GREEN MOUNTAIN AGENT VERMONT INSURANCE AGENTS ASSOCIATION | MARCH 2020
Technology Trends Inside!
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 ________________ March 2020
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Letter from the President YAC Meeting Announcement 08 InsurTech
www.viaa.org
VIAA Officers President Alan K. Kinney Vice President Dan Rodliff Secretary/Treasurer Michael Barrett National Director Ron Bixby Directors Chip Ams Erin Odell, CIC Paul Plunkett Jessica Fleury Ex-Officio Staff Executive Director Mary Eversole mary@viaa.org
15 On the Hill 19 NewsFlash 23 E&O Corner 26 Technology 32 Cyber Security 37 Insurance Commentary 41 Company/Agency News
LETTER FROM THE PRESIDENT ______________________________ March 2020
It can be very hard to keep up the ever-changing technology landscape for insurance agencies but it’s important to keep up with its evolution. Everyday there are new shiny objects being thrown at us to increase sales, improve prospecting, etc. but I’m of the opinion that agents need to focus on tools that help operate the agency more efficiently and provide a better customer experience. Did you know, there are very simple ad-ons to your email system of choice that allow you to create activities in your agency management system without ever having to click over to it. Most new phone systems will automatically pull up a client’s account when they call in which improves the speed your team can find the client.
Alan Kinney VIAA President
Through our Evolve 2020 conference we will continue to promote and show how these types of tools can enhance our agency system. The future of our system will depend on our ability to provide the local personal service we do every day but also provide the convenience that the large national direct writers can. It’s also important that we continue to work hand in hand with our carrier partners to make sure they are working on IT projects we think are important and that we are committed to using. We aren’t too far away from our agency management systems talking directly to our carriers and making changes in real time vs. us having to log-in to their system and make a change and wait for it to download the next morning. Many predict that technology advancements will hurt the agency system but I firmly believe that it is going to enhance it and allow for our long-term success.
5 INSURTECH TRENDS FOR 2020 By AnneMarie McPherson “It’s the best time ever to be in insurance,” says Ron Berg, executive director of the Big “I” Agents Council for Technology (ACT). Emerging technology and endless opportunities that 20 years ago seemed like science fiction are now transforming the dayto-day reality of independent agents in mindboggling ways. And the new year will only bring more advancements as InsurTech continues to launch technology solutions into the hands of consumers and agents.
insurtech
Here are five of the biggest InsurTech trends that agents can expect to see in 2020: 1) Data analytics will empower agents. As the new year and decade progress, InsurTech will continue to focus on maximizing the application of data. Data-driven organizations are 23 times more likely to acquire customers, six times more likely to retain them and 19 times more likely to be profitable, according to McKinsey Global Institute. “The insurance industry is no different,” says George Mueller, vice president of sales and operations at NextGen Leads, a sales lead vendor to carriers, insurance agencies and independent agents in automotive, health and Medicare. In the insurance industry, data analytics may be the next frontier, opening the door to an array of discoveries. “Many customer relationship management companies are developing conversion endpoints (APIs) to track performance metrics and allowing for more complex software integrations to gather additional information for machine or human learning,” Mueller says. “Customers who take advantage of these tools have a major
gain more power over data to inform decisions and priorities. “Agents have been asking for this for ages,” Berg says. “Analytics, data insights using artificial intelligence and machine learning give the power of data to agents so they can understand their book of business. For example, through analytics they may spot a client who, based on habits, may be prone to leaving the agency. Knowing that ahead of time, agents can spotlight and work with that customer to keep them.” 2) User experience will continue to trend mobile. Those little bricks in our hands will continue to shape consumers’ expectations around accessibility and service, requiring technology to hone user experience to remain relevant. Key to understanding needed changes in user experience: expectations. Data shows increasing mobile phone use year over year, with more than half of all search queries coming from mobile in
