2019 Summer PIA of TN Magazine by PIA of Tennessee

Summer 2019 • Tennessee

Page 16

OppOrtunities aBOund Organize and embrace change

Business planning 9

Legal actions, perpetuation

Don’t compete … differentiate

23 Set goals now

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Departments 4 Summer 2019 • Tennessee

In brief

9 Legal 13 Learn 27 E&O 31 Sales 34

Readers’ service and advertising index

Cover story 16 Opportunities abound Organize and embrace change

Feature 23 Set goals now Are you on track for your 2019 goals?

Statements of fact and opinion in PIA magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents. Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services. CEO Mark LaLonde, CPIA, CIC, AAI; President Jeff Parmenter, CPCU, ARM; Executive Director Kelly K. Norris, CAE; Communications Director Katherine Morra; Senior Magazine Designer Sue Jacobsen; Member Information Manager Jaye Czupryna. Postmaster: Send address changes to: Professional Insurance Agents of Tennessee, 504 Autumn Springs Court, Suite A-3, Franklin, TN 37067. “Professional Insurance Agents” is published quarterly by PIA Management Services Inc. PIA Management Services, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 12077-0997; (518) 434-3111 or toll-free (800) 424-4244; email pia@ pia.org. ©2019 Professional Insurance Agents. All rights reserved. No material within this publication may be reproduced—in whole or in part—without the express written consent of the publisher.

Cover design Roberta Lawrence

In brief

from the executive

But, why would I want to network with my competition? We get it! It seems counter-intuitive to think that networking at a PIA convention could be beneficial to you—or at least beneficial enough to invest being out of the office. It is easy to think of other PIA agents as your competition. However, other independent agents are not your competition—they are your assets. Your competition is direct writers and online quoting systems. Your competition is not being aware of what other agents are doing to tackle the new, modern methods for capturing, securing and retaining clients. The world is changing. And, PIA and the other PIA agents are resources and part of your toolbox to adapt to those changes.

Glen Page Distinguished Service Award; Janet Gibbs as CSR of the Year; Ryan McKinney as the Young Insurance Professional of the Year; numerous CPIA designation conferrals, as well as door prizes and cash.

Kristopher Mark Fisher, CAE, CPIA, LUTCF Executive Vice President & CEO PIA of TN Franklin, Tenn.

Imagine the PIA convention from a different perspective. It is a chance to talk to other independent agents from across Tennessee and learn what they are doing to be successful. It’s your opportunity to hear from independent agents from other states who have spoken at major agent conferences to teach them new ways to look at the business of insurance. You can meet with carriers, MGAs, aggregators and vendors to find out what products, programs and tools they have to assist you. If you were unable to attend the PIA of Tennessee Annual Convention and Trade Show on June 19-20, you missed an incredible event. Those who attended made an investment of their time and money, and here are a few of the rewards they received:

Education. They heard ideas that they can put into practice at their agency, including how to use social media in marketing; market themselves; ways to grow commercial-lines production; create a customer experience versus basic customer service; common mistakes that can lead to errors-and-omissions claims; and what could happen to their agency if an E&O claim goes to court. Networking. They met and deepened relationships with carriers, industry-related vendors and other agencies at a trade show, receptions and events.

Fellowship. They enjoyed camaraderie with fellow agents and reps at our Presidents Dinner, featuring a real-life Monte Carlo-themed Casino Party. One attendee said it was “the best PIA event in the past 10 years.”

One thing that has been said about PIA conventions in the past few years is that they are significantly different than typical conventions or trade shows. For years, the PIA convention was known as a place where agents looked forward to attending—and brought their families with them. For many agency owners, the PIA convention became part of the family vacation planning. In the past three years, we have revived that model. This convention offered participants the opportunity to book rooms for a few extra days at the same rate, and bring their families to enjoy the facilities and local attractions. If you missed this year, you should make plans to attend next year. PIA always has been known as an extended family. The relationships between agents are strong and supportive. PIA becomes a group of colleagues to whom an agent can reach out for advice, assistance, and ideas in this everchanging industry. There is no way to understand this dynamic, until you experience it for yourself. If you missed the convention, it’s not too late to see what it was like and get details for next year. Our fall edition of the magazine will include pictures and an event summary. And, check out PIATNconvention.com. If there is anything that we can do to assist you or your organization, contact us at (615) 771-1177. Always at your service,

Charity. They supported the families assisted by the Soldiers Child Charity at our annual golf tournament in memory of our beloved Herbert Montgomery. Recognition. They participated in the announcements of Tom Gernt as Agent of the Year; Joe Clayton as Representative of the Year; George Hilliard as the recipient of the 4

Kristopher Mark Fisher, CAE, CPIA, LUTCF Executive Vice President & CEO

Professional Insurance Agents magazine

platinum profile

www.cmsinsurance.net

Area of Business (states where company conducts business): TN, KY, WV, IN & MO Senior Executives: Conn Johnson (CEO) / Mark Johnson (President/COO)

Company History: Conn & Joyce Johnson began an independent insurance agency in a small town in West Virginia over 40 years ago – Johnson Insurance Agency. Johnson Insurance is a family-owned agency that was created from the ground up. The knowledge & perspective gained from these “real-world-insurance” experiences provided the inspiration for CMS Insurance Service Inc. Conn & Joyce understood the real challenges and true needs surrounding the independent agency system; thus, CMS Insurance was born and a unique philosophy was created out of need within their own agency. The “CMS philosophy,” coupled with a strong desire to help other independent agents, has made CMS what it is today. Company Philosophy: Our mission is to help support and perpetuate the independent agency system in a manner consistent with principles based on fairness and integrity. We are committed to the growth and retention of the family-owned independent agency. Who we are: We are a general agency; however, we are NOT a broker. We partner with agencies to provide markets whereby YOU are the agent and YOU own your book of

Contact Info: Tyler Siddens – Regional Marketing Manager (270) 991-3994 tyler@cmsinsurance.net

business. It is important to distinguish that anyone can “provide markets,” but it’s how WE do business at CMS that makes us different our unique philosophy and straight-forward approach to compensation is what truly sets us apart. In addition to providing markets, we offer the following specialized programs: • • •

Commercial Consulting Performance-Based Compensation (for agency owners) Agency Perpetuation and other related programs targeting profitability/growth/stability

Whether you are competing with the agency down the street, looking for additional markets, searching for ways to compete in an everchanging marketplace or just trying to find ways to become more profitable, we can help you with our unique system of programs designed specifically for the independent agent. We’ve been helping independent agents, just like you, for over 30 years! We are proud to be familyowned and proud of what we strive to represent – give us the opportunity to help your agency and let us demonstrate what makes us different.

