May La Voz

a L

z o V

May 2009

"The Voice" of Independent Agents since 1934

Cinco de Mayo

IIANM Wins National Education Award

Feelin' Lucky?

Win an iPod Shuffle ...page 30

Golf Tournament

The Big “I”

Products & Services

ADVANTAGE

www.bigimarkets.com

IIABA and IIANM are ideally positioned to create an electronic bridge between product providers and independent agencies. IIABA has the technological expertise, systems and industry contacts; IIANM has local marketing and educational ability, as well as close relationships with agents. Together IIABA and IIANM can bring product providers to agents' desktops and make agents aware of what products are there and how to take advantage of them.

You will need to log-in in order to view more information.

Please contact Rachel for your log-in information.

Tips for Smooth Account Transactions Common account concerns and questions are addressed.

Big “I” Markets’ habitational market with MiddleOak® Specialty has now been available for nine months. In this time, Big “I” Markets has seen the program grow to more than $1 million in written premium and tracked common oversights, questions and confusion. To ensure a smooth transition with any account you may write, review the tips below.

1. There are on-site inspections of all locations. Make sure you have visited the property before requesting a binder.

2. The BIM system has a file size limit of 1MB per new message. An electronic photo is generally larger than 1MB and will cause an error when uploading. The best way to get photos to the underwriter is to e-mail them directly to her; Diana Dylan’s e-mail address can be found on the Underwriting and Coverage page. Generally, she will provide the address in her first new message once the risk is submitted.

3. The quick quote design in BIM isn’t suited for multiple locations or multiple buildings on one location. The accounts requiring a schedule are better handled with ACORDs in the beginning. When sending in a risk of this type, you still need to click on “Request a Quote.” Because the fields are mandatory, type in “see ACORD/see attachment” in each field and then attach the ACORD applications (125, 126, 140 and 130 SOV).

4. Be sure to specify the occupancy. Often, the class of occupancy isn’t specific enough. The risk is rated for the exposure, which opens the possibility of a re-rating after the inspection. Protect yourself by having the client fill out the supplemental application.

5. “Product Resources” is where you will find all MiddleOak® supplemental applications, as well as brochures explaining the program to your client. To get there, click on the name of the product and then Page 2

select “Product Resources” in the blue menu bar to the left. It will be under “Request a Quote” and “Company Credentials.”

6. There is no blanket option for this program. However, MiddleOak® does offer unlimited guaranteed replacement cost coverage per building. Therefore, a statement of values (ACORD 130 if multiple locations) is critical. When submitting a statement of values, be sure to break out the building value, square footage and number of units per building.

7. Make sure you are logged in as yourself. When the underwriter needs to contact you, she will use the information appearing on the For a full description the products highlighted quote detail. This is automatically generatedofbased on the login used on this page, click on: to request the quote. Additionally, BIM automatically sends an e-mail notification to that same person when any activity is created by the underwriter. If you don’t have an individual login, e-mail us at bigimarkets@iiaba.net.

8. Payment and Billing information has always been located on the “Underwriting & Coverage” page, but BIM has recently added it to the binder request screen as well.

With these tips, you will find the Habitational program easier to work with. If there are others we have missed, please contact Aimee Fawns, program manager, at aimee.fawns@iiaba.net.

State availability varies by state. Log in to Big “I” Markets to see if it is available in your state. You will see it listed on the welcome page by scrolling down a bit.

Did You Know?

IIANM and Big "I" Logos are available for download for members who have logged in.

Click here to download our logo for your use.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

La Voz “La Voz is a monthly 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, CIC

Features Contact is Key to Successful Agent-Carrier Relationships

05

Workers' Compensation & The Economy

06

12 Great Questions to Ask in an Exit Interview

10

L&H Trends - Is Perception Reality?

15

Supreme Court Addresses Punitive Damages

16

Lost Opportunities

17

Covering PDA's, MP3 Players and Other Gadgets

18

New Mexico Agents Lobby Congress

21

Insuring Property in Storage

23

With Coverage Comes Responsibility

27

NMM / IIANM Scholarship Golf Tournament

28

Win an iPod Shuffle!

30

IIANM Wins National Education Award

30

Monthly

VP Of Membership Services Lorri Gaffney

Big I Advantage

02

Tech Talk

08

Director Of Communications Rachel Sheffield

Fraud News & Reviews Partners Program Company Listings

25 26

Education Edge

31

May's Clickable Calendar

32

Odds n Ends

33

Director Of Insurance Programs Carmen Reese Porter, ACSR, CISR Director Of Education Jeff Straight, CIC, LUTCF Receptionist / Member Services Associate Renee Trujillo

2008-2009 Officers Chair Angela Vasquez Vice-Chair Alma Franzoy-Capron Secretary/Treasurer Kathy Yeager National Director Patty Padon, AAI, CIC, LUTCF Immediate Past Chair Sam Conlee

Advertiser Index American Mining

11

Burns & Wilcox

24

Colonial General Insurance Agency, Inc.

07

Market Finders, Inc.

04

The Midlands Company

10

National Lloyds

14

New Mexico Mutual

34

Transwestern General Agency

11

Trustco, Inc.

09

www.marketfindersnm.com

Phone: (505) 822-8711 Fax: (505) 822-1165 Toll Free: (800) 530-8711

New Mexico’s Locally Owned Managing General Agency Since 1977 Representing some of the most financially strong and innovative insurance companies in the specialty marketplace!

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 At Market Finders, Inc., our mission is to professionally provide quality specialty markets and service to the Agents of New Mexico.

Market Finders, Inc.

4910 Alameda Blvd NE - P.O. Box 90280 Albuquerque, NM 87199

Page 4 Page 20

www.marketfindersnm.com

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009 Independent Insurance Agents of New Mexico - www.iianm.org - * September 2008

Contact is Key to Successful Agent-Carrier Relationships Quality of relationship is more important to agents than price, compensation.

Consistent contact and diverse policy offerings trump price when it comes to agencies’ satisfaction with carriers, according to a recent study by J.D. Power and Associates. The 2009 Insurance Agency Satisfaction StudySM also revealed that agencies tend to drive most of their business toward the carriers they are most satisfied with.

Jeremy Bowler, senior director of insurance practices at J.D. Power and Associates, says the impetus behind the study, performed at the request of carriers, was learning how to optimize independent agencies’ success. According to Bowler, the most surprising finding was that pricing and compensation do not necessarily drive agency satisfaction; instead, it’s personal relationships that make the difference, as indicated by the 32% of the 1,539 insurance agent respondents who cited “key contacts” as the most important satisfaction factor. Only 10% cited price, while a mere 5% valued compensation highest.

“We had gone into the study expecting that high commission rates would bubble up in the charts as important to satisfaction, but we found that what’s more important is the quality of the people agencies interface with,” says Bowler. “It’s a question of whether people representing the carriers are accessible, responsible and personable.”

Dennis Dressel, president of Founders Insurance Group in Torrington, Conn., does not hesitate to name personal relationships as essential to his satisfaction with carriers.

“The most important thing to us is a personal relationship with the people in power at the insurance company,” says Dressel.

“This is still a relationship business, as much as carriers try to make it automated, so we do business with the companies we have best relationships with.”

by Veronica DeVore

A carrier’s responsiveness is often improved by personal visits to its agencies. The study revealed that satisfaction levels are especially high when a business contact from the carrier visits more than once per month, but fewer than 15% of agents report receiving such frequent visits. Tom Schneider, president of Schneider insurance agency in Gahanna, Ohio, considers frequent visits with his carriers to be essential.

“In the best carrier relationships, you get to know the president of company, and they’re accessible and come out and visit you,” says Schneider. “Those carriers hold meetings where the heads of the company listen to you and know your name.”

Schneider also believes programs like co-op marketing and subsidies for new producer training speak to a carrier’s commitment to its agents. The 2009 Insurance Agency Satisfaction StudySM found that nearly 60% of agents polled did not receive any budget for local marketing or advertising. Among those agents who received and used all the advertising funds provided by the insurer, satisfaction scores average 808, compared with an average of 692 among those agents who were offered no funds.

Both Schneider and Bowler agree that the concept at the heart of J.D. Power’s study is that a carrier’s No. 1 customer is the agent, so if the agent isn’t happy, the carrier suffers.

“The agents are clearly the glue that binds, and if they can bind to the customer better than the carrier can, it’s disaster for the carrier if agent isn’t happy,” says Bowler.