5 InsurTech Trends for 2020 Continued 2019, according to Google. “Consumers are used to readily available, convenient and accurate information,” Mueller says. “They need to be able to research plans, compare options and pay bills via the device they choose.” By observing that trend, NextGen has responded by focusing on “a mobileoptimized user experience in every aspect of the operation,” Mueller says. “Unfortunately, several industries overlook and underestimate the impact user experience has on conversion rate and customer satisfaction. We expect a mobilefocused push in 2020, from both the carrier and agent and broker level.” One emerging change to fast-track and mobilize the user experience is the use of augmented reality (AR) to speed up the quoting process. AR is an interface in which a user can see the real world with an overlaid digital image. Remember the Pokemon Go phenomenon? That was AR. “A carrier will partner with an AR mapping company so customers can take their phones and just go across their house,” Berg explains. “It maps out their belongings and does a quick assessment of the real value of their TV, computer and monitor, guitar, furniture…They can then accurately price the underwriting and actuarial and also mitigate claims. It winds up being so much faster for the companies and the agents—and customers have an amazing experience.” 3) Compliance will tighten. Although emerging technology is exciting, it also presents challenges the industry must address. One such challenge is compliance with stricter standards and protections of consumer data. “As consumer data protection becomes more of a focus in the media, we can
expect to see more states moving towards a more European GDPR-type data protection policy,” Mueller says. “California is one of the first states to adopt such a policy with the recently adopted California Consumer Privacy Act (CCPA), which will come into effect January 1, 2020.” He adds: “With more legislation focused on protecting consumers, we expect a stronger push towards industry-standard software to verify a company’s right to contact consumers.” 4) Insurance agents will need to cut through the noise. Insurance consumers and companies have access to each other at unprecedented levels. A simple search both leads a searcher to an agency site and allows an agency to access a searcher’s attention in a personalized search experience. With everyone competing at such close quarters, it’s difficult for small businesses like independent agencies to make a name for themselves. "Years ago, you might have had a little office down the street and you walked in and they knew your name,” Mueller says. “Knowing how to cut through the noise in an appealing and helpful way to reach people and inspire them to act is key.” “Innovations should reinforce and influence each other to make things more automated, seamless and helpful to consumers who have a world of insurance product choices at their fingertips,” he adds. “Most agents know that in order to compete they have to be easy to do business with and expand their reach,” Berg says. “And there’s never been a time where they can expand their reach more readily than what’s available now: ranking highly in search results, being on mobile, having a
5 InsurTech Trends for 2020 Continued great website and targeting niche products, such as food trucks or microbreweries.” 5) Independent agents will be more valuable than ever. Robots won’t be replacing independent agents just yet, provided independent agents continue to adapt. “There's definitely a lot of value that agents provide,” Mueller says. “Over time, a lot of their role will be filled with embracing technology. They can continue to best help consumers by being on the cutting edge of technology.” “It’s always been about relationships, the trusted advisor role,” Berg says. “It was a relationship business when it was door-todoor sales. It moved to offices where people come in, and now it’s however and whenever people want to do business. As independent agents adapt that customer experience, they’re only magnifying their value.” How do independent agents adopt the new model? “Within your network, look at other agents who are doing things well,” Berg says. “Understand your core groups of customers, what they want and how to provide that. Start today, even when it’s small steps. That’s what ACT does. For customer experience, cyber, emerging trends, we have high to mid-level detail on what it is, how to get started, and free resources to allow them to strategically look at where they need to go, take the first steps and tactically create a plan.” View all of these free resources and more on ACT’s homepage.When it comes to figuring out what customers need, one crucial aspect is understanding
generational differences, Mueller points out. “Boomers might be okay with getting something in the mail and printing things out. But if you are working with younger generations, specifically Gen Z, who are entering the workforce and starting to buy insurance products, then count on all transactions being online or mobile. Agents need to evolve to meet customer needs through mobile, electronic signatures and other tools.” Looking at the future, Berg is optimistic about the independent agent community’s ability to keep up with the times. “There are still hurdles,” he says. “But our partners are accelerating what they’re doing to adopt technology, and a lot of the agencies I see are starting to accelerate too. 2020 is when we’re going to see a lot of that.” AnneMarie McPherson is IA assistant editor.
