SPRING 2013 • VOLUME 31 • ISSUE 2 INDEPENDENT INSURANCE AGENTS OF IOWA
File Documentation & Records Retention
Meet Iowa’s New Insurance Commissioner Nick Gerhart
13 E&O Risk Management Tips for Action in 2013 Tales of the Crop
ARE YOU totally
West Des Moines, ioWA • 800.274.3531 • WWW.iMtins.coM
President’s Report REVIEWING IIAI’S 2013 LEGISLATIVE ISSUES Independent Insurance Agents of Iowa 4000 Westown Parkway West Des Moines, Iowa 50266 (515) 223-6060 • FAX (515) 222-0610 800-272-9312 (In-State only)
Advertising Editor Melissa Meiners
As we visited Washington DC in April, I see some of the same issues are still on the agenda, and I think it is important for all of you to know what those issues are for 2013. by Paul Pohlson Page 5
National Director’s Report YOUR ASSOCIATION UPDATES
BOARD OF DIRECTORS Paul Pohlson - Grinnell
The overall financial condition is excellent and the national staff is doing a great job of controlling expenses and managing the day-to-day activities of Association business.
by Dean Brooks, CPCU, CLU, ALCM
Terry McDonald, CIC - Iowa City
Treasurer Scott Morningstar, CPCU - Lisbon
National Director Dean Brooks, CPCU, CLU, ALCM West Des Moines
Directors Jerry Mease - Winterset Eldon Hunsicker - Ottumwa Terry Friedman, CPCU - Dubuque Tim English, CIC - Dyersville John Dalton - Council Bluffs Steve Madsen - Marshalltown David Rowley, CPCU, CIC, AU - Spirit Lake Scott Wirtz - Emmetsburg Jamie Krist, CIC, MBA - West Des Moines
In This Issue Meet Nick Gerhart, Iowa Insurance Commissioner Page 10
2013 Rural/Small Town Agency Conference Page 20
2012-2013 IIAI Leadership Page 23
Advertisers We would like to thank our advertisers for their support. This magazine would not be possible without them. THANK YOU! 25 ACUITY 24 Amerisafe 30 Bituminous Insurance Co. 9 Burns & Wilcox
Insurance Day On The Hill
30 Celina Insurance Group
6 EMC Insurance Co.
Brian Petersburg - Decorah
File Documenation & Records Retention
IIAI OFFICE STAFF Chief Executive Officer
38 EMC Insurance Co. 22 Grinnell Mutual 39 Big “I” Professional Liability 2 The IMT Group
Bob Skow, CPCU, CAE email@example.com
13 E&O Risk Management Tips For Action In 2013
14 IMWCA Iowa Municipalities Workers’ Compensation Association
Membership Operations Coordinator
33 Integrity Insurance
Melissa Meiners firstname.lastname@example.org • Ext. 15
Technology & Communications Administrator Jeanne Reynolds email@example.com • Ext. 17
Membership Services Coordinator Marilyn Paul, CPCU, AIT, AAM, CPIW firstname.lastname@example.org • Ext. 11
Membership Services Coordinator Brenda Kluger, CIC, CISR, CIIP, CRM email@example.com • Ext. 14
Customer Service Representative Megan Kincy firstname.lastname@example.org • Ext. 16
Receptionist Cindy Grim email@example.com • Ext. 12
Tales Of The Crop - Three E&O Crop Claims With Three Different Results Page 34
14 Iowa Mutual Insurance Co. 36 Merchants Bonding Co. 18 M.J. Kelly Company 18 QBF NAU 8 Northern States Agency
Spring Cleaning - It’s A Good Time To Do An Agency E&O Self-Audit
18 Pekin Insurance
by Bob Skow, CPCU, CAE Chief Executive Officer
4 SECURA Insurance Co.
28 Western National Insurance
24 Ringwalt & Liesche Co. 6 Scobie Group 16 West Bend
MISSION STATEMENT: The Independent Insurance Agents of Iowa will be an unrelenting advocate of the business, professional and p olitical interests of its members; doing so by working in the p ublic’s best interest and with the highest e thical standards. Viewpoint is a publication of the Independent Insurance Agents of Iowa. Viewpoint is published quarterly: Winter, Spring, Summer and Fall. Viewpoint is mailed to Iowa insurance agents, Iowa Home Office Executives, Affiliate members, and other state associations and organizations.
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legislative issues IIAI’s 2013
pring is here and it is time to review IIAI’s legislative issues. As we visit Washington DC in April, I see some of the same issues are still on the agenda, and I think it is important for all of you to know what those issues are for 2013. Your Association works hard on both the State the Federal level, so please know that your comments are always valuable. I encourage you to also feel free to talk to members of the Board or contact the IIAI office in West Des Moines. The issues for 2013 are as follows:
The Affordable Health Care Act – This issue is so vital to our economy; let alone our very own income; and one which I am not personally feeling will be less expensive for the consumer either. I just read an article indicating that the Exchanges may also be able to sell other products, such as Life, Disability, and other such coverages. So, is the Federal Government entering the insurance business?
Crop Insurance – Our Association needs to keep involved in this valuable topic important to our Iowa farm economy. The Big “I” is working so hard to protect the agent commission for the sale of crop insurance and to make sure that insurance agents are the sole sales force for the crop insurance product.
Big “I” Markets – This resource is extremely helpful to me and my agency. I know we will have some discussion on this regarding the products, programs and services. Please continue to look at what is available to you with your membership.
Agents Council for Technology (ACT) – If you are not looking at what is happening in our market regarding Technology, then I highly recommend asking your Association for advice. In fact, the state Convention in September is packed full of this topic, but if you wait until September to begin asking for help, you are only that much further behind.
Licensing Reform (NARAB) – This would streamline the licensing process, but agents would still need to adhere to each state’s consumer protection laws.
National Flood Insurance Program (NFIP) – The Big “I” is attempting to get this program renewed at the Federal Level.
Consumer Agents Portal (CAP) – Another initiative from the National Big “I” to help us grow our business.
Commitments to PACs – The Big “I” is using PAC money to work both nationally and locally to help not only our businesses, but also trying to protect the consumers as well. I recommend you consider following the above mentioned topics, and if you can find a way to contribute to the State and National PACs, please do so. Every dollar spent is needed and it truly applies to all of us. The PACs do not ensure support from the various legislators, but it does establish and maintain relationships. You have an Association that works hard for every agent in Iowa, and we always accept comments from members.
SPRING 2013 |
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national director’s REPORT
DEAN BROOKS, CPCU, CLU, ALCM
’m happy to report that your National Association is running smoothly from a business perspective. The overall financial condition is excellent and the national staff is doing a great job of controlling expenses and managing the day to day activities of Association business. I’ll forgo details – those can be excruciatingly boring – and move on to items of more direct interest to us as agents.
