October 2016

Louisiana Agent October 2016 A publication of the: Independent Insurance Agents & Brokers of Louisiana

IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com Francine Berendson Director of Communications & Events fberendson@iiabl.com

Big I Gives Back

4

TrustedChoice.com

5

Delay of Overtime Rule

6-7

New Agency Universe Study

8-10

Business Exposure Gap

12

New Homeowners/Dwelling Insurer

16

Best Practices Louisiana Map Changes

25-30 33

Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com

Kim Jackson Education & Membership kjackson@iiabl.com

Commissioner’s Corner

14-15

Karen Kuylen Director of Accounting kkuylen@iiabl.com

Ask Mike

18-24

E. Lee Mowe Marketing Representative lmowe@iiabl.com

IIABL Calendar

26

Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com

Rate & Rule Filings

27

Jamie Newchurch Insurance Services jnewchurch@iiabl.com

Tech Tips

Lisa Young-Crooks Executive Assistant lyoung@iiabl.com

IIABL Partners

30-31

35

Louisiana Agent 3

Big I Members, Associates & Friends Give and Big I Gives Back We are so lucky to be part of this great industry. Donations came from many: corporations, state associations, state execs, member agencies and other individuals. Over $80,000.00 in donations have been made to the Trusted Choice Disaster Relief Fund and contributions are still coming in.

Distributions to those individuals who applied for a grant has totaled over $130,000.00. The need is great and the funding was equally as great! Thirty-four individuals have been awarded on an average between $3,000.00 and $4,000.00. Individuals from Baker, Baton Rouge, Denham Springs, Gonzales, Hammond, Lafayette, St. Amant and Youngsville were all assisted.

This will help so many insurance industry personnel to get back on their feet.

If you have not submitted your grant application – please do so now!

State Associations, State Execs and State Association Affiliates have contributed: $37,650.00 Corporations, Agencies and Individuals have contributed: $45,100.00

Our sincere gratitude to all who contributed!

Continued page 5

Louisiana Agent 4

Louisiana Traffic Data 104% Growth in Traffic

TrustedChoice.com continues to improve and offers improvements to all members.

For Advantage subscribers, a new Help Desk is available, offering tips and tricks, and now ALL members can receive referrals from interested insurance buyers.

IIABL spent $50,000 for SEO (Search Engine Optimization) for Louisiana Big I members.

There has been a dramatic increase to TrustedChoice.com in the number of referrals.

Check out these graphs to see our growth!

Keyword Ranking 2,032 KEYWORDS

1,239 KEYWORDS

TOTAL KEYWORDS

PAGE ONE KEYWORDS

Tracking this many keywords for you.

Now we have this many keywords ranking on page one of Google.

16,694 VISITS

WITHOUT SEO PROGRAM Feb-Aug 2015

34,061 VISITS

WITH SEO PROGRAM Feb-Aug 2016

Louisiana Referral Data 34% Growth in Referrals

456 REFERRALS

WITHOUT SEO PROGRAM Oct-Jan 2015

613 REFERRALS WITH SEO PROGRAM May-Aug 2016

Good News for 2017—we have authorized another $50,000 for SEO!

Louisiana Agent 5

Big ‘I’ Continues to Support Efforts to Delay Overtime Rule

BY JENNIFER WEBB

As the Big “I” pursues legal action challenging the Department of Labor (DOL) overtime rule, year-end congressional efforts to delay or phase in the overtime rule are also ramping up.

The association is concerned that the DOL rule will negatively impact independent agencies and their clients. Scheduled to take effect Dec. 1, the rule raises the monetary threshold at which employees can qualify for “white-collar” exemptions—meaning they do not require overtime pay—by 100%, from $23,660 to $47,476. The threshold will also automatically update every three years.

Just before Congress left town ahead of the election, the U.S. House of Representatives passed the Big “I”-supported H.R. 6094, the “Regulatory Relief for Small Businesses, Schools, and Nonprofits Act,” by Rep. Tim Walberg (R-Michigan). The bill would delay implementation of the overtime rule until June 1, 2017. Sen. James Lankford (R-Oklahoma) introduced identical legislation in the U.S. Sen-

ate, S. 3462; however, the Senate has not taken action, and President Obama said he would veto the legislation if it passes.

Before the pre-election recess, Sen. Lamar Alexander (R-Tennessee), Chairman of the Senate Committee on Health, Education, Labor and Pensions, introduced another bill that would phase in implementation of the rule: S. 3464, the “Overtime Reform and Review Act.” The bill would phase in the DOL’s new salary threshold in four stages, starting with a substantial salary threshold increase to approximately $36,000 on Dec. 1, followed by a “pause year” in 2017 to allow employers to review and adjust to the changes of this new rule. Further increases to the salary level would occur annually thereafter, until reaching the final rule’s new threshold of $47,476 on Dec. 1, 2020. Especially important to Big “I” members, the bill prohibits the rule’s automatic increases to the salary threshold.

