June 6, 2014

In this issue: Gov. Malloy signs PIACT’s certificates of insurance bill into law Legislature addresses workplace, employment laws Take PIACT’s Company Performance Survey today Westport flood maps now available at Town Hall It’s hurricane season—PIA can help you be prepared Is your agency just starting out? PIA’s Market Transition Tool Kit PIA Creative Services offers options for agency promotion PIACT IRC: Interns under FLSA Upcoming PIACT-YIP events PIA praises passage of TRIA renewal bill by Senate Banking Committee Tower Group, subsidiaries downgraded to ‘C++’ First-quarter financial reports for 2014 ISO/PCI analyze 2013 p/c insurers’ performance Education highlights

State

Gov. Malloy signs PIACT’s certificates of insurance bill into law

Top legislative priority a win for PIACT

On June 3, Gov. Dannel P. Malloy signed Public Act 14-74 (formerly H.B.5248) into law, clearing the way for it to take effect on Oct. 1, 2014. This bill, PIACT’s highest 2014 legislative priority, codifies aspects of existing Connecticut Insurance Department guidance and, importantly, further expands these protections to restrict other dangerous practices that erode the reliability of coverage representations and puts producers in the crosshairs of coverage disputes.

As detailed in prior publications, this new law prohibits the inappropriate demand for, and issuance of, certificates of insurance that attempt to expand, amend or alter coverage beyond that in the policy. The bill further bars the issuance of certificates or other non-certificate adviser letters that attempt to state that a policy will give advance notice of cancellation, add additional insureds not on the policy, or certify that a policy will behave in a manner not described in the policy itself. This law, and the penalties listed therein, will enable producers to push back against these unfair and damaging demands and prohibit the certificate from putting words in the policy’s proverbial mouth, bringing Connecticut in line with other states, providing fines and penalties for those who violate the law.

PIACT lauds Gov. Malloy

Your association commends Gov. Malloy for signing this legislation into law.

“PIACT applauds Gov. Malloy for his leadership in recognizing the importance of this law,” said PIACT President Peter Frascarelli, CPIA, said Tuesday. “It allows diligent and responsible professional, independent insurance agents to refuse to issue inaccurate certificates of insurance without being put in an awkward position in which they may be perceived as not helping out their clients.”

In response to its members’ concerns, PIACT took the lead on this initiative and was instrumental in drafting this legislation, securing its introduction and, with the dedicated grassroots efforts of its membership, seeing it passed and signed into law. At the beginning of this year’s session, in support of H.B.5248, PIACT submitted testimony to the Connecticut Joint Insurance Committee this past March. In its testimony, PIACT reported that its members have received numerous requests from private parties and government instrumentalities to issue certificates or similar documents that offer commentary about the policy, or certify how the policy will react in certain conditions.

“The passage of this law represents the culmination of years of work by PIACT to protect agents and brokers from misleading and impossible certificate requests,” said Frascarelli.

The law and you

Your clients may have questions about certificates, or need advice when they need a certificate from someone with whom they do business. PIACT and PIA Creative Services offers an explanatory document detailing the law’s salient points in a simple manner, informing your clients about how this new law affects them. Contact Susan Newkirk at snewkirk@pia.org or call (800) 424-4244 for more information.

The bill passed with the much-appreciated assistance of PIACT members, who contacted their elected representatives with real-life stories of why this bill was needed. PIACT thanks our association members who worked to help make this bill become law.—Wallace

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Legislature addresses workplace, employment laws

The Connecticut legislative session concluded its business on May 7. As the session wound along, a number of insurance-related bills saw action one way or another, and were detailed in May’s Reporter. However, the session’s work touched on a number of other issues of interest to the state’s agent and broker community, including wage and hour law issues. PIACT reported on the progress of some of these measures as they occurred, and is collecting this reporting for the post-session summary below.

The wage and hour law with the arguably highest profile was Public Act 14-1, which raises Connecticut’s minimum wage to $10.10 by Jan. 1, 2017. The bill, which raises the minimum wage in yearly steps, starting at $9.15 in Jan. 1, 2015, was signed by Gov. Malloy on March 27, 2014. This new law takes effect July 1, 2014.

