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GREEN MOUNTAIN AGENT VERMONT INSURANCE AGENTS ASSOCIATION | MARCH 2019

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.

Seasons May Change, But Our Commitment to the Independent Agent Channel Remains the Same...

ermont Mutual is proud to have served Vermont and the New England market through the longstanding partnership with our Independent Agents. It remains our privilege to work with the finest Independent Agencies in the industry … the only place you can buy a Vermont Mutual policy.

89 State Street, P.O. Box 188, Montpelier, VT 05601 | 800.451.5000 | VermontMutual.com 02

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Vermont Mutual is proud to sponsor the Vermont Insurance Agents Association’s new Education Center in Williston, Vermont.

Green Mountain Agent is a publication of

CONTENT MARCH 2019

04 600 Blair Park Road Suite 100 Williston, VT 05495 Phone: 802-229-5884 Fax: 802-876-7912 www.viaa.org VIAA Officers President Paul Plunkett, CIC Vice President Alan Kinney Secretary/Treasurer Dan Rodliff National Director Ron Bixby

Directors

Letter from the President

07 On the Hill

08 Feature: Knowledge

12 Feature: Agency Operations

16 E & O Corner

27 Company & Agency News

Chip Ams Michael Barrett Erin Odell, CIC

Staff Executive Director Mary Eversole mary@viaa.org

GMA Publication Design LONDONmiddlebury londonmiddlebury.com

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LETTER FROM THE PRESIDENT MARCH 2019

It is said that March comes in like a lion and goes out like a lamb. I certainly hope that is the case as we all look forward to more mild and pleasant weather. We made it through “Crossover Week” in the Vermont Legislature where VIAA has been working to protect our members’ livelihoods daily. During the second half of the legislative session, we will call on our membership to help advocate on issues that could potentially impact our industry negatively. Be sure to check your inbox! The VIAA Board of Directors has been focusing on the organization’s future this year. Member input is critical in this process. As our members perpetuate, so does VIAA. With the spring thaw, our member agencies will be visited by our Executive Director to learn more about what agencies need and want to stay competitive. We look forward to full participation in this process.

Paul E. Plunkett, CIC VIAA President

“Individually, we are one drop. Together, we are an ocean.” -Ryuonuske Satoro

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HELP WANTED: Commercial Lines Producer

Lines‘I’ Experience to the Next Level? ON THE HILL: BIG WARNS We Want You! AGAINST FCIP CUTS South Burlington, VT Looking to Take Your Personal

By Jennifer Webb NFP, a leading insurance broker and consultant that provides employee benefits, property & casualty (P&C), retirement, and individual insurance and wealth management solutions is currently seeking an experienced Personal Lines Producer to advance his or her career as a Commercial Lines Producer in its South Burlington office. This position is responsible for generating new sales for all Commercial Lines policies and requires the ability to work closely with clients, customer service representatives, producers, management, and insurance carriers. The work environment is professional and very supportive. The ideal candidate should have excellent interpersonal skills, {2+} years of experience, and ability to adapt to emerging technology. They will be supported with commercial lines training and mentoring for Earlier this week,sales the Big “I” proposals joined a long prospect/planning, calls, andlist of insurance, commodity, farm, environmeneducation. A property and casualty license is tal and lending groups in sending two letters required. NFP offers a highly opposing cuts to the Federalcompetitive Crop Insurance compensation and benefits package.

Program (FCIP) during this year’s budget pro-

cess. send The first letter went to Secretary Sunny Please your resume to: Perdue, who leads the USDA; the second

Dan Rodliff to the U.S. House of Representaletter went tives and U.S. Senate Budget Committees. Vice President, NFP P&C PO Box 2243 President Trump’s proposed budget is expectSouth Burlington, VT 05407 has included ed next month, and historically suggested cuts to the FCIP. The letters note

Orthat “crop insurance is a linchpin of the farm

safety dan.rodliff net” and that @nfp.com it would not make sense Email:

to entertain cuts to the FCIP when the enactment of the 2018 Farm Bill just reaffirmed the importance of crop insurance less than two months ago. Protecting the FCIP will be a top issue members bring to the Hill during this year’s Big “I” Legislative Conference. Other issues this year include the NFIP, TRIA, data security and privacy, health care, and insurance regulatory reform. Register online by March 8 for earlybird pricing. Jennifer Webb is Big “I” federal government affairs counsel.