“If a carrier can keep an agent happy, they can also keep customers happy,” echoes Schneider. “Companies that are no longer with us are driven by the bottom line rather than by taking care of the agent.”

Dressel subscribes to another trend indicated by J.D. Power - the tendency to write more business with the carriers he is most satisfied with. The study shows that nearly 70% of agents with satisfaction scores of more than 800 points on a 1,000-point scale intend to increase business with the insurance company, while only 28% of agents with scores of 600 points or less indicate the same. Luke Praxmarer, president of Corkill Insurance Agency in Elk Grove Village, Ill., notes this trend is not at all unusual among independent agencies.

“It’s certainly not uncommon for an agency’s top three carriers to have 50 to 60% of their business,” says Praxmarer.

“A standout factor for us is whether a carrier is responsive enough to quickly turn around something with a very short time frame.”

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 5

Workers’ Compensation & the Economy Do unemployment spikes precede increases in workers’ comp loss ratios?

We’ve all heard it: “When unemployment rates increase, workers’ compensation loss ratios are expected to follow.” As the story goes, employees who fear being laid off in hard times will look hard to detect injuries to provide them with workers’ comp benefits. Workers’ comp loss ratios may also spike in hard times because workers who take over the jobs of laid off workers may become overworked and more easily injured. In addition, employees who assume physically demanding jobs they are not trained to do can develop more injuries.

Before examining the graphical evidence, one might argue that the loss ratio spike will occur at the same time or even prior to the spike in unemployment. That is, workers generally know when hard times are coming, so when they actually arrive, the workers’ comp rate would have already spiked. That may still be the case, but one would expect the obvious correlated peaks in the chart below to show autocorrelation with unemployment spiking and lead to a later spike in workers compensation loss ratios.

Source: A.M. Best Aggregates and Averages 2008, 2000, 1994, 1987 and 1977 editions; Bureau of Labor Statistics

With unemployment rates approaching 25-year highs, will a spike in workers’ comp loss ratios follow?

Only time will tell.

Page 6

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Colonial General Insurance Agency, Inc.

Colonial General specializes in both standard and non-standard business, and writes Property and Casualty business including Commercial Auto, Commercial Contract, Personal Lines, and Professional Liability.

With 2,500 active producers under contract, Colonial General operates in eight states throughout the southwest with offices in Murray, Utah and Scottsdale, Arizona.

Most of all, we pride ourselves in our friendly customer service and our ability to help our producing agents with their many insurance needs.

P.O. Box 14770 Scottsdale, AZ 85267-4770 8475 E. Hartford Drive, Suite #100 Scottsdale, AZ 85255 Phone: (480) 991-7889 Wats: (800) 848-8860 Fax: (480) 948-1394 www.colonialgeneral.com www.colonialgeneral.com

Commercial Lines/Brokerage Department • Preferred BOP

• Property

• Inland Marine

• Professional Liability

• Commercial Liability

• Workers Compensation

Avoid monthly or annual membership fees, use Colonial General for your Preferred Business Owners Policies. We have several markets available to give you the best quote. For additional information contact your underwriter.

Transportation Department • Truckers

• Physical Damage

• NB Mexican Truckers

• Local Radius

• Garage

• Intermediate Radius

Please contact our Utah office for all your Transportation needs.

P.O. Box 571770, Murray, Utah 84157 (801) 562-1188 *Wats: (800) 594-8900 Fax: (801) 562-2218 * Toll Free Fax: (800) 332-9285

Personal Lines Department • Masterpiece Company

• Standard Company

• Umbrellas

• Stand-alone Liability

• Vacant

• Seasonal

• Dwelling Fire

• Homeowners

Preferred Commercial Lines Division

You will never pay a fee to access our companies. No volume or binding contracts. Contact John Weber at (800) 848-8860 x278 for additional information.

www.colonialgeneral.com

Founded in 1985, Colonial General Insurance Agency, Inc. is a wholesale General Agency providing quality insurance products to the Independent Insurance Agent.

Sign up for

Gmail is one habit that users don’t want to quit. If you don’t yet have a Gmail account, this article will give you some insight into why Gmail is so popular and growing so rapidly. If you already use Gmail, you should find some useful hints here.

Gmail is free, like its main competitor, Yahoo, and some other Webbased e-mail accounts. To open a Gmail account, go to http://mail. google.com.

Make sure you use a security question/answer and an alternate e-mail account that you will remember. You will need these to quickly get back into your account if you ever get locked out (such as from too many failed login attempts).

Create labels Most e-mail systems—whether Web-based (like Yahoo) or disk-based (like Outlook)—let you move items out of your Inbox and into folders.

Gmail uses labels instead of folders. The big difference is that you can have multiple labels for an e-mail. So you might label the e-mail "HOA" if you're on the Home Owners Association and the e-mail is about that, but you might also have a label for "Client" if the sender is also one of your clients.

All the labels you create are shown on a list, on the left side of the page. Clicking on a label changes the display immediately to show ONLY those e-mails that have that label. Very handy.

What many new (and some long-time) users don't realize is that the Inbox is actually just another label. When you're IN the Inbox, you don't SEE the label, but "Inbox" is just a label. To see what I mean, do this: Look at the very first item in your Inbox (the most recent) and then find the hyperlink on the left (near the top) that says All Mail and click it. You'll see that the most current item is tagged with both All Mail and Inbox. (All mail, except Spam, Trash, and Drafts is tagged with All Mail.)

Here's how to move items out of the Inbox: Simply click the Archive button at the top. Trust the Force, Luke—Gmail will never lose your e-mail. Archiving e-mail keeps it fully active; it simply removes the Inbox label. When you do a simple search of your e-mail—even while looking at your Inbox—Gmail is actually searching the All Mail tags, and your e-mail is still there. Or, you can just click the All Mail link to see it all again.

If you have the (bad) habit of storing everything in your Inbox, you can be much more efficient (and not lose track of stuff) by the judicious use of labels and archiving. For a great presentation on how to keep control of your Inbox, watch Merlin Mann's Inbox Zero speech—recorded at Google's office, by the way.

Customize your settings

While understanding, creating, and using labels is easy and intuitive, new users are used to moving items out of the inbox and into a folder. If you don't know how to do this in Gmail—easily the most misunderstood feature—read item #3 very carefully.

Clean up your Inbox All e-mail (except items flagged by Gmail as Spam) goes to your Inbox by default. Gmail also opens to your Inbox by default. So, unless you Page 8

get into the habit of keeping your Inbox clean, it can quickly fill up with hundreds or thousands of e-mails. If you have more than one page of e-mails in your Inbox, shame on you—you aren't using Gmail to its best advantage.

At the top right, you'll see a small link that says Settings. Click it, and spend some time going through all of the settings, even if you don't change most of them. Although the default installation is very well thought out, Gmail has a surprising amount of customization available.

It's worth playing with.

Learn to use the Filter capability—it can be very useful. For example, if you regularly get non-critical e-mail that you want to review only periodically, you could set up a filter that says, for example, Skip Inbox and Apply Label "eBay'" to all eBay-related e-mail.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Try Gmail Lab When you go to Settings you'll see an item called Labs. Try it. Gmail Labs is a collection of tweaks that the Google programmers have come up with. Some are not ready for prime time, but many are very useful. For example, Gmail lets you "star" important items, which is another kind of tag or label. If you like that, then Gmail Superstars adds lots more.

You'll find Offline in the Labs tab, in the Settings area. Gmail Offline downloads your e-mail onto your hard drive and regularly updates it in the background when you're online. There are two main advantages.

First, it speeds up Gmail, since it may already have downloaded current e-mail (instead of having to go out and pull it down). Secondly, it allows you to work when you're offline. Obviously, any e-mails you send don't actually get sent until you're back online.

My favorite item, added from the Labs, is the Forgotten Attachment Detector. If I mention an attachment but fail to attach it—a regular occurrence—and then press the Send button, Gmail prompts me to attach it.

When you install Gmail Offline, accept the prompt that asks if you want a shortcut on your desktop. This allows you to easily start Gmail when you're not connected to the Web.

You can easily turn these experimental features on and off with a single click of the Enable or Disable radio button.

Try some of these. Until you actually use them, you never know which ones will turn out to be useful for you.

Use Gmail Offline The biggest drawback to free Web-based e-mail accounts is that, well, you have to be connected to the Web to use them. That means you can't work on an airplane, or if your home or office computer isn't currently connected. Enter Gmail Offline.

