GREEN MOUNTAIN AGENT VERMONT INSURANCE AGENTS ASSOCIATION | JULY 2020
Vermont Insurance Agents Association is a statewide trade association representing nearly 100 independent insurance agencies in Vermont, with more than 900 employees. VIAA member independent insurance agents represent more than one insurance company, and as a result, can offer clients a wider choice of auto, home, business, life and employee benefits.t
Green Mountain Agent is a publication of
CONTENT ________________ July 2020
04 Letter from the President
600 Blair Park Road, Suite 100 Williston, VT 05495 Phone: 802-229-5884 Fax: 802-876-7912 www.viaa.org
11 COVID-19 Thrusts D&O Into Hardest Market as Underwriting Tightens 14 On the Hill
VIAA Officers
17 Weather Safety Tips for Boaters
President Alan K. Kinney
18 On the Hill
Vice President Dan Rodliff
19 E&O Corner
Secretary/Treasurer Michael Barrett
23 Top 3 Tools You Need to Manage Remote Workers
National Director Ron Bixby
27 Outdated Cash Management Practices Could be Hurting Your Agency
Directors Chip Ams Erin Odell, CIC Paul Plunkett Jessica Fleury Ex-Officio
30 Commentary 32 Agency & Company News
Staff Executive Director Mary Eversole mary@viaa.org
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LETTER FROM THE PRESIDENT ______________________________ July 2020
This month we celebrate the independence of our country, it’s also a good time to reflect on what that means to us as independent insurance agents. Our independence allows us to operate our businesses the way we want, whether that is in the traditional office center or in the new, remote office environment. Our independence allows us to choose the carriers we want to be associated with, those that share our vision of what our customers need. Our independence allows us to hire people who reflect our values and mission; people we trust to do the job the best they can to take care of our customers and help meet agency goals. Our independence allows us our agencies in ways that benefit our customers and our employees. We’ve learned that we can be flexible and we can do business in new and effective ways. While things are not what they were just six months ago, our independence and the freedom to make the right choices for our customers and our employees is truly something to be grateful for.
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Alan Kinney VIAA President
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VERMONT INSURANCE AGENTS ASSOCIATION
JOIN US 2020 ANNUAL MEETING VIRTUAL MEETING
August 22, 2020 10:00 a.m. Installation of 2020 VIAA Officers Installation of 2020-21 President Dan Rodliff, NFP P&C Watch your email for an invitation to participate!
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COVID-19 THRUSTS D&O INTO HARDEST MARKET AS UNDERWRITING TIGHTENS By Will Jones
MARKETS
At the start of the year, the directors & officers market was hardening. “Almost all D&O buyers were seeing their premiums increase, with public company D&O insurers seeing substantial increases,” says Kevin LaCroix, an executive vice president at RT ProExec, a division of R-T Specialty, LLC. These changes were the result of adverse claims trends, significant increases to prior accident year underwriting reserves, compounded by years of underpricing, he explains. IPO companies, life sciences companies and financially impaired companies were seeing 50% increases with renewal terms that often included significant increases in the self-insured retention. The coronavirus pandemic has caused even more disruption. Alongside rate increases, certain industries are being hit even harder— both from an insurance and company perspective—as underwriting tightens significantly. “With the COVID-19 crisis and the economic recourse it brings, this solidifies the hardening market, especially in the small business sector and in retail and hospitality operations,” says Heather Schaaf, underwriting director, Burns & Wilcox. “These segments should know that it is likely their policy renewal will not be flat and that aside from the retention and premium increases, they may not be able to obtain the same limits and coverage as before, given some carriers are pulling back limits and adding exclusions or, in extreme cases, www.viaa.org
sending nonrenewals,” Schaaf says. “They may also see more declinations on new small business D&O risks.”
As a result of the coronavirus pandemic, certain businesses and sectors have become hard-to-place classes as insurers institute “a host of new underwriting procedures geared toward trying to understand the operational and financial impact on the applicant company of the pandemic,” LaCroix says. In addition to the retail and hospitality sectors, cannabis-related businesses and cryptocurrency organizations remain hard to place, as well as many other sectors. Airlines, hotel chains, casinos and cruise ship companies, “will face a very different underwriting process than they may have faced in the past” as insurers begin to class them as “suspect classes,” LaCroix says. 11
COVID-19 Thrusts D&O into Hardest Market as Underwriting Tightens Continued “The pandemic will be the root of new D&O event-driven claims,” Schaaf explains, who notes that the courts will be forced to decide if a “business’ response should have been better, done differently or the company should have been more prepared to weather a particular storm, such as protecting the company against financial loss,” she says. “These will be test cases on our court system as they involve some speculation.”
