Fall 2023 Kentucky IA Magazine

Fall 2023

ANNUAL CONVENTION PREVIEW THANK YOU,

DIAMOND SPONSORS!

JAMES CLEAR A POLICY ARCHAEOLOGIST

TALKS POLICY RECORD

RETENTION PG. 11

THE BANK ANNUAL KY P-C SOUNDNESS QUESTION: MARKETPLACE

REPORT PG. 22

WHAT IT MEANS FOR AGENTS PG. 7

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WHAT'S

INSIDE

Page 7

CONTENTS 7

The Bank Soundness Question: What It Means for Agents

11 A Policy Archaeologist Talks Policy Record Retention 18 Convention Preview

Page 11

22

2022 Kentucky Property-Casualty Insurance Marketplace Annual Report Preview

29 Breaking Up With a Client - Can You Tell Clients to Find Another Agent?

Page 18

IN

37 You're in Control

EVERY ISSUE 4

From the Chair

40 Classified Ads

5

From the Commissioner’s Desk

42 Industry Partners

40 Upcoming Events

Page 37

43 Social Media Links

40 Advertiser Index

OUR MISSION Create value for our members through innovative resources and legislative advocacy while fostering industry relationships.

The Kentucky IA is the official magazine of Big I Kentucky, and is published quarterly.

Office Address: 13265 O’Bannon Station Way Louisville, KY 40223 Telephone 502-245-5432 Email info@bigiky.org fax 502-245-5750

All advertising and editorial submissions are welcome.

3 | Kentucky IA - Fall 2023

Chair From the

A MESSAGE FROM WHITNEY FLOYD Coming out of COVID, it has been a struggle for us to re-engage at live events. There’s a shortage of labor, hard market conditions and numerous other excuses for missing days in the office.

But last year at the Big I Kentucky Annual Convention, people showed up. We crushed our attendance goals, largely due to our keynote speaker, Robert O’Neill. The Seal Team 6 soldier credited with firing the shot that killed terrorist Osama bin Laden, he enamored the crowd with his storytelling and insights into teamwork. So how do we top that in 2023?

If you haven’t heard of the book Atomic Habits, you’ll be well acquainted after this year’s keynote speaker. Author James Clear has sold over 15 million copies of his #1 NY Times best-seller. Packed with self-improvement strategies, Atomic Habits teaches you how to make the small changes that will transform your habits and get 1% better every day. Below is a copy of James Clear’s biography:

OFFICERS Whitney L. Floyd , CIC

Chair, Henderson 270.827.3543

Laura Yount, CIC, CISC

Chair-Elect, London 606.878.0100

Chris Wiseman, CIC

Vice-Chair, Bowling Green 270.781.2020

Allen J. Crawford, CIC, CSRM

Treasurer, Somerset 606.679.6311

George “Chip” Atkins III

National Director, Louisville 502.585.3600

Kevin Desmond

Immediate Past Chair, Bellevue 859-491-5100

DIRECTORS

Philip Anderton James Clear is a writer and keynote speaker Louisville, 502.585.3277 focused on habits, decision making and continuous improvement. He is the author of the #1 New York Danny Greene Northern Kentucky, 513-534-0294 Times bestseller, Atomic Habits. The book has sold over 15 million copies worldwide, has been translated John Purdom into more than 50 languages and is the #1 bestMurray, 270.753.4751 selling book of 2021 on Amazon and #1 audiobook Jared Pursley on Audible. Clear is a regular speaker at Fortune Glasgow, 270-646-8162 500 companies, and his work has been featured in Carolyn Reynolds publications such as Time magazine, the New York Richmond, 859-623-8485 Times, the Wall Street Journal and on CBS This Morning. His popular “3-2-1” email newsletter is sent Nick Rolf Fort Thomas, 859-781-0434 out each week to more than 2.5 million subscribers.

James doesn’t merely report the research of others. He tries out the concepts for himself as he experiments with building better habits as an entrepreneur, writer and weightlifter. In the end, his talks end up being one-part storytelling, one-part academic research and one-part personal experiment, forming a colorful blend of inspirational stories, academic science and hard-earned wisdom.

It is guaranteed to be an unforgettable session at this year’s Convention.

However, if this alone does not draw your attention, we have plenty of other events lined up for November 15-17. The largest insurance trade show in Kentucky will be on Wednesday from 1-5pm. Immediately following the trade show will be our first ever Top Golf: Swinging for Success event.

Transportation is provided to/from Top Golf Louisville. Thank you to our event sponsor, Liberty Mutual/Safeco/State Auto! Breakout sessions on Thursday include Roundtables by Agency Size: Collaborate, Learn, Succeed as well as our State of the Industry Panel: Navigating the Future. Fan favorites including the Wine & Bourbon Toss and an Afternoon at Churchill Downs are back too. Please look for much more information to follow in the weeks leading up to our Annual Convention.

I’ll see you at the next event!

