IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com
A Look Back At 2016
4-5
What’s Next for Your Agency Perpetuation
6-7
Francine Berendson Director of Communications & Events fberendson@iiabl.com
Good-Bye Elections, Hello Old Problems
8-10
Insurance Technology Competitors
14-18
Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com
7 Insurance Industry Concerns for 2017
25-33
Kim Jackson Education & Membership kjackson@iiabl.com Karen Kuylen Director of Accounting kkuylen@iiabl.com E. Lee Mowe Marketing Representative lmowe@iiabl.com Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com
Ask Mike
20-24
IIABL Calendar
26
Rate & Rule Filings
27
Jamie Newchurch Insurance Services jnewchurch@iiabl.com
Tech Tips
Lisa Young-Crooks Executive Assistant lyoung@iiabl.com
IIABL Partners
28-31
35
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A Look Back at 2016 January: This year the buzz word for Louisiana was “FLOOD.� In January IIABA testified at hearing before the U.S. House of Representative Committee on Financial Services Subcommittee on Housing and Insurance. The emphasis was that we need a strong NFIP. Although the private flood insurance market can play a valuable role it is a complement to the NFIP and lacks the capability to underwrite flood insurance on a pervasive basis. February: IIABL and LSLA worked together to address surplus lines cancellation & nonrenewal issue. LSLA committed to IIABL that they would issue a notice to all surplus lines insurers and brokers urging them to adopt 30 days notice of cancellation and nonrenewal as an industry standard. LSLA also agreed to work with IIABL to advocate on behalf of any agents who received less than 30 days notice of cancellation or nonrenewal to convince the insurance company to adopt the 30 day industry standard.
March:
This month experienced round 1 of historic flooding in Louisiana in the northern part of the state. The Trusted Choice Disaster Relief fund was utilized by many of those effected. The annual Young Agents Crawfish boil raised $713.00 for InsurPac for the annual 50/50 fundraiser. April: TrustedChoice.com grew to 300,000 consumer visits to the site every month and Big I agents get 8,000 referrals per month. IIABL agents attend the Big I Legislative Conference and meet with Louisiana senators and congressmen on Flood Insurance, Crop Insurance, Health Care, Insurance Regulatory Reform, Risk Retention Act Expansion, and DOL Regulations. May: Louisiana Citizens Property Insurance made significant enhancements in EPIC Commercial Lines covering the renewal process, payment plans, and coverage confirmation letters. Continued page 5
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June: Nearly 400 insurance professionals attended the IIABL Convention in Destin, Florida June 19-22, the largest annual insurance conference in the Louisiana insurance industry. The 2016 Regular Session of the Louisiana Legislature was a very busy session for insurance issues. 59 insurance related bills were passed by the Louisiana Legislature and the complete summary can be found by clicking here. July: The Louisiana Department of Insurance issued Advisory Letter 2016-02 on July 7, 2016 to advise all insurance producer agencies to register, under its agency license, every member, partner, officer, and director as well as other individuals that are personally engaged in the solicitation and negotiation of policies of insurance in the State of Louisiana. August: “THE FLOOD-Round 2� Many IIABL member agencies, staff, and customers were devastated by severe flooding in south central Louisiana. IIABL members & associate members rose to the challenge to help each other with donations, labor and inspiration.
September: The Trusted Choice Disaster Relief Fund paid out $69,500 in grants to IIABL members. What a great industry that we work for!! Randy Lanoix, Lanoix Insurance Agency in Lutcher, represented Louisiana very well as the 2015-2016 IIABA Chairman. Thank you Randy for making Louisiana proud of her native son!! October: While the number of independent agencies has remained relatively steady in favorable business conditions, agents cite emerging purchase channels as their top concern in the new 2016 Agency Universe Study (AUS). November: The marketplace for commercial insurance will continue to favor insurance buyers in 2017, particularly those with strategic risk management and risk transfer strategies, according to Willis Towers Watson’s 2017 Marketplace Realities report.
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What’s Next for Your Agency Perpetuation Plan? By Keith Mangini
You’ve built a successful agency and are now starting to look ahead to retirement. What’s your exit plan? What do you need to start thinking about today as you plan for the transition of your business? The absence of a good perpetuation plan not only can affect an agency’s value and your retirement date, but also the ability to fund such a transaction.
What steps can agency principals take now to maximize the value of their agency? One way is to grow your agency’s book of business, including growing both organically and through acquisition. “A valuable agency is one that can not only grow organically, but also can grow by making strategic acquisitions and folding them in successfully,” says Robert J. Pettinicchi, chief lending officer of InsurBanc. The absence of a good perpetuation plan
not only can impact an agency's value and your retirement date, but also the ability to fund such a transaction. Although there are only weeks left in 2016, it is not too late to do something positive today to improve your agency’s value. A current best practice is to establish a line of credit that can be used for small agency acquisitions that will help grow your book of business and increase the size of your agency, maximizing its value. This will give you more options for the transition of your business. Due to competition, opportunities to purchase books of business to complement your agency, while fewer, can come up quickly. A line of credit positions your agency to be ready to buy ahead of the competition. Another option is to take out Continued page 7
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a bank term loan to recapitalize the business, refinance a variety of agency debt and possibly take out some capital. The economic and tax picture may be different in 2017. Tax rates may, and likely will, change next year with a new administration and a change in the congressional majority. It is highly recommended that, with so much at stake, you get a valuation by industry experts early on when putting together a perpetuation plan. The cost that these industry professionals may charge is far less than the amount of money that could be lost if the transaction is structured improperly from a tax or legal standpoint. The services of industry experts will undoubtedly help to avoid costly errors and identify opportunities. You will also want to make sure your bank can provide the capital you need. It is important that a lender understands agency value and can provide the proper amount and sustainable structure of debt to make the transition work smoothly from a financing perspective. From a lender’s perspective, the ability for your successors to obtain financing will depend on a
well-crafted perpetuation plan and a well -run agency. Everyone who is part of building the plan will have a vested interest in its success and in your agency’s ability to maximize value. Take steps today to maximize your agency’s value for the future, and to ensure that you have attractive alternatives available when you are ready to perpetuate. This can include selling the agency internally to a family member or key employees, or externally to another agency or third party.
