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2018 Quarter 4 Your NY Connection Magazine

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Published by NYIA, 2018-12-20 12:51:24

Your NY Connection - Q4 2018 Magazine

2018 Quarter 4 Your NY Connection Magazine

NYYour Connection
magazine
Fourth Quarter 2018 • Issue 24

A Brisk Walk Around the Blockchain

Considerations for the Implications of Blockchain on the Insurance Industry

FORESIGHT FOR THE FUTURE

Longtime Members Build Strong Association Foundation

THE CHANGING FACE OF
TRANSPORTATION

New York’s Photo
Inspection Law

Its Origin & Its Future

KNOW BETTER NEW YORK CONNECTIONS



10 Contents
19
FEATURES
28
37 10 Foresight for The Future
Longtime Members Build Strong
Association Foundation

19 The Changing Face
of Transportation

28 A Brisk Walk Around
the Blockchain
Considerations for the
Implications of Blockchain on
the Insurance Industry

37 New York’s Photo Inspection Law
Its Origin & Its Future

IN EVERY ISSUE

04 Chair’s Message

06 President’s Remarks

07 Welcome to NYIA’s
Newest Members

08 Alternate View

15 Q&A

42 Out & About

44 Giving Back

46 New & Noteworthy

50 Upcoming Events

www.nyia.org • Fourth Quarter 2018 • 3

NYIA OFFICERS & DIRECTORS Chair’s Message

Elizabeth Heck, Chair NYIA has officially launched Thank Goodness for
President & CEO Insurance! The campaign has cleverly been dubbed TGFI
Greater New York Mutual Insurance Company playing off the popular acronym that hails Fridays for
their greatness. And while TGFI aims to not be boastful,
Mark Prechtl, First Vice Chair we do want insurance consumers to be reminded that
Executive Vice President/CEO insurance plays an important role in their lives. The
Chautauqua Patrons Insurance Company campaign aptly focuses on the fact that insurance
companies are inspired by our customers and are grateful for the opportunity
Charles Makey, Second Vice Chair to provide people and businesses with financial security.
Senior Vice President, Insurance Operations
Merchants Insurance Group NYIA formally announced the campaign last month to the public. An email
outlining the initiative was also sent to all members and included a request
Norman Orlowski, Treasurer to help spread the word about TGFI. The campaign is multifaceted and will
President/CEO be rolled out over the coming months. First up is the auto insurance and
Erie and Niagara Insurance Association community sections. Future sections will be released, including homeowners’
insurance, business insurance and renters’ insurance. A trending topics section
Steven Coffey, Immediate Past Chair will also be featured with rotating timely content on specific topics such as
Vice President cyber security and ride sharing.
Broome Co-operative Insurance Company
If you attended the NYIA Annual Meeting or the New York Auto Forum, you
Ellen Melchionni, President were able to experience a sneak peek of all TGFI has in store. I have to say
President that seeing our industry’s contributions drawn together into one light and fun
New York Insurance Association, Inc. package was a really uplifting experience. I have always been proud to work in
the insurance industry, but TGFI makes me that much prouder of not only my
Stacey Orlando, Secretary company but our industry as a whole.
Director of Design & Technology
New York Insurance Association, Inc. If you have not done so already, be sure to take a look at the TGFI website, which
includes a number of different interesting and informative pieces, including
Matthew Benedict infographics, videos/animations and testimonials. I was particularly piqued
President & CEO by the Impact of Insurance video, which highlights the many contributions
Midstate Mutual Insurance Company of our industry. And I highly recommend taking a look at The History of Auto
Insurance animation, which brings levity to what could be a dry subject and
Mark Gardner may even lead to a few chuckles.
New York Regional Counsel
Allstate Insurance Company This is my personal request to each and every member to be a part of TGFI. The
ultimate level of success the campaign has in encouraging consumers to view
Edward Harper insurance differently and more positively hinges on our getting the word out
President & CEO to as many people as possible. Social media is the driving force behind TGFI, so
Mid-Hudson Co-Operative Insurance Company be sure to follow, like, post, share, etc. through Twitter, Facebook and Instagram.
Everything is available through thankgoodnessforinsurance.org. Take a look
Stephen Harris and spread the word!
President & CEO
Sterling Insurance Company Elizabeth Heck
NYIA Chair
Craig MacCormac
Vice President, Business Development
Hartford Steam Boiler Inspection & Insurance Co.

Patrick O’Malley
General Manager, Commercial Lines Division
Progressive

Kristofer Snader
Senior Director, Government Relations
Nationwide Insurance

Jaynine Warner
Legislative Affairs, North Atlantic
Farmers Group, Inc.

4 • Your NY Connection Magazine

Pastel & Rosen, LLP

Engaging in the general practice of law
with an emphasis on representing
property/casualty insurance

companies for legislative, regulatory,
and compliance work.

Robert S. Pastel, Esq. and Michael E. Rosen, Esq.

258 State Street, Albany, NY 12210 (518) 462-4715 PastelandRosen.com

NYIA STAFF President’s Remarks

Ellen Melchionni, CAE Despite what the label on the hat says, there is no one
President size fits all. Not for hats and certainly not for insurance.
[email protected] Any standard hat will usually keep your head somewhat
Cassandra Anderson, CAE dry, but before buying one a consumer should decide
Vice President if they want to be completely covered or only partially
[email protected] covered. Do they want a hat that merely protects them
Stacey Orlando from light rain or do they want to be prepared for a
Director of Design & Technology potential downpour? Some folks don’t mind getting a little wet if they can
[email protected] save a few bucks. And there are those that prefer to skip the hat altogether
Javier Tapia and take the risk of being exposed to any weather that might come their way.
Director of Government Affairs
[email protected] The same applies to your customers. Every customer is different and should
Susan Dawes be treated so whenever possible. They have different needs and financial
Account Services Coordinator situations. They present unique risks and their expectations can change over
[email protected] time. Your customers can be loyal and look to your reputation, but there is no
Kaitlyn Emory denying that some simply prefer to shop and hop based solely on price.
Administrative Assistant
[email protected] Let’s not forget that every insurance company is different as well. Some offer
products that appeal to a wide audience and generate relatively standard
NYIA OFFICE policies en masse. They capitalize on the numbers and work the tight margins.
Other insurers operate like boutiques specializing in unique niches or provide
130 Washington Avenue hard-to-find products. And other companies fall somewhere in between.
Albany, New York 12210
518.432.4227 Similarly, every association is different. There are organizations that serve a
518.432.4220 fax narrow customer base. They may offer limited services or perhaps only one
[email protected] type of service. There are others, like NYIA, that have a much broader mission.
www.nyia.org They offer a variety of products and services and serve many members with
a variety of needs. NYIA advocates on behalf of our members. We work with
Visit Us Online policymakers to effect change and strive to make New York a better place to
do business. We provide educational and networking opportunities. We spread
www.nyia.org the good word about our industry and work to attract talent to our profession.
facebook.com/
newyorkinsurance Finding a hat is not difficult. Finding the right hat can be more challenging. We
association recognize that each member of NYIA is unique. Members belong for different
twitter.com/nyinsuranceassn reasons. You may be extremely engaged or prefer to more quietly participate.
linkedin.com/company/ You may read every Albany Update or only Your NY Connection magazine.
new-york-insurance- Perhaps you dial in to every bi-weekly call or only a few depending on what’s
association on the agenda. You may be a member company that calls regularly with
specific inquiries or only seek guidance periodically. You may be a member so
6 • Your NY Connection Magazine that you can discuss common challenges and share solutions with your peers
or simply to network. We understand one size does not fit all. Not for hats, not
for insurance and not for associations. That is why NYIA wears many hats.

Ellen D. Melchionni, CAE
NYIA President

Welcome Editor-in-Chief
Cassandra Anderson
to NYIA’s Newest Members...
Creative Director
NYIA is proud to add the following companies to the Stacey Orlando
association’s membership:
Managing Editor
Arch Reinsurance Company Kaitlyn Emory
Mr. Richard H. Horigan, Jr., Program Director
74 Batterson Park Road, 2nd Floor, Farmington, CT 06107 Contributing Writers
860.255.5410 Susan L. Dawes
[email protected] Sue C. Quimby
www.archcapgroup.com John D. Reiersen
Arch Re is a well-capitalized and secure provider of risk transfer solutions, Javier R. Tapia
as evidenced by the strong ratings they have earned from leading rating
agencies. Arch Re offers treaty and facultative property and casualty Looking to advertise?
reinsurance on a worldwide basis with solutions ranging from traditional Please contact Stacey Orlando at
reinsurance structures that are designed to protect against adverse scenarios, 518.432.4227 or [email protected]
to customized offerings to meet the specific needs of their clients. for advertising information.

