04lavoz by Independent Insurance Agents of NM

April 2014

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COVERAGE

WORK

Five Reasons Your Customers Should Be Protected By New Mexico Mutual

CREATED FOR NEW MEXICO BUSINESSES

Created by New Mexicans for New Mexicans, we understand the diverse operations of our state’s workforce. By placing business with our company, premium dollars stay in New Mexico. We are an A-(Excellent) A.M. Best Rated company and take ownership of providing New Mexico businesses cost-effective workers’ compensation coverage.

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PROTECTION FOR EMPLOYEES, SECURITY FOR YOUR CUSTOMERS

Our tagline, coverage @ work, states our purpose. We protect businesses as well as employees. We ensure that your customers’ business investments are protected from the costs of an accidental injury and provide programs and services to keep their employees safe at work and rehabilitate those who may suffer a workplace injury.

EXCELLENT CUSTOMER SERVICE We distinguish ourselves from the competition by providing the highest standard of customer service. We are a local company that understands the state and your customers’ specific needs, not a faceless 800 number. We are committed to service excellence and our local team of safety and claims professionals know how to take care of injured workers and provide useful and practical information to keep workplaces safe. Our website, which includes safety videos (streaming or checkout), Pay My Bill, File a Claim and many other features, is another valuable resource available to all employers and their employees.

LEADERSHIP AND ADVOCACY FOR NEW MEXICO BUSINESSES

New Mexico Mutual works to ensure that New Mexico continues to be a good place to do business by monitoring legislative and regulatory bodies throughout the year. We are an industry leader in collecting and providing workers’ compensation data to the state of New Mexico. We represent our clients and their employees in Santa Fe by advocating legislation that protects businesses and workers, while keeping the cost of workers’ compensation insurance to a minimum.

INTEGRITY

New Mexico Mutual is recognized as one of the most ethical companies in New Mexico and we’ve earned that designation by being forthright and respecting the relationships we’ve built with our agents, policyholders and injured workers. We have fair processes for employees and employers that are all handled locally. We are financially strong and can be trusted to back your customers when they need us most.

New Mexico’s Experts in Workers’ Compensation Insurance

“La Voz” is the official monthly e-publication of the

Independent Insurance Agents of NM 1511 University Blvd. NE Albuquerque, NM 87102. (505) 843-7231. Fax (505) 243-3367. Web site www.iianm.org. This publication is intended to provide accurate and authoritative information on the subject matter covered, but is distributed with the understanding that neither IIANM, nor any contributing author, publisher, contributor or advertiser is rendering legal, accounting or any other professional service and assume no liability whatsoever in connection with its use. Further, the electronic links to our advertisers and/ or contributors found in this publication are provided as a courtesy to our readers and do not necessarily indicate an endorsement by IIANM. News items from members of Independent Insurance Agents of New Mexico and the general insurance industry are encouraged. The advertising deadline is the fifteenth day of the month, preceding publication. Advertising rates are available upon request. Please contact Rachel Sheffield at rachel@iianm.org for details

IIANM Staff President/CEO Thom Turbett Chief Strategy Officer Marit Peters VP of Member Services Consuelo Trujillo Insurance Programs Administrator Suzie Dodds, CIC Communications Director Rachel Sheffield Member Services Associate Renee Trujillo

2013-2014 Officers Chair Diana Hobbs Vice-Chair Gabe Portillo Secretary/Treasurer Connie Sevier National Director Sam Conlee Immediate Past Chair PJ Wolff

Independent Insurance Agents of New Mexico

iianm’s

Anniversary

Celebrating 80 Years in New Mexico On the Cover:

This month’s iconic New Mexico locale: Rio Grande Gorge Bridge

The bridge, once called “The Bridge to Nowhere” is 650 feet above the Rio Grande & is the fifth-highest bridge in the United States. It was awarded “Most Beautiful Steel Bridge” in the Long Span category. The bridge has been seen the movie ‘Natural Born Killers.’ Scenes using the bridge were shot for ‘Twins,’ ‘She’s Having a Baby,’ ‘Wild Hogs’ and ‘Terminator: Salvation.’

Features IIANM 2014 Company Partners! 04 80th Anniversary Photo Contest 06 What to do Today to Build Your Online Presence

Independent Agents Show Market Share Mettle

Do Insurance Company Automated Underwriting Systems Really Work? 13 IIANM Dues Deductibility 15 IIANM’s Las Cruces Southern Seminar Registration

Game Changer - Electronic Policy Delivery

Administration Announces More ACA Regulatory Changes

E&O - There’s No Such Thing as a Stupid Question

In Every Issue Tech Talk 16 March’s Clickable Calendar 26 Odds n Ends 27

Advertiser Index Acuity 21 Burns & Wilcox Back Cover Litchfield Special Risks

Market Finders, Inc. 05 Molina Healthcare 12 Mountain States Insurance Group

New Mexico Mutual 02 RPS 14

These carriers have partnered with our association to support the vitality of the independent agent system in New Mexico. Take a moment to visit their new page on our site and take advantage of their varied products and services. Independent agents have the freedom to choose!

Representing some of the most financially strong and innovative insurance companies in the specialty marketplace

“FINDING MARKETS FOR THE AGENTS OF NEW MEXICO SINCE 1977” WE THANK YOU FOR YOUR BUSINESS!!

Top-Tier Markets For:

Commercial / Public Auto General Liability Property / Vacants Garage / Dealers Liquor Liability Special Events Inland Marine Directors & Officers Liability Professional Liability / E&O Commercial Umbrella Watercraft / Motorcycles / ATVs Personal Umbrellas Homeowners Mobile Homes Dwelling Fire / Vacants New Mexico’s Locally Owned Managing General Agency

ESTABLISHED IN 1977

Market Finders, Inc. April 2014

5201F Venice Ave NE - P.O. Box 90280 Albuquerque, NM 87199-0280 (800) 530-8711 (505) 822-8711 Fax: (505) 822-1165 www.marketfindersnm.com

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IIANM Announces 80th Anniversary

Photo Contest

By now you should be aware that 2014 is IIANM’s 80th

• Pictures must be taken in New Mexico, and should relate

year as an association. As we mentioned in our initial

to the years from 1930 to the present.

announcement in the January issue of La Voz, we will be doing a number of fun and informative activities and initiatives to commemorate the occasion. This month we are announcing our first member challenge: Show us your

• Extra credit will be given to photos that incorporate or feature agency staff members (please identify them for us separate from your essay).

creative proficiency with a camera!

