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The Oregon Agent • Fall 2016
Independent agents throughout your area Count on EMC ® for a number of reasons. • 100-plus years of commercial lines experience. • Expert loss control services. • Responsive service delivered by a fully-staffed branch office. Let us show you how EMC Insurance Companies can work for you. RACHEL KUNTZ, CPCU, AU, AINS Commercial Lines Senior Underwriter EMC Bismarck Branch
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IndependentInsAgentsOfOregon_7.375x9.875_WinMoreBusiness_Rachel.indd 1
www.emcins.com © Copyright Employers Mutual Casualty Company 2016. All rights reserved.
8/1/2016 11:56:04 AM Fall 2016 • The Oregon Agent
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FALL 2016
Agent
Page 10
CONTENTS
OREGON
Page 14 Page 22 IIABO Office 5550 SW Macadam Ste 305 Portland, OR 97239 Phone: 503-274-4000 Fax: 503-274-0062 Toll Free: 866-774-4226
Page 25
Page 30
IIABO Staff Directory Executive Vice President Jim Perucca jimp@insureoregon.org
Sr. Vice President Marketing & Communications Barb Demings barbd@insureoregon.org Vice President Education & Finance Tyra Dressel tyra@insureoregon.org Asst. Vice President Agency Products & Services Abby Kahl abbyk@insureoregon.org IIABO Lobbyist Roger Beyer roger@rwbeyer.com
6
A Letter from the New IIABO President, Kay Hunkapillar
8
IIABO 2016 - 2017 Leadership
10 “A Rejection Form, a Rejection Form, My Kingdom for a Rejection Form” 13 E&O Risk Management Course Information 14 4 Reasons Millennials See Insurance as a Lifelong Career 18 The DOL Overtime Rule: Q&A 22 Succession or Perpetuation?
For more information on advertising, contact : Jim Aitkins Blue Water Publishers 22727 161st Avenue SE Monroe, WA 98272 360-805-6474 fax: 360-805-6475 jima@bluewaterpublishers.com
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The Oregon Agent • Fall 2016
25 E&O and Recording Phone Conversations 28 How to Bring Youth Into Your Agency 30 You Don’t Know What You Don’t Know ADVERTISER INDEX
The Oregon Agent is a publication of the Independent Insurance Agents and Brokers of Oregon and is published quarterly by Blue Water Publishers, LLC. IIABO reserves the right in its sole discretion to reject advertising that does not meet IIABO qualifications or which may detract from its business, professional or ethical standards. IIABO and Blue Water Publishers, LLC do not necessarily endorse any of the companies advertising in the publication or the views of its writers. The publisher cannot assume responsibility for claims made by advertisers, content provided by the editor, or for the opinions expressed by contributing authors.
Anchor Bay Anderson and Murison Burns & Wilcox Contractor Connection EMC Insurance Grange Insurance Association Griffin Underwriting
17 29 7 15 3 5 2
Imperial PFS Liberty Mutual Mutual of Enumclaw Preferred Property Program RT Specialty Ron Rothert Ins Services Western National Ins Group
12 32 31 17 16 24 11
“Strength, stability, and security are principles that GIA had when they founded the company and these are still used day to day in their practices.” Kristi Roots Krtisti Roots Insurance
We value the
independent agent.
Interested? Let’s talk. Grange Insurance Association only partners with Independent Agents. Why? Because these agents are uniquely qualified to offer trusted advice and superior customer service. Independent Agents also know the value of personal relationships. And so do we, which allows us to provide the tools and support to help you succeed. Because better coverage means more satisfied customers. Call us today. California • Colorado • idaho • oregon • Washington • Wyoming
For information, contact us at (800) 247-2643 Visit us online at grange.com Fall 2016 • The Oregon Agent
5
FROM THE IIABO PRESIDENT
Kay Hunkapillar
President, Wheatland Ins. Ctr., Inc.