PIA of Tennessee and CMS Insurance Services proud partners for independent agents.

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platinum profile

Why Rytech? • Our Agent Package ensures you have updated client information • Speak with a live person - 24/7/365 • Policyholders are contacted with 30 minutes of claim assignment and a Rytech certified technician is on-site within 4 hours • We use state-of-the-art equipment to find, dry and monitor moisture with the least amount of demolition on each and every job • Our Centralized approach and Rytrac software ensures a superior and consistent experience on each and every claim, from first call, through to completion • Our professional approach with policy holders lets them know they made the right choice in you ... by you making the right choice in us

Water Damage & Mold Specialists History and Philosophy Locations Chattanooga, TN – Will Cleghorn, Owner www.rytechinc.com/chattanooga Phone: 423-702-1256 Email: wcleghorn@rytechinc.com Knoxville, TN – Chris Huss, Owner www.rytechinc.com/knoxville Phone: 865-287-5309 Email: chuss@rytechinc.com Memphis, TN – Jim Giovanetti, Owner www.rytechinc.com/memphis Phone: 901-277-2581 Email: jgiovanetti@rytechinc.com Nashville, TN – Robert Pick, Owner www.rytechinc.com/nashville Phone: 561-379-4971 Email: rpick@rytechinc.com

For over 30 years, William “Bubba” Ryan has owned and operated highly successful restoration companies. By the early 1990’s, Ryan recognized the need for significant improvements in the water damage restoration industry. As new technologies emerged and proper drying procedures developed, Ryan realized the need for major improvements as many companies lacked the ability to provide efficient and effective drying service. In 1995, Rytech, a “water only” mitigation company was borne. Headquartered in Atlanta, GA, Rytech has become a leader in the water damage restoration and mold remediation industry. From its humble beginnings in one location, the company has reached exponential growth and currently provides service to 49 major markets across 25 states.

Professional Insurance Agents magazine

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Agency perpetuation: The inevitable endgame “I am ... inevitable.” Thanos—the big bad in the Marvel Cinematic Universe—utters this line at the end of Avengers: Endgame, to show that his act of wiping out a trillion people with a literal snap of his fingers was an act that could not be stopped. Interestingly, this line also could apply to agency perpetuation in the insurance industry. The MCU started in 2008 with the release of Iron Man, which contained a stinger scene after the movie’s credits. It featured Nick Fury’s discussion with Tony Stark/Iron Man about the Avengers Initiative. Iron Man laid the groundwork for The Avengers, a movie that would not come out for four years. Similarly, the stinger in The Avengers gives us our first glimpse of Thanos, a character who would not appear to any material degree in an MCU film until six years later. What is the lesson here? It is never too early to plan. Just because the endgame is inevitable does not mean it has to be something to fear. The worst thing you can do is wait until retirement to decide the future of your agency. Procrastinators never prosper. Prudent planning now will relieve many headaches later. The longer you wait, the more limited your options become. Once you’ve decided on your perpetuation plan, it’s a good idea to consider a number of legal actions that will make the transition smoother. For the sake of space, I will concentrate on the internal passage of an agency by sale or inheritance.

Contractual arrangements Selling your agency to someone internally (i.e., a family member or another employee), has the benefit of a smooth transition. The person at the top is changing, but everything else will stay the same (hypothetically). This method also grants the agency owner the greatest amount of control. To do this, consider entering into a contractual arrangement with the would-be purchaser, which also will give him or her some skin in the game. Typically, this is done by allowing the would-purchaser some ownership interest in the agency’s book of business—or if your agency is set-up as a corporation, some ownership in the agency via stock. This not only satisfies the skin-in-the-game benefit, but it also lowers the eventual final price of the agency for the would-be purchaser. The would-be purchaser will be buying the agency less the value of the book or the value of the stock he or she already owns. Note: While this is good for the would-be purchaser, it might not be as good for the current agency owner as the final payout for the agency will be less than if the purchaser was buying the complete book or all the stock in one purchase. pia.org

legal

bradford j. lachut, esq. Director of government & industry affairs, PIA Management Services

That said, this type of purchase agreement does have the benefit of maximizing the amount of money a seller can get for the agency. By structuring the sale over a long period, the purchaser can make smaller yearly payments, a structure that will lower the tax consequences for the seller as well. However, the shorter the selling period, the higher the payments will be and the more likely it becomes that internal perpetuation is not possible.

Contractual safeguards If this type of internal perpetuation is the scenario you do pursue, it is important to establish a few contractual safeguards to protect the agency in case the relationship with the purchaser sours and he or she no longer wants to purchase the agency. One protection you should consider is a right-to-buy clause, which will allow the current owner to purchase the employee’s book of business and/ or stock if he or she decides to leave the agency. This ensures that the producer cannot walk out the door with the book or retain an ownership interest in the agency to the detriment of the agency. However, if the agency does need to buy the book of business or stock back, the cost to the agency could be substantial, depending on the size of the book or the amount of stock owned. 9

Agency Agency E&O E&O

Another option is to have a phase-in on the ownership of the book of business and stock. The contract could be structured to give the purchaser a larger percentage of ownership in the book/stock the longer he or she works for the agency. For example, after five years the producer would own 10 percent of the book; after 10 years, 20 percent, etc. This sort of arrangement is even more effective if you couple it with the right-to-buy clause mentioned in this article. This makes the producer earn the book or the stock while making the buyback option cheaper for the agency. In addition, the longer a purchaser stays at an agency, the more interest he or she has in it, which will make it less likely that he or she will walk out the door. Not ready to retire to a farm on some distant planet to pick space fruit? Then, you could employ the above methods for the sale of the agency and execute an employment contract with the next owner to guarantee that you have a place at the agency until you feel it is time to leave.

