Primary Agent - March 2011 - MD Edition

MARYLAND

INTHISISSUE: ______________ Legislation: one year later Opportunities for brokers

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Contents PRIMARY AGENT MAGAZINE

Patient Protection and Affordable Care Act: one year later

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Controversy and conflict aside, health care reform is upon us. The March 2010 reform law set the wheels in motion, and a year later, implementation and its recourses are reality. Here, IA&B cuts through the clutter and presents key updates on what members – as producers and as small-business owners – need to know.

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An upside to health care reform Health care reform has cast a dark shadow over the industry. But beyond the concern over commission cuts and the future of producers’ role, there is a bright spot: the blossoming voluntary benefits market.

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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.

In every issue 4 5 6 8 10

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

19 24 28 28 28

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

Subscriptions: Non-member price: $2.25 per copy or $15 per year.

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All communications for publications, including news, features, advertising copy, cuts, etc., must reach the editor by 1st of month two months prior to publication. Advertising rates furnished upon request.

Address inquiries to: Primary Agent Editor PO Box 2023 Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and additional entry post office.

Postmaster: Send address changes to above address.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2011-3) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2011. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

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

David B. Rosenkilde Sr., CIC

Chair of the Board’s M

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

Health care reform: here and now

Members Joyce M. Bailey, CIC, CRM, CPIW Newark, Del. Norman F. Basso, CPCU York, Pa. Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md. Henry “Butch” Bradley, Jr. Crofton, Md. Timothy P. Burris Thompsontown, Pa. John T. “Chip” Colwell Jr., CIC Corry, Pa. N. Lee Dotson, CIC, AAI Wilmington, Del. John L. Frankenfield Telford, Pa. G. Greg Gunn, CIC Lemoyne, Pa. Diana M. Hornung-Momot, ACSR Wilmington, Del. Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, Pa. Robert S. Klinger, LUTCF Germantown, Md. Michael F. McGroarty Sr. Pittsburgh, Pa. Ann Gallen Moll, CIC Reading, Pa.

This month marks a year since health care reform legislation passed. While some of IA&B members’ fears have waned (think: a likely repeal of the burdensome 1099 provision), others have grown as stages of implementation are phased in.

The next year will prove critical. On a national level, producer groups must push for a legislative adjustment to the MLR ruling. Meanwhile, on a state level, it’s crunch time to advocate for privately run health exchanges that involve the producer community.

IA&B members — whether they write health or they operate a small business — will be affected by health care reform. It’s the job of your association to keep you informed of the changes and, wherever possible, advocate on behalf of your best interests.

I invite you to read the latest on reform implications – including a growth opportunity — in this edition of Primary Agent magazine.

And then I encourage you to read Agent Headlines and access iabgroup.com for further updates.

This is a time of great change, a time like no other for the independent agent community. Make the most of your membership.

Until next time, Dave

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

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Member FAQ QUESTION: Do reverse mortgages have any impact on a homeowners’ policy?

ANSWER: In the last couple of years, reverse mortgages have been touted to seniors as a viable financial tool. Consequently, there has been an increase in the number of reverse mortgages secured by seniors, which has led to inquiries into the insurance ramifications.

What is a reverse mortgage?

A reverse mortgage is a product that allows an individual 62 years or older to convert part of a home’s equity into cash without having to sell the home or repay monthly installments. In other words, it allows the equity to become “liquid” without selling the home.

Traditional home equity loans let you access money, but first, you must qualify for the loan, and second, you must repay the loan monthly.

There are different types of reverse mortgages. ◗ Single-purpose reverse mortgages, offered by some state and local government agencies and nonprofit organizations ◗ Federally-insured reverse mortgages, known as Home Equity Conversion Mortgages (HECMs) and backed by the U. S. Department of Housing and Urban Development (HUD)

◗ Proprietary reverse mortgages, private loans backed by the companies that develop them HECMs offer several payment options: ◗ “Term” option — fixed monthly cash advances for a specific time ◗ “Tenure” option — fixed monthly cash advances for as long as you live in your home

While reverse mortgages can be an attractive option, individuals interested in this option should weigh the pros and cons, including upfront costs. For more information on reverse mortgages, several reliable sources have published material on the subject, including: ◗ HUD (http://www.hud.gov/offices/hsg/s fh/hecm/hecm—df.cfm)

◗ Line of credit that lets you draw down the loan proceeds at any time in amounts you choose until you have used up the line of credit

◗ AARP (http://assets.aarp.org/www.aarp. org_/articles/money/financial_pd fs/hmm_hires_nocrops.pdf)

◗ Combination of monthly payments and a line of credit

◗ Federal Trade Commission (http://www.ftc.gov/bcp/edu/pubs /consumer/homes/rea13.shtm)

What about insurance?

From an insurance standpoint, the most significant characteristics of a reverse mortgage are that the homeowner: ◗ Remains in the home ◗ Retains the title/deed to the property As a result, the named insured on the policy is not affected. The lender will be added as a mortgagee, as it would under a traditional mortgage arrangement.

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 | March 2011

As this issue of Primary Agent went to print, two competing, reformimplementation bills were before the General Assembly.

Health care reform: Maryland update Health care reform remains on the fast track in Maryland. In January, the state’s Health Care Reform Coordinating Council released its report to the governor, recommending the creation of a public health care benefits exchange, among 15 other action steps.

