HAPPY THANKSGIVING LOUISIANA AGENT NOVEMBER 2017
A publication of the: Independent Insurance Agents & Brokers of Louisiana
Inside this issue:
ISO’s New 2018 Personal Auto Policy
HO Policy & Guns Use
Mechanical Breakdown Exclusion
Louisiana Agent November 2017
In this issue:
IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com
Francine Berendson Director of Communications & Events fberendson@iiabl.com
The Independent Agent System ...................... 4—10 Why IA’s Might be Too Far Behind ................... 4—16 Ask Mike: Mechanical Breakdown Exclusion . 18—24 Rate Filings ........................................................... 22
Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com Kim Jackson Education & Membership kjackson@iiabl.com
ISO’s New 2018 PAP ...................................... 25—26 ACT Report Part 2 .......................................... 26—27 Things You Didn’t Know ........................................ 28 Give Your Website a Digital Checkup ................... 30 Calendar ................................................................ 32
Karen Kuylen Director of Accounting kkuylen@iiabl.com
HO Policy & Gun Ownership ........................... 34—38 IIABL Partners ...................................................... 40
E. Lee Mowe Marketing Representative lmowe@iiabl.com Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com Jamie Newchurch Insurance Services jnewchurch@iiabl.com Lisa Young-Crooks Executive Assistant
Photo credit: Charles Seale Designs Thanksgiving on Lacassine Bayou
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The Independent Insurance Agent System
Why Independent Insurance Agents Might be Too Far Behind (and 5 Actions to Catch Up)
The independent insurance agent (IA) system is pretty darn basic. It is fundamentally about selling insurance.
Remember when the idea of marketing your insurance agency online was crazy?
by Chris Burand
It is not about: • Joining an aggregator to make more commission without selling more insurance. • Joining aggregators/clusters to have access to more companies. • Divining coverages. • Running agency management systems better. • And for most, it is not even about marketing (niche programs are the possible exception). The IA system is about selling, period. The other items are secondary. A long, long time ago in a time where horses and buggies were still prevalent, insurance distribution was born. At that genesis, where it was de
I’ve heard all the excuses… “We’re a smile and handshake business.” “Everything we do is about relationships.”
“The insurance industry is different.” “People want to buy insurance from someone they trust, not a faceless website.” “We don’t want that type of client.” Wow, how the times have changed. Continued Page 11
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IA System continued
termined insurance would be sold by agents, a fork in the road was created. One fork was for captive agents. That fork promised the carriers would be effective marketers, the agents would assist but mostly clients would come to them or the agents would call using the carriers’ brands to gain an opportunity to quote. In return, those agents were paid less and had fewer options to offer clients. The other fork stipulated agents do their own marketing and selling. Because these agents were too small to effectively market, the end result was these agents had to sell and the brand they were selling was them, personally. No one recognized the carriers they represented and the carriers did not do much advertising or marketing. In return, these agents were paid well, gained ownership of valuable assets (their books of business), and had access to many carriers enabling them to offer their clients many more choices. They could also service a much wider range of customers. These are obviously the IA’s.
The IA’s fundamentally are about making sales, one sale at a time. Period. Otherwise, IA’s are not necessary. The entire model is based on an agent building one trusting relationship and then one sale at a time. The model is not designed to cause dozens of prospects to call the agency every day or ask for web based quotes. No trust exists in either of those scenarios and the IA system requires the client trust the agent and the agent trust the client to thrive. To leave that core strength is to endanger the entire model because captives, direct, and the web can all make sales without trust far more cheaply and effectively than independent agents can ever hope to do. I meet agency owners and company people regularly who are repelled by the thought of selling. They think selling is an awful, disingenuous manipulation of the consumer regardless of whether the consumer benefits. They truly believe selling is unethical. To sell is to cross the line into unethical territory. These well-meaning folks truly need to find a different career or start believing in the benefits of selling because otherwise, they are a true mismatch.
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I meet others who are truly scared of selling. I and probably most people that readily admit we’re in sales get that. Everyone, mostly, has some fear of rejection when selling but some can push through that fear and others cannot. Unfortunately, the anti-sales people are combining more and more with the scared-of-sales people to push IA’s into marketing. Marketing, in so many ways, is for sissies. Marketing provides a cover behind which personal accountability can hide. In sales, a person either makes the sale or does not make the sale and everyone knowns whether the sale was made or not. In marketing, if sales don’t happen, there are delays between introducing the marketing and sales (if sales do happen) and marketing campaigns are almost always feel-good group endeavors so personal responsibility is limited. Marketing, when it works, is designed to cause the consumer to call the retailer (or the retailer calling the wholesaler). This makes those in the “sales is unethical” camp feel better about themselves because if the consumer calls the agency, the agency does not have to sell and therefore, does not have to engage
in unethical behavior. It is even better if the customer buys insurance on a web-based platform because that is proof the purchase is entirely the client’s initiative and no selling is involved. I am not being cynical or sarcastic. I am simply repeating what these people have told me. The more people who want to rely on marketing whether within the IA footprint or with captives, online distributors, or direct writers, the more opportunity is created for people willing to stay true to the fundamental heart of the IA model and build one trusting relationship at a time. Part of building trusting relationships depends upon the agent working with the consumer to identify that person’s or that company’s individual risks and exposures and building coverages specifically for them. Every policy should be custom built and a large portion of the public wants this. They do not always know enough about insurance to articulate their desires but they truly do want agents to take the time to learn about their companies with them. A good salesperson will not abandon this market. It is large. It is lucrative. It has higher profit margins and higher retention if manContinued page 10
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Chris Burand is president of Burand & Associaged well. Furthermore, customizing coverages provides one of the best chances on earth to help protect lives, businesses, and jobs and rebuild lives, businesses, and jobs after a loss. By selling, a producer has a rare opportunity to make a huge difference in their clients’ lives. Hardly any professions exist where such a huge difference can be made and of the ones that do exist, being a selling insurance agent may pay the best. It is a convergence of the best of all worlds. The chance to do good by selling far exceeds any good done by people that want to market because they think selling is dirty.