Another important legislative achievement this year was the revision of the state’s Paid Sick Leave Law. Public Act 14-128 would “(1) clarify that all manufacturers are exempt from the paid sick leave law, (2) allow employers to administer paid sick leave on the same annual basis as other benefits, and (3) allow employers to determine their number of employees in the same manner as for the purposes of the state’s Family and Medical Leave Act.” The highlights of the bill, as described in the Office of Labor Relations summary, are that employers with greater than 50 employees must grant paid sick leave according to a start date corresponding to a calendar of the business’s choosing, rather than on Jan. 1, as previously required. Additionally, the bill changes the manner in which the 50-employee threshold is determined; it also regulates certain measures a business might take to avoid falling into the law’s requirements, such as firing or shifting employees between locations.

Other employment-related bills considered but eventually not adopted include H.B.5054 and H.B.5274, which would assist job seekers by prohibiting various types of discrimination against currently unemployed job seekers. While H.B.5054 was part of a larger package of reforms to be implemented along with Gov. Malloy’s budget recommendations, and H.B.5274 stood alone, both would prevent employers seeking workers from using a person’s status as unemployed as a disqualifying factor. The two bills varied on the scopes of their various prohibitions, but both would have precluded a prospective employer from advertising that only employed people were eligible for openings. The bills both made it out of their originating committees, and died awaiting further action.

Another bill PIACT tracked that did not become law was S.B.249, which would create a state-administered retirement savings program for certain low-income workers. This bill, as stated in the OLR summary, would create “the Connecticut Retirement Security Trust Fund to provide a public retirement plan for certain private-sector employees, who are automatically enrolled in the plan unless they opt out.” Groups scrutinizing the bill observed that the plan would put the state in competition with the many private sector entities already providing similar services.—Wallace

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Take PIACT’s Company Performance Survey today

PIACT’s Company Performance Survey is well underway. The survey, available through June 30, 2014, gauges insurance producers’ views of the companies they represent in the state. Independent agents can rate the companies with which they do business anonymously on 20 performance items, including: claims handling, products and pricing, underwriting, technology and marketing support to gauge their relationship with the carriers.

Started in 2002 by PIACT, the biennial Company Performance Survey builds on years of historical data collected by PIACT, PIANY, PIANJ and PIANH. PIA members can view this data at pia.org/GIA/cps/cpsjump.php.

The focal point of the Company Performance Survey continues to be fostering relationships between professional, independent insurance agents and their companies.

To access the survey, log on to pia.org, and click “Rate your carriers” on the right-hand side of the screen.—Pittz

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Westport flood maps now available at Town Hall

The Planning and Zoning Commission has Federal Emergency Management Agency Flood Insurance Rate Maps for Westport available, which were effective beginning July 8, 2013. The maps illustrate flood-zone designation, base flood elevation and date. Special flood hazard areas are also designated.

The maps are available in the Westport Planning and Zoning office, Room 203 of the Town Hall, 110 Myrtle Ave., from 8:30 a.m.-3 p.m. Monday, Wednesday and Friday, and from 8:30 a.m.-4:30 p.m. Tuesday and Thursday. They can also be found at msc.fema.gov.

It is helpful to know the street address, map and lot number of the property to determine a rate.

Elevation certificates are being maintained in the Planning and Zoning Commission’s office for all new construction and substantial improvements within the special flood hazard areas.

For more information, or to ask questions, call Michelle Perillie at (203) 341-1076.—Kuehnel

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Association

It’s hurricane season—PIA can help you be prepared

Are you ready for hurricane season, which began June 1 and runs through November? Are your clients?

While the National Oceanic and Atmospheric Administration has predicted a “near-normal or below-normal 2014 Atlantic hurricane season,” recent years have shown us that hurricanes can affect the Northeast.

PIA offers resources to help educate your clients about hurricanes, storms and flooding. PIA’s Agency Marketing Tool Kit has this and many suggestions to keep your agency in front of clients and prospects. And, PIA Creative Services offers a self-mailing brochure (complete with consumer tips and a business reply card for cross-selling opportunities), a related oversized postcard and a personal-lines exposures survey, which can be personalized with your logo and contact information. These materials are updated regularly.

Also, check out the property-loss checklist brochure. To order any of these products, call PIA’s Creative Services Department at (800) 424-4244 or email snewkirk@pia.org.

For more flood resources, visit PIA’s Flood Insurance Tool Kit. And, if a storm hits your area, PIA’s award-winning Storm Info Central is available to help you.—Newkirk

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Is your agency just starting out?