IA&B disagrees with the recommendation and maintains that a non-profit entity, involving industry representatives, should oversee the exchange. At the heart of IA&B’s concern is the future of insurance producers: A government-run exchange would not guarantee the role of licensed producers – those with the experience and knowledge to help the public make informed health care decisions – in the delivery of insurance.

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◗ SB 182/HB 166: Administrationbacked legislation to establish a government-run exchange ◗ SB 107: IA&B-supported bill to create a non-profit, rather than public, exchange IA&B continues to advocate for the role of producers in a health benefits exchange — for the livelihood of members and for the success of reform efforts. Members can join the movement by participating in the Health Insurance Buyers and Brokers Coalition (learn more at http://hibbc.org).

By federal law, each state must create an exchange by March 23, 2012 and offer open enrollment by Jan. 1, 2014. For more, read this month’s feature article, Patient Protection and Affordable Care Act: one year later.

Members can anticipate updates from IA&B as legislation is considered and reform initiatives are enacted.

IA&B members set sights on federal advocacy Nearly a dozen IA&B of Maryland members will congregate in Washington, D.C. as part of the PIA Federal Legislative Summit. On their agenda? Communicating independent agents’ opinions on health care reform, optional federal charter, flood insurance and the NARAB Reform Act to a host of freshman legislators and a core group of incumbents.

Look for highlights from the March 31 conference in Agent Headlines and future issues of Primary Agent magazine.

Non-resident licensing 101 Securing (and maintaining) a nonresident license just became a bit easier.

Noticing an increase in member inquiries, IA&B created a Web page reviewing the process for individuals and agencies to secure a non-resident license in various states.

The information reminds producers: ◗ An agency usually must first register the business with the Secretary of State

The National Insurance Producer Registry’s website has become a gateway for non-resident licensing.

A shortcut is available from IA&B’s Web page to directly access the State Matrix of Business Rules, which provides a summary of each state’s requirements.

New year’s headaches for producers who write in N.Y. A sobering reality took hold Jan. 1: implementation of New York’s compensation disclosure requirement. And non-resident producers must comply.

Access the resource: www.iabgroup.com/md/licensing/ non_resident

IA&B members have access to the association’s New York affiliate’s disclosure templates, which received the New York State Insurance Department’s blessing.

Nearby news:

The regulation requires a producer to explain the following when a consumer applies for a policy:

Delaware crop insurance sales Producers with a non-resident property or a property/casualty license in Delaware must amend their existing license to add the new crop line of authority. This ensures their continued ability to sell crop insurance in The First State.

No fee will be charged for the amended license, but the request should be submitted by March 31, 2011, according to the Delaware Department of Insurance.

◗ the producer’s role in the transaction ◗ whether the producer will receive compensation from the insurer based on the sale ◗ that a producer’s compensation varies depending upon the volume of business done with an insurer or profitability that the consumer may request additional information on the producer’s expected compensation

Read more: http://delawareinsurance.gov/ departments/licensing/WebPageCrop Notice.pdf

If asked, the producer must provide written disclosure of the anticipated compensation as well as any alternatives.

Access form to amend license: http://delawareinsurance.gov/depart ments/licensing/New2C.pdf

New York producer groups, which lost a legal challenge in late November, vowed to appeal the ruling. IA&B will update members on their progress.

◗ A “registered agent” is often needed to finalize the registration ◗ Knowing and monitoring each state’s filing and tax requirements should be addressed up front to avoid nasty surprises ◗ Licensing the individual and the agency with the Department of Insurance is generally the easiest part of the process [7]

Coverage Primary Agent | March 2011

CORNER

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

“This insurance does not apply to ‘bodily injury’ or ‘property damage’ expected or intended from the standpoint of the insured.

This exclusion does not apply to ‘bodily injury’ resulting from the use of reasonable force to protect persons or property.”

say. The following are a few examples of how the courts have interpreted the “intentional injury or damage” exclusion.

Case #1: Two fourteen year-old boys were playing war with their BB guns in one of the boy’s backyard. Their playful shootout resulted in one of the boys being hit in the side.

He then aimed his BB gun in the general direction of where he believed the other boy to be, fired the gun and hit him in the left eye.

Sound familiar? It should.

This is the first exclusion under the Coverage A – Bodily Injury and Property Damage section of the Commercial General Liability (CGL) policy. This exclusion is not unique to the CGL – it’s also included in the Business Auto, Personal Auto, Homeowners’ and Umbrella policies.

The resultant liability claim against the boy’s parents was denied by their Homeowners’ insurer, Wisconsin Physicians Service Insurance. The boy who shot his friend testified, “I was intending to shoot him in the arm or leg just to cause a slight sting, a sharp pain like he did to me. I didn’t want to cause serious injury.” The trial court, referring to the “intentional injury or damage” exclusion, found in

We’ve always assumed this exclusion does not apply to “intentional acts,” but to “intentional results.” In other words, “I intended to do that, but I didn’t intend to hurt anyone” should be covered.

However, as is the case with most of our policies and their exclusions, it’s not what we think, but what the courts [8]

favor of the insurance company.

On appeal, the Wisconsin Appeal Court stated, “So long as the actor intends to inflict a personal injury, the requisite intent is established even though the actor did not intend the particular injury that occurred.” The judgment of the trial court was affirmed in favor of the insurance company.