I
It was an honor to be elected last month to serve as your president of the IIABO. Our 88th Annual Convention was held again this year at the Eagle Crest Resort in scenic Central Oregon. If you haven’t attended this event in recent years, I encourage you to plan now to bring your family and enjoy next year’s convention. There are plenty of activities for the family to enjoy while you catch up with friends and make new acquaintances among the independent agent community. I want to extend a huge Thank You to our Title Sponsors, Liberty Mutual and Safeco, as well as all the other company sponsors and exhibitors who helped “Make It Happen”. Their generous support of the IIABO enables us to bring meaningful education and special events to our members throughout the state. Patrick Galvin’s workshop gave everyone attending fresh ideas on how to grow their agencies “one relationship at a time.” His energetic style was both motivating and educational! This year we were very excited to see the Young Agents group come together again. Their energetic leadership team promises to bring together young talent throughout our state for networking opportunities and educational seminars.
banquet was followed by the unique and highly entertaining comedy of Dwight Slade. Tuesday morning’s popular Champagne breakfast was followed by a presentation by Brian Fordham, manager of the Oregon Insurance Division Consumer Education and Outreach section, during which he explained some of the unique insurance challenges dealing with the emerging cannabis industry. Some upcoming events you won’t want to miss: November 16, 2016, E&O Risk Management brought to you by Westport/SwissRe and IPFS; Our Annual Forecast Breakfast Thursday, January 12, 2017, with renowned economic forecasting expert John Mitchell PhD; And don’t forget the popular MidWinter Education Symposium, March 9 & 10, 2017 at The Inn at Spanish Head in Lincoln City, which includes 12 hours of quality continuing education with a spectacular view of the Oregon Coast! Our association welcomes new members, and our awesome association staff would love to hear from you! On a personal note, I want to express that our Executive Vice President, Jim Perucca, has been touched by the outpouring of love and support following his recent automobile accident. Your cares and concerns are truly appreciated by Jim and his family. Kay Hunkapillar President IIABO Wheatland Insurance Center, Inc.
The Out To Pasture Animal Sanctuary once again benefited from many generous raffle donations. Monday evening’s
Your association staff: Executive VP
Jim Perucca
503-274-0583
jimp@insureoregon.org
Sr. Vice President
Barb Demings
503-274-4000 ext. 26
barbd@insureoregon.org
Vice President
Tyra Dressel
503-274-4000 ext. 31
tyra@insureoregon.org
Asst. Vice President
Abby Kahl
503-274-4000 ext. 23
abbyk@insureoregon.org
Toll Free Numbers:
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The Oregon Agent • Fall 2016
1-866-77-IIABO or 1-866-774-4226
CHOOSE A CHAMPION Congratulations Jimmy Walker
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Brokerage | Binding | Commercial | Professional | Personal | Risk Management Services Fall 2016 • The Oregon Agent
7
2016 - 2017 IIABO LEADERSHIP The IIABO Board of Directors is a diverse group of insurance professionals representing the varied interests of agents throughout the State of Oregon. We would like you to learn more about these volunteer leaders and the years of experience they bring to the association.
