Kentucky IA -September/October 2018

September/October 2018

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What's

Inside

Page 15

Contents

10 Emerging Leader Clay Shoot 12 Lost in Translation: How to address language gaps with clients 15 Staff Profile: Kristie Weyer

Page 21

17 New Tax Regulation is a Big Win for Big “I” Members 21 Is Binge Working Destroying Your Professional Life & Your Insurane Agency?

25 7 Ways Conversational Computing will change Agency Operations

Page 25 The Kentucky IA is the official magazine of the Independent Insurance Agents of Kentucky, and is published bi-monthly.

Editorial offices are located at 13265 O’Bannon Station Way, Louisville, Kentucky 40223.

Telephone:(502) 245-5432 Email: iiak@iiak.org Fax: (502) 245-5750 The Kentucky IA welcomes all advertising and editorial submissions. Inquiries for advertising, news releases and editorial contributions can be directed to Nikki Robins at the editorial office address or via email at nrobins@iiak.org

28 Final Junior Golf Tournament Proves to be a Scorcher 30 When Clients Sell: Part One

In Every Issue 4 From the Chair

23 Upcoming Events

5 DOI News

35 Advertiser Index

6 Education Calendar

35 Classified Ads

23 Industry Partners

35 Social Media Links

Mission Statement The mission of the Independent Insurance Agents of Kentucky is to be the preeminent advocate for Kentucky Independent Agents and support their business and professional development needs.

www.iiak.org | September/October 2018 | 3

Chair

Officers

From the

Michael G. Johnson, CIC

Chair, Lexington 859.233.1461 Aaron LaRue

Chair-Elect, Bardstown 502.348.0050 Ray A. Robertson, CIC

Vice Chair, Mt. Sterling 859.498.3410 James D. England, AAI

Treasurer, Pikeville 606.437.7361 Stephen R. Kinkade, CPCU, AAI

National Director, Leitchfield 270.259.5465 George L. “Chip” Atkins, III

Immediate Past Chair, Louisville 502.585.3600

Directors Allen J. Crawford, CIC, CSRM

Somerset, 606.679.6311 Kevin T. Desmond

Bellevue, 859.491.5100 Whitney L. Floyd, CISR

Henderson, 270.827.3543 Barrett H. “Skip” McGaw, II, CIC

Madisonville, 270.821.3122 Danny S. Neely, II

Emerging Leader Chair, Winchester 859.744.3857 Chris J. Wiseman, CIC

Bowling Green, 270.781.2020 Laura Yount, CIC, CISR

London, 606.878.0100

Staff Tara T. Purvis

President & CEO Katie M. Freshley

Member Services Director

Wow, time flies when you’re having fun. Here we sit over half way through the year, but it seems like just yesterday I was being sworn in as your Chairman.

Part of the reason this year has flown by has to do with the many things your IIAK team has been doing for and on your behalf. The Road Shows were lengthened, bringing information and networking to members that have a hard time coming to many of our regular events.

Each Road Show provided an insight into the legislative happenings and legal updates, an opportunity to earn continuing education credits, meet other agents and discuss the industry as a whole. Be on the lookout next year for a Road Show near you. We are adding even more locations in 2019!

In June, the Emerging Leaders hosted their annual Leadership Conference in Owensboro.

Those in attendance were treated to some great speakers geared toward the use of technology in both our professional and personal lives. This was also our Third Annual Pitchin’ For PAC Corn Hole Tournament and it continues to be a fun and engaging event. If you haven’t been to the Leadership Conference in the past few years, put it on your calendar for June 2019. It really has become an engaging and motivating conference, with a lot fun included.

Finally, I can’t remember a year with as much activity in both Frankfort and Washington DC. Much was accomplished at both the state and national levels. With disrupters gaining momentum, the environment is ripe for changes and this has been evident in the government affairs department. Nationally your association gained a big victory in the tax code arena.

Your national government affairs team has been diligently working to make sure insurance agents don’t get lumped into the “specified service trade or business” category. I’m happy to report that the initial review indicates that the IRS DOES NOT consider insurance agents as “specified service trade or business.” A substantial portion of our membership is made up of pass-through entities, which prior to this win, could have seen the 20% tax deduction phased out. This was all possible because of the grassroots efforts and having a voice on Capitol Hill.

That voice can only be heard because of our collective efforts with InsurPAC. Check your mailbox for information on how to donate to InsurPac. Your continued support to this PAC will allow us to move the needle when we need to. This fall is going to be interesting politically with the potential for many changes in Congressional seats. A strong InsurPac means better legislative results for you! Reach deep into your pockets and support InsurPac, our futures depend on it.

Amy Good

Financial Services Director

It has been an honor serving as your Chair. I hope to see you all in November for Convention.

Cassie Powell

Director of First Impressions Nikki S. Robins

Communications Director Kristie Weyer, CISR

Insurance Services Director

4 | www.iiak.org | September/October 2018

Michael G. Johnson, CIC

The Workplace Environment Creating a Security Culture

By: John Melvin

Creating a work culture in which both managers and employees prioritize cyber security pays long-term dividends to the vitality of your business. After all, cyber security efforts that prevent cyber-attacks, data breaches, and identity theft can aid in risk management.

