Primary Agent - January 2012 - DE Edition

DELAWARE

ALSO INTHISISSUE: _________________ Health care reform in 2012

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Contents PRIMARY AGENT MAGAZINE

Putting the freeze on LTC objections

16

The objections to LTC insurance are numerous, but so are the reasons for securing it. Check out the new LTC riders that offer client appeal and producer approval.

Page 10

Health care reform in 2012 These days the only constant is change for health care. Read up on a few of the ways the insurance industry will be affected by health care reform legislation in 2012.

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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.

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Chair of the Board’s Message Member FAQ State News Coverage Corner H.R. Headquarters Glance at Events

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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 # 2012-1) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2012. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

Board of Directors

Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P

Officers Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P Chair of the Board West Chester, Pa. Norman F. Basso, CPCU Vice Chair of the Board York, Pa.

Chair of the Board’s M

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David Rosenkilde, CIC Immediate Past Chair of the Board Reisterstown, Md.

New year, new start

Members Joyce M. Bailey, CIC, CRM, CPIW Newark, Del. Henry “Butch” Bradley, Jr. Forest Hill, Md. Timothy P. Burris Mifflintown, Pa.

Welcome to 2012 — a fresh start, a clean slate, a new chance for you to achieve your goals. That’s what I love about the new year. Even when times are tough, it offers you a chance to brush yourself off and get back on the horse.

It’s no secret that the independent agent community is facing its fair share of challenges: the lingering soft market, carriers’ increasing demands and, perhaps most concerning, direct writers’ deep pockets and visible advertising presence. But there’s no time like the present to push ahead and persevere.

N. Lee Dotson, CIC, AAI Wilmington, Del. John L. Frankenfield Telford, Pa. G. Greg Gunn, CIC Lemoyne, Pa. John B. Hollister Milford, Pa. Diana M. Hornung Hanby, ACSR Wilmington, Del. Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, Pa. +

Robert S. Klinger, LUTCF, CPIA Germantown, Md. Douglas A. Loesel, CPCU Erie, Pa. Michael F. McGroarty Sr. Pittsburgh, Pa. Ann Gallen Moll, CIC Reading, Pa. April E. Ressler, CIC Altoona, Pa.

That’s just the attitude the IA&B Boards of Directors has taken. While at times it seems like an uphill battle, we are determined to fortify our members, fight back against the competition and win the independent agency system’s viability.

Over the next year IA&B will provide you with practical guidance for marketing your agency and for branding the independent agency system as a whole. I encourage you to take advantage of these and additional association offerings and to make 2012 your best year yet.

Wishing you a happy new year and a prosperous year ahead, Bob

Scott C. Rogers, CPIA* York, Pa. David B. Wasson Sr., CIC State College, Pa. Lawrence A. Wilson, CIC, CPIA, CPCU, ARM** New Castle, Del.

Driving members to distinction.

* Pa. IIABA National Director ** Del. IIABA National Director + Md. PIA National Director

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Member FAQ QUESTION:

We were recently told that the use of signature flags, highlighters or

x-marks to identify where the client is supposed to sign could create an E&O issue.

Is it true? If we can’t do that, what can we do?

ANSWER: The use of signature flags, or “X” designations, is not a violation of law, and is not, per se, an E&O “no no.”

However, by using a “sign here” flag, the producer is clearly opening himself up to a potential claim by his client, that he was misled into signing something that he did not intend to sign, or into selecting a limit that he did not intend to select.

If an agency insists on using a “sign here” flag, then producers need to take every precaution to insure that the line they are asking the client to sign is the correct line, and perhaps also include in the cover letter a request to the client to double-check the selections that are being made by the client.

About pre-filled applications, generally The signature flags issue begs the more general question of how a producer should handle an application that is essentially pre-filled, or completed by the agency, and then sent to the client for execution.

Are there other pitfalls?

On a purely customer service level, this practice is common. Agents often know their clients well, and are able to complete a majority of the information in an application without the client’s help. In addition, an agency often has a prior application in its file from which the agent can copy the relevant information onto a new application. Doing this saves the client a lot of time and hassle in dealing with the completion of an application.

However, when an agent decides to complete an application on behalf of his client, he should do the following: ◗ make sure the information is correct. When in doubt, call the client to verify; ◗ request that the client review the application and verify the information it contains; ◗ make the client sign the application.

Don’t EVER sign for the client, and verify (if possible) that the client in fact is the one who signed the application. As an example, if the application is signed by an unauthorized person (i.e. office worker, spouse, etc.), the carrier might get stuck paying for the loss (despite material misrepresentations in the application), and look to the agency for indemnification.

Finally, even though a producer completes an application, when the client signs the application, he or she is attesting to the accuracy and truth of the information in the application. This is a defense that will be used on E&O claims.

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!

