I O WA I N D E P E N D E N T A G E N T S
Trusted Choice®
VOLUME 28 / ISSUE 1 / WINTER 2010 INDEPENDENT INSURANCE AGENTS OF IOWA
INSIDE: Credit Scoring, Who Likes It? Who Needs It? Adapting To The Cards That Are Dealt Your IIAI Staff Security Breach Law And Your Responsibility To Protect Sensitive Client Data Are Your Employees Exempt Or Non-Exempt? IIAI’s Top 10 Contracts For Reporting Agencies Are Agent's Associations An Endangered Species? Are Independent Agents Endangered?
MEET YOUR IIAI STAFF As the staff of IIAI, we strive to make this a premier insurance association. We seek to be advocates for all independent insurance agents in Iowa. We are committed to a quality of service that noticeably exceeds our members’ expectations. In achieving these objectives, IIAI employs a distinctly competent staff and we focus on our continuous improvement, as well as improving the service we give to our members.
™
™
.
Laptop. Appointments. Self-Assurance. Society It’s what you need to do business.
s all the difference. In any business, having the right equipment make dy is better equipped And when it comes to business insurance, nobo ance isn’t just our than Society® Insurance. You see, business insur we can offer truly core business; it’s our only business. That’s why ialized services and unique solutions that provide high-quality spec gives us superior that fully comprehensive coverage. It’s this focus rstanding of the expertise, not to mention a more thorough unde r insurance companies intricacies of your clients’ businesses that othe with an insurance just don’t have. So, if you’d rather do business our website. company that’s all business, call Society or visit
150 Camelot Dr ive P.O. Box 1029 Fond du Lac, W I 54936 888-5-SOCIET Y (888-576-243 8) societyinsuranc e.com
™
Restaurants • Bars • Lodging • Medical Offices • Grocery • Workers Compensation
I O WA I N D E P E N D E N T A G E N T S
Trusted Choice®
President’s Report Credit Scoring, Who Likes It? Who Needs It?
Viewpoint is a publication of the Independent Insurance Agents of Iowa. Viewpoint is published quarterly: Winter, Spring, Summer and Fall. Viewpoint is mailed to Iowa insurance agents, Iowa Home Office Executives, Affiliate members, and other state associations and organizations.
Independent Insurance Agents of Iowa 4000 Westown Parkway West Des Moines, Iowa 50266 (515) 223-6060 • FAX (515) 222-0610 800-272-9312 (In-State only)
Advertising Editor Melissa Meiners
President
BOARD OF DIRECTORS
Jeff Bohnenkamp, CIC - Spencer
President-Elect
Mark Currie, CIC, CPIA - West Des Moines Brian Petersburg - Decorah
National Director
Tom Richardson, CIC - Keokuk
Directors
Paul Pohlson - Grinnell Terry McDonald, CIC - Iowa City Scott Morningstar, CPCU - Lisbon Jerry Mease - Winterset Eldon Hunsicker - Ottumwa Terry Friedman, CPCU - Dubuque Tim English, CIC - Dyersville John Dalton - Council Bluffs Steve Madsen - Marshalltown Hans Boehm, CPCU - Boone
Chief Executive Officer Bob Skow, CPCU, CAE bob@iiaiowa.org
Membership Operations Coordinator Melissa Meiners melissa@iiaiowa.org • Ext. 15
Page 5
33 Berkshire Hathaway Homestate Companies
National Directors Message
4 General Casualty 16 IIAI
by Tom Richardson, CIC Page 7
42 IIAI 32 IIAI 16 The IMT Group 22 IMWCA Iowa Municipalities Workers’ Compensation Association 35 Iowa Municipal Insurance, LTD
In This Issue Your IIAI Staff Page 9
40 Iowa Mutual Insurance Co. 28 Insurance Finance Corporation 30 Integrity Insurance 36 Merchants Bonding Co. 34 M.J. Kelly Company
Security Breach Laws And Your Responsibility To Protect Sensitive Client Data
17 Northern States Agency
by Steve Anderson
37 Rain and Hail
Page 18
22 RDS Group
Are Your Employees Exempt Or Non-Exempt? Page 27
10 Pekin Insurance 38 Progressive
35 Ringwalt & Liesche Co. 24 Rural Community Insurance Services 26 State Auto Insurance Companies 21 SECURA Insurance Co.
Agency E&O Considerations When Using Social Media by Sabrena Sally, CPCU
Marilyn Paul, CPCU, AIT, AAM, CPIW marilyn@iiaiowa.org • Ext. 11
Page 37
Membership Services Coordinator
Are Agent’s Associations An Endangered Species? Are Independent Agents Endangered?
Membership Services Coordinator
17 First Western Insurance
“What I have come to admire about the people who make up our industry is the ability of agents to change with the times, and adapt to the cards they are dealt.”
Membership Services Coordinator
Brenda Kluger, MBA, CIC, CISR, CPIW brenda@iiaiowa.org • Ext. 14
25 EMC Insurance Co.
29 Grinnell Mutual Reinsurance Co.
Top 10 Contracts For Reporting Agencies
Membership Services Coordinator
14 Burns & Wilcox
Adapting To The Cards That Are Dealt
Page 31
Linda Brazelton linda@iiaiowa.org • Ext. 16
43 Acuity 10 AMERISAFE
Technology & Communications Administrator Jeanne Reynolds jeanne@iiaiowa.org • Ext. 17
Advertisers
by Jeff Bohnenkamp, CIC
Treasurer
Past President
IIAI OFFICE STAFF
“I have never been a proponent of the use of credit scores as an underwriting or rating tool.”
2 Society® Insurance 6 Taylor Insurance Services 26 Truckers Insurance Associates, Inc. 8 West Bend We would like to thank our advertisers for their support. This magazine would not be possible without them. THANK YOU!
by Bob Skow, CPCU, CAE — Chief Executive Officer Page 39
Marie Huggins marie@iiaiowa.org • Ext. 22
Receptionist
Cindy Grim cindy@iiaiowa.org • Ext. 12
MISSION STATEMENT: The Independent Insurance Agents of Iowa will be an unrelenting advocate of the business, professional and political interests of its members; doing so by working in the public’s best interest and with the highest ethical standards.
|president’s message|
Credit Scoring, Who Likes It? Who Needs It? by Jeff Bohnenkamp, CIC
I
have never been a proponent of the use of credit scores as an underwriting or rating tool. I have not believed this is an actuarially sound mechanism such as the “law of large numbers” and the “spread of risk geographically”. The use of credit scores has been a nightmare for the personal lines agents trying to place customer’s coverage and explaining the increased prices in a downturn economy due to the lowering of credit scores. It started with the direct writer personal lines companies buying into the concept of credit scoring in insurance. The industry followed. Then there was the battle to protect and prohibit the sale of expiration dates by the same company that created the credit score mechanism. Across the country, consumers have complained to their respective state insurance departments and commissioners that they don’t like the practice and felt it was discriminatory. At the advent of use of credit scores, companies would share the information of their losses broken down by score with agents. Our agencies experience, when broken out in this manner, did not support the validity of the mechanism. In fact, at that time, our auto insurance customers with the lowest scores had the lowest rate of reported claims. I felt this had to do with the group of customers self insuring physical damage on their vehicles. When money is tighter the physical damage coverage does
not seem to be purchased and therefore not as many physical damage claims are turned in on owned vehicles. Recently a study was released by St. Ambrose University on this very subject to the Iowa Insurance Department. The 44 page study was interesting reading. The title of the study was “Use of Credit Scores by the Insurance Industry: Iowa Consumers’ Perspective”. The survey of 1,200 Iowa consumers was used to determine the attitudes, knowledge and beliefs about the use of insurance based credit scoring. While it is unsure what all can be concluded from the study, there does seem to be two main
points. Iowa consumers do not believe credit scores are a good indicator for the likelihood of a claim to be filed. However, the study concludes that the use of credit scores does reflect the likelihood of one to file a claim. It will continue to be interesting to watch how the study is interpreted and used by the Insurance Department and the Legislature. To the members of the Independent Insurance Agents of Iowa, I wish you all a fun, prosperous, and safe 2010. Thank you again for allowing me to serve as your President.
The survey of 1,200 Iowa consumers was used to determine the attitudes, knowledge and beliefs about the use of insurance based credit scoring. While it is unsure what all can be concluded from the study, there does seem to be two main points. Iowa consumers do not believe credit scores are a good indicator for the likelihood of a claim to be filed. However, the study concludes that the use of credit scores does reflect the likelihood of one to file a claim.