What measures create a workplace culture or environment where employees know and understand the importance of cyber security? The answer lies in quality training, increased employee awareness of potential cyber risks and effective information technology policies that protect your organization’s digital information and networks.

It is vital to create an environment where all employees are aware of the risk that hackers pose and, more importantly, where they feel comfortable reporting unusual or suspicious activity. We need to configure and train the human firewall, which means making training and education relevant and engaging so employees truly understand the threat. This means getting employees to recognize and accept that they could be responsible for a major breach.

A few years ago, cybercriminals specialized in identity theft.

Today, they highjack your organization’s network, hack into your bank accounts, and steal tens or hundreds of thousands of dollars. Security awareness training specializes in making sure your employees understand today’s risks of spam, phishing, spear phishing, malware, ransomware and social engineering, and apply this knowledge in their day-to-day job.

The cyber security landscape is always changing as hackers find new ways to access information, which is why creating a culture of consistent awareness of threats is so important.

Keeping up with new technologies, security trends and threat intelligence also presents a challenging task. However, it is necessary in order to protect information and other assets from cyber threats, which take many forms.

Companies and individuals are often targeted by cybercriminals through emails designed to look like they came from a legitimate bank, government agency, or organization.

In these emails, the sender asks recipients to click on a link that takes them to a page where they will confirm personal data, and account information. It is often difficult to distinguish a fake email from a verified one. Let us focus on that sentence again: It is often difficult to distinguish a fake email from a verified one.

We get so busy trying to accomplish our daily tasks we miss the subtle hints of the fake email. It does not matter if you have the most secure security system in the world. It takes only one untrained employee to be deceived by a phishing attack and give away the data you have worked so hard to protect. Make sure both you and your employees understand the telltale signs of a phishing attempt.

Investing in employee awareness will boost your preventative measures to protect your organization from online criminals.

Organizations must implement policies and guidelines that protect both the employee and the organization itself. For example, employees often use tools that are at their disposal to make their jobs easier, including using unmanaged devices like their smart phones or laptops. Organizations that fail to adjust to stricter workplace guidelines, such as allowing employees to connect personal devices from home to devices at work, are far more likely to experience data breaches.

Employees must understand that the threats that target them as individuals must be avoided to protect the company as a whole. Information security is everybody’s responsibility, not just the IT team. When an organization has a strong culture of network security and an effective incident response plan, it is better able to prevent and mitigate cyber-attacks.

Security training, increased employee awareness and appropriate policies go a long way toward creating a work culture that appreciates cyber security. A more secure world creates a safer world for business…especially your business.

We wish you all the best as you strive to protect your agency against constant intrusive cyber threats.

John Melvin is the Director of Insurance Product Regulation for the Commonwealth of Kentucky. He can be reached via email at john.melvin@ky.gov or by calling 502-564-6046.

www.iiak.org | September/October 2018 | 5

Continuing Education

IIAK has a range of classroom and webcast continuing education courses as well as valuable designation seminars.

See below for our latest offerings.

ON-SITE COURSES:

E&O: Roadmap to Policy Analysis October 3 • IIAK Education Center

ONLINE COURSES VIA ABEN: Date/Time

Seminar Name

CE Credits

September 24 @ 1 pm October 29 @ 1 pm

Agency Management Based E&O and Ethics

3

September 6 @ 3 pm October 4 @ 3 pm

Annuity Basics and Where They Fit

1

September 18 @ 19 am Business Auto Claims That Cause Problems October 22 @ 24 am

2

September 13 @ 11 am Business Fraud Protection October 11 @ 11 am

1

September 20 @ 11 am Certificates of Insurance – Emerging Issues and Other Stuff that May Scare You! October 24 @ 11 am

3

September 14 @ 10 am Commercial Lines Claims That Cause Problems October 23 @ 2 pm

2

September 18 @ 1 pm October 24 @ 1 pm

COPE – Property Underwriting and Effective Loss Control

2

September 14 @ 2 pm October 12 @ 2 pm

Data Privacy Insurance

2

September 5 @ 10 am October 3 @ 10 am

Directors and Officers Liability Insurance

2

September 10 @ 1 pm October 8 @ 1 pm

Double Trouble - Certificates of Insurance and Business Auto Endorsements

2

September 20 @ 11 am E&O Risk Management – Meeting the Challenge of Change (6 hour course) October 2 @ 9 am

6

September 27 @ 10 am E&O Risk Management – Meeting the Challenge of Change (Part 1) October 23 @ 10 am

3

September 27 @ 2 pm October 23 @ 2 pm

E&O Risk Management – Meeting the Challenge of Change (Part 2)

3

September 13 @ 3 pm October 11 @ 3 pm

Estate Planning Basics

2

September 20 @ 11 am Ethics and Business

6 | www.iiak.org | September/October 2018

3

Date/Time

Seminar Name

CE Credits

October 18 @ 2 pm

Home Based Business Exposures

2

September 6 @ 11 am October 4 @ 11 am

Hot Topics in Personal Lines

2

October 25 @ 2 pm

Liability Issues to Worry About – Indemnity Agreements and Additional Insureds

2

September 18 @ 10 am Long Term Care Insurance October 19 @ 10 am

2

September 20 @ 11 am National Flood Insurance Program Basic Course - 2016 October 18 @ 11 am

3

September 28 @ 2 pm October 26 @ 2 pm

1

Personal Fraud Protection

September 12 @ 11 am Personal Lines Claims That Cause Problems October 10 @ 11 am

2

September 28 @ 11 am Professional Ethics in the Insurance Industry October 26 @ 11 am

3

September 13 @ 2 pm October 18 @ 2 pm

Property & Liability Concepts - Comp. Cov. Series

2

September 25 @ 9 am October 23 @ 9 am

Rental Cars: More Than Meets the Eye

2

September 21 @ 10 am Shake, Rattle, and Roll with it- Earthquake Basics October 19 @ 10 am

1

September 24 @ 11 am Those Kids and Their Cars!