Homeowners Catastrophe Insurance Trust

G. Barry Klein is a former insurance agent who maintains UltimateInsuranceLinks.com as an industry service. He can be reached at barry@barryklein.com.

Your preferred homeowners clients deserve the broadest possible coverage for their homes and personal property. As an active member of IIANM, you have the original -- the very best such program available to you right now.

The HCIT Difference in Conditions (DIC) policy supplements basic homeowners coverage by providing protection for catastrophic losses, including FLOOD and EARTHQUAKE.

Just contact:

Trustco, Inc. - HCIT Program Administrator

2063 East 3900 South Ste. 100, Salt Lake City, UT 84124 1-800-644-4334 / Fax: 801-278-9051

www.hcitins.com

Bobbi Phillips / bobbip@hcitins.com Eric Kingdon / erick@trustcoinc.com

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 9

12 Great Questions to Ask in an Exit Interview Exit interviews done with employees who leave voluntarily are a wonderful, yet often wasted, opportunity for learning how to more effectively manage talent. With the right questions and the right interviewer—that is, someone who is open-minded, listens well and is able to get people to open up—you can gain some powerful insights into your organization. Here are some questions to help get you started—and get you thinking.

1. What did you like about your job?

2. Did you feel a sense of accomplishment about your work?

3. Is there anything we could have done to make your job more fulfilling?

4. Did you feel you had opportunities to develop your skills?

5. How did you feel about your opportunities for growth and advancement in the company?

6. What did you think about how you were managed?

7. What are some problems in the organization that you think should be addressed?

8. What suggestions do you have for improving work conditions or employee morale?

9. Tell me your thoughts on your compensation and benefits package.

10. What would it have taken to get you to stay?

11. What did you like most and least about the company?

12. If an opportunity to return arose in the future, would you ever consider it?

Before your start the interview, really think about the kind of information you’d like to uncover. What areas of your business do you think you could improve? What information would help you do that?

Remember, if you have a plan, your interviews have a much greater chance of success. And, having a plan also involves knowing how you’re going to use the information you gather.

And one more thing to keep in mind, exit interviews can also be a great way to start the process of hiring back valued employees. If you focus that interview on the reasons they left and what could’ve been done to make them stay, you may find that through making some necessary organizational changes you are in a position to call back a strong employee and say, “We kept the things you liked and got rid of the things you didn’t. Are you interested in coming back?” It doesn’t hurt to ask!

Page 10

Why risk using another company when Midlands is a leading market for Self-Insureds and Self-Insured Groups?

Affiliated companies to Midlands Management Corporation: Midlands Claim Administrators, Inc., Midlands Injury Management, Inc., Midlands Management of Texas, Inc. Midlands Management Corporation of New York

EXCESS WORKERS’ COMPENSATION PROGRAM • Claims and risk management services available • Accepting applications from agents and brokers nationwide • Limits up to Statutory Specific • Wide variety of classes written • Minimum SIR of $300,000 • Aggregate coverage available

®

The Midlands Companies SUPPORTING AMERICA’S AGENCY SYSTEM SINCE 1990

www.midlandsmgt.com

Midlands Management Corporation Phone: 405.840.0074 800.800.4007 Fax: 405.840.5432 Midlands Management of Texas Phone: 972.588.2000 888.743.2628 Fax: 972.588.2020

Coverage not available in all states.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Fast and Fair Claims Service • Excellent Customer Service Extensive Industry Knowledge • A.M. Best A+ Superior Rating

Insurance From People Who Know Mining.

20 Years of Experience Providing Workers’ Compensation Insurance to the Mining Industry

We Insure Copper, Silver & Coal mines: surface and underground coal truckmen quarries sand and gravel digging other types of mining

For more information, contact

mining related risks

Bryant Brown, V.P. Marketing 1.800.448.5621, x 249.

WWW.AMERICANMINING.COM

Page Independent 11 Insurance Agents of New Mexico - www.iianm.org - * May Independent 2009 Insurance Agents of New Mexico - www.iianm.org - * May Page 2009 11

2009 Annual CONVENTION Please fill out this form and get it back to us as soon as possible: YES! I will attend IIANM's 75th Annual Convention, September 30 and October 1, 2009. I will commit to registering for a hotel room at the IIANM corporate rate in return for one complimentary registration to the convention.

I understand that the registration does not include golf. (This is over a $300 value)

Name: Agency: Date:

Return to: Lorri Gaffney - Fax: (505) 243-3367 or lorri@iianm.org

We would like to encourage as many people as possible to attend the celebration of our 75th Anniversary at the Isleta Resort & Casino in Albuquerque, NM on September 30 & October 1, 2009.

As an added incentive and to thank our loyal member agencies, we have budgeted money to pay for one full convention registration for each member agency, as well as every past Chair and Lifetime Achievement award winners.

Denim&

Diamonds

WWW.AMERICAN-SUMMIT.COM WWW.NATLLOYDS.COM

WWW.NATLLOYDS.COM WWW.AMERICAN-SUMMIT.COM gvanek@natlloyds.com ckirk@natlloyds.com

fcarr@natlloyds.com rjames@natlloyds.com bpage@natlloyds.com

klauritzen@natlloyds.com dwharton@natlloyds.com

L&H Trends Is Perception Reality?

Many industries’ reputations have fallen prey to the mistakes of a few.

Any business’s reputation is critical to its ability to compete and remain competitive in the long term.

Advertising may help motivate a consumer to try a product, but if they are not satisfied with the purchase or the relationship, they will ultimately walk away. And, it may be a long time before they give that company another chance. Most successful business people recognize the reality that bad outcomes can diminish a business’s outlook for decades. Unfortunately, consumers are not always as discriminating when it comes to problems outside a business’s control.

For example, during the recent salmonella outbreak in peanut butter, only one company’s product was at issue.

However, the problem occurred because the peanut butter company that produced the tainted product distributed its peanut butter to food manufacturers to be used as an ingredient in other processed foods. Peanut butter from the plant with the salmonella outbreak was also shipped to institutions, including long-term care facilities and cafeterias. Ultimately, more than 125 products were recalled. The outbreak sickened hundreds and resulted in the death of a number of people. However, almost all other peanut butter was unaffected. While a number of snack companies were supplied by the tainted company, which has since filed for bankruptcy, some snack companies manufactured their own, safe peanut butter.

However, the sales of responsible companies were significantly and adversely impacted by the public perception of the salmonella outbreak.

The insurance industry experienced a similar effect on public perception after the failure of AIG in September 2008, which led to tremendous upheaval in the industry.

Of course, the nexus for AIG’s problems and subsequent bailout dealt with the credit default swaps (CDS) that their London-based, non-insurance operation had guaranteed. This resulted in the need for more capital

IS P E T C I ON R E P REALITY?

by Dave Evans

as AIG’s ratings dropped and the terms of their guarantees required more capital. As major Wall Street firms ran into trouble with their portfolios, the financial virus spread, resulting in a slowing economy and mass layoffs. The auto industry is now in the throes of the financial tsunami. Once again, the federal government is intervening and its decisions may very well decide the fate of the Big Three auto makers.

Many independent insurance agents have been deluged by policyholder calls regarding the stability of insurance companies. Agents have patiently explained that AIG’s problems did not directly impact their insurance operations. Now, the public is seeing that several major life insurance companies are applying for TARP funds. While an agent can explain that it appears the effort is preventative in nature, the very mention of the Troubled Asset Relief Program causes any rational person to pause to consider the implications.

Life insurance investments are backed by the general assets of the insurance company, and ultimately the respective state guarantee funds, with limits. Policyholders, with insurance in excess of the state guarantee fund limits will no doubt be nervous. Independent agents need to stay abreast of developments to help separate fact from rumor, being careful not to dismiss their customers’ concerns.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 15

Supreme Court Addresses Punitive Damages Rules on punitive damages vary by state.

by Paul Buse

On March 31, the U.S. Supreme Court dismissed an appeal by Altria Group (Philip Morris USA) regarding a nearly $80 million punitive damage claim. This action could finally clear the way for total payments of more than $150 million due to the impact of pre and post-judgment interest accruals, and could renew interest in the pursuit of such awards by the plaintiff’s bar. Only two years ago, business groups were much more sanguine about the previous decision by the court in this case.

