Primary Agent - August 2022

AUGUST 2022

FOURTH-GENERATION INDEPENDENT AGENT

SARA PAYNE

EXCLUSIVE MEMBER MAGAZINE

ALSO INSIDE AGENCY SUCCESSION PLANNING CERTS & ADDITIONAL INSUREDS

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AU G US T 2022

CONTENTS FEATURED 4

CERTS & ADDITIONAL INSUREDS What difference does a date make? To an additional insured, it makes all the difference.

IA&B Education Consultant Cathy Trischan explains.

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> > > > > 14 JOIN US ON SOCIAL MEDIA: Facebook.com/IABforME LinkedIn.com/company/IA_and_B Twitter.com/IA_and_B YouTube.com IA&B is the premier resource and champion for independent insurance agents in Pennsylvania, Maryland, and Delaware.

Periodical postage paid at Mechanicsburg, PA and at additional mailing offices. Postmaster: Send address changes to Insurance Agents & Brokers, 650 Wilson Lane, Suite 200, Mechanicsburg, PA 17055.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2022-8, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B. Copyright 2022. 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 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. 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 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.

Q&A WITH SARA PAYNE IA&B member and fourth-generation independent agent Sara Payne shares how her family’s agency has evolved – and the best advice from her father.

AGENCY SUCCESSION PLANNING Learn what questions to ask in advance of internal agency perpetuation, according to agency consultant Jon Persky.

MONTHLY 2

PRESIDENT'S MESSAGE

3

CLAIRE-IFICATION

6

NEWS & NOTES

12

PICS & POSTS

19

STAFF PROFILE

21

UPCOMING EDUCATION

IABforME.com |

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PRESIDENT’S MESSAGE

LOOKING AHEAD I’d like to advise on two key initiatives that came out of a recent IA&B board meeting – and which will directly involve you, the member:

INSURANCE AGENTS & BROKERS 650 Wilson Lane, Suite 200 Mechanicsburg, PA 17055 191 Main Street, Annapolis, MD 21401 800-998-9644 | IABforME.com

STRATEGIC PLANNING The board chose a firm to help us with a long-term strategic plan. Leadership recognizes the rapidly changing landscape for independent insurance agents, particularly as a result of continued mergers and acquisitions. The goal is to collaboratively create a 5-7 year strategic plan to respond to the new business landscape, address the changing needs of members, and proactively plan for the desired future.

This is an example of IA&B remaining member-centered and relevant.

What we offer today may not be pertinent in five years, and we want to plan accordingly.

IA&B BOARD OF DIRECTORS OFFICERS Richard M. Rankin, CIC, Chair Lancaster, PA D. Bradley Rosenkilde Jr., Vice Chair Hunt Valley, MD

MEMBERS Gregory H. Bennett

This planning process will rely heavily on member interviews, member focus groups, and a full membership survey. Your candid feedback will help steer the direction of IA&B well into the future, so please keep an eye out for that.

Sarah M. Brown, CIC, CRM, AFIS Shrewsbury, PA

FACE-TO-FACE MEETINGS After a long pause of in-person activities due to the pandemic, IA&B staff will get back out and about with our members. We will restart our member-ageny visits with IA&B staff members to say hello and thank you, and to gather information for our strategic planning process. We also are planning regional lunches and happy hours, some young agent group meetings, and even a golf outing or two.

This will all be a lead-up to larger events returning, like our Futures Conference and Executive Management Conference.

The landscape has certainly changed as a result of the pandemic, with a focus on virtual. However, we miss seeing our members and gaining the valuable feedback we can only get in person. Look for IA&B staff in your area in the near future.

Andrew Enders, Esq.

Harrisburg, PA

Len Gieseler, LUTCF

Pottstown, PA

Lisa A. Leach Goth, CIC

New Bethlehem, PA

Christopher J. Miller, CIC

Jonestown, PA

Michael A. Papa, CIC, MBA

Hunt Valley, MD

William H. Purdy

Sunbury, PA

Kent Reynolds, CIC

Hagerstown, MD

Jason Rodriguez

Wilmington, DE

Donna Roper

York, PA

Candace Shoupe, AAI, AIC

New Castle, DE

Tara S. Silfies, CPCU

Bethlehem, PA

Robert L. Smyrl Jr., CIC

Hatfield, PA

Michael Thomas

Gambrills, MD

Sheila Wells, CIC, CISR

Rehoboth Beach, DE

J. Marshall Wolff, CIC, CPCU Easton, PA

NATIONAL DIRECTORS

Best,

Michael P. Ertel Sr. (PIA) Columbia, MD G. Greg Gunn, CIC (IIABA) Lemoyne, PA Jason F. Ernest President & CEO 2

Bel Air, MD

AUGUST 2022

Diana Hornung Hanby (IIABA) Wilmington, DE

CLAIRE-IFICATION

CLAIRE-IFICATION IA&B Vice President - Advocacy Claire Pantaloni, CIC, CISR Are you a member with a question?