Insurance Data Processing, Inc. (IDP) No part of this publication may be
Mr. Steven C. Craig, Senior Vice President reproduced, stored in a retrieval
8101 Washington Lane, Wyncote, PA 19095 system or transmitted in any form,
267.620.2448 electronic, photocopying, recording,
[email protected] mechanical, or otherwise without prior
www.idpnet.com written permission of the publisher.
IDP is a leading technology services provider that has exclusively served the
P&C community since 1949. IDP has leveraged extensive industry knowledge Copyright 2018 by New York Insurance
and technical expertise,along with decades of rich customer insights to develop Association, Inc. All rights reserved.
intuitive, agile, and affordable solutions. As a strategic business partner to
the P&C community, IDP delivers comprehensive bureau reporting services www.nyia.org • Fourth Quarter 2018 • 7
enhanced by a newly announced alliance with ISO for carriers of all sizes.

Merlinos & Associates, Inc.
Mr. Mark Brannon, Principal & Consulting Actuary
3274 Medlock Bridge Road, Peachtree Corners, GA 30092
678.684.4843
[email protected]
www.merlinosinc.com
Merlinos & Associates, Inc. is a full-service P&C, health, disability, and
life actuarial consulting firm founded in 1988. They’re one of the largest
independent actuarial firms in the United States. They provide services to
insurance carriers and state regulators, giving them a broad exposure to the
realm of pricing, reserving, and products from “both sides of the fence” that is
not available to many actuaries. Their clients benefit from their unique and
informed perspective.

ALTERNATE
VIEW

A slightly different take on
P&C insurance issues

WEEK OF GIVING

MEMBERS GIVE BACK

by Susan L. Dawes
New York Insurance Association, Inc.
This past October IICF celebrated 25 years for the Week of Giving campaign. Each year NYIA
member companies continue to give back to their local communities. In addition to the companies
below, Aon Benfield, Willis Towers Watson, Excess Lines Association of New York (ELANY), Farmers
Group and Munich Re also participated in projects during this industry week.

From left to right: Merchants Insurance Group; Erie
and Niagara Insurance Association; AIG, Eastern
Mutual Insurance Company, Mid-Hudson Co-
Operative Insurance Company, MLMIC Insurance
Company, and NYIA; Community Mutual Insurance
Company, AIG, Eastern Mutual Insurance Company,
MLMIC Insurance Company and NYIA.

Check out NYIA’s social media pages for more information about these exceptional projects.

8 • Your NY Connection Magazine

Solutions URB
to many of
your insurance
problems.

Underwriters Rating Board (URB) is a full service rating bureau offering
personalized service to insurance carriers in New York and Pennsylvania. URB
focuses on providing the perfect rating bureau solution for insurance carriers by
offering a broad variety of standardized forms, endorsements and rate manuals
for an assortment of personal and commercial lines. URB develops customized
forms and manuals, as well as provides filing assistance, to all subscribers.

• Homeowners • Boat Pak • Special Multi Peril
• General Liability • Umbrella • Crafts/12
• Commercial Fire • Farmowners • Home Business
• Landlords Package • Dwelling • Inland Marine
• Golf Course Pak • Businessowners

URB has a strong desire to understand your business. Call us today at
518.355.8363 to learn about the many benefits of being a URB subscriber.
Visit us online at www.urbratingboard.com.

PO Box 13059, Albany, NY 12212 • 518.355.8363 • 518.355.8639 fax • [email protected]

10 • Your NY Connection Magazine

FTOHREEFSUIGTHUTREFORLongtime Members Build Strong Association Foundation
bNyeKwaYitolyrknInEsmuorarnyce Association, Inc.

T hroughout history, the In the mid 1700s, insurance in America in
insurance industry has its earliest form began as a way to protect
been an ever-evolving homeowners from risks associated with fire.
constant. Insurance provides Most homes were built out of wood, closely
together in growing American settlements.
protection of life and This presented dangers to not only the
homes but to the security of budding
assets as well as compensation of specific cities—fire insurance was an essential
measure. As more risks became apparent
loss, damage, illness or death in return in a rapidly growing country, the insurance
industry continued to advance, expanding
for payment of a premium. The history of to coverages that provided protection for
health, homes, life and auto. The insurance
insurance is a direct reflection of the history industry assumed the role of financial first
responders, providing monetary support in
of what people and organizations feared times of need.

happening to themselves or their assets. The Industrial Revolution saw a shift that
society was not completely prepared for
In its earliest inception in economies that and insurance sought to catch up. Business
used bartering as their basic form of finance, and disability insurance were becoming
insurance was simply an agreement among increasingly popular, although created
neighbors that if your home was robbed or to protect business owners and their
damaged that the community would pitch employees, it is when the industry began to
in and help with the loss or reconstruction. first see strong trends of scandal and fraud.
Ancient Persia was one of the first Regulations and laws were passed in many
civilizations to practice political insurance. states to try to protect insurers and insureds
Groups would “gift” various expensive alike, but the industry remained unstable.
items to monarchs, these gifts were a way
of securing protection from harm. Another
form of early insurance was boat and cargo
protection. A bottomry contract would grant
loans to merchants with the provision that
if the ship or cargo was lost at sea, the loan
would not have to be repaid.

www.nyia.org • Fourth Quarter 2018 • 11

How could insurance companies ensure Our founding member companies have
there was protection against eventualities witnessed the appointments of some of
for the industry? the first state commissioners of insurance,
development of the state and federal based
The forming of insurance trade associations insurance regulatory systems, the expansion
was strategic. The associations were a way of property and casualty insurance
for competing insurance companies to coverages—fire, homeowners, auto, renters,
come together for the betterment of the etc. and the abolishment to the prohibition
industry. The creation of a single voice was of multiline charters. Could the founding
essential to present to executive, legislative, members have imagined what the modern
judicial and regulatory bodies concerning industry would look like today?
state institutional views in a manner that
was in the best interests of the insurance Many additional companies and
industry. Without a stable industry the future organizations have joined over the years
of insurance may not have been viable. NYIA making NYIA even stronger, more resilient
was a pioneer in this effort and has had a and evenly balanced. Some longtime
significant and positive influence on the members that deserve recognition are
insurance landscape of New York State. Midstate Mutual Insurance Company, which
NYIA’s roots can be traced back to 1882 has been a member for 93 years, Otsego
having evolved from the oldest property and County Patrons Co-op, a member for 87
casualty insurance state trade association years and Finger Lakes Fire and Casualty
in the nation. Founding member companies Insurance Company a member for 75
had the necessary foresight to understand years. We are also proud to have founding
the industry’s worth and the challenges that members of the New York State Insurance
they may need to navigate in the future. Association, an equally important part of the
We are proud to have founding member current NYIA equation, which was formed in
companies that are currently thriving 1942. These members include Greater New
insurance entities and still belong to the York Mutual Insurance Company, Merchants
unified association, NYIA of today. Insurance Group and Utica National
Insurance and can be credited with being
United Frontier Mutual Insurance Company, instrumental in forming the newer segment
Lockport, NY; Callicoon Co-Op Insurance of NYIA, which still has an amazing 76 years
Company, Jefferson, NY; Wayne Cooperative of history.
Insurance Company, Clyde, NY; Chautauqua
Patrons Insurance Company, Jamestown, NY; In 1997, the New York State Insurance
Broome Co-operative Insurance Company, Association and the New York Insurance
Vestal, NY and Washington County Co-Op Alliance unified to form the current New
Insurance Company, Greenwich, NY are York Insurance Association. NYIA’s history is
all founding members of what is now the rich, and our culture is even richer thanks
New York Insurance Association and have to the member companies who make the
been members for an incredible 136 years. association so robust and vibrant, old and
NYIA has seen many important and pivotal new members alike!
changes in the industry since the 1880s.

12 • Your NY Connection Magazine

RM Hoffman
Roth &
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LONGTIME MEMBER RECOGNITION

Members 25 Years + Members 45 Years + Members 87 Years +
Allegany Insurance Group Associated Mutual Insurance Otsego County Patrons Co-Op
American International Cooperative
Group, Inc. Kingstone Insurance Company Members 93 Years +
Countryway Insurance Ontario Insurance Company Midstate Mutual Insurance
Company Preferred Mutual Insurance Company
Dryden Mutual Insurance Company
Company Security Mutual Insurance Members 136 Years +
Erie and Niagara Insurance Company United Frontier Mutual
Association Sterling Insurance Company Insurance Company
Fulmont Mutual Insurance Union Mutual of Vermont Callicoon Co-Op Insurance
Company Companies (Eastern Mutual) Company
Genesee Patrons Cooperative Utica First Insurance Company Wayne Cooperative Insurance
Insurance Company Company
Madison Mutual Insurance Members 75 Years + Broome Co-operative
Company Finger Lakes Fire and Casualty Insurance Company
Md-Hudson Co-Operative Insurance Company Chautauqua Patrons Insurance
Insurance / Claverack Company
North Country Insurance Members 76 Years Washington County Co-Op
Company Greater New York Mutual Insurance Company
Insurance Company *Founding members of the
Merchants Insurance Group original NYIA formed in 1882.
Utica National Insurance Group
*Founding members of the
newest NYIA formed in 1942.

