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September/October 2017
by Jon Spaugy, BIG CEO
BRINGING PEOPLE TOGETHER
you remember about BIG is our great convention, we are failing you, and we refuse to let that happen.
Have you noticed that the very same technology that is supposedly bringing us all together is actually keeping us apart? Everyone (practically) is on Facebook, Twitter, Instagram, and whatever flavor of the month social media site is out there. But are we truly “connecting” with others or just being self-absorbed time-wasters who think simply everyone wants to know all about the minutiae of our lives?
I am proud to say BIG has put together some very successful non-traditional industry events, including networking events at baseball games (over 500 tickets sold), our first annual Family Picnic that had over 150 agency owners, family and staff attending, and the year is not over yet! Our annual Holiday Party usually ends up with over 300 industry professionals and their families enjoying end-of-the year festivities.
There is no doubt social media has created business opportunities. Individualized banner ads, commercial tweets, corporate Facebook pages and more have turned our smartphone and computer screens into venues for instant advertising. But as someone once said, no man is an island. The worst thing you can do to a prisoner is put them in solitary confinement, yet we inflict this punishment on ourselves as we disappear into our own little social media-driven worlds.
If you think your social needs can be fulfilled by logging on to Facebook or laughing at the You Tube antics of a cat chasing a piece of string, think again. You are in need of a firm handshake and a hug. You need to look at someone’s face for a reaction, not read about it on a message board. Get some group dynamics going while enjoying a pitcher of margueritas and not by following an email thread. You need to come to a BIG event and see for yourself.
Maybe you have gotten into this and have had varying levels of success. I am certainly all for utilizing any technology that will help grow your business and lead you to prosperity. But I also think you need human touch.
Check our calendar at www.biginsusa.com and see what’s coming up. Then mark YOUR calendar and we’ll see you soon!
This is all coming to mind as I enjoy our 5th annual Minivention in Northern California . We had about 30 vendors with over 100 agents attending. That’s a pretty good number for Northern California and it is not cyber-interaction, but real life. BIG is all about bring people together. Sure, we have member meetings and training seminars, totaling eight so far this year. Of course, our annual convention and Northern California minivention are well-known. But we aren’t about to be just a one-trick pony. If all
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September/October 2017
Get Active, Get Involved, Get BIG!
DON’T BE AN INSURANCE
AGENT BE AN INSURANCE HERO By Precise Leads
their clients. They check in on a regular basis to see if their insurance needs have changed: Did the client recently expand his or her business? Do they have a baby on the way? When they meet face-to-face with clients, successful agents learn about the person through meaningful conversations, which are, as marketing consultant Maribeth Kuzmeski of Red Zone Marketing, Inc., writes the “bedrock of relationships. The act of listening — the other half of having a great conversation — shows people you care.” 2. They’re Knowledgeable, But Don’t Use Jargon
As the bulk of insurance processes migrate online via innovative insurtech platforms, independent agents may believe their role in the insurance sales process is diminishing. If consumers can purchase policies via the internet, is there really a need for an agent? The reality is that the demand for agents is alive and well. J.D. Power’s 2016 Insurance Shopping Study suggests that 50% of consumers still finalized an insurance purchase with an agent, even after doing online research. That’s because successful agents know insurance isn’t a one-off transactional game; it’s a business centered around developing long-term, personal relationships with clients. To grow their book of business, the most successful agents aren’t just great salespeople — they’re true partners to their clients. Here’s how they do it. 1. They Take the Time to Get to Know Their Clients The best insurance agents out there don’t wait until renewal time or the annual review to reach out to
Insurance agents have a wide variety of products at their disposal that they can offer to clients. By understanding the unique circumstances of each individual client, they can recommend those best-suited to meet their needs. However, successful agents never slip into jargon or overly technical vernacular that might disengage the client. Rather, they relate highly complex insurance terms into language the client can understand. 3. They Provide Great Customer Service After a client suffers a catastrophic loss, a successful agent doesn’t refer them to an 800 number; rather, they’ll contact them personally to offer guidance and support in their time of need. Just as importantly, the best agents never make empty promises. Nothing builds trust more than following through for the client — and nothing destroys it more than failing to do so. In today’s digital world, customer service has many touchpoints. Answering inquiries via Facebook and Twitter and other social media channels are great ways to interact with clients and extend customer service outreach. 4. They Provide Real Value Savvy consumers never buy products based on price alone — instead, they conduct research and try to attain the maximum amount of value on their investment. Successful insurance agents convey that value by fostering deep relationships with their clients, providing excellent customer service, and always putting
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September/October 2017
their client’s needs ahead of their own. When your client is confident he or she is getting a good deal, that bolsters loyalty and retention. According to Christian Bieck, Global Insurance Lead for IBM Institute for Business, value isn’t based on price, but other factors such as quality and transparency. 5. They Actively Market Themselves Successful insurance agents market themselves on a daily basis. They set aside time to send out fliers, build their database, ask for referrals from current clients, and email or call prospects. During their marketing efforts, some agents may find they assist many clients in one industry, so they market their services to that niche. They promote their business by joining local civic and professional groups and speaking before organizations about insurance issues. While marketing themselves, successful agents present a professional demeanor and emphasize how they can help people protect their assets through insurance. Marketing to a successful agent is all about touting their expertise so prospects and clients want to work for him or her. In other words, successful agents
know it’s not about them — it’s all about their prospects and/or existing clients. Becoming an insurance hero grows from building trust and loyalty with insurance consumers. Agents don’t need superpowers to succeed. But they do need to provide great customer service, communicate effectively, and offer top value. About The Authors Precise Leads is an award-winning lead generation and customer acquisition firm. Since 2004, Precise has connected our clients to millions of consumers in search of insurance, financial, and other services. We match consumers shopping for services including Health, Auto, Home and Life insurance, Medicare Supplement and Advantage Plans, and more. We also offer inbound calls and live transfers that deliver prospects directly to national sales organizations. For more information, please call (866) 532-3489 or visit http://www.preciseleads.com.