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Kay Hunkapillar President, IIABO President, Wheatland Ins. Ctr., Inc. Pendleton, Oregon - 46 years
Brett Slater President Elect, IIABO Chief Operating Officer, Slater & Assoc. Insurance, Inc. Tualatin, Oregon - 26 years
Steve Smelley Vice President, IIABO Chief Operations Officer, PayneWest Insurance Beaverton, Oregon - 25 years
Trish Fulwiler Past President, IIABO President, J.D. Fulwiler & Co. Portland, Oregon - 24 years
TJ Sullivan Legislative Chair, IIABO Huggins Insurance Services Salem, Oregon - 18 years
Keith Blackerby Finance Chair, IIABO Chief Operating Officer, Bisnett Insurance Offices throughout Oregon - 28 years
Ed Davis National Director, IIABO Maps Insurance Services Salem, Oregon - 49 years
Lyndsay Kooistra Young Agents Chair, IIABO LaPorte Insurance Portland, Oregon - 14 years
Mark Atkinson Board Member President, Atkinson Insurance Group Portland, Oregon - 25 years
The Oregon Agent • Fall 2016
Debbie Flores Board Member KPD Insurance, Inc. Springfield, OR - 29 years
Gary Githens Board Member Data Breach Specialist Brown & Brown NW Bend/Portland, Oregon - 35 years
Greg Horner Board Member Commercial Lines Producer, Insurance Partners, LLC Portland, Oregon - 20 years
Joe Hubbard Board Member Managing Partner, The Protectors Insurance Medford, Oregon - 31 years
Marty Kantola Board Member Owner, Chet Hill Insurance Portland, Oregon - 30 years
Debbie Krambeal Board Member President, CAL/OR Insurance Specialists, Inc. Brookings, Oregon - 32 years
Matthew Pidcock Board Member Co-Owner, Valley Insurance LaGrande, Oregon - 17 years
John Timm Board Member President, Timmco Insurance, Inc. Portland, Oregon - 39 years
Brian Wilbur Board Member Owner, Pacific Insurance Partners Forest Grove, Oregon - 21 years
Insurance carriers and service providers do not serve on the IIABO board of directors, but support the association as Associate Members, Sponsors and Exhibitors. If you want to learn more about the IIABO, or if you would like to get involved, please contact any of these individuals. If you are not a member, please email Jim Perucca, jimp@insureoregon.org for information on membership.
Fall 2016 • The Oregon Agent
9
A cautionary tale with apologies to William Shakespeare By Richard F. Lund, JD
I
In his play “Richard III”, William Shakespeare relates the tale of King Richard III in which Richard is unhorsed on the battle field at the most crucial moment. In a desperate attempt to save himself, he cries out: “A horse, a horse, my kingdom for a horse!” Unfortunately for Richard, no horse is delivered and Henry dispatches him, succeeds to the throne as Henry VII and marries Princess Elizabeth of the House of York. This very famous story highlights how one asset can be the most important factor in determining the success or failure of a person, especially when timing is critical. For Richard, it was his horse. For you as an insurance agent, while not as noble or glamorous, it can be the coverage rejection form. While certainly an agent won’t lose his life without this form, the financial impact can be devastating. And to the contrary, if such a form is in obtained, not only may it save the day, it may also be financially rewarding if you are insured by Swiss Re Corporate Solutions. A case in point: In 2011, an agent was retained to procure personal auto liability and umbrella coverage on behalf of his customer. The policy had UIM limits of $250,000/ $500,000 aggregate and an accompanying umbrella policy had a $1MM limit. At that time, according to the agent, the
10
The Oregon Agent • Fall 2016
customer signed a UM/UIM rejection form for the umbrella policy. Under this particular state law, an applicant must execute a signed UIM waiver form during the application process in order to waive UIM coverage under an umbrella policy. Additionally, the agency agreement with the insurance carrier expressly stipulated that the agency retain for the period specified in the underwriting requirements, all original, signed applications, driver exclusions, selections and rejections of optional coverage, premium discount documents, vehicle inspection reports, and power of attorney. After the primary and umbrella policies were issued, the customer was involved in a serious accident that resulted in a significant brain injury. The claimant sought the full $1MM umbrella limit from the carrier. (Notably under the law of the state, if an insurer fails to pay a first party UIM claim within thirty days, it may be subject to the assessment of double damages). The carrier contacted the agency to determine if any such waiver existed and after a thorough search, none was found. The carrier was required to pay the $1MM limit of the umbrella policy and then tendered a $1MM policy limit indemnification demand against the agency. Due to the agency’s inability to locate the waiver and the language of the agency agreement, the claim was paid.
We can help with both. With friendly underwriters who listen, and a full complement of products to serve your small-to-mid-size commercial insurance needs (including enhanced BOP, surety, and packaged coverages), Western National is your one-stop shop for getting business done. The proof is in the partnership.
