Primary Agent - August 2011 - MD Edition

MARYLAND

ALSO INTHISISSUE: _________________ E&O considerations for the automated agent

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I’m celebrating our 100th year by planning for our next 100 years.

Tanya Wentzel, Des Moines Branch Marketing Manager The way insurance is bought and sold is changing. We know it will continue to change. We’re advancing ways to interface with agency management systems and streamline the process for agents. We’re expanding the use of data analytics to identify risks that are a better fit for our agents and our company. Although technology is crucial to our future, we will continue to focus on what distinguishes EMC in the marketplace—responsive, local service delivered through a network of branch offices.

Valley Forge Service Branch: 800.333.3622 | Home Office: Des Moines, IA

www.emcins.com © Copyright Employers Mutual Casualty Company 2011 All rights reserved

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Contents PRIMARY AGENT MAGAZINE

On-Demand training makes a splash

16

IA&B long has been known for its professional development. Expert instructors, convenient locations and exceptional value keep insurance professionals across the Mid-Atlantic coming back for more — more designation programs, more licensing preparation courses, more special topic seminars.

And now they have another reason: introducing IA&B’s on-demand training.

Page 12

E&O considerations for the automated agent Technology: the double-edged sword. The same tools that can improve an agency’s bottom line can trip up an agency, leading to a costly E&O claim. Read on for key ways technology can help – and hinder – an agency and how to avoid common missteps.

Page 16 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.

Get social with IA&B

In every issue 4 5 6 8 10 15

Chair of the Board’s Message Member FAQ State News Preventing Errors & Omissions Coverage Corner IA&B Partners

21 22 24 28 28 28

Glance at Events H.R. Headquarters 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 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 # 2011-8) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2011. 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.

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Board of Directors Officers David Rosenkilde, CIC Chair of the Board Reisterstown, Md. Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P Vice Chair of the Board West Chester, Pa.

David B. Rosenkilde Sr., CIC

Chair of the Board’s M

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S

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A

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Kathleen M. Glattly, ChFC, CLU, CPCU Immediate Past Chair of the Board Factoryville, Pa.

Members Joyce M. Bailey, CIC, CRM, CPIW Newark, Del. 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. John T. “Chip” Colwell Jr., CIC Corry, Pa. N. Lee Dotson, CIC, AAI Wilmington, Del. John L. Frankenfield Telford, Pa.

A farewell and a look ahead This issue marks my last message, as my capable successor, Bob Hall, will assume my post as IA&B Service Group chairman on Sept. 1. As such, I would like to take this opportunity to discuss the state of the organization and what’s in store for members.

When leadership changes hands on Aug. 31, members will find themselves part of a vibrant, thriving, responsive organization that is in step with their evolving needs.

Continual member research keeps the boards of directors clued into members’ realities and poised to push for the additional products, programs and services that maintain the state associations’ value. And that approach is how this organization will continue to operate.

Diana M. Hornung Hanby, ACSR Wilmington, Del.

So rest assured that no matter what the future brings, your state agents’ association is committed to the advancement of you, its valued member, as well as the independent agency system.

Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, Pa.

Thank you for the opportunity to serve as your chairman.

Robert S. Klinger, LUTCF Germantown, Md.

Dave

G. Greg Gunn, CIC Lemoyne, Pa.

Michael F. McGroarty Sr. Pittsburgh, Pa. Ann Gallen Moll, CIC Reading, Pa. Scott C. Rogers, CPIA* York, Pa. Susan A. Sallada, CIC** Ft. Washington, Pa. David B. Wasson Sr., CIC State College, Pa. James M. Watkins* Dover, Del. King W. “Kip” White, LUTCF Fallston, Md. * IIABA National Director ** PIA National Director

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E

Member FAQ QUESTION: Can I send my privacy notice on a postcard?

ANSWER: The best answer is “maybe.”

Before elaborating, however, let’s start with a reminder: Privacy regulations require agencies to provide every consumer and customer with a notice describing the agency’s handling of nonpublic personal information. The notice must contain specific provisions.

With regard to your question, the privacy regulations in our three states all provide for a simplified notice in certain circumstances, which considerably cuts down on the amount of information that has to be provided. It may fit on a large postcard; but first, you should check if you are eligible to use it.

initiative or an agency newsletter. Make sure, however, that your timeline for delivery remains consistent from one year to the next.

Puzzled about the whole privacy topic?

IA&B has an extensive resource to help you comply. Follow the “how to proceed” instructions above, and you’ll soon be on your way to compliance.

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!

If you do not share information, you may use the simplified notice. You must: 1) assess your situation (i.e. conduct an audit of your information-sharing practices or use IA&B’s audit), and 2) determine that you do not share any information other than under the listed exceptions.

How to proceed It’s actually very easy: Log onto www.iabgroup.com and go to Agency Operations, then Privacy. Select “Where are you on the path to compliance,” and go to the first step of “Building your privacy notice.” To build your notice using IA&B’s template, you simply need to take the IA&B audit (very short questionnaire). If you can answer “Yes” to all the questions, you then can access the sample simplified notice and personalize it to your agency.

Remember to check that the notice accurately reflects your circumstances. Keep in mind that while the regulation does not require a specific font size, the notice must be legible.

Other ways to cut costs If you feel that sending these privacy notices is a big waste of money, remember that you can combine your privacy notice with another mailing, whether a marketing/cross-selling

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Contact: Dennis Marsaglia, Ext. 230 dennis@brokerssurplusagency.com Evelyn Frisch, Ext. 227 evelyn@brokerssurplusagency.com

State News Primary Agent | August 2011

Michelle Smith named Md.’s Outstanding CSR of the Year Quick facts Name: Michelle D. Smith Designations: CISR Title: Customer Service Agent Employer: Atlantic/Smith, Cropper & Deeley, LLC

Few insurance professionals start their career with the goal of working in this field. And Michelle Smith is no exception.

That’s sage advice from a true insurance professional and an outstanding CSR.

“A friend worked in insurance, and she referred me into it,” she shares. “I started at the bottom and worked toward getting a license.”

As part of her application for Outstanding CSR of the Year, Smith submitted an essay on preserving and enhancing client relationships while utilizing current technologies.

Excerpts follow.

Thirteen years later, Smith continues her work at Atlantic/Smith, Cropper & Deeley, in Willards, Md., where she spent five years in personal lines before becoming a customer service agent in the commercial department.

Like many successful CSRs, Smith enjoys a challenge – no doubt an indicator of why she succeeds in commercial lines.

“There are time restraints,” says Smith of her daily routine. “It’s critical to juggle multiple requests.”

She cites her department’s workflow manual, which she created along with customer service guidelines, for properly handling the workload.

And for those just entering the field, Smith offers these words of wisdom: “The most important thing is to grow knowledge with continuing education and learn as much as you can. Then be confident in that foundation and your knowledge.”

Essay excerpt

Our performance says many things, and we can use technology as an advantage to convey that we are approachable, diligent, knowledgeable and proactive at a time of loss.

One of the advantages of technology is allowing us to be more accessible to our clients by increasing their options for communication…. We have noted on each client’s account what their preferred method of communication is.