Without the hoped for national limits, however, agents should be aware that the state view of punitive damages varies, as does the availability of insurance to cover punitive damages.

The last time this case was in the news in February 2007, business groups were optimistically interpreting the high court’s view on large punitive damage awards. The justices at the time sent the Altria decision back to Oregon, presumably to consider reducing the award. This was viewed favorably by business groups and, in particular, large businesses facing the prospect of punitive awards. These businesses included Merck & Co., Inc., the maker of Vioxx, and Ford Motor Company, a veteran of punitive damage controversies involving its Pinto gas tank design and Explorer model prone to rollovers.

With no national limits to punitive damages in sight, insurance agents should be aware that punitive damages are not handled the same way in all state courts. Some states do not recognize assessments of punitive damages in all situations and the insurability of punitive damages varies. The latter is of particular importance to insurance agents and the differences among states arise from the fact that punitive damages are by definition and practice intended to punish or “make an example of” wrongdoers. Some courts do not allow insurance to cover punitive damages since that would not sufficiently punish the wrongdoer. Below is a graphical summary of the ability to insure punitive damages in each state.

“The Insurability of Punitive Damages” Clearly, state-by-state differences abound.

Green states generally have little or no Source: McCullough, Campbell & Lane LLP restriction on the ability to insure punitive damages. Blue states generally allow insurance, but not when the damages are awarded for intentional conduct. Red states have significant restrictions on insurability and do not allow it unless damages are assessed vicariously (that is, indirectly for actions of others like employees). Gray states are undecided or unsettled in their view or the state does not recognize the awarding of punitive damages.

Member agents wanting to know more about punitive damages will find the Big “I” Virtual University (www.independentagent.com/vu) a valuable resource regarding how to handle such damages in specific policies. Agents insured via the Big “I” Professional Liability Program with Swiss Re will be pleased to know the Westport Insurance Industry Professional Liability Coverage Unit does include punitive damages, as well as all pre-judgments and post- judgments. If you have a question about your errors & omissions insurance, your state association contract can be found at www.independentagent.com/eo.

Page 16

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

P

utting one's head in the sand is a real, and sometimes very tempting, strategy. It's even an effective strategy, if a person's goal is to slowly die (there's not a lot of air to breathe down there). However, if the goal is to progress and improve, it is definitely a strategy to avoid. Consider these examples: Sales Strategies A few months ago, I saw the best seminar on selling workers' compensation that I have ever seen. After the seminar, one of the agents in the audience told me he thought it was worthless. Frankly speaking, there is no way that presentation was worthless to anyone wanting to learn to sell Comp better. This agent said he didn't need to change the way he did things. He found it much easier and safer to stick to his old ways. He was criticizing the presentation because he did not want to face up to the fact that his own approach was clearly out-of-date and was not working sufficiently to keep his clients, much less get new clients.

By Chris Burand

Lost Opportunities

Company Stability I recently gave a speech regarding insurance company stability. During the speech, I discussed how A.M. Best's rating is a solvency rating, not a stability rating and I explained why agents should do business with companies that are very solvent and very stable, not just one or the other.

For example, several companies in the past few months have had their solvency ratings affirmed or only slightly downgraded while simultaneously, their credit ratings have taken significant hits. A solvency rating means that in the belief of the rating agency, a company has the ability to pay claims.

It does not mean the company can pay their creditors or agents (hence the downgrades to their credit ratings), or that service is not going to deteriorate (if a company has difficulty paying creditors, one would think that customer service might suffer too).

During a break in my presentation, a visibly upset insurance company executive approached me. His company did not have a credit rating and it did not have a strong A.M. Best Rating, so he took exception to my message that agencies should only do business with companies that are highly solvent and highly stable. His company could not prove either and yet, he believed it was very stable because it had been around forever. He felt I was misleading the audience by insisting on companies meeting both criteria. So I asked which he preferred that I leave out, that companies only need to be stable or only need to be solvent?

His company's problem is significant but rather than trying to find a workable solution, he wanted to stick his head, and my head, into the sand. The solution is not easy, but running from the problem and hoping agents will stay ignorant of that problem is likely to snowball into a much larger problem.

The Facts are the Facts Soon after returning from that presentation, an agent argued with me that 100 less 1,000 is not -900. I have been yelled at, cursed at and even fired for arguing that simple math is not open to interpretation. Most of these situations arise because an agency's accounting is either so bad that no one can honestly conclude what the situation is without a forensic audit or the agency has spent money that does not belong to it (trust money) and will not own up to what they have done.

Even if an agency owner does not know (or does not want to know) their own financial condition, it is not okay to make up the numbers. Some agency owners simply refuse to even read their own financial statements so they do

not have to accept reality and then they make up what they want reality to be. This may sound unbelievable to many readers, but in desperate situations, people will do desperate things including burying their head as deep as possible in sand or whatever else is available.

Denial The issue at the root of each of these situations is denial. Denial is a very common reaction that everyone experiences at some point in their lives.

When a person is confronted with such significant facts that they are forced into a fight or flight emotional response, denial is often the result. Denial is a handy reaction, but it isn't a cure.

When things go wrong in agencies, the faster agency owners can move from wanting to bury their head to accepting their problem for what it is, the more likely the problem can be successfully resolved. The agency owner must take the critical step of seeing the situation for what it is because without admitting the truth, nothing else is possible. Getting people to move forward in these situations is never easy and mollycoddling is never helpful. Being factual but polite sometimes serves the shock necessary to awaken people to the situation at hand. The shock is most often painful, but necessary and brings to mind Shakespeare's famous line, "I must be cruel, only to be kind: Thus bad begins, and worse remains behind." (Hamlet. Act iii. Sc. 4.)

Putting one's head in the sand may be the easiest strategy and it may sometimes seem the safest, but what is the true cost of the ease and safety?

Suffocation? What opportunities are lost while hiding? The next time you're faced with a challenge or a change, remember to consider all the opportunities that might be lost while hiding in the sand. ________________________________________

NOTE: The information provided in this newsletter is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.

Burand & Associates, LLC is an advocate of agencies which constructively manage and improve their contingency contracts by learning how to negotiate and use their contingency contracts more effectively. We maintain that agents can achieve considerably better results without ever taking actions that are detrimental or disadvantageous to the insureds. We have never and would not ever recommend an agent or agency implement a policy or otherwise advocate increasing its contingency income ahead of the insureds' interests.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 17

Here is a recent questions received by our "Ask an Expert" service:

Q.

"I know I am getting old when I don't use (understand) the technological gadgets that are coming on the market and am concerned, as an insurance broker, if this lack of understanding is leaving my clients uninsured.

"With that being said, what are the appropriate ways to properly insure MP3 players, Ipods, or any handheld device (Palm Pilots) where our clients may be paying for downloaded information from the internet. If an Ipod holds 2,500 songs at 99 cents per song there is potentially a good sized exposure.

"Obviously there is the cost of the device, but what about the lost data? What about the cost in time of the insured to download 2,500 songs onto the replaced electronic device?

Can these type of devices be backed up by the user? What about a mechanical breakdown that causes the loss of all data? How does one deal with the varying value of downloaded data over a period of time?

"Obviously a named peril (homeowners policy) does not cut it. Are underwriters willing to insure these items on an inland marine policy? Your ideas are appreciated."

A.

This is a great question. No doubt there are thousands of consumers with thousands of dollars worth of downloaded music on their MP3 players, not to mention PDA users with important data on their handheld devices.

Needless to say, insurance is not the only solution to risk exposures, though it's the risk management technique that we'll focus on here. In many, if not most, cases, electronic information is downloaded to a PC, then to the handheld device.

So, there is naturally some spreading of risk by automatically creating a backup. On top of that, it is probably a good idea to maintain a secondary backup off-site. In addition, other loss control techniques can be used to safeguard the device and the data. Again, though, here we'll focus on the insurance implications.

We ran this question by our faculty and their opinions were pretty much consistent. Below are a couple of representative responses: Faculty Response: First you must have damage from a covered peril. With the standard ISO HO-3, you're limited to the 16 named perils. Using the HO-5 (or HO-15 endorsement in the HO-91 program) converts the named peril to "special causes of loss." The device itself is covered, and I'll assume here it's used for personal use and not for business. That could limit coverage if it is. Clearly the "lost time" to download isn't covered since the policy only covers "direct damage." And as far as the songs go....I'll plead ignorance and would have to ask my kid exactly what an MP3 player is!