Succession through inheritance

Has a market for your agency Utica National PIAPRO Business Risk Partners Navigators Rockwood E&S markets Contact Contact Kristopher Fisher Tom Gernt 800-875-7428 800-875-7428

If you preferred to execute your agency perpetuation through inheritance, don’t forget to update your will. People don’t like to think about death, especially their own, but it is inevitable. The more planning we can do for it, the better. You should review your will annually, since life has a habit of changing. Have a new grandchild? Did a spouse pass away? Do you want to pass your shield on to your best friend, Bucky, or your loyal sidekick, Sam? As life changes, your will should change to reflect it. If your intentions aren’t clear in your will, then you run the risk of your wishes not being honored once you’ve passed away. Then, tell the person you want to inherit your agency your plan. This is especially important if the person is not a licensed insurance producer. I have fielded many member calls from unlicensed spouses who inherited agencies and don’t know what to do. Not being licensed restricts what the inheriting person can do. It would be like leaving your Infinity Gauntlet to someone who isn’t powerful enough to wear it. I won’t discuss the intricacies of licensing law in this article—you can call PIA if you want more details. Generally, an unlicensed inheritor can receive renewal commissions earned by the estate, but cannot transact any new business or offer services to any current or new clients. Most states will grant an inheritor a temporary license, but it usually lasts a few months. What does that mean? It means that the inheritor has to get his or her license quickly, or more likely get a temporary license. The latter puts the inheritor at a disadvantage if he or she is trying to sell the agency. The potential buyer will know that the inheritor needs to sell soon or risk losing business by attrition. Negotiating from a place of desperation is not ideal. So, for a smoother transition, make your wishes known early and allow the inheritor to negotiate from a place of strength, if selling the agency is the long-term plan. Whatever your plan is, start putting it into action now. If you don’t have a plan, start developing it now. It is never too early to start planning. Once you get to the endgame, it often is too late—unless you have a way to pull off a time heist. Lachut is PIA Management Services’ director of government & industry affairs.

Professional Insurance Agents magazine

We know what it took to build this unique business.

And we know what it takes to protect it. Underwriters who know and understand what coverages are necessary for each unique business. Loss prevention professionals who use a hands-on approach to help develop programs tailored to each specialty business. Claim reps with the expertise and technology to process claims quickly and efficiently. As an Official Supplier of the Silver LiningÂŽ, you and West Bend will find a specialized insurance plan for your valued customers. To find out more, talk to your West Bend underwriter.

Celebrating 125 years of valued relationships with our agent partners.

THE HARTFORD’S FLOOD PROGRAM

PIA MEMBERS - ACCESS THE TOOLS, TECHNOLOGY AND SUPPORT YOU NEED TO GROW YOUR FLOOD BUSINESS The Hartford and PIA have joined together to make it easier for PIA member agents to provide their clients with flood coverage through The Hartford. The program is available to PIA members and their policyholders in all 50 states and Puerto Rico. HELPING YOU MARKET • On demand training • Webinars • Marketing materials and newsletter • Dedicated Flood Sales Executive • Access to Transfer Consultant – we make moving your flood business to The Hartford easy • Access to Training Consultant – we help you build flood expertise ADVANCED TECHNOLOGY FOR EASE OF DOING BUSINESS • Flood zone determinations • SEMCAT and Vertafore integrated flood quote technology • Electronic application submission • Assistance in obtaining elevation certificates • Technological upgrades due to legislative changes MEASURING YOUR SUCCESS • Claims reporting • Policy database download and maintenance • Electronic movement of premium and commission funds • Increased revenue with competitive commissions • Reports on demand • Repetitive loss review

THE PIA ADVANTAGE When you participate in PIA National’s official flood insurance program from The Hartford, you have the power of PIA behind you. PIA’s dedicated staff is ready to help if you need assistance. And, you’ll have access to The Hartford’s Flood Insurance Marketing Support Center. CONTACT US For more information about The Hartford’s Flood Insurance program for PIA agents, contact your local Flood Sales Executive: William Pitkin Phone: 860-547-2169 Email: WPitkin@thehartford.com

LEARN MORE AT PIANET.COM/HARTFORDFLOODINSURANCE.

The Hartford® is The Hartford Financial Services Group, Inc. and its subsidiaries, including issuing companies, Hartford Fire Insurance Company, Hartford Insurance Company of the Midwest and Hartford Underwriters Insurance Company. Its headquarters is in Hartford, CT. All policies are written subject to the National Flood Insurance Program. Please note that this product is available in most states. Features and credits may vary by state. For simplicity, this brochure does not include all the features, exclusions and limitations of the policy. For full information, The Hartford suggests that you read your policy or consult with your independent agent. On all losses and claims, policy terms apply. All information and representations herein are as of March 2018 PLA245-1 © March 2018 The Hartford Financial Services Group, Inc. All rights reserved.

Don’t compete … differentiate It is an understatement to say that the world is changing. The way we communicate with others, purchase goods and services, engage in entertainment, have all changed at an unprecedented rate leaving many businesses trying to comprehend what they will need to maintain and grow their client base. One of my favorite quotes is from Author Larry Wilson who states that, “We are faced, today, with the option of either learning the rules, roles and distribution of rewards in this new game, or continuing to practice our present skills and become the best at a game that is no longer being played.” The bottom line: The consumer culture of how and with whom they want to do business is changing at a speed that most businesses are not prepared to handle and are in danger of becoming the “best at a game no longer being played.” Then, how can you compete with multibillion-dollar organizations that spend millions of dollars advertising their products across print, television, radio and socialmedia platforms? The answer: Differentiate.

The consumer culture of how and with whom they want to do business is changing at a speed that most businesses are not prepared to handle and are in danger of becoming “the best at a game no longer being played.”