GOVERNMENT AFFAIRS AND PAC There are few guarantees in the insurance business but one thing you can count on year in and year out is the insatiable desire of the Feds to control more and more of our business. Although we technically are not in an election cycle right now, the political season never truly ends in Washington. Your national Big “I” staff and many volunteer agents, including especially those on the Government Affairs Committee, work non-stop twelve months a year to protect our livelihood from unwarranted government intrusion. They testify at hearings, attend endless meetings, and continually educate legislators and their staffs on insurance issues. They count their successes in the bad legislation that is quietly killed in the backrooms as much as the favorable legislation that gets passed. For
2012, examples of current issues in play include Federal Crop Insurance, agent licensing reform, health care reform, terrorism insurance, insurance regulatory reform, and tax changes for individuals, corporations and estates. Over the years, the national Big “I” has earned a reputation as the most influential property casualty insurance trade association in Washington. In 2012, we were the largest agents’ PAC and ranked fifth overall behind only NY Life, NAIFA, USAA and Aflac. This success is a combination of both the tremendous grass roots support from members on key issues and the generous member contributions to the national PAC. Our goal in 2012 is to have every independent agent support their Big “I” PAC by committing to a yearly contribution. Personally, I look at my PAC contribution as an investment rather than just a contribution. After all, our future is at stake here. A large number of Iowa agents have already made a 2013 investment and we thank you for that. If you haven’t, what
are you waiting for? Even if only for a small amount, step up. It is your livelihood we’re protecting here. Do you really believe in what you do? If so, protect your future and invest in the only agents’ PAC that has an impact in D.C. Although this article is supposed to focus on national issues, I would be remiss when talking about political action if I didn’t mention the outstanding job Bob Skow does for the Iowa Big “I” at the Iowa Statehouse. There is not a single conversation about insurance that does not involve Bob sooner or later. One of the best examples of his work I have seen in my 40 plus years was the statutory “fix” he shepherded through both Houses to abrogate the horrible Supreme Court decision in Langwith. If the Langwith precedent would have been allowed to stand, our E&O premiums would have increased dramatically. This savings alone will offset a nice PAC contribution each year.
TRUSTED CHOICE® AND CAP The Trusted Choice® branding effort continues to evolve in conjunction with
SPRING 2013 |
the rollout of the Consumer Agent Portal. There will be a sharper focus on the key advantages of doing business with an independent agent. The core brand message will be “Bigger Savings, Better Coverage, Best Service”. The tag line narrative to reinforce this message will be: “Trust the unbiased expert advice of your local Trusted Choice® independent agent. They shop hundreds of insurance companies to deliver choice, savings and value, tailored precisely for you.” This emphasizes that independent agents are truly consumer advocates, and their expert advice provides peace of mind, control, added value and savings in time, effort and money for the consumer. The overall vision of the branding campaign is to restore premium and revenue growth by educating consumers on the advantages of the Independent Agent channel – bigger savings, better coverage and best service.
Trusted Choice® and CAP are closely tied together in terms of what consumers – our customers – will see when researching insurance online. Project CAP can be thought of in simple terms as a lead generation machine. The goal is to position your agency high on the search engines so that consumers find you when searching online for insurance information and quotes. As we all know, most consumers now look around online for insurance information but most do not buy online. This fundamental fact leads to an equally fundamental truth – we do not need to “out-internet” direct writers, we need to “out-local” them. CAP gives agents the tools to get good results from consumers’ internet searches while retaining all the benefits of being a local independent agent.
VIRTUAL UNIVERSITY AND ASK AN EXPERT
University site, you are missing out on a valuable membership benefit. Also, remember there is the “Ask An Expert” feature that allows you to send in questions to be reviewed and answered by a panel of experts. Questions can include commercial and personal lines coverage, agency management, marketing and errors and omissions best practices. I would encourage you to utilize these free member resources if you haven’t done so already.
QUESTIONS AND COMMENTS As always, if you have any questions or comments, please feel free to contact me: Email: firstname.lastname@example.org Direct phone: 515-868-0484 Miller, Fidler & Hinke Insurance Agency 12035 University Ave., Suite 202, Clive, Iowa 50325
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Meet Nick Gerhart, Iowa Insurance Commissioner
I was born and raised in the Des Moines area. I grew up in Ankeny. My dad was a family physician there, a small business owner as well, so I had a great childhood. I graduated from Ankeny High School in 1994 and from there I went to the University of Northern Iowa where I met my wife, Jessica.
| SPRING 2013
Nick Gerhart Iowa Insurance Commissioner
Number one is the health care reform. Given we are now the lead agency a lot of eyes are on us.
Viewpoint: We are visiting with the new Iowa Insurance Commissioner, Nick Gerhart. On behalf of the Independent Insurance Agents of Iowa, thank you for agreeing to meet. Tell us about your past history and where you grew up. Nick:
I was born and raised in the Des Moines area. I grew up in Ankeny. My dad was a family physician there, a small business owner as well, so I had a great childhood. I graduated from Ankeny High School in 1994 and from there I went to the University of Northern Iowa where I met my wife, Jessica. After Northern Iowa I attended St. Louis University and earned my law degree and a Masters of Health Administration. We moved to Wisconsin after law school and I practiced law there for a little while. When we got a little older we decided to come back to Iowa to start a family, Jessica was from central Iowa as well. I started at American Equity in November 2003, which is how I got into the insurance business.
Viewpoint: What did you do at American Equity? Nick:
I was hired to be a staff attorney and from there I went into a compliance function, regulatory function, and ultimately ran their compliance and regulatory affairs. Most recently, I left American Equity in 2010, I worked at Sammons Financial Group, Midland National Life/North American Company for Life and Health before I started at the Iowa Insurance Division. I was the Vice President of Compliance and Regulatory Affairs there. I did a lot of NAIC work, worked with
agents, and trained the field on suitability and regulatory issues. Viewpoint: It was at Sammons in the last few years that you became very familiar with the National Association Insurance Commissioner activities, attended the meetings, and worked with Commissioners around the country correct? Nick:
Absolutely. I have been going to NAIC meetings since 2005. The first one I went to was very interesting since I did not know what to expect. I went to more and more meetings, met regulators, and worked on national life insurance and annuity suitability issues. I did some work in D.C. around the SEC Rule 151A issue too.
Viewpoint: You were appointed Insurance Commissioner effective Feb. 1, 2013, and you were confirmed by the Iowa Senate unanimously correct? Nick: Yes. Viewpoint: How long is your term? Nick:
Viewpoint: Tell our readers about the current state of the Iowa Insurance Division. Nick:
It is a great agency with a lot of long-time folks here with great institutional knowledge that I have been leveraging. I have spent time assessing all of the people and what they do. Health care reform
SPRING 2013 |
Meet Nick Gerhart, Iowa Insurance Commissioner
has been taking an enormous amount of time. My top priority has been health care reform. Beyond that, I want to understand who is on the team, what makes them tick, their goals and what the team needs from me to make them more successful. Viewpoint: As the Insurance Commissioner it is not just about insurance, but securities as well. How many people do you have in each department? Nick:
based in Iowa. Some have come into my office and introduced themselves, and I am impressed with the number of large agent shops that do business all over the nation. I was aware of the ones in Des Moines, but there are many outside of Des Moines.
We have a total of 102. Under the IID we have regulated industries which would be cemeteries and we also regulate securities.
Viewpoint: Our readers might find it interesting the Iowa Insurance Division oversees cemeteries. What does the Division do in the area of cemeteries? Nick:
We have a team that basically monitors their solvency, making sure they are in good shape financially. To be honest, I didnâ€™t know that the Iowa Insurance Division regulated cemeteries until I got here.