*Due to a fire in the New York Insurance Alliance office years ago, records may not be complete. If your company
has additional information regarding your membership, please contact Kaitlyn Emory so we can amend our records.

Today, NYIA has over 100 contributing After all, as Aristotle said, “The whole is
member companies and continues to be an more than the sum of its parts.”
advocate for the industry in New York. The
members companies and the association Kaitlyn Emory is NYIA’s administrative
work collaboratively to promote an assistant. You can reach Kaitlyn at [email protected]
insurance market that is viable and strong— nyia.org or 518.432.4227.
the same mission that began so many years
ago, unity for the betterment of the industry.
The association recognizes that our success
can be directly attributed to the conviction
and passion of its members.

14 • Your NY Connection Magazine

Q&A was simultaneously working on my MBA at SUNY Albany,
a classmate encouraged me to look into an opening at
Stephen Harris AIG. I took his advice and ended up as their upstate New
York production manager. Finally, while sitting at my desk
by Cassandra Anderson, CAE at AIG one day the phone rang and it was Sterling; they
New York Insurance Association, Inc. heard I was in the business and being that I was a home
town boy they asked me to join them. The rest is history.
S teve Harris is well known in the NYIAcommunity.
He is a loyal individual who is extremely proud Q: What do you like best about working in insurance?
of Cobleskill, Schoharie County and Sterling A: I think it’s an incredibly honorable business and I take
Insurance Company, where he has spent 30 a great satisfaction in knowing that we put people’s lives
years with many at the helm as president and back together after disaster strikes. I love the complexity;
CEO. He is straightforward and sincere, so you are sure to I’ve been in the business for over 30 years, have my CPCU,
appreciate his candid answers. etc., and there is still so much to learn. What I like most
though are all the wonderful people. I tell my associates
Q: What drew you to work in the insurance industry? that despite all our efforts to leverage automation this is
A: I had an associate that assured me both he and I were still a “people” business. In fact, maintaining our personal
failures. When I pressed him to explain why he felt that approach is just one of what we refer to internally as
way he replied, “Because we only fell into the insurance a “strategic imperative.” Times change, tactics change,
industry after we failed at what we really set out to do in cycles occur but our strategic imperatives are non-
life.” I thought that was quite comical and it is true I sort wavering; we are steadfast in our commitment to them
of fell into the business, but I’ve never felt like a failure! regardless of both the internal and external environment.

Q: Where did your career take you before this role? Q: What do you like most about working for Sterling?
A: Upon college graduation I immediately went to work Sterling is a breath of fresh air! I think I’m qualified to say
for a large commercial bank as a management trainee, that given that I previously worked for both a national
but I quickly concluded commercial banking wasn’t and international insurer. If you take some digits off
my calling (although I was so disturbed about the way the numbers you’ll find that the processes are virtually
tellers were treated I thought I should organize the the same. The difference is when you work for a small
Tellers Union of America). A close friend sold commercial company, at least at Sterling, you are totally connected
insurance for Wausau and hooked me in with them. I was to the entire operation. You are far more than a spoke
practically thrown on the street chasing jumbo accounts in a large piece of machinery; you are exposed to the
before I was even licensed! Several years later while I big picture. We have a collaborative management team.
We work hard and play hard. We laugh together and cry
together. It sounds cliché, but we really are a family.

Q: What is Sterling’s greatest strength?
A: Sterling has a lot of strengths, but at the end of the
day it’s the employees that make it a prime example of
American exceptionalism. We import talent on occasion,
but most of our staff has Schoharie County roots. We
believe we are the best employer in town and if this
is where you want to live, you won’t find a nicer home

www.nyia.org • Fourth Quarter 2018 • 15

than Sterling. Consequently, our turnover is all but non- ideas. This is a team sport and I’m nowhere without the
existent and when an agent calls they have a good chance people I’ve been blessed to work with.
of talking with the same person they spoke to years ago.
Almost every employee has one or more diplomas from Q: How would your colleagues describe you?
the Institutes; they are a professional group of people A: I think they would agree I am inclusive. Some might
and I’m proud to be associated with them. say I’m too benevolent. They would ask, “Why doesn’t
Steve deal with this person?” It’s probably a fair criticism,
Q: How long have you been affiliated with NYIA? but before I make a decision that will negatively impact
A: The association predates me, and I’ve been at Sterling a person’s life, I provide every opportunity to correct the
for over 30 years. NYIA is a terrific resource for us. situation. If I am criticized for being too benevolent, I can
We’re not large enough to employ in-house counsel or deal with that … I can think of worse traits in a leader.
a regulatory compliance staff. We rely a great deal on
NYIA to keep us informed and it’s hard to imagine why a Q: If you could encapsulate your philosophy on life on a
company wouldn’t belong; they bring tremendous value. bumper sticker, what would it say?
A: Work Hard/Play Hard
Q: What prepared you for your current role?
A: I’m not sure I was prepared for my current role. I Q: If you weren’t in insurance, what would you be doing?
became Sterling’s president and CEO at the age of 43. A: I’m still a number of years away from retirement but
Sadly my predecessor, Paul Stauble, developed terminal I’m sadly getting closer. I know one thing; I have no
cancer in his early 50s and Sterling’s board turned to me interest in taking up a rocker or even fiddling around in
to step in. We didn’t have time to prepare for a textbook my garage. I’ve got all kinds of interests like playing golf,
transition, but fortunately, in addition to being a terrific bow hunting, fly fishing, traveling, exercising, wilderness
human being, Paul was a very inclusive leader and that travel be it by foot, horseback, bicycle, cross country
inevitably helped me prepare for the challenges ahead. skiing, canoeing, etc. I also have three daughters that
could end up all over the country and family is my first
Q: What is your greatest professional accomplishment? priority. I’m certainly not one of these people that won’t
A: I’m most proud of the incredible team that has been have anything to do in retirement. My problem is I get
assembled here at Sterling and the corporate culture we bored easily and I enjoy many activities, but they don’t
have built; whenever we hire someone that has worked provide me the substance I need to be truly fulfilled. I
elsewhere they almost always tell me they’ve never did buy a hobby farm on the outskirts of our village that
worked in an environment that is so professional yet has about 10 quality building lots on it and I’ve toyed
simultaneously such a fun place to work. Of course I’ll with the idea of developing them. I guess time will tell
always be proud of the transformation that has taken but I’m in no hurry to find out.
place at Sterling during my tenure as the CEO; we’ve
gone from a company that was financially strained Q: What do you like about being back in your hometown?
with a questionable future to a company that is today There are many rewards to coming back home, but the
financially rock solid with an incredibly bright future. best part of returning to Cobleskill was the pride I know
my parents felt when I joined Sterling’s management
Q: How would you describe your leadership style? team. They have both passed on now, but they loved me
A: Like my mentor, Paul Stauble, I’d like to think I am unconditionally. I know they would have been proud of
inclusive and collaborative. I’ve surrounded myself with me no matter where I went or what I did, but I have to
tremendously talented people and I trust and respect believe joining one of the community’s oldest and most
them. I encourage my associates to “shoot holes” in my respected companies was very special for them.

16 • Your NY Connection Magazine

Work with industry-focused
professionals that fit right
into your organization.

Want a more
insightful advisor?

The choice is right in front of you.

Our specialized industry team understands the unique
challenges for insurance companies like you, including the
regulations that affect you, new threats and opportunities

you face and how to position your company for success
through our tax, assurance and risk, internal audit
and compliance consulting services.

Connect with us:
Jason Jacobs, Partner
[email protected]
bakertilly.com l 212 378 9884

Want to receive our articles?
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Baker Tilly refers to Baker Tilly Virchow Krause, LLP, an independently owned and managed member of Baker Tilly International. © 2017 Baker Tilly Virchow Krause, LLP

1188 •• YYoouurr NNYY CCoonnnneeccttiioonn MMaaggaazziinnee

OPPORTUNITIES AND RISKS FOR INSURANCE COMPANIES Transportation Scooter
network companies News
(TNCs) are bringing

with them new
exposures for

users.

The Changing Face of

TRANSPORTATION

by Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE
MSO, Inc.