The “Overtime Reform and Review Act” is similar to legislation Rep. Kurt Schrader (D-Oregon) introduced in the House: H.R. 5813, the “Overtime

Louisiana Agent 6

Reform and Enhancement Act.” The Big “I” sent a letter in support of S. 3464 this week, and previously sent a letter in support of H.R. 5813. The association is also advocating for legislative fixes to the rule as part of the Partnership to Protect Workplace Opportunity.

While Congress contemplates multiple bills before the end of the year, the threat of a presidential veto and a packed post-election agenda mean any related efforts face an uphill battle. Also, the timing of any court decision that could delay or change the rule is uncertain. As such, Big “I” member agencies should still review the rule and assess its potential impacts on agency employees in preparation for the Dec. 1 deadline.

The Big “I” offers a resource page on the overtime rule, featuring a recently updated FAQ, sample job descriptions and explanatory materials on the Fair Labor Standards Act and employee classification.

Members must log in to view the page.

Jennifer Webb is Big “I” federal government affairs counsel.

Louisiana Agent 7

Emerging Purchase Channels: Top Agent Concern in New Agency Universe Study While the number of independent agencies has remained relatively steady in favorable business conditions, agents cite emerging purchase channels as their top concern in the new 2016 Agency Universe Study (AUS).

Every two years, the Future One Coalition—a partnership between the Big “I” and 17 major insurance companies—conducts a study of the independent agency system. Released this week, the 2016 study findings provide insight into the overall health and prosperity of the channel. They address business conditions, agency perpetuation, marketing and social media use, as well as what agencies consider the biggest challenges to their business.

The study segments the agency population by size and provides a glance at agency technology, market access provider use and staff diversity.

Based on the study data and several outside business and government resources, the 2016 AUS makes estimates about the agency population and how it is geographically dispersed.

Here are the top findings:

In 2016, the estimated total number of independent property-casualty agents and brokers in the U.S. stands at 38,000. This represents a small decrease relative to 2014 that presumably reflects the current M&A environment, as well as the relatively stable rates of exclusive agency conversions and new agency formation. Since 2004, the estimate has fluctuated between 37,500 and 39,000. Note: All estimates are rounded to the nearest 500.

Small agencies make up 21% of the population and jumbo agencies almost 2%. After a major decrease in the proportion of small agencies last wave—to 15% in 2014 from 28% in 2012—this year marks a reversal of that pattern, with small agency representation approaching that seen in 2012. The increase in jumbo agencies mainly reflects M&A activity.

Small agencies in particular are also gravitating towards large metro areas and away from small rural towns: 57% of small agencies are concentrated in large metro areas this year, compared to 50% in 2014.

Continued page 10

Louisiana Agent 8

Business conditions remain favorable, as they have for the past several AUS waves. The 74% of agencies that saw revenue increases between 2014 and 2015 report higher percentage increases than in 2014, averaging a 23% increase, compared to just 19% in 2014.

Seventy-two percent of agencies continue to use market access providers, although usage has declined this wave, from 80% in 2014. The slightly lower use of market access providers may be due to a higher number of direct appointments with carriers reported in the 2016 survey. Agencies also seem to be spreading commercial lines business across a larger number of carriers, as evidenced by a decrease in percent of commercial lines premium placed with their top three carriers.

Aging of the independent agency universe may be slowing. At the same time, more than three-fourths of agencies have no plans for a significant change in agency ownership within the next three years. 2016 represents the first AUS wave since 2010 in which the average age of agency principals has not increased. This year, the average age of principals with 20% or more ownership is 55, with 17% age 66 and older. In 2014, 18% were 66+ with an average age of 56. In both

2014 and 2016, however, few agencies anticipate an imminent change in agency ownership.

Although perceived challenges associated with retention of experienced producers and staff members has declined relative to 2014, agents consider lack of available talent for succession a key impediment to future ownership plans. In most size categories, nearly two in 10 agencies are concerned they do not have the necessary talent pool for future ownership.

For smaller agencies, questions about agency net worth are also a key impediment to agency ownership plans—in most cases, a reliable net worth figure is essential for succession planning. Roughly two in 10 agencies would like more information and support regarding perpetuation tools associated with buying out principals’ interest or having family take over.

Agencies, particularly smaller ones, are more immediately concerned about the impact of emerging purchase channels than the impact of technological advancements or the sharing economy. One -third of agencies believe direct purchase through carriers will significantly impact their

Louisiana Agent 9

agency. Concern is highest among small agencies at 43%, but two in 10 jumbo agencies are also concerned. One-fourth of small agencies also believe non-insurance websites and retail stores will significantly impact their agency within the next two years. By contrast, less than two in 10 agencies—regardless of size—feel the sharing economy, driverless cars or drones will impact them in the next two years.

Non-white agency principals continue to be underrepresented in the independent agency universe. Agencies with one or more minority principals are younger—but not necessarily smaller—than agencies with only non-Hispanic white principals. Notably, minority-led agencies indicate lower membership in insurance and financial organizations and lower awareness of Big “I” programs, suggesting additional outreach and programming may be necessary.

prominent among newer agencies, and include social media outreach, paperless communication and texting with clients.