Agency owners have many things to consider, and they are quantified if you are a newer agency owner and trying to learn as you go. Issues such as proper licensing, financial planning, sales, office organization, personnel management, internal workflow and technology are keys to your success.

The member-exclusive Steps to Success Tool Kit is geared toward the newer agency principal to assist them in building their businesses, but also offers tips for all agency owners, to assist you in growing your business.

To access the tool kit, log on to pia.org, click on “Member Resources,” then “Steps to Success” beneath “Agency development.” Or, if you have a specific question, simply contact PIA’s Industry Resource Center at (800) 424-4244 or at resourcecenter@pia.org.—Albright

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PIA’s Market Transition Tool Kit

Respondents told PIA in the 2014 PIA Market Trends Survey that prices are rising, but the survey results indicate that the rate at which this is happening has slowed since the prior year.

Agents also reported their remarketing efforts have increased since last year.

With insurance being a cyclical business, market trends are always key elements to insurance-agency planning and profitability. To assist association members, PIA continues to offer information to help educate their clients and agency staff on the changing market, PIA continues to update its Market Transition Tool Kit with the latest information to address these issues.

The Market Transition Tool Kit features a sample client letter and support materials about the changing market, designed to be shared with agency clients in advance of their renewal, as well as a compendium of industry information on market trends.

It also includes state-specific resources on policyholder protection laws; agency termination laws; surplus-lines requirements; and more.

The tool kit offers important resources such as:

• information on market cycles (definitions of hard and soft markets, etc.);
• latest market news (industry information and survey results assessing the changing market);
• markets/expert information to assist clients;
• customer-education resources (i.e., sample letters and articles);
• policyholder protection laws/regulations; and
• surplus-lines market rules.

This member-exclusive tool kit is available at pia.org/IRC/markettransition/.—Albright

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PIA Creative Services offers options for agency promotion

PIA Creative Services writes, designs and produces original and on-target promotional materials, always building on a fundamental understanding of the insurance industry. Comprised of PIA’s expert marketing staff, PIA Creative Services knows creativity and it knows your business.

To see what PIA Creative Services can do for you and your agency, visit pia.org/COMM/creative/, email snewkirk@pia.org or call (800) 424-4244.—Newkirk

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PIACT IRC: Interns under FLSA

The Fair Labor Standards Act is a federal law that establishes minimum wage, overtime pay, recordkeeping and youth employment standards that affect employees in the private sector and in federal, state and local governments.

While the FLSA governs many important aspects of a worker’s terms of employment, it is not all-encompassing. For example, it doesn’t set vacation, holiday, severance or sick pay, nor does it define or require meal or rest periods, holidays off or vacations. The law does not speak to or impose rules on termination rights or employment discrimination. However, the law does govern an important aspect of an employer-employee relationship—the classification of certain types of employees as hourly or exempt.

Recently, one member inquired: Are interns treated as employees under the federal FLSA and, therefore, subject to the minimum wage and overtime rules?

A. Covered and nonexempt individuals who are employed to work must be compensated under the FLSA for the services they perform for an employer. Internships in the “for-profit” sector most often will be viewed as employment unless the following criteria have been met:

• The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.
• The internship experience is for the benefit of the intern.
• The intern does not displace regular employees, but works under close supervision of existing staff.
• The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded.
• The intern is not necessarily entitled to a job at the conclusion of the internship.
• The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the act’s minimum wage and overtime provisions do not apply to the intern. As you can see, this exclusion from the definition of employment is quite narrow because the FLSA’s definition of “employ” is very broad.

For more information, go to http://1.usa.gov/1nepxQH.

More information on the FLSA, including exempt and nonexempt employees, can be found in PIA QuickSource document No. QS90722, entitled An overview of the FLSA, which can be accessed by logging on to the PIACT website and typing QS90722 in the Google-facilitated search box or by faxing a request to PIA’s Industry Resource Center at (888) 225-6935.—Albright

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Upcoming PIACT-YIP events

Springfest 2014, June 24

PIACT-YIP Springfest is around the corner, on Tuesday, June 24, 2014, at 9 a.m., at Lyman Orchards Golf Club, Middlefield. This event brings together members and industry colleagues for 18 holes of golf and an unrivaled opportunity to cultivate new business contacts. Whether you’re an avid golfer or a beginner, come out and play golf with your fellow insurance professionals at one of the largest industry golf events in Connecticut. With extended networking opportunities during dinner, even nongolfers benefit from this fun event.