Free Legal Consultation for VIAA Members – Up to 30 minutes KEIDEL, WELDON & CUNNINGHAM, LLP Attorneys at Law

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WHAT HAPPENS IF YOU PAY YOUR CLIENT’S PREMIUM AND THEY DON’T PAY YOU BACK?

KNOWLEDGE

By Big “I” Virtual University Faculty cancel for nonpayment. If a friend paid for the client and then didn’t get reimbursed, could the carrier cancel for nonpayment? No, of course not. This is no different. Second, and more important, you should not be paying premiums for your clients. That’s an example of rebating and is illegal in every state I know of. Q: If I pay the insurance premium on behalf of a customer and they don’t pay me back, can I order the carrier to cancel the policy for nonpayment? Response 1: No. Only the insured or the carrier has the right to cancel the policy— not the agent. From the carrier’s standpoint, the premium has been paid. Fronting money for an insured is always a bad idea for this very reason. It’s not a good business practice. You could try to take legal action. Response 2: That’s the problem with paying your clients’ bills. Never do this. To get your money back, you could take the client to small claims court—and then help them find a new agent. Response 3: I think you just learned a hard lesson—never advance payment. The carrier has been paid, so unless you have an agreement, such as those used by premium finance companies, you can’t force the carrier to do anything. Response 4: The carrier should not and will not reimburse you. First of all, you simply gave the insured an unsecured loan. The carrier has been paid, so they will not 08

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Response 5: NO! NO! NO! The policy clearly states that the only parties who can cancel the insurance are “you”—the named insured—and “we”—the insurance company. Response 6: Why in the world would you do that? This is not a good business practice. Response 7: The parties involved in an insurance contract are the insurer and the insured. The agent is the middleman. If the insurer has been paid and there are no other valid reasons for cancellation, an agent can’t legitimately order a cancellation. We all like to trust others, but some sort of written agreement involving a down payment would have been the best course of action. This question was originally submitted by an agent through the VU’s Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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The Certified Insurance Service Representative (CISR) designation program is a nationally recognized education program directed at a very particular job description in the agencyâ€”the customer service representative. CISR COURSES MAY BE TAKEN FOR CE CREDITS FOR THOSE NOT SEEKING THE DESIGNATION.

CISR Elite status now offers an even higher distinction for those eager to gain greater skills and knowledge of insurance service and sales.

The CIC Program is for agency and company personnel -- owners, producers, agents, account managers, brokers, underwriters, and marketing or claims personnel. Participants should be licensed agents, brokers, adjusters, or solicitors; or have at least two years of full-time experience in the insurance industry or as a risk management professional; or have served for at least two years as a full-time insurance faculty member at an accredited college or university. CIC COURSES MAY BE TAKEN FOR CE CREDITS FOR THOSE NOT SEEKING THE DESIGNATION. ATTENDANCE REQUIRED FOR ALL DAYS TO RECEIVE CREDIT FOR INDIVIDUAL CLASSES.

James K. Ruble Graduate Seminars are designed specifically for CIC Designees and feature a variety of topics along with real-life applications in a seminar that is designed to satisfy the CIC annual update requirement. YOU MUST BE A CIC OR CRM AND A DUES-PAYING MEMBER OF THE SOCIETY TO ATTEND A RUBLE SEMINAR.