State News Primary Agent | January 2012

Kicking off the 2012 legislative session The new year marks the start of a new legislative session. The state legislature faces a full plate, to include several hot topics for insurance producers. But DAIAB members, take heart: Your association is poised to hit the ground running. ◗ Certificates of insurance – DAIAB will work with the Insurance Department to issue a bulletin regarding certificates of insurance and unlawful alterations. After the bulletin is in place, DAIAB will work toward introducing model legislation to address certificates of insurance abuse. ◗ State health exchange – DAIAB continues to have a presence at the Delaware Health Care Commission meetings as its members study ways to implement a state health exchange. DAIAB will remain involved with the Department of Insurance and the legislature to advocate for the role of agents and brokers in the health exchange.

Help DAIAB help you in Dover. Your monetary support of AgentPAC helps DAIAB to educate and influence legislators on the issues most important to you.

Read more and contribute: www.iabgroup.com/AgentPAC

DCRB’s Bruce Decker discusses the state’s WC market at a late-fall DAIAB meeting.

WC rates tipping in 2012 The Delaware workers' compensation (WC) rates will seesaw in the coming months in an effort to maintain market stability. As reported in Agent Headlines, the Department of Insurance (DOI) approved double-digit increases for WC policies effective on a new and renewal basis as of Dec. 1, 2011.

Specifically, the market loss costs show average increases of: ◗ 12.61 percent in the voluntary market ◗ 18.26 percent in the residual market These numbers take into account the impact of the July 2009 Chancery Court decision.

DAIAB members voiced concerns about market stability following three consecutive years of significant rate

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decreases. DAIAB took these to the DOI and the DCRB and maintained dialogue with the entities, most recently hosting the DCRB’s Bruce Decker at a Nov. 16 membership meeting.

Review the filing: http://www.dcrb.com/dcrb/ circulars/d_pdf/de872.pdf

DOI addresses treatment of civil unions Same-sex partners should receive the same insurance benefits as married spouses as of Jan. 1. The Department of Insurance (DOI) issued Bulletin No. 46 to clarify the effects of the Civil Union and Equality Act of 2011 on the industry.

(A regulation will follow but was not available as of press time.)

The law affects same-sex partners who establish a civil union. According to the DOI, companies will not be required to file amended forms but “existing and newly issued policies must be administered to provide parties to a civil union and their dependent children with identical benefits, rights and protections as those afforded to married spouses and their dependent children.”

Read Bulletin No. 46 by visiting the DOI website: www.delawareinsurance.gov

State receives federal funding to establish health exchange

January membership meeting — WC with Jerry Milton

Delaware will receive a boost from the federal government to establish its state-run health insurance exchange.

The U.S. Department of Health and Human Services granted $3.4 million to the state for the following activities:

Members can quell their hunger and their thirst for knowledge Wednesday, Jan. 18. DAIAB will host a breakfast meeting, featuring Jerry Milton and his Workers’ Compensation – Who and What It Covers presentation.

◗ Developing a rules-based eligibility mechanism to streamline enrollment into Medicaid, Delaware Healthy Children (the state's children’s health insurance program) and the exchange ◗ Preparing business and computer systems for non-eligibility related functions of the exchange, such as price comparison ◗ Creating a sustainability plan for the exchange moving forward ◗ Engaging stakeholders ◗ Assessing the impact of regulatory changes on the current marketplace Delaware's application for the funding projected the expansion of Medicaid and the availability of subsidized commercial health insurance through the exchange to help cover the state's nearly 100,000 uninsured.

Jerry will answer questions such as: ◗ Is workers compensation the exclusive remedy between any employer and employee for work-related injuries? ◗ When can an employee sue the employer? ◗ What benefits are payable? ◗ Can an employer collect the benefits payable in another state? ◗ How does the Delaware workers’ comp law address: covered employments, independent contractors, injuries not covered, suits against third parties, waiver of subrogation, physician choice and employment of minors?

The program has been submitted for three general CE credits.

Read more and register: www.iabgroup.com/DEmeetings

DAIAB will continue to maintain a presence at Delaware Health Care Commission meetings and to monitor the effect of the federal health care law on the state.

Company Appreciation Night Save the date to celebrate DAIAB’s long-standing relationship with its partners.

Where: Hilton Wilmington/Christiana

When: March 21, 6 p.m.

Mingle with old and new contacts and make the most of your agency-partner relationships.

Coverage Primary Agent | January 2012

CORNER

WHAT IF WE WROTE THE CONTRACTS?

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,

indemnitee. The indemnitee operates from a position of power, and the indemnitor operates from a position of weakness.

Two parties get together.

They want to do business – build something, lease something, sell something – you name it. There will be a contract; you can bet on that.

The contract will spell out the terms and conditions of their agreement and the costs of what is to be built, leased or sold.

The indemnitee will call all of the shots, make no mistake about that. The contract will be drawn up by the indemnitee’s attorney. That attorney will require the indemnitor to indemnify, save and hold harmless the indemnitee for all forms of malice, malcontent and evil.

CIC and continuing education programs.

