If you still think bedbugs are only a problem for the great unwashed living in squalorous tenements, read the news. Your customers probably already have, especially if they’re located in Terminex’s recent list of cities with the biggest bedbug problems, including New York, Philadelphia, Detroit and Chicago.

Bedbugs are a growing problem, not just for homeowners and apartment managers, but also for some of the biggest names in retail (two Abercrombie & Fitch stores in Manhattan were recently forced to close because of the problem, as was an AMC Theater in Times Square).

And if you think these pernicious pests are just a problem for the Big Apple, consider this: although they prefer places with beds where they can come out at night and feed on people, bedbugs are becoming increasingly common in downtown office spaces, even in filing cabinets, in all the metro areas where bedbugs are prevalent. Yes — bedbugs could be living in those file cabinets in your own office.

Why bedbugs and why now? I spoke at length with entomologist and expert witness Lawrence J. Pinto about the rapid growth of this problem, which is often blamed on the FDA’s failure to approve the use of a pesticide as lethal to bedbugs as DDT, which was banned in 1972. Not true, says Pinto, coauthor of “Bed Bug Handbook: The Complete Guide to Bed Bugs and Their Control.”

“DDT was the magic bullet when it was introduced after World War II, but within a few years, bedbugs had gotten resistant to it and the pest control industry wasn’t using it anymore because it didn’t work,” he said. “The chemicals of the day were the reason we got rid of bedbugs in the first place; they were a scourge in the 1930s, but by the late ‘50s and early ‘60s, they were gone. Pest control companies in the ‘70s and ‘80s saw so few cases that they stopped treating for them.”

Although the bedbug problem began to resurface in the mid-1990s, it was still rare. However, in the last 5 to 6 years, the number of bedbug infestations has “exploded” (ewww), Pinto said. According to a recent survey by the National Pest Management Assn., 10 years ago only 10 percent of pest control companies were seeing bedbug problems. The figure is now 80 percent.

At the risk of sounding politically incorrect, the rise in bedbugs can be at least partially attributed to the influx of goods and people from the world’s less developed countries, Pinto said. ”The way international travel changed is the spur,” he said. “Today, the whole world is traveling from places in the world where bedbugs are common. And not just people, but products – if you package something in a box and ship it to New York, it will have potential to contain bedbugs or any other pest.”

The other half of the equation is the “shy and cryptic” nature of the bedbugs themselves. Not only are they good at hiding (in beds, furniture, walls, clothing), they are also prolific breeders and extremely hardy – and adult bedbugs can survive without feeding for a year and a half, Pinto said.

Many apartments spend as much as $100,000 a year dealing with getting rid of intial problem, which doesn’t include maintenance to keep them away, Pinto said. For the typical homeowner, the cost is anywhere from $300 to $1,200, and probably somewhere in the middle. (This doesn’t include the cost of special bedbug-sniffing dogs, which are 96 percent accurate in detecting the pests and cost $300 and up to sniff out a private home.) Treatment, which includes not only the application of pesticides, but steam and vacuum cleaning, usually takes three applications to eradicate the pest. “Bedbugs are the worst problem in pest control, nothing else compares to it,” Pinto said.

And because bedbugs, like termites or vermin, are excluded from personal and commercial insurance policies, business owners are on the hook for cleanup costs. “Bedbugs are considered a maintenance issue,” said Loretta Worters of III, who spends a lot of her time these days talking about bedbugs (http://twitter.com/LWorters). “Insurance coverage has broadened over time.  It used to be insurance just covered fire, then it expanded to include such perils as theft and wind.  But bedbugs, or bugs of any kind, have never been covered. There are no riders or additional coverages that could cover pests,” she added. “I don’t know about hundreds of thousands of dollars, but if it spreads throughout a big building it would be extremely expensive for the building owner.”