ON THE HILL: New NAIC Model Would Create New Standard of Care and Other Duties for Agents
Two weeks ago, the National Association of Insurance Commissioners (NAIC) adopted significant revisions to its Suitability in Annuity Transactions Model Regulation that could have adverse implications for agents who sell annuity products in the near future and potentially for all agents. The model proposes a broad range of new obligations for insurance agents and includes a handful of provisions that are particularly concerning. The most notable and troubling element of the NAIC’s proposal is the establishment of a “best interest” standard of care for insurance producers who recommend annuities to consumers. Requiring an agent to act in a customer’s best interest may seem innocuous and unremarkable, but such a standard would produce uncertainty and other
consequences. A requirement of this nature is inherently abstract, vague and subjective, and would place agents in an untenable position because it is unclear what specific actions or compliance measures it requires and what behavior it would prohibit. The lack of clarity and objectivity would also result in uncertainty and inconsistent application. Adding to the confusion and concern is the fact that courts and other observers typically equate an obligation to act in one’s best interest with a fiduciary duty. The NAIC model also includes a series of new compensation and other disclosure requirements. It would, for example, require an agent to provide written disclosures outlining: The scope and terms of his/her relationship with the consumer
On the Hill Continued The agent’s role in the transaction The types of relevant products the agent is authorized to sell Whether the agent has access to the products of one insurer or multiple companies In addition to banning some forms of incentive compensation, the proposal would also require disclosure of the sources and types of compensation an agent would receive from the purchase of a particular annuity and mandate that an agent provides an estimate of compensation upon request. Finally, the model would require an agent to make a written record of the reasons why an annuity recommendation was made and communicate the basis of the recommendation to the consumer. The Big “I” argued against imposing an amorphous best interest standard and establishing other vague and unnecessary mandates during the development of the model. The association asserted that certain elements of the proposal do not benefit consumers or enhance the regulatory framework and that those obligations are likely to create higher compliance costs and result in fewer professionals offering annuities. The Big “I” also expressed concern about such obligations possibly being extended to other lines of insurance and ultimately to every agent and every insurance transaction. One of the most frustrating aspects of the NAIC’s development of this proposal was the lack of a justification for the sweeping proposed changes in law and the absence of any consideration of whether there are marketplace problems or regulatory gaps that truly need to be addressed in this manner. Some proposals seemed to operate under a misguided and unsubstantiated belief that insurance agents routinely recommend the purchase of products based on their own self-interest and to the detriment of consumers. Other proposals argued that securities industry-
specific rules should be extended to and foisted upon insurance producers despite the differences between the two financial sectors and the disruptive effects this could have for many agents and consumers. The Big “I” opposed the most troubling aspects of the NAIC model and was often the lone voice doing so. During the proposal’s development, the association was especially concerned that the unnecessary references to a best interest obligation would create new litigation exposure for agents and allow private plaintiffs to utilize the vague standard of care to bring unwarranted lawsuits. Amendments to help address this concern proposed by the Big “I” were incorporated into the final model, and the association was grateful for their inclusion. These revisions make clear that the proposal is to be enforced exclusively by regulators and clarify that it should not be interpreted to create or imply causes of action and civil liability that do not exist today. NAIC models do not have the force of law on their own and operate only as recommendations to state policymakers. Proposals such as this must be adopted by states in order to take effect, and it will be up to each individual jurisdiction whether to implement this model as recommended by the NAIC to revise it or to ignore it altogether. The NAIC is encouraging state insurance departments to adopt this particular proposal by regulation but the Big “I” believes the nature and magnitude of these public policy changes are so significant that they should be considered by state legislators. The debate over this NAIC model and the recommendations contained therein now moves to individual state legislatures and departments of insurance. Big “I” members and state associations are urged to monitor any developments closely and weigh in as necessary.
NEWSFLASH VERMONT BUSINESSES TO SEE DOUBLEDIGIT RATE DECREASE IN WORKERS’ COMPENSATION INSURANCE IN 2020 Governor Phil Scott announced that Vermont businesses will see a double-digit rate decrease in workers’ compensation insurance in 2020. The new rates, approved by the Department of Financial Regulation (DFR), become effective on April 1, 2020. This is the fourth straight year of rate decreases since Governor Scott took office and represents the largest decrease in over a decade. When combined with decreases from 2017-2019, Vermont employers will pay an average of 30% less in workers’ compensation premiums than they did in 2016. “As we work to grow the economy and the size of our workforce, addressing the high cost of doing business in Vermont is critical,” said Governor Scott. “A major expense for Vermont businesses has been workers’ comp insurance, so I’m incredibly pleased we’ve been able to continually reduce these costs, without reducing benefits for workers. These savings will help Vermont employers of all sizes hire more workers, increase salaries and expand their operations in our state.” In the voluntary market – which is the open competitive market loss costs (the primary component of workers’ compensation rates) will decrease by an average of 11.6%. Approximately 90% of Vermont employers receive voluntary market coverage. In the assigned risk market – which is the market for employers unable to obtain coverage in the voluntary market rates will also decrease by an average of 12.1%. The continued rate relief in the assigned risk market is particularly good news for new businesses who are often forced to obtain coverage in this market due to lack of claims history. “Vermont has experienced the largest cumulative