• This promotion is limited to IIANM member insurance

The theme of this challenge is this: Take a picture of some-

try, and the limit is one submission per agency (each branch

agencies. Be sure to include an agency contact for the en-

thing in our state that you relate to, and then tell us about it

may enter if you have multiple locations).

and why it is important to you. We are interested in explor-

• The deadline for submission is August 30, 2014, and we

ing what makes New Mexico unique and how our diverse

will publish the best entries we receive in La Voz, on our

culture, events, natural resources, or historical landmarks

website, our Facebook page, and at Convention. (By send-

have impacted or shaped your history, your community,

ing us an entry, you agree to give us permission to use your

and/or your insurance agency.

image and publish it with your essay).

For example, if you live in a community with an old saw mill, you might take a picture of your staff in front of it, and then explain how the timber industry was created out of the necessity for wood during the war years, and how important

• The IIANM staff will judge the entries and the winning agencies will be announced at our Annual Convention and Tradeshow September 24 & 25 at Sandia Casino & Resort in Albuquerque.

it was in helping your community grow and prosper be-

• Winning agencies will receive a customized advertiz-

cause it created ancillary businesses that your agency then

ing campaign in your local area using the new ‘Freedom’

protected with insurance.

campaign developed by IIABA and Trusted Choice. We will

• Please email your picture and no more than a 200 word essay about it to rachel@iianm.org and put “IIANM 80th Anniversary Photo Entry” in the subject line.

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work with you to tag radio, TV and print ads worth $5,000

for 1st place, $4,000 for 2nd, $3,000 for 3rd, $2,000 for 4th and $1,000. For 5th place. (see

example on next page).

April 2014

IS YOUR INSURANCE AGENT FREE TO GET YOU A BETTER DEAL?

AN INDEPENDENT AGENT HAS FREEDOM OF CHOICE. With many different providers at their fingertips, Trusted Choice® Independent Agents can put together a coverage plan just for you, with options and prices you may not have seen before. The only one they’re linked to is you.

Find your independent agent. Find a better deal at trustedchoice.com

Free to do what’s right for you.

LET’S TALK ABOUT WHAT LET’S TALK ABOUT WHAT FREEDOM OF CHOICE FREEDOM OF CHOICE CAN DO FOR YOU. CAN DO FOR YOU

O P F

FPO e r e H y c n e g Your A Jane Sullivan 800-123-4567

April 2014

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For more information on Project CAP, visit ProjectCAPMarketing.com By Robert Allan Paul

Everyday Online:

What to Do Today to Build Your Presence The phone rings in your office. Can you imagine not answering or never responding to the voicemail left? Could you conceive deleting an email from a potential client without reading it or following up with an appropriate reply? Of course not. Ignoring such inquiries would not only violate basic rules of customer service, but would also be detrimental to your company’s growth. Yet many companies have created a new website or established a corporate account on social media sites without the necessary follow-through— and without a daily commitment to engage online. These companies aren’t just failing to gain benefit from their online presence, but might actually be harming their brand because they are not interacting appropriately. The advent of online marketing has changed the playing field. In the past, marketers controlled the message, pushing content to customers. Now, the customer is in charge of the conversation; they’re pulling the content they want, when they want it, and they expect you to participate. If not, you are letting their questions, comments and complaints fall on deaf ears. As Paul Gillen remarked in Secrets of Social Media Marketing, “Social media challenges nearly every assumption about how businesses should communicate with their constituencies. The most important change to understand and to accept is that those constituencies now have the capacity to talk – to each other and to the businesses they patronize. In the past, those conversions have been limited to groups of at most a few people. Today, they are global and may include millions of voices. Once a shift like this occurs, a lot of change happens, both predictable and unforeseen.” To facilitate this new level of customer engagement, there are some simple basics: 1. Establish a daily schedule. Just as you set aside time to reply to emails or follow up on phone calls, commit to a block of time each day to review your sites and respond as needed. 2. Divide and conquer. If there are multiple sites to manage, assign different individuals to each one. Rotate responsibility occasionally to gain insight to your brand’s

April 2014

footprint and diverse customer perceptions. This is the process Project CAP uses to produce its weekly blog at www.ProjectCapMarketing.com and it’s made the content more interesting for all concerned. 3. Speak with one voice. Even though different people may be responding on different sites or to different customers, make sure you’re all reflecting your brand’s personality in the same way. This calls for creation of an “engagement strategy,” which establishes clear lines of responsibility, clarifies required timelines for response, and addresses how comments will be handled—from positive feedback to negative complaints. 4. Share conversations. Some messages will reveal issues that will require immediate action. Others can be collected for review by the group on a weekly or monthly basis so that you can track trends and understand what is driving customer comments. 5. Be genuine. The technology used—your computer— may be impersonal, but the conversation should be just as real as if you were having it face-to-face. You owe a quick, courteous response and if additional research is needed, timely follow-up. 6. Connect to sites. Just as you want to encourage customers to leave comments on your own sites, it is equally important to leave comments elsewhere on the Internet to improve your search rankings. Every time you leave a comment, create a link, “retweet” or indicate a “like,” you are increasing the amount of “interconnectivity” with your own site. This will ultimately increase your overall visibility and establish you as an expert within your own field. 7. Relish the opportunity to learn. Your online interactions will give you tremendous customer insight. You’ll be talking with customers who are eager to receive a response. Don’t be afraid to ask for their advice. The most important consideration as you approach the incredible resources of online marketing may be your attitude. Don’t look at it as another task, but as a direct line to your consumers. Once it becomes a part of your routine, it will feel as natural as picking up the phone or sending an email. And you’ll soon wonder what you ever did without it!

