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PENNSYLVANIA

IN THIS ISSUE ________________ Privacy audit Top 5 privacy provisions How one agency met new HIPAA mandates


I used to think EMC was ju st for niche commercial programs. Then again, I used to think babies

came from storks.

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

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

www.emcinsurance.com

© Copyright Employers Mutual Casualty Company 2009 All rights reserved


Call for info 877-390-7475 Visit us online www.absolute-risk.com

ABSOLUTE RISK PLACEMENT

Does your agency need market access? Are you having difficulty placing coverage?

Help is on the Way…. Absolute Risk Placement is a multi-line insurance brokerage providing skillful market access and related services to a select group of independent insurance agents and brokers.

Our core practice areas include: Health Care QSkilled and Assisted Care Facilities QHospitals QHome Health Agencies QHospice QMiscellaneous (Laboratories/Clinics/Urgent

Care)

We are known for our ability to provide products that are comprehensive and cost effective. Our capable, experienced staff stands ready to assist you with many kinds of insurance placements. In addition, we have access to many aggressive “small business” markets that can provide fast, competitive products for you.

Construction Q Q Q

Street & Road General Contractors Excavation/Utility Contractors Q Iron/Steel Erection

Transportation Q Q Q

Long Haul (minimum of 5 power units) Motor Coach/School Bus Sand & Gravel

Environmental Q Q Q Q Q

Remediation Landlord/Property Development Engineering Municipal Industrial

We’re looking for strong partners. Find out how to do business with us, it’s easy.

..................................... Visit us online at www.absolute-risk.com and click on the “Become an ARP Producer” tab. Or contact Tim O’Brien at tjobrien@absolute-risk.com, or by phone at 877-390-7475 x128.

Help is on the Way….


Contents

14

PRIMARY AGENT MAGAZINE How to be well schooled in privacy compliance For insurance producers – and agencies as a whole – privacy compliance has become an ever-expanding web of standards and rules, mandates and regulations. Goodbye, days of simply shredding MVRs and calling it a day. Today you need programs in place and policies under constant review. Misstep (even by ignorance), and you’ll pay.

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Page 14 Privacy audit These questions provide teachable moments: locating where your agency makes the grade … and where you ought to hit the books.

Page 15

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Member profile Much like Mother Nature did with snow, new federal regulations buried Health producers in privacy responsibilities last February. Tom Thorne, of IA&Bmember John Yurconic Agency, explains how the agency responded.

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

4 5 6 8 11 12

Chair of the Board’s Message Member FAQ State News Preventing Errors & Omissions Glance at Events Coverage Corner

23 24 28 28 28

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

Subscriptions: Non-member price: $2.25 per copy or $15 per year. All communications for publications, including news, features, advertising copy, cuts, etc., must reach the editor by 1st of month two months prior to publication. Advertising rates furnished upon request. Address inquiries to: Primary Agent Editor PO Box 2023 Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and additional entry post office. Postmaster: Send address changes to above address. Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2010-8) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

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


Get Ready Pennsylvania. Here Comes ACUITY !

Interested in an agency appointment? Please contact Territory Director Steve Harris at 717.756.9983

A.M. Best A+

For For All All That That Matters Matters www.acuity.com www.acuity.com


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

Members Norman F. Basso, CPCU York, Pa. Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md. Henry “Butch” Bradley, Jr. Crofton, Md.

Kathleen Glattly CPCU, CLU, ChFC, AIM

Chair of the Board’s M

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What can we do for you? Over the past 12 months, you have read my articles that shared information about your association. In this, my last article as chairwoman of your association, I wanted to describe those key benefits in greater detail. w The weekly e-mail providing timely information, Agent Headlines; w Member discounts on your Errors & Omissions and other insurance products;

Timothy P. Burris Thompsontown, Pa.

w The Member Service Center which is readily available to review your concerns, issues or questions;

M. Scott Clemens, CIC, CPCU, CLU, ChFC Souderton, Pa.

w Review and counsel of agency/company contracts and agency termination procedures;

John T. “Chip” Colwell Jr., CIC Corry, Pa.

w Top notch professional training and education brought to you by industry experts such as Jerry Milton and Rita Hollada;

G. Greg Gunn, CIC Lemoyne, Pa. Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P West Chester, Pa. Diana M. Hornung-Momot, ACSR Wilmington, Del. Linda A. McCann, AAI, CPCU, CPIW Salisbury, Md. Michael F. McGroarty Sr. Pittsburgh, Pa. Scott C. Rogers, CPIA York, Pa. Susan A. Sallada, CIC** Ft. Washington, Pa. William D. Schneider, CPCU, ARM* Pittsburgh, Pa. Robert A. Walbeck, CIC Homer City, Pa. David B. Wasson Sr., CIC State College, Pa. James M. Watkins* Dover, Del. King W. “Kip” White, LUTCF Fallston, Md. John S. Yasik, CIC Newark, Del. * IIABA National Director ** PIA National Director

E

w Grassroots advocacy on your behalf to companies, legislatures and regulatory bodies via our online Political Action Center, which provides you legislative information and the ability to communicate directly to your legislators; w Our Company Satisfaction Index, due out later this year and completed every other year (since 2004), which provides a unified voice to the companies we represent; w Industry resources and tools to assist you and your agency in areas such as human resources, privacy compliance (read more in this issue), producer licensing, law changes and legislative or regulatory issues; w www.iabgroup.com, a resource library available 24/7/365; w And last but certainly not least, Member Agent Panels (MAPs) — regional bi-annual meetings that allow members to voice their issues and needs to IA&B leadership and staff. (This is where you can get involved, and you will be glad you did! See www.iabgroup.com/maps.asp to learn more.) It has been my honor and privilege to serve as your chairwoman over this past association year. Your association’s board of directors, incoming chairman David Rosenklide, and the talented staff are among the very best, and I thank them for their support. All the best to you and yours, Kathleen

[4]


Member FAQ recommendation on whether or not we should do or continue to do business with a specific carrier?

ANSWER: IA&B does not, and

?

technically cannot, provide any advice or recommendation in that area, for a couple of different reasons. We can, however, provide you with some “food for thought” in assessing your relationship with various carriers. So, read on! Why IA&B can’t provide advice Antitrust laws place strict limitations on anything that could be deemed an “agreement” to act in concert, including whether to do business or not to do business with a particular company (a.k.a. a boycott).

One tool that can be, and is increasingly, used in assessing companies is IA&B’s “CSI” (stands for Company Satisfaction Index). The CSI is a biennial report card developed from a membership-wide survey. Interestingly enough, the tool is also increasingly used by carriers themselves to see how they are viewed by producers as a group. The CSI does not address any specific products, but rates the companies on four categories:

w Agency/Company Relationship, and w Technology; The information is found at www.iabgroup.com (go to Carrier Relationships, then Company Satisfaction Index).

