2020 Winter Edition - Professional Insurance Agents of Tennessee

Winter 2020 • Tennessee

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WHAT IS INSURTECH? An agents’ review INSURTECH FOR AGENTS 5

Stay connected with clients

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Tools for a pandemic

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Who controls the data?

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DEPARTMENTS 4 Winter 2020 • Tennessee

In brief

5 Tech 7 Connect 9 Sales 20 E&O 22

Readers’ service and advertising index

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Officers and Directors

COVER STORY 12 What is InsurTech?

An agents’ review

FEATURE 17 Who is in control?

Agents and their data

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.

President and CEO Jeff Parmenter, CPCU, ARM; Executive Director Kelly K. Norris, CAE; Communications Director Katherine Morra; Senior Magazine Designer Sue Jacobsen; Editor-In-Chief 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. ©2020 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 Zack Littrell

IN BRIEF

ASSOCIATION NEWS

Moving forward together At the same time that a pandemic is causing businesses across the country to seek out new and better ways to do business, an exciting transformation is underway at PIA of Tennessee.

While we manage the uncertainty of a pandemic, we are evaluating how we will present our conferences, and how we can bring education and networking events to our members.

PIA’s transition will produce an association that is better equipped to handle the needs of independent agents throughout the state of Tennessee.

Lastly, our headquarters in Franklin, Tenn., is a major asset, and we will review how best to utilized it.

I think this pandemic will continue to push us in new ways to operate our businesses. Here is the agenda that I would like to focus on as we move forward together: • We will better focus on the needs and daily challenges of independent agents of Tennessee. We need to concentrate PIA’s efforts on what is most important, and not try to do everything.

• We will rework the PIA of Tennessee website to create a more user-friendly experience and provide the best, most useful agent information.

• We need to grow our membership and our advantage services income through errors-andomissions sales. We have a tremendous opportunity in the new independent Nationwide Insurance professionals who joined the independent agency system in the past year.

I want to welcome all the Nationwide insurance agents to the independent channel. I would like to thank those who have joined PIA of Tennessee, and I encourage all new Nationwide independent agents to join PIA of Tennessee.

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The PIA of Tennessee board of directors is busy working on implementing these goals so we can spend more time on our members, and less time on trivial matters.

I want to thank my board and the PIA of Tennessee membership and all the people behind the scenes for support and help over the last several months.

I also want to give a special thank you to PIA National and PIA Nebraska/Iowa for all your help and support as we begin this transition.

And last, but not least, we want to welcome back Sandy Clive as a PIA of Tennessee employee who already is doing great work for our members.

As one of the group of volunteer leaders, I am excited about the rebirth of our association.

PIA of Tennessee has a very bright future. We still have much work to do, and I ask for everyone’s support as we serve the needs of our members.—Neal McConnico, president, PIA of Tennessee

PROFESSIONAL INSURANCE AGENTS MAGAZINE

TECH

KATHERINE SLYE-HERNANDEZ, PH.D. Government & Industry Affairs specialist, PIA Management Services

Lessons from COVID: Stay connected with clients This year has looked different for many businesses—especially those that deal directly, face-to-face with the public. Since the pandemic “shut down” the country in March, we have had to rely more on electronic forms of communication, some of which we may have never used before in our businesses, such as Zoom, a cloud-based, peer-to-peer software platform used for teleconferencing.

Some businesses, including insurance agencies, were more prepared or set-up to adapt to these new forms of communication while others struggled, but it demonstrated the need for agents to have multiple ways to connect with clients individually and to communicate about their products and services to the public. It also stressed the importance of having clients’ cell phone numbers, email addresses, and social-media handles.

Electronic communications

Even under normal circumstances, electronic communications can make sharing policy-related documents much easier. However, electronic communications became vital when states were on lockdown.

During this time, shipping companies and the U.S. Postal Service were overrun by increased online ordering, which led to delays—something you

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don’t want when it comes to insurance. Getting your clients signed up for electronic communications about their policies can make communication easier and seamless; clients can receive their policy information in a matter of minutes instead of days or even weeks.

However, remember you cannot start communicating such information automatically. You need to get consent from a client to communicate policy information and documents electronically.