Contact Claire to find the answer at 800-998-9644, ext. 604 or ClaireP@IABforME.com.

QUESTION:

Is it true that a Pennsylvania customer with Full Tort who is involved in an accident in New Jersey can’t sue the at-fault New Jersey driver?

ANSWER: It depends. A Pennsylvania driver may be restricted from suing if his/ her insurer is also licensed in New Jersey. This provision stems from the New Jersey (NJ) Motor Vehicle code and is referred to as the Deemer statute or “verbal threshold.” It applies to all out-of-state residents who have an unrestricted right to sue in their home state’s auto insurance policy and are insured by a carrier licensed in New Jersey.

In Pennsylvania, drivers select full tort or limited tort, and that’s what determines their ability to sue an at-fault driver for non-economic damages (i.e. pain and suffering). It stands to reason they would expect this selection to carry over to an accident occurring in New Jersey.

However, under N.J.S.A 17:28-1.4 of the NJ Motor Vehicle code, the Deemer Statute applies to any out-of-state driver whose auto insurer is authorized to do business in New Jersey. So, if a Pennsylvania driver’s auto insurer is licensed and sells insurance in New Jersey, the statute applies and will deem that Pennsylvania driver to have the equivalent of limited tort, even if he/

she selected full tort.

IMPORTANT NOTES: ▲ The restriction extends to carriers that are affiliated with each other or under common control, so using different “pup” companies will not be sufficient to circumvent the Deemer statute. Licensed insurance companies are usually identified on the NJ Department of Banking and Insurance’s website, so you can verify if your insurer is listed at this url: https://www. state.nj.us/mvc/pdf/Vehicles/ insurance_codes.pdf ▲ Just like limited tort in Pennsylvania, this “verbal threshold” can be overcome under specific circumstances described in the statute.

These circumstances are the equivalent of the “serious injury” in Pennsylvania and include: (1) death; (2) dismemberment; (3) loss of a fetus; (4) significant disfigurement or scarring; (5) displaced fractures; or (6) permanent injury.

IABforME.com |

▲ Under the Deemer statute, the policy for the out-of-state driver also has to provide the same type of Personal Injury Protection (PIP) benefits as required under New Jersey law, including the $250,000 mandatory PIP minimum limit. So while the out-of-state driver may not be able to sue for pain and suffering, the out-of-state policy will be automatically reformed to provide the mandated level of coverage in New Jersey, even if it was written with a lower limit.

This document is not a legal opinion and should not be relied upon as such. The intent of this document is to provide a general background regarding the topic or topics discussed, not to provide legal advice.

Producers and agencies should consult an attorney regarding specific situations and specific questions with respect to the topic or topics covered in this document. Neither the Insurance Agents & Brokers nor any of its employees shall be responsible for any errors or omissions regarding any statements made in this document, nor any errors or omissions regarding any statutes, regulations, court rules, and/ or any other government documents cited in this document.

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WHAT DIFFERENCE A DATE MAKES – TO AN ADDITIONAL INSURED

By Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP

Your contractor client sends you a certificate request with insurance requirements for a new job. The general contractor is requiring that it be additional insured on CG 20 10 11 85 or its equivalent. You issue the certificate showing coverage on the CG 20 10 12 19 form your insurer is currently using. Your insured calls and is furious. The general contractor refuses to let him begin work until the proper endorsement is issued and is threatening to cancel the contract.

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What went wrong? Isn’t what you provided equivalent?

example, while a general contractor might add a project owner.

The short answer is no – it is not equivalent. The long answer requires a bit of an additional insured history lesson.

The CG 20 10 11 85 states that coverage applies with respect to liability arising out of the named insured’s work for the additional insured. This form does two things that more recent editions of the form do not do. The CG 20 10 11 85 covers the additional insured even if the named insured has done nothing to contribute to the loss – for example, when the additional insured is the solely negligent party.