October 29 @ 11 am

2

September 25 @ 2 pm October 30 @ 2 pm

Top 5 Life Insurance Uses

2

September 5 @ 3 pm October 3 @ 3 pm

What you Need to Know about Employment Law & Coverage

2

September 13 @ 10 am Workers Compensation Beyond the Basics October 17 @ 10 am

3

New Hire eLearning Training Available!

Visit iiak.org/education for more information www.iiak.org | September/October 2018 | 7

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A little rain wasn’t going to keep our shooters away! The Emerging Leaders of Kentucky hosted a Clay Shoot on August 16th. Forty people attended the innagural event that was held at Blue Grass Sportsmen’s League in Wilmore.

The groups began with a gun safety meeting and instructions. Then each team was off to their post as they rounded all eight shooting stations. All that shooting gave everyone an appetite and the day rounded off with food, drinks and some cool stories of the great (and sometimes not so great) shots from the day.

Sharp Shooters!

Logan Edelen and Will Coblin tied for 2nd while Stephen Hill came away with 1st Place.

Thank you to everyone who was able to participate.

We hope to see everyone for tailgating at Keeneland on October 18th.

Better Luck Next Time!

Maddie Dobson of RPS came away with a sweet Nerf gun...despite her poor clay shooting skills.

10 | www.iiak.org | September/October 2018

Winner Winner Chicken Dinner Logan Edelen took home our raffle prize - a 65 Quart Yeti Ice Chest!

Robbie Blain, Jack LaRue, Tripp Humston, John Funkhouser, Jared Pursley

Cody Quinn, Brian Riehl, Brody Layton

Adam Sheridan, Logan McGary, Maddie Dobson, Jared Pursley

Lindsey Pruitt, Nick Rolf, Johnny Bush, Danny Yackey

Eric Harden, Logan Edelen, Kimberley Wilson, Joe Cerzosie

Josh Dahl, Steve Moughamian, Damon Thurman

Will Coblin, Aaron LaRue, Scott Burks, Donna Schlie, Danny Greene

Stephen Hill, Tonya Cothern, Chip Atkins, Nathan Shanks

Katie Freshley, Diana Norwood, Tara Purvis, Lisa Switzer

www.iiak.org | September/October 2018 | 11

Lost in Translation: How to address language gaps with clients By: Alison VanDyke As the U.S. population becomes more multicultural, the needs of non-English speaking clients will change the way agents and brokers service their customers.

Lack of communication and poor documentation present significant E&O exposures for insurance professionals—risks compounded by a language barrier between agent and client.

Clients who do not speak English fluently often bring an interpreter when visiting an agency. In this case, agents should: • Obtain the interpreter’s full contact information.

• Ensure that the interpreter fully communicates to the client what is and is not covered by the policy in question. This may require frequent checks to confirm nothing is lost in translation, especially when using insurance terminology.

• Include notes in the file to document discussions with both the interpreter and the client.

• Never let an interpreter complete and/or sign an application. The client is the person who should complete and sign the insurance contract. If the insurer’s application is written in English, clients should not sign non-English documents. Multiple dialects across various languages leave room for misunderstanding.

Language diversity is here to stay. Particularly in multilingual communities, agencies should consider hiring bilingual staff to better serve their clients’ needs.

Remember, the same best practices apply for bilingual staff in terms of file documentation. Even when an agent speaks the client’s native tongue, the agent should still include notes in the file when communicating with the client.

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What if the client does not have an interpreter and the agency does not have bilingual staff?

Consider referring the client to another agency that can assist.

If agents cannot communicate with potential clients because of a language barrier, it is best to refer the client to an agency that can service their needs in their native language.

Agencies that address language issues early and often will position themselves as multiculturally friendly—and reap the rewards of new business and repeat customers.

Alison VanDyke is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the office in Overland Park, Kansas.

Best Practices Here are a few tips for supporting your customers who do not speak fluent English: • Hire bilingual staff.

• Partner with an independent producer who can communicate with non-English speaking clients.

• Retain a translator on a case-by-case basis.

• Make independent, contemporaneous notes to a file when communicating with any client, reflecting thorough translation of any key documents—including all application questions—for the customer.

• Take advantage of any language services your carrier may offer, including applications, policy forms and promotional materials in the customer’s preferred language.

• If unable to service a particular client’s needs because of a language barrier, refer that customer to another agency for which that barrier does not exist.

—A.V.

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Insurance Services Director Time at IIAK: 7 years What does your job entail?