The face of transportation has CitiBike in New York City offers
changed drastically in recent years, 12,000 bikes at 750 stations in 60
posing opportunities and risks for neighborhoods. Newer entrants on
insurance companies.Transportation the scene include e-bikes (equipped
network companies (TNCs) such as with batteries to assist with
Uber and Lyft, and short term rental pedaling) and motorized scooters
and car sharing services are putting or mopeds, bringing with them new
a dent in traditional taxi, limousine, exposures for users. As insurance
and public transportation systems. professionals, it is essential that

www.nyia.org • Fourth Quarter 2018 • 19

we understand the risks of these new Transportation network companies saw a
exposures and determine the proper way to meteoric rise and a precipitous decline
structure appropriate coverage. The intent over a period of three years. According to
of this article is to provide a snapshot CNBC, although Uber had $7.5 billion in
of where transportation technology is sales in 2017, they posted a net loss of $4.5
today and provide commentary on a few billion. The company has eliminated some
types of transportation and related key unprofitable operations, and its net loss
developments with emphasis on the advent narrowed in second quarter 2018 from $1.1
and use of scooters in metro areas around billion a year ago to $891 million.
the country.
Crime is a challenge, as was reported in
Transportation Network Companies Newsweek in an article this past May,
over 120 Uber and Lyft drivers have been
A TNC offers prearranged transportation charged (and 31 drivers convicted) with
through use of online or smartphone apps assault, including rape, sexual assault, and
that pair passengers with drivers who use kidnapping. In response, Uber has instituted
their personal vehicles. Features of the safety procedures, such as a direct to 911
apps include the ability to track where the button and stricter background checks
car is, get a quote, and pay the fare with a for drivers. Passengers have the ability to
credit card. add trusted contacts who can track the
passenger’s trips.

Insurance coverage may be problematic for
TNC drivers. Uber drivers, for example, have
a low level of liability coverage under the
TNC company’s policy while the app is on,
and a higher level is in effect once a ride
is accepted and while the passenger is in
the vehicle. The driver’s personal auto
policy will most likely not provide
coverage while driving for a TNC,
as business use is a standard
exclusion under that type
of insurance contract and
furthermore exclusions may
be in place specifically for
TNC activity. The purchase of
supplemental coverage by the
driver is advised to cover their
liability as well as damage to the
vehicle. Personal use (while the app
is off) would still be covered under the

owner’s personal auto policy.

20 • Your NY Connection Magazine

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Shared Scooters Among the advantages of scooters are
inexpensive cost of use and reduced
Electric scooters offer the opportunity to emissions. In fact, countries such as Vietnam
get around at up to 15 mph—much faster have introduced initiatives to encourage
than walking—with no physical exertion scooter usage as a means of reducing air
(aka sweat) and no hassle or expense of pollution. An added benefit is reduced traffic
purchasing, insuring, maintaining and congestion as reported in The Lancet.
parking a car. Bird and Lime are two
companies that offer electric scooters to the A large issue is safety. While there is a
public for short term rentals. Seen mostly in requirement that the operator wear a helmet,
urban areas, as well as college campuses, most do not. Very few people carry a helmet
they offer an inexpensive and convenient around with them. In most areas, regulations
mode of getting from place to place. All of prohibit use of scooters on sidewalks, but
these systems have one thing in common— that does not stop people from doing so.
technology. Users access the systems via a Scooters may not be feasible for elderly
smartphone or online app. For a small fee, riders or those with physical disabilities,
you use the app to find and unlock a scooter. such as balance issues.
The actual fee is mileage-based.

Lime launched their service in San RISKS
Francisco, and claims six million rides
were taken in their first year of operation.
Lime states that scooters complement the
public transportation system, as their data
indicates 40 percent of its users got to
or from public transit stations on their
scooters. Electric bike and scooters paired
with public transportation are significantly
cheaper than owning a vehicle. Uber is
partnering with Lime to offer their bikes
and scooters in the Uber app.

Traditional mopeds or Vespas have
a seat and are often powered by a
gasoline engine. In contrast, scooters
are basically motorized “Razor”
type conveyances, battery-powered
and require the operator to stand. The
maximum speed is usually 15 to 20 mph.
In some jurisdictions, such as California, no
helmet or driver’s license is required to ride
them, although the renting company may
impose these restrictions.

22 • Your NY Connection Magazine

OTHER RISK CONSIDERATIONS INCLUDE:

• Theft/vandalism of scooter (even though customers use the app to
lock the device when ride is completed)

• Blocking public access to sidewalks, streets, shops, etc.
• Injury to rider
• Rider causing injury to others
• Impaired use

Other risk considerations include: The San Antonio City Council will be
• Theft/vandalism of scooter (even regulating the use of scooters in the Texas
though customers use the app city. According to Texas Public Radio, the
to lock the device when ride is city council voted in October to adopt a
completed) six month pilot program that will establish
• Blocking public access to sidewalks, a permitting system, assess fees and put
streets, shops, etc. requirements in place for scooter companies
• Injury to rider for the stated purpose of analyzing the
• Rider causing injury to others activities, riders and ridership of scooters.
• Impaired use The city’s more than 3,000 scooters, which
has more than quadrupled since August,
The shared scooter market is experiencing can be used on streets and sidewalks,
growing pains. Regulation remains a gray with a preference for bike lanes with rules
area, as registration, licensing, and insurance stating that riders need to be two feet from
requirements that apply to gasoline-powered pedestrians and must be older than 16.
motorcycles, mopeds, and scooters do not
Typically, scooters are “dockless,” meaning
apply to electric scooters. Some cities, they do not have a home base. They may
including San Francisco and Denver, be picked up and dropped off from random
have banned their use, citing lack of locations, as long as the user complies
adequate regulation. San Francisco with local ordinances. This has caused a
recently awarded permits to several revolt in some areas—residents are tripping
scooter rental companies to reintroduce over scooters left on sidewalks and being
run into and sometimes run over by them.
the service in the city under a one year Riders weave in and out of traffic, often
pilot program. It is notable that none of without helmets. Residents have reacted
the “established” companies—Lime, Bird, by vandalizing or trashing the scooters—
and Spin, as well as TNC giants Uber and even throwing them in San Francisco Bay.
Lyft, received permits. These companies
will be unable to operate in the city for at www.nyia.org • Fourth Quarter 2018 • 23
least a year.

DAMAGE AND INJURIES TO RIDERS, PEDESTRIANS &
OTHERS CAN COME FROM A VARIETY OF INCIDENTS:

• Defective scooters result in crashes and single rider injuries
• Injuries due to road hazards such as potholes
• Collisions with pedestrians, cars, bicycles, or other scooters
• Scooter riders “doored” by vehicles
• Riders swerving to avoid scooters and hitting other cars or

pedestrians.

#ScootersBehavingBadly is an Instagram Where is the coverage? Most personal auto
site that documents questionable behavior policies will not provide any coverage for
of riders, and responses from residents. electric scooters, which are less than four
wheels and not licensed for road use. To
How are the scooters charged? Bird be covered under a standard personal lines
contracts with numerous “bird hunters” who program such as a homeowners or tenants
travel around and pick up the scooters policy, the vehicle must typically be used
from wherever they have been left. The app solely to service the insured premises or
shows real time locations of all scooters in designed to assist the handicapped. Scooters
the area in need of charging. The hunter racing along downtown sidewalks do not fit
takes them to a charging station, and once these criteria. General liability policies are
they are “fed,” returns them to designated probably not the answer either. Coverage for
“Bird Nests.” Bird hunters can earn hundreds mobile equipment is limited to vehicles that
are not licensed for public roads.
of dollars per night. The finder’s fee
increases for scooters that are more Damage and injuries to riders, pedestrians,
difficult to locate. This has led to and others can come from a variety of
a hoarding problem, since the incidents:
company pays a $20 bounty
for “missing” scooters. Bird • Defective scooters result in crashes
hunters hold onto the and single rider injuries
scooters until they are
reported missing. What • Injuries due to road hazards such as
is especially troubling potholes
is that criminals are
reported to be using • Collisions with pedestrians, cars,
the scooters as bait, bicycles, or other scooters
and mugging “hunters”
when they show up • Scooter riders “doored” by vehicles.
to retrieve the units as • Riders swerving to avoid scooters
detailed in an article that
ran in Fortune this past May. and hitting other cars or pedestrians

Riders usually sign away liability for
accidents they cause when they agree to the
conditions of the sharing app.

24 • Your NY Connection Magazine

Serving the Needs of the
Insurance Community

Proud Member of NYIA

Farber, Brocks & Zane L.L.P. Tel (516) 739-5100
[email protected]
400 Garden City Plaza - Ste. 100 www.fbzlaw.com
Garden City , NY 11530
Westteld, Simsbury,
With offices in; New Jersey Connecticut

Newburgh,
New York

www.nyia.org • Fourth Quarter 2018 • 25

Autonomous Vehicles

Much has been written about
the coming of autonomous
vehicle. According to U.S.
News and World Report,
current estimates show 46
companies are testing these
vehicles in cities around the
world. Half of American cities
are making plans to integrate
self-driving cars into their
future transportation systems.
A recent study from the
University of Surrey and the
University of Oxford posited
that the nascence of readily
available autonomous vehicles
could have a significant effect
on the urban tourism industry.