ates, LLC, an insurance agency consulting firm. Readers may contact Chris at (719) 485-3868 or by e-mail at chris@burand-associates.com. NOTE: None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.
For true success and our clients’ best interests, it is imperative for independent agents to stay honest to the IA model. Sell one trusting relationship at a time that customizes coverages and solutions for each individual client.
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Why IA continued from page 5
From GEICO, to Google Compare Auto Insurance, to Insureon, to Coverhound, to The Zebra, to Policy Genius, to every other business school graduate who thinks they’re a smarter marketer than independent insurance agents, the case has been proven that insurance buyers are willing to go online for their insurance needs. These Digital Disruptors are capitalizing on the cultural change happening in our society. Consumers (of every industry) are now willing to communicate, build relationships and make buying decisions online. I call these people The Con-
nected Generation. Digital Disruptors have let go of the way business has always been done, in exchange for a better customer experience. The modern insurance consumer demands a better customer experience. The Disconnect Between Independent Agents and Modern Insurance Consumers
Here is what the independent agent believes should be important in the insurance buying process: Correct coverage Relationship Communication on their terms The relationship is first, then comes the transaction. Here is what the modern insurance consumer believes is important in the insurance buying process: Ease of business Price Trustworthiness Communication on their terms. The transaction is first, then comes the relationship.
See the difference? The modern insurance consumer needs insurance and doesn’t want to take the time to build a strong relationship before they purchase. That doesn’t they’re a price shopper or that they don’t want a relationship. But rather they want the relationship on their own terms. This is an idea independent agents have struggled to adopt.
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The Idea Adoption Curve and Why it Might be Too Far Behind The image above is courtesy of the great Seth Godin and his blog post: How Idea Adoption works Why IA continued
the Idea Progression. The premise Seth’s post: every idea starts out on the left, only fringe members of any community believe in and adopt the idea. As these early adopters experience success the idea moves from fringe to risky, from risky to new and so on across the idea adoption cycle. The vast majority experiences in the modern consumer’s life have been digitized. From banking, to taxes, to retail, the customer experience is focused on ease of business, speed of business, access to information, competitive pricing and ondemand communication. In most industries, the digitized customer experience
has reached the “Always” phase of the idea adoption curve. Yet, for the independent insurance industry we’re still questioning the importance of these basic principles. Why? Why would we continue to question and drag our feet when so many others, (so called Digital Disruptors), are building businesses based on these principles with success? The truth is, in terms of customer experience, we’re falling behind. Every year, for the last three years, more insurance consumers than ever before have shopped their insurance. Would this be true if our clients were satisfied with the experience we are providing them? No.
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We’re falling behind our competition… and if we don’t take action we’ll soon be too far behind.
licited inbound lead opportunities?
5 Actions to Catch Up
Do you have a process in place to respond promptly to inbound lead opportunities?
1) Update Your Website The modern insurance consumer journey starts online, most often with a Google search. What will an insurance buyer researching new agents think when they hit your website? Your website doesn’t need to be flashy or complex. Instead think clean, professional and easy to navigate. To the modern insurance consumer websites are a direct reflection of business quality. Are you proud of the story your website tells about your agency? 2) Train Your Staff to Handle Inbound Leads Did you know that 40% of referral calls through TrustedChoice.com that hit a phone drop without ever talking to a human?
Unsolicited inbound leads are different from referrals. These individuals have chosen your agency, but that doesn’t mean they’ll give you the same leeway as a standard referral. They expect prompt service, clear communication and smooth workflow. If your agency has not created a dedicated process (and team) for handling unsolicited inbound leads you are ABSOLUTELY losing business today. 3) E-Signature and Technology Upgrades Have you made the necessary technology upgrades to provide the modern insurance consumer with an enhanced customer experience? Continued page 14
Do you know who is responsible for handling unsoWhy IA continued
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Why IA continued
The industry has changed…
This means e-signature options, mobile applications (like the Go Insurance Agent App), VOIP phone systems, cloud-based management systems, customer relationship building software
The insurance buyer has changed…
(like Rocket Referrals), digital education tools (like Clickable Coverage), and the list goes on. The point is, over the last ten years tools and resources have hit the market at affordable rates which can help drastically increase the customer experience provided at the agency level.