At the same time, agencies continue to face challenges in marketing themselves effectively on the internet. Fifty-seven percent of agencies report that marketing their agency effectively online is among their top three technological challenges—a significant increase over the 46% of agencies that cited the same challenge in 2014. Sixty-three percent of small agencies feel particularly challenged, perhaps because they have fewer resources and receive less carrier support than larger agencies.

The Management Summary of the 2016 AUS is now available for purchase.

Use of social media is on the rise, with lower reliance on print marketing strategies. Fiftysix percent of agencies included social media and digital marketing in their 2015 marketing activities, up from 48% in 2013. Facebook and LinkedIn are by far the social media channels used most frequently, although 9% of agencies use Google+ and 6% use Twitter “often,” respectively. Digital strategies appear to be particularly Continued page 11

Louisiana Agent 10

Louisiana Agent 11 Louisiana Agent 11

Close the Home Business Exposure Gap Most new U.S. businesses start at home, so you likely have clients with a home business exposure you don't know about. And thanks to a new online submission process and online direct bill payments, submitting business with the Big "I" RLI Home Business Program is now easier than ever.

Isn't my customer's homeowners policy enough?

No! A typical HO policy doesn't provide adequate coverage for a home business. For example, coverage is usually excluded in these situations:



Business equipment is stolen from their vehicle

and scanner Someone steals their cash box RLI's Home Business policy can provide coverage for all of these situations, for over 130 classes of business. Some coverage features include:



Liability limits up to $1 million



Satisfies most event or tradeshow liability requirements



Business property protection up to $100,000 Additional insureds can be added Click here to learn more about this product or contact Jamie Newchurch at jnewchurch@iiabl.com



Groceries spill onto inventory in the trunk of their car



A power surge damages their computer

Louisiana Agent 12

Louisiana Agent 13

Commissioner’s Corner

The Affordable Care Act Marketplace in 2017

October is traditionally the month when the Department of Insurance reminds consumers of the opportunity to evaluate their Health Care Marketplace plan and start looking for a replacement if they are not satisfied with their coverage. As the Affordable Care Act (ACA) moves into its fifth year of enactment, there have been changes to rates and availability across the country. Louisiana is not immune from these market forces.

United Healthcare announced in April that it would withdraw from most ACA exchanges in 2017 and Louisiana is one of the markets where United Healthcare Marketplace plans will not be available in the new year. Citing costs that were too high and a population that was less healthy than the average, United Healthcare announced that it expects to lose $650 million on exchange plans in 2016. Other insurance companies have also expressed concerns about their futures on the exchanges. During a panel discussion at the Louisiana Department of Insurance’s annual Health Care Conference, representatives from Louisiana health care issuers expressed concerns about the exceptions that are made for people to sign up for health insurance outside of Open Enrollment. This can make it possible for those who become sick to sign up for coverage, take advantage of services, and then drop coverage or stop paying premiums.

place; Tennessee is seeing rate increases in the individual market range from 44-62 percent; Colorado’s individual market has a statewide average increase of 20 percent; and Connecticut’s average statewide increase in the individual market is 25 percent. While we don’t have authority to approve or disapprove rates, our actuaries are in the process of determining if the rate increases for Louisiana plans are actuarially justified. Rates will be final November 1.

Among the factors contributing to the rate increases are some provisions of the ACA that have had unintended consequences. The “Three Rs” - reinsurance, risk corridors and risk adjustment - were created within the Affordable Care Act to assist insurers with the transition from a market where they could decline to cover individuals with expensive medical problems to a market where a potential policyholder cannot be turned down due to their illnesses. At

For 2017, health issuers in Louisiana are seeking an average approximate rate increase of 27 percent in the Individual Market. In 2016 the average rate increase in the individual market was about 13-14 percent. In the small group market the average proposed rate increase is six to nine percent which is higher than the average for the last three years of three to six percent. From coast to coast the trend of higher rates in 2017 is playing out across the country. In Alabama, the average rate increase is 39 percent on individual market plans offered through the MarketLouisiana Agent 14

the start of ACA implementation, it was believed that the new enrollees may not have had access to care in the past and may be very high-cost and drive up premiums. To smooth out the unpredictability of the new claims the legislation offered the Reinsurance and Risk Corridor programs for a limited amount of time. Both programs are set to expire this year.

The goal of the Reinsurance Program through the Affordable Care Act was to stabilize the individual market while the Marketplace was first rolled out.

The Reinsurance Program transfers funds from insurers with lower-cost enrollees to insurers with higher-cost enrollees. In June of this year, the Centers for Medicare and Medicaid Services (CMS) announced that in 2015 contributions to the reinsurance program ($6.5 billion) were smaller than requests for payments ($14.3 billion). CMS estimates that it will make $7.8 billion in reinsurance payments to 497 of the 575 participating issuers nationwide.

