Primary Agent - September 2009 - MD Edition

MARYLAND

ALSO IN THIS ISSUE ________________ Coverages for swine flu claims

THESE AGENTS HAVE MADE THEIR MARK Congratulations to Progressive’s Signature Agents PROGRESSIVE

LȨȞȽǸɜɤɑȐ ȞȐȽɜ

Congratulations to the 43 Pennsylvania independent agents who’ve achieved Signature AgentSM status in our new Progressive Preferred program.

The program recognizes and rewards agents for selling an average of at least one preferred Progressive personal auto policy per week. This elite group now earns higher commission and a variety of additional benefits, including the opportunity to leverage more of Progressive’s marketing firepower.

James Wade

Jim Iddings

Tom Wolf

Roy Thompson

Robert Coleman

Wade Insurance Philadelphia

Iddings Insurance Agency Wyalusing

Wolf Insurance Agency Nazareth

Thompson NE Insurance Scranton

Coleman Insurance Agency Gilbert

James Ford and Stephen Brown

David Sciolla

Brian Miller

Ron Maerz

Jim Hoffman

Sciolla Agency Ivyland

Miller Insurance Agency Jonestown

The Insurance Man Roslyn

J E Hoffman Agency Hawley

James Ford and Stephen Brown Agency Philadelphia

John Sciolla

Zheng Niu

Gary Orvieto

John Coolbaugh

Sciolla Agency King Of Prussia

Metro Insurance Services Philadelphia

Imperial Agency Bala Cynwyd

Coolbaugh Insurance Agency Stroudsburg

James Morrell First National Insurance Agency Meadville

Steven Goldberg

Bill Riemenschneider

Doug Erwin

Brian Fitzsimmons

Contemporary Insurance Agency Monroeville

Riemenschneider Agency Lansdale

Advanced Insurance Solutions Hershey

Fitzsimmons Insurance Agency Forest City

Lee Hinkle

Anita Allegrezza

Jeffrey Pompei

Hinkle Agency Inc Richboro

Freedom Insurance Group Philadelphia

Brian Tirpak

Carl Karschner

Tirpak Insurance Tamaqua

William R. Karschner & Son Coudersport

Richard Hirsch

Kathleen Johnston-Parone

Sterling Insurance Agency Levittown

Henderson Agency Aliquippa

Pompei Insurance Agency King Of Prussia

Michael Padgeon Juniata Insurance Agency Philadelphia

Tom Florey Florey Insurance Agency Clarks Summit

Mike McCorriston McCorriston Agency Newtown

Michael Fulginiti

Paul Barzd

Fulginiti Insurance Aston

B & W Agency Washington

Cliff Hutchens

Mike Guerrini

Cliff Hutchens Agency Philadelphia

Guerrini Insurance York

In Memory of Mark Coleman* Coleman Insurance Inc Pittsburgh Felicia Katz Shirley Katz Inc Stroudsburg/E Stroudsburg

Mike Bastendorf AAA Insurance Agency Harrisburg/Lancaster

Teri Miller Miller & Miller Agency Slatington

Dan Morton D J M Insurance Agency Mechanicsburg

Brian Corbett Corbett Insurance Shavertown

Andrew Bommentre Fry & Bommentre Incorporated Warminster

Gary Dijosie Dijosie Insurance Services Philadelphia

Robert Moran Moran Insurance Harleysville

Mark Johnson Runkles Insurance Agency York

*We'd like to offer our condolences to the family, friends and associates of Mark Coleman of Coleman Insurance in Pittsburgh.

Mark passed away suddenly on July 19, 2009.

To find out what you need to do to make your mark as a Signature Agent, contact your Progressive account sales representative.

The Progressive Preferred program is currently only available in Pennsylvania and Colorado.

©2009 Progressive Casualty Insurance Company and its affiliates, Mayfield Village, Ohio.

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Contents

12

PRIMARY AGENT MAGAZINE

Hope for the best, prepare for the worst From frozen pipes to fires, hazmat incidents to hurricanes, common accidents and natural disasters cause thousands of businesses to close each year. And at least 25 percent never reopen. IA&B members have a new resource to help them prepare for the unthinkable and reduce their likelihood of becoming a statistic. Introducing the Emergency and Business Continuity Planning Manual….

Page 12

Insurance coverage for swine flu claims Diana Shafter, Marshall Gilinsky and Rhonda D. Orin of Anderson Kill & Olick discuss insurance coverage for liability related to swine flu, including coverage under CGL, D&O and workers’ compensation policies.

18

Page 18

In every issue 4 5 6 7 8 10

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

11 17 24 27 27

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 # 2009-9) 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.

FLEXIBILITY. Gumby’s not the only one who can bend over backward.

Ever seen an insurance company stretch? At Harleysville, our professionals give new meaning to the word, “flexible.” And they’re anything but green.

Instead, you’ll find seasoned underwriters who arrive in your office with the authority to craft solutions to meet your challenges. A loss control staff that’s OSHA-certified to lead safety training wherever you need them to go. And a claims team as accommodating to your clients as that of any other carrier—large, mid-sized or small. In fact, the only way we’re rigid is in our commitment to the independent agent. Don’t expect us to bend when it comes to that.

For more information, call 800.523.6344, ext 5016, visit www.harleysvillegroup.com, or contact your local Harleysville office.

B U S I N E S S | A U T O | H O M E | L I F E / E M P L O Y E E B E N E F I T S | F L O O D | W W W . H A R L E Y S V I L L E G R O U P. C O M Gumby © 2008 Perma Toy Co.,Inc. All Rights Reserved

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

Members Norman F. Basso, CPCU York, Pa. Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md. 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. Linda A. McCann, AAI, CPCU, CPIW Salisbury, Md. Michael F. McGroarty Sr. Pittsburgh, Pa. Scott C. Rogers, CPIA York, Pa. Susan A. Sallada, CIC** Ft. Washington, Pa. William D. Schneider, CPCU, ARM* Pittsburgh, Pa. Robert A. Walbeck, CIC Homer City, Pa. David B. Wasson Sr., CIC State College, Pa.