The world has changed… There is no discounting the methods and philosophy upon which our great industry was built, but we can no longer afford to dismiss the reality that these same methods now have a diminished return. We must now empower ourselves and agency staff to seek out new methods of attracting, influencing, capturing and retaining new business.
To catch up we must take advantage of the tools at our disposal.
Encourage your staff to learn and test new tools, tactics and strategies to find your target client in today’s marketplace.
4) Train and Encourage Your Staff
5) Find Additional Lead Sources
The young agents of today could not build their own agency the same way today, that successful agency principals built their own agencies of the last 30 years.
TrustedChoice.com gives independent insurance agents an additional opportunity to showcase their agency. It’s not the only lead generation platform which exists in the market, but it is the only platform Continued page 16
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focused solely on the independent insurance agent.
TrustedChoice.com has over 3,500 website pages, visited by more 250,000 people a month, dedicated to educating insurance buyers on proper insurance coverage and the value of an independent insurance agent. In August more 7,000 of those people contacted TrustedChoice.com Advantage Subscriber agencies about their insurance. I believe in this product and what it can do long-term for the agents and carriers who take advantage of it. Click here to learn more about the TrustedChoice.com Advantage Profile. The Rub Prioritize customer service over customer experience and you’re already a commodity. We need to move customer experience, specifically the digital customer experience, further down the idea adoption curve and this must happen rapidly. The time has come for our industry to stop questioning the validity of the digital marketplace and begin working on making it an synchronous part of everyday business.
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IIABL Director of Education, Mike Edwards, CPCU, AAI is your source for technical questions. Contact Mike at medwards65@aol.com or 770.402.1011
Subject: Mechanical Breakdown Exclusion Q. I insure a metal fabricating shop. A few days ago, one of their machines had some sort of major mechanical failure. The insurance adjuster initially indicated that the damage is not covered due to the mechanical breakdown exclusion. However, this morning, my insured called to tell me that they now suspect the machine’s CNC system (Computer Numerical Control) was tampered with by an employee who was recently disciplined. Adding to their suspicions is the fact that this employee has not shown up for work since the incident. Also, it appears that two critical bolts were loosened. I relayed this information to the adjuster, but he said that the mechanical breakdown exclusion still applied, because in his opinion, the damage was due to poor maintenance and an inexperienced operator. He also added that the only exception to the exclusion was if
mechanical breakdown results in elevator collision. I am not convinced that this is the correct interpretation of how the exclusion works. What are your thoughts? A. I agree with you. In my opinion, if vandalism by the employee can be proven, or otherwise plausibly assumed, the mechanical breakdown exclusion will not apply. For the discussion below, assume your insured is Smithco Fabricating. Excerpts and comments are based on coverage forms from the Insurance Services Office (ISO). Proprietary forms may be different.
Causes of Loss – Special Form CP 10 30 10 12 B. Exclusions
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1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. [Summary:] a. Ordinance or Law b. Earth Movement c. Government Action d. Nuclear Hazard e. Utility Services f. War and Military Action g. Water h. Fungus, Wet Rot, Dry Rot, and Bacteria 2. We will not pay for loss or damage caused by or resulting from any of the following:
property that causes it to damage or destroy itself; (3) Smog; (4) Settling, cracking, shrinking or expansion; 5) Nesting or infestation, or discharge or release of waste products or secretions, by insects, birds, rodents or other animals. (6) Mechanical breakdown, including rupture or bursting caused by centrifugal force. But if mechanical breakdown results in elevator collision, we will pay for the loss or damage caused by that elevator collision. (7) The following causes of loss to personal property: (a) Dampness or dryness of atmosphere; (b) Changes in or extremes of temperature; or (c) Marring or scratching.
d.(1) Wear and tear; (2) Rust or other corrosion, decay, deterioration, hidden or latent defect or any quality in
But if an excluded cause of loss that is listed in 2.d.(1) through (7) results in a "specified
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cause of loss" or building glass breakage, we will pay for the loss or damage caused by that "specified cause of loss" or building glass breakage. Comments: (1) I think there are 2 key points that should be considered in understanding the intent of this (and similar) exclusions. First, note the context of the occurrences in Exclusion B.2.d. (1)-(7). Mechanical breakdown is included among similar types of losses that are usually the result of some sort of inherent defect, or gradual, long-term deterioration or damage, such as wear and tear, [2.d.(1)], and rust, corrosion, deterioration, latent defect, etc. [2.d.(2)], and so forth. The strong and clear intent of these exclusions seems directed at internal failures, and not those caused by outside forces or events. An excellent argument supporting this view is effectively made by a court ruling on the application
of the mechanical breakdown exclusion in a case involving damage to contractor’s equipment. [The policy is a proprietary form similar to ISO coverage form.]
The "Perils Insured" clause, which must be broadly construed in favor of coverage, insures against "all risks... from any external cause... except as hereinafter excluded." Clause 7(c) is, like clause 2(c), susceptible to two interpretations. It purports to exclude losses "caused by... structural or mechanical... breakdown or failure...." If this exclusion were interpreted broadly, it might be found to exclude losses arising from external causes as well as from inherent defect. Such a reading would restrict the effect of the "Perils Insured" clause by excluding from coverage almost every imaginable loss which results in failure of the equipment to function. Because most casualties to contractor's equipment may be expected to impair its function to some degree, such an interpretation renders the insurance clause nearly meaningless and the insurance nearly worthless.