That contract also will contain two sections that we insurance people are all too familiar with: the indemnification provisions and the insurance requirements. The contract not only obligates the parties to do or not do something, it also transfers the obligation to pay for the financial consequences of certain losses from one party (indemnitee) to the other party (indemnitor).

The indemnitee does not transfer its liabilities — it transfers the obligation to pay for certain liabilities. If the indemnitor cannot pay for these liabilities, the indemnitee will be financially responsible. Therefore the indemnitee will require the indemnitor to purchase and maintain certain policies of insurance and provide proof of the required insurance.

Insurance may pay for some, or all, of the obligations assumed in the indemnity agreement. However, the

Who will be the indemnitee and the indemnitor is determined when the contract is negotiated. The party holding the most power will be the

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insurance is completely independent of the obligation to indemnify.

I know absolutely nothing about the law. I’m an insurance guy. Attorneys who draw up these contracts, for the most part, know absolutely nothing about insurance. And that is the problem. All too often attorneys require an indemnitor to indemnify the indemnitee for losses, costs and expenses that can’t be insured. And then to compound the problem, they include insurance requirements that can’t be satisfied.

If we insurance folks had any input, maybe we could resolve some of the conflicts that exist between the indemnification provisions and the insurance requirements. Here are a few thoughts: ◗ Limit the indemnity to loss attributable to bodily injury, sickness, disease

or death, or to injury to or destruction of tangible property including loss of use. (Insurance does not cover indemnification for “any and all injuries and damages.”) ◗ Do not require indemnification for consequential damages such as loss of use, fines, penalties, etc.

(Again, those expenses are not covered by the indemnitor’s insurance.) ◗ Indemnification should be limited to losses arising out of any act or omission of the indemnitor or its employees. (I know a few states allow the indemnitee to make the indemnitor financially responsible for the indemnitee’s sole negligence. But most of our additional insured endorsements require that the loss arise out of an act or omission of the named insured (indemnitor) or its employees, thereby excluding sole negligence coverage for the additional insured (indemnitee).

In addition, many of our insurers are attaching the Amendment Of Insured Contract Definition endorsement (CG 24 26) which excludes coverage if the indemnitee is solely negligent. ◗ Do not ask for waivers of subrogation on the Commercial General Liability and Business Auto policies. They are not needed. Both policies permit the insured to waive recovery prior to the loss. However, the Workers’ Compensation And Employers Liability policy does not. ◗ If the indemnitor is a contractor, do not ask for the Additional Insured – Owners, Lessees Or Contractors endorsement (CG 20 10 Edition 11/85). Most

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of our insurers will not write.

Accept the current CG 20 10 plus the CG 20 37, which covers completed operations. ◗ Do not ask to be added as an additional insured on the Business Auto Policy. It’s not needed.

The BAP automatically covers anyone liable for the conduct of an “insured,” to the extent of that liability.

renewed. That is not required in the policy. Therefore, we have no obligation to notify the certificate holder, unless the policy has been endorsed.

Oh well, wishful thinking! But I think this would be a pretty good start.

I’m sure y’all can add to this list.

Y’all take care!

◗ Do not ask to be added as an additional insured on the Workers’ Compensation And Employers Liability policy. It ain’t going to happen! ◗ As a certificate holder, do not ask to be notified if the insured’s policies are cancelled or non-

At Harford Mutual, we’re committed to being here for our independent agents and policyholders. Accessible. Experienced. Accountable.

Responsive. That’s Harford Mutual. That’s what mutual success is all about.

Learn more about opportunities for mutual success with Harford Mutual at harfordmutual.com.

H.R.

Primary Agent | January 2012

HEADQUARTERS

JURY DUTY: WHAT IS MY RESPONSIBILITY?

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.

Many employers want to support employees who fulfill their civic responsibility and provide some form of compensation for wages lost while on jury duty. Some allow the use of accrued paid time off; others adopt a separate jury duty policy that provides additional paid time off while serving. For such policies, limits of three to five (or more) days of pay are common, as this period covers most types of service. If the jury duty continues after the limits of the policy, employers often allow employees to use their accrued personal time off.

I recently had the opportunity to talk with an agency owner who had an employee called to jury duty. The question was whether there is a legal requirement to continue the employee’s pay while he serves the court in that capacity. To complicate the scenario, this employee may be involved on a jury over a period of several months.

While there is no legal requirement for employers to continue pay for jury duty, employees are afforded certain protection while they serve. The Jury System Improvement Act of 1978 protects employees from adverse employment decisions as a result of performing their civic service. In other words, employees who serve on jury duty are to be treated as any other regularly employed person. In addition, Delaware, Maryland and Pennsylvania have similar laws that follow the federal act, and none require continuation of pay.

Jurors are entitled to the stipend received from the court when they serve.

Some employer policies require that their pay continuance for jury duty be offset by the stipend amount, and that practice is permissible under federal and state law. While this offset is permissible, you may chose not to incorporate it into your policy after you consider

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your administrative time to process the adjustment in relation to the daily stipend paid to jurors and the expected frequency that your employees may be called to serve.