In New York, where the pest is most prevalent, legislators are looking for ways around this. Brooklyn Asssemblyman Dov Hikind and Senate Majority Conference Leader John Sampson plan to introduce a bill that would require insurers who underwrite property and casualty policies in the state to offer policies that cover the cost of bedbug infestations. And there is also a bill under consideration (New York State Assembly Bill A10081) to give a tax credit to residents who lose property due to bedbugs in their homes. And only days ago, New York Gov. David Patterson signed the Bedbug Disclosure Act, which requires apartment owners to inform consumers if bedbugs were discovered in an apartment, said Loretta Worters of III.   

It seems to me that some enterprising underwriters could look on bedbugs as an opportunity to craft some interesting coverage that, for a price, could protect businesses against costs related to their eradication. But since this coverage doesn’t yet exist, what should agents tell their business customers about risk management for bedbugs?

Larry Pinto suggests starting with full disclosure if a problem has been detected and is being treated, which could prevent lawsuits in the future. Awareness and early detection are key. “You can control bedbugs in any site if you have the money and cooperation,” he said. “Management must be sure to inspect and treat not only the areas where there are bedbugs, but the adjacent areas as well.” And although prevention is easier than mitigation, it’s sometimes hard to convince management of this, he added. “Your pest control service should be doing regular maintenance focused on bedbugs, and managers also need to make their custodial staff and residents aware of the threat — and if there is a problem, to attack it aggressively.”

There are also some surprisingly low-tech, low-cost ways to prevent a problem, including bedbug-proof encasements that go over mattresses, box springs and pillows, and plastic “insect interceptors” that go under the legs of beds and furniture and trap bedbugs. And because bedbugs are vulnerable to heat, simply putting infested bedding and clothing into a standard clothes dryer is enough to kill both eggs and adults, Pinto said.

I’d love to hear from any readers, especially those in big bedbug cities, about what their customers are saying about the problem. Anyone care to bite? (hahahaha….)

An article in today’s Wall Street Journal got me thinking about how to put the BP oil spill into perspective.

 The gist of it is that although insured losses from the Deepwater Horizon Gulf Coast oil spill could reach $3.5 billion insured, according to Moody’s, this disaster and the volcanic ash mess earlier this year could end up being a shot in the arm for the insurance industry. In the case of the oil spill,  80 percent of the losses will be carried by self-insured BP, and the volcanic ash thing had little impact on insured losses. The “upside” is, insurers will be able to hike rates on property coverage for oil rigs and offshore energy liability insurance to reflect the increase in risk.

The article concludes:

This would provide some welcome relief for an industry that for years has suffered from declining prices and volumes, because demand for cover declined in the absence of large catastrophes.

Talk about turning lemons into lemonade. You can see this oil spill from space and it’s threatening the whole Gulf Coast, Florida Keys and Cuba, but heck, the insurance industry is happy because we might be able to raise rates.

I don’t know about you, but that doesn’t seem like much of a reason to celebrate.

Last week, III came out with a comprehensive study on the impact of Deepwater Horizon and the possible fallout we can expect to see in the insurance industry. True, the industry may only end up shouldering 20 percent of the direct p-c losses, but a disaster of this magnitude will doubtless spread just as inexorably as the oil itself to all areas — especially as the litigation sharks begin to circle (as of May, 110 lawsuits and counting).

According to III, first- and third-party insurance policies that will take the biggest hits are:

• Business interruption/loss of production income
• Comprehensive general liability
• Environmenta/pollution liability
• Operators’ extra expense (provides coverage when controlling well after a blowout)
• Physical damage
• Workers’ compensation/employers liability

 One of the biggest insurance angles of this story, however, doesn’t lie in potential claims or rate increases, but in risk management — or lack thereof. With the U.S. Attorney General announcing that federal authorities were opening criminal and civil investigations into the spill, it’s likely that a host of risk management oversights will come to light, including increasing pressure on the Minerals Management Service and its lackadaisical regulation of offshore drilling.

In fact, based on the number and magnitude of oil spills over the last 20 or so years, nuclear power plants, in spite of their bad press, are beginning to look like paragons of safety in comparison (there’s an interesting blog on the subject here).

