New Website Feature - Policyholder Corner To better serve our policyholders, we have developed a new website feature called “Policy Corner.� It is available via the Employers tab of the website and requires employer log-in. This self service area provides access to more detailed policy information, such as policy documents, billing transactions, account statements and claims summaries. Please note that agents have access to the same policyholder information through the CompQuick system. Please share this exciting new self service feature with our policyholders and encourage access for their policy service needs. While there, free safety services are also just a click away!
NewMexicoMutual.com > Employers > Policy Corner *An employer log-in will be required to utilize these new features.
“La Voz” is the official monthly e-publication of the
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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.
Features
o VZ
"The Voice" of Independent Agents since 1934
IIANM’s 2013 Company Partners 04 Thom’s Springtime Message to Our Members
05
Is There Coverage for Damage Caused by Meteors or Police?
07
Cyber Coverage Moves Into Standard Lines
09
Insurbanc Helps Fast Track Agency’s Perpetuation Plan
11
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.
Beyond the U.S., New Rules Emerge for Advisor Compensation
15
5 Ways to Curb Negative Online Reviews
17
Union Standard’s League of YA Heavy Hitters
18
Advertising rates are available upon request.
Young Agent Spotlight - Anna Byers 19
Please contact Rachel Sheffield at rachel@iianm.org for details
Key Ideas for New Insurance Agents
20
Community Corner 22
IIANM Staff President/CEO Thom Turbett Chief Strategy Officer Marit Peters VP of Member Services Consuelo Trujillo VP of Insurance Programs Julie A. Franchini Communications Director Rachel Sheffield Member Services Associate Renee Trujillo
2012-2013 Officers Chair PJ Wolff
13 E&O Risk Management Tips
24
What Do Companies Want?
26
Industry TidBits
28
Study: IA Channel Flexes Strength in P&C Market
30
In Every Issue Tech Talk
12
April's Clickable Calendar
32
Odds n Ends 33
Advertiser Index Acuity Burns & Wilcox
29
Back Cover
Litchfield Special Risks
10
Vice-Chair Diana Hobbs
Lovelace Health Plan
21
Secretary/Treasurer Gabe Portillo
Market Finders, Inc.
14
Mountain States Insurance Group
National Director Sam Conlee Immediate Past Chair Scott Jones
16
New Mexico Mutual
02
Philadelphis Insurance Companies
23
Risk Placement Services (RPS)
08
The companies listed below have made a commitment to support the strongest agents' association in New Mexco. In turn, as members, please show your thanks by utilizing their varied products and services!
Become a Partner! We invite companies to experience the networking, recruiting and branding opportunities presented by becoming an IIANM Corporate Partner. Our Associate's Partnership Program puts supporters front and center in a meaningful and memorable fashion. Click here for more info!
Thom’s Springtime Message to Our Members: The recent economic downturn has changed us all. I don’t know about you, but it seems like all I’ve been doing these past four years is reacting to one challenge after another. Well, enough is enough. Things are starting to improve, so for us at the Big I it’s time for a change from reactive to proactive. On both the state and national fronts, our association has been working to better understand the important challenges and issues that agencies are facing, now and in the future. Our national association has been gathering responses from surveys, which many of you have participated in; and our IIANM Board of Directors has been conducting strategic planning sessions. The message has been loud and clear. Our industry and agencies are facing challenges in: • Hiring and retaining talented staff • Sales training / techniques • Marketing in the digital age • Client loyalty • Commission decreases • Succession planning in agencies • Personal lines competition by direct writers online We are committed to facing these challenges with you and ensuring that we provide easily adaptable, quality solutions. Therefore, we have created a new position within IIANM to specifically focus on your needs and develop additional programs that bring value to your businesses. I am pleased to share with you that Marit Peters is returning to the association to fill this role. During her 9 years away she has acquired valuable experience and skills in strategic
planning, business development, talent management, sales management, succession planning, executive coaching and human resources. In short, you could say that we are re-tooling here at IIANM. Along with building new programs and services, Marit will also be heading up the Project CAP Initiative for NM agents, which is very close to launching. Project CAP will help independent agents recapture personal lines market share by providing the means and opportunity to do business the way consumers want to do business. Many of you can expect to hear from her and other staffers here at IIANM over the next six months as we explore ways to best meet your needs. I hope you will take the time to share your concerns as well as creative ideas. I think you will be pleased with the improved technology, support and solutions that we will now be able to provide. Between now and August, we will be traveling the state in a series of Town Hall Meetings to share our new ideas and programs with you. Please plan on joining us to learn how we can help you to be more productive and extra visible to all those potential new clients out there. See below for meeting dates & locations! ~Thom Turbett
Town Hall Dates & Locations: May 1st - Albuquerque, NM May 21st - Farmington, NM June 11th - Roswell, NM July 11th - Santa Fe, NM July 23rd - Las Cruces, NM Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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Proudly Presents: The 1st Annual
Thursday, April 25, 2013 6:00-9:00 PM Casa Rondena Winery, Los Ranchos de Albuquerque An evening of fine wine, food and entertainment is guaranteed, and with your help, we are hoping to raise enough to grant the fondest Wishes of 10 New Mexico children!
Tickets are $50.00 per person •Wine Sampling •Entertainment •Hors D’oeuvres •Live & Silent Auction This event is made possible thanks to the generosity of our Aficionado Title Sponsors:
And our Enthusiast Sponsors:
Is There Coverage for Damage Caused by Meteors or Police?
February’s meteor strike and cabin fire prompt questions on property insurance. by Bill Wilson Would damage to your client’s property be covered if it were struck by a meteor? Or how would a homeowner’s policy respond if authorities set property ablaze? Both of these questions submitted to the Big “I” Virtual University’s Ask an Expert service were prompted by incidents that made headlines in February: the meteor that exploded over Russia, and the California cabin that burned down during an ex-Los Angeles police officer’s standoff with police.
Covering Meteor Blasts Most homeowners and commercial property policies cover meteor strikes. Most of these policies are written on an “open perils” basis and cover any damage to buildings or structures that is not excluded. There is no exclusion for direct hits by meteors and the damage caused by their sonic booms. Even in the case of personal property or occasional real
lieved to have barricaded himself—caught fire while it was surrounded by police, according to media reports. A police official later said authorities did not intentionally set the blaze, which erupted after they fired tear gas canisters that can emanate heat. If police cause damage to a property, would the governmental action exclusion in the HO 00 03 05 12 and DP 00 03 12 02 exclude coverage for the homeowner?
property written on a “named perils”
It's arguable, depending on how literally the refer-
basis, there is usually the following or a
enced policy provisions are read.
similar peril that is covered by the policy:
Did the government actually order the destruc-
Falling Objects This peril does not include loss to property contained in a building unless the roof or an outside wall of the building
tion? Or was it just trying to flush the suspect out, or provide cover for an assault—making the ensuing fire an accident? Or did the suspect set the fire?
is first damaged by a falling object. Damage to the falling
What happened in this case is not akin to, for example, a
object itself is not included.
governmental order of condemnation on a property, some-
The falling object would be the direct proximate cause of
thing that is a primary source for the origin of this exclusion.
the sonic boom, and it should be covered there as well. In
Aside from that issue, California is one of 28 states con-
addition, there is usually a named peril for “explosion” and
sidered "standard fire policy" states, where insurance laws
the rapidly expanding air that causes the sonic boom would
or regulations prohibit property coverage more restrictive
likely fit that peril. In the case of sonic booms from aircraft,
than a codified standard fire policy—often, the 1943 New
there is usually a named peril for aircraft.
York Standard Fire Policy, according to the American As-
Insurance companies often cover things that are unlikely to happen—but every now and then, the unlikely happens. Determining Governmental Action Exclusions In California, a cabin—where a fugitive ex-officer was be-
sociation of Insurance Services (California Insurance Code Article 3, Section 2070-2084, California Standard Form Fire Insurance Policy). If the governmental action exclusion is not in the standard fire policy, it should not apply to losses otherwise covered by the policy, such as fire.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
Page 7
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Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
Cyber Coverage
Moves into Standard Lines
by Katie Butler
The high-demand coverage is increasingly becoming an add-on product.