Injuries to riders may be covered under The impact of autonomous vehicles will
the individual’s health insurance. Ultimately, extend far beyond their passengers. It is
the responsible party—be it the driver, predicted that personal auto ownership
scooter company, or third party—may bear will decrease significantly. In turn, service
the financial burden for damage and injury businesses such as mechanics and body
resulting from scooter accidents. Several shops, will be in smaller demand. The need
recent fatalities bring to light the potential for on street parking may be greatly reduced
danger. A woman was killed in Cleveland, or eliminated. New businesses to address
Ohio in August 2018 after being hit by the autonomous phenomenon, will come
a car. Lime saw two scooter fatalities in into existence.
September 2018. In Dallas, Texas, a 24-year-
old man died after apparently falling from The face of transportation is changing
his scooter. And in Washington, DC a rider dramatically. Financial service professionals,
was killed after being pulled under an SUV. in particular insurers, are well-advised to
invest in development of insurance products
to address the needs of a changing world.

There is a lot of interest in the scooters, Sue C. Quimby is assistant vice president,
which have seemingly come on the scene media editor, client services and training;
overnight. But with this type of quick senior product development analyst for
emergence, municipalities are left after the MSO, Inc. (The Mutual Service Office, Inc.).
fact to determine the best approach for a You can reach Sue at 201.857.9128 or
very popular trend with serious safety issues. [email protected]

26 • Your NY Connection Magazine

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A Brisk Walk Around the Blockchain Hailed by futurist George Gilder
as the next great innovative
Considerations for the Implications of Blockchain on the Insurance Industry breakthrough in Internet
technology capable of ushering in
by Javier R. Tapia a new“heroic age of human accomplishment,”
New York Insurance Association, Inc. while derided by others such as True Link
Financial CEO, Kai Stinchcombe, as “crappy
technology” that serves as a “bad vision for
the future,” blockchain remains a promising
yet controversial emerging technology with
tremendous implications for the broader
economy in general, and for the financial
services industry in particular.

The most well-known impact of blockchain industry it is important to briefly review
on financial services thus far is, of what blockchain is and how it operates.
course, as a cryptocurrency. Most closely
associated with bitcoin, which reached an What is blockchain?
astronomical value of nearly $20,000 per
bitcoin in the fall of 2017, blockchain has Developed in 2008, by the Japanese
also inspired competing cryptocurrencies computer engineer Satoshi Nakamoto (or
such as Ethereum and Litecoin, all vying by another person or group of persons
with traditional currencies and precious assuming that pseudonym) blockchain is
metals for investor cash. In addition to based on highly specialized and complex
attracting investor capital, cryptocurrencies cryptography. It is essentially an open
have begun to emerge as transactional decentralized transaction ledger distributed
currencies in their own right. Real estate across a peer-to-peer network of computers,
listings, as reported by the LA Times, have and hence not located in any central server
begun to be made (and closed) in bitcoin, or location.
and perhaps most significantly, the state of
Ohio has become, as of this writing, the first
state in the United States to accept bitcoin
for tax payments.

However, beyond its use as an investment
vehicle or as a currency, usage of blockchain
technology has begun to expand in the
financial services industry. In the insurance
industry in particular, reports of blockchain
usage have surfaced in three main ways:
for fraud protection; claims processing;
and regulatory compliance. To understand
how blockchain is impacting the insurance

28 • Your NY Connection Magazine

As described by the host of the podcast block’s algorithm. Once a transaction-block
Humans 2.0 and founder of the tech has been validated it receives a time-
startup VU Dream, Mark Metry, blockchain stamped “hash” which is then attached to
works like so: a single transaction on the a previous block’s hash, creating a “chain”
network can be aggregated together as of transactions, and hence the name
a “block” of transactions, which are then “blockchain.”
examined by the computers (referred to
as “nodes”) on the network using agreed Because the records are recorded, marked,
upon cryptographic principles to solve the and interlinked like a chain on an open
underlying algorithms attached to each decentralized peer-to-peer network Metry
block. writes that a blockchain “cannot be
falsified except by convincing participating
These transactions are deemed valid when a computers that the tampered data in one
consensus (i.e. 51 percent) of the computers block and all prior blocks ever created is
on the network agree on the solution to a true. Such a feat is considered impossible.”

www.nyia.org • Fourth Quarter 2018 • 29

Claims Processing

Fraud Protection Claims processing, in fact, is according to
Triinu Murumäe, chief marketing officer
One of the most obvious applications of (CMO) of Insly.com, an area of insurance
blockchain in the insurance industry, then, where blockchain will have the biggest
is for fraud protection. According to a 2016- impact because of smart contracts. IBM
study by McKinsey and Company, 5 percent describes a smart contract as essentially
to 10 percent of all the annual insurance a computer code written on a blockchain
claims made in the United States are that operates under an “if/then” conditional
fraudulent. structure that automatically executes when
a specified condition has been met. For
Furthermore, the FBI has estimated that this example, in a typical buy/sell contract
translates into more than $40 billion in fraud scenario a buyer’s worry is paying for an item
costs to non-health insurers in the United that the seller never delivers. Conversely, a
States. According to Samsung Next Ventures, seller’s concern is delivering an item that
of the $40 billion in non-health insurance the buyer never pays for.
fraud, jewelry fraud is said to comprise up
to $2 billion. Much of this fraud is soft-fraud With a smart contract on blockchain the
claim padding by overstating the value of transaction can be digitally programmed so
a particular jewel (or substituting a less that each condition of the transaction must
valuable jewel for the loss in place of a be complied with before the transaction can
higher priced one) or misrepresenting the continue to the next phase. Consequently,
provenance of a jewel to be insured. The as detailed by Daniel Newman of Futurum
traditional appraisal system currently serves Research, a buyer’s payment would be held
to combat this fraud, however as noted by in digital escrow until a seller’s proof of
Samsung, as a supplement to traditional shipment or delivery is recorded in the
appraisal methods jewelers and insurers blockchain ledger in which case the payment
have begun to turn to blockchain platforms would then be released to the seller.
such as IBM’s “TrustChain,” a provenance
service that helps track the source of origin In the insurance context, Murumäe has
of a jewel through the supply chain to the reported that when a claim arises all
underwriting process, and if necessary, the the parties to the claims process would
claims process. have access to the smart contract via the
blockchain ledger and could view the
relevant policy details and provide the
necessary proofs, documents, and evidence
necessary to process the claim through

30 • Your NY Connection Magazine



denial or final payout. Again, because The Blockchain integration and tokenized
smart contracts are structured on an process allows [Black Insurance to]
“if/then” paradigm, the claims process distribute securities [in] a completely new
could only advance once each condition way.” Of course, before Black Insurance can
precedent was completed. revolutionize the insurance industry as it
claims, it will have to face the scrutiny of
According to Murumäe, the Estonia based insurance regulators who will thoroughly
digital insurance company called, Black vet their business model.
Insurance, is already leveraging blockchain
technology for smart insurance contracts, Regulatory Compliance
which will transform the future of insurance.
Black Insurance, itself, claims that it is Accordingly, another area where blockchain
going to disrupt the insurance industry is impacting, and will continue to impact,
by opening the “historically centralized the insurance industry is in the realm of
insurance market for crowdfunding” because regulatory compliance. Operating in a
“[c]rowdfunded capital gives all investors heavily regulated industry, insurance carriers
first-of-a-kind investment opportunities to can incur tremendous opportunity costs
invest in stable insurance portfolios with with regulatory compliance requirements.
long-term financial profits that so far have
been shared among insurance companies Complying with data calls and periodic
and re-insurers. market conduct and financial exams can

32 • Your NY Connection Magazine

platforms allow an enterprise to manage
who can access or view their enterprise
blockchain. According to the Computer
Business Review, regulators could be granted
access to view only that data, including
historical data, that they would need to
review to ensure regulatory compliance.