Client access Being unable to meet with clients in person has made an online presence all the more important. In the 21st century, it is necessary—especially

since most people look for things online. It also gives you another means to communicate with all of your clients.

A website gives you a central location to send clients if they are looking for certain information, and it makes it easier for potential clients to find you.

The same goes for a Facebook or LinkedIn page. These social-media channels give you the opportunity to share information with clients, like about the dangers of floods or tips on how to prepare for a hurricane. They also allow you to encourage people to contact your office should they have questions about whether their policy includes certain coverages, and allows you to have another touch point of communication with your clients.

The phone or Zoom app also has become more widely needed during this time. Current or potential clients discuss policy options with you via phone or Zoom instead of coming into the office to talk. In the early days of the pandemic—even in states where insurance agencies were considered essential businesses—many people were not comfortable traveling to places unless it was necessary, so we had to find other ways to connect.

Here to stay?

While COVID-19 precipitated the push for more clients to opt-in to electronic communications, for agencies to increase their online presence and utilize other communication tools like Zoom, there’s a good chance these practices won’t go away when we (hopefully) return to a semblance of normal.

This technology, while necessary right now, is great even when we are not limited in where we can go. It makes it easier for the client to just sign on to Zoom to chat instead of driving to your office, and it can help you talk to more clients. An online presence can help you get your agency in front of more people and get more clients.

And, electronic delivery of policy information is not only quicker and easier for all involved, it saves money for mailing and is more environmentally friendly than printing an entire policy and related documents to mail to a client. While there was an increase in use of these tools out of necessity, we can see that they benefit businesses, and should not be forgotten once we can move on from COVID-19.

Reach out to clients

Design+ Print (800) 424-4244 design.print@pia.org pia.org/design&print

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Should you need help marketing your agency, to connect with clients, PIA Design & Print can help you update your website, and help you if you need to rebrand your agency.

And, if you are interested in designing, printing and mailing marketing materials that can be sent to your clients to keep in touch with them (e.g., brochures, postcards, fliers, magazines or newsletters), PIA Design & Print can help with that, too. For more information, or to see samples, log on to pia.org/design&print, email design.print@pia.org or call (800) 424-4244.

Slye-Hernandez is PIA Management Services’ Government & Industry Affairs specialist.

PROFESSIONAL INSURANCE AGENTS MAGAZINE

Contingency tools in the time of pandemic In the midst of the COVID-19 pandemic, insurance agencies are adjusting to stay safe and operational. While it’s unclear how long the effects of the pandemic will last, it’s important for agency owners and employees to take measures to mitigate confusion, fear and loss.

This article outlines some InsurTech solutions that are available to help you maximize your agency’s effectiveness and efficiency. Though these measures are imperative for meeting today’s immediate needs, they also set up critical contingency structures for future unexpected disasters. Have you considered each of these tools for your agency?

Cloud-based systems A cloud-based agency management system provides uninterrupted access to the hub of agency operations. Such anytime, anywhere, access means your agency can continue operations no matter where your team needs to relocate to stay safe.

Integrated systems When all your systems (e.g., accounting, customer relationship management and proposal creator) talk to one another, you’re able to process information faster with less logging in and out and comparing data fields. System integration also helps mitigate your potential for an errors-and-omissions claim, so your team can be more confident in claims and policy processing, and integration with marketing efforts, among other procedures.

Mobile access Almost everyone has a smartphone, and, according to J.D. Power’s 2019 Insurance Digital Experience Survey, nearly 75% of all insurance companies evaluated offered a mobile app. Your agency needs mobile access to provide immediate self-service and a convenient way to capture timely information during an accident, or when you need to get in touch with customers quickly. It also can be used to provide customers with regular updates and share FAQ answers to calm concerns.

Client portal According to a 2019 report by Statista.com, close to 90% of U.S. consumers expect businesses to have a self-service online portal. These portals empower customers to meet their needs, and get to know your agency better in the process. And, client portals are available 24/7 to answer routine FAQ concerns, freeing up customer service representatives to spend more time on problems that require a human touch.

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CONNECT

ALEX DEAK CEO, Strategic Insurance Software LLC

When integrated with your agency management system, client portals sync customer activity in real-time, so you’re up-to-date with your customers, even during uncertain times.