This conveys a message to the client that they can approach us at any time and we will respond promptly and professionally while using their preferred method of communication.

Technology has dramatically increased the speed in which we handle the client’s requests and needs…. This conveys to the client that we, as their agent, are working diligently to fulfill their needs.

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One of the greatest benefits that technology has produced for insurance professionals is an increase in accurate information…. Our clients can feel confident that we are knowledgeable about the latest products, risk management, insurance laws and are, above all else, trusted advisers.

There is no question about it, our claims handling process has drastically improved by the use of technology….

One of the greatest benefits is our ability to supply the company or adjustor with complete and precise information without delay. Taking such a positive approach results in a faster recovery towards the client’s way of life and simultaneously keeps industry costs at a minimum….

With all the changes that technology has created, it becomes apparent to me that we should not feel threatened by it, but instead use it to work for our advantage while looking forward to future development with enthusiasm.

How to use the Company Satisfaction Index Members – along with carriers and clients – can benefit from IA&B’s biennial Company Satisfaction Index (CSI) report. Here’s how to make the CSI work for you:

sort results by carrier ranking or category, as well as compare carriers side by side.

Carriers

Carriers (more often than not) appreciate agents’ feedback. And recommendations and commendations alike have their place in the CSI. Members can open lines of communication and start constructive dialogue with companies by sharing CSI results with their marketing reps, underwriters and claims contacts.

Clients

Representing multiple companies is a double-edged sword. While customers appreciate an independent agent’s ability to find the right coverage (at the right price), they sometimes hesitate at a lesser-known insurer’s name.

Considering a new appointment?

Or wondering if others share in your experience with a particular carrier? Then look no further than the CSI results.

The survey compiles members’ experiences with policy service and claims; products, pricing and underwriting; agency/company relationship; and technology. Ratings are imported into an online comparative tool, where members can [7]

If you sell annuities, you will need to complete a one-time, four-hour training course by May 1, 2012. If you obtain a Life license (or add the Life line of authority) after Nov. 1, 2011, the training must be completed before you start selling annuities.

The Maryland Insurance Administration recently adopted amended regulation 31.09.12, bringing Maryland into compliance with NAIC standards for suitability in annuity transactions, effective Nov. 1. Of note, the regulation requires that the producer:

Results of the CSI survey add credibility where name-recognition lacks.

Specifically, members can show clients how fellow independent agents rated the recommended carrier on its policy service and claims.

◗ Examine a number of factors for suitability before executing an annuity transaction

Read more or access the CSI: www.iabgroup.com/csi

◗ Obtain a signed statement documenting a client’s refusal to provide suitability information, if applicable

Md. moves to birth-month license renewal

◗ Obtain a signed statement if the client decides to enter the annuity transaction not based on the producer’s recommendations

Reminder: Maryland producer licenses are in the process of being converted to the last day of the producer’s birth month. IA&B offers a summary of the conversion, as well as a link to the Maryland Insurance Administration’s memo regarding the change, online.

Members

Md. updates annuity, suitability standards; includes producer training

Read more: Visit www.iabgroup.com and select Agency Operations. Click on the Licensing link.

◗ Make a record of any recommendation

Scrutiny is clearly increased, and producers active in this market should familiarize themselves with the requirements. With carriers responsible for monitoring compliance with various aspects of the regulation, producers should expect further communication from them in the near future.

WELCOME

New Members Bayside Insurance Associates Inc Chester, Md.

Preventing Primary Agent | August 2011

ERRORS AND OMISSIONS

THE BENEFITS AND CHALLENGES OF MULTI-CULTURAL OPPORTUNITIES FOR YOUR AGENCY CURTIS M. PEARSALL CPCU, AIAF, CPIA Curtis M. Pearsall, CPCU, AIAF, CPIA, president of Pearsall Associates Inc. and special consultant to the Utica National Errors & Omissions Program, supplied this article.

addressing potential language-barrier issues.

In reviewing the latest census data, it was interesting to note that while the overall population of the United States grew by 9.1 percent, the Hispanic population grew by 37.1 percent and now constitutes nearly 16 percent of the total. That translates to more than 48 million people and is one of the fastest growing population segments over the last 10 years.

Hispanics are also one of the youngest races in our country, with a median age of 27.4 years. Although it is difficult to get exact numbers, there are many other immigrants now looking to call America home: Bosnians, Russians and Vietnamese, to name a few.

These customers’ knowledge of insurance may vary, depending on the culture with which you are dealing.

This opens up the potential for misunderstandings between the agency and the customers. The goal is finding the means to effectively communicate with customers to understand their insurance exposure, determine what coverage they are requesting and ensure their understanding of the product and the process. As with any discussion with clients, quality documentation is extremely important.

There is no doubt the Hispanic population, and a multitude of others, present tremendous opportunities for insurance agents to target these individuals’ personal and commercial insurance needs. With those opportunities, however, can come challenges in

Questions often raised by agents Should the proposal/ marketing material be in Spanish if the customer is fluent in Spanish? It is best that all written material be in English. Otherwise, there is the potential for a misunderstanding because

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various languages may have multiple dialects. Assuming the carrier is relying on the agent to properly communicate the risk in English, the agent needs to be secure and confident about the truthfulness and accuracy of the information put on the application.

How do we address the language barrier with the customer? There are several approaches. Some agencies have employees fluent in a specific language. This is a great approach and shows you are looking to serve these customers in their native language. If your community has a significant population of a certain culture, consider reaching out to this community to identify a potential employee fluent in the language.

Other approaches may involve identifying a current employee and requesting, with an incentive, that they learn a new language. In other cases, the customer

may bring a friend or relative to help ensure a solid understanding of the issues and answers, essentially to serve as an interpreter. It is best if the friend or relative is an adult as this should help with communication. It is also possible the carrier may provide a translator. If translators are not available in this capacity, check with your phone company as many offer a language service for a fee.

Many English-speaking customers do not have a solid understanding due to unique terminology in our industry.

This will present a similar challenge for other cultures, so take time to explain the process, the various questions on an application and the coverages.

Giving added value As with any customer, ascertaining the exposures is important. Through the interpreter, ask the necessary questions and document the responses. Once you have determined what coverage is being requested, begin completing the application.

Have the interpreter help secure answers to the application questions.

In virtually every state, the applicant is responsible for the information contained in the application. It is highly recommended that agency staff complete the application – do not let the interpreter handle this function.

Then, have the customer review the answers with the aid of the interpreter to ensure you have correctly entered the information.

Present the information in understandable terms as best you can. This will greatly assist in ensuring there are no misunderstandings. Look for signs the customer or interpreter is struggling with any part of the process or the product.

Once again, the goal is to present the carrier with a complete, accurate picture of the exposure. If a loss occurs and the carrier learns the exposure is not what they thought, the claim may be denied – or, if it is paid, the carrier could pursue recourse against the agency.

Several years ago, an errors & omissions claim developed when the application, completed by an interpreter, contained misleading information. Although the client had signed the application, he later claimed the information on the application was not the information he gave the interpreter. Such a scenario certainly creates a challenge for an agency and gives added value to having an employee fluent in another language.