Kathleen Glattly CPCU, CLU, ChFC, AIM

Chairwoman O F

T H E

B O A R D ’ S

M E S S A G E

Be Prepared Fall is often associated with change — even from our childhood, when the season marked a new school year. At IA&B it coincides with a change in leadership, as this month marks my first in the role of chairwoman of the board. I am excited and energized to be given this opportunity to serve our membership.

Physician, heal thyself. We preach the value of insurance, of preparing for the unexpected. But beyond insurance, when it comes to our own agencies and livelihood, many of us ignore the potential for disasters, accidents and emergencies.

September is National Preparedness Month, which makes it the perfect time to focus on your agency’s readiness for an event that disrupts your day-to-day business operations. If you haven’t already, I encourage you to take advantage of IA&B’s Emergency and Business Continuity Planning Manual, a simple-to-use, Webbased resource that walks you through preparation and provides a guide for managing crises. (You’ll find an article about this new member benefit on page 12.)

I would also like to take this time to remind you that it is our responsibility to prepare and secure our future by: w educating our clients about our industry to attract and develop individuals to a business that everyone needs and is a major part of our economy;

James M. Watkins* Dover, Del.

w continuing to defend the role of agents in the sale of health insurance and be recognized as purchasers of health insurance for our employees; and

King W. “Kip” White, LUTCF Fallston, Md.

w being a united voice!

John S. Yasik, CIC Newark, Del. * IIABA National Director ** PIA National Director

As the new leadership of the IA&B Board of Directors begins its term, I pledge to you that we will do our best to prepare for the changes, known and unforeseen, that threaten our association and its members.

Until next month, Kathleen

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Glance at Events S E P T E M B E R C A L E N D A R Date

Topic

Location

1-3

P&C Licensing Study course

Philadelphia, Pa.

2

CISR Commercial Casualty course

Reading, Pa.

3

CISR Commercial Casualty course

Baltimore, Md.

Dynamics of Service seminar

Pittsburgh, Pa.

9

Company Auto vs. Personal Auto seminar

Baltimore, Md.

10

Company Auto vs. Personal Auto seminar

Mechanicsburg, Pa.

14-17

CIC Agency Management institute

Harrisburg, Pa.

14-16

James K. Ruble Graduate seminar

Ocean City, Md.

14

*CISR Personal Residential course

Mechanicsburg, Pa.

15

*CISR Personal Auto course

Mechanicsburg, Pa.

16

*CISR Agency Operations course

Mechanicsburg, Pa.

E&O-10 Ways to Get Sued seminar

Newark, Del.

*CISR Commercial Property course

Mechanicsburg, Pa.

E&O-Mistakes That Lead to E&O Claims seminar

Baltimore, Md.

18

*CISR Commercial Casualty course

Mechanicsburg, Pa.

22

Company Auto vs. Personal Auto seminar

Allentown, Pa.

23-26

CIC Life & Health institute

Pittsburgh, Pa.

23

Company Auto vs. Personal Auto seminar

Newark, Del.

24

Company Auto vs. Personal Auto seminar

York, Pa.

17

*CISR Marathon Week

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.

[5]

Primary Agent | September 2009

State News The countdown is on: Oct. 1 marks regulatory, legislative changes Licensing

Several producer licensing changes will become effective Oct. 1, 2009. w General CE: Licensees renewing on or after Oct. 1, 2009 will need 24 hours of CE credits, unless they are grandfathered (continually licensed for over 25 years as of Oct. 1, 2008), in which case they will need only 8 credits. w Ethics CE: Licensees renewing on or after Oct. 1, 2009 will need to have completed 3 ethics credits.

IA&B’s ethics course has been approved for credit by the Maryland Insurance Administration. Members can find additional information on the course by visiting iabgroup.com or by contacting IA&B’s Member Service Center toll free at (800) 998-9644, option 0.

Title insurance

The recently adopted SB 86 amends Section 10-121 of the Insurance Article by adding language that requires: (A)(1) In this subsection, “Trust Money” means a deposit, payment, or other money that a person entrusts to a licensed title insurance producer in connection with the provision of escrow, closing, or real estate settlement services.

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(2) Except as provided in paragraph (3) of this subsection, only a licensed title insurance producer may exercise control over trust money.

(3) This subsection does not apply to trust money that is entrusted to: (I) A law firm as defined in Section 10-125 of this subtitle; (II) A title insurer.

Persons who “may exercise control over trust money” include those with signature authority on a trust or escrow account, those who can approve and/or release wire transfers from a trust or escrow account and those who have day-to-day control of disbursements from a trust or escrow account. The amendments went into effect June 1, except for Section 2, which will become effective Oct. 1, 2009.

The bill also increased the amount of the mandated fidelity bond, surety bond or letter of credit from $100,000 to $150,000 each. A bond in the increased amount will be required for any producer who applies for a new license or holds an existing license due to renew on or after Oct. 1, 2009.

Get out the Fidelity bonds

MAP

The General Assembly this year passed HB 687 (SB 541) requiring governing bodies of cooperative housing corporations, condominium and homeowners’ associations to purchase fidelity insurance protecting against fraud, dishonesty or criminal acts by its directors, officers, agents or employees.

The new requirement takes effect Oct. 1, 2009.

The amount of coverage needed is the lesser of $3 million or: w for cooperative housing: three months’ worth of gross common charges and the total amount held in all investment accounts at the time the fidelity is issued; w for condo associations: three months’ worth of gross annual assessments and the total amount held in all investment accounts when the fidelity is issued; and w for homeowners’ associations: three months’ worth of gross annual association fees and the total amount held in all investment accounts when the fidelity is issued.

This month marks the second Member Agent Panel – better known as a MAP – of the year. It’s an opportunity for IA&B to hear members’ feedback on programs and services and for members to drive the association’s priorities.

Who: IA&B members What: Member Agent Panel Where/When: Gaithersburg, Sept. 9 Towson, Sept. 10 Bowie, Sept. 10

MAP participants (most of whom are agency principals) volunteer for a two-year term and attend meetings each April and September in a nearby town. In total, IA&B hosts 13 MAPs throughout Delaware, Maryland and Pennsylvania.

Spaces remain for participants in the 2009/10 cycle. Interested members should visit iabgroup.com/about_us/maps.asp or contact IA&B’s Member Service Center toll free at (800) 998-9644, option 0.