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Despite the onslaught of advertising dollars from the direct and captive channels,

independent agents are still holding their own...

Independent Agents Show Market Share Mettle by Madelyn Flannagan, Big “I” VP of agent development, education & research In personal lines, independent agents grew personal auto premiums nine times more in 2012 than they did in 2011. Agents increased premiums $1.8 billion in 2012, compared to a mere $200 million the previous year. And independent agents still dominate commercial insurance sales, which have grown by more than $10 billion two years in a row, controlling 79% of these markets.

Independent agents still control a majority of the entire P&C market, writing 57% of all premiums, including a third of all personal lines premiums. And according to the latest data from A.M. Best, independent agents grew premiums and/or market share in 25 of the 50 states. The research is outlined in a new Big “I” report, “2012 Property-Casualty Insurance Market: Opportunities & Competitive Challenges for Independent Agents & Brokers.” This is the 18th year the Big “I” has reviewed the propertycasualty insurance market using premium data provided by A.M. Best Company and the study provides analysis on the most recent year of data available. The report is encouraging regarding how well the independent agency system is performing in the face of an evolving and challenging marketplace. For the second year in a row, all P&C insurance premium lines grew, building on the market rebound that began in 2011. After two years of solid growth, both personal and commercial lines are approaching their pre-recession volumes, and combined are again generating annual premiums of more than $500 billion. Independent agents were well positioned to capture a larger piece of the market. Overall, their share grew significantly in several states—once again, regional independent agency carriers outpaced market growth in many business lines nationwide. Furthermore, several independent agency carriers increased their market share by substantial amounts.

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In examining personal P&C lines since 1995, several key shifts in market share emerge: • Direct-response writers have doubled their market share, climbing steadily from 7.1% in 1995 to 14.4% in 2012. • While captive agency carriers continue to control half of the personal lines market, this is down 8.3 percentage points from their market share in 1995 of just below 60%. But most of this decrease occurred in the 15-year period between 1995 and 2010, and captive market share has bounced between 50% and 52% since—perhaps retaining business due to more appealing and effective consumer advertising. • Regional independent agency carriers now enjoy 7.5 percentage points more market share than in 1995, but this shift also occurred primarily between 1995 and 2010. Since then, regional carrier share has hovered between 25 and 26%. • The market share of national independent agency carriers has dropped more than 6 percentage points since 1995, although that decrease appears to have slowed since 2010. Capturing a significant number of drivers apparently isn’t helping direct-response carriers cross-sell other policies. While direct insurers capture 18% of personal auto premiums, they generate only 5%, or $4.4 billion, of the $77 billion homeowners market. And they’re nearly invisible in the commercial space.

April 2014

Introducing Molina Healthcare’s exciting 2014 Medicare Advantage Prescription Drug Special Needs Plan Molina Healthcare, a Fortune 500 Company, was created more than 30 years ago by Dr. C. David Molina. As an emergency room doctor, he believed that every person should have access to high-quality care. Molina Medicare Options Plus HMO SNP Plan offers a competitive plan design with additional benefits that you can market year round to meet the needs of dual eligible customers.

• Large Provider Network • Comprehensive and Preventive Dental Services • Vision Exams and Eyewear • Transportation • Over-the-Counter Medications and Supplies • Strong Compensation Plan • Renewal Commissions • Competitive Plan • Market Year Round to Dual Eligible Customers

If you have a New Mexico Life and Health License, contact us to learn more. Please contact: Broker Support Unit (866) 440-9788 broker@molinahealthcare.com

NSR_14_MMG_345

38979MED0214

Do insurance company automated underwriting systems really work? by Chris Burand According to most, maybe all, insurance companies using such systems, this is a rhetorical question. Of course Automated Underwriting Systems (AUS) work or they would not have spent so much money on them. Another agitated response might be, of course they do as evidenced by the companies' tremendous profitability.

mercial casualty composite." Its combined ratios have not decreased over the last five years even with underwriting discipline and predictive modeling. At best it looks to me as though these efforts have only mitigated poor results but this company can't use AUS's to increase sales. They are still playing defense, not offense.

An issue exists here where even if the companies are right, they are right for the wrong reason. Insurance company profitability is always and--barring some wild and currently unimaginable change in business models--will always be highly correlated with loss ratios. Losses have regularly consumed more revenues than any other line item for the last 200 years and I do not see this changing. In fact, losses have generally consumed between 55 percent and 65 percent of premiums on a rather consistent basis.

Another reason claiming victory so early may be misguided is that so much of the industry's profits lately have been generated by reserve releases. One might argue that these releases are justified by new reserving models, but that means the old models were wrong and I haven't seen a press release on this subject. Furthermore, it just seems odd to me that claims could be so fully developed that releases of such magnitude are completely justified only 12 to 24 four months out. It might be worth exploring the extent to which the reserve releases match Wall Street earnings expectations.

So if an Automated Underwriting System works well, causing a reduction in losses relative to premiums, then what will the company do with the extra money? Historically in this industry, companies lower rates. When rates decrease, loss ratios will again increase unless some way, somehow, the AUS causes losses relative to premiums to always decline. Some might have been lulled into believing this is how AUS's work given how loss frequency has fallen off the cliff. But to come to this conclusion would be to believe that AUS's are actually causing people to incur fewer claims rather than shifting claims to less sophisticated companies and/or getting more rate. An AUS then is likely a temporary advantage, at best, from a profit perspective. This is why some companies are right for the wrong reason. If these systems truly work, they effectively provide a cost advantage enabling the company to write business for less money, thereby giving the company the ability to increase market share profitably. The smartest companies are indeed taking advantage of this opportunity. Other carriers are less competent but want agents to think otherwise. For example, if these systems work as well as advertised, then the following results are incongruous. The following is from an A.M. Best report. "... [the company has] focused underwriting discipline... [and] predictive modeling initiative..." The report continues on, stating, "...despite reporting a combined ratio which slightly exceeds the com-