Whitney 4 | Kentucky IA - Fall 2023

Eric Schumacher

Maysville, 606-759-5663

Adam Sheridan

Somerset, 606-679-6311

STAFF Tara T. Purvis

President & CEO

Erin Fosson

Sales & Marketing Director

Katie Hines

Membership Services Director

Jennifer Hurt

Office Manager

Kristie Weyer, CISR

Insurance Services Director

Cassie Young

Workforce Development Director

From the

Commissioner’s Desk The insurance industry for homeowners’ coverage faces multiple challenges in 2023 as the economy attempts to stabilize and industry conditions become more uncertain. The robust premium gains in commercial and homeowner property insurance lines have been offset by higher loss expenses driven by rising replacement costs, higher claims costs and increased losses from cyber and climate risk. To sum up the past three years for the industry: • 2021 was the year of the resignation with insurance companies---like other industries--losing many experienced employees; • 2022 was the year for major inflation trends and continuing supply chain delays; and • 2023 is the year for capital crunch for companies including the greatly increasing cost (40% - 60%) for reinsurance Any of the factors would have a major impact on the insurance industry but combining the factors increases the stress and forces the industry to make some difficult choices.

The national loss ratio for homeowners’ insurance in 2022 was 102.5%. In other words, for every $100 in premium the insurance industry received for homeowners’ insurance, $102.50 was paid in claims even though the premium growth nationally was a 9.8% increase.* These are not sustainable numbers and will result in moderately large to large rate filing increase requests with the state Departments of Insurance. It is anticipated in Kentucky; we will see premium increase between 15-22%. The Kentucky Department is also seeing insurance companies reviewing their appetite to cover certain items.

Through the filings submitted to the Department, we are observing higher deductibles, filings lessening the availability for actual replacement value on roofs due to windstorms, and an increased scrutiny of existing policies to determine renewability.

These challenges are not United States specific but are affecting the industry across the globe. While we have heard of major insurers leaving the marketplace in several states, in Kentucky the market is stable.

However, the third week of September, the

Department received a notice from Kentucky National Insurance Company that it planned to cease issuing new homeowners’ coverage in mid-October, 2023 and would stop renewing homeowners’ coverage, January 1, 2024. After internal review the Department “did not disapprove” this plan and we notified the Tennessee Department of Insurance which is the only other state in which Kentucky National has policyholders.

The Department is meeting with the company and making sure that all statutes are upheld in this process including the required 75 days’ notice to policyholders of the non-renewal of coverage.

No one is happy with insurance premium increases but the Department must ensure that the insurance industry is financially solvent to pay claims and that we have a strong market in Kentucky where there are many insurance companies to offer coverage thus offering choice for consumers. We hear regularly from insurance consumers who are not happy with rate increases and I know that you are having those same conversations with your customers. The best we can do is to listen and to try to help them understand why the rates are increasing. The worst scenario we can have in Kentucky would be for many of our companies to stop writing coverage. The Department is increasing our actuarial reviews of the rate increases to make sure that they are needed and justified. We will continue to do our job at the Department and we are confident that as experienced professionals you will also connect with your customers to help them understand the current status of the market. *Source: Center for Insurance Policy and Research. (n.d.). Content.naic.org. https://content.naic.org/ research

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You’ll find this and so much more. Find out why agents choose West Bend by visiting thesilverlining.com.

The worst brings out our best.® 6 | Kentucky IA - Fall 2023

THE BANK SOUNDNESS QUESTION: WHAT IT MEANS FOR AGENTS

By: David W. Tralka

Many independent agents have watched with concern as a small number of high-profile banks have faltered during 2023.

Just what does this shock to the banking system mean to independent agents and brokers throughout the country?

were specific to those few banks. America’s strong bank depositor protections responded to those situations, and healthy banks stepped up to absorb the assets and liabilities of the troubled banks. The protections in place worked. It appears that issues in the banking system have been contained.

The soundness of the banking system, frankly, is not something that most independent agency principals spend time thinking about. But since these issues have arisen, it’s important for agency leaders to navigate the issue. I see four takeaways as relevant to agents in the current environment.

While the distress has been limited to a few institutions, the rising interest rate environment of 2022-2023 has put many banks under pressure.

Banks, which always face competitive pressure to offer favorable interest rates for deposit products and appealing credit terms for loans, now must do so in a market that is challenging to their The problems leading to the notable bank failures earnings model.

7 | Kentucky IA - Fall 2023

The competitive pressures that all banks face will lead them to narrow their lending activity. For businesses such as independent agencies that present a different business model than other business borrowers, credit availability may be significantly curtailed.

Even as some banks tighten lending, institutions that truly understand the agency financial model will continue to be active lenders. Banks that exhibit strong earnings, liquidity and available capital will have the financial flexibility to continue providing capital to independent agencies.

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Agents should speak to their financial institution and ask questions about deposit insurance protection, bank liquidity and capital ratios.

Many banks today face challenges to earnings and balance sheet strength. I expect there will be a fair number of banks posting lower profits in coming quarters. That’s a long way from saying they might fail, but it does mean they could change the way they operate. This could affect the way banking relationships work for independent agencies.