Case #2: The co-owner of a clothing store set fire to the store and its contents, which caused substantial damage to a shopping store and surrounding stores. Great American, the liability insurer of the clothing store, denied the claims of the property insurers of the shopping center and the other tenants on the basis that the loss was not an accident.

Both the trial court and the appeal court concluded that the insured did not intend to destroy the property of

others and therefore the “intentional injury or damage” exclusion did not apply.

The case was then appealed to the Louisiana Supreme Court. The court determined that the insured used four to five gallons of gasoline to start the fire in a 25 x 82 foot space, which was enough to destroy the entire shopping center had it not been for the fast response of fire fighters. They found this amount of gasoline to be excessive for the intent to destroy the clothing store’s merchandise and concluded that, “…..no reasonable person would believe that his insurance policy would provide coverage for his criminal act or arson.”

The judgment of the trial court, which was affirmed by the appeal court, was reversed in favor of the insurance company and against the parties seeking reimbursement.

Case #3: Overwhelmed by business problems, the owner of a music store placed a connected soldering iron on a pad soaked with cleaning fluid. He left the store, and a fire ensued that destroyed the building. It also damaged three adjoining buildings and resulted in serious injury to a fireman. The insured store owner admitted to having committed arson.

It was not disputed that, with respect to damage to the adjoining buildings, the fire was not an accident and the consequences of the insured’s actions were predictable. Therefore the insured’s liability insurer, Frankenmuth Mutual, was not obligated to defend the lawsuits for property damage.

However, the firefighter and his wife sued the store owner for his injuries and loss of consortium. Both the trial court and the appeal court determined that, although the insured intended to cause property damage, he did not

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intend to injure the firefighter. Based on their decision, the insurance company had a duty to defend the insured against the injury claim.

business on fire and that bodily injury occasioned by the firefighter was not the direct result of the insured’s conduct.”

Frankenmuth Mutual appealed this decision to the Michigan Supreme Court. The court concluded that, “…..the insurer has a duty to defend the insured in this personal injury suit because there are no facts to suggest that the insured intended to inflict bodily injury on anyone by setting his

Sounds like to me the courts are saying, “If the results of your actions are predictable, the resultant injury or damage is excluded.”

Y’all take care!

Glance at Events M A R C H

C A L E N D A R

Date

Topic

Location

1-3

L&H Licensing Study Course

Mechanicsburg, Pa.

8

CISR-Personal Auto Course

Pittsburgh, Pa.

William T. Hold Seminar

Lehigh Valley, Pa.

CISR-Personal Auto Course

Altoona, Pa.

CISR-Agency Operations Course

Lancaster, Pa.

14

CISR-Personal Residential Course*

Philadelphia, Pa.

15

CISR-Personal Auto Course*

Philadelphia, Pa.

10 Ways to Get Sued Seminar

Baltimore, Md.

CISR-Agency Operations Course*

Philadelphia, Pa.

William T. Hold Seminar

Baltimore, Md.

CISR-Personal Auto Course

Newark, Del.

16-18

J.K. Ruble Graduate Seminar

Ellicott City, Md.

17

CISR-Commercial Property Course*

Philadelphia, Pa.

18

CISR-Commercial Casualty Course*

Philadelphia, Pa.

21

Navigating Contractual Liability and Certificates of Insurance

Mechanicsburg, Pa.

22

CISR-Personal Auto Course

Reading, Pa.

10 Ways to Get Sued Seminar

Philadelphia, Pa.

23

CISR-Personal Auto Course

York, Pa.

23-26

CIC-Personal Lines Institute

Newark, Del.

28-31

CIC-Commercial Property Institute

Erie, Pa.

29

CISR-Personal Auto Course

Pittsburgh, Pa.

30

CISR-Personal Residential Course

State College, Pa.

CISR-Commercial Property Course

Altoona, Pa.

Navigating Contractual Liability and Certificates of Insurance

Philadelphia, Pa.

Navigating Contractual Liability and Certificates of Insurance

Baltimore, Md.

9

16

31

*CISR Marathon Week

Spring into CISR designation: March has it all. Personal Auto and the four other CISR courses are available individually in various locations, or you can take them all in the same location during Marathon Week in suburban Philadelphia. A new William T. Hold update is also scheduled in two locations. For more information and to register, visit iabgroup.com/education or call the Member Service Center at (800) 998-9644, option 0.

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trust. acuity.com

INDUSTRY NEWS

Patient Protection and Affordable Care Act: one year later Where we’ve been, where we’re going and what it means to members

Controversy and conflict aside, health care reform is upon us. The March 2010 reform law set the wheels in motion, and a year later, implementation and its recourses are reality. Here, IA&B cuts through the clutter and presents key updates on what members — as producers and as small-business owners — need to know.

Primary Agent | March 2011

T

he divisive and controversial Patient Protection and Affordable Care Act of 2010 sent shockwaves through the country. In fact, many political observers have cited last year’s passage of federal health care reform as the impetus for November 2010’s historic and tidechanging elections that left an undeniable dent in the Democratic Party’s armor.

The U.S. House of Representatives swung solidly to the right last fall as Republicans gained over 60 seats — the largest shift in the House since the Great Depression.

