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1 April 27, 2015 No In This Issue... WCIRB: Calif. Comp Insurers Charged Average Rate Last Year of $2.93 Per $100 of Payroll CEA Gets CDI OK to Decrease Rates 10% as of Next Year, Add Various Insurance Options Survey: 70+% of Agents at Least Very Satisfied with Top Personal-, Commercial-Line Carrier Steenland to Become Next Chairman of AIG July 1, Seventh Since 2005 Verizon: Greatest Security-Breach Risk for Any Company is Phishing (Links Sent in s) Consumers Rate Firms from 20 Industries, Including Insurers, on Experience, Trust, Likelihood of Forgiving Mistakes A.M. Best Affirms Financial-Strength Rating of Chubb s P/C Subsidiaries Monterey Man Who Defrauded Broker-Agent, Clients Sentenced to 180 Days in Jail, Five Years Probation ************************************************************************************************************* WCIRB: Calif. Comp Insurers Charged Average Rate Last Year of $2.93 Per $100 of Payroll Workers compensation insurers in California charged an average rate last year of $2.93 per $100 of payroll, about 2% greater than the average rate of $2.86 in 2013 and 40% more than the average of $2.10 in 2009, according to projections by the state Workers Compensation Insurance Rating Bureau based on carrier data through Dec. 31. The rates reflect all rating-plan adjustments except deductible credits, retrospective rating plan adjustments, terrorism charges and policyholder dividends, the bureau noted. Other projections by the WCIRB included the following: Calendar-year written premium continued to climb, rising to approximately $16.5 billion in 2014, approximately 11% more than the written premium of $14.8 billion reported for 2013 and 88% above the written premium of $8.8 billion in Total ultimate losses and allocated loss-adjustment expenses for accident-year 2014 were $12.6 billion, about 4% greater than the projection of $12.1 billion for AY 2013 and 27% more than the projection of $9.9 billion for AY The ultimate loss and ALAE ratio for AY 2014 was 77.9% compared with 84% in AY 2013, 95.5% in AY 2012, 105.3% in AY 2011 and 110.2% in AY The downward trend in the last several accident years is primarily because of increased premium levels and low claim-severity growth during the period. The combined ratio for AY 2014 is estimated at 103% vs. 109% in AY 2013, 121% in AY 2012 and more than 140% in AYs 2009 through Of the AY 2014 figure, 61% is attributable to the indemnity- and medical-loss ratio and 42% to the loss-adjustment and other expense ratio. The decrease in recent years is primarily because of increasing premium and relatively low claim-severity growth in 2014.

2 The preliminary estimate of the calendar-year 2014 combined ratio is 105% compared with 109% in CY 2013, 114% in CY 2012 and 122% in CY 2011, but 2014 is the seventh consecutive year with a combined ratio of more than 100%. The indemnity-claim frequency for AY 2014 is 1.2% greater than the frequency for AY 2013 and 12% more than for AY The increase is largely attributable to rises in claims for cumulative injuries, involving late-reported indemnity losses, for injuries to multiple body parts and in the Los Angeles area. The average severity of an indemnity claim last year was $83,654 vs. $82,884 in 2013, $83,586 in 2012 and $84,341 in 2011; 2014 marked the sixth straight year the average was greater than $82,000. The average indemnity-related cost of such a claim last year was 5% greater than in 2013 ($27,230 vs. $25,870), primarily as a result of SB 863 increases to permanent-disability benefits in The projected average medical cost, including medical-cost-containment-program costs, of a 2014 indemnity claim declined for the fourth straight year to $43,410 and is 10% below the projected average medical cost of $48,051 for Total statewide ultimate losses on all injuries that occurred on or before Dec. 31 is approximately $6.8 billion more than the amounts reported by insurers, an estimate that is somewhat less than prior ones because of favorable loss development in recent quarters. CEA Gets CDI OK to Decrease Rates 10% as of Next Year, Add Various Insurance Options The California Earthquake Authority will cut its rates an average of 10% Jan. 1 and introduce other insurance options after receiving approval from the California Department of Insurance. In addition, beginning next year insureds will have the option of deductibles of 5%, 10%, 15%, 20% and 25% instead of the current 10% and 15%. The CEA will also offer new