I administer our E&O, Group Health and Cyber Liability programs for our members. I also answer any and all insurance related questions. I may not know the answer but odds are, I know who to call to get the answer.

What do you like most about your job?

Every day is different. I like the fact that I can go visit our members and also attend a variety of work functions. I also love the people I work with. They are my family away from home.

What was the first job you ever had?

I worked at Sugar & Spice Donut Shop during high school. It only lasted a few months. As you can imagine, having to be at work at 5am on a Saturday and Sunday got old really fast.

Tell us about your family My daughter, Kenzie is in her first year of college and my son, Logan just started 6th grade.

Education Background: I have a Bachelor’s degree in Criminal Justice from the University of Louisville. However, during college I worked a part-time job at an insurance inspection company and little did I know that would start me down the rabbit hole of insurance. I earned my CISR designation in 2007.

What are you most proud of, personally or professionally?

Would it be cheesy if I said paying my house off?!

Name something people would be surprised to know about you.

One of my more interesting jobs during college was aircraft marshalling….or the person on the ground who signals the airplane pilot when to back up and when to start turning.

Name one thing on your bucket list I would love to travel through Europe.

Favorites Food: Turkey & Dressing Team: GO CATS! Movie: I don’t really have a favorite. I typically go to the movies with my son so it tends to be Marvel, DC or Star Wars.

TV Show: Supernatural Band: With kids I rarely get to choose what I listen to on the radio but my choice would be music from the 80’s and 90’s.

www.iiak.org | September/October 2018 | 15

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16 | www.iiak.org | September/October 2018

New Tax Regulation is a Big Win for Big “I” Members By: Jennifer Webb The Internal Revenue Service recently issued a draft regulation on a key provision of the 2017 tax law (26 U.S.C. §199A) that allows for a 20% deduction on “qualified business income” for owners and shareholders of pass-through businesses.

Under the draft regulation, owners and shareholders of insurance agencies and brokerages can take the 20% tax deduction on qualified business income, no matter their taxable income levels, because the IRS does not consider insurance agents and brokers to be a “specified service trade or business.” Owners and shareholders of specified service trades and businesses cannot take advantage of the deduction if their taxable income is over a certain level.

The relevant part of the draft regulation reads as follows: “Proposed §1.199A-5(b)(2)(x) uses the ordinary meaning of “brokerage services” and provides that the field of brokerage services includes services in which a person arranges transactions between a buyer and a seller with respect to securities (as defined in section 475(c)(2)) for a commission or fee. This includes services provided by stock brokers and other similar professionals, but does not include services provided by real estate agents and brokers, or insurance agents and brokers.”

Section 199A provides the 20% tax deduction to an owner or shareholder of a pass-through entity where the owner or shareholder’s annual taxable income does not exceed $315,000 for joint filers and $157,500 for single filers in 2018. In other words, all owners or shareholders that are organized as pass-throughs under the above income thresholds can utilize the full 20% deduction, and any regulations or guidance released by the Treasury Department, including the draft released in August, will not impact this.

However, an owner or shareholder of a specified service trade or business with an annual taxable income between $315,000 and $415,000 (joint) and $157,500 and $207,500 (single) will see the deduction phased out.

Those with an annual taxable income above $415,000 (joint) and $207,500 (single) will be prohibited from utilizing the new deduction.

While the regulation is only in draft form, it was previously unclear whether insurance agencies and brokerages would be considered specified service trades or businesses.

Because insurance agencies and brokerages are not a specified service trade or business, it means that those with annual taxable income above the $315,000 (joint) and $157,500 (single) thresholds can take advantage of the deduction. But, the total amount of the deduction for www.iiak.org | September/October 2018 | 17

those at these upper income levels cannot exceed 50% of employee W-2 wages, or 25% of W-2 wages plus 2.5% of capital assets (e.g. tangible property purchased for the business), whichever is greater. Alongside the draft rule the IRS released a proposed procedure for calculating W-2 wages.

The Big “I” is currently reviewing the draft regulation, which is open for a 45-day public comment period. A public hearing on the regulation is tentatively scheduled for Oct. 16. Because the regulation is in draft form and open for public comment, changes may occur before the rule becomes final.

The Big “I” has been aggressively advocating before Congress and the Treasury Department that insurance agencies and brokerages should not be considered a specified service trade or business.

The Big “I” will provide comments to the IRS and additional guidance to members over the next few months. Final regulations are expected before the end of the year.

In April, the Big “I” sent a letter to key Treasury Department officials and had a meeting with the department. As a follow-up to the meeting, the Big “I” sent another letter to the Treasury Department, specifically addressing questions about the term “brokerage.” The Big “I” has also had a number of meetings with key congressional offices on this issue.

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

Beyond the “specified service trade or business” definition, the draft regulation covers several issues related to the Section 199A deduction which may impact agents and brokers depending on individual circumstances.

For example, financial advice and retirement planning services would qualify as specified service trades or businesses, and consulting is considered a specified service trade or business to the extent that a fee is charged for such services. However, “consulting that is embedded in, or ancillary to, the sale of goods, if there is no separate payment for consulting services” is not considered a specified service trade or business.