Regardless of whom the next generation of ownership might be, the best perpetuation plans are flexible to change, take time and effort to prepare, and allow for the selling generation to achieve its retirement goals while enabling the successor generation to purchase a business with a stable financial footing. Mangini is vice president, commercial loan officer at InsurBanc, a division of Connecticut Community Bank, N.A. InsurBanc is dedicated to providing agency financing and deposit services to independent insurance agents. Email: kmanginii@insurbanc.com. Website: www.insurbanc.com.
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President's View: Good-Bye Elections, Hello Old Problems By Stephen Waguespack, President & CEO LABI
The election is over, and it is time to get to work. Well, sort of. Now that we have a new U.S. Senator, two new Congressmen and a few new local officials, some special elections will need to be held to replace those winners vacating other offices. As those elections happen, other elections will likely be needed to fill some of the expected vacancies. In short, while elections never truly end in Louisiana, the time is now to start sharpening those pencils and getting your calculator prepared for the 2017 legislative session (or sessions) where tax increases will once again take center stage. In preparation for this moment, the Task Force on Structural Changes in Budget
and Tax Policy was created by House Concurrent Resolution 11 in the first special session in March 2016 and given a broad mission to study and recommend changes to the state’s tax laws as well as the structure and design of the state budget. Beginning in March, the HCR11 Task Force held many meetings from the spring to the fall. The Legislature received the final report and recommendations on November 1, 2016. While the report makes a handful of recommendations related to the state budget, the overwhelming majority of the time and focus of the Task Force was to raise more revenue and revamp the state tax code. Continued page 9
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On state SPENDING, the Task Force made generalized recommendations such as avoiding budget practices that allow spending beyond the available recurring revenue and reworking some subsidies to local government by replacing it with some authority to raise additional local revenue. The Task Force also suggested staggered sunset dates on non-constitutional dedications and stabilizing the budget from surges in mineral or corporate income tax revenue.
On the SALES TAX, the Task Force recommended reducing the rate back to four percent, authorizing local rate increases by local vote and expanding an aligned state and local government base. They also recommended developing a uniform system of tax administration, collection, and auditing; a state sales tax on non-residential utilities and manufacturing machinery and equipment(with a newly created rebate); and
the permanent repeal of various exemptions that were temporarily removed in the 2016 sessions. On PROPERTY TAX, the Task Force suggested maintaining the homestead exemption at the current level; reworking the industrial tax exemption; phasing-out of the inventory tax over ten years with a simultaneous five-year phase-out of the inventory tax credit; phasing-out the ad valorem tax credit for natural gas over five years; and maintaining the ad valorem tax credit for offshore vessels and for telephone company property. On CORPORATE INCOME AND FRANCHISE TAX, the Task Force acknowledged the many changes made in 2015 and 2016, that are now in the implementation phase, such as changes to the credContinued page 10
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it for taxes paid in other states, a new apportionment formula, and an add-back law that is now in the rule-making process. Other sizeable suggestions included a restoration of the full carry-forward of the Net Operating Loss deduction; a study to restructure, phase-out, or eliminate the franchise tax; and sunsets or major changes to many of the Louisiana Economic Development tax credit and rebate incentives.
On INDIVIDUAL INCOME TAX, the Task Force recommended expanding the income tax base by eliminating most exemptions, compressing the tax brackets, and potentially lowering the rate if the broader plan is approved by voters. The full report by the HCR11 Task Force can be found at www.ldr.louisiana.gov. The Task Force had the stated objective to
design a revenue system that is fair, simple, competitive with other states. They also clearly were given the less public mission to raise $12.5 billion in taxes, licenses, and fees for the budget. While we are told this would help stop the chronic budget deficits Louisiana has faced for generations, it appears more likely that Louisiana’s history of government shortfalls will never be solved by focusing primarily on tax changes. Robust reform of spending and budget structure must be the primary driver of any serious plan. Based on current five-year projections, the spending rate in state government will continue to grow between three and four percent annually. It is doubtful that the recommendations of the Task Force will grow at that same rate, leaving us in the same cyclical deficit posture going forward. Considering the state budget grew by nearly $3 billion this year but deficits still dominate public discourse, a heavy tax approach is clearly ineffective for government and toxic for our economy. Getting the long-term solution right is critical as the Louisiana economy struggles through a recession. A predictable and stable tax climate and state budget are in the best interest of both the public and the private sector. In 2017, any successful comprehensive tax reform effort must acknowledge the necessity for job growth and be partnered with comprehensive budget reform with fewer dedications, scrutinized spending, and better prioritization of limited dollars. This report is just the opening salvo of an economic and budget debate that will take many twists and turns in the months ahead. The elections are over. The moment is here. It’s time to get to work. Louisiana Agent 10
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Merry Christmas and Happy New Year from your IIABL Staff
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Insurance Technology Competitors by Chris Burand I keep reading about how new insurance distributors are going to disrupt the insurance industry. That got me wondering, what part of the industry are these technology companies going to disrupt? It also got me wondering whether insurance companies believe enough in these start-ups, all less than three years old, to invest or otherwise support them (they are) and even whether insurance agencies are already supporting these start-ups.