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We will not adopt such an interpretation. Instead, construing clause 7(c) narrowly, pursuant to the rule in Nusbaum, we hold that the effect of its exclusion of losses caused by structural or mechanical breakdown or failure is restricted to losses arising from internal or inherent deficiency or defect, rather than from any external cause. That interpretation is consonant with, rather than repugnant to, the insurance clause. Losses arising from external causes are covered. Losses caused by inherent defect are excluded. There is a sound pragmatic basis for such an interpretation. A contractor may have recourse against the seller or manufacturer of equipment which fails from inherent defect, but his only protection against damage from external causes is ordinarily the purchase of insurance. [Caldwell v. Transportation Ins. Co., 234 Va. 639.] (2) Secondly, compare the introductory language between Exclusion B.1. and B.2. In B.1., the scope of the exclusion is much broader, and is commonly referred to as “anti-concurrent causation” (“ACC”). Among other things, this provision blocks the “proximate cause” argument, where a covered peril caused, or contributed to, an excluded loss (“concurrent causation”). For coastal states like Louisiana, the textbook example is storm surge in a hurricane. Under proximate cause, windstorm could be argued as the originating (proximate) cause of the storm surge, which is factually true. If that argument was successful, it would overcome the intent of the Water Exclusion [B.1.g.] (the so-called the “flood exclusion”). As the result of adverse litigation, and to strengthen Exclusion B.1.a.-h, the phrase “…regardless of any other
cause or event that contributes concurrently or in any sequence to the loss” was added in 1983.
In Smithco’s situation, where vandalism might be the actual originating cause of the mechanical breakdown, the introductory language to Exclusion B.2. does not contain the ACC provision, and since vandalism is not excluded, the claim is covered.
Conversely, consider an actual claim (and subsequent litigation), where a vandal removed a number of sandbags from a levee, causing flood damage to an off-road vehicle dealer’s premises. The insured claimed vandalism as the originating, proximate cause. But since water damage (“flood exclusion”) is listed in Exclusion B.1., the insurer argued that the exclusion applies, regardless of the originating cause, even if a covered peril. Here is the court’s reasoning for upholding the insurer’s denial of the claim:
Language in the policy’s exclusion clause intended to contract out of application of the proximate cause doctrine, thus the flood exclusion applied, even though flood was caused by vandalism of the levee. [TNT Speed & Sport v. American States Ins.,114 F.3d 731.] (3) The bottom line is that if mechanical breakdown was listed in Exclusion B.1., Smithco could not successfully use proximate cause (vandalism) as the originating cause of loss, due to the ACC lead-in wording. On the other hand, since mechanical breakdown is listed in Exclusion B.2., proximate cause is a valid argument, and since vandalism is a covered cause of loss, the claim is covered. Equipment Breakdown (“Boiler & Machinery”) insurance. The gaps in coverage that arise from the mechanical breakdown and similar exclusions in the commercial property causes of loss forms (such as the CP 10 30 discussed above) can be addressed by Equipment Breakdown (“EB”) coverage forms. These EB forms are the modern offspring of Boiler & Machinery coverage forms that originated in the mid-1800’s, during the heyday of steam power. While steam engines of all sorts were vital to the industrial revolution, by the 1850’s, records show that there were approximately two steam explosions every week. The Hartford Steam Boiler Inspection and Insurance Company was founded June 30, 1866, offering, as the name suggests, both boiler inspections and insurance on the boiler equipment. Louisiana Agent 21
Company Armed Forces Ins Exchange
Property Ins Assoc of LA
Coverage Type
Number of Policyholders:
Overall % Impact:
Overall $ Impact:
+8.45%
+$299,475
1,670
New: 11/13/2017 Renewal: 11/13/2017
+6.9%
+2,147,588
35,865
New: 3/1/2018 Renewal: 3/1/2018
+18.0%
+$6,321,692
15,626
New: 12/6/2017 Renewal: 12/6/2017
Changes
4 – Homeowners
1 – Property Dwelling Manual Fire & Extended Coverage Rate Level Revisions
American National Gen Ins Co Anpac Louisiana Ins Co
19-Private Passenger Auto
Zurich American Ins Co
19 – Commercial Auto
+15.4%
+$2,012,109
548
New: 3/1/2018 Renewal: 3/1/2018
AIG Property Casualty Co
17 – Other Liability
+15.0%
+$259,220
1,103
New: 3/15/2018 Renewal: 3/15/2018
State Farm Fire & Casualty
Private Passenger Auto
+10/8%
+$173,834,676
1,118,054
New: 2/5/2018 Renewal: 2/5/2018
State Farm Fire & Casualty Revised Rate Only
Homeowners HOH and HOS
-6.6%
-$292,890
3,669
New: 11/3/2017 Renewal: 11/3/2018
Valley Forge Insurance Co Continental Casualty Co
5 – Commercial Multiple Peril
+9.9%
+$890,223
2,597
New: 7/1/2018 Renewal: 7/1/2018
American Fire & Casualty Co Ohio Casualty Insurance Co Ohio Security Insurance Co West American Insurance Co
1-Property Revised Rate
+4.0%
+$338,715
1,850
New: 7/1/2018 Renewal: 7/1/2018
LA Farm Bureau Casualty Ins LA Farm Bureau Mutual Ins Southern Farm Bureau Casualty Ins
19 – Commercial Automobile
+6.959%
+$478,160
8,198
New:2/1/2018 Renewal: 2/1/2018
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There are five exclusions/limitations in the CP 10 30 which are the main focus of EB coverage: (1) Artificially generated electrical, magnetic or
electromagnetic energy that damages electrical devices.
b. Blowouts, punctures or other road damage to tires. This exclusion does not apply to such "loss" resulting from the total theft of a covered "auto". Comments:
(2) Mechanical breakdown, including rupture or
bursting caused by centrifugal force.