Dealing with the various cultures in our respective communities presents some great opportunities. If this is an area you are looking to focus on for business growth, map out a strategy to ensure the issues and challenges you face are researched and resolved.

The extra time you spend now will ensure your efforts are that much more rewarding.

MUTUAL BENEFIT GROUP Huntingdon, Pennsylvania www.mutualbenefitgroup.com

Mettle you can count on.

You don’t just wear ar it; you earn it.

“Agents rank us as their #2 carrier when it comes to adjusting usting claims promptly and fairly. y. As a claimant on a loss put itt not long ago, ‘Your adjuster w was a as so helpful we considered changing our insurance over to Mutual Benefit.’”

- Mike Snare MBG Multi-Line Claims Supervisor

Start with MBG, and you’ll finish with a winner.

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Much more rewarding There is no doubt issues such as cancellations, inspections, losses, etc., will come up during the year, so have quick access to an interpreter to resolve these matters. If the interpreter is the customer’s family member or friend, have that person’s contact information in the client’s file.

The interpreter should be readily available to assist whether the matter is handled face to face or over the phone. Be sure the file reflects their role in the specific insurance matter.

Coverage Primary Agent | August 2011

CORNER

ADDITIONAL INSURED ENDORSEMENTS – DO THEY COVER THE CONTRACTUAL OBLIGATIONS? JERRY M. MILTON, CIC 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

UPS Freight (f/k/a Overnight Transportation Company) owns a trucking facility with 44 loading docks, office facilities, and a tractor-trailer parking lot in Erie, Pa. On Sept. 23, 1997, Overnight leased to C.C. Eastern, Inc. 12 loading docks numbered one through eight and 41 through 44, as well as office space in the basement of the building.

education programs.

The lease required C.C. to: 1. Be responsible for all maintenance of the leased portion of the trucking terminal 2. Keep in full force and effect a broad form general comprehensive public liability insurance policy covering C.C.’s obligations under the lease with respect to the business operated by C.C. and to C.C.’s occupancy of the premises and name Overnight as an additional insured; all insurance carried by C.C. shall be primary and non-contributory

3. Indemnify, defend and hold Overnight harmless from and against any suits, judgments and costs arising out of or in connection with any injury to persons on or about the premises or any acts or omissions of C.C. or C.C.’s employees C.C. obtained a Commercial General Liability policy issued

by National Union Fire Insurance Company. The policy included an additional insured endorsement which stated in part, “Any person or organization to whom C.C. becomes obligated to include under this policy, as a result of any contract or agreement C.C. enters into which requires C.C. to furnish insurance to that person or organization of the type provided by this policy, but only with respect to liability arising out of C.C.’s operations or premises owned by or rented to C.C..”

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On Jan. 4, 2002, Donald Thomas, a C.C. employee, fell from a loading dock at the Overnight trucking terminal.

He alleged that while he was walking on the loading dock, it separated from the wall, and he fell six feet to the ground and was injured.

Thomas brought suit against a number of defendants, including Overnight and C.C. It was determined that Thomas was injured on loading dock 10, which C.C. did not lease. Therefore, on Nov. 18, 2005, the Court of Common Pleas issued an order granting summary judgment in favor of a number of defendants, including C.C. On June 19, 2006, Overnight brought a declaratory action in the Western District of Pennsylvania against National Union seeking defense and coverage in the suit by Thomas. On Oct. 30, 2006, Overnight added C.C. as a defendant, asserting that if National Union was not required to defend and

indemnify Overnight, C.C. was obligated to do so by reason of the lease provisions.

On Sept. 22, 2008, the District Court ruled against Overnight stating that National Union’s coverage was limited to the precise parts of the trucking terminal leased to C.C. Additionally, the District Court granted C.C.’s motion for summary judgment because it did not breach its contractual obligations under the lease.

covered Overnight for liability arising out of C.C.’s operations.

On May 3, 2011, in UPS (Freight f/k/a Overnight Transportation Company) v.

National Union Fire Insurance Company of Pittsburgh and C.C. Eastern, Inc., the Third Circuit Court of Appeals reversed the District Court’s ruling and entered a judgment in favor of Overnight. The Court of Appeals found that Thomas was injured while engaged in activities that supported

Overnight appealed the District Court’s ruling. Overnight argued that the District Court erred by finding that National Union did not owe it a duty to defend after C.C. was dismissed form the suit because the additional insured endorsement extended coverage to “liability arising out of C.C.’s operations or premises rented to C.C..” Overnight asserted that Thomas was injured while going from one part of the premises rented to C.C. to another part of the premises rented to C.C. and therefore his injury arose out of C.C.’s operations.

C.C.’s operations since he was walking from his truck to the office located in the basement of the facility.

Do we pay much attention to exactly when, where and what the additional insured endorsement covers – “premises only,” “operations only,” “premises and operations,” “productscompleted operations?”

Y’all take care!

ENTHUSIASM IT’S CONTAGIOUS

“I love skiing, but I avoid dangers. As a Personal Lines Underwriter, I’m just as diligent in knowing ways to protect against risk.

Your clients count on you—I appreciate the opportunity to help you maintain that trust.”

To support its position, National Union relied on Minges Creek, L.L.C. v. Royal Insurance Co. of America, 442 F.3d 953 (6th Cir. 2006). Minges Creek had been added as an additional insured to their tenant’s CGL policy. In this case the Sixth Circuit found that Royal was obligated to defend Minges Creek as an additional insured only if the accident “occurred on premises owned or used by the tenant.” Since the injured person slipped on ice in a common area outside of the tenant’s store, the Sixth Circuit ruled that Royal had no duty to defend the claim against Minges Creek.

Nicole Bielat Personal Lines Underwriter—and bunny hill graduate Connect with Nicole on LinkedIn!

Overnight pointed out that the National Union additional insured endorsement was broader than Royal’s additional insured endorsement since it did not limit coverage to a defined area and also

Managing General Agency Since 1920 Property/Casualty t Professional Liability t Surety Commercial Transportation t Personal Lines t Premium Finance

800.666.5692

[ 11 ] ENTHUSIASM IT’S CONTAGIOUS

“I love skiing, but I avoid dangers. As a Personal Lines Underwriter, I’m just as diligent in knowing ways to protect against risk.

Your clients count on you—I appreciate the opportunity to help you maintain that trust.”

Nicole Bielat Personal Lines Underwriter—and bunny hill graduate Connect with Nicole on LinkedIn!

Managing General Agency Since 1920 Property/Casualty t Professional Liability t Surety Commercial Transportation t Personal Lines t Premium Finance

800.666.5692

jmwilson.com

jmwilson.com

EDUCATION

On-demand training makes a splash IA&B launches CE portal with flood seminar

IA&B long has been known for its professional development. Expert instructors, convenient locations and exceptional value keep insurance professionals across the Mid-Atlantic coming back for more — more designation programs, more licensing preparation courses, more special topic seminars.

And now they have another reason: introducing IA&B’s on-demand training.