trying to cut out human independent agencies and the associated administrative expenses, in favor of primarily web based interaction with customers?
start-ups. Because of the anonymity of parent companies and the complex web of "which company owns that company," and "which business entity is indirectly investing in that company behind closed doors," it was difficult to uncover which insurance companies, if any, are directly or indirectly investing in these start-ups. (I did find direct carrier investment of approximately $100 million in other "disrupter" online agencies.)
An exception exists with carriers who have high overhead costs and/or high quality customer service and/or loyal customers. Online comparison sites do not favor these models because the heavy emphasis on price overshadows product quality. Comparison sites diminish brand loyalty definitely at the carrier level and maybe at the distribution level too. The advertised message that "it's okay to shop around for car insurance, in fact you probably should every year or so" exemplifies the encourage-
Some insurance companies might prefer comparison websites and the model these start-ups provide over traditional independent agents. Because of these assumptions, a chance exists they are investing in and support these start-ups. "Budget" insurers (large and small) may be in favor of comThese start-ups need to be taken seriously parison sites because the insurer knows if for no other reason than all the private they can already out-price the competition. equity that is being investTeaming up with ed, effectively making these sites could be brand new distributors that an inexpensive way The good news is that agents who may not even have the to generate sales. build a high quality plan will begin proper licenses according to having a much easier time proving Niche insurers (large some press reports. These their value. I am already seeing and small) may be in start-ups are collectively this work incredibly well with many favor of comparison worth more than any 100 of my clients but making this case sites because these typical independent agenand clearly articulating it, will be an insurers have a cies with hundreds of years effort. product that is unof collective experience. In common and thereother words, Wall Street fore, would have acand private equity are betcess to a highly satting the standard agency is effectively dead. urated market with limited competition. Are your insurance companies making the same bet or at least hedging their bets? Small insurers (with limited budgets) may be in favor of comparison sites because Question #1: Are insurance companies inthey would be marketed to local customers vesting in these start-ups? I chose three they probably couldn't reach with traditionsample start-ups for no reason other than al advertising. These websites may lower I've seen their names most often. I then reoverhead costs and become an inexpensive searched whether insurance companies are marketing strategy. supporting (investing in) in these specific
Question #2: Are insurance companies
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ment to not be loyal.
Some other developed countries' companies are more experienced with online distribution than the U.S. Because capitalism and human/ business nature are similar internationally (aside from government regulations), a review of other countries' experiences is valuable. Australia has four relatively large online insurance comparison sites. All offer health and life insurance comparisons. Three also offer personal auto insurance. The following is based on an analysis conducted by CHOICE.(1) CHOICE's Findings:
'Free' comparison sites can earn exorbitant fees per sale from the insurers.
These fees may cause premiums to increase because they are a material portion of the overall premiums.
Some comparison sites are misleading about how much of the market they compare.
Some sites are actually owned by the insurance companies they're supposedly comparing. All the sites CHOICE reviewed, according to
their disclaimers, reported how the site is paid (commissions, fees, etc.). However, none stated how much they are paid. One of the premises of this new online culture is transparency. While so many independent agents still fight to reveal how much they're paid, doing so is a competitive advantage and builds trust. Independent agents' sales depend on trust because without that trust, the client really does not need you. Another question vital to transparency is the ownership of these companies and/or their websites. Without transparency, are the quotes and/or advice given biased? In Australia, per CHOICE, conflicts of interest may exist:(2)
iSelect owns 3 of the 12 auto insurance brand names listed on the site. 10 of the 12 brands are underwritten by the same insurer.
Choosi.com.au is the second-most popular site. It seems to specialize in life insurance and is owned by a major provider of life insurance. It distributes 7 of the insurance brands available on the site.
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
Compare the Market is owned by a major insurance carrier.