Privacy/Data Breach White Paper The Big I’s Agency Council of Technology (ACT) has recently published a white paper that advises agents on critical aspects of compliance with federal privacy and data breach response laws. This document is the result of extensive reviews of over 100 different company agency agreements and guides agencies through privacy, security, and data breach overviews in view of GLBA, FCRA, FACTA, HIPAA, and HITECH laws.

It can be found on the ACT website by clicking here.

The Risk Corridor Program was meant to make onExchange plans share their profits and losses with the government. However, Congress and the Administration both mandated that CMS could only pay out funds under the program that it had collected. Because of the revenue-neutral requirement and the enormous losses that most insurers had on the exchanges, the Risk Corridor Program was only able to pay out $0.13 per dollar and the unanticipated shortfall contributed to severe losses for many insurers, including a number of Co-Ops that became insolvent. Litigation is ongoing by some insurers who allege that the government violated its constitutional, statutory and contractual obligations by not guaranteeing full risk corridor payments.

Although the programs that were meant to mitigate losses during the first few years after the implementation of the ACA are coming to an end, the turbulence they were intended to calm seems not ready to make the same exit. The shakeout from rate increases, insurers pulling out of the Marketplace, and some of the largest financial mergers this country has ever seen will continue to affect the industry for years to come.

Louisiana Agent 15

New Homeowners / Dwelling Insurer Enters Louisiana

Spinnaker Insurance Company (Spinnaker) is an admitted Illinois domiciled insurance company with approximately $32 million in policyholder surplus. The company has earned a rating of A- from AM Best. Spinnaker is licensed to write business in 45 states. For more information about Spinnaker, please visit their website at www.spinnakerins.com.

In addition to offering its voluntary products through Baton Rouge-based Acadian Managers, Spinnaker plans to participate in this year's round of Louisiana Citizens depopulation. Independent agents interested in producing new business for Spinnaker must authorize the company to depopulate requested policies from Louisiana Citizens; only agents doing so will be contracted to produce new business.

Interested agents can contact Kristie Seymore at kseymore@AcadianManagers.com or (225) 412-6430 Ext. 403. For more information about Acadian Managers, please visit their website at www.AcadianManagers.com.

Louisiana Agent 16

Louisiana Agent Louisiana Agent 17 17

IIABL Director of Education, Mike Edwards is your source for technical questions. Contact Mike at medwards65@aol.com or 678.513.4390

Subject: Extended Business Income

Q.

I am stumped on a couple of business income issues, and would appreciate your help. First, I’m trying to figure out the difference between Extended Business Income, Extended Period of Indemnity, and Maximum Period of Indemnity. Second, how do all these differ from “regular” Business Income?

I realize these are probably pretty basic questions, so my apologies in advance. I am still learning about Business Income.

A.

No apology needed. I’ve been in insurance for over 30 years, and I’m still learning, too. In fact, in my view, every agent should be committed throughout their career to the goal of “still learning.”

For the discussion below, assume: (1) Your insured is “JJ’s Restaurant,” which is owned

by Jill Smith and her daughter Jillette. (2) The restaurant is damaged by a fire on March 9. (3) Coverage form excerpts and comments are based on ISO (Insurance Services Office) forms. (4) Proprietary forms may be different.

I think the key to understanding these three options is to first see how “regular” Business Income coverage works. Below are pertinent excerpts from the ISO Business Income coverage form – CP 00 30 10 12.

Issue #1: (“Regular”) Business Income coverage CP 00 30 10 12 Business Income (And Extra Expense) Coverage Form A. Coverage 1. Business Income

We will pay for the actual loss of Business Income you sustain due to the necessary "suspension" of your "operations" during the "period of restoration". The "suspension" must be caused by direct physical loss of or damage to property at premises which are described in the Declarations and for which a Business Income Limit Of Insurance is shown in the Declarations. The loss or damage must be caused by or result from a Covered Cause of Loss.

Comments: (1) For JJ’s Restaurant to have a valid Business Income claim, their operations must be suspended due to direct physical damage by a Covered Cause of Loss to property at their premises.

(2) Business Income is defined as “a. Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred; and b. Continuing normal operating expenses incurred, including payroll.”

(3) Payment for the loss of income (“a.” above) as well as for the continuing normal operating expenses (“b.” above) is made for the duration of time it takes to get the restaurant repaired, rebuilt, or relocated, which is referred to as the “period of restoration.”

F. Definitions 3. "Period of restoration" means the period of time that: a. Begins: (1) 72 hours after the time of direct physical loss or damage for Business Income Coverage; or (2) Immediately after the time of direct physical loss or damage for Extra Expense Coverage;

Louisiana Agent 18

Louisiana Agent 19

caused by or resulting from any Covered Cause of Loss at the described premises; and

b. Ends on the earlier of: (1) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or (2) The date when business is resumed at a new permanent location.