Primary Agent | August 2011

I

A&B recently launched an on-demand CE portal that combines the quality education for which the organization is known with the convenience of online technology.

In many ways, IA&B’s on-demand training mirrors the classroom setting. The technology allows participants to experience audio and video of the instructor and to easily ask questions.

“I really felt like I was sitting in the classroom,” says Leslie Ryan, of Keller-Stonebraker Insurance in Ellicott City, Md., after completing an IA&B on-demand seminar. “I took an online ethics course last year, but it didn’t incorporate video, just the audio. I preferred having both. It was very helpful to see the instructor rather than just to sit there reading.”

However, unlike a regimented live seminar, the on-demand platform allows participants to set their own pace by stopping and restarting the program at any point. Plus, they can take the course anytime, anywhere it’s convenient.

For Ryan, that meant remaining accessible to her clients by taking the course from her office and pausing to answer calls. For others, it means earning CE at the airport, from home or on their smart phone.

Test the water with flood training IA&B’s inaugural on-demand course offering is “Understanding the National Flood Insurance Program.” National flood expert – and favored instructor – Rita Hollada, CPCU, CIC, CPIA, teaches the program, which meets state-required and recommended flood continuing education (see sidebar).

“Rita is wonderful,” shares Ryan. “You could tell she wasn’t just reading a manual but that she was speaking from knowledge. She used examples to illustrate the points in her material.”

The three-credit course is divided into 10 sections, or chapters. Each one includes approximately 15-20 minutes of instruction along with a brief quiz to reinforce the main points. The seminar concludes with a 25-question exam (to meet the requirement of self-study learning). After successful completion of the exam, requested continuing education credits are filed will the state insurance department within 10 days.

“The training exceeded my expectations,” says Ryan. “I really enjoyed it and would absolutely recommend it.”

Additional on-demand webinars on E&O and ethics are in the pipeline. Watch for more information in Agent Headlines and at www.iabgroup.com/on-demand. ____________________________________________________

Karen Robison is public relations director for IA&B.

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Flood CE Requirements Delaware: Agents licensed to sell homeowners’ or personal lines are required to take two hours of flood credit during each renewal period.

Maryland: Agents licensed in P&C and selling flood insurance must earn two hours of flood CE during each renewal period. Those not selling flood but licensed to sell homeowners’ are subject to a one-time, two-hour requirement.

Pennsylvania: Approved “flood education training” is required.

Training should meet federal guidelines of three credits and is set and monitored by WYO companies.

Approvals IA&B’s “Understanding the National Flood Insurance Program” is approved for the following continuing-education credits. ◗ Delaware: 3 GEN/FLD ◗ Maryland: 3 PC/FL ◗ Pennsylvania: 3 FLD

On-demand system requirements Internet Explorer 7.0 or higher, or Mozilla Firefox 3.4 or higher Adobe Flash (available for free at http://get.adobe.com/flashplayer/)

Platinum Profile FEATURED PARTNER ACUITY PRESIDENT & CHIEF EXECUTIVE OFFICER Ben Salzmann

Insurance Agents & Brokers proudly recognizes ACUITY as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

COMPANY LOCATION Sheboygan, WI A.M. BEST RATING “A+” (Superior)

S

ince opening its doors for business in Pennsylvania in 2010, ACUITY has been writing personal and commercial lines accounts at a record-setting pace. In fact, the insurer is on track to book $12 million in premium in the Keystone State in its first 12 months.

The credit for ACUITY’s fast start in Pennsylvania goes to its select group of independent agents. And, according to President and CEO Ben Salzmann, no company is more committed to agents than ACUITY. “For 86 years, we have done business exclusively through independent agencies,” he says. “We bring our experience and dedication in building strong partnerships to agents in Pennsylvania.”

“Agents always know what to expect when they do business with ACUITY,” adds Wally Waldhart, Vice President - Sales and Communications. That includes ACUITY’s unwavering focus on providing the technology, products, and value-added services that make the insurer a powerful business ally.

Acuity President & CEO, Ben Salzmann

and delivers policies to agents within seconds in both personal and commercial lines. The company has recently introduced “ACUITY share,” which allows an agent and policyholder to view applications and rating details simultaneously from different locations.

“Almost all insurance carriers either are sound in relationships or technology, but rarely both,” says Salzmann. “We bring that unique combination of the two, along with franchise value in Pennsylvania, which makes us a highly coveted market for independent agents.”

When it comes to building relationships, no company does more for independent agents than ACUITY. Over the past five years, agents have earned 100,000 continuing education (CE) credits thanks to ACUITY’s free CE courses, speaking tours, and in-agency training. Additionally, ACUITY knows the bottom line is vitally important to agents as well. “We pay more in contingent commissions as a percentage of written premium than our peers,” Waldhart reports.

On the technology front, ACUITY has focused on developing and investing in ease-of-business solutions for agents. ACUITY provides real-time, online policy quotation and application, and automatically issues

With strong growth and profitability, ACUITY offers independent agents remarkable financial stability in an otherwise unstable market. A fiercely independent company firmly committed to remaining mutual,

ACUITY is also remarkably well-run: the company is rated A+ by both A.M. Best and Standard & Poor’s and has been named to the Ward Top 50 Best-Run Companies for 12 consecutive years.

ACUITY also offers independent agents stability in staffing, with a remarkable voluntary turnover of under one percent. Salzmann credits this achievement to being a great place to work. In fact, ACUITY is ranked as the top mid-sized employer in the nation by the Great Place to Work Institute.

As a result of its comprehensive and well-rounded strategy, ACUITY provides consistency and security in an industry marked by wide market swings and financial uncertainty.

“We are a healthy, strong, stable, and truly regional mutual carrier,” Salzmann says. “We are thankful to Pennsylvania agents for the trust they have placed in us, and we are incredibly optimistic about our continued success in the state.”

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 help you succeed in the insurance industry.

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ACUITY Berkley Mid-Atlantic Group Donegal Insurance Group Erie Insurance Group Harleysville Insurance Highmark Casualty Insurance Co Insurance Agents & Brokers Service Group Inc

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AmWINS Program Underwriters Inc Auto-Owners Insurance Company Briar Creek Mutual Insurance Company Builders Insurance Group Chubb Group of Insurance Companies Countryway Insurance Company First General Services Foremost Insurance Group Goodville Mutual Casualty Company Guard Insurance Group Harford Mutual Insurance Co Hanover Fire & Casualty Insurance Company Insurance Alliance of Central PA Inc Insurance Placement Facility of PA Keystone Insurers Group Inc Lebanon Valley Insurance Company

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Reamstown Mutual Insurance Company State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Motorists Insurance Group The Mutual Service Office Inc Travelers Tuscarora Wayne Insurance Company Zenith Insurance Primary Agent August 2011

TECHNOLOGY

E&O considerations for the automated agent

Technology: the double-edged sword. The same tools that can improve an agency’s bottom line can trip up an agency, leading to a costly E&O claim.

Read on for key ways technology can help — and hinder — an agency and how to avoid common missteps.