Fall 2016 • The Oregon Agent
11
There are two key points to remember from this tale: the first is to always read your agency agreements thoroughly and be fully aware of their terms. The explicit language of the agreement was that it was the agency’s duty to retain copies of certain documents and in particular to this case, the waiver of coverage form. Therefore, liability for indemnity to the carrier was absolute. Had the agency read and understood this provision, perhaps better care would have been taken to ensure that the document was retained. When you are presented with any written agreement that you must sign in order to be able to do business with a company, be sure to read the document thoroughly and if you have questions concerning the provisions, consult with your own attorney to review and advise you of any provisions you may not understand. In many instances, some provisions may be negotiated if you or your attorney do not believe they properly state or protect your interests.
Hopefully this has given you a little help so that when you are on the battlefield in your everyday business, you won’t end up like Richard III crying out “A Rejection Form, a rejection form, My Kingdom for a rejection form!” This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re”) and/or its subsidiaries and/or management and/or shareholders.
The second key point is to properly document and retain rejections of coverages. Offers of higher limits can, and would have *Richard F. Lund, JD, is a Vice President and Senior Underwriter in this case, prevented a significant exposure in which a claim of Swiss Re/Westport, underwriting insurance agents errors and was later made as it related to the coverage limit. And, if you omissions coverage. He has also been an insurance agents E&O are insured under a policy issued by Swiss Re Corporate Solu- claims counsel and has written and presented numerous E&O tions/Westport Insurance Corporation, you may reap a finan- risk management/ loss control seminars, mock trials and articles cial benefit. Under the Deductible Reduction feature of the nationwide since 1992. policy, if an insured agency generates and maintains contemCopyright 2013 Swiss Re poraneous written documentation of a customer’s refusal to accept any type of coverage or limit recommendation made by the agency, and there is subsequently a claim alleging a failure to secure such recommended type of coverage or limit, then 50% of the deductible relating to that claim will be waived up to a maximum of $12,500, or until dismissal of the allegations, whichever is first. For example, in the case THE INDEPENDENT INSURANCE AGENTS & BROKERS OF OREGON MATTER TO US. above, if the agency had the signed That’s why Imperial PFS,® the leading source of premium funding for the IIABO membership, has been waiver in its file, and an action was located in the Pacific Northwest for more than 30 years. In addition to a strong local business, we are brought against the agency and costs dedicated to Customer service and delivering advanced technology to better serve YOU. were incurred, the agency would have Our stable and experienced team finds creative solutions to help address your needs and grow your books been responsible for only 50% of their of business. For more information on how Imperial PFS® can help you, contact: deductible. Had the deductible been $10,000 for example, the agency would Darren Eversole: 971.246.8575 | email: darren.eversole@ipfs.com have saved $5,000, perhaps enough to buy a horse!
LOCAL SERVICE
LOCAL VALUES
For more information about how to properly document your files, go to www.iiaba.net/eohappens and look under “Prevention Tools”. To learn more about the coverages that you should be offering to your customers, look for the “Virtual Risk Consultant” as well. 12
The Oregon Agent • Fall 2016
Connect with us anywhere, anytime using your Android or iOS device! Using a QR code reader app, scan the QR code above, or go to www.ipfs.com.
Visit us online at www.ipfs.com or download our mobile app.
Fall 2016 • The Oregon Agent
13
4
M
Reasons Millennials See Insurance as a Lifelong Career By Morgan Smith
More than three-quarters of millennials view insurance as a lifelong career and 82% are optimistic or very optimistic that the industry will evolve to attract the next generation, according to Vertafore’s Millennial Revolution survey. After surveying 3,000 young professionals—10 times last year’s respondent pool—the second annual report found work-life balance and technology to be top traits of overall job satisfaction for millennials in insurance. And whatever the industry is doing seems to be working: 77% of millennials plan to stay in the industry as long as possible. “Without having a silver bullet, a few key things [for agencies] to recognize is the types of environments and opportunities that are attractive to millennials in the first place,” says Guy Weismantel, vice president of marketing at Vertafore. “Our industry is well set up to have a lot of those things that people are looking for that are going to be attractive to them: freedom, responsibility, work-life balance.”
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The Oregon Agent • Fall 2016
What’s contributing to the long-term outlook? Here are four things independent agencies are doing right: Work-life balance. The survey found that work-life balance and compensation (both 98%) are the most important factors keeping millