Primary Agent - July 2009 - DE Edition

DELAWARE

IN THIS ISSUE

_______________ Value proposition: your meal ticket to an amazing career Customer service slumps and solutions When the back office is half a world away Berkley Mid-Atlantic Group looks beyond soft market, hard economic times

More Commission.

More Rewards.

More Reasons to Prefer Progressive.

PROGRESSIVE

LȨȞȽǸɜɤɑȐ ȞȐȽɜ Earn higher commission and put Progressive’s marketing power to work for your agency with the Progressive Preferred program Progressive Preferred is a new rewards program for independent agents in Pennsylvania.* To qualify, sell an average of one policy per week to preferred customers. That’s someone who owns a home, has a good driving record, and has continuous insurance with no lapse.

HIGHER COMMISSION IS ONLY THE BEGINNING

Signature Agents are rewarded with numerous special benefits including: 15/12 commission on preferred personal auto A $2,000 annual marketing allowance for exclusive Signature Agent goods and services SM

An appointment to sell the Progressive Home Advantage and Personal Umbrella – both offer 15/12 commission Increased opportunity to put Progressive’s marketing power to work for your agency BECOME A SIGNATURE AGENT

Ready to learn more? Contact your Progressive account sales representative. *This program is currently available only to Progressive agents in Pennsylvania and Colorado.

One-Stop Insurance Shopping Secure, Competitively Priced Protection For employees

Workers’ Comp For property and liability

Businessowners’ Policy in PA and NJ For vehicles and fleets

Commercial Auto in PA and NJ For added protection

Commercial Umbrella in PA and NJ COMING SOON More States in 2009

Ask About Our:

! !

Increased limits Coverage extensions

! !

Price discounts Good income potential

Our GUARD Business Shield is a comprehensive insurance solution that offers the multiple lines of coverage typically needed by small- to mid-sized businesses. As the current soft market begins to draw to a close, GUARD’s history as a stable and secure carrier through both good times and bad will become even more important!

To learn more, visit www.guard.com/apply OR call 800-673-2465, ext 4567.

A- (”EXCELLENT”) A.M. Best Rating

Contents

14

PRIMARY AGENT MAGAZINE

Value proposition: your meal ticket to an amazing career How do you create value? This apparently simple question may well be the most important one you will ever be asked. Your ability to clearly articulate your value proposition will separate you from the pack, elevate your performance and offer direction as you move ahead with your career.

Page 14

18

Customer service slumps and solutions Customer service is more than icing on the cake. It’s the bread and butter of an agency’s livelihood. A little training can go a long way toward addressing common concerns and improving service.

Page 18 When the back office is half a world away When the sheer amount of data entry began to slow down his agency, Jerry O’Donovan found help — a half a world away.

Page 20

20

Berkley Mid-Atlantic Group looks beyond soft market, hard economic times Berkley Mid-Atlantic Group representatives recently met with the IA&B Board of Directors to discuss the company’s differentiation points, commitment to addressing agents’ technology needs and plans for growth despite the soft market and hard economic times.

Page 24

In every issue

24

4 6 7 8 10 12

Chairman of the Board’s Message State News New Members Preventing Errors & Omissions Coverage Corner Glance at Events

13 29 30 32 32

Member FAQ IA&B Partners Technology Update Advertisers Index Classified Ads

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.

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.

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 # 2009-7) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2009. 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.

GLOBAL SOLUTIONS MEET LOCAL SUPPORT.

We’re General Casualty®.

We’re the regional insurer you already know, always there to help independent agents with expert field support that understands local needs. Now that support is stronger than ever—because we’re stronger than ever. General Casualty has joined QBE®, providing local hands with the international reach needed to solve even your most complex challenges.

We are now QBE Americas Division.

And we’re working for you.

generalcasualty.com General Casualty is a registered service mark of General Casualty Company of Wisconsin.

QBE and the links logo are registered service marks of QBE Insurance Group Limited.

All coverages underwritten by member companies of QBE. © 2009 QBE Holdings, Inc.

Board of Directors Officers Robert J. “Buc” Cawley, AAI Chairman Wexford, Pa. Kathleen M. Glattly, ChFC, CLU, CPCU Vice Chairwoman Factoryville, Pa. G. Kevin Nemith, CIC Immediate Past Chairman Dover, Del.

ROBERT J. “BUC” CAWLEY AAI

Chairman OF THE BOARD’S MESSAGE

Members Norman F. Basso, CPCU York, Pa.

Reading material for your summertime escape

Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md.

The dog days of summer have arrived. If you haven’t already, I hope that you take an opportunity to escape from the daily hustle and bustle and enjoy some quiet time to recharge your work batteries. And in the event that some work-related reading material ends up in your suitcase, this issue of Primary Agent, which is dedicated to customer service, will be worth the read….

Timothy P. Burris Thompsontown, Pa. M. Scott Clemens, CIC, CPCU, CLU, ChFC Souderton, Pa. John T. “Chip” Colwell Jr., CIC Corry, Pa. Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P West Chester, Pa. Denise M. Kozel, CPCU Newark, Del. Linda A. McCann, AAI, CPCU, CPIW Salisbury, Md. Thomas G. McElhaney State College, Pa. Michael F. McGroarty Sr. Pittsburgh, Pa. Scott C. Rogers, CPIA York, Pa. David Rosenkilde, CIC Reisterstown, Md. Susan A. Sallada, CIC** Ft. Washington, Pa.

Customer service is crucial to maintaining an agency’s profitability. Just ask industry expert and instructor, Rita Hollada. She makes her case for taking service seriously — and for committing resources to honing staff’s skills — on page 18.

This issue includes other customer-service considerations as well. On page 14, IA&B member and industry coach, Scott Addis, explores the importance of communicating your value to customers. And on page 20, IA&B member Jerry O’Donovan shares his back-office secret that allows his agency to exceed his customers’ time expectations.

Best wishes for a summer filled with time for family, relaxation and fresh ideas for the fall.

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

[4]

Trouble Get t ing Mar ket s?

Your Bridge to Success!

THE ALTERNATIVE The Strategic Independent Agents Alliance (SIAA) is the future of insurance distribution…NOW. Since 1983, SIAA and our Master Agencies have made a business out of helping local independent agencies stay independent, while helping Captive Agents, Direct Writers, Producers, and Life and Financial Service Agents become independent.

GET INSTANTLY BIG As soon as you join an SIAA Master Agency, you become instantly BIG by accessing the companies that you need in order to compete with and win against any agency. Your agency’s income and value will increase beyond any amount that you can generate on your own.

Over 2,100 agencies like yours have increased their income and value by joining SIAA. Find out more by visiting our website at www.siaa4u.net.

© SIAA 2005

agencies Now over 50 nia in Pennsylva

Primary Agent | July 2009

State News Delaware addresses employee misclassification Following a national trend, Delaware has legislation pending that would help curtail the problem of fraudulent employers classifying their workers as independent contractors, as opposed to employees — a move made to avoid costly workers’ compensation (WC) insurance and other benefits.

HB129, which follows on the heels of significant WC and independent contractor classification reform from several sessions ago, pertains only to the construction industry and imposes substantial penalties (fines, terms of imprisonment, loss of business licenses) on employers who improperly classify their employees.

DAIAB again will work to ensure that agents will not be held liable for the misclassification of clients’ employees.