April 2014

Another possibility exists. Underwriting success is fairly basic. One must write risks profitably, but not so profitably that other companies (since the barriers to entry are almost nonexistent) might offer the same product for a lesser but still profitable rate. This "sweet spot" is obviously hard to identify, making underwriting as much art as science. Trying to make it too much a science seems an awfully dangerous endeavor. I strongly recommend anyone with even a slight curiosity on this matter to read The Quants, by Scott Patterson. This book is about how really smart people built extremely fast and complicated software to make security trades. In essence, the goal was to take human decision making out of the equation. As the book brilliantly describes, the Quants did not address the people factor. The systems they built changed the way all other systems and the people interacting with those systems traded. Likewise, the AUS models rely only on data and assumptions. Numbers simply do not tell the whole story. And, what if the data and/or assumptions are simply wrong? continued next page...

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SERVING NEW MEXICO WITH QUALITY PRODUCTS AND SERVICES

Placing a call to us will put you on the fast track to providing the best solution for your clients. • Underwriting & Brokerage capabilities • Proud members of AAMGA, NAPSLO, PLUS and various state independent agency associations • Excellence in service • Relationship driven COVERAGES • Excess & Umbrella • Fiduciary & Crime • Garage Liability & Physical Damage • General Liability • Inland Marine • Personal Lines • Products Recall

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Visit our online Marketing Library to learn more about all our specialty products, programs and contact directories.

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SCOTTSDALE, AZ 800.475.2626 RPSins.com

If an AUS truly works and the initial results are not luck and are not due to reserve releases, then when other companies build their own AUS's, all companies theoretically will offer insurance for a lower but still profitable price. The losers will be the companies that have not been able to lower their cost structure. However, if the AUS's only intensify competition or give a false sense of success or if the people (i.e. agents) working within the system learn how to gimmick the system, an AUS may actually make future loss ratios worse. Clear examples would be that the AUS chooses risks or prices risks poorly. Potentially I can envision a different problem arising. A smart insurance company with good leadership could employ good underwriters. I have had the fortune of knowing some good underwriters and they are artists. They can underwrite risks faster, better and less expensively than machines. Of course finding enough of these people is dif-

ficult, which is one reason AUS's are so attractive. Even if the underwriters are not perfect, agents truly appreciate a company that has good underwriters. All else being equal, or even if the rate is slightly higher but competitive, an agent will give such a company first shot at quality business. A good agent is the best upfront underwriter imaginable. So if a company can charge slightly more, it can afford slightly more expense, remain competitive, and likely get first shot at the best business that will more than offset its higher expenses. AUS's are clearly the way insurance companies are going, some only because they are following the herd. The danger is in not understanding the negative competitive advantage created rather than the permanent competitive advantage discussed publicly. This mistake will only result in inadequate pricing because AUS's are about gaining market share not profit. Another danger is not recognizing how a system can change other systems' and peoples' behaviors. It will be interesting to watch as time passes whether different underwriting models and philosophies will develop. If so, which will be more successful? Understanding the true advantages of AUS's will give executives and even agencies a better understanding of how to develop their strategies.

2012-2013 IIANM Dues Deductibility Dues to the Independent Insurance Agents of New Mexico (IIANM) are not deductible as a charitable contribution but may be deductible as an ordinary and necessary business expense. To the extent that IIANM engages in lobbying, the portion of the dues that relate to lobbying expenses is not deductible as an ordinary and necessary business expense. This law was enacted in 1993, effective March 1, 1994 [Section 13222 of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993)]. The non-deductible portion of dues for 2012-2013 is 23.14%. Please forward this information to the appropriate staff in your organization. The following is a recap of the non-deductible portion of dues for the past six years:

FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14

April 2014

Estimated Estimated Estimated Estimated Estimated Estimated Estimated

25.16% 18.23% 17.72% 21.92% 22.83% 22.71% 23.76%

Actual Actual Actual Actual Actual Actual

17.99% 17.35% 21.37% 22.19% 22.29% 23.14%

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Steve

Anderson.com by, Steve Anderson (Always feel free to email me with comments, new ideas or products that have worked for you. I will check them out and spread the word!)

Seven Ways to Write Better Emails 4. Keep the email as brief as possible. How to effectively manage email continues to be a hot topic. I’ve said for a long time that email is the biggest productivity drain in an agency today. I seldom get people disagreeing with that statement. In past TechTips, I have talked about many different strategies you can use to regain control over your email inbox. One strategy is to learn how to write better emails. Improving the emails you send can have a major impact on reducing the emails you receive and make it much easier for you to respond. Here are seven suggestions that are simple yet can be very useful:

1. Include only one request per email. This may sound counter-intuitive because you may end up sending more emails. But, multiple requests slow things down. When you only have one topic in an email, the individual can reply to that email with the information you need. When you make multiple requests in one email, the recipient may need to keep that email longer in their inbox so they can answer each of the requests you have made.

2. Use a subject line that reflects the topic and urgency. Most people will scan the subject line to get an idea of how important and how urgent your email is. By putting the topic and the urgency in the subject line you will help them be able to prioritize when and how fast they need to answer your email.

3. Get to the point quickly. The first sentence in your email should be a clear explanation of the request you are making. Any explanation for the reason for the request should be included in subsequent paragraphs.

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You are trying to help the individual to whom you are sending this email to be able to respond to your request or provide the information that you need as quickly and easily as possible. Keeping the details as brief as possible will help them save time and, hopefully, provide you with a quicker response.

5. Provide “if-then” options. If there are multiple possible outcomes or ways to provide the information then give the recipient a list of the options that you know are possible. They then will be able to choose a different option without having to reply and ask for additional information. This will cut down on the number of times they need to ask more detailed questions.