Primary Agent | August 2011

T

echnology is providing agents and brokers with several tools to increase sales and profitability, as well as to provide better customer service. Automation is also helping many agencies manage their E&O risks more effectively because of its capabilities to retain accurate data, foster consistent processes, document transactions and conversations and generate reports to monitor adherence to agency procedures. However, if the agency does not implement its technology in a disciplined way, this same technology can be used against the agency in connection with an E&O claim or lawsuit. ____________________________________________________________ Any agency that is contemplating the electronic delivery of insurance documents should follow a few simple steps to help protect against an E&O claim or lawsuit. ____________________________________________________________

Electronic delivery of insurance policies It is crucial in defending many E&O claims and lawsuits that the agency be able to demonstrate that it delivered the insurance policy to the customer. Without this evidence, we are unable to raise one of our most valuable defenses – the “duty to read” defense. However, many agencies are now delivering insurance policies and other insurance documents to customers in electronic form rather than in paper form. This can help save time and money and allow an agency to provide a higher level of customer service, but it opens up areas of concern, too.

Any agency that is contemplating the delivery of electronic copies of insurance documents to customers should follow a few simple steps in order to better serve the customer and help protect against an E&O claim or lawsuit. First, the agency should make certain that the customer consents to electronic delivery and understands that going forward, until such time as he or she indicates otherwise, he or she only will receive electronic copies of insurance documents and will not receive paper copies. The best practice for the agency to follow is to have the customer sign a letter acknowledging his or her acceptance of this practice.

If policies are being e-mailed to customers, the agency should not rely upon automatic receipts, since sometimes they can be falsely generated by the recipient’s anti-virus software. Instead, the agency should request that a customer who is sent a policy by e-mail affirmatively respond that he or she has, in fact, received the e-mail and attachment. If the customer does not affirmatively respond, the agency should be sure to call the customer to confirm receipt, and then be sure to make a note of that conversation in the agency management system.

If a customer is being provided with an electronic copy of his or her insurance policy that is contained on a CD, the agency should be sure to send or hand deliver that CD along with a letter stating that the electronic document is the policy and that the customer should be sure to review the policy carefully and

[ 17 ]

Voice mail tips to avoid E&O claims Modern technology provides a slew of advantages for keeping the lines of communication open between agents and clients, but it comes along with E&O exposures, too.

When customers land in voice mail, they must be advised by the message that their expressed need for coverage does not put coverage in effect and that they must speak with a licensed agent.

The following tips can help prevent E&O situations: ◗ Update your outgoing voice mail message on a daily basis. ◗ Always provide an option for callers to reach a “live” person in the office. ◗ Include an appropriate disclaimer on the voice mail greeting advising callers on procedures for handling coverage requests and claims. Here’s just one example: You have reached the voice mail of <your name> on <today’s date>, and I will be out of the office all day. Please leave a detailed message, and I will return your call as soon as possible. If you require immediate assistance, <provide directions on reaching other staff> who can assist you. Please be aware that coverage cannot be bound or changed via voice mail, e-mail or fax, or online via the agency’s website, and is not effective until confirmed directly with a licensed agent. Thank you for calling and have a great day. ◗ Keep your system simple by avoiding many layers the caller must go through to speak to someone in your agency. ◗ As soon as possible, input all information from phone conversations and voice mail messages into your agency management system. Include the name of the caller, the date/time and message. ◗ Confirm in writing with the client any requests received by voice mail. ◗ Create a procedure for dealing with personal voice mail boxes when staff is out due to vacation or illness. ◗ Put all procedures in writing.

TECHNOLOGY

advise the agency of any questions he or she may have or changes that need to be made.

In addition to sending an e-mail or delivering a copy of the insurance policy on a CD, there is also an electronic system whereby an agency sends an email to the insured with a link to a stand-alone secure server where the client can obtain a copy of his or her policy. If the insured retrieves an electronic copy of his or her policy, the agency management system is documented to show that it was retrieved, by whom it was retrieved and when it was retrieved. However, if the insured does not retrieve the electronic copy of his or her policy, an email is sent to the agent to advise that the policy has not been retrieved. The agency can then either send the customer another e-mail reminding him or her to access the policy through the secure portal, or print out the policy and send it the old fashion way via the mail. _________________________________ You would be amazed at how many times an agencyâ&#x20AC;&#x2122;s file is missing such details as to whom they spoke, or where the conversation took place, or even the issues that were discussed. _________________________________

Notes of discussions with insureds and insurers The rule within every agency should be that all employees must consistently make notes within the agency management system of any discussions with insureds, insurers or anyone else that concern in any way issues

related to coverage or claims.

The agency management system notes the date and time for any such notes which are entered.

These notes can be very powerful proof if needed to defend the agency against an E&O claim or lawsuit. There are five important aspects to documenting any communications: 1.

Note the date, time and duration of the conversation;

2.

Note the name and title of the individual with whom your agency is communicating;

3.

Note how the conference took place, such as office conference, telephone conference and/or cell phone conference;

No matter what agency management system you are utilizing, the first and most important thing to confirm is that any activity performed is reflected by an activity within your system. For example, if your agency creates a certificate of insurance for a customer, your agency management system should create an activity in the activity log that corresponds to the creation of the certificate of insurance.

This would likewise apply to any other type of task, such as the completion of applications, change endorsements, performing a function on the carrier website, etc.

While this seems extremely basic, you would be amazed at how many times an agencyâ&#x20AC;&#x2122;s file is missing such details as to whom they spoke, or where the conversation took place, or even the issues that were discussed.

Without some, or all, of this basic information, it may be more difficult or even impossible to defend an agent in an E&O claim properly.

The second most important thing to keep in mind is that the activities that are created should always be closed when the activity has been completed. A very powerful piece of evidence in defending E&O claims and lawsuits is to demonstrate that an activity was opened, handled and then closed when completed. Conversely, it can be very damaging for an agency to have activities within its agency management system on which there has been no follow up; or if they have been followed up on, they have not been closed.

Accordingly, every agency should make certain that all employees are creating, following up and then closing all activities within the agency management system.

Activities noted in the agency management system

Voice mail messages and disclaimers

Activities that are created within the agency management system are a great way for employees to document matters for follow-up.

Messages regularly are left by customers on the voice mail system of agencies, asking questions on coverage, reporting

4.

Note the salient points of the conversation;

5.

If possible, follow-up with the insured in writing to confirm the conversation.

[ 18 ]

Primary Agent | August 2011

claims and requesting changes in coverage. For this reason, it is recommended that a voice mail disclaimer be used on the message for every employee and also on the main message for the agency. This disclaimer should state that coverage cannot be bound or modified, nor can a claim be reported, by use of the voice mail system.

In addition, it is a good practice for an agency to consider adopting a procedure whereby voice mail messages are retained either in the original recorded form or in written form. Some agency management systems are compatible with phone systems to allow a copy of voice mail

messages to be attached to an insured’s electronic file. There are also programs that exist where you can have a written version of your voice mail messages sent to you by e-mail and then retain that written version of the message.