WINTER 2010 |
|5
|national director report|
Adapting To The Cards That Are Dealt by Tom Richardson, CIC
W
e’re starting a new year, and more than likely, a new set of challenges and issues which will affect our businesses. The Insurance industry and small business as a whole has always been about changing and adapting, and I’m sure this coming year will be no different. What I have come to admire about the people who make up our industry is the ability of agents to change with the times, and adapt to the cards they are dealt. Over the years we have dealt with cycles of soft markets, hard markets, no markets and yes, more markets than we could make happy. But in the end, Independent Agents prove year in and year out that they are true entrepreneurs in the small business world. They adapt, they work, and they seem to have the innate ability to go with the flow, make the best of a bad situation, and be productive and effective leaders in their respective community’s. By the time this article is published, there is a very good chance that there will be a health care reform bill that is signed, or about to be signed into place by the President. Regardless of the final makeup of the health care bill, one thing is certain, it will in some way impact Independent Insurance Agents. As of the writing of this article, there was still no final bill to talk about, but however it impacts agents and our industry, we will go forward and make the best of it. I am concerned that
this whole reform process has taken place in just under a year, and so far I believe the only thing that will be accomplished is that health insurance rates will go up for individuals and small business. Yes, we may get more people insured, but as always it seems that middle class America will shoulder the financial burden. Real reform that is so badly needed would mean making health care affordable to all Americans, without placing unnecessary economic burdens on those that are already starting to collapse under the strain of more taxes and less income to spend. This was a chance to have real health care reform, but so far it appears that we have only bandaided the problems and not even begun to solve them. Independent Agents are survivors and
opportunists in an increasingly hostile environment. It’s easy for the Washington DC politicians to make the Health Insurance Industry out to be the villain in the health care reform debate, and we seem to be an easy target to hit. But then, I come back to my original point, and that is the Independent Agent will come through this and figure out a way to thrive and make the most out of whatever form the health care reform legislation takes. We are survivors, and we’ll make the best of it. In fact, I have all of the confidence in the world, that whatever happens, Independent agents will take it in stride, take this new challenge head on, and then go on to solve the next problem. Have a safe and prosperous New Year.
The Insurance industry and small business as a whole has always been about changing and adapting, and I’m sure this coming year will be no different. What I have come to admire about the people who make up our industry is the ability of agents to change with the times, and adapt to the cards they are dealt.
WINTER 2010 |
|7
Tired of doing things the hard way? You won’t be with West Bend. That’s because independent agents believe West Bend makes it easy to do business! A nationwide ease-of-doing-business survey polled 8,600 agents and brokers who ranked West Bend at the top when it comes to providing insurance expertise and support, flexibility in underwriting, accurate and timely policy service, effective and user friendly technology, and fair and properly handled claims. So when it comes to doing business, make West Bend your first call! We’re the easy choice!
YOUR IIAI STAFF
A V A I L A B I L I T Y . P A R T N E R S H I P. A D V I C E
IIAI
In this issue of IIAI Viewpoint Magazine we are featuring profiles on our staff. IIAI is like every organization; the people who work here are key to the daily operation, and dedicate a significant part of their lives to the interests of Iowa Independent Agents.
The employees of the Big “I” focus our call to service on four basic principles. n We do our best to be accurate. We know you expect accuracy and we pledge to do our very best in meeting your expectations. n Availability – while our business hours are from 8:00 a.m. to 4:30 p.m. Monday through Friday, we always attempt to do our best at being available to the membership. Our goal is to return all calls and emails in a timely fashion. n The staff of IIAI partner with you in advocating for independent agents. The collective staff has over 100 years of insurance experience. We all understand the partnership IIAI has with the agents and their agencies that belong. We pledge to do our best to listen to the needs of Iowa’s Independent Agents.
n Advice – Advising and counseling members is something that the IIAI staff strives to perform. We believe our education programs, our communications and availability to visit via phone, in person, or by email all are key services we provide to members. Our website advancements and tools like “Ask the Expert” all are efforts to be here as a resource you can look to for advice. If you have legal issues, E&O concerns, or Buying and/or Selling questions, your IIAI staff is here to assist you. We hope the profiles help you put a face with a name. Everyone associated with the Independent Insurance Agents of Iowa thanks you for your support. Together we make a difference!
The IIAI staff has its own unique mission statement which is: As the staff of IIAI, we strive to make this a premier insurance association. We seek to be advocates for all independent insurance agents in Iowa. We are committed to a quality of service that noticeably exceeds our members’ expectations. In achieving these objectives, IIAI employs a distinctly competent staff and we focus on our continuous improvement, as well as improving the service we give to our members.
Continued on page 11 ‹
WINTER 2010 |
|9
Good Chemistry Creates
SUCCESS
The catalyst for everything we do is making certain that our programs aid our agents in becoming more efficient and profitable, and our products make them more competitive and responsive.
Since 1921
We combine equal parts of experience, strength, and dedication to become a loyal agency partner with our independent agents. Contact us and together we will create a formula for success. • • • • • • • • •
Competitive Rates Attractive Commissions Profit Sharing Contracts Company Trips Upload/Download Capabilities Electronic Funds Transfer Qualified Field Representation Training Department Life and Health Specialists
• Wide Array of Competitive Products (Life, Health, Annuity, Personal Lines, and Commercial Lines) • Agents’ Intranet Site • 24-Hour Claim Call Center with 4-Business-Hour Call-Back Service • One-Call-Does-It-All Roadside Rescue Service • Mobile Claim Office • And, There’s Much More
PEKIN INSURANCE 2505 Court Street Pekin, Illinois 61558 800•322•0160 Extension 2662 www.pekininsurance.com
MELISSA MEINERS
Organize Annual Planning Conference; handle Des Moines Association database; Westown Owners Association; building maintenance and Iowa Cub ticket sales. n What do you like most about your job: I like the planning aspect of my job — but there are times I do wish my life away because I will sometimes wish that a conference or Convention is over due to all of the work that goes into it.
Melissa Meiners Membership Operations Coordinator Melissa@iiaiowa.org 515-223-6060 ext 15 n What you do at the Big “I”: I do a variety of task here at the Big “I” — I handle new IIAI & Affiliate Membership, Dues, Accounting; Convention planning; Rural Agents Conference planning; Young Agents Conference and Agency Management/Technology Expo planning; Education — setting up yearly calendar, organizing classes and finalizing classes; Viewpoint Advertising Editor and proofer;
JEANNE REYNOLDS
Jeanne Reynolds Technology & Communications Administator Jeanne@iiaiowa.org 515-223-6060 ext 17 n What you do at the Big “I”: Primary responsibility is maintaining the IIAI cobranded website. This includes keeping information current and accurate, test hyperlinks for accuracy, keep IIAI staff current on new additions, issue ID’s and passwords when requested, set-up online class registration on the website and set-up and periodically update the annual calendar on the website. Construct and send the semi-monthly Association Newsletter, the Government Affairs Newsletter
n Education: Graduated from North Polk High School in 1987 and attended American Institute of Business; graduated in 1989 with and Office Degree. Received my Personal Lines license in 2002. n Family: I have been happily married to Paul for 18 years this past December. We have two children — Allyson who turned 14 this January and Austin who just turned 9 in December. We also have a cat — Coco — who is the best cat ever! n Most Proud moment: The birth of my kids and marrying Paul! n What you do when you are not at work: We like to do many things — Attending all of our kid’s activities which include soccer, baseball, basketball, softball, volleyball, track and football. When
we are not doing that we like go to stock car races and I also like watch Paul race when he can. We also like to snowmobile which we are enjoying a lot this year in the wonderful state of Iowa. Also enjoy spending time with family and friends. We love to go to Northern Minnesota — where one day I hope to own some property. n Words to live by: My father always said “Life is short play hard!” I live by those words as he is no longer with us and he did play hard up until his final days. n Favorite food: Crab Legs, Steak and Lobster. n Favorite Movie: Dirty Dancing and Grease. n Favorite color: Purple and Green. n Pet Peeve: Slow Drivers and Dishonesty. n Last Book you read: A romance novel by Danielle Steele. n If you could do something else: Stay at home Mom. n Favorite place to go on vacation: Northern Minnesota Ely area in the boundary waters.
three times during the legislative session, and all broadcast emails for newsletters, CE classes, action alerts and other important information. Help plan the Summer Board Meeting including confirmation of the date and location of the event, coordinate the license exam schools. Responsible for the State and National Political Action Committees including entering contributions for both PACs in our database, forward InsurPac checks to National, reconcile the IIAI/PAC checking account and make deposits, write PAC checks to Iowa Representatives/Senators, submit PAC reports to the Iowa Ethics & Campaign Disclosure Board and submit Lobbyist Reports for Bob when required. Assist Melissa with CE classes, includes entering registrations in the database and weekly education deposits. Assist Marilyn with the automatic renewals of the Philadelphia D&O policies.
in Personal Lines. Have experienced over 30 years in the insurance business.
n What do you like most about your job: What I like most about my job is the variety of work and the fact that I don’t do the same things day after day. My job is challenging at times and I have the opportunity to learn something new every day.
n Favorite Movie: Blind Side.
n Education: Graduated from Roosevelt High School, Des Moines, completed oneyear Secretarial Program at Ellsworth Jr. College in Iowa Falls, earned the Certificate of Completion in the Introduction to Property and Liability Insurance course, licensed
n Family: Paul and I own a home in West Des Moines. I have two daughters, Chrissie who lives in Overland Park, Kansas with her husband John, and their two daughters, Emma 8 and Cate 6, and Kim who is single and lives in Dallas, Texas. Kim has a black Lab named Gracie. n Most Proud moment: I will always say the births of my two daughters are my most exciting moments, followed by the births of my 2 granddaughters. n What you do when you are not at work: I enjoy walking/exercise, golf, spending time with family and friends. n Words to live by: Life is a gift, make the most of it. n Favorite food: American and Italian. n Favorite color: Blue. n Pet Peeve: People who exaggerate and are not truthful. n Last Book you read: Mounting Fears by Stuart Woods. n If you could do something else: Not work and have the time and the financial resources to travel to every state in the U.S. that I haven’t already visited. n Favorite place to go on vacation: Arizona (Scottsdale and Mesa).