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!

w Products, Pricing & Underwriting, w Policy Service & Claims,

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

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

ND INS LA I N E R V

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GR

What to do Members must individually assess the financial strength and the integrity of the carriers with which they do business. Some criteria will likely be similar from

OUP

Contact Amber J. Ayrer at 800-232-6992, ext. 1237 or aayrer@cumberlandgroup.com

Celebrating 166 years of service [5]

A

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ANCE UR

Producers are all considered competitors under law. If you have attended an IA&B seminar or meeting, you may have noticed a statement at the beginning of every class reiterating the requirement to comply with antitrust laws: in substance, the statement reminds participants that they must refrain from exchanging information regarding price, refusals to deal or agreements to proceed in certain anti-competitive respects. This is not to say that you cannot name a company or say anything about it, but the nature of what can be said is restricted. For IA&B — as an association — to recommend that you refrain from doing business with a particular carrier could be deemed an “agreement” among competitors to take concerted action.

one agency to the next (obviously, the company’s financial rating comes to mind), others may differ: products, claims handling, underwriting, technology, ease of doing business… and sometimes, quite simply, trust.

MBER CU

QUESTION: Do you have any

1844 - 2010


State News Primary Agent | August 2010

Barbara Golden named Pennsylvania’s Outstanding CSR of the Year Two words come up frequently in conversation with Golden: challenge and education. She can’t get enough of either. And that makes the industry a perfect fit for her. “I’m always learning something new,” she confides as her favorite thing about working in insurance. “It’s very interesting.” About the Outstanding CSR of the Year Contest Each year The National Alliance for Insurance Education & Research holds a competition to find the most exceptional customer service representatives in the nation. One CSR is recognized from each state and Puerto Rico. These 51 award winners then advance to the national competition, where one CSR is chosen to receive a $2,000 prize in recognition of his or her contributions to the industry and profession. In addition, four national finalists receive $500 each.

Quick facts Name: Barbara Golden Designations: AAI, AU, CIC, CPCU Title: Commercial Lines Client Service Manager and Supervisor Employer: E.K. McConkey & Company, Inc., York, Pa. Most everyone has a story of accidentally landing a career in the insurance industry. But few backgrounds are more surprising than Barb Golden’s. Golden graduated from Bloomsburg State College with a degree in fine arts. While searching for a job in her field, she took a position as a filing clerk with an insurance company. That lead to a job as a personal lines CSR and later as a commercial lines CSR. And then, suddenly, this artist found a reason to stow her easel. “Once I got into commercial lines, I stayed because I love it,” explains Golden, an 18-year veteran and client service manager with E.K. McConkey & Company, Inc. in York, Pa. “I loved the daily challenges of working with clients and learning about different types of businesses.” [6]

And learn she does. Golden holds AAI, AU, CIC and CPCU designations and is a member of the CPCU Society Central Pennsylvania Chapter. Not surprisingly, when asked for advice for CSRs just entering the field, Golden points to education. “Learn as much as you possibly can,” she shares. “And be patient. The knowledge doesn’t come overnight.” “If you’re a detailed person who likes learning and working with the public, this industry is for you.” – Barb Golden Essay excerpt As part of her application for Outstanding CSR of the Year, Golden submitted an essay on the industry changes she has observed and what would be the best title for the CSR of tomorrow. An excerpt follows. “After 32 years in the business, you observe how rapidly the insurance business changes…. The insurance industry has benefited vastly over the years from technology in


countless ways. I remember when I started in the business, you would issue fire policies, binders and certificates of insurance by typewriter. Currently, everything is issued via computer. There would be no way to keep up with issuing hundreds of certificates of insurance which have to be issued daily in today’s world by typewriter. You need to master FaxAdvantage, Real Time, Outlook, Excel, Word, Facebook, Twitter and various insurance rating programs. These optimize business efficiency and give us the cutting edge. The best title of a CSR of tomorrow would be client care advocate. The realities of our industry are that we need to take particular care of our clients now and always. This is something you cannot compromise…. Relationships are the strongest components of our business. Our clients should be able to trust our instincts and have faith in our efforts, and we should exceed their expectations everyday.”

Not familiar with the issues of faulty workmanship caused by these successive court cases? Brush up on them by visiting www.iabgroup.com/ pa/faulty_work. Then contact your carriers to verify the availability of an endorsement restoring coverage.

w The budget will rely heavily on cuts to state programs, laying off state workers and enacting a tax on the extraction of natural gas from the state’s Marcellus Shale formation, in order to close a $1.2 billion budget deficit.

The E&O exposure is substantial. So is the competitive advantage of having the endorsement.

w Not included in the final plan is an expansion of the state sales tax, which was proposed to include professional services such as legal and accounting fees, or implementation of a tax on smokeless tobacco and cigars.

Look for IA&B’s upcoming webinar to explain the string of court cases, the decisions’ effects and how producers should respond.

State budget passed; IA&B priority bill buried

w The final budget number agreed to is just over $28 billion, or a spending increase of 0.6 percent from last year. Moving into the fall, look for additional advocacy updates from IA&B on the 2010 general election and on any legislative developments that may occur during the remaining days of this year’s session.

First the good news in this year’s state budget battle: The details of it left agents unscathed. And it was passed by the General Assembly on time for the first time since 2002.

Trend continues: Faulty workmanship excluded from CGL coverage

Now for the bad news: With the focus this summer on the budget and the General Assembly out of town until September, time is running out to push for HB 1780, IA&B’s priority bill which would allow for the expansion of Workers’ Compensation coverage to include partners of a partnership and members of an LLC. The bill is entangled in the ongoing independentcontractor debate, making its chances of momentum dim.

More fuel to the CGL-and-faultyworkmanship fire: Another case has followed in the footsteps of Kvaerner and Gambone and further proven that Pennsylvania is one of the harshest states in construction defect claims. In the latest case – Specialty Surfaces International, Inc. v. Continental Cas. Co. — the Third Circuit Court failed to recognize the subcontractor’s faulty work as an “occurrence.” The ruling prevented coverage for the subcontractor’s faulty work and any consequential damage from such faulty work. [7]

More specifics of the 2010-2011 FY budget: w Agents dealing in crop insurance should note that the budget appropriates $509 million to the Department of Agriculture’s crop insurance program, a cut of $91 million from last year’s amount.

WELCOME

New Members Edgehill Special Risk Inc. Horsham, Pa. S & S Financial Services LLC Fairchance, Pa. Newhart Insurance Agency Inc. West Pittston, Pa. Lloyds’ of Pittsburgh Pittsburgh, Pa. Whitaker Realty Whitaker, Pa.


Preventing Primary Agent | August 2010

ERRORS AND OMISSIONS

WHEN PLACING WORKERS’ COMPENSATION, WHAT COULD POSSIBLY GO WRONG? CURTIS M. PEARSALL CPCU, AIAF, CPIA Curtis M. Pearsall contributed this article on behalf of Utica Mutual Insurance Company in Utica, N.Y. Insurance Agents & Brokers Service Group Inc. is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania. For questions regarding this article or your Errors & Omissions coverage, contact IA&B at (800) 998-9644 or by e-mail at iab@iabgroup.com.