"Period of restoration" does not include any increased period required due to the enforcement of or compliance with any ordinance or law that:

(1) Regulates the construction, use or repair, or requires the tearing down, of any property; or (2) Requires any insured or others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of "pollutants".

The expiration date of this policy will not cut short the "period of restoration".

Comments: (1) The definition of the “period of restoration” clearly lays out the span of time for which JJ’s Restaurant can be compensated. [3.a. and 3.b. above.]

Issue #2: Extended Business Income CP 00 30 10 12 A. Coverage 5. Additional Coverages c. Extended Business Income (1) Business Income Other Than "Rental Value" If the necessary "suspension" of your "operations" produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur during the period that: (a) Begins on the date property (except "finished stock") is actually repaired, rebuilt or replaced and "operations" are resumed; and (b) Ends on the earlier of: (i) The date you could restore your "operations", with reasonable speed, to the level which Continued page 22

(2) The 72-hour delay in the commencement of the period of restoration can be reduced or eliminated by endorsement CP 15 56 – Business Income Changes – Beginning of the Period of Restoration.

(3) But even after all repairs are completed and JJ’s Restaurant is back in business, there is still a potential vulnerability: customer traffic may not return to pre-loss levels immediately. In other words, income might lag behind what it otherwise would have been before the loss. This exposure is commonly referred to as a “lag loss.” It is impossible to accurately predict how long this diminished-income period will last, so consultation with the insured on this point is very important.

(3) The CP 00 30 includes a little cushion for lag losses, called “Extended Business Income.”

(4)

Louisiana Agent 20

Louisiana Agent 21

would generate the business income amount that would have existed if no direct physical loss or damage had occurred; or

(2) Note that Extended Business Income is automatically included in the CP 00 30, as an Additional Coverage. No endorsement is needed.

(ii) 60 consecutive days after the date determined in (1)(a) above.

(3) Depending on JJ’s reputation and customer loyalty, and other factors that need to be addressed with Jill and Jillette, the income might return within 60 days.

However, Extended Business Income does not apply to loss of Business Income incurred as a result of unfavorable business conditions caused by the impact of the Covered Cause of Loss in the area where the described premises are located.

Loss of Business Income must be caused by direct physical loss or damage at the described premises caused by or resulting from any Covered Cause of Loss.

Comments: (1) Extended Business Income starts when repairs are completed [c.(1)(a)], and can last up to 60 days [c.(1)(b)(i)(ii)]. That is, Extended Business Income starts when the period of restoration ends.

(4) For some business income insureds, they may recognize that the 60 days of Extended Business Income coverage is insufficient to cover anticipated lag losses.

For those insureds, a critical available option is Extended Period of Indemnity.

Issue #3: Extended Period of Indemnity CP 00 30 10 12 E. Optional Coverages 4. Extended Period Of Indemnity Under Paragraph A.5.c., Extended Business Income, the number 60 in Subparagraphs (1)(b) and (2)(b) is

Continued page 23

Louisiana Agent 22

replaced by the number shown in the Declarations for this Optional Coverage.

Comments: (1) A good memory-jogger to remember Extended Period of Indemnity is that it “extends Extended Business Income” (beyond 60 days).

(2) Under ISO Rule 51.D., options are available for Extended Period of Indemnity up to 730 days (2 years).

Issue #4: Maximum Period of Indemnity The Maximum Period of Indemnity is one of three Optional Coverages available to an insured as an alternative to the Additional Condition – Coinsurance requirement. The three options are Maximum Period of Indemnity, Monthly Limit of Indemnity, and Business Income Agreed Value.

CP 00 30 10 12 E. Optional Coverages 1. Maximum Period Of Indemnity

a. The Additional Condition, Coinsurance, does not apply to this Coverage Form at the described premises to which this Optional Coverage applies. b. The most we will pay for the total of Business Income loss and Extra Expense is the lesser of: (1) The amount of loss sustained and expenses incurred during the 120 days immediately following the beginning of the "period of restoration" or

(2) The Limit Of Insurance shown in the Declarations.

Comments: (1) Maximum Period of Indemnity provides coverage for up to 120 days. Essentially, the insured’s “period of restoration” is limited to 4 months.

(2) This optional coverage is much simpler to manage than Coinsurance, Monthly Limit of Indemnity, or Business Income Agreed Value.

(3) For insureds who could either rebuild, repair, or relocate in that period of time, it Continued page 24

Louisiana Agent 23

can be the best option.

(4) However, a miscalculation by an insured that the business could be up and running in that amount of time can be catastrophic, since the Extended Period of Indemnity option cannot be used if the Maximum Period of Indemnity option is selected. [ISO Manual – Business Income Coverage Options, Rule 51.D.2] (5) There appears to be no ISO Manual Rule regarding the applicability of Extended Business Income (the 60-day extension), if the Maximum Period of Indemnity option is selected. Therefore, the insured might be able to have the 120 days, plus 60 days, coverage. Insurers may differ on this, however, absent any ISO guidance.

Additional Information Lastly, here are some suggestions that I think will be valuable as you continue your “still learning” trek.