L
ooking for cyber liability coverage? These days, agents have to look no further than a businessowners policy. Rick Betterley, president of Betterley Risk Consultants, says one of the biggest trends in cyber coverage is it’s becoming an add-on in BOP and other standard lines, whether it covers just breach notification or is more extensive to cover liability and breach response.
risk? And it’s evolving as we’re talking. What I don’t know is if it is priced appropriately.” Francis concedes that relative to other coverages, cyber is still less mature in terms of the industry loss data that shapes pricing. “But I think you have seen over the last few years a little more consistency in terms of pricing and coverage,” he says.
And the trend of more coverage availability dovetails with the increasing demand for cyber protection across all types of businesses.
Coverage Developments One of the latest cyber enhancements, Derigiotis says, is covering PCI fines—the fines issued by credit card companies to retailers who are non-compliant with sensitive customer data and receipt storage. “For any retail business that accepts credit cards, receipts have to be stored in a certain way,” he says. “Once word gets out to the payment card industry that you’ve had a breach, they could fine you. And if you’re doing it wrong for one person, you could be doing it wrong for a lot of people—and it could be a pretty hefty fine.”
“From small mom-and-pop stores through large sophisticated Fortune-100 companies, we’re continuing to see an uptick in companies buying coverage,” says Tim Francis, enterprise cyber lead for Travelers. Why the increase? “Agents are becoming more aware of the breadth and depth of coverage available in the marketplace, and risk managers are more aware that cyber-related issues are not just the kind of thing that can affect very large companies, but have a material effect on smaller companies,” he says. “In the large company space, despite the fact that they have well-resourced IT departments, there is no IT department that is without vulnerability.” Pricing With more expanded products and enhancements, David Derigiotis, assistant vice president, special risk division-professional liability for Burns & Wilcox, says pricing for cyber coverage has “come down dramatically.” Betterley agrees there is a lot of carrier competition in the stand-alone cyber market, and though he says he doesn’t think premiums are necessarily going down, “there are a lot of discussions going on.” Betterley points out that, especially for smaller businesses, cyber coverage is not price prohibitive. “For $120 a year, you can add on cyber coverage for breach response plus third party—somebody paying a few thousand dollars a year for a BOP ought to look at that and say it’s a no-brainer,” he says. But Betterley points out that cyber is different than most areas of insurance other than crime because people are being actively hostile. “Having your warehouse burn down most likely wasn’t done for a profit,” he says. “With cyber, people are trying to steal valuable information. If they don’t figure out a way to penetrate your insureds’ data today, they will try again tomorrow. How do you measure that
Betterley also points out that cyber is expanding in valueadded services that are not a part of the actual policy but provide a real benefit to the insured. Risk management services—such as breach response plan templates, statespecific information on who has to be notified in a breach and discounted response services—fall outside the actual coverage, but they help insureds from having a claim in the first place. “For the agent, it’s a really good part of the sales presentation,” he says. “If the insured says, ‘I get insurance plus these other services’, the premium seems more reasonable.” On the Horizon Risk management will be the focus of the next evolution of the stand-alone cyber policy, says Betterley. “Conceptually I liken it to having sprinklers,” he says. “In a cyber world, that includes products and services that help prevent a breach.” Just last week, AIG announced that CyberEdge policyholders who qualify will have access to AutoShun, a third-party hardware device that sits between a customer’s firewall and the external Internet to help stop a cyber attack in real time. Francis says the industry will keep evolving with cyber risk, and that agents need to stay current and choose the right partners. “The ways customers use technology changes exponentially and the exposures keep pace,” he says. “Be aware of the current state of the market and customer needs but keep an eye out for changing developments. And make sure you have partnered with carriers who will do the same.”
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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InsurBanc Helps Fast-Track Agency’s Perpetuation Plan After Principal’s Passing by PHIL GUSMAN, PROPERTYCASUALTY360.COM
F
or an insurance agency, executing an internal perpetuation plan can be tricky enough. But when unfortunate circumstances force the plan to be completed on an accelerated timeline, the challenges mount. Such was the case for Branford, Conn.-based V.F. McNeil Insurance, which saw its agency principal and fifth-generation owner, Paul H. Sturgess, pass away from amyotrophic lateral sclerosis (ALS, often referred to as Lou Gehrig’s Disease) before completing his plan to sell the business to Daniel McNamara, who at the time was a vice president with the agency. Facing the hurdle of securing the transaction’s financing after Sturgess was diagnosed, McNamara went to three different banks: two were traditional banks, while the third, InsurBanc, specializes in providing financing to insurance agencies. The initial perpetuation plan, developed in 2006 long before the ALS diagnosis, called for Sturgess to hold the whole note of the agency (meaning he would act as the exclusive lender and be the only one to receive any interest paid in the transaction, without a bank’s involvement). But as his condition quickly worsened over the next few months, McNamara says Sturgess decided it would be a good idea to get a bank involved to fund either all or part of the deal so that he could get some money upfront and take care of his family. “We really had to get on the fast track to find a bank that could do this,” says McNamara, who encountered a number of difficulties in conveying the agency’s value to traditional banks. One lending institution, he says, wanted to see all of the agency’s premium financing, “which we don’t have very much of. They were looking for about $1 million worth of premium financing, so that was pretty restrictive.” At TD Bank, McNamara says he tried to see what the terms and conditions for a Small Business Administration (SBA) loan would be, but the person he dealt with didn’t know how to read the agency’s reports or value the business, which required lengthy explanations. Still, ultimately he was able to secure a loan offer from TD. Dealing with InsurBanc was a totally different experience, says McNamara: “They primarily deal with insurance agencies, so it gives them a better understanding of what we do.”
When an owner quickly succumbs to a fatal illness, the right financing - and a deep appreciation of agency value helps ensure a successful transition InsurBanc, he says, ultimately offered more favorable terms and conditions than TD; a better interest rate; worked with him on the length of the loan; and responded quickly under a tight timeline, offering him a solid proposal within weeks of their meeting. Robert J. Pettinicchi, InsurBanc's executive vice president and chief lending officer, says many agencies run into the same issues McNamara did when trying to get a loan from a traditional bank. “In our case, we view independent-insurance agencies as a very nice, professional-practice business with reliable recurring cash flow. We know how they work and how to analyze them. We’ve lent to hundreds of them.” After engaging with InsurBanc, McNamara was able to quickly get the deal under way, although it was not finalized until after Sturgess’s death, which tragically occurred just six months after he had been diagnosed. The final terms were a 50/50 split of the loan between the estate and the bank. Much of McNamara’s praise is reserved for Sturgess and his foresight in developing a perpetuation plan in 2006. That foresight serves as a lesson: “Bad things happen, and agents have to be prepared for them.”
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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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!)
Capture Written Notes Easily
To capture your notes you will need to use one of Livescribe's proprietary dot notebooks. You get one small notebook as part of your initial purchase. Additional notebooks are $20 for a package of four, containing about 200 pages in each. The pen automatically keeps track of what notebook you are using to write your notes.