Viewpoint: You are not only a regulator from cradle to grave, but even after the grave. Nick:
Right, we still have you regulated!
Viewpoint: What are the biggest challenges facing the Iowa Insurance Division as we move forward? Nick:
As you well know we have a vibrant insurance economy with a lot of people working in the industry in home offices. The state also has a lot of agents. It has been interesting learning how many agent groups there are around the state. I didnâ€™t realize how many large agencies we have
| SPRING 2013
I think the biggest challenge is maintaining a fair, efficient regulatory environment where businesses can do business efficiently, and agents can work with their customers. For the next few months, health care is our biggest challenge and the Governor did put the Division as the lead agency for health care reform. It has been a collaborative effort between the Insurance Division, Department of Public Health and Department of Human Services, so now this agency is leading the stateâ€™s efforts.
Viewpoint: What role will the state and the Division play in health reform, and where do you see things going over the next few years? Nick:
As of today, the state is in a partnership with the federal government so we are going to do plan management at the Division and DHS is handling the Medicaid eligibility piece. The Division will be reviewing the health plans as they come in, check out the actuarial soundness of it and other contractual parameters. There are a lot of new parameters that insurance departments and federal regulators now have to look at when they review rates and deem them to be qualified health plans. We will also be looking at the policy forms. We are really trying to work closely with the industry to make sure if they want to be in an exchange that it will be here and we will be able to get these plans on file and reviewed and approved. We have to have all of our plans and recommen-
“Eventually, every state will have a multi-state plan. Your multi-state plan could be United Health Group or it could be the Blues. You may not have a new market entrant in the state market, but every state will eventually have a multi-state plan and it will be run by the OPM (Office of Personnel Management), not the Insurance Division”
dations to the federal government by July 31st, so it is really a quick turnaround. Carriers have until June 30th to file the plans in an Iowa Exchange. I am hopeful by April 15th we will be able to start accepting applications for qualified health plans. From there, we are going to be working with the industry. If we have deficiencies come up we will work to fix those and get them all to the federal government by July 31st. Viewpoint: Do you see new players coming into the Iowa marketplace? Nick:
We have the CO-OP Health Plan (David Lyons, former Iowa Commissioner is founding Director) coming in for sure. We’ve had many discussions with our other top carriers – Aetna/Coventry, United Health and Wellmark. I can’t tell you who will be in or not. I think one of those for sure will be, however.
Viewpoint: Do you see any other new carriers coming into the State in general? Nick:
No, not as of now. We may have a multi-state plan under the ACA. The Office of Personnel Management out of D.C. which runs the Federal Health Plan (five or six million members) are putting out a RFP, for lack of a better word, to solicit national multi-state plans in every state. The law requires in future years that every state would have two; one not-for-profit and another for-profit like United Healthcare. The federal government is in the process of trying to find these plans for every state, and I have heard they are having a difficult time finding plans to be in every state for 2014. The law doesn’t require that every state have one in 2014 because it is a phased approach, so Iowa may or may not have one in 2014. I have asked
the federal government several times where we are at on that and they don’t know. Eventually, every state will have a multi-state plan. Your multi-state plan could be United Health Group or it could be the Blues. You may not have a new market entrant in the state market, but every state will eventually have a multi-state plan and it will be run by the OPM (Office of Personnel Management), not the Insurance Division. Viewpoint: The Iowa Insurance Division has done an effective job monitoring health insurance rates and premiums that are collected. Iowa ranked as one of the states that gave the least amount back to consumers because of overcharging if you will under the Federal law. What will the Division’s role be as we move forward in regulating the actuarial side of the health insurance? Nick:
Good question. We are going to be part of plan management, confirming rates. These are going to be new products. There was no such thing as a qualified health plan prior to the Affordable Care Act, so this is going to be a little bit different. We will be reviewing the base rate if you will, not necessarily a rate increase like we had typically done in the past, so we are working with outside consultants to help us. We have one actuary here in the Division that handle these and have built up capacity behind him to manage this. It could be ten plans or fifty plans, I can’t tell you how many. Rates submitted to us will be monitored closely. With the new requirements and everything that is out there, carriers will have very limited underwriting available to them, so some of these carriers are likely finding it difficult because this is a paradigm shift for them having never priced a product like this. It is going to be a bumpy road for a few years and the ACA accounts
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Meet Nick Gerhart, Iowa Insurance Commissioner
for this through the three R’s – Risk Corridor, Risk Adjustment and Reinsurance. This gives the carriers at least some comfort level that when they come in the market they are not going in totally blind. It will be very interesting to see how the rates come in, and I assume most of these carriers have very smart actuaries working for them. Our job is to then confirm those rates and make sure they comply with the new market reforms. We have new tools at our disposal to review those rates. Viewpoint: It is our understanding that the State/Federal Partnership will be operated by the federal government and you will backfill the regulatory side. Do you see a time in the future when the State will be potentially running the Exchange or how do you see that playing out? Nick:
That is a good question. Clearly at the moment, it is a Federal Exchange where we will be doing some of the front-end review and backend complaints and things like that. As you know, Senator Hatch has his bill down at the Legislature. To have a State-based Exchange by 2015, we would have to file an amended or new blueprint by November of this year. The federal grant money goes away after 2015, your Exchange has to be self-sustaining for 2015 and beyond and the money available now for states to establish an exchange goes away. Any state that is really going to do it is probably going to have to make a decision this year. The interesting thing about our market is I can’t tell you if we are going to have 75,000 Iowans use the Exchange or 400,000. I have seen numbers that go up to 500,000; I don’t think it will be that high, but it could be 200,000. I don’t know what carriers are going to be in the Exchange, so there are a lot of unknowns right now.
Yes, 33 states will be under a federally operated Exchange. Insurance Commissioners I have talked to around the country are motivated to do this model, but have the same question; they don’t know how many people are going to access it. Delaware is a great example, they are in a partnership and their model shows they will have about 70,000 people that will come into their market. Their Governor said that for 70,000 people they will do the State partnership and have the federal government run the Exchange and they will do pieces of it. If you know those numbers you can make that decision, but here in Iowa the potential range is so big it is hard to know.
Viewpoint: Historically, Iowa has ranked in virtually all lines of insurance as being a low cost state for consumers to buy insurance, an extremely competitive state. What do you see facing the property casualty side of the industry that is problematic as we move forward? Nick:
I haven’t spent a lot of time on property & casualty issues since the majority of my time has been focused on health care so far. We have a lot of property casualty carriers and they have been very active in trying to introduce themselves and their issues to us. Looking out at the NAIC there is really not a lot of issues at that level. Tom O’Meara, here in our office, covers any NAIC property casualty issues and he keeps me abreast of those, but looking at the Iowa market and talking with some of the carriers, I feel good about the market here in Iowa. We have had some workers’ comp issues from different sources, businesses and carriers, but that is the only area I have heard some rumbling. We are also continuing to look at ways to educate the consumer in both preventative measures to avoid claims and what proper actions to take if a claim does occur.
Viewpoint: How many states are going the path of either Iowa (a partnership) or allowing the federal government to solely run it?
