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Insurance Executive

Ten Questions for Dan Olmsted

A private client executive with Ironshore looks for strong building codes and building code enforcement when underwriting high net worth homes.
By: | February 10, 2017 • 7 min read

Ironshore recently achieved approvals to provide private client business in the key New York market. Risk & Insurance® talked to Dan Olmsted, New York-based senior vice president for the private client group about this development and his approach to the segment.

R&I: How long has Ironshore been writing the private client business, Dan?

Olmsted: Ironshore has been in the high net worth sector of the personal lines market since I joined in 2010. We wanted to approach the sector from a specialty angle first and then expand to the admitted capability.

R&I: We note that Ironshore is writing private client insurance on an admitted basis in five states — most recently New York — with plans to expand the business.  Do you have a goal for how soon the coverage will be more broadly available?

Olmsted:  In 2010, we started to offer coverage geared toward homes valued at a million dollars and higher on a specialty basis. Now we are underwriting in five states with the same million dollar valued homes and higher threshold on an admitted basis. What I am focused on is gaining traction in these East Coast states as well as contiguous territories geographically that make sense.

We recently received approval in New York, which was important because it filled out our presence in the tristate area, including Connecticut, New Jersey and Pennsylvania. That’s notable because most brokers and producers write on a geographic territory or regional basis. We are also looking at East Coast centers of business and affluence. We have or will have the capabilities to write around New York, Atlanta, Washington. DC., Boston and Philadelphia.

R&I: Recent reports outline the threat to high-end residential properties on the coasts due to rising seas and climate change. How is Ironshore working with clients to mitigate and transfer the risk of this threat?

Olmsted: I look at two aspects of coastal risk. One is the macro, which I think you are referring to. Then there is the micro, an actual home, whether I’m going to write it and what the terms and conditions are going to be.

We model every home before we write it. We consider wind and storm surge and flooding for the property and tailor the product accordingly. We consider the individual characteristics of the home over a 12 month period. We also assess what mitigation measures might be in place that might address any issues and also how it models.

Dan Olmsted,senior vice president for the private client group, Ironshore

On a macro level, I do tend to be more aggressive in writing where there are strong building codes and strong enforcement of those codes. One organization that I reference is the Insurance Institute for Business & Home Safety. They rank on a regular basis each state for coastal hurricane peril.

They rank the quality of the building codes for the state as well as the quality of the enforcement of the building codes. Florida does very well. They have a 95 percent rating on a scale of zero to 100. Their ranking is so high because they have strong building codes and they enforce them.  I can look at a South Florida location and if I know the year it is built, we can capture a good amount of information.

R&I: That’s interesting. Are there some states in the Northeast, for example, that are stronger than others?

Olmsted: Yes, Virginia and New Jersey have pretty good to very good building codes and enforcement. It’s an evolving environment. As we learn more, we can determine and refine our approach as states amend and improve those codes.  Equally important is making sure states are enforcing codes and that they are not just written on a sheet of paper.

We model every home before we write it. We consider wind and storm surge and flooding for the property and tailor the product accordingly. We consider the individual characteristics of the home over a 12 month period. We also assess what mitigation measures might be in place that might address any issues and also how it models.

R&I: In the case of individual home owners, what are you asking for in terms of mitigation or protection?

Olmsted: In the case of flood, there’s the elevation issue and there may not be anything we can do about that. In terms of the wind exposure, you are looking for hurricane glass, the type of roof, and the pitch and the type of attachment of the roof to the dwelling to determine whether all openings are protected.

R&I: Is that something homeowners are paying more and more attention to?

Olmsted: Yes. Modeling of a residence has become more and more important. The roof, the attachments and the type of hurricane glass can all make a difference in how a home will model. We definitely see a correlation between the steps in mitigation and what ultimately might be the loss in an event.

R&I: It seems to us that high net worth clients highly value umbrella coverage. Having too many policies with too many renewal dates is a headache. How do you view the appetite among high net worth clients for this type of coverage?