However, members are reminded not assist clients in the classification process of their employees, which exposes producers to unnecessary liability risks.

WELCOME

New Members Cambridge Broyhill Chambers LLC Lewes, Del.

[6]

Maryland condo clarification As a reminder to those with condominium-owner or condo association clients in Maryland, legislation to address condominium law went into effect June 1.

The IA&B of Maryland lead a coalition that pushed for the legislation, which requires condominium associations to insure individual units exclusive of betterments or improvements. The owner of the unit where damage originated still is responsible for the association’s deductible up to $5,000.

However, the ability of the association to assess the unit owner for the $5,000 is now automatic, rather than requiring inclusion in the association’s bylaws.

Need for the legislative clarification came after an April 2008 Maryland Court of Appeals decision which held that the Maryland Condominium Act did not require the master insurance policy of the condominium association to cover damage to an individual unit.

Members can read a recap of the issue — as well as access a webinar that explains the new coverage conditions — by visiting iabgroup.com/md, selecting Industry & Legal Affairs from the lefthand navigation bar and then clicking the Industry link.

Legislative news on the national front In addition to the health care reform movement, several bills have been introduced in Washington, D.C., that could impact members. IA&B’s national affiliates are advocating on behalf of members, and IA&B will provide updates via Agent Headlines e-newsletter in the coming months.

The Homeowners’ Defense Act The Homeowners’ Defense Act (HR 2555) would address the financial repercussions of natural disasters. The bill would create four programs to help stabilize the private insurance market and prevent potential insolvencies, all with an end goal of increasing the availability of catastrophe insurance.

The Insurance Information Act This bill (HR 2609) calls for the creation of an Office of Insurance Information within the Treasury Department. The bill first surfaced last year as part of then Treasury Secretary Henry Paulson’s Blueprint on Financial Modernization. Some worry that the legislation would serve as a precursor to an optional federal charter, but bill sponsor Paul Kanjorksi (D-Pa.) told IA&B last summer that the proposal is intended solely to help the federal government address “insurance policy issues.”

[7]

The National Association of Registered Agents and Brokers Reform Act Known as NARAB II (HR 2554), this legislation would establish a private, non-profit entity to coordinate license issuance and renewal. Membership would be voluntary and benefit producers who write in multiple states.

The bill, which would allow states to maintain regulation of the industry, is supported by IA&B. The National Insurance Consumer Protection Act The National Insurance Consumer Protection Act (HR 1880) would create an optional federal charter (OFC) as an alternative to state-based insurance regulation. An OFC would provide regulation similar to the dualchartering system that controls the banking industry. While many large insurers favor this bill, IA&B and its national affiliates do not.

The Non-admitted and Reinsurance Reform Act The Non-admitted and Reinsurance Reform Act (HR 2571) would standardize state regulation of the surplus-lines market and reinsurance.

The legislation would unify surpluslines premium tax allocation and remittance and multi-state surplus-lines risks.

Primary Agent | July 2009

Preventing ERRORS AND OMISSIONS

DOCUMENTATION — WHAT IS YOUR AGENCY’S EXPECTATION? Take this recent claim: You are successful in securing a new account, and the client initially asks you to just duplicate what he currently has. Sounds simple. As you get into securing proposals, the client advises you (verbally) that due to economics, he is not interested in continuing his umbrella coverage. As a result, you proceed with placing the remainder of the coverage. After you get the other lines placed, one of his vehicles is in a serious accident resulting in the fatality of one of the other car’s passengers – definitely a loss that would exceed the underlying limits and hit the umbrella layer.

CURTIS M. PEARSALL, CPCU, AIAF, CPIA Curtis M. Pearsall is vice president of E&O for 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.

I remember back in 1987 asking Ron Anderson and Jim Harrison, two of the true experts on the Agents E&O class of business, what the key was for an agent to avoid/minimize E&O claims.

Their response was clear: document, document, document. Having just been provided with the responsibility of managing the

Utica program, I thought this seemed too simple; there had to be more to it. Now over 20 years later, while there are a number of steps that can be taken to reduce the potential for an E&O claim, a key factor in whether a claim is even brought and if it is what direction it takes, deals with the matter of documentation.

[8]

Guess what his story is now?

He is advising you that he wanted his prior coverage replaced exactly as expiring, no exceptions. The issue?

There is nothing in writing, nothing documented. It is too early to know where this claim is going to go, but without the necessary documentation, the defense of the agent is definitely not

as strong. In retrospect, one could fault the agency for not having full and complete documentation in the file.

For example, a letter to the client recapping the conversation that the umbrella was not wanted would have been appropriate. So would have been providing the client with an umbrella proposal anyway and then getting his signoff that he didn’t want it. Sure, these would take time, but I would hope that everyone would agree that it is time well spent.

Could this claim occur in your agency?

Is there a clear and concise position from management to the CSRs and producers how they would expect the above matter to be handled/ documented? Is the documentation expectation actually documented?

can play a big role. If the producer spoke with the customer, then the producer should be the one handling the documentation. To ask a CSR to handle that when they were not even part of the conversation is not appropriate and certainly not fair to the CSR. Also be certain that the documentation in your system is handled promptly and without a lot of abbreviations. You definitely want to keep the comments professional as notes in your system can be discovered in the event that a claim develops on that file.

Good solid documentation takes time, and there is no doubt that while strong documentation is key, it is easier said than done. It would be appropriate to

Unfortunately, there are many more claims like the one above where a solid trail of documentation would make the difference. Imagine in the claim above what would happen if there was solid documentation.

Chances are the claim would not have even become a claim when the client realized that he put in writing that he did not want the umbrella policy.

There are many scenarios where the degree of documentation would play a key role in the defense of the agency.

Whether you are dealing with policy changes (either additions or deletions) or moving accounts from one company to another where the coverage may be different, solid documentation is key. The preference would be to get something from the customer in writing, but if this isn’t practical, sending the customer a letter/e-mail detailing what you believe that he is asking for is a good alternative. Also, ensuring that the right person is doing the documenting

[9]

talk this through with your staff members to see if you can collectively identify some efficiencies that will enable them to have the time to do the necessary documentation.

If you are serious about making changes that will reduce the potential for an E&O claim being made against your agency, documentation is a great starting point. There is no doubt that taking the time to the proper job of documenting will pay major benefits for your agency.

Primary Agent | July 2009

Coverage CORNER

FIRST, KVAERNER METALS; NEXT, GAMBONE BROTHERS; NOW, NO COMPLETED OPERATIONS COVERAGE FOR CONTRACTORS JERRY MILTON, CIC

Exclusion l. under Coverage A of the CGL policy states:

Jerry M. Milton teaches

Damage To Your Work

and consults on industry

“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.” This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

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.

The Commercial General Liability (CGL) policy has always excluded damage to “your product” or “your work” arising out of that product or work including any part of it.

These are considered “business risk” exclusions. If you made a faulty product or did faulty work, you should be responsible for replacing that product or work.

However, for many, many years there has been an exception to the “damage to your work” exclusion if the work was done by subcontractors. Prior to 1986, this exception was added by endorsement and was called “broad form property damage.” Since 1986, this exception has been incorporated in the language of the ISO CGL policy.