hazard-mitigation discounts ranging from 10% to 20% for homes that have been retrofitted to standard. Finally, the CDI approved the following optional coverages that will be available next year: Higher limits for personal property and loss of use/additional living expenses. New endorsements for exterior masonry veneer and breakable personal property. Increased limits for chimneys. New coverage for energy efficiency and environmental-safety upgrades. Survey: 70+% of Agents at Least Very Satisfied with Top Personal-, Commercial-Line Carrier More than seven out of 10 independent agents are either extremely satisfied or very satisfied with their top commercial- and personal-line insurers, but some producers are interested in getting appointments with additional carriers, according to a survey of approximately 2,200 producers by Channel Harvest Research that was sponsored by Insurance Journal. The survey found 82% of respondents were extremely or very satisfied with the personal-lines insurer with which they place the most business and 73% had same levels of satisfaction with their top commercial-line carrier. Other findings by Channel Harvest Research included: Agents in general gave their top insurers the highest grade for financial strength and the lowest on social media support. 69% of respondents indicated their firm s revenue was greater last year than in 2013, 15% said there was little change and 9% reported a decrease. 74% are interested in adding new carriers this year; 32% are very interested. Only about 20% of agents are very or somewhat interested in adding any of a list of 10 new products such as various coverages or financial or retirement planning. 73% work for a firm that is not part of an agency aggregator such as a cluster or network; 94% of these agents indicated they are unlikely to join an aggregator within a year. Of the 27% who are part of an aggregator, 87% said they are unlikely leave within a year; 89% of agents whose firms are part of an aggregator said they believe their aggregator provides a lot or some value-added services and support. Of the agents interested in targeting a niche or market segment, professionals and millennials were the most commonly cited.

3 Steenland to Become Next Chairman of AIG July 1, Seventh Since 2005 AIG named Douglas Steenland, 63, chairman effective July 1, when he will become the seventh man to hold that post since Maurice Greenberg was ousted in Steenland, formerly CEO of Northwest Airlines Corp., a position he left when Northwest merged with Delta Air Lines, will replace Robert Steve Miller, who like Steenland is not an executive of AIG. Miller will seek re-election to the board at AIG s annual meeting next month. Both men joined the board in June Steenland is chairman of the board s regulatory, compliance and public-policy committee. Verizon: Greatest Security-Breach Risk for Any Company is Phishing (Links Sent in s) Business owners concerned about security breaches of their online records should be most worried about which of the following: a multi-faceted attack by a hacker, poorly configured systems or an employee clicking on a link in an . The last one, and it s not even close, at least according to a study by Verizon Communications that found more than two-thirds of 290 electronic espionage cases it examined last year involved trick s or phishing. Verizon found that because people are so likely to click on tainted links or attachments, sending phishing s to no more than 10 employees will enable hackers to access to a company s records 90% of the time, Reuters reported. The Verizon study also concluded that an examination of security-breach-related insurance claims found that while costs rise based on the number of records compromised, the increase flattens out. For example, Verizon predicts the loss of 100,000 records would cost an average of $475,000, while the expense from the loss of 100 million records would be about $8.85 million, according to Reuters. Consumers Rate Firms from 20 Industries, Including Insurers, on Experience, Trust, Likelihood of Forgiving Mistakes How do top property/casualty insurers rate on customer experience and trust as well as the likelihood of forgiveness if a firm made a mistake? Research and consulting firm Temkin surveyed about 10,000 consumers to get their opinions on 293 companies in 20 industries, including 15 insurers. To assess experience and trust, respondents were asked to evaluate their recent interactions with companies based on success, effort and emotion, each on a seven-point scale. Below are the rankings by percentage for the carriers that were part of the survey. Except where noted by an *, the ranking was a tie with at least one other company. Experience 52. USAA 75% 100. State Farm 71% 105. Geico 70% 119. The Hartford, Progressive 68% 136. Allstate 66% 168. AAA 63% 187. Nationwide, Travelers 62% 199. American Family, Liberty Mutual 61% 218. Farmers 59% 226. MetLife 58% 264. Amica 52% st Century 51% Insurer Average 65% Trust 6. USAA* 77% 26. State Farm 68% 42. The Hartford 65% 63. AAA 63% 70. Geico 62% 93. American Family 60% 111. Progressive 59%