I have been experimenting for a while with various ways to take notes when out of the office. I'd like there to be a good solution for taking notes directly on my iPad. However, I am coming to the conclusion that pen and paper may be my best way to take notes, especially in meetings and listening to presentations. But while I like using pen and paper and it is often faster and more convenient, sharing my notes is limited and backing up means scanning the notepaper. Livescribe's latest smartpen bridges this gap. Livescribe has been creating smartpens since before the iPhone debuted. These pens record what you're writing and hearing as you write. When you want to capture your notes electronically you simply connect the pen to a computer and offload the digital files for sharing and storage. Livescribe's newest version - Sky Smartpen - allows you to sync your notes without actually connecting to a computer using a Wi-Fi connection. Like past Livescribe smartpens, the Sky is a bit large, about the size of an extra-large Sharpie, with a flat section along the backside so it sits flat on a desk surface. I got used to writing with this size pen fairly quickly. Instead of using the proprietary Livescribe Desktop software, the Sky relies on a tight integration with Evernote. When you set up the pen with your Evernote account, a smartpen notebook is created. After syncing, you will find your notes in these notebooks. There is a separate Evernote notebook for each physical notebook you use. Page 12
I have used the Sky pen to take notes in several situations, including consulting assignments with two agencies. Because you can record audio while you are taking notes, it is very easy to go back and listen to the conversation taking place when you wrote the note. I find that, because of this function, I listen more carefully while taking general notes. I can always go back and listen again to the conversation to pick up any details I might have missed. I have noticed that the audio picks up the sound of the pen writing on the notebook, which is a little distracting. After you've written something, simply touching the Sync Now button immediately pushes the data to your Evernote account. If you don't have a wireless connection available, you can still write and capture data. The Sky syncs up the next time it connects to a wireless network. Also, since it's Wi-Fi enabled, software updates are pushed to the pen wirelessly. This could be a good solution for producers to use in a meeting with prospects or clients. I would recommend you tell them you would like to record your conversation "to make sure I don't miss any important details." Your notes can then be converted into an electronic version and included as part of that client's file. The Sky Wi-Fi smartpen starts at $170 for 2GB of storage but is also available in a $200 4GB model and a $250 8GB model, which is a Livescribe.com and Best Buy exclusive. Each GB equates to about 100 hours of use.
15% off any Livescribe pen
I’ve set up a special deal where you can get 15% off your purchase of any Livescribe smartpen. Just click here to get started. Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
Capture Documents with your Phone Producers out of the office often need to capture documents electronically. Examples include everything from a receipt for lunch to a policy dec page that you will use as a basis for a full coverage review. While a regular desktop scanner usually gives you the best quality, it is seldom easy to carry with you. Several mobile apps have stepped into this space to provide you with a way to turn your smartphone into a document scanner. There are a number of ways to combine the capabilities of your PC and mobile device that can make your tablet or smartphone an even more powerful tool. There's no shortage of scanner software for both iOS and Android, and most of the apps are pretty similar in operation: take a picture of a document with the phone's camera, apply post-processing filters as desired, and then save the scans to your phone. The differences lie in price, and in what the apps can do with your "scans" after you've made them. JotNot Scanner Pro This is a good application if you're using iOS and want something simple and inexpensive. You use the app by either snapping a photo of your document or importing it from your photo library, at which point it will attempt to detect the edges of your document. The app does a pretty good job of edge detection by itself, but you can move the edges of the document around before post-processing to make sure your scan just shows the document and not part of your desk or table underneath.
CamScanner+ This application costs $4.99 and comes in both iOS and Android versions. Like JotNot, it can email scans in PDF or JPG formats (but not PNG), save scans to your phone's photo library, and integrate with cloud services like Google Docs, Box.net, Dropbox, and Evernote. However, the higher price gets you some additional features. The app is better at storing and organizing scans, and allowing you to find them later: scans can be categorized under one of several predefined or custom-made tags, making it easier to keep your business cards separate from your receipts, and you can make notes on each scan that you can then search for later. CamScanner also includes optical character recognition (OCR), which can make the text of scanned documents searchable, useful if you're digging through your scans looking for one particular document. Piikki Receipt Scanner Receipts are the bane of my existence. I'm constantly misplacing ones I need to file for expense and travel reports. For $1.99, Piikki for iOS converts snapshots of your receipts into expense reports.
For the best results, you'll want to get in as close to the document as you can, make sure it's lying flat, and ensure that you're not taking the photo from an excessive angle -this can cause odd bending and warping of the final scan -it's especially problematic if you're trying to capture a sheet of paper that has begun to curl at the edges.
This application offers an auto-shoot mode that saves you the extra step of tapping a capture/scan button. Once the app has focused on the receipt, it instantly snaps a photo. A small time-saver, sure, but a nice little perk. Piikki also uses geo-location information to automatically assign a name to the receipt based on the nearest street address.
Once you've scanned a document, you can add more pages to create a multi-page scan. To move your scans to your computer, the free version is capable of saving scans to your camera roll, which you can then move to your computer via Photo Stream or a USB cable.
Like other apps, it integrates with Dropbox, Google Drive, and Evernote, meaning you can easily archive receipts to the cloud service of your choice, then share them with accounts payable or your tax guy.
There's also a Pro version available for $1.99 that adds support for uploading to Evernote, Box.net, Dropbox, Google Docs, and WebDAV shares; emailing scans; and converting scans into JPG, PNG, and PDF; but you can save money by downloading the application and activating that functionality via a $0.99 in-app purchase.
None of these apps are feasible for high-volume use, for cases where detail is of the essence, or for excessively damaged documents that won't lie flat on their own. If all you need to do is scan a few business cards, receipts, or a few pages of paper every now and again, though, scanner apps can do the job of a portable document scanner for a fraction of the price.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
Beyond the U.S.,
Emerge for Advisor Compensation Financial advisors in the U.K. are required to adopt a fee-for-service model. by Dave Evans
here have been times when the type of compensation
T
This represents a monumental change for advisors that
that agents receive has been in the spotlight. Some
have been typically paid by the sale of a financial prod-
think agents add no value and represent an unnecessary
uct. Now, compensation to the advisor will be a separate
frictional cost. But this uninformed notion is likely due to a
charge, agreed to by the customer. As a result, Barclays
lack of understanding about the service that agents provide
and HSBC have invested in their direct online channels to
to their clients.
distribute their products.
In the United States, agent compensation has been ad-
There is a substantial difference between financial products
dressed in the Patient Protection and Affordable Care Act (PPACA). The law’s medical loss ratio calculation includes
and property-casualty insurance. But what’s troubling is the mentality that unbundling agent compensation from a
agent compensation in the general and administrative cost
product serves the needs of all consumers.
category, which cannot exceed 15% of a carrier’s group
Consider life insurance sales. With the advent of online
adjusted health insurance premiums (20% for individual
quoting for life insurance, some would think that consum-
health policies)—or else the carrier must pay a rebate of
ers would prefer this channel and term life insurance sales
the excess amount. As a result, agents have seen their
would explode because of low rates and ease of online
commissions reduced or eliminated.
quoting and binding. Yet, sales data for the past two years
But the United States isn’t the only country to weigh agent and advisor compensation.
shows the number of term life insurance policies sold decreased by 6% in 2011 and were flat in 2012. When an agent is not part of the equation, consumers are
This year in the United Kingdom, all financial advisors are
less likely to purchase insurance on their own. The issue
now required to adopt a fee-for-service model. The same
of agent compensation may be the tail wagging the dog:
rule will apply for advisors in Australia, beginning in July.
People need assistance in formulating a plan, but may be
This means that selling a product while getting a commis-
less willing to pay a separate fee for advice.
sion will not be permitted in these countries.
Even though the “fiduciary” definition is being debated, it
In addition, advisors can charge clients an ongoing fee only
doesn’t appear that the United States will go into this direction
if they provide an ongoing service, and they must disclose
anytime in the near future with respect to advisor compensa-
to clients what the corresponding charges will be for any
tion. While some think the direct Internet channel is best for
services rendered.
consumers, common sense should debunk that premise.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
Page 15
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5051 Journal Center Boulevard N.E., Albuquerque, New Mexico, 87109 Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
5 Ways to Curb
It seems like one little hashtag can ruin your day. Need proof? Visit Twitter and search #fail. You’ll see a litany of tirades about brands that failed to fulfill their promises.
by Marty Agather
Negative Online Reviews Even bad publicity can be turned into an advantage for your agency.