The CG 20 10 – Additional Insured - Owners, Lessees or Contractors endorsement adds coverage for those for whom a named insured contractor is performing operations. A subcontractor can add a general contractor, for AUGUST 2022

COVERAGE CORNER It also provides both ongoing and completed operations coverage.

With the 10/01 additional insured revisions, ISO added language to the CG 20 10 that clearly describes when coverage for the additional insured ends. That is also when ISO created the CG 20 37 to provide the completed operations coverage no longer included in the CG 20 10.

It became necessary to add both endorsements to provide ongoing and completed operations coverage for the additional insured. These editions still include the desirable arising out of language, and it is common to see requests for CG 20 10 10 01 plus CG 20 37 10 01 instead of CG 20 10 11 85.

One of the biggest changes is in the CG 20 10 07 04 form. The arising out of language was replaced with language stating that the loss must be caused in whole or in part by acts or omissions of the named insured or one acting on its behalf – an employee or subcontractor, for example. With this language, which is still in later forms, there is no coverage unless the named insured has done something to contribute to the loss. ISO added similar language to the CG 20 37 07 04.

Additional changes to both the CG 20 10 and CG 20 37 were made in the 04/13 versions. First, added language states that the coverage afforded the additional insured only applies to the extent permi�ed by law. In many states, one cannot, in a construction contract, indemnify another party for any of its own wrongdoing. In some of these states, additional insured endorsements cannot be used to circumvent the intent of these antiindemnity statutes.

Two additional changes in the 04/13 forms a�empt to limit the coverage provided to the additional insured to what the named insured agreed to do in a contract or agreement. If there is a contract or agreement, coverage will not be broader in scope than the contract requires or provide limits higher than the contract requires. If the subcontractor with a $2,000,000 CGL agrees to provide only $1,000,000 of coverage for the additional insured and agrees that such coverage will apply only to the extent the subcontractor is negligent, coverage for the additional insured will be less than the endorsement without this language would provide.

Language changes in the CG 20 10 12 19 and CG 20 37 12 19 are mainly to recognize that policy limits on the declarations may have been changed by endorsements.

Many insurers do not offer the CG 20 10 11 85, although some have created their own forms that come close. Whether an insurer offers something that might be considered equivalent is a question that should be addressed before coverage is bound. It is important to discuss with the insured what he is agreeing to do in his contracts and to arrange coverage, where possible, to meet those requirements. It is also important to note that only the additional insured can make the determination as to whether the endorsement used is equivalent to the CG 20 10 11 85. This is subjective, and the insurance agent should avoid expressing this opinion. It is be�er to provide a copy of the endorsement used and let the additional insured decide whether it is equivalent.

IABforME.com |

So what difference does a date make? To an additional insured, it makes all the difference. Til next time!

Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP is IA&B’s commercial lines education consultant. She works with our CIC and CISR programs, as well as our live CE webinars. Catch her at one of our upcoming courses: IABforME.com/education

COVERAGE COURSE

|

LIVE CE WEBINAR Review common issues with certificates of insurance and additional insured endorsements.

Plus, earn CE without an exam.

Member price is only $75.

CERTIFICATES & ADDITIONAL INSUREDS AUG 11 1 - 4PM

CE

PA: 3 GEN MD: 3 PC DE: 3 GEN

Register today. IABforME.com 800-998-9644, option 1

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NEWS & NOTES

LAST CHANCE FOR IA&B EDUCATION SCHOLARSHIPS Hurry! Apply by Aug. 12 for the next round of insurance education scholarships.

IA&B will award two individuals with full CIC and CISR designation scholarships, as well as member agencies with scholarships for their staff to attend CIC, CISR, CPIA, and CE courses. Scholarships to attend licensing study courses are available throughout the year.

Access an application at IABforME. com/IAB-education-scholarships.

And watch for the announcement of the recipients on Sept. 16.

Questions? Contact Sarah Jacoby SarahJ@IABforME.com 800-998-9644, ext. 104

CONNECT & UNWIND AT IA&B CRAB FEAST Crack crabs with industry friends!

After a two-year hiatus, everyone’s favorite Delaware insurance community tradition is back.

All staff of IA&B member agencies and company partners are invited to Boondocks in Smyrna, DE on Wednesday, Sept. 21 for all-you-caneat crabs, shrimp, chicken fingers, fries and corn on the cob. Wine, beer, and soda are also included for $50 per member and $95 per nonmember. Members save $45!

Reserve your spot: IABforME.com/ eventregistrations/?eventId=6310

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MEMBER BENEFIT HIGHLIGHT Customize IA&B’s employee handbook template for your agency.