It’s somewhat of a surprise that when looking at E&O claim statistics, E&O claims arising out of the placement of Workers’ Compensation each year account for approximately 10 percent of all claims. Moreover, many of those WC claims are well in excess of $100,000. What could go wrong? Let’s take a look. Ensure you are providing coverage for all of the client’s states When meeting with the account to secure the necessary information to provide a proposal or issue a policy, bring along the necessary WC application so specific risk questions can be asked and documented. Obviously, answers to these questions could determine the acceptability of the risk and what endorsements are provided. One of the key questions involves the states in which the client is doing business.

There are a number of issues here. If there is a chance the client will have an employee temporarily working in another state, while the policy may provide coverage, there is the chance that the benefits of that other state will be greater than the home state with the employer forced to pay the difference. If the client is looking to set up a permanent new location, absent the policy reflecting that additional state, there would be no coverage. A highly recommended approach is to add Other States coverage to the policy to ensure injuries to employees in the other states will be fully covered. One exception to this involves the monopolistic states; private insurers are not allowed to provide coverage in those states. Explain and document this discussion with your clients. The preferred language for Other States coverage would be to use “All states, U.S. Territories and Possessions except

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monopolistic states and states designated in item 3.A of this Information page.” If for some reason, the underwriter is not agreeable to that language, at the very least, neighboring states and states where the employees may travel to attend seminars, meetings or conventions, should be listed in 3.C.. As discussed below, make sure this is reviewed every year. With respect to monopolistic states, please note that in late 2008, Ohio amended its Workers’ Compensation statute to remove an exemption for out-of-state employers for temporary work (up to 90 days). The law was rewritten to provide an exemption only if the employer’s state statute held a reciprocal provision exempting Ohio employers for incidental work performed in that other state. If there is no reciprocity, the out-of-state employer must secure an Ohio policy even for incidental operations.


Don’t just renew “as is” It is highly recommended that you secure an update each year with your client as to what their work plans are for the next policy term. If your client only has “partial” other states coverage (did not get “all states except monopolistic states” listed in item 3.C), you want to be extra cautious in assessing your client’s situation. There have been many E&O claims where the client apparently did not understand the “rules” and opened up a permanent location in another state only to have an employee injured – and then discover there was no WC coverage in effect. As you will note by the following claim, when moving the account to another carrier, be certain the coverage is at least equal. In this claim, the agency failed to properly replace WC coverage for a trucking firm that had “other states” coverage on a previous policy. The new policy only covered losses in the state in which the client was domiciled. The client had an employee injured in another state, only to find they had no coverage for losses occurring in that state. The case settled for $317,000. Even if your client had the preferred wording, keep in mind that the policyholder must notify the company “at once” if they begin any work in any state listed in item 3.C. If the insured is working in a state not listed in item 3.A on the effective date or renewal date of the policy, there is only 30 days coverage, unless the carrier received notice, for benefits paid under that state’s statute. Relying on item 3.C to provide

automatic coverage can be a dangerous practice. State requirements In New York, it is mandatory to have New York listed if the insured has any New York exposure – even if it is incidental. In fact, sources confirm that New York has started to levy fines against employers if there is an exposure in New York but the state is not listed. Thus, keep up with and comply with the various state regulations! And as indicated above, Ohio also changed its law in a way that can adversely impact out-ofstate employers with incidental operations if they do not fully understand the requirement. Insuring contractors? This class of business has its fair share of E&O claims arising from improper handling of the WC exposure. Sometimes, the terms of the contract with a sub-contractor call for the general contractor to supply the Workers’ Compensation coverage. If you are insuring the GC, work with your client to understand this stipulation and take the necessary action. Don’t wait for an employee of the subcontractor to be injured to find out that no WC coverage was in place. Be alert to communication from your carriers regarding coverage status This is a claim where the agency procured Workers’ Compensation for a small contractor. After the policy had been in force for a month, the carrier cancelled the policy for underwriting reasons. Both the client and agent denied seeing a cancellation notice and thus no replacement policy was procured. It was not until a worker was injured

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several months after the cancellation that it was discovered the WC policy had been cancelled. The client was forced to pay the benefits and sued the agent. A review of the agency’s records revealed a fax the agent had received from the carrier one month prior to the cancellation date clearly indicating the policy was to be cancelled. Because the agency failed to act on the fax, the case was settled for $11,000. U.S. Longshoreman and Harbor coverage Do you have a client that is subject to the Longshore and Harbor Workers’ Compensation Act? This act, administered by the U.S. Department of Labor, provides medical benefits, compensation for lost wages and rehabilitation services to longshoremen, harbor workers and other maritime workers injured during the course of employment or who suffer from diseases caused or worsened by conditions of employment. Placing this coverage may not be easy and extra caution should be exercised. As you will note by the following example, the dollars at stake can be high. The client requested U.S. Longshoreman and Harbor coverage be provided for their employees. The agency went through a broker to place the coverage. An employee of the client was injured and the carrier disclaimed, saying there was no policy in place. The employee lost wages and incurred medical bills and attorney fees. The client was faced with the cost of an attorney and had to pay fines for not having coverage in place. Although the carrier felt the broker was at fault – there was documentation on file supporting the position that the broker had agreed to


Preventing ERRORS AND OMISSIONS

Brush up on the latest in Workers’ Comp Members have access to the coverages guru himself – Jerry Milton – for a series of statespecific Workers’ Comp seminars, produced in conjunction with IA&B. The course covers classification and rating, experience-rating plan, and federal compensation and liability laws.

procure the coverage – following a bench trial the Court found the agent equally liable with the broker. With the total damages claimed in excess of $700,000, the agent’s share was $315,000.

Without a Guaranty Fund to provide protection, a high degree of due diligence should be exercised. This lack of a Guaranty Fund should also be clearly communicated in writing to your customers.

WC Trusts/alternative programs If you are looking to use a trust to place one or more of your WC customers, it is important to fully understand these trusts, how they operate and, quite certainly, their financial condition. In New York, a number of these have declared insolvency in the past few years.

Placing WC is not that difficult – doing it right is the hard part When placing this coverage, there is a definite need for attention to detail. Work with the application and document the responses from the prospect, and your job should be a lot easier.

Catch Jerry in a nearby town: Erie, Pa.

Aug. 24

Pittsburgh, Pa.

Aug. 25

Hagerstown, Md.

Aug. 31

Mechanicsburg, Pa.

Sept. 1

Dover, Del.

Sept. 2

Allentown, Pa.

Sept. 28

King of Prussia, Pa.

Sept. 29

Hanover, Md.

Sept. 30

Learn more and register by visiting www.iabgroup.com/ education/sp_work_comp.html

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Glance at Events A U G U S T

C A L E N D A R

Date

Topic

Location

3-5

L&H Licensing Study Course

Mechanicsburg, Pa.

4

Dynamics of Service

Trevose, Pa.

CISR—Commercial Casualty Course

Wilkes-Barre, Pa.

CISR—Agency Operations Course

Lancaster, Pa.

CISR—William T. Hold Seminar

Macungie, Pa.

Insuring Success Seminar (CPIA Module 1)

Coraopolis, Pa.

E&O Coverage Standards Seminar

Allentown, Pa.

Pennsylvania Compliance Pitfalls Seminar

Lancaster, Pa.

Insuring Success Seminar (CPIA Module 2)

Coraopolis, Pa.

E&O Coverage Standards Seminar

Hagerstown, Md.