WINTER 2010 |
| 11
MARILYN PAUL
I have worked in three areas of the Insurance Business, Company, Agency and now Association. It’s great to be able to use that background to assist our agents. I enjoy visiting with them by phone, e-mail and at our events. n Education: High School and some college at GrandView and Simpson. I earned my AAM (Associate in Automation Management) in 1989, AIT (Associate in Information Technology) in 1999 and CPCU 1999, I also have my CPIW (Certified Professional Insurance Woman) a designation presented by NAIW (National Association of Insurance Women).
Marilyn Paul, CPCU, AIT, AAM, CPIW Membership Services Coordinator Marilyn@iiaiowa.org 515-223-6060 ext 11 n What you do at the Big “I”: I work with the Agents Professional Liability Program, assist agents with other IIAI programs, i.e. Big “I” Markets, ASP (Agency Shield Program), E & O Happens and answer miscellaneous questions from our member agents. I am the liaison for the Technical Affairs Committee. Behind the scenes I work with the back office accounting for IASC (Independent Agents Service Corp). n What do you like most about your job: My job has variety, great co-workers and I really enjoy helping our agents.
LINDA BRAZELTON
Linda Brazelton Membership Services Coordinator Linda@iiaiowa.org 515-223-6060 ext 16 n What you do at the Big “I”: My primary responsibility is working with the professional liability program available to insurance agencies through the IIAI. n What do you like most about your job: I really enjoy working with the insurance agencies and helping them with the variety of situations
12 |
| WINTER 2010
n Family: No children, five nephews and one niece all in Arkansas whom I spoil as much as I can. n Most Proud moment: This is tough so I changed to what you might not know about me. I attended Clown Camp in LaCross, WI and although I am no longer clowning I might take up again when I retire. Clown name was “Poppy”. I am an Arkansas Razorback fan and the first IIAI convention I attended Lou Holtz was the luncheon speaker. What a thrill. n What you do when you are not at work: I’m a joiner and belong to 2 organizations, IAGDM (Insurance Association of Greater Des Moines) and Kappa Chi Chapter of Phi Tau Omega Sorority. (National Social & Philanthropic Organi-
involving their agency’s professional liability coverage. Working at the association also provides a great opportunity to interact with others affiliated with the insurance industry. This association does a great job representing the interests of those involved in insurance. The support of the member agencies, company sponsors and those individuals that share their time and knowledge through their participation with our board, committees, education, etc. contribute to the continued success of the association. n Education: Graduated from North Polk Community High School; attended GrandView College in Des Moines, Iowa. n Family: My immediate family is my husband and very best friend, Alan. We celebrated our 36th anniversary in December. We have one son, Tom and his wife, Cami and their children Henry who will be 3 in February and Pearl who was born this past December. I also need to include their beagle, Truman, another very important part of my family! They live in West Des Moines and we are very fortunate to have them living so close to us which allows us to spend as much time as possible with all of them!
zation.) I am an active volunteer in both organizations. At one point I belonged to three organizations but gave up Toastmasters a couple years ago. I love movies, theatre, and all live entertainment. A high light this year was sitting in the front row at the James Taylor concert at the Civic Center in May. n Words to live by: Think you can or Think you Can’t, Either Way You’ll Be Right – Henry Ford. Life is too short to be serious – Unknown. n Favorite food: Artichokes. n Favorite color: Red. n Pet Peeve: When you dining out and the server brings your entrée when you have not finished your salad. People who leave a voice mail and you can’t understand what they say their name is. n Last Book you read: The Last Lecture – Randy Pausch. I also read a lot of mysteries. My favorite mystery authors are Sue Grafton and Robert Parker. n If you could do something else: Something to do with humor and healing. Resident humorist at a hospital or care facility. Children’s librarian. n Favorite place to go on vacation: Europe, New York. There are many states I have not been to so that’s on my “bucket list”.
n What you do when you are not at work: Spend time with family, Travel and Gardening. n Words to live by: Promise only what you can deliver. n Favorite food: Salads. n Most Proud moment: Life is full of moments and they are all memorable. n Pet Peeve: Dishonesty. n Last Book you read: The last book that I read was to our grandson. It was “How Do Dinosaurs Say Good Night?” n If you could do something else: Landscape design or florist. n Favorite place to go on vacation: I’ve been going to Scottsdale, Arizona for 36 years so I would say it’s my favorite place but I also enjoy visiting the wine regions in California.
BRENDA KLUGER
n What do you like most about your job: Getting to work with the variety of agents. n Education: Morningside College: Bachelor of Science in Business Administration, Bachelor of Science in Business Education and Indiana Wesleyan University: Master of Business Administration. n Family: Husband: Monty — Living in Quad Cities and is going to Palmer College of Chiropractic. Dog: Moyra (Derived from names of my grandma, Myrna and Monty’s grandpa, Roy).
Brenda Kluger, MBA, CIC, CISR, CPIW Membership Services Coordinator Brenda@iiaiowa.org 515-223-6060 ext 14
n What you do at the Big “I”: Work on the Errors & Omissions Program doing renewal solicitations, review applications, issue quote proposals and upon receiving request to bind, issue policies. Process checks and prep for deposit. Have made some agency visits.
CINDY GRIM
n Most Proud moment: I enjoy learning and had wanted to get my MBA so made it a goal to do so before I turned 35. After 28 months of classes and just a few weeks prior to my 35th birthday, I received my MBA. It was made special by the fact that my family had all traveled out to Indiana to be there for the commencement ceremonies. n What you do when you are not at work: I am involved in Insurance Association of Greater Des Moines and Junior League of Des Moines so participate in their meetings and
n Favorite Movie: Steel Magnolias as I can. n Favorite color: Blue. n Pet Peeve: Slow drivers. n Last Book you read: Does studying for test for Certified Risk Manager-Practice of Risk Management count? Cross your fingers for me that I passed! n If you could do something else: Commercial Airline Pilot (I haven’t given up on the idea of someday taking lessons and getting my pilot’s license). n Favorite place to go on vacation: Monty and I like to visit new places when we can but if I had to pick someplace to go back to it would be the Mayan Riviera in Mexico or visiting my brother in New York City.
n Favorite food: chicken.
n Education: I graduated from Dallas Center-Grimes High School in 1988. I went to college at the American Institute of Business and graduated in 1990 with an Associate Degree in Business Administration and Office Management.
n Pet Peeve: Continual laziness.
n Most Proud moment: The births of my two children.
n What you do at the Big “I”: I work part-time to accomplish the following tasks: answering the telephone, greeting visitors, filling study manual orders, filing, typing, copying/binding class handouts, preparing prospect or new member binders, and ordering supplies for the office and equipment. I am also the staff liaison for the Young Agents Committee.
n Words to live by: Everyone can use a little help now and then so I try to make it a habit of helping others whether I know them or not, no matter how small the good deed.
n What do you like most about your job: I like the variety of tasks that my position offers.
n Family: Husband Tim, 16-year old son Evan and 13-year old daughter Emily.
Cindy Grim Receptionist Cindy@iiaiowa.org 515-223-6060 ext 12
activities. I also like to scrapbook and enjoy baking.
n Favorite Movie: Shining Through.
n Last Book you read: Marley and Me. n If you could do something else: Accounting/financial work. n Favorite place to go on vacation: I have been fortunate enough to enjoy several vacations through the years, but Chateau on the Lake in Branson, Missouri was an extremely relaxing place. Continued on page 15 ‹
n What you do when you are not at work: I spend a lot of time attending my children’s athletic, choir and band events. My husband and I are active volunteers in the weekly youth program at First Presbyterian Church in Grimes. I enjoy participating with the youth in monthly volunteering for various organizations in Grimes and the Des Moines area. Traveling with my husband and children; watching movies; playing cards; and spending time with family also bring me joy. n Words to live by: “Everything happens for a reason, accept and move on”.
WINTER 2010 |
| 13
Quotes at the Speed of Sound.
Alan Jay Kaufman Chairman, President & CEO
When it comes to protecting your clients, waiting days for a quote just won’t fly. At Burns & Wilcox we have the expertise to write and bind specialized programs with the speed only an internal underwriting department can provide. Do you have brokerage or specialty contract business needs? Don’t wing it. Turn to Burns & Wilcox – the specialty insurance MGA/wholesaler that soars above the rest. St. Paul, Minnesota
651.487.2800 toll free 800.637.7318 fax 651.487.2010 stpaul.burnsandwilcox.com
MARIE HUGGINS
very understanding when you explain why the additional information is requested. n Education: High School plus 13 years in life insurance, 16 years in a P&C agency and 13 years working with the Professional Liability program. n Family: Husband: Lowell and two children daughter Michelle and son Brian. Two grandchildren ages 14 and 11. Also two dogs are a part of the family, a Miniature Beagle and Black Lab and two grand doggies!