And as far as pinning hard-market hopes on Deepwater fallout, I wouldn’t hold my breath — everyone expected that a hard market would be inevitable after the losses of Hurricane Katrina, but it didn’t happen. Given the fact that there’s still plenty of capacity in the market, it seems unlikely that a single event, even as big as this oil spill, will cause the soft market to magically disappear.

Last week I had the pleasure of attending an independent agent seminar presented by Hales & Co. and hosted by National Underwriter and AA&B on “creating and enhancing shareholder value.”

Don’t let the Hales tag fool you: although M&A was a large part of the discussion, it was by no means the only topic. In fact, the all-day event pretty much ran the gamut of all the challenges independent agents face, from complying with the new healthcare reform law and other legislation to building a stronger brand.

The main message I came away with was this: Being an independent insurance agent is not for wimps. Not only are you stuck competing in the worst economic mess since the Great Depression, but you also have to worry about complying with state and federal regulations, finding new business, tracking your insurers’ financial stability, and on top of everything else, staying on top of Facebook, LinkedIn and Twitter.

And now, to add insult to injury, you’re also a target for professional wrestlers.

In a story that sounds like something from the Onion, last week the St. Petersburg Times reported that Hulk Hogan (real name: Terry Bollea) has sued his insurance broker, Wells Fargo Insurance Services, claiming the broker should have offered him an umbrella policy, which would have protected him from lawsuits when his son crashed his car, catastrophically injuring a passenger in 2007. Although he had a third-party auto liability policy with a $250,000 limit, Hulk recently paid a confidential settlement in the accident, which the broker lawsuit seeks to recover.

The case goes to the heart of the broker-as-consultant issue, which holds the profession to a higher standard of ethics and expertise than a mere policy-pusher. According to the Times article:

Didn’t Bollea have a personal responsibility to investigate on his own what he needed to do to protect his multimillion-dollar net worth?

“Not if you put your trust in your broker,” Florin (Hulk’s lawyer) said.

“This isn’t a personal responsibility case,” Florin said. “This is a professional responsibility case.”

 Every agency consultant, including those at the Hales event, extols the virtues of independent agents and brokers differentiating themselves in a tough market by becoming more professional and consultative. Unfortunately, as the Hulk case demonstrates, that professionalism can be a double-edged sword. If you’ve cut corners to survive the soft market and the recession, that frugality could come back to haunt you if you’re not covering all the bases with your agency services.

 As the industry continues to evolve in sophistication, don’t be surprised if you start seeing more of these types of cases.

And it would be really cool if they could be settled with a cage match.

With all due respect, I think the researchers at Careercast.com must be, as the Brits say, “having us on.”

That’s the only conclusion I can come to after looking at their much-touted “Best Jobs for 2010” list, just up on their Web site.

Not so much that they rank the job of insurance actuary as No. 1. After all, the rankings are based on a combination of “environment, income, outlook, stress and physical demands.” The fact that actuaries make good money, wear nice suits and sit at a desk would obviously rank the profession higher on the list than, say, anything seen on the “Dirty Jobs” show.

Nor do I take much umbrage over most of the other top 10 jobs, including the predictable computer software designer and analyst, accountant (they’re in demand in all economies) and dental hygenist (although I beg to differ with the “stress” element of that job — when my son was young he once threw up on one).

But guess what: ”Insurance agent” came in at an unenviable No. 103, right between “telephone installer/repairer” and “artist (fine art).” While the job of insurance agent might well include elements of both those jobs, I find it hard to believe that the job outlook for insurance agents is only one step above that of an aspiring paint-flinger. (It’s gotta be the stress level: 63.322 compared with 51.994 for artistes.)

Another position that handed me a laugh was that of “publication editor” (in the immortal words of Bozo the Clown, “Hey, that’s me! Wha-ha-ha-ha!”). Ink-stained wretches actually beat out insurance agents for job viability, coming in at No. 65. And although the fine print did concede that the hiring outlook for editors was “very poor,” this relatively high ranking completely ignores the fact that more U.S. print publications went down the tubes in the last two years than in the history of publishing.