Pennsylvania Compliance Pitfalls Seminar

Scranton, Pa.

11-13

James K. Ruble Graduate Seminar

Hershey, Pa.

12

Insuring Success Seminar (CPIA Module 3)

Coraopolis, Pa.

17

CISR—Agency Operations Course

Trevose, Pa.

18

CISR—William T. Hold Seminar

Dover, Del.

18-21

CIC—Commercial Property Institute

Timonium, Md.

24

CISR—Commercial Casualty Course

Timonium, Md.

Workers’ Compensation Seminar

Erie, Pa.

24-26

P&C Licensing Study Course

Mechanicsburg, Pa.

25

CISR—Commercial Casualty Course

Lancaster, Pa.

Workers’ Compensation Seminar

Pittsburgh, Pa.

31

CISR—Commercial Casualty Course

Salisbury, Md.

31

Workers’ Compensation Seminar

Hagerstown, Md.

5

10

11

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Coverage Primary Agent | August 2010

CORNER

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

Larger, well-managed contractors usually require their subcontractors to sign a contract prior to beginning any work. These contracts will include an indemnification provision, as well as require the subcontractor to procure and maintain certain policies of insurance. A typical indemnification provision may read as follows: “The subcontractor shall indemnify and hold harmless the contractor and its employees from and against claims, damages, losses and expenses arising out of work performed under this contract, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death to any person, or to injury to or destruction of tangible property including loss of use resulting therefrom.”

Commercial General Liability, Automobile and Workers’ Compensation. Some contracts also require the subcontractor to purchase Pollution Liability insurance. Few, not many, include a requirement for Professional Liability insurance. This requirement is enforced by some insurers who attach endorsements to their Commercial General Liability policies that exclude coverage for the contractor arising out of the actions of any uninsured subcontractor. An example of this type of exclusion is: “If you are a contractor, builder or developer, there is no coverage under this policy for ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ caused by the acts of independent contractors/ subcontractors contracted by you or on your behalf unless the independent contractor/subcontractor contracted by you or on your behalf maintains

The policies of insurance that the subcontractor is required to procure include [ 12 ]

insurance coverage and limits of insurance equal to or greater than the insurance coverage and limits of insurance provided by this policy and naming you as an Additional Insured.” In addition, the contract between the contractor and the subcontractor normally stipulates that all policies of insurance provided by the subcontractor shall contain a waiver of subrogation in favor of the contractor. Some states prohibit insureds from waiving an insurer’s rights to recover workers compensation benefits paid to an injured worker. However, Pennsylvania, Maryland and Delaware do not; waivers of subrogation are permitted. Sam Subcontractor was hired by Carl Contractor to paint the interior and exterior of a new building under construction. Sam signed a contract with the same indemnification provisions and insurance requirements as discussed above.


One of Sam’s employees was injured when he fell from defective scaffolding. The injured employee will be paid the Workers’ Compensation medical and indemnity benefits required by the state under Sam’s Workers’ Compensation policy. However, the employee was advised that he could also sue Carl Contractor for his negligence in failing to provide proper supervision of the job. In Pennsylvania and Delaware an employee can collect Workers’ Compensation and also sue a third party. In Maryland the employee can either collect Workers’ Compensation or sue a third party, but not both. Incidentally, Maryland is one of seven states that have this provision. If Sam’s employee does sue Carl, then Sam’s Commercial General Liability insurer will have to defend and, if necessary, indemnify Carl as per the

indemnification provisions of the contract. Sam’s CGL policy excludes bodily injury to an employee during the course of employment. However, the exclusion does not apply to any liability assumed under an insured contract. The definition of insured contract includes this construction contract between Carl and Sam. If the injured employee does not sue Carl: w In Pennsylvania the employer is subrogated to the rights of the employee;

However, in either case, whether the employee sues Carl or not, Sam and his insurer are blocked from any recovery from Sam. Why? The waivers of subrogation, that’s why. Why can the employee sue Carl? The employee is not bound by the waiver — just Sam and his insurer. Now you know why insurers want contractors to require their subcontractors hold them harmless and also procure certain policies of insurance. Y’all take care!

w In Maryland the Workers’ Compensation insurer may bring an action against Carl; and w In Delaware the employer or the Workers’ Compensation insurer can file an action on behalf of the employee.

HELPING AGENCIES AVOID COSTLY E&O CLAIMS That’s how we deliver distinction.

IA&B HAS OVER 50 YEARS OF EXPERIENCE TRAINING AGENCY STAFF By attending IA&B training programs, your staff will have the skills to provide proper coverage and avoid costly E&O claims. No one knows E&O like IA&B. Don’t trust your employee training to anyone else. FOR MORE INFORMATION, VISIT IABGROUP.COM OR CALL THE IA&B MEMBER SERVICE CENTER AT (800) 998-9644.

Driving members to distinction


AGENCY MANAGEMENT

Privacy 101 How to be well schooled in compliance

Privacy is all the rage these days. Customers expect it, and the government regulates it. For insurance producers — and agencies as a whole — privacy compliance has become an ever-expanding web of standards and rules, mandates and regulations.

______________________________ “Sometimes we’re so focused on retaining business that we can be broadsided by regulatory issues,” said Mike Papa, senior vice president at Diversified Insurance Industries, Inc., in Baltimore, Md., who utilized IA&B’s privacy resources. “We really count on IA&B to identify problems and create solutions.” ______________________________


Primary Agent | August 2010

G

oodbye, days of simply shredding MVRs and calling it a day. Today you need privacy programs in place and policies under constant review. Misstep (even by ignorance), and you’ll pay. IA&B recognizes that what you don’t know can hurt you. That’s why the association has developed privacy compliance resources (which are award winning, we might add) that cover your state and federal obligations and walk you, step by step, through the necessary provisions. No other organization offers this thorough of a product within membership dues. The privacy audit is located on the right of this page. Answer the questions to find out where you and your agency stand. Then make a commitment to compliance.

ANNUAL

PRIVACY NOTICE

Agencies gained the classification of financial institutions in 1999, when the feds enacted the GrammLeach-Bliley Act (GLBA). They subsequently became subject to new privacy requirements. Individual states were granted oversight of the rules and standards. Pennsylvania, Maryland and Delaware (among others) regulated that agencies disseminate an annual privacy notice.

Privacy audit Do you sell personal lines, Workers’ Compensation and/or group-benefit policies? How about Health insurance? n Yes n No Yes? Read up on the privacy notice you’re required to provide to clients and prospects. See page 15. Is your privacy notice provided initially and annually? And is it posted on your Web site? n Yes n No No? You best learn more about the privacy notice you’re required to share. See page 15. Do you share client information with any affiliates (applies if you hold at least a quarter ownership or control) or with any non-affiliated third parties? n Yes n No Yes? Then your privacy policy must allow customers to opt out. See page 15. Do you have an information-security provision with the service providers (think: IT providers, envelope stuffers, telemarketers, data-backup providers) who access your facility or files? How about with fellow agencies in your cluster? n Yes n No No? You need a security addendum for your contract that restricts others’ use of your client information. See page 15. Do you have a written information security program in place that addresses how you protect the information collected by your agency? n Yes n No No? Find out what an information security program is all about and how IA&B can help. See page 16. No and you write Health or group benefits? More stringent guidelines apply. See page 18. Do you have a plan to identify and respond to data breaches in your agency? n Yes n No No? You’re required to have procedures and systems in place. See page 17. Do you simply delete electronic files with customers’ credit or insurance scores? n Yes n No Yes? Better read up on the FTC’s approved methods of trashing customer files. See page 21.