Integrated texting Integrated texting is an essential way for independent agents to communicate directly and immediately with clients without creating gaps in documentation. Texting can be used to alert customers when a policy is coming up for renewal, when a payment is late, or to update them on critical information regarding safety and operations.

Paperless processing and eSignature During an emergency, it’s unlikely you’ll be able to print, fax, and mail documents in any timely manner.

The ability to smoothly and securely bind coverage and submit applications digitally is critical to maintaining business operations during these times. With paperless document processing, including digital eSignature technology, your agency cannot only operate during a disaster, but can do so quickly, securely, and more efficiently than with paper forms.

Secure infrastructure With so much data transferring via digital technology, your agency needs to be ready with secure infra-

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structure to protect your clients and employees from external data threats.

According to the Clark School at the University of Maryland, a cyberattack occurs every 39 seconds. And 43% of those attacks are on small businesses, like local insurance agencies. To reap the benefits without being exposed to the risks, agencies need to invest in infrastructure and training to keep customer data safe.

Essential contingency tips Beyond obtaining the right tools, your agency also needs to address areas like: Digital tools. It’s essential to train staff and allow customers to use digital tools, like virtual meetings apps or remote desktops. As the COVID-19 outbreak became a pandemic, virtual meeting platform Zoom saw a 109% surge in downloads according to a report by Crain’s New York Business. This surge was followed by a rush in how-to videos and tutorials to get new users up to speed. Have the same tactics in place for your agency, including providing laptops and IT support for those who may be new to working remotely.

Create and update a disaster plan. Make sure to include a point person and structures for how to make decisions and deliver information to your employees, customers, and partners. This plan should be updated regularly as your agency grows and new contingency tools become available.

Expect change. Based on what you, your agency, and the national and global economy faces during a disaster, be prepared for some of the changes your agency has made during the pandemic to become permanent. Additionally, agents should think about how COVID-19 will lead to a demand in

coverage for pandemics and other biological disasters.

Communication and connection At the heart of all these tools and tips are communication and connection.

Staying in touch with your clients and employees can ease stress and reinforce meaningful connections during uncertain times. Leverage systems like marketing automation and integrated texting and email to stay in touch with your clients, and keep them updated on your efforts to keep operations safe and moving forward. Though we can’t predict when disasters will end or the longlasting outcomes, we can keep business as close to usual as possible when we connect and communicate.

Deak is one of the founders of NuGrowth Solutions and CEO of Strategic Insurance Software, acquired

by NuGrowth in 2009.

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

SALES

JOHN GRAHAM Principal, GrahamComm

How to keep going when you want it all to go away How long will the Damocles Sword of the pandemic hang over our heads? As the days drag on, will it threaten to upend us indefinitely? Even though we try to avoid thinking about the troubling possibilities, they keep creeping into our minds, creating more stress, clouding our ability to stay focused, and leaving us irritable, angry, less effective—and tired.

It’s not a pretty picture, not one we could possibly imagine ever facing. So, when we’re confused and uncertain about the future, what are we to do? Here are some thoughts about this question: Don’t listen to yourself. Why does it always happen when we’re trying to get to sleep at night? What is so upsetting is what causes the anxiety and does the damage is the voice inside your head. We are never our own best friend in the middle of the night.

Stop listening to yourself. It’s time for a personal fact-checker—but neither Alexa nor Siri qualify—this is a job for someone you trust. Reach out to someone and ask: “This is what’s concerning me. Am I on track or off the rails?”

Look for new possibilities. The good news is that life is not a matter of choosing the right fake Zoom background to convince ourselves (and others) that we’re more than just OK. It amounts to more than that.

Recently, an editor sent me one of my sales articles. He had kept it until he found the right place for it. Recognizing that it had been around for about a year, he asked if I would look it over to see if it needed updating. When I read it, I was shocked at what I found! In a relatively short time, the world changed dramatically—and the article needed updating to reflect what had transpired.

People are no different, so it may be time to ask yourself a tough question, “Am I dated?” Think about it. What can you do to update yourself? Sure, you may know your job backwards and forwards, but that doesn’t count anymore.

Focus on figuring out how to revise your performance. How can you make what you do more relevant? What can you do to enhance your value? Think about the possibilities.