Legal & Regulatory Landscape

As an emerging technology the legal
and regulatory framework surrounding
blockchain has yet to be fully developed.
New York was one of the first jurisdictions
to regulate blockchain technology when in
2015, under then Superintendent Benjamin
Lawsky, the New York State Department of
Financial Services (DFS) issued its BitLicense
regulation which licensed virtual currency
activities in New York.

cost insurers significant amounts of time Since then various bills have been introduced
and money. To streamline this process the in the state legislature addressing
American Association of Insurance Services blockchain technology. Two bills in
(AAIS) and IBM have recently announced the particular, however, would apply blockchain
development of the open insurance data link to business enterprise purposes. The first,
(open IDL) which is based on IBM blockchain A10854, introduced by Assemblyman Clyde
and allows carriers to submit required Vanel would amend New York’s economic
data to a secured blockchain platform in development law to include “digital ledger
satisfaction of regulatory requirements. technology” as a form of economic activity
that would qualify blockchain businesses for
While blockchain is often thought of as an the Excelsior Jobs Program, which is aimed
open transaction ledger that is transparent at incentivizing businesses to start up in,
to all participants in the network, this does or relocate to New York through various
not necessarily mean that data stored on business tax credits.
a blockchain is viewable by anyone in the
world with a computer. Different blockchain Another bill, A8780/S8858, introduced by
models, such as enterprise-based models Assemblyman Vanel and by Senator Martin
can be created using managed blockchain Golden would allow for “smart contracts”
platforms such as the aforementioned IBM by defining the term within New York law
platform or Amazon Web Service’s (AWS) new and amending the New York Electronic
managed blockchain platform. The managed Records and Signature Act (ESRA) and allow
signatures secured through blockchain

www.nyia.org • Fourth Quarter 2018 • 33

... blockchain’s impact on technology officer of HYPR Corp., begin to
the insurance industry verify their personal identifiable information
is here to stay and its (PII) directly on a blockchain ledger rather
impact will only grow.” than through point-to-point contact with
an organization. This could minimize the
technology to have legal validity in New amount of a policyholder’s PII that is actually
York. Neither bill has yet passed the retained by brokers, agents, and insurers and
legislature, although given the implications could potentially significantly alter their
of blockchain technology for the economy, internal cybersecurity risk assessments.
and the decisions of other states (such as
Ohio accepting tax payments in bitcoin) to The various possibilities of applying
expand their use of blockchain, New York blockchain to insurance are still emerging
will have to take some further legislative and have hardly gone mainstream yet.
and/or regulatory action to stay with the Perhaps given its potential applicability,
curve of this technology. blockchain could even help tackle such
intractable insurance fraud issues as
Conclusion premium leakage and rate evasion. In the
meantime, legal and regulatory hurdles to
To paraphrase the historian John H. Elliott, allow expanded use of the technology will
the full implications of blockchain on the have to be overcome and best practices
insurance industry are such that they merit developed.
either a very long discussion, or a brief one.
The foregoing is merely intended to briefly Furthermore, as historian Artur Herman has
review ways in which blockchain technology noted blockchain is not without its own
is currently being deployed in the insurance weaknesses. The on-going development
industry. A myriad other uses for blockchain of quantum computers, for example, could
in the insurance sector could potentially potentially supersede blockchain technology
develop. For example, if blockchain can help in the not-too-distant-future by developing
combat fraud by tracking the provenance sufficient computing power to easily crack
of insured goods, it could potentially blockchain’s cryptographic algorithms
fight against fraudulent upcoding or non- and rendering its security claims moot. If
treatment billings of no-fault or workers’ blockchain is superseded in such fashion, it
compensation fraud by immutably recording could become a ball and chain rather than
an irreversible time stamped transaction of a transformative tool for companies that
each treatment a claimant is supposed to overinvest in the technology too soon. Based
receive, if and when the claimant actually on these early returns, however, it appears
received such treatment, and what treatment that blockchain’s impact on the insurance
the provider bills for. industry is here to stay and its impact will
only grow.
Cybersecurity compliance could also
potentially be significantly reduced with Javier R. Tapia is NYIA’s director of
blockchain technology as policyholders government affairs. You can reach Javier
could, as suggested by Bojan Simic, chief at 518.432.4227 or [email protected]

34 • Your NY Connection Magazine

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CAR PHOTO INSPECTION

36 • Your NY Connection Magazine

New York’s Photo
Inspection Law

Its Origin & Its Future

by John D. Reiersen, CPCU, CFE, CIE
Kingstone Insurance Company

New York’s photo inspection law (Section only the second state to adopt no-fault
3411 NYIL and Regulation 79 (11NYCRR67)) automobile insurance. The law provided
became law effective December 1, 1977. up to $50,000 per injured person without
The law is now 41 years old and it has regard to fault. In order to pay these benefits
become apparent to me that there are a person’s right to sue for noneconomic
misconceptions about why the law was loss required that they be seriously injured.
enacted and some debate today on whether Unfortunately, the serious injury definition
the law is cost effective. Many have called in the law permitted a person to accumulate
me the “Father” of the photo inspection law $500 in medical bills to meet the definition.
and so I have decided to lay out the history The serious injury definition was supposed
of the law and answer the question as to to eliminate 80 percent of the lawsuits, but
whether it’s needed today. only 40 percent were eliminated. Also, there
were no medical fee schedules in place,
Background of Events in 1977 which caused health providers to charge
significantly more to no-fault patients. The
The New York Insurance Department started impact of these defects in the no-fault law
to get involved with product and market resulted in rate increases in automobile
conduct regulation in the late 1960s. insurance of 30 to 40 percent a year.
Previously, other than reviewing rates and
processing complaints, the Department In 1977, there was not a Frauds Bureau at the
focused primarily on the solvency of insurers. Insurance Department and most automobile
Effective February 1, 1974, New York became insurers did not have a special investigation

www.nyia.org • Fourth Quarter 2018 • 37

unit (SIU). There were many insurance fraud inspected the vehicles nor did the insurers.At
abuses involving automobile thefts. During the meeting, the insurers requested that the
the years 1975–1977 the Department Department require them to pre-inspect the
received over 20,000 complaints a year from vehicles as a condition of coverage. I asked
consumers complaining about automobile why they just couldn’t voluntarily require an
insurance premiums. Members of the inspection as permitted in most automobile
Legislature and the Governor’s office were physical damage policies. The response was
also deluged with automobile insurance that for competitive reasons no insurer
complaints. In short, we had a crisis on our would unilaterally require inspections as
hands. In my view, one I think is shared by applicants would then go to a competitor for
most elected officials, a crisis is when many their insurance.
consumers are complaining about the same
issue. No-fault was clearly not working and In 1977, the Chairman of the Senate
insurance fraud was growing significantly Transportation Committee John Caemmerer
due to lack of detection and enforcement. introduced a bill that would have mandated
Something had to be done! that the only automobile physical damage
policy that could be sold in New York was
In 1976 Governor Carey requested that a stated value policy. The insurer and the
the Department come up with a solution insured would agree on a value and that
to the automobile insurance rate crisis. would be the amount paid in the event
The Department put together a task force of a total loss, less depreciation. Part of
that dedicated itself to finding solutions. I the bill required the insurers to physically
regulated the no-fault law from 1974–1989, inspect the vehicles prior to coverage. The
so I was among the key members of the task purpose of the bill was to reduce the
force, along with the folks who created the incidence of automobile physical damage
no-fault law. While we spent most of our fraud both with regard to phantom vehicles
time drafting changes to the no-fault law, and vehicles being insured with significant
including creation of the verbal threshold pre-existing damage.
and medical fee schedules, we also looked at
ameliorating the fraud inherent in property Enactment of the Photo Inspection Law
damage coverages.
The Department Task Force drafted The
In 1976, I met with a group of representatives Automobile Insurance Reform Act of 1977
of major automobile insurers writing in New (Chapter 892 of the Laws of 1977) which
York. The group included Allstate, State reformed the no-fault law by enacting the
Farm and GEICO. They complained to the verbal threshold and mandating medical fee
Department of the existence of “phantom schedules. The act also included the addition
vehicle claims”. These claims involved of Section 167-d (now Section 3411) to
automobiles that had been totaled in other require the pre-inspection of automobiles
states and then the title was registered as a requirement of coverage for physical
in New York. Shortly after being insured, damage coverage. In order to get the act
these vehicles would be reported stolen. through the Legislature much negotiation
The Department of Motor Vehicles never and trips to Albany were required. The trial

38 • Your NY Connection Magazine

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In my opinion the law is not cost effective because automobile thefts in New York have
declined from 187,000 in 1976 to only 15,269 in 2015. Since enactment of the law in
1978 many cost containment measures have been adopted that have severely reduced
the incidence of thefts, especially fraudulent thefts.