Viewpoint: What is your opinion about the old debate “State vs. Federal” and how insurance should be regulated?
There are seven of us in the partnership model and then twenty-six that are federally operated. So, 33 total.
Viewpoint: So, the majority of states will be like Iowa who will be moving down the path of either of Federal Exchange or a partnership correct?
The state regulators have done a commendable job. Most notably, I think State regulators have done a really nice job through the financial crisis managing solvency of insurance companies and making sure they understood the company’s business. They were able to go in and when there were problems, address those much quicker. AIG is the poster child for insurance companies and
SPRING 2013 |
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Meet Nick Gerhart, Iowa Insurance Commissioner
regulators failing. I actually think it is the reverse, because I think it showed how well the insurance regulatory system worked. The insurance company assets were the assets that paid back all the bailout money. It was the financial products unit that was doing all of the trades that caused the problems. I think state regulators did a nice job managing what we are supposed to do, which is the solvency of these companies, understanding what the companies are investing in. Going forward we have new tools, so I think the state based system is going to be strengthened by legislation we are passing including the own risk solvency assessment, holding company act amendment and credit for reinsurance. Those are bills we are working on or will work on in the future and will only strengthen our tools to be able to work with companies to make sure we understand their risk and business. Viewpoint: It is no secret that Independent Insurance Agents and Brokers of America Association in general across the country favors state regulation and we have been gently supportive sometimes when the federal government can set parameters, but leave the regulation to the state. How do you answer the problems coming from the life side of our business who are very concerned about competing in an International marketplace and the fact that some of them complain they would rather deal with an 800 pound gorilla, the federal government, than 51 jurisdictions counting Washington D.C. and that some states have these little regulatory kingdoms. In fact, there can be a handful of states that may cause insurance companies a lot of problems. What is the solution to that? Nick:
Last year there were issues around Actuarial Guideline 38, which is a guideline dealing with universal life policies secondary guarantees. Regulators and industry arrived at a compromise, no one was really happy, so I guess that is how you know you came up with a good compromise. Afterwards, one state said we are not going to follow it. This is a great example of one state that has kind of gone off and done its own thing. The NAIC needs to be more accountable I think. They need to make sure it is a standard setting organization and the commissioners are working together, because we do have to have uniformity in certain market conduct issues and solvency regulation. We will never get complete uniformity
on market conduct, but when it comes to reserves for life insurance or a receivership issue or rehabilitation, we should all be able to work together. I understand the large international companies are out there trying to do business globally and there is no equivalent regulator here in the U.S.
The NAIC, as you know, is not a regulator, so when I look at it I think the NAIC has taken some good steps. I give them credit for the reinsurance and the holding company act amendments. One of my goals at the NAIC is to make sure commissioners understand how important it is that we all try to work together. The AG38 issue is a perfect example of one state trying to do its own thing and it disrupts the marketplace, because carriers then have to vary their business practices.
Viewpoint: So, you see NAIC as a facilitator to help states meet the uniformity standards? Nick:
Yes, I hope it is a standard setting organization and regulators who participate in it can use that as our forum to get these issues on the table. The NAIC has done a lot of great work in the last few years. I know coming from the industry how frustrating it is when you have a market conduct exam in one state on a model law that goes well, 6 months later another state comes in and does an exam under the same model act, and the exam goes right off the train tracks. We need to work to improve uniformity.
Viewpoint: I think the lack of consistency is a legitimate criticism some people have and I am glad to hear that you recognize that. I believe the National Association of Insurance Commissioners has helped states like Iowa become an even better regulator and they are to be commended. What do you see on the securities side from a State standpoint? Nick:
I havenâ€™t looked at it too much. One of my pet projects will be investor education and outreach. My wife and I are passionate on it and facilitated Dave Ramsey, Financial Peace University. I do not agree with his insurance positions, but I think his basic financial literacy on owning your own budget and how to budget is all good stuff. We are actually going to work on an initiative probably in the summer or fall where we go out and educate Iowa on investor education issues.
SPRING 2013 |
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Meet Nick Gerhart, Iowa Insurance Commissioner
Also, I have been involved in some security scam cases and I have no tolerance for that. We had a situation recently where some charitable gift annuity folks were running a ponzi scheme, not in Iowa too much, but in other states. I was part of the industry group that helped shut that down, so I am aware of those issues and I don’t have any tolerance for people out there preying on elderly and trying to rip them off. I feel we could use this office to help educate people; we are not advisors, but helping people understand the issues and how to avoid some of those problems would be good.
“I feel we could use this office to help educate people; we are not advisors, but helping people understand the issues and how to avoid some of those problems would be good” We are active in our church, Holy Trinity in the Beaverdale area, where we did Financial Peace University there. My wife is a stay-at-home mom and she does a lot of things at the school where our girls attend. When I am not working and not with family, I try to get on the tennis court once in a while. I get up at about 4:30 every morning and workout at the gym. My days are long, I start at 4:30 a.m. and usually get home about 6:00 p.m. and sometimes I work at night too.
Viewpoint: What are the three or four key things for the Insurance Division to do under your leadership? Nick:
Number one is the health care reform. Given we are now the lead agency a lot of eyes are on us. We need to get our part of the Exchange up and running. The staff has been amazing and we are going to be doing two years’ worth of work in two months, so that is our number one priority for this year. Beyond that I look to work more with the industry and find out what they need to have a fair, efficient marketplace. What things we need to put in the insurance industry’s bill not just the carriers or the agents, but everyone’s ideas. I want to have a very open process in that to cover all the issues. The third thing I want to be known for is the openness and communication with all groups, consumer groups and the industry. I have an open-door policy and if you request a meeting you will get one. It’s demanding on my schedule, but I have been doing it and it helps me understand the different issues. I love to learn, read and meet people. I would like to be someone who helps drive uniformity at the NAIC. Finally, using technology, whether it be managing an exam and incorporating that into our process to save money and make Iowa a better place to do business. Those are the things I will be focusing on.
Viewpoint: We appreciate that and we look forward to your years of being Iowa’s lead insurance regulator. Tell us about your family and your interests outside of the Division. Nick:
My wife and I have been married twelve years and we have a seven year-old girl, a two and a half year-old girl and a four month old son. Our three kids keep us busy. We call our middle daughter the hurricane because she runs all over the house with gale-force winds about 80 miles per hour.
Viewpoint: I am sure you know how to change a diaper then. What is the last book you read for fun? Nick:
Oh yes, often the first thing when I get home is change a diaper. The last book I read was Lincoln on Leadership. I read about two or three books a month.
Viewpoint: What is your favorite food and beer? How about your favorite color and favorite clothes to relax in? Nick:
Thai food is my favorite with Thai Flavors being our favorite restaurant. Our kids are already trained to like it. My favorite beer is Amstel Light, my favorite color is blue and I relax in sweatpants and a t-shirt. I do not sleep in a tie as many people at work joke about.
Viewpoint: We appreciate your time and your willingness to share with us. If someone has a consumer complaint what is the best way to file that? Nick:
Go to our website, www.iid.state.ia.us, on the Internet.