Olmsted: There are several different modules that the high end customer needs. A lot of it is built around the property, the home, jewelry, fine art, etc. And then there is the general liability exposure, particularly with a high net worth individual because they can often become a target, or be perceived as a target for a liability loss. People often don’t realize how much they have at risk in terms of liability.

High net worth homeowners do a lot of things to protect their homes and financial investments. For example, a bad accident on a snowy day could wipe out a lot of their wealth if liability is at stake. I say to people, your spouse calls you and says I hit something. The next question is ‘hit what?’ a mailbox or god forbid someone, then there is potential for a much higher exposure.

It makes sense for homeowners to buy as much umbrella protection as they can. People can lose not only what they have today but what they might earn in the future. I always encourage my insureds to buy as much as they feel they can afford.

R&I: What do you see as the key pain points for high net worth clients that a savvy underwriting company that seeks market share would be wise to address?

Olmsted: The general pain point in the high net worth space compared to the non-high net worth space is that clients expect outstanding claims service.  We emphasize claims servicing for taking care of our clients.

In terms of the underwriting process, we provide homeowners more flexibility. There are a lot of rules of thumb that have developed over time in our industry. Just take one for example. If you secure coverage for a million-dollar home, companies will offer a quote which automatically includes 10 percent of that amount will cover other property structures. Seventy percent of that amount would be for contents and so on.

Those are all nice averages but people have different needs. Someone might be in a $5 million home but might not have $3.5 million in contents, particularly if they schedule the contents, collectibles and other belongings.

High net worth homeowners do a lot of things to protect their homes and financial investments. For example, a bad accident on a snowy day could wipe out a lot of their wealth if liability is at stake. I say to people, your spouse calls you and says I hit something. The next question is ‘hit what?’ a mailbox or god forbid someone, then there is potential for a much higher exposure.

We offer insureds the proper coverage amount with the flexibility to buy what they need for the other coverages. A lot of times people will say, well I don’t have what you are assuming I have for contents. Or I have multiple homes and I don’t need loss of use coverage. So, Ironshore offers product flexibility for each insured.

Another area that concerns me is the whole inspection process, which has developed over the last 30 years. The problem is that people are busy. Both couples might work and don’t have time to schedule a walk through for their house. Some homeowners have privacy concerns. To do a good job for the client, we have to walk through the house and conduct a proper appraisal. There are circumstances where there is virtual information online or the residence was inspected two or three years ago. We can then access that information.

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If possible, we try to conduct a virtual inspection. The goal is to get the right value for the client upfront. There is nothing worse than a homeowner getting a quote before an inspector walks through their home.  Two weeks later, they get an increase in their home valuation and a resultant increase in the premium.

R&I: Can you share with us, Dan, your history in the private client area? How did you first come to work in this space?

Olmsted: Initially, I worked at ISO in  product development. I later joined Atlantic Mutual as they were developing their high end product, called the Atlantic Master Plan, which was probably the first true package policy for high end clients. I worked at Atlantic Mutual for 25 years, serving as president and eventually CEO.  And then we sold the business in 2008 to ACE. I joined ACE at that time and then moved to Ironshore in 2010.

R&I: What about work with the private client business do you find most interesting and challenging professionally, Dan?

Olmsted: The thing I like best is that while homeowners try to control the insurance costs, the service component is so important in the product underwriting and the claims handling within the high net worth sector. As an underwriter, you can be creative. You can develop new coverage ideas or new ways to deliver claims servicing efficiencies.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Pharma Under Fire

Opioids Give Rise to Liability Epidemic

Opioids were supposed to help. Instead, their addictive power harmed many, and calls for accountability are broadening.
By: | May 1, 2018 • 8 min read

The opioid epidemic devastated families and flattened entire communities.

The Yale School of Medicine estimates that deaths are nearly doubling annually: “Between 2015 and 2016, drug overdose deaths went from 33,095 to 59,000, the largest annual jump ever recorded in the United States. That number is expected to continue unabated for the next   several years.”

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That’s roughly 160 deaths every day — and it’s a count that’s increasing daily.

In addition to deaths, the number of Americans struggling with an opioid disorder disease (the official name for opioid addiction) is staggering.