reduction in our workers’ compensation rates these past four years compared to any similar time period over the last two decades,” said DFR Commissioner Michael Pieciak. “The cost of coverage is clearly moving in the right direction and is the result of a continued commitment to workplace safety by employers and a continued focus on this market by our department.” Rate changes vary by industry and classification, however, several key Vermont industries with historically high rates will see significant relief. Vermont’s logging industry will see rate reductions between 16-20%, the skiing industry will see rate reductions between 10-14% and the dairy farming industry will see rate relief between 8-12%. Craft brewers will also experience a reduction of 7% and many segments of the manufacturing sector will see significant decreases. DFR has also revised a rule that will reduce the price that certain small businesses pay for workers’ compensation coverage by 50%. The revised rule generally applies to one- or twoperson small businesses and allows their coverage to be priced at 50% of the Vermont State Average Weekly Wage rather than the full weekly wage average. Currently, many of these businesses choose to exempt themselves from coverage due to the high cost. The revised rule will encourage greater participation in the system thus benefiting workers and ultimately further reducing costs. The Governor and Commissioner Pieciak recognize the diligent work of the Department of Financial Regulation team that oversees the rate approval process, including Deputy Commissioner Kevin Gaffney, Rosemary Raszka, Pat Murray and Jessica Sherpa.
C E O & R O N ER
A STITCH IN TIME CAN HELP AVOID AN E&O CLAIM OR LAWSUIT By The Partners of Keidel, Weldon & Cunningham, LLP
As you know from our E&O Reports over the years, in addition to writing about certain timeless Best Practices and E&O prevention issues, we also write about issues that arise from litigation that we are currently handling. Like the Noble Laureate in Economics, John Nash, in the 2001 biopic “A Beautiful Mind," we often start to see patterns in disparate E&O cases that, to us, are related and suggest a larger issue that may exist. Thus, we write about those issues through the narrative of discussing those matters. This is such an occasion. The phrase, “A stitch in time saves nine" originated in France in the 1700's. It literally meant “Do one sewing stitch well" and you can avoid having to sew nine others. In our context today, this phrase means that an insurance agent or broker can avoid many problems and potential E&O claims and lawsuits by doing certain simple things at the outset. Audit Premium vs. Minimum Earned Premium Insurers in the non-admitted market have no impediment to issuing auditable policies with premium based, for example, on sales, with an accompanying 100% Minimum Earned Premium, (“MEP"). While in and of itself this might not seem to be an issue, consider the situation where the Applicant-Insured grossly overestimated their sales by several million dollars. Accordingly, the deposit premium was exceptionally high. Again, that would not ordinarily have been an issue as with the audit, the premium could be adjusted downward based on the actual
sales for the expired policy period. But, the inclusion of the 100% MEP provision in the insurance policy precluded any downward adjustment. When that became apparent to the insured it sued the broker for the hundreds of thousands of dollars in overcharged premium. The difficulty for the broker in this situation was that while the proposal from the insurer to the broker listed, among all the other policy forms, the MEP, the broker failed to (1) mention the inclusion of the MEP to the Insured and/or (2) similarly list the MEP on the proposal to the insured. This E&O situation could have been avoided by the broker simply by advising the customer of the existence of the MEP at the time when the proposal was presented. Workers Compensation Premium We have seen an uptick in premium audits by the State Insurance Fund where their audit has resulted in additional premium bills in the tens of thousands to hundreds of thousands to even millions of dollars. The consequences of these audit bills is obvious. An insured builds into its contract pricing the cost of insurance only to have any profits for that year decimated when it receives a large the audit bill. Often the reason for that is that the original Workers Compensation Class Code is erroneous, overly rosy and optimistic and does not take into account that the codes can reflect the highest risk classes in a company and be applied more broadly than anticipated.
A Stitch In Time . . . continued Risks with the Digital World Most pernicious is that with the takeover of insurance procurement by the digital world, certain safety nets that were concomitant with the physical way of doing things have been lost and with that, the loss of what were historically bullet proof defenses. The failures that have given rise to less defensible E&O claims are as follows. Not having a signed application. We are currently litigating a multi-million-dollar E&O claim where the underlying primary insurance was not in compliance with the requirements as listed on the application for the excess/umbrella coverage. Unfortunately, the broker never obtained the insured's signature on the application, negating what would have provided us with a potent defense for the claims asserted. Furthermore, it is imperative that there be proof that the Insured actually is the party that signed the application. More often than you might think, claims of forgery are asserted in E&O actions that may preclude dismissal of the claims against the agency or brokerage early on in the litigation. Not having proof of timely policy transmittal. Not only is it imperative to have documented proof of the transmittal of the full policy to the insured, it must be done as soon as possible. Doing so three or four or more months after the policy incepts is simply unacceptable. So is not having proof of transmittal.