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CREATING AND IMPROVING YOUR E-COMMERCE
By Andree Ochoa, CEO, DomainCarts.com
E-advertising -- Google, Yahoo, Bing, AdTraffic.us, and other advertising agencies -- is a must. Always look for the sweetest deal out there. There are many advertising agencies around the world that will give you great service for less than others. Traffic is very important for an online store. Organize local marketing campaigns and encourage your audience to visit your website. Acquire as much traffic as you can, the more the better. Also, never forget about email marketing and try to combine all marketing efforts to work for a defined goal, which is to help your website sell more. When attending off-line events, remember to have your website and customer service number printed in all marketing materials. This will eventually drive customers to your website when they need it. In today’s online world, successful e-commerce requires a localized website. Study what your business needs and work with your development team or programmer to achieve that goal.
Hope you liked this article, and as always let me know if you have any questions, I will be more than happy to answer. Look for me on social media as @andreeochoa.
When I started DomainCart.com in 2007, I didn’t know what to do to start earning money online on auto pilot. As months and years passed, I had to learn SEO, online marketing, and lots of other useful stuff just to get the business going. Today, DomainCart.com sells domain names and hosting to people in many countries. It wasn’t until I understood that a series of localized landing pages with call-to-action buttons, forms, and well explained information is what it takes for a customer to purchase from you or from someone else. Have your team build a landing page for each and every product that you offer with as much detailed information about it as you can (without making it look crowded). This will add value to your website and will drive automated traffic from search engines.
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September/October 2017
Study: 37% of
American Adults Skip Life Insurance
compared with 29% in the 30-49 age bracket and 26% in the 50-64 bracket Are single: 23% of those with life insurance policies are single, while 75% are married Have less formal education: Only 26% of those without policies are college graduates Make less money: Of households with an annual income of $75,000 or more, 78% have life insurance policies; of those with an income $50,000 to $75,000, 74% have life insurance policies Those who don’t have a policy say they’d spend extra income on the following before buying affordable life insurance: Purchase food/utilities (76%); Put money in savings (71%); Pay down debt such as car loan or student loan (67%); Donate to a charity (49%). “The longer you wait to get life insurance, the more expensive policies become—so I always recommend to young adults that they do their best to get a jump start. When determining a policy, top factors to consider include your own personal health, loved ones, family history, retirement and estate taxes.
A recent survey from insuranceQuotes.com finds that 37% of adults do not have life insurance. And while expense was the most commonly cited reason for not purchasing a policy—with 59% of those without a policy saying so—data revealed that respondents still wouldn’t do so, even if money weren’t an issue. But why? “Many adults, particularly millennials, believe that since they’re currently healthy, they do not need life insurance. But rather than being viewed as an expense, life insurance should be viewed as an investment as well as a safeguard, for your spouse and children,” said Laura Adams, senior insurance analyst at insuranceQuotes. “There are many affordable policies out there, and unlike other insurance types, life insurance covers losses from an event that is inevitable.” The study found that most non-policy holders:
“Also worth considering, especially for consumers concerned about cost, are policies that convert life insurance into an income annuity, supplementing your retirement savings,” added Adams. The full report—which includes additional data, tips and insights—is available at www.insurancequotes.com. Methodology: InsuranceQuotes and Princeton Survey Research Associates International conducted an online survey of 1,001 U.S. adults aged 18 and older in May of 2017. About InsuranceQuotes: InsuranceQuotes gives consumers a free, easy way to shop and compare insurance quotes online for auto, home, health, life and business. Follow on Facebook, Twitter, and Google Plus.
Largely belong to the millennial generation: 65% in the 18-29 age bracket do not have life insurance policies
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Robert Deleon CEO, LoDel Insurance Services
By Don Lukenbill Perhaps one of the most hotly debated topics of the last decade, health care coverage is once again in the news. One side bringing up legislation that is doubtlessly close to the congressional record for number of times defeated. The other side proposing wholly unrealistic” solutions to our national conundrum. Here in our state, we have the result of an Obamacare codicil which created a state-run insurance exchange called Covered California. Many agents opted to take advantage of this new and much-needed marketplace. One such forward-thinking producer was LoDel Insurance Services CEO RobertDeleon. Because this particular market continues to be in teh spotlight, we thought it would be interesting to have a discussion with Deleon about why’ he got involved, what could be in it for P&C agents, and a bit about the man himself. BIG TIMES MAGAZINE: We always like to start with a little background to let our readers get to know our Q&A stars. Tell us what brought you into the insurance business. ROBERT DELEON: As far as I can remember, I had always had a passion to help others. In 2007, after completing a Bachelors of Science degree in Administration of Justice, I pursed a career in law enforcement by becoming a Probation Officer for Los Angeles County Probation Department. Through my years working as a Probation Officer, I saw time after time many families in the community that struggled financially for not having insurance. For instance, many families I worked with would not have life insurance or funeral expenses coverage to compensate for the burial services of a love one. Instead, the culture of dealing to finance burial expenses for those families was simply to organize a car wash or go around asking for donations; therefore, solely depending from the kindness of strangers to come up with at least enough money to cover the cost of cremation. Knowing that no family should have to struggle financially for not
having insurance during a time of a loss, I began to network with local insurance professionals and begin to connect them with those families. However, I still felt that I could more and decided that my best approach was educating families to take advantage by learning about insurance products that would protect their life, health and personal property. In 2012, I obtained my life/accident & health insurance licensed and with my life partner, Yadira Lopez founded our agency: LoDel Group. Through LoDel, we began to focus on educating those lacking an insurance solution for their families. Moreover, we began to established relationships in the insurance industry and created the right channels to help improve the lives of many by offering family legacies solutions in order to protect their assets. Those relationships led me in 2013 to established our first retail location at city of Lynwood, California: “LoDel Insurance Services” after becoming P & C licensed. In 2014 the new healthcare reform, the Affordable Care Act also known as the Obamacare, came into force and we became Certified Agents with “Covered California”. Covered California is the entity that runs the ACA Health Exchange Marketplace in the state of California. Through LoDel, we positioned ourselves at the right time and took control of the chaos and uncertainty that this new legislation came with. By doing so, this allowed us to innovate the ACA marketplace in the greater Los Angeles Area and became known as the “Experts of Covered California” or “Expertos de Obamacare”. Our knowledge and efforts have proven to be successful as our agency became a General Agency for Covered California, with the top producing agents in California and as a result, Yadira and I have each earned a seat in the broker advisory board for Covered California. BTM: When did you realize you were ensconced in a career?
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RD: Personally, I never thought I will be in the position of changing people’s lives and helping people by educating them about their insurance options. Moreover, I enjoy being able to network with other service professionals with the purpose to unite forces to bring my knowledge and expertise to their clients. Needless to say, I feel honored to hear when our clients share with us how life changing it was for them to be able to obtained the right insurance solution through us and how easy it was. BTM: Why health insurance and not the P&C market like so many others? RD: I followed the development of the ACA closely; therefore, when the ACA legislation came into effect, I realized that there was going to be a need for Certified Agents , especially in the Latino community. As I took advantage of the ACA mandate momentum, I educated myself and positioned my agency to become the experts in the field. The P & C world is well established and there is a lot of completion out there. BTM: The Affordable Care Act, aka Obamacare, has been quite a point of contention. Why was such legislation – good or bad – necessary? RD: Based on my experience of seeing families financially struggled for not having insurance during a time of loss, I have also come to see the benefits of having health insurance benefits and not having to depend from an employer or government job to enjoy the freedom of entrepreneurship. I never gave it a second thought when I walked away from health benefits from a well paid government job the minute ACA came into force and decided to become an insurance agency owner. Today I enjoy this entrepreneurship opportunity that the ACA provided me and being able to provide jobs and contribute to the economy in our great nation. At the same time, I have peace of mind to know that if I ever become sick, I could get medical care without having to go broke. Therefore, I must say that this legislation has more good than bad. On the other hand, I can tell you this legislation is not perfect and needs a lot of improvement; however, just
a complete repeal should not be the solution before attempting to make it better. BTM: Some people are fans of ACA, others think it was detrimental to the health insurance market. What is your opinion? RD: It is my personal opinion, based on my experience dealing with the ACA, that some people based their opinion from a political stand point and not the facts. I have seen that many times, a person has a negative opinion since he/she is negatively affected by the ACA. For example, an individual may have a negative opinion about the ACA because that person may face a fiscal penalty for not having the ACA at the time of tax filing, people that don’t qualified for a subsidy to help them pay for their health insurance, or already have health insurance and don’t ever fathom the idea of not having health insurance. The truth of the matter is that many people see the ACA depending on whether is convenient or not for that person. As a business owner, I have also seen how the ACA has improved the economy in California. Ever since the ACA, I have seen almost like a gold rush in our communities of new doctor medical offices, Urgent Care clients, hospitals, etc that continue to be seen in almost at every corner now. Also, as an Insurance Agent, it has created an opportunity for new agents to become successful and recognized in the so much competitive industry. BTM: An obvious result of ACA, Covered California has stepped in when the state’s health insurance market seemed to be heading over a cliff. First, is that an accurate characterization and second, how does this state-run insurance marketplace operate? RD: People in the state of California have been blessed that we have Covered California. When it comes about the ACA, “Covered California” is the “Rolls Royce” marketplace for Health Insurance on contrast to the rest of our great nation. Covered California has successfully and continue to negotiate with the health insurance carrier in order to maintain the share of cost to the lowest possible for their members. As a matter of fact, this year in which the current administration hasn’t been clear about ACA and about paying
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the subsidies in 2018, Covered California already has a plan B in order to continue the ACA in California. Needless to say, Covered California has prepared itself since day one and it is self-sufficient in the event the current administration or congress decides not to provide funding for the ACA subsidies. Bottom line, the negative that one hears in the media regarding the ACA, is not the case in California. Therefore, Covered California continues to be the sample model for other states in trouble. BTM: Some people consider Covered California the health insurance equivalent of the FAIR Plan or Assigned Risk. How do you respond to that? RD: That’s an interesting point of view. The Affordable Care act contains 10 essential coverage categories that make on and off policies identical and fair. Including no exclusions for pre existing conditions, making plans affordable for all. Therefore it is like the Fair plan where no person will be turned away. BTM: Can writing business through insurance exchanges/pools be profitable for producers? RD: Definitely, I run an agency that brings in over a million dollars a year in commission and has produced millions of dollars in premiums to health insurance carriers. Needless to say, every year, our agency continues to double up our client base. On the other hand, the exchange only simplifies the policy writing process. BTM: Do you see many cross-selling opportunities for P&C customers? RD: There is always an opportunity to inform your existing clients regarding health insurance especially when you know that not having health insurance implicates a fiscal penalty. Still, most people aren’t aware of how health insurance works or when to sign up; therefore, when trying to cross sell a little education is required. However, why send business elsewhere when you can leverage another way to retain this client, generate more referrals but above all, take advantage of the free advertising during open enrollment.
BTM: If a P&C producer was interested in writing health coverage what would they need to do? What advice/direction would you give them? RD: One must first need to become life, health and disability licensed. Once licensed, he or she would have to become certified with Covered California. However, the certification process doesn’t teach you how to complete the Covered California application, what documents to gather, how to sell it, etc. For this reason, BIG, I.C. Training Centers and my agency developed a series of Covered California awareness seminars in order to guide P&C agents in how to profit from the ACA. Another reason for these awareness seminars is that new agents seeking to become Certified Agents with Covered California, must become affiliated with a general agency that will guide them through the certificate process, and to teach the do’s and don’ts. Therefore, the attendees will learn from the best ! BTM: Now, a little more about you. If you could go back ten years and talk to Robert Deleon, what would you say to him? RD: I would like to know more about the roots of his entrepreneur aspirations. Also, I would like to know about his struggles and obstacles he encountered while leaving a secured job, steeping away from his comfort zone and become a business owner. At the same time, I would like for him to share with me his fears of not knowing exactly what this new career change will bring for him. On the other hand, I would like to know his personal experiences dealing with the early days of the ACA, the changes his agency saw in the insurance industry and how did he over came all of to become an over million dollar agency. Also, I would like to know the origin of his passion towards making a difference in an industry that was changing. But above all, if he would do it all over again. And my answer will always be: YES, Without a doubt in my heart! BTM: Now, jump into that same time machine and head to 2027. What would you want Robert Deleon to say to you?
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RD: I would thank him for paving the way for others to follow his lead. I would ask him about his legacy and current projects. I would ask for him to share with me his trade and secrets of his success. What advice would he give those not sure about whether to pursue their dream or to play it safe. BTM: In a few sentences, what is your professional philosophy? RD: My LoDel core values revolve around the following principles: Truth, Customer Service and Education. TRUTH: Always tell the truth even if that means that you won’t benefit from it. CUSTOMER SERVICE: Service your customers as you would like to be serviced. EDUCATION: Teach your staff, Educate your clients but never stop learning. Especially learn from your mistakes and figure out a way to not make the same mistake twice but if you do, think outside the box and look for the reason why you continue to keep making the same mistake.
The truth of the matter is, you made it this far but not what. I encourage you to consider the idea of becoming licensed or if you already licensed to sell health insurance, give your agency the opportunity and take advantage of the ACA trend. Whether you agreed or disagreed with the legislation, consider the extra revenue that now you could be able to generate. My sincere hope is that at least one P & C agent wakes up and see the potential of becoming affiliated with the Covered California brand and my general agency. Best of luck and hope that my story helps you see the potential of the ACA.
BTM: Any final thoughts? RD: My final thoughts are for those agents that know the struggles as business owners we face every day. My only advice to you is, keep up with the changes in your industry but at the same time be able to have an open mind to new changes. Sometimes, you may required to step away from your comfort zone in order to see potential. However, change sometimes is good. Believe me, if being a business owner was easy, everyone would be one. Unfortunately, you and I know that it’s not easy.
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Sidebar with
Harper & Heim Lawyers
By Jon S. Heim, Attorney
PRODUCTION AGENCY RECORDS
at any time. (See also, 10 Cal. Code Regs., § 2190.7(d).) However, in De La Cruz v. Quackenbush (2000) 80 Cal. App.4th 775, the Court of Appeal held that a warrantless inspection of an insurance broker’s records by the Insurance Commissioner was unconstitutional despite Insurance Code section 1727. Consequently, the Insurance Commissioner must obtain an administrative subpoena or a search warrant to search an insurance producer’s records, if the producer does not consent to the search but asserts his or her constitutional right. Like almost any other right, that one may be waived, by expression or sometimes by mere conduct. Acting under authority of Insurance Code section 1727, the Insurance Commissioner promulgated California Code of Regulations title 10, sections 2190.2 through 2190.7. These regulations specify the required records and retention times. Sections 2190.5 and 2190.6 mandate retention of bank records and interest bearing accounts authorizations. These sections are short and plain. They need no explanation. Sections 2190.3 and 2190.4 address records by file, while section 2190.2 primarily concerns records of money flow. Because these regulations govern producers’ most common and most used records and because the regulations create lists, they warrant extensive quotation, with italics supplied. First section 2190.3, about records by file of agency billed business.
§ 2190.3. Records by File. California Insurance Code section 1727, subdivision (a) authorizes the California Insurance Commissioner to regulate what records an insurance producer must maintain, and where and for how long the producer must do so. Insurance Code section 1727, subdivisions (b) and (c) require producers to maintain those records, both on the producer’s business and on business transacted by the producers’ solicitors.
(a) Wherever applicable, the following records shall be maintained by every agent or broker and surplus lines broker and special lines’ surplus lines broker in a file pertaining to a particular insured for a period of eighteen months after the transaction described by such records:
Insurance Code section 1727, subdivision (a) states that these records shall be open to inspection by the commissioner at all times, and that the commissioner may require a licensee to furnish information in those records
(2) Records of all binders, whether written or oral, showing the names of insured and insurer, nature of coverage, effective and termination dates and premium for binder or policy to be issued,
(1) Identity of each person who transacted the insurance, renewals and any change in coverage,
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(3) Copy of application or memorandum of request for insurance, (4) Correspondence received, copies of correspondence sent, memoranda, notes of conversation, or any other record necessary to describe the transaction.
The producer must also keep information about the entitlement to and transmittal of premiums, commissions and their returns, essentially financial tracking information. This is the subject of section 2190.2.
§ 2190.2. Required Records.
The foregoing section also applies to nonadmitted insurance disclosures, diligent search reports and replacement cost records. (10 Cal. Code Regs., § 2190.3(c-f).) Some surplus line insurance records not commonly held by retail personal lines producers must be kept for five years. (10 Cal Code Regs, § 2190(b).)
Wherever applicable, the following records shall be maintained by every agent or broker or surplus lines broker or special lines’ surplus lines broker with respect to each and every insurance transaction for at least five years after expiration or cancellation date of the policy to which the records pertain:
Retention of records of direct billed business is simpler, thanks to section 2190.4.
(a) Name of insured,
§ 2190.4. Direct Billing. (a) With respect to any business transacted on a direct billing basis, the following records may be maintained in lieu of the records required by Section 2190.2:
(b) Name of insurer, (c) Policy number, (d) Effective date, termination date and mid-term cancellation date of coverage,
(1) A policy record card or sheet or declaration page,
(e) Amount of gross premium,
(2) Copies of premium payment receipts or other memoranda thereof for premiums collected when collected by the agent or broker,
(f) Amount of net premium,
(3) Records of premium payments made by the agent or broker,
(h) Names of persons who receive, or are promised, any commissions or other valuable consideration related to the transaction,
(4) Copies of memoranda of any additional or return premium received by the agent or broker, (5) Monthly or other periodic statements from the insurer showing premium receipts on the agent’s or broker’s business, and (6) Copy of any cancellation notice, or letter of cancellation notice, or letter of cancellation for cause. (b) All records specified in Section 2190.4(a)(1), (a)(2), (a)(3), (a)(4) and (a)(6) shall be maintained for at least five years after expiration or cancellation date of the policy. The producer’s record-keeping burdens are not confined to the file records listed in sections 2190.3 and 2190.4.
(g) Amount of commission and basis on which computed,
(i) Amount of premium received including itemization of any partial payments or additional premium, (j) Date premium received by agent or broker, (k) Date deposited in bank account or bank depository into which premiums are deposited or maintained in accord with Section 1733 of the Insurance Code, including but not limited to trustee accounts maintained pursuant to Section 1734 of the Insurance Code, (l) Name and address of bank and number of account in which premium is deposited or maintained in accord with Section 1733 of the Insurance Code, including but
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not limited to trustee accounts maintained pursuant to Section 1734 of the Insurance Code, (m) Date premium paid by agent or broker to the person entitled thereto and identification of the means of transmittal, (n) Amount of net and gross return premium, (o) Date return premium is received from insurer by agent or broker which may be the date the credit is taken from the insurer or the date the check or draft is received, (p) Date gross return premium is remitted to person entitled thereto by agent or broker and identification of means of transmittal, and (q) Any documents required to be maintained pursuant to Section 2695.182 or subdivision (i) of Section 2695.183. Except for file records on agency billed business, the required records must be maintained at the production agency’s principal office for one year, then may be stored off-premises for the remaining retention time. (10 Cal. Code Regs., § 2190.7(a, e).) The producer may seek the Insurance Commissioner’s written authorization to store them elsewhere. (10 Cal. Code Regs., § 2190.7(f).) File records on agency billed business may be kept at the servicing office. (10 Cal. Code Regs., § 2190.7(b).) Note that, for many of these required records, the mandatory retention period is five years after policy expiration or cancellation. Insurance professionals know that, after a year or two at most, policy and consumer information loses most or all of its marketing value. Why then must insurance producers retain unproductive information for so long? At Harper & Heim, Lawyers, we perceive two reasons,
one more benign than the other. The first is to explain old policies. The second is to use the information against the producer. So producers must and do keep the required information, but never for profit and sometimes for opponents. These regulatory objectives may be appropriate, and sections 2190.2 through 2190.4 may strike a fair balance in pursuing them. Nonetheless, producers should recognize these objectives and the detriment they sometimes may work on the regulated class – you and your colleagues. What may happen after five years? Of course producers may retain records longer. But, if they have no sales reason to do so, why do so? Also, unlike criminal or civil actions, license disciplinary proceedings are not subject to any fixed statute of limitations. They may be filed years after the events underlying them, even long after a criminal or civil suit would be barred by a statute of limitations. However, if the Insurance Commissioner files a disciplinary proceeding after passage of the required retention time for relevant records and the accused producer already has disposed of exculpatory or key defensive records lawfully and in good faith, the proceeding may be barred by time anyway, under a longstanding equitable defense called laches. This defense, which, incidentally, may be founded on grounds other than record disposal, is the only time-bar theory available in license disciplinary proceedings. Producers are required to maintain records for five years. Records are worth little or nothing after that time. So on balance, it does not pay to keep them longer. Call Jon Stanley Heim at (510) 725-7593, or e-mail him at jshinslaw@gmail.com or harperandheim@gmail.com.
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INSURANCE COMPANIES AND REINSURANCE COMPANIES CREATED CATASTROPHE (CAT) BONDS. IS THIS EXTREME RISK TRANSFER, ENRICHING INVESTORS WHO ASSUME IT?