Viewpoint: If there is a question about a fairness issue in the marketplace, what is the best method to ask that question? Nick:
Call the Iowa Insurance Division and ask for me.
Viewpoint: Thank you, Commissioner, we wish you the best in the years to come.
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Bob Jester covers issues involving insuring Governmental entities.
Larry Spain and Tom Beeken truck insurance experts from Continental Western, had the group taking a lot of notes.
Bio fuels expert William Howell visits with agent Dave Bernhardt.
Record crowd gave rave reviews to the 2013 IIAI Rural and Small Town Agents Conference.
Wade Sheeler of Grinnell Mutual discusses Farm Liability coverage and issues.
Crop Insurance expert Dr. Art Barnaby, Professor at Kansas State, had everyone talking.
Insurance Commissioner Nick Gerhart addressed the group for the first time.
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A Policy of Working Together速
2012 - 2013 IIAI LEADERSHIP
DEAN BROOKS, CPCU, CLU, ALCM
President Rasmey Weeks, Inc. Grinnell
TERRY MCDONALD, CIC
1st VP Mease Insurance, Inc. Winterset
Treasurer Lisbon Insurance Agency Lisbon
TERRY FRIEDMAN, CPCU
TIM ENGLISH, CIC
President-Elect A.W. Welt Ambrisco Insurance, Inc.
SCOTT MORNINGSTAR, CPCU
National Director Miller, Fidler & Hinke Clive
2nd VP NOEL Insurance, Inc. Ottumwa
3rd VP Friedman Insurance, Inc. Dubuque
4th VP English Insurance Agency, Inc. Dyersville
Director Midwest Insurance Associates, LLC Council Bluffs
Director Shomo-Madsen Insurance Marshalltown
DAVID ROWLEY, CPCU, CIC, AU
JAMIE KRIST, MBA, CIC
Director Bank Midwest Insurance Spirit Lake
Director Hughes Brennan Wirtz Emmetsburg
Director Krist Insurance Group West Des Moines
Past-President A & J Petersburg Insurance Agency Decorah
SPRING 2013 |
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www.acuity.com For All That Matters
Linda Upmeyer House Majority Leader speaks to agents about issues of importance.
Insurance Day on the Hill features industry exhibits in the Capitol Rotunda and lunch with Legislators.
House Minority leader Kevin McCarthy 8th from the left poses for picture with the group.
Senator Minority Leader Bill Dix visits with agents (5th from right front row).
Senate Majority Leader Mike Gronstal covers insurance bills with group.
File Documentation & Records Retention Good Documentation:
The Best Way to Proctect Your Agency
hether your agency operates in a totally automated environment, is still paper-based, or exists anywhere in between, file documentation is rule number one when it comes to protecting against errors and omissions losses. Claims adjusters and defense attorneys who handle agency E&O claims all agree—there is no such thing as an overdocumented file. Many E&O claims result in a version of “he said, she said” when it comes to reconstructing the conversations that took place, often many years before. No one can perfectly recall exactly what took place when handling a customer transaction, and unfortunately, in a court of law the buyer is much more likely to be believed than the seller. It goes without saying that each and every step in the process must be documented in the customer’s file, whether electronic or paper. The file needs to tell the story of what transpired, with sufficient detail provided that anyone in the agency can read it and clearly see what took place. As is often the case, when an agency is involved in an E&O situation, not every person who was involved is still with the agency. Record-keeping is vital to defending oneself from a claim that something was done improperly or not at all.
What Constitutes Proper Documentation?
Every conversation with a prospect, customer, underwriter or other insurance company staff member, or third party (such as a person who requests a certificate of insurance or a vendor with
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whom the insured does business) must be recorded in the customer file. It is important to specify who initiated the call, what was the substance of the conversation, what action is to be taken, and what the next steps, if any, would be. Letters, faxes, and emails are less problematic from a documentation standpoint, because they actually exist and are in the words of the person who created them. They must, however be attached to the proper customer file. Form letters, ACORD forms, and other items created in an automated
“Each and every step in the process must be documented in the customer’s file, whether electronic or paper”
system will generally attach automatically to the customer’s electronic file at the conclusion of the transaction.
Who Should Document Files?
The simple and obvious answer is that the person who had the conversation should be the one who documents the file. However, this is not always practical. Producers spend a large percentage of time outside
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the office, and may not have ready access to the agency’s paper files or agency management system. Files need to be updated immediately, so that anyone speaking with the customer is working with the latest information. If there is going to be a delay before a producer can document a file, the information must be immediately transmitted to the CSR via telephone, fax, or email to retain the integrity of the agency’s file. The best course of action would be for the producer not to have the conversation in the first place, and to simply advise the insured to call the CSR directly. This does not always happen, however, so a process must exist whereby the producer transfers the information obtained in the conversation at the earliest possible time.
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13 E&O Risk Management Tips for Action in 2013 Small Actions Can Prevent Big E&O Claims Implementing E&O risk management into the agency can be overwhelming. Agency staff is busy servicing customers and trying to grow the agency. The good news is that an agency with good E&O procedures in place is also more likely to be more profitable. Below is a list of 13 steps the agency can implement to help reduce E&O exposure. They don’t need be implemented all at once. To keep from getting overwhelmed consider implementing one per month.
Assess customer needs: Understanding
your customers’ operations can help agency staff uncover areas of exposure. To do this, agents need to know the right questions to ask. Risk assessment questionnaires can guide producers in their conversations with customers and E&O coverage checklists can document coverage that is offered. Whether state law prescribes a legal duty to assess customer exposures and offer coverage, covering exposures that could later lead to an uncovered claim is the most proactive thing agencies can do from an E&O risk management standpoint. For an annual subscription of $250, the Big “I” Virtual Risk Consultant offers descriptions for operations of hundreds of businesses, risk assessment questionnaires and E&O coverage checklists. It will make agency staff better at what they do and in the end increase agency revenue.
Offer Coverage: When it comes to E&O
claims against agents, it’s always interesting to hear testimony from customers saying they would have bought the coverage if only it was offered to them. Yeah, right! Customers come to the agency with an idea of the type and amount of insurance they need and are looking for the best price. Even if it seems like a bother to the customer, don’t be afraid to discuss other exposures they may have and provide quotes for additional coverage. Producers should keep these couple things in mind: 1.) it’s the agents job (although not necessarily legal duty) to offer coverage to protect the customer’s assets and it’s the customer’s job to make the buying decision and 2.) offering coverage and documenting rejections protects the agency even if the customer doesn’t purchase them.
Offer Increased Limits: It’s the customers’
responsibility to determine insurable values and preferred limits. However, why not include increased limits with every quote? E&O claims often stem from inadequate limits so higher limits can be the difference between a covered and uncovered claim. Another proactive risk management approach is to make sure customers understand the valuation methods and any coinsurance limitations.
Don’t Renew As-Is: Agents work so hard to
attract new customers which is a difficult task. But once the customer is written there is danger in putting their renewal on autopilot. Customer exposures change over time and so do their coverage needs. How often is agency staff working with renewals to assess their exposures? Is there at least an annual letter emphasizing that the customer should contact the agency for changes to their insurance needs? Is coverage that may have been offered during the new business process being offered at renewal?