Q. In plain English, what does the directive mean?

A. Tell customers (and potential customers) what you do with the health and

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AGENCY MANAGEMENT

Common questions about privacy notices w My carrier told me I didn’t need a privacy notice. True or false? w What can I tell car dealers who call and ask for information on customers who are buying a car? w What about lenders asking for information on customers who are buying or refinancing a house? w What if I share information with an MGA or broker? w I received a subpoena asking me for a copy of a client file. Can I share that? w I belong to a cluster. What’s permissible to share? w I own two separate agencies but operate them with the same staff. How can I share information between the agencies? w I’m in the process of selling my agency, and the prospective buyer wants a look-see. How should I handle this?

Turn to IA&B’s online Q&A for the answers: Pennsylvania – www.iabgroup.com/pa/privacy/qa Maryland – www.iabgroup.com/md/privacy/qa Delaware – www.iabgroup.com/de/privacy/qa

financial information you collect. Share it at the beginning of your relationship with the customer and then again annually. And if you have a Web site, post the notice online – and document any customer information you gather or store via the Web.

Q. Exactly what information does the regulation include?

A. Health information is selfexplanatory. The financial information in question includes any information given by or obtained about the consumer relating to the transaction. If the insurance product is used for personal, family or household purposes, the regulation applies.

Q. What should my privacy notice say?

A. So glad you asked. IA&B members have access to Web-based audits that determine if your notice can say that you don’t share information “other than as permitted by law” or if you must give more information based on your agency’s practices. And depending on those practices, the audits may prompt you to include an opt-out provision for clients to request that their information isn’t shared. No matter your audit results, in the end you’ll learn which of IA&B’s four sample notices fits your agency.

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Create your notice: Pennsylvania – www.iabgroup.com/pa/ privacy_requirements Maryland – www.iabgroup.com/md/ privacy_requirements Delaware – www.iabgroup.com/de/ privacy_requirements Note: You also must have a privacy agreement in place with every service provider (i.e. IT provider, marketing firm) and fellow cluster agency that come in contact with your customers’ information. An addendum to your contracts can clarify their use of that information. Read up on information security addenda: Pennsylvania – www.iabgroup.com/pa/ privacy/service_provider Maryland – www.iabgroup.com/md/ privacy/service_provider Delaware – www.iabgroup.com/de/ privacy/service_provider

WRITTEN INFORMATION SECURITY PROGRAM As mentioned in the previous section, the GLBA labeled agencies as financial institutions – a lofty title that stipulates privacy obligations. Individual states oversee the privacy rules and standards. Pennsylvania and Delaware require agencies to create a written information security program. And while Maryland


Primary Agent | August 2010

never regulated it, producers in the state are still required by federal law to develop one.

Q. What should be included? A. A written information security program details the measures your agency takes to protect customers’ information, including: w Identifying and determining the likelihood of threats, w Defining administrative procedures, office security and computer systems security and w Assessing the sufficiency of those safeguards.

Q. How do I get started? A. IA&B has you covered. Complete a Web-based riskassessment survey, and you’ll earn a customized program to keep on file. The only things left to do? Training your staff to implement the program, and monitoring your agency operations to adjust the program as necessary.

stringent information security program to comply with HIPAA’s new HITECH Security Rule. Read more in the security standards section on page 18.

is considered a covered entity, i.e. is an employer with a fully insured or self-insured health insurance plan for his or her own employees.

DATA-BREACH

Q. How do I know if I’m a

NOTIFICATION

It’s common knowledge that the Health Insurance Portability and Accountability Act (HIPAA) guards personally identifiable health information. (Under HIPAA, it’s called protected health information, or PHI.) What’s not so well known is that HIPAA requirements recently expanded to further affect producers. The bottom line: As of September 2009, affected producers must comply with detailed notification procedures if PHI – whether it’s electronic, written or spoken – is breached. Specifically, producers are on the HIPAA hook if they are considered a business associate of a covered entity (defined as a healthcare provider, health insurance plan or health insurance clearinghouse). Of course, HIPAA obligations also can be triggered if the producer

business associate?

A. Chances are, if you sell health insurance or group benefits, you’re a business associate. While a business associate isn’t a member of the covered entity’s workforce, he “performs functions or activities on behalf of covered entities that involve the creation or receipt of protected health information.”

Q. What’s this businessassociate agreement I’ve heard about?

A. Put simply, the agreement establishes safeguards to protect health information. It also stipulates that business associates and their vendors (and their vendors’ vendors, etc.) enter into contracts when sharing protected information. And since the

Create your information security program: Pennsylvania – www.iabgroup.com/pa/ privacy_requirements Maryland – www.iabgroup.com/md/ privacy_requirements Delaware – www.iabgroup.com/de/ privacy_requirements Note: If you sell Health insurance (even just one policy), you’ll need a more

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Digital copiers: the weak link An unexpected source of data breach is that seemingly innocuous office copier. Digital copiers store a copy of every document that is copied, scanned or e-mailed. And that could mean trouble when the copier leaves your office. CBS News last spring ran a story about digital copiers that were purchased or leased and then replaced or discarded without wiping the hard drive. Personally identifiable information, including social security numbers and protected health information, were available within hours of purchase on the second-hand market. The lesson: Make sure the hard drive is wiped before leased digital copiers leave the premises. And before replacing owned copiers, contact the manufacturer to secure or remove the hard drive before you dispose of the equipment. Last but not least, make these processes part of your information security program.


AGENCY MANAGEMENT

Securing the e-mail trail E-mail contents and attachments are free game as they travel the Internet. Think of an open postcard sent through the mail, where anyone can read it en route. If an unsecured e-mail is intercepted and it contains sensitive client information, the agency would be on the hook for a security breach. Not to mention a damaged reputation. Transport layer security (TLS) is an industry standard protocol to protect e-mails sent via the Internet. It’s built into most e-mail gateways (Microsoft Exchange, IBM Lotus Notes) and is activated with a click of the mouse. The sender and receiver will notice nothing.

data-breach rule went into effect, the agreement also gives a timeframe for the business associate to notify a covered entity of a breach. Your carrier, the covered entity, likely asked you to sign a business-associate agreement. And carriers on top of their game already sent out amended agreements to reflect the recent data-breach and Security Rule changes.

TLS operates independently. When an e-mail is sent from one domain (an agent, for example) to another (a carrier), the servers that control transmission negotiate to determine if TLS is enabled. If it is, the servers transmit the e-mail within an impermeable tunnel. Message content and attachments are protected.

Your client also is considered a covered entity and should have sent you an amended business-associate agreement, too. If not, give them a gentle reminder. (The law includes a whistle-blower provision that requires you to report violations … such as failure to provide a business-associate agreement.)