Page 18

Faculty Response: Interesting question. Clearly, the devices are covered property and full Coverage C applies worldwide with no specific limitations unless they are used for business. If that's the case, the on/off premises Special Limits would apply. You'd also have to have damage caused by a covered peril, which would be limited under an unendorsed HO3...you'd need to endorse broader coverage unless an HO-5 is in place. In either case, there'd be no mechanical breakdown coverage.

The other questions are harder to answer. The HO-3, by and large, only covers DIRECT damage to property, not the value of the "download time." In addition, the policy only covers "direct PHYSICAL loss." I would interpret that NOT to include electronic data. There is a specific exclusion, under Property Not Covered, for "business" data other than the cost of blank media and retail "computer programs."

So, I suspect the only coverage that can be assured is for direct physical damage to the device itself if caused by a covered peril. That being the case, the insured will need to employ alternative risk management techniques such as making a backup copy of the "data" and safeguarding it.

Subscriber Response: Mike Norman, CIC, of Aronson Insurance Agency in Newton, MA writes: Regarding the article in the about insuring PDA's, Ipods and the like, I am in agreement with your team of experts, except for one possible area that may have been overlooked: Under the Special Limits of Liability (HO 00 03 10 00), item b. (see below), the policy provides $1,500 coverage for certain types of personal data (we know that there is no coverage for business data). Do you think it's possible that this coverage could be extended to cover the lost data on a PDA or songs on an MP3 player? Your thoughts? b. $1,500 on securities, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, personal records, passports, tickets and stamps.

This dollar limit applies to these categories regardless of the medium (such as paper or computer software) on which the material exists.

This limit includes the cost to research, replace or restore the information from the lost or damaged material.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Mike...mea culpa. This is something we entirely overlooked in our analysis. Whether MP3 songs qualify for the types of "records" indicated above is perhaps debatable, but there is little doubt that PDA records would certainly qualify for this coverage IF damage results for a covered peril. Thanks for keeping us honest!

Q.

"Hypothetical situation: An insured has their computer stolen. They have downloaded lots of music over the internet at a certain price per song. Are the downloaded songs they paid for included in the final claim payout? If not, where is it excluded under the unendorsed 1991 ISO HO3? If they had the Special Computer Coverage endorsement would that change the situation?"

A.

So far, I've personally downloaded 1,148 songs and 4 video clips from iTunes, for a total of $1,144.48. I have a copy on my PC, on a portable 300GB hard drive, and on my Ipod, so I use the risk management technique of segregation of exposures.

As for HO coverage, the best argument for denying the claim is the Coverage C perils requirement that damage involve "direct physical loss":

records, passports, tickets and stamps.

This dollar limit applies to these categories regardless of the medium (such as paper or computer software) on which the material exists.

This limit includes the cost to research, replace or restore the information from the lost or damaged material.

Clearly, this indicates that there is at least $1,500 of coverage for "information" that consists of "personal records."

So, you could argue that this implies that "information" IS covered, and it's limited only if it is "personal records" (e.g., information on a PDA that isn't subject to the "business" data Property Not Covered exclusion) or one of the other restricted categories; otherwise, there's no limitation.

As to what's correct or how a court would uphold it, you've got me. That's why I have two backups, not counting a ton of songs on my kid's PC that I've shared with him (iTunes allows you to make 5 copies of a song or video). Insurance is not always the only (or the best) way to treat exposure to loss.

We insure for direct physical loss to the property described in Coverage C caused by any of the following perils unless the loss is excluded in Section I – Exclusions.

The argument would be that the loss of electronic information doesn't constitute a physical loss. At least that's what ISO claims is the case with regard to electronic data in their CGL. The best argument for covering the claim would be that, under Property Not Covered, there is a specific exclusion for "business" data: "Business" data, including such data stored in: (1) Books of account, drawings or other paper records; or (2) Computers and related equipment.

We do cover the cost of blank recording or storage media, and of prerecorded computer programs available on the retail market; That might imply that personal data, unless otherwise excluded, is covered...or at least creates an ambiguity. This basis for coverage is supported by this Special Limit: $1,500 on securities, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, personal

VU Faculty

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

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Last week, more than 1,400 independent agents and brokers from across the country will visit members of Congress to explain why local insurance regulation works best.

On the Hill New Mexico Agents Lobby Congress

by Thom Turbett

Last week 11 IIANM members and Young Agents attended the Big I national legislative conference in Washington D.C. and lobbied our state’s Congressional delegation. The following people took the time to help lobby on your behalf: • Patty Padon, Manuel Lujan Insurance in Albuquerque and IIANM National Director • Thom Turbett, President/CEO IIANM • Mike Zambrano, New Mexico Mutual and Young Agent President • Diana Padilla, New Mexico Mutual Young Agent • Rebecca Martinez, New Mexico Mutual Young Agent • Genevieve Kluckman, Poms & Associates in Albuquerque and Young Agent Officer • Heather Fortner, AVI Risk Management in Farmington and Young Agent Office • Sandra Lobato, AVI Risk Management, Farmington Young Agent • Kathy Yeager, High Country Agency in Ruidoso and IIANM Secretary/Treasurer • Alma Franzoy-Capron, Leavitt Group Southwest, Hatch and IIANM Vice Chair • Tom Capron, Leavitt Group Southwest The following issues were discussed with the five members of our Congressional delegation: HEALTH CARE REFORM The Obama Administration as well as the U.S. Congress has made health care reform one of their top priorities and hope to pass a comprehensive bill by the fall of 2009. A central component of nearly every health care reform proposal under consideration in Congress is the creation of a Health Care Exchange, as has been implemented in Massachusetts. The Big I is concerned the exchange could potentially eliminate or significantly curb the role of agents in the sale and delivery of health insurance.

In our meetings with our Congressional delegation we talked about the importance of insurance agents and brokers in the sale of health insurance. Each individual and business has distinct health care needs, and agents help them navigate the complexities of the market and find the best coverage.

We encouraged Congress to build on the employer-based health care delivery mechanism rather than displace it with a federal-run program.

The Big I supports offering small businesses incentives such as tax credits and rebates. We are also concerned about the taxing of current

employer-provided health care benefits because it will further drive up health care costs and undermine the employer-based system.

INSURANCE REGULATORY REFORM With the bailout of the largest insurance company in the world, President Obama has made financial services regulatory reform one of his top priorities. Large insurers and national brokers for the past decade have been pushing for the creation of a federal regulator and see this as a good opportunity to push this agenda. Their bill, the National Insurance Consumer Protection Act (H.R. 1880), would establish an Office of National Insurance within the Treasury Department to provide for the optional chartering of national insurers and national agencies.

We shared with our elected officials that only AIG’s insurance-related subsidiaries are regulated by state insurance commissioners and they are financially sound. AIG’s exotic investments, including credit default swaps, are regulated by the feds and have created the need for the federal bailout.

The Big I supports making changes to our current state regulatory system to make it easier for insurance companies and agents to do business in multiple states and opposes the legislation to create an optional federal charter for the insurance market. We shared the Big I’s concern that the establishment of a federal insurance charter would not provide better protection for insurance consumers but add an additional layer of regulation and confusion. It would not be optional for independent agents and consumers. Since some insurers would choose to be regulated at the state level and others at the federal level, independent agents and their customers would need to deal with two regulators.

We shared our concerns about nonresident agent licensing as an example of a needed reform of our current regulatory system. The average independent agency is licensed in at least eight states and many are licensed in 35-50 jurisdictions. Maintaining the licenses is time consuming and confusing. The Big I supports NARAB Reform continued...

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 21

Act, which passed the U.S. House in September 2008 and will soon be reintroduced this year. This legislation would establish a non-profit entity that would act as a one-stop shop for producers to easily get licensed in as many states as they choose by filling out one application without additional regulations/requirements.

The Big I strongly supports the FCIP and urges Congress to continue this valuable program and calls on Congress to ensure that independent insurance agents continue to receive just compensation for the work put into crop insurance sales and servicing.