I also had to laugh at other job entries that beat out insurance agents on the list — including “historian” at No. 5 (hey, all you business school students — ditch the MBA and start focusing on the Punic Wars!), “author” at No. 74 (riiiiight…), “janitor” at No. 83 and “bookbinder” at No. 91. Although ballerinas, astronauts, cowboys and pretty-pretty princesses didn’t make the cut, this list suggests that even your wildest kindergarten career fantasy would have been a better choice than what you’re doing now.

Still, you can take some comfort in the fact that you’re not in the career that came in No. 200: “roustabout.” No, not in the circus, but on oil rigs. Careercast.com describes it as a job with good earning potential, but with long hours, dirty and dangerous working conditions, isolation and high stress. Oh, wait…sound familiar?

When the countdown ends on 2009, it also brings an end to the first decade of the new millennium. It’s hard to believe how much our world has changed in those 10 short years, from global terrorism (still happening) to the financial meltdown to the ascendancy of the Internet. Let’s look at just a few:

Everything tech. Yes, the Internet was around at the turn of the century, but it wasn’t as ubiquitous as it is now. Since then, a whole generation has grown up with this technology, and that generation is our future employees and customers. While all this has made our lives a lot easier, it’s also phased out a lot of what we were confortable with and raised the bar on customer expectations. A mixed blessing, to say the least.

A world of new risks. The world is smaller, and the risks you underwrite are not like anything that’s been insured before. Acts of terrorism, environmental exposures, professional liability related to new technology standards and expectations — they’re all in the mix, with new risks coming at us every day. The challenge for our industry will be to keep one step ahead of anything new that comes along.

A bigger, smaller agency universe. The agency/brokerage M&A boom may have slowed to a trickle, but the activity of the past 10 years has altered the landscape forever. Big brokerages have gotten bigger by increasingly targeting the midmarket customers that have long been the bread and butter of the average agency. Conversely, the latest IIABA Agency Universe numbers suggest that smaller, startup agencies are on the rise, thanks in large part to the availability of sophisticated automation systems that allow them to compete with bigger players.

More eyes on the industry. Public/political scrutiny of the insurance industry is nothing new, but the seismic financial upheavals of the past 10 years — from the Enron fiasco in 2002 to last year’s subprime mortgage meltdown and AIG bailout and current healthcare debate — have put this most risk-averse industry in the spotlight more than ever before.

And while nobody can predict what the next 10 years will bring, it’s a safe bet that the trends we saw begin at the dawn of the century will continue to play a significant role going forward. And while 2009 was a good year in that we dodged a lot of bullets — from natural disasters to truly bad legislation — it’s inevitable that we’ll stand to take a hit from these and other problems in the future.

What were your biggest concerns in 2009, and what do you predict will dominate the headlines in 2010?

Last June, AA&B took an in-depth look at insurers and agents who were specializing in “green” insurance coverage. Our sources spoke glowingly of the potential for growth in green construction, especially in the area of retrofitting existing buildings — a topic covered in a current Web exclusive article on the subject.

Supporters maintain that adopting green building methods and materials will create a “green collar” job transformation in the U.S.  The latest figures from the USGBC in a “Green Jobs Study” conducted by Booz Allen suggests that green building will support or create 7.9 million jobs between now and 2013. And in certain areas of the country, it seems to be working. One independent study shows California green jobs grew 36 percent from 1995 to 2008.

But President Obama’s campaign promises to create 5 million new green jobs and put the U.S. in the forefront of renewable energy production have failed to materialize. Ironically, China, which for years has been reviled for its profligate use of nonrenewable energy, is now the world leader in the production of off-grid wind turbine generators, according to a recent article in EcoWorld.com.

According to a recent article in Fast Company magazine, there is terrific potential for green job growth in these areas:

• Farmers
• Foresters
• Solar power installers
• Energy efficient builders
• Wind turbine fabricators
• Conservation biologists
• Green entrepreneurs
• Recyclers
• Sustainability systems developers
• Urban planners

This list is inclusive enough to accommodate all levels of workers, from MBAs to retrained blue-collar people.