The tool helps you to define the policies and procedures your agency follows and to promote understanding of your agency’s culture and expectations.

The employee handbook template is one of many HR tools available exclusively to IA&B members. You’ll also find FLSA resources, a producer agreement toolkit, a production schedule worksheet, and more.

Visit IABforME.com/HR-Resources.

Questions? Contact Claire Pantaloni ClaireP@IABforME.com 800-998-9644, ext. 604

PA PASSES CANNABIS BANKING & INSURANCE LEGISLATION Thanks in part to IA&B’s advocacy, insurance agents soon will be protected when conducting business with legal cannabisrelated establishments in the Commonwealth. At the time of this writing, House Bill 331 was waiting on Gov. Wolf’s signature.

The bill includes an amendment with language that IA&B helped draft.

It will protect agents from criminal prosecution or regulatory penalties for engaging in business activities that are legal under state law. This addresses the issue in Pennsylvania and many other states, where medical marijuana is legal, yet still banned according to federal law.

AUGUST 2022

SHARE YOUR MILESTONE ANNIVERSARIES Many independent agencies have a rich history in their communities.

IA&B wants to recognize your agency’s contributions.

Is your agency celebrating a milestone anniversary? Whether it’s five years or 125 years in business, we want to acknowledge your accomplishment. Submit a (historical or present-day) photo of your staff or building for inclusion in Primary Agent magazine.

Email announcements and images to IA&B Public Relations Director Karen Robison at KarenR@IABforME.com.

IA&B RECOGNIZED FOR EXCELLENCE IN INSURANCE EDUCATION The Big “I” recognized IA&B with Diamond level 2022 IIABA Excellence in Insurance Education awards. This is the sixth consecutive year that our team earned these top-tier awards.

“Thank you, our members and participants, for your ongoing support of our programs,” said IA&B President & CEO Jason Ernest, Esq. “We take your patronage seriously and remain committed to providing you with the very best insurance training and education.”

Workers’ Compensation Expertise?  Check!

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Count on EMC ® to take care of your clients so they can get back to business.

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EMC Insurance Companies | Des Moines, IA | 800-447-2295 ©Copyright Employers Mutual Casualty Company 2022. All rights reserved.

IA&B PARTNERS PROGRAM

OUR FEATURED PLATINUM PARTNER Insurance Agents & Brokers proudly recognizes Penn National Insurance as one of its Platinum Partners.

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

OUR MISSION We help people feel secure and make life better when bad things happen.

FEATURED PARTNER Penn National Insurance HEADQUARTERS Harrisburg, PA A.M. BEST RATING A- (Excellent)

OUR EXECUTIVE TEAM Robert Brandon CEO & president John Foster senior vice president - Insurance Operations Jacquelyn Anderson senior vice president, CFO/treasurer Karen Yarrish senior vice president, secretary & general counsels Thom Korber vice president, Human Resources Mike Watts chief information officer

Left to right: Karen Yarrish, senior vice president, secretary and general counsel; Bob Brandon, president & CEO; Mike Watts, chief information officer; Thom Korber, vice president - Human Resources; John Foster, senior vice president - Insurance Operations; Jackie Anderson, senior vice president, CFO & treasurer

CREATING EFFORTLESS, PERSONAL, RESPECTFUL AND RESPONSIVE CUSTOMER EXPERIENCE Partner with us if you are seeking: • A mutual carrier solely focused on agents and policyholders • Local managers who understand your operating territory • Access to an executive management team eager to get to know you • The ability to have merit-based conversation about decisions impacting your agency • Consistency in underwriting approach • A claims team that dependably earns high service marks • A carrier always seeking ways to make the experience better for agents and policyholders

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AUGUST 2022

Thank You

/Partners2020

Agents know us as: • Vibrant • Innovative • Personable • Bold

• Resilient • Persistent

Convenient service and information options • Policyholder self-service for premium payment, billing preferences, and policy information, backed up with personal phone service option

Thanks to these partners for supporting the independent agent network.

• Claim reporting by phone, website and mobile app

PLATINUM PARTNERS

• Claim-tracking status alerts, with email or text message option

Acuity

• Access to Auto insurance ID cards online, by phone or mobile app

Erie Insurance

• Claim reporting 24/7 by phone, website or mobile app Diverse array of commercial and personal coverages Penn National Insurance values the relationships we have with our agents as part of the underwriting process and placement of accounts with us. We offer a diverse portfolio of products and services to meet today's customer needs.