Review/Audit Customer Files: You’ve
heard it in E&O seminars that the three most important things an agency can do is “document, document, document”. Good documentation in customer files is tremendously important, but does your agency have it? Make it a routine to periodically pull some customer files to check if they have the level of documentation that would help defend the agency should an E&O claim occur. Consider a peer review process. Make it an exercise of continuous improvement, not one targeted at catching employee mistakes. This type of process will keep good documentation at the forefront of the minds of agency staff.
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Stay Current On Coverage: Insurance
coverage is complicated and it is constantly changing. In 2012 ISO introduced changes to the commercial property form and 2013 will bring changes to the CGL form. Agency staff needs to stay abreast of changes in coverage and educate customers accordingly. The investment in educating agency staff will pay huge dividends in writing more coverage and reducing E&O exposure. Set up education paths for all agency employees and keep in mind that Continuing Education requirements should be looked at as minimum standards.
Create a Culture: E&O risk management is
not something that the agency staff should turn off and on. It needs to be a culture that permeates agency staff year round. Hold staff meetings about the importance of E&O risk management, share articles, periodically audit files, and make part of the employee performance review discussion. Frequently asking employees if they are aware of situations that could potentially give rise to future claims also keeps the subject front and center. But it is only possible with a culture of awareness.
Don’t Be Afraid to Report Potential E&O Claims: The earlier your E&O carrier is
involved in an E&O claim the better the chances of a positive outcome. While your first instinct maybe to try yourself to make the claim go away, this is the wrong approach. On the average, 1 in 7 agencies will report an E&O claim but 50% of claims are closed with no defense or indemnity payments. E&O claims are going to happen but focus on getting your E&O carrier involved early.
Handle Customer Claims Expeditiously:
It is astounding how many E&O claims involve agents failing to handle customer claims properly. The common error is failing to forward the claim to the carrier in a timely basis. When claims are taken and not delivered to the carrier the same day with appropriate follow-ups set in the agency management system, the agency not only puts itself in jeopardy of an E&O claim but also of losing its reputation with customers. Customers pay premiums for the moment when a claim happens and when it is not handled appropriately frustration can set in as to why they purchased the coverage in the first place. Make sure customers understand their responsibilities in the event of claims and execute on the agency’s responsibilities as well. Agencies should never make coverage determinations, as that is the role of carriers. Agency staff should report the claim in a timely fashion to ALL carriers where coverage may be applicable including excess and umbrella carriers.
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Incorporate Disclaimers: A simple line of defense against E&O claims is incorporating disclaimer language in the agency’s operations. There are different types of disclaimer language that can be used in different scenarios such as
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voice mails including language that coverage cannot be bound or changed without speaking to a licensed agent or proposal disclaimer language that the insured should read their policy. Sample disclaimer language can be found on the E&O Happens website (www.iiaba.net/eohappens). Disclaimers are helpful in the defense of an E&O claim and can reinforce information customers need to be aware of.
Value or Limits: Re-evaluate how your
agency handles the determination of insurable values and limits for customers. Inadequate limits or values are common allegations made against agents when customers experience a loss that is insufficiently covered. Be sure to clearly state that values and limits are determined by the customer. When agency staff specifies the limits a customer should procure their standard of care can be increased to assure the limits are adequate. When using cost estimators provide a disclaimer that this is just an estimate and the cost to rebuild or replace could exceed the limits. Make sure the customer is accounting for upgrades and explain that purchase price and appraisals are different than the actual cost to rebuild under specific circumstances.
Protect Customer Data: This is a compli-
cated issue but it’s time for agents to stop burying their heads in the sand. Agents have a legal obligation to protect customer data. Start by educating yourself on the state and federal laws outlining responsibilities. The E&O Happens website and the Big “I”’s Agents Council for Technology website (www.iiaba.net/act) have information to help you understand agency exposures. Keep in mind that your customers have cyber liability exposure and are also subject to many of the same regulations that the agency is. Learn how it applies to the agency and then parlay that into selling coverage to your customers. Visit www.bigimarkets.com if you are in need of access to some cyber liability markets.
Attend an E&O Class: Only good things
come to those that attend an E&O seminar put on by a Big “I” state association. Data shows that those agencies that attend are much less likely to have an E&O claim. Agents can also get discounts on their E&O premium and CE credits are often filed for the seminar. In addition, attending the seminar will help you achieve and implement all of the suggested risk management items listed above. Implementing any of the above steps can help any agency reduce exposure to E&O claims and improve customer service. If you feel overwhelmed by the list, pick the low hanging fruit such as sending all staff to an E&O seminar, pull a couple customer files every so often to review documentation being used, implement disclaimer language which is available at www.iiaba.net/eohappens, and purchase the Big “I” Virtual Risk Consultant (www.iiaba.net/VRC) for staff which will educate them on customer risk exposures and coverages, and provide them with E&O checklists.
We make things easy for you. So you can make things easy for them. For more about how Integrity can help you help your customers contact: Cathy Beaudin at 920.968.8326 or firstname.lastname@example.org integrityinsurance.com
TALES OF THE CROP Three stories of E&O crop claims with three different results By Janice Blanton
Let Me Tell Y’all a Story ‘Bout A Farmer Named Fred Claim Scenario: The “Crops ‘R’ Us” Insurance Agency had been placing crop coverage through the Federal Crop Insurance Corporation, for Farmer Fred and his father for many years. Farmer Fred and his father had each claimed a 50 percent share interest in the crops on the acreage report in previous years. Farmer Fred’s father retired from farming, and Farmer Fred acquired a 100% share interest in all crops reported on the FSA 578 annual acreage report and the crop carrier’s acreage report. Farmer Fred advised the agency of the change in the share interest. Farmer Fred then completed the FSA 578 acreage report to reflect his 100% share interest in the crops. He provided the agency with a copy of the report. The agency had Farmer Fred sign the crop carrier’s acreage report and assured him that the agency would make the change. Unfortunately, the agency did not register the change on the crop carrier’s acreage report, so it only showed Fred’s 50% share interest. The summary of coverage was issued by the crop carrier, and the agency did not review it and therefore didn’t discover that Farmer Fred’s share interest hadn’t been changed on the policy. Farmer Fred reviewed the summary of coverage form when he received it, but did not notice the change hadn’t been made. Some months later, Farmer Fred reported a total crop loss to the agency. The agency reported the claim to the
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carrier, which assigned a crop adjuster and noted the share interest of 50% for Farmer Fred. The adjuster told Fred that he would only be paid for the 50% share listed on the report. Farmer Fred then contacted the agency and asked why he would not be receiving the full 100%. The agency then reviewed its file and discovered that the change in share interest had not been completed. The agency then contacted its Errors & Omissions carrier. End Result: In this case, the agent reported the claim to the E&O carrier. The agent was understandably upset because he had not done as the customer requested. The claims specialist reviewed the facts with the agent and asked him to send a copy of his file. The claims specialist then discovered that the agent had documented the request in the file but had not sent it on to the carrier. The specialist was aware of a Federal Crop Insurance Corp. Risk Management Agency rule that stipulates that if the share interest, reported acres or planting pattern is inaccurate, crop carriers will in most instances revise the acreage report to show the proper information in cases where the correct information was provided by the policyholder to the agent, documented in the file and inadvertently omitted. Knowing this, the claims specialist instructed the agent to contact the carrier about the problem. The agent provided the documentation to the carrier showing the request by Farmer Fred to change
the share interest and requested that the carrier correct the acreage report. The carrier reviewed the documentation and ultimately agreed to revise the acreage report and summary of coverage. The carrier then paid the claim in full. Lessons: If any information is incorrect and there is a crop loss, it should be no surprise that the farmer is going to look to the agency to fix it. You can avoid this by following these procedures: • Make all changes to the application and acreage report prior to the applicant/ named signing these documents. • Give the applicant an opportunity to review these documents. Ultimately, it is their responsibility to check the accuracy of the information on the application or acreage report. • Never ask the applicant to sign the forms in blank, and never sign on the applicant’s behalf.