Workplace fraud

Senate Bill 909 goes into effect Oct. 1, 2009. The pending law, which applies to the construction and landscaping industries, establishes penalties for employers who knowingly fail to properly classify employees and further establishes broad investigative procedures for the state to utilize in cases of noncompliance.

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MAP participants drive the association’s priorities.

Primary Agent | September 2009

Preventing ERRORS AND OMISSIONS

WHAT DOES MY E&O REALLY COST?

ROBERT J. BURNS Robert Burns is an E&O underwriting manager for Utica Mutual Insurance Group in Utica, NY. 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.

Ralph Waldo Emerson said; “Can anybody remember when times were not hard and money not scarce?” Everyone is watching their costs and expenses these days.

It is a serious responsibility for any business manager or owner to ensure that every dollar spent is a worthwhile investment in their business. It is a duty they owe themselves, their stockholders and employees.

It is right and appropriate to look at serious competitive bids for every business cost.

Your agency E&O insurance premium is one of those costs. Most agencies do look, and there are many ways to go about it.

Most go through a process of analysis. Common comparisons are limits, deductible and major coverage terms. With this article I would like to address those and add some additional points of comparison.

The normal routine is to look at the limits and deductible first. Then the major terms such as insolvency are compared. But

does this address cost differences in their entirety?

From my experience, the price variances in a single year are usually around 7 to 15 percent. In heated competition it can become a lot more. And some real oneyear savings can be had.

If you step back and look, you’ll see there’s more to this picture when you consider whether your agency is really saving anything over, say, a five-year period … or even a two-year period.

What if you save $5,000 and then find out that the new deductible applies to company expenses other than attorney fees, and they hit you for $7,500 on a “no indemnity” claim that would not have applied on your old policy? Your $5,000 savings just turned into a $2,500 loss.

There is a whole range of other variables that can have a huge impact on the cost of your E&O that you should consider. The first goal is managing the overall, long-term cost of protecting your agency. The one-year premium is only one part of that cost.

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Agents’ E&O insurance is a specialized line of business.

Many standard insurance company claims and underwriting practices don’t apply in E&O. You only gain that insight with experience.

Take management of loss history from an underwriting perspective. If the loss ratio becomes too high, nonrenewal is an industry practice. It is not desirable with E&O because of the nature of the tail coverage. If a carrier gives you a significantly better deal on the first year but non-renews you for claims in an unfavorable part of the market cycle, your costs can go up 100 percent.

Because we offer very broad, extended reporting period options, it is in our best interest to work with an agency as opposed to using non-renewal. When looking at other carriers, you may want to see how long they have been in the E&O line as a test of stability.

Another soft cost is claims expertise. Better claims handling results in more efficient claims handling. This can have major impact on

your office operation because knowledgeable E&O claims people are going to take up less of your time and mitigate the lost revenue, lost time and lost productivity your agency will spend dealing with a loss.

While it is difficult to quantify, look at it this way: An agency with $2 million in revenue over 250 days of operation makes $8,000 a day. Or look at the revenue generated per person for a sense of what may be lost due to depositions and staff time pulling together information. You want to make sure that your E&O carrier is not taking a second more than is needed in addressing your claim. That can only be done by highly experienced claims professionals with a superb panel of attorneys.

So it’s worth asking a prospective E&O carrier directly, “What is the experience of your claims staff, and what attorneys do they use?”

The main things that I think you should look at are: w Coverage: How broad are the coverages? w Experience: Does the company have a successful track record? Does it have the ability and motivation to hang on through tough times?

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w Service: Do you have access to decision makers in claims and underwriting? w Cost: Is the pricing aimed at being a long-term overall value?

Service can also be a major unseen cost factor. Do you have direct access to decision makers? If you have an immediate question such as a merger acquisition question, can you get an answer that day? If you can’t, what is the potential cost in lost revenue while the details are put through channels?

This leads to the question of future needs. We will occasionally hear an insured say that they don’t need broad coverage. What is true today may not be true in the future, particularly as your agency grows. An example is coverage for temporary workers and interns. If an agency has an opportunity to purchase another agency, might the sudden increase in business make it necessary to hire temps? You would, of course, want coverage!

Limits are important. Most agencies scale their limits with their worst-case loss exposures. Consider your future needs. If you now have coverage for one million dollars and you sign to represent a new carrier in your office that demands five million in limits, can your E&O carrier meet the request? If not, what is the potential lost revenue opportunity?

It is important to remember that the premium for your E&O is just one part of the cost. More than any other line that I can think of, the overall service is a package deal. If you focus only on the premium amount, you may shortchange yourself in the end.

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Make Our Experience, Your Advantage.

The Harford Mutual Insurance Companies 165 years experience in Commercial Lines Join our team today. Contact us to learn more:

www.harfordmutual.com 800-638-3669 The Harford Mutual Insurance Companies 200 North Main Street Bel Air, Maryland 21014-3544

Primary Agent | September 2009

Coverage CORNER

MEDICARE SECONDARY PAYER REPORTING

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.

Medicare is a federal program that pays for certain covered health care provided to enrolled individuals age 65 and older, certain disabled individuals and individuals with permanent kidney failure. Every one of you knows that!

and have been modified several times since then.

These provisions were amended again by Section 111 of the Extension Act of 2007, which established mandatory reporting requirements.

Reporting Entities, to: 1. Determine the Medicare status or all claimants; and 2. Report all claims involving a Medicare beneficiary to the CMS when those claims are paid.

The Centers for Medicare and Medical Services (CMS) is an agency of the federal government and is part of the Department of Health and Human Services. The CMS is responsible for the oversight of the Medicare program, including implementing Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 Medicare Secondary Payer reporting provisions. Now I’ll bet most of you didn’t know that!

Congress enacted the Medicare Secondary Payer Act in 1980 to curb the rising costs of Medicare. These changes expanded the statute to make Medicare the secondary payer to any medical benefits received under a group health plan, workers’ compensation, liability insurance (including self-insurance) and no-fault insurance. Prior to this, expansion the Medicare Secondary Payer Act had been limited to workers’ compensation claims.

If the reporting for any claimant is not done in a timely manner by the Responsible Reporting Entity, the Extension Act of 2007 authorizes CMS to enforce a penalty of $1,000 per day. Who is a Responsible Reporting Entity? Simply put, it’s the entity making the claim payment or settlement. That could be the insurance company, a third party administrator or a self-insured entity.