Features include the following:

• 18 holes of golf with cart;
• continental breakfast;
• hole-in-one contests;
• picnic lunch;
• complimentary Lyman Orchards apple pie; and
• specialty contests and prizes.

Sponsorship opportunities are available. As a sponsor, enjoy the following benefits:

• a price break on golfer registrations;
• your company name prominently displayed throughout the course and at the picnic lunch; and
• your support noted on the PIACT-YIP website for a full year.

For more information about this event or available sponsorship opportunities, call (800) 424-4244 or email lbunce@pia.org.

Save the date: PIACT-YIP’s Golden Gala Awards Night, Sept. 25

Mark your calendar now: Thursday, Sept. 25, 2014, will be the PIACT-YIP’s Inaugural Golden Gala Awards Night! Come walk the red carpet as PIACT-YIP honors individuals and companies with a passion for insurance excellence. This industry-wide awards gala will recognize extraordinary contributions, including technological advancement, innovation, lifetime achievement and more. Details and registration information are coming soon.—DerGurahian

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National

PIA praises passage of TRIA renewal bill by Senate Banking Committee

PIA applauds the Senate Committee on Banking, Housing and Urban Affairs for unanimously approving the Terrorism Risk Insurance Program Reauthorization Act (S.2244). The bill would reauthorize the Terrorism Risk Insurance Act for seven years, which is currently set to expire at the end of 2014.

“PIA applauds the action by the Senate Banking Committee to advance the reauthorization of TRIA and urges the full Senate to follow suit,” said PIA National Executive Vice President & CEO Mike Becker. “PIA strongly supports a clean bill providing for a long-term reauthorization.”

Meanwhile, House Financial Services Subcommittee on Housing and Insurance Chair Randy Neugebauer, R-Texas, is circulating a draft framework (TRIM) among committee Republicans to reauthorize the program for just three years, with a host of significant changes aimed at phasing out TRIA over time. A hearing is expected in the House later this month.

“PIA has long advocated for a straightforward reauthorization of this important law,” said PIA National Director of Federal Affairs Jon Gentile. “We look forward to working with the full Senate and the House Financial Services Committee to reauthorize TRIA in as straightforward a way as possible. Acts of terrorism do not fit the definition of insurable risk and it remains difficult, if not impossible, for underwriters to accurately determine premiums based on sound actuarial calculations. A TRIA backstop is needed to ensure that this coverage remains available and affordable, especially for small- and mid-size commercial insureds.”—PIA National

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Company

Tower Group, subsidiaries downgraded to ‘C++’

A.M. Best has downgraded the financial strength rating to “C++” (Marginal), which remains under review, from “B” (Fair) and the issuer credit ratings to “b” from “bb” of the pooled and reinsured members of the Tower U.S. Pool and Castle Point Reinsurance Co. Ltd. Concurrently, the issuer credit rating was downgraded to “cc” from “b-” of the ultimate parent, Tower Group International Ltd.

These ratings will remain under review pending the planned merger with ACP Re, which is expected to close in summer 2014, but which has a merger termination date of Nov. 15, 2014.

According to a press release issued May 9, by A.M. Best, “The rating actions take into consideration TWGP most recent Securities and Exchange Commission 10K filing, which included an additional $63 million of prior-year reserve development, further reductions in GAAP shareholders’ equity as well as ongoing declines in statutory policyholders’ surplus and risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio. These rating factors are in addition to the diminished shareholders’ equity and reserve actions already taken by TWGP during the year.”

A.M. Best’s release further reported that these ratings reflect the group’s significantly elevated financial leverage, constrained liquidity and heightened uncertainty around Tower Group International Ltd.’s ability to repay its senior debt holders in the event its pending merger with ACP Re Ltd. (Bermuda) does not occur. According to the release, continued delays in reporting its quarterly filings was another concern noted. Tower issued a letter to its agents, accessible at http://bit.ly/1slvITB.

What this means to you

It is prudent to notify your existing customers to make them aware of this new downgrade. A sample letter is available to PIA members by logging on to pia.org, and typing QS90249 in the Google-facilitated search box. PIA also offers other resources relating to company downgrades, which can be accessed by logging onto pia.org.