Canstar.com.au is privately owned by shareholders with no known links to insurers. Many insurance carriers in the U.S. have multiple brands with absolutely no related names. In other words, a consumer will not know the quotes are just different brands within the same family. Conversely, Europe's experience, and especially the U.K.'s experience, may be more applicable to the U.S. and Canada if for no other reason that some of the same carriers write in all three countries and because North American insurance still has such strong ties to London. The net effect of web based comparison raters and web-based sales is an intensified focus on price. The additional emphasis on price likely has caused consumers to consider insurance, especially but not exclusively auto insurance, as a pure commodity. This means they think every single auto policy is identical. They think every company provides identical claim service. They think every distributer of insurance provides identical customer service. By definition, a commodity must be identical regardless of the party selling the product. This means the independent agent has absolutely no role because with a commodity, an agent provides no additional value and is therefore 100% expendable. Their commission is simply a waste. Carriers depending on agents then are at risk and obviously agents that cannot sell more than price, agents that cannot prove they bring value to the table in some form, will lose this market and this market is growing daily. Even established carriers and agents who can prove value will be negatively affected because the price pressure will not stop at their door. They will have to provide value at competitive (i.e., lower) rates. The rates though, if value is proven, do not have to be as low as some web-based distributor. The U.S. market seems to be melding these experiences. Established carriers are clearly hedging their bets by readily planting with
these web-based distributors. One has to wonder, if a traditional start-up agency called these companies and asked for an appointment, would they get one without verification of proper licensing? I do not know but companies are at least clearly willing to appoint brand-new entities, with no ready business to roll and maybe with limited insurance experience, and because the insurance market is not growing exceptionally fast, unless their demographic studies show differently, they are willing to cannibalize their existing distribution plant. In other words, they may not grow using these new distributors but at least they will not lose by not participating. For the three start-ups, I found the following based on reviewing their web-sites. This is public information. Zenefits: According to their website, as of 3/26/2016: Zenefits is partnered with 1,018 insurance carriers. According to A.M. Best, only 205 health insurance carriers groups exist. Each group may have a dozen different companies so maybe that is what they are counting. I could not find a complete list of providers, but here are the ones listed on their website: Blue Cross Blue Shield, Aetna, Cigna, Humana, Kaiser Permanente, United Healthcare, Allina Health, American Family Insurance, Coventry Health Care, WellPoint, HCSC, HighMark, Guardian, Anthem Blue Cross, AIG, MetLife, and Prudential. Source: https://www.zenefits.com/healthinsurance-broker/ The Zebra: According to their website, as of 3/26/2016: The Zebra compares over 200 insurance companies. A list of insurance companies The Zebra compares can be found here: https://www.thezebra.com/car-insurancecompanies/ The Zebra founder and CEO Adam Lyons has stated that he sees the potential for auto insurance to go online, the way the travel industry already has. He references sites like Orbitz and Kayak. If one studies that market, the online concentration by market share has grown significantly with Louisiana Agent 16
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Google controlling a large percentage. Such concentration may not be in the consumers' best interest. According to COO Joshua Dziabiak, the company has relationships with some, but not all, of the companies whose quotes it provides. He also advises they have other big-name insurers on board who are still in the process of being integrated. For those situations where Insurance Zebra doesn't have a direct relationship with an insurer, Dziabiak explains "What we're doing is leveraging public rate filings. Every carrier, by law, is required to submit these extremely long rate manuals to each state, which are made public through the state's Dept. of Insurance website."(3) That is a perplexing point to me because my understanding of typical insurance rate law is that an agent cannot deviate from filed rates. Insurify: Insurify seems to specialize in auto insurance. According to their website, Insurify compares over 30 auto insurance companies. A partial list of carriers per their website is: 21st Century, AIG, Amica, Dairyland, Esurance, Nationwide, Plymouth Rock, Progressive, Safeco, The General, Farmers, Infinity, Liberty Mutual, Mercury, MetLife, The Hartford, Titan, Travelers, and USAA. Source: https://insurify.com/ (3/26/2016) In summary, Wall Street and private equity are betting large on completely new players having far more value in the foreseeable future than traditional agents, and quite directly these online based entities having better marketing to consumers and salespeople for investors. If carriers are hedging their bets on which distribution force is likely going to be most important going forward, independent agents had better figure out their own individual game plan. That plan had better include transparency so clear that it illuminates online conflicts of interest (if they exist). That plan had better consider the fact some of their own carriers might file better rates with online distributors. That plan had better consider the loyalty some carriers have towards independent agents and whether that loyalty will enable them to grow their market. Vice versa, that loyalty comes with a
price and that price is agents had better increase sales or those companies are going to be forced to join the bandwagon. That plan also better include far better management because rate suppression will reduce revenue growth but agencies’ expenses are likely to continue increasing. The good news is that agents who build a high quality plan will begin having a much easier time proving their value. I am already seeing this work incredibly well with many of my clients but making this case and clearly articulating it, will be an effort.
(1) Bird, Jodi, “Insurance Comparison sites,” Choice.com, 19 August 2014, https://www.choice.com.au/money/ insurance/insurance-advice/articles/ insurance-comparison-sites. About: CHOICE is the leading consumer advocacy group in Australia; Independent and member-funded non-profit that has been established for over 50 years. (2) Ibid. (3) Perez, Sarah, “Insurance Zebra Launches A Kayak For Auto Insurance,“ Techcrunch.com, 5 September 2013, http://techcrunch.com/2013/09/05/ insurance-zebra-launches-a-kayak-for-auto -insurance/
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IIABL Director of Education, Mike Edwards is your source for technical questions. Contact Mike at medwards65@aol.com or 678.513.4390
Subject: Dad borrows trailer owned by daughter’s business
Q.
I write the personal insurance for a long-time friend. We were at a club meeting together yesterday, and he asked me about a situation that I need your help with. Next weekend, he is going to borrow his daughter’s trailer to haul some building materials to his mother’s house, where he and his brother are going to do build her a greenhouse, so she can enjoy working with her flowers and herbs year-round. The red flag for me is that my insured will be towing a trailer that is titled in the name of his daughter’s business. She owns a landscaping company, and usually has a couple of trailers that sit idle during the winter. So I’m trying to think through the various coverage issues where his auto is towing a business-owned trailer.