Source: Agents Council for Technology

Q. How do I handle a

Note: TLS is particularly well suited for e-mails between agencies and carriers. What about clients? When it comes to those that are covered entities under HIPAA, e-mail security must be addressed by discipline (absolutely no PHI sent via e-mail) or by encryption. TLS may or may not be an option, depending on your client and your operations.

Learn more: Pennsylvania – www.iabgroup.com/pa/ technology/TLS Maryland – www.iabgroup.com/md/ technology/TLS Delaware – www.iabgroup.com/de/ technology/TLS

breach?

A. This is serious stuff. HIPAA mandates notification by the covered entity within 60 days of discovering a breach of unsecured PHI that compromises the information’s security. All those affected must be notified. So must prominent media outlets if over 500 people in the same state or jurisdiction are impacted. If covered entities have 60 days for notification, guess what? Business associates have less time (anywhere between one and 59 days) to notify their covered entity. So if you

[ 18 ]

discover a breach in your agency, check your agreement ASAP for a timeline. IA&B’s Web site details the scenarios that don’t trigger notification and, worst case scenario, the specific steps to take if a breach occurs. Read up on HIPAA’s data-breach provisions: Pennsylvania – www.iabgroup.com/pa/hipaa/ breach_rule Maryland – www.iabgroup.com/md/hipaa/ breach_rule Delaware – www.iabgroup.com/de/hipaa/ breach_rule Note: Independently from HIPAA, all agencies are affected by state data-breach laws, which address identification and client notification of breaches. Learn more about state laws: Pennsylvania – www.iabgroup.com/pa/ privacy/breach Maryland – www.iabgroup.com/md/ privacy/breach Delaware – www.iabgroup.com/de/ privacy/breach

SECURITY

STANDARDS

Insurers and employers considered covered entities under HIPAA have always had to comply with strict security standards. As of February 2010,


Primary Agent | August 2010

business associates – a term that includes most agencies with Health policies – must play by the same rules, specifically the Security Rule.

Member profile: The John Yurconic Agency tackles new HIPAA mandates

Curious if your agency is considered a business associate (or perhaps a covered entity)? Read the criteria in the previous section on databreach notification.

The mid-sized agency, which handles Life and Health as well as Property and Casualty, geared up for the change months in advance. They made modifications to their agency management software, restricted access to information and began utilizing limited data sets.

Q. What does the Security Rule entail?

A. Business associates must comply with the following: w Limit “the amount of protected health information they access, receive or process,” w Review security controls and add encryption where possible, w Develop an incidentresponse plan and w Train employees on how to handle health information and how to carry out the incidentresponse plan. What’s more, business associates are bound by a whistle-blower rule. If a covered entity isn’t compliant, they must terminate the contract or report the breach. (The rule goes both ways: Covered entities must address business associates’ security slip-ups.) The Security Rule is no joke. Business associates are now subject to the same civil and criminal penalties as covered entities.

John Yurconic, left, and Tom Thorne are up to speed on privacy compliance.

Much like Mother Nature did with snow, new federal regulations buried Health producers in privacy responsibilities last February. Obligations once reserved for covered entities (typically, insurance carriers) under HIPAA were expanded to encompass business associates (typically, agents), thanks to the Security Rule. Tom Thorne, of the Allentown, Pa.based John Yurconic Agency, knew a bit about HIPAA thanks to his background working for a health insurance carrier. So when he heard about the Security Rule, he jumped at the chance to help the agency prepare. “We were always very focused on protecting members’ privacy,” he says, “but this brought it up to a whole new level. We became directly accountable for the protection of information.”

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“While some IT requirements may be expensive,” says Thorne of the agency’s adjustments, “as far as nuts and bolts and the cautious and proper procedures on releasing and managing data, it’s not expensive. It’s just common sense.” Ready by February 2010, the John Yurconic Agency was no doubt ahead of the game. And now, with the Security Rule firmly in place, agencies that have yet to comply must follow suit. “I know some agencies haven’t taken it seriously, but I urge them to be cautious with that,” he warns. “Enforcement is probably not something that will come up too often, but when it does, it could be catastrophic for a small agency.” Read more about security standards on page 18.


AGENCY MANAGEMENT

Q. How do I comply? A. Have no fear. IA&B walks members through the daunting project with a series of online assessments – administrative, physical and technical safeguards.

Snapshot of 2009 data breaches Who is behind data breaches? 74% resulted from external sources 20% were caused by insiders 32% implicated business partners

Each assessment labels individual standards as required or addressable. As the title suggests, covered entities and business associates must comply with required standards. Addressable standards require compliance if it is reasonable and appropriate based upon your agency. For the addressable standards that you choose not to implement, you’ll need to document why and implement an alternative measure.

How do breaches occur? 67% were aided by significant errors

Once the assessments are complete, formalize and implement the policies and procedures, and then set a reminder to review the policies. Access the Security Rule assessments: Pennsylvania – www.iabgroup.com/pa/hipaa/ security_rule Maryland – www.iabgroup.com/md/hipaa/ security_rule Delaware – www.iabgroup.com/de/hipaa/ security_rule Note: The Security Rule applies only to electronic information. The HIPAA databreach notification mandates, on the other hand, apply to electronic, written and spoken information.

64% resulted from hacking

Data security 101

What do they have in common? 83% of attacks were not highly difficult

Learn more about data security at IA&B’s Executive Management Conference on Oct. 26-27 in Lancaster, Pa.

87% were considered avoidable through simple or intermediate controls 99.9% of records were compromised from servers and applications Where should mitigation efforts be focused? 3 Ensure essential controls are met.

The technology-themed event will bring together industry experts to cover: w Agency management systems w Data security w Electronic document management w Social networking w Top technology tips

3 Find, track and assess data. 3 Collect and monitor event logs. 3 Audit user accounts and credentials. 3 Test and review Web applications. Source: Verizon Business Investigative Response Team

Look for more information in Agent Headlines and at iabgroup.com [ 20 ]


Primary Agent | August 2010

DISPOSAL

OF CUSTOMER FILES Trashing consumer reports — in the insurance world, think: credit or insurance scores, MVRs and C.L.U.E. reports — is governed by the Fair and Accurate Credit Transactions Act (FACTA) and enforced by the FTC. Agencies must destroy the documents using “reasonable and appropriate” measures.

Q. What are “reasonable and appropriate” ways to destroy consumer reports?

A. There are a few methods that meet the FTC’s demands: w Shredding, burning or pulverizing papers, w Destroying or erasing electronic files (watch out: simply deleting files is not sufficient) and w Conducting due diligence and hiring a documentdestruction contractor. Beyond consumer reports, remember that any sensitive information, such as social security numbers, must be protected. Detail it all in your agency’s written information security policy. (See page 16 for more on creating an information security policy.)

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Private eyes are watching you Think no one will notice a privacy transgression? So did Robert Warren Spruill when he dumped over 1,000 insurance records and documents into an unlocked dumpster. A bystander saw the activity, became suspicious and alerted the media. In the end, Spruill was down $11,000 thanks to an Oregon Department of Consumer and Business Services fine.