One of my first consulting contracts was with a company that asked me to work with its countrywide underwriting offices. Before going to each of the offices, I asked the company not to tell its employees that I had any experience in the insurance industry and simply let them assume I was a generic consultant who wasn’t familiar with insurance. After pointing out that they were a part of an independent agency environment in which agents get to choose with whom they do business, I asked them why an agent should choose to work with them. As I expected, each office responded with the same answers (e.g., good commissions, service centers and variety of products). I wrote these answers on a flip chart. Before flipping over to the next page, I asked, “Do

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learn

john fear, cisr, cpia Owner, Premier Business Consulting

you have the highest commissions?” No. “Are you the only company with service centers?” No. “Does any other company offer those same products?” Yes. After each answer, I crossed off the individual elements, tore the sheet off the pad, crumped it in a ball and tossed it into the middle of the room and asked, “Why you?” again. In an industry that nearly has convinced itself that insurance is little more than a commoditized product that, in order to compete, you need to have the cheapest annual premium, there still are ways to differentiate your business.

Value vs. price The annual premium a client pays reflects the risk and who assumes what. This equation is driven by the coverage limit and the amount of the loss the client is willing to assume (i.e., the deductible). Increase deductibles and lower limits and you have a lower premium. You know this, but do your clients? I used to ask prospective clients what they expected from the policy if they had to file a claim. Most people said they’d like full coverage, so you need to educate your clients on the way their policies actually will pay out during claims. Your clients should realize that saving 15 percent

now could end up costing tens of thousands of dollars if their limits and deductibles have been adjusted to save them money.

High tech, high touch As an early adopter of technology, I understand the value of technology in the service of clients—as an addition to service, not a replacement. During a conversation with a client who started his agency almost 40 years ago, he shared how he missed the annual event of hand delivering the clients’ renewals. When I asked what he missed, he said that it was the chance to look them in the eye and thank them for their business. I picked up my smartphone, turned on the HD video function, and asked him to articulate what he wanted to share with me if I was a renewing client. He looked directly at me and shared how much he appreciated my trust in his family business all these years, knowing that I had other choices when it came to my insurance renewal, and just wanted to say thank you for renewing with him. I ended the video and then shared with him how that could be uploaded to his agency’s YouTube channel and a hyperlink could be placed in a “thank you for renewing” email template in his agency management system and sent to clients who renewed their policies. His clients would open the email, click on the link from the owner and see his face, looking them in the eye and thanking them for their business. High tech, high touch. This same principle can be applied to Happy Birthday messages (your AMS has a date-of-birth field) as well as sending handwritten thank-you notes to new clients to your agency. Fewer people are sending out these types of messages. Be careful not to fall into the generation gap—believing that Gen X, Y or Z would rather get a text. As a panelist at a recent tech conference, I was asked, “What should businesses do to improve their client’s experience?” One panelist looked at me incredulously when I recommended sending clients handwritten notes based on the interaction (e.g., congratulations, get well soon, happy birthday or thank you for your new business). Then I asked the mostly Gen X through Z audience to raise their hands if they had ever received a personalized note acknowledging them for their business. When only a few hands were raised, the other panelist felt justified in never sending such a note. Then, I asked the audience to raise their hand if they had received a personalized note of appreciation and if that would influence their decision to do future business with them and/or refer their friends. Nearly every hand was raised.

You are the difference When the University of Connecticut Women’s basketball team started gaining national prominence in the early 2000s, the head coach, Geno Auriemma, was asked what made them different. He responded, “We have Diana [Taurasi] and they don’t.” When it comes to our businesses, it cannot be overstated that we are the difference to your clients and that people do business with the people who work there. Remember, “Why you?” needs to be answered on both an individual as well as corporate level. What is your agency’s culture when it comes to a differentiated customer experience? It can be as simple as how phone calls are answered in your office

Professional Insurance Agents magazine

and whether there is a live person on the line or if it becomes an exercise of entering policy numbers or searching for extensions on a company directory. In an agency that I managed, our receptionist worked in the agency as a teenager and then was a young professional concierge at a high-end hotel. The hotel staff trained her to come out from behind the desk to greet the guest rather than talk over an inanimate object. This customer service, muscle memory carried over into her role in the agency and, over time, you could tangibly discern the difference of interaction from clients who came into the agency for service.

Don’t compete … differentiate While many view our product as a commodity, our process should differentiate us from our competition. In an environment filled with hyperactive activity for interaction with clients, we shouldn’t just focus on being faster or doing more than others in our marketplace, but we should strive to offer an authentic alternative in an increasingly artificial environment. Fear has worked in the independent agency profession for more than 20 years in a variety of roles and business areas. He works with companies, associations and individual agencies in the areas of agency operations, process improvement and sales proficiency to provide outstanding service for their clients. As a member of PIA and its Circle of Consultants, he can be contacted either through the PIA website (pia.org) or JohnFear.com.

GLOBE-SPANNING EXPERTISE

Scale: Burns & Wilcox brings together the widest range

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FEET-ON-THE-GROUND SUPPORT

Professional Insurance Agents magazine

Matt MasIello CEO, SIAA

Opportunities abound

Organize and embrace change

ndependent agents who remain static and focus only on servicing their current books of business are not positioning themselves for the future. With direct writers and new technology eating away at standard agency offeringsâ&#x20AC;&#x201D;price-sensitive auto and some home insuranceâ&#x20AC;&#x201D;professional insurance agents need to keep an eye on the competitive landscape. That means finding time in their busy schedules to develop a strategic planâ&#x20AC;&#x201D;and giving themselves the products, tactics and tools they need for success.

pia.org

The planning process begins by examining where you are now: Where is your agency growth coming from? What differentiates your agency in today’s crowded insurance market? And, do you have a strong and sustainable industry or operating niche? It’s also important to look at what your competitors are doing; how technology is affecting your business; and how you can use it in your favor. Also, look at whether you have the markets, internal resources and community presence to implement new strategies effectively.