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AGENCY OPERATIONS

3 REASONS YOU SHOULD CARE ABOUT BEST PRACTICES By Jacquelyn Connelly The Best Practices Study, a joint effort of the Big “I” and Reagan Consulting, Inc., celebrated its 25th anniversary with the update released last fall. Since 1993, the Best Practices Study has aimed to help agencies measure themselves against best-in-class agencies, identify performance gaps, and better manage their businesses to address problem areas. The cover story in February IA dives into the three most valuable metrics of the Best Practices Study, and how focusing on them can help your agency thrive in 2019 and beyond. But if you’re still not convinced you have something to gain by engaging with the research, here are three specific reasons that might change your mind: 1) Valuation. Reagan Consulting recently determined that if an agency increases growth across the board for commissions and fees by 1% each year, it creates a 5% premium on agency valuation, says John Merrill, vice president at Reagan Consulting. On average, Best Practices agencies achieve an organic growth rate of about 4.6%, according to the 2018 Best Practices Study Update. Calculate yours by taking the yearover-year change in commission and fee revenue (excluding acquired revenue) and expressing it as a percentage of prior-year commissions and fees. “The difference between those two numbers is your organic growth, excluding any contingents and acquired revenue,” explains Tom Doran, partner at Reagan Consulting. In short, “the value of a company that is growing at a fast pace is much, much higher than one that’s not,” Doran says. “There is a real premium on organic growth in the valuation, so a relentless focus on organic growth should be at the top of any agency owner’s priority list.”

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2) Perpetuation. The 2018 Best Practices Study Update classifies producers by age group: up to age 35, age 36-45, age 46-55, and over age 55. Understanding the age banding of your agency’s sales force is an important consideration when evaluating the strength of your sales culture, Merrill says, because “you don’t want to be too concentrated in one age group.” “You don’t want to see all your new business generation in the senior category that could be retiring within the next five to 10 years,” Merrill continues. “That’s going to be an issue when you’re thinking about valuation, perpetuation and mergers & acquisitions—you’d like your new business generation to be more balanced across the board, and you want to be investing in some of those younger classes to create long-term value.” If you discover, for example, that “you’re getting a lot of production out of your junior and senior classes and not a lot from your freshman class, that’s an easy way to determine you’ve got a shortage of young producers being developed,” Doran says. Especially if your agency has producers in their 50s who are “really doing well and hitting

Inc. in Montgomery, Alabama. “I’ve always tended to want to manage through data—I think data can tell you a lot of things. But at that point in time, the data Reagan was getting didn’t exist. I wanted that data from a management perspective.” Why? “We’ve gotten kind of competitive about it, because we want to be the best in our category,” says Newsom, who credits Best Practices for improving key performance metrics over the 10 years that his agency has been participating in the research process. “When the last round of results came in and we saw our metrics, I thought, ‘Hey, that’s pretty good, but come on—we can do better, right?’ There’s that element of motivation for us. It’s nice to have someone to compete against in a way that’s measurable. I have found that very useful.”

big numbers,” Doran says, looking at your new business generation alone isn’t enough to determine whether your sales success is sustainable long-term. “Those producers are going to retire at some point, so you better make sure you’re investing in that next generation of producers in order to maintain your production capability.” As with everything in the Best Practices Study, the research enables you to compare your agency’s production numbers and validated producers to those of your peers, Doran says: “That would help you make sure you’ve got enough producers on board to drive the growth you want to accomplish.” “That’s an issue a lot of us are struggling with— where’s your next sales force coming from?” says Michael Newsom, fifth-generation owner of W.J. Wheeler Insurance Agency in Bethel, Maine. “Are we going to turn one of our current employees into a producer, or are we going somewhere else for that next person who’s going to sell? Are we looking at someone who has insurance experience, or are we going outside the industry?” 3) Motivation. When the Best Practices Study first started in 1993, “it was a fairly new concept,” recalls Trey Starke, president of Starke Agency,