Also of note, a trade or business is not a specified service trade or business if it has “gross receipts of $25 million or less (in a taxable year) and less than 10 percent of the gross receipts…[are] attributable to the performance of an SSTB.” If gross receipts are above $25 million, the relevant percentage is 5%. This means an insurance agency that has predominantly a propertycasualty book of business, but also has a small retirement planning, consulting or financials services component, would not be considered a specified service trade or business under the draft regulation.

18 | www.iiak.org | September/October 2018

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20 | www.iiak.org | September/October 2018

Is BINGE WORKING Destroying Your Professional Life & Your Insurance Agency?

By: Billy Williams, PhD

You’ve no doubt heard of binge drinking and binge eating, but you probably haven’t heard of binge working.

Just like the previously mentioned binges, binge working is a pattern of performing an excessive amount of work in a short period of time or expecting an excessive amount of work in a short period of time from others.

Being a binge worker is not the same as being a workaholic.

Workaholics work consistently at their job; the pace and amount of work they perform rarely changes. Binge workers on the other hand have massive swings in their work production and emotions. Binge workers usually only work at their binge pace for a short time, the rest of the time they tend to be unproductive and inefficient with their time and activities.

There are many problems and issues related to being a binge worker, especially a binge leader!

HERE ARE A FEW PROBLEMS WITH BINGE WORKING 1) Just like a binge drinker or a binge eater, binge workers tend to be emotionally and verbally abusive when they are on their binge. They often say things like “things are going to change around here.” “You guys have been taking advantage of me and I am sick of it.” Or, “I’m going to have to fire you if you don’t get your act together.”

2) When I work with a small business as a mentor, I immediately look for the symptoms of binge leadership, once

I see it, I know my number one job is to calm down the team members and to try to mitigate the emotional damage that the binge leader has caused.

3) Binge leaders rarely train their staff or team members because of the leader’s poor time management and complete lack of focus. However, when they’re on a binge, they expect the team to be operating at peak efficiency and binge right along with them, often requiring the employees or team members to stay late or come in early.

4) Binge leadership usually results in high staff turnover since success measurements change from moment to moment depending on the mood of the binge leader.

5) Binge workers and leaders try to perform too many tasks and projects that they are not qualified, educated enough or have the technical skills to do, which results in a lot of “started but never completed projects.”

6) Binge leaders often (very often) pull their employees and other team members off of their schedules and tasks because they want their binge ideas to take priority over everything else. This generally disrupts the entire office or organization and leads to an immense amount of frustration.

7) When a binge worker or leader comes off of their binge, they leave a mess for others to clean up. Often when a business comes to us for mentoring, it is to clean up the mess that a binge situation has caused in the business.

www.iiak.org | September/October 2018 | 21

Be HONEST with yourself. If you are not good at a task, get the hell out of the way and let someone that is good at the tasks do the dang task!

8) If the binge worker is the owner or leader in the business, they are generally the reason their business never moves forward.

It’s hard to move forward when the majority of the employees’ work day is spent fixing problems a binge leader causes. I could go on and on but I think you get the point.

HOW TO NOT FAIL AS A BINGE LEADER If you are a binge leader here are some things you can do to “get the hell out of your own way!”

problems are a direct result of your binge working and the problems it causes.) Prayer, reading motivational books, and surrounding yourself with high energy people will help you find your happy place.

Billy R. Williams, Ph.D., is the President of Inspire a Nation Business Mentoring, an insurance agent and small business owner mentoring company that mentors 1000’s of insurance agencies and small businesses annually on the best tools, processes, and workflows to grow their enterprise.

1) Use as much automation as possible in the day to day operation of your business. Automation isn’t afraid of your binge tirades and it will not call in sick just to avoid you. Using automation such as drip email schedules, automated phone tools, and tracking tools will help with the consistency of operating your business.

2) Have your employees and team members follow a daily tasks and process schedule. It is much more difficult to pull your team off of their tasks when the tasks are an everyday part of the culture of your business.

3) Have a set schedule (day and time) for your leadership tasks to get accomplished. Schedules help control binges and emotions.

4) Have a mentor and/or a board of advisors that you talk to on a regular basis. A good mentor and/or a board of advisors will help keep your binges under control and help you identify your weaknesses.

5) Outsource tasks and processes that you tend to screw up. Be honest with yourself, if you are not good at a task get the hell out of the way and let someone that is good at the task, do the dang task!

6) If you have hired bad employees that can’t learn to properly perform a needed task or process, that is your fault, and you have to make a business decision: either train them, or get rid of them. This is one time where your binge could actually come in handy, since you will probably fire them while you are ticked off.

7) Find your happy place and your energy makers!