If you adopt a jury duty policy, caution should be taken with respect to exempt employees: They cannot be docked pay for a partial week of work.

Exempt employees may substitute the jury duty time with other bona fide paid time off programs if your policy permits it. But if your policy does not, the exempt employee must receive his full weekly salary for a partial week of work. On the other hand, an exempt employee who is absent from work for an entire week is not entitled to receive pay.

HR Solution© offers a sample jury duty policy for your consideration. Sign in at www.iabgroup.com/HR. From there, go to page 52 of the Associate Handbook template.

Glance at Events JANUARY & FEBRUARY CALENDAR Date

Topic

Location

JANUARY 2012 18

Workers' Compensation—Who and What It Covers

Newark/Wilmington, Del.

25

CISR—Agency Operations Course

York, Pa.

26

CISR—William T. Hold Seminar

Philadelphia, Pa.

31

CISR—Personal Auto Course

Pittsburgh, Pa.

FEBRUARY 2012 1

CISR—William T. Hold Seminar

Salisbury, Md.

2

Understanding Cyber Liability Exposures and Solutions Seminar

Pittsburgh, Pa.

7

CISR—Personal Auto Course

Philadelphia, Pa.

7-9

P&C Licensing Study Course

Mechanicsburg, Pa.

14

CISR—William T. Hold Seminar

Allentown, Pa.

CISR—Personal Auto Course

Mechanicsburg, Pa.

CISR—William T. Hold Seminar

York, Pa.

CISR—Personal Auto Course

Reading, Pa.

16

CISR—Personal Auto Course

Wilkes-Barre, Pa.

20-23

CIC—Personal Lines Institute

Harrisburg, Pa.

21-23

L&H Licensing Study Course

Philadelphia, Pa.

21

Understanding Cyber Liability Exposures and Solutions Seminar

Mechanicsburg, Pa.

CISR—Personal Auto Course

Allentown, Pa.

Understanding Cyber Liability Exposures and Solutions Seminar

Allentown, Pa.

CISR—Personal Auto Course

York, Pa.

28

CISR—Personal Auto Course

Frederick, Md.

29

CISR—Personal Auto Course

Wilmington, Del.

CISR—William T. Hold Seminar

Pittsburgh, Pa.

15

22

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COVERAGES

Putting the freeze on LTC objections How to warm up customers to the idea with riders

The objections to LTC insurance are numerous, but so are the reasons for securing it. Check out the new LTC riders that offer client appeal and producer approval.

Primary Agent | January 2012

A

dding riders to enhance the features of a base life insurance policy has been popular since the early days of the industry. Whether it’s one that doubles the death benefit in the case of an accidental death or waives the premium in the event of the insured becoming disabled, both insurance companies and agents have found that adding these riders can greatly increase the marketability of insurance contracts by customizing the life insurance policies to address specific concerns of an individual client.

For example, a guaranteed insurability rider can be added to a life insurance policy that will guarantee the client the ability to purchase a specific amount of insurance at certain points in time in the future. This type of rider is often favorable for a client who is starting a family and is anticipating the need for additional insurance upon the birth of children.

The accelerated benefit rider is another example of one that has been very popular in the past. It’s often triggered by a terminal illness or permanent disability. It’s particularly appealing since it creates a “living benefit” for the client in addition to the basic death benefit from the policy by paying the client up to 100 percent of the death benefit for a qualifying event.

Some riders now allow clients access to their death benefit in the event they are in a nursing home or long-term care facility. This new twist on an old idea has substantial client appeal since it provides an effective argument to counter many of the objections to purchasing a traditional long-term care (LTC) plan.

How it works While there are several types of LTC “hybrid” products that are currently on the market for life and annuity contracts, the focus here is on those that can be added to life insurance contracts.

The most common structure of these riders is in the form of an “accelerated benefit” that provides the client with a specified percentage of the death benefit each month that can be accessed to offset the cost of long-term care.

Assume, for example, that a female client needs $300,000 of permanent life insurance. Along with the life insurance protection, a needs analysis reveals that the client can benefit from LTC protection of $200/day in the event of being admitted to a nursing home. To address the need, a 2 percent LTC rider will be added to the policy so the client can access up to $6000/month of the total death benefit for LTC payments.

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At least 70 percent of those over the age of 65 will require some form of LTC at some point in their lives.

COVERAGES

To qualify for benefits, the rider’s requirements are the same as a normal LTC plan: The client needs assistance with two out of the six activities of daily living. After the waiting period (90 days on most riders), a client can begin collecting benefits each month until the death benefit is exhausted.

Some riders currently on the market have an “enhanced” benefit feature that doubles the benefit pool for LTC purposes.

Most of these plans pay on a reimbursement basis. The client submits the LTC bills and is subsequently reimbursed accordingly for LTC facilities, home health care or nursing home care. If the client does not use the full benefit each month, the unused portion remains in the pool for later use. If the rider is never used, however, the client’s beneficiaries will be paid the full death benefit.