Republicans now hold a 49-seat majority over their Democratic colleagues and with it the ability to filibuster any unfavorable legislation.

Many state legislatures switched party leadership as well, and 11 new Republican governors are now at the helm, adding to the 19 who were already in place. These leaders will play a major role in how the law is implemented in their states.

As Congress starts a new legislative session, controversy continues to shroud health care reform legislation. House Republicans repealed the law in a largely symbolic vote, entitled “Repealing the Job-killing Health Care Law Act.” In the meantime, the Congressional Budget Office estimated that repeal of the law could add $230 billion to the deficit over the next 10 years.

Then there are the legal challenges. A federal judge in Florida found the law’s individual mandate, requiring all Americans to have health coverage, to be unconstitutional in a late-January ruling. This followed a Virginia judge’s similar ruling in December. However, courts in two other cases upheld the mandate. Many suspect the Supreme Court ultimately will have to resolve the issue.

While the political environment may have become more unstable, the effects of the Patient Protection and Affordable Care Act of 2010 are here to stay. Already, in the 12 months since its March 23, 2010 passage, several reforms have been implemented: tax credits for small businesses, the extension of health care coverage to young adults and measures to expand coverage for those with pre-existing conditions.

As additional regulations are phased in, IA&B will keep members apprised. The following pages highlight some of the already-enacted components that members, as producers and as small-business owners, need to know.

Medical loss ratios In late November, the U.S. Department of Health and Human Services issued a final interim rule on medical loss ratios (MLRs) – the amount of premium dollars spent directly on care in relation to that spent on administrative costs. (A final interim rule carries the full force of the law but allows for comments and the opportunity for a revised final rule.)

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The MLR ruling already has begun to hurt producers as some insurance companies cut commissions to become compliant.

INDUSTRY NEWS

The ruling determined that, as of Jan. 1, 2011, insurance companies in individual or small group markets must spend 80 percent of premium dollars on medical care or quality improvement measures. The threshold rises to 85 percent for those companies in large group markets. Insurance companies also are required to publicly report how they spend premiums. Those companies not meeting the MLR standards will be required to provide rebates to their consumers (individual policyholders or employers) starting in 2012.

The National Association of Insurance Commissioners (NAIC) failed to recommend that commissions be removed from MLR calculations in its report to

the Department of Health and Human Services, despite the support of 15 commissioners at the NAIC’s fall 2010 meeting.

Therefore, the MLR ruling also qualified agent and broker commissions as “non-claims costs,” defined as those costs not used to adjust premiums or incurred claims or to improve quality care. The producer community continues to argue that commissions are passed 100 percent to third parties and, therefore, are pass-through fees that should not be included in the administrative definitions.

The MLR ruling already has begun to hurt producers as some insurance companies cut commissions to become compliant. For example, effective Jan. 1, 2011, Blue Cross Blue Shield of Delaware now

◗ Free preventative care and prescription drug discounts available to seniors ◗ Establishment of a new Center for Medicare & Medicaid Innovation ◗ Option to provide home and community-based services through Medicaid ◗ MLR ruling that 80-85 percent of premium dollars be spent on health care services

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pays just 5 percent across the board. They previously had given 15 percent commission for first-year plans and 7 percent for subsequent years. Expanded over the industry, these cuts could lead to job losses, business closures and an unstable insurance market overall.

Each state’s insurance commissioner is charged with overseeing implementation and may request up to a three-year “adjustment” of the MLR regulation for individual markets, based on projected disruptions. IA&B has requested such a deferment for Pennsylvania, Maryland and Delaware. In the meantime, Congress may address the MLR formula through legislative changes to the health care law.

◗ Increase in usage of electronic health records to streamline billing and information sharing ◗ Creation of a voluntary long-term care insurance program to provide cash benefits to adults who become disabled

IA&B continues to monitor potential repeals of or changes to the regulation.

1099 provision A bright spot in the battle over health care reform implementation is the likely repeal of the 1099 provision. The onerous mandate requires that all businesses issue a form to vendors from whom they purchase goods totaling $600 or more (e.g. Internet services or a computer) during a calendar year. It is scheduled to take effect in 2012.

IA&B and its national affiliates have advocated against the mandate, citing the additional paperwork, record keeping and accounting work for agents. The arguments have found support in Congress.

At the start of this legislative session, Rep. Daniel Lungren (R-Calif.) introduced the “Small Business Paperwork Mandate Elimination Act,” aimed at eliminating the Form 1099 _______________________________ The onerous [1099] mandate requires that all businesses issue a form to vendors from whom they purchase goods totaling $600 or more. _______________________________ requirement from the health care reform law. And, a lastminute amendment to a bill to include a repeal provision, sponsored by Sen. Debbie Stabenow (D-Mich.), easily passed the Senate in early February. Several attempts.

Several attempts to repeal this

requirement failed last legislative session due to timing (end of session), political posturing (both parties wanted to take credit) and cost (repeal removes $19 billion in estimated additional revenue). But Republicans campaigned on the promise to address this issue, and Rep. Lungren’s bill already has more member support than past attempts. The issue has been broadly supported by both parties, and President Obama has stated he is open to the amendment.