Get better acquainted with yourself. If you really want to get to know yourself as you really are, you might want to spend time in Wyoming. But be prepared, Wyomingites aren’t subtle. They don’t tip-toe around; they’re not afraid to tell it like it is, no matter who you are. Having lived there, I speak from experience. For example, I recall the memorable words of a motorcycle-

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riding English professor from the University of Wyoming: “If you can’t write it, you don’t know it.”

Here’s the point. If you want to get better acquainted with yourself, jot down life experiences from your early memories to now. Don’t just remember them, get them on paper.

Write them down as they come to mind. Ideas never come all at once.

If you really want to know yourself, start writing. You may like what you discover.

Be ready for the unexpected. How many times in the last six months have you heard someone say, perhaps wistfully, “I’ll sure be glad when life gets back to the way it was.” Even though we may not have said it out loud, most everyone has harbored the thought more than a few times. It’s just too much to let ourselves think that going back is not an option.

If we’ve learned anything from the pandemic, it’s that we should learn to keep an eye out for surprises and the unexpected. Even though we may not like to think that everything is up for grabs because of the pandemic, it is: the way we live, work, play, learn, shop, think, do business, and behave. It’s changing and will continue to evolve. Keeping an eye out for the unpredictable will make living easier and more rewarding.

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Change the picture of yourself.

Add continuing uncertainty to the pervasive impact of COVID-19, and it’s more than enough to distort our picture of ourselves and crush our self-confidence. It’s too much to let ourselves think about what could possibly be coming next.

How we happen to view ourselves is not a given or chiseled in stone, unless we allow ourselves to look at it that way. In a wonderful essay,

How we happen to view ourselves is not a given or chiseled in stone, unless we allow ourselves to look at it that way.

“Homo Sapiens: The Unfinished Animal,” physicist George Stanciu, Ph.D., writes, “Nature gives human beings no specific way of life—no fixed occupation, no fitting dress, no appropriate emotional profile. It’s as if nature grew tired when she fashioned Homo sapiens and left this one species unfinished.”

And, that’s good news. In spite of everything, what we do with what we are given has not been written or handed to us. Our story is unfinished—and it is in our hands.

Graham of GrahamComm is a marketing and sales strategy consultant and business writer. He is the creator of Magnet Marketing, and publishes a free monthly eBulletin, No Nonsense Marketing & Sales Ideas. Reach him at (617) 774-9759 jgraham@grahamcomm.com or johnrgraham.com.

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

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WHAT IS INSURTECH? An agents’ review

T

here has been a lot of buzz about InsurTech in the insurance industry over the past decade—among both insurance carriers and insurance agencies. However, many agents who hear the term are fuzzy on what it really means. InsurTech is an offshoot of the 2010 Fintech movement. By definition, InsurTech refers to any innovative, insurance-based technology that delivers new features, services or processes to agencies and carriers. These technology innovations are designed to streamline workflow efficiencies, increase productivity, and lower operating costs. Agencies and carriers are implementing these technologies to achieve a competitive advantage and improve their bottom line.

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

DAVID COOKSLEY CEO, Quikfuzion

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Traditionally, investments in carrier solutions far outpace the investment for agency solutions, given that agencies simply do not have the time or money to spend on automated solutions. Many InsurTech companies are relatively new or start-ups that are trying to bring positive change to an industry in which the legacy methods remain in use. Market entry for these new companies has not been an easy task. Not only do new vendors face a highly regulated insurance industry, they also are up against traditional vendors that actively work to block new vendor development and protect market share.

InsurTech vendors take advantage of technology to disrupt or to improve processes through a variety of methods, but the two most common are: 1. APIs: The Application Programming Interface allows vendors to connect to other systems easily.

2. Plug-and-play solutions: These easy-to-use solutions enable a computer to recognize and configure the app with little or no user intervention.

Internet of Things Another term that is bantered around is IoT, or the Internet of Things, but what does it really mean? It describes the network of physical objects (things) that are embedded with sensors, software, and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet. For example: Water damage for homes and apartments are big claim items for insurance carriers. There are IoT solutions that provide sensors set near areas with washing machines, water heaters and furnaces that raise alerts when water is rising. The sensor can trigger a command to shut the water off to avoid a catastrophic loss if nobody is home.

The agents’ perspective InsurTech is a huge topic and covers many areas, so we can only begin to scratch the surface. This article will focus on personal and commercial lines. Given the pandemic, many agencies have adapted to a new way of doing business. And, InsurTech companies are positioned to mitigate some of the issues by replacing older legacy methods with innovative solutions at disruptive prices.

Agents from agencies of various sizes helped to collaborate and provide input for this article. To start, we asked them for feedback on how they gauge return on investment for InsurTech solutions. They responded that the top factors to determine ROI were: time, customer service and cost.

Time. The time saved was the most important criteria when trying to determine the ROI of InsurTech. For example, if a staff member saves 15 minutes a day by using an improved process or feature, it equates to five hours a month or 65 hours a year—just for one person. Multiply that by the number of staff members and the savings become substantial. Agents must look at the possible hidden, long-term benefits when they evaluate new technology solutions.

Customer service. The second most important criteria was selecting solutions that improve customer service and response, which ultimately helps with retention. Agents are concerned about their ratings and reviews that appear online, so they look for solutions that add value and enhance their customers’ experiences.

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PROFESSIONAL INSURANCE AGENTS MAGAZINE

Cost. Additionally, agents will consider new products that improve time-and-service efficiencies. Agents prefer to see a 12-18 month breakeven (return on investment). In addition to the cost of the new automation, agents also consider the implementation and training-time costs when they consider the ROI. These agents do not want training on new products to disrupt their current operations and bottleneck their agencies’ customer service.

Next, we asked the agents how they select InsurTech solutions for their agencies. These solutions are found through personal referrals from other agents, which the agents found are the best way—since it is better to hear from actual users about their experiences, if possible.

Agents also reach out to their own personal networks. They have people they can call to ask questions and disseminate information. And, under normal conditions, many agents find new solutions through state, regional or national trade association conferences and conventions—but this year most of those options were not available given the pandemic.

Additional avenues for research include reading various trade publications, insurance forums or search engines (e.g., Google). Agents also access vendors’ websites for information after reviewing ads shared on social media.

When searching for new InsurTech solutions, these agents also take into account the vendor’s financial stability. They want to make sure that any new vendor they adopt will be around for the long haul. This can be difficult to gauge unless the vendor provides its financial information. Agents are concerned about adopting a new product, only to

have a venture capital company or a competitive industry giant acquire the product and change it, increase the price, or pull it off the market.

When we asked if the national pandemic affected their decision to look at new InsurTech solutions, the consensus was “yes.” The fact that agencies’ staff members were forced to work remotely made many agency principals realize that running an agency remotely introduced new challenges. For example, one agency was focused on developing a digital marketing program and launching a new website. However, when the pandemic struck, the agency shifted its priorities to the following: • The agency put its new digital marketing plan and website on hold after it realized it needed to adapt a new remote workplace.

• It implemented Zoom for video conferencing, purchased headsets for the staff members, and provided the necessary training.

Adding Zoom replaced on-site visits, and gave the staff members the ability to talk to prospective clients and existing clients about their current policies and renewals.

The pandemic also showed agents how valuable InsurTech solutions can be. Agencies with true, webbased agency management systems were able to adapt to working from home much easier than agencies with cloud-based systems or locally installed systems. Agencies with true web-based systems only needed to access the internet through their browser—no software installation was required. Comparatively, agencies with cloud-based systems had to install software on every remote computer physically. Employees at agencies with locally installed

agency management systems that are not cloud-based, needed to bring their office computer home, or install the whole system on their home computer.

The process was both time consuming and financially painful.

When asked about the InsurTech solutions that proved to be most valuable for their agencies during the pandemic (when their offices were closed), the agents responded that—in addition to teleconferencing applications—they soon realized how much time could be saved using eSignature, which made the whole application process much faster and easier for their current or prospective clients. Without eSignature, agents were forced to use email or the U.S. Postal Service to send and receive applications. The entire process was slower and labor intensive. Using eSignature also solved another problem—no one had to worry about handling paper forms, and catching the virus.

We also asked if any of the agents had explored new agency management systems lately. One agent has started exploring various options, since the agency’s automation costs are one of its biggest expenses. The agent prefers to have an agency management system that is integrated fully with everything including the agency’s website. Currently, the agent is comparing the real cost of adding all the extras (e.g., customer portal, mobile apps, self-service and eSignature) against new systems that have bundled these services.