(1) The BAP has two categories of exclusions that are structured like the
(3) Explosion of steam boilers, steam pipes,
CP 10 30, discussed above.
steam engines or steam turbines
(4) Steam boilers, steam pipes, steam engines
or steam turbines caused by or resulting from any condition or event inside such equipment. (5) Hot water boilers or other water heating
equipment caused by or resulting from any condition or event inside such boilers or equipment, other than an explosion. Most EB markets make coverage available by one or more of these options: (a) monoline EB coverage; (b) endorsement(s) to a commercial property form; and/or (c) a special package policy developed for specific types of risks.
(2) Exclusion B.1. includes “anti-concurrent causation” (ACC) language, which bars the proximate cause argument for damage by nuclear, or war or military action. [B.1.a.b.] (3) Exclusion B.3., lacking the ACC language, allows proximate cause to be used by an insured, if a non-excluded event leads to mechanical breakdown. For example, if a rogue employee did indeed vandalize the metal fabricating machine, he might also have done intentional damage to a company vehicle, such as pouring diesel fuel or other harmful liquids into the fuel tank. This would likely have caused a mechanical breakdown of the engine.
Business Auto. The ISO Business Auto Policy (BAP) also includes an exclusion for mechanical breakdown.
Business Auto Coverage Form CA 00 01 10 13 Section III – Physical Damage B. Exclusions 1. We will not pay for "loss" caused by or resulting from any of the following. Such "loss" is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the "loss". a. Nuclear b. War or Military Action 3. We will not pay for "loss" due and confined to: a. Wear and tear, freezing, mechanical or electrical breakdown. Louisiana Agent 23
However, the exclusion could be overcome by proving the proximate cause was vandalism, and such damage would be covered, if the BAP included coverage for this peril. (4) Note also that Exclusion B.3. applies only to loss “due and confined to” mechanical breakdown, wear and tear, etc. Assume an employee of Smithco is driving a company vehicle and the serpentine (“serp”) belt (fan belt) suddenly breaks. The serp belt operates the water pump, and often the power steering and power brakes. The exclusion clearly applies to the serp belt. And the failure of the water pump will soon cause extensive damage to the engine from overheating. In situations like this, many courts have held that the exclusion also applies to other parts of the same system, which were damaged due to the same event. However, if the vehicle subsequently crashes or catches fire due to engine failure, that damage should not be excluded by the mechanical breakdown exclusion, if the BAP provides coverage for the ensuing loss (collision, fire, etc.). The exclu-
sion is limited to damage “due and confined to” mechanical breakdown. (5) The ISO Personal Auto Policy (PAP) also has the “due and confined to” language. Additional Information: “Mechanical Breakdown Exclusion” “Mechanical Breakdown Exclusion – Revisited” “Does the PAP Cover Engine Damage Due to Water in the Fuel?” “Wear and Tear and the Personal Auto Policy” “The Wear and Tear Exclusion” “The Wear and Tear Exclusion – Revisited” “Commercial Property Coverage for Public Water Main Break” These materials are intended for educational purposes only and should not be relied upon as legal advice. Please consult a qualified attorney for legal advice.
