Primary Agent - April 2010 - PA Edition

PENNSYLVANIA

IN THIS ISSUE ________________ Consequences of misclassification Premium audit: ins and outs Member profile

THESE AGENTS HAVE MADE THEIR MARK Congratulations to Progressive’s Signature Agents Congratulations to these 18 Pennsylvania independent agents.

They’re the newest inductees into Progressive’s Signature Agent program.

SM

Brian Corbett

Mark Preiss

Alan Liu

Al Kartsonas

Eastern Insurance Group Wilkes Barre

A Agency Insurance, Inc. Allentown

A-Best Insurance & Financial Services Philadelphia

Kartsonas Agency, Inc. Pittsburgh

Carol Troup

David and Ward Hartman

Carlos Rexach

Gerard Halloran

Sholley Agency Lewisburg

Hartman Insurance Agency, Inc. Dallas

Carlos Rexach Insurance Agency Philadelphia

GJH Insurance Center, Inc. Gouldsboro

Judy Werner & David Kurtz

Frank Hacko

John Joyce

Mark Gannon

Harry L Bubb Insurance Agency Hanover/Red Lion/Shrewsbury

Frank H Hacko Insurance New Brighton

Joseph J Joyce and Associates Pittston

Gannon Associates Athens

Sean Barrett

Karl Kincel

Michael Dortch

E F Barrett Agency, Inc. E Mckeesport

Kincel & Company, LTD Dunmore

Combined Insurance Group Lansdale

Gerald Laughlin Laughlin, Inc. Philadelphia

Barry Lefkowitz Atlantic Insurance Agency Upper Darby

Dawne Griffith Kazmiryk & Krypel Insurance Taylor

They join these 43 agents who have already earned Signature Agent status.

Susan Coleman Coleman Insurance, Inc. Pittsburgh

John Sciolla Sciolla Agency King of Prussia

Roy Thompson Thompson NE Insurance Scranton

Brian Corbett Corbett Insurance Shavertown

Robert Coleman Coleman Insurance Agency, Inc. Gilbert

Zheng Niu Metro Insurance Services, Inc. Philadelphia Steven Goldberg Contemporary Insurance Agency Monroeville

Jim Hoffman JE Hoffman Agency Hawley

Anita Alegrezza

Brian Tirpak

James Wade

Freedom Insurance Group Philadelphia

Tirpak Insurance Tamaqua

Wade Insurance Philadelphia

Mike Guerrini

Bill Riemenschneider

Brian and Jim Fitzsimmons

Guerrini Insurance York

Riemenschneider Agency Lansdale

Fitzsimmons Insurance Agency Forest City

Ron Maerz

Felicia Katz

Insurance Man, Inc. Roslyn

Shirley Katz, Inc. Stroudsburg/East Stroudsburg

Brian Miller

Mike Bastendorf

Richard S. Miller, Inc. Jonestown

AAA Insurance Agency Lancaster/Harrisburg

Jeffrey Pompei

Tom Wolf

Pompei Insurance Agency King of Prussia

Wolf Insurance Agency, Inc. Nazareth

Lee Hinkle Hinkle Agency, Inc. Richboro

David Sciolla Sciolla Agency Ivyland

Mark Johnson Runkles Insurance Agency, Inc. York

Doug Erwin

Jim Iddings

Advanced Insurance Solutions Hershey

Iddings Insurance Agency Wyalusing

Michael Fulginiti

Tom Florey

Fulginiti Insurance Aston

Florey Insurance Agency Clarks Summit

Andrew Bommentre

Carl Karschner

Fry & Bommentre, Inc. Warminster

Cliff Hutchens

John Coolbaugh

Cliff Hutchens Agency Philadelphia

Coolbaugh Insurance Agency Stroudsburg

William R. Karschner & Son Coudersport

Steve Brown

Dave Nottingham

Robert Moran

B & W Agency, Inc. Washington

Robert A. Moran, Jr. Harleysville

James Ford & Stephen Brown Agency Philadelphia

McCorriston Agency Newtown

Kathleen Johnston-Parone

Gary Dijosie

Richard Hirsch

Henderson Agency, Inc. Aliquippa

Sterling Insurance Agency Levittown

Gary Orvieto

Dan Morton DJM Insurance Agency Mechanicsburg

Mike McCorriston

Imperial Agency, Inc. Bala Cynwyd

Dijosie Insurance Services Philadelphia

Teri Miller Miller & Miller Agency Slatington

Michael Padgeon Juniata Insurance Agency Philadelphia

James Morrell First National Insurance Agency Meadville

The Signature Agent program recognizes and rewards agents for selling an average of at least one preferred Progressive personal auto policy per week. This elite group now earns higher commission and a variety of additional benefits, including the opportunity to leverage more of Progressive’s marketing power.

To find out what you need to do to make your mark as a Signature Agent, contact your Progressive account sales representative.

©2009 Progressive Casualty Insurance Company and its affiliates, Mayfield Village, Ohio.

09A00214.AP2.PA (02/10)

Contents

10

PRIMARY AGENT MAGAZINE

Misclassification: What are the consequences?

A contractor approaches an agent about his budding business. A conversation ensues, and the agent deciphers enough information to write Commercial General Liability and Workers’ Compensation policies. Or does he?

Page 10

16

Workers’ compensation fraud: the premium audit A workers’ compensation policy’s retrospectively determined premium lends itself to fraudulence. Hence all of the focus on premium audits. On the following pages, the authors explore the ways employers attempt to skirt higher premiums and disrupt the audit process … and how agents can help to prevent fraud.

Page 16 The SWIF shift

22

When the Rhodes Insurance Agency Inc. found itself limited by mono-line workers’ compensation carriers’ classification acceptability and other restrictive guidelines, the State Workers’ Insurance Fund (SWIF) became the steady standby. But that meant limited offerings and no commission. Then IA&B’s Market Options program expanded into the workers’ compensation market….

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In every issue Mission Statement Primary Agent delivers ideas to help Insurance Agents & Brokers’ members negotiate their unique position as guardians of trust between insurance consumers and companies while facing the challenges of maintaining a small business. Primary Agent also supports IA&B’s mission to preserve and advocate the American Agency System.

2 3 4 5 6 8

Chair of the Board’s Message Member FAQ State News New Members Preventing Errors & Omissions Coverage Corner

13 15 26 28 28 28

Glance at Events IA&B Partners Technology Update Advertisers Index Classified Ads Last & Least

Subscriptions: Non-member price: $2.25 per copy or $15 per year.

All communications for publications, including news, features, advertising copy, cuts, etc., must reach the editor by 1st of month two months prior to publication. Advertising rates furnished upon request.

Address inquiries to: Primary Agent Editor PO Box 2023 Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and additional entry post office.

Postmaster: Send address changes to above address.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2010-4) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2010. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

Board of Directors Officers Kathleen M. Glattly, ChFC, CLU, CPCU Chair of the Board Factoryville, Pa. David Rosenkilde, CIC Vice Chair of the Board Reisterstown, Md. Robert J. “Buc” Cawley, AAI Immediate Past Chair of the Board Wexford, Pa.