The agent is exploring what other kinds of features are available to help the agency reduce its workload, save time, improve service, downloads, analytics and reporting. Then the agent will be able to determine and compare its true monthly cost.

Another agent said the agency really needed to upgrade from its old system— it was rigid and not equipped to handle some of the problems that exist today.

The agent has just started the product-review process.

Regarding additional InsurTech solutions, two of the agents interviewed said their agencies have a customer portal and/or mobile app. While customer portal and mobile app solutions are getting a lot of press, one agent found that the customer adoption/acceptance rate was low.

At first, one agent was reluctant to embrace a customer portal. The agent thought that millennials would not be loyal to the independent agency channel. Much to the agent’s surprise, there is data in the last two years that indicates that millennials value an independent agent’s advice more so than baby boomers. The third agent’s agency did not have a customer portal or mobile app, but the agent was willing to look at them again.

Only one agent interviewed had a self-service portal as part of the agency’s offerings. The agent viewed the self-service portal positively for the agency’s commercial-lines clients as it allowed customers to add a certificate holder, print their own certificate of insurance, and improved customer service.

For the agents who did not have a commercial-lines, self-service portal for their agencies, their main concern was the price of the system, and whether their clients would view the adoption of such as system as a value-added service.

Generally, the agents thought that the adoption rate of a self-service portal for personal-lines clients would be low among customers.

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Future solutions We asked the agents what their No. 1 hot-button issue is, and what InsurTech solution they would like to incorporate into their agencies if there weren’t any limitations.

The first agent wants a better customer relationship management system that would allow the agency to collect more information and improve analytics.

However, the solution needs to be balanced. And, the system needs to be affordable, and easy to use for the producers, given that it will take more time to collect the data.

The second agent would like to see more carrier integrations for commercial lines to help speed up the data entry and collection. The agent wants to see a personal-lines like quoting process.

What challenges does your agency face in adopting new technologies?

Insufficient training 38.6% Insufficient staffing 31.8% Lack of financial or other support from my carriers 31.2% Insufficient budget 27.3% No clear ROI 26.8% Cultural resistance 25.2%

Siloed legacy system 15.3% Other 12.1% 5

10

15

20

25

30

35

40

Source: NU Property and Casualty and National Association of Professional Insurance Agents: March 2020

The third agent would like to see a method that will consolidate all the carrier rating and endorsements done in real time through a single interface. The agent wants carriers to provide full underwriting and rating information in their downloads—instead of the limited data that currently populates the agency management systems. If carriers downloaded the full information to the agency’s management system, then agents will not have to waste time to collect

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Automation In the end, personal- and commercial-lines business is all about data automation—and the burdensome amount of time and cost agents spend gathering, entering, submitting, processing, and retrieving data.

Right now, there are InsurTech solutions that address these issues. These solutions clearly demonstrate new and improved workflow efficiencies for carriers and agencies. These InsurTech products/systems increase agency productivity and reduce operating costs, which improve profitability and increase the agency’s bottom line.

So, these are exciting times. Find out for yourself what the buzz is all about: InsurTech, it will be worth your time.

Lack of compatibility with most of my carriers 22.7%

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it from the carrier again at renewal.

Complete information will streamline the renewal/rewrite process and save agents a tremendous amount of time. Improving the processing time gives agents more time to talk to their customers about important coverage items—they want more time to sell their insurance products, and close more business.

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Quikfuzion, an InsurTech company, has developed an agency management platform designed to replace older and expensive agency management systems.

Prior to Quikfuzion, Cooksley was CEO of Xcipio, which created the industry’s first real-time comparative rater that was sold to Fiserv. He spent 20 years in a family owned insurance agency specializing on mid- to largesized commercial accounts.

FRANK SENTNER Sole proprietor, Sentwood Consulting

Who is in control?

Agents and their data

All individuals and businesses have come to realize how critically important data is to their ability to function in today’s world. Security, privacy, authenticity, and control are all factors that must be considered when devising a data strategy. In this article, I will be focusing on control (i.e., who regulates access to agency data, who has the rights to use agency data, and who determines the purposes for which it can be used).