Penn National Insurance (www.pennnationalinsurance. com), founded in 1919, in Harrisburg, Pa., sells propertycasualty insurance through a network of more than 1,200 independent agency operations. The company wrote $771 million in net written premium in 2021 with total assets nearing $2 billion. The company employs approximately 800 people in its 11-state sales and service territory.

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BECOME A PARTNER TODAY  Penn National Insurance Headquarters: Harrisburg, PA ■ Personal & Commercial ■ Commercial Only ■ Partners Mutual Insurance

An Affiate of Penn National Insurance

 Headquarters: Milwaukee, WI ● Branch Offices

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Interested in becoming a partner?

Reach out today.

Tim Wonder IA&B VP-Membership 800-998-9644, ext. 351 TimW@IABforME.com 9

Q&A with

SARA PAYNE Sara Payne is Chief Financial Officer and an agent with Edward L. Sanders Insurance Agency, a full-service independent agency Mike Thomas is principal located in La Plata, MD. of Lighthouse Insurance Services, a full-service independent agency in Gambrills, MD. He is also a member of the IA&B Board of Directors.

Q. Your agency is approaching its 120th anniversary! Tell us about its history.

A. The agency was opened by my great grandfather, Ed Sanders Sr., in 1903, and the primary focus in the early years was on life insurance. He took on his first fire insurance carrier in 1913, which began the shift from life to property and casualty. Each generation has put its mark on the agency. Ed Jr. finalized the shift from life to property & casualty, and my father (Larry) developed relationships with regional carriers. My brother (Michael) and I are fourth generation and have navigated through the fast-paced changes in technology within the insurance industry.

Fun fact – Ed Sr. started the agency in a building located at 1 Washington Avenue. Almost 120 years later, we’re still on Washington Avenue, just one block away from the original office location.

Q. You and your brother are the fourth generation to work in the agency. Was it always your plan to join the family business? If so, what drew you to the industry? And if not, what changed?

A. If I’m being honest, joining the family business was the furthest thing from my mind! My original plan was to plant roots in North Carolina after graduating from East Carolina 10

University. Just before graduating, I met my (now) husband who was living back at home in Maryland. I came back home and took a job doing commercial lending with a local bank. Not quite a year into that job, my father called me in for a meeting to discuss my grandmother’s retirement from the family insurance business. He asked me to replace her as the bookkeeper for the agency. We agreed that I could leave anytime if insurance wasn’t a fit for me.

After careful consideration, I accepted, and here I am 18 years later!

Q. What does your typical workday look like?

A. I could wear a number of hats on any given day. My main focus within the agency is running the day-to-day operations and finances; however, I also manage some commercial lines accounts and am the producer for others.

Once I got my feet wet in the business, I decided I wanted to learn how to do each role within the agency, so I’ve spent the last 18 years doing just that.

Q. What’s your favorite part of your job? What’s the most challenging?

A. Insurance is never boring! There is constant change – whether that’s the coverages, carrier computer systems, etc. I like that even after working in the business for almost 20 years, I am still learning.

AUGUST 2022

ON THE COVER The most challenging part of an independent agency is the technology. Our staff has to become proficient in all of our carriers’ rating systems and agent sites. It’s like having to learn many different foreign languages because they’re all different!

Q. In any business, even when everyone’s vision is aligned, there are bound to be differences in opinion. What advice can you share on handling conflict when working with family members?

A. This probably goes without saying, but mutual respect for one another is extremely important. If the family members respect each other, then it’s easier to have productive conversations rather than creating conflict.

Having multiple generations within the agency is a huge plus. It allows us to discuss where the agency has been, what’s worked, and what may need to change in order to meet our goals.

Maryland.” We have many access points to rivers for boating and crabbing during the summer. And while Charles County has grown, La Plata still has that small town feel.

Q. When you’re not working, where will we find you and what will you be doing?

A. My kids are currently 8 and 11, so more than likely my husband and I are watching one of their sporting events.

We’re a very active family, and the kids enjoy baseball, football, softball, and swim team. Other than that, I’m happiest while enjoying the sunshine by a pool or on a boat somewhere!

Q. What’s the best professional advice you’ve received?

Who gave it to you?

A. At some point during my first few years working in the agency, my father and agency owner, Larry Sanders, told me “You’re a Sanders. You have to work 10 times harder than everyone else in the office.” It’s true; you can’t ask something of your staff that you’re not willing to do yourself.