Members Norman F. Basso, CPCU York, Pa. Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md. Henry “Butch” Bradley, Jr. Crofton, Md. Timothy P. Burris Thompsontown, Pa. M. Scott Clemens, CIC, CPCU, CLU, ChFC Souderton, Pa. John T. “Chip” Colwell Jr., CIC Corry, Pa. G. Greg Gunn, CIC Lemoyne, Pa. Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P West Chester, Pa. Diana M. Hornung-Momot, ACSR Wilmington, Del. Linda A. McCann, AAI, CPCU, CPIW Salisbury, Md. Michael F. McGroarty Sr. Pittsburgh, Pa. Scott C. Rogers, CPIA York, Pa. Susan A. Sallada, CIC** Ft. Washington, Pa. William D. Schneider, CPCU, ARM* Pittsburgh, Pa.

Kathleen Glattly CPCU, CLU, ChFC, AIM

Chair of the Board’s M

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A closer look at workers’ comp fraud Writing workers’ comp comes with a unique set of challenges — and, unfortunately, fraud is one of them.

When it comes to workers’ comp, some employers are known to pull a fast one … or two. Lowballing payrolls.

Blurring the employee/subcontractor line. Fudging audit paperwork.

Agents have two key roles in workers’ comp fraud prevention — searching out accurate information for applications and educating insureds on audits and the consequences of fraud. This issue of Primary Agent magazine tackles both.

Jerry Milton penned a feature article on misclassification.

With laws in Delaware and Maryland — and one pending in Pennsylvania — that establish penalties for misclassifying employees (and that don’t provide a safe harbor for agents), this topic is more relevant than ever. You’ll also find a feature that explains the who, what and why behind a workers’ comp insurer’s premium audit.

Of course these topics are just the tip of the workers’ comp iceberg. To learn more, consider attending Jerry Milton’s upcoming seminar (see page 11). You can also find additional resources at iabgroup.com by selecting “coverages” from the menu bar.

Until next time, Kathleen

Robert A. Walbeck, CIC Homer City, Pa. David B. Wasson Sr., CIC State College, Pa. James M. Watkins* Dover, Del. King W. “Kip” White, LUTCF Fallston, Md. John S. Yasik, CIC Newark, Del. * IIABA National Director ** PIA National Director

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E

Member FAQ QUESTION: I do some health insurance and have been told by my carrier that HIPAA had been expanded in a way that forces me to protect client information differently. My carriers have asked me to sign a new agreement. Is this true?

?

ANSWER: Absolutely, as part of the American Recovery

w train their employees in both how to properly handle health information and in how to carry out that incident response plan.

In order to comply, agencies must first assess their agency’s security and review each item identified by the Department of Health and Human Services. The Security Plan that will emerge from the risk assessment must cover the three major categories of safeguards analyzed:

and Reinvestment Act (ARRA), a number of different provisions were adopted that affect the protection of patient health information and have a significant impact on insurance agencies and their procedures.

w administrative (think staff training and internal procedures),

Insurance agencies are usually considered business associates of covered entities under HIPAA, because they “perform functions or activities on behalf of covered entities that involve the creation or receipt of “Protected Health Information” (PHI).

w technical (think password-protection, anti-virus and encryption software).

The most significant new requirements involve the following: Data Breach Notification — The rule requires specific notification to affected parties if there is breach of unsecured PHI, and the breach compromises the security of the PHI. That means you need to have proper security and monitoring processes in place, be able to recognize a breach and notify the appropriate party. The safe harbor here is that entities that secure health information through encryption or destruction as specified by HHS are relieved from the notification requirement in the event of a breach (as soon as the information is rendered unusable, unreadable or indecipherable, it is no longer “unsecured”).

w physical (think locks or document-shredding), and

This Security Plan must be formalized and implemented through specific policies and procedures. It must also be reassessed periodically and updated as needed.

One significant detail is that the Security Rule applies to Electronic Protected Health Information only (EPHI), whereas the data breach notification rule applies to all types of PHI (paper, electronic or information given orally).

For more information and guidance on HIPAA’s latest data breach and security rules, log onto www.iabgroup.com.

Applicability of the Security Rule to Business Associates — The new requirements involve implementation of tighter security standards for Business Associates. Until now, Business Associates were only required to give their Covered Entities “satisfactory assurances” that safeguards were in place to protect patient information. They now must comply with the same requirements as Covered Entities. That means they are expected to: w limit “the amount of protected health information they access, receive or process,” w review security controls and add encryption where possible, w develop an “incident response plan,“ and

DO YOU HAVE A QUESTION? E-mail it to us at iab@iabgroup.com. Please use “Primary Agent FAQ” in the subject line of your message.

You can also fax your question to (717) 795-8347. We look forward to answering your questions!

Primary Agent | April 2010

State News A snapshot of the Big “I” Legislative Conference Forty IA&B members convened in Washington, D.C. March 3-4. They joined hundreds of agents from across the nation to advocate, learn and network at the annual Big “I” Legislative Conference & Convention.

IA&B members discussed health care reform with Rep. Jason Altmire.

The event fell on the heels of the Blair House Summit on health care reform and the belated extension of the National Flood Insurance Program (NFIP).

“Insurance agents rank at the top as the most influential lobbyists in any district and are considered a reliable source of information.”

“The conference came at the perfect time,” said Norm Basso, chairman of IA&B of Pennsylvania. “Health care reform and reauthorization of the NFIP were hot topics, and legislators were interested in what our members had to say.”

IA&B members met with their Congressman, Rep. Todd Platts. From left to right: Jack Ulrich, Joanne Bankos, Rep. Platts, Sunny Simpson, Scott Rogers

Other discussion topics included federal regulation of insurance, taxes and crop insurance. (See the adjacent page for an update.)

IA&B members arrived Wednesday afternoon to attend the Big “I” legislative issues briefing and reception and, later, an IA&B reception, briefing and dinner.

The next morning, they traveled to the Capitol to meet with their legislators.

– Rep. Barney Frank (D-MA), chairman of the House Committee on Financial Services

IA&B of Pennsylvania brought one of the largest groups of members to the conference.

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IA&B’s March 2009 legislative visits: Rep. Jason Altmire Rep. Chris Carney Sen. Bob Casey Rep. Kathy Dahlkemper Rep. Charlie Dent Rep. Mike Doyle Rep. Chaka Fattah Rep. Jim Gerlach Rep. Tim Holden Rep. Paul Kanjorski Rep. Patrick Murphy Rep. Tim Murphy Rep. Joe Pitts Rep. Todd Platts Rep. Allyson Schwartz Rep. Joe Sestak Rep. Bill Shuster Sen. Arlen Specter Rep. Glenn Thompson

Thank you to our sponsors: Premium Finance Brokerage, LLC — reception sponsor Travelers – dinner sponsor

Where things stand in D.C.

Primary Agent: Making other trades green with envy

As this edition of Primary Agent went to print — and IA&B members went to the national legislative conference — the following issues were on the Congressional radar.

April 22 marks the 40th anniversary of Earth Day. In recent years, independent agencies have jumped on the environmentalism bandwagon — recycling and going paperless.

Federal Insurance Office The House voted out legislation to create a Federal Insurance Office (FIO) in December. It was part of a sweeping consumer-protection bill that would provide for the greatest changes to the financial system since the Great Depression.