Michelle Appelbaum, research coordinator at Reagan Consulting, Inc., notes that “we have a number of agencies that had submitted their data and didn’t initially get selected, but as they continued to track their numbers and progress in subsequent years, ended up becoming a Best Practices Agency by the next study cycle. We’ve seen how agencies continue to improve by taking advantage of benchmarking and understanding exactly where they are.” “It would be difficult to overstate the number of agencies we’ve worked with over the years that took to heart that information that was disappointing initially, and said, ‘Hey, we’re going to manage our business by these benchmarks and we’re going to get better,’” Doran agrees. “We have dozens and dozens of case studies over the years of agencies that have transformed themselves simply by focusing in on a handful of key metrics and putting together a plan to close those performance gaps.” Once you’ve defined where your agency has room for improvement, “it’s a relatively easy matter to unravel the issues,” Doran adds. “That’s the beauty of metrics—they allow you to laser-focus in on the problem and then figure out how to fix it. Benchmarking helps you better understand what ‘normal’ looks like for a well-run company, and then identify where you may or may not be out of sync.” The result: an uptick in not only candidates, but the right candidates—the kind you actually want to hire. Jacquelyn Connelly is IA senior editor. W W W.V I A A .O R G

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DOES THE RIGHT HAND KNOW WHAT THE LEFT HAND IS DOING? By Annette Hollingsworth, J.D., CPCU, CLU, ARC, Vice President, Swiss Re Corporate Solutions

As technology allows the ability to service large groups of clients more efficiently, many agencies are increasingly expanding their reach beyond the confines of one metropolitan area. In order to better service their customer base, agencies may open additional locations or may acquire existing entities to expand their business. The management of multiple locations creates new challenges and those challenges if not handled correctly may lead to increased opportunities for error. Controlled growth whether organic or through acquisition can increase efficiencies and reduce cost. However, it is important to manage that growth. Be sure that the “right hand knows what the left hand is doing”. Consistent culture, compliance and communication throughout the agency at all locations, is essential to prevent confusion and potential claims which may otherwise arise from acquisitions and dispersed locations. Make sure all staff understands your agency culture. Owners, producers, agents, CSR’s and all staff must understand the focus of the business. If the agency’s stated focus is on personal lines, then the agency should not deviate into complex specialized lines. If the agency focus is on certain niches of business, the agency should train their agents and supporting staff on how to service those markets. Often claims begin when the agency attempts to sell insurance products with which it is unfamiliar. Understand your focus. If you are acquiring agencies, acquire those that fit your vision. Then share your vision with all staff at every agency location on a regular basis. Help your team see what the agency is trying to accomplish and how each person can contribute by staying focused on the goals of the entire organization. When the workload is heavy and clients demand your attention at your primary agency location, it can be difficult to give your attention to the other office locations. But in order 16

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to keep those other locations in line with your vision, you must provide them with the attention they need. You should try to visit your other agency locations frequently, at least once a month. Visit each site for a long enough time that the each site does not put on a front for you but actually reveals to you its true method of operation. By allowing each office to become comfortable with your visits, you can build trust and familiarity. The agents and staff at each location must feel close enough to the primary agency to be able to ask questions, share problems and seek feedback. Establish uniform office procedures and a standard system of compliance. Each province has regulations to protect their own citizens. If you locate a branch office or even a teleworker, in another state, you must research licensing and other business regulations impacting your insurance operation. Failure to comply with regulatory requirements could lead to regulatory investigation, disciplinary action, or even the possible revocation of your license. If adjustments are needed to be made as a result of the regulations do not begin operating your business until you comply with the law. For example, an agency had a CSR move to another state and began working remotely as a clerical assistant to their Personal Lines Manager. This employee’s job description did not entail discussing or recommending coverage with clients, and the agency believed that her job description was in line with the requirements of the state department of insurance. However the department viewed it differently and fined the agency $7,000 for the employee not having the proper license and viewed the tasks performed by this employee as “effectuating the sale of coverage”. As soon as the agency was notified of the infraction, they made changes to her job description and directed her to acquire the proper license. They then established a Director of Compliance and Compliance Committee to monitor the activities on an ongoing basis. Standard operating procedures will enhance the ef-

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Helen Collins hcollins@viaa.org