6. Don’t send "me too" emails unless absolutely necessary. This is especially true when sending emails to a group of people. There is little that's more annoying for others than to read a string of emails that all say "me too!" This applies to “thank you” emails also. I seldom send a reply to an email simply to thank the individual.

7. Proof your emails before sending them. To make sure you have time to proof your emails you may want to set up your Outlook to not automatically send emails immediately. Or, save your emails as a draft and let them sit for a few minutes before you click Send so you can reread them to make sure they are actually saying what you intended. This will cut down on the number of questions and/or clarifications you may have to deal with later. Email is a great communication tool — when managed well. I hope these tips will help you write better emails and take you one more step toward regaining control of your email inbox.

April 2014

6 Steps to Protect Your

Privacy

There has been much media attention surrounding the latest data breaches from Target, Neiman Marcus, and Michaels. Customers of these stores have had their private information stolen. It can be overwhelming for you (and your clients) to figure out what to do to protect yourself. While you don’t have any control over the breach, following are some steps you can and should take to protect yourself from being a victim of identity theft. This information is important even if you weren't a victim of any of the recent breaches. Privacy and security professionals say on a regular basis, data breaches aren't a question of "if," they are a question of "when." It is best to be prepared and proactive.

Step 1: Review your accounts. As a result of the Target data breach, many banks and credit card companies took proactive action to cancel and reissue cards. Go online and check the accounts you use to make purchases at any retailer on a regular basis. Don’t wait for the monthly statement. If there is any charge — including a very small charge — that you did not make or authorize, call immediately.

Step 2: Credit cards are better than debit cards. Always. If you used a debit card at the breached retailer, call your financial institution and request that they issue you a new card (if they haven't already). And in the meantime, monitor your account closely and report any loss as soon as you notice it.

Step 3: Take advantage of free credit monitoring services, BUT realize their limitations. In the cases of Target and Neiman Marcus, they are each offering a single-bureau monitoring service (there are three credit bureaus). This can be helpful if someone gains access to your Social Security number and tries to open a new account in your name, but it does not protect you against other forms of fraud. Sign up for the service Target is offering: Target's Free Credit Monitoring. And check out Neiman Marcus' service: Full-Service Identity Theft Protection.

Step 4: Keep a lookout for scams. If you follow these general rules, you will greatly reduce your chances of falling victim to common scams. • Never give sensitive information out to anyone who calls you. It is unlikely that any company that has had a data breach is going to call everyone whose records were

April 2014

breached — and don’t trust your caller ID. This also applies to any law enforcement or government agency, bank, or other entity that may have a reason to need sensitive information. Verify before you ever provide information over the phone. • Keep an eye out for fraudulent emails. If the email seems suspicious, delete it. I received an email last week from British Airways confirming my ticket. I didn’t buy a ticket — it was an obvious phishing attempt. Don’t click on links in the email unless you know exactly where that link will take you. Don't open attachments unless you BOTH trust the sender and are expecting an attachment from them. Don’t respond to an email asking for any sensitive information even if it looks official.

Step 5: Keep up with your credit reports. It doesn't matter if you've been the victim of a data breach; you are entitled to one free credit report per year from each of the three credit bureaus. We recommend spacing them out and ordering one report every four months. Make sure to only do this through the official site, Annual Credit Report. com. Don’t fall for websites with similar names that want to charge you for ongoing credit monitoring services.

Step 6: Talk with your family. Make sure everyone in your family is familiar with these steps. Children can be just as much a target for spammers as adults. Data breaches have become a reality in our online world. You can fight back by being smart and vigilant. Taking these steps will not guarantee you won’t have your identity stolen but it sure will help add a layer of protection. I think this would be good information to include in a newsletter to your clients. You have my (Steve Anderson) permission to copy and use this TechTip for your agency. Just make sure you edit it to make it your own.

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15 hours of continuing education for insurance professionals

Day

CE Seminar

/ 5/21/14

Choose a morning class: Commercial Lines Coverage Gaps Jeff Straight, CIC,LUTCF, AAI

Obama Care in the Insurance Agency / NMHIX Update Patty Padon, CIC, LUTCF, AAI

Ethics Townhall Luncheon

11:30am - 1:00pm

Choose an afternoon class:

IIANMâ&#x20AC;&#x2122;s Annual Southern Seminar

Flood

What is a Co-op? / ACA Update

Jeff Straight, CIC, LUTCF, AAI

Patty Padon, CIC, LUTCF, AAI

Day

/ 5/22/14

Choose a morning class:

Las Cruces Convention Center

May 21 & 22

Personal Lines Coverage Gaps Jeff Straight, CIC,LUTCF, AAI

Best Practices: Keys to Remaining Independent Part 1 Marit Peters

Choose an afternoon class: Certificates of Insurance & Additional Insureds Jeff Straight, CIC,LUTCF, AAI

Best Practices: Keys to Remaining Independent Part 2 Marit Peters

Full Seminar (15 CE hrs): Member: $200 / Nonmember: $240 One Full Day (8 CE hrs): Member: $105 / Nonmember: $140 One Half Day (AM 4 CE hrs / PM 3 CE hrs): Member: $70 / Nonmember: $75 Ethics Only (1 CE hrs): Member: $35 / Nonmember: $45 (Be sure to log-in in order to receive member pricing!)