In this spirit, IA&B is proud to boast a green magazine. Primary Agent is printed with soy ink on paper stock certified by the Sustainable Forestry Initiative (SFI).

The FIO would be included within the Treasury Department and tasked with monitoring the industry, assisting with the terrorism-insurance program and providing industry information to policymakers. It would not preempt state regulation — a win for the industry.

Since the House vote, the bill has been sitting in the Senate, where it is likely a more moderate reform bill will be drafted. The issue is expected to regain attention after health care reform is out of the spotlight.

TRIA and crop insurance budget cuts The Obama Administration proposed budget cuts to the federal crop insurance subsidy program as well as the Terrorism Risk Insurance Program, established by TRIA. Congress continues to review the USDA’s proposal to cut program funding by $4 billion over five years.

This would be in addition to the $6 billion reduction mandated by the 2008 farm bill.

For TRIA, Obama’s FY 2011 budget calls for nearly $250 million in cuts effective October 1 and a phase-out of the program by 2014. The cuts would mean higher deductibles and co-payments for terrorism insurance companies.

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SFI standards conserve biodiversity and protect soil and water quality, as well as wildlife habitats. What’s more, SFI participants plant over 650 million trees each year to thriving forests.

WELCOME

New Members Krombolz-Sheets Inc. West Chester, Pa. Sttarz Corporate Insurance LLC Chadds Ford, Pa. Lehigh Agency Bethlehem, Pa. Indiana Insurance Indiana, Pa. Schratz Insurance Agency Plymouth Meeting, Pa. Jacoby & Associates Agency LLC Gibsonia, Pa. Blue Chip Services Insurance Alliance Harrisburg, Pa. Ridge Insurance Agency Inc. Cranberry Township, Pa.

Primary Agent | April 2010

Preventing ERRORS AND OMISSIONS

E&O AND HOMEOWNERS — NOT AS EASY AS YOU WOULD THINK CURTIS M. PEARSALL, CPCU, AIAF, CPIA Curtis M. Pearsall contributed this article on behalf of Utica Mutual Insurance Company in Utica, N.Y. Insurance Agents & Brokers Service Group Inc. is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania.

For questions regarding this article or your Errors & Omissions coverage, contact IA&B at (800) 998-9644 or by e-mail at iab@iabgroup.com.

One would think that insuring homeowners is fairly straight forward. After all, the coverages are fairly standard among the carriers – an HO 3 with company A is probably pretty close to an HO 3 with company B (assuming that they are both on the same edition date). But in the world of E&O claims, things are a bit different.

More than 15 percent of E&O claims in 2009 were generated by this one line of business, which certainly shows that things can go wrong. Plus, when losses happen, they have some severity potential – ranging from a couple thousand dollars, to hundreds of thousands of dollars in the event of a total loss. On average, an E&O claim involving an underlying Homeowners’ coverage is around $30,000.

By examining the causes of losses more closely, it appears that in many situations it is not necessarily a coverage

issue that caused the loss.

Instead, the cause of the E&O claim resulted from an agency procedural error. Consider the following claim and ask yourself, “Could this happen in my agency?”

The client, Justine X., requested that the agent procure HO coverage for her.

Although the agent was told by the client that she owned a German Shepherd, the agent answered “no” to the question “Do you own any dogs?” when he uploaded the application to XY Mutual.

The dog subsequently chased and bit a mailman, causing the mailman to fall and severely fracture his leg. The insurance carrier denied coverage, stating it never would have written an HO risk with a dog of this type because its underwriting guidelines prohibit this exposure. It was clear there was definite liability against the agent. Thus, after gathering medical costs on the mailman, the case against

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the agency’s client was settled for $210,000, with Utica paying the entire amount.

Here are other “common mistakes” agents make.

As you review these, what do you think the agent could have done differently or better?

1) The agent determines the homeowners’ limit rather than asking the client for a limit. The agent needs to be careful taking this position.

While most companies provide “estimators” for the agent to use to “approximate” the value, these are not 100 percent perfect as there may be uniqueness to the house that the estimator does not factor in. When calculating the amount, it is important to advise the customer that this is not a guarantee that the home can be replaced for this amount. You might be better off recommending that the customer secures the services of a licensed appraiser.

2) The agent fails to have the customer sign the application.

There is really no excuse for this.

When providing HO coverage for customers, you should meet with them to complete the application and have them sign it. If coverage is being secured online, it is still recommended that you get an application completed and signed for your file. Without a signed application, the agency will be exposed to claims by the carrier and the client if the application contains a misrepresentation.

3) The agent fails to advise the carrier of issues pertaining to the risk — such as dogs, prior cancellations for non-pay, type of construction or size of a dwelling, loss history, etc. This situation would certainly be avoided if you comply with the recommendations in No. 2 above.

The carrier counts on you to provide an accurate description of HO exposures. Without asking the customer the appropriate questions, it would be rather difficult to know the correct answers. Don’t think you know the right answers? Ask the questions and document the responses.

4) The timing of when to switch from a Builder’s Risk to an HO policy – i.e., switching to an HO when the building is still vacant and unoccupied. This is a common question. By and large, when the customers move into the house (at the time of the closing), the building is no longer considered “vacant and unoccupied.” In those situations where the homeowner is responsible for insuring a home under construction, some companies may consider providing a homeowners’ policy with certain stipulations. Either way, it is strongly suggested that you contact the HO carrier for perspective and advice.

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5) The agent fails to advise a client to increase limits to keep up with the rising cost of construction and materials. With the increasing cost of construction, copper, plywood and other building materials, it is generally recommended adopting the inflation increases of the carriers you represent.

Other recommendations: Receipt of the policy – Advise clients, verbally and in writing, that when they receive their policy they need to review it to ensure everything is in order. The agency should also review the policy to make sure it matches what was requested.

Educating your customers – Education is an extremely effective way to reduce the potential for an E&O claim. A monthly newsletter — in

printed form and on your Web site — is a great means to accomplish this. Do your customers know the limitations within a HO policy? Do they know how much coverage applies for their sons/daughters while they are away at college? Does your agency know if the customer has a business in their home and how best to insure it? Can the staff recite the differences between various HO forms?

Good luck and good selling!

Primary Agent | April 2010

Coverage CORNER

THE FIRST NAMED INSURED

JERRY MILTON, CIC Jerry M. Milton teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages. He is also the education consultant for IA&B, working with CISR, CIC and continuing education programs.

Let’s discuss something all of you already know. But I’ve learned over the years that an occasional reminder can be a good thing.

$1,000,000 limit is not very much when it’s being shared by four different entities, their employees and their additional insureds.

Way back in 1984, when the Insurance Services Office (ISO) made major revisions to all of their commercial policies, they introduced a form called the Common Policy Conditions (IL 00 17).

ISO reasoned, correctly so, that certain policy conditions apply to all coverage forms, be it Commercial Property, Commercial General Liability, Commercial Auto or any of their other commercial forms.

The Common Policy Conditions grants certain rights to, and imposes certain obligations upon, the first Named Insured. The other Named Insureds, no matter how many, do not have these rights and obligations.

The Common Policy Conditions specifically states the following: w The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation.