Medicare has been a secondary payer to workers’ compensation benefit payments since the inception of Medicare in 1965. Additions to the Medicare law and regulations, which are referred to as Medicare secondary payer provisions, were enacted in the 1980s

When individuals enrolled in Medicare receive medical benefits from other sources — group health plan, workers’ compensation or liability settlement – Medicare is the secondary payer. Beginning July 1, 2009, Section 111 requires certain entities, referred to as Responsible

Many settlements include future medical costs. In these arrangements Medicare setaside arrangements must be used to allocate settlement money for future medical expenses that would otherwise be covered by Medicare. Medicare set-aside arrangements

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Member FAQ

funding and administrative requirements are: 1. The claimants cannot use any of the set-aside money until the claimant becomes a Medicare beneficiary; 2. The set-aside money is held in an interest-bearing account;

QUESTION: I have an employee who is currently in a clerical position. I would like to get him licensed, but he mentioned a prior felony conviction. Will he be able to get licensed?

ANSWER:

3. The set-aside money can only be used for expenses covered by Medicare;

Well, it depends. But most importantly, depending on the type of felony conviction, your employee could be in trouble for working in your agency, even in a clerical function, and so could you!

4. Set-aside accounting must be reported to the CMS Regional Office annually until the funds are exhausted; and

The Violent Crimes Control and Law Enforcement Act (VCCLEA) is a federal law which prohibits anyone who was convicted of a felony for dishonesty or breach of trust from working in insurance without securing prior written consent from the state’s insurance regulatory authority. It also prohibits anyone from willfully employing such an individual in insurance without ensuring that such consent was granted.

5. Legal fees and administrative costs cannot be charged to the set-aside account.

Unless you are a business entity which qualifies as a Responsible Reporting Entity (insurance company, third party administrator or self-insurer), Section 111 will have very little impact on you. However, any individual who receives reimbursement for medical care under a group health care plan, workers’ compensation or liability settlement will be asked to furnish his or her Medicare Health Insurance Claim Number. If that number is not available, the individual’s Social Security Number will likely be requested.

Individuals who receive ongoing medical care reimbursement, make a settlement which includes future medical costs, or receive a judgment for future medical costs will be asked for their Medicare Health Insurance Claim Number or Social Security Number, even if they are not currently enrolled in Medicare.

If you get a call from one of your insureds asking why all this information is needed, now you know.

Y’all take care!

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?

The bad news? Both of you already could be in violation of the law. The penalties are very severe, both criminal and civil, for the employee and for the employer, including hefty fines and imprisonment. By the way, no time limit applies either.

The good news? It’s never too late to do the right thing.

At this time, the first thing you need to do is talk to the individual and explain the legal requirements. If the felony conviction is one that could fall within the scope of “dishonesty or breach of trust,” the Insurance Department should be contacted immediately and an application for written consent secured. The consent form is sometimes referred to as a “1033 waiver,” after the applicable section of the US Code (18 USC 1033). Until consent has been secured, the person should not work for the agency. If it’s your lucky day and the felony has no chance of being categorized as indicated above, read that as a sign … that you need to read more.

IA&B has a comprehensive, turn-key and — let’s brag — award-winning resource available at iabgroup.com. Members who are not familiar with the VCCLEA are encouraged to log on and learn more about what the requirements entail and practical ways to comply.

A word of caution: Employers who plan on relying on the word “willfully” to exonerate themselves should be aware that this may just not cut it. Agency principals are expected to exercise due diligence. It is the nature and the extent of the due diligence that will come under scrutiny if a violation is found. If you choose not to ask questions so as not to hear the answers, trouble may still come your way.

The VCCLEA is the reason behind all the background checks conducted by carriers on their appointed agents. Agencies should do the same with their staff, licensed or not. It will demonstrate due diligence, and you can also look at it as a good business practice.

For complete resources and assistance with the requirements and the process, go to iabgroup.com, Agency Operations, Employee Management, Employment Background Checks.

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!

ASSOCIATION AT WORK

Hope for the best, prepare for the worst IA&B unveils Emergency and Business Continuity Planning Manual

From frozen pipes to fires, hazmat incidents to hurricanes, common accidents and natural disasters cause thousands of businesses to close each year. And at least 25 percent never reopen.* An insurance agency, in particular, cannot afford to be out of commission.

The pun is intended because insureds — and an agency’s viability — depend on accessibility.

Primary Agent | September 2009

II

A&B members have a new resource to help them prepare for the unthinkable and reduce their likelihood of becoming a statistic. Introducing the Emergency and Business Continuity Planning Manual….

How one member agency coped with disaster It was Friday, Sept. 17, 2004, and Hurricane Ivan had dumped inches upon inches of rain in downtown Pittsburgh. Tod Aronson’s agency, E.R. Munro and Company, was housed on the ninth and tenth floors of an office building located along the Monongahela River. Eight feet of water flooded the basement, where Aronson rented storage space and where controls for the building’s phone lines, electrical circuits and elevators were kept.

The office building was closed for 10 days, six of them workdays. During that time, Aronson funneled phone calls and e-mails into his home, where he operated an exhausting temporary operation. It was a spur-of-the-moment plan of action – one that kept him afloat but required him to scramble.

Aronson vowed to be better prepared for a future disruption of his agency’s operations. He secured alternate office space, hired a recovery-management firm and, most recently, utilized IA&B’s planning manual to formulate a strategy.

The input section walks members through cataloguing the following: w Staff w Key contacts w Agency management system w Computer software w Computer hardware w Office equipment w Vital records w Go Kit (emergency supplies) w Alternate site prospects

How the planning manual works IA&B’s Emergency and Business Continuity Planning Manual contains two sections: an input, where members catalogue their business relationships, inventory their equipment and identify back-up locations, and an output, which incorporates members’ information from the input and serves as a finalized plan of action.

The personalized output outlines the various scenarios that can disrupt an agency’s operation and then delves into the implementation of the plan, which is broken down into timeframes – the first 12-24 hours, day one through end of the emergency, and termination of the plan and restoration of normal operations.