A.
1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer". 2. Any person using "your covered auto". 3. For "your covered auto", any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part. 4. For any auto or "trailer", other than "your covered auto", any other person or organization but only with respect to legal responsibility for acts or omissions of you or any "family member" for whom coverage is afforded under this Part. This Provision (B.4.) applies only if the person or organization does not own or hire the auto or "trailer". Comments: (1) Jack’s PAP covers him for the use of any trailer. [B.1.] (2) Coverage applies whether the trailer is hitched or unhitched, owned (declared or undeclared), rented, or borrowed.
As I first read your question, my initial thought was not about coverage. It was that thank goodness your friend has an independent agent to research and answer this complex coverage issue.
(3) While the trailer is owned by a business, that would have no impact on coverage in Jack’s PAP. From Jack’s perspective, the trailer is not being used by him for business.
For the discussion below, assume the following: (1) Your insured is Jack, and his daughter is Jill. (2) Her company is The Lawn Arranger, Inc. (“TLA” below). (3) Excerpts and commentary are based on Insurance Services Office (ISO) forms. Proprietary forms may be different.
(5) Jack’s PAP liability coverage is excess for non -owned vehicles (applies to autos and trailers).
Issue #1: Jack’s Personal Auto Policy (PAP) Personal Auto Policy PP 00 01 01 05 Part A – Liability Insuring Agreement B. "Insured" as used in this Part means:
(4) Assuming TLA is also sued, Jack’s PAP does not cover TLA, since it owns the trailer. [B.4.]
Personal Auto Policy PP 00 01 01 05 Part D – Coverage for Damage to Your Auto Insuring Agreement A. We will pay for direct and accidental loss to "your covered auto" or any "non-owned auto", including their equipment, minus any applicable deductible shown in the Declarations. Continued page 22 Louisiana Agent 20
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C. "Non-owned auto" means: 1. Any private passenger auto, pickup, van or "trailer" not owned by or furnished or available for the regular use of you or any "family member" while in the custody of or being operated by you or any "family member" Limit of Liability However, the most we will pay for loss to: 1. Any "non-owned auto" which is a trailer is $1500. Comments: (1) If Jack’s PAP includes Part D, coverage applies for TLA’s trailer for up to $1,500. (2) As with Part A liability, Part D is excess for non-owned vehicles (applies to autos and trailers).
ing carried on, towed by or hitched for towing by a vehicle described in a. above. Comments: (1) Jack’s HO covers personal property he is using. [See 1.] (2) There is a sublimit of $1,500 for trailers. [See 3.] (3) Coverage C does not apply to “motor vehicles.” [See 4.] (4) A trailer is a “motor vehicle while hitched, etc. to an auto. [See 7.b.] (5) A trailer not hitched, etc., is eligible for Coverage C, subject to the sublimit. (6) The unendorsed HO pays ACV on personal property, but would pay replacement cost if HO 04 90 05 11 Personal Property Replacement Cost endorsement attached. (7) If other insurance applies to the trailer, Coverage C pro rates with such insurance based on limits.
Issue #2: Jack’s Homeowners Policy (HO) Homeowners Policy HO 00 03 05 11 Section I – Property Coverages Coverage C – Personal Property 1. Covered Property We cover personal property owned or used by an "insured" while it is anywhere in the world. 3. Special Limits Of Liability d. $1,500 on trailers or semitrailers not used with watercraft of all types. 4. Property Not Covered
Homeowners Policy HO 00 03 05 11 Section II – Liability Coverage Exclusions
Continued page 23
A. "Motor Vehicle Liability"
1. Coverages E and F do not apply to any "motor vehicle liability" if, at the time and place of an "occurrence", the involved "motor vehicle": a. Is registered for use on public roads or property; b. Is not registered for use on public roads or property, but such registration is required by a law, or regulation issued by a government agency, for it to be used at the place of the "occurrence."
We do not cover: c. "Motor vehicles".
Definitions 7. "Motor vehicle" means:
Definitions 7. "Motor vehicle" means: a. A self-propelled land or amphibious vehicle; or b. Any trailer or semitrailer which is be-
a. A self-propelled land or amphibious vehicle; or b. Any trailer or semitrailer which is being carried on, towed by or hitched for towing by a vehicle described in a. above.
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Comments:
passenger “autos” only
(1) The motor vehicle exclusion [A.1.] does not apply to a detached trailer [7.b.]
laws
Issue #3: The Lawn Arranger’s (“TLA”) Business Auto Policy (BAP)
5 = “Autos” subject to a state’s No-Fault 6 = “Autos” subject to a state’s compulsory UM laws 7 = Specifically described “autos”
Business Auto Coverage Form
8 = Hired “autos” only
CA 00 01 10 13
9 = Non-owned “autos” only
Section I – Covered Autos Item Two of the Declarations shows the "autos" that are covered "autos" for each of your coverages. The following numerical symbols describe the "autos" that may be covered "autos". The symbols entered next to a coverage on the Declarations designate the only "autos" that are covered "autos". A. Description Of Covered Auto Designation Symbols 1 = Any “auto” 2 = Owned “autos” only 3 = Owned private passenger “autos” only 4 = Owned “autos” other than private
Section II – Covered Auto Liability Coverage 1. Who Is An Insured The following are "insureds": a. You for any covered "auto". b. Anyone else while using with your permission a covered "auto" you own, hire or borrow Section V – Definitions B. "Auto" means: 1. A land motor vehicle, "trailer" or semitrailer designed for travel on public roads; Comments – Covered Autos and Trailers:
Continued page 24
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(1) In the ISO BAP, the term “auto” includes trailers. [Section V - Definition B.1.] (2) Since TLA owns the trailer that Jack has borrowed, the symbols that would be applicable for liability coverage are 1, 2, or 4, since any of these cover owned autos (and owned trailers).
(6) Jack is an “insured” under [1.b.] : “Anyone else while using with your permission a covered "auto" you own, hire or borrow.”
Additional Resources.
(3) Symbol 7 would cover their owned trailer only if it was declared (or was newly acquired, under certain circumstances).
“The BAP and Automatic Trailer Coverage” (Includes discussion of the 2,000 lb. trailer issue, as well as symbol 3 and trailers.)
(4) Symbol 3 is generally considered not to apply to trailers in general, since most experts hold the view that there is no such thing as a “private passenger trailer.” However, there is automatic coverage under symbol 3 for trailers under 2,000 lbs. load capacity. This is discussed in the “Additional Resources” section at the end. Given the business TLA is in, which includes the need for commercial-size trailers, it seems unlikely that their BAP would use symbol 3 for liability.
“Personal Vehicle Pulling Business-Owned Trailer”
Comments – Who Is An Insured: (5) In the event of a lawsuit involving the trailer, TLA is an “insured” under [1.a.]:You [named insured] for any covered “auto” (or any trailer).
“Pulling a Personally-Owned Trailer with a Company Truck” “The CGL and Trailers” “Insuring Owned Trailers Without Owned Autos” “Borrowed Trailers” “HO Coverage for Camper Trailer at a Campsite” “Insuring Trailers – HO or PAP?” These materials are intended for educational purposes only and should not be relied upon as legal advice. Please consult a qualified attorney for legal advice.
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Top 7 Insurance Industry Concerns for 2017 By Jamie Yoder, PropertyCasualty 360 The insurance industry has remained much the same for more than 100 years, but the status quo cannot endure nor lead to growth of an organization. Commercial insurers face tough times ahead with underwriting margins that are pressured by softening prices and a potentially volatile interest rate environment. What are the keys to success? Better capabilities, service, customer-focus and products — all of which require on-going investment in capabilities. As we look to 2017, it’s important to consider the biggest drivers of change to ensure a boost in your bottom line: Customer expectations: Customers expect convenience and transparency and have greater ability to find it than ever before. Pace of innovation: Customers have a need for new insurance solutions, but incumbents are
struggling to provide appropriate products and services. Startups: New players that have the ability to innovate quickly are taking advantage of the opportunity to fill the gaps that incumbents have not. Although the industry has seen generally strong underwriting results in recent years, this could change — potentially very soon. The following top seven insurance industry issues should be closely monitored as you head into planning for 2017, creating an environment that is adaptive to change and positioned for growth: The rise of insurance technology There are several business challenges that established insurers are facing as they try to meet new customer needs while improving core insurance functions. A specific focus on insurance technology, or “InsurTech,” has emerged to help insurers solve these challenges. Continued page 32
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Webcasts E&O Risk Management January 5, January 19, January 17
Ethics January 3, January 17
Flood January 20
Commercial & Personal Lines Courses Click above title for courses & dates for 2017
2017 E&O Classes 3/28—Monroe 3/29—Lafayette 3/30—Baton Rouge 3/31—Metairie
2017 Flood Classes 5/9—Bossier City 5/9—Monroe 5/10—Lafayette 5/11—Kenner 5/11– Covington
IIABL Fall Education Conference October 19 Shreveport Convention Center
Environmental Strategists (eS) Becoming a certified environmental Strategist™ (eS) will equip you with the knowledge to identify, manage and transfer environmental exposures impacting everyday business.
Cyber Risk Manager (cyRM) Completion of the Cyber Exposures & Insurance – Training for Agents & Brokers course qualifies you to register for the cyRM certification for FREE.
Seminars IIABL Spring Education Conference March 9, 2017 Crowne Plaza Baton Rouge Flood & Ethics CE
Events IIABR Installation Luncheon January 12 Ruffino’s Restaurant
Trusted Choice Make A Wish Bowling Fundraiser April 20th—New Orleans April 28th—Shreveport, Monroe, Lafayette, Baton Rouge
On-Demand Webcasts Masters Series: The Master Series are unique agency management courses from industry experts. in the Masters Series.
CSR Training: The Customer Service Representative is key employee in every agency and is a difficult commodity to find.