[ 10 ]

Because of this exception, general contractors have historically been covered under the CGL policy for damage to buildings they constructed if that damage was caused by a subcontractor’s faulty work.

On October 25, 2006, the Pennsylvania Supreme Court changed all of this in their Kvaerner Metals Division of Kvaerner U.S., Inc. v.

Commercial Union Insurance Co. decision. In the Kvaerner case, the Pennsylvania Supreme Court eliminated coverage for a general

contractor for damage to a building caused by the faulty workmanship of a subcontractor. In its decision, the court determined that faulty work is not an accident, and therefore, does not constitute an “occurrence” under the CGL policy.

In June of 1997, Bethlehem Steel Corporation filed a complaint against Kvaerner Metals and other related companies for breach of contract and breach of warranty in the design and construction of a coke oven battery.

Kvaerner sought coverage from its insurer, Commercial Union, based on the fact that the damage was caused by work done by a subcontractor.

Commercial Union denied the claim on the basis that faulty workmanship is not an “occurrence,” and the trial court agreed. On appeal, the trial court’s decision was reversed by the Superior Court. Commercial Union appealed, and the Pennsylvania Supreme Court overturned the Superior Court’s decision. The court determined that the faulty work that caused the damage was not an accident and thus not an “occurrence” under the CGL policy. The court further determined that damage from faulty construction work should be expected and therefore is no accident.

In reaching its decision, the Pennsylvania Supreme Court relied on similar cases in New Hampshire and South Carolina. However, most other states have not agreed with Pennsylvania. For example, in 2007 the Florida Supreme court stated the following in a case similar to Kvaerner: The insurance and policyholder communities agreed that the CGL policy should provide coverage for defective construction claims so long as the allegedly defective work had been performed by a subcontractor rather than the policyholder itself. This resulted both because of the demands of

the policyholder community (which wanted this sort of coverage) and the view of insurers that the CGL was a more attractive product that could be better sold if it contained this coverage.

The Superior Court of Pennsylvania recently reinforced the Kvaerner decision in Millers Capital Insurance Co. v. Gambone Brothers Development Co. Gambone constructed several houses that had various faulty construction issues, including faulty exterior stucco, which led to water damage to the homes. Because the stucco work was done by a subcontractor, Gambone submitted the claims to Millers Capital.

Millers denied the claims, and the trial court agreed. Again, not an “occurrence.” Gambone appealed the decision to the Superior Court. Relying on the Kvaerner decision, the Superior Court rejected all of Gambone’s arguments. The court stated in part: The grant of coverage states that “property damage” will only be covered if caused by an “occurrence,” which is, in turn, defined as an “accident.”

Inasmuch as the claims are premised on allegations of faulty workmanship, Gambone argues that the exception to the “your work” exclusion allows coverage to lie for claims based on faulty workmanship by a subcontractor.

Yet, claims predicated on faulty workmanship cannot be considered “occurrences” for purposes of an occurrence CGL policy as a matter of plain language and judicial construction. Gambone does not offer us any manner in which to rectify this seemingly insurmountable contradiction.

Unfortunately the court’s ruling in Gambone goes even further than

[ 11 ]

Kvaerner. The effect of the Gambone decision could be that not only is any damage to the work itself excluded, but any third party damage or injury is also excluded. In other words, the practical effect of the Gambone decision will be to exclude coverage under Pennsylvania law for any consequential damages that are caused by faulty workmanship.

If this is the case, then contractors in Pennsylvania will have no coverage whatsoever for any injuries or damages arising out of their completed operations. If this decision is upheld and strictly interpreted, why does a contractor need a CGL? In reaching their decisions, some of the courts have stipulated that faulty workmanship should be addressed by a performance bond. A bond is not insurance. The surety has the right of recovery if any payment is made.

Furthermore, the statute of repose for contractors in Pennsylvania is 12 years.

How many sureties are willing to extend their bond period following completion for 12 years? I can answer that one.

None!

The good news, if there is any, is that several insurers have developed endorsements to address this problem by redefining “occurrence.” Those insurers are to be congratulated and thanked. Hopefully these endorsements will remedy the problem we now have in Pennsylvania. If you have not done so already, talk to your insurers and ask them how they plan to solve this issue.

Until then, my advice to a contractor in Pennsylvania is, “Don’t build anything!”

Pennsylvania is now one of the most, if not the most, restrictive states in the country for construction defect claims.

Remember when the license plates in Pennsylvania stated, “You’ve got a friend in Pennsylvania?” Well, contractors don’t!

Y’all take care!

Glance at Events J U LY C A L E N D A R Date

Topic

Location

7

CISR Commercial Casualty

Allentown, Pa.

Mistakes That Lead to E&O Claims seminar

Allentown, Pa.

CISR Commercial Casualty

Mechanicsburg, Pa.

William T. Hold seminar (Personal Lines)

Philadelphia, Pa.

Insuring Contractors

Newark, Del.

CISR Commercial Property

Lancaster, Pa.

William T. Hold seminar (Commercial Lines)

Salisbury, Md.

Insuring Contractors

Philadelphia, Pa.

William T. Hold seminar

Baltimore, Md.

10 Ways to Get Sued (Sources of E&O Claims) seminar

Mechanicsburg, Pa.

20

CIC Commercial Casualty

Philadelphia, Pa.

21

CIC Commercial Casualty

Philadelphia, Pa.

CISR Commercial Casualty

Erie, Pa.

CIC Commercial Casualty

Philadelphia, Pa.

CISR Agency Operations

Baltimore, Md.

CISR Commercial Casualty

Pittsburgh, Pa.

CIC Commercial Casualty

Philadelphia, Pa.

William T. Hold seminar (Personal Lines)

Pittsburgh, Pa.

28

Compliance Pitfalls—How to Avoid Costly Fines & Penalties seminar

Pittsburgh, Pa.

29

Compliance Pitfalls—How to Avoid Costly Fines & Penalties seminar

Mechanicsburg, Pa.

8

9

14

22

23

Don’t wait for a CISR course to come to you — access it from your desktop! CISR OnLine is an excellent way to complete a course you need that may not be scheduled in your area in the timeframe you need it. You can also mix and match the CISR OnLine course with classroom courses so you can still maximize the benefit of networking and face time with the instructor. Register for courses online at iabgroup.com.

[ 12 ]

Member FAQ QUESTION: A mortgage lender is requiring my insured to cover the home for the full loan value rather than the replacement cost. Is this an acceptable practice?

ANSWER: No, but it’s not always that simple. We have already addressed this issue in the past, but an update is needed based on recent developments. In all cases, the answer will depend on:

?

w the state where the practice occurs and w the type of financial institution and/or loan.

First of all, our three states now all have language prohibiting the practice of requiring more than the replacement value of the buildings. It is important to remember that this prohibition applies to state-chartered banks.

Delaware: The Delaware Code specifically addresses the amount of property insurance in connection with the loan at Chapter 21. Mortgages on Real Estate, section 2119 Insurance requirements for mortgages. It states, in relevant part, that the lender may not require more than “the value placed on the improvements,” which by definition excludes the value of the land.

Maryland: The Maryland Code is replete with protection for consumers, prohibiting state-chartered lenders from requiring a borrower to obtain coverage beyond the replacement cost of the real property. Members who are confronted with this situation can refer the lender to Commercial Law/ Credit regulations § section 12-124 (for a first mortgage or first deed of trust). Substantially similar language is also available at § 12-410 for secondary mortgages, § 12-312 (e) for consumer loans, § 12-909 (e) for revolving-credit transactions, and at § 12-1007 (f) for closedend-credit transactions.