He also told me, “If you treat your staff well, they’ll treat the agency well.” This mindset has rewarded us with many long-tenured employees who care immensely about our agency.

Q. Your family is committed to preserving local ownership of the agency. Tell us about that.

A. In Southern Maryland, many of our community businesses are still locally owned. They want to work with professionals who are also locally owned businesses. There’s something to be said for keeping the personal touch with our clients.

Q. What should we know about La Plata, MD? A. La Plata, MD (located in Charles County) and the surrounding communities are full of history and offer the best of both city and country living. We are just 30 minutes south of Washington, D.C. and within minutes of neighboring St. Mary’s and Calvert Counties, which along with Charles County make up what we call “Southern IABforME.com |

Sarah Payne and her family live in Southern Maryland, where her family has operated an independent insurance agency for four generations.

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PICS & POSTS

PICS & POSTS

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AUGUST 2022

Facebook.com/IABforME LinkedIn.com/company/IA_and_B Twitter.com/IA_and_B YouTube.com

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Gain intellectual capital from the highest caliber agents Increase your agency’s contingent and incentive revenue Simple contract model and minimal membership fees Business resources are hand-selected by our members Outperforming the industry

Find Out What the ANE Advantage is Today 800.700.9643 information@ane-agents.com www.ane-agents.com

AGENCY SUCCESSION PLANNING: DEVELOPING A GAME PLAN

BY JON PERSKY, CPA, CIC, PHR PRESIDENT OF OPTIMUM PERFORMANCE SOLUTIONS, LLC

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AUGUST 2022

FEATURE ARTICLE

ARE YOU PLANNING ON INTERNAL AGENCY PERPETUATION? THEN READ ON FOR THE QUESTIONS YOU SHOULD ASK IN ADVANCE ABOUT YOUR PERPETUATION PLAN AND YOUR INTENDED SUCCESSOR. Recently, I was speaking to an agent about his agency perpetuation plan.

Agent: “My son is my perpetuation plan.”

on you? What about disability insurance? Have you outlined a detailed process to transfer your managerial responsibilities to your successor?

OWNERSHIP TRANSFER ISSUES

Consultant: “Really? How old is he?”

Agent: “Twelve.”

Consultant: “Oh. And is he licensed?”

The son can be the perpetuation plan in about 20 years, assuming he wants to join the agency and is competent.

But this doesn’t address what happens if the agent dies, becomes disabled, or wants to retire before then.

But let’s assume the son is 32 instead of 12 and has been working in the agency for the past few years. Is he ready to take over the reins of the agency? Maybe yes, maybe no.

Assuming you don’t want to sell the agency to an outside party, there are numerous issues that must be addressed with the internal heir apparent.

Will the transfer of ownership be a stock transfer or an asset transfer? This issue can have serious tax ramifications to both the buyer and the seller. Besides the agency, are there any assets owned by the seller personally, such as the building, automobiles, etc., that will be included in the deal with the successor? If the space is leased, can the successor replace the current agency owner on the lease?

CARRIER ISSUES

(Note: There are no “right” or “wrong” answers to most of the questions posed in this article. The best solution is for the current owner and the successor to have an honest and frank discussion about each of the following points.)

Most carrier agreements state that if there is a material change in the stock ownership of an agency, the carrier must be informed and they may or may not issue a contract to the successor. Likewise, agreements are not transferable in the event of an asset sale. Before the successor takes over the agency, you and the successor should speak with your carriers to get their concurrence regarding the agency perpetuation plans.

GENERAL SUCCESSION ISSUES

LICENSING ISSUES

Can the successor personally afford to purchase the agency from you? If not, how will this person pay you for the agency? Most agencies are acquired through a leveraged buy-out, meaning that the cash flow of the agency is used to pay the seller.

Does the successor have his property and casualty, life and health, and other needed insurance licenses? If not, what is being done to obtain the necessary licenses and when is the licensing expected to be completed?

Are you willing to hold a note from this person? What happens if he walks away from the agency after running it into the ground? Did he provide you with sufficient collateral to protect you or are you going to have to go back into the agency and try to rebuild it?

Is the successor the beneficiary of an insurance policy IABforME.com |

PRODUCT KNOWLEDGE ISSUES What level of knowledge does the successor have in the various personal lines, commercial lines, and life and health products the agency sells? In any area where the level of knowledge is less than “high,” what training or process is being used to raise the successor to a “high” ranking?