Pre-Licensing Online prelicensing 3 optional study packages available Click here for additional information
Louisiana Agent 26
Company
Coverage Type
Overall % Impact:
Overall $ Impact:
Number of Policyholders:
Changes
ACE Insurance Co of the Midwest
Homeowners ACE Platinum Portfolio Program
+9.8%
$859,822
1,177
New: 2/1/2017 Renewal: 4/1/2017
American Fire & Casualty Ohio Casualty Ohio Security Insurance West American Insurance
Commercial Property
+7.4%
$624,271
1,754
New: 7/1/2017 Renewal: 7/1/2017
Allstate Insurance
Commercial Property Fire & Allied Lines
+14.5%
$359,359
1,316
New: 1/30/2017 Renewal: 4/12/2017
Anpac Louisiana Insurance
Personal Umbrella & Excess
+12.0%
$54,529
676
New: 3/6/2017 Renewal: 3/6/2017
Federated Mutual Insurance
Businessowners Program
+2.5%
$38,615
184
New: 3/15/2017 Renewal: 3/15/2017
Imperial Fire & Casualty
4-Homwoenrs
+5.0%
$805,502
11,454
New: 11/6/2016 Renewal: 12/21/2016
Privilege Underwriters Reciprocal Exchange
17 – Other Liability
+5.00%
$65,552
1,489
New: 2/18/2017 Renewal: 4/19/2017
Louisiana Agent 27
By: Steve Anderson
Check Your Agency’s Cyber-Hygiene to Make Sure You and Your Clients Are Protected
The Center for Internet Security (CIS) is a nonprofit organization funded by the Department of Homeland Security, focused on enhancing the cyber-security readiness and response of public and private sector entities. Starting this past summer, the CIS has been working with the ACT Security Issues Work Group to review the existing CIS tools to make them as useful as possible for insurance agencies. The CIS toolkits help agents count, configure, control, and patch their hardware and software resources so they are as secure as possible. The free program is called "Cyber Hygiene." Ryan Spelman, program executive at the Center for Internet Security, presented at
the November 1, 2016, ACT Meeting and did an excellent job of highlighting some of the security issues agencies face. The following notes are from Ryan's session at the ACT Meeting. No Let-Up from Hackers and Thieves Criminals are targeting your organization. They want data. Why? Data is money. Credit card apps are worth $2 each. A black card is $10. A medical record can garner as much as $100. There are two kinds of companies — those that have had a data breach and those that don't yet know they have. (Note that the average time from data breach to detection is 229 days, according to FireEye.)
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Anyone can take down a network. Hackers used to be kids in the basement hacking into the federal government. Not anymore. The number of cyber criminals is growing fast. It's easy to rent some servers, hire guys for thousands of dollars a week, and rent an old aircraft hangar. It's a less risky crime than bank robbery, and you don't get shot at. Cyber-crime may be larger than the drug trade in its financial impact on society.
over, industrial control systems can be breached fairly easier. For example, hackers can use a patch for an HVAC system, making that a great jumping-off point for a cyber invasion.
Kids in basements have become "hacktivists," where many are doing harmless things. However, other times it can be vicious. Hackers can use your servers to attack governments.
Preparedness is Lacking Agencies need to ask themselves some critical questions, such as what their readiness level is. Seventy-five percent of organizations are not prepared to respond to attacks, and 55% lack sufficient risk awareness.
Interestingly, not all breaches are from outside hackers — one-third of malicious attacks are caused by human error. Your company computers may be loaded with vulnerable software as well: Microsoft, Java, Adobe, and Firefox are all at risk. Hacking is common across all systems. More-
There are multiple types of cyber incidents, the most common of which are phishing, browser attacks, ransomware, and lost/stolen devices or data. These comprise 90% of cyber events.
It's possible to prevent attacks by upgrading software, but one-third of people who are notified to update software (browsers, operating systems) don't do it. That is foolhardy when you consider the magni-
Continued page 30
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of the threat: the cost of each record in a data breach is more than $200. The average total cost of a data breach across large corporations is $5.5 million. Compliance costs money, but so do violations, so make sure your agency knows and complies with all state and federal laws regarding data privacy and protections. National Campaign for Cyber Hygiene The CIS is working with ACT on a free "Cyber Hygiene" program for the distribution channel. There are five basic steps:
1. Count: Know what's connected to and running on your network. If you have five employees, it's easy. If you have 500, it's tough. Include all personal devices, even a smart watch.
2. Configure: Implement key security settings to protect your systems.
3. Patch: Regularly update all apps, software, and operating systems.
work. But remember, people say that they limit only 20% of hacks or breaches. Run and update anti-virus software. Ransomware is a fast-growing crime. Hackers get into your system and encrypt your data, holding it hostage for a price. A hospital in Hollywood initially was asked for $2 million to get back its data. It eventually paid $17,000. The average for individuals can be $500 or more. Encrypt mobile devices. If the device is lost or stolen but you encrypted the data, the theft might not result in a breach. To reduce your chances of a data breach, you need a written information-security policy that is shared with people. Security awareness training should be conducted on the basics of cyber hygiene, including the dangers of phishing, email attachments, etc. And you should insist on secure coding, a set of clearly defined controls that must be in place when developing an application.
4. Control: Limit and manage admin privileges and security settings.
5. Repeat: Regularize the top priorities to form a solid foundation of cyber security. Cyber security is not a destination, it's a journey, and you want to keep as far ahead as you can. Hackers will move forward. Other aspects of a solid program include maintaining, monitoring and analyzing audit logs, and installing protections for email and web browsers, such as black/white listing. Email attachments are one of the primary methods by which attackers seek access to your network. Both black and white listings can limit your exposure. Proxies can reduce your vulnerability. Have technologies (e.g., web filtering) in place that limit your users' access to risky and malicious sites.
Resources I encourage you to access the Cyber Hygiene toolkits. ACT and the CIS are also working to create and release a free Small Business Guide to Cyber Security. They estimate this will be available in early 2017, so be on the lookout for it. Cyber Security is a top issue for everyone in the insurance industry. The CIS toolkit is an excellent resource for any size agency. How prepared is your agency to adequately protect client information? Let me know.