The need A U.S. Department of Heath and Human Services study found that at least 70 percent of those over the age of 65 will require some form

of long-term care at some point in their lives. This is an overwhelming statistic for most people and demonstrates the clear need that most Americans face for LTC coverage. When the high probability of needing care is combined with the cost statistics for average nursing home care, the numbers become staggering.

________________________________

According to most estimates, the average nursing home costs about $200/day, and the average stay is about 2 ½ years.

When the costs are added up, on average about 70 percent of people will incur a bill of more than $180,000 (this figure can be significantly higher in metropolitan areas).

There are many objections that clients come up with to justify delaying or completely dismissing the purchase of LTC insurance. However, most of these fall into the following three concerns, which an advisor should be prepared to address simply and clearly.

Even with all the data, many consumers choose not to purchase LTC policies. Given this often-daunting situation, a producer must look at every possible solution and that’s where the LTC rider can provide an attractive alternative to a traditional LTC plan.

Riders can provide an intriguing solution to the complexities surrounding the sale of traditional LTC plans. ________________________________

An alternative solution

Cost: Cost is the most common objection to purchasing an individual LTC plan. If we look at a typical individual plan with the same parameters for the same 65-year old female client ($6,000/month for five years), the policy would cost about $3,000/year. However, adding the LTC rider to the $300,000 insurance policy costs only $400/year. At a time when most

[ 12 ]

Americans admit to being underinsured, this rider can provide added motivation to obtain adequate insurance to cover the life insurance need and LTC coverage gap.

Failure to use: The second reason consumers give for not purchasing LTC is the possibility that they may never use the benefits. Some life carriers attempt to mitigate these concerns through return-ofpremium LTC plans. However, this adds significant costs to already expensive plans.

Presenting the LTC rider to a client can successfully overcome this objection.

Because the rider is added to an underlying insurance contract, there always will be a death benefit paid to the client’s beneficiaries if the rider is never used. When the rider is added to a life insurance plan with cash value, there is the added flexibility so the client can access the cash for supplemental retirement or emergency income needs.

Sufficient savings: The third objection is expressed by the client with sufficient assets that mitigate the need for an LTC policy. Based on our example, a client would need at least $300,000 of liquid assets set aside for LTC. These so-called “lazy assets” are typically held in very low-yield, low-risk securities such as money market funds or CDs. However, if the client takes less than one-third of this emergency fund (about $85,000

in this case) and purchases a single-pay life insurance policy that includes an LTC rider, she can obtain the same $300,000 benefit pool. Along with the leverage this gives the client, there is the added benefit of an additional $300,000 of life insurance, which can then be used to offset estate taxes or to create a legacy.

ATLANTIC SPECIALTY LINES the “A” way — Attitude, Assistance, Adaptability

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The sale In a highly competitive market where products are constantly changing and information is easily available to consumers, it is vital that advisors be prepared with a level of knowledge to benefit their clients. Long-term care riders can provide an intriguing solution to the complexities surrounding the sale of traditional LTC plans.

The concept can be used either to open the door to a new client or to provide a compelling reason to revisit the insurance needs of current clients. This new twist on an old idea should prove to be a beneficial source of revenue as people increasingly try to get the most value out of their insurance policies in the tight monetary environment. ________________________________

Josh O’Gara contributed this article. He is a brokerage manager at First American Insurance Underwriters Inc., the Needham, Mass.-based brokerage firm that specializes in coaching life insurance producers that want to grow their practices. He can be contacted at jogara@faiu.com or 800-444-8715.

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That belief has been a big part of our success.

In 2006 we took steps to diversify into the mid-Atlantic states and expanded our model into Pennsylvania. Met with great success and a bright future, we expanded into Virginia in 2011.

To differentiate ourselves from the larger companies, MMG works to ensure top-notch service. We take a tremendous amount of pride in being there when our agents and policyholders need us. We still answer the telephone in person, which is rare, and have empowered employees to resolve issues quickly.

We do business exclusively through independent agents and live by the philosophy that people do business with people.

MMG management and staff meet face to face with agents to see what they are dealing with and bring innovative ideas back, making changes where necessary.

We strive to add value to the agents’ operations, so our major focus is making it easy for them to do business with us, particularly through cutting-edge automation. It’s that combination of high-tech, high-touch that enables business to flow quickly from the agents to us and back and ultimately benefits the policyholder.

MMG is honored to have recently received the following awards: 2010 Top Performing Company Insurance Agents & Brokers of PA 2010—2011 Company of the Year Maine Insurance Agents Association 2011 Excellence in Service Professional Insurance Agents of NH 2011 Interface Partner Award Applied Systems

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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INDUSTRY NEWS

Health care reform in 2012 The bruised and battered PPACA lives on

These days the only constant is change for health care. Read up on a few of the ways the insurance industry will be affected by health care reform legislation in 2012.