As we have discussed many times over the years, pursuant to the laws of evidence, New York courts recognize a legal presumption of receipt of mail that is sent by the US postal system according to a regular office practice and procedure for mailing. Unfortunately, there is currently no similar type of standard legal presumption provided by the courts for communications that are sent by email.[1] Accordingly, the best practice to follow when policies are sent to insureds by email is to request that the insured affirmatively respond to the agency or brokerage that they received the email and were able to open to the attached policy. If this is done, the email that was sent to the insured with the insurance documents (whether it is the proposal, quote, application or policy) can be used in support of the duty to read defense by the agency or brokerage. Conclusion In all of the above scenarios, and many other situations, all that the agent or broker had to do to avoid the “nine stitches" is to have paid attention to the “one." Whether the “one" is the proper transmittal of a proposal that matches the one from the carrier, or getting a signed application by the insured or having proof of the timely transmittal of a proposal, quote, application and/or policy, the simple act of basic due diligence early on, prevents a world of trouble later.
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The Insurer of the Future
TECHNOLOGY
By Alan Walker
The Digital Transformation of the Insurance industry is underway. Technologies such as the Internet of Things, Big Data Analytics, Robotics and Artificial Intelligence are already making an impact. But where will this end? What will the Insurer of the Future look like? What will be the impact of driverless cars? Of manufacturers providing customers with 'vehicles as a service'? How will Big Data and Artificial Intelligence (AI) engines impact Underwriting and Pricing? How about Customer Relationship Management (CRM) and Marketing? What will become possible in Claims? And in Products and Product Development? The insurance industry is, of course, broader than just the insurers themselves. What will be the impact on insurance intermediaries? And, finally, what does all of this mean for insurance industry employees?
Auto / Motor Insurance The Insurer of the Future will do very little business in the auto/motor market. Insurers that remain focused on this segment (whether personal or commercial lines) will either shrink dramatically or fail. Once fully driverless cars become the norm, then: Accident rates will be diminished dramatically; and There will no longer be drivers to insure. But it's actually even worse than that: Thefts will be minimized too, as vehicles can be disabled remotely; Fire and malicious damage cover will no longer be needed, as personal and business vehicle ownership is increasingly replaced by manufacturers supplying 'vehicles as a service'; With the majority of vehicles still being owned by manufacturers, those manufacturers will increasingly self-insure - at best taking some reinsurance cover
The Insurer of the Future continued from the industry for catastrophic software failures. All of the above won't happened overnight - but the trends are already there. Underwriting and Pricing If I was a young Actuary or Underwriter I'd be worried - because the Insurer of the Future won't have much need for my skills. What do these professionals do for a living? They rely on their personal experience plus various data sources to understand and price a risk more accurately. Sometimes they carry out complex statistical calculations in support. But the Insurer of the Future will have its experience data captured on its internal systems. It will also tap into vast amounts of additional data available from external sources - some structured, some unstructured. And it will channel all of this data, far more than a human Actuary or Underwriter could ever handle, to its Artificial Intelligence (AI) engines. These AI engines will examine the data for patterns, apply multiple statistical models, and add their own experience from previous analyses to come up with a much more accurate price, massively quicker than a human ever could. And in the Insurer of the Future the AI engines will be wired directly into the sales and underwriting processes, which will operate 'straight through' with no involvement from humans. Behind the scenes, the Actuary's workload will be reduced through much greater use of automation and AI in capital modeling, prudential regulation compliance, reserving, and financial accounting. There will be room for some human oversight roles, to ensure that the AI
engines don't 'go rogue' and generate crazy results - but the vast majority of Actuaries and Underwriters will no longer be required. Claims Handling William Gibson, the author, once said, "The future is already here; it's just not very evenly distributed." So what is 'already here' in relation to Claims handling? Two data points: Lemonade, the new US insurer, says it uses AI to complete the entire claims process in under 3 seconds Fukoku Life, in Japan, expects 30% efficiency gains from replacing employees with an artificial intelligence system that can calculate payouts to policyholders. The Insurer of the Future will handle almost all of its Claims automatically, without human intervention. It will: Detect Claims, using sensors on the Internet of Things (IoT) and data feeds from, for example, death registries Analyze those Claims, drawing on multiple internal and external data sources, and applying Artificial