You need firewalls, a technology that controls incoming and outgoing traffic on your netLouisiana Agent 31
Explore ways to leverage and incorporate technology into your growth strategy to discover emerging coverage needs and risks that require new insurance products and services. 2. Artificial intelligence The initial impact of artificial intelligence (AI) primarily relates to improving efficiencies and automating existing customer-facing, underwriting and claims processes. Over time, its impact will be more profound; it will identify, assess and underwrite emerging risks and identify new revenue sources. Organizations should consider taking specific steps to incorporate AI techniques within a broader data science group, such as building a pilot of your AI process using existing vendor tools or open source tools.
ers have set limits below the levels their clients seek, and some have imposed restrictive exclusions and conditions. There are several ways insurers, reinsurers and brokers could put cyber insurance on a more sustainable footing and take advantage of the opportunities for profitable growth, such as sharing data more effectively. 4. Aging workforce The insurance industry is facing a looming crisis with a rapidly aging workforce. According to the U.S. Bureau of Labor Statistics, the number of insurance professionals aged 55 years and older has increased 74 percent in the last 10 years; by 2018, a quarter of insurance industry employees will be within five to 10 years of retirement.
3. Cyber insurance Cyber is a potentially huge but still largely untapped opportunity for insurers and reinsurers. It’s estimated that annual gross written premiums will increase from around $2.5 billion today to $7.5 billion by the end of the decade. However, wariness of cyber risk is widespread. Many insurers don’t want to cover it at all, oth-
Most U.S. employers are woefully unprepared for the business realities of an aging workforce. Companies that effectively recruit, train and develop dedicated future staff and leaders will differentiate themselves and set themselves up for success into the future.
5. Industry M&A activity
7. Insurance taxation
Inbound foreign investment — especially from Japan and China — is expected to continue fueling U.S. merger and acquisition (M&A) activity. Private equity will remain an important player in the deals market, not least because it has expanded its targets beyond brokers to the industry as a whole. The need to eliminate costs in order to grow the bottom line will remain a primary economic driver of consolidation.
There are several proposed legislative changes that could significantly impact the insurance industry as the U.S. leadership endures change. Election-year politics are dominating legislative action this year as both parties lay down policy agendas for 2017 and beyond. At the same time, President-elect Donald Trump and the Republican-controlled Congress are expected to generate controversy with their tax proposals.
6. Model risk management
All companies — regardless of scale — need to ensure that their capital and operating spend aligns with their strategy and capabilities and the ways they choose to differentiate themselves in the market. Keeping a close eye on these evolving industry issues will aid to your organization’s competitive edge. In this transformative time, the ones that can’t or won’t do these will fall increasingly behind the market leaders.
One of the fastest growing concerns on insurers’ enterprise risk agenda is model risk management, which has become a major focus of regulators and the subject of intense activity and debate at insurers. Generating measurable business value is model risk management’s next developmental stage. Models are among insurers’ greatest assets. Putting models and the data that feeds them at the center of value creation can provide new perspectives that better address customer expectations.
GOLD LEVEL
SILVER LEVEL
BRONZE LEVEL AMERISAFE
AMERICAS INSURANCE
AMTRUST GROUP
BANKERS INSURANCE
CNA INSURANCE
EMC INSURANCE
FOREST INSURANCE
GULFSTREAM P&C
HOMEBUILDERS SIF
LANE & ASSOCIATES
MAISON INSURANCE
MARKEL FIRST COMP
RPS COVINGTON
SUMMIT CONSULTING
ASI
LUBA WORKERS’ COMP NATIONAL FLOOD SERVICES
Louisiana Agent 33
IIABL 2016—2017 BOARD OF DIRECTORS & OFFICERS Richard D. Jenkins President Moore & Jenkins Insurance—Franklinton Neil Record President Elect Record Agency, Inc.—Clinton
John L. Beckmann, III Secretary/Treasurer J. Everett Eaves—New Orleans H. Lee Schilling, Jr. National Director Schilling & Reid Insurance—Amite David Dethloff Past President Dethloff & Associates—Shreveport Derek Canchola Young Agent Representative Blumberg & Associates—Baton Rouge Byram H. Carpenter, III Moreman, Moore & Co—Shreveport Brenda Case Lowry-Dunham, Case & Vivien—Slidell Joseph Cunningham, Jr. Cunningham Agency—Natchitoches Donna DiCarlo Riverlands Insurance Services—LaPlace Morris Funderburg Reeves, Coon & Funderburg—Monroe
Ross Henry Henry Insurance Service—Baton Rouge Bret Hughes Hughes Insurance Services—Gonzales Philip McMahon Paul’s Agency—Morgan City Joe King Montgomery Thomas & Farr Agency—Monroe Joseph A. O’Connor, III The O’Connor Insurance Group—Metairie Paul Owen John Hendry Insurance Agency-Zachary Martin Perret Quality Plus—Lafayette David T. Perry Arthur J. Gallagher RMS—Baton Rouge Robert Riviere Riviere Insurance Agency—Thibodaux
Armond Schwing Schwing Insurance Agency—New Iberia Michael D. Scriber Scriber Insurance Services—Ruston Donelson P. Stiel David H. Stiel, Jr. Agency—Franklin
Louisiana Agent 35