4 117. MetLife 58% 129. Allstate, Amica 57% 142. Farmers, Nationwide, Travelers 56% 189. Liberty Mutual 52% st Century 43% Insurer Average 61% Forgiveness 2. USAA* 60% 18. Amica 49% 76. American Family 40% 116. State Farm 37% 130. AAA 36% 146. Allstate, Geico 35% 162. Farmers 34% 193. MetLife 31% 204. The Hartford 30% 213. Progressive 29% 234. Nationwide 26% 243. Liberty Mutual 24% st Century 22% 282. Travelers* 17% Insurer Average 35% A.M. Best Affirms Financial-Strength Rating of Chubb s P/C Subsidiaries Rating, Outlook: A++, stable Positive Rating Factors: superior risk-adjusted capitalization; excellent underwriting and overall operating performance; sustainable competitive advantages in its standard and specialty commercial lines and upscale personal lines, based in part on its consistent outperformance of industry peers; comprehensive and proactive enterprise risk management; disciplined underwriting practices; strong franchise recognition; position as a leading insurer in the U.S.; well-diversified book of business. Negative Rating Factors: challenging market conditions; catastrophe and other weather-related losses that have had impact on underwriting performance in four of the past five years, adding about six, nine, 10 and four points to the company s combined ratios for 2010, 2011, 2012 and 2014, respectively; adverse development of loss reserves for asbestos and environmental liabilities. Subsidiaries Licensed and Active in California: Chubb Indemnity Insurance Co., Chubb National Insurance Co., Executive Risk Indemnity Inc., Federal Insurance Co., Great Northern Insurance Co., Pacific Indemnity Co., Vigilant Insurance Co. Monterey Man Who Defrauded Broker-Agent, Clients Sentenced to 180 Days in Jail, Five Years Probation A 46-year-old resident of Monterey was sentenced to 180 days in jail and five years probation and ordered to pay more than $39,000 to victims of his insurance fraud. Ernie Morris pleaded guilty to two felony counts of theft of funds from a broker-agent and one misdemeanor count of identity theft. Morris, who neither is nor was licensed as an agent or broker in California, sold workers compensation and private-passenger auto coverage to multiple clients and did not remit the premium to insurers, according to California Department of Insurance investigators. The CDI began probing Morris after receiving a complaint from FirstComp Insurance Agency. Morris, after initially claiming to be licensed, partnered with another person who subsequently became a licensed producer, according to the Monterey Herald, which did not identify Morris cohort. Morris claimed to be his licensed partner when selling the comp and auto policies, the premium for which he diverted to his personal account and a business account he controlled, the newspaper reported.

5 As part of his probation, Morris won t be allowed to gamble or be anywhere in which gambling takes place, and he cannot wager money on the Internet or via social media, according to the Salinas Californian. In addition, his probation will preclude him from being employed in a position with fiduciary responsibility unless he obtains a bond, becomes licensed and notifies his employer of his conviction, the Californian reported. ********************************************************************************************** WIAA respects your privacy and does not share or sell your address to anyone. You are receiving this because your company is a member of WIAA. Your was supplied to us in order to send you our newsletter. If you wish to be removed from this mailing list, you may do so by sending an to bulletin@wiaagroup.org and type Remove Me in the subject line. Remember, in doing so you will no longer receive this valuable newsletter. To reach us by phone, call Western Insurance Agents Association (WIAA). All rights reserved. Reproduction or quotation whole or in part without written permission is prohibited.