Joseph Spallone, senior vice president, commercial management liability, Sompo International U.S. Insurance, is also witnessing “rigorous underwriting diligence as the COVID-19 environment heightens,” and warns of other exposures due to businesses’ financial strength, reliance on supply chains and the preparedness of smaller companies amid an economic turndown. Within the at-risk areas, “there is the risk of a significant number of bankruptcies,” Spallone says. “Over the next six to nine months, that could likely lead to claims from creditors or trustees, which have historically been severity drivers for insurers’ private books of business.” Additionally, Spallone looks back to the Great Recession to highlight another sore spot for insureds. “This pandemic’s impact on the economy in the near term and the uncertainty of what lies ahead in the form of further hardships, coupled with the recovery time, is not too dissimilar to the financial crisis,” Spallone says.
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Compared to 2008, the difference is not bad behavior or aggressive business practices, but rather the stress on businesses created by shutting down the vast majority of the global economy, Spallone explains. As a result, “management has been forced to make difficult decisions with respect to staff, financial obligations and disclosures to constituents,” he says.
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The economic environment has caused carriers to begin adding “virus, bankruptcy and downsizing exclusions,” says Peter R. Taffae, managing director, Executive Perils, who expects the current trends to continue for a while yet. “Historically, hard markets have lasted approximately 18 months,” Taffae says. “Even in 2008, except for real estate and financial instructions, the 18 months patterned continued.” However, Taffae believes the conditions will last two to three years. “Insurance companies are grossly unreserved from more than 10 years of soft pricing and there is a very good chance that some insurance companies will not survive,” Taffae says. “Those with fragile reinsurance relationships and small written premiums will face large challenges to survive.” “Having financially secure insurance companies on insureds’ programs needs to be considered at this year’s renewal,” he adds. "Typically, these are long tail claims, ranging from three to five years before resolved.” Will Jones is IA managing editor. This article was published in the June issue of Independent Agent magazine.
ON THE HILL: Big ‘I’ Submits Comments Regarding Main Street Lending Program Proposal
The Big “I” submitted comments to the Federal Reserve Board regarding the Main Street Lending Program. The comments addressed the Federal Reserve Board’s request for public feedback on a proposal to expand the program to provide access to credit for nonprofit organizations. As a result of the Coronavirus Aid, Relief & Economic Security (CARES) Act, the Federal Reserve established the Main Street Lending Program to promote lending to a wide variety of small and medium-sized businesses that were in good financial condition before the onset of the COVID-19 pandemic. The program is authorized to provide $600 billion in financing to these businesses to help maintain operations and payroll. The Main Street Lending Program offers fouryear loans to eligible borrowers—ranging in size from $500,000 to $200 million—with floating 14
rates and principal and interest payments deferred during the first year to assist businesses facing temporary cash flow interruptions. Lending is conducted through eligible lenders. The Federal Reserve does not extend loans directly to borrowers. It should be noted that unlike the Paycheck Protection Program, Main Street loans are not grants and cannot be forgiven. In the program’s proposal for non-profits, they note that each organization must be a taxexempt organization under section 501(c)(3) or 501(c)(19) of the Internal Revenue Code. Comments submitted by the Big “I” urge the Federal Reserve Board to include Internal Revenue Code Section (Section) 501(c)(6) organizations, such as trade and professional associations, in the Federal Reserve’s Main Street Lending Program. The comments make clear that, “associations are facing
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Big ‘I’ Submits Comments Regarding Main Street Lending Program Proposal continued unprecedented financial losses from event cancellations and other programmatic losses. Without support, Section 501(c)(6) organizations will be unable to continue to provide the important services on which so many rely.” As the Trump administration continues to release guidance on the Main Street Lending Program and other COVID-19-related relief efforts, the Big “I” will make the most up-to-date government affairs information available on the coronavirus resource page and in the weekly News & Views e-newsletter. Wyatt Stewart is Big “I” senior director of federal government affairs.