Marie Huggins Membership Services Coordinator Marie@iiaiowa.org 515-223-6060 ext 22 n What you do at the Big “I”: In 1996 when the ERC/Westport/SwissRe Professional Liability program transitioned from ERC to the State Association offices, I began working with the E&O program and have continued in that capacity to the current date. n What do you like most about your job: The challenge to stay current on changes and; of course, the interaction with Big “I” members. Our members are
BOB SKOW
Bob Skow, CPCU, CAE Chief Executive Officer Bob@iiaiowa.org 515-223-6060 ext 13 n What you do at the Big “I”: A little of everything! My job is to advocate for and on behalf of independent agents. I lobby, write the newsletter, editor of our magazine, speak, manage the association, and advise and counsel members. n What do you like most about your job: I love the insurance business, and I love politics so I have the perfect job.
n Most Proud moment: I have been blessed in many ways throughout the years and to pick one defining moment is hard. The top of list would be: Marriage, birth of children, children graduating from college and being honored to receive the Big “I”’s Presidential Citation. n What you do when you are not at work: Attend the grandson’s activities; i.e., basketball, baseball, school concerts, and hockey (some out-of state). I also serve as my church’s secretary doing the weekly bulletin and monthly newsletter along with being Membership Secretary and Historian. In 2002 we joined the Excel of Iowa Camping Club and I serve as Secretary/Treasurer for the camping club. My days off are filled with these volunteer jobs. I also like to study my
computer programs to learn the “functionality” and shortcuts of the various programs whether it be on-line demos or just experimenting with the programs. n Words to live by: Don’t make mountains out of mole hills. Be patient, engage brain before mouth. n Favorite food: Homemade noodles cooked with home-grown chicken (not store boughten chicken). It is “fun” to dress your own chickens. Enough said! n Favorite color: Metallic green and rust/bronze were my wedding colors 50 years ago. n Pet Peeve: Those who do not clean up after themselves and leave things the way they found it. n Last Book you read: The Christmas Carol by Charles Dickens. n If you could do something else: Find the time to take advanced computer classes to maximize using existing software packages. n Favorite place to go on vacation: Federal Campgrounds with family when possible.
I find a great deal of enjoyment in representing the business interests of independent agents.
n Favorite food: Spaghetti.
n Education: BS Drake University, Chartered Property Casualty Underwriter designation (CPCU), Certified Association Executive designation (CAE) and 36 great years in the insurance business
n Pet Peeve: Laziness.
n Family: Wife of 37 years Connie, two married daughter Dr. Emily Skow Grant and husband Jared two grandchildren Max and Eva, and Laura Smith and husband Neal and grandchild Rowan…oh and 17 wonderful Labrador Retrievers!
n If you could do something else: Member of U.S. Congress.
n Favorite color: Blue.
n Last Book you read: First, Break All The Rules by Marcus Buckingham and Curt Coffman…every agency manager should read this book.
n Favorite place to go on vacation: Belize or England.
n Most Proud moment: Not just one, but the top ones would be getting married, birth of my two daughters, being elected to the Iowa House of Representatives at age of 27, my Eagle Scout award at 8 days past my 13th birthday. n What you do when you are not at work: I love living in the country, live on 45 acres in rural Dallas Co, spending time with the family and dogs. n Words to live by: Do onto others as they want to be treated.
WINTER 2010 |
| 15
DON’T GET BITTEN BY AN E&O CLAIM YOU COULD HAVE AVOIDED. Big “I” members whose agency E&O insurance is written by Swiss Re through the Big “I” Professional Liability Program have access to an exclusive risk management web site. Log on today to fish for E&O claims frequency data, real-life case studies and analysis, sample client letters, sample agency procedures, agency E&O self assessments, podcasts on important E&O topics, and much more.
Big “I” Risk Management Website
www.independentagent.com/EOHappens
security breach laws and your
responsibility
to protect sensitive
client data “
An insurance agency maintains more
private and personal information about their clients‌than just about any other business type. Agencies face growing exposure and liability if the information in their care
�
is compromised.
by Steve Anderson
Reprinted from the December 2009 issue of TAAR with permission from The Anderson Agency Report (www.taareport. com). For additional information about Client Information Security visit www. ClientInformationSecurity.com.
A
s of November 18, 2009, there have been 512 confirmed cases of a business, university, or government agency compromising the personal information of individuals in their care. This represents over 11 million records that have been breached. An insurance agency maintains more private and personal information about their clients (personal lines, group and individual health, and commercial lines) than just about any other business type. Agencies face growing exposure and liability if the information in their care is compromised. There are both federal and state laws that require an organization to take appropriate steps to make sure that private client data is kept private. It is important to note that these regulations include the insurance industry (companies and agencies) under the definition of “financial institution.” Don’t make the mistake of thinking that these regulations only apply to banks. Following is a short description of these laws.
Gramm-Leach-Bliley (GLB) Act The GLB Act includes two privacy rules— the Financial Privacy Rule and the Safeguards Rule. The Financial Privacy Rule enforces financial institutions to protect information collected about individuals. The Safeguards Rule requires insurance companies to have reasonable policies and procedures for the security of customer information. These policies and procedures must be appropriate to the company’s size and complexity, the nature and scope of its activities, and the sensitivity of the customer information it handles.
Health Insurance Portability and Accountability (HIPAA) Act HIPAA’s Security Rule requires organizations to ensure the confidentiality, integrity, and availability of all electronic protected health information (ePHI) that is created, received, maintained, or transmitted by the company. They must also protect against any reasonably anticipated threats or hazards to the security or integrity of such information and protect against any reasonably anticipated uses or disclosures of such information that are not permitted or required.
HITECH Act of 2009 On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (aka the Stimulus Bill) was signed into law by the federal government. Included in this law is a provision that is intended to be used to increase the use of Electronic Health Records (EHR) by physicians and hospitals. Part of this act requires “reasonable security policies and procedures to protect computerized data containing personal information,” as well as nationwide notice in the event of a security breach.
The Advent of State Laws California was the first stare to enforce a data security breach notification law in July 2003. As of October 2009, only five states in the United States do not have a state-specific data security law: Alabama, Kentucky, Mississippi, New Mexico, and South Dakota. All other states have since implemented similar laws modeled after the California law. A brief look into the California law provides a glimpse of the data security breach laws across the United States. Any personal, non-public information that has not been encrypted and includes a person’s first name or initial and last name plus a wide variety of data, including Social Security number, driver’s license number, or financial account number, in combination with any password that would permit access to a financial account, is covered by the California statute. Any entity that conducts business in California and owns, licenses, or otherwise maintains computerized data about a customer or client located in California is subject to these statutory provisions. The law states that companies must notify any resident of California whose unencrypted personal data were, or are reasonably believed to have been, acquired by an unauthorized person that a security breach has taken place. We see from these examples that insurance agencies have a lot to lose in case of data breaches. The most glaring drawback is the time, effort, and tremendous amount of money that has to be spent for investigation, corrective action, and litigation. Private customer data leakage may also attract heavy fines from regulatory authorities. Such incidents also influence customer perception and lead to loss of trust. This results in customers moving over to the competition, ultimately eroding the business value of the organization. Therefore, it is of extreme importance that confidential data is identified, protected, and destroyed appropriately. It is also vital that the security structure of the organization is taken seriously, because the security of an organization is ultimately only as strong as its weakest link. The rest of this article provides some basic details on the areas to consider while securing information within your agency.
WINTER 2010 |
| 19
|security breach laws| What data needs protection? The first step in securing your organization from data breaches is to identify the data that needs to be protected. Note that information could be present in physical or computer format. Data used by the agency must be first classified based on the information value of the data, criticality of the information, and the impact in case of its breach. Classification should be applicable to all information, whether stored or transmitted, which is in the possession or under the control of the agency. Typically, classification of information can be a combination of their CIA (Confidentiality, Integrity, and Availability) criteria. Based on an information asset’s classification, a security plan can be designed for data that needs to be protected. For example, in the figure below, controls to secure data can be determined based on the colored groups. Information that is Highly Confidential, Highly Unstable, and Highly Critical falls under the “Highest Level of Security” group and will be fully protected using the strongest set of information security controls. Information that is Public, Highly Stable, and Non Critical falls under the “Lowest Level of
lose in case of data breaches. The most glaring drawback is the time, effort, and tremendous amount of money that has to be spent for investigation, corrective action, and litigation… Such incidents also influence customer perception and lead to
”
loss of trust.
Security” group and does not need to have any security controls.
Steps to Protect Client Data
Take stock—what personal information do you maintain? The first step in protecting data is to have complete
control of the data stored or transmitted within the organization. An inventory of all “Highest Level of Security” information, and the software, applications, hardware, services, or other assets that interact with this information during storContinued on page 23 ‹
Confidentiality
Integrity
Availability
Highly Confidential
Highly Unstable
Highly Critical
Confidential
Unstable
Critical
Departmental
Unsteady
Vital
Internal
Steady
Sensitive
Public
Highly Stable
Non Critical
Highest level of security
20 |
“
…insurance agencies have a lot to
| WINTER 2010
Moderate level of security
Lowest level of security
Š 2008 SECURA Insurance
Success is finding an advantage. If you want to win, you have to come prepared. Agents know this. That’s why so many choose SECURA to grow their business. Please call us at 1-800-558-3405. Write your own success story.
|security breach laws| age, transmission, or destruction, should be maintained.