Usually binge working is a result of dealing with stressful issues outside of the work place such as people or finances. (Though usually your money

22 | www.iiak.org | September/October 2018

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IIAK would like to welcome our newest members:

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For information regarding IIAK membership, contact Amy Good, Financial Services Director 502-245-5432 • agood@iiak.org

Save These Dates

E&O: Roadmap to Policy Analysis October 3

IIAK Education Center • Louisville

Emerging Leader Tailgate at Keeneland October 18

Keeneland • Lexington

122nd Annual Convention & Trade Show November 14-16

Omni Hotel • Louisville

CRM: Practice of Risk Management February 20-22, 2019

Hilton Garden Inn Louisville Northeast • Louisville

Leadership Conference June 12 & 13, 2019

Holiday Inn University Plaza • Bowling Green

Silver AFCO Amerisafe, Inc. Kentucky National Insurance Co Keystone Insurers Group KY Associated General Contractors Seneca Insurance State Auto Insurance Company Bronze Alexander J. Wayne & Associates AmWINS Brokerage of the Midwest, LLC Anthem Blue Cross Blue Shield Auto-Owners Insurance Company BITCO Insurance Companies Capital Premium Financing ClearPath Mutual Columbia Insurance Group Countryway Insurance Company EMC Insurance Company FCCI Insurance Group FFVA Mutual Insurance Company

Frankenmuth Insurance Imperial Premium Financing Specialists InsurBanc J.M. Wilson Market Finders Insurance Corp Motorists Insurance Group Prime Insurance Companies Summit SwissRe Corporate Solutions United Home Insurance Company Westfield Insurance

www.iiak.org | September/October 2018 | 23

®

By: Steve anderson As a kid, I watched the original Star Trek series live on TV starting with the first episode in 1966.

It was fascinating to watch as people simply said “Computer”, asked a question and then received an answer.

What was science fiction back then has become reality today. Voice enabled apps are everywhere. I’ve been using voice recognition software (Dragon Naturally Speaking) for many years to dictate articles and email. Siri and Google Now are options many people use on their smartphone to dictate text and emails.

In November 2014 Amazon announced the Alexa service and Echo smart speaker. According to ComScore, as of January 2018 20% of Wi-Fi connected homes now have a smart speaker. This is more than a 50% increase in the last year to a staggering 18.7 million US homes using a smart speaker.

It doesn’t take much imagination to understand that as consumers begin asking their devices for information they will also begin expecting your agency to be part of that ecosystem. And, it’s not just consumers at home.

Talk Instead of Typing

As I’ve been talking about voice computing (also known as voice interfaces or conversational computing) I am finding a small but growing number of agency staff that have added an Amazon Echo device to their office. If a significant part of your workday involves typing or reading, you stand to benefit by having an Amazon Echo with Alexa in your office.

Here are just a couple of examples on how you might use Alexa to save time and effort: • Reminders/to do list - “Alexa, add follow-up with Steve on endorsement request to my to do list.”

• Note Taker - taking quick audio notes with Alexa is easy and they are converted into text in the Alexa app.

• Alerts – “Alexa, remind me to call Steve in 20 minutes.”

• Calendar integration – “Alexa, create new calendar appointment with Steve for Tuesday at 10 AM for one hour.”

As the number of skills, actions and activities that Alexa can understand grows (Alexa currently has more than 30,000 skills), your imagination is the only limitation on www.iiak.org | September/October 2018 | 25

how it might be able to help you during the day. Voice interfaces have the potential to be a game changer in business because users don’t have to find a specific app to accomplish a certain task, and they don’t need to learn a new user interface. People already know how to talk and ask questions.

As a simple example, Wynn Las Vegas is installing Alexa power devices in 4,748 hotel rooms, allowing guests to use their voice to open curtains, turn on the lights, fire up the TV, and get basic information like news and weather.

Last month Google upped the ante in the voice-powered computing race with its new Duplex service. It also made significant updates to its virtual assistant. Google Duplex can carry out sophisticated conversations over the phone with the human. It can take on relatively mundane tasks for its users such as booking restaurant reservations and scheduling appointments at stores or offices.

Google Duplex acts as your virtual digital personal assistant. Duplex allows people to have a natural conversation with computers, as they would with each other.

Google showed the initial capabilities of the new Duplex service at an industry conference. Two phone call recordings were played, one was a phone call requesting a hair appointment, and the other was requesting a restaurant reservation. It is hard to tell which voice was the computer and which was the human. To listen for yourself search for “Google Duplex demo.”

These are early examples of where conversational computing will take us. The technology behind conversational computing is developing rapidly.

Amazon, Google, Microsoft, and Apple are all investing significant money into developing products and services that allow you to verbally ask a question and get the information you want quickly and easily.

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Here are nine possible ways conversational computing will benefit you, your customers, and the insurance industry: • Replace online client portals with voice-enabled skills to access information about their insurance program • Receive an insurance quote via voice (already available as a demonstration project) • Client issue certificates of insurance via voice (already available) • Use Alexa “Drop In” to allow a customer to connect directly to an account manager in the office • Create a voice-enabled Frequently Answered Questions to provide personalized answers and replace your website’s static FAQ • As mentioned above, streamlining your office work will be a benefit • Assuming agency management vendors get on board, imagine how much easier it would be to ask for a customer’s coverage information instead of searching

Speed is a Value

Today’s consumers demand value. They want to engage with people who provide products and services. And they want it when they want it, how they want it, anytime, day or night. For insurance agents that are merely “order takers,” changes like conversational computing will be a threat.

Speed is a powerful way to enhance your customer experience.

Speed is a part of the ongoing change in your customer’s expectations: immediacy. Velocity. They want what they want now. They probably really want you to anticipate what they are going to want and have it ready when they decide they need it.

What do you think? Will you be able to talk to a computer like Captain Kirk did on the Starship Enterprise?

Reprinted with the permission of Steve Anderson.