What makes the planning manual unique The new planning manual available to IA&B members is Webbased. The input process is completed online, and the output (a.k.a. finalized plan) is available online or as a Microsoft Word document.

Besides ease of personalizing the plan, the benefit of housing it online is availability. Members are encouraged to store their plan in multiple locations (onsite and offsite) and in various formats (in print and on an electronic storage device), but thanks to the Web-based structure of IA&B’s planning

*Business & Home Safety, a non-profit initiative of the insurance industry

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The output section (a.k.a. finalized plan) addresses three scenarios: w Single event isolated to the agency, such as a minor fire, severe weather or loss of utilities w Catastrophic event (may or may not be isolated to the agency), such as a major fire, natural disaster or malicious attack w Pandemic

ASSOCIATION AT WORK

Accessing the planning manual: Easy as 1, 2, 3

manual, members’ plan is available anywhere at any time via the Internet.

IA&B members with administrator rights to iabgroup.com have access to the Emergency and Business Continuity Planning Manual.

“This is another example of IA&B bringing value to its membership.”

____________________________

____________________________

1. Visit iabgroup.com.

2. Choose Agency Operations from the left-hand navigation bar.

3. Click the Emergency Planning link.

How IA&B’s plan rates Since Aronson saw his agency through the 2004 flood, IA&B asked him — along with several other members who recovered their agencies from various disasters and emergencies —

[ 14 ]

to test drive the planning manual. It passed with flying colors.

“It’s well organized and well thought out,” said Aronson, who tackled the input process by dividing the workload among his employees. “This is another example of IA&B bringing value to its membership.”

All IA&B member agencies have access to the planning manual as a benefit of membership. To learn more, visit iabgroup.com or contact IA&B’s Member Service Center toll free at (800) 9989644 or locally at (717) 7959100, option 0.

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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.

Platinum Profile Insurance Agents & Brokers proudly recognizes Harleysville Insurance as one of its Platinum Partners.

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

FEATURED PARTNER Harleysville Insurance CHIEF EXECUTIVE OFFICER Michael L. Browne President and CEO COMPANY LOCATIONS Home office in Harleysville, Pa., with four regional and 16 branch offices A.M. BEST RATING A- (Excellent) Positive outlook WEB SITE www.harleysvillegroup.com

arleysville Insurance is a leading regional provider of insurance products and services for small and mid-sized businesses, as well as for individuals — ranking among the top 60 U.S. property/ casualty insurance groups with $1.1 billion in annual net written premiums. Harleysville also is ranked nationally as one of the 20 largest commercial multi-peril insurers and as one of the top 15 “Write Your Own” flood insurance carriers.

H

Commercial lines generate 82 percent of the company’s property and casualty risk portfolio, while personal lines sales account for the remaining 18 percent. In addition, Harleysville’s agents have the unique capability of rounding out customer accounts through a full line of life and flood insurance products.

At the heart of Harleysville’s success are the lasting partnerships the

company has developed with its 1,350 independent agencies. Harleysville distributes its products exclusively through independent insurance agencies and reflects that commitment to its agency force by being a Trusted Choice® company partner. To perpetuate its long-standing agency relationships, Harleysville provides decision-makers close to the point of sale — field underwriters dedicated to specific business segments and customer service representatives licensed to assist agents with their account management responsibilities.

“Our independent insurance

Having “good people to know” at all levels of the organization serves to define Harleysville in the marketplace by delivering on its brand promise every day — making it easy for agents and policyholders to do business with the company through advanced technology and customer-friendly services.

agency system.”

agents are trusted advisors who offer their customers freedom of choice through the companies they represent.

As a Platinum-level supporter of the IA&B Partners Program, Harleysville is investing in the futures of both our company and our sole distribution outlet — the independent

—Michael L. Browne, President and CEO

BUSINESS | HUMAN SERVICES | INLAND MARINE | AUTO | HOME | LIFE/EMPLOYEE BENEFITS | FLOOD

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

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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.

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COVERAGES

Insurance coverage for swine flu claims

Diana Shafter, Marshall Gilinsky and Rhonda D. Orin of Anderson Kill & Olick discuss insurance coverage for liability related to swine flu, including coverage under CGL, D&O and workers’ compensation policies.

Primary Agent | September 2009

A

s the world braces for a swine flu pandemic, the first concern of every business is the safety of its workers and customers, if it is in the hospitality industry or another business that draws people into physical proximity to one another.

Step one is to access and implement the “business pandemic influenza planning” checklist jointly produced by the Centers for Disease Control and Prevention and the Department of Health and Human Services, available at http://www.pandemicflu.gov.

Step two is to consider the health and welfare of the business itself and the various protections provided by the business insurance policies. To use a health metaphor, such policies are the business equivalent of a flu vaccine.

Insurance may provide relief in a number of ways. Property insurance policies, for example, may become relevant if a flu pandemic disrupts a business’s daily operations. A company may be able to file a business interruption claim in various circumstances, such as if its office buildings or warehouses are shut down or access is otherwise impaired for reasons related to the pandemic.

Liability insurance policies would come into play for any business with exposure to claims by individuals. For many businesses that liability, if any, would be limited mainly to workers’ compensation claims. Depending on the facts, it is conceivable for employees who become ill to claim that they were exposed to the disease in the course of their employment.

For other businesses, the risks are higher. For example, businesses subject to “invitee liability,” such as restaurants and hotels, cruise operators, conference organizers and others that draw people together, may face claims from anyone who becomes ill shortly after visits to their premises. These businesses should be alert to this risk and be prepared to give notice to their liability insurers as soon as they become aware of actual, even potential, claims.

The same is true for businesses that conceivably could be held accountable for exposing people to the disease through their products or services. Although this category seems small, potential candidates are businesses that provide transportation services, such as airlines, as well as businesses in the food service industry, such as caterers and supermarkets.

Similarly, should shareholders in companies adversely affected by the flu outbreak make claims against executives based on allegations of wrongful acts by management that caused harm to the claimants, directors-and-officers insurance should provide coverage for such claims.

[ 19 ]

Businesses subject to “invitee liability,” such as restaurants and hotels, cruise operators, conference organizers and others that draw people together, may face claims from anyone who becomes ill shortly after visits to their premises.