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Weather Safety Tips for Boaters The U.S. Coast Guard, in its “A Boater’s Guide to the Federal Requirements for Recreational Boats,” offers these clues to an approaching weather change, which usually brings the most challenging conditions. Signs of bad weather approaching for boaters: Flat clouds getting lower and thicker; Puffy, vertically rising clouds getting higher; Dark, threatening clouds, especially to the west/southwest; A sudden drop in temperature; A halo around the sun or moon; Increasing wind or a sudden change in wind direction; Flashes on the horizon; Seas becoming heavy; Heavy AM radio static, which can indicate nearby thunderstorm activity. Reprinted from Discover Boating. Visit them at www.discoverboating.com
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C E O & R O N ER
How to Choose Your Agency’s Errors & Omissions Limit By By Matthew R. Davis Vice President and Claims Manager at Swiss Re Corporate Solutions
Three days. That’s how long the driver had been working for his new employer, a trucking company. His truck was solid—no mechanical issues at all. Unfortunately, you could not say the same for the trucker. He had been on the road since 5 a.m., so when he came to a highway slowdown at 7 p.m. due to construction and a work lane closure, the driver was slow to react. He struck the rear of a Toyota Prius at an estimated 78-82 m.p.h., which set off a chain reaction that included seven other vehicles holding a total of 18 occupants. One of the vehicles caught fire, killing its driver and three passengers. Two more people were killed and four were injured. The accident happened due to driver fatigue and methamphetamine use, according to the National Transportation Safety Board, which included the failure of the pre-employment screening process—the driver had four wrecks in the preceding three years—as a contributing factor. The trucking company had just $1-million limits to address this claim, while the insurance agency, which allegedly had assumed responsibility for screening drivers, had $5 million in coverage—both per claim and in the aggregate—to defend the resulting errors & omissions claim. The initial demand from all parties totaled more than $150 million. That begs the question: Was $1 million enough coverage for the trucking company? Was $5 million enough for the insurance agency that placed that policy?
property where coverage is placed and the higher the potential liabilities faced by an auto or commercial general liability customer, the larger the potential for an excess-of limits E&O loss. Large claims happen more than you might realize, and yet, they are only part of the story. With a $5-million aggregate limit in place, most insureds believe they are unlikely to be overcome by a series of small, unrelated claims in a single policy period. There is some truth to that but some peril, as well. A significant scenario leading to an uncovered excess exposure is a series of claims stemming from a single catastrophic event. When Hurricane Harvey struck the Houston area, an estimated 1 million cars and trucks were destroyed. When an agency places a significant quantity of homeowners, auto or trucking coverage in the path of a storm, they could see a lot of claims for missing or inadequate coverage and failure to recommend adequate flood and wind coverage. With these considerations in mind, a thorough analysis of your E&O limits should consider: The policy limits in place for your largest customers because, if missing, those limits may define the damage model in your E&O claim. The nature of the customer’s business, such as industrial, trucking and manufacturing, as well as larger companies that incorporate your customer’s products and services into their larger exposure.
The answer to the latter depends on the nature of the customer. The more valuable the www.viaa.org
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How to Choose Your Agency’s Errors & Omissions Limit Continued The number of insureds located in close proximity to each other, which can set up the potential for multiple catastropherelated losses, creating a serious aggregate loss exposure. And, most importantly, the agency’s risk appetite in the face of these perils. You may have been lucky this year. The big claims and big storms may have passed you by, so your current limits may have been adequate. Then again, is “may be” good enough for you, or is it time for a second look? This information is provided solely as an insurance risk management tool. Westport is not providing legal advice, or any other professional services. Westport shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues.
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Top 3 Tools You Need to Manage Remote Workers
AGENCY MANAGEMENT
By Sharon Emek, WAHVE CEO
Today’s employees Zoom, Skype, Jabber, FaceTime, GoToMeetings and chat in Google Hangouts and Webexes. When they’re not videoconferencing, they’re emailing, collaborating in Microsoft Teams, and instant chatting on Slack. They’ve already got the tech tools they need to make it easy and more convenient to work remotely, but do you have the right management tools in place to keep your remote employees engaged? There’s no doubt that hiring remote employees can benefit your insurance business by bringing in critical skills that you don’t have or can’t easily find. Remote workers can be a boon to recruiting, productivity, business continuity, and improved customer service. But relying on a traditional management style to keep a dispersed workforce motivated and moving forward won’t cut it. So, what are the best ways to keep employees you rarely see motivated?
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Build a Virtual Water Cooler The cornerstone to keeping remote employees engaged is proactive communication. When you can’t simply stop by an employee’s desk to chat, grab a cup of coffee, or physically sit with them in a conference room, it’s important to make a concentrated effort to make time for casual conversation. It’s not enough to schedule a few one-hour meetings per week. Communication with remote employees should be fluid, spontaneous and regular. Create a virtual water cooler by continually chatting with people to find out what they did during the weekend, how their family is doing, and what their plans are for time away from work. Establish Some “WAHVY Gravy” When employees are out of sight, it can be easy to unintentionally exclude them, making them feel isolated. And when people feel isolated and not a part of the work community, productivity suffers.