SIDE BAR

FLOOD INSURANCE REFORM On Sept. 30, 2009, the prior extension of the National Flood Insurance Program (passed in March 2009) will expire. Congress must pass another extension of this program or consumers will face nonrenewal of their NFIP policies. Additionally, the dramatic impact of the 2005 hurricanes on the NFIP has led many in Congress to call for reforms to put the NFIP on a more stable financial footing. NFIP claims liabilities arising from Hurricanes Katrina and Rita are estimated at more than $21 billion, far surpassing the total claims paid in the entire history of the NFIP. We communicated with our elected officials that the Big I is a strong supporter of the NFIP and seeks to modernize and strengthen the program for the future. The Big I believes the private insurance industry has been, and continues to be, largely unable to underwrite flood insurance because of the catastrophic nature of these disasters. Therefore, the NFIP is virtually the only way for people to protect against the loss of their homes or businesses due to floods. We strongly urged Congress to extend the NFIP and also modernize the program and protect it from the threat of insolvency in the years ahead.

The Big I has laid out a 23-point reform initiative on how to reform the program. These include adding optional business interruption insurance, additional living expenses coverage, finished basement coverage and replacement cost coverage. The plan also encourages increasing maximum coverage limits and creating risk-based rates for nonresidential or second homes.

Insure Your Future!

New Mexico agents collectively raised almost $10,000 in individual contributions for our national political action committee, InsurPac – making us one of the leading states in giving (per capita).

InsurPac is the largest P & C insurance industry PAC and is one of the reasons why the Big I is routinely rated in Fortune magazine’s top-25 list of most successful lobbying groups in Washington D.C. By pooling individual contributions, InsurPac helps elect candidates and re-elect members of the U.S. Congress who share the Big I’s business philosophy. While contributions do not buy solutions to legislative debates, they do allow the Big I significant ‘face time’ with very busy elected officials to give us an opportunity to educated them.

Help us make sure the voice of the independent agent is heard loud and clear in Congress. “Insure Your Future!” and contribute to InsurPac today.

CROP INSURANCE Since 1994, agents have been the sole sales force of the Federal Crop Insurance Program (FCIP). During this time, the total net acres insured increased from about 83 million in 1993 to about 242 million in 2006.

The House Government Reform and Oversight Committee and the Government Accountability Office (GAO) plans to examine the crop insurance program this year. The Obama Administration has also submitted a budget proposal that would cut some funding for the FCIP. We shared the Big I’s concern that these additional proposed cuts to crop insurance would undermine the program’s affordability to farmers, as well as the program’s efficient and effective delivery of services through independent agents.

We are also extremely concerned that these or any other proposed cuts would reopen the 2008 Farm Bill. The 2008 Farm Bill resulted in a massive $6 billion cut to the crop insurance industry, the effects of which are still being determined.

Page 22

left to right: Kathy Yeager, Tom Capran, Alma Franzoy-Capran and Genevieve Kluckman in the Nation’s Capitol last week.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2003

Insuring Property in Storage Keep insureds informed about what their homeowners policy covers

The Big "I" Virtual University's "Ask an Expert" service recently received the following question about coverage for property in a storage facility: "Our insured has to place items in a self storage facility for approximately six months while his new home is being built. Does the homeowners policy cover these items or do we need to obtain more specific coverage?"

A

s long as there is a homeowners policy in place on the current residence, or a tenant's policy if an apartment, the insured should be OK. Agents should still review the form, but most homeowners policies cover personal property anywhere in the world. There is typically a limitation on property usually located at another residence, but that doesn't apply to a storage facility.

Subject to certain restrictions, personal property owned or used by an insured is covered worldwide. While often misinterpreted as limiting all offpremises personal property coverage to 10% of the coverage C limit, the HO policy only applies the 10% limit to personal property that is "usually located at an insured's residence other than the residence premises." That is, for the restriction to apply, the insured must have more than one residence. In addition, the personal property must be "usually located" there. For example, if the insured has a second home, the coverage C on the homeowners policy covering his or her main residence only extends 10% of the coverage C limit to personal property usually kept at the second home. For personal property the insured takes back and forth, the 10% limit would not apply.

The 10% limit would also not apply to personal property that is usually kept at a residence that is not an insured's residence. Personal property in storage at a friend or family member's house would not be subject to the 10% limit.

tions of coverage, in addition to the 10% limit discussed above. Under "Special Limits of Liability," coverage C is limited for business property. The HO 04 12 - Increased Limits on Business Property endorsement can usually be used to increase the policy special limits, but it does not provide any additional coverage for business property in storage. Under the endorsement, the increase in limits on business property does not apply to "business property in storage..."

The coverage C named peril for theft contains several limitations relevant to certain types of personal property in storage (or otherwise off-premises). For example, insureds who use a mini-warehouse to store watercraft and equipment, or trailers and campers, have no theft coverage for such property.

Another limitation exists in valuation if the HO 04 90 - Personal Property Replacement Cost endorsement is added. There is no coverage for "outdated or obsolete" articles that "are stored and not being used."

There are also a number of liability and contractual exposures to consider, so while the homeowners policy provides broad coverage for insureds in most storage-related situations, there are certain specific exposures that are not covered. Agency staff should be aware of potential gaps in coverage and make appropriate recommendations to insureds when handling new and renewal personal lines business.

To read the entire article, click here.

If you do not know your Big "I" Web site user name and password, e-mail rachel@iianm.org to request your login information.

Mike Edwards (medwards65@aol.com) heads an insurance training firm in Atlanta, Ga.

Personal property of college students is subject to the 10% limit, according to most insurance experts. In most cases, the 10% limit under the parents' homeowners policy is usually sufficient, but coverage can be increased using the HO 04 50 - Increased Limit on Personal Property in Other Residences endorsement (or, the student can purchase an HO-4 policy).

Personal property stored in a mini-warehouse is not subject to the 10% limit under the insured's coverage C. Again, the 10% limit only applies to "property usually located at an insured's residence, other than the residence premises."

A mini-warehouse is clearly not a residence, thus the 10% limit does not apply to property stored there; full coverage C applies, subject to other restrictions discussed in the full article from which this is excerpted.

While coverage C basically applies to personal property worldwide, there are certain restricIndependent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 23

www.scottsdale.burnsandwilcox.com

Who has the ability to handle all your specialty insurance needs?

The

Answer is Your Specialty Insurance Professionals

Professional Liability Umbrella & Excess Employment Practices Commercial Property Products Liability General Liability Commercial Auto Personal Lines

Global Resources. Local Relationships.

Albuquerque, New Mexico

(866) 643-8538 / (505) 822-0018 / fax (505) 822-0092 scottsdale.burnsandwilcox.com

www.scottsdale.burnsandwilcox.com

Fraud News & Review SOURCE: North American Training Group

Fraud Making News

The New Mexico legislature adjourned for the year without passing a measure that would’ve let courts combine insurance money from several schemes when considering fraud sentences. The more stolen money, the larger the potential sentence. SB 117 cleared the Senate but died in a House committee.

The recent omnibus spending bill that President Obama signed includes $2 million to help states clamp down on the illegal diversion of addictive prescription drugs—a crime trend that’s heavily financed by insurance fraud. The federal dollars will help fund the National All Schedules Prescription Electronic Reporting system. This will help states implement prescription monitoring programs that track usage patterns of addictive drugs such as OxyContin. Insurers pay billions of dollars in bogus claims for these drugs, says the coalition’s landmark report Prescription for Peril. States should implement and fully fund the monitoring programs to keep track of providers, pharmacies and patients for these drugs, the coalition urges.

“Is the recession a fraud magnet?”

News keeps surfacing that more stress-out consumers are ditching vehicles for insurance payouts. Consider some of the latest in New Mexico: “Because of the economy in New Mexico and throughout the country, many people are upside down on their vehicles. And unfortunately, with nothing left to do, they’re increasingly turning to this,” State Superintendent Mo Chavez told the Albuquerque Journal this week. Adds Det. Bill Webb of the Bernalillo County Sheriff’s Department: “We’ve seen dozens of these in the past six months…Someone will buy a car and be all excited about it, then all of a sudden say: ‘Holy crap! I’ve got a $700-a-month payment plus insurance, and I can’t afford it anymore.’ Then they take the vehicle out to the mesa, set it on fire, report it stolen and go collect the insurance money.”

To read more on Fraud Convictions, Verdicts, Government Updates & Related News, click the following links and check out last months editions of NATG Fraud News WEEKLY:

Volume 24 Volume 25 Volume 26

Volume 27 Volume 28

To receive this publication directly, simply email your request to rlippman@fraudeducation.com

LEARN MORE ABOUT INSURANCE FRAUD AND SIMULTANEOUSLY EARN CE CREDITS, VISIT THE BIG "I" VU FRAUD TRAINING CENTER FOR ON-LINE COURSES, RESOURCES & DAILY NEWS

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 25

ENT INSURANCE AGENTS OF NEW MEXICO

INDEPENDENT IN

2009 Company Partners IIANM gratefully acknowledges the following companies, who are our 2009 Company Partners. They have generously agreed to support all our major conferences and events held in 2009. Without their assistance, fees for these events would be significantly higher and/or the quality of programming would be restricted.