For a business to be fully protected, it is essential for its risk manager or other person responsible for its insurance to maintain a complete set of all insurance policies in a secure location outside the business premises.

COVERAGES

As a practical matter, the risk of such claims may be small.

It may be unlikely, if not impossible, for people who become ill to prove the exact moment and location of the exposure that caused the illness. For planning purposes, though, that practical consideration is not the point.

It makes good sense for all businesses to take stock now, before the pandemic spreads, of the ways in which it might affect operations and the types of insurance that may protect them.

Several key issues are likely to arise from claims under these types of insurance policies.

Is business interruption coverage available for a swine flu pandemic?

Depending on the facts, it may be possible for a swine flu pandemic to give rise to business interruption coverage.

Such coverage typically is purchased by businesses as part of their property insurance policies in the form of a rider, endorsement or an optional additional coverage. Business interruption coverage is designed to protect companies from losses they may suffer unexpectedly because of unavoidable interruptions in their daily operations.

Business interruption coverage may apply in a variety of circumstances, such as a forced shutdown or a substantial impairment in access to a business’s physical plant or warehouses. Recent, infamous

examples of events giving rise to such business interruptions are the events of Sept. 11 and Hurricane Katrina.

In most property policies business interruption coverage is triggered only when the site suffers property damage.

Physical damage, however, can include contamination of equipment. Moreover, some policies, particularly those written for policyholders in the hospitality industry, do provide coverage for losses stemming from infectious disease without requiring physical damage to premises. Further, civil authority coverage, triggered when authorities shut off access to an area in which a business is located, can be triggered without physical damage to the policyholder’s premises.

The unfortunate events of Sept.

11 and Hurricane Katrina illustrated clearly that for a business to be fully protected, it is essential for its risk manager or other person responsible for its insurance to maintain a complete set of all insurance policies in a secure location outside the business premises.

Otherwise, if a business is unexpectedly deprived of access to its premises, it will find itself deprived as well of access to the very policies it needs to file a business interruption claim.

At this point, any business that has not already secured a set of its insurance policies and key non-insurance documents in a secure, off-site location should do so immediately. It

[ 20 ]

may be a small inconvenience to make these arrangements, but that inconvenience is more than offset by the benefits the business would garner on the day it needs those off-site copies.

Is there CGL or D&O coverage for claims related to swine flu?

Commercial general liability coverage is designed to cover policyholders against claims brought against them by others alleging the policyholder’s conduct caused bodily injury to the claimant, such as sickness and disease resulting from exposure to harmful conditions.

Since most claims by sickened non-employees would fit this description, CGL coverage will be a key source of protection against such claims.

Any policyholder that receives even one such claim faces the risk, because of the way in which swine flu is contracted and spread, of being the target of many more claims. Thus, it is important that notice is given as soon as possible to the CGL insurance company.

Early notice will ensure that the insurer cannot try to deny coverage based on the contention that it could have helped stem the policyholder’s exposure to additional claims if only it were given notice sooner and therefore was prejudiced by some delay in notice.

It is possible that people other than those personally sickened by the flu outbreak (e.g., shareholders in companies

Primary Agent | September 2009

adversely affected by the flu outbreak) may make claims against companies or their executives based on allegations that management’s acts or omissions caused such claimants to suffer financial losses.

Although most D&O polices contain exclusions for claims alleging bodily injury, such claims for financial damages are covered under D&O insurance. As with CGL coverage, it is important for policyholders that become aware of such claims against them to give notice to their insurers as soon as possible and certainly before the

policy period or reporting period for their current D&O coverage expires.

Will afflicted workers be covered under state workers’ compensation laws?

Assuming one or more of a company’s employees become ill, will they be entitled to workers’ compensation benefits? That depends on how they became ill and the nature of the illness.

Virtually every state workers’ compensation statute provides that an employee will be entitled to benefits for what is known as an “occupational

disease.” To constitute an occupational disease, two conditions must be met: The disease must be proven to stem from causes and conditions that are characteristic of and peculiar to a particular trade, occupation or employment, and the disease cannot be an ordinary disease of life to which the general public is equally exposed outside employment.

The distinction between an occupational and infectious disease, however, is not always easy to make. While occupational diseases are covered, and ordinary diseases generally are not, the latter

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COVERAGES

may be covered in some circumstances if a direct, causal connection to the workplace can be established.

Is a flu outbreak an “occupational disease”?

If a business faces one or more workers’ compensation claims arising from an alleged illness, it will have to determine whether to challenge the claim. Whether a given illness would constitute an occupational disease and thus be covered under state workers’ compensation law is an issue of fact.

There is limited case law dealing with the spread of contagions in the workplace to provide insight into the factors a court may examine in determining whether a given outbreak is sufficiently connected to the workplace to constitute an occupational disease.

In California a breakout of a contagious eye disorder called keratoconjunctivitis, among employees at a steel company was found to be “proximately caused by and to have arisen out of the employment” and “constituted a special exposure in excess of that of the commonality.”

In Bethlehem Steel Co. v.

Industrial Accident Commission, 21 Cal. 2d 742 (Cal. Mar. 19, 1943), the California Supreme Court held that conjunctivitis apparently was “epidemic” in the defendant’s shipyards and that

“although there were many cases of the disease among the public, there [was] nothing in the record to show that the same proportion as in the shipyards was affected.”

Washington, too, requires a direct link between the occupational injury or disease and the employee’s scope of employment. In affirming a workers’ compensation award to an employee who developed asthma from exposure to workplace dust, smoke and fumes, the court found a correlative link between the affliction and the nature of the employment.

In Simpson Logging Co. v.

Department of Labor and Industries, 202 P.2d. 448 (Wash.

1949), the court held: Under the present act, no disease can be held not to be an occupational disease as a matter of law where it has been proved that the conditions of the extrahazardous employment in which the claimant was employed naturally and proximately produced the disease, and that but for the exposure to such conditions, the disease would not have been contracted.

It is clear that an employee seeking workers’ compensation coverage for illness would need to demonstrate that there was a proximate link between the disease and her employment or that she was subjected to some

[ 22 ]

special exposure in excess of that of the commonality.

How many self-insured retentions will apply in the event of an outbreak?