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Top 3 Tools You Need to Manage Remote Workers continued Go beyond relying on virtual meetings to establish community. If you have an intranet, create a space where people can share news, tips, or pictures of their pets. Many companies dedicate specific Slack channels to support socializing. Others use virtual coffee breaks, book clubs, TED talks, or online learning courses that everyone participates in to encourage a deeper sense of community. Another strategy is to incorporate a few minutes for team members to share something personal at the end of meetings. At WAHVE, we call this “WAHVY gravy.” We ask people to share something that’s important to them – whether it be pictures of their artwork, hobbies, or stories about recent vacations. Another idea is to ask employees to share an “ah ha” or an “appreciation” – something they recently learned or someone they’d like to acknowledge. The important thing is to make it fun and personal. This changes how people interact with each other at a human
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level and builds interest and empathy for one another. Don’t Forget Face Time Despite all of the fancy tech tools, there’s still no substitute for face time. When you’re managing a remote team, no matter the size, it’s important to bring the entire team together when you can. Doing this shows on site and remote workers how much you appreciate them, and it builds connection. At WAHVE, we bring our staff together biannually, and we find that these events are invaluable to help the team bond, strengthen our culture, and share goals and future direction with everyone physically present. According to an analysis by FlexJobs and Global Workplace Analytics, remote work has grown 44% over the last five years and 91% over the past 10 years. It’s a trend that will likely continue to rise, so there’s no time like the present to adapt your management style to support remote workers, and in turn, the success of your business.
Outdated Cash Management Practices Could Be Hurting Your Agency
AGENY MANAGEMENT
By Patricia Smith Does your agency still deposit checks manually? Is your cash-management system up to date? Are you aware of the latest cyber protections? Old habits and outdated office procedures could be hurting your agency. Here are three ways to improve efficiency and employee productivity in your banking, cash-management and security practices: Modernize your banking. Many agencies are unaware of the savings they can achieve by modernizing their banking. Start by asking your bank for a financial review. Perhaps you still prepare deposit tickets by hand and spend time going to the bank. Collection of premium payments, receivables and carrier payments can all be performed electronically. Remote deposit capture (RDC), automated clearing house (ACH) transactions and mobile banking have been around for quite a while, but agencies have been slow to adopt these technologies. RDC allows access to funds several days faster than traditional deposit methods and gives you an electronic record of checks that can be easily searched. Scheduling debits and credits automatically via ACH is more convenient than writing, mailing, receiving and processing paper checks. Also, check approvers can approve www.viaa.org
ACH payments securely online from anywhere. Business mobility apps allow you to make deposits and transfers on your mobile device. You can even approve bill payments, positive pay exceptions, ACH file transfers and wire transfers. Automate your cash management. Cash management can seem daunting, especially if you’re trying to do it yourself. Not having the time to focus on your daily cash position or not having the discipline to make timely transfers can result in missed opportunities and inefficiencies. Consider using sweep accounts and zerobalance checking accounts, which can automatically put your unused funds to work in higher-yielding instruments. These accounts allow you to manage everyday transactions while pursuing long-term financial goals. You can set targets so that money is automatically transferred into a money market fund or other investments. 27
Outdated Cash Management Practices Could Be Hurting Your Agency continued Stop fraud. Cybercrime is a serious threat, but did you know that old-fashioned check fraud still is a big risk? Positive Pay is one solution banks offer to prevent losses from fraudulent check writing and ACH transactions.Your bank will report discrepancies to you before a payment is made, preventing thieves from stealing from you. Cybercriminals also can defraud your agency through various social engineering attacks. Employees are tricked by email into divulging credentials, downloading malware or initiating bogus wire transfers. Every agency needs to have a solid cybersecurity plan in place. Protect your assets, improve your cash flow and increase productivity by working with a good banking partner. Don’t fall behind your competitors by clinging to outdated management and security practices.
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Work-From-Home Arrangements May Create Coverage Gaps
William C. Wilson, Jr. CPCU, ARM, AIM, AMM is the founder of InsuranceCommentary.com. He retired from the Independent Insurance Agents & Brokers of America in December 2016 where he served as Assoc. VP of Education and Research and was the founder and Director of the Big "I" Virtual University for over 17 years. 30
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I was reading a Carrier Management article today about how likely work-from-home arrangements that have proliferated during the COVID-19 pandemic are to continue in the future. This can create potential coverage gaps under both commercial and personal lines and likely necessitates the need to revisit traditional policy coverages to revise them to reflect this new reality or at least provide coverage options.
Returning to the remote working arrangements expressed in the Carrier Management article, business property at homes or other locations other than described locations may become the new normal to significant extent. A comparable situation came up a couple of months ago with an office that had 30 people working from home due to the pandemic.