Primary Agent | January 2012

T

he Patient Protection and Affordable Care Act (PPACA) clock began ticking in March 2010, when President Obama signed the contentious bill into law. Since then, despite repeated attempts to dismantle it — think: a series of lawsuits (see “A supreme challenge” sidebar) and continued legislative maneuvering – the provisions’ effective dates keep arriving. And the countdown until complete implementation in 2014 keeps nearing.

This year will be no exception: Several portions of the law will come due. And IA&B members — some as health producers, others as small-business owners — will face changes and challenges as a result.

The following pages outline what the insurance industry can expect from PPACA in 2012.

Uniform explanation of coverage documents (section 2715)

A supreme challenge

Implementation deadline: March 23, 2012 Affected parties: health insurers and group health plan sponsors/administrators Penalty for noncompliance: up to $1,000 per violation/enrollee Health insurance policyholders, applicants, enrollees and certificate holders must receive a summary of their benefits and coverage. PPACA requires uniformity in those documents and outlines their specifics, including (among others): ◗ A four-page limit ◗ Uniform definitions of insurance and medical terms ◗ Coverage exceptions, reductions and limitations ◗ Examples of “common benefits scenarios” ◗ Contact phone number and Web address

Ensuring the quality of care (section 2717) Implementation deadline: March 23, 2012 Affected parties: health insurers and group health plan sponsors/administrators Penalty for non-compliance: to be determined by the U.S. Department of Health and Human Services Secretary Kathleen Sebelius New federal guidelines dictate the monitoring of the following changes (among others): ◗ Improvements to “case management, care coordination, chronic disease management, and medication and care compliance initiatives”

[ 17 ]

The legality of PPACA’s individual mandate will be decided once and for all. The U.S. Supreme Court in midNovember agreed to hear the case, which, at its core, questions the requirement of all Americans to buy health insurance or face a penalty.

Twenty-six states and the National Federation of Independent Business separately appealed the Supreme Court to strike down the health care reform law in its entirety. The justices could decide that — or to invalidate the individual mandate only, to delay a ruling until the mandate takes effect in 2014, or to leave the mandate (and the rest of the law) in place.

Oral arguments are scheduled for March, and a ruling is due by July.

INDUSTRY NEWS

States push forward Federal law mandates each state to create a health exchange by 2014 for consumers to shop for and purchase health insurance products.

IA&B continues to advocate for the preservation of producers’ role and to push for the exchanges to supplement, not overhaul, the existing health insurance marketplace. State-specific implementation updates (as of late 2011) follow: Delaware: Delaware formed a health care commission tasked with studying ways to implement the state’s exchange. The group, which includes a DAIAB presence, meets monthly.

Maryland: The Maryland Insurance Administration, General Assembly and the O’Malley administration worked quickly in 2011 to pass legislation that establishes the state exchange’s governing board and its initial role and duties, including conducting a study and making recommendations.

Pennsylvania: The state House Insurance Committee held spring 2011 hearings to study options and learn from other states. Then in August, the Insurance Department held public stakeholder meetings, in which IA&B staff and member agents participated. The Insurance Department announced in November that the commonwealth will create its own exchange rather than letting the feds create one.

◗ Implementation of hospital discharge programs that prevent readmissions ◗ Improvement of patient safety ◗ Promotion of health and wellness activities Health insurers and health plans must submit annual reports to the U.S. Department of Health and Human Services, as well as coverage and plan enrollees and re-enrollees, that outline their compliance with these improvement-of-care measures.

Patient-centered outcomes research fee (sections 6301, 10602) Implementation deadline: Sept. 30, 2012 Affected parties: health insurers and group health plan sponsors/ administrators PPACA mandates establishment of the Patient-centered Outcomes Research Institute to help “patients, clinicians, purchasers and policy-makers” make informed health decisions. Research will “evaluate and compare health outcomes and the clinical effectiveness, risks and benefits of two or more medical treatments [or] services….”

To support the institute, health insurance policies and plans dated from Sept. 30, 2012 through Sept. 30, 2013 will include a $1 fee per person

[ 18 ]

Primary Agent | January 2012

covered. Then, until 2019, plans and policies will include a $2 fee per person.

Reducing health care coverage costs (section 2718) Implementation deadline: Jan. 1, 2011

Agent magazine went to print, producer groups continued to lobby for legislation that would exclude commissions because they are pass-through fees, delivered 100 percent to third parties.

Additional changes Beyond the insurance industry, the medical community and Medicare beneficiaries will feel PPACA’s repercussions in 2012. The following chronicles

Reporting deadline: June 1, 2012 Affected parties: health insurers and group health plan sponsors/ administrators Penalty for non-compliance: first round of consumer rebates by Aug. 1, 2012 The law dictates a medical-loss ratio provision, which limits health insurers’ spending on administrate costs to 20 percent in the individual and smallgroup markets and 15 percent in the large-group market. Reports on how premium dollars are spent must be made public, and failure to comply with the medical-loss ratio requirement forces insurers to provide consumer rebates.

Non-complying insurers are expected to pay out up to $1.4 billion in rebates to nearly 9 million Americans. The U.S. Department of Health and Human Services expects an average $164 rebate per person in the individual market.