T
oday, the power of messaging has shifted. Brands, which once controlled nearly all product imaging through mass media, have a new line of communication—and it’s one that is controlled by consumers. Social media and online sites allow anyone to reach a worldwide audience. Is that good or bad? Depends on how you choose to respond. In the past, a negative customer comment had little power beyond immediate tales shared with family, friends and coworkers. The steam of anger could only carry the message so far. Now, one tweet, one post or one comment can tour the world and take on a life of its own. You may remember the YouTube video posted by a service member in June 2011 complaining about Delta airlines when it required 34 soldiers returning from overseas deployment to pay $200 for their second bag—the one that contained their guns and gear. The story went viral. After that initial customer volley, the airline issued an apology statement on its blog, noting “how deeply Delta respects and admires the men and women who fight every day for our country.” Just one day later, following an incredible flurry of negative news coverage (just search “airline charging soldiers for their bags” and you’ll get more than 9.5 million results), Delta decided to change its baggage policy for soldiers. But it was too little too late; the damage was already done. So what’s a brand to do? Negative word of mouth will happen. The key is to plan your response before it occurs. Here are five steps your agency can take: Monitor comments. You can’t respond if you don’t know what’s being said. Search for keywords beyond your brand name, including variations and the names of high-profile employees as well. Even if you aren’t actively engaged on social sites, someone else is or will be talking about you. Monitor comments about key competitors and your industry as well. You may learn where opportunities exist or how you can leverage a particular strength.
Optimize your page. Upload fresh content, include as many search terms as possible and build links to maximize search engine placement. If someone enters your brand name, you want the pages or sites you host to come up first. If you simply create a website and leave it static, you’ll lose visibility. Encourage comments. More activity equals better Google rankings. Don’t wait to do this—if a negative news event occurs, you want your ranking firmly established to eclipse the coverage. Don’t be afraid of negative comments. If someone has taken the time to make a post, they have a connection to your brand in the first place—and that’s a good thing. Don’t remove negative comments. Customers are savvy and want to see authenticity. Online visitors tend to distrust sites with nothing but glowing reviews. Respond quickly. If you find a negative comment, reply promptly and sincerely. Avoid empty rhetoric like the initial post by Delta. If you are in the wrong, apologize. The public is forgiving, but not if they think you’re simply trying to make the problem disappear rather than trying to fix it. If it’s a particularly complicated issue, invite direct contact to resolve the problem. Let other readers know of any adjustments you are making to improve things going forward. And positive reviews or comments? They deserve a thank you. Respect the process. You now have a remarkable library of information available to you every day for free. It’s like having daily focus groups. View the input as a blessing, not a curse. If you spot trends or consistency of comments, factor such into your planning going forward. If your customers are taking the time to praise or criticize you, it matters—don’t disregard the connection. After all, if you had a group of customers in your lobby, you’d go out and shake their hands, wouldn’t you? Make sure you do the same virtually. If you’re interested in better positioning yourself online, please use our Big “I” resources through Marit Peters.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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Union Standard Insurance Group®
League of Heavy Hitters
Union Standard is committed to working with young independent agents because they are the future of our business. That’s why we are partnering for success with New Mexico’s Young Agents. Union Standard recognizes the need to foster the growth of new talent to perpetuate the Independent Agency System as well as provide young agents a competitive advantage.
Union Standard and the League of Heavy Hitters, Now that’s a Winning Team!
POW, BAM...WOW!
Congratulations Congratulations, 2013 2013 League of Heavy Hitters Anna Byers Brad Tillotson Chad Hewitt Charlie Estrada Jeff Wilson Joe Cito Joe Menicucci Kelly Mancha Michael Dennis Michelle Wilson Mike Parisi Robert Lilley Ryan Brennan Sadie Ary Samantha Sanchez Tanesha Vigil Will Gorham
J. S. Ward & Son Cress Insurance Consultants J. S. Ward & Son Pat Campbell Insurance Insurance One Berger Briggs Berger Briggs Insurance One Free Market Insurance Meridian Financial Holdings Western Assurance Wells Fargo Berger Briggs Free Market Insurance J. S. Ward & Son Rio Grande Insurance Wells Fargo
Artesia Albuquerque Carlsbad Las Cruces Albuquerque Albuquerque Albuquerque Albuquerque Albuquerque Roswell Albuquerque Albuquerque Albuquerque Albuquerque Artesia Santa Fe Albuquerque
Commercial Insurance >> Done The Right Way >> By a Company of People >> Who Care
6501 Americas Parkway, NE Suite 600 Albuquerque, NM 87110 . www.usic.com
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PRESENTED BY
Young Agent Spotlight! The second Young Agent Spotlight in our 2013 series is Anna Byers of JS Ward & Son, Inc. Anna was born and raised in the little oil patch town of Artesia. She attended Simpson College in Indianola Iowa where she earned a Bachelor of Science in Accounting. She is married to Marc Byers and has 3 children – Taylor age 10, Jack age 5 and Beau age 3. Her current interests include taxi driving, sunflower seed eating, her kids sporting events and 4th grade homework. When she has extra time, she really enjoys watching the latest episode of “The Bachelor” with girlfriends or spending late nights recreating the latest craft project from Pinterest.
Are you involved in any professional or civic activities? Anna: I serve as a Board Member for the Greater Artesia Chamber of Commerce and more specifically and heavily involved as a member of the Economic Development Committee. I am also a lifetime member of Leadership New Mexico having graduated from the inaugural Connect Class in 2007. Currently serving a one year term in the Independent Insurance Agents of New Mexico Board of Directors. I am a member of the Society of Certified Insurance Counselors (CIC). I also stay involved with my church where I teach 3rd grade Bible Study class and finally a member of the Yeso Elementary School PTO.
Where do you work now and what are your responsibilities? Anna: I am so fortunate to work for my family at J. S. Ward & Son, Inc. I work in the Artesia office. My primary role is Producer but I also oversee the daily activities of the office. The real answer is I just do whatever my dad, Gary Sims, tells me to do!
How and why did you choose insurance as your career? Anna: The how and the why seem obvious when you understand that my family has been in the business for over 85 years. However, for me, the path getting here was not straight and narrow. I started my career as an auditor for Deloitte & Touche in Dallas, TX. Finding that I loved the technical side of accounting and the personal interaction with the customers that auditing provided, I realized that I could have that same experience in insurance and do it with my family. Instead of waiting on Mr. Right to marry and move back home with me to work for my dad, I decided I could do it myself! I moved home in 2002 and began to work in the agency. It has been a tremendous opportunity and I am so glad my family would have me!!
Do you have any influences / role models that have helped to shape your career? Anna: There have been several along the way, but probably the greatest influences have come from my family. First would be my grandmother Mrs. Charlene Ward. She really impressed upon me at an early age that if “it was worth doing, it was worth doing right!” This is proven true for me over and over again. Although she is not able to come in as often as she would like – her influence is still felt and we are still trying to do things right around here! The second is my dad, Gary Sims. He trained me that it is the customer who matters most and that without them we don’t exist. He was trained by J. S. Ward and I think Grand Daddy Fritz’s did a great job. Gary - I call him that because it makes our relationship feel more professional from 8 to 5 - asks rhetorical questions all the time – he is just encouraging me to be a critical thinker. The latest he presented on a sticky note…”Define Servant Leadership?” He likes to quiz our team on various coverages and introduces us to new vocabulary all the time with his Webster dictionary. He taught me my first Latin phrase in junior high – Carpe Diem!
What do you think are the key challenges that young professional agents face in our industry? Anna: There are lots of challenges for young professionals these days. Probably the most difficult for me right now is differentiating myself. There are lots of really great agents. All the good agents have the company appointments they need. So the tough part is finding a way to set myself apart from my competition when I know that the product and pricing we are offering will be very similar. Our industry is moving toward value added services. Creating that “toolbox” that you can rely on when you need to differentiate yourself is critical! In order to be maintain professionalism and trust in this industry we have to find a way to avoid the CopyQuote-Pray trap!