Pennsylvania: IA&B spearheaded the Mortgage Property Insurance Coverage Act (Act 51 of 2008), which applies to owner-occupied residential property. The new law prohibits

lenders from requiring a borrower to obtain property insurance coverage which exceeds the replacement value of buildings and structures situated on the land. The borrower may not be required to insure the value of the land.

Fannie Mae / Freddie Mac: Fannie Mae and Freddie Mac purchase mortgages and convert them for resale to investors.

Both institutions have specific guidelines that also prohibit the practice of asking more than the replacement cost. If the issue you run into involves any one of these institutions, the lender should be referred to: w the Fannie Mae Selling Guide - Single Family (Part B, Chapter B7-3, Hazard and Flood Insurance) or w the Freddie Mac Single Family Seller/Servicer Guide (Volume 2, Chapter 58, Section 58.2).

Flood policies: if the situation involves a flood policy, you may refer the lender to the NFIP publication entitled Mandatory Purchase of Flood Insurance Guidelines, available at fema.gov/pdf/nfip/mandpur1.pdf. A similar prohibition is also clearly stated.

The main stumbling block remains national banks (which have the word “national” in their name or “N.A.” after their name). National banks are regulated by the Office of the Comptroller of the Currency (OCC). The OCC does not currently provide any guidance for lenders on this issue.

Producers can still encourage individuals to file a complaint with the Office of the Comptroller of the Currency, but there is no legal or regulatory leverage to speak of.

IA&B has developed a state-specific resource on the issue of loan value. It is accessible at iabgroup.com under Agency Management/Coverage Issues/Homeowners. Any questions can be directed to IA&B’s Member Service Center toll free at (800) 998-9644 or locally at (717) 795-9100, option 0, or by e-mailing iab@iabgroup.com.

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!

[ 13 ]

CUSTOMER SERVICE

Value proposition: your meal ticket to an amazing career How do you create value?

This apparently simple question may well be the most important one you will ever be asked. Your ability to clearly articulate your value proposition will separate you from the pack, elevate your performance and offer direction as you move ahead with your career.

Primary Agent | July 2009

Y

our value proposition is the reason for your professional existence. It describes how you create value for others. It makes you stand out in a crowded marketplace. Without a compelling value proposition, you are ordinary and disposable — a commodity. With a distinguished value proposition, you are unique and indispensable.

A value proposition statement summarizes the reason why a potential customer should buy your particular product or service, how it exceeds that of your competition and why it is worthy of the price they must pay. The ideal value proposition is concise and appeals to the customer’s strongest decisionmaking drivers. It is an irresistible offer, an invitation that is so compelling and attractive that the customer would be out of his or her mind to refuse your offer. The million dollar question is how to make your value proposition seductive.

Research indicates that most professionals do not have a value proposition in the form of a clear and concise statement that explains the tangible results their customers will receive, the unique benefits they bring to bear that others cannot. A differentiated value proposition goes beyond functional product or service descriptions to express the results a consumer can expect to achieve. Most people attempt to sell a product or service without focusing on customer benefits or outcomes.

Let’s take a look at two well-known value proposition statements from FedEx and M&M. “When your package absolutely, positively has to get there overnight.”

FedEx became the leading overnight courier in the world with the help of this value proposition by identifying that the customer did not just want fast delivery but also valued a rock-solid guarantee of urgent delivery.

“The milk chocolate melts in your mouth, not in your hand.”

M&M’s powerful value proposition made customers realize that chocolate did not have to make a mess. This statement made a particular impact with children.

Which of the following value proposition statements would you be most likely to respond to: w “We offer one-stop shopping. My company can offer you a full range of products and services to meet your every need!” w “After going through our unique process, one client saw a 30 percent reduction in claim frequency and a

[ 15 ]

A powerful value proposition is not about you. It is not about the products, services and resources of your firm. It is all about the customer. Your ability to articulate how you are uniquely qualified to help the customer will distinguish you from others in the marketplace.

CUSTOMER SERVICE

In developing your Value Proposition Advantage™ you must understand that: w Value cannot be created unless the customer has a business problem or issue to solve. w Value is in the eyes of the beholder. Each customer has a different set of needs and business issues. Your value proposition must be customized to the specific needs of each customer. w A value proposition based solely on product features, functions, performance and pricing is not sustainable. You may win in the short term, but you will lose when your competition introduces better capabilities. w Your true value lies outside the product or service you are selling. You can create tremendous value through the intangibles brought to bear in a relationship. w To consistently win, you must be able to articulate your value at the time the decision is being made.

25 percent decrease in insurance costs.

Through the utilization of my diagnostic system, you will realize significant impact to your bottom line.”

Earlier this year, I had the pleasure of meeting Kelly at a Beyond Insurance® workshop. Kelly is a successful agency principal who cares deeply about each and every member of her 50 person firm. During the workshop, Kelly confided in me that she was perplexed about the performance of Ryan and Chase — two of her senior producers.

Kelly stated, “Both men are polished, passionate and extremely professional.

They are team players who effectively utilize the agency’s value-added services and resources.

However, I cannot comprehend why Chase lags so far behind Ryan in business-development performance.”

It was obvious that Kelly cared about Ryan and Chase. She truly had their best interests at heart. Yet, she was pained by the fact that Chase’s book of business was hovering around $500,000 in revenue after 10 years with the firm, while Ryan boasted a $2,000,000 book of business.

[ 16 ]

“Chase has an amazing work ethic,” said Kelly. “He is personable, attractive and technical. He is adored by our staff and the community. I don’t get it.”

After carefully listening to Kelly agonize over the performance gap between Ryan and Chase, I suggested that Kelly accompany both individuals to a handful of first-meeting prospect interviews to study each individual’s value proposition. Kelly loved the idea. She created a scorecard to evaluate both individual’s value proposition in the following three areas: 1. The ability of Ryan and Chase to articulate how they create value.

2. The consumers’ ability to understand and appreciate each individual’s value proposition.

3. The degree to which each person’s value proposition was differentiated from others in the marketplace.

Two weeks after leaving the Beyond Insurance® workshop, I received an enthusiastic phone call from Kelly.

“I figured it out,” she said.

“The only difference between Ryan and Chase is the quality of their value

proposition statements.

Ryan’s is clear and concise.

The consumer is able to understand and easily identify with how he creates value. On the other hand, Chase is missing the mark. He speaks eloquently about the agency’s unique process and services, yet does not demonstrate the impact to the customer. He uses too much insurance jargon.”

Kelly had uncovered a common flaw in many w ell-intentioned producers.

They do not reach their performance potential as they lack a compelling and attractive value proposition.

Over the next month, I worked with Kelly to repackage Chase’s value proposition.

Before Kelly and I could help Chase formulate his value proposition, we asked him to answer the following questions: 1. What do you believe the consumer values?

2. What are the biggest challenges facing the consumer as they relate to insurance and risk management?

3. What unique abilities do you possess to assist the consumer with these challenges?

4. Who is your competition and what are they delivering?

5. What can you provide that your competitors cannot?

6. What will be the outcome if you can help the customer with these challenges?

Accompanying the five questions listed above, I sent Chase a document to be posted in his office which stated, “A powerful value proposition is not about you. It is not about the products, services and resources of your firm. It is all about the customer.