Diamond

New Mexico Mutual

Gold

Mountain States Insurance Group

Builders Trust of New Mexico / Letcher Golden & Associates

Become a Partner!

We invite companies to experience the enormous 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.

Silver

Allstate Workplace Division

Cresta Insurance, LLC

FirstComp

MetLife Home & Auto

New Mexico Health Insurance Alliance

Page 26

IIANM's Partners Program is a special program for insurance companies and others who support the Independent Insurance Agents of New Mexico on an on-going basis.

Click here for full details and registration form.

If you have any questions, please call VP of Membership, Lorri Gaffney at (505) 999-5805 or send an email to lorri@iianm.org.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

N

With Coverage Comes Responsibility H

ave you ever tried to remember what it was like before you started your insurance career? What kind of knowledge did you have about reporting a claim or changes in your personal or business circumstances? Probably about as much as the average insurance consumer and if you were lucky, you didn’t have to learn from personal experience.

As an insurance professional, one of your responsibilities to your clients is to educate them about their responsibilities. As rudimentary as it may seem to you, many of the duties expected of our insureds are not obvious to them.

Their minds are on their businesses, their families, the economy or their homes. And if you recall, the urge to tear open and read one’s insurance policy when it arrived was not particularly compelling. Many insureds won’t ever read the policy that you send them until they suffer a loss and that reality is what many times leads to an E&O claim for you.

Take something as simple as making premium payments.

Everyone knows that insurance costs money but does your client know that if they don’t pay their premium, no one else will?

Statistics from a 2007 study from the Independent Insurance Agents and Brokers of America & Swiss Re show that about 7% of all E&O claims stem from non-payment of premium. How does this happen? By way of magical thinking, some insureds make an assumption that you will keep their policy in force for them, even if they don’t make their payments. An uncovered claim due to a lapse for non-pay can quickly turn your somewhat sophisticated business client into a self-proclaimed dullard who allegedly had no idea that coverage ceased when the third notice of nonpayment arrived. Therefore, it’s important to make it clear upon binding and issuing the policy who is responsible for making premium payments, where the payments should be sent, and what the consequences of a lapse are.

What about reporting changes? Whose responsibility is it to keep an up-to-date listing of inventory, autos, locations, or employees? Of course the answer is the policyholder. But do they know that? What happens when your insured moves or adds a new dimension to their business operations? The human condition lends itself to vague and fleeting thoughts of calling one’s insurance agent during these events but the demands of time and progress often get in the way. If your insured hasn’t read their policy, they may not even know that they have a contractual duty to report changes. A common mistake is for insureds to assume that it’s good enough to report changes at renewal only. Make it a practice to enlighten your customers by pointing out policy language that describes these duties and what the consequences are for not complying with their insurance contract.

Probably the most important responsibility you can teach your customers is what to do in the event of a claim or potential claim. If you’re doing your job, your customers will know that there are specific actions they need to take when their auto is in an accident, when their employee is injured or a fire destroys their business.

The worst possible time for your insured to learn what to do is after that devastating loss. This is not only because of the emotional turmoil accidents bring but especially because the agent is usually the one at the top of a short list of people to blame when your insured discovers that becoming financially whole again is not a possibility, and that it could have been prevented. Basic policy language that spells out duties in the event of a claim is a great place to start in discussing this issue. Even the most experienced in the industry sometimes forget that admitting liability, failing to take action, or documenting common sense interactions can be fatal. If the best among us are vulnerable, think about your average insured.

Big “I” members whose agency E&O insurance is written by Swiss Re through the Big “I” Professional Liability Program have access to an exclusive risk management web site: www.indepndentagent.com/EOHappens. Log in today for E&O claims frequency data, real life case studies and analysis, sample client letters, sample agency procedures and much more.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 27

Golf Tournament 15th Annual Scholarship

May 18th, 2009

Tanoan Country Club

Preparation is in progress for the New Mexico Mutual and Independent Insurance Agents of New Mexico’s 15th Annual Scholarship Golf Tournament which will be held on May 18th, 2009 at the beautiful Tanoan Country Club at 10801 Academy Road NE, Albuquerque, NM 87111 This event is designed to fund college scholarships for deserving candidates. Since we are set up as a ‘C-3’ charitable organization, your contributions are entirely tax deductible. We are asking that you contribute to this very worthwhile cause by way of monetary donations, gifts, sponsorships or participation to help us make a dream come true for a worthy nominee.

NMM & IIANM are also soliciting nominations for this years recipient. If you are interested in nominating an individual, please contact Cecil Rudd at (505) 343-2823. The scholarship will be awarded at the reception immediately following the tournament. Your participation is vital to the success of our scholarship program.

See the reverse side of this for a registration form.

Your contributions and registrations should be mailed to the address below. Registrations may be faxed to (505) 243-3367. Should you require additional information, please contact Lorri Gaffney at (505) 999-5805 or 800-621-3978.

Upon Completion of Play: Recipient Award Presentation / Dinner / Golf Awards - Special prizes for: Hole-in-One, Closest to the Pin, Longest Drive, and Numerous door prize giveaways.

Tournament Details: Registration begins at 11:30 am Pick-up box lunches at 12 noon Tee-off at 1:00 pm

Mail or fax this form back to us:

Registration Deadline: May 15th, 2009 Includes: Golf, Lunch & Dinner/Award Presentation $100/per person

IIANM Attn: Lorri Gaffney 1511 University Blvd. NE Albuquerque, NM Fax: (505) 243-3367

Golf Tournament

15th Annual Scholarship May 18th, 2009 Tanoan Country Club

Hole-in-One Sponsor $5,000 or more...

• • • • • •

Full Page Ad in La Voz Recognition Plaque Full Registration for Four Players Hole Sponsorship and Recognition Sign Recognition in Event Program Listing an Appreciation Sign at Event

• • • • • •

Eagle Sponsor $1,000 - $2,500 • • • •

Full Registration for Four Players Hole Sponsorship and Recognition Sign Recognition in Event Program Listing an Appreciation Sign at Event

Company / Agency Contact: Company / Agency Name: Address: City, State & Zip: Phone:

Double Eagle Sponsor $2,500 - $5,000 1/2 Page Ad in La Voz Recognition Plaque Full Registration for Four Players Hole Sponsorship and Recognition Sign Recognition in Event Program Listing an Appreciation Sign at Event

Birdie Sponsor $500 - $999 • • • •

Par Sponsor up to $499

Full Registration for Two Players Hole Sponsorship and Recognition Sign Recognition in Event Program Listing an Appreciation Sign at Event

• Recognition in Event Program • Listing an Appreciation Sign at Event

Fax:

Sponsorship Level Selections:

E-mail: Play as one team

Hole-in-One Sponsor

Willing to play on various teams

Double Eagle Sponsor

Eagle Sponsor

(4 players to include) Name Name Name Name

Please fax this form back to: (505) 243-3367 Attn: Lorri or mail to:

Birdie Sponsor (2 players to include) Name Name

IIANM 1511 University Blvd. NE Albuquerque, NM 87102

Par Sponsor Individual Registration Form: Golfer: Company / Agency Name: Address: City, State & Zip: Phone:

$100 per person

Fax:

Your Desired Team: This is for team assignments only! A separate registration form is required for each player. We will try our best to honor your requests. Questions may be directed to Lorri Gaffney at 999-5805.

Registration deadline is May 15, 2009.

Yourself Name Name Name

E-mail: Method of Payment: Bill Agency (for Members Only) Check Enclosed (payable to IIANM) Credit Card Name: #: Exp. Date:

From the Wild, Wild West to the Best of the Best!

IIANM Celebrates our 75th Anniversary in 2009!

We would like to invite everyone in the Association to celebrate our collective success in this endeavor, so throughout 2009, we will be announcing a number of fun and informative initiatives to commemorate this milestone year.

Every month La Voz will feature a trivia question where the answers can be located on our web site and Membership Directory.

!

! e fl f u h S d in an iPo

W

This month's trivia question is:

Last month's WINNER!!

