Simple Approach On Complex Coverages

If youve ever come across Peter Taffae of the wholesalere-perils.com at an industry meeting, its likely that he was theredelivering a sermon about the perils of cyberspace.

Even at a recent seminar on the subject of directors andofficers liability insurance, the aggressive cyberinsuranceevangelist managed to make his way onto the program as the solepresenter on the topic, “cyber liability and property insurance”atopic that has little to do with D&O insurance.

In fact, Mr. Taffae is as well versed in thespecifics of D&O, professional liability and employmentpractices coverage as he is in emerging cyberinsurance products.But when he sits down to talk about his company, a wholesalebrokerage specializing in all those lines, its not the need forcomplex coverage thats on his mind. Instead, he centers on simplemessagesdelivery, follow-through and customer satisfaction.

“Back when we were retailers, we used to think to ourselves, Ifwe treated our clients like the wholesalers are treating us, wed beout of business,” Mr. Taffae said. He explained that while part ofthe concept for e-perils.com was to create a wholesaler narrowlyfocused on coverages for electronic perils and professional lines,the real vision was to create one dedicated to service.

“There was a huge void in the wholesale segment for expertiseand quality service,” he said, pointing to insurance policydelivery as one area where wholesalers consistently “drop theball.” Their clients often have to wait six-to-eight months for apolicy, he said.

“Policy delivery is a huge thing. We deliver 82 percent of ourpolicies within 45 days of the effective date,” he said. “We spenda lot of money on that,” he said, noting that one of the companysfive employees spends nearly 80 percent of his time on qualitycontrol.

The firm also makes use of technology to enhance its qualitycontrol initiative, he said. “We send acknowledgments within threehours,” he said, indicating that high-speed technology is also usedto move submissions into underwriters hands.

“When I was a retailer, months and months would go by and youwould never see a policy. Theyd take forever,” said WayneBernstein, another e-perils team member in a separate interview.For Mr. Bernstein, working at e-perils.com has meant an opportunityto apply a retail agents mindset to a wholesale operation.

“Dealing on the retail end, you need to be a little moreattentive to a client that does a tremendous amount of businesswith you. You have to live and die by that,” he said. “On thewholesale end, you have a lot of variety because youre not onlydealing with one client. Youre dealing with different types ofaccounts for different people,” he said.

The detail-oriented former retailer says hes found a comfortablehome at one-and-a-half-year-old e-perils.com because “I can providethe same kind of service that I provided on the retail side to ourclients here.”

Both men say they encourage retail clients to have highexpectationsand aim to meet or beat those expectations.

“We say, Were going to call you back and we call back. Or wesay, Were going to have a quote by such and such and we do,” Mr.Bernstein said.

Indiana retailer Hugh McGowan Jr. confirms the level of servicehe has received from e-perils as a result of a phone call.

“All of a sudden I had this guy hopping on a plane and flyingout from Los Angeles,” said Mr. McGowan, the vice president ofMcGowan Insurance Group, a 71-year-old property-casualty agency indowntown Indianapolis.

Mr. McGowan, the past chairman of the Independent InsuranceAgents of Indiana Young Agents committee, said his call wasinitiated by a seminar at the groups May 2000 conference. Afterhearing a presenter talk about how cyberinsurance was becoming morenecessary, he asked the speaker about a client he hadanInternet-based bank.

The speaker recommended Mr. Taffae, prompting Mr. McGowan tomake a phone call because “I wanted someone I could talk to aboutcyberinsurance.”

“It wasnt like we have a significant book of business” or along-standing relationship. “I told him our story and he took aleap of faith and flew out to Indianapolis. He learned about us.And he learned about our insured,” Mr. McGowan said.

At the end of the day, the insured chose not to buy acyberinsurance policy, but Mr. Taffae talked to them extensivelyand explained it in simple terms, Mr. McGowan said. Insurance isnot the only way to address risk, he said.

The fact that the client today has “the same policies they hadbefore I met Peter” doesnt make the story any less compelling forMr. McGowan, who now uses e-perils for some of his other clientsD&O and bond needs.

Mr. Taffae had “the ear of all the insurance markets you wouldwant” and the willingness to explain the “good story” of Mr.McGowans insured to many of the underwriters that he hadrelationships with. He was also able to “explain to our insured whythey couldnt get some coverage,” Mr. McGowan added.

Mr. Taffae and Mr. Bernstein count their successes, not in termsof the number of policies theyve bound, but the retailerrelationships theyve built and a dogged determination to keeptrying new approaches for clients, even if the odds are stackedagainst them.

“Nobody ended up wanting to write” an EPLI policy for a“gentlemens club” submission, but that doesnt stop Mr. Bernsteinfrom using the risk as an example of innovation at work.

“My initial reaction was: why would a club like that want to buythis type of insurance policy [one that includes coverage forsexual harassment claims] when theyre surrounded by that aura?” hesaid. Still the e-perils team thought up an approach that mightworkasking underwriters to consider “lasering out” the sexualharassment and leaving coverage for wrongful termination anddiscrimination.

“We don't take a traditional approach on very difficultsituations,” Mr. Taffae said, describing solutions ranging fromretroactive D&O coverage for bankrupt e-tailers to“evergreens”noncancellable D&O and E&O policies for futureyears.

He also recalled designing an “option plan” for a client worriedabout the renewal of a tough D&O risk. “We had an underwritermake a binding quote [and] we were able to hold it open for fourmonths” in return for a small option premium, he explained.

“The client wanted to continue his relationship with the currentcarrier, but was also very concerned about his expiring carrier'sinterpretation of the risk at renewal. So he was willing to pay alittle bit of money to have an option available to him at renewal,”Mr. Taffae said.

“People initially come to us as a last resort. It happens almostdaily. While we'd prefer they come to us first, we look at that asan opportunity,” he continued.

With underwriter relationships going back 20 years, e-perils.comboasts a hit ratio in the high-70s. “We get right to the chase.Theres no educational process. We have to know what their appetiteis. Its our job,” he said.

Mr. Taffae, who over the course of his career spent eight yearswith retailer Marsh and two with specialty insurer Chubb, willpoint to e-perils.coms relationships with 100 insurance companymarkets as one measure of the firmss success.

Operating in the black just 14 months after opening its doors isanother milestone for the company and its investor partner,Worldwide Facilities, a 25-year-old wholesaler writing over $100million in premiums.

But for Mr. Taffae, a more important measure of success is a 97percent retention rate. “The 3-to-5 percent that we don't renewarise because of things beyond our controllike mergers orbankruptcies,” he said. “That tells us our approach isworking.”

Mr. Taffae wouldnt be coaxed into revealing the companys successin terms of revenue dollars, but did say e-perils.com has 1,500retail broker relationshipshe calls them “partnerships”and that thefirm now does business in 34 states.

The employees at e-perils.com are partners also, he says. “Noone has titles. Weve tried to make it a team and not a hierarchicalsituation. Were all equal. We make decisions in consensus,” hesaid.

So whats with the name?

“We think it's a great name and a lot of people like it, but inmany ways it's misleading. We put more of the emphasis on the wordperils than the e,” highlighting the staffs expertise in D&O,E&O, EPLI and intellectual property coverage, in addition tocyberinsurance.

As for the “dot-com” part, he said, the company has over 70applications on its web site that retailers can download and printor forward directly from the site to a prospect or client. The sitealso has educational information, including cyber-definitions,claims examples and articles that retailers can use when they talkto prospects. In addition, Mr. Bernstein puts together a monthlynewsletter thats e-mailed to retail partners, extracting andreporting recent news on management, cyber-liability andprofessional liability coverages.

The two men also reported that e-perils.com is evaluating aquote and bind distribution mechanism. If its launched, Mr. Taffaesaid, Quote N Bind will be a way to buy coverages over the Internetfor very safe and small risks.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, November 12, 2001.Copyright 2001 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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