The lead-in wording of the Common Policy Conditions states, “All Coverage Parts included in this policy are subject to the following conditions.” This wording is followed by six conditions.

w We may cancel this policy by mailing or delivering to the first Named Insured written notice.

When different entities (corporations, limited liability companies, etc.) have common ownership, we often issue a single policy of insurance and list each of these entities as a Named Insured. There’s nothing wrong with that, except they share the policy limits. A

w We will mail or deliver our notice to the first Named Insured’s last mailing address known to us. w If this policy is cancelled, we will send the first [8]

Named Insured any premium refund due. w The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent. w The first Named Insured shown in the Declarations is responsible for the payment of all premiums and will be the payee for any return premiums we pay.

Only the first Named Insured can cancel the policy; only the first Named Insured is notified by the insurer in the event of cancellation; only the first Named Insured can make changes in the policy; and only the first Named Insured is responsible for the payment of the premium.

That’s what the policy says, pure and simple.

Before we go any further, let’s fully understand that these conditions in no way affect coverage. Your coverage under the policy is the same, whether you’re the first Named Insured or the fourth Named Insured.

Now, let’s talk real life. You have an insured, Company A. They have two wholly-owned subsidiaries, Company B and Company C. Their Business Auto Policy lists Company A, Company B and Company C as Named Insureds. Your agency and these three companies have a close relationship. You’re friends. You play golf together. You go to the same church.

The chief executive officer of Company B calls the agency and tells you to remove a truck from their Business Auto Policy. What do you do? Remove the truck, tell the executive to send you a written request (for E&O protection), or tell the executive of Company B that you cannot remove the truck without authorization by Company A. If you remove the truck, you and the insurer have breached the insurance contract. Even a written request by Company B will probably not do you much good. Only Company A can request changes in the policy. That’s what the policy says. If Company A wants Companies B and C to have the ability to request changes, they should consult their attorney and draft powers of attorney or whatever legal documents are needed.

Incidentally, the above story is true. The truck in question was not sold, but was transferred from Company B’s fleet to Company C’s fleet. The executive of Company B simply misunderstood what was said and thought it was being sold.

The agent did remove the truck based on Company B’s request. Guess which truck was involved in an accident shortly thereafter. The insured did file a complaint against the agent and insurer for breach of contract and bad faith.

Are any of us guilty of this sin?

Enough said.

Y’all take care!

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COVERAGES

Misclassification: What are the consequences?

A contractor approaches an agent about his budding business. A conversation ensues, and the agent deciphers enough information to write Commercial General Liability and Workers’ Compensation policies.

Or does he?

On the following pages, Jerry Milton follows the policies through an audit and sheds light on WC parameters as well as the repercussions of misclassifying operations and employees and of failing to secure certificates of insurance for subcontractors.

Primary Agent | April 2010

Agent: “Mr. Jones, I’m Sam Smith.”

Client: “I’m Joe Jones. Nice to meet you.”

Agent: “I understand you’re just getting started in business and want to discuss your insurance needs.”

Client: “That’s right.”

Agent: “What will you be doing?”

e v a S ate D e Th

Client: “Some remodeling, a few additions – stuff like that.”

Agent: “When you remodel or make an addition, will you do all the work yourself or will you use other contractors?”

Client: “Well my specialty is carpentry, but I’ll be doing a little bit of everything – drywall, plumbing, electrical … you name it. I’ll probably use other contractors as I need them for the painting, masonry work and so forth.”

Agent: “Are you incorporated?”

Client: “No, everything I do will be done as an individual – in my name.”

Agent: “How many employees do you have?”

Client: “Right now there’s just me plus one full-time employee. There are two other fellows who pretty much work for me full time, but I treat them as independent contractors.”

IA&B to offer a new seminar, taught by

Jerry Milton Workers’ Compensation — Who, What, When, How and Why Topics: w State-specific laws

Agent: “What do you think your total receipts and payroll will be for the year?”

w Classification and rating

Client: “Hard to say. I’m pretty optimistic. I hope to do $500,000 the first year. I pay my employee $40,000 a year. I’ll probably have to pay other contractors, including the two fellows who do a lot of work for me, about $100,000.”

w Workers’ Compensation and Employer Liability

Sam thinks he is now ready to write Joe Jones’ Commercial General Liability and Workers’ Compensation policies. What classification(s) will he use? What amounts will he show for receipts and payroll?

w Experience rating plan

w Federal compensation and liability laws w Premium audit w E&O exposures

Seminar Location & Dates:

Sam knows that both policies are subject to audit. So what’s the big deal? Classify Joe Jones as “carpentry” for both policies. After all, neither policy excludes the insured for operations not shown in the Declarations.

Erie, Pa.

Aug. 24

Pittsburgh, Pa.

Aug. 25

Hagerstown, Md.

Aug. 31

Don’t be so sure.

Mechanicsburg, Pa. Sept. 1

Some insurers, especially in the E&S market, are attaching a Classification Limitation endorsement to their CGL policies.

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Delaware

Sept. 2

Allentown, Pa.

Sept. 28

Philadelphia, Pa.

Sept. 29

Baltimore, Md.

Sept. 30

COVERAGES

The IRS launched a three-year study of employee misclassification in February 2010. The recession has been blamed for a skyrocketing number of workers illegally classified as independent contractors rather than full-time employees.

Source: Associated Press

This endorsement specifically excludes any operations not listed and classified in the Declarations.

Even if the policies do not exclude additional operations, let’s discuss the audit. Is Joe in for a shock when the insurer sends him a bill for the receipts and payroll that are classified as plumbing, electrical, roofing, etc., etc.? I think so!

Furthermore, if Joe can’t separate his receipts and payroll for each classification, can the auditor assign the highest rated classification for all receipts and payroll? Sure. Joe is no longer in shock — now he’s angry!

But Joe is in for another surprise. Joe’s applications showed receipts of $400,000 and payroll of $40,000. Sam did not inform Joe that he was responsible for all subcontracted work if he did not require Certificates of Insurance from those subcontractors. Do you think Joe required Certificates from those subcontractors? I doubt it.

Especially from the two fellows

that pretty much work for him full time. Additional premium is now due for both policies. By now, Joe has reached a higher level of anger.

of Joe’s account? Probably.

Might they non-renew? It’s possible. Will their relationship with their agent, Sam, change?

It could. It’s called “distrust.”

But, the surprises are not over for Joe. Is Joe covered for Workers’ Compensation? Does he want to be? Can he be covered? The answer is, “It depends on the state.”

Misclassification of payroll now has another consequence. Both Maryland and Delaware have passed bills that address misclassification. These bills establish penalties for employers who fail to properly classify employees. No safe harbor is provided for agents who are aware of any misclassification. A similar law has passed the Pennsylvania House and is currently before the Senate.

The Pennsylvania Workers Compensation Act stipulates that sole proprietors are excluded from the Act and cannot be considered an employee. However, sole proprietors are being insured under the Pennsylvania State Workers Insurance Fund (SWIF).

In Maryland, sole proprietors are exempt unless they elect to be covered. The sole proprietor must be named and added to the policy. In Delaware, sole proprietors engaged in construction are subject to the Act and must secure coverage.

To cover Joe — more payroll and more premium.