Independent agency principals tend to be fiscally conservative. They’ve weathered crises large and small, and they’re used to sleeping well at night. It makes sense for agency owners to ask questions of the banks they’re doing business with. In addition to asking about financial soundness, now is a good time to ask about their current and future appetite for agency lending.

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In this environment, independent agency principals may expect banks to shy away from lending for agency perpetuation, new producer development and acquisitions. New loans, when available, likely will cost more.

For years, I’ve seen many banks avoid independent agencies as borrowers. Bank lenders tend to have little appreciation for the enterprise value of an independent agency and tend to discount the value associated with an agency’s policy renewals, client retention, carrier relationships and loss experience. Faced with recent events and the forecast of higher interest rates, I don’t expect banks to suddenly change their perception of independent agencies.

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If you are an agency principal, there is one last point to consider about your own financial picture.

Any agency owner who has taken out a loan in recent years should carefully review their loan terms and conditions. Numerous agency loans have been made at floating rates based on the prime rate. With interest rates sharply higher over the past two years, loan payments may be significantly higher. You can use the current yield curve to your advantage by thinking about refinancing to a fixed rate loan. In many cases, a medium-term fixed rate may be lower than the floating rate you currently have. A lender that is knowledgeable about the independent insurance agency channel can quickly identify opportunities to save on future interest costs.

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This article was originally featured on insurancejournal.com.

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8/23

WHAT’S THE SELECTIVE FLOOD DIFFERENCE?

FLOOD.

EASE OF DOING BUSINESS

AGENCY ENGAGEMENT

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API connection – Create a seamless connection from Selective’s ood portal into your agency management system.

Real time policy transactions – No need to wait for overnight batch process to get a dec page or endorsement.

Live Chat – Connect with your Selective Flood Underwriting or Customer Service teams effortlessly.

Quote It Now –Embed this tool on your website or add link to communications, allowing customers to get a ood quote quickly and easily.

More than NFIP – Get access to additional products including private and excess ood markets.

Speak with a decision maker – Get direct access to knowledgeable Selective Flood staff, not a third-party service.

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Underwriters that know your state - Selective’s dedicated staff are assigned to each agency based upon geographic location.

RCBAP Experts - Underwriting staff are considered experts with RCBAP underwriting.

Dedicated Flood Territory Managers (TMs) - TMs are spread around the country with regional knowledge to help you communicate the need for ood insurance to your clients.

Dedicated rollover team - Let Selective take the work out of your hands.

Expertise – Selective’s underwriting and sales teams collectively have over 300 years of experience in the ood industry. We know ood!

Dedicated claims staff – Selective team members are on call to support you and policyholders during a ood claim event.

Continual learning - Access comprehensive ood training materials through Selective’s agency portal.

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Producer council meetings - Agents share thoughts and suggestions to continually improve the program.

They’ve got a seat at the table - Selective Flood managers have strong relationships with key players at FEMA, giving agents a voice to program changes.

Co-branding opportunities – Attach your agency logo and contact information to marketing material to educate your clients about ood insurance.

Involved ood leaders - Newsletters from management team keep you abreast of WYO program revisions.

Nationally endorsed carrier of the Big “I” - We represent your interest with NFIP reform on Capitol Hill.

Big “I” Member’s Only Benets – Receive benets from Selective Flood unique to Big "I" members.

CUSTOMER ENGAGEMENT •

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Flood Perks program – Get discounts on services and products to help customers reduce the risk of loss and assist with recovering from a loss.

Customer self-service portal – Give customers easy access to manage their account, from making payments, ling a notice of loss, or getting claim status updates.

Receive advance claim payments – Before nal settlement, clients can receive payments to help them recover sooner.

Claim process support - Clients have access to resources, including claims videos and dedicated Selective claim staff to help guide them through the claims process.

Direct bill payment options – Clients select payment methods, including credit card, automatic withdrawal, phone payment and more.

Customer Chat coming soon – Customers will have an additional channel to contact Selective quickly and easily.

LEARN MORE AT INDEPENDENTAGENT.COM/FLOOD 8/23

9 | Kentucky IA - Fall 2023

AGC Self Insurers’ Fund

A POLICY ARCHAEOLOGIST TALKS POLICY RECORD RETENTION

by Nancy Germond, Executive Director, Risk Management and Education for the Independent Insurance Agents & Brokers of America

11 |11 Kentucky | Kentucky IA - Summer IA - Fall 2023 2023

How Long to Keep Policy Information Continues to Challenge Insurance Agencies and Brokerages According to Ralph Korn, a risk management consultant in Kentucky, “In today’s digital age, scan the policy and keep it in a file, in your cloud storage, or on a disc.” Data storage is cheap.

Korn provides a real-life example.

A large southern California newspaper that had been in business for about a hundred years used to discard old printing ink. Printing ink, of the kind they used, turned out to be a carcinogen.

Back in the olden days (the 1960’s), printers barreled the used ink and sent it to a landfill.