Health exchanges The health care reform bill calls for each state to set up an exchange, or marketplace, that would allow qualifying individuals and small businesses (fewer than 100 employees)

◗ Additional funding for state Medicaid programs that cover preventive services

◗ Prohibition on denying coverage based on pre-existing conditions or gender

◗ Increasing Medicaid payments for primary-care doctors

◗ Prohibition on annual insurance coverage limits

◗ Additional funding for the Children’s Health Insurance Program (CHIP)

◗ Establishment of operational health insurance exchanges in the states ◗ Increased smallbusiness tax credit ◗ Increased access to Medicaid

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INDUSTRY NEWS

to purchase health insurance.

The exchange is intended to provide a “one-stop-shop” for insurance coverage. _______________________________ IA&B continues to communicate with the insurance departments and state legislatures to advocate that the exchanges are run by a nonprofit entity and inclusive of stakeholders from small business and producer communities. _______________________________ As outlined by the Department of Health and Human Services, the exchanges will be required to: ◗ Operate an informational hotline ◗ Maintain a website for plan information ◗ Assign price and quality rating to available plans ◗ Present information on plan benefit options ◗ Provide information on Medicaid and CHIP eligibility Exchanges may be run as a governmental agency or a nonprofit entity. Regardless of organizational form, the exchange must provide consumers with options and should offer comparison tools based on quality and price.

States do have the option of creating regional exchanges or establishing an interstate system.

The health care reform bill requires that exchanges are created by March 23, 2012 and operational (that is, offering open enrollment) by Jan. 1, 2014.

If a state fails to act, then the federal government will step in to establish an exchange by Jan. 1, 2013. The federal government has given the states millions in federal grant monies to plan the exchanges, but each one must be self-sustained by 2015.

IA&B continues to communicate with the Pennsylvania, Maryland and Delaware insurance departments and legislatures to advocate that the exchanges follow the following principles: ◗ Run by a nonprofit entity, not a government agency ◗ Inclusive of stakeholders from small business and the producer communities ◗ Focused on providing coverage for those currently uninsured ◗ Bound by the same regulations currently governing health insurance producers ◗ Limited to providing health insurance and related products only ◗ Prohibited from direct solicitation of those already served by the private insurance market Maryland is moving quickly to create an exchange with competing bills already before the legislature. One heavily favors the creation of a

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government agency, while the other supports producers' concerns. Pennsylvania and Delaware are still in exploratory phases. IA&B will continue advocating for the preservation of producers’ vital roles.

High-risk pools The mandated creation of state high-risk insurance pools were one of the first health care reform provisions to take effect, with enrollment beginning in August 2010. The pools are designed to cover people who have been denied insurance due to pre-existing conditions and have been without coverage for at least six months. The pools will be in effect at the state level until 2014, at which point insurance companies will be required to cover everyone regardless of their medical history. The reform law does allow for the secretary of the Department of Health and Human Services to cap enrollment in a pool, but for now limitations are not expected.

States had the option of deferring to the federal government to run their high-risk pool. Delaware, along with 20 other states, chose this option, while Pennsylvania elected to run its own high-risk pool. Maryland acted quickly during the 2010 legislative session and passed legislation to put a high-risk pool in place before the federally imposed deadline. The bill authorized the Maryland Health Insurance Plan (MHIP), which already served Marylanders who were unable to secure coverage from other providers, to

Primary Agent | March 2011

enter into an agreement to serve as the state’s pool.

While the high risk pools were up and running quickly, lingering concerns remain as to their long-term financial viability. The Department of Health and Human Services recommends shifting money from states not using all of their allocated funds to those in need of more to solve the problem. The health care reform law allotted $5 billion for the pools, but several estimates, including one from the Congressional Budget Office, indicate that the actual amount needed will be significantly higher due to public demand.

Looking ahead…

In 2012 the new law will institute a series of changes to standardize billing and require health plans adopt and implement rules for the electronic exchange of health information. Even further down the line, most individuals who can afford it will be required to obtain basic health insurance coverage or pay a fee to help offset the costs of caring for uninsured Americans in 2014. As these and other tenets of the law are implemented, uncertainty grows for producers, insurers and consumers.

IA&B is dedicated to continued advocacy at the federal and state level to ensure the smoothest transition possible and the preservation of producers’ interests. Members can stay abreast of reform implementation and IA&B’s advocacy by reading

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Agent Headlines and Primary Agent and by following IA&B on Twitter.

Note: This article was accurate as Primary Agent went to print.

Legislative updates will be communicated via Agent Headlines.

_______________________________

Nicole Grear, government affairs assistant, and Kari Kissinger, government affairs director, penned this article.

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

FEATURED PARTNER: Millers Mutual Group CHIEF EXECUTIVE OFFICER: Robert L. Lyon, Chairman, President/CEO

COMPANY LOCATION: Harrisburg, Pennsylvania A.M. BEST RATING: A- (Excellent)

A

t Millers Mutual, we are committed to developing a genuine rapport and lasting relationship with each of our agency partners, as we continue to build an enviable reputation for integrity, stability, and personal service that can’t be matched by national or large regional carriers.

So we are delighted to have placed so highly in IA&B’s most recent Carrier Satisfaction Survey, where agents ranked us among the Top 3 carriers on important dimensions such as underwriting flexibility and low turnover of staff, providing a consistent and stable market, and confidence in our management team.

Strong relationships flourish when agents know what to expect from a financially sound company. In an era

when carriers move in and out of markets unpredictably, agents appreciate having a stable market for small to mid-sized commercial accounts and property risks, expertly underwritten, with attention to detail, and a decided preference for understanding the unique characteristics of each account.

Admittedly, we conduct business the old-fashioned way — we listen and we care.

Our promise is a simple one — there’s simply more for you at Millers. More support for your agency, more attentive personal service, more strength and stability, and more across-the-board satisfaction. But don’t take our word for it: Trust the people who know us best — the independent agents who work with us every day.

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

GOLD LEVEL

BRONZE LEVEL Aegis Security Insurance Co Agency Insurance Company Auto-Owners Insurance Company Briar Creek Mutual Insurance Company Builders Insurance Group Chubb Group of Insurance Companies Encompass Insurance First General Services Foremost Insurance Group Goodville Mutual Casualty Company Grange Insurance Companies Guard Insurance Group Hanover Fire & Casualty Insurance Company Insurance Alliance of Central PA Inc Insurance Placement Facility of PA

Allied Insurance MMG Insurance Progressive

Keystone Insurers Group Inc

SILVER LEVEL

Merchants Insurance Group

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

Mercury Casualty

Lebanon Mutual Insurance Company Mercer Insurance Group

Penn Millers Insurance Company Penn PRIME Municipal Insurance Reamstown Mutual Insurance Company Rockwood Casualty Insurance State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Mutual Service Office Inc Tuscarora Wayne Insurance Company Primary Agent March 2011

MARKETS

An upside to health care reform Increased need for information creates opportunity for brokers

Health care reform has cast a dark shadow over the industry. But beyond the concern over commission cuts and the future of producers’ role, there is a bright spot: the blossoming voluntary benefits market.

Primary Agent | March 2011

E

mployers are working overtime to sort through the details of the new health care reform legislation and its effect on their benefits programs. Although the legislation creates lots of changes for employers and the medical insurance they offer employees, experts predict the impact on voluntary benefits to be minimal. That is good news for everyone, but it is an especially welcoming message for major medical brokers looking for new sources of revenue.

As health insurance becomes more widely available during the next few years, voluntary benefits will still be in demand to help employees strengthen their financial safety nets as they face more risks and costs. Because of its complexity, health care reform will also create a growing need for effective benefits communication and education at the worksite. In fact, the need for voluntary benefits, coupled with effective benefits communication and education, will be stronger than ever. You do not want to miss out on this tremendous sales opportunity by taking a wait-and-see approach.

The need for voluntary benefits, coupled with effective benefits

communication and education, will be stronger than ever.

Many of the changes outlined in the legislation will take several years to implement. In the meantime, we are confident that: Voluntary benefits will be minimally affected in the short-term.

The insurance market reforms in the legislation address comprehensive major medical insurance coverage and not plans considered excepted benefits from the portability, access and renewability requirements of HIPAA. Excepted benefits would include accident, disability, specified disease and hospital indemnity coverage.

Voluntary insurance coverage still will be a very relevant part of employee benefits.

Voluntary products are in demand in today’s marketplace – even for the shrinking number of employers with rich benefit plans – because they help pay expenses not covered by major medical insurance.

Voluntary products can help employees strengthen their financial safety nets as more risks and costs become their responsibility.

The need for benefits communication and education is growing.

The shift of more benefits decision-making to employees increases the demand for clear information so they can make the best choices for themselves and their families.

Even in a time of relatively high unemployment, employers still want to retain their best workers. Benefits communication helps employees understand and value their benefits package, as well as their employer’s investment in benefits.

The flexibility and cost savings offered by voluntary benefits help explain their rising popularity among employers and employees in recent years. The 2009 sales of voluntary benefits

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___________________________ The 2009 sales of voluntary benefits nationwide increased 3.3 percent from 2008, and expectations are high for the near future. ___________________________

MARKETS

nationwide increased 3.3 percent from 2008, and expectations are high for the near future.

A recent study conducted by Eastbridge Consulting Group showed that 20 percent of employers indicate they are likely to add at least one employeepay-all benefit in the next 18 months. Another Eastbridge study indicated that 82 percent of respondents believe that employees will be more enthusiastic about voluntary benefits 12 months from now.

Partner with an expert You will be surprised and relieved at what the right voluntary benefits provider can

do for you at no cost. Instead of offering your clients the dreaded annual health insurance rate increases, you may be able to bring them cost-saving solutions with the potential to increase employee satisfaction and retention.

You no longer have to be the expert on every new product and every new trend in employee benefits. The right voluntary benefits provider knows about product and enrollment trends, can provide the most desirable products and services, has in-depth experience in worksite marketing and can deliver ongoing solutions.

What’s more, the right voluntary benefits partners truly are partners. It is your decision whether they have an active or silent role with your clients. You should feel comfortable and confident with them so you’re able to call on their experience and insights and feel free to use them as a sounding board.

They should also offer comprehensive resources so they can actively market to your accounts and provide ongoing account service. You’ll find that the right partner is like adding a skilled, professional employee to your agency at no cost to you.