___________________________ Remember, misclassification results in additional premium for the insured, distrust by the insurer and, depending on the state, possible penalties.

___________________________ We’ve been talking about Joe being angry. What about the insurer? They’re certainly not happy with the misclassification of Joe’s receipts and payroll. Do they now take a different view

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Here are a few things to remember about audits: w Auditors specifically look for uninsured subcontracted labor when conducting an audit. w Valid Certificates of Insurance for work performed by others is always required. Otherwise, the cost of that work will result in additional premium. w Payroll separation by classification may save the insured significant premium dollars, but it has to be done correctly. w Audits should result in large additional premiums only if there is a big increase in the receipts and payroll that were projected at policy inception — not because the operations were misclassified.

Have you informed the insured:

________________________

an executive of a corporation?

w How subcontracted work is treated at audit and the need for Certificates of Insurance?

w That misclassification could result in non-renewal or cancellation by the insurer?

w What is required for separation of payroll for different operations?

w What the legal penalties could be for misclassification?

w How your state addresses Workers’ Compensation coverage for a sole proprietor, partner in a partnership, member of a limited liability company, or

Jerry M. Milton, CIC, teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages.

He is also the education consultant for IA&B, working with CISR, CIC and continuing education programs.

Remember, misclassification results in additional premium for the insured, distrust by the insurer and, depending on the state, possible penalties.

Y’all take care!

Glance at Events A P R I L

C A L E N D A R

Date

Topic

Location

2

CISR—Personal Auto

State College, Pa.

3

Best Practices of E&O Loss Control

Mechanicsburg, Pa.

3-6

CIC—Commercial Casualty

Newark, Del.

4

CISR—Personal Auto

Reading, Pa.

8-11

CIC—Personal Lines

Erie, Pa.

9

CISR—Commercial Casualty

Scranton, Pa.

10

William T. Hold Seminar

Erie, Pa.

16

CISR—Personal Auto

Frederick, Md.

E&O Coverage Standards seminar

Philadelphia, Pa.

17

CISR—Commercial Property

Mechanicsburg, Pa.

17-19

James K. Ruble Graduate Seminar

Ellicott City, Md.

22

CISR—Personal Residential

Mechanicsburg, Pa.

CISR—Personal Residential

Philadelphia, Pa.

23

CISR—Personal Auto

Philadelphia, Pa.

24

Dynamics of Service

Baltimore, Md.

CISR—Agency Operations

Philadelphia, Pa.

CISR—Commercial Property

Pittsburgh, Pa.

25

CISR—Commercial Property

Philadelphia, Pa.

26

CISR—Commercial Casualty

Philadelphia, Pa.

30

Mistakes That Lead to E&O Claims seminar

Baltimore, Md.

31

CISR—Personal Auto

Lancaster, Pa.

Platinum Profile

Insurance Agents & Brokers proudly recognizes Millville Mutual Insurance Company as one of its Platinum Partners.

IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

Millville Mutual company headquarters located in Millville, Pennsylvania FEATURED PARTNER: Millville Mutual Insurance Company COMPANY PRESIDENT: M. Paige Raski President COMPANY LOCATION: 215 State Street, Millville, PA 1-800-262-8495 A.M. BEST RATING: “A” (Excellent) WEB SITE: www.millvillemutual.com

illville Mutual takes pride in serving nearly 60,000 policyholders throughout the state of Pennsylvania. We are dedicated to building strong ties to rural and suburban Pennsylvania, which gives us the insight and knowledge to tailor our products and services to fit the specific needs of each individual policyholder. With over 175 Independent Agencies across the state, customers can receive the personalized service and individualized products they deserve.

M

We are continuously releasing new product lines and customer service enhancements to ensure our policyholders are receiving the utmost in quality and innovation. 2009 saw the development and implementation of a newly automated Recurring Payment option which can be accessed from the online payments section of our company website.

With nearly $50 million of assets and $25 million in surplus, Millville Mutual is proud to announce that due to our financial strength and efficient

operations we have retained an “A” (Excellent) rating by AM Best Company, which is a rating we have maintained since 1973.

2009 proved to be another successful year with the emergence of a newly updated Commercial Property Program. The new class rated program enabled us to offer a broader array of coverages as well as updated policy forms and manuals.

2010 will see the launch of a new Special Residential Package Policy which will provide package policy coverage to owners of tenant occupied rental dwellings. We will continue to work hard in 2010 to implement new products and ideas to better serve our customers’ needs.

We strive to provide the best possible combination of personalized customer service and technological advancement available in today’s market, and are committed to building lasting relationships with both our policyholders and our Independent Agency force.

Listed below are those companies that strongly support the independent agency system and Insurance Agents & Brokers.

Thank you for your continued sponsorship.

WHAT IS IA&B PARTNERS? The IA&B Partners program gives company and allied businesses the opportunity to demonstrate their commitment of support to independent agents and receive maximum market exposure. As an IA&B Partner, you will also realize the benefits of IA&B membership to

PLATINUM LEVEL

BRONZE LEVEL

Berkley Mid-Atlantic Group Erie Insurance Group Harleysville Insurance Insurance Agents & Brokers Service Group Inc Millers Mutual Group Millville Mutual Insurance Co Mutual Benefit Group Penn National Insurance Selective Swiss Re The Main Street America Group Travelers Utica National Insurance Group

AAA Insurance Agency Insurance Company Allied Insurance Briar Creek Mutual Insurance Company Builders Insurance Group Capitol Insurance Company Chubb Group of Insurance Companies Companion Property & Casualty Group Countryway Insurance Company Encompass Insurance First General Services Foremost Insurance Group Friends Cove Mutual Ins Company Goodville Mutual Casualty Company Grange Insurance Companies Hanover Fire & Casualty Insurance Company Insurance Alliance of Central PA Inc Insurance Placement Facility of PA Keystone Insurers Group Inc Lebanon Mutual Insurance Company Mercer Insurance Group Merchants Insurance Group Mercury Casualty Penn Millers Insurance Company Penn Prime Municipal Insurance PMSLIC Insurance Company Reamstown Mutual Insurance Company Rhoads & Sinon LLP Rockwood Casualty Insurance State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Mutual Service Office Inc The Philadelphia Insurance Companies Tuscarora Wayne Mutual Insurance Company UPAC Insurance Finance

help you succeed in the insurance industry.

DO YOU SEE YOUR NAME? To become an IA&B Partner, choose the sponsorship package that matches your commitment of support.

Contact the Member Sales Center at (800) 998-9644, (717) 795-9100 or visit us online at www.iabgroup.com to get started.

GOLD LEVEL Ohio Casualty Progressive

SILVER LEVEL Aegis Security Insurance Co American Mining Insurance Co Cumberland Insurance Group Donegal Insurance Group Frederick Mutual Insurance Co Harford Mutual Insurance Co Juniata Mutual Insurance Co MMG Insurance Company Private Client Group PSBA Insurance Trust The Motorists Insurance Group Westfield Insurance Zenith Insurance

Primary Agent April 2010

COVERAGES

Workers’ compensation fraud: the premium audit A workers’ compensation policy’s retrospectively determined premium lends itself to fraudulence.