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ficiency and management of multiple agency locations. Staff can transfer among agencies, without extensive readjustment. The essential procedures should not vary. Each agency should have similar procedures regarding date-identification of communication with clients and carriers. Additionally, documentation of coverage offered and rejected, and maintenance of expiration lists should be standardized. This excerpt from a letter we received from the attorney retained to defend an insured, reveals the difficulties in offering a defense when procedures are not followed. The litigation arose from damage sustained by a commercial enterprise where the carrier argued that the agency had not provided the necessary information for the carrier to quote coverage, despite several requests. Counsel stated the agency “has no documentation that it sent the proper information and the agent who worked on the account left the agency several years ago on unfavorable terms. The agent’s CSR says the agent was not detail oriented, was not good about providing information, and often made mistakes.” Defense counsel opined that it was highly likely the judge will rule that the agency failed to provide the necessary information. The agency itself had a strong culture of compliance but suffered from one agent who had not followed the standard office procedures established and who, thus, created a significant problem for the agency. In addition to implementing uniform procedures around the process of file documentation, the agency should also implement uniform procedures for diary and suspense systems. There should be a centralized agency management system and computers in each location should be compatible with one another. In fact, it is likely that computer systems will become a backbone for your organization as offices are spread out geographically. Additionally, it is essential that you ensure adequate security of personal information acquired from your insureds, and that you provide proper privacy training to all employees. The use of encryption and other measures to protect personal data when transmitted is important. If employees use smart phones, verify the phones are password protected.

As part of the establishment of standardized procedures, make sure the staff in each location knows the method to report an errors and omissions situation. Establish and discuss the procedure with all agents and employees. Do so regularly to prevent hesitation in reporting at the time of occurrence. Don’t let problems linger. Delays could create coverage issues with your professional liability carrier. Communication is a key to successfully running multiple locations. Free and open communication with all staff is very important when you have multiple locations. Neither the culture nor the compliance can happen if you neglect to focus on communication. Have weekly staff meetings by phone or webinar. Have your office personnel get together at least once or twice a year to enhance communication between people on all levels. Communicate your vision to all managers in all locations and they in turn must commit to clearly communicating your vision to others in the off-site agencies. Regular audits and evaluations of the manager and the office are critical to making sure your vision is being carried out according to your expectations. While striving for positive energy in your organization, do not avoid discussing problem situations. Consider learning opportunities which may present themselves from potential claims situations. Educate your employees about the situations which have created problems in one office so other office sites can avoid the same mistake. Growth is positive when controlled but be sure that the “right hand knows what the left hand is doing”. Consistent culture, compliance and communication throughout the agency at all locations, can be essential to preventing confusion and potential claims which may otherwise arise from acquisitions and dispersed locations. Annette Hollingsworth has spent over 30 years in the insurance industry. While with ERC /GE Insurance Solutions/ Swiss Re, Annette Hollingsworth has served in a variety of capacities ranging from claims to underwriting, legal to regulatory services and global compliance. Annette now serves in the Products unit where she supports the Insurance Agents Professional Liability underwriters in both the US and Canada. She attended Washburn University undergraduate and KU Law School. She has her JD., CPCU, CLU, and ARC designations.

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Leasing: A Seamless Customer Experience

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From start to finish I experienced firsthand how seamless it was to conduct business with them. We have a 35 person agency so to update everyone’s computers was a decent size upgrade. InsurBanc made the process very easy and offered attractive terms and competitive rates which helped to manage the agency’s cash flow”. – Jay Byrnes ~ Byrnes Agency How it works: • Lease terms are 24, 36, 48 or 60 months with a minimum transaction of $5,000 • You are looking for 100% equipment financing, including certain soft costs such as software, shipping, installation and maintenance* • No down payments or advance payments are required • Monthly payments can be customized to meet your special business needs • You are looking for potential tax benefits associated with equipment financing**

We invite you to see for yourself. Contact us today for help preserving your cash flow with an equipment lease solution. These materials are for informational purposes only. The availability of any financing described herein is subject to approval of applicant’s credit, the equipment supplier and the equipment. *Soft costs are limited to 20% of the total amount financed. **Nothing herein constitutes tax advice and customers are advised to consult with their own tax advisors prior to electing specific rates or options. Agents’ Express leasing is a program of De Lage Landen Financial Services, Inc., a third party not affiliated with InsurBanc, a Division of Connecticut Community Bank, N.A.