(1) The “IIABL website” (Independent Insurance Agents & Brokers of Louisiana) has

myriad resources for agency staff, such as technical articles (Technical Advisories and Ask Mike articles, both of which are Indexed), frequently requested statutes, industry news, and other educational resources.

(2) The “IIABA Virtual University” (“VU”) of the Independent Insurance Agents & Brokers of America has at least 12 excellent articles on various issues related to Business Income.

Access to the VU is free. Use the Search box to find all the articles.

The VU also has an “Ask An Expert” service, where subscribers can submit questions, and receive responses from several experts on the VU Faculty.

(3) The Independent Insurance Agents and Brokers of Louisiana and the Independent Insurance Agents of Mississippi sponsor an annual Young Agent Conference, usually in August. It is an ideal forum to network with the next generation of insurance professionals.

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.

Louisiana Agent 24

Best Practices Agencies: Organic Growth Down, Profitability Steady While organic growth has slowed, profitability remains steady at the top-performing independent agencies in the country.

The newly released 2016 Best Practices study, which provides benchmarks and analysis of the group of 260 Best Practices agencies, reveals how they are thriving in a difficult environment—and how all independent agencies can follow their success strategies.

Every three years, the Big “I” collaborates with Reagan Consulting to select Best Practices firms throughout the nation for outstanding management and financial achievement in six revenue categories: less than $1.25 million; $1.25-2.5 million; $2.5 -5 million; $5-10 million; $10-25 million; and more than $25 million. Big “I”affiliated state associations and insurance companies nominate agencies which are

then qualified based on operational excellence. The Best Practices program reviews financial and benchmarking information for the participating agencies and provides updates the following two years.

This year’s benchmarking analysis examines four key challenges facing the insurance brokerage industry:

Slowing growth. The average Best Practices firm grew organically by 6.9% in 2015, down from the recent high of 9% in 2012.

For most Best Practices agencies, consistent organic growth—or non-acquisition growth— is the most important goal. Sales velocity is a benchmark designed to measure the single most important driver of organic growth: new business. Defined as new commissions written as a percentage of a firm’s baseline (prior-year) commission and fees, sales velocity can create organic growth, even in a Continued page 28

Louisiana Agent 25

Webcasts E&O Risk Management November 1, November 8, November 17,

Ethics November 3

Flood November 10

IIAGNO Town Hall 11/10/2016 Metairie Country Club Speaker: Michael Hecht, CEO of Greater New Orleans, Inc.

IIABR Luncheon 11/10/2016 Speaker: Congressman Garret Graves

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.

Commercial & Personal Lines Courses Click above title for courses & dates for 2016

Seminars Flood Seminars Monroe—November 8 Lafayette—November 9 Baton Rouge—November 9 Kenner—November 10 Covington—November 10

Events IIAGNO Rock N Bowl Company Appreciation Event 11.4.2016 Contact Lisa Young-Crooks lyoung@iiabl.com

On-Demand Webcasts Masters Series: The Master Series are unique agency management courses from industry experts. in the Masters Series.

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 Louisiana Agent 26

Company

Coverage Type

Overall % Impact:

Overall $ Impact:

Number of Policyholders:

Changes

American Nat’l General ANPAC Louisiana Ins. Co

19-Private Passenger Auto

+10.025%

$3,091.892

14,531

New: 9/6/2016 Renewal: 9/6/2016

Privilege Underwriters Reciprocal Exchange

19-Private Passenger Auto

+5.000%

$196,736

815

New: 12/3/2016 Renewal: 2/1/2017

Church Mutual Ins Co

Commercial Package

-7.63%

-$1,242,200

1331

New: 12/1/2016 Renewal: 2/1/2017

Republic Underwriters Southern Ins Co of Virginia Republic Fire & Casualty Southern Underwriters United Services Auto Assoc.

USAA Casualty Ins Co USAA General Indemnity

Commercial Auto

+8.0%

$377,029

417

New: 12/1/2016 Renewal: 12/1/2016

19-Private Passenger Auto

+14.5%

$28,473,970

88,000

New: 2/18/2017 Renewal: 2/18/2017

Progressive Security Ins Co

19 – Private Passenger Auto

+9.400%

$32,511,948

158,356

Progressive Paloverde Ins

19 – Private Passenger Auto

+7.500%

$9,731,081

59,363

Metropolitan P&C Ins Co

4 – Homeowners

+9.400%

$1,248,964

7,632

New: 8/19/2017 Renewal: 11/17/2017 New: 8/19/2016 Renewal: 11/17/2016 New: 10/15/2016 Renewal: 10/20/216

Allstate Indemnity Co

5 – Commercial Multiple Peril

+8.700%

$124,938

2,140

New: 1/5/2017 Renewal: 1/5/2017

LA Citizens

1 – Property

-5.90%

-$650,000

2,684

New: 2/1/2017 Renewal: 2/1/2017

Arch Insurance Company

16 – Workers Comp

-2.4%

-$157,244

121

New: 11/1/2016 Renewal: 11/1/2016

Allstate Insurance Company

4 – Homeowners Mobilehome Program

15.0%

$330,656

2,798

New: 1/5/2017 Renewal: 1/5/2017

Aetna Life Insurance Co

17 – Other Liability Revised Rate only Health Excess/Stop Loss

-14.5%

-$413,509

6

No effective date published yet

Republic Underwriters Southern Ins of Virginia Republic Fire & Casualty Southern Underwriters Ins

9 – Inland Marine

-19.8%

-$5,090

66

New: 1/1/2017 Renewal: 1/1/2017

Louisiana Agent 27

struggling marketplace.