Platinum Profile 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.

FEATURED PARTNER ACUITY PRESIDENT & CHIEF EXECUTIVE OFFICER Ben Salzmann COMPANY LOCATION\S Sheboygan, WI A.M. BEST RATING “A+” (Superior)

Acuity President & CEO, Ben Salzmann

A

CUITY believes insurance should be fun. Despite the apparent insanity as seen through its crazy promotional materials, ACUITY takes a very serious approach to the business of insurance — and does it solely through professional independent agents.

“ACUITY is focused on being the ‘go-to’ company for agents,” explains Wally Waldhart, Vice President Sales and Communications. That focus has led to ACUITY’s commitment to developing and investing in ease-of-business technology aimed squarely at its agent partners. ACUITY provides real-time, online policy quotation and application and automatically issues and delivers policies to agents within seconds. ACUITY’s ongoing leadership has helped the company

earn more technology awards from ACORD than any other carrier in the nation over the past 10 years and a spot on the InformationWeek 500 for the past six.

as one of the top 50 best-run insurers nationwide. ACUITY writes $750 million in premium through over 900 independent agencies and manages over $2 billion in assets.

ACUITY also offers a wide range of products in personal and commercial lines, a broad appetite, and expert value-added services in key areas such as loss control and managed care. The company balances competitive rates and pricing flexibility with underwriting discipline and considers accounts of virtually any size.

Perhaps combining fun and pragmatism to the business of insurance is the reason ACUITY is the only company across all industries to be named one of the top five Best Places to Work in each of the last six years. According to Ben Salzmann – President and CEO, “Our voluntary employee turnover rate of less than 1 percent clearly contributes to consistently outperforming the industry over the past decade. We are incredibly excited about what we bring to the table, as well as the tremendous potential in Pennsylvania.”

The carrier — rated A+ by both A.M. Best and Standard & Poor’s — has consistently outperformed the industry in terms of profitability and surplus growth over the past decade and has been named by Ward Financial Group for 10 straight years


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.

PLATINUM LEVEL

BRONZE LEVEL

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

Aegis Security Insurance Co

GOLD LEVEL DO YOU SEE YOUR NAME? To become an IA&B Partner, choose the sponsorship package that matches your commitment of support. Contact the Member Sales Center at (800) 998-9644, (717) 795-9100 or visit us online at www.iabgroup.com to get started.

Agency Insurance Company Auto-Owners Insurance Company Briar Creek Mutual Insurance Company Builders Insurance Group Chubb Group of Insurance Companies Encompass Insurance First General Services Foremost Insurance Group Goodville Mutual Casualty Company Grange Insurance Companies Hanover Fire & Casualty Insurance Company Insurance Alliance of Central PA Inc Insurance Placement Facility of PA Keystone Insurers Group Inc

Allied Insurance MMG Insurance Progressive

Lebanon Mutual Insurance Company

SILVER LEVEL

Mercury Casualty

American Mining Insurance Co Cumberland Insurance Group Donegal Insurance Group Frederick Mutual Insurance Co Harford Mutual Insurance Co Juniata Mutual Insurance Co PSBA Insurance Trust The Motorists Insurance Group Westfield Insurance Zenith Insurance

Penn Millers Insurance Company

Mercer Insurance Group Merchants Insurance Group

Penn PRIME Municipal Insurance Reamstown Mutual Insurance Company Rockwood Casualty Insurance State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Mutual Service Office Inc Tuscarora Wayne Insurance Company

Primary Agent August 2010


Primary Agent | August 2010

Technology U P DATE

CONSUMER SHOPPING FOR AUTO INSURANCE GROWS ONLINE How independent agents can benefit from active Web presence

RON BERG Ron Berg is senior technology research specialist within the Agency Services & Technology unit of MetLife Auto & Home (www.metlife.com), based in Warwick, R.I. Ron can be reached at rberg1@metlife.com. He produced this article for ACT; for information about ACT, please visit www.iiaba.net/act. This article reflects the views of the author and should not be construed as an official statement by ACT, nor of MetLife Auto & Home, nor should it be interpreted as MetLife Auto & Home’s endorsement of comScore or the report.

ComScore’s latest assessment of the online auto insurance landscape reflects continued growth in quoting and purchasing auto insurance online (2010 comScore Online Auto Insurance Report). Most consumers still buy off line, however, and want to deal with a person. Independent agents can continue to succeed in this new environment if they build their own online presence with an engaging Web site, use social media to develop “fans,” incorporate online

consumer quoting coupled with rapid follow-up and demonstrate they add value to the process. It is important for independent agents to be fully aware of the trends revealed in comScore’s latest research as they develop their online strategies, and this article seeks to present those highlights. The 58-page report covers trends regarding online quoting and purchasing, [ 24 ]

information about customer preferences, agent versus direct-channel purchasing, as well as aspects of customer self-servicing and loyalty. For this survey, comScore relied upon input from 1 million U.S.-based consumers, as well as insights from a panel of over 2,000 U.S. online consumers. Online quoting Online quoting continues to be the first stop for consumers researching auto insurance. Online quoting


increased 21 percent from the previous year’s survey to a total of 38.8 million quotes submitted online. In 2009, 54 percent of all consumers went online to get auto insurance quotes, and 72 percent have gone online to find auto insurance information at some point in their lives.

UnderwritingYour

————————————— Savvy agents can start to divert a lot of this online business by using Internet tools to duplicate the speed and convenience the direct carriers are providing.

Success

SM

————————————— The economy continues to be a driver in shopping around for insurance. Twenty-one percent of consumers reported they are “more likely� to shop around for insurance due to the economic conditions. We see this play out online with the majority (83 percent) going directly to insurer Web sites, versus only 17 percent going to aggregators and online agencies (Insurance.com, NetQuote, etc.). Of the quotes done on carrier sites, the usual “direct� suspects lead the pack: GEICO (28.8 percent of all quotes), Progressive Direct (28 percent) and Esurance (13.8 percent). Independent agents have a say in all this, as a full 22 percent of consumers went to a multiple-carrier agent. This is a decrease of 3 percent from the previous year, so the focus on improving agent Web site functionality becomes critical – with the inclusion of Web site comparative rating tools, as well as direct-tocarrier quoting links offered by carriers as agency Web site add-ons. [ 25 ]

GIVING PROPERTY OWNERS CONFIDENCE TO BUILD UPON. Years ago, Mike Serluco had a national company insuring his growing property development business. “But they go the way the wind blows,â€? he says. Then Independent Agent Don Kingsbury, of Christian Baker Insurance Agency, Lemoyne, suggested a local insurer with a stronger commitment to building owners – Millers. “It’s very, very important for an investor to have an insurance partner, and that’s what I call Millers,â€? Mike says. With the few insurance claims he’s had, “Bing, bam, boom – it’s done and taken care of.â€? Adds Kingsbury, “With Millers, they actually listen to what you have to say. And not only do they know this industry, they offer package policies at a good price, and they back it up with excellent claims service.â€? Smart business people, independent agents and Millers...truly partners in protection. .*--&34.656"-(3061t805 N. Front St., Harrisburg, PA 17108  'BYtNJMMFSTJOTVSBODFDPN *OTVSJOHZPVSCVTJOFTTUISPVHI.JMMFST$BQJUBM*OTVSBODF$PNQBOZ *OTVSJOH-JHIU.BOVGBDUVSJOHt0GGJDFTt4NBMM3FTUBVSBOUTt3FUBJM4UPSFT 4USJQ.BMMTt"QBSUNFOU#VJMEJOHT


TECHNOLOGY UPDATE

When it comes to consumer attitudes on purchasing, independent agents still have an edge.

visit with was third at 13 percent, after “protecting my assets/possessions.”

