syracuse community by providing nutritious hot meals to anyone in need 7 days a week, needs more than 35 volunteers a day to help meet their guests’ needs.

Lisa Lounsbury and I were two of those volunteers Monday morning.  We worked with a team of amazing volunteers and staff who each had a task or responsibility assigned to them.  Michael Martini, the kitchen coordinator, gave Lisa and I (in my opinion) the primo task... serving food to the people the mission serves.

What I learned from watching and interacting is that the Samaritan Center is all about relationships. The staff and the volunteers care about the people they serve.  They notice things about them – if someone is sitting alone or all of a sudden just doesn’t seem right, they interact with them. It’s a beautiful thing to witness, the passion they have for helping others and the desire to create a family for folks who may not have a family.

I encourage everyone to volunteer in your community. There are so many organizations out there that need our help.

Interested in finding out more about the Samaritan Center?
Nov 09
Workers Comp Premium Assessment To Drop in 2024

​The New York State Workers Compensation Board announced that the state assessment rate on insurance premiums will decline to 9.2%​ next year. The new rate marks a drop from the 2023 rate of 9.8%.

State law requires the board each year to set an assessment rate by November 1. The assessment, which applies to Workers Compensation insurance standard premiums (or premium equivalents for self-insured employers) funds the board's operations. 

The new assessment takes effect on January 1, 2024.

Nov 02
New York's Cyber Regulation is Changing. Here's What it Means for You.

​As we reported yesterday​, the New York State Department of Financial Services has adopted its long-planned amendments to its Cybersecurity Requirements for Financial Services Companies regulation. We have prepared a summary of the changes​ in order of the dates when compliance is required. 

What Happened:

For more than a year, the New York State Department of Financial Services (NYSDFS) has been working on amendments to the state’s cybersecurity regulation. On Wednesday, those changes were made final. Throughout the amendment process, Big I NY advocated strongly for many changes that will benefit independent insurance agencies and their customers, including an expanded limited exemption and total exemption for inactive licensees. We also urged the department to eliminate the requirement that agents and carriers "cross police" each other as third party service providers, and eliminate the annual certifiaction of compliance requirement, however these suggestions were not adopted.

What it Means For You:

The most common question we have heard from agents is, “are these changes good?” The answer is it’s a mixed bag. The following is a brief summary of the key provisions. A detailed summary of all changes, including effective dates, is available here. 

Expanded Limited Exemption: A welcome change is the expanded criteria for who qualifies for a “limited exemption.” The limited exemption exempts small and mid sized entities from the most burdensome (but not all) requirements. An estimated 93% of Big I NY members will now qualify under the new criteria:

  • Fewer than 20 employees (previously 10) or;
  • Less than $7.5 million in gross annual revenue over the last 3 fiscal years (previously $5 million); or
  • Less than $15 million in year end assets (previously $10 million)
Exemption for Inactive Licensees: Licensees who have no carrier appointments will now be completely exepmt from the regulation.

Changes to Certification of Compliance: The compliance filing that you must submit every year by April 15 will now require you to identify requirements under the regulation where your agency was not in material compliance the year before. You will also have to explain whether you have achieved compliance and, if not, what you plan to do about it. 

The filing will also require two signatures - one from the agency's senior officer, the other from the officer or manager in charge of cybersecurity. Big I NY repeatedly opposed these changes. We plan to ask NYSDFS for clarification on how agencies should handle that requirement when both roles are filled by the same person.

Multi Factor Authentication and Cyber Training:  Beginning November 1st, 2025, all licenced entities (limited-exempt or not) must use multi-factor authentication for access to their information systems. Beginning April 29th, 2024, all entities must provide their employees with cyberseucrity awareness and social engineering training.

Big I NY Has Your Back:

We plan to provide videos and other media to further explain the changes. Also, watch for your cha​nce to register for a special Gear Up presentation on the amendments later this month.

Don't forget that you can access our cybersecurity-related information at anytime by visiting www.biginy.org/cyber and by checking the Cyber category in our Newsfeed.

Some of you may need individual help with the changes, and we're prepared to aid you with that as well. We are expanding our technical consulting service​ to include cybersecurity regulation compliance assistance. For an affordable hourly fee, you can get the individual attention you need to meet your obligations under the regulation. 

Any change in laws or regulations that effect your business will be confusing and stressful, but we are hear to make it as easy for you as possible. Check back here often as we add new content to help you with compliance.

Nov 02
Boost Your Operations with an Operational Agency Evaluation

Written by: Cindy Scharf, Agency Consultant & Corporate Project Manager

 
Our Operational Agency Evaluation is FREE!  It's so simple to take the evaluation; and answer a series of questions on your agency operations.

You'll receive a customized report including recommendations along with links to our products and services for Big I Members.  The report is broken down into sections for E&O Exposures; Operational Efficiency; Sales & Marketing;  and Management & HR.  In today's hard market, all these items are important to the success of each agency.

In addition to the FREE recommendations, you'll receive a FREE half-hour virtual call to answer any questions you may have plus we'll show you where you'll find the information on our website. At the end of the call, you'll have helpful tools that align with your agency's specific needs.

Give it a try, you'll be surprised at the quality of information you'll receive.  And it's FREE, because we value your membership and support!

Click here to access our Operational Agency Evaluation.  Click on Get Started to receive your customized report.

Consulting Services

Nov 01
BREAKING: NYSDFS Adopts Cyber Reg Changes

​The NYS Department of Financial Services this morning formally adopted changes to the cybersecurity regulation. This is something we have been anticipating for nearly 18 months. At the same time, it appears they may have emailed every licensed person for whom they have an email address to announce the adoption. You may have received this email. 

Here is what you need to know today: 

  • We are in the process of reviewing the final version of the amendments. This is the third version of the amendments DFS has published, and it is not identical to what they proposed earlier.
  • ​Both previous versions stated that the earliest date compliance will be required is 30 days from today (December 1,) and that deadline only applies to reporting certain types of security breach incidents. Compliance with most of the changes will not be required until May 1, 2024, and some will have later compliance dates. No one has to do anything immediately.
  • Once we've analyzed the final version, we will provide the information to members in a variety of media, including blog posts, possibly videos, webinars, meetings with local association boards, and any other methods we can think of that might work.
  • We have also met with representatives from DFS about coordinating training on the amended requirements. That training will likely occur in early January.
  • Visit the Compliance Resources section at www.biginy.org/cyber and the Cyber category in the Newsfeed section of our website which can be found by dragging your cursor over the News link in the upper right corner. We have content about the previous two versions in those locations.
  • ​​Above all, please know that we're on top of this and there is absolutely no need for you to do anything right now.

​​ We will post additional information here as soon as we have it ready.​

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