Tag Archives: insurance professional

Are You Telling a Good Story?

Think back to the last time you listened to a great story. There was a fantastic cast of characters, breathtaking scenery and, of course, a plot line that hooked you. For a brief moment, you were there, right in the middle of it, living the story.

Each time a successful salesman sit downs with a potential customer or client, he weaves together a story in which the product or service has already become an integral part of the listener’s life. The customers, through the picture painted by the salesman’s words, soon realize how beneficial this particular product or service could be and start to wonder how they existed without it for so long.

Does this sound like some sort of trick?    

Does it seem like some sort of mind game played on unsuspecting victims? 

No. By painting a picture with words, by telling a story rich in substance, the insurance professional accomplishes a number of things. First, he helps to develop the conversation with the potential client. By offering details, and making sure that everyone is seeing the same picture, he can see where miscommunication may occur. Also, the potential customer is more likely to think of more detailed questions to ask to help fill out the remaining part of the picture.

Remember that people make the connection with an item or a service not through rational thought but through emotion. Sure, a potential client needs to know the good points, the bad points and the mechanics of how something is going to work, but the final decision is greatly influenced by how he feels about something.

Does your product or service instill confidence? 

Does it feel familiar? 

Does it cause excitement? 

All these feelings and emotions can help make the sales process a success.

So, how do you craft an emotionally engaging story?

First, it is important that you, as the storyteller, believe and are emotionally connected to your story. Remember, a client will hear the sincerity in your voice, or the lack thereof. This is where the knowledge and personal use of your service or product can be so important. By using your own experience, or that of other customers, you can easily convey a believable story that extols the virtues of your product or service.

Second, a great story has structure. We have all heard stories that seemed to go on forever, with no point in sight. We have also all heard stories that jump around so much we tune out because we are lost. There are different ways to structure a story. One is called a “hero’s journey” model. The hero’s journey follows a departure, an initiation and a return.

Steve Jobs was a master storyteller. Watch one of his keynote speeches and observe how he weaves a story throughout his entire presentation. Case in point: his Stanford commencement speech in 2005. (Text is here. Video is here.) His first story connects the dots of his childhood to his success. The second story tells about his loves and losses. The final story is about death. He really gets personal, connecting with his audience on an emotional level. You hear jeers, cheers, laughter, and when the camera pans the audience in the video you see tears. His message is to trust the process, love what you do and don’t settle. Don’t live anyone else’s life. When you listen to this speech, as well as his others… you pay attention, you listen and you feel. You are emotionally connected.

As you formulate your presentation, remember how we, as humans, communicate. Surprisingly, when a person is talking, research shows that most people only give a fraction of their attention (7%) to the words that are being spoken. Over half (55%) is given to the various pictures and images that are created during the conversation. The remaining amount of attention is allotted to the mechanics of speaking itself, such as our mannerisms and body language.

To be an effective sales person, you must engage your potential client and make the entire story memorable. Like an artist, you need to create an emotional picture with your words and bring what you are trying to communicate to life. Don’t be a stick in the mud while talking; use your hands naturally. If you feel enthusiastic about your product or service, don’t be afraid to let those around you know. Chances are the excitement that is coming from you will encourage them to take a second look at what you have.

The art of selling isn’t really about selling at all. It is about sharing a story and bringing your potential client into the creation of the next chapter. By guiding them to a vision where their success and their satisfaction is an integral part of this story, you’ll have a great chance of convincing them of what they truly need.

Are you connecting emotionally to your audience? 

When was the last time you told a good story?

Outlook For The Private Directors & Officers Marketplace

Private Directors and Officers Liability (D&O) policies are generally combined policies including D&O and Employment Practices Liability (EPL). Although they are typically marketed as Directors & Officers policies, and there are definitely D&O claims, claims frequently come from the Employment Practices Liability side of the form. Private Directors & Officers carriers find it challenging to cope with the high frequency of Employment Practices Liability claims that come with this line of business.

The premiums associated with these policies have been creeping up over the past few years, and now is an appropriate time to investigate and report on the causes. Rather than give you generalities that claims are frequent, here is some of the data that supports what the insurers are telling us.

2012 EEOC Complaints
Top Five States Total Complaints Percent Change Since 2010 2010 Total Complaints Total Population 2010*
Texas 8,929 -4.1% 9,310 25.1 million
Florida 7,940 2.1% 7,779 18.8 million
California 7,399 3.3% 7,161 37.3 million
Georgia 5,903 2.3% 5,771 9.7 million
Illinois 5,490 3.8% 5,288 12.8 million
Year Total Total Complaints – All 50 States
2012 99,412
2011 99,947
2010 99,992
2009 93,277
2008 95,402

* The population totals are included to show that the highest volume of claims generally come from the largest states.

The Equal Employment Opportunity Commission (EEOC) isn't the only regulatory body bringing employment actions against employers — state agencies like the California Department of Fair Employment and Housing (DFEH) are filing cases as well. In its 2010 annual report, the California DFEH notes that they filed between 17,500 and 20,000 cases each year between 2007 and 2010 (2011 and 2012 numbers are not yet available). The department also estimates that the average post-accusation case settled for more than $40,000.