Your ability to articulate how you are uniquely qualified to help the customer will distinguish you from others in the marketplace.”

With guidance and inspiration from Kelly, Chase retooled his value proposition statement. He boiled down the complexities of how he creates value into something that the customer could easily grasp, identify with and remember. Chase’s new, irresistible value proposition statement was all about helping the customer discover issues and create solutions.

It was also about differentiation. Chase realized that to be successful, his value proposition had to be differentiated and superior to all others.

In a recent conversation, Chase informed me that he is having the best year of his career.

[ 17 ]

He said, “I now have a clearer picture of who I am and my role in serving the customer.

I had no idea of the importance of my value proposition statement. My new value proposition pinpoints my ability to uncover the customers’ issues and deliver solutions to address these problems. The shift in my thinking about how I create value has impacted my confidence, attitude and results.”

How do you create value?

Your answer to this question has unparalleled implications in determining your future success. ______________________________

The author, Scott Addis, is the president and CEO of The Addis Group and Addis Intellectual Capital, LLC (AIC). AIC is a coaching and consulting company with the purpose of transforming the process that insurance agents, brokers and carriers use when working with their clients. Scott is recognized as an industry leader having been named Inc Magazine’s “Entrepreneur of the Year” as well as one of the 25 Most Innovative Agents in America.

He can be reached at saddis@beyondinsurance.com or 610-945-1019.

CUSTOMER SERVICE

Customer service slumps and solutions

“Getting people-skills training is the easiest change agencies can make to improve their customer service.”

Rita Hollada, Customer Service Consultant & IA&B Instructor

Customer service is more than icing on the cake.

It’s the bread and butter of an agency’s livelihood.

“

Primary Agent | July 2009

T

he only stable source of income an agency has is its existing customers,” says Rita Hollada, an IA&B instructor and customer-service consultant for the insurance industry. “Keeping customers happy is a source of profitability through continued growth and new referrals.”

Hollada cites a study that found agencies require up to four years to overcome the costs associated with the loss of an account.

“Going out to get new customers is far more expensive than an agency may know,” she says.

Industry professionals may be surprised by the value customers place on service as well.

“Assuming that price is all that matters is a mistake,” says Hollada, pointing to another study. “Of the top 10 things that customers find most important when dealing with their insurance agent, price ranks sixth, while customer service is first.”

Service challenges The economic downturn undoubtedly has affected the day-to-day operations of insurance agencies, and one of the strains is on customer service.

“One challenge is doing more with less,” explains Hollada, “less premium but not less work or fewer customers.”

In response to reduced income, some agencies are implementing voluntary furloughs and foregoing the replacement of retired employees. And those personnel changes can have a negative effect by disrupting hard-earned relationships between clients and their agency contacts.

To register for CISR seminars, including Dynamics of Service and Agency Operations, visit iabgroup.com and select Education from the left-hand navigation bar.

For more information on

Additional challenges stem from technology. First there are carriers’ various delivery systems and degrees of automation.

customized, in-house programs,

“The learning curve is phenomenal,” says Hollada.

Center toll free at

Then there are the new sources of insurance information — much of it misinformation – that insureds can easily find on the Internet. That creates situations when agency staff must re-educate customers, many of whom are confused and some of whom are angry.

call IA&B’s Member Service (800) 998-9644 or locally at (717) 795-9100, option 0.

Training solutions A little training can go a long way toward addressing these issues and improving service. IA&B offers Dynamics of Service and Agency Operations courses – both through the CISR designation program — that cover people, listening and communication skills.

“Getting people-skills training is the easiest change agencies can make to improve their customer service,” says Hollada. “It’s not a given that employees know the importance of building rapport.”

In addition to the CISR courses, IA&B offers in-house, customerservice trainings that can be customized to an agency’s specific needs.

“The industry offers lots of technical training but needs to do more with relationships,” offers Hollada.

[ 19 ]

See page 27 for details on Dynamics of Service and Agency Operations seminars offered through IA&B.

AGENCY MANAGEMENT

When the back office is half a world away When the sheer amount of data entry began to slow down his agency, Jerry O’Donovan found help — a half a world away.

Primary Agent | July 2009

W

hen the soft market of the late ‘80s and early ‘90s hit, Jerry O’Donovan searched for a better way to position his agency, O’Donovan & Associates Inc., and in 1995 he created TimberSure. The niche program positioned him to insure subagents’ logging contractors throughout the country.

Early on, carriers oversaw policy issuance, but through the years, they began requiring O’Donovan’s staff to handle it.

“Now we process just about everything but claims,” explains O’Donovan, as he rattles off the list of duties. “We have underwriting authority, and the tradeoff in order to get the pen and function of the program is that the carrier has fewer overhead costs.”

How it all began Around the same time, New York-based insurance wholesaler The Distinguished Programs Group developed a unique solution to their own staffing needs.

When an insurer pulled out and left them with the overwhelming task of reissuing thousands of habitation policies, the agency principal’s son, who was in China teaching English, offered that a few of his college students might pick up the work on the side. _________________________________________________________

Q. What is remote staffing?

A. Remote staffing offers some of the benefits of outsourcing (lower costs, processing expertise) but is different in that it does not require agencies to migrate their

“We couldn’t find anyone to handle the work,”

agency management

says O’Donovan. “Everyone right out of high

system or data to an

school expected to make $45,000 a year, and then we had to worry if they would show up or not.” _________________________________________________________ With six students in Qingdao, China on the case, the backlog that would have taken The Distinguished Programs Group four to six months to complete took only three weeks.

And from there, the insurance-processing company ReSource Pro was born. Today nearly 600 Chinese students work for insurance-related agencies and companies throughout the United States, O’Donovan & Associates included.

Why it’s needed Back in Glenelg, MD, the sheer amount of data entry was weighing — and slowing — down O’Donovan’s agency.

“We couldn’t find anyone to handle the work,” says O’Donovan. “Everyone right out of high school expected to make $45,000 a year, and then we had to worry if they would show up or not.”

[ 21 ]

external provider.

Adapted from resourcepro.com

AGENCY MANAGEMENT

After learning about ReSource Pro at a Target Markets annual meeting, O’Donovan contracted with them in January 2008. The original contract covered the outsourcing of data entry to one employee. Today O’Donovan works with five and may add a sixth.

How it works O’Donovan and his 11 on-site staff developed how-to manuals for their Chinese counterparts and now communicate with them via e-mail and telephone. Each night O’Donovan’s staff places work in an electronic outbox. Then the ReSource Pro employees complete it overnight — which, of course, is the next workday in China.

“We write auto, CL and property,” explains O’Donovan. “That means we have a number of ACORD applications, MVRs, loss runs, etc.

These guys enter the data into the system for us.”

In fact, the ReSource Pro employees are so efficient and detail-oriented that O’Donovan has expanded their duties to include quoting through the rating system.

Each night O’Donovan’s staff places work in an electronic outbox. Then the ReSource Pro employees complete it overnight — which, of course, is the next workday in China.

COVERAGES TO HELP YOUR BUSINESS GROW at Insurance Innovators, Inc.