I wrote about some of the commercial lines implications in this article: “Has the Pandemic Created Coverage Gaps You Haven’t Thought Of?” I also addressed some of the personal lines issues in this article: “Potential Adverse Implications of the Coronavirus on Personal Lines Coverages”
That policy, like the one above, had only $10,000 of coverage for business personal property temporarily away from the premises which was likely insufficient to cover the amount of property in the possession of 30 people. Perhaps even more important, if this arrangement was to become permanent, the instant that decision is made, the new coverage limit becomes $0. So, what should be done. Interestingly, when I took a look at the current ISO BOP policy, it had the following provision:
This article adds a little more specificity to the commercial lines side. A couple of days ago, I received an email from an agent who had the following claim denial.
Personal Property Off-premises You may extend the insurance provided by this policy to apply to your Covered Property…while it is in the course of transit or at a premises you do not own, lease or operate.
A commercial insured had some inventory held for sale (not sales samples) that was in the possession of one of their sales reps. The inventory was damaged by a covered peril. The adjuster denied the claim under the ISO CP 00 10 Building and Personal Property Coverage Form because of this policy language:
The limit is still $10,000 but note that there is no mention of this being a temporary circumstance. This form provides superior coverage during the transition from temporary to permanent but the limit may be inadequate. In addition, there is a huge variation from one insurer to another in what their BOP policies cover and for how much.
Property Off-premises You may extend the insurance provided by this Coverage Form to apply to your Covered Property while it is away from the described premises, if it is…Temporarily at a location you do not own, lease or operate…. The basis for the denial was that the property was not “temporarily” away from the described premises. There was no intention of ever returning the property held for sale to the described location. That might happen, but that was not the plan. I tend to agree with the adjuster that, for all practical purposes, this property is permanently away from the described premises.
Many property policies, with minor exceptions, only cover business personal property on a described location. When home working is extensive, it is not practical to describe every location. This indicates a need for some sort of blanket coverage with optional limits in the policy form or an endorsement. It also requires us to revisit the business limitations and exclusions found in personal lines policies. This is indicative of the types of insurance coverage issues that need to be addressed in the so-called “new normal.” Let’s get busy.
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COMPANY & AGENCY NEWS www.viaa.org
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In Memory of Michael W. Nobles, President and CEO of Union Mutual Michael W. Nobles, President and CEO of Union Mutual, passed away unexpectedly Wednesday evening. Michael was 50 years old. Having joined the Company in 1995, Michael served as Assistant Treasurer, Treasurer, Senior Vice President and Chief Operating Officer before being elected President and CEO in 2014. Michael was a visionary leader and inspired those around him. Michael is survived by his wife, Tsana, and two daughters Morgan and Lindsay. As many of you know, Michael was deeply committed to the New England and New York communities in which the Company operates. His devotion to volunteerism and philanthropy moved us. Having most recently served as Board member on the Montpelier Development Corporation, Michael led a campaign to raise over $200,000 in financial assistance for small businesses affected by the COVID-19 pandemic. Michael also united the Company and the insurance industry in support of Special Olympics Vermont. Many of us will remember Michael most spirited when jumping into Lake Champlain every winter to further the SOVT cause, this past year having led the effort to raise over $130,000. “Our Company, industry, and state have suddenly lost an inspiring, energetic and articulate leader,” said Josh Fitzhugh, Chairman of the Board of Directors for Union Mutual. “We grieve his passing and extend the deepest condolences to his family.” While we look to honor Michael’s memory, our Board of Directors named Lisa L. Keysar interim President and CEO of Union Mutual. Lisa joined the Company in 1995 and most recently held the title of Executive Vice President. Lisa’s deep understanding of the industry and insightful leadership style will serve the Company well during this time. Our Board of Directors expressed confidence in the staff of the Company to continue operations seamlessly. Josh Fitzhugh stated that “one of Michael’s greatest strengths was his ability to identify and develop future leaders. As such, the Board has great confidence in the competence of the leadership team at the Company.” Please join us in remembrance of Michael Nobles. In this difficult time, on behalf of our employees and Board of Directors, we feel honored to have the support of our agency
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Job Opening for Personal Lines Account Manager
Position entails developing relationships with clients and carriers. Responsible for handling customer calls/inquiries, policy changes, claims, quoting and overall customer service. Requirements; Strong customer service skills; written-verbal-listening Detail oriented Ability to work in a team environment Provide high level of customer retention and satisfaction Positive attitude Experience in property/casualty insurance and Vermont insurance license preferred Full time position Monday through Friday 8:00-4:30 With benefits Submit resume/inquiries to: customerservice@finnandstone.com
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