Disclaimers for e-mail, websites and social media sites In addition to a disclaimer on voice mail, it is also important for every agency to have similar disclaimers on their e-mail transmissions, websites and social media sites. Some agencies advise us that they like to use e-mail for their customers to report claims. For those

agencies, the disclaimer might state as follows: “Please note that an e-mail will not be effective to report a claim or request a coverage change until such time as you receive a confirmation from us that the claim submitted or change requested has been processed.”

Additionally, some agencies have interactive websites that allow customers to report claims or request policy changes. A similar type of disclaimer should be used for those interactive websites as well.

Where an agency or brokerage is utilizing a social media site like Facebook or Twitter, the agency

iabgroup.com/on-demand

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WHEN AND WHERE YOU WANT IT! Remain in the know while you’re on the go.

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Coming soon: Ethics [ 19 ]

TECHNOLOGY

should use a disclaimer similar to that mentioned above with the addition of advising that these vehicles should not be used to communicate client-specific information to the agency, any content the customer provides becomes the property of the agency, and the agency is at liberty to add, modify or delete any content that is not acceptable. ________________________________ The agency should be sure to retain, either in paper form or electronically, a copy of every certificate of insurance issued. ________________________________

Certificates of insurance Certificates of insurance are still one of the largest sources of E&O claims and lawsuits. As such, it is important for every agency to have good documentation concerning how certificates were issued in the event an issue arises related to a certificate. The agency should be sure to retain, either in paper form or electronically, a copy of every certificate of insurance issued.

While agency management systems will automatically save a copy of the certificates on the system, one problem we have encountered is that many of those systems only will print out the current date (not the date that the actual certificate was issued). Because of the importance of having an exact copy of the actual certificate that is issued (including the exact date it was issued), agents should make certain that if they are saving the copies of certificates electronically, and not in a paper

form, their agency management system will either: (a)

print out the date that the certificate was actually issued if the certificate is printed at a later date; or

(b)

scan a copy of the certificate that is actually issued by the system and maintain an electronic copy of it within the respective insured’s file.

ACORD forms It is equally important that every agency use the most current and up-to-date ACORD forms in connection with its daily operations. Doing so will help protect the agency from potential E&O claims and lawsuits and often also will help better serve your customers.

For example, the ACORD 80 Homeowners Application was revised in October 2009, but some agencies still appear to be using the earlier versions of the application. The new ACORD Homeowners Application now contains five pages, and it is akin to a checklist of coverages and exposures which is one of the best means to dispute a claim by a customer that coverages were never reviewed. Reviewing the completed application with customers will help protect the agency from claims that the agency did not review a particular type of coverage with the customer or ask about a certain exposure that may exist.

Another form that is often not used by agencies in its most current version is the ACORD 25 Certificate of Insurance. The most recent

[ 20 ]

version of the ACORD 25 is the May 2010 edition. As mentioned above, because certificates of insurance are involved in a great many E&O claims and lawsuits, it is of the utmost importance that agencies use the most recent version of the ACORD 25 Certificate of Insurance. ________________________________ Using the most current and up-to-date ACORD forms will help protect the agency from potential E&O claims and lawsuits and often also will help better serve your customers. ________________________________

Downloads and uploads Another area to address is the agency’s uploading and downloading documents and information from the insurers with whom they do business.

While uploading and downloading have become major tools to increase agency efficiency, there are several points to keep in mind: 1. Confirm that your agency management system is not allowing your agency’s downloads to change the applications from insureds unless it creates a new version.

2. Downloads can greatly enhance the accuracy of the agency’s data which is essential when counseling insureds, but it is important to audit these downloads regularly to make sure they are accurate and that the agency’s database contains good data overall.

Primary Agent | August 2011

the other E&O risk management principles that they have learned and how the technology they are using might impact them.

Critical to all of these recommendations is that the agency incorporate them into its written procedures, train its employees on them and require that they be followed, as well as audit the agency’s systems regularly to make sure the procedures are being followed.

Editor’s note: Access additional technology and E&O resources by visiting IA&B’s website, iabgroup.com. _______________________________

This overview is not meant to be an exhaustive list of potential E&O issues that you may face when you examine the electronic side of your business. Agencies should always keep in mind all of

This article was prepared for Agents Council for Technology (ACT) by Jim Keidel, Chris Weldon and Darren Renner of Keidel, Weldon & Cunningham, LLP, a law firm located in New York, Connecticut, New

Jersey and Rhode Island, concentrating its practice in the defense of insurance agent and broker E&O claims and litigation, loss control and education, as well as insurance coverage analysis and litigation and insurance regulatory matters for insurance agents and brokers. Jim or Chris can be reached at 914-948-7000 or by e-mail at jkeidel@kwcllp.com and cweldon@kwcllp.com. This article reflects the views of the authors and should not be construed as an official statement by ACT.

Glance at Events A U G U S T

C A L E N D A R

Date

Topic

Location

2-4

P&C Licensing Study Course

Pittsburgh, Pa.

3

William T. Hold Seminar

Salisbury, Md.

3-6

CIC: Agency Management Institute

King of Prussia, Pa.

9

CISR: Commercial Casualty Course

Lancaster, Pa.

Navigating Contractual Liability Seminar

Hagerstown, Md.

9-11

P&C Licensing Study Course

Mechanicsburg, Pa.

10

CISR: Commercial Casualty Course

Philadelphia, Pa.

10-12

James K. Ruble Graduate Seminar

Hershey, Pa.

11

Dynamics of Service

Baltimore, Md.

16

William T. Hold Seminar

Lehigh Valley, Pa.

CPIA: Module 1

Pittsburgh, Pa.

William T. Hold Seminar

Dover, Del.

CPIA: Module 2

Pittsburgh, Pa.

Navigating Contractual Liability Seminar

Pittsburgh, Pa.

CPIA: Module 3

Pittsburgh, Pa.

22-25

CIC: Commercial Casualty Institute

Hunt Valley, Md.

23-25

P&C Licensing Study Course

Philadelphia, Pa.

24

E&O Best Practices Seminar

Lehigh Valley, Pa.

30-Sept. 1

L&H Licensing Study Course

Mechanicsburg, Pa.

17 18

H.R.

Primary Agent | August 2011

HEADQUARTERS

FAIR LABOR STANDARDS ACT AND THE PROBLEM WITH PAYING NON-EXEMPT EMPLOYEES A SALARY: PART II JEFFREY W GERHART CEBS, MBA Jeffrey W. Gerhart, CEBS, MBA, provided this article on behalf of Mosteller & Associates, IA&B’s contracted human resources consulting firm.

IA&B members have access to HR Solution©, a compilation of products and services to help them establish or improve their human resources program.

Included are base-level consultation services and discounted professional services from Mosteller & Associates.

Oh ... do I have to pay overtime on commissions earned by hourly paid producers when they sell a policy?

Last month, we heightened awareness of non-exempt employees and the need to pay overtime when a commission or other lumpsum bonus payment is made.

This month’s article features one method for determining the overtime amount.

Remember, the Fair Labor Standards Act (FLSA) requires that overtime be calculated when a non-discretionary, recurring lump-sum payment (read: commission) is paid to hourly (non-exempt) workers.