Hence all of the focus on premium audits. On the following pages, the authors explore the ways employers attempt to skirt higher premiums and disrupt the audit process … and how agents can help to prevent fraud.

Primary Agent | April 2010

T

he audit of a workers’ compensation policy is a unique animal in the insurance industry. For most types of insurance, the premium charged is based on underwriting factors that are known or can be determined at the inception of the policy. Premium for these types of insurance (e.g., health, life, disability insurance) is, thus, determined prospectively. The premium owed under a workers’ compensation insurance, in contrast, is based on factors that are determined with certainty only after the policy period has ended, or retroactively.

Premium is based on the amount of the employer’s payroll and the amount attributable to each type or “classification” of work the employer is engaged in. The precise amount of an employer’s payroll, however, can rarely be known in advance of the policy term. The employer, therefore, is asked to provide an estimate of its payroll in the application and at each policy renewal. The insurer relies heavily on the good faith of the employer to provide a reasonable estimate of his payroll so that an appropriate initial premium can be charged.

This article is one in a five-part

Basics of the premium audit

series penned by Popham and

The typical workers’ compensation policy expressly grants the insurer broad rights to conduct an audit of the employer’s business records, usually after each policy term, so that the final, actual premium amount may be determined. The policy requires the employer to keep accurate records of its payroll and make those records available for an audit at any time upon request. The policy will usually specify which records the employee must maintain and make available. These include payroll ledgers, disbursement journals and tax returns.

McCann for IA&B. The

For those employers who engage subcontractors, one of the more critical types of documents that must be maintained is certificates of insurance received from subcontractors. If certificates of insurance, or other proof that the subcontractors have their own workers’ compensation coverage, are not provided during the audit, the policy typically will allow the auditor to include the payroll of those subcontractors in computing the employer’s premium.

Insurers also have the contractual right to inspect the employer’s premises for the purpose of confirming the nature of the employer’s business and the appropriate classification.

In lieu of an on-site audit or inspection, insurers sometimes request certain employers to complete an audit form identifying the employer’s payroll and the nature of its business operations during the past policy term. Whether the insurer conducts a “paper audit” or on-site audit is often not governed by any specific guideline or procedure, but is left to the discretion of the underwriters and auditors. Generally

[ 17 ]

corresponding articles on workers’ compensation fraud are available at iabgroup.com.

Simply select “Coverages” from the left-hand menu and click on the “Workers’ Compensation Coverage” link.

The best policy for agents … is to take what steps they can to better inform their clients and help them avoid a problematic audit, or ultimately litigation.

COVERAGES

speaking, paper audits are conducted of employers who have lower estimated payroll, little or no claims experience, and are engaged in lower risk businesses.

Repercussions of the premium audit Seldom does an employer look forward to a premium audit.

The employer will usually have to spend considerable time collecting the documents and

information requested by the auditor. The audit itself may interrupt the operations of the business and require the employer to take time away from his or her job to locate information or respond to the auditor’s questions, or even dedicate an employee to do so.

Moreover, rarely are the results of the audit favorable to the employer. Since many employers are conservative in their estimate of payroll, audits often result in moderate or sometimes substantial increases in premium. Hence the reason that some employers attempt to avoid audits, purposefully not provide all the information requested, or even to falsify the information provided.

Each of these, however, runs its own risks.

The failure to allow or cooperate in a premium audit will, at a minimum, constitute a breach of the policy’s terms.

Under these circumstances, the policy will typically allow the insurer to cancel or rescind the policy, but an audit will still need to be conducted.

Once the policy is cancelled or rescinded, obtaining the employer’s consent to allow an auditor on site to perform a final audit is not always easy.

The insurer may be forced to bring a court action to obtain a declaratory judgment or an order of specific performance compelling the employer to allow the audit. As with any court action, this is a timeconsuming and costly process.

[ 18 ]

I used to think EMC was ju st for niche commercial programs.

Then again, I used to think the moon was made of cheese.

MAKE EMC YOUR CHOICE FOR MAIN STREET BUSINESS When you think main street business, start thinking about the EMC Choice® Businessowners Program. Small and midsize businesses will enjoy the flexible coverage options designed to meet their specific insurance needs, the added value of free loss control services, plus the responsive service from an EMC branch office nearby. So if you still think EMC is just for niche programs, think again. Count on EMC ® for your main street commercial lines marketing, too. For more details, contact your local EMC branch office.

Valley Forge Service Office: 800.362.3620 | Home Office: Des Moines, IA

www.emcinsurance.com

© Copyright Employers Mutual Casualty Company 2009 All rights reserved

COVERAGES

Fraud in connection with the premium audit usually begins with the pre-policy term estimate. Employers may purposefully underestimate payroll in order to avoid paying a higher initial premium and in the hopes that an audit will not be conducted. An estimate, however, is just that – an estimate. Proving that the employer intentionally understated its future payroll for the purpose of defrauding the insurer may be difficult.

On the other hand, an employer’s concealment or intentional misrepresentation regarding the nature of its business may be easily detected by reviewing, for example, the employer’s contracts and invoices at the time of the estimate. Although minor changes in an employer’s business during the policy term should be expected, a substantial change in operations (e.g., from distributing widgets to manufacturing them) may indicate fraud.

Fraud also may occur during the audit process itself. An employer has a duty to not only allow the audit to proceed, but an affirmative duty to convey truthful information to the auditor. Providing the auditor with falsified payroll records, withholding key documents and misrepresenting the employer’s business operations to the auditor are common themes in premium audit fraud.

In a recent fraud case, the employer had represented to the insurer in the original application and at subsequent renewals of the policy that he was engaged only in the business of painting, used only subcontractors to perform that work, and had no employees. A detailed review of the insured’s canceled checks and documents obtained from general contractors with whom the insured did business revealed that the employer was actually engaged in the drywall business and had over 100 employees.

The insured, in fact, had signed, under penalty of criminal prosecution, hundreds of WH347 payroll forms, required by the U.S. Department of Labor’s Wage and Hour Division when working on federal government jobs. In the forms, the insured identified, by name, the “employees” working on federal jobs, the hourly rate they were paid, and the withholdings the insured deducted from their paychecks.

An agents’ role in preventing fraud Agents generally have little involvement in the audit process. The best policy for agents, however, is to take what steps they can to better inform their clients and help them avoid a problematic audit, or ultimately litigation.

First, agents should do what they can, when taking an application, to obtain a realistic payroll estimate and accurate business description from the

[ 20 ]

employer. An agent does not have a duty to independently verify the information they receive from the employer, but one way to ensure reasonably accurate answers to these important questions is to provide the employer with an explanation of how premium is determined, how the audit process works, what the employer’s obligations will be if an audit is requested, and the importance of keeping complete and accurate payroll records. It may even be prudent to inform the employer about the risks associated with underestimating payroll, misstating the nature of its business, and failing to cooperate with or impeding the audit. Better informing the employer in this regard may avoid a premature cancellation or rescission of the policy, and decrease the risk of litigation for both the employer and the agent.

________________________ Bryson Popham and Michael McCann contributed this resource. Popham is a partner with Popham & Andryszak and serves as IA&B’s regulatory and legislative counsel in Maryland.

This article originally appeared in the July 2005 Primary Agent magazine.