Intelligence (AI) to establish what needs to be done Assess appropriate reserve values, and input them to the insurer's financial systems Trigger external supply chains, such as clean-up and restoration services, bodyshops, and online retailers, to return the policyholder to their pre-loss state Instruct loss adjusters where necessary, ingest their subsequent reports, and act on their findings Make payments directly into policyholders' bank accounts where appropriate Trigger, and follow up, recoveries and reinsurance claims as needed In the early days, this will happen for simpler Claims only. But in due course, as the abilities of Cognitive / AI systems surpass those of humans, Claims personnel will be required by the Insurer of the Future for only the most complex of Claims. And even for these, workloads will be reduced through the use of new capabilities such as multi-party collaborative environments to speed access to data and decision-making. Blockchain If the Insurer of the Future is a new
entrant, blockchain will be at the core of both its business model and its operating model. It will use blockchain to: Underpin a series of smart-contract enabled parametric insurance products (if event X happens, and 'oracle' Y confirms that, then pre-agreed sum of money Z is paid out automatically); and Maintain secure policy records significantly more cheaply than its legacy competitors. If the Insurer of the Future was a traditional player, it's more likely to be using blockchain as a 'bolt on', supporting new products that wouldn't otherwise be cost effective. It might, for example, use blockchain ledgers to support micro-insurance policies. An example product could be insuring jewelry just for the time its owner plans to wear it this evening. Or providing top-up insurance to participants in the gig economy, lasting just for the length of each gig. But whether the Insurer of the Future is a new entrant or an existing insurer, blockchain will be just one of a number of new tools at its disposal. This is one area in which new technology will be incremental to the industry rather than truly disruptive.
The Insurer of the Future continued Indeed, it may well be that the biggest impact will be at the pan-industry level, taking advantage of a blockchain ledger's ability to serve as a system of record for multiple participants. We can already see experimentation along those lines - two examples being the Marine market pilot in the UK and the formation of the RiskBlock consortium in the USA.
Providing value adds to customers, free of charge, enhances its customer relationships. So when the Insurer of the Future makes an occasional offer to a customer, it's the right offer, at the right time, through the channel and device of the customer's choice. As a result of the Insurer of the Future's expertise, the customer is significantly more likely to buy.
CRM and Marketing
Compared to its predecessors, the Insurer of the Future has a loyal customer base driving lower lapse/churn rates, a greater share of wallet, and higher Net Promoter Scores.
CRM was always a challenge in the past because, unlike banks and retailers, Insurers had only small numbers of interactions with their end customers. That made it hard to gather data on their customers' needs and wants, and limited their ability to build relationships. But the Insurer of the Future has access to enormous quantities of data about its customers, available from a wide range of external sources. So it ports this data into its own systems, fueling more powerfuland accurate analytics. It uses the insights gleaned to reach out proactively to customers; not just to sell them products, but to provide genuine value adds.
There's more to learn, including: Products Products Development Employee Benefits Smart Automation Agents & Brokers Human Capital Read about these here.
Top 4 Cybersecurity Risks for Insurance Agents By Ken Butler
CYBER SECURITY
Every type of insurance policy collects sensitive data to determine and qualify risk. Insurance agents and brokers collect full names, dates of birth, social security numbers and payment information from every prospective customer.
Since today’s insurance marketplace requires every insurance professional to be connected to the Internet, it is imperative that they keep this accumulated sensitive data safe. There is no better way to ensure financial devastation in your business than to allow hackers to steal the sensitive data of your cherished prospects and clients during a security breach. As more and more businesses use wireless connections, hackers can instigate threats to your network in many different ways:
Threat 1: The Lone Wolf Hacker Your worldwide Internet connection puts you at risk from hackers, whether they’re living down the street or across the globe— and they can penetrate any wireless device in your office without your knowledge. By the time you’ve realized a breach has taken place, the sensitive information that belongs to clients and employees is already up for sale. Hackers can be individuals, small groups or even large syndicates intent on stealing data and selling it on the black market. Hackers may also use “ransomware” to force their target to pay a ransom or lose access to all the data stored on their computer or device.