Someone decided to investigate what was in this old landfill, and lo and behold, here were all the old drums of ink, marked with the name of the newspaper. Authorities traced nothing else in the landfill to other depositors, so the Environmental Protection Agency (EPA) sent a bill for cleanup expenses to the newspaper.

The paper submitted a claim to their current commercial general liability (CGL) insurer. The CGL carrier promptly denied the claim based on the pollution exclusion. That’s where Korn came in.

Korn located the CGL policies from the 1960 period and discovered that the GL policy contained no such exclusion. The carrier wrote the GL policy on an occurrence form. “To their dismay,” Korn said, “the old CGL carrier had to pony up the cleanup costs, which almost exceeded the policy limits.”

What’s the Moral of the Story?

The moral of this story, according to Korn, “Don’t discard old casualty policies.” With today’s storage capacity, some insurance experts recommend maintaining those CGL and liability policies “in perpetuity.”

12 | Kentucky IA - Fall 2023

For property policies, keep old policies while there are any outstanding claims open on those, and of course, follow your state statutory guidelines. Copy these to a computer file or a disc, but if the carriers have resolved all claims occurring during the policy period, it is not as critical to retain those policies.

Then, there’s the suggestion by the Nonprofit Risk Management Center to retain all but claims-made policies “permanently.”

So, the perfect records retention policy is another risk management conundrum best answered by “It depends.”

The Difficulty of Record Retention In this day of cloud storage, why would agents not want to keep liability policies in perpetuity?

One of the downsides to storage is the possibility of a cyber hack, which can then expose your agency to liability. Policy data contains a lot of personal information, and this can be a problem.

As one claims expert reminds, “Hold on to as little of the information as necessary to submit a claim down the road. The cyber liability of holding personal data is real.”

What is Personally Identifiable Information (PII)?

PII is data identifying a natural person, such as an identification number (think group health), location data, online identifier (even an IP address) or other specific factors.

We normally consider PII a Social Security number, driver’s license number, bank or other financial accounts, email addresses, login records, passwords, certain addresses, phone numbers, and birth date, but it can broader than these data. PII is a ripe target for hackers, so beware of store housing PII past its normal use.

The Big “I” offers a records retention policy guideline at this link, but it applies only to the Big “I’s” retention policy. To add to the uncertainty regarding record retention, the National Association of Insurance Commissioners has a model act for record retention, although it is somewhat dated.

After reviewing your state’s requirement for retention, your agency management team should clarify what works for your organization.

If you determine you’re going to keep records “in perpetuity,” ensure that you protect your data from potential cyber hacks. Develop a procedure for an annual “purge” when appropriate and ensure at that time your policy is still consistent with your state’s regulations and with current best practices.

Nancy Germond is a second-generation insurance professional and the Executive Director, Risk Management and Education, for the Independent Agents & Brokers of America. Nancy has written scores of risk-management related articles and is a frequent conference presenter on topics ranging from post-mortem of an E&O claim to managing emerging talent risks.

She is the author of Workers’ Compensation in Two Hours: The Business Owner’s Guide to an Exceptional Workers’ Compensation Program.

Records Retention Due to changes in technology from paper files to virtual files and cloud computing, and changes in privacy laws due to the Gramm-Leach-Bliley Act(GLBA),Health Insurance Portability and Accountability Act(HIPAA),the Patriot Act and its successors, federal and state specific laws regarding notifications necessary due to data breaches, individual state laws regarding document retention, and individual agency/ carrier agreement requirements, a "one size fits all" method of document retention is no longer conducive to good business practice. With the advent of digitized electronic documentation, the ability to store a vast amount of records in a relatively small electronic space has dramatically changed the ability to retain records. However, along with the ability to store documents electronically comes the vulnerability that people from outside your agency could obtain access to your records for purposes such as identity theft and corporate espionage. As to insurance agents errors and omissions claims, the retention time period for agency file documentation that could relate to an E&O claim is simple: as long as possible. There are many factors that could have an effect on how long documents could be necessary to help in the defense of claim, including, but not limited to, statute of limitations or an extension of that limitation.

At the same time the longer you retain such documents, the greater your exposure in the event of a data breach. Each agency must determine for itself the time period for its documents to be retained based upon their location, type of business and all of the factors previously mentioned. We recommend that you consult with legal counsel in developing your agency's document retention policy.

13 | Kentucky IA - Fall 2023

PROFESSIONAL L I A B I L I T Y.

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The new E&O Guardian insurance agency risk management web site is designed to arm Big “I” members with information and tools to mitigate agency errors and omissions. Big “I” members can tap into a variety of

educational materials designed to safeguard your agency. Explore the site and dive into specialty agency risk management articles on a wide variety of topics, recorded webinars, sample checklists, sample letters, an archive of newsletters, and more.

E&O GUARDIAN

www.independentagent.com/EOGuardian .