By Stephen S. Santoro
My other question would be if this is another Wall Street scheme that will go the way of Mortgage Backed Securities (MBS’s: Sub-Prime and Alt-A mortgages), Collateralized Debt Obligations (CDO’s) and Collateralized Loan Obligations (CLO’s)? Business in CAT bonds is brisk. There are many bulls. There many bears and skeptics. Insurers and reinsurers are increasingly transferring extreme risk to many institutional investors via CAT bonds. If the recent hurricanes in Texas and Florida “trigger” a CAT bond structured to insure against such risk, the insurer or reinsurer who sold it uses the buyer’s principal to pay claims. If the risks insured against don’t manifest themselves before the bond matures, the buyer, typically a hedge fund or private-equity firm would keep its principal and collect a large coupon, enjoying a great return.
earthquake or terror related could cause many insurance and reinsurance companies insolvent. CAT bonds are similar to mortgage backed securities (MBS’s), in that CAT bonds transfer the largest risks to investors. This is how a CAT bond works: An insurer or reinsurer forms a special purpose vehicle (SPV) usually with the help of an investment bank. The SPV agrees to indemnify and hold harmless the sponsoring insurer or reinsurer against a specific particular catastrophic event and then “hedges” the obligation by issuing bonds to institutional investors which carry a coupon (interest) rate component. The funds from the bond sales are invested into high-quality securities, held in trust as collateral until the bonds mature or are called upon to pay claims (triggered).
Only one CAT bond has been required to pay off, highlighting the low probability of catastrophic events and increases this securities attraction to investors like me. Forecasts of extreme weather, however, as well growing demand from buyers, issuance could surge in coming years. CAT bond risk capital outstanding currently totals $16 billion. According to a SWISS RE study by 2018 the market will reach $70 billion. A CAT bond differs from traditional insurance (reinsurance) contracts, which the insurer (or reinsurer) assumes responsibility for compensating a policyholder for a particular loss in return for premium paid. If an insurance company or reinsurance company determines it holds too much risk on their balance sheets, they can buy reinsurance, transferring the claims-paying obligation to a reinsurer or retrocessionaire (reinsurance of reinsurers). Hurricane Andrew caused $21 billion of claims to be paid in 1992. This caused insurers, reinsurers and retrocessionaires to reconsider this model. If several catastrophes occurred at one time, weather,
The trigger is very specific: A hurricane’s wind speed, the size of an earthquake, the level of claims in a specific geographic locale or a specific terrorist event. CAT bonds are expensive to underwrite, the use of these
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products comes at a price. SWISS RE states the price of the SVP is expected to lower as more critical mass and economies of scale are achieved, as the bond issues become more standardized and as the markets grows and matures. An important point is issuers must pay a high coupon rate (interest rate). Often it is one-half a percentage rate over LIBOR (London Interbank Offered Rate) to compensate the bond buyers for the possibility the bond buyers can lose all or part of their holdings should a CAT event occur. SWISS RE issued a cat bond after Katrina with an annual coupon of 40%. As these bonds could loose 100% of principal, plus the coupon, their ratings are often low: single -A or double -BB. Since these bonds have paid off investors well, they are not a key driver in reinsurance and insurance markets. SWISS RE even has a BB-Rated Cat Bond Index. SWISS RE’s index shows a return of 33.15% since 2005 through May, 31, 2015. This is much greater than the Lehman High Yield Corporate Bond Index (Junk Bond Index) of 19.1%. Even though the risks are high, buyers are pleased with these products as a tool for portfolio diversification. Fermat Capital Management, which has $2.5 billion under management feels CAT bonds are uncorrelated to the broader markets and have finite exposure and quantifiable risk of loss. Credit Suisse also owns these securities and Credit Suisse believes this is a fast growing market that helps investors find viable alternatives. Credit Suisse portfolio of $800 million has returned 10.6% as of 6.2015. Many have concerns this product will implode like sub-prime mortgages, Alt-A mortgages and other MBS like products. I have those concerns too. While this market probably will not have the “mass market appeal” that MBS’s, CDO’s, CLO’s and other products of this ilk, Wall Street and investors have a bad habits of turning too much of a good thing into a very bad thing. Folks argue that demand for insurance-linked securities like CAT bonds have stayed strong while the mortgage market collapsed. That is a silly argument. MBS’s, CDO’s and CLO’s went bad starting in 1.2007, with over $500 billion at risk. The CAT bond market at best is $16 billion now. However, if regulators watch this product and don’t allow the foolish unbridled underwriting that sub-prime and Alt-A became, this product may remain successful and not tarnish Wall Street or regulators as
MBS’s, CDO’s and CLO’s have. SWISS RE leads the market makers. Goldman Sachs, Lehman Brothers, CITIGROUP, Morgan Stanley and Munich RE are strong market makers too. Munich RE CEO Nikolaus von Bomhard states, “The market for insurance-linked securities will continue to grow at double-digit rates. We are determined to make use of the market.” In fairness to this product, the only bond that has been triggered and redeemed was issued by SWISS RE on behalf of client Zurich Financial Services, allowing Zurich Financial to post a record profit in 2005 despite claims linked to Hurricane Katrina, which cost the industry over +$40 billion in 2005 alone. That bond performed as it was designed: mitigate losses while giving Zurich Financial a healthy return on equity. Make no mistake: Zurich won and investors lost and lost big! Insurers and reinsurance are beginning to use bonds to transfer risks other than CAT. T His maneuver reduces risk and improves ROE, allegedly. I might remind you readers and “end users of these products if you are currently selling homeowners insurance” that this same argument was made by Wall Street investment bankers, sub-prime and Alt-A lenders, banks, regulators and all the other perpetrators of that scandal, starting in 1998! SWISS RE in 2007 created an SPV, Vita Capital III to receive +/-$705 million of payments in the event of a high death rate linked to a single event, terrorist attack or an outbreak of the bird flu pandemic in the US, UK, Germany, Japan or Canada. Many critics think insurers, reinsurers and retrocessionaires should “stick to their core business” and not play investment banker. Such critics (myself included) feel these risk-takers should take what risk they can handle on their own balance sheet and “not rent someone else’s”. Just ask Bear-Stearns, CITIGROUP, Lehman Brothers and UBS, regarding sub-prime, Alt-A, MBS’s, CDO’s and CLO’s. Warren Buffet who in 2007 bought 3% of SWISS RE’s common feels the same way: “I’m aware of these products, but I’d rather keep the risks on my own balance sheet.” NOAA (the National Oceanic and Atmospheric
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Administration) forecasted 12-16 storms in the 2008 hurricane season, 6-9 being hurricanes and 5 with Category 4 or 5 designations (the worst). Some folks have been lulled into a false sense of security due to this product. If investors feel some huge losses, this market will dry up, as did MBS’s, CDO’s and CLO’s. Why do I say that? The same investors in MBS’s, CDO’s, CLO’s, prime, sub-prime and Alt-A, are and were the same investors in CAT bonds.