Scale down—keep only what you need. Data minimization is the practice of eliminating unnecessary information stored by an agency, organization, and/or individual for the purpose of decreasing risk of information and, possibly, identity theft. Recommendations for proper data minimization include: Don’t acquire information unless it’s needed. Minimize the number of places where information is stored and retained. Purge data once the need for it has expired. For most insurance organizations, the more you know about a client or a prospect, the better. There may be very little you can do to reduce the scope of this type of data. However, any other data used in the organization should be re-looked at from an importance perspective. This will mostly include data that falls under the Public, Highly Stable, and Non Critical classifications, but could also include other categories. For example, keep only as much employee detail as is required by law. Learn about where information is stored. This may include databases, digital documents, physical paper documents, computer printouts, etc. for a single piece of information. Try and reduce this redundancy so that you maintain only original and backup copies as far as possible. Once data is no longer required, it should be destroyed. This may include insurance policy schemes that have been scrapped more than five years ago, or details of clients who have died more than seven years ago (data relating to ex-clients may still be maintained as they could still be potential clients for a new product), or financial information from 10 years ago.
“
…keep only as much employee detail as
is required by law.
”
Lock it—Protect the information. As discussed before, data protection depends on CIA criteria. Ideally, all the controls stated below will be applicable to information in the “Highest Level of Security” group. This includes personal customer data. Information that forms part of other groups should be secured by a subset of these controls, based on their classification.
Policies and procedures Information security policies ensure that a standard level of information security is maintained across the organization. They demonstrate management’s resolve to implement controls and checks to secure data. They serve as a reference to follow when new processes and new types of information make their way into the organization. Procedures contain the steps required to accomplish what the policies aim to achieve. Procedures contain the exact method of implementing information security controls that an organization wishes to follow. This top-down method ensures a uniform approach to data protection and maximizes its effectiveness.
Access control Data stored in digital form must be protected at all points of access. The following controls can be implemented for optimized security. User Account Management: User credentials required for access to various information systems should consist of a user ID and password or other credential (such as digital certificates, token, etc.) that is unique to an individual. Common user IDs should not be issued to multiple users when it is technically and functionally feasible to provide individual user IDs.
Privilege Management: Minimum
privileges required for every job function and role should be identified based on discussions with the functional teams. Privileges should be allocated to individuals based on the requirements of their job function and role and on authorization from appropriate personnel. Additional privileges should be allowed after getting approval from appropriate personnel. Password Management: User
passwords should remain confidential and not shared, posted, or otherwise divulged. However, the system administrators may share power-on passwords of PCs, as the same PCs are shared among them in different shifts. Monitoring Access: User activities
should be logged by the operating systems, agency management system, applications, other databases, and network elements. This may be extensive logging, but to reduce system load and performance degradation, restrictive logging and monitoring of critical commands can be configured. User Access Policies: A policy
should be created, making the user aware of their security responsibilities by the acceptable use of systems and infrastructure. The objective of the policy should be to ensure security of the information and information resources they interact with. Network Equipment: All network
equipment and communication lines should be identified, documented, and updated regularly. Encryption: Data flowing through
public networks has to be securely channeled. Encryption ensures
WINTER 2010 |
| 23
|security breach laws| that data is not sabotaged in such cases. Encryption of stored data also protects data when storage devices are stolen. At a minimum, Transport Layer Security (TLS) should be used whenever possible. Backup and Recovery: All appli-
cation and operating system software, data (including databases), application and operating system configuration information, hardware configuration information (where applicable), and log files/logs from various systems that need to be backed up should be identified. Backup data should be provided for recovery after appropriate approvals. Anti-virus: All possible and feasible measure should be taken to prevent the introduction of viruses and malicious software into information systems. Physical Security: Physical access to information processing areas and their supporting infrastructure (communications, power, etc.) should be controlled to prevent, detect, and minimize the effects of unintended and unauthorized access to these areas. Media Handling: A stock or inventory of all media should be maintained. All movement of material going in
24 |
| WINTER 2010
and out of premises should be authorized and tracked. Personnel Security: The organization should ensure that personnel at all levels are required to contribute to maintaining an appropriate level of Information Security. Background checks should be performed on all personnel (including temporary personnel and contract personnel) performing sensitive or critical job roles before they are selected for the position or transferred to the position. Pitch—Properly Dispose: Any information that is of no use to the agency for business purposes should eventually be discarded. HIPAA states that any record which contains client protected health information must be maintained for a minimum of six years. A retention policy should be charted based on these as well as agency requirements. Plan Ahead: Create a plan to respond to a security incident. After a breach, many companies don’t know what to do. If a breach occurs, the ability to respond must be timely. Companies only have about 30 days or less. It is thus essential for an agency to have a sound incident management plan in place.
Insurance coverage available Implementing the controls described above tremendously reduces the risk of a data breach to an agency’s data. However, it does not entirely eliminate the possibility of a breach. An organization may not be able to implement all controls due to financial or other business reasons. A new virus, an unknown backdoor, an intelligent hacker, or a disgruntled employee may find a way to violate an organization’s data. It is unlikely that a general liability, business owners, or agency errors and omissions policy will provide coverage to an agency to help pay for the consequences and expenses associated with a data security breach. There are a growing number of data security breach policies that have become available that you should consider in order to provide some level of protection for your organization.
Final thought This issue is not going to go away. The insurance industry, and especially agencies, needs to review their internal data security controls and create a plan for effectively protecting private client data.
I used to think EMC was ju st for niche commercial programs. Then again, I used to think babies
came from storks. MAKE EMC YOUR CHOICE FOR MAIN STREET BUSINESS
When you think main street business, start thinking about the EMC Choice® Businessowners Program. Small and midsize businesses will enjoy the flexible coverage options designed to meet their specific insurance needs, the added value of free loss control services, plus the responsive service from an EMC branch office nearby. So if you still think EMC is just for niche programs, think again. Count on EMC ® for your main street commercial lines marketing, too. For more details, contact your local EMC branch office.
Des Moines Office: 800.362.2227 | Home Office: Des Moines, IA
www.emcinsurance.com
© Copyright Employers Mutual Casualty Company 2009 All rights reserved
driven
Steady and true Insurance coverage for the transportation industry can sometimes be unknown territory. But a partnership with Truckers Insurance Associates provides clear direction. Truckers Insurance is solely focused on transportation insurance — and has been for over 65 years — so we know every turn, every twist and every hard-to-see pothole. Whether your clients include a single owner-operator or a full-fledged fleet, Truckers Insurance will deliver the right coverage at the right price. With knowledgeable service and innovative solutions from Northland, Carolina Casualty, Zurich, Maxum, The Hartford, and Dakota Truck, working with Truckers Insurance can make for a very smooth ride. Call Truckers Insurance at 800.652.9515 for a quote today.
www.truckers-insurance.com
TI-CORP00056 AA&B Ad.indd 1
800.652.9515
8/7/09 9:29:07 AM
ARE YOUR
EMPLOYEES EXEMPT OR NON-EXEMPT?
by Al Diamond
The FLSA (Fair Labor Standards Act) requires three things to make an employee exempt, compensation above a weekly minimum ($455/wk or $23,600/yr), the employee must be salaried, as opposed to hourly and must perform “certain” exempt duties. While there are no standard reasons for making employees exempt or non-exempt, many agency owners over-simplify the decision based only on whether the employee would or should receive overtime pay. And some employees would like to be considered exempt, over-simplifying the reason for being salaried as avoiding potential loss of income if they are not able to work the full work week. Others, who work longer hours, want to be hourly to be eligible for overtime pay for time worked over 40 hours. But, in fact, most agency employees are, by DOL (Department of Labor) definition, non-exempt, regardless of how agency owners or employees would like to view themselves or each other. And, if you think that no one notices, here are a few statistics:
1. In 2005 there were 5,290 FLSA complaints registered. In 2008, the number of complaints were more than 23,000.
2. The results of FLSA complaints recently cost U.S. businesses individually over $120 million in back wages.
3. State Farm was fined $135 million and Allstate paid $120 million in class action suits for adjusters when the companies tried to make them exempt from overtime.