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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Key Ideas for
New Insurance Agents by John Chapin Success in any venture begins with the proper mindset. As a new insurance agent, there are five key “truths” about the insurance industry and your role in it that will help ensure you have the correct mindset and the best chance at success. Five “Truths” About Your Role as an Insurance Agent Truth
1
#
: You are a salesperson.
In order to be a successful insurance agent over the long haul, you have to accept your role as a salesperson and you need to be good at selling. No, sales does not mean selling someone something they do not need, or otherwise manipulating or taking advantage of someone. When you sell, your objectives are: to help people, to be a trusted advisor, and to educate and lead people down the path they need to go. For example, if you are talking to a qualified prospect with a young family and you don’t convince that person to protect their family with life insurance, and something bad happens, it’s your fault that person’s family is not protected. You did not do your job as a salesperson. The bottom line is: you need to get great at selling by both making sales a study and by finding out what the top, most successful agents do, and then do the same things. Truth
2
#
: You are running a business.
You are self-employed in your own individual small business. You are your only job security. If you do your job well and generate sales and profit, you will have a job and a business, if you don’t generate enough sales and profit, you will be out of business looking for another job. As a business, your highest priority is: making a profit and staying in business. There are only three activities that will ultimately make you money: prospecting, closing, and servicing accounts. Those three activities are where most of, if not all of, your prime selling time should be spent. If you can’t pay someone to do the other non-profit generating activities and thus have to do them yourself, you must do them off-hours, not during prime calling time.
3
#
Truth
4
#
: You have to work really hard.
You have to be a self-starter and you must be willing to push yourself harder than anyone else will push you. As Zig Ziglar, the famous motivational speaker, once said, “The harder you are on yourself, the easier life will be on you.” Of course the converse is also true. While you want to work smart: follow the best practices of the successful agents and not reinvent the wheel, in the beginning you simply must work hard until you figure things out and build a successful business. You must put the hours in and be willing to do whatever it takes. Once you have your daily plan in place and know how many sales you need to make and how many people you need to contact, you have to work hard to carry out that plan and make those numbers a reality. You have to be willing to cold call and do other similar difficult, unpleasant activities if that’s what it takes. By the way, these are the activities that the failures rarely or never do. Your objective is to be known as the hardest working person in the office.
5
#
: You must take 100% responsibility for your business.
If your sales numbers are dismal, own them, take responsibility for them. See your results as a warning sign that you need to make some changes in your activity and your approach. Don't make excuses or blame anything outside of yourself such as: the economy, the market you’re in, or the people you work with. You are completely responsible for your success or failure.
: You can’t wing it.
This relates to both your activity during the day and your interaction with prospects and customers. You must have a Page 20
When you talk to prospects and customers, you need to know exactly what you’re going to say. Script out everything, this will ensure that you say exactly what you need to say in as few words as possible, while using the most effective words possible. Once you have your scripts, practice, drill, and rehearse them until they are second nature and flow naturally, you don’t want to sound canned or unnatural.
Truth
Note: While your highest priority is making a profit and staying in business, this is never done at the expense of taking advantage of another person or doing something that is not in their best interest. Truth
plan to follow every day. It’s imperative that you know how many calls and contacts you need to make in order to get the prospects and the sales you need.
For access to John's free monthly newsletter and white paper on what it takes to be successful in sales, visit John's website at www.completeselling.com
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
s . m e smi ile. fe v . o l e le. feeelltthheelov AWARDS & RECOGNITION AWARDS & RECOGNITION TOp RANkED ppO IN NEW MExICO NCQA’s Private Health Insurance Plan TOp RANkED ppO IN NEW MExICO Rankings, 2011-2012 NCQA’s Private Health Insurance Lovelace Insurance Company,Plan Inc. Rankings, 2011-2012 4-STARInsurance RATING Company, Inc. Lovelace Center for Medicare & Medicaid Services 4-STAR RATING Lovelace Health Plan Center for Medicare & Medicaid Services BEST plACES TO WORk Lovelace Health Plan Modern Healthcare Magazine for 2011 BEST plACES TO WORk Lovelace Women’s Hospital Modern Healthcare Magazine for 2011 Lovelace Westside Hospital Lovelace Women’s Hospital ROADRuNNER RECOGNITION Lovelace Westside Hospital Quality New Mexico ROADRuNNER RECOGNITION Lovelace Women’s Hospital Quality New Mexico Lovelace Westside Hospital Lovelace Women’s Hospital BREAST IMAGING CENTER Of ExCEllENCE Lovelace Westside Hospital College of Radiology BREAST IMAGING CENTER Of ExCEllENCE Lovelace Women’s Hospital’s Diagnostic College of Radiology Imaging Center Lovelace Women’s Hospital’s Diagnostic Only hospital in Albuquerque recognized as Imaging Center TOp pERfORMER ON kEy QuAlITy MEASuRES Only hospital in Albuquerque recognized as The Joint Commission TOp pERfORMER ONHospital kEy QuAlITy MEASuRES Lovelace Westside The Joint Commission Only hospital in New Mexico Lovelace Westside Hospital CARf ACCREDITED IN SIx pROGRAMS Only hospitalRehabilitation in New MexicoHospital Lovelace CARf ACCREDITED IN SIx pROGRAMS GET WITh ThE GuIDElINES Lovelace Rehabilitation Hospital STROkE SIlvER pluS pERfORMANCE AChIEvEMENT AWARD GET WITh ThE GuIDElINES American Heart Association/STROkE SIlvER pluS pERfORMANCE AChIEvEMENT AWARD American Stroke Association American Heart Association/ Lovelace Medical Center American Stroke Association BEST plACES WORk Lovelace Medical TO Center New Mexico Business Weekly for 2011 BEST plACES TO WORk Lovelace Health Plan New Mexico Business Weekly for 2011 Lovelace Health Plan LHP 976-0112 LINC 483-0112
things just keep getting better. things just keep getting better. A few years back, we began telling you that you’re going to
loveyears Lovelace. we didn’t just you tell you we began toto show A few back, But we began telling that–you’re going you. We made commitment to change the way healthcare love Lovelace. Butawe didn’t just tell you – we began to show is delivered just here in Albuquerque, the whole you. We made not a commitment to change the but wayinhealthcare state. Wenot made commitment to hard but workinand is delivered justahere in Albuquerque, the providing whole quality to recruiting the best and to state. We healthcare, made a commitment to hard workemployees and providing providing affordable, accessible plans to businesses quality healthcare, to recruiting the health best employees and to and individuals. providing affordable, accessible health plans to businesses and individuals. Our commitment is showing results. Today, Lovelace Health System is proudisto be recognized by these independent Our commitment showing results. Today, Lovelace Health organizations. But not finished. Ourindependent focus remains on System is proud to bewe’re recognized by these bringing theBut best health to you. And giving you even organizations. we’re notcare finished. Our focus remains on more to about Lovelace day.giving you even bringing thelove best health care to every you. And more to love about Lovelace every day. It’s proof positive that we’re changing the way healthcare delivered. It’sisproof positive that we’re changing the way healthcare is delivered.
Lovelace Health System, Inc. • Lovelace Insurance Company Lovelace Health System, Inc. • Lovelace Insurance Company
lovelace.com
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exceptional care for
Congratulations to AVI Risk Management & Insurance Brokers! Acuity Insurance Company honored them with their 2012 #1 Agency in New Mexico award. Pictured: Lynn Mintz & Julie Decker
Several IIANM members were acknowledged in Albuquerque Business First’s 2013 Healthiest Employers special publication. They were recognized as companies that create a healthy workplace environment through a variety of wellness programs. #1 in the small business catogory:
Young Agents Share Advice
- The Manuel Lujan Agencies
Recently the NM Young Agents traveled south to Las Cruces to visit NMSU students currently enrolled in their Insurance Program. They met to discuss career opportunities in the insurance industry and received lots of positive feedback.
and listed in the very large business catogory: - Lovelace Health Systems - Blue Cross Blue Shield of NM - United Healthcare Thank you for creating awareness and improving the health and well being of your employees.
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Pictured: Micheal Theibert, Westfield Insurance and Jessica Loomis, HUB International (Young Agent Secretary /Treasurer of the board).
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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Implementing E&O risk management into the agency can be overwhelming. Agency staff is busy servicing customers and trying to grow the agency. The good news is that an agency with good E&O procedures in place is also more likely to be more profitable. Below is a list of 13 steps the agency can implement to help reduce E&O exposure. They don’t need to be implemented all at once. To keep from getting overwhelmed, consider implementing one per month.
13 E&O Risk Management Tips for Action in 2013 Small Actions Can Prevent Big E&O Claims
Assess customer needs: Understanding your customers’ operations can help agency staff uncover areas of exposure. To do this, agents need to know the right questions to ask. Risk assessment questionnaires can guide producers in their conversations with customers and E&O coverage checklists can document coverage that is offered. Whether state law prescribes a legal duty to assess customer exposures and offer coverage, covering exposures that could later lead to an uncovered claim is the most proactive thing agencies can do from an E&O risk management standpoint. For an annual subscription of $250, the Big “I” Virtual Risk Consultant offers descriptions for operations of hundreds of businesses, risk assessment questionnaires and E&O coverage checklists. It will make agency staff better at what they do and in the end increase agency revenue.
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Offer Coverage: When it comes to E&O claims against agents, it’s always interesting to hear testimony from customers saying they would have bought the coverage if only it was offered to them. Yeah, right! Customers come to the agency with an idea of the type and amount of insurance they need and are looking for the best price. Even if it seems like a bother to the customer, don’t be afraid to discuss other exposures they may have and provide quotes for additional coverage. Producers should keep these couple things in mind: 1.) it’s the agents job (although not necessarily legal duty) to offer coverage to protect the customer’s assets and it’s the customer’s job to make the buying decision and 2.) offering coverage and documenting rejections protects the agency even if the customer doesn’t purchase them.
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Offer Increased Limits: It’s the customers’ responsibility to determine insurable values and preferred limits. However, why not include increased limits with every quote? E&O claims often stem from inadequate limits so higher limits can be the difference between a covered and uncovered claim. Another proactive risk management approach is to make sure customers understand the valuation methods and any coinsurance limitations.
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Don’t Renew As-Is: Agents work so hard to attract new customers which is a difficult task. But once the customer is written there is danger in putting their renewal on autopilot. Customer exposures change over time and so do their coverage needs. How often is agency staff working with renewals to assess their exposures? Is there at least an annual letter emphasizing that the customer should contact the agency for changes to their insurance needs? Is coverage that may have been offered during the new business process being offered at renewal?
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Review/Audit Customer Files: You’ve heard it in E&O seminars that the three most important things an agency can do is “document, document, document.” Good documentation in customer files is tremendously important, but does your agency have it? Make it a routine to periodically pull some customer files to check if they have the level of documentation that would help defend the agency should an E&O claim occur. Consider a peer review process. Make it an exercise of continuous improvement, not one targeted at catching employee mistakes. This type of process will keep good documentation at the forefront of the minds of agency staff.
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Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
Stay Current On Coverage: Insurance coverage is complicated and it is constantly changing. In 2012 ISO introduced changes to the commercial property form and 2013 will bring changes to the CGL form. Agency staff needs to stay abreast of changes in coverage and educate customers accordingly. The investment in educating agency staff will pay huge dividends in writing more coverage and reducing E&O exposure. Set up education paths for all agency employees and keep in mind that Continuing Education requirements should be looked at as minimum standards.
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Create a Culture: E&O risk management is not something that the agency staff should turn off and on. It needs to be a culture that permeates agency staff year round. Hold staff meetings about the importance of E&O risk management, share articles, periodically audit files, and make part of the employee performance review discussion. Frequently asking employees if they are aware of situations that could potentially give rise to future claims also keeps the subject front and center. But it is only possible with a culture of awareness.
7
Don’t Be Afraid to Report Potential E&O Claims: The earlier your E&O carrier is involved in an E&O claim the better the chances of a positive outcome. While your first instinct maybe to try yourself to make the claim go away, this is the wrong approach. On the average, 1 in 7 agencies will report an E&O claim but 50% of claims are closed with no defense or indemnity payments. E&O claims are going to happen but focus on getting your E&O carrier involved early.
8
Handle Customer Claims Expeditiously: It is astounding how many E&O claims involve agents failing to handle customer claims properly. The common error is failing to forward the claim to the carrier in a timely basis. When claims are taken and not delivered to the carrier the same day with appropriate follow-ups set in the agency management system, the agency not only puts itself in jeopardy of an E&O claim but also of losing its reputation with customers. Customers pay premiums for the moment when a claim happens and when it is not handled appropriately frustration can set in as to why they purchased the coverage in the first place. Make sure customers understand their responsibilities in the event of claims and execute on the agency’s responsibilities as well. Agencies should never make coverage determinations, as that is the role of carriers. Agency staff should report the claim in a timely fashion to ALL carriers where coverage may be applicable including excess and umbrella carriers.
9
10
Incorporate Disclaimers: A simple line of defense against E&O claims is incorporating disclaimer language in the agency’s operations.
There are different types of disclaimer language that can be used in different scenarios such as voice mails including language that coverage cannot be bound or changed without speaking to a licensed agent or proposal disclaimer language that the insured should read their policy. Sample disclaimer language can be found on the E&O Happens website (www.iiaba.net/eohappens). Disclaimers are helpful in the defense of an E&O claim and can reinforce information customers need to be aware of. Value or Limits: Re-evaluate how your agency handles the determination of insurable values and limits for customers. Inadequate limits or values are common allegations made against agents when customers experience a loss that is insufficiently covered. Be sure to clearly state that values and limits are determined by the customer. When agency staff specifies the limits a customer should procure their standard of care can be increased to assure the limits are adequate. When using cost estimators provide a disclaimer that this is just an estimate and the cost to rebuild or replace could exceed the limits. Make sure the customer is accounting for upgrades and explain that purchase price and appraisals are different than the actual cost to rebuild under specific circumstances.
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Protect Customer Data: This is a complicated issue but it’s time for agents to stop burying their heads in the sand. Agents have a legal obligation to protect customer data. Start by educating yourself on the state and federal laws outlining responsibilities. The E&O Happens website and the Big “I”’s Agents Council for Technology website (www. iiaba.net/act) have information to help you understand agency exposures. Keep in mind that your customers have cyber liability exposure and are also subject to many of the same regulations that the agency is. Learn how it applies to the agency and then parlay that into selling coverage to your customers. Visit www.bigimarkets.com if you are in need of access to some cyber liability markets.
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Attend an E&O Class: Only good things come to those that attend an E&O seminar put on by a Big “I” state association. Data shows that those agencies that attend are much less likely to have an E&O claim. Agents can also get discounts on their E&O premium and CE credits are often filed for the seminar. In addition, attending the seminar will help you achieve and implement all of the suggested risk management items listed above.
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Implementing any of the above steps can help any agency reduce exposure to E&O claims and improve customer service. If you feel overwhelmed by the list, pick the low hanging fruit such as sending all staff to an E&O seminar, pull a couple customer files every so often to review documentation being used, implement disclaimer language which is available at www.iiaba.net/eohappens, and purchase the Big “I” Virtual Risk Consultant (www.iiaba. net/VRC) for staff which will educate them on customer risk exposures and coverages, and provide them with E&O checklists.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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What do Companies Want?