Share and Share Alike? Claim Scenario: Farmer Sunny had previously farmed and insured her own crops. However, she had recently agreed to farm Uncle Joe’s and Aunt Betty’s farms. She came into Crops ‘R’ Us Insurance Agency and advised her agent that she needed to fill out a new application this year. She told the agent about the two new farms and requested each be considered independent of each others. The agent advised Farmer Sunny that this could be accomplished by putting a check in the “Optional Units” coverage box on the application. Farmer Sunny
was in a hurry, and the agent quickly filled out the application and included the new farms; however, he forgot to check the “Optional Units” coverage box. Neither the agent nor Farmer Sunny noticed the box was unchecked before Farmer Sunny signed the application. Farmer Sunny filled out the FSA 578 and provided it to the agency. The agency in turn filled out the crop carrier’s acreage report. A summary of coverage was issued; and the agency did not review the document and did not send Farmer Sunny a copy right away. Farmer Sunny contacted the agency and notified her agent of a hail crop loss on one of the farms. The agency notified the crop carrier, and a crop adjuster was sent to adjust the loss. This crop year had been quite productive except for the occasional small hail storm. The adjuster presented the crop loss adjustment worksheet to Farmer Sunny, who was shocked to see that the final loss calculation being paid was only a fraction of the amount she expected for the hail damage. She was also faced with the task of explaining to Uncle Joe why he was not receiving a higher payment. When Farmer Sunny questioned the adjuster as to how these calculations were made, he advised that the yield on the farms that were not affected by the hail storm had offset the loss to the farm that had suffered hail damage. Of course, Farmer Sunny contacted the agency and inquired as to why the loss was not being adjusted independent of the other farms. The agent reviewed the application and that’s when he discovered that the “Optional Units” box had not been checked. The agency then reported this to its E&O carrier.
also correctly reflected the addition of the two new farms. The agent advised the claims specialist that after explaining the optional units coverage, Farmer Sunny had requested this coverage. The claims specialist interviewed Farmer Sunny who confirmed that she had requested the optional units coverage. Based on the investigation by the claims specialist, the claim was determined to be a liability claim for the agency. The E&O carrier retained the crop adjuster to adjust the crop loss to the one farm, independent of the other farms’ yields. The E&O carrier settled this claim with Farmer Sunny for the amount that she would have been paid had the “Optional Units” box been checked. Farmer Sunny was quite relieved that she did not have to do some explaining to Uncle Joe.
End Result: After the Crops ‘R’ Us Insurance agency reported this claim to its E&O carrier, the claims specialist requested a copy of the file documents, including the application and any notes. The specialist noted that the agency’s file contained some handwritten notes that reflected Farmer Sunny’s need for optional units. The agent and Farmer Sunny both confirmed that Farmer Sunny had notified the agent of the addition of the two new farms and the need to keep these farms independent. The application
Til Death Do Us Part
Lessons: The claim above was clearly due to an omission by the agent, which ultimately left the agency liable to Farmer Sunny. If the agent had told Farmer Sunny how much time he would need to complete the application, she may have allotted adequate time. If it appears that there will not be enough time, it is best to reschedule rather than rush through the documentation. Take your time, review your notes, and don’t let other’s deadlines create E&O claims for you! • Haste makes waste is an old adage, but one to remember when it comes to filling out crop insurance applications and acreage reports. • Give the applicant time to review the accuracy of the documents and the coverage requested on the application. • Don’t skip over questions or those small check boxes.
Claim Scenario: Farmer Dale decided to purchase crop insurance for his spring crops. Farmer Dale and his wife Rebecca had been having marriage difficulties and had filed for divorce. Farmer Dale went to the Crops ‘R’ Us Insurance Agency, and the agent went over each question on the application and asked if Farmer Dale was married. Farmer Dale didn’t consider himself still married since divorce papers had been filed and advised the agent that he was
no longer married. Farmer Dale listed himself as the only named insured and signed the application. He filled out the FSA 578, listing himself as having 100% share interest in the crops. The agency filled out the carrier’s acreage report based upon the FSA 578 acreage report. The Summary of Coverage was issued reflecting Farmer Dale as the only named insured, and the agency reviewed it for accuracy and mailed it to Farmer Dale immediately upon receipt from the carrier. That summer, Farmer Dale and his wife reunited, and the divorce never became final. That year was extremely dry and one of the hottest in 75 years. A severe drought destroyed Farmer Dale’s crops. Farmer Dale notified the agency of the loss, and a claim was forwarded to the carrier. The crop adjuster performed a loss calculation and met with Farmer Dale and Rebecca. The crop adjuster asked when Farmer Dale had married Rebecca, as she was not listed as a named insured. That’s when it was discovered that Farmer Dale had been legally married when the policy was taken out. Unfortunately for Farmer Dale, the failure to list his legal spouse as a named insured reduced his loss payment by 50%. Had Farmer Dale listed Rebecca as a named insured, she would have been entitled to 50% of the loss payment as well, ultimately reimbursing them for 100% of the adjusted crop loss. Farmer Dale accused the agency of failing to explain to him the impact of not listing a spouse on the policy and demanded payment of the other 50% of his crop loss. The agency notified its E&O carrier. End Result: The E&O carrier’s claims specialist requested the file documents and reviewed the application of Farmer Dale closely. The agent had made notes that Farmer Dale was not married, along with other information obtained during the initial interview. The specialist interviewed Farmer Dale, and he admitted he did not consider himself married because he and Rebecca had filed for divorce, and he did not understand the impact of the question. However, he believed the agent should have explained to him why he was asking.
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Based upon the notes of the agent, Farmer Dale’s admission that he did not consider himself to be married at the time the application was filled out, the fact that Farmer Dale was still legally married, and the fact that the agent had no obligation to verify the accuracy of the information that Farmer Dale was providing, the E&O carrier denied any liability of the agency for the error on Farmer Dale’s application and did not compensate him for the 50% reduction of the crop loss. Lessons: There are lessons to be learned from the agency’s effective pratices in this case: • The agency had documentation to support that Farmer Dale claimed he was not married. • The agent went over each question on the application with Farmer Dale and allowed him time to review it before signing. • The carrier’s acreage report accurately reflected the information contained in Farmer Dale’s FSA 578. CHEERS TO • The agency forwarded the summary of coverage to Farmer Dale after reviewing it to make sure the policy matched the application and acreage report. • The agency notified the crop carrier of the claim. MERCHANTS BONDING COMPANY These three claim scenarios contain just a few examples of the many types of E&O claims that can be made against CHEERS TO agents who place crop insurance. Crop insurance is a government program that is different than most types of insurance in that the application cannot be changed after a set date. Because of this, every line and every box on the application can MERCHANTS BONDING COMPANY be a potential E&O claim and should be carefully filled out and reviewed with the applicant. The same is true for the carrier’s acreage report. Change requests are limited to specific pieces of information and only for a certain period of time. This spring, use these best practices to help avoid costly E&O claims: • Don’t rush while filling out documents. • Go over all questions on the application and acreage report. • Place accurate information on the application and acreage report the first time. • Make all changes prior to the applicant reviewing and signing the document.