Let's put this into perspective. The Betterley Report: Employment Practices Liability Insurance Market Survey 2012 (December 2012) estimates the total Employment Practices Liability market at around $1.6 billion in premium. Just for discussion purposes, let's assume that the Department of Fair Employment and Housing estimate is applied to all claims. At $1.6 billion in total premiums collected, the insurance marketplace could handle 40,000 claims and break even (40,000 claims X $40,000 average settlements = $1.6 billion). Considering we know there are more than two times that many EEOC complaints, plus tens of thousands of other state agency claims, we know that the volume of insured claims exceeds 40,000 per year.

Since we know that there are more than 40,000 claims a year, the second half of the debate is what these claims cost. The Department of Fair Employment and Housing has their estimate for out of court settlements at over $40,000. Jury Verdict Research, a publication that puts out jury trial settlement trend data, indicated in its 2011 report titled, “Employment Practices Liability: Jury Award Trends and Statistics,” that the average awards range from $600,000 for discrimination claims to as much as $790,000 for wrongful termination claims. Their median award range is from $200,000 to $260,000 based upon their research. This data implies that the average claims are going to be far greater than $40,000 to settle on a nationwide basis. These reports only show us awards, which do not include the defense costs paid to get to the award stage.

If we take this one step further and assume that the average claim will cost approximately $120,000 — though the Jury Verdict data tells us it's higher — then the amount of claims the insurers could handle in a year, and possibly break even, is more like 13,333 claims per year ($1.6 billion total annual premium divided by $120,000). If we factor in underwriting expenses and other transactional costs, then even less money is available for defense costs and settlements.

So, what's the bottom line? The insurers have been struggling to make a profit on this line of business for many years. While competition for market share has continually lowered the premiums they could charge and still write business, we've gotten to a crossroads and blown right through the stop sign. The pricing has been creeping up over the past three to four years, and we are still far from a corrected market. The dilemma for insurers has been how to adjust their pricing and terms in a way that still provides a valuable policy for insureds. The responses have varied from insurers pulling out of a specific region (like southern California), gradual elevation of retentions, increasing premiums, reducing limits available and declining risks with specific employee count ranges.

Bertrand Spunberg, Senior Vice President, Hiscox USA: “We have strived to maintain 'sustainable underwriting' since we opened up in 2009, even when the market was still very soft. That discipline is now starting to pay off as other insurers are adjusting their rates and retentions up to a point that's more comparable to what we have been all along. We are seeing some insurers revising their appetites or pulling out of jurisdictions and segments altogether. Other carriers are taking a portfolio view of the business, making them more prone to declining rather than underwriting around account-specific exposures. This creates an environment that is increasingly difficult to navigate for both insureds and brokers. EPL claims have been leading the way, but we are also seeing D&O claims arising from financial issues, such as bankruptcy. In response to that, we have seen insurers indicate that they would be looking to limit or even remove entity coverage.”

Mr. Spunberg's comments should serve as a warning to all brokers. While pricing and retention changes are typically obvious changes to renewal terms, you need to pay extra attention to any other changes in coverage terms. On some policy forms, the inclusion of entity coverage may only be signified by an “X” in a box on a declarations page or quote letter. It could be easy to miss the removal of this subtle notation. Also watch out for changes in endorsement numbers and titles. You may find an insurer substituting an endorsement with the same title as previous years but adding a new clause that removes or restricts coverage from what you've come to expect.

Steven Dyson, Executive Vice President, ERisk Services, LLC: “We track a lot of data on our insureds and claim performance. Rather than penalize all insureds in every state, we have evaluated where our claims are coming from and adjusted our rates in a targeted fashion. Difficult venues like southern California, Illinois, southern Florida and metro New York, are getting more rate adjustments than less litigious parts of the country. We drill down to the county level when evaluating the performance of our book and adjust accordingly.”

As brokers, we appreciate ERisk's targeted approach. As insurance professionals, it can be a difficult message to give to insureds that an underwriter is penalizing them for the poor performance of another risk, or that the underwriters may have misunderstood the risks of the businesses they underwrite.

No insured likes to see their premiums rising. It helps when underwriters are doing their best to stabilize the marketplace and articulate the logic behind rate changes.

Joseph Casey, President, ACE Westchester: “At Westchester, we have seen a significant increase in the number of Private Company D&O submissions, apparently based in part by some markets reacting to an increase in Employment Practice Liability claims. The increase in EPL litigation and the corresponding rise in defense costs require, more than ever, greater underwriting discipline. However, the right carrier, with an expertise in EPL and a flexible approach, has the ability to look at the type of company, the jurisdictions in play and other factors unique to the insured, and provide suitable coverage.”

Our wholesale-dedicated markets like ACE Westchester and ERisk are less prone to some of the broad brush underwriting approaches taken by many of the standard markets. The wholesale markets are always looking for a way to differentiate and uncover risks that are neglected or underserved by the standard markets. When the retail-focused markets head out the door, our markets are usually running in; that appears to be what we are currently experiencing. We've had a sustained period of underpricing in the private D&O/EPL area as insurers compete for market share. With the loss frequency where it is and expenses rising, it is indeed time to reevaluate. While the wholesale markets are noticeably more competitive in a challenging market, they also do a great job when things are going smoothly.