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AGENCY OPERATIONS MANAGEMENT ISSUES Does the successor have a high level of knowledge regarding the agency’s workflow and procedures? Is he familiar with the way the automation system works and what information/reports can be generated from it?

How familiar is the successor with the agency’s current geographic market area as well as potential new marketing opportunities? How will your key clients and centers of influence be transitioned to the successor in the event of your death, disability, or retirement?

AGENCY ACCOUNTING ISSUES

DEVELOPING A GAME PLAN

When was the last time you discussed the agency’s accounting, financial systems, and financial condition with your successor? You don’t want to wait until he is ready to take over before sharing the information with him. To some, accounting is like a foreign language. Make sure you begin to indoctrinate your successor early regarding the financial statements, budget, payroll, payroll taxes, and cash flow of the agency.

Once you have identified your likely successor, you need to evaluate this person by applying the preceding questions to him or her. You also need to determine how long it will take to bring him up to speed in all the areas he needs to be knowledgeable in. How does this fit into your personal retirement plans?

You also need to make sure the successor understands the fiduciary relationship between the agency and its carriers and clients. He can’t use the trust account to pay agency operating expenses or to give himself a loan.

“YOUR BEST BET IS TO PLAN EARLY AND CONSTANTLY REVIEW YOUR PLAN.” - JON PERSKY, PRESIDENT OF OPTIMUM PERFORMANCE SOLUTIONS, LLC

HUMAN RESOURCES ISSUES How familiar is the successor with the human resources laws that apply to your agency? Does he know how to interview candidates, do performance reviews on existing employees, and terminate problem employees? Lack of knowledge in this area can be devastating, as defending yourself against an HR-related lawsuit can be costly. A mistake in this area can cost the successor (as well as you) the agency.

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MARKETING AND CLIENT ISSUES

If you want to retire at the end of the year and it is going to take your successor two years to reach an adequate level to run the agency, you have two choices: delay your retirement or sell to someone else. But retirement is an easier issue to deal with than your unforeseen death or disability. In those cases, you may not have the luxury of time to get the successor up to speed in all these areas.

This may necessitate a change in your perpetuation plan from selling to the successor to selling to a third party.

But a third party may look upon your death or disability as a fire sale since there will not be a transition period. The result could be a lower sales price.

Your best bet is to plan early and constantly review your plan. You may also want to bring in an outside consultant to help facilitate an agency perpetuation planning meeting and help develop your game plan.

Jon Persky, CPA, CIC, PHR is president of Optimum Performance Solutions, LLC, a company that provides management consulting services on a nationwide basis to insurance agencies and carriers.

The firm specializes in the areas of mergers and acquisitions, agency valuation, sales and marketing, compensation planning, perpetuation planning, and workflow analysis. Learn more at optperform.com or contact Jon at jon@optperform.com.

LEADER OF THE

Linda McCann, a long-time contributor, shares what drives her support.

“As agents, we are busy running the day-to-day business of an agency and don’t have time to constantly talk with legislators and look at pending legislation.

It’s good to know that IA&B has our back and works diligently to stay on top of pending legislation and keep our name in front of legislators. As a business owner, it is important to support AgentPAC so that IA&B is known as the “go to” group when it comes to insurance issues.”

AgentPAC is IA&B’s state-based, bi-partisan political action committee which supports the election of candidates and legislators who understand the issues important to the independent agent and broker community. Support of these candidates who are critical to IA&B’s government affairs work would not be possible without AgentPAC contributions from engaged IA&B member agents.

Join the effort and learn more about AgentPAC by visiting IABforME.com/political_ advocacy.

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STAFF PROFILE

Get to Know …

Blair Aylward Member of the IA&B Education Team

Years with IA&B: 24

Role at IA&B: To make your classes and events run smoothly so you get the best return on your investment. For in-person classes, I work with facilities on contracting, room setup, billing, meal prep, and travel arrangements. A lot goes into our education calendar, and the IA&B Education & Events staff all have a role in the experience. Negotiation, communication, and molding business/personal relationships are key components in this position.

Best part of your job: Meeting agents and sales people from our three states.

They all have their own personalities and differences, and that is perfectly fine in this business.

Favorite sports team: New York Giants (the G-Men) … it’s time to get back to their former identity.

What keeps you busy outside of work?

Our daughter has been involved in competitive field hockey year-round since 2013, so we travel on weekends and have developed quite the packing list for all types of weather and tournaments. Beyond that, I want to golf more again as I miss playing certain courses and want to see if I can still break 80. I also like visiting minor league ballparks and reading about golf course design.