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[ 21 ]

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MARKETS

The SWIF shift How an agency’s clients, and bottom line, benefited from IA&B’s Market Options program

When the Rhodes Insurance Agency, Inc. found itself limited by mono-line workers’ compensation carriers’ classification acceptability and other restrictive guidelines, the State Workers’ Insurance Fund (SWIF) became the steady standby. But that meant limited offerings and no commission. Then IA&B’s Market Options program expanded into the workers’ compensation market….

Primary Agent | April 2010

H H

ow times have changed — for Rhodes Insurance Agency and the mono-line workers’ compensation market.

When the West Chester, Pa.-based agency opened its doors in 1973, it offered personal lines and life insurance. By 1981, it was time to expand. Current president, Michael DeSeve, was brought in to build the commercial book of business, and today it is a thriving general agency with a balance of personal and commercial lines business.

Issue

The following is a sampling of the classes served through the IA&B Market Options workers’ compensation program: w Auto dealers w Banks

More as a result of demography than intent, the Rhodes Insurance Agency’s contractor customer base grew quickly.

And at times, that made finding a voluntary workers’ compensation carrier a challenge.

When the agency expanded into commercial lines, the selection of mono-line workers’ compensation insurers was limited. And the carriers that did write those policies became more and more restrictive.

That made it difficult for DeSeve and his team, whose clients did not always fit the general classes. So they turned to SWIF … an unsatisfying and, at times, ineffective alternative.

“We weren’t getting paid commission, and our clients could have had a better program through an insurance carrier,” explained DeSeve. “And there were some clients’ requirements that we couldn’t meet through SWIF.”

w Colleges w Contractors w Garbage hauling w Health care w Hospitality w Manufacturing w Physicians and dentists w Retail w Sanitation w Transportation w Truckers w Universities

—————————————————————————————

w Wholesale

“For our size agency, the program has been very helpful.” – Mike DeSeve —————————————————————————————

Solution Enter IA&B’s Market Options program with workers’ compensation through Agency Resources, Inc. (ARI).

Soon after IA&B announced its partnership with ARI, DeSeve sent a few submissions “to test the waters.” The experience was positive, and through the years, ARI’s expansion of available markets corresponded with the Rhodes Insurance Agency’s needs.

“It was an alternative for our customers rather than just SWIF,” he said. “In some cases the choice of markets was

[ 23 ]

IA&B Workers’ Comp Programs Expanded Class Codes IA&B’s Market Options program recently expanded its workers’ compensation class codes to include home health care and professional health care staffing.

Visit iabgroup.com to learn more.

MARKETS

IA&B’s program also came as other mono-line workers’ compensation carriers increased their volume commitments — which put the Rhodes Insurance Agency and many similar sized agencies in a difficult spot as some clients preferred their policies bundled.

Result “The program is a good match,” he shared. “The availability of markets and the recognized companies they offer can fill a void for an agency. In the end, that’s what made a big difference for us and our customers.”

DeSeve also touts the program’s service and support.

STRONG RELATIONSHIPS PRODUCE RESULTS There is no better time to become part of The Cumberland Insurance Group Team. We are now appointing agents in Central Pennsylvania.

Commercial and Personal Lines Competitive Commissions Exceptional Customer Service Financial Strength Experienced Underwriters Marketing Support

Contact Cheryl Oswald at: 610-857-9900, ext. 3117 or coswald@cumberlandgroup.com

ND INS LA I N E R V A

M

1844

GR

ANCE UR

“I receive a turnaround quote the same day or next day in most cases,” he said. “I’ve worked with them on claims and billing questions, and they’ve been very helpful and effective.”

More information is available by visiting iabgroup.com or contacting the IA&B Member Service Center at (800) 998-9644, option 0.

MBER CU

perfect and actually saved our clients’ money over going into SWIF.”

OUP

About the program IA&B’s Market Options program expanded into the workers’ compensation market in 2003. There are no access fees or volume requirements, and competitive commissions are granted on new and renewal business.

[ 24 ]

Celebrating 165 years of service

◆

1844 - 2009

Goodville Mutual New Holland, Pa. Partnering with the finest independent agents for over 80 years Contact Fred Macy, CPCU fred.macy@goodville.com 800-448-4622 goodville.com

A-Rated Carrier Now Appointing New Producers in Pennsylvania, Maryland & Delaware!

(More states to be added in the near future.)

Business Insurance— CPP, BOP Monoline Fire, GL Competitive pricing—All Lines MSO rates and policy forms Personal lines roll overs will be considered Commercial auto for artisan contractors, retailers and wholesalers Contractor’s policy rated on number of employees, not payroll Internet rating system No minimum premium requirement for our producers Fast and friendly service for our customers from company staff

To get started, please contact Dick Riddle, CPCU Knightbrook Insurance Company P.O. Box 686, 927 West Main Street Valley View, PA 17983 Office: Cell: Fax: E-mail:

[ 25 ]

215-249-1394 215-272-1442 215-249-1395 richard.riddle1@comcast.net

Primary Agent | April 2010

Technology U P DATE

BUILD A WEB PRESENCE WORTHY OF 2010

MATTHEW MARKO Matthew Marko is a marketing process manager for Progressive Insurance. He works to provide local marketing strategies, tools and co-branded collateral to help independent agencies grow their businesses. E-mail him at matthew_marko@progressive.com.

Matt prepared this article for

The day you hung your first sign outside of your office you took the step to say, “We’re here.” By taking the same pride in building an agency Web site, you tell online visitors that you are open for business.

ACT. For more information about ACT, contact Jeff Yates, ACT executive director at jeff.yates@iiaba.net. This article reflects the views of the author and should not be construed as an official statement by ACT.

Auto insurance is one of the most shopped-for products on the Internet, and interest is growing. Seventy-three percent of people use the Internet to search for insurance information, but 67 percent still prefer to buy from a local agent . It should be clear that locals are searching for your agency.

If they can’t find you, they may call an agency down the street.

Start by building a quality site Whether you develop a site on your own or use an

outside resource, your site should: Reflect your agency’s brand.

Clearly set your agency apart from others in your area.

Show your logo, local office and team members’ faces rather than generic stock photography. Talk about what makes your agency unique.

Include customer testimonials.

Show all of the ways customers can interact with you. Include real-time online quoting, phone number, address with a map, an e-mail address and a short contact form. Our company, as well as others, offers a real-time online quoting banner agents can place on their site. Some comparative rating vendors offer tools you can put on your site to enable consumers to get online multiple quotes that then feed into your agency rater.

[ 26 ]

Provide easy ways for customers to make self-service changes. This can be as easy as providing a link to your carriers’ online self-service sites or a form for your customers to fill out that is automatically routed to you.

Incorporate search engine optimization (SEO). SEO is the technical term for moving your listing up the ladder on sites like Google, Yahoo, Bing and others. The higher your listing appears on the page when someone types in “[Your City] insurance,” the more likely people will click on that link. We’ll talk more about SEO in the next section of this article.

Build with measurement in mind. Google Analytics, a free service, can tell you how people arrived to your site, what pages received the most attention, the key

words people typed in search engines to find you and other valuable information. A professional Web development partner can link Google Analytics to your site or you can do it yourself by visiting www.google.com/analytics.