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It looks like a family history of valuing and trusting business relationships, and a goal of serving you. Our focus is on developing lasting partnerships so we can tailor our solutions to your agency’s needs and help you expand your book of business. Our collaborative teams work to get the best market in the shortest time.

Our core pillars of honesty, integrity and trust mean we stand by our word and are committed to helping you find the right solution.

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Aviation | Bonds | Cannabis | Casualty | Commercial Agribusiness | Farm Healthcare & Human Services | Personal Lines | Professional Liability | Property | Transportation | Workers’ Compensation 15 | Kentucky IA - Fall 2023

MEMBER VIEWS TAKE ADVANTAGE OF YOUR MEMBERSHIP

The Big I of Kentucky does an outstanding job for agency members.

They provide top lobbying efforts in both Washington, DC and Frankfort.

Their meetings throughout the year are meaningful and educational. Big I functions are the best way to network with other insurance agents and carrier employees.”

Tim Murphy Harbor Insurance

Big I KY is an invaluable resource for agency. We take advantage of both the E & O program and group health plan We were able to train and hire a new young employee with the apprenticeship program. There's just a lot of tools available to support and help us grow our agency.

Aaron Larue Larue-Carey Insurance

We see cyber quotes daily from our other carriers and our policy through the BIG I is very competitively priced. Plus, we have been through large cyber claims with our clients and the carrier means everything. It’s crucial we have a reliable, knowledgeable partner when a claim occurs.”

Susan Coblin Chenault & Hoge Insurance

16 | Kentucky IA - Fall 2023

Commercial | Personal | Farm | Agribusiness | Specialty

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ATTEND THE INSURANCE EVENT THAT HAS IT ALLREGISTER TODAY!

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SCHEDULE OF EVENTS WEDNESDAY

November 15, 2023 12:00 PM – 5:00 PM 1:00 PM – 5:00 PM 5:30 PM – 8:30 PM

Registration Trade Show and Grand Prize Giveaway Top Golf: Swing into Success sponsored by Liberty Mutual/Safeco/State Auto

THURSDAY

November 16, 2023 7:30 AM 8:00 AM – 10:00 AM

10:30 AM – 11:30 AM 12:00 PM – 1:00 PM 1:15 PM – 2:30 PM 2:45 PM - 3:45 PM 5:00 PM – 7:00 PM 7:00 PM

Registration Open "Morning of Possibilities"- Welcome Breakfast & General Session with Special Guest IIABA ChairElect, Todd Jackson Keynote Speaker Author James Clear, "Atomic Habits" Luncheon "State of the Industry Panel: Navigating the Future" "Roundtables by Agency Size: Collaborate, Learn, Succeed" Cocktail Reception, Bourbon & Wine Toss, Silent Auction Leadership Dinner

FRIDAY

November 17, 2023 8:30 AM – 9:30 AM

11:45 AM – 4:30 PM

Legislative Breakfast with special guest Congressman Andy Barr Afternoon at Churchill Downs 19 | Kentucky IA - Fall 2023

Keynote Speaker Author James Clear

We're excited to welcome James Clear, author of the #1 New York Times best-seller Atomic Habits, to the Big I Kentucky Annual Convention. His work has been featured in places like Time magazine, the New York Times, the Wall Street Journal and on CBS This Morning. He is also a regular speaker at Fortune 500 companies with previous clients including Capital One, Cisco, General Electric, Honda, Intel, LinkedIn, Lululemon, McKinsey & Company, Merrill Lynch and many more.

"True behavior change is identity change. Anyone can convince themselves to visit the gym or eat healthy once or twice, but if you don’t shift the belief behind the behavior, then it is hard to stick with long-term changes. Improvements are only temporary until they become part of who you are. Every action you take is a vote for the type of person you wish to become."

20 | Kentucky IA - Spring 2023

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For more information, contact: Tami Dombrosky tdombrosky@agile-pf.com 502.558.5722 www.agile-pf.com 21 | Kentucky IA - Fall 2023

MARKETPLACE SUMMARY

Kentucky Property-Casualty Insurance Marketplace Annual Report 2022

This report provides a summary of the 2022 annual property-casualty (p-c) insurance marketplace.

Unlike most industry watchers of insurer profitability and insolvency, we used direct written premiums - not net written premiums. This is to be consistent with our member agent’s view of the insurance world.

P-C Insurance Industry Analysis Provided by: Real Insurance Solutions Consulting, LLC Paul A. Buse, Principal realinsurancesc.com 301.842.7472

_________________________________

Big I Kentucky members can access this report for free at bigiky.org.

BIGIKY.ORG © 2023, Big I Kentucky. All rights reserved.

22 | Kentucky IA - Fall 2023

2022 Kentucky Annual P&C Marketplace Summary You are being provided this 2022 Kentucky Annual P&C Marketplace Summary covering the Kentucky property and casualty (P&C) insurance marketplace as a benefit of your membership in the Big I Kentucky.

What follows is a graphic and numeric presentation of the Kentucky P&C industry data from an independent agent’s perspective. The data used is the most recently available from A.M. Best Company. For this Summary that is the annual data for 2022.