You can reach Blair at: 800-998-9644, ext. 510 BlairA@IABforME.com

IABforME.com |

19

Are you looking for

MARKET ACCESS? Take a look at IMS • A broad mix of standard and niche markets • No initiation or monthly fees • Low to no volume commitments • Standard commission rates • You will be the agency of record on all policies • 100% ownership of expirations

Shopping Your E&O? As an IA&B Member, you could qualify for a program that provides better value and protection. Benefit from IA&B’s: ▲ Relationships with reputable carriers ▲ Industry leading claims service ▲ Highly trained, licensed professionals

Get Started Today David Wertz, CPIA Insurance Placement Specialist 800-998-9644, ext. 506 DavidW@IABforME.com IABforME.online/insurance

IMSaccess.com Contact Tim Wonder VP - Membership TimW@IABforME.com 800-998-9644, ext. 351

ANNOUNCING THE RETURN OF

CRAB FEAST

IN-PERSON CLASSES RETURN Check out the list of in-person courses and live webinars at IABforME.com.

Register Today.

ALL YOU CAN EAT CRABS, SHRIMP, CHICKEN FINGERS, FRIES & CORN-ON-THE-COB

800-998-9644, option 1 IABforME.com

Wednesday, Sept 21 | 6-9 PM Boondocks Restaurant | Smyrna, DE $50 members & partners $95 non-members & non-partners

Register at IABforME.com

20

IABforME.com |

EARN CE WITH IA&B

WELCOME NEW MEMBERS Susquehanna Valley Insurance Selinsgrove, PA Slingshot Global LLC Milford, DE For information about membership or benefits, contact: Tim Wonder, VP-Membership 800-998-9644, ext. 351 TimW@IABforME.com

E D U C AT I O N SCHEDULE AUGUST 2022 Register today! 800-998-9644, option 1 IABforME.com/education IN-PERSON CLASSES ARE BACK! DATE TOPIC

LOCATION

Aug 2

CISR - Personal Lines Miscellaneous

Hunt Valley, MD

Aug 9

James K Ruble Graduate Seminar

Gettysburg, PA

Aug 18 CISR - Commercial Casualty II

Mechanicsburg, PA

LIVE WEBINARS DATE TOPIC

TIME

Aug 3

CISR - Elements of Risk Management

8AM-3:45PM

Aug 9

James K. Ruble Graduate Seminar

8AM-5PM

Aug 9

That’s Personal: Home & Auto Exposures

9AM-12PM

Aug 9

Flood Insurance, FEMA, and the NFIP

1-4 PM

Aug 11

CISR - Agency Operations

8AM-3:45PM

Aug 11

Personal & Commercial Lines Endorsements

9AM-12PM

Aug 11

Certificates and Additional Insureds

1-4 PM

Aug 16 Cyber - Evolution, Exposures, Incidents & Insurance

PRIMARY AGENT Editor: Karen Robison KarenR@IABforME.com 800-998-9644, ext. 606 Contributing editors: Jennifer Ross Megan Fioretta Sarah Jacoby Sales Account Executive: Laura Gaenzle laura.gaenzle@theygsgroup.com 717-430-2351

9AM-12PM

Aug 16 Employment Practices Liability - Can't Afford to Be Without 1-4 PM Aug 17

CISR - Personal Residential

8AM-3:45PM

Aug 17

Hour w/ Nicole: Homeowners Loss Settlement Issues

2-3 PM

Aug 18 Homeowners in Real Life: Tales of Claims & Coverage

9AM-12PM

Aug 18 Why Good People Do Bad Things: Agency Ethics

1-4 PM

Aug 23 Chris Amrhein’s “Adventures in Aging”: Social Security & Other Retirement Income Solutions

1-4 PM

Aug 24 CISR - Commercial Property

8AM-3:45PM

Aug 24 Hour w/ Dave: Fast Facts About Flood

2-3 PM

Aug 25 Agent’s E&O: Duties, Best Practices, Ops, Workflows, Certs

1-4 PM

Aug 31

CISR - Personal Auto

8AM-3:45PM

Aug 31

Hour w/ Cathy: Insurance Issues for the Commercial Tenant 2-3 PM

IABforME.com |

21

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...And More To Come.

It Pays To Get A Quote From Applied.® Learn more at auw.com/MoreToLove or call sales (877) 234-4450 ©2022 Applied Underwriters, Inc. Rated A (Excellent) by AM Best. Insurance plans protected U.S. Patent No. 7,908,157.