The National Institute on Drug Abuse (NIDA) estimates that 2 million people in the United States suffer from substance use disorders related to prescription opioid pain relievers, and roughly one-third of those people will “graduate” to heroin addiction.

Conversely, 80 percent of heroin addicts became addicted to opioids after being prescribed opioids.

As if the human toll wasn’t devastating enough, NIDA estimates that addiction costs reach “$78.5 billion a year, including the costs of health care, lost productivity, addiction treatment, and criminal justice involvement.”

Shep Tapasak, managing principal, Integro Insurance Brokers

With numbers like that, families are not the only ones left picking up the pieces. Municipalities, states, and the federal government are strained with heavy demand for social services and crushing expenditures related to opioid addiction.

Despite the amount of money being spent, services are inadequate and too short in duration. Wait times are so long that some people literally die waiting.

Public sector leaders saw firsthand the range and potency of the epidemic, and were among the first to seek a legal reckoning with the manufacturers of  synthetic painkillers.

Seeking redress for their financial burden, some municipalities, states and the federal government filed lawsuits against big pharmaceutical companies and manufacturers. To date, there are more than 100 lawsuits on court dockets.

States such as Ohio, West Virginia, New Jersey, Pennsylvania and Arkansas have been hit hard by the epidemic. In Arkansas alone, 72 counties, 15 cities, and the state filed suit, naming 65 defendants. In Pennsylvania, 16 counties, Philadelphia, and Commonwealth officials have filed lawsuits.

Forty one states also have banded together to subpoena information from some drug manufacturers.

Pennsylvania’s Attorney General, Josh Shapiro, recently told reporters that the banded effort seeks to “change corporate behavior, so that the industry can no longer do what I think it’s been doing, which is turning a blind eye to the effects of dumping these drugs in the communities.”

The volume of legal actions is growing, and some of the Federal cases have been bound together in what is called multidistrict litigation (MDL). These cases will be heard by a judge in Ohio. Plaintiffs hope for a settlement that will provide funding to be used to help thwart the opioid epidemic.

“From a societal perspective, this is obviously a big and impactful issue,”  said Jim George,  a managing director and global claims head with Swiss Re Corporate Solutions. “A lot of people are suffering in connection with this, and it won’t go away anytime soon.

“Insurance, especially those in liability, will be addressing this for a long time. This has been building over five or six years, and we are just now seeing the beginning stages of liability suits.” 

Basis for Lawsuits

The lawsuits filed to date are based on allegations concerning: What pharma knew or didn’t know; what it should have known; failure to monitor size and frequency of opioid orders, misrepresentation in marketing about the addictive nature of opioids; and false financial disclosures.

Opioid manufacturers, distributors and large drugstore chains together represent a $13 billion-a-year industry, meaning the stakes are high, and the pockets deep. Many have compared these lawsuits to the tobacco suits of the ’90s.

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But even that comparison may pale. As difficult as it is to quit smoking, that process is less arduous than the excruciating and often impossible-to-overcome opioid addiction.

Francis Collins, a physician-geneticist who heads the National Institutes of Health, said in a recorded session with the Washington Post: “One really needs to understand the diabolical way that this particular set of compounds rewires the brain in order to appreciate how those who become addicted really are in a circumstance where they can no more [by their own free will] get rid of the addiction than they can get free of needing to eat or drink.”

“Pharma and its supply chain need to know that this is here now. It’s not emerging, it’s here, and it’s being tried. It is a present risk.” — Nancy Bewlay, global chief underwriting officer for casualty, XL Catlin

The addiction creates an absolutely compelling drive that will cause people to do things against any measure of good judgment, said Collins, but the need to do them is “overwhelming.”

Documented knowledge of that chemistry could be devastating to insureds.

“It’s about what big pharma knew — or should have known.  A key allegation is that opioids were aggressively marketed as the clear answer or miracle cure for pain,” said Shep Tapasak, managing principal, Integro Insurance Brokers.

These cases, Tapasak said, have the potential to be severe. “This type of litigation boils down to a “profits over people” strategy, which historically has resonated with juries.”