Source: © A.M. Best Company — Used by Permission; US Census Bureau

This Summary emphasizes direct premiums, direct losses, and the associated direct underwriting results before reinsurance. Also included is data from nearly 3,000 insurers that are domiciled in the United States, and if they have written premiums in Kentucky then their data is incorporated. As independent agents, this is the marketplace experience for the business we place (or compete against) for our clients in Kentucky.

This 2022 Kentucky Annual P&C Marketplace Summary provides you with the following important information on the Kentucky P&C Marketplace: • Premiums for all 32 P&C lines of business in Kentucky, • The Top 10 lines for independent agents, • Growth rates, • Loss ratios, • Penetration rates and trends, • Commission rates, and • Surplus lines utilization rates.

United States national data on each of the above is also furnished, to give perspective.

© 2023, Big I Kentucky. All rights reserved.

23 | Kentucky IA - Fall 2023

Kentucky Premiums: All 32 P&C Lines of Business

Source: © A.M. Best Company

The above chart shows all 32 P&C lines of business that P&C insurers are required to report on, state-by-state, in their annual statement. They are listed in alphabetical order and in all subsequent tables/charts and graphs in this Summary. Of these 32 lines, 26 are primarily focused on by independent agents in Kentucky and are emphasized above with an asterisk (*).

24 | Kentucky IA - Fall 2023

© 2023, Big I Kentucky. All rights reserved.

Kentucky Total Premiums Perspective To provide perspective, in the table below is comparative data on Kentucky P&C premiums; and how Kentucky premiums compare to the United States in total, including some common groupings of lines of business, on a per capita basis. Also provided are the smallest/lowest state, and largest/ highest state for either total premiums, or per capita premiums.

Each of these groupings are organized as follows: • Total (All Lines) includes premiums for all 32 P&C lines of business; • Personal Lines includes All Private Passenger Auto, and Homeowners Multi-Peril; • Commercial Lines includes All Commercial Auto, Commercial Multi-Peril, Other Liability (Claims- Made), Other Liability (Occurrence), Products Liability, and Workers’ Compensation; and • Agricultural Lines includes Farmowners Multi-Peril, Multi-Peril Crop, and Private Crop, In each case, the basis of the per capital comparative premium uses the most recent population estimate from the U.S. Census.

Source: © A.M. Best Company — Used by permission and U.S. Census Bureau, Population Division and Annual Estimates of Resident Population (Release Date: December 2022)

© 2023, Big I Kentucky. All rights reserved.

25 | Kentucky IA - Fall 2023

Kentucky Top 10 Independent Agent Lines of Business

Source: © A.M. Best Company — Used by Permission

The below pie charts show which lines of business are the most important to independent agents, based on direct written premiums. The top 10 lines of business are shown in each pie chart, with premiums from all other lines of business combined in the “All Other” pie section.

Data for Kentucky is used in the top two pie charts, with the lines of business ordered by rank order of premiums through independent agents in Kentucky. The left pie chart includes premiums only through independent agents. The right pie chart adds all premiums from all distribution styles included in each pie section.

For comparison, data for the United States is used for the second two pie charts. The rank-order for the United States pie charts is based on premiums through independent agents in all of the United States.

26 | Kentucky IA - Fall 2023

© 2023, Big I Kentucky. All rights reserved.

Commercial & Personal Lines Insurance solutions for small, medium, and large businesses.

Competitive pricing, multi-product discounts, and easy submission process!

APPLY TO BE AN AGENT: WWW.GUARD.COM/APPLY/ Not all Berkshire Hathaway GUARD Insurance Companies provide the products described herein nor are they available in all states. Visit www.guard.com/states/ to see our current product suite and operating area.

28 | Kentucky IA - Fall 2023

BREAKING UP WITH A CLIENT CAN YOU TELL CLIENTS TO FIND ANOTHER AGENT?

By: Mallory Cornell, Vice President of Virtual Agency Solutions, Powered by the IIAW

Have you ever wondered if you’re able to just “break up” with a client?

Are there clients whose name you dread seeing on the caller ID? Or those clients that you’re constantly trying to follow up with?

What about those “oh, I forgot to mention” clients who love to give you important information at the last minute? Is it ok to tell them to find another agent?

In short, yes. But, as with any respectable breakup, you should be mindful of your timing, your language, and how it may impact the other party. (You don’t want them to ruin your chances of other relationships, right?)

What are some reasons why an agent may want to consider ending a relationship with a customer? Our partners at the Independent Insurance Agents of Texas published some helpful advice on this subject. An agency has the right to request nonrenewal of a policy for its own reasons, which may have nothing to do with company underwriting guidelines.

For example: The agency may wish to target a particular market segment through minimum standards with regard to account size, limits of liability, or the purchase of optional coverages.

29 | Kentucky IA - Fall 2023

In an effort to maintain a profitable book of business and maximize its opportunity to benefit from company profit-sharing arrangements, the agency may impose underwriting guidelines that are more stringent than the company's guidelines.