Threat 2: Your Employees Ponemon Institute surveyed 945 individuals who were laid off, fired or quit their jobs in the past 12 months for the "Jobs at Risk = Data at Risk" survey, showing that 59% admitted to stealing company data. Your former employees have the ability to wreak havoc on your company out of spite. Your current employees have that ability even more so. It is not uncommon to hear about a server in your favorite restaurant who was caught stealing data from customers’ credit cards, or a nursing assistant at your primary physician’s office stealing and then selling private information. What about your employees? Have you taken the necessary preemployment steps to make certain you can trust them, or do you simply assume you can? Threat 3: Mobile Devices Allowing your employees to use their own
Top 4 Cybersecurity Risks continued mobile device, tablet or laptop to access your network without proper security measures is like giving them the keys to the office and the security code for the alarm system. The insurance industry is especially vulnerable since a large segment of the workplace typically telecommutes.
Sophisticated hackers can obtain your valued clients’ sensitive and private information 24/7. That makes implementing a security program at your agency essential in mitigating risk and protecting the information with which you are entrusted.
Mobile devices are the most common form of communication for insurance agents and brokers who are usually out of the office during the day. Most agents and brokers can access their CRM from their phone and therein lies a significant risk. Accessing unsecured wireless networks via your smartphone is a recipe for disaster if there ever was one.
Ken Butler is the founder & manager of Evolution Agency Management, an agency management system.
Threat 4: Third-Party Service Providers Generally speaking, this could be a very large category. For the insurance agent or broker, third-party service providers typically consist of companies hired to help complete the insurance transaction. For property-casualty insurance, this might include property inspectors and motor vehicle records agencies, either private or state controlled. For life-health, this might include medical exam providers, as well as agencies like MIB Group, Inc. (formerly The Medical Information Bureau Inc.). For commercial insurance, this might include building inspectors, credit agencies and Comprehensive Loss Underwriting Exchange. All these agencies—and others—transmit sensitive client data over the Internet directly to the agent or firm that has a valid subscription. These transmissions, if intercepted by a hacker, can open a gigantic hole in the security net over your network and put your clients at risk.
Onerous Certificate of Insurance Requests
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.
Recently I was contacted by an agent whose insured was participating in a festival. The contract required a certificate of insurance evidencing that the following were additional insureds under the insured’s CGL policy: Tradeshow Company LLC and their direct and indirect parents and subsidiaries, any of their affiliated entities, successors and assigns and any current or future director, officer, employee, partner, member or agent of any of them. Large Metropolitan City and their direct and indirect parents and subsidiaries, any of their affiliated entities, successors and assigns and any current or future director, officer, employee, partner, member or agent of any of them. Giant Holding Company, LLC and their direct and indirect parents and subsidiaries, any of their affiliated entities, successors and assigns and any current or future director, officer, employee, partner, member or agent of any of them. This reminded me of a COI/AI request I saw several years ago: “XYZ Catering, Inc. (d/b/a XYZ Creations), ABC Sports & Entertainment LLC, ABC Holdings LP, the DEF Center, their respective principals, members, officials, officers, directors, shareholders, employees, and agents, their respective parent and affiliate companies and their respective Successors or Assigns as now or hereafter may be constituted and the Centennial Authority, the
City of Raleigh, North Carolina, the State of North Carolina and their departments, divisions, commissions, and boards and their respective principals, members, officials, officers, directors, shareholders, employees, and agents have been named as additionally insured’s [sic] under said policy with respect to any legal liability arising out of the Licensee’s performance hereunder.” The insured in the latter instance was a guy with a hot dog cart. They wanted him to name the organizer and essentially everyone else in the state of North Carolina as additional insureds. Talk about dilution of limits and dramatically increasing the potential for getting the carrier involved in a lawsuit against one of essentially hundreds of thousands of AIs. Yes, this is not uncommon. It’s a ridiculous request, but there is no downside to the immediate upstream party for making the request and, no doubt, their contract requires it. While most AI endorsements today require some liability on the part of the named insured, all that’s required to trigger a defense of potentially countless entities is a lawsuit alleging such liability on the part of the named insured. In addition, from the standpoint of contractual liability under most CGL policies, the existence of this contract can also trigger coverage for claims involving the contractual assumption of liability where defense is within limits, thus rapidly exhausting policy limits for the named insured. Of course, it could be worse, like the request to name as an additional insured “The United States of America.” It’s unfortunate that someone can’t sell hot dogs without giving away insurance coverage.