4. Countrywide Financial paid $30 million when they claimed account executives were exempt.
There are five classes of possible exempt employees: Executives — must earn no less then $455/wk or $23,660/yr, must manage the agency or a division or department as a primary part of their job, must have the authority to hire, fire, evaluate and set compensation for employees (giving evaluations is not, in itself, sufficient) and must manage at least two employees. Professionals — May be one of three types, Creative (artists, musicians, etc. – that does not apply to agencies, Computer (primarily system analysts or programmers, so repair and maintenance employees don’t count as exempt), and Learned (intellectual and advanced knowledge in a field of science or learning specifically that requires consistent exercise of independent discretion and judgement). This area has been attempted for use by
Reprinted from the PIPELINE, the national newsletter for agency principals, by permission of Agency Consulting Group, Inc. a leading consulting firm for Independent Agents in the U.S. for 27 years. Call 800-779-2430 for information or subscription; e-mail, info@agencyconsulting.com; website, www.agencyconsulting.com
agencies to exempt service employees. If the employee must follow guidelines (like system requirements or underwriting requirements) they will be treated like the claims adjusters who were judged to be non-exempt since they must follow their companies’ claims guidelines in their adjustment efforts. Moreover, jobs in which most employees gain their skill and knowledge by experience does NOT qualify for
WINTER 2010 |
| 27
|are your employees exempt or non-exempt?| exemption. Most agency staff would be considered technicians (also not permitted to be exempted). Computer — must earn either $455/wk salary or $27.63/hourly AND must have primary duties systems analysis, computer systems programming or design — well out of range of most computer employees in agencies. Administration — Primary duties must be related to the management or (non-manual) general business operations with independent discretion and judgment on significant matters with primary responsibility for keeping the business running. It would be very difficult to include most agency administrative staff in these definitions of exemption. Outside Sales — This is a good opportunity for exemption of sales employees, but, he warned, IT APPLIES ONLY TO OUTSIDE SALESPEOPLE (primary
28 |
| WINTER 2010
responsibility selling and working with clients and prospects primarily outside of the office)! The issue with producers is the general use of 1099 independent contractor agreements (trying to avoid payroll tax loads and T&E expectations) for people who the IRS will categorize as agency employees. If you provide desk space, benefits, working hour assignments, prospects, clients and expectations of production (goals, monitoring, management, etc) and maintain ownership of the accounts generated for 1099 producers and if they only work for your agency, the chances are that, in an audit, these people will be considered agency employees and you will face fines and penalties. Producers have no minimum compensation levels and they can be paid in any way (including pure commission) and still be considered agency employees by the government oversight bodies.
RECENT QUESTIONS TO AGENCY CONSULTING GROUP, INC. REGARDING PRODUCERS AND EXEMPT EMPLOYEES: I have had a producer on commission only as a 1099 independent contractor for years. He is devoted to selling insurance for us and is a sub-producer on our agency management system. He works his own schedule, can either work from his office at our agency or from home, can work or not based on his initiative and either earns commission or not based on his sales activity. He can work as few or as many hours as he wants and it doesn’t directly affect his compensation. He pays his own T&E and schedules his business expenses on his own tax return. We give him a fair commission on his sales. The good news is that you can certainly pay him straight commission and he is by definition exempt from overtime issues
|are your employees exempt or non-exempt?| since his role is in outside sales. The bad news is that, by IRS definition, he is an employee, meeting most (if not all) of the qualifiers of an employee. Just because a person is on commission doesn’t mean that they are (or are not) qualified as employees. Just because a person is a producer doesn’t automatically make them an exempt employee (they must be “outside” salespeople to become exempt). We have three owners in our agency. My partner and I own 45% each. He is the primary outside salesperson for the agency. I run the agency. We recently gave our most loyal and important (to us) customer service representative 10% of the agency to reward her, give her a stake in the agency for its growth and her retirement
benefit and to protect us from competitors trying to take her from us. We are all exempt, of course, as executives and professionals — aren’t we? Ownership does not necessarily make an employee an executive or not, professional or not and is not, in itself, an equivalence to exempt status. Many employees of major corporations purchase stock in their company. That certainly does not make them executives, nor does it change their exempt/non-exempt status as an employee. Most small to medium sized agencies do not have professional HR managers who understand FLSA rules. More than 70% of small businesses in the U.S. would fail on FLSA Audit. Your best bet to avoid this situation is to perform an annual selfaudit, or have Agency Consulting Group,
We are all exempt, of course, as executives and professionals — aren’t we?
Inc. audit your FLSA Exemption Status specifically indicating the exemption status and the rationale for each employee. A business may correct any deficiency through the Safe Harbor provision of the Act that permits employers to correct improper deduction mistakes without losing an employee’s FLSA exempt status. This indicates your good-faith efforts to ward off double damages to those misclassified exempt employees.
WINTER 2010 |
| 29
|Agency E&O|
Agency E&O Considerations When Using Social Media
&O
CY E
AGEN
by Sabrena Sally, CPCU Senior VP, Westport Insurance Corporation
Article Synopsis: A lot has been written about how agencies can use social networking tools to enhance their online marketing and market reach. This article explores how the use of social media can impact the E&O risks agencies face and recommends specific steps agencies can take to mitigate those risks, so that the agency can get the full benefit out of these new tools.
N
ot a day goes by without my email containing an invitation to join a social networking site. Whether used for business contacts, maintaining contact with friends and family, or to reconnect with acquaintances from years past, the use of social networking sites is rapidly increasing. According to one Internet research firm, 2008 saw the use of social networking sites overtake email by Internet users across the world. Much discussion has taken place on how to best harness the power of social networking for the benefit of your insurance agency. ACT and other organizations have written extensively on the power of social media to enhance agency online marketing and to generate “virtual” referrals. The focus of this article, however, is to examine the risks that agencies need to take into account when they take advantage of these opportunities to broaden their reach. I will examine the more common errors and omissions risks that can be associated with the use of social networking, along with steps you can take to mitigate those risks. If you are not familiar with social networking sites, here is a brief discussion of the most common functionalities. This is
by no means all-inclusive, as the technology changes daily. Most sites offer the ability to create a home page following a template provided by the site. Depending on the site being accessed, the profile template may be limited to key information you wish to be known about your agency along with an uploaded photo, or it can be as robust as a site containing multiple photos, videos, and links to other sections of the site (as well as to other sites) containing additional content you have created and posted. Users of the site typically invite other users to join their community, and the invitee is free to accept or decline. Most sites also offer blogs, chat rooms, forums, and search capabilities to help locate other users based on your chosen search filters.
Rules of the Site Posted privacy statements and user agreements are standard on social networking sites, and most also include a list of “dos and don’ts” to follow when using the site. Although containing lengthy legal terminology, it is in your best interest to fully read a site’s user agreements and privacy statements before agreeing to the terms of usage. User agreements tend to be very broad in favor of the site owner, commonly giving the rights to the site to use all content posted by users, and retaining the right to remove, discard or withhold user posted information at any time. User agreements usually state that the site assumes no responsibility to monitor disputes between users, and contain hold harmless/indemnification agreements in favor of the site for damages suffered by the site as a result of
content posted by a user or as a result of any actions of the user while using or misusing the site. Now, let’s assume you have read the user agreements, privacy statements, and “dos and don’ts” of a site you have chosen to use. You are ready to sign up. But wait! Don’t hit that submit button too quickly. Instead, take some time to consider what type of errors and omissions exposures your agency may face by using the site.
Overview the E&O Exposures The exposures can range from advertising, contractual liability, defamation, offering erroneous recommendations, and may even extend to antitrust issues. These are not new exposures to your agency, but the nature of social networking sites does impact errors and omissions exposures in several ways. Information entered on social networking sites is able to achieve instantaneous worldwide distribution in a matter of seconds. An electronic record is also created which can survive indefinitely. In addition, discussions taking place on these sites tend to be more casual and take place more quickly than even email communication, making it easier for a statement to be taken out of context. Let’s drill down to the most common errors and omissions exposures faced by agencies using social media.
Contractual Liability The user agreement on the site most likely contains a requirement that you Continued on page 33 ‹
WINTER 2010 |
| 31
Just a guppy
when it comes to selling flood?
www.iiaba.net/Flood
Don’t be shy - Big “I” Flood is here to help. There’s a lot to understand when it comes to flood insurance. We admit it! From changing flood zones to determining the best level of protec�on for our client, there is a lot to navigate. So even though you’re a big fish when it comes to selling other coverages, flood can make you feel like a guppy! But don’t let this prevent you from offering flood coverage to your clients. We’re here to help you understand and sell flood. Big “I” Flood provides: ACCESS - In, Above & Outside of the NFIP! EDUCATION - Classroom CE or the new Flood Learning Center on VU ADVOCACY - Representa�on on Capitol Hill & NFIP advisory commi�ees Learn more at www.iiaba.net/Flood, or contact Big “I” Flood Program Manager Linda Mackey at linda.mackey@iiaba.net or (800) 221-7917. Let us explain how we operate in, above, and outside the NFIP!
FLOOD In, Above, and Outside the NFIP!
|Agency E&O| hold harmless and indemnify the site. The agreement at one popular site is quite broad, stating: “you shall indemnify and hold us harmless from any damages, losses and costs related to third party claims, charges or investigations, caused by your failure to comply with this agreement, including without limitation your submission of content that violates third party rights or applicable laws, caused by any content you submit to us, or caused by any activity in which you engage through the site.” That provision in itself is amazingly broad, but it becomes even more so when you look at the definition of the site agreement. The site agreement in this particular case states that you must comply with all applicable laws, the “dos and don’ts” posted on the site, the notice and take-down procedures of the site, the site privacy policy, and any other notices of the site.
other advertising identifier as part of their personal social networking site. Does that then constitute advertising for which the agency can be held liable? That question has yet to be settled. The agency’s exposures from advertising on these sites can be mitigated by following the same legal vetting process as is used for traditional advertising. An agency procedure should also be established that addresses to what extent employees have permission to link to the agency’s sites, or use the agency name, logo, or other advertising material on their personal sites (more on this procedure later). Loss Control Tips: • Be sure your agency advertising on the site complies with all statutory and regulatory guidelines. • Establish an agency procedure addressing employee linking to agency sites
or use of agency name, logo, or other advertising on their personal social networking sites.