April 2014

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Game Changer: Electronic Policy Delivery The insurance industry is a paper hog. Insurance companies probably generate and distribute more paper than any other industry, second only to publishers of books, magazines and newspapers. But even publishers are migrating more and more towards electronic platforms, and carriers are beginning to adapt as well. With the introduction of dual monitors, smartphones and tablets, most insurance organizations have begun to reduce their reliance on paper over the last five years - it simply requires changing getting creative about information exchange, while still remaining “trusted advisers.” The first step? Electronic policy delivery. In increasing numbers, consumers are demanding online access to their insurance information, including auto ID cards, certificates of insurance and copies of their insurance policies - and research indicates that seven out of ten clients prefer electronic documents. Here’s how to implement electronic policy delivery at your agency: 1. Adopt Activity Notes to receive policy copies electronically from carriers directly into agency management system. 2. Implement a new process to obtain and retain the approval of clients to accept electronic versions of policies and other insurance documents. 3. Employ a secure and registered email or eSignature tool to send electronic documents to clients securely, or provide access to documents through a secure, password-protected portal . Combined, these solutions enable the typical agency to: • Eliminate scanning and indexing paper copies of many documents • Significantly reduce printing and mailing costs • Reduce the “cycle time” to deliver a policy from weeks down to days or even minutes

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by Susan LaBarre

• Increase renewal retention • Learn of transactions before clients do • Free up staff to acquire new business, cross-sell and service existing accounts • Compete more effectively with direct carriers Besides that, moving to electronic delivery is good for our planet. The average tree makes 16.67 reams of copy paper - more than 8,000 sheets, according to conservatree.org. From consumers to corporations, society is recognizing the need to reduce its carbon footprint, but the insurance industry generates billions of pages of paper documents each year. Delivering policies electronically will allow us to preserve vital natural resources. And electronic policy delivery is also good for your bottom line. When agents do the math, reducing dependence on paper saves them time and money. Receiving policies electronically gives agencies an easier, faster way to enter them into the agency management system and deliver them to clients. The migration from paper to electronic documents is an evolution, not a revolution. It will take some time for all parties involved to modify systems and workflows to fully support electronic delivery. Some consumers may never embrace electronic documents 100%, but let’s treat exceptions as just that. Times are changing, and our industry needs to step up to the challenge by setting a positive example and positioning ourselves to compete with direct carriers. To thrive as a value-added distribution channel, independent agents, brokers, carriers and vendors must work together in order to offer our customers an electronic experience that is better than paper. Visit the ACT website to read the full version of this article. Susan LaBarre is director of agency automation and quoting, customer experience, at Liberty Mutual commercial insurance. She also chairs ACT’s Policy Delivery Work Group.

April 2014

RELAX. WE’VE GOT YOUR BACK.

FOR ALL

THAT MATTERS

www.acuity.com April 2014

facebook.com/acuitywow

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by Ryan Young, Big “I” senior director of federal government affairs.

Administration Announces More ACA Regulatory Changes Feds may grant MLR wiggle room Insurance carriers – and possibly producers – finally may catch a break in the midst of the Affordable Care Act (ACA) implementation. The Centers for Medicare and Medicaid Services announced on March 18th its intention to relax the medical loss ratios (MLR) for health plans sold on the state and federal exchanges. The proposal seeks to raise the ceiling on administrative costs in order to offset expenses incurred from initial enrollment problems. The adjustment would apply to all states beginning in 2015. Under the ACA, insurers are required to spend at least 80 percent of premium dollars on medical costs. The remaining 20 percent may go toward administrative costs, which include agent and broker compensation. The MLR rule was designed to limit the amount of money insurance carriers can spend on overhead costs and, when it is exceeded, impose customer rebates. We’ll monitor this proposal and its potential impact on producer compensation.

Another week in Washington, D.C. brought another batch of major changes to various Affordable Care Act (ACA) provisions as the Obama Administration continues its trend of ad-hoc implementation. The delay that made the biggest splash recently was the extension of grandfathering protection for ACA noncompliant plans for another two years. The Administration also made significant announcements on the data reporting requirements under the employer mandate, as well as the much-maligned $63 reinsurance fee. The latest regulatory actions make significant changes in individual mandate enforcement; weigh in on state regulation of navigators and non-navigator assisters; and propose addressing consumer complaints regarding reduced plan networks. Grandfathered Plans In a widely expected move, the Administration announced that it would allow a two-year extension of plans slated for cancellation in 2014 due to new ACA requirements. The regulatory action at the federal level now leaves it up to state regulators and insurers to determine whether these plans will continue to be offered. If allowed, this move by the Administration means consumers could renew an ACA noncompliant plan as late as October 2016, allowing them to retain such a plan until October 2017. The Administration had already provided for one year of grandfathering - 2014 only - of these noncompliant plans under the ACA, due to massive political pressure from consumers receiving waves of cancellation notices last fall. According to industry experts, 24 states followed the federal government’s lead and allowed for the extension of noncompliant plans, with 23 states barring the offering and the remainder taking no action. It’s unclear how state regulators and insurers will react to this latest move, but it will likely provide some relief for pro-ACA members of Congress in their reelection efforts this fall. The Administration is being roundly criticized for what many consider a blatant political move. Employer Mandate Reporting As part of the regulatory package, the U.S. Treasury Department also released final rules on the reporting requirements for businesses subject to the employer mandate. The Administration has described the rules as “streamlined” and intended to ensure the federal government has the information necessary to enforce the mandate that larger employers must offer coverage or pay a fine. Reinsurance Fee Relief Also as part of the Treasury regulations, the Administration offered new relief

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April 2014

for certain plans from the fee intended to fund the reinsurance program under the ACA. For 2015, the new rules would lower the fee from the previous $63 per person to a newly estimated $44 per person. The regulations would also give certain self-insured plans and multi-employer arrangements - such as those administered by unions - a two-year reprieve from paying the $63 per person fee. Individual Mandate Hardship Exemption In a little-noticed and unpublicized announcement recently, the Administration extended and broadened the current individual mandate exemption for two additional years for consumers with cancelled plans who feel the plans available to them are too expensive. In response to millions of policy cancellations last fall for non-ACA compliant plans - as well as the ensuing storm of criticism and political pressure - federal regulators created a one-year exemption for affected individuals if they can provide documentation of their plight. The recent action extends this “hardship exemption” from the individual mandate for two more years, and also makes the documentation requirement optional. Although the full effect of this policy move will only reveal itself over time, some experts believe it could reduce the number of insured individuals by millions. Navigator Regulations The Administration also published proposed regulations regarding navigators and non-navigator assisters - most likely a reaction to the passage of laws in 17 states so far that create a state regulatory regime for these entities. The Big “I” has been very active in state capitols advocating for this oversight because the association views this as a consumer protection issue - by definition, these entities have no training or background in insurance and are lightly regulated at the federal level. Not surprisingly and as previously disclosed by the HHS, the rules propose that states cannot institute a requirement that navigators and nonnavigator assisters obtain E&O coverage. A worrisome and broad prohibition on state laws would prevent these entities from performing the duties described in the ACA. An example provided by the Administration is if there is only one navigator entity in a given Marketplace, any rule that would prevent this navigator from completing its duties would be barred. The rules also stipulate that states cannot require navigators to refer all business to an agent or broker for enrollment, or that they must end contact with a consumer if they discover an agent is already assisting with an enrollment. The proposed regulations would confirm that states can impose requirements for navigators and similar federally-funded entities, such as fingerprinting and background