This means you need to pay attention to how your hourly employees are compensated if they work more than 40 hours in a week, and make sure they are paid correctly.

How do I calculate the commission overtime pay?

The first step is to determine the period of time to which

the bonus applies. Since commissions usually are deferred and paid after the insurance company completes its process, you need to tie the sale to a particular work week. If your producer worked no more than 40 hours in that week, there is no overtime pay involved.

However, if more than 40 hours was worked in an applicable week, follow these steps: Example My non-exempt, inside producer sold five policies in December 2010. Each policy sold carries a $200 commission, and I just received the commission check from the insurance company today in the amount of $1,000.

Step 1: Since you keep track of hours worked for your producer and the dates when sales were made, first verify whether the week(s) worked in December was over 40 hours. If no overtime occurred in any week where a sale was made, there is no overtime calculation required. [ 22 ]

Step 2: You determine that the producer worked a total of 47 hours during one week in December when three policies were sold. The other two policies were sold during weeks where no overtime occurred.

Step 3: Divide the total commission earned in the overtime week ($200 x 3 policies = $600) by the total hours of worked (47 hours) in the applicable week for a regular rate of $12.77/hour.

Step 4: The required payment is one and one half times the regular rate. Since the $600 payment is considered the regular rate, you need only to calculate the half-time portion ($12.77/hour divided by 2 = $6.39) and multiply it by the number of overtime hours (7 hours) to determine $44.70 in overtime pay.

Add the $44.70, in addition to the $1,000 commission pay, to the regular paycheck with the next payroll process.

Confused?

While it may be inconvenient to go back in time to calculate the overtime payment, you should look at your payroll process and determine how you can comply with the law. In addition, an hourly paid producer who left your employment and has remaining commission to be paid has the same required overtime calculation as an active employee.

Some have questioned whether a nonexempt status may be changed to salaried (or exempt) for the period in which the producer earns his or her commission. The answer is a resounding “no.” When a FLSA status is assigned to an employee, the intent of the classification is to imply a regular pay arrangement, not one subject to periodic status changes. When it appears that the reason for the change to exempt status is to evade the payment of overtime, that change can become a problem for the agency and one that U.S. Department of Labor would like to uncover. In particular, inside sales personnel are nearly always classified as non-exempt.

Editor’s note: Use IA&B’s HR Solution to access guidelines on FLSA status, as well as hyperlinks to U.S. Department of Labor wage & hour fact sheets. Visit www.iabgroup.com/HR to access (or register to access) the program. Then choose “administrative tools” and scroll to pages 37-40.

Or call 610-779.3870 to contact IA&B’s HR Solution consultant, Jeff Gerhart, who has helped many employers comply with required overtime calculations.

Help for HR headaches In many independent agencies, human resources fall onto the plate of already overworked and stretched-too-thin senior management.

But it’s those loose ends that can unravel an agency from the inside out. Take, for instance, that problem employee who poisons staff morale. Or that unfiled I-9 form that carries a daily fine of up to $1,000. Or that position that was never reclassified and now violates state and federal wage requirements.

Few agencies have the resources to manage the moving target of human resources compliance without help. Enter IA&B’s HR Solution©, a compilation of products and services to help member agencies build a human resources program.

Take Angela Malizia, of IA&B-member agency The Lunar Agency Inc. in Newton Square, Pa., who utilized the HR Solution consultation service, audit and customizable employee handbook.

“When you’re a small-business owner, it’s hard to keep up with laws and changes and what you are and aren’t allowed to do,” she said.

“It’s comforting to have these resources.”

Donna Dates, with The Winans Insurance Agency in Warren, Pa., concurs: “I could not do what I do without IA&B’s HR resources.

There’s so much all in one place, and that makes it much easier to stay on top of it.”

Originally launched in January 2008, IA&B recently updated and refined the tools to account for newly enacted laws and regulations and a new human resources consultant’s feedback.

HR Solution includes an audit, customizable employee handbook, administrative guide and access to services and discounts from a contracted human resources consultant. Best yet, it’s all included with membership.

Access HR Solution by visiting iabgroup.com/HR.

[ 23 ]

Primary Agent | August 2011

Technology U P DATE

THE INDEPENDENT AGENTS’ OPPORTUNITY TO TAKE BACK PERSONAL LINES JEFF YATES Jeff Yates is executive director of the Agents Council for Technology (ACT), which is part of the Independent Insurance Agents & Brokers of America.

Jeff can be reached at jeff.yates@iiaba.net.

A lot of auto insurance business is currently in play for independent agents as most online shoppers still go offline to purchase. Agents, still, need to have a strong online presence so consumers can find them, along with the quotes they seek.

ACT’s website is iiaba.net/act.

This article reflects the views of the author and should not be construed as an official statement by ACT.

Sometimes an opportunity is staring you in the face, but it is invisible to you because you are so focused on what a particular competitor is doing and how you are going to compete on the same terms.

Let’s take personal auto insurance. I was so focused on what the direct carriers were doing with their massive amounts of advertising, online quoting and rapid market share growth, that I failed to see the incredible opportunity that independent agents have today to present consumers with a better business model.

“Go opposite” This is an excellent time for you to implement a defined strategy backed by sales power and resources to grow your personal lines. To help you see why this opportunity is so great, let’s apply a tool that Daniel Burrus, author of the bestseller Flash Foresight, recommends organizations use in their strategic planning.

“Go opposite,” Burrus encourages, in order to see opportunities that previously have been invisible to you. He urges us to make a list of everything your competitors are doing and then look at each item and ask, “How can I gain an advantage by doing the opposite?” He argues that we are living in a world where in so many ways “our entire world and everything about it is going through an intensely rapid and comprehensive reversal,…where the acceleration of digital technology is turning

conditions on their heads….”1 In short, we are seeing this reset of consumer expectations and practices take place all around us in our daily lives.

Why can’t it take place with insurance as well?

Let’s apply the tool of “go opposite” with regard to the trend of growth in online automobile insurance sales by the direct carriers — a concern for all of us. The direct online carriers are emphasizing price to such an extent in their advertising that consumers are starting to put less and less importance on the enhanced coverages they can get, according to recent research conducted by comScore.2 In other words, the direct carriers are selling auto insurance as more of a commodity, and consumer loyalty to the various providers has become pretty low.3

1 Daniel Burrus, Technotrends newsletter, May 2011.

2 comScore 2011 Auto Insurance Shopping Report, p. 32-35.

3 70% of online purchasers are seriously considering changing their insurance company. com Score 2011 Auto Insurance Shopping Report, p. 7-8.

In addition, the 2011 comScore and J.D. Power Auto Insurance Shopping reports show that most online consumers are getting automobile insurance quotes from multiple carriers4 and that these consumers are spending an average of two or three days gathering quotes.5 Most are entering the same data into multiple websites. Sound familiar?

Independent agents all know how inefficient that business model is, having experienced it themselves before the availability of real-time multiple carrier quoting.