lawyers opposed the verbal threshold and the for older vehicles and brand new vehicles.
Medical Society opposed the fee schedules. In December 1977 the PIA did a cost benefit
Senator Caemmerer also wanted his stated analysis of the law, which concluded that it
value policy provisions included in the act. would cost $100 million a year and only save
Because we had a crisis, the parties did $4 million. I remember receiving a call from
successfully negotiate the act and it became Al Lewis, the new incoming Superintendent,
law effective December 1, 1977. While the that I had 10 days to refute the PIA study or
stated value policy did not become law, the else the law would be repealed. I contacted
pre-inspection requirements were enacted. PIA to find out where they got their data,
and I requested the identity of the insurers
Implementation of the Photo Inspection Law involved, all of whom I contacted. The $4
million in savings came from a speech given
The Department drafted and promulgated by Superintendent Harnett given in 1974
Regulation 79 (11NYCRR 67.0). There was where he estimated the cost of automobile
a lot of opposition to the law especially insurance fraud in New York. The cost was
from insurers and the Professional Insurance 4 million vehicles times $25 per inspection.
Agents of New York (PIA). The Independent The effective date of the law was moved
Agents of New York (The Big I) strongly to January 1, 1978 to give more time for
supported the law as did the Council of implementation. The Department decided to
Insurance Brokers. The regulation was the waive renewal inspections which eliminated
subject of much debate at producer and 50 percent of the required inspections. A
insurer meetings around the state. After new company called CARCO came to the
enactment of the law, politicians and the Department and offered to set up 750
Governor’s office began to fear long lines inspection sites and do the inspections for
of car owners waiting to get their cars $4.25 each. In retrospect had CARCO not
inspected. The long gas lines caused by the come forward, the law would not have seen
Oil Embargo of 1973–1974 was still fresh the light of day. After checking with the
in the minds of many lawmakers. Originally insurers that PIA contacted, I was able to
the Department wanted to inspect all determine that the true cost of inspections
vehicles coming up for renewal in addition using CARCO or insurer staff was about $6
to newly insured vehicles. This meant that an inspection. I estimated there were about
approximately 4 million vehicles would need 15,000 phantom vehicle claims at about
to be inspected. The Department had but 6 $6,500 each for a savings of $100 million.
months to implement an inspection network The PIA backed off and the rest is history.
with a small budget to get this done.
Effectiveness of the Photo Inspection Law
Inspection companies including Equifax
and Hooper Holmes agreed to perform The only change affecting automobile theft
inspections but at $25 per inspection. During claims in New York during the 1978–1979
the process of drafting Regulation 79, the period was this law. During this time, New
Department did enact waivers of inspection York saw a 7 percent drop in automobile

40 • Your NY Connection Magazine

thefts, which amounts to about 13,000 mandated fraud plans for insurers. These
vehicles. Bordering states of Pennsylvania, plans require insurers to maintain Special
Connecticut and New Jersey saw auto theft Investigation Units (SIUs) based on premium
increases of 16 percent, 19 percent and volume. Any theft loss reported is subject to
36 percent, respectively. Obviously, the a comprehensive investigation based on
perpetrators of phantom vehicle fraud established fraud indicators.
just moved their operation to a friendlier
environment. I estimate that the inspection 4. Improvement in anti-auto theft devices
law saved in excess of $100 million a year including LoJack and GPS systems
for many years after its enactment. In short,
the law was a success. The above improvements have dramatically
reduced automobile thefts in New York
Is the Photo Inspection Law Cost Effective and it is nearly impossible to commit a
Today phantom vehicle fraud today. The fear is
the elimination of the law would bring
In my opinion the law is not cost effective back the fraud, but given all the above
because automobile thefts in New York actions to deter fraud, I believe the reality
have declined from 187,000 in 1976 to of that happening is negligible. The photo
only 15,269 in 2015. Since enactment of inspection law should be made optional
the law in 1978 many cost containment for all insured vehicles other than vehicles
measures have been adopted that have insured through the New York Automobile
severely reduced the incidence of thefts, Insurance Plan. Making the law optional
especially fraudulent thefts. These include will save a significant amount of money and
the following measures: eliminate a hassle for insurers and an even
bigger hassle for policyholders. Insurers
1. A Federal law has required all states to should still have the right to pre-inspect as
adopt uniform salvage disposal procedures a condition of coverage since the law can be
for motor vehicles. Insurers must report an effective underwriting tool, but it should
all total losses to the DMV and the title to be at the option of each company.
these vehicles becomes a junk and salvage
title. These vehicles cannot be registered John Reiersen serves on the board of
anywhere in the United States without a directors of Kingstone Insurance Company
comprehensive inspection report. and previously served as president
and CEO of the company before his
2. Today New York and most other states retirement. John spent the first part of
require insurers to report all property his insurance career at the New York
damage claims to a central registry known Insurance Department for a total of 25
as PILR. In New York Regulation 64 requires years. You can reach John at 631.965.9661
all insurers to check this database prior to or [email protected]
paying a theft claim.

3. There are now Insurance Fraud Bureaus
within regulatory agencies including

www.nyia.org • Fourth Quarter 2018 • 41

AUGUST 30 SEPTEMBER 17 SEPTEMBER 30–
OCTOBER 3
Member Company Visit at New York
Chautauqua Patrons SITA Conference
NYIA director of design and Regulatory Symposium Ellen Melchionni and
technology, Stacey Orlando, Members gathered to hear Cassandra Anderson attended
visited Chautauqua Patrons representatives from DFS the State Insurance Trade
Insurance Company’s office discuss the latest New York Association (SITA) Conference
in Jamestown, New York. regulatory matters, including in Coeur d’Alene, Idaho and
best practices for filing exams gained keen insights from
and cyber security compliance around the country relating to
at a NYIA event in Albany, NY. a wide array of property and
casualty issues.

SEPTEMBER 14 SEPTEMBER 23–26 OCTOBER 14–20

New York Compensation NAMIC Convention IICF Week of Giving Projects
Insurance Rating Board Ellen Melchionni and NYIA staff and members spent
(NYCIRB) Forum Cassandra Anderson traveled time at the Northeast Regional
Ellen Melchionni and to San Antonio, TX to attend Food Bank, Vanderheyden
Cassandra Anderson attended the National Association of and other volunteer projects,
the NYCIRB forum and heard Mutual Insurance Companies lending a hand where needed
informative presentations (NAMIC) 2018 Annual across New York.
about the state and the future Convention and hosted
of the workforce. a dinner for many NYIA
members in attendance.
42 • Your NY Connection Magazine

Out &
AbOut

OCTOBER 23 NOVEMBER 7 NOVEMBER 15

Syracuse I-Day NYSBA Law School for 2018 Annual Meeting
NYIA president, Ellen Nearly 100 members and industry
Melchionni, and NYIA director Insurance Professionals professionals attended this event
of government affairs, Javier Association members along in Latham, NY. Members elected
Tapia, spent the day in with NYIA’s Javier Tapia the 2019 Officers and Board of
Syracuse, NY and heard an attended the Law School Directors, established the 2019
industry panel discussion as for Insurance Professionals Legislative and Regulatory Agenda,
well as a keynote address from in Albany, NY that was and heard from Tanisha Edwards of
Deborah Norville, anchor for co-sponsored by NYIA and the Governor’s Office and Demotech
Inside Edition. the the New York State Bar on the New York P&C marketplace.
Association.

OCTOBER 23 NOVEMBER 14

Erie Coffee House New York Auto Forum
Cassandra Anderson spoke NYIA members came together
at the Erie Albany District in Latham, NY to talk about
Coffee House in Malta, NY all things auto, heard
about the latest happenings presentations on no-fault,
with New York legislative distracted driving, auto claims
and regulatory matters. and participated in a fireside
chat with legislators.