An agency, particularly in a small town, may be aware of an insured's personal reputation or characteristics, such as heavy drinking, that could increase the exposure to loss.

The insured may display disruptive behavior in the agent's office or be discourteous or even abusive to agency employees.

Here are a few simple things to keep in mind if you’re looking to end a customer relationship.

• Timing: Send a notice to the insured well in advance of their renewal. This provides them with ample time to find a new agent.

• Language: The notice should provide language regarding the reasons for ending the relationship. Perhaps the insureds needs may be better met by another agent.

30 | Kentucky IA - Fall 2023

Resources: Advise the client that they can continue with the same carrier by obtaining an agent of record letter. You may also want to provide the client with loss runs and a schedule of policies to make their transition easier.

There are also some internal business practices you may want to consider before you decide to end any relationships.

1.

Develop internal criteria to help determine what customers are a “good fit” for the agency and would be better serviced elsewhere. Set standards for your book of business and then follow those standards.

2.

Create a letter that can be used as a standard template for “referring” clients that don’t meet the criteria the agency has set.

3.

Consider how an unhappy customer may be handled and the potential reputational risk. Is the individual in influential circles or a position to easily influence a large group of people?

4.

Take steps to consider why the customer may not be profitable to the agency and consider ways to make that customer profitable instead of terminating the relationship.

An agent should not take relationships lightly but should consider the ideal book of business that will keep them profitable. If you’re looking to end relationships but are worried about the legal ramifications due to past E&O claim activity or for any other reason, you should seek legal advice from your agency’s legal counsel.

Finding the right technology solution is something to get excited about Connect with top vendors serving the insurance industry and simplify your workflow.

Check out TechCompare today!

SEO | Digital Marketing | Social Media | Websites | and more! www.TechCompare.IndependentAgent.com Looking for marketing or technology partners for your agency? Browse service providers that have experience with the independent agency channel. These tools are focused on sales/marketing, operations, and customer experience to increase efficiency and help your agency grow.

Look for vendors with the ‘MRP’ tag to see where you can spend your Trusted Choice Marketing Reimbursement Program Dollars!! You can also browse for the Big “I” Agents Council for Technology partners (ACT).

Sep. 2021

32 | Kentucky IA - Fall 2023

Is Your Agency Prepared For the

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Download this free toolkit today and continue to focus on what you do best – providing excellent customer service to your clients.

Turn the hard market into your agency’s success story!

TrustedChoice.IndependentAgent.com/Hard-Market 34 | Kentucky IA - Fall 2023

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36 | Kentucky IA - Fall 2023

YOU'RE IN CONTROL

By: Carey Wallace, AgencyFocus

Over the past 18 months, we have experienced the highest interest rates since 2000, with them peaking at 7.08% in November of 2022. Over one-third of the independent insurance agencies in the U.S. anticipate a change in ownership in the next two years, which means that over 13,300 agencies will transition ownership according to the 2022 Agency Universe Study. Many agency owners plan to transition their ownership to family, children, or a current partner, and if a bank loan is involved the change in interest rates can have a significant impact on the price of their agency and their retirement. Now more than ever, it is important for agency owners that wish to maximize the value of their agency to focus on the things that they can control.

Get Informed

Take a close look at your agency’s financial statement and get to know your numbers. Compare your agency’s performance to the industry standards to determine the areas where you are lagging behind and the areas that you excel. When you are planning to sell, a buyer will use these benchmarks to set their expectations on what it will take to run your agency and what profitability they can expect for an agency of your size. For those agencies that are outperforming the benchmarks, the benchmarks can create a discount for your agency.

It is in your best interest to know your own proven performance and maximize that performance prior to selling your agency both internally and externally.

Profitability

The best way to maximize the value of your agency when you are selling is to run your business like you’re selling it tomorrow. By removing all discretionary expenses and investing those funds in the growth of your agency, you will position your agency to command the maximum value at the time of your ownership transition. This will allow you to fund the investment in the resources, infrastructure, and technology, and support your agency needs to operate efficiently and be positioned for growth and scale. Common investments can include people, training, technology, and the development of strong operating procedures.

Transition Time Do not wait until you are ready to walk away to start planning to sell your agency. We are in a relationship business, so you are an important component in the transition of the ownership of your agency. By working through a transition plan to provide a warm handoff of your staff, customers, centers of influence, referral partners, and carrier partners, you will increase the likelihood that those key relationships will stay with the agency.

37 | Kentucky IA - Fall 2023

Your recommendation and behavior will speak volumes to the people who have trusted you. They will look to both your actions and your words to determine if they want to continue to do business or work with your successor. If you are not willing to work with them, they may not want to either, and that would be detrimental to the retention of key staff, customers, and ultimately the value of your agency. Plan to spend this time to ensure that you are able to demonstrate your strong support to your successor.

Minimize Risk Be aware of the risks inside your business and work to reduce those risks prior to your transition. There are three main types of risks: concentration, performance and culture. Consider the areas of your agency that are dependent on one person, one carrier, one relationship.