Broadening Liability

As suits progress, all sides will be waiting and watching to see what case law stems from them. In the meantime, insurance watchers are predicting that the scope of these suits will broaden to include other players in the supply chain including manufacturers, distribution services, retail pharmacies, hospitals, physician practices, clinics, clinical laboratories and marketing agencies.

Litigation is, to some extent, about who can pay. In these cases, there are several places along the distribution chain where plaintiffs will seek relief.

Nancy Bewlay, global chief underwriting officer for casualty, XL Catlin

Nancy Bewlay, XL Catlin’s global chief underwriting officer for casualty, said that insurers and their insureds need to pay close attention to this trend.

“Pharma and its supply chain need to know that this is here now. It’s not emerging, it’s here, and it’s being tried. It is a present risk,” she said.

“We, as insurers who identify emerging risks, have to communicate to clients. We like to be on the forefront and, if we can, positively influence the outcome for our clients in terms of getting ahead of their risks.”

In addition to all aspects of the distribution chain, plaintiffs could launch suits against directors and officers based on allegations that they are ultimately responsible for what the company knew or should have known, or that they misrepresented their products or signed off on misleading financial statements.

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Shareholders, too, could take aim at directors and officers for loss of profits or misleading statements related to litigation.

Civil litigation could pave the way, in some specific instances, for criminal charges. Mississippi Attorney General Jim Hood, who in 2015 became the first state attorney general to file suit against a prescription drug maker, has been quoted as saying that if evidence in civil suits points to criminal behavior, he won’t hesitate to file those charges as well.

Governing, a publication for municipalities and states, quoted Hood in late 2017 as saying, “If we get into those emails, and executives are in the chain knowing what they’ve unleashed on the American public, I’m going to kick it over to a criminal lawsuit. I’ve been to too many funerals.”

Insurers and insureds can act now to get ahead of this rising wave of liability.

It may be appropriate to conduct a review of policy underwriting and pricing. XL Catlin’s Bewlay said, “We are not writing as if everyone is a pharma manufacturer. Our perception of what is happening is that everyone is being held accountable as if they are the manufacturer.

“The reality is that when insurers look at the pharma industry and each part of the supply chain, including the pharma companies, those in the chain of distribution, transportation, sales, marketing and retail, there are different considerations and different liabilities for each. This could change the underwriting and affect pricing.”

Bewlay also suggests focusing on communications between claims teams and underwriters and keeping a strong line of communication open with insureds, too.

“We are here to partner with insureds, and we talk to them and advise them about this crisis. We encourage them to talk about it with their risk managers.”

Tapasak from Integro encourages insureds to educate themselves and be a part of the solution. “The laws are evolving,” he said. “Make absolutely certain you know your respective state laws. It’s not enough to know about the crisis, you must know the trends. Be part of the solution and get as much education as possible.

“Most states have ASHRM chapters that are helping their members to stay current on both passed and pending legislation. Health care facilities and providers want to do the right thing and get educated. And at the same time, there will likely be an uptick in frivolous claims, so it’s important to defend the claims that are defensible.”

Social Service Risk

In addition to supply chain concerns, insurers and insureds are concerned that even those whose mission it is to help could be at risk.

Hailed as a lifesaver, and approved by the Food and Drug Administration (FDA), the drug Naloxone, can be administered to someone who is overdosing on opioids.  Naloxone prevents overdose by blocking opioid receptor sites and reversing the effects of the overdose.

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Some industry experts are concerned that police and emergency responders could incur liability after administering Naloxone.

But according to the U.S. Department of Justice, “From a legal standpoint, it would be extremely difficult to win a lawsuit against an officer who administers Naloxone in good faith and in the course of employment. … Such immunity applies to … other professional responders.”

Especially hard hit are foster care agencies, both by increased child placements and stretched budgets. More details in our related coverage.

While the number of suits is growing and their aim broadening, experts think that some good will come of the litigation. Settlements will fund services for the addicted and opioid risk awareness is higher than ever. &

Mercedes Ott is managing editor of Risk & Insurance. She can be reached at [email protected]