At Frederick Mutual, we adhere to the following Pillars of SUCCESS

S U C C E S S

Frederick Mutual Insurance Company, an AM BEST A- (Excellent), VI property/casualty insurer writing in Maryland and Pennsylvania is currently looking for experienced property/casualty insurance agents licensed to write personal and commercial lines business in Maryland and Pennsylvania. Frederick Mutual, a niche company, specializes in writing Small Artisan Contractors, Mainstreet BOP Business, Homeowners, Dwelling Fire and Personal Umbrella.

ecurity in Your Time of Need nparalleled Customer Service orporate Integrity ompetitive Pricing

Established in 1843, we pride ourselves on our quality of service and desire to partner with equally dedicated professionals.

ase of Doing Business uperior Financial Strength

Additional background information regarding Frederick Mutual is available on our website at www.fredmut.com.

ound Products

57 Thomas Johnson Drive, Frederick, MD 21702-4301 301-663-9522

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What to look for in a partner With more and more companies getting into the voluntary benefits arena, you have more choices than ever for finding a partner. So how do you choose?

Start by finding out if your potential partner has limits on account size. You want someone who says yes when you call for help, not someone who makes you jump through hoops or is only interested in the big accounts. You want a voluntary benefits partner that is eager to help you enroll accounts of any size and shape.

Look at your potential partner’s track record. What is its persistency rate? This measure will tell you if the employees keep the products they have purchased. The higher the persistency rate, the better your partner is at initial and reenrollments. You will also want to see performance survey results on the company’s enrollment team.

You do not have to go it alone.

The right voluntary benefits partner can help you maintain long-term relationships with your clients and provide additional income opportunities that will bring in more revenue

[ 23 ]

year after year. Take advantage of the increased interest in voluntary benefits and benefits communication, and talk to a voluntary benefits provider today. _______________________________

Chris Ginakes is a public sector manager for Colonial Life with an office in Daytona Beach. This article originally appeared in the October 2010 issue of Florida Underwriter magazine and was reprinted with permission.

Primary Agent | March 2011

Technology U P DATE

MAINTAINING POLICIES LOCALLY IN TODAY’S AGENCY AND E-MAILING POLICIES TO CLIENTS JEFF YATES Jeff Yates is Executive Director of the Agents Council for Technology (ACT) which is part of the Independent Insurance Agents & Brokers of America.

Jeff can be reached at jeff.yates@iiaba.net. This article reflects the views of the author and should not be construed as an official statement by ACT.

As agencies go paperless and carriers stop providing paper policies, agencies have to decide whether to continue to retain policies locally or rely on electronic policy view to access the policies on the carrier’s website. Agencies also are considering whether to begin to e-mail policies to clients, rather than sending them paper copies. Since I get these questions frequently, I decided to reach out to a number of agency consultants and E&O risk-management experts to get their insights on these questions. (Please see acknowledgements at the end of this article for the names of these individuals.)

Agency retention of policies Many agencies have decided to retain commercial lines policies locally, even if they have a good download of policy data and electronic policy view in place, because they find they need to refer to these policies and endorsements frequently

when coverage and claims issues arise. In contrast, many agencies with a good download in place have decided not to retain personal lines policies locally because they are able to handle the typical client inquiries without referring to the policies. Often these questions relate to billing and making a payment, and the agents are able to handle these inquiries efficiently by using real-time billing inquiry and make-apayment functionality.

2. Is there a good download in place for the line of business, and is my database accurate? If there is not a good download for the business, then the agency will probably want to retain at least the dec page locally.

Each agency is different, however, so I have provided a list of considerations to assist agencies in deciding this question:

4. Does the carrier provide links on the dec page to all of the actual policy forms and endorsements applicable to that risk — not just the latest editions of these forms — so that they are easy to access?

1. How frequently does the staff need to refer to the actual policies for the line of business and for what purposes? Does the amount of usage justify the amount of time it will take to attach them to the client file?

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3. Does the agency use the dec page for policy checking and like to retain it as part of the documentation of the policy checking process?

5. Has the carrier provided a contractual guarantee that the agency will continue to have access to its policy information in the event the carrier or the agency terminates the

relationship? This commitment should be for the statutory period in which the agency must retain this information (usually seven years).

6. Do the applicable state laws require the agency to retain the policy documents locally or is access to them at the carrier website sufficient?

Agencies should go through the same analysis with regard to their E&S policies.

Industry opportunity Since many agencies have made the decision to retain commercial lines policies locally, it is incumbent on carriers and agency management system providers to make it as simple as download for agencies to attach these policies to their client files.

One approach would be to give the agency the option to have the carrier download PDFs of policies (new, renewal and endorsements) each evening using real-time activity notifications and alerts. An option could even be given to receive the dec pages with links to the actual policy forms or the complete policies.

Agency management systems should have the capability to route these notifications to the appropriate person in the agency for checking and attachment to the client file. Using this real-time workflow would be an improvement over the e-mailing of these policies because of the added security and transmission directly into the agency management system.

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Since some agencies use the personal lines dec pages to check policies for accuracy and then retain them, the same workflow should be made available to agencies for personal lines.

Delivering client policies electronically Agents are generally supportive of personal lines carriers that give clients

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[ 25 ]

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Service is our specialty; protecting you is our mission ®

TECHNOLOGY UPDATE

discounts in order to go paperless and access their policies electronically. In the commercial lines and E&S markets, however, many agents are concerned about the inefficiency and cost shifting that takes place when carriers stop sending the paper policies to the agent for delivery to the client because many insureds still want the paper.