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ISO’s New 2018 Personal Auto Policy by: Bill Wilson Insurance Commentary.com
ISO has filed a new countrywide Personal Auto program in all jurisdictions except Hawaii, North Carolina, and Puerto Rico. The target effective date in most states is September 1, 2018. Some carriers may not adopt the change until later, but it is not uncommon for some carriers to adopt some or all of the changes prior to that date. Almost a dozen changes are made to the policy itself, along with well over 40 endorsement changes, including over a dozen noneditorial changes. Understanding the impact of these changes prior to their adoption by carriers and in advance of 2018 renewals can give you a competitive advantage and reduce your E&O exposure. Some of the policy changes involve incorporating exclusionary language for “car sharing” programs that currently exists in several endorsements. Another notable and DANGEROUS coverage reduction is that there is a restriction in time that insureds have for notice of the acquisition of replacement autos in order to continue liability, medical payments, and UM coverage. Being aware of these coverage restrictions is critical to minimizing your E&O exposure. On the positive side, there are quite a few broadenings of coverage and new coverage endorsements. Being aware of these coverage improvements and options may give you a competitive advantage over other agents who are not aware of these sales opportunities. For example, a HUGE improvement is that the Named Nonowner endorsement can now be used to extend physical damage coverage to nonowned autos for individuals who do not themselves own an auto. Another positive change, perhaps more of a clarification than a true broadening (although there are carriers and adjusters that might disagree) is that ISO is adding an express exception to the public or livery conveyance exclusion for the use of autos for “volunteer or charitable purposes.” To illustrate, the following is an “Ask an Expert” question that was submitted to the Big “I” Virtual University (VU) just three weeks ago:
“We insure a non-profit organization that occasionally asks their employees to use their personal vehicles to provide rides for their clients to doctor’s appointments, the grocery store, etc. They are all local rides. The client does NOT pay the employee for the ride; however, the employee receives a mileage reimbursement from the employer. We have advised the employer to have their employees check with their personal agents to make sure their PAP policy will respond in case of accident in this scenario. “We are receiving a wide variety of answers from the PAP carriers, from $100/month additional premium (I’m assuming to change from commute to business use) to the carrier wanting off of the risk, citing the ‘livery’ exclusion. We have liability for the employees’ vehicles covered by having non-owned liability as well as Employees as Insureds on the employer’s business auto policy. “I have researched your VU, and find that there is really no way for the employer to provide physical damage coverage for the employee’s vehicles. I’m sure that our non-profit organization is not the only one having their employees do this type of driving activity. If the PAP carriers are excluding, or not wanting to write this exposure for the employees, how do we get this exposure covered?” We believe that a majority of courts only apply the public or livery conveyance exclusion to individuals who hold their autos out to the general public for hire, not to individuals working for a private employer where such service is provided to their customers, not the general public. For example, if you are a Big “I” member, you can access two articles on this: “Transporting Clients of Nursing Homes or Social Service Agencies” “PAP Coverage for ‘Meals on Wheels’ Deliveries” Louisiana Agent 25
However, case law varies by jurisdiction. In addition, many carriers use more restrictive language such as “transporting persons or property for a fee” or worse. ISO now makes it clear, at least with regard to volunteer or charitable activities such as Meals-On-Wheels or transporting seniors to doctor appointments, that their new PAP clearly covers this exposure. This is not the case for many auto policies in the marketplace, again giving you a competitive advantage. So, how can you find out what these changes are? On December 4, 2017, the legendary Chris Amrhein and I will be doing a 3-hour webinar that includes a detailed review of the new ISO Personal Auto program. In addition, we are going to address a number of exposures, several of them potentially catastrophic, that are often overlooked, including rental cars, placing teenagers or other household residents on their own policies, kids who have autos or access to autos while away at college, street racing, when to drop physical damage coverage, etc. We’ll also reveal almost two dozen differences between the ISO PAP and other auto policies in the marketplace, again giving you information that you can use for a competitive advantage.
How do you register for the webinar? Click here.
Big I Agents Council on Technology (ACT) Conference Report By Ross Henry, IIABL Board Member Henry Insurance Service, Baton Rouge
Very pertinent in this age of mobile computing and cyber-everything was the discussion of data security. The statement was made by one of the presenters that “cyber/data security is the biggest issue facing agencies today.” The risks are rapidly evolving. Civil liability as well as federal and state penalties make this a veritable minefield for agents to navigate. This document, Gramm-Leach-Bliley Privacy Law for Producers found in the appendix of the ACT website, to define the problem. The most farreaching privacy law which does affect insurance producers is the federal Gramm-Leach-Bliley Act (GLBA), enacted in 1999. The GLBA repealed part of the Glass–Steagall Act of 1933, removing many legal barriers that previously separated banking, securities, and insurance businesses.
However, since the new law would allow greatly increased sharing of information among businesses that were previously separated by law, a significant portion of the GLBA is devoted to privacy protection. This law is nearly 2 decades old and it is estimated that only 12% of IAs are in compliance. For example, I was asked to sign a new contract with a carrier this week that our agency has represented for many years. This contract includes the provision that we must be compliant with GLBA. We often sign these documents without fully appreciating the extent of liability we are accepting. Did you know that customers must be given privacy statements annually? Many agents feel overwhelmed by the enormity of an issue which is ambiguous and we may be tempted to throw up our hands in surrender because we don’t even know where to start. Here is a high-level overview of the GLBA security measure regulations: 1.Access controls on customer information systems, including controls to authenticate and permit access only to authorized individuals and systems to prevent employees from providing customer information to unauthorized individuals who seek it through fraudulent means; 2.Access restrictions at physical locations containing customer information; 3.Encryption of electronic customer information, including when in transit or in storage on systems where unauthorized individuals may have access; 4.Procedures to ensure that customer information system modifications are consistent with an organization’s information security program; 5.Dual control procedures, segregation of duties and employee background checks for employees with access to customer information; 6.Monitoring of systems and procedures to detect actual and attempted attacks on or intrusion into customer information systems; 7.Response programs for when an organization suspects or detects that unauthorized individuals have gained access to customer inforLouisiana Agent 26
mation systems; 8.Measures to protect customer information from destruction, loss or damage by environmental hazards or technological failure; 9.Training for staff to implement the security program; and 10.Regular testing of the key controls, systems and procedures of the security program. For Agency Cyber Guide 1.0, click here: a fantastic resource. In addition you can download the cybersecurity policy template. This ready-made document can be adopted by your agency right away. Don’t forget that, in addition to the federal laws, you must adhere to state laws as well. Some are much more onerous than others. For instance, if you do any business in New York you are now subject to one of the strictest standards of data security which exists today. Handling sensitive information is now one of the most critical responsibilities faced by the modern insurance agency. We can no longer afford to labor under the assumption that a cyber breach will only happen to someone else or that only the “big guys” need to worry about that.