Best Practices firms generate a sales velocity averaging about 15%. This is well above the industry norm of approximately 12% and helps explain why Best Practices firms tend to outgrow the rest of the industry.

Although growth has slowed, Best Practices agencies find that specialization can create new revenue streams. Today, most Best Practices agencies derive a significant portion of their revenue from areas in which they specialize, because focused expertise can differentiate a firm in a crowded marketplace. For the largest firms, nearly half of revenue comes from industries in which they specialize.

Increased consolidation. The consolidation pace has steadily increased since 2009, when merger & acquisition activity temporarily cooled in the wake of the Great Recession.

According to SNL Financial, 2015 was a rec-

ord year for deal activity, marking 469 transactions.

Most agency shareholders face a dilemma created by this frothy market. Best Practices agencies address it by doing whatever it takes to close the gap between the lower internal agency value and the higher “street value.” The higher values delivered by third-party buyers typically result largely from expense reductions—producer compensation, owner compensation, staffing reductions—that the seller must agree to implement after the deal is closed. Today’s agency owners recognize that they can narrow the difference between internal and external value by getting more serious about making these changes on their own, without selling their business.

Another strategy the active M&A marketplace has produced is an offensive one.

After years of believing they were priced out of the acquisition Continued page 29

Louisiana Agent 28

market, today’s Best Practices firms are jumping into the acquisition fray. They typically focus on smaller, local agencies owned by friends or respected competitors.

Aging workforce. The average age of employees at most agencies has significantly increased. A workforce that is too heavily concentrated among any single age group will create a succession challenge if a large group retires within a small window of time. Best Practices firms recognize the dual necessity of investing in talent and managing age concentrations to ensure stability of leadership, production and client servicing. Agencies best positioned to achieve long-term independence tend to employ generationally balanced production talent.

Many producers’ clients are heavily concentrated among their peer group.

As producers approach retirement, decision makers at many of their clients may be doing the same. Regardless of whether

or not the decision maker is on the verge of retirement, it is not unusual for a producer’s book of business to undergo a higher level of account attrition as they retire.

Because of this, many Best Practices agency leaders have developed plans and protocols for transitioning producer books for business when they retire. Savvy firms also emphasize early succession planning for all key leadership positions.

Disruptive technology. New technologies may disrupt the traditional broker model. According to CB Insights, a firm that tracks technology investments in the insurance industry—dubbed “InsurTech”—the first half of 2016 marked 82 investments in insurance startups, totaling more than $1 billion.

These startups permeate every segment of the insurance industry. Best Practices agencies monitor InsurTech developments so they can effectively respond to emerging changes.

Continued page 30

Louisiana Agent 25 29

Two areas that seem to have above-average vulnerability are small commercial propertycasualty and small group medical. Agency owners should know the percentage of business generated by these business segments.

Wherever possible, agents need to find ways to match or exceed the value proposition technology players offer, while retaining the all-important client relationship and risk management expertise that form the heart of the existing insurance brokerage industry.

This is the 24th edition of the annual Best Practices benchmarking analysis and the first year of the current three-year study cycle. The complete report is available for purchase as an e-book.

By: Steve Anderson

Building a Digital Sales Culture A few weeks ago I had the opportunity to present at the Applied Net user group conference in Orlando. My topic was Building a Digital Sales Culture.

I, along with others, have talked quite a bit over the last few years about the changes in the buying behaviors of consumers. The digital consumer starts their search for information online. For example, 55% of people looking to purchase a new product start their search for information on Amazon. This buying behavior does carry over into insurance.

It is well established that an increasing percentage of consumers begin their search for information about insurance products and services online. A high proportion of these Continued page 31

Louisiana Agent 30

consumers want to talk to a person before they make a final purchase decision. And that is good news for insurance agents.

However, does your insurance agency sales culture embrace the different sales processes needed to engage and, ultimately, sell to this digital consumer?

What happens when the prospect finds you online and contacts your agency? What is your follow-up process if they fill out that form on your website? Do they receive the same experience they have come to expect in other digital channels?

This is where the concept of building a digital sales culture becomes necessary.

If the agency sales process is not updated to include the digital channel, then the consumer experience will not be optimized, and they will buy from someone else.

How to Begin Following are some ideas on how your organization can begin thinking about building a digital sales culture.