“They have helped us with efficiency and processing time,” he continues. “It used to take us 60 days to process an endorsement.

Now it’s done in two days.”

O’Donovan points to another benefit: Less human resources work.

“I don’t have to worry about employee issues,” he says. “No taxes, no benefits.

There’s just one flat fee per year. And they have made us money because of an increase in production.”

For O’Donovan, who keeps a photo of his Chinese team on his desk, a back office that works a day ahead presents the perfect state of affairs.

[ 22 ]

TREE PRUNERS LANDSCAPERS DEBRIS REMOVAL GARDEN CENTER/NURSERIES SWIMMING POOL INSTALLATION www.iiigroup.com

Home Office Contacts: Etty Herzig ext. 139 etty@iiigroup.com or Janet Barton, ext. 128 janet@iiigroup.com 800-523-6422, 215-885-7300, 215-886-2482 Fax

Bond excuses you’ll never hear from Commonwealth:

“Sorry, the contractor’s too small and doesn’t have enough working capital.”

Relax, Commonwealth writes bonds for small short-on-capital companies.

Now, whenever you need to place a bond for a small contractor who’s short on cash, you can count on Commonwealth Insurance. With our innovative approval process, we can write bonds for just about anyone with quick approval. Which means one less headache for you --and faster profits, too.

Quick, no hassle bonds make bonding a snap.

With more than a decade of serving insurance agents, Commonwealth knows how fast you need answers, so

we give you quick approval with NO cash collateral and NO letter of credit in most cases. 90% of our bonds are for small and mid-sized companies.

Express service makes life easier.

Fast turnaround with no runaround is why brokers depend on Commonwealth Insurance. In most cases, we can provide the bond you need in 24 hours or less.

Call us for your next bond and learn how easy it is to place bonds with a minimum of paperwork--and earn a big commission on every Commonwealth bond.

COMMONWEALTH INSURANCE The No-Excuses Bond Company

CALL TOLL FREE: 1-800-886-7760

FAX TOLL FREE:1-800-566-7761

INDUSTRY NEWS

Berkley Mid-Atlantic Group looks beyond soft market, hard economic times Berkley Mid-Atlantic Group representatives recently met with the IA&B Board of Directors to discuss the company’s differentiation points, commitment to addressing agents’ technology needs and plans for growth despite the soft market and hard economic times.

(Left to Right) Robert “Buc” Cawley, IA&B’s Chair; Bill Yount, Berkley Mid-Atlantic Group’s Capital Region RVP; Kathleen Glattly, IA&B’s Vice Chair; Marianne Morosko, Berkley MidAtlantic Group’s Vice President Regional Underwriting PA & OH; and Eric Lange, Berkley Mid-Atlantic Group’s PA & OH Region RVP.

Primary Agent | July 2009

T

he March IA&B Board of Directors meeting included a presentation by three Berkley Mid-Atlantic Group (BMAG) representatives — J. Eric Lange, Regional Vice President for the Pennsylvania and Ohio Region; Marianne M. Morosko, Vice President of Agency Relations and Marketing; and William E. Yount, Regional Vice President of the Capital Region. IA&B invited them to enhance the association’s relationship with the carrier, learn more about the company’s market position and strategic direction, review topics of interest to the association and explore areas of common ground.

Strengths “We’ve been blessed with an outstanding claims staff from the beginning,” shared Yount, when recounting the company’s strengths, “and our underwriters are very experienced.”

He also pointed to the company’s structure as a differentiation point: “We have significant autonomy as an independent operating unit. We can react to market conditions much, much faster than certain national companies with the typical hierarchal structure where you have to run it up the flagpole and get permission and by the time you get the permission it’s too late.”

What’s more, the companies are run with integrity. According to Yount, founder Bill Berkley, who serves as chairman of the board and CEO, expects his senior management to be “good corporate citizens” in addition to delivering a high return on investment each year.

Growth The soft market, combined with the recession, has hit the industry hard, so the BMAG representatives were asked how they can expect to grow in such a challenging environment.

“We have implemented a few steps to penetrate certain areas where Berkley Mid-Atlantic Group didn’t really have a presence,” said Yount, who observed that last fall they didn’t anticipate just how drastic the economic downturn would be.

“We think there are growth opportunities, not in price per se, but from additional representation, adding policy count. We anticipate pressure on price to dissipate through the year. The problem is that we can achieve small rate increases but still lose premium because of the economic conditions.”

Lange expanded on growth opportunities and discussed his desire to expand in southeastern Pennsylvania along with the company’s new areas of focus, including manufacturing and wholesale distribution and alternative energy businesses. The carrier has also made its way into the non-profit and social service markets by offering professional liability coverage and, as a result, anticipates adding premium this year.

[ 25 ]

A history of Berkley Mid-Atlantic Group, LLC Berkley Mid-Atlantic Group, LLC is a regional insurance operation offering commercial property and casualty coverages in Delaware, the District of Columbia, Maryland, North Carolina, Ohio, Pennsylvania, South Carolina and Virginia, with a focus on middle-market commercial accounts. The company, which writes exclusively through independent insurance agents, was created in 1999 through the combination of operations of four regional units – Firemen’s Insurance Company of Washington, D.C.; Presque Isle Insurance Division of Firemen’s Insurance Company of Washington, D.C.; Chesapeake Bay Property and Casualty Insurance Company; and Berkley Insurance Company of the Carolinas.

Berkley Mid-Atlantic Group is part of the W. R. Berkley Corporation. Founded in 1967, the W. R. Berkley Corporation is an insurance holding company with $4 billion in written premium and a long-term strategy of decentralized operations. It is among the largest commercial-lines writers in the United States and operates in five segments of the property/casualty-insurance business: specialty insurance, regional property/casualty insurance, alternative markets, reinsurance and international.

INDUSTRY NEWS

“We depend on a tight relationship with our agencies, and where we have trust, we have success, and it’s mutually profitable.”

Technology

Opportunities

Berkley Mid-Atlantic Group is working to improve its performance in the technology segment of IA&B’s most recent Company Satisfaction Index survey.

Company representatives offered that they take those results seriously and are making improvements as a result.

Berkley Mid-Atlantic Group is looking for new appointments with agencies that can meet the company’s objectives, including reaching a profit-sharing premium eligibility threshold of $500,000 within the first few years.

One way that the company is addressing the issue is via its real-time, automated system, Berkley Link, which will connect agency management systems with the carrier’s rating system.

“We’re getting ready to do a very slow rollout of Berkley Link, and we’re starting in Pennsylvania with four agents,” said Morosko.

At first the technology will be utilized for business owners’, auto and workers’ compensation policies.

Eventually, the carrier will use it for all lines.

“We’re not looking at it as a rating quote system to get small business,” explained Morosko, who expressed interest in increasing the average account size of business owners’ policies. “We’re looking at it as an easier way for agents to get business to us and to prevent re-keying errors which generate endorsement requests.”

[ 26 ]

“We’re looking for agents with capabilities and strategic plans for organic growth, agents who articulate a true need for a company like Berkley Mid-Atlantic Group, as well as the member companies of the W.R. Berkley Corporation,” said Lange.

According to Yount, the relationship those agents will find is one of consistency and mutual trust.