Defamation Most social networking sites feature blogs, chats or forum discussions. Participating in these discussions can present exposure to defamation, or in this case libel since the discussion is in written form. Your agency has always faced exposure to defamation from verbal discussions and written communications. On social networking sites, however, discussions taking place on blogs and in chat rooms or forums tend to be less formal, may include more opinion than fact, and tend to move quite rapidly between many parties. In fact, the popular site Twitter limits text comments to no more than 140 characters. The end result is that it is much easier to make a statement that is taken
Loss Control Tip: • Read the user agreement, privacy statement, and “dos and don’ts” thoroughly. Consult with your legal counsel if needed to be sure you have a full understanding of the liabilities to which your agency is agreeing.
Advertising Liability You most likely will create some type of agency home page, so let’s look next at advertising exposures. The insurance regulations in several states specifically mention Internet advertising. For example, this excerpt from NY L Circular Letter No. 5 (2001) is both specific to Internet advertising and broad in scope: “Advertisements that appear on the Internet are subject to all applicable existing statutory and regulatory guidelines and restrictions applicable to advertisement in any other medium.” It is clear that the same level of care should be given to agency advertising on social networking sites as is given to the agency’s traditional advertising. Where the line can easily be blurred, however, is when an individual agency owner or employee uses the agency name, logo, or
WINTER 2010 |
| 33
|Agency E&O| out of context. Unlike verbal discussions, comments made on the inter-active features of social networking sites or in blogs that accompany online articles are captured electronically and can be stored indefinitely, further exacerbating the issue of less formality. Keeping in mind that commercial speech — speech which proposes an economic transaction — if entitled only to limited First Amendment constitutional protection, there is a real question as to the level of First Amendment protection business representatives will receive when they write or respond to a blog. The Answer is not yet clear. As this area continues to develop, you would be well served to consult with legal counsel experienced in First Amendment law for guidance on creating the agency’s policy regarding the content you will permit on blogs on your agency’s behalf.
34 |
| WINTER 2010
Loss Control Tip: • Consult with qualified legal counsel for guidance on the agency’s policy on blogging.
Privacy Issues Closely tied to defamation is public disclosure of private facts, which occurs when someone reveals information that is not of public concern, and the disclosure of the information would be offensive to a reasonable person. The interactive spaces on social networking sites are not secure spaces for discussing personally identifiable information.
Agency Procedures for Social Web Use Agency procedures for social networking should require employees to keep their discussions professional and they should distinguish between statements of fact versus those of opinion. Comments that can be construed as leading or participating in attacks on either individuals or businesses should be avoided. Employees should limit their focus to a generalized discussion of an insurance topic. When a discussion becomes specific as to an identifiable risk or individual, it is no longer appropriate for an interactive space, and should be moved offline. Once moved offline, a discussion specific to an identifiable risk or individual should then move into the agency’s established work flow process. This provides the standard servicing and documentation that would occur
had this discussion taken place in person, via phone or within email. Loss Control Tip: Establish written agency procedures addressing employee use of social networking sites, including: • Who within the agency has permission to participate on behalf of the agency. • Define acceptable behavior (professional, fact versus opinion, no leading or participating in attacks on individuals or businesses). • Employee sites should make clear they reflect their own views and not those of the agency. • Identify when a discussion should be moved offline and into a agency work flow. • State the consequences of noncompliance. • Incorrect Advice. Agencies face exposure every day when rendering or failing to render professional services. Operating in the virtual world of the social web is no exception. Whether it is the advertising of agency services provided as part of the agency home page or comments made in a chat area discussion, the standard of care in providing professional services is no less than what exists in more traditional venues. The standard disclaimers used on your agency’s voice mail, email, and website should also be used on social networking sites. The same agency procedures your staff follows regarding risk analysis, recommendations, and documentation also apply to all content and discussions on social networking sites. As mentioned above, the interactive features of social networks do provide unique challenges. The written procedures your agency establishes to address social networking will not only guide agency staff behavior while using these sites, but will also help protect your agency against allegations of errors and omissions. Continued on page 36 ‹
|Agency E&O| Loss Control Tips: • Use standard disclaimers such as those used in voice mail, email, and on website. • Be clear in the agency’s procedures that established processes and work flows apply to all discussions and service focused on an identifiable risk or individual or business generated through the social network site. Armed with an awareness of the main errors and omissions exposures that can arise from use of social networking sites, you are almost ready to take advantage of the opportunities presented while still protecting your agency against unexpected exposures. But before getting started, give careful thought to what your goals are in using these tools. Do you plan to use sites such as Facebook or LinkedIn more as another venue in which to advertise your agency? Or, are you considering
36 |
| WINTER 2010
jumping in with both feet and actively participating in or running an interactive discussion to generate new “fans” who can become prospects? Once you have decided on your goals, consult with qualified legal counsel. By following the advice of qualified counsel that is specific to your planned use of these sites, and applying the loss control tips I just discussed, you will be ready to enjoy all the benefits of social networking with the peace of mind of knowing you have taken steps to mitigate the risks. This article is intended only for educational or illustrative purposes and should not be construed to communicate legal or professional advice. You should consult legal or other professionals with respect to any specific questions you may have. Further, the statements and/or opinions contained are those only of the author
and do not constitute and should not be construed to constitute any statement, opion or position of Swiss Re. Sabrena Sally, CPCU is Senior Vice President of Westport Insurance Corporation, a Swiss Re company who manages the Big “I” Agency Professional Liability Program. Sabrena can be reached at sabrena_sally@swissre. com Sabrena produced this article for the Agents Council for Technology (ACT), a part of the Independent Insurance Agents & Brokers of America. For more information about ACT, visit www.independentagent.com/act or contact Jeff Yates, ACT Executive Director at jeff.yates@iiaba. net. This article reflects the views of the author and should not be construed as an official statement by ACT.
IIAI’s Top 10 Contracts for Reporting Agencies Agencies with Commissions of $300,000 or Less Agencies Listing Contracts
408
Wellmark Sagamore
Allied
Rain & Hail
Continental Western
EMC Progressive Farmers Mutual Hail
Iowa Mutual
Grinnell Mutual Reinsurance
IMT
Number of Reporting Agencies Listing: Progressive 240 Allied 145 EMC 119 IMT 116 Rain & Hail 86 Grinnell Mutual Reinsurance 85 Farmers Mutual Hail 81 Iowa Mutual 72 Continential Western 55 Wellmark 54 Sagamore 54
Agencies with Commissions of more than $300,000 Agencies Listing Contracts
273
United Fire & Casualty
Allied
Progressive Auto-Owners
Continental Western
Iowa Mutual
IMT
Number of Reporting Agencies Listing: Progressive 217 Allied 185 EMC 152 Continential Western 113 IMT 106 Auto-Owners 84 United Fire & Casualty 77 General Casualty 72 Iowa Mutual 67 Grinnell Mutual Reinsurance 64
EMC Grinnell Mutual Reinsurance
General Casualty
WINTER 2010 |
| 37
more commission. more rewards. more reasons to Prefer Progressive.
earn higher commission and put Progressive’s marketing power to work for your agency with the Progressive Signature Agent program Signature Agent is a new rewards program for independent agents in Iowa*. To qualify, sell an average of one policy per week to preferred customers. That’s someone who owns a home, has a good driving record, and has continuous insurance with no lapse. HigHer commission is only tHe beginning
Progressive Signature Agents are rewarded with numerous special benefits including: 15/12 commission on preferred personal auto A $2,000 annual marketing allowance for exclusive Signature Agent goods and services SM
An appointment to sell the Progressive Home Advantage and Personal Umbrella – both offer 15/12 commission Increased opportunity to put Progressive’s marketing power to work for your agency become a signature agent
Ready to learn more? Contact your Progressive account sales representative.
©2009 Progressive Casualty Insurance Company and its affiliates, Mayfield Village, Ohio. *The Signature Agent Program is not available in all states. For a list of states it is available in contact your Progressive account sales representative. 09A00214.IA _IA (11/09)
09A00214.IA_IA_Sig_Agent_7.5x10.083.indd 1
11/23/09 1:23:19 PM
|the last page| I was recently asked by an insurance company marketing person “Are Agent Associations an Endangered Species?” I responded “What?” He said it appeared to him that “The Iowa Big ‘I’ was kind of the lone survivor when it came to local operated agent’s associations.” Huh! I had never thought about it, but he was kind of right. The Independent Insurance Agents of Iowa is the only agent’s trade association operating in the state with an official office and staff.