200 Insurance Holding Companies. Both firms were/ are traded on the NYSE. Stephen’s background focused on reinsurance in both USA and tax haven venues. Stephen attended the University of UT from 1975/1980. Contact Stephen at (310) 305.0459 or E-mail address: ssantoro@stephensantoro.com.
“Too much of a “good thing” from Wall Street always turns out bad. I like these products. These products have a place in the reinsurance and insurance portfolios. But NOT as mass marketed products like MBS’s, CDO’s and CLO’s were mass marketed. You decide folks! Thank you to Jon Spaugy and the Board of BIG for allowing my viewpoints. I’ll be back next time! About the Author Stephen (pronounced Steven) Samuel Santoro is a former senior executive officer from two Fortune
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NORTHERN CALIFORNIA BIGGIE AWARD WINNERS
At the recent BIG Minivention held at the Wente Vineyards in Livermore , CA , some of the insurance industry’s brightest stars were honored. Every year, BIG recognizes insurance professionals, companies and industry advocates for extraordinary contributions to insurance producers and the business as a whole with its BIGGIE Awards. The honorees at the Northern California event have been especially noteworthy in that part of the state.
2017 Company of The Year -- Alliance United This is the fifth year in a row that Alliance United has won
“BIG is honored to recognize the talent and dedication of these outstanding individuals and companies. Through their efforts, insurance agents and brokers are given additional tools for success. They truly make the industry better,” commented BIG CEO Jon Spaugy. “Our BIGGIE Awards are just a small token of appreciation for the tremendous skill set they bring to our industry.”
2017 MGA of The Year -- Arrowhead General Insurance Agency Inc. This is the third win out of five years for Arrowhead General
Here are the winners of the 2017 BIGGIE Awards, Northern California edition:
2017 Agency of The Year -- Academy West This is the first win for Academy West 2017 Vendor of the Year -- ITC This is the first win for ITC
“The Northern California market is very unique, and BIG is pleased to acknowledge this through our NoCal BIGGIE awards,” said Spaugy. “It is very gratifying to know that so many people are focused on making the insurance industry better for everyone.”
2017 Marketing Representative of The Year -- Carmen Cortes. This is the second year in a row that Carmen Cortes has won
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IT’S NOT TOO EARLY TO MAKE PLANS FOR BIG’S HOLIDAY CELEBRATION The must-attend event of the Holiday Season is now open for reservations. Always a great lead-in to end-ofthe-year celebrations, the BIG Holiday Party has been slated for Saturday, December 2nd at the Ontario Doubletree Hotel. Over 300 of your colleagues and friends are expected and will enjoy a live 80’s band, excellent food and drink, a DJ, and professional photos, just for starters. Many agencies and companies choose the BIG Holiday Celebration to host their own event-within-an-event and make it their agency holiday party. Invite your whole staff, as well as favored clients and hot prospects. BIG does all the work and YOU get all the credit! Reserve a table or two, or just bring along your significant other. Either way you will have a great time!
If you want to emphasize your commitment to BIG and our members, there are sponsorship opportunities available. Take advantage of the great networking opportunities, including the opening ceremony and closing reception. If you’d like to party until the wee hours, BIG has arranged for a special room rate of $103 if you mention BIG and book prior to 11/20/17. Remember that space is limited, so reserve your space ASAP. For more information about BIG’s Holiday Celebration (or other BIG news and events) visit www.BigInsUSA.com. (www.wallethub.com)
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The Big Book of Dashboards: Your Definitive Guide to Visualizing Data in the Real World
world through cataracts,” says Wexler. “You miss important, often critical, things that if you could only see them would lead to better understanding and better decisions. And your job is always to pave the way to the best possible decisions for your company.” The authors have written a book that helps leaders master the “must-have” skill of creating dashboards that really provide useful, actionable insights. Clear, concise, and packed with how-tos (and just as important, how-NOT-tos), this is the definitive reference book focused on proven, real-world examples of business dashboards and why they succeed. Comprising dozens of examples that address different industries and departments (healthcare, transportation, finance, human resources, marketing, customer service, sports, etc.) and different platforms (print, desktop, tablet, smartphone, and conference room display), it’s the only book that matches great dashboards with real-world business scenarios. Wexler, Shaffer, and Cotgreave have a combined 30plus years of hands-on experience helping people in hundreds of organizations build effective visualizations. They have fought many “best practices” battles and bring an uncommon empathy to help readers survive and thrive in the data visualization world.