If workers can demonstrate that they have contracted an illness through their employment and are therefore entitled to workers’ compensation benefits, one issue likely to arise is the number of self-insured retentions that will apply for a given outbreak.

Many workers’ compensation insurance policies, particularly those providing excess coverage, provide coverage beyond an initial self-insured retention (essentially, a deductible) for each accident and/or employee for disease, after which unlimited coverage is provided for workers’ compensation coverage until the applicable statutory caps.

Thus, if an illness is deemed to constitute a “disease,” most policies would apply a separate retention for each individual employee asserting a “disease claim.” This is the likely outcome if workers contract a disease such as the swine flu (pandemic outbreaks typically constitute “diseases,” not “accidents,” for purposes of determining the number of applicable retentions under workers’ compensation policies). Employers facing multiple claims thus could face extremely high exposures.

Primary Agent | September 2009

If, however, an illness outbreak is triggered by a causal event at the workplace and directly flows from the work being performed, it may be argued that the resulting disease was produced by an accident, thus reducing the number of applicable self-insured retentions. One commentator noted that: [I]f the cause of an infectious disease is traceable to a specific incident(s) at or related to work, then contracting the disease meets the definition of accident and qualifies as a covered injury. For example, if contracting typhoid fever could be

traced to polluted water in a factory, then the illness is a covered injury.

Whether a given outbreak infecting multiple workers would be regarded as an “accidental event” or an “occupational disease” depends on the specific circumstances leading to the initial exposure. If a specific event led to the spread of the contagion, an outbreak could be considered an “accident,” causing bodily injury, as opposed to a “disease.”

Thus, a business only would be required to pay one selfinsured retention, no matter how many employees were

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exposed to a contagion or contaminant. _____________________________

Diana Shafter Gliedman, Esq., Marshall Gilinsky, Esq., and Rhonda D. Orin, Esq. Diana Shafter Gliedman is an attorney, and Marshall Gilinsky is a shareholder in Anderson Kill & Olick’s New York office. Rhonda D. Orin is the managing partner of the firm’s Washington office.

They specialize in insurance recovery litigation on behalf of policyholders.

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Technology U P DATE

THE BREAKTHROUGH IN AGENCY AUTOMATION … A BRIEF HISTORY

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.

For much of its history, agency automation was a source of agency frustration because of its cost and unfulfilled promises.

Remember “Paper-free in 83” or the promises to achieve SEMCI (Single Entry, Multiple Company Interface) in the 80s and 90s?

Fortunately, there has been a sea change over the last decade in the quality and functionality agency automation now offers, coupled with agent-carrier interfaces that really deliver.

Agencies taking advantage of these advances are cutting redundant and time-consuming processing and replacing it with revenue-generating sales and pro-active service.

Many agencies are virtually paper-free in personal lines today, and increasing numbers are working on small commercial business now that carriers and vendors have improved their commercial lines download. The great progress being made with Real Time is putting independent agencies within striking distance of achieving the agents’ vision of SEMCI — and it is only going to get better.

The history of agency automation is also the story of how independent agents and carrier and vendor leaders can

make a real difference in the evolution of the technology and workflows available to our distribution system by becoming involved at the industry level in user groups and organizations like ACT (Agents Council for Technology) and AUGIE (ACORD User Groups Information Exchange).

Agents’ vision for carrier interface The agents’ overall vision to be able to work in a consistent manner with multiple carriers has been remarkably constant over time. In 1906, an agent petitioned the National Association of Insurance Agents (NAIA, now IIABA) to take the lead in developing standard applications and procedures for dealing with the carriers. This agent was ahead of his time, but as a result of the foundation work of several California agents and western based carriers starting in 1968, NAIA and 12 carriers formed the ACORD Committee within the agents’ association in 1970 to begin the development of standardized applications and forms.

In 1975, ACORD became a separate corporation and has since grown into the international standards body for the insurance industry. In the early years it was extremely [ 24 ]

difficult to get the carriers to agree on common forms, especially applications. But through agent persistence over several years and the leadership of several companies, the logjam eventually broke, and today there are thousands of standardized ACORD forms without which the agency management systems of today would not have had the standards necessary to design the data fields in their systems and generate common applications.

In addition to having standardized forms, however, the prescient agents in 1975 wanted to develop an agency universal terminal that they could use to access multiple carriers electronically. To further this goal, NAIA formed the EPIC Committee which had a meeting with several carriers in Point Clear, AL, that lead to the formation of the Insurance Institute for Research (IIR) in 1977 to study agent-company operations automation. IIR studied the concept of the agents’ universal terminal and also began the development of batch electronic standards which eventually became the basis for the downloads that save agencies so much time today.

Out of IIR emerged the need to create IVANS in order to provide

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TECHNOLOGY UPDATE

the industry with a shared datacommunications network to save cost.

IVANS today is still the entity that most carriers and agencies use to aggregate and transmit carrier downloads to agencies each evening. While IIR was successful in creating the first electronic standards for the industry along with the creation of IVANS, there was not sufficient support to move forward with the universal terminal concept that many agencies wanted to see. In 1982, ACORD & IIR merged bringing together the entity that developed both the paper and electronic standards for the industry that we know today.

During the 1980s and 1990s, the agents made great progress with standardized forms and personal lines download but still had to contend with the inefficient uploading of data to the carriers. First, the carriers placed their proprietary terminals in agent offices, and then some carriers and vendors tried to achieve SEMCI by implementing batch uploads using the standards, but this approach only met with limited success.

The Internet creates major change With the advent of the Internet in the late 90s, carriers saw an opportunity to build their own carrier Web sites to increase the information and functionality available to their agents as well as to reduce their own processing costs. As these Web sites proliferated, agents again were faced with having separate and inefficient workflows for each carrier, including the need to log on to each carrier’s site, remember the carrier’s password, learn how to navigate the site, enter the same data again and again to compare quotes (even though the data was already sitting in the agency management system) and train each employee on multiple carrier workflows.

Fortunately, the Internet and the Web services used by carriers for their proprietary Web sites also sowed the seeds that enabled enterprising agency

management system vendors to create a workflow that allows agencies finally to realize their long-held vision of a SEMCI workflow. It is called Real Time.