Independent agents can provide the online consumer a better alternative Now what if independent agents “go opposite” and start showing online consumers that there is a better way to think about and buy auto insurance? Consumers can go to an independent agent and have a more efficient shopping experience and get quotes from multiple carriers in one stop.

And independent agents can offer consumers the added value of personalized professional counsel and debunk the myth that the coverage and limits are not important and that auto insurance is just a commodity.

The technology tools are now available The technology has now become available to enable independent agents to enter the online shopping and quoting space effectively. Agents have access to real-time quoting through their comparative raters and agency management systems, so they finally can quote personal lines prospects efficiently. These tools are essential to agents being able to compete in today’s personal lines marketplace.

Independent agents can implement online consumer portals from several comparative rating vendors to provide consumers with online quotes from

multiple carriers. Agencies using these tools are achieving a close ratio of 35 percent to more than 60 percent by promptly responding to consumers with quotes. These agencies are following up with consumers within 15 minutes or less and have rotating employees on call to follow up with online prospects after hours.

These close ratios show that consumers are hungry for a better alternative, where the agent custom fits the insurance to the consumer’s needs to provide proper protection, often at an equal or better price than the direct carriers.

But consumers have to find the agent’s website and online multiple carrier quoting tool. Online technology tools have become available here as well.

Agents can improve their visibility online significantly with search engines and on social media.

Agencies are taking advantage of inexpensive resources such as: ◗ Local search tools offered by the various search engines. These tools are easy to set up, usually free and give terrific positioning when consumers look for a local provider. ◗ Blogging and an attractive website rich in insurance information of interest to consumers. ◗ Other social media, such as Facebook and LinkedIn, where the agency can show its values and “personality,” its commitment to its community and its insurance expertise.

High levels of consumer shopping can benefit independent agents Recent research of automobile insurance consumers conducted by comScore and J.D. Power and Associates6 provide additional helpful information to

independent agents as they fashion their strategic plans to grow personal lines.

Massive advertising campaigns urging consumers to shop their auto insurance, coupled with the tough economy, have led to unprecedented levels of consumer shopping. This is creating more potential prospects for independent agencies and those with a strong personal lines strategy and online presence are poised to capitalize.

Of the 51 percent of insurance consumers who shopped for auto insurance in 2010, 19 percent switched carriers (down from 22 percent in 2009).7 The comScore research also found that 70 percent of online purchasers are seriously considering changing their insurance company, compared to 50 percent of those who purchased through a local agent.8 This indicates a significantly higher degree of loyalty when having the experience of using an agent. However, consumer loyalty is down across all distribution systems.

Those independent agencies that have implemented efficient processes for handling this business — such as realtime quoting and inquiry; policy, direct bill commission and claims download; and electronic files to replace paper — are well positioned to manage this increased shopping by their own clients and to target the increased numbers of insurance consumers whose business is in play. As a result of implementing these processing enhancements, one major insurance agency recently told me that its personal lines department is now achieving the highest return on revenue of any of its departments.

Important to have a strong online presence and ability to quote online J. D. Power & Associates has reported that 2010 was the first time a majority of

4 59% of online carrier website quoters got 2-3 quotes and 19% got 4 or more. comScore 2011 Auto Insurance Shopping Report, p. 23.

5 J.D. Power and Associates 2011 Insurance Shopping Study, p. 2.

6 comScore 2011 Auto Insurance Shopping Report & 2011 Auto Insurance Servicing Report; J.D. Power & Associates 2011 U.S. Insurance Shopping Study.

7 comScore 2011 Automobile Insurance Shopping Report, pp. 8-9.

8 Op. cit., pp. 7-8.

TECHNOLOGY UPDATE

insurance shoppers (54 percent) initiated their policy purchase process by applying for a quote online.9 Websites have become the dominant lead generation channel and the second most important distribution related factor for the consumer, second only to the local agent.10

Fifty percent of these online quotes, however, still are closed by an agent or call center representative according to the J.D. Power & Associates research.

Jeremy Bowler, senior director of global insurance practice at the research firm, concludes that the latest consumer shopping behavior is “blurring the lines of how we traditionally think about

discreet sales channels,” as consumers use multiple channels during their shopping process.11 The comScore research reports that 80 percent of those who shopped online went offline to purchase. Sixty-two percent of those going offline to purchase ended up buying through an agent in person. An additional 31 percent purchased through a local agent over the phone.12 The bottom line is that a lot of auto insurance business is currently in play for independent agents to attract and most online shoppers still go offline to purchase. Agents, however, need to have a strong online presence so consumers can find them, and receive quotes online.

Research confirms agents’ value to insurance consumers ComScore’s research also provides some very positive confirmation that a high percentage of those insurance consumers who have a local agent strongly value that relationship. Of the 61 percent of consumers who purchased their current auto insurance through a local agent, 81 percent find their agent to be valuable.13 We also see that a much higher percentage of online purchasers are seriously considering changing their insurance company (70 percent), compared to those who have a local agent (50 percent).

9 J.D. Power and Associates 2011 U.S. Insurance Shopping Study, June 2, 2011 press release.

10 Ibid.

11 Ibid.

12 comScore 2011 Auto Insurance Shopping Report, p. 28.

13 comScore 2011 Auto Insurance Shopping Report, p. 26 & comScore 2011 Auto Insurance Servicing Report, p. 7.

[ 26 ]

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In a future article, I will drill down further into the comScore and J.D. Power & Associates research to ferret out additional trends in automobile insurance consumer preferences and behavior that can assist independent agencies in refining their personal lines sales and servicing strategies.

I believe the latest consumer research confirms the significant opportunity independent agents have to offer insurance consumers a better alternative for auto insurance than the direct carriers are currently providing them â&#x20AC;&#x201D; one that offers a more efficient shopping process and tailors the coverage to the needs of particular consumers. The technology tools exist to enable independent agents to handle this business efficiently and to establish an online presence that is highly visible to consumers in their community. The remaining question is whether significant numbers of independent agencies will have the will to make a significant commitment to personal lines, to build their online presence and quoting capability, and to â&#x20AC;&#x153;go oppositeâ&#x20AC;? to the â&#x20AC;&#x153;auto insurance as commodityâ&#x20AC;? business model the direct carriers are currently providing.

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[ 27 ]

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If you’re feeling mis-tweeted…

Thanks to the Internet, it’s easier than ever to get fired these days. In fact, you can do it in 140 characters* – or less – via Twitter. And plenty of people have.

A recent, industry-related snafu occurred when Gilbert Gottfried tweeted arguably offensive jokes following Japan’s March earthquakes and tsunami. Aflac, who long had employed Gottfried to voice its duck mascot, gave the comedian the boot.

Word on the Web is that Lloyds of London is developing policies to cover “tweeps” (a.k.a. Twitter users) in the event of a misguided post. Look also for corporate policies to protect the ever-increasing number of companies finding their place in the “twittersphere.”

Source: “Coming soon: Twitter insurance to protect you (and your brand) from careless tweets,” mediabistro.com

Insurance Innovators Inc . . . . . . . . . . . . . . . . .27

* Tweets – or posts on Twitter – are limited to 140 characters.

Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC

----------------------------------------------------------------———————------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.

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