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DISPELLING ANOTHER INSURANCE MYTH

William C. Wilson, Jr., CPCU, ARM, AIM, AAM 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. W W W.V I A A .O R G

A contractor was building a detached garage for a homeowner and preparing to depart at the end of the day. The building was 99.9% completed except for a few minor corrections that he was going to finish in a couple of hours the following morning. As he prepared to leave, he discarded a cigarette he was smoking which smoldered until a fire broke out, largely destroying the garage. The adjuster for his CGL insurer denied the claim under a reservation of rights, citing these three exclusions: “Property damage” to… That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; “Property damage” to… That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it. “Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”. This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor. The first question is whether this is an ongoing operation or a completed operation, the latter defined in the policy to include the following language: Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed. Based on this definition excerpt, we believed this to be a completed operation, but it really doesn’t matter if the policy language expressed in the three cited exclusions is carefully reviewed. In our opinion, the damage did not arise out of either ongoing or completed ‘operations’ nor was “your work” incorrectly performed on the garage. These are largely workmanship exclusions. In our opinion, negligently discarding a cigarette is not part of the insured’s work or operations. In the end, the adjuster bought this premise and paid the claim. What do you think? Photo by Daniel M. Hendricks

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Union Mutual Raises Nearly $45,000, Sets New Penguin Plunge Fundraising Mark MONTPELIER – Union Mutual proudly participated in the Penguin Plunge to benefit Special Olympics Vermont on Saturday, Feb. 2, 2019 at the Burlington Waterfront. With the widespread support of hundreds of donors, the “Union Mutual Popsicles” were able to set a new high-water mark for the event’s fundraising with a grand total of $44,932. The previous team fundraising record was $30,000, set back in 2012. “Union Mutual is thrilled to continue its partnership with Special Olympics Vermont and help make the 2019 Penguin Plunge a huge success. We are truly humbled with the level of support our employees, agency partners, friends and families generated. Both of our organizations strive to do the best we can to better the lives of those within our communities and we look forward to collaborating with each other for years to come,” Union Mutual President & CEO Michael Nobles said. The Union Mutual Popsicles consisted of 37 employees, agency partners, friends and family who braved the 18-degree air, strong winds and 33-degree water temperatures as they “Plunged” into the icy waters of Lake Champlain. Led by Jeff McLaughlin, Connor Turnbaugh and Nobles (who was also the event’s lead fundraiser), the Popsicles helped the more than 1,200 participants raise over $543,000 for Special Olympics Vermont. “The Penguin Plunge is our largest fundraising event and directly impacts our ability to change attitudes and raise awareness about the abilities of people with intellectual disabilities. The funds raised through the Penguin Plunge allow us to showcase the skills and dignity of our athletes,” said Sasha Fisher, Senior Manager of Events and Partnerships for Special Olympics Vermont. “Sports are a powerful force and can shift the focus from disability to ability, from isolation to involvement. The transformative power of sports instills confidence, improves health and inspires a sense of competition. This is why we Plunge!” Union Mutual is the proud lead sponsor of the Special Olympics Vermont Summer Games.

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Department of Financial Regulation Summer Intern As an Intern, you will gain valuable hands-op experience working at The Vermont Department of Financial Regulation in Montpelier, Vermont. We are seeking three interns who will rotate through various Departments including Legal, Banking, Insurance, Captives and Securities. You will apply your educational insights and learning in a real-world regulatory setting. The Interns will be responsible for various projects under the guidance of Department leaders. The Internship will include job shadowing, reviewing regulatory rules, participating in consumer service processing of complaints, financial analysis and examination and the legal process of Financial Regulation. Ideal candidates should be detail-oriented and well organized, have a strong desire to learn and apply knowledge and have the ability to exhibit effective interpersonal skills with a collaborative style. This is a paid internship and we provide supervisory support required to obtain college credits if needed and permitted by your college/university. Location:

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Pay:

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How to apply: Email Pat Murray with resume and cover letter. pat.murray@vermont.gov

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