By Chris Burand
M
any agents possess a significant fear that they are not big enough. To some degree, this feeling of inadequacy is nothing new. No matter if an agency has $500,000, $1 million, $5 million or $100 million, I’ve had agency executives tell me they do not have enough volume to please their carriers. The carriers simply have an insatiable appetite. With such insatiable appetites, no one ever has enough and size in and of itself is the wrong goal. This is actually proven by most, though absolutely not all, carriers’ contingency contracts. Very few contingency contracts actually pay materially more for pure size once the $1 million threshold is crossed. Instead, the majority pay materially more for higher growth rates without regard for initial volume. The carriers are telling agencies that growth is more important than volume, but agency owners are not listening. Growth is different than volume and maybe this is where the confusion originates. Growth is a percentage. Volume is a dollar based measure. Again, once the $1 million threshold is crossed, the dollar basis is generally less important than the percentage of growth. Another reason agency owners may be confused is that company reps are not always clear themselves so they send confusing messages. This is why agencies of all sizes feel inadequate. No matter how large they are, the companies always want more. Many carriers are downright gluttonous. In years past, some companies have told their most profitable agents they want more growth completely regardless of loss ratio. I saw some examples of companies completely unappreciative of quality loss ratios. They were basically telling their agents with 30% loss ratios, “If you can’t grow more quickly, you can take your loss ratios elsewhere!” Times seem to be changing for some carriers though. I am seeing some carriers express urgency now toward improved loss ratios. The market is now growing faster than any time in many years. This enables them to focus on loss ratios and simultaneously, the poor quality of business written the last few years is beginning to haunt and scare
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them. This would likely have occurred no matter what, but last year’s catastrophe claims and the severe under-reserving in workers’ compensation have accentuated the rush. Yet, agents have been brainwashed that volume will always be king. Adjusting will be difficult. The result is that perfectly good agents are now making significant mistakes in an effort to finally achieve adequate volume once and for all (which will never actually occur). For example, some are beginning to make more acquisitions. All else being equal now is a good time to buy agencies because prices are lower. However, many of the sellers are under duress which is why prices are lower. Being under duress, some sellers’ prices are still too high because their retention will be less than expected and buyers who do not adequately consider this will be sorry. After all, what is the point of buying an agency to get volume if the business is not retained? Clusters are probably the most common example. I am completely perplexed by most companies’ attitudes toward clusters. For example, why do some companies pay more in contingencies because these agencies use one code rather than five codes? The company is getting $0 additional volume, no improvement in loss ratios, and an even worse perpetuation problem. I am not writing about the firms that deliver a truly better set of results to the companies. Companies should pay more to these firms, but these firms are few and far between. Another factor I do not believe company executives get is that most agencies of any size (I am excluding really small agencies) that join these organizations cannot sell insurance. They are not sales organizations. They have no true sales culture. They are account babysitters. This is not a bad characteristic. It just is not a characteristic that generates sales. So if a company wants growth, this is not where they will find it unless a consolidation strategy between the cluster and carriers are part of the deal. This of course, is not necessarily good ethics.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
Company executives advise they see many of their agencies happy to belong to such organizations and these agencies should be happier for the time being because: 1) their responsibility to grow has been diminished, at least for the short-term; 2) the company marketing rep is not focused on them, but on their cluster; 3) the members feel safer because the cluster has so much more volume than the agency could ever achieve on its own. This mindset obviously ignores the fact that growth is more important than volume, but nonetheless, they feel safer and feeling safer is worth a lot to most people. We’re already seeing evidence that some companies are belatedly realizing or maybe just now feeling enough pain to act on the reality that not only are they getting $0 extra dollars and 0% extra growth, their loss ratios are also deteriorating because loss ratios tend to suffer when an agency’s contingency is no longer dependent on their personal loss ratio. The way most clusters are designed, contingencies are doled out based on volume. Rarely ever is loss ratio a component to the individual members. This is a great example of the economic lesson contained in what is commonly known as the “Death of the Commons.” When individuals do not own the property, when it is held in common, little incentive exists to take care of the commonly owned property. In fact, it pays to exploit the property to its fullest extent. As a result, some carriers are already pulling out of specific clusters leaving all those agencies that joined in a far worse situation than before they joined. They not only lost their contract, they have no way to get another one on their own. My advice? Do not worry about figuring out what companies want. Agencies that have good organic growth rates and loss ratios will always find smart companies wanting to do business with them. Such companies may not be the hot company de jour. Such companies may be few and far between. But this industry is a slow growth industry in which steady, methodical, profitable growth ultimately will win. Focus on what you can control. Focus on the opportunity presented by others’ mistakes. Focus on one quality sale at a time and the agency will achieve enormous success. Chris Burand is president of Burand & Associates, LLC, an insurance agency consulting firm. Readers may contact Chris at (719) 485-3868 or by e-mail at chris@burandassociates.com. NOTE: None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.
Big “I” Young Agents The future of the independent agency system YAC Chat Webinars We have a welcoming and educational environment for young agents entering the insurance industry. The national Young Agents Committee is offering a series of free webinars presented by award-winning young agent committees from all across the states.
April 11 - 11am MT: Outstanding Communications: Young Agents Committee of the Independent Insurance Agents of North Carolina May 09 - 11am MT: Outstanding Meeting: Young Agents Committee of the Independent Insurance Agents of Arkansas. Past Webinar Recordings YAC Chat: Outstanding Membership Development, The Young Agents Committee of the Independent Insurance Agents of Indiana, Inc. - Recording - PowerPoint Presentation Click here to read full descriptions and to register
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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PRC Insurance Division Closes Hobbs Insurance Agency
AIG Shareholders Win Class-Action Status in Lawsuit Against U.S.
A Hobbs insurance agency and its owner have been suspended from doing business in New Mexico for at least one year, according to a disciplinary order handed down by the Public Regulation Commission’s Insurance Division.
Two groups of American International Group (AIG) shareholders won class-action status from a federal judge in a $25 billion lawsuit by former Chief Executive Maurice "Hank" Greenberg over alleged losses caused by the U.S. government's bailout of the insurer.
William C. Pilley, owner of the Hobbs Insurance Agency, has been fined $1,500 and stripped of his license to sell insurance until March 2014 for breaking multiple state insurance codes.
U.S. Court of Federal Claims Judge Thomas Wheeler also appointed Greenberg's lawyer, David Boies, of Boies, Schiller & Flexner LLP, as lead counsel for the classes.
At a Feb. 14 hearing, state insurance investigators said Pilley failed to respond to several inquiries about his business practices and questions about whether he was operating without a legal “Business Entity Registration.” Pilley was given one month to refute the code violations, but did not comply. State Superintendent of Insurance John G. Franchini said failing to respond to formal requests from the Insurance Division is grounds for taking swift action against any agency or private insurer. “Agents and business owners must take requests for information from state insurance regulators seriously,” Franchini said. “Not responding sends up a red flag, and can be grounds for immediate suspension, loss of license, or a combination of both.” For more information, contact the Insurance Division’s Investigations Bureau at 505-827-4439, or visit www.nmprc.state.nm.us/insurance.
Greenberg's Starr International Co, once AIG's largest shareholder with a 12 percent stake, sued the United States in 2011 over what eventually became a $182.3 billion bailout for the New York-based insurer. It said that by taking a 79.9% AIG stake and then conducting a reverse stock split without letting existing shareholders vote, the government conducted an illegal taking that violated the 5th Amendment of the U.S. Constitution. Citing Boies' estimate that "tens of thousands" of shareholders might be affected, Wheeler said "class certification is by far the most efficient method of adjudicating these claims." He distinguished the case from the U.S. Supreme Court's 2011 rejection of class status for more than 1 million WalMart Stores workers alleging gender bias, saying the AIG claims are "based on the same exact government action" rather than "literally millions" of separate actions. One class includes AIG shareholders as of September 22, 2008, when a credit agreement awarding the 79.9% stake took effect. The other class includes shareholders as of June 30, 2009 who were denied a chance to vote on the reverse split. U.S. Department of Justice spokesman Charles Miller declined to comment.