Insurance is data Data is more important to the functioning of insurance businesses than any other kind of business. Unlike organizations that make, service, or sell stuff, insurance businesses collect information about people and organizations, and the stuff they make or use in order to create and sell financial promises. Those promises (which we call policies or bonds), define the risks and exposures represented by people and businesses and their stuff, and guarantee compensation for damage, illness or death caused by specific kinds of incidents, accidents, or injuries—all

of which are described by data. More succinctly, data is the only product produced by insurance businesses.

Information and data The distinction between information and data is a subtle, but important one. Information can arrive in many forms, but data always is digital. Despite a recent increase in consumer-facing websites and software apps for the collection of risk and exposure information, typically, insureds still share their information with agents or insurers using the phone or paper forms. This information does not become data until the agency or the insurer’s personnel enter the information into their computer systems. Sadly, this data will likely go through several transformations from data to information to data and back during its lifetime, because our industry does a poor job of sharing data electronically.

For example, an insured shares a current paper policy (information) with an agent who keys this information into the agency management system (data) and then generates ACORD applications as PDFs (information), PIATN.COM

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which are emailed to their insurers to request quotes. The insurer’s personnel key that information into their systems (data) to generate quotes as PDFs (information), which are emailed to the agent. The agent then shares the quotes with his or her prospective customer, or types the insurers’ quote information into their proposal document for the prospect. Ultimately, the insured will choose a quote and the agent will request issuance of the policy and, eventually, the policy information will be downloaded (data) into the agency management system. And, then the PDF/paper policy (information) will be emailed/mailed to the insured and agent.

Regulators and data Insurance regulators seem to struggle to define the rights and responsibilities for data, applicable to the agents and insurers that they are in charge of regulating. Everyone will agree that insureds own their data, but very little of the data contained in the systems of agents and insurers actually is contributed by the insureds. Clearly, names and addresses and other personally identifiable information (e.g., Social Security numbers and birth dates) belong to insureds. But, what about data such as the coverages, limits, and deductibles recommended and entered by agents into their agency management systems?

And, what about rating factors and prices entered by the insurer’s personnel or generated by the insurer’s systems? And finally, what about publicly available data such as convictions and classifications?

State regulations hold agents and insurers responsible for the security and privacy of the data that “belongs” to insureds that is stored in their systems. While many insurers have their own data centers in which they have complete control of insureds’ data, the vast majority of agents utilize systems that they license from vendors that own the data centers in which the agents’ data is stored, and that they access via the internet using desktop or laptop computers (which do not store the data). Unfortunately, the regulators have no control over these vendors, so the agents are caught in the middle. Some states have begun fining agents for using outdated versions of ACORD forms—even though agents have no control over when their vendors update their systems.

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Ownership and control Discussions of data ownership quickly become fraught, and are largely beside the point. Control is the point (i.e., who regulates access to agency data, who has the rights to use agency data, and who determines the purposes for which it can be used). Unfortunately, most agents have ceded the rights to the data in their agency management systems to the vendors that control them.

There are many significant benefits to using software-as-a-service solutions—when agents license the software, but don’t have data storage on-site for the programs or data.

And, there is absolutely no reason that agents have to sign over their rights to control access to their data to the vendors providing these SaaS systems. However, the language of those license agreements definitively gives their vendors that right.

Agencies and AMSs How has this happened? It is a cautionary tale. When AMSs came on the market, many agency principals did not understand the new technology. Because most of the systems that were built originally focused on operations (i.e., accounting, policy and claims information and forms generation)—and offered little in the way of sales support like customer relationship management systems and mobile applications— agency owners typically placed little value on automation. So, when their vendors offered them the opportunity to outsource their technology, they leapt at the chance.

In the early days, the agency management systems’ license agreements did not provide the vendors with control over access to the agencies’ data—and there is no reason that they should today. However, as the largest vendors grew, and they realized the potential of all that data, they changed their license agreements to give themselves the right to use the agents’ data. Data is a big business, and some big-data companies and private-equity firms return profit margins in excess of 50%. This is why it is important to read your licensing contracts.

De-identified and aggregated In order to use agencies’ data, big-data companies and private-equity firms commit that it will be de-identified and aggregated—which means that any data that could enable someone to identify a specific insured, or any of his or her individual risks must be removed. It also means that the data from many agencies must be combined in such a way that the business results exposed in their analyses can’t be traced back to a particular agency. This allows them the ability to analyze the entire insurance industry for trends. Additionally, according to many AMS licensing agreements, once the information is de-identified and aggregated, it becomes the property of the vendor.