April 2014

checks, as long as the deadlines for completion do not prevent any entity providing a good faith effort to comply. In addition, the regulations state that these entities should be paid on a salaried basis rather than a per-enrollment basis. The rules also envision creating civil money penalties for these entities if they violate certain federal requirements. The Big “I” will file formal comments on the proposed rule in the coming weeks. Plan Networks Lastly, the regulations also propose addressing the issue of reduced networks for plans sold through the federal Marketplaces. The rules make clear that federal regulators are planning to conduct more rigorous oversight of these plans, following recent reports from many consumers who discovered their preferred provider is not part of a plan only after enrolling. Plans available on the federal Marketplace in 2015 must offer 30% of area "essential community providers” - an increase from the current 20%. Although reduced plan networks are a method of controlling health care costs, the Administration has come under fire as consumer complaints continue to surface. As this tool is pared back, premiums are even more likely to rise in the future.

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errors

&omissions “There are naive questions, tedious questions, ill-phrased questions, Questions put after inadequate self-criticism. But every question is a cry to understand the world.” ~Carl Sagan

There is No Such Thing as a Stupid Question.

by Richard F. Lund, J.D.

“There’s no such thing as a stupid question so feel free to ask whatever you want.” That is one of the first things you hear from a teacher, professor or educator when you go into any learning environment once you reach the high school level. As a matter of fact, I say the very same thing when I’m presenting at an E&O risk management seminar. How many times have you been in a seminar where you’re afraid to ask a question, because you think it seems so obvious that you’re afraid other people will think you’re foolish for asking it? Trust me, if you are thinking it there are probably at least three other people who are thing the same thing they THEY ALSO don’t want to ask as THEY don’t want to appear foolish. So, let’s forget about the risk of appearing foolish and ask the question! It’s been said that pride goeth before the fall, so if you fail to ask the question, you may just be opening yourself up to an E&O claim. As the risk management coordinator for the Swiss Re Corporate Solutions/Westport Insurance Corporation Insurance Agents Error and Omissions Liability program, I am asked questions all the time about any number of E&O subjects. While I may have answered the same question many times, I treat each one as if it’s brand new. The reason is simple: if the person knew the answer, they wouldn’t be asking and while it may be old hat to me, it’s new to them. They have never run across the subject before because they may be new to the insurance industry, a new agent, a new E&O insured, or maybe even a more seasoned insurance veteran. My experience has been that they are really asking because something is going on in their business that could

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ultimately lead to an E&O incident and they don’t know what to do. So what kind of questions do I get asked? The questions may be simple, complex and anything in between. While some might be general in nature, some may also depend on a specific state law or regulation. I don’t rely on my knowledge alone. I’ll ask our claims team and insurance experts I know, for their opinion before I provide an answer. Why do I do that? Because I’m not afraid to ask a stupid question. Here are just a few of the most common:

Q: Do I really have to document every phone call with my customers? I know which are important and which aren’t. I’ll remember. A: Yes, you should document every phone call, even if it’s just a short note. If your customer is calling you, it’s because they are having an issue that may or will involve their insurance policy. Why else would they be calling? Even if it is something so innocuous as to ask what the limits are on their policy or what their premium is, what is the underlying reason why they are asking? If it is about limits about limits, have they had a claim? Why do they need to ask about that? If it’s about their premium, do they owe it? Are they trying to reduce it? Are they looking for another quote? If they call about their auto policy and ask who is listed on it, why do they want to know? Little things can mean a lot when it comes to an E&O claim and consistency. Documentation can be the key to making it defensible.

Q: I heard at an E&O Seminar that I shouldn’t call my customers who have company direct bill policies when their premium is due. But I know they won’t remember to pay the bill if I don’t call them. They just expect that as part of my customer service. Do I really have to quit calling them.

April 2014

A: YES, yes, a thousand times yes. If you haven’t stopped calling them, stop immediately. But before you do, send a letter to all of your company direct bill customers, preferable certified mail-return receipt requested, that effective immediately you will no longer be calling them to advice them when their premium is due. The reason is simple, by calling them you have created a duty that you did not otherwise have. The one time you forget or miss calling them is the one time they don’t pay their premium, their policy is cancelled for non-payment, they then have an uncovered claim, and they blame YOU because they didn’t get your call telling them the premium was due. We recently had a claim where an agency didn’t call any of their direct bill customers, except one. It was a big account and they knew that they would only pay their premium when the agency called them. Of course, the agency person who was responsible for calling the customer was on an extended vacation, and no one called the customer when the premium was due. The customer received the direct bill notice of payment, but ALWAYS waited to pay it until they received the call from the agency. Since they didn’t get the call, they forgot to pay the premium, the policy cancelled, they had an uncovered loss of $65,000 and made a claim against the agency. The agency is clearly in error but had they not taken on that duty, they would not have been responsible. The agency as now sent a letter to the customer, certified mail, and return receipt requested, that they will no longer be notifying them when their premium is due.

Q: Why do you want to send the letter certified mail with return to receipt requested?

A: To document in your file that your client received the letter advising them they would no longer be notified by the agency.

Q: Our office has recently gone paperless, i.e. we scan and store all documents electronically. Do we still need to retain the paper files and documents?