Most E&O carriers’ insolvency coverage responds according to the insurance carrier’s rating at the time of placement. We recommend you contact your carrier, if you have any concerns with regard to insolvency coverage provided by your E&O carrier in the event of a claim involving Tower Group International Ltd.

All other member inquiries may be sent to PIA’s Industry Resource Center at resourcecenter@pia.org or by calling (800) 424-4244. PIA will keep you updated.—Albright

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First-quarter financial reports for 2014

American International Group Inc. reported net income attributable to AIG of $1.6 billion for the quarter ended March 31, 2014, compared to $2.2 billion for the first quarter of 2013.

The Chubb Corp. reported that net income in the first quarter of 2014 was $449 million, compared to $656 million in the first quarter of 2013. First quarter net income per share was $1.80 in 2014 and $2.48 in 2013.

Cincinnati Financial Corp. reported a first-quarter 2014 net income of $91 million, or $0.55 per share, compared with $154 million, or $0.94 per share, in the first quarter of 2013.

CNA Financial Corp. announced first quarter 2014 results, which included net operating income of $190 million, or $0.70 per share, and net income of $13 million, or $0.05 per share.

Great American Group Inc. reported a net loss in the first quarter of 2014 was $1.3 million compared to net income of $1.3 million for the first quarter of 2013.

The Hanover Insurance Group Inc. reported net income of $54.6 million, or $1.22 per diluted share, for the first quarter of 2014, compared to net income of $66.2 million, or $1.46 per diluted share, in the first quarter of 2013.

The Hartford reported core earnings of $564 million for the three months ended March 31, 2014 (first quarter 2014), up 23 percent from $457 million in first quarter 2013, reflecting improved results in all of the company’s business segments.

Kemper Corp. reported net income of $35.1 million, or $0.63 per diluted share, for the first quarter of 2014, compared to $58.4 million, or $1 per diluted share, for the first quarter of 2013.

Liberty Mutual Holding Co. Inc. and its subsidiaries reported net income attributable to LMHC of $272 million for the three months ended March 31, 2014, a decrease of $46 million or 14.5 percent from the same period in 2013.

Marsh & McLennan Cos. Inc. reported its net income was $443 million, or $0.80 per share, in the first quarter of 2014. This compares with $413 million, or $0.74 per share, in the prior year.

Progressive reported that its net income was up 4 percent to $321.3 million, or $0.54 per share in the first quarter of 2014, from $308.6 million, or $0.51 per share in the first quarter of 2013.

Selective Insurance Group Inc. reported its financial results for the first quarter ended March 31, 2014. Net income per diluted share was $0.31, compared to $0.38 in 2013, and operating income per diluted share was $0.23, compared to $0.36 in 2013.

The Travelers Cos. Inc. reported net and operating income of $1.052 billion, or $2.95 per diluted share, for the quarter ended March 31, 2014, compared to net income of $896 million, or $2.33 per diluted share, and operating income of $887 million, or $2.31 per diluted share in the prior year quarter.

Willis Group reported net income of $246 million or $1.35 per diluted share in the first quarter of 2014. This compares to net income of $219 million, or $1.24 per diluted share, in the year ago period.—Czupryna

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Trends

ISO/PCI analyze 2013 p/c insurers’ performance

The Insurance Services Office Inc. and the Property Casualty Insurers Association of America published a press release on private U.S. property/casualty insurers’ performance in 2013.

The insurers net income after taxes grew to $63.8 billion in 2013 from $35.1 billion in 2012, with insurers’ overall profitability as measured by their rate of return on average policyholders’ surplus climbing to 10.3 percent from 6.1 percent. At 10.3 percent, insurers’ overall rate of return had risen to its highest level since the 12.4 percent for 2007. Insurers’ pretax operating income—the sum of net gains or losses on underwriting, net investment income, and miscellaneous other income—rose to $64.3 billion in 2013 from $35 billion in 2012. The combined ratio—a key measure of losses and other underwriting expenses per dollar of premium—improved to 96.1 percent for 2013 from 102.9 percent for 2012.

The swing to net gains on underwriting is attributable to premium growth and a drop in net losses and loss adjustment expenses, but were partially offset by increases in underwriting expenses and dividends to policyholders.—Corbin

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