Real Time – a major breakthrough Real Time enables agents to work with multiple carriers in a consistent way through their own systems: It handles logons 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. Real Time includes inquiries (billing, policy view, claims, etc.), endorsements and quoting through their agency management systems and comparative raters.

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. One agent calculated that this time savings translated to the equivalent of $3,000 annually per personal lines employee.

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. Forty-three 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. The amount of real-time quoting in both personal and commercial lines is growing significantly in 2009 because of the tremendous time savings agent users of this functionality are [ 26 ]

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.

The evolution of download In 1988, a group of savvy agents and carrier representatives under the auspices of the associations and ACORD stepped forward to spell out the actual functions effective interfaces must possess from the agents’ perspective. They formed the Interface Systems Requirements (ISR) panel which made the crucial recommendation in 1990 that download should be the starting point for current interface development. This gave a clear direction to interface development for carriers and vendors that broke a log jam and resulted in a proliferation of download implementations. Personal lines download is one of the greatest success stories to date in the advance of agency automation in terms of the productivity enhancements that have resulted from it.

Even today, agents encourage carriers to implement download first, then Real Time.

Agent-carrier pairs implementing personal lines download continue to grow. Today there are 170,531 such agent-carrier pairs.

Agencies can save significant additional processing time by implementing direct bill commission download that automates the entry of commission statement information into their systems. 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.

Commercial lines download is the next big opportunity area now that significant steps have been taken in recent years by individual carriers, vendors and industry groups to improve the quality of these downloads and to reduce the overwriting of agency data. Today there are 42,067 agent-carrier pairs that have implemented commercial lines download representing an 18 percent increase over the prior year.

Classified ADVERTISEMENTS Commercial lines download is providing many agents with significant productivity benefits, and I encourage agents to test it again with their carriers now that these quality improvements have been made.

Agency management systems become the hub of the electronic agent It all started back in the 1950s when vendors emerged to do agency accounting on a batch basis. From these roots, the first agency management systems emerged still focused on automating the accounting function. With the approval of ACORD standard applications, these management systems were then in a position to create a policy and client database so that agencies could service clients from the system and use it as a marketing tool to cross sell. Agency management systems also were sensitive to the E&O risks agents faced and developed activity logs that track every transaction performed by the system as well as permit the capture of client conversations and events. Most recently, the focus of agency management systems has broadened importantly beyond internal agency operations to agentcarrier connectivity using tools such as Real Time and download.

During this evolution in the functionality of the systems, we also saw the introduction of the PC, windows, color, email and the laptop which made these systems much more attractive for agency principals and producers to use. Now agency managers can generate invaluable management reports from these systems to oversee their agency operations.

Today the truly electronic agency is emerging, eliminating paper wherever it can. The agency management system provides the hub for the agency’s information, and the agency’s other systems, if needed, integrate with the management system as much as possible. Thanks to the Internet, agencies

no longer need to have their agency management system on site. It can now be housed at the vendor allowing the vendor to be responsible for updates, maintenance and proper back ups. In addition, agents can access their systems and work from anywhere that the Internet is available.

Agents once again have played a key role in the evolution of the automation available to them by working with their agency management system vendors through their user groups to provide continuous improvements in functionality.

These user groups also provide invaluable education and online services to their agent users to help them get maximum benefit out of their systems.

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Agent advocacy at the industry level We have seen how small groups of agents have made big impacts in the evolution of agency automation for the better over time. That critical agent involvement – coupled with carrier and vendor leaders having similar foresight – continues today.

In 1999, the Independent Insurance Agents & Brokers of America (IIABA) created the Agents Council for Technology (ACT) to put a more consistent and permanent focus on industry automation issues from the agents’ perspective. The immediate catalyst was the impact the Internet was starting to have on the industry. At the first ACT meeting, the carriers made an urgent plea for the development of new standards based on XML for transporting data across the Internet. ACORD responded promptly and its XML standards today provide the basis for the industry’s Real Time transactions.

The agents, carriers, vendors, associations and user groups involved in ACT are working on: w improving agent-carrier connectivity

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[ 27 ]

TECHNOLOGY UPDATE

and workflows in the standard as well as E&S markets, w promoting best practices agency workflows, w addressing agency and agent-carrier interface security issues, w helping agents with their online marketing using Web sites, search engine positioning, and social networking, w extending quoting and servicing functionality to clients through agency Web sites and w assessing major technology and societal trends that will impact our distribution system and identifying the industry’s “must-do” issues arising out of these trends.

ACT has created a number of resources to assist agencies and the industry in these areas which are available at www.independentagent.com/act.

Also in 1999, ACORD established AUGIE (ACORD Users Group Information Exchange) to bring together all of the agency management system user group leaders. ACT and AUGIE closely coordinate their activities and often meet back to back, so that they avoid duplication and communicate a consistent message. AUGIE has created several reports and tools to assist agencies in adopting the latest workflows. (Visit www.acord.org, click on “Advocacy” and then AUGIE).

AUGIE’s top priority in 2009 is to increase the implementation of commercial lines download.

A key to ACT and AUGIE’s success has been the unprecedented level of involvement and insight being provided by carrier, vendor, user group, and agent and industry association leaders. The interest by the carriers and vendors in working together to further the agents’ ease of doing business is greater than I have ever seen it in my 34 years in the business.

The coming together of the industry to create the Real Time/Download Campaign in 2007 is a great example of the high level of industry partnership that is currently occurring on agent-carrier workflow issues. The campaign has been hugely successful in driving increased agent and carrier implementation of Real Time and now hopes to accomplish the same result with commercial lines download. The campaign has also developed excellent materials to assist agents with their Real Time and download implementations (www.getrealtime.org). Another great resource on what Real Time and download functionality particular carriers and vendors offer is found at www.ACTtech.org.

Agency automation tools are meeting the needs of agencies better than ever before and are critical to the functioning

of the successful agency today. But the evolution of agency automation is a journey, and our work will never be done as we continue to react to and incorporate the technology enhancements that become available.

It is reassuring that the industry has ACT and AUGIE in place keeping a constant focus on these issues with unprecedented support by the different stakeholders. But we need more agents, carriers, and vendors to get involved at the industry level. As this brief history has shown, a few committed people can make a real difference in the evolution of agency automation, creating lasting benefits that improve the daily work of virtually every independent agency employee.