Note: In December, the U.S. Department of Health and Human Services issued its final rule that includes producer commissions as administrative fees. As this issue of Primary

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[ 19 ]

INDUSTRY NEWS

Chipping away at PPACA PPACA opponents can tally the April 2011 repeal of the 1099 mandate and the October 2011 demise of the Community Living Assistance Services and Supports Act (CLASS) in the win column.

The retracted reporting requirement PPACA originally included a mandate for all companies to file a Form 1099 for any business-to-business transaction for goods or services totaling over $600 annually. While the goal was to offset PPACA costs by increasing tax compliance, the requirement would have been burdensome – especially for small businesses. A bipartisan bill dismantled the mandate and, in turn, placed the burden of fund raising on families required to repay tax credits for health insurance premiums when their income rises above the federal threshold.

The lost LTC program The long-term care (LTC) insurance plan was designed as a voluntary insurance program where all working adults would pay a monthly premium toward a benefit they could collect if they became disabled. Funds would have been earmarked for use toward home health services or nursing home bills.

Challengers targeted the program’s fiscal viability: PPACA originally mandated that CLASS be solvent for 75 years.

The U.S. Department of Health and Human Services, however, reported that it could not be simultaneously affordable and solvent while remaining voluntary. As a result, the Obama Administration removed the plan from the health care reform law before its planned 2012 implementation.

— albeit briefly — some of the changes they can expect this year.

Medicare health-system integration Physicians and hospitals that serve Medicare beneficiaries are encouraged to partner and form accountable care organizations (ACOs). The goals of coordinated efforts are to improve care and reduce health care costs associated with unnecessary testing, procedures and hospital admissions. The carrot? ACOs can retain some of the money they help save.

Data collection The U.S. Department of Health and Human Services will begin collecting racial, ethnic and language data from federally funded and public health programs. The purpose is to identify and, eventually, reduce disparities in access to care.

Electronic records Requirements will begin for health plans to standardize billing and adopt rules for electronic exchange of information. The goal is to reduce administrative burdens, costs and errors.

Medicare value-based purchasing Hospitals’ performance will be publicly reported, and those that improve their quality of care will receive financial

[ 20 ]

IF YOU HAVE THE TOOLS, WE HAVE THE INSURANCE. incentives. Planning will begin to create similar programs for other medical facilities — such as skilled-nursing facilities and home-health agencies — that treat Medicare patients.

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Learn more about PPACA: http://www.healthcare.gov/law Track challenges and state implementation: www.iabgroup.com/features/health

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[ 21 ]

Primary Agent | January 2012

Technology U P DATE

THREE TOOLS FOR MAXIMIZING YOUR AGENCY’S FACEBOOK REACH

KEVIN AMENT Kevin Ament, marketing communications manager at Progressive Insurance, can be reached at John_K_Ament@Progressive.com.

Kevin produced this article for ACT (www.iiaba.net/act ).

It reflects his views and should not be construed as an official statement by ACT.

subject’s Facebook page.

Secondly, the tag creates a link between your page and theirs; your fans can click the tag within your update to visit your subject’s page, and your subject’s fans can click the wall post to visit your page for more information.

When working with agents in a recent Progressive social media workshop, several participants asked how they could get their Facebook posts to new audiences.

Fortunately, Facebook offers a few easy tools for expanding your reach beyond current fans, enabling you to tap into their networks of hundreds, even thousands of prospects.

Here’s how:

How do you do it?

Before you can tag, you must use your agency page to “like” the subject’s business page. Once you’ve liked their page, you can now tag them in a status update. When referring to your subject, type the “@” symbol and their Facebook page name. You’ll see a drop-down menu of potential subjects you can tag.

Once you post your update, it will appear on your wall and theirs, and the subject will receive a notification.

Tool No. 1: tagging What is it?

Tagging creates a connection between your agency’s Facebook page and the Facebook page of another local business you reference in your status update. There are two benefits of tagging rather than simply typing the business’s name in your status update. First, when you tag, not only does your status update appear in your News Feed and on your wall, but it also posts directly to the wall of your subject’s Facebook page, making it visible to anyone who visits your

Example You recently joined the Townsville Chamber of Commerce, and at your first monthly meeting, you meet several small-business owners [ 22 ]

in your area. Searching on Facebook, you find business pages for both the Townsville Chamber of Commerce and fellow Chamber member Bill’s Bikes, a popular motorcycle dealership. Both pages have 500 fans. After using your agency page to “like” the pages for the Chamber and Bill’s Bikes, you type the following status update: Great meeting today at the @Townsville Chamber of Commerce. Met Bill Miller from @Bill’s Bikes. Planning to stop by this weekend to see what’s on the showroom floor and drop off a few business cards for his customers.

By tagging their Facebook pages, 1,000 additional fans (primarily small business owners and motorcycle owners) have the opportunity to see your update. The Chamber and Bill’s Bikes benefit from your call-out, and fans of the Chamber and Bill’s Bikes can click the update to visit your page and

learn more about commercial auto and motorcycle insurance from your agency.