Tasked with overseeing or building the development of a business dashboard and not sure of the best way to apply it to your industry? Sure, you can pick up any number of books that cover the fundamentals of data visualization. They contain great examples about why a bar chart is almost always better than a pie chart—but until now, none of them have provided any real-world solutions that matter to you. That’s too bad, say Steve Wexler, Jeffrey Shaffer, and Andy Cotgreave, authors of The Big Book of Dashboards: Visualizing Your Data Using Real-World Business Scenarios. As the business world becomes ever more complex (and less and less forgiving), the ability to show data in a meaningful way—without overwhelming people or leading them to the wrong conclusions—has become a foundational skill for all leaders. “Looking at a bad dashboard is like trying to look at the
Here are just a few of their insights on why we need better dashboards: Being able to visualize time is critical to business, but most organizations don’t know how to do it right. Being able to plan and forecast effectively requires you to have a good handle on time, but visualizing time isn’t just about making a timeline! Want to really understand churn and attrition in your organization? Then you’ll probably want a waterfall chart. Need to understand demand for services at different locations at different times and different days of the week? Then you’ll probably want to try a cycle plot. Need to show if you are on track to reach goals? Then a pace chart may serve you best. Twenty-three of the 28 dashboards in the book deal with time, and the authors explain how each dashboard uses a different combination of chart types to help readers see how to master time.
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Dashboards should change, radically, as organizations mature. A good dashboard will generate as many questions as it provides answers. The moment people see something and think. That’s phenomenal! I never saw that before! They will soon counter with, I need to know more...why is this happening? Has it always happened? Is it happening for all products and sectors? Enlightened leaders and analysts know that dashboards may need to evolve to adapt to an organization’s evolving questions. Just because you have a million colors at your disposal doesn’t mean you should use them all. Color can be amazing at helping people distinguish what’s important from what isn’t, but the moment you have more than a handful of colors in play, a dashboard becomes a mishmash of visible noise. The best dashboards use color sparingly and purposefully. “It’s great to have theory and evidence-based research at your disposal, but what will you do when somebody asks you to make your dashboard ‘cooler’ by adding packed bubbles and donut charts?” says Shaffer. “A well-designed dashboard can point out risks, opportunities, and more; but common mistakes can make your dashboard useless at best, and misleading at worst,” adds Cotgreave.
About the Authors: Steve Wexler, Jeffrey A. Shaffer, and Andy Cotgreave are coauthors of The Big Book of Dashboards: Visualizing Your Data Using Real-World Business Scenarios. Steve Wexler has worked with ADP, Gallup, Deloitte, Convergys, Consumer Reports, The Economist, ConEd, D&B, Marist, Tradeweb, Tiffany, McKinsey & Company, and many other organizations to help them understand and visualize their data. Steve is a Tableau Zen master, Iron Viz champion, and training partner. To learn more, visit DataRevelations.com. Jeffrey A. Shaffer is vice president of information technology and analytics at Recovery Decision Science and Unifund. He is also adjunct professor at the University of Cincinnati, where he teaches data visualization, and was named the 2016 Outstanding Adjunct Professor of the Year. To learn more, visit DataPlusScience.com. Andy Cotgreave is technical evangelist at Tableau Software. He has over 10 years’ experience in data visualization and business intelligence, first honing his skills as an analyst at the University of Oxford. Since joining Tableau in 2011, he has helped and inspired thousands of people with technical advice and ideas on how to build a data-driven culture in a business. To learn more, visit GravyAnecdote.com.
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HALLOWEEN Fun Facts
Nothing ushers in the fall season like Halloween. “Halloween” is short for “Hallows’ Eve” or “Hallows’ Evening,” which was the evening before All Hallows’ (sanctified or holy) Day on November 1st. Depending on which part of the country you live in, Halloween memories may include hay rides, community events, hiding the sweater your Mom made you wear over your costume, neighborhood reconnaissance to see who is giving out the full-size Snickers, or all of the above. Halloween is the second highest grossing commercial holiday after Christmas. But whether you were only allowed a few pieces of candy or usually had a two-pillowcase evening, practically everyone likes Halloween. In fact, trick-or-treating evolved from the ancient Celtic tradition of putting out treats and food to placate spirits who roamed the streets at Samhain, a sacred festival that marked the end of the Celtic calendar year. “Souling” is a medieval Christian precursor to modern-day trick-or-treating. On Hallowmas (November 1st), the poor would go door-to-door offering prayers for the dead in exchange for soul cakes. In the spirit (pun intended) of the holiday, here are some fun facts about Halloween and scary things in general:
- The “Michael Myers” mask used in the 1978 film Halloween was a William Shatner Star Trek mask. - The owl is a popular Halloween image. In Medieval Europe, owls were thought to be witches, and to hear an owl’s call meant someone was about to die. - The word “witch” comes from the Old English “wicce,” meaning “wise woman.” In fact, wiccans were highly respected people at one time. - Halloween was influenced by the ancient Roman festival of Pomona, which celebrated the harvest goddess of the same name. Many Halloween customs and games that feature apples (such as bobbing for apples) and nuts date from this time. - According to Irish legend, Jack O’Lanterns are named after a stingy man named Jack who, because he tricked the devil several times, was forbidden entrance into both heaven and hell. He was condemned to wander the Earth, waving his lantern to lead people away from their paths. - According to tradition, if a person wears his or her clothes inside out and then walks backwards on Halloween, he or she will see a witch at midnight. - During the pre-Halloween celebration of Samhain, bonfires were lit to ensure the sun would return after the long, hard winter. Often Druid priests would throw the bones of cattle into the flames and, hence, “bone fire” became “bonfire.”
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