Nobody should be cheering green jobs more than the insurance industry. With the manufacturing and construction industries struggling to find a place in the “new normal” economy, a burst of new activity in the green jobs area could pull these and other industries out of the doldrums.

But as the California example indicates, it takes more than hope to build the new green collar middle class American worker. Green is “gold” in California in large part because of state and municipal rules mandating green compliance. Like any fledgling industry, green jobs need some government incentive to get off the ground. As long as it’s cheaper to keep doing things the old way, the green promise will remain just that. In China, the government subsidizes wind power, knowing the young industry won’t be self-sustaining for years, but willing to make the investment. It seems if we really want to dig ourselves out of our current economic malaise, our country would be better served by a government that’s willing to invest in the future instead of propping up relics from the past.

It’s hard to believe it’s been 8 years since the terrorist attacks on the WTC and the Pentagon. Do you remember what you were doing when it happened?

I was driving north on 294 on my way to work at NAII (now PCI) and listening to erstwhile Chicago radio shock-jock Mancow Muller gibbering about a plane hitting first one tower, then the second. By the time I walked into the office, the news about the Pentagon attack was being broadcast. My first thought was that a massive planned air attack was moving west, and that a downtown Chicago target would be next on the list.

Of course, there weren’t any attacks on Chicago, but that didn’t keep the events of that day from changing all of our lives, on both a professional and personal level. I recall spending the next week or so in a state of shock and uncertainty. When would another attack happen? Where was Osama bin Laden? Were there still people buried alive in the WTC rubble? How could insurance craft coverage and pricing to protect against similar events? And how could someone write about the impact of such an unprecedented event when history was still happening?

I wasn’t alone. Both businesses and people were afraid to travel, conduct business, make long-term plans. 9/11 may not have launched the recession of the early 2000s, but it sure didn’t help. In the aftermath, a burgeoning global recession went viral, following heady years of stock market growth, dot-com mania, and relief that we dodged the 1999 Y2K or Armegeddon bullet. 

Ultimately, of course, insurance took a huge hit — between property, business interruption, aviation, workers’ comp, life and liability payouts, the cost came to almost $40 billion, according to III. The human cost was much higher.  Zurich, Marsh and Aon, all of which had offices in the Twin Towers, had their share of fatalities among the almost 3,000 who died as a result of the attacks.

Today, in spite of a couple of wars and the Dept. of Homeland Security, we don’t seem to be any safer. According to risk modeling firm Risk Management Solutions (RMS), potential insured losses from a terrorist attack rose 8 percent in 2008, based on the growing threat of chemical and biological attacks. (This doesn’t even take into account the threat of cyber-terrorism, which could wreak more havoc on the civilized world than a dozen 9/11s).

We live in a world that has been unalterably changed because of what happened on 9/11. Today’s children, many of whom can never know what things were like before the threat of global terrorism, can never comprehend the more carefree times we were lucky enough to have experienced. It’s pretty sad when you have to pity the young.

As everyone knows by now, megabroker Arthur J. Gallagher has received the blessing of Illinois regulators to resume the practice of collecting contingent commissions nationwide starting in October, a move that’s expected to generate more than $10 million in earnings.

The practice, eliminated in 2004 as part of the fallout of a major investigation by former New York AG Eliot Spitzer, hit AJG, M&M, Aon and Willis and caused a major ruckus in the industry, especially among the industry’s biggest brokers and insurers, who are still smarting from billion-dollar fines and lost revenues.

And AJG’s decision has observers speculating on whether the other big brokers will try to follow Gallagher’s lead to get contingent commissions reinstated.

Not everyone is pleased with the news. Yesterday RIMS issued a statement expressing “disappointment” with the move, reiterating its belief that incentive commissions are an inherent conflict of interest, even though Gallagher vows to practice full transparency in the process.