Evaluate your agency If you don’t know how to start when evaluating your agency, a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a good place to start. This technique can help you carve out a sustainable niche in your market, and a simple web search will give you plenty of guidelines to help you along. Don’t forget to include your staff in the SWOT analysis, get their input, buy-in and have them be part of the solution. This analysis makes you examine how to build on your strengths. Maybe you have a strong industry niche; a recognizable brand; or impressive community presence. It also asks you to consider your weaknesses. Maybe your investment in technology has lagged behind other agencies, or you rely on home and auto policies rather than expanding into commercial lines or life insurance. Perhaps your staff lacks training to sell these other policies. Then, find opportunities upon which you can capitalize. These may include expanding into other product lines; developing a specialty; or expanding your access to admitted or specialty/program markets. Finally, identify threats to your business. These may include direct sellers or competitors that have invested in technology and are using it to grab additional market share. When finished with this analysis, you should have a good picture of where your agency stands in today’s market, including what policies you’re selling; to whom you are selling; the tools you are using to sell them; and whether you have the systems and resources needed to make necessary changes. Now, let’s look at some of the key considerations in planning today.

Expand your book of business If your analysis finds you are continuing to rely on price sensitive auto and home insurance, and you have not invested in sales and marketing technology, it is likely your market share is eroding. Direct sellers have made significant inroads in these traditional mainstays of the independent agent, with online selling, mobile apps and other technology leading the way. Planning strategies should include moving into commercial lines, which are strong and present growth opportunities for agents. In fact, independent agents are selling the majority of these policies. When you get into commercial lines, consider starting with a focused approach that targets one or two industries or specific types of products, become the expert and build on that expertise with expanding coverages and adding new classes of targeted business. Cyberrisk and databreach coverage is a fast-growing niche in commercial lines, and not just for big business. Nearly half (43 percent) of cyberbreaches affected small businesses.1 Plus, another report found that nearly half of U.S. small businesses suffered a cyberattack in the past year, with 44 percent of 18

Professional Insurance Agents magazine

them experiencing two, three or four attacks.2 There is an opportunity to educate small businesses about the cost of not covering themselves with this insurance. Where else do you look for a niche? Look at market trends about industries that are growing faster than the economy, learn where they are and what propels them. Then, you can learn and understand their lines of business and market to them. By specializing in one or two fields, you will be able to meet your clients’ needs; create consistency within your business; and build trust with your clients and potential clients. Life insurance is another underserved market. It was never a popular line among property/casualty insurance agents, often because, historically, selling life insurance involved collecting extremely personal information from the client, as well as conducting medical testing. Agents now can look to develop life insurance sales without the need for invasive questioning. A recent study reported that 30 percent of households remain without this important coverage,3 which presents a great opportunity for independent agents to fill an underserved market, increase revenue and add more policies per client. Another growing market to consider is the mass affluent market (not high net worth), which presents a significant opportunity for insurers, according to a new study: “Affluent households—those with more than $100,000 income—grew by 30 percent between 2012 and 2016,” said Mary Pat Campbell, vice president, insurance research at Conning. “While still the smallest income segment in number of households, the Affluent Market has significantly more financial resources

than the Middle Market and is able to purchase a wide variety of financial products.”4

Embrace technology Today, technology is integral to every independent agent’s success. Agency principals must set a course to embrace and implement today’s technologies, including their agency management systems. If you don’t maximize on today’s technologies, how will you implement new ones coming our way? When planning, ask yourself this: Do you know the five or six key performance indicators for your agency to monitor weekly or monthly to manage progress? Can your clients reach out and get questions answered whenever it is convenient to them (e.g., 24/7, access policies or make changes on the go)? Can they reach you via phone, text, website or mobile app? Do you use data analytics to better understand your clients and target prospects? Today insurance agents must provide clients with service through seamless omnichannel experiences. Technology enables insurance agents to understand client needs at a deeper level, and serves as the bridge to engaging all clients and prospects; beating the competition; and bringing insurance into modern day. Any independent agent’s strategic plan in 2019 and beyond should consider an investment in innovative tools and technology that can streamline operations, sales and data collection. These include agency management and development systems, comparative raters, websites, mobile apps and social media. These tools are essential to keep pace with current and potential

clients. Remember, your competitors are taking advantage of these new tools, and it is working for them.

Staying local In a tech-focused age, building and maintaining a local identity may seem like a challenge, but it remains important. Sam Friedman, insurance research leader for Deloitte Services LP, said he believes the independent agent can thrive in the new InsurTech ecosystem. “Customers’ connections to a professional agent remain strong, especially in commercial lines,” he said. “In the end, agents will likely continue to thrive if they leverage their experience and interpersonal skills effectively.”5 Technology doesn’t remove the need for human interaction; it enhances the interaction. I believe most people still want to buy locally and connect with their local agent, they just want the ability to use technology for the more mundane processes. Today, building your local brand is about evolving and combining your physical presence in the community—select community and networking events—with building a digital footprint in your community. The goal is to raise awareness of your brand among local business owners and other members of your community, making sure they know you offer more choices than other local agents and the personal touch the direct writers can’t duplicate. Building a strategy around this goal should be a priority in your longterm planning.

Do you have what it takes When developing a plan for growth, you must evaluate whether you have the tools and resources you need to accomplish your goals. Here are some questions to ask: Do you have access to the markets you need to diversify your book of business? Do you and your staff have the training needed to sell new products? Do you have the agency management systems and technology needed to compete effectively in today’s digital world? If you’re answering “no” to some or all of these questions, then you need to address these in your planning. When it comes to training, carriers often offer courses for independent agents to further their understanding of commercial lines. Most carriers offer producer schools (e.g., Travelers, Nationwide, State Auto, Merchants, Liberty Mutual and The Hartford). Generally, classes are available online or run from two weeks to six months at a carrier’s location. These types of courses also are available in the Training and Learning Center, which all SIAA members can access. [Editor’s note: For your employees who are new to the industry, PIA offers its New Employee Orientation Series, which offers courses on personal lines and commercial lines coverage basics, agency personnel orientation and delivering quality service to the customer and employer.] For example, a businessowners policy course may highlight key coverage, optional endorsements, target markets and how small-commercial accounts benefit from a BOP. In addition, the Hartford School of Insurance has classes for commercial-lines producers, account managers, virtual commercial lines and small-business coverage specialists, among others.