IIABL Member Benefit: Agency Operations Big I Best Practices Library Benchmarking tools and data Docusign E-Signatures IIABL & Docusign partnered to bring digital signature technology to your agency. Big I Member Discount!!
Agents Council on Technology Resource and reference website to enhance use of technology in your agency Real Time Agency Automation Service provided to enhance workflow for servicing or quoting.
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Things You Didn’t Know About Everyday Objects
To many, the bobble located on the top of a winter hat is just a fancy fashion statement. Whether it is to accentuate an outfit or simply to state your loyalty for a team, most winter hats nowadays contain this little bobble at the top. But its origin story speaks of its usefulness. French marines would wear a sailor hat with a bobble on the top to prevent themselves from hurting their heads on the low cabin ceilings. The furry bobble would soften any head blows dealt by an unwary sailor or it could act as a warning signal if you felt your bobble grazing across your scalp. Later, they were used to define different branches of the military based on the size, shape and color of the bobble. The word was later changed to pompoms and the first people to have ever worn hats with pompoms are thought to be Vikings. Pictures depicting Viking gods regularly showcased them wearing caps with pompoms and to this day it is still a key component of Scandinavian folk costume.
The popular lollipop brand Chupa Chups is known not only for its delicious candy but also for that weird hole at the top of the stick. Although many thought it was for children to whistle through or to prevent choking hazards, they are actually created to stop the candy from being pulled out. This makes the candy harder to swallow by accident. In the production phase, and while the candy is still in liquid form, the hollow stick is inserted into the liquid so that when it hardens, it does so through the hole first to prevent the candy from falling out.
The colors of the lines at the bottom of tubes of toothpaste were at first thought to denote the type of toothpaste (organic or non-organic). But in reality, they are just bar codes used by light beam sensors at the factory to designate where the tube should be cut and folded.
Many backpacks nowadays come with this diamond -shaped, pig-nose symbol on the front of the backpack. Although many assumed it was merely a fashion statement, it actually serves a purpose! Hikers and climbers alike could attach a rope or a metal loop through it while an athlete ties his shoes, keeping it hands-free!
It is almost inevitable that a pair of dress pants or trousers are going to contain some folds and creases. But where did they originate from and what is their purpose? Well, back in the 19th century when European factories had to ship their clothing to other countries, the clothes had to be shipped via a shipping container. In order to save space and to send more clothes, items had to be folded in order to maximize the room. When the clothes finally got to their destinations, the pants and shirts would be so creased and folded that it became a part of the daily attire.
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Give Your Agency’s Website & Mobile App A Digital Checkup! Did you know... one tier of the Trusted Choice Marketing Reimbursement Program includes a complimentary digital check up?! Trusted Choice will provide you with a free check up of your agency's website or mobile app, and then you can receive up to $500 towards the cost of a web developer/vendor to build or update your website, mobile app, or even social media. If this sounds a little overwhelming, visit 24/7 Agency Solutions for website and mobile app vendors recommended by IIABL with discounted rates. 24/7 Agency Solutions offers your agency: 1) State of the art website design customized for your agency – make your website something that you will be proud of and something that attracts new customers.
2) Your own agency mobile app – give your customers the tools they need to manage their policies, report changes and claims, and stay connected to your agency…right on their cell phone or mobile device. 3) 24/7/365 answering service manned by licensed professionals – a cost effective way to service your customers any time they call. Your answer to "Jake from State Farm." The Big I has carefully aligned with best in class technology companies to provide your agency with 24/7 Agency Solutions. It's time to revolutionize your brand and meet the challenges of the future. IIABL is here to help you become a 24/7 agency - get started today! Check out the 24/7 Agency Solutions website: www.247agencysolutions.com For questions regarding this new service contact: Natalie Simpson, nsimpson@iianc.com .
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Webcasts E&O Risk Management December 5, December 21
Ethics December 6
Available on Demand
Flood December 27
Available on Demand
Available on Demand
Commercial & Personal Lines Courses Click above title for courses & dates for 2017 Available on Demand
New ISO Personal Auto Policy 3 Hrs PC/ADJ December 4
Seminars E&O Risk Management 5/8/18—Monroe 5/9/2018—Lafayette 5/10/2018—BR 5/11/2018—NOLA
E&O Risk Management 10/16/2018 –Shreveport 10/17/2018—Lafayette 10/18/2018—Kenner 10/29/2018—Covington
Events IIAGNO Company Past President’s Luncheon 12/14/2017
On-Demand Webcasts Masters Series: The Master Series are unique agency management courses from industry experts. in the Masters Series.
CSR Training: The Customer Service Representative is key employee in every agency and is a difficult commodity to find.
Environmental Strategists (eS) Becoming a certified environmental Strategist™ (eS) will equip you with the knowledge to identify, manage and transfer environmental exposures impacting everyday business.