Ashley Hyland, White Sands Insurance Agency, Alamogordo, NM

"Who are the three Past Chairs of IIANM who have been honored as a Lifetime Achievement Award winner and also served as National Director?"

Email your answers to rachel@iianm.org by May 15, 2009.

On May 18, there will be a drawing for the winner from the correct entries.

Look out for next month issue of La Voz for your next chance to win!

HINT: If you do not have access to a hard copy of our Membership Directory, you can find it online on our site.

Look for “Member Resources”, then “Member Directory”.

IIANM Wins National Education Award!

For the tenth straight year, the Independent Insurance Agents and Brokers of America (IIABA) have recognized the Independent Insurance Agents of New Mexico for our outstanding educational programs. At an awards ceremony held on May 3rd at the National Board of Directors meeting in Washington, DC, IIANM was presented with the 2009 L.P. McCord National Education Award. This is the eighth time this decade we have won IIABA’s highest educational honor.

IIANM was cited for our continued expansion of products and services for members, including the accessibility of our programs in a variety of delivery systems. The association’s Director of Education, Jeff Straight, has done a terrific job of bringing in new courses and improving an already excellent program.

IIANM National Educational Awards this decade: 2000: LP McCord National Education Award 2001: LP McCord National Education Award 2002: LP McCord National Education Award 2003: LP McCord National Education Award 2004: LP McCord National Education Award 2005: LP McCord National Education Award 2006: Best Single Seminar 2007: Best Non-seminar Educational Services 2008: LP McCord National Education Award 2009: LP McCord National Education Award Page 30

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

IIANM’s

EducationEDGE Insurance Education Programs in New Mexico are critical to a successful and profitable career in the insurance industry. Every year, we offer exciting opportunities to expand your professional horizons.

All of these education programs are designed to help insurance agents thrive in the most competitive of marketplaces.

The pre-licensing classes are designed to be a review for the state licensing examination.

We recommend that students be familiar with the study material prior to attending class.

Pre-Licensing Study Materials

Pre-Licensing Classes Study materials are NOT included in class prices.

To see a list of what is available and to purchase your study materials online, click here.

Property & Casualty Review Class (2 days)

Life & Health Review Class (1 day)

Regular Price: $150 Member Price: $120

Regular Price: $115 Member Price: $90

Instructor: Instructor:

Jack Cleary Kitty Leslie

- May 12 - 13 8am - 5pm - June 9 - 10 8am - 5pm

Click here for a full listing of our education program.

Instructor: Instructor:

Manny Mansour - May 14 8am - 5pm Bob Ouellette - June 11 8am - 5pm

The FINE PRINT: IIANM reserves the right to cancel/reschedule classes. Please call ahead to verify when classes will run. Decisions will be made three days prior to class. Cancellations received after 5 business days, will be assessed a $50.00 cancellation fee. Cancellations received on or after deadline and ‘no shows’ will forfeit the registration fee altogether. A substitute is always welcome, with no extra fee, but prior notification would be appreciated.

Class Name/Date: Full Name:

Method of Payment:  Bill Agency (Members Only)

First Name for Badge:

 Check Enclosed (Payable to IIANM)

Agency / Company:

 M/C  Visa  Disc  Amex

Address:

Amount:

(all prices include tax)

Card No:

City, State, Zip:

Exp. Date:

Telephone: ( Fax: ( Send in your registration:

)

E-Mail:

Signature:

) Go on-line: www.iianm.org or E-mail: jeff@iianm.org

Give us a call: (505) 843-7231 (800) 621-3978

Mail in: 1511 University Blvd. NE Albuquerque, NM 87102

Fax in: (505) 243-3367

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

Page 31

May's Clickable Calendar - Click on a class to register online -

Sunday

Monday

3

4

10

17 24

11

Tuesday

CE = continuing education hours

Wednesday Thursday

Personal Lines Related Coverages 8 CE

Commercial Liability 8 CE

P&C Pre-licensing Class

P&C Pre-licensing Class

5

6

AAI 82/C Specialized Commercial Lines 8 CE

7

Friday

Saturday

1

2

8

9

L&H Pre-licensing Class

12

13

14

15

16

19

20

21

22

23

26

27

28

29

30

NMM / IIANM Scholarship Golf Tournament

Classifieds

31

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18 ce i f f O sed Clo 25

Where Will You Find Your Next Great Hire?

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 there to lend a helping hand.

The staff at IIANM knows that “Teamwork Makes Us Stronger” and we want to help all interested individuals find that perfect fit.

Click here to take advantage of IIANM’s Job Bank.

Independent Insurance Agents of New Mexico - www.iianm.org - * May 200

O dd s N Ends

Cinco de Mayo The 5th of May is not Mexican Independence Day, but it should be! And Cinco de Mayo is not an American holiday, but it should be. Mexico declared its independence from mother Spain on midnight, the 15th of September, 1810. And it took 11 years before the first Spanish soldiers were told and forced to leave Mexico.

So, why Cinco de Mayo? And why should Americans savor this day as well? Because 4,000 Mexican soldiers smashed the French and traitor Mexican army of 8,000 at Puebla, Mexico, 100 miles east of Mexico City on the morning of May 5, 1862.

The French had landed in Mexico (along with Spanish and English troops) five months earlier on the pretext of collecting Mexican debts from the newly elected government of democratic President (and Indian) Benito Juarez.

The English and Spanish quickly made deals and left. The French, however, had different ideas.

Under Emperor Napoleon III, who detested the United States, the French came to stay. They brought a Hapsburg prince with them to rule the new Mexican empire. His name was Maximilian; his wife, Carolota. Napoleon's French Army had not been defeated in 50 years, and it invaded Mexico with the finest modern equipment and with a newly reconstituted Foreign Legion. The French were not afraid of anyone, especially since the United States was embroiled in its own Civil War. The French Army left the port of Vera Cruz to attack Mexico City to the west, as the French assumed that the Mexicans would give up should their capital fall to the enemy -- as European countries traditionally did.

Under the command of Texas-born General Zaragosa, (and the cavalry under the command of Colonel Porfirio Diaz, later to be Mexico's president and dictator), the Mexicans awaited. Brightly dressed French Dragoons led the enemy columns. The Mexican Army was less stylish.

General Zaragosa ordered Colonel Diaz to take his cavalry, the best in the world, out to the French flanks. In response, the French did a most stupid thing; they sent their cavalry off to chase Diaz and his men, who proceeded to butcher them. The remaining French infantrymen charged the Mexican defenders through sloppy mud from a thunderstorm and through hundreds of head of stampeding cattle stirred up by Indians armed only with machetes.

When the battle was over, many French were killed or wounded and their cavalry was being chased by Diaz' superb horsemen miles away. The Mexicans had won a great victory that kept Napoleon III from supplying the confederate rebels for another year, allowing the United States to build the greatest army the world had ever seen. This grand army smashed the Confederates at Gettysburg just 14 months after the battle of Puebla, essentially ending the Civil War. Union forces were then rushed to the Texas/Mexican border under General Phil Sheridan, who made sure that the Mexicans got all the weapons and ammunition they needed to expel the French. American soldiers were discharged with their uniforms and rifles if they promised to join the Mexican Army to fight the French. The American Legion of Honor marched in the Victory Parade in Mexico, City.

It might be a historical stretch to credit the survival of the United States to those brave 4,000 Mexicans who faced an army twice as large in 1862. But who knows?

In gratitude, thousands of Mexicans crossed the border after Pearl Harbor to join the U.S. Armed Forces. As recently as the Persian Gulf War, Mexicans flooded American consulates with phone calls, trying to join up and fight another war for America.

Mexicans, you see, never forget who their friends are, and neither do Americans. That's why Cinco de Mayo is such a party -- A party that celebrates freedom and liberty. There are two ideals which Mexicans and Americans have fought shoulder to shoulder to protect, ever since the 5th of May, 1862.

VIVA! el CINCO DE MAYO!!

Independent Insurance Agents of New Mexico - www.iianm.org - * May 2009

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Insuring New Mexicans @ work for over 17 years

S A F E T Y

@

T H E

J O B S I T E

PEACE OF MIND @ THE OFFICE SM

CUSTOMER SERVICE @ ITS BEST SM

SM

SM

PO Box 27825 • Albuquerque, NM 87 125-7825 1.505. 345.7260 • toll free 1.800.788.8851 www.NewMexicoMutual.com