Understand the Customer Journey The graphic below provides an overview of what I consider to be the perfect customer journey. The old marketing funnel has been replaced by this circle because anyone can enter at any point.

Prospect Management This is the traditional Customer Relationship Management (CRM) process. Keeping track of information about prospects and clients is important so engagement can be customized for each person.

Mobile First

This is not about phones. It is about a mindset that understands people often (most of the time?) engage via mobile first. Are your follow -up processes built for mobile?

Facebook and LinkedIn Advertising A vast untapped resource for both personal and business lead generation.

Opportunity Management Being able to do a better job identifying which prospects have a higher potential for becoming clients.

Campaign Management Creating an ongoing communication process that will keep you (and the agency) in front of those prospects that you want to work with but the time is not right. This “long-term wait� series could go on for years.

Marketing Automation Allows you to track when someone clicks on a link in a newsletter, for example, and automatically modifies the follow-up process with customized and personalized information.

Results Management Lets you know what is and is not working so you can adjust your time, effort, and resources to maximize your sales process.

Your agency is well positioned to help prospects with the products and services digital consumers want and need. When you transition your sales culture to recognize and embrace digital, your agency will be prepared to welcome the digital consumer with open arms.

How is your organization building a digital sales culture? Let me know in the Comments Section.

Louisiana Agent 31

LOUSIANA MAP CHANGES MADE EASY! Effective September 30, 2016 new FEMA flood maps will take effect in Orleans Parish and many properties will change from a Special Flood Hazard Area, “A zones,” to a non-hazard areas, “X zones,” due to the reconstruction of the hurricane risk reduction system and significant drainage improvements following Hurricane Katrina.

With the change in zones, many properties will be eligible for a Preferred Risk Policy (PRP), offering lower-cost coverage to owners and tenants of eligible buildings located in the moderate-risk B, C, and X Zones. Property owners are still encouraged to maintain flood coverage in the moderate-risk areas, based on the fact that 25% of all flood losses occur outside of a Special Flood Hazard Area.

Starting on October 1, 2016 Selective will be reviewing all flood policies in Orleans Parish to determine those that qualify for the PRP. Policies that qualify based on their change of zone will be converted to a PRP using Cancel Reason 24 from the NFIP Flood Manual, which allows these policies to be rewritten to a PRP* subject to loss history.

The policy change can result in a lower premium for the much needed coverage. There will be no gap in coverage and a new PRP declaration page and refund check will be generated.

As part of FEMA’s Clear Communication starting on October 1, 2016, all flood policies will be reviewed on an annual basis to make sure each policy is being rated based on the correct flood zone, allowing the opportunity to review and rewrite policies that qualify for the PRP. For additional assistance or if you would like more information, please contact your Selective Flood Territory Manager or Underwriting Team today.

GOLD LEVEL

SILVER LEVEL

BRONZE LEVEL AMERISAFE

AMERICAS INSURANCE

AMTRUST GROUP

BANKERS INSURANCE

CNA INSURANCE

EMC INSURANCE

FOREST INSURANCE

GULFSTREAM P&C

HOMEBUILDERS SIF

LANE & ASSOCIATES

MAISON INSURANCE

MARKEL FIRST COMP

RPS COVINGTON

SUMMIT CONSULTING

ASI

LUBA WORKERS’ COMP NATIONAL FLOOD SERVICES

Louisiana Agent 33

IIABL 2016—2017 BOARD OF DIRECTORS & OFFICERS Richard D. Jenkins President Moore & Jenkins Insurance—Franklinton Neil Record President Elect Record Agency, Inc.—Clinton

John L. Beckmann, III Secretary/Treasurer J. Everett Eaves—New Orleans H. Lee Schilling, Jr. National Director Schilling & Reid Insurance—Amite David Dethloff Past President Dethloff & Associates—Shreveport Derek Canchola Young Agent Representative Blumberg & Associates—Baton Rouge Byram H. Carpenter, III Moreman, Moore & Co—Shreveport Brenda Case Lowry-Dunham, Case & Vivien—Slidell Joseph Cunningham, Jr. Cunningham Agency—Natchitoches Donna DiCarlo Riverlands Insurance Services—LaPlace Morris Funderburg Reeves, Coon & Funderburg—Monroe

Ross Henry Henry Insurance Service—Baton Rouge Bret Hughes Hughes Insurance Services—Gonzales Philip McMahon Paul’s Agency—Morgan City Joe King Montgomery Thomas & Farr Agency—Monroe Joseph A. O’Connor, III The O’Connor Insurance Group—Metairie Paul Owen John Hendry Insurance Agency-Zachary Martin Perret Quality Plus—Lafayette David T. Perry Arthur J. Gallagher RMS—Baton Rouge Robert Riviere Riviere Insurance Agency—Thibodaux

Armond Schwing Schwing Insurance Agency—New Iberia Michael D. Scriber Scriber Insurance Services—Ruston Donelson P. Stiel David H. Stiel, Jr. Agency—Franklin

Louisiana Agent 35