Cyber Risk Manager (cyRM) Completion of the Cyber Exposures & Insurance – Training for Agents & Brokers course qualifies you to register for the cyRM certification for FREE.
Pre-Licensing Online prelicensing 3 optional study packages available Click here for additional information
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Homeowners Policy and the Liability of Gun Use and Ownership With so much in the news about gun laws, this article addresses many questions in this regard. How the policy responds has a lot to do with the situation and what happened – each situation could have a different coverage outcome. Reviewing specific policy language is a must and consulting with your company as to variations from the standard ISO form might be a good idea also. Let’s be honest, there is a tremendous gap in understanding between the general public and the insurance industry on liability, intentional and criminal acts, and insurability. It’s important to differentiate the exposures and education your customers on the fact that not everything may be insurable – intentional and criminal acts are typically not covered by any policy. How od HO policies generally address gun liability? Most policyholders don’t realize that the homeowners’ policy covers many types of liability claims that can include gen-related accidents. “Accident,” here, is key. Under a traditional
ISO HO-3 Form (HO 00 03 50 11), there is no specific gun-related exclusion. There is and “Expected or intended injury” exclusions which contains an exception for “use of reasonable force by an ‘insured’ to protect persons or property.” There is some coverage under the HO policy: Available for the accidental firing of a gun (e.g. the gun discharging while the insured is cleaning it), and Self-defense situation, if the gun firing was deemed “use of reasonable force,” something that obviously is 1) fact- specific and 2) subject to interpretation. Keep in mind that 1) reviewing the customer’s specific policy language is a must, as it may not include the use-of-reasonable-force exception Continued page 38
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HO & Guns continued
language, and 2) coverage determination is always fact-specific, but it’s particularly true here. What about intentional firing? When inquiring in the context of legislative proposals, customers often are focused on the intentional firing of the gun, such as in a public setting, during an active shooter event. The ability to argue self-defense or “use of reasonable force” depends on the circumstances: Was the insured defending from a home invasion? Was he in a public setting? Did the insured shoot an active shooter, shoot another persona he confused for the shooter, or accidentally hit a bystander, etc? Agents should stay away from speculating on coverage – except maybe for the active shooter himself (intentional criminal act), who obviously is never covered. Are there other options for broadening coverage? Yes, for gunowners who are concerned about liability issues, several gun organizations have devel-
oped additional insurance programs that expand coverage, mostly to provide defense costs and sometimes indemnity under broader claims of self-defense. A shooting range or club may offer insurance as part of membership. National associations such as the United States Concealed Carry Association (USCCA) or the National Rifle Association (NRA) offer coverage options for gunowners. These specialized policies have their own focus and their own exclusions.
Bottom Line: The HO policy generally will cover accidental discharge, and in some cases, self-defense. Only specialized policies provide additional coverage mostly targeted at defense costs in broader self-defense scenarios. Fundamentally, issues of liability will be extremely fact-specific, and may also differ based on the state (and case law) where the incident occurs.
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GOLD LEVEL
SILVER LEVEL
BRONZE LEVEL
BANKERS INSURANCE
CNA INSURANCE
FCCI GROUP
FOREST INSURANCE
GULFSTREAM P&C
HOMEBUILDERS SIF
IROQUOIS SOUTH, INC.
LANE & ASSOCIATES
LUBA WORKERS’ COMP
MAISON INSURANCE
MARKEL FIRST COMP
RPS COVINGTON
SUMMIT CONSULTING
AMERISAFE
EMC INSURANCE
AMERICAS INSURANCE
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IIABL 2017—2018 BOARD OF DIRECTORS & OFFICERS Neil Record President Record Agency, Inc.—Clinton John L. Beckmann, III President Elect J. Everett Eaves—New Orleans
Joseph A. O’Connor, III Secretary/Treasurer The O’Connor Insurance Group—Metairie H. Lee Schilling, Jr. National Director Schilling & Reid Insurance—Amite Richard Jenkins Past President Moore & Jenkins Insurance—Franklinton
Stuart Harris McClure, Bomar & Harris—Shreveport Ross Henry Henry Insurance Service—Baton Rouge Bret Hughes Hughes Insurance Services—Gonzales Harry B. Kelleher, III Harry Kelleher & Company—Harahan Philip McMahon Paul’s Agency—Morgan City Joe King Montgomery Thomas & Farr Agency—Monroe
Paul Owen John Hendry Insurance Agency-Zachary
Donnie Stiel Young Agent Representative Stiel Insurance of Acadiana, Inc.
Martin Perret Quality Plus—Lafayette
Byram H. Carpenter, III Moreman, Moore & Co—Shreveport
David T. Perry Arthur J. Gallagher RMS—Baton Rouge
Brenda Case Lowry-Dunham, Case & Vivien—Slidell
Robert Riviere Riviere Insurance Agency—Thibodaux
Joseph Cunningham, Jr. Cunningham Agency—Natchitoches
Armond Schwing Schwing Insurance Agency—New Iberia
Donna DiCarlo Riverlands Insurance Services—LaPlace
Michael D. Scriber Scriber Insurance Services—Ruston
Morris Funderburg Reeves, Coon & Funderburg—Monroe
Donelson P. Stiel David H. Stiel, Jr. Agency—Franklin Louisiana Agent 40