“For the foreseeable future, we plan to deal exclusively with independent agents as our sole source of distribution,” he said. “We depend on a tight relationship with our agencies, and where we have trust, we have success, and it’s mutually profitable.”

Additional information about BMAG is available at wrbmag.com.

Customer service by the books The Certified Insurance Service Representatives (CISR) designation is intended for agency personnel interested in improving their customer service.

The completion of five, one-day courses, along with corresponding exams, is required within three years of starting the program. Designees leave with a thorough understanding of risks, coverages and exposures, which makes the program ideal for newer agents and agency personnel.

Dynamics of Service and Agency Operations are two of the seminars particularly geared to customer service.

Dynamics of Service The Dynamics of Service course focuses on customer service skills.

Designed for customer service personnel, the one-day program teaches mediation skills, behavior styles and communication techniques to improve dealings with difficult personalities. The goal? Tactful yet decisive customer service.

Topics:

Agency Operations The Agency Operations course covers insurance agencies’ dynamics and operations. Designed for agency and company personnel, the seminar focuses on the basics of risk management, financial-statement analysis, due diligence, account management and claims processing.

Topics: w Understanding agency functions and systems w Meeting ethics and legal obligations w Insuring commercial casualty

CISR OnLine

w Analyzing general liability, workers’ compensation, commercial auto endorsements

Several CISR courses,

w Qualifying risk and analyzing risk exposures

are now available on

To register for CISR seminars, including Dynamics of Service and Agency Operations, visit iabgroup.com and select Education from the left-hand navigation bar.

w Integrating service from the sale onward

including Agency Operations, demand. Participants have 30 days after registering to take the course. It is accessible any time of the day or night and can be stopped and restarted as needed.

w Targeting common “people issues” w Learning people skills w Improving listening and communication skills

[ 27 ]

Platinum Profile Insurance Agents & Brokers proudly recognizes Berkley Mid-Atlantic Group, LLC as one of its Platinum Partners.

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

FEATURED PARTNER Berkley Mid-Atlantic Group, LLC

PRESIDENT & CHIEF EXECUTIVE OFFICER Kevin W. Nattrass

COMPANY LOCATIONS Home Office, Glen Allen, VA PA/OH Region, Harrisburg & Erie, PA Capital Region, Glen Allen, VA Carolinas Region, Charlotte, NC 1-800-283-1153

A.M. BEST RATING “A+” (Superior)

WEB SITE www.wrbmag.com

Pictured from left to right is Eric Lange, PA & OH Region RVP; Marianne Morosko, Vice President Regional Underwriting PA & OH Region; Bill Yount, Capital Region RVP and Kevin Nattrass, President and Chief Executive Officer.

erkley Mid-Atlantic Group, LLC (BMAG) is a regional commercial property and casualty carrier organized into three full-service territories with local claim, underwriting and loss control teams located close to its customers and policyholders.

BMAG’s policies are issued exclusively through independent agents serving clients throughout the Mid-Atlantic Region, including Delaware, Maryland, North Carolina, Ohio, Pennsylvania, South Carolina, Virginia and Washington, D.C. BMAG is a member company of W. R. Berkley Corporation, an insurance holding company founded in 1967 that is among the largest commercial lines writers in the United States.

B

BMAG takes a generalist approach to underwriting, with a focus on middle market commercial accounts within the Service, Manufacturing, Retail, Construction, Wholesale and Finance industries. Additionally, with its Marine Program and Account Specialists, BMAG offers niche-oriented products.

Our business approach is predicated on sound, disciplined underwriting practices, always “doing the right thing” for our agents and policyholders and is further exemplified in our core values of Trust, Integrity, Agility, and Excellence. We are committed to “Insuring the Future of Business” with our Independent Agency relationships.

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.

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.

PLATINUM LEVEL

BRONZE LEVEL

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

AAA Insurance Agency Insurance Company Allied Insurance Briar Creek Mutual Insurance Company Builders Insurance Group Capitol Insurance Company Chubb Group of Insurance Companies Companion Property & Casualty Group Countryway Insurance Company Encompass Insurance Foremost Insurance Group Friends Cove Mutual Ins Company Goodville Mutual Casualty Company Grange Insurance Companies Hanover Fire & Casualty Insurance Company Insurance Alliance of Central PA Inc

GOLD LEVEL

Insurance Placement Facility of PA

Ohio Casualty Progressive

Keystone Insurers Group Inc Lebanon Mutual Insurance Company

SILVER LEVEL

Merchants Insurance Group

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

Mercer Insurance Group Mercury Casualty Penn Millers Insurance Company Penn Prime Municipal Insurance PMSLIC Insurance Company Reamstown Mutual Insurance Company Rhoads & Sinon LLP Rockwood Casualty Insurance State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Mutual Service Office Inc The Philadelphia Insurance Companies Tuscarora Wayne Mutual Insurance Company UPAC Insurance Finance Primary Agent July 2009

Primary Agent | July 2009

Technology U P DATE

POSITIONING YOUR AGENCY TO PROSPER IN A TOUGH MARKET

JEFF YATES, ACT EXECUTIVE DIRECTOR Jeff Yates is executive director of the Agents Council for Technology (ACT) which is part of the Independent Insurance Agents & Brokers of America.

Jeff can be reached at jeff.yates@iiaba.net. ACT has posted further information on many of the subjects discussed above at www.independentagent.com/act.

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

Independent agents certainly have a lot of challenges right now. We are dealing with a property-casualty market that is not growing. Many of our commercial-lines clients have had to scale back or have closed their doors permanently. Our investments have taken a severe hit. We are understandably concerned about whether independent agents will continue to have a role in the health insurance market as national health care proposals are being developed.

Focusing on the opportunities During this time of challenge, it is easy to become fixated upon the problems and to

overlook the huge opportunities that are staring us in the face. As I have gone around the country talking with agents, what has impressed me is the number of agencies that are continuing to grow even in this tough market. I run into agencies which have been able to double their premium volume with the same number of employees. How are these agencies doing it?

A common thread I have seen among these agencies is a determined focus to take advantage of the new technologies available to enhance their productivity.

This focus is driven by the agency principals, and they

[ 30 ]

are using the time and cost savings they achieve to build their sales power. These agency leaders understand that technology has finally improved to the point that it can deliver significant benefits to them far outweighing the costs, provided they fully use the technology’s capabilities.

Carrier reps have told me that they are finding the technology-savvy agencies running disciplined shops to be their best business partners and performers.

Technology-driven transformation Consider this quote from Daniel Burrus, the author of Technotrends, who is known for his forward thinking and

ability to identify significant trends and opportunities: We are now at the dawn of a profound technology-driven transformation that will make the changes we have experienced over the past 25 years seem small and slow…. We are about to transform how we sell, market, communicate, collaborate, innovate, watch TV, learn and as you might guess, much more….

This is a once-in-a lifetime opportunity for you personally, and for your organization. Don’t miss it! (January 2009 Technotrends Newsletter) So how are these agencies using technology to enhance their productivity and how is it benefiting them? These agencies are moving to an electronic model as completely as they can, eliminating paper wherever possible.

Their agency management systems provide the hub for their information, and their other systems, if needed, integrate with their management system as much as possible. These agencies are active in their user groups, taking advantage of the excellent classes and online services provided by these groups to help them get maximum benefit out of their systems. They also drive continued improvements in their software from their vendors through these user groups.