For more information visit: www.SteveAnderson.com

Doing The Right Thing Since 1964 Standing Tall

Mark Maucere, Andy Roe, Jim Roe, Chad Trainor, Janet Phillips and Jim Eades

Ready to stand out?

We’ll stand with you.

To keep your agency relevant, you need the right products, partners and people. Our team of dedicated and responsive professionals can help you fill the gaps in your insurance offerings, providing more unique opportunities for you to meet the needs of your clients. The more you get to know us, the more you’ll see the possibilities.

Let us help you find the right solutions. ®

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Final Junior Golf Tournament Proves to be a Scorcher By: Nikki Robins

The 50th and final Trusted Choice Big “I” State Qualifier went out with a bang, once again bringing fierce competition and weather-related challenges. In years past, participants have had to deal with rain delays, however, heat was Mother Nature’s obstacle of choice this year. On July 5 & 6 competitors braved record-setting temperatures at Quail Chase Golf Club in Louisville.

Cooper Parks of Campbellsville ran away with the boys title with 7 birdies and 1 eagle on the second day to shoot 8 under (64) for a two-day total of 135. Union’s Madison Smith clinched the girls title with a 2-under par finish for the tournament.

The top finishers advanced to the TrustedChoice Big “I” National Championship that was held August 6-9, 2018, at the Daniel Island Club in Charleston, South Carolina. Cooper Parks shot four solid rounds to finish third overall. Visit www.bigi.bluegolf.com for full results.

28 | www.iiak.org | September/October 2018

Boys Division Winners (L-R) Allan Lockwood (3rd, Elizabethtown), Cooper Parks (1st, Campbellsville), Jackson LaLonde (2nd, Lexington)

Girls Division Winners (L-R) Olivia DiPaolo (3rd, Union), Madison Smith (1st, Union), Molly Bebelaar (2nd, Louisville)

We Build Relationships That Thrive

Sharing Knowledge At RPS, our commitment to the success of our agent and broker partners begins with knowledge.

With access to over 200 markets, we understand risk, as well as its unique exposures. Our extensive research, modeling and analysis assure confidence that the coverage provided matches the need of your customers. Whether arranging layered structure and pricing, calculating probable maximum loss or creating renewal action plans and timelines, RPS provides the knowledge a true partner expects from a market leader.

To learn more how RPS is building partner relationships with retail agents and brokers across the country, we invite you to download our Building Relationships That Thrive at RPSins.com/Relationships. For other information contact Ron Smedley 859.685.6202, Ron_Smedley@RPSins.com or email ContactRPS@RPSins.com.

RPSins.com

Part 1

You find out your client sold their business. Sometimes you’re excited. Sometimes you’re heartbroken. Often times you’re both. But most of all, you’re just not sure what to do.

You’ve probably had a relationship with them for years, and, at least on a personal level, you’re probably excited for a client who’s starting a new chapter in their life. You may be heartbroken from a professional level, because you’re not sure the buyers will become clients of the agency.

This article will touch on what to do when you find out a client is on the cusp of closing and getting ready to sell.

The first thing is both the simplest and the hardest. Get your client to involve you in the process and have them get you a draft of whatever sales documentation exists.

By no means must it be final and it certainly doesn’t have to be pretty. This simple step is hard because many clients do not intuitively understand that, even as a seller, they have insurance issues they must address.

You will need to look at the agreement from an insurance perspective. Obviously, there may be specific insurance requirements in the agreement, but you need to have a broader perspective. Is it going to be an asset sale or will ownership be changing hands via a stock sale?

30 | www.iiak.org | September/October 2018

By: Rick Pitts

WHEN CLIENTS SELL

Many believe asset sales are preferred by buyers because asset sales create a theoretical wall or break between the operations of the seller before the sale and the buyer’s business conduct after the sale. In asset sales, the buyer isn’t going to be generally held liable for the sins of the seller, so to speak.

Why do we care about the structure of the deal? It influences the content of the agreement that interests us professionally.

Sometimes, tax considerations or the outcome of negotiations dictate a stock sale, which means that the business will continue as it did pre-sale, albeit with different ownership. Two important insurance implications flow from this. One concerns the buyers, since they bought the place “lock, stock and barrel,” so to speak and will obtain most of the rights under existing insurance policies of the seller.

Simply put, our named insured, “Corporation, Inc.” is still our named insured, still in business and probably has several months left under multiple policies. The change in ownership doesn’t – by itself – interrupt most traditional insurance coverage.

The second insurance implication is subtler, but just as real. When our buyers take over “Corporation, Inc.” by

buying the stock, they’re naturally inclined to know a whole lot more about the operations of the business prior to closing. They’re also inclined to have our sellers make a whole lot more promises about how the business has been operating and whether anything’s gone wrong…or even if there are storm clouds on the horizon.

These sorts of promises are called “representations and warranties,” or “reps and warranties” or “R&W” in the biz.

The reps and warranties tend to get stiffer and more significant as the dollars at stake get higher and there’s a stock sale involved.

What kind of “no shenanigans” or “nothing to see here, officer…” type promises is our seller making? Here’s a partial list of the usual reps and warranties that are significant from an insurance perspective: • “We’re in compliance with all laws.” More importantly, there haven’t been any “notices, orders or other communication from the government of any alleged, actual, or potential violation of or failure to comply with any law. At minimum, that rep and warranty should match what’s in the producer’s file.