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To reach your goals, it also may be necessary to invest further in technology: innovative tools and technology that can streamline sales and data collection, an agency management and development system and comparative raters. Time savers may include having a live chatbot on your website to answer frequent questions, or a mobile app to increase 24/7 access, which clients are now expecting from most businesses. When diversifying into life and commercial lines, it may be necessary to expand your markets by working with new carriers. Lack of market access can be a real barrier for some independent agents, but there are options. Consider attending industry conferences where you can meet new carriers or joining a good agency network—one that can provide not only access to new markets, but commercial-lines education, marketing support and other tools to help achieve your goals. Make sure your choice of agency network does not just solve your immediate needs, but can support you throughout the lifecycle of your agency. When you have analyzed where you want to go and what it will take to get there, then prioritize your goals and establish short- and long-term strategies to meet them. Some planning, such as a major investment in technology, will be longer term. Others, such as building a local brand, expanding into new lines of business and embracing social media may be attainable in the short term. Most importantly, get started now. The industry is changing rapidly and independent agents who are ready to move forward with an eye to the future can position themselves for many years of success.

• • • • • • • • •

Professional Insurance Agents magazine

Masiello is CEO of SIAA, the largest alliance of independent insurance agencies in the country. Reach him at mattm@siaa.net. Verizon Data Breach Investigations Report, 2019 (vz.to/2H7MKX5) 1

Hiscox Small Business Cyber Risk Report, 2018 (bit.ly/2JTvc3W)

LIMRA, 2016 (bit.ly/2JnwFim)

Conning, 2018 (bit.ly/2Q8A4Ca)

Deloitte, 2018 (bit.ly/2YAI6qp)

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Set goals now Are you on track for your 2019 plan?

It’s summer! The days are longer, the kids are home from school, and well, everything just seems better. However, summer also brings the end of the second quarter of the year (and the launch of the third quarter) for your insurance agency, and it’s time to pull out your plans and see how you are navigating through hitting your agency’s goals. There is no doubt that running a small business is a bit like running an obstacle course, however, agency owners need to stay focused on their strategy and how to hit their personal goals.

Once you clean up even just three months of data, stop and take a look. Where can your agency strengthen and improve? Here are some typical reports we like to review with agencies:

What if we didn’t set goals this year?

Now you can share the numbers and set a modest goal that everyone can feel good about hitting. We always recommend setting a new business goal, retention goal and one special project each quarter.

We always recommend looking at the data, but take the time to polish it. Agency metrics often are inaccurate for three reasons. First, data entry protocols may be nonexistent or not being followed. Second, often the download needs to be cleaned up. Third, the reporting filters could be inaccurate. While it may seem like you have 7,000 better things to do, this is critical for running a strong and growing agency.

• Retention. Break this down by policy, premium and revenue. • New business sales. Make sure remarkets are not in there. • Closing ratio. This one can be the trickiest to figure out because you have to have a strong new business process.

What if we aren’t on track with our goals? The first step as a leader is to take a self-inventory. Here are some questions I like to ask agency owners:

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• Were you consistent in meeting with the team and reviewing the results? • Can you pinpoint why you are off track? • Has there been improvement and growth or was it status quo? • Can the team clearly tell you what the goal is or is it more of a recommendation? If any of these answers are inconsistent, we know it starts with leadership. Most people run from goals; there is a level of vulnerability, uncertainty and fear if we don’t hit them. While we don’t want to inspire those thoughts, we do need to work like a team and learn together where were need to improve. As the leader, you need to review the plan to see we the agency stands to bring transparency and communication on how everyone can pitch in to help. Sharing the goals once per quarter doesn’t necessarily help connect the team to the dream. Next, to help spark commitment and provide resources to the team, you need to invest in training. This can be done with webinars, virtual training or on-site training. We want to provide the team with an open forum to discuss how to increase their knowledge of your agency and its goals. In addition, the best thoughts occur when we are pulled out of our comfort zones. All too often, in insurance we stay where we feel the best—but this doesn’t always drive the best results.

Yeah! We are on track Great job! Break out the champagne and celebrate. I mean it. Agencies often focus on the challenge of the day rather than taking a moment to stop and recognize the team. Taking a moment doesn’t mean that everything is sunshine and rainbows, but it does show the team you recognize their contributions and allows you to set the stage for next year. Use this as an opportunity to communicate what is next.

Plan for the long haul Annual planning is a must if only just to clarify where you want to be. Ultimately, the goal is to create a business that serves you and your family. You shouldn’t be angling to become a slave to your business. This includes hitting goals so you know when to invest in technology that will empower your team and the next team members. The right technology also will help you delegate, so you can focus on being the principal of your agency. Over time, I have seen agents who are great at becoming the principal, as well as those who cling to being an agent. You may not be able to see letting go today, but if you dream and plan for the next five years, you can get a little excited about what that may look like. The bottom line is: If your business is the same in five years as it is today, you’re slipping behind.

Build your marketing strategy You have your insurance license, not a marketing degree, right? When in years prior you would have spent thousands of dollars on monthly Yellow Page ads, now you aren’t sure or confident where to place those funds. In today’s insurance marketplace, you need to invest in three major things: 24

Professional Insurance Agents magazine

No. 1: Building a brand for your insurance agency. With competition around every corner and Geico spending $1 billion on advertising, where does that leave you? If you are voiceless and blend in, it’s time to become closer and louder than your competition. We can break free from the insurance blues and give our business a real personality that connects with our target clientele. We can make insurance marketing fun again. People want to buy from people, so hiding behind big, law firm-like signs and having a brochure website won’t cut it for the next 10 years. Everyone in your community is going to buy insurance, so help build a brand that is louder and closer to your clients. No. 2: SEO optimized website that you own, not lease. Your website is the central hub for everything. To find your phone number today, people Google you. If your website is stale, confusing and hard to navigate, you won’t be competitive. Moreover, you need to make sure your website is mobile-friendly and has calls to action readily available for people to connect. Investing in SEO is a longterm strategy, but if no one can find you, how can you be heard? When agencies spent money on Yellow Page ads, they were working toward being closer and louder in their community. Investing in SEO services is the same. You also need to make sure you own your website, so you have the flexibility to make changes and adopt new strategies quickly. No. 3: Confused on how to make it work? You need a marketing person. Let’s face it: The best use of your time is not posting on Facebook. It’s leading your agency. In addition, marketing is a complicated full-time profession. Just like insur-

ance changes, SEO changes, socialmedia changes and email marketing changes. If you want to get into the details of setting up email campaigns, great. Hire a COO or spend the money on a marketing professional. Now agencies often will hire college kids. I’m going to recommend against this. Here is why: They are fresh out of college, and they need to be mentored by marketing professionals before they can help your agency. They often lack office skills and need considerable feedback that you can’t give. People in entry-level positions are also known for consistent job-hopping. Take a moment and invest in someone with a few more years of experience.