Tool No. 2: questioning What is it?

Using the Question tool (rather than simply asking a question in a status update) enables your question to spread to the individual walls and News Feeds of anyone who answers. As your question moves through your fans’ social networks and beyond, many more users have the opportunity to answer your question and learn more about your agency.

How do you do it?

On your agency’s Facebook page, click the “Question” tab, then type the question you’d like to pose to your fans. Check “Add poll options” to create a list of potential answers, and check “Allow anyone to add options” to enable participants to add to your poll.

Doing so creates more opportunity for engagement and can help circulate your agency name far beyond your original fan base as others add options to your list.

Example Your agency participates in a number of charity events in your town, including several 5K walks. This year, three of the walks fall on the same Saturday, and your agency can attend only one.

You’re having trouble choosing, so you ask your Facebook fans to vote on their favorite cause by posting the following Question: XYZ Agency will be sponsoring one of the 5K walks below. Help us decide which one by voting for your favorite.

[Option 1] Townsville Walk for Wishes [Option 2] Walk for the Cure in downtown Townsville [Option 3] Walk for Hunger supporting the Townsville Food Bank

As your fans vote, the poll posts to their individual News Feeds, bringing your philanthropic message to their friends and family. The poll not only gives you a free way to promote your agency beyond your fan base, but it aligns your agency with a popular cause or local business. If these events (or the groups organizing them) have Facebook pages, you can “tag” these pages in the list of options you post, building additional awareness for your agency.

Tool No. 3: contests What is it?

Using a third party vendor, Facebook allows you to host contests on your agency’s page. You can choose from several different types, including photo, video, sweepstakes, trivia and more.

These contests can be used to build Facebook fans, generate customer engagement and leverage your fans’ networks to generate prospects and build broader awareness of your agency.

How do you do it?

Select a third party vendor (Progressive uses Wildfire) that offers turnkey Facebook contests. There are a number of affordable options, some charging just $5 per campaign with an additional $1 a day while the contest is live. Create your contest online, using the vendor’s Web interface. You’ll need to provide details on timing, official rules, the winner-selection process and information you want to collect from your participants. Once you’ve built your contest, you can publish it to your agency’s page and website, and you can promote it to your customers through email, Facebook or any other medium, using the unique contest URL. As your fans participate in the contest, they can post their submission to their own Facebook pages and invite their friends to vote on an entry, building engagement and awareness. Vendors offer detailed measurement and dataexport functionality, so you can easily

[ 23 ]

capture leads while monitoring traffic, submissions, engagement (comments and votes) and the effectiveness of your promotional communication.

Example Say you want to promote a pet-related coverage to pet lovers in your community. You hope to leverage your customers’ social networks to reach their friends and family, so you host a Pet Photo Contest on Facebook to spread the word. Customers can submit their pet pictures online in two categories – pet/owner look-alike and cutest pet – then vote on their favorites.

After setting up the contest, you email the link to your customers, asking them to upload pictures of their pets and encourage their friends and family to vote for their submission. Customers invite their friends and family to vote on the contest site, which includes information about pet-related coverage and contact information for your agency. The contest engages customers who are passionate about their pets and, as they ask their friends and family members to vote, helps build awareness of your agency and collect valuable leads you can target with future marketing.

These three tools, when used strategically and creatively, extend your reach on Facebook, engage existing fans and build connections with other businesses in your community. Be sure to incorporate these tools into your Facebook strategy and learn how to use all the resources available to get the greatest return from your social media investment.

Editor’s note For additional resources on digital marketing, visit www.iabgroup.com.

Select Technology from the left-hand menu bar, then Other Resources.

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Heads up on satellite debris liability The autumn 2011 satellite debris freefalls posed an interesting question: Who covers resulting personal injury or property damage losses?

If you would like to place a

The sky is falling!

Classified Advertisement, simply

In late September, a 20-year-old NASA research satellite crashed into the atmosphere, slamming approximately 26 pieces into the Pacific Ocean. Then, one month later, an out-of-use German research satellite broke through the atmosphere, sending nearly 30 pieces torpedoing toward Southeast Asia, most likely into the Indian Ocean or Andaman Sea.

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There’s a convention for that.

According to the United Nations-adopted 1972 Convention on International Liability for Damage Caused by Space Objects, the government which launched the satellite would be responsible “to pay compensation for damage caused by its space object.”

Insurers could take the fall.

Thanks to the recent increase of private satellites, a few insurers offer space coverage. Many operators, including DirectTV and Google Inc., have coverage of up to $500 million for freefalls, launch malfunctions and effective operation of their $200 to $300 million satellites.

Source: “Falling satellites? Uncle Sam’s got it covered, mostly,” Insurance Journal, Sept. 22, 2011; “Satellite debris could have hit Asia, or the sea,” Associated Press, Oct. 23, 2011

----------------------------------------------------------------———————------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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