COMPANY & AGENCY NEWS
In Memory of Bradley S. Fortier Bradley S. Fortier, 62, of Berlin, VT passed away suddenly on Thursday, February 20 surrounded by family at Porter Medical Hospital. He was born in Barre, Vermont on July 18, 1957 to Maurice and Dottie Fortier. He attended Spaulding High School in Barre and graduated from Champlain College in 1980 with an Associate Degree in Business. Brad first started selling insurance at Paige and Campbell in 1982 before transitioning to marketing where he spent 25 years developing and marketing insurance programs at Champlain Casualty and Vermont Mutual Insurance. During this time, he became a Certified Insurance Counselor and an Accredited Advisor of Insurance. For the last 11+ years, Brad worked at Co-Operative Insurance Companies where he was the Executive Vice-President of Operations. Brad was a true outdoorsman and was deeply connected with nature. He spent many hours hunting and fishing with Jessica, his family, and many friends. Brad was especially fond of the times spent on Peacham Pond at the family camp which he helped build with his father and brothers in 1969. Brad was a skilled musician who enjoyed playing the guitar, the piano, and most recently he taught himself to play the banjo. Music was an integral part of his life from playing in a band with friends, to most recently serenading his granddaughters who were his biggest fans.
Acuity Shows Continued Strength in 2019 Financial Results Acuity released its 2019 financial results, which showed that the insurer set new records across key areas of measurement while exceeding the industry’s performance in those areas. Highlighting Acuity’s 2019 performance is a 95.2 combined ratio, nearly four percentage points better than the insurer’s competitors in the property/casualty industry. This marks the ninth consecutive year Acuity has earned an underwriting profit. Acuity showed strength and growth in many other areas in 2019 as well. The company continued to add to policyholders’ surplus—essential for fulfilling its promise of financial protection to customers—ending the year at a record $2.466 billion (GAAP). Assets surpassed $5 billion for the first time in Acuity’s history and finished 2019 at $5.126 billion (GAAP). Additionally, Acuity generated a net income of nearly $185 million (GAAP). “Acuity’s performance is confirmation that we are doing things right—pricing products fairly and accurately, maintaining underwriting discipline, and operating at a high level of efficiency,” said Ben Salzmann, Acuity President and CEO. “We continue not only to build on our foundation of financial strength, but also to surpass industry benchmarks. Most important to our customers, employees, and independent agents, our consistent performance builds financial strength everyone can depend on.” In 2019, Acuity also combined outstanding financial performance with strong revenue growth. Fueled in part by a record-setting $277.5 million in new business in 2019, Acuity reached an all-time high in written premium in 2019 of $1.66 billion, an increase of more than $115 million over 2018.
Vermont Mutual Again Recognized as a ‘Best Place to Work’ For the fifth year in a row, Vermont Mutual Insurance Group® has been recognized as one of the Best Places to Work in Vermont by Vermont Business Magazine and the Vermont Chamber of Commerce. The nationally recognized Property & Casualty Insurer has earned the distinction each year it has participated in the survey. Vermont Business Magazine surveys companies annually to identify the best places to work in the state. They review company policies, systems, practices and demographics. Included in the assessment are anonymous survey responses from employees, which account for 75% of the total evaluation. Dan Bridge, Vermont Mutual’s President and CEO stated “Vermont Mutual has been recognized as a Top 50 insurer in the U.S. for eleven consecutive years, confirming our expertise in the insurance business.” Bridge continued “We believe our work environment and culture contribute significantly to our success and we are proud of our employees continued commitment to making Vermont Mutual a 'Best Place to Work’". Susan Chicoine, Vice President of Human Resources, remarked “Vermont Mutual has been an employer in Vermont for over 190 years. In fact, many of our employees count the number of years they’ve been with the company in decades, rather than years and that is a testament to the positive atmosphere we all enjoy here.” Chicoine added “By offering a healthy work-life balance, flexible hours, competitive pay and benefits, both our employees and the company, benefit greatly.” The final rankings will be announced at a special awards presentation on March 30, 2020 at the DoubleTree Hotel in So Burlington from 5:00 pm thru 7:30 pm. The awards program is presented in partnership with the Vermont State Council, Society for Human Resource Management, the Vermont Department of Labor, the Vermont Department of Economic Development, and Best Companies Group.