IIANM Resources: We have downloadable manuals on our site to help with new employee orientations, internships, training checklists, and disaster planning. They are all in Word format allowing you to edit and personalize. Page 28
AIG decided on January 9 not to join Greenberg's lawsuit, amid anger from Congress and voters at the prospect that it might sue the same entity that rescued it from collapse. Greenberg is separately appealing the November 19, 2012 dismissal of a related lawsuit in Manhattan federal court against the Federal Reserve Bank of New York. On March 1, AIG bought back warrants from the Treasury Department, eliminating the government's last financial interest in the insurer. Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
$1,000,000,000 CELEBRATING ONE BILLION IN WRITTEN PREMIUM! DOUBLE DIGIT GROWTH has pushed ACUITY over the $1 billion revenue mark! In the past 14 years, we’ve quadrupled our written premium and you are responsible for that. Thank you! We have the agents, employees, and strategic plan to allow our growth to keep compounding on the path to becoming a multibillion-dollar insurer.
www.acuity.com For- *All That Independent Insurance Agents of New Mexico - www.iianm.org April 2013Matters
facebook.com/acuitywow Page 27
Study: IA Channel Flexes Strength in IA insurers boost premiums and dominate commercial lines but face challenges in personal auto.
P&C Market Competition Revs Up in Personal Auto
S
howing signs of strong health, the independent agency system grew premium volume while maintaining majority control of the rebounding property-casualty market in 2011, a new Big “I” report shows. But challenges lie ahead for the IA channel—especially in personal auto, where direct writers’ $2 billion in new premiums is 10 times greater than the IA system’s growth of $200 million for that line from 2010 to 2011, according to the 2011 Property-Casualty Insurance Market study released today. Overall, IA insurers claimed 57% of the P&C industry’s $484.5 billion in direct premium written, according to the study, which is based on the latest available A.M. Best data from the 2011 calendar year. After coping with a shrinking market in recent years, regional IA carrier P&C premiums grew 4.8% from 2010 levels and national IA carrier premiums rose 3.1%. Direct writers experienced the greatest growth percentage of 7.4% for P&C premiums, although they held the smallest market share at 7.3%, the study shows. Captive agency carriers’ premiums grew just 1.8%, and they had 34% of the overall P&C market.
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Personal auto represented one-third of the entire P&C market and it “continued to be troublesome for independent agencies and their carriers in 2011,” the study says. Direct writers wrote 7.5% more in private passenger premiums in 2011 than in 2010, while national IA carriers collectively lost 2.7% and regional IA carriers gained just 1.2%, according to the study. Captive agencies’ premiums were nearly level to those of 2010. That means direct writers controlled more than $1 of every $6 in the $169-billion personal auto market, with a share of 17.4%, or $29.3 billion. And, if their growth rate continued in 2012, the study predicts they “will approach 20% of the auto market in the next year or two.” “While their production dollars may not yet rival that of regional IAs or captive carriers, the continued growth of direct response—even during a recession—suggests traditional advertising and new forms of marketing are effective,” the study says. “The branding messages—including those related to ‘save money’ and ‘ease of purchase’—clearly are appealing to consumers.” But independent agencies and their carriers are well positioned to compete, according to the study, which notes some IA companies made significant market-share gains in
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
personal auto.
Commercial Premiums Surge
“Many IAs compete locally with the direct-response channel by applying focus, customized services and sales power to personal lines marketing,” the study says. “They leverage strong carrier partners for products and pricing; real-time communications with customers and companies; modern social media and email marketing methods; and the power of Trusted Choice, the national consumer brand for independent agents and brokers.”
Commercial lines premium volume climbed 5%, or $11.4 billion, in 2011—and the IA channel captured roughly threequarters of that growth, the study reports. By IA carrier size, commercial premium volume grew 6.1% for regional companies and 3.8% for national insurers—although national carrier growth rate is below the commercial market’s 5% expansion rate, the study notes.
Personal Lines Presents Opportunities
Still, IA companies continued to dominate the $239.4-billion commercial market, where they collectively held a share of 78.4%, or $187.7 billion, according to the study. Premium volume for captive agency insurers grew 4.1%, bringing their market share to 18.3%, or $43.8 billion. Direct writers, which collectively have the smallest market share of 0.9%, wrote 4.4% more in commercial premiums for a total volume of $2.1 billion.
The $245.1-billion personal lines market—including auto and home—was $5.7 billion larger than the $239.4-billion commercial market in 2011, the study reports. IA insurers controlled roughly one-third of the personal lines market, according to the study. Premium volume for national IA carriers—which alone held the smallest market share of 9.4%—was nearly level to 2010 production, slipping just 0.1%. But volume grew 3.2% for regional IA companies, which claimed 26.3% of the market. Personal lines premiums for direct writers jumped 7.6% in 2011, to bring their total market share to 13.6%, according to the study. And captive agency carriers no longer hold half of the marketplace, dipping to a 49.3% market share in 2011.
More information, including market share results by state and expense comparisons for insurance distribution models, is in the full 2011 Property-Casualty Insurance Market study on the Big “I” website.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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Clickable Calendar
April 2013
Click on class title to register Sunday
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P&C Pre-Licensing Exam Review
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ACSR 2 Personal Auto 8 CE
L&H Pre-Licensing Exam Review
AAI 83C Management Tools & Processes 8 CE
ACSR 8 Commercial Auto 8 CE
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IIANM’s Job Bank Looking to fill a position within your agency? Trying to find a job but don’t know where to look? Whether you are looking for somewhere new to share your special skills or an employer looking for quality, professional employees, we are here to lend a helping hand. Click here to take advantage of IIANM’s Job Bank. Do you have an agency you’re trying to sell, or in the market to buy one? Check out our Classifieds! Page 32
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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April is National Gardening Month! Gardeners know that nurturing plants is good for us: Our attitudes toward health and nutrition improve, kids who garden do better in school, and community gardens help community spirit grow. Join your family and neighbors to help make America greener, healthier, and more livable.
10 Content Ideas to Turn
ers into April Follow w o h S ers r il p A April showers bring May flowers, and hopefully lots of followers. Project CAP gives you a head start on your April content plan with a few (or all) of these content ideas.
30 English words from our British cousins Brits have some creative words that Americans might not typically use. Here are 30 new words to impress your friends with.
There is nothing in the world so irresistibly contagious as laughter and good humor. ~Charles Dickens
The absolutely true origins of
April Fools’ Day Are you an average social networker? If so, you have about 229 Facebook friends, according to a recent Pew study, Social Networking Sites and Our Lives. Just who are these “friends?” The average list includes: • High school friends: 22 percent • Extended family:12 percent • Co-workers:10 percent • College friends: 9 percent • Immediate family: 8 percent • Voluntary groups: 7 percent • Neighbors: 2 percent
The origins of April Fools’ Day are, perhaps appropriately, shrouded in mystery. The commonly accepted story is that when Pope Gregory XIII replaced the Julian calendar with the Gregorian version, New Year’s Day shifted from the traditional April 1 to Jan. 1. Those who adopted the Gregorian calendar made fun of people who continued to celebrate the New Year on April 1, calling them “April Fools.” According to the InfoPlease website, though, a Boston University history professor proposed an alternative explanation in 1983: During the reign of the emperor Constantine in the 3rd and 4th centuries, he said, a group of court jesters claimed they could do a better job of running the empire. Constantine finally made a clown named Kugel king for a day. One of Kugel’s edicts called for a day of absurd behavior, and the tradition continued every year after Constantine resumed the throne. And now, the rest of the story: After being quoted by the Associated Press, though, Professor Boskin admitted he’d been playing an April Fools’ Day joke of his own: He’d made the story up.
Independent Insurance Agents of New Mexico - www.iianm.org - * April 2013
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