We don’t want our seller to turn in a matter to us for defense or to see if there is coverage and have it not be disclosed to the buyer as an exception to the promise made here or in the next one below.

• “We’re not in any lawsuits.” The selling shareholders and “Corporation, Inc.” will have to rep and warrant there aren’t any lawsuits, arbitrations or administrative actions pending, or, they’ll have to disclose each one.

Then, they’ll have to rep and warrant there aren’t any more, i.e., the list is exhaustive. Part of what is promised here is that none of the lawsuits or claims would, if “Corporation, Inc.” lost it, have a “material adverse effect on the earnings, business, operations, or financial condition of the company.” What constitutes a material “adverse effect” can vary dramatically from deal to deal, but for the most part if there is a defense being undertaken without any reservation of rights, the warranting party can feel much more comfortable with the “no material adverse effect” promise.

and warranties can even get to the level of what the experience modification of “Corporation, Inc.” is for worker’s compensation. This R&W might even require disclosure if our seller or company has received any nonrenewal notices or had interruptions in coverage.

• “We’re good with the benefits stuff.” The R&W here is regarding tax law, ERISA, COBRA and state or other federal laws impacting employee benefits administration. This one is specific to the benefits end of the discussion, but typical reps and warranties can often extend to things such as whether employees have been terminated, whether severance was offered, and the like. As insurance professionals, we’re looking here at the implication on the fiduciary liability side, of course, but we should also be vigilant for broader reps that could implicate what our client has done regarding employment practices liability.

• “Neither the EPA nor KDEP are after us.” For the uninitiated, that’s the Environmental Protection Agency and the Kentucky Department of Environmental Protection. The company is usually going to promise that it doesn’t have any “liability under, nor have they violated, any Environmental Law. Any property owned, operated, leased, or used by company or any subsidiary, and any facilities and operations thereon, are presently in compliance with all applicable Environmental Laws.” Notice that the term “Environmental Law” is capitalized. That usually means that the phrase is defined in the agreement and – not surprisingly – is usually defined quite broadly.

This isn’t a comprehensive list, but it’s enough to let us know that we should be consulted about some of the specific issues in a business sale situation. In our next look at the topic, we’ll talk about specific insurance requirements and an asset sale.

Richard S. Pitts, IIAK’s General Counsel is also part of a member benefit, First Call Free Legal.

Members receive up to a 30-minute phone consultation on an insurance or agency-related matter once a year at no charge. Contact IIAK for more information.

• ” We’ve given you all of our insurance policies, and they are up to date and in effect.” This representation usually includes all P&C insurance policies and all L&H policies, too. The insurance implications in this subject matter are obvious, but this topic can, in certain instances, run much deeper. Some representations www.iiak.org | September/October 2018 | 31

32 | www.iiak.org | September/October 2018

Relax...

You’ve offered each of your clients a personal umbrella policy.

Right?

It might not be quite as relaxing as a day at the beach, but knowing you’ve done everything in your power to protect the customers who trust you to help them will go a long way towards easing your mind.

Offering each and every client an umbrella not only protects those who choose to purchase the coverage. It protects your agency from liability. And it protects your book of business, since studies show that customers who have multiple policies are less likely to move their business elsewhere.

As a Big “I” member, you have access to a stand alone personal umbrella program from A+ rated carrier RLI, featuring: Limits up to $5 million available Excess UM/UIM available in all states You can keep your current homeowner/auto insurer New drivers accepted - no age limit on drivers Up to one DWI/DUI per household allowed Auto limits as low as 100/300/50 in certain cases

Competitive, low premiums for increased limits of liability Simple, self-underwriting application that lets you know immediately if the insured is accepted E-signature and credit card payment options Immediate coverage available in all 50 states plus D.C.

So cover your clients... protect your agency... and profit from umbrella sales!

Contact Jennifer Hopper, your RLI Administrator at: Email: jhopper@arlingtonroe.com Tollf Free: (800) 878-9891, ext. 8639 Local Fax: (317) 554-8551 Toll Free Fax: (888) 552-9891

Coun t on us to be there, there ...

A strength that sets EMC apart from other insurance companies is the local service we provide.

We cover policyholders in more than 45 states and we have 20 offices strategically located around the country. So when you partner with us, you not only get the stability of one of the country’s top insurance organizations, but you also get a familiar face close to home.

We look forward to seeing you soon.

www.emcins.com ŠCopyright Employers Mutual Casualty Company 2018. All rights reserved.

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Classifieds Acquisitions

Looking for Producers

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.

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.

Call R. Alex Rankin, CPCU or Philip Anderton, CIC, at Sterling G. Thompson, Co. at 502-585-3277

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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Advertisers We would like to thank our advertisers for their support.

This publication would not be possible without you!

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KEMI Prime Insurance RLI Personal Umbrella Risk Placement Services Secura Summit Consulting Trusted Choice West Bend Mutual Insurance

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For classified ads or to advertise in the Kentucky IA, contact: Nikki Robins, Communications Director at nrobins@iiak.org or call 502-245-5432.

www.iiak.org | September/October 2018 | 35

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