It’s not unusual for a vendor to charge its customers to provide analytics of their profitability and the efficiency of their operations, or analyzing and recommending courses of action for an agent to take with particular insureds.

However, combining all agencies’ customers’ data to derive analytics about the industry as a whole deserves at least a conscious opt-in provision, instead of a clause in the SaaS license agreements.

Next steps When you look to partner with any vendor that will have access to your data, read your licensing contracts carefully, so you know what you are signing away. Remember to look at all your options—there is a broad range of InsurTech startups, which are available to you and offer you a wide variety of solutions.

Sentner has provided technology solutions to the insurance industry for more than 40 years. He has managed policy, billing and claims system replacement projects for insurers, has provided strategic consulting for The Council of Insurance Agents & Brokers, and now consults with ACORD and serves on the boards of several startup InsurTech firms. Recently, he worked with representatives from Connecticut, the City of Hartford, UConn, several national insurers, and InsurTech Hartford to create the first InsurTech Accelerator in Connecticut.

PIATN.COM

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E&O

THOMAS CASELLA, JD, MBA, SCLA Senior risk management specialist, Utica National Insurance Group

When a customer makes an E&O allegation

In the event that an agency customer had a claim denied by his or her carrier, or for which there were not enough limits to cover the loss, the customer may decide to contact your agency and allege that he or she had the wrong coverage, or that the coverage in place had insufficient limits.

If this occurs, there are several things that you need to do—and practices that you should avoid—to ensure that you do not compromise your agency’s errors-and-omissions coverage.

What to do Steps to take to ensure that you do not compromise your E&O coverage: Report the incidents and claims in a timely manner. Incidents are facts that are made known to you that may result in an E&O claim. An E&O claim is a demand for money or services. It is important that you notify your E&O carrier if there is an incident or claim to preserve your coverage.

Report a subpoena for a customer’s file to your E&O carrier. A subpoena for a customer’s file is a fact-finding endeavor. Not all such subpoenas result in the pursuit of an E&O claim, but having legal counsel review the request to ensure that the response is appropriate may prevent additional issues from arising. Your E&O policy may cover subpoenas for customer files, and defense counsel may be assigned to assist you in the response, if necessary.

Advise your customer that the issue has been reported to your carrier—if asked. You should not discuss an open claim with the claimant. You should continue speaking with this customer about other insurance matters, and provide the customer with the same service you would if there was not a claim.

However, you should not discuss the claim with the claimant.

What not to do Things you should never do when a customer makes an allegation of, or tenders an error or omission claim to your agency: Never make any admissions. This includes apologies, which may be construed as an admission. Admissions may be used against you if the matter is litigated.

Simply state that you will take the customer’s information, and report the matter to your E&O carrier for review.

Never make a payment to a customer on a claim prior to discussing it with your E&O carrier. Making payments—yet another form of admission—may cause you issues if the customer intends to pursue a claim despite the payment, and may have serious repercussions under your E&O policy as 20

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a breach of policy conditions. If you get a demand for money or services from your customer or a third party, report it immediately to your E&O carrier’s claims department, so the E&O claims specialists can review the matter and provide you with the appropriate assistance.

Never attempt to “fix” the issue.

Similar to making payments, providing services or advice to attempt to “fix” the issue, without first speaking to an E&O claim specialist, may result in exacerbating the situation. Submit the claim or incident and discuss it with an E&O claims specialist before proceeding.

Do not delay. Report the matter to your E&O carrier as soon as possible. Failure to report a claim in a timely manner may result in your insurer refusing to accept your insurance claim.

Do not jeopardize your E&O coverage because you think a claim will be within your deductible, or you believe the hassle of reporting the claim will not be worth the effort.

The potential for claims to escalate is great, and the time it takes to report a claim and discuss the facts with a claim specialist is insignificant when compared to the time and expense of a litigated E&O claim.

Utica National Insurance Group and Utica National are trade names for Utica Mutual Insurance Company, its affiliates and subsidiaries. Home Office: New Hartford, N.Y. 13413.

(as of 8-26-20)

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