Productivity-minded agencies provide their servicing and processing employees with at least two monitors, and sometimes three. The additional monitors pay for themselves in added productivity in well under one year. The capability of their systems to generate automated letters to clients is used to the maximum extent possible. The objective is to automate processing wherever possible, so that employees can concentrate on more productive servicing and sales activities. Employees are trained on written procedures and workflows that are implemented

consistently throughout the agency, and compliance with the procedures are consistently monitored. E&O exposures are reduced as a result.

Real Time – a given These best-practices agencies have implemented Real Time inquiries (billing, policy view, claims), endorsements and quoting through their agency management systems and comparative raters. Real Time enables agents to work with multiple carriers in a consistent way through their own systems; it handles log-ons and passwords to carrier systems and Web sites automatically; and it eliminates having to re-enter data that is already in the agency management system. It is a “no brainer” for these agencies to turn on their Real Time capability because it is usually provided by their agency management system at no cost.

In the 2008 IIABA Future One Agency Universe Survey, agencies ranked Real Time billing, claims and policy inquiry as the technology having the greatest impact on their productivity. And it is no wonder. In the January 2009 Real Time Campaign Agency Survey, the agents using Real Time (inquiries, endorsements and/or quoting) reported saving 10 hours a month per employee on average.

Real Time is fast becoming the predominant workflow used by agents to perform transactions with carriers, supplanting carrier-proprietary Web sites. That same 2009 Real Time Campaign Survey indicated that 54 percent of the agencies with agency management systems are doing Real Time inquiries and endorsements. Fortythree percent of agents are using personal-lines, real-time rating through the agency management system or comparative rater; and 18 percent are performing commercial- lines, real-time rating. I expect the amount of real-time quoting in both personal and commercial lines to grow significantly in 2009 because of the tremendous time [ 31 ]

savings agent users of this functionality are deriving. Another very positive sign is that 180 carriers and carrier groups are now offering at least some real-time functionality. That’s a 58 percent increase in two years.

Download – more critical today Download has become even more important in the world of the electronic agent because the agency depends on having accurate data in its system to advise clients; create certificates, auto id cards and other client documents; generate reports and marketing campaigns; and transmit data back to carriers in subsequent real-time transactions. Best-practices agents not only have implemented personal-lines download; they have implemented commercial-lines download particularly for their small commercial business. The carriers, vendors and user groups have done a lot of work to improve the quality of commercial-lines downloads in recent years and continued refinements are ongoing today. Carriers will work with agents to start with a few commercial policies to see how the download impacts their data. To be successful with commercial-lines download, it is critical that the agency’s employees take a disciplined approach to place data only in the field for which it was intended so that important data is not over-written.

Agencies report saving significant processing staff time by automating the entry of commission-statement information into their systems using Direct Bill Commission Download.

Agents are also taking advantage of Claims Download where available to get back into the claims loop and to automate the entry of claims data into their systems.

Going “paperless” rocks I am also seeing agents derive great benefit from going “paperless.”

Agencies typically implement back-end scanning first where the CSRs scan the

Classified

TECHNOLOGY UPDATE

ADVERTISEMENTS important documents they want to keep.

Moving to electronic files allows those files to be more easily shared among employees and offices, reduces the number of searches for misplaced files and protects that information should there be a disaster, provided the electronic information has been properly backed up.

More and more agencies are now taking the next step to front-end scanning where documents are scanned as they come into the agency and are tracked continuously as they make their way through the agency, so that processing time can be monitored and employee workloads managed.

The social Web is transforming marketing Savvy agents are also starting to enhance their Internet presence by using socialnetworking tools. These agents understand that the Web is in the midst of a profound transformation from one where static information is presented (Web 1.0) to one where the participants are actively engaged in contributing comment and spreading messages (Web 2.0). Web 2.0 is creating exciting new opportunities in marketing where agents can participate in online communities and expand their reach considerably, just as previous generations have done participating in civic and other community organizations.

Even more exciting, the Social Web is putting the person back into the Internet, rather than having it dominated by big companies. This bodes very well for independent agents who excel in building personal relationships based upon trust.

By developing their personal and agency brands in these online communities, agents are developing “fans” who want

[ 32 ]

to learn more about them and their agencies and visit the agent’s Web site.

These fans often help extend the agent’s reach even further by spreading the agent’s message to all of their own contacts in a viral fashion. Agents are finding that by participating in a combination of social media – blogs, Facebook, Twitter, and LinkedIn being the most commonly used – they are increasing the traffic to their Web site, improving their Web site’s position on search engines, developing new prospects and establishing their credentials as an insurance expert to a wider audience.

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

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

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

Importance of continued investment and innovation Successful businesses continue to invest and innovate in tough markets permitting them to emerge as even more dominant players when the clouds clear away and the sun returns. It is wonderful to see so many independent agencies taking advantage of this period of unprecedented opportunity to employ productive technologies, implement new marketing strategies and transform their staffs’ focus from processing to more proactive service and sales. These agents realize that this is absolutely the best time to be an independent agent because of their unique ability to provide their customers with choices; their ability to engender trust; and their agility to make changes to adjust to new market conditions and take advantage of new opportunities.

Ad Index Commonwealth Insurance Co . . . . . . . . . . . . .23 General Casualty . . . . . . . . . . . . . . . . . . . . . . . . .3 Guard Insurance Group . . . . . . . . . . . . . . . . . . .1 IA&B Series Ads . . . . . . . . . . . . . . . . . . . . . . . .IBC IA&B Partners Program . . . . . . . . . . . . . . . . . . .29 Insurance Innovators . . . . . . . . . . . . . . . . . . . .22 Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC KnightBrook Insurance Co . . . . . . . . . . . . . . .IBC Preferred Property Program . . . . . . . . . . . . . . . .9 Progressive . . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC Susquehanna Ins Agents Alliance . . . . . . . . . . . .5

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

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

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

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

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

Ripe For the Picking Let Interstate help you reap the abundance of summer opportunities.

Your clients with outdoor businesses need extra protection for the unique risks that the summer season brings. Interstate can cover: • Amusement Parks, Batting Cages, Kiddie Rides, Go-Karts & Bumper Boats • Festivals, Special Events, Parades and Carnivals • Hole-in-One and Fishing Contests and Bowling Tournaments • Sports Camps and Instructors • Horse Clubs, Boarding, Shows and Races • Pet Groomers, Kennels and Trainers • Outdoor Guides and Outfitters Interstate also offers coverages for a variety of other seasonal and non-seasonal businesses with special coverage needs including: • Flea Markets and Vendors • Driving Ranges • Beauty and Barber Shops • Health and Fitness Clubs • Bars, Taverns and Restaurants • Lawn Care and Landscaping Contractors • Janitorial and Window Cleaning Services • Power Washers • Garbage and Refuse Haulers

Call Interstate for the best coverages for all your hard-to-place risks.

In Pennsylvania, Maryland, Delaware, West Virginia & Virginia 2307 Menoher Boulevard • Johnstown, PA 15905 814-255-7878 • 1-800-452-0297 • Fax: 814-255-6010 In Ohio, Indiana & Kentucky 663 Park Meadow Road • Suite E • Westerville, OH 43081 614-794-0800 • 1-800-701-5587 • Fax: 614-794-0840 interstate-insurance.com