Perpetuation We handle and manage risk all day, but we are often shortsighted on how

we prepare for our own risks. Perpetuation to us means having a plan for two different situations: No. 1: Unexpected immediate departure. If you were to become ill or pass away, who is ready to buy and step in immediately? You can have an agreement drawn up just for this purpose. It may sound morbid, but things happen, and you don’t want your family to suffer due to a fire sale. No. 2: Long-term perpetuation. Identifying who you can mentor is an honor. Finding the right person to take over your business, whether he or she is a family member or a talented agent, is a great way to approach perpetuating your agency. However, if the right person doesn’t appear, you should have a plan B. We have seen many agency acquisitions go south during the due diligence process. Plan for both scenarios. For many agency owners we work with, setting goals can be a challenge. It can feel like you are just picking a number out of the sky. You run numbers from your management system, but you don’t quite trust them or you sit with a piece of paper and are stumped where to start. Well, think of the launch of the third quarter as a chance for a fresh start. We have exactly half of the year left to go set goals for ending strong. As the founder of Agency Performance Partners, DonahuePiro has helped hundreds of insurance agencies boost revenues, profits and efficiency. Reach her at (401) 415-6205 or kelly@agencyperformancepartners. Or, connect with her on social-media platforms.

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E&S: Uniqueness could spell E&O trouble While the excess-and-surplus lines segment of our industry plays a vital role, it is important to understand the uniqueness it presents. Failure to do so could create errors-and-omissions trouble for your agency. There are a number of issues to lookout for, so let’s review some of the main ones.

Lack of authority to bind In the standard marketplace, typically, carriers spell out the types and sizes of risks agencies can bind. This adds to the efficiency of the process. Conversely, in the E&S marketplace, typically, accessing these carriers requires you to deal with an agency that has an E&S license (i.e., a wholesaler). The wholesaler’s job—which most do well—is to provide your agency with access to additional carriers that write more specialized risks and potentially some hard-to-place risks. Technically, the wholesaler is the agent for that carrier and will have some type of brokerage contract. Your retail agency is not an agent for these carriers, and thus, you do not have binding authority. To bind a risk, you would need to advise the wholesaler of your desire that the risk be bound. In some cases, the wholesaler may not even have the authority to bind the risk and may need to contact the carrier. Bottom line: As the retail agency, do not advise the client that coverage is bound until you have confirmation from the wholesaler.

Binding requirements If you deal with multiple wholesalers, chances are the procedures and expectations to bind among those wholesalers differ. Let’s say you want to bind a risk on a Friday, at 4 p.m. Can you do it or will the wholesaler advise you that it needs premium payment and the necessary affidavit forms before it can bind the policy? Clearly, know the rules of engagement when working with wholesalers. Professional wholesalers will make it clear on the proposals what it needs to bind coverage. Be aware of these “rules” and factor them into your handling of the risk. Bottom line: Look for wholesalers that will provide you with an account current for your business. This will take away some of the potential headaches.

Unique endorsements Do you know if the E&S carriers in your state include the Classification Limitation endorsement on their policies? You need to know because this form pia.org

E&O

Curtis m. pearsall, cpcu, CPIA

has the potential to be your biggest headache. What this endorsement essentially does is restrict coverage under that policy to only those classifications noted on the policy. For example, if you insure a painter who only performs inside painting, the coverage would state only claims arising from inside painting would be covered. If the painter gets the opportunity to paint the outside of a house, there would be no coverage unless the policy was modified accordingly. Bottom line: Look out for this form. If it is included on a particular policy, advise your customers in writing of this limitation. Explain that if they perform any work outside the stated classifications, they won’t have any coverage and they should contact the agency before undertaking this additional work. There also is the possibility the proposal/policy may contain other unique endorsements that could severely limit the coverage actually provided. Watch for these forms. It is highly recommended that you advise your clients of these various limiting endorsements or exclusions at proposal time and when you send them their policies. Bottom line: Note in your cover letter to clients that they should read their policy carefully and contact the agency with any questions. 27

Renewal policies may look different When your E&S accounts come up for renewal, there is a good chance you will need a renewal application as automatic renewals are not the norm on the E&S side. When you receive the renewal proposal from the wholesaler, review it carefully to identify any changes or new endorsements. When carriers want to modify coverage in the E&S industry, they do not need to issue a conditional renewal notice, unlike the standard marketplace. The E&S carrier may add new exclusions or even reduce the limits. Bottom line: While it is hoped that your wholesalers will give you advance notice about changes to policies, typically, they are not required to do so. It is wise to ask your wholesalers ahead of time if they expect any changes on the renewal policy. There is a chance the coverage changes could be significant. In some cases, the customer may not be agreeable to the changes, so make it part of your process to contact the clients and review the renewal proposals with them to get their approval on whether they want coverage bound.

No backdating It is critical that the agency’s staff understands there is no backdating of coverage in the E&S market. As account executives prioritize their work, special attention should be given to accounts in the E&S market. If there is an account that renews on a Saturday and you leave the office on Friday not having bound the account, there is a good chance that when you call on Monday to bind, the account will be bound as of Monday. If there was a loss over the weekend,

No Guaranty Fund protection With the exception of New Jersey, the State Guaranty Fund does not provide any protection if an E&S carrier is declared insolvent. As a result, and even for agents in New Jersey, it is highly recommended to know the financial condition, the A.M. Best rating, of the carrier. When you receive proposals, know who the carrier is. It may be a new carrier you have never heard of or a known carrier. Carrier ratings change, so know the carrier’s current rating. It is not a bad idea to ask your wholesalers. However, don’t rely strictly on their feedback.