Online purchasing A record 2.8 million policies were purchased online in 2009 – an increase of 22 percent from the previous year. For some perspective, only 700,000 policies were purchased online in 2004.

Self-servicing Retaining customers is crucial for both agents and insurers. One of the most important aspects is payments. Fifty-five percent of customers pay for their bills on a monthly basis. While a little over one-quarter of all customers pay their premiums in full up front to obtain discounts, there is a large opportunity to provide ease of use functionality to the customer who makes monthly payments, by providing this functionality through the agent’s Web site (as well as at the carrier’s site) – to keep the agent’s Web site in the forefront of the customer’s mind.

The opportunity for independent agents lies with assisting the consumer in understanding his/her insurance needs. Seventy-eight percent of consumers are still purchasing offline, and by far the largest reason is that they want to speak with someone who can guide them. Seventy-one percent listed this as their primary reason for purchasing offline. The key is making it easy for the consumer to find agents on the Web, as well as connecting the consumer to the agency via technology tools like online quoting on the agency Web site, live chat, online forms requesting agent call-back and using social media. Additionally, more consumers are able to sign all needed policy documents online. A full 82 percent reported using online tools such as electronic signature in 2009. Overall, consumers are expecting easy-to-use functionality and rapid service. Agency carriers are producing better long-term retention. Thirty-nine percent of all shoppers switched their auto insurance in 2009. However, State Farm and Nationwide had the highest retention of those consumers staying with their insurer five years or more. GEICO and Progressive had the lowest five-year retention. While price was the biggest driver for switching insurers (49 percent), having a real person with whom the insured can

Many carriers provide eService links that can be placed on their agency’s Web site, allowing clients to go the agency Web site first and then link to the carrier’s sign-in and make a payment function. In total, 34 percent of customers pay their bills online – either at the insurance carrier’s eService Web site or by online banking. Online activity varies with age For those shopping online for Auto insurance, the biggest increases were between ages 18-24 and 25-34. All age ranges over 35 decreased. Twenty-three percent of 18-24 year olds purchased their policies online in 2009, compared to only 9 percent for 55+. Percentages purchasing online decreased for each range: 18-24: 23 percent 25-34: 21 percent [ 26 ]

35-44: 18 percent 45-54: 15 percent 55+: 9 percent Conversely, the percentage of those purchasing through an agent rises from 60 to 70 percent as age ranges increase. Buying with or without an agent The top four reasons consumers give to have bought through an agent include: wanted a real person to visit with or call (38 percent); have always used an agent (34 percent); wanted local agent from one company who could help with all insurance needs (26 percent); agent quoted best price (25 percent). The top four reasons consumers chose not to go through an agent in making their purchase were: more convenient to use Web site or 24-hour toll-free number (27 percent); faster to purchase online or through toll-free number (23 percent); got a quote with a toll-free number and decided to purchase (23 percent); prefer Web site or toll-free number (16 percent). Agents can employ available technology tools to offer the same convenience and speed as the direct carriers, but add on top of that the personal advice and local presence they offer. Seventeen percent of respondents indicate they purchased a policy through an affiliation with an association or a group. Thirty-one percent indicated they would definitely purchase “pay-as-youdrive” insurance – more evidence that consumers are looking for discounts wherever possible.


Where are the opportunities? The majority of consumers are going online to research auto insurance premiums. Agent Web sites can attract a larger portion of those by improving site functionality with quoting and making their site easy to find with social networking and SEO (search engine optimization). Twentytwo percent of those in the comScore survey went to local agents to get quotes. Twenty-six percent of consumers looked online for a local agent, either on a search site or on a carrier’s Web site. Seventy-eight percent are still purchasing offline. Agents can continue to provide a crucial link in helping consumers find a great price matched with the coverage they need. While the direct giants like GEICO and Progressive Direct still get the most quotes online, agent-based

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

insurers have the lead in total premiums written. Consumers still put more faith in agent-based insurers, and agent-based insurers have the best retention versus direct writers. Twenty-five percent of the respondents have individual Auto and Homeowners’ or Renters insurance with different carriers. There is a significant opportunity here if the agent can attract more consumers to educate them on the price and flexibility advantages of writing all of their insurance needs with one carrier. And 54 percent said they have additional insurance policies outside of Auto and Homeowners, primarily Life. Thirty-four percent pay their bills online. Links to carriers’ eService sites placed on agency Web sites are one way to keep the clients in touch with agency Web sites. In addition, 82 percent of online purchasers were

able to sign all policy documents online at the time of purchase, which is up from 76 percent in 2009. Carriers and agents should work together to offer this same eSignature capability for online forms. While the clear trend is toward more online activity without the involvement of an agent, savvy agents can start to divert a lot of this online business by using Internet tools to duplicate the speed and convenience the direct carriers are providing. Agents can now optimize their Web sites with online quoting and eServicing capabilities and links, as well as attract more traffic using social networking. Including customer selfservice functions on agency Web sites not only provides more customer preference options, but it keeps the agency Web site in the customer’s field of view.


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End-of-summer blues? Then get a chuckle from these nightmarish travel insurance claims — both of which were paid.

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Ad Index ACUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Absolute Risk Placement . . . . . . . . . . . . . . . . . .1 Cumberland Insurance Group . . . . . . . . . . . . . .5 EMC Insurance Co . . . . . . . . . . . . . . . . . . . . . .IFC

Monkey madness A couple vacationing in Malaysia left their chalet window open when they went for a stroll. They returned to find that monkeys had stolen their clothes ... and strewn them throughout the adjacent jungle.

Sick of the sea A gentleman suffering from seasickness bent over a cruise ship balcony to get sick. Unfortunately, a bout with nausea wasn’t the only thing he lost. His false teeth fell out and splashed into a watery grave. Source: http://ezinearticles.com/?expert=Josh_I_Harrison

Goodville Mutual Cas Co . . . . . . . . . . . . . . . . .27 IA&B Partners Program . . . . . . . . . . . . . . . . . . .23 IA&B Series Ads . . . . . . . . . . . . . . . . . . . . .13, IBC Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC Miller Mutual Group . . . . . . . . . . . . . . . . . . . . .25 Mutual Benefit Group . . . . . . . . . . . . . . . . . . . .27 Penn National Insurance . . . . . . . . . . . . . . . . .21 Preferred Property Program . . . . . . . . . . . . . . . .9 Tri-State General Ins Ag . . . . . . . . . . . . . . . . .IBC

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----------------------------------------------------------------———————------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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Primary Agent - August 2010 - PA Edition  

Primary Agent - August 2010 - PA Edition