NU Online News Service, Sept. 28, 12:42 p.m.EDT

NEW YORK—Independent agents seeking new markets have substantialopportunities selling directors and officers insurance toprivate-sector businesses, an executive with Chubb says.

Tony Galban, senior vice president, global D&O productmanager for Chubb, speaking in New York yesterday, says that whilethere are opportunities in this line for insurers and agents, thecomplexity of the product and patience needed to sell and serviceit is not for every agency.

His comments came during the first annual Advisen ManagementLiability Insights Conference held here.

In a one-on-one discussion with David Bradford, president,research and editorial group for Advisen, Galban says that over theyears insurers have not had much success in their distribution ofthis product through large brokerage firms. Those brokers, withtheir focus on the Fortune 200 companies, feel that the low-premiumlevels they collect from the sale of these products is not worththeir time and effort. But, considering the opportunities, hebelieves insurers should be turning more attention to independentagents.

“There are certain brokers who could see this as a good littlebusiness,” says Galban.

He says insurers have done a poor job of permeating thismarketplace because they have not put the marketing in place tomake it successful.

“Distribution is important in this business and [producers] needto accept low premium levels,” says Galban. “Service is importantand you need to find ways to write lean and find the tools to writethis in a less-expensive way.”

From a sales perspective, the major obstacle to selling thisproduct is convincing a privately held company that they need thecoverage. Executives at publicly held companies understand theirexposure. For privately held companies, the exposure is not soapparent. But lawsuits holding the directors and officersresponsible for a private company's actions do happen more oftenthan one might think.

“They don't understand why they need it and resist buying,” saysGalban.

The traditional hook, as he calls it, is “fear” and makingclients understand the burden a D&O claim can have on theircompany's finances.

He compares private-sector D&O to cyber coverage. Companiessay it can't happen to them. When it does, they see the cost andthen understand the value of the policy.

Advisen's Bradford illustrated the potential marketplace forthis coverage, saying that according to his firm's figures thecurrent market in this segment has around $2.5 to $3 billion inwritten premium. But considering the number of privately heldbusinesses that range from small corporations to partnerships,there is a potential $15 billion in written premium.

“There is an enormous amount of growth available,” saysBradford.

Turning to non-profits, they were termed as a much easier saleby Bradford because the boards are often comprised of sophisticatedexecutives who understand their exposure.

“The non-profit market is more mature,” says Galban.

In another discussion moderated by Jeff Klenk, senior vicepresident Travelers, three brokers discussed the buying patternsthey are seeing.

Dennis Donovan, executive vice president, S.H. Smith & Co.,a wholesale broker, says independent agents have to do a better jobof explaining to the customer that this coverage protects thebalance sheet. He notes that business executives are under theillusion that their general-liability policy will protect them, andagents have to get customers to understand where they haveexposures.