This could be related to a specific area of expertise, risk appetite, or simply a responsibility that you have never opened up to anyone other than a key person inside your agency. Whenever possible look for ways to minimize that risk by exposing multiple people to the customer relationship, invest in training, and document the processes that are handled in all key roles to minimize the delay or confusion should any key employee no longer be part of the team.

Is it based solely on referrals, or do you have a welldefined strategy for attracting new clients with a content and marketing strategy? Do you have contracts in place with your staff, or are you at greater risk of losing business if they leave the agency? What is the level of expertise inside your agency when it comes to coverage, technology, automation, and innovation?

Have you created a culture of trust that allows you to embrace change, or do you have a culture in your agency that resists change? All of these factors are important to the continuity of your agency in a transition of ownership. How you lead your team can impact the value of your agency, so think about ways to foster a culture of trust. It will have a positive return.

The compensation structure as well as the benefits package that you provide for your staff is also an area that will impact the value of your agency. When another agency is looking to buy or when the next generation is looking to purchase the agency, the compensation structure will impact the cash flow of the agency.

Compensation is the largest controllable expense inside any agency, so if your compensation structure is not in line with the industry standards, it may be difficult to continue and also provide you with the price you expect for your agency. If the incoming owner makes a change to the compensation structure they will be at risk of losing talent and staff that are critical to keeping the Performance Risk customers and relationships with referral partners and carriers. If you want to maximize the value of your To address risk in performance, it is critical to know the agency, you need to embrace a strategy to move your key performance indicators that will impact the value of staff to compensation plans that are tied to the growth your agency. You should know what the growth, of your agency long before you plan to transition the retention, new business, profitability, and efficiency ownership of the agency. If you do not make this change expectations are for the key roles inside the agency. By inside your agency, and your compensation structure is knowing these standards, you can work to strengthen not in line with industry standards, you need to be the areas of your agency that are weak, and highlight realistic in your expectations for the price of your your agency’s areas of strength. These performance agency. indicators will serve as a guide for you to where to invest and also provide a way to measure the success of There are many things you can do to plan for the your investments. Too often when technology is successful transition of your agency, and it starts with implemented there is no way to measure the impact, focusing on the factors that will impact the value of your which makes it hard to know the return on your agency that you can control. Well-run agencies will investment. Think of these performance metrics as continue to command high multiples regardless of ways to measure your ROI. interest rate fluctuations and other factors that are not within our control. By knowing your numbers, focusing Culture Risk on driving profitability and performance inside your agency, and planning ahead, you will maximize your The last area of risk is culture. This is the area that many agency’s value and be well-positioned when the time times is the most important as well as the hardest to comes for you to transition the ownership of your mitigate. This encompasses how you run your agency, is agency. your sales and service work clearly defined or is it blended roles inside your agency? How do you drive For more information on how to best prepare for the new business to your agency? future of your agency visit www.agency-focus.com or email carey@agency-focus.com.

38 | Kentucky IA - Fall 2023

Do you have a

plan

future

for your agency’s

?

Agency Valuation • Ownership Transition • CFO Services • Compensation Strategy • Business Planning & Projections

certified exit planning advisor

614.657.2674 | carey@agency-focus.com | agency-focus.com

39 | Kentucky IA - Summer 2023

2023 UPCOMING EVENTS Scan the QR Code below to register for any upcoming event.

CLASSIFIEDS Acquisitions Established Louisville agency interested in acquiring insurance agencies in Jefferson and surrounding counties. If you are interested in selling, merging, or need assistance with perpetuation, we would like to talk with you in confidence.

Call Kevin Lavin, CIC or Philip Anderton, CIC, CRM at Sterling Thompson Company at 502-585-3277

Looking for Producers Independent with top best markets looking to expand presence in Jefferson, Oldham or Shelby counties. Wanting Personal lines Producer or book of business to move or purchase. All arrangements possible, in strict confidence.

IA-MBA Virtual September 6-November 15, 2023

KEENELAND TAILGATE Lexington, KY October 20, 2023

ANNUAL CONVENTION & TRADE SHOW Louisville, KY November 15-17, 2023

bigiky.org 40 | Kentucky IA - Fall 2023

Please send inquiries to: Turner Insurance Agency, 2460 Shelbyville Road, Shelbyville, KY 40065 or call Kurt Turner, CPCU at 502-633-6060.

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Big I Kentucky gratefully acknowledges these fine companies, our 2023 Industry Partners. Without their assistance, fees for the events and programs throughout the year would be significantly higher and/or the quality of the program would be restricted.

TO BECOME A SPONSOR OR FOR MORE INFORMATION ABOUT OUR INDUSTRY PARTNER PROGRAM, PLEASE CONTACT ERIN FOSSON, SALES & MARKETING DIRECTOR, AT 502-245-5432 OR EFOSSON@BIGIKY.ORG 42 | Kentucky IA - Fall 2023

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43 | Kentucky IA - Fall 2023