Are Agent’s Associations An Endangered Species? Are Independent Agents Endangered? by Bob Skow, CPCU, CAE - CEO
I
was recently asked by an insurance company marketing person “Are Agent Associations an Endangered Species?” I responded “What?” He said it appeared to him that “The Iowa Big ‘I’ was kind of the lone survivor when it came to local operated agent’s associations.” Huh! I had never thought about it, but he was kind of right. The Independent Insurance Agents of Iowa is the only agent’s trade association operating in the state with an official office and staff. That caused me to start doing a lot of thinking. The very future of the indepen-
dent agent delivery system could be at risk. As insurance companies demand more volume we are seeing an alarming number of mergers and acquisitions. Could the companies be causing the shrinking agency universe by demanding more volume? Could reductions in commissions, increase in workload, and growing overhead costs be driving agents to consolidate? Could loss of population in rural communities be causing agencies to merge? I guess the answer is yes to all of these. One thing is clear with fewer agencies
comes two critical problems; shrinkage of insurance industry grassroots, and loss of dues dollars for agent trade associations like the Big “I”. The Independent Insurance Agents of Iowa is one of the strongest state agent associations in the country. We have almost every independent agency in the State as a member; today the membership is 710 agencies, and almost 300 branch offices. We own our building; in fact, we have rental income which helps with operational costs. We are strong and viable; we mirror the membership we represent. Our success and future is dependent on yours! Included with this article are two pie charts showing where your association income comes from and where we spend money. A few items are important to note, first dues income accounts for 37% of our operating budget. Of the dues we collect, 35% goes to the National Association meaning we only retain about 65% of your dues here in Iowa. Our minimum dues are $350 and $200 of the $350 goes to our parent organization, the Independent Agents and Brokers of America (IIABA). Our maximum dues category is $1,750 and $751 of those dollars goes to IIABA. So, as you quickly see, we need more than dues dollars to keep our door open. Our dues income for the first
WINTER 2010 |
| 39
|the last page| time in years dropped in 2009. But the amount we owe to our national association basically remained the same! Education programs account for 14% of our income, but account for 12% of the expenses. In 2009, we basically broke even on education. We discovered it takes a minimum of 63 students for us to pay the bills for a class. We continually get requests to hold classes at more locations, but reality is that is just not economically feasible. Many members choose to attend alternative CEC programs which take away from our programs making them even more difficult to cash flow. Let me ask, does a class put on by St. Ambrose, Drake, or one of the community colleges cost you less…the answer is no. In fact, they cost more! Do the alternative providers advocate for you with the public, carriers, and regulators? Will they provide you with valuable information and assistance when you call? Of course everyone knows the answer…no! We
have witnessed an increase in insurance companies providing free classes, on-line competition, and a growth in programs like CIC which all take students out of our classes making it difficult to pay the costs. IIAI will not be increasing our education fees in 2010. We will continue to provide you lunch (virtually no one does this in their fees), top speakers, and topics important to you. We remain committed to providing our members excellent education programs at affordable and discounted fees. But we can only do so if our membership sends their staff to our classes. The third major source of income for operating your Association comes from your business partners, the companies. Between program sponsorship, and ads in our magazine they account for a critical 12% of our revenue. So please thank them, support them, and respond to their ads in IIAI Viewpoint Magazine without company support there would be no
Big “I” as we know it. The last major source for operating income is the Errors & Omissions programs we offer at membership discounted rates. We offer Fireman’s Fund, UTICA and Westport (Swiss RE). Our E&O program accounts for 8% of our income, but it also accounts for significant staff expenses. The IIAI nets a very small amount of margin in handling members E&O. But, it does allow us to create a volume of business that helps us develop a pool of expert witness, great defense counsel, and resources to help you avoid liability losses, and design risk management programs for independent agents. The E&O program is a key component for our continued success. When you look at our expenses it should be no surprise that staff salaries are like your agencies is the single largest expense. We have a great staff with over 100 years of combined insurance experience, two CPCU’s, an MBA, CIC, and
Conducting business in today’s marketplace is not for the faint-hearted. We recognize that every decision must reflect our dedication to continuous improvement. Our associates understand this need, and they are meeting the challenges daily. We offer tools to help your agency navigate the stormy insurance industry climate. How about a company that: • has competitive, family friendly personal lines products • has local district sales managers with full underwriting authority • fully supports the independent agency system • has been providing innovative commercial products to the Midwest for over 100 years Proudly exceeding expectations—every time, every day. Interested in knowing more about Iowa Mutual? Contact Jack Dunning, Vice President, Marketing, at 800-456-5259, extension 3253; at Iowa Mutual Insurance Company, 509 9th Street, DeWitt, IA, 52742; or at jack.dunning@iowamutual.com. Iowa Mutual is proud to be associated with Independent Insurance Agents & Brokers of America and to participate in its programs.
www.iowamutual.com
40 |
| WINTER 2010
|the last page| everyone is licensed except our receptionist. These talented people make the IIAI one of the most successful agent trade associations in the industry. A significant amount of money has been allocated to our marketing program. Hopefully you have seen our ads on T.V. The Big “I” Trusted Choice advertising program represents 16% of our expenditures for 2010. The ads explain to Iowans the value an Independent Agent brings to their communities, someone they can trust and someone who gives them choices…your Trusted Choice Independent Agent. We think promoting the value of using an agent is key to your success. Our survey in 2008 indicated a vast majority of our membership wanted us as an organization do a better job of telling consumers the value you bring to them when they purchase insurance from an independent agent. The Trusted Choice T.V. campaign is your association’s response to that call. While the IIAI remains a strong voice for Iowa’s independent agent community, we know we need to continue to do better. You can help us by doing the following: • Encourage every independent agency in the state to belong. We have approximately 60 who do not. And most important, we need you to continue your support of IIAI. • Attend IIAI CEC programs, go to our State Convention in September, and attend the Rural Agent & Small Town Agency Conference in January each year. Participate in our EXPO, and encourage those under 40 to go to our Young Agents Conference in May. We need your support of our programs! • Use the Iowa Big “I” for your E&O coverage. We have the three top markets and will save you money. If you are not insured with one of our programs, give us a chance to quote — you’ll be glad you did! • Thank the companies who help sponsor your association’s programs and advertise in IIAI Viewpoint Magazine. If they aren’t a program sponsor ask them why.
IIAI’S INCOME E&O Program 8% Company Sponsorships 9%
Dues 37% Education Class Fees 14% Publications (Study Manual Sales) 4% Rental Income - Tenants 5% Golf Tournament 1%
Affiliate Dues 3% Convention Registration 5%
Investment Income 2% Viewpoint Advertising 3%
IIAI’S EXPENSES Property Building Office Supplies Taxes & Printing 2% 2% Maintenance & Repair Other 2% 2% Postage/Telephone National IIABA Dues & Utilities 2% for Members 13% Insurance 1% Educational Expense 12%
Big “I” TV Advertising Program 16%
Convention Expense 7%
Computer Expense 1% Auto & Travel 1% Audit & Accounting 1% Employee Insurance 2% 401K 2% Payroll Taxes 1%
Viewpoint Expense 3% Study Publications Expense 2% Lobbying Expense 1% Staff Salaries 21%
Without company support we would have to increase our dues and fees for our programs. The company support is critical. • Allow us to email you! A surprising number of agents will not give us their email address. Using email allows us to do two important things: save money and communicate rapidly. If you are not receiving your newsletter, and updates from us by email, please contact us today. Help us do a better job of communicating with you and your staff.
Convention Golf Tourney 1%
Board/Officer Travel & Meeting Expenses 5%
Together we make a difference. IIAI spends significant resources lobbying, attending meetings representing independent agents, advocating on your behalf with the companies, and telling your story. If we weren’t here doing that…who would be? The IIAI is the last remaining voice for the Iowa agent community…a strong voice because of your support! No, we are not an endangered species! IIAI is a strong and vibrant voice for Iowa’s independent agents and together independent agents will remain Iowa’s strongest insurance marketers!
WINTER 2010 |
| 41
You’re an independent agent.
Don’t forget your helmet.
The Big “I” Professional Liability Program Prevent.
Our risk management resources keep your agency from making common preventable mistakes.
Protect.
Our superior coverage and expert claims teams are in your corner in the event of a claim.
Prosper.
When you know you have the best E&O protection, you can focus on growing your most important asset–your business.
The Big “I” and Swiss Re are jointly committed to providing IIABA members with leading edge agency E&O products and services. The IIABA and its federation of 51 state associations endorse Swiss Re’s comprehensive professional liability program.
www.independentagent.com/EO
Insurance products underwritten by Westport Insurance Corporation, Overland Park, Kansas. Westport is a member of the Swiss Re group of companies and is licensed in all 50 states and the District of Columbia. ©2008 Swiss Re
trust. acuity.com
INDEPENDENT INSURANCE AGENTS OF IOWA 4000 Westown Parkway, Suite 200 West Des Moines, Iowa 50266
PRSRT STD U.S. Postage Paid Des Moines, IA Permit No. 2538
IIAI SPONSORS
Listed are the companies who strongly support the Independent agency system and the Independent Insurance Agents of Iowa.
PLATINUM Allied Insurance EMC Insurance Companies The IMT Group Independent Agents Service Corp. Iowa Mutual Insurance Co. Pekin Insurance Progressive Insurance
SILVER Farmers Mutual Hail Ins. Co of Iowa GuideOne Insurance Indiana Insurance Merchants Bonding State Auto Insurance
BRONZE Accident Fund/United Heartland Acuity Berkshire Hathaway Homestate Companies General Casualty
GOLD Continental Western Group Grinnell Mutual Rain & Hail LLC United Fire Group
LeMars Insurance Company North Star Mutual Insurance Co. RDS Group SECURA Insurance Selective Insurance Co of America West Bend Westfield Insurance
THANK YOU FOR YOUR SUPPORT!