www.nyia.org • Fourth Quarter 2018 • 43

givingback by Kaitlyn Emory
New York Insurance Association, Inc.
Otsego County Patrons—
A Sweet Way to Help ESveecruyrityyearMuthtuealOtIsnesguoraCnocuentCyoPmaptraonnys cInosnusriadnecres
Cthoemmpsaenlvyehsa“sonbeeebnighfealmpiinlyg.”tTohreuynhtahvee fbrieeedn ddoouinghg
44 • Your NY Connection Magazine bouositnhesast itnhethaenFninugalerSLcahkeensevauresaFfiorermovaenr’s1C3a0ryneivaarls.
Eanmdpltoaykeeps rhidaeveinbetehneisrt“roentcehbinig, faryminilgy”angdivsinuggabraincgk
ftorlotchael fmamasilsieess ifnorthoevceorm1m5unyietay.rsS.evTehreal coafrnthiveairl
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bfaymaiildyinmg einmtbheerscotsot ocfanecedr.eTdheequCipanmceenrt.Resource
Center of the Finger Lakes is an organization where
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dtheaptairstmcleonste wtoatsheinir hdesaprtesrawtehilneegeidvinogf bvoaclukn. teers
for the annual carnival. Andela assembled a group
oTfhesta2f0f1v7olWunatlekeartshothna/5tKwowraksedthoenethoirdtwyeoanr igthatst
dSeucriunrgitythMeutuharelec–hnoisgehtoesvpeonnt.so“Irt ahceolprpsotroateretmeainmd.
mHeeathaetr IHwaorriksoinn,ana aSmeaczuirnitgy liMttluetuhaalmelemt,pwlohyeeree,
pheaodpalen sitnilsltcruamreeanbtoaul tpeaartchinotohregraannizdintagkea ttheeamtimoef
t1o8coemepltooygeeetshearn,”dA/nodreflamsailiyd.m“Semembserlsik. eEtahceh etnetairme
tmoewmnbaenrdtlooockaltchoemtmimuenitioesrashisoewfunpdesa, cphayrteiacrip!”ate
and cheer each other on during the event.
The Schenevus Fireman’s Carnival is a true family
e“TvheentSaencdurlitoycaMl utrtaudailtieomn.pAlonyeaenstiqfiuned ctahraotusceolmaindg
fteorgreisthwehreetol prsouvpipdoerltigthhtohseearftaecdinthgrilclasnfocerrchiinldrtehne,
wcohmilme uannityompeonsitnrgewcaerdeminogn,”yLisfeaaKtuarninelgliss,kCyopdoivraetres
pSerocvreidtearsy,ensateidrt.a“iInnmaedndt iftoiornt,htohseywfhinodhcaovme faorftlarine
fkonroawdivnegnthuerey.aTrheescuaprpnoivratilnaglseoabchoaostthsear sinpeacntaecvuelnart
ftihraetwhoraksshdaisdplaaydiarnedctloimcaplamctusoinc. them individually
or as a group.” Security Mutual will continue to
OpatsrteigcoipCaoteunitny PthaetroCnasnhceorpeRsetshoautrtcheeiCreinvteorlvoefmtehnet
iFnintgheer LSackheesnWevaulksaFthiroenm/5aKn’sfoCr amrnainvyalyehaars tionscpoimreed.
other businesses to donate their time as well.
ASencouthrietyr loMcuatluianlsutrraienscetaogefinncdy swtaarytsedtovolguinveteebraincgk
atot tthheeircacrnoimvaml usneivteyraalllyeyaerasr alfotenrg,OthseisgoinCcoluudnetys
Pparotrvoidnisn, gtheay“lMikieratcolethCinhkristhtmatatsheDyayst”abrtyedadaotpretinndg.
“loWchaillefawmeilifeins,andcoianlalytinsgupbploorotdlotcoal tchhearAitmieesriacnand
cRleudbsC/grorossupasnwdepfaeretlicthipaattginivginign oUf noiutredtimWeahye’slp“sDuays
foefelCmaroinreg.”coTnhneescetedevwenitths thberinlogcatlhecoirmemmupnliotyyewees
stopgeentdheoruor udtasyidsewoof rtkhiengofifnic,”eA, anldloewlainsgaitdh.e“Omutrowgoivrek
ibnacthketofrtiehde dcoumgmhubnoiotyt,hapllutthseawsmhiilleeloenaronuinrgfamceosr!e”
about each other.
You can find Otsego County Patrons in the fried
dKoauitglyhnbEomothornyexist yNeaYrIAa’sndafdomr minaisntyrayteivaersatsosicsotmanet..
You can reach Kaitlyn at [email protected] or
K51a8it.l4y3n2.E4m22o7r. y is NYIA’s administrative assistant.
You can reach Kaitlyn at [email protected] or
518.432.4227.

Reinsurance Association of America • Reinsurance Education Institute

New & Noteworthy

Community Mutual Countryway Receives

Announces Retirement Ward’s Top 50 Award

of Thomas White Countryway Insurance Company, through its affiliation
with Virginia Farm Bureau Mutual Insurance Co., was
Community Mutual announces the named among the 2018 Property-Casualty Ward’s Top
retirement of Thomas A. White, 50 Companies. Located in Syracuse, N.Y., Countryway is
from his position as president, a regional carrier that provides property and casualty
effective December 31, 2018. insurance coverage in nine states. The company’s
operating results flow through its parent company,
In 2003 Tom joined Community Virginia Farm Bureau Mutual Insurance Co., which
Mutual as executive vice president. writes insurance exclusively in Virginia and acquired
After Robert Carpenter’s retirement in March of 2005, the Countryway in 2011.
Board of Directors elected White as Community Mutual’s
next president. He was instrumental in a number of key Union Mutual Announces
initiatives including Community Mutual’s affiliation with
Union Mutual in 2013. Under his oversight, the company Hiring of M. Joseph Cook
has subsequently grown its direct written premium 85
percent and surplus nearly 230 percent. M. Joseph “Joe” Cook recently
joined Union Mutual Companies
During his 40-year insurance career, White has as chief marketing and business
accomplished much. He started his insurance career development officer of New York
on in 1979 at Eastern Mutual as a field representative. operations earlier this year.
He left in 2003 as executive vice president-claims,
secretary and director. White served as chairman of the “We are thrilled Joe has joined our
New York Insurance Association (NYIA) in 2002–2003. team,” Union Mutual president & CEO Michael Nobles
He was also honored with their Distinguished Service said. “Joe brings with him an extensive and diverse
Award in 2014. 35-year insurance and reinsurance background with a
proven and dedicated focus on delivering high-caliber
Tom attributes his well-rounded knowledge of the results.”
insurance industry to the relationships he developed
with fellow employees, agents, colleagues, attorneys, Cook comes to Union from Swiss Re, where he was a
independent adjusters, service bureaus and others he regional and national eastern region vice president,
has worked with over the years. focusing on business development and account
management. He has also served as a sales executive for
Tom is a life member of the East Greenbush Fire Employers Re as well as held several key positions with
Company serving 43 years. He also served as a Town of American/Munich Re including as vice president, direct
East Greenbush Fire Investigator and volunteered for 20 treaty account executive.
years as a Rensselaer County Fire Investigator.

46 • Your NY Connection Magazine

GeoVest Advisors, Inc.

Investment Managers

Serving the Insurance Industry for over 20 years

Fee-Based, Professional Money Managers
Working Only For you

245 WillowBrook Office Park, Fairport, NY 14450 | 585-248-5050 or 800-638-5050 | www.geovestadvisors.com
Contact: David Upson at extension 103

When there’s
trust in partnership,
the feeling is mutual.

Mutual Boiler Re has been setting the standard
in New York for Equipment Breakdown
reinsurance. We provide coverage for a wide
range of equipment against loss or damage
caused by mechanical, electrical and pressure
systems breakdown.
Visit mutualboilerre.com or call 800-814-4458.

New & Noteworthy

Israel Bonds Honors Law, a J.D. from New York Law School, M.A. in philosophy
from Columbia University and New School, a M.A. in
NYIA Members theology from Fordham University, and a Bachelor of
Science in criminal justice from St. John’s University, cum
Israel Bonds’ Greater New York Region Insurance laude. He is also a Charter Property Casualty Underwriter
Division held its annual luncheon at the St. Regis Hotel (CPCU) and is working on his Ph.D. in philosophy of
in New York on October 17, 2018 to honor Keith J. Wolfe, science at the New School.
president, U.S. Property & Casualty at Swiss Reinsurance
Company and Thomas Hughes, executive vice president, Ontario Insurance Company
general counsel and corporate secretary for Greater
New York Mutual Insurance Company. It annually honors Appoints New COO
individuals for commitment and leadership in the
insurance industry. This year’s annual luncheon brought Ontario Insurance Company has
together over 255 insurance industry professionals appointed Alan Fry as chief
committed to Israel and the Bonds enterprise. operating officer and executive
vice president. A Florida resident
Keith Wolfe serves as president of U.S. P/C – Regional with 15 years of experience in the
& National at Swiss Reinsurance Company and is legal and insurance fields, Fry has
responsible for all legal entity management, rating relocated to the Finger Lakes
agency and regulatory interaction on behalf of the region to take the leadership role with the company. Fry
flagship reinsurance carrier. Wolfe received a MBA in was selected as COO following a nationwide search led
strategy, international business and organizational by a local recruiting firm and Ontario Insurance
behavior and entrepreneurship and a B.S. in fire Company’s Board of Directors.
protection engineering from University of Maryland.

Thomas Hughes is executive vice president, general Previously, Fry served as vice president and corporate
counsel and corporate secretary for Greater New York counsel at Ring Power Corporation, a distributor and
Mutual Insurance Company (GNY). Before joining GNY, seller of construction, agricultural and power-generation
Hughes was the assistant solicitor general in charge machinery and equipment. Fry’s responsibilities at the
of the New York State Attorney General’s New York self-insured, 2,000-employee company included risk
City Appeals & Opinions Bureau. Prior to that, Hughes management, compliance, handling of self-insured
held litigation and appellate positions at a number of claims, litigation management and more. Earlier in
highly-regarded private law firms. He was admitted to his career, he worked as an attorney at Akerman LLP,
the bar after spending 10 years with the Federal Bureau Carlton Fields and Jones Day. He earned his law degree
of Investigation’s Foreign Counterintelligence Division. at the University of Chicago Law School and a B.A. in
Hughes holds a LL.M. from New York University School of psychology at DePaul University.

Do you have news you would like to share?
Please send releases and announcements to Kaitlyn Emory at [email protected]

48 • Your NY Connection Magazine

&JOHNSON • LAUDER SAVIDGE, LLP
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Where People Count

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Upcoming Events

P&C Legislative Buffalo, NY • 716.854.3343 • WeirResources.com
Action Day
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In partnership with the national phone call from Jon or Bill Weir at Weir Financial
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April 30, 2019 in Buffalo, NY. I have worked with both of them
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50 • Your NY Connection Magazine  Plan Communication & Servicing
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