Electronic policies represent the future and are more efficient in many ways (no mail time, do not need to be scanned into agency system, potentially save printing costs). Agents should encourage their clients to make the transition to electronic policies in the same way that other financial services companies are inviting their clients to move to electronic delivery.

Carriers, in turn, should help their agents with this transition by providing them with electronic policies and the option to receive paper copies for clients who are not ready to accept the electronic model.

Many agencies like to deliver commercial lines policies to their insureds personally and are now delivering these policies on a CD as an

added value, where clients agree to this method. Several larger agencies provide a secured area on their website where clients can access their policies. Hopefully, technology providers will increasingly provide turn-key solutions for the broader agency population so that they can provide their clients a secured portal for accessing their policies, as well as linking to their carriers to make payments and perform other selfservice functions. This is an area in which ACT’s Consumer Functionality Work Group is trying to spur more industry action.

E-mailing policies to clients In this emerging paperless environment, many agencies are considering e-mailing policies to their insureds. There are several issues for agencies to assess and then incorporate into their procedures when considering such a change in delivery: 1. Confirm that the particular state’s laws and regulations permit the e-mailing of policies and do not require that the insured be provided a physical copy.

2. Secure the advance agreement of the client to receive policies electronically by e-mail.

3. Provide in the e-mail attaching the policy a request that the client acknowledge receipt of the e-mail and policy by return e-mail and have a procedure — that is consistently followed — of following up with the insured if he/she does not acknowledge receipt.

4. Include in the e-mail a disclaimer that the insured should read the policy to ascertain that its limits

[ 26 ]

and coverages are appropriate for its needs and that it should contact the agency if it would like to add any coverages or make any changes. The notice should also give the insured the option to elect to receive paper policies. (This disclaimer should be provided in the cover letter that accompanies the personal delivery of a paper policy or CD as well.)

5. Check the policy for accuracy before sending as provided in the agency’s procedures.

6. Send the e-mail by secure e-mail if the policy contains any private personal information under the applicable state and federal privacy and data breach notification laws.

Such private information might include the federal employer identification number, driver license numbers, etc. ACT encourages the use of TLS e-mail encryption for secure e-mail, and TLS works very well in agent-carrier communications when both parties have it. A proprietary secure e-mail solution, however, will be necessary for many client communications when the client does not have TLS. 7. Deliver the policy to the client promptly after being received — whether e-mailed or delivered personally — and avoid any agency backlog in policy deliveries.

8. Document in the agency management system that the policy has been sent, the steps taken to follow up if necessary and attach the transmittal e-mail in unalterable form.

The emergence of a paperless environment is precipitating changes in agency workflows and is creating opportunities for carriers and technology providers to provide new tools to help agencies function more efficiently in this new environment. These new tools include the use of activity notifications and alerts to send electronic policies to agencies and the availability of easy-to-use and cost-effective plug-ins to enable agencies to provide secure portals for their clients to access documents and to perform other services online.

Acknowledgements: Thank you to the following agency consultants for their insights on these issues: Pat Alexander, Steve Anderson and Laura Nettles. Thank you also to the following agency E&O risk management experts: Dave Hulcher, IIABA; Jim Keidel, Keidel, Weldon & Cunningham; and Sabrena Sally, Westport Insurance Corporation. Last but not least, thanks to the ACT Agent Feedback Group for its input.

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Zachary Eaton sustained a broken finger when he was caught in a skirmish at an Orono, Maine nightclub – aptly named Finger Rock Bar. While removing an unruly patron, a bouncer slammed open a door and inadvertently caught Eaton’s hand.

Eaton required medical treatment and claimed lost income. A Superior Court Justice signed a judgment in Eaton’s favor, requiring that the nightclub’s owner, Albenco, Inc., provide him with $125,000.

Ad Index ACUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Brokers Surplus Agency . . . . . . . . . . . . . . . .3, 27 Commonwealth Ins Co . . . . . . . . . . . . . . . . . . . .1 Frederick Mutual Ins Co . . . . . . . . . . . . . . . . . .22 Guard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Harford Mutual . . . . . . . . . . . . . . . . . . . . . . . . .25 IA&B Partners Program . . . . . . . . . . . . . . . . . . .19 IA&B Series Ad . . . . . . . . . . . . . . . . . . . . .23, IBC

When Eaton attempted to collect the money from Albenco’s insurer, Penn-America Insurance Company, the carrier moved for a summary judgment. PennAmerica pointed to the CGL exclusion for “‘bodily injury’ … or any other damages resulting from assault and battery or physical altercations that occur in, on, near or away from the insured’s premises.”

Eaton argued that because intentional physical contact is required for an assault and because the bouncer didn’t intend to assault him, the exclusion didn’t apply.

The court disagreed. (For more on this argument, read this month’s Coverage Corner.)

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

In the end, Eaton watched the cash slip through his fingers, as a District Court ordered in favor of Penn-America.

Penn National Insurance . . . . . . . . . . . . . . . . . .9

Source: U.S. District Court, District of Maine, CV-09-71-B-W

Insurance Club of Pittsburgh . . . . . . . . . . . . . .27

Preferred Property Program . . . . . . . . . . . . . . .25 Progressive . . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC TAPCO Underwriters . . . . . . . . . . . . . . . . . . . . .17

[ 28 ]

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