Be personal and be local. Your neighbors are looking for a hometown resource. Your site should have links to other local businesses and organizations. Reference the areas you serve and clearly show that you are committed to your community.

Update regularly. No prospect or customer wants to visit an outdated Web site, and, just as importantly, search engine rankings reward sites that are frequently updated. Try to post new content to your site at least once a month. Better yet, start a blog on your site where you answer common insurance questions, describe your agency’s involvement in the community or share local news and events.

Broaden your reach A quality Web site is a necessary first step. It is your agency’s Internet “hub,” the place you want online users to eventually reach — whether they get there from an Internet Yellow Pages listing, a search engine, a carrier Web site or a social media site like Facebook. But it’s equally important that you constantly work to attract people to your site.

When someone types in a business name or “[Your City] insurance” into Google or Yahoo, some of the top listings that show up are “local listings.” Try it. Type your agency name and city into one of those sites and see where you end up on the list — if at all.

Local listings are like Internet phone books that show your company’s phone number, address (sometimes

even a visible map of your area), background information and Web site. These listings are free, but you have to claim them and check them for accuracy and consistency.

Our company has run agent surveys indicating that fewer than one in five independent agencies have claimed free online local listings. Don’t let your agency miss this high-impact opportunity.

To start, claim your free local listings at Google, Yahoo! and Bing. (Tip: to get started on Google, for example, type “Google local listing” into the Google search engine and select the Google Local Business Center.) Make sure your agency information is consistent and accurate, that each listing links back to your agency Web site, and that you choose appropriate business categories and keywords.

Take note of how your highestranking local competitors are listed and mirror that format.

Your agency also should claim free listings at localeze.com, infousa.com, yellowpages.com and superpages.com — the more listings your agency claims, the better.

Attract “searchers” Next, help people find your Web site when they perform searches on sites like Google and Yahoo! for common insurance terms. That’s called “Search Engine Optimization,” and it’s driven by two main factors: your content and the Web sites that link to yours.

You can control both.

Use Google Analytics and Google Keywords to better understand the words people use to search for insurance in your area. For example, if you have an agency in Boca Raton, Fla., and you discover that people search for “Boca Raton insurance” most, those three words need to be integrated into your home page copy.

[ 27 ]

To boost SEO: w Create separate pages for each product line. w Write for humans. Tell people exactly what you offer and why you’re the best. Integrate search terms but don’t repeat them. w Work with a local Web development partner that can improve your SEO. Behind-thescenes metatags, link-building strategies, keyword optimization and other tactics can improve your search engine rankings.

Ask for local references of any partners you consider. w Link to carrier sites and ask carriers to link to yours. For example, all of our agents can be linked to and from our agent locator site. w Start a Facebook “fan” page and be sure to have a listing on LinkedIn. These social networking sites also feed search engines.

Keep them coming back Agents most successful on the Internet are those who invest ongoing time and money in their online presence. These agents respond quickly to online inquiries.

They designate team members to keep content fresh and regularly check online listings for consistency.

And, most of all, they measure their results with online analytics and by the business generated through Internet activities. _________________________

Editor’s Note: For more tips on Web sites, search engine optimization, blogs and other social media issues, visit iabgroup.com. Select “Technology” from the menu, and then “Other Resources.”

Classified ADVERTISEMENTS AGENCY MANAGER Manage and grow mid-size agency, primarily personal lines, located in Southeast PA. Equity position with eventual purchase opportunity.

Send resume in confidence to: Editor #202, PO Box 2023 Mechanicsburg, PA 17055.

SOUTHEAST PA PRODUCERS & AGENCIES Professional agency since 1926 located in Feasterville, Bucks County, Pa. Call for confidential information and a review of our services.

Contact Ray Reinard at (215) 375-8600, Ext. 119.

If you would like to place a Classified Advertisement, simply fax your ad on company letterhead to (717) 795-8347, and we will take care of the rest.

Ad Index

Bogus workers’ comp policies stranded employees A Missouri man lost his legs in a work accident.

When his workers’ compensation policy denied payment of prosthetic limbs, he was forced to pay out of pocket … for the one leg he could afford.

He is one of hundreds of thousands of workers — and their employers — who were duped in one of the largest U.S. insurance fraud cases.

Three men ran a network that siphoned $100 million in workers’ compensation premiums through illegitimate organizations, including a fake insurance carrier, and into their pockets.

In 2008, a Florida judge sentenced them to a combined 55 years in federal prison.

Cumberland Insurance Group . . . . . . . . . . . . .24 EMC Insurance Cos. . . . . . . . . . . . . . . . . . . . . .19 Goodville Mutual Cas Co . . . . . . . . . . . . . . . . .25 IA&B Partners Program . . . . . . . . . . . . . . . . . . .15 IA&B Series Ads . . . . . . . . . . . . . . . . . . . . . . . .IBC Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC Knightbrook . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 LIG Insurance Co Ltd . . . . . . . . . . . . . . . . . . . .21 Millers Mutual Group . . . . . . . . . . . . . . . . . . . . .9 Mutual Benefit Group . . . . . . . . . . . . . . . . . . . .25 Penn National Insurance . . . . . . . . . . . . . . . . . .18 Preferred Property Program . . . . . . . . . . . . . . . .7 Progressive . . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC Tri-State General Ins Ag . . . . . . . . . . . . . . . . . .21 [ 28 ]

Sources: Coalition Against Insurance Fraud The Florida Times-Union ----------------------------------------------------------------———————------The Last & Least column is dedicated to the industry’s oddities — from creative claims and kooky coverages, to (tasteful) jokes and strange stories. Submit yours to iab@iabgroup.com, subject line: Last & Least. The editor will happily protect sources’ anonymity upon request.

PREMIUM FINANCING FOR YOUR CUSTOMERS FROM IA&B Using IA&B’s premium financing program through Premium Financing Brokerage (PFB) you can provide your clients more affordability in managing their insurance premiums. This IA&B-endorsed program comes as an improved financing solution for you to offer peace of mind to your personal and commercial lines clients regardless of account size. Program features include: w Credit Card Down Payment option w Interest Rate Guarantee w Flexible payment terms w Rapid accessibility to quoting and account servicing w Minimum account size Make the most of your IA&B membership and enroll in PFB premium financing.

FOR MORE INFORMATION ABOUT THE BENEFITS OF PFB, CALL (866) 381-6501 OR VISIT IABGROUP.COM.

Affiliated with

In Delaware & Pennsylvania

Driving members to distinction

YOUR SUPPORT MATTERS. CONTRIBUTE TO AGENTPAC. Through AgentPAC, IA&B can work to elect legislators who understand you. IA&B is a strong advocate for you, but even the strongest advocate cannot succeed unless there are legislators who understand the issues faced by independent agents — that is where your support matters!

Help IA&B support legislators who understand independent agents. Contribute to your state AgentPAC.

Affiliated with

VISIT IABGROUP.COM OR CALL THE IA&B MEMBER SERVICE CENTER TOLL FREE AT (800) 998-9644 OR LOCALLY AT (717) 795-9100, OPTION 0 FOR MORE INFORMATION.

In Delaware & Pennsylvania

Driving members to distinction