A: No, once you have scanned and stored the documents electronically, the original documents should be shredded and disposed of. The underlying question from an E&O standpoint is whether an electronic copy of an original document can be used as evidence when there is a claim, and the answer is yes. The Uniform Electron Transactions Act (UETA) was developed by the National Conference of Commissioners on Uniform State Laws (NCSL) in the late 1990’s and has been adopted by all states except Illinois, New York and Wash-

April 2014

ington, which developed their own laws regarding electronic transactions. Among the basic tenants of the law is that any document that is electronic is the same as a paper document, and as such, is admissible as the original of the document. In addition, in 2000 the United States Congress enacted the Electronic Signatures in Global and National Commerce Act (E-Sign) which established the validity of electronic records and signatures under federal law. They key to remember is that once you create an electronic record, you should immediately destroy the paper document. Here is the most recent question I received:

Q: Our agency is trying to get our arms around some social media opportunities to help promote our agency. When we started our website redesign last year, I recall going through some hoops with our E&O carrier about what was permissible and what was not. This year we are crawling into Facebook and Twitter and wonder about the E&O implications, if any.

A: Swiss Re Corporate Solutions and the IIABA have a module that specifically address Social Media in the new E&O seminar materials, “E&O Risk Management: Meeting the Challenge of Change.” Those materials are available on the E&O Happens Website. I also went to the E&O Happens website and entered “social media” in the search tool and got 30 responses that are throughout the website including E&O Happens, ACT and Virtual University, some of which specifically reference Facebook and Twitter. I recommend visiting the websites and taking a look at those that interest you. These are just a few of the questions that have come up in the last year. The first three, I have been asked several times before and the answers are readily available on several different IIABA resources, including the E&O Happens Website, the Virtual University and the Agents Council for Technology (ACT). As you can see from the last question, many times I’ll take the subject that is being inquired, enter it in the search feature on the main page of the IIABA website or on the E&O Happens page; and I’ll get numerous results pointing to different places in all three of those locations where the answers can be found. The reason I do this is not necessarily because I don’t know the answer, but because I want to know if there is a place for you as an agent and member of IIANM and a Swiss Re Corporate Solutions policyholder to locate the information quickly and then pass on to you. So remember, there’s no such thing as a stupid question. The only stupid question is the one left unasked.

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April 2014

Clickable Calendar

Click on class title to register Sunday

Monday

Tuesday

Wednesday

16 (ACSR1)

8 CE hours

Saturday

Homeowners

Friday

P&C Pre-Licensing Exam Review 13

Thursday

L&H Pre-Licensing Exam Review

17 Commercial Liability (AAI82A)

8 CE hours

Defining E&O Basics

e Officosed Cl

(ACSR4)

8 CE hours

IIANM’s Job Bank Attention hiring managers, students or insurance professionals. View available job listings and descriptions or post your resume for prospective employers. We will be encouraging university’s to use this resource for job placement and will need agencies and companies to be actively posting job opportunities as they become available. Click here to take advantage of IIANM’s Job Bank.

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April 2014

ODDS andends

Earth Day, April 22. Spend the day cleaning up and focusing on environmental awareness.

Crack the hidden secrets of the everyday egg You think coloring and hiding eggs for Easter is tough? Imagine what those hens have to go through in order to produce them for you. As the water is boiling on the stove, ponder these interesting facts from the American Egg Board: • A hen requires 24 to 26 hours to produce an egg. Thirty minutes later, she starts all over again. • The eggshell may have as many as 17,000 tiny pores over its surface. Through them, the egg can absorb flavors and odors. Storing them in cartons helps keep them fresh. • White-shelled eggs are produced by hens with white feathers and white earlobes. Brown-shelled eggs are produced by hens with red feathers and red earlobes. • To tell if an egg is raw or hard-cooked, spin it. If the egg spins easily, it is hard-cooked but if it wobbles, it’s raw. • Egg yolks are one of the few foods that naturally contain vitamin D. • Yolk color depends on the diet of the hen. Natural yellow-orange substances such as marigold petals may be added to light-colored feeds to enhance colors. Artificial color additives are not permitted. • Occasionally, a hen will produce double-yolked eggs throughout her egg-laying career. It is unusual, but not rare, for a young hen to produce an egg with no yolk at all.

More of us are bingeing on our favorite shows Remember when you had to actually wait seven whole days to watch the next episode of your favorite TV show? That’s so last century. A survey from the DVD and online streaming company Netflix says that 61 percent of Americans now “binge watch” their shows at least once a week, watching two to three (or more) episodes at a time. In an odd way, it’s not all about instant gratification, though: In the survey, 37 percent indicated they’d rather save up multiple episodes to watch at one time than sit down each week when their shows air.

While money can’t buy happiness, it certainly lets you choose your own form of misery. ~Groucho Marx

Make some extra money in your own front yard

A yard sale can help you make some extra cash, but you’ve got to treat it like any other business venture. Here are some tips on getting the most out of your event: • Advertise by placing notices on the Internet and in the local newspaper. (If you’re sneaky, you can try waiting until someone else in your neighborhood places an ad in the paper, then holding your own yard sale the same day.) • Put prices on everything. When pricing items, start with the guideline of one-third of what it cost new. But that’s just a guideline. That book that cost you $15 probably won’t sell for more than $3. • Display the more interesting items for sale at the end of the driveway to lure people in. • If someone hands you a large bill and you need to give them change, leave the bill out until after you have given them their change. Otherwise, a dishonest person could claim, “I gave you a $20, not a $10,” and it would be your word against his or hers. • As items get sold, fill in the empty spots on your tables to keep things looking attractive. • Put out a “FREE” box. No one is going to buy that stained T-shirt or chipped coffee cup. • Make sure the items you’re selling are in the best possible shape; e.g., put air in that basketball and turn the TV on if you’re selling it. • Put on background music. Stores do this for a reason: It works to keep browsers there longer and more likely to buy.

April 2014

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