State regulations There are a number of states that require that a risk be declined by a specific number of admitted markets before business can be placed in the E&S marketplace. In addition, in many states, the account cannot be placed in the E&S market if there is an admitted market willing to write the risk. It is essential that you comply with these regulations.

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there will probably be no coverage in effect. This could be a significant issue with property coverage.

Professional Insurance Agents magazine

The E&S can be an asset While the E&S industry has significant uniqueness to it. However, for certain risks, you will need this side of the insurance industry. Establish a solid relationship with several wholesalers, as no one can do it all— and be on the lookout for the issues discussed in this article—because an ounce of prevention is worth a pound of cure.

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Rating ■ Staff rating for agencies with 9 or fewer employees ■ Excess rated for agencies with 10+ employees or special acceptance categories ■ Refer to state rate pages

■ First-dollar legal defense provided for claims not covered by underlying insurance ■ Professional liability — excess limits protection on a following-form basis for errors and omissions in the course of the agency’s business as an insurance professional. Coverage can be written over occurrence or claims-made forms of a variety of primary E&O carriers.

Coverage features on a following-form basis ■ Full prior-acts coverage ■ Covers any person acting in a capacity as a real estate agent or notary. ■ Options unique to this program: ? Personal coverage — broadened and excess personal protection for owners, partners and officers, including members of their families. (Submit ACORD Personal Umbrella Application.) ? Employment practices liability — excess limits protection for liability incurred by named insured or employees for wrongful employment practices. Coverage can be written on a claims-made basis over a number of approved EPL carriers. Maximum available as a sub-limit is $2 million. (Submit a copy of underlying EPL application.)

■ Two payments — 50% down, one installment of 50% due three months later ■ 40/30/30 — 40% down, two installments of 30% each due every other month ■ Quarterly — 25% down, three installments of 25% each due quarterly ■ Monthly — 20% down, five installments of 16% each due monthly

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How many hours a week equal sales success? Recently, I spoke with an insurance agency owner about the lack of success of his two most recent hires. When I asked how many hours they were putting in, the answer was, “About 45 or 50 per week.” Keep in mind, these agents are in their twenties; are new to the industry; and relatively new to sales. In other words, not only do they have to spend time learning about an industry they know next to nothing about, they also have to learn how to sell, in addition to learning the ins and outs of their new employer. Taking all of that into consideration, I gave him my estimate of how many hours they should invest every week. He told me: “Look, you can’t expect millennials to work more than 40 or 50 hours a week.”

Hourly investment When hiring a new agent, I tell people to look for five things: people skills, mental toughness, work ethic, attitude and character (i.e., honesty and integrity). You give me a person who is positive and upbeat, who is good at connecting and communicating with people, who is able to persist and persevere through rejection, who will always do the right thing, and who is willing to work to be successful, and I’ll show you someone who will be successful in sales, and pretty much anything. The number of hours someone is willing to put in, though most closely related to work ethic, also ties into attitude, mental toughness and character—they are taking money from you to do a job that requires putting in the effort necessary to get the results and pay you back. Ultimately, there are four factors to determine how much time someone needs to invest: 1. how good their sales skills are; 2. how well they know the industry; 3. how large, loyal, and influential their network is; and 4. whether they are new to the company. Factor No. 1: Sales skills. To be successful at the highest levels, new agents will need great sales skills. If they were in another industry previously, and already have great sales skills, that is good, but they will still have to adapt their skills to the new industry. Either way, developing great sales skills is a job all by itself, and a significant amount of time needs to be spent here. Factor No. 2: Industry knowledge. If they’ve been in the industry for the while, this can be helpful. My sister was the equivalent of a dental hygienist for seven years before she began selling dental equipment. Because she knew the products and what her customers would consider important, this cut down

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sales

john chapin President, Complete Selling

significantly on the time she needed to put in to get up to speed on the industry and product knowledge. That said, most new agents are new to the industry and as a result, this is another area in which a significant amount of time needs to be invested. Factor No. 3: Network. Typically, new agents don’t have a large, loyal, influential network that they can rely on for tons of business. If they do, it tends to be the exception. For example, if Rob Gronkowski decided to be an insurance agent, financial planner or sales representative for almost any industry, he’d get tons of business based upon his network and the number of people who are familiar with him and would like to be connected with him. Similarly, if a well-known and well-liked member of the community who is in his or her sixties decided to switch careers, it is likely that this person would be able to do a large amount of business simply based upon his or her network and centers of influence. Again, these two examples are the exception, not the rule. The rule is that most new agents will need to spend a lot of time building their network— by pounding the pavement, making phone calls, doing other forms of marketing and following up.

Factor No. 4: Are they new to the company? This is the least of the factors in the equation and is a short-

term consideration, but if employees are new to the agency, they have to learn the tools, systems, procedures and processes of the agency. This includes: how the customer relationship management system works; the email and phone systems; who to go to for certain questions; what paperwork is required when, and how to fill it out; relationship building within the organization; along with learning some of what everyone else does; and a plethora of other details about the inner workings of the organization, the business, and the industry.

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Professional Insurance Agents magazine

Remember, if agents are new to an industry and agency, and they have average, poor, or few sales skills; and they do not have an extensive network that they can rely upon for massive amounts of business, they should be putting in a minimum of 67 hours a week, and probably more than that, for their first three to five years. There are plenty of millennials who are willing to put in the hours to be successful, you just have to dig to find them and know how to paint a picture of an exciting future in your industry. Their generation does not have a monopoly on people who don’t want to work. Chapin is a motivational sales speaker and trainer. For his free newsletter or to have him speak at your next event, log on to completeselling.com. He has more than 31 years of sales experience as a No. 1 sales representative and is the author of the 2010 sales book of the year: Sales Encyclopedia. Reach him at johnchapin@completeselling.com.

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