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• Schedule ample time for the applicant to review the documents before signing. • Never present a blank form to the applicant. • Never sign a document for the applicant. • Never alter dates on forms. • Submit all documents by the deadlines set by the Risk Management Agency. • Review the summary of coverage and forward a copy to the insured as soon as possible. • If any errors are discovered, contact the crop carrier and attempt to resolve immediately. • Document, document, document! If any of these above stories have a familiar ring to them, now is the time
to review your agency’s practices and adopt the best practices above. An ounce of prevention is worth a pound of cure. Have a productive crop insurance placement and renewal season. *Janice S. Blanton, AIC, is an Assistant Vice President and Claims Specialist with Swiss Re Corporate Solutions. Since joining Swiss Re Corporate Solutions as a Claims Specialist in 2002, Janice has handled claims for insurance agents and brokers. Prior to that, she worked in the Legal Department from 1995 until joining claims in 2002.
This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re”) and/or its subsidiaries and/or management and/or shareholders.
A N N I V E R S A R Y
Years MERCHANTS BONDING COMPANY 8 0 T H
A N N I V E R S A R Y
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A N N I V E R S A R Y
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Common Sense Surety Since 1933
cleaningIt’s a Good Time to do an Agency E&O Self-Audit
ost agency management experts suggest an agency should do self-examination of their procedures from time to time. An annual physical if you will – where you take time to look at how you are risk managing your agency selling and servicing process. What we do know is the liability exposure for selling insurance agents and brokers are facing is growing. It is imperative that agents take a proactive position to make sure the client’s file has adequate documentation, copies of communications or notes about oral discussions, and make sure the process is a consultant. Documentation, communications and consistency are the three keys to successful risk management of Errors & Omissions exposures. A good idea is to pull a sampling of files and review them to see how you grade on each of the three key processes, a self-audit.
BOB SKO W, C P C U CHIEF E , CAE – XECUTIV E OFFIC ER
SPRING 2013 |
Iowa trial lawyers are being more aggressive and the courts seem to be responsive to holding agents to a higher legal standard; these factors are driving up claim frequency. We are witnessing a significant increase in the number of E&O claims, at the same time we are being hit by a tougher professional liability insurance marketplace. Agents are wise to be proactive in risk managing their E&O exposures. Areas that agents in Iowa seem to be struggling with are numerous. They include the following: • Inadequate property values; • Improper binding of risks; • Workers’ Compensation lack of coverage; • Crop insurance errors in acreage reporting and coverage options; • Bonds incorrectly handled; • Commercial Auto and Trucking coverage issues; • Vehicles not titled in the insured’s name; • Certificates of insurance incorrectly stating coverage; • Uninsured & Underinsured motorist issues including coverage on umbrellas; • Farm liability not covering non-farm business exposures;
• No cyber liability coverage; • Lack of employee dishonesty coverage; and • Agents interfering with cancelation of a policy by the carrier. While the list above doesn’t include all the situations we see, it does describe areas where we have witnessed growing problems. No agent wants to be sued by a client, but if and when it happens suit proofing your agency by being sure you have documented communications and maintained consistency will keep you from finding yourself in a bad situation. So, this spring, do a little file inspection sort of a spring cleaning! Do you have signatures on file? Are your files adequately documented? Is everyone in the agency doing it the same way? Are you doing the job of communicating when necessary, in a timely and professional manner? Are policy applications, changes and claims being processed quickly and accurately? By doing things to suit proof your agency, you will be in turn doing a better job for your customers too. You’ll be writing more business, have happy clients and a less stressful life. Devoting a half a day to doing an agency self-audit this spring will pay dividends later.
Documentation, communications and consistency are the three keys to successful risk management of Errors & Omissions exposures.
Retention Strategy #5 POLICYHOLDER ACCESS
“ Keep customers connected for better service.” Sara Richards, Business Technology Analyst Connect your personal lines customers to EMC’s Policyholder Access for better service and satisfaction. This online service allows customers to do everything from manage payments to access valuable safety tips. It’s just one of the many reasons policyholders Count on EMC®.
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Home Office: Des Moines, IA
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| SPRING 2013
WHEN YOU CAN SOAR?
Swiss Re Corporate Solu ons policyholders: Don’t miss out on the invaluable risk management resources available exclusively to you. Log in to www.iiaba.net/EOHappens to access claims sta s cs, preven on tools, insigh ul ar cles and more.
THE BIG “I” PROFESSIONAL LIABILITY PROGRAM Prevent.
Our exclusive risk management resources help your agency avoid making common preventable mistakes.
Our superior coverage through Swiss Re Corporate Solu ons and our experienced claims teams are in your corner in the event of a claim.
When you know you have the best agency E&O Protec on, you can focus on growing your most important asset–your business.
The Big “I” and Swiss Re Corporate Solu ons are commi ed to providing IIABA members with leading edge agency E&O products and services. IIABA and its federa on of 51 state associa ons endorse the comprehensive professional liability program oﬀered by Swiss Re Corporate Solu ons.
to connect with your state associa on today. Insurance products underwri en by Westport Insurance Corpora on, Overland Park, Kansas. Westport is a member of Swiss Re Corporate Solu ons and is licensed in all 50 states and the District of Columbia.
INDEPENDENT INSURANCE AGENTS OF IOWA 4000 Westown Parkway, Suite 200 West Des Moines, Iowa 50266
PRSRT STD U.S. Postage Paid Des Moines, IA Permit No. 2538
INDEPENDENT INSURANCE AGENTS OF IOWA PROGRAMS SPONSORS The companies listed below have made a commitment to support the strongest agentsâ€™ association in Iowa.
PLATINUM Allied Insurance EMC Insurance Company The IMT Group Independent Agents Service Corporation Iowa Mutual Insurance Company Pekin Insurance Progressive United Fire Group
Continental Western Group Grinnell Mutual Integrity Insurance Rain & Hail, LLC
S I LV E R Farmers Mutual Hail Insurance Company Great American Insurance Companies GuideOne Insurance Merchants Bonding Company
BRONZE Accident Fund/United Heartland ACUITY Hastings Mutual Insurance Company LeMars Insurance Company Liberty Mutual Insurance M.J. Kelly Company - Iowa North Star Mutual Insurance Company QBE Regional Insurance
SECURA Insurance Selective Insurance Company of America Society Insurance Travelers Insurance West Bend Mutual Western National Insurance Westfield Insurance