The controversy harkens back to the original discussion of whether or not any sort of commissions, incentives or whatever you want to call them are a conflict of interest — whether it’s for placing insurance or selling cars. Any sales-based culture uses volume requirements and profitability goals as incentives for its producers to sell more. The rub lies in whether or not the customer knows or cares about what goes on behind the scenes.

We’ve all learned a lot since 2004. Transparency is now the mantra, not just for insurance, but every other business, especially with the hot spotlight on government oversight of financial services. You can be sure that in today’s hypersensitive business environment, any practice that smacks of collusion will be scrutinized, vilified and quashed — and rightly so.

It should be interesting to see whether AJG’s decision will generate any backlash from those outside the industry — or if yesterday’s atonements and adjustments have paved the way for a more lenient view of a practice that, when done ethically, is just part of a sales culture.

A surprising item on yesterday’s newswires was an Accenture study revealing that two-thirds of the world’s biggest insurers were planning to expand operations outside of their home markets over the next 12 months, with 75 percent of respondents viewing the current economy as as opportunity for growth.

On second thought, maybe it isn’t that surprising. The study included both property-casualty and life insurers, both of which have been aware for awhile that emerging markets are where large number of people with disposable incomes have people and property to protect, some of them for the first time.

On a related note, I noticed an item about how a Bolivian unit of Zurich Financial Services is teaming up with BancoSol, a microfinance bank, to offer a form of life insurance to Bolivian emigrants in Spain. The coverages come in four forms, all based on a $10,000 coverage to return a decedent’s body to Bolivia in case of death, with annual premiums ranging from $57 to $129.

This is a pretty creative way to address a socio-economic trend: Bolivian emigration to Spain has increased dramatically throughout this decade.

There are opportunities like this right in our backyard. A recent study by the Minneapolis Foundation shows that African immigrants in the U.S. represent a growing but “largely untapped” market segment. Most of these immigrants have their own checking and savings accounts, and most have cell phones and e-mail. The results were collected from focus groups in Minneapolis, New York and Los Angeles, and surveys of African immigrants in Minnesota, California, New York and Washington, D.C.

Twitter and the blogosphere were ablaze this week with the buzz surrounding an Accenture study that found three-quarters of U.S. consumers prefer to buy insurance products through agents and other trusted sources rather than online.

The study of more than a thousand Americans at least 18 years old who own one or more insurance products showed that 73 percent preferred to buy auto and home insurance products from an agent, and 75 percent preferred to buy life products from an agent or trusted source, such as an employer or financial advisor. (The exception is “younger and more affluent” customers, who preferred to buy products over the Web: 39 percent of consumers aged 18 to 24 and 28 percent of buyers with incomes above $60,000 said they preferred online purchases, especially for auto and home products.)

This is a bit of welcome news for independent agents, especially the smaller Main Street guys who are struggling right along with their customers in this tough economy. Am I surprised? Not really, considering that some of the biggest players in the business world are the doing the worst right now.

For years, smaller agents have been bludgeoned with predictions that they’re headed the way of the dinosaur. Ironically, these are the types of businesses that are poised to succeed in the worst economy in decades, probably because they’ve always practiced the ”doing more with less” philosophy that big corporations have just recently been forced to adopt.

The National Federation of Independent Business’s index of small business optimism hit 86.6 last month, breaking a 4-month pattern of declines. And the American Express Open small business monitor of firms with fewer than 100 employees shows that 77 percent think that managing their firms over the last several hard months has made them better at managing their businesses in general.

NPR recently aired a segment on how half the current home foreclosures could be avoided through loan modification. Banks take a massive hit on foreclosed property, so it’s in their best interest to work with troubled mortgage holders to keep them in their homes. Yet amazingly, megabanks like Wells Fargo and Citibank are literally ”not set up” to deal with the problem, even though they saw it coming ages ago–and the bigger the bank, the bigger the problem.

It got me to thinking that the bailout mantra of “too big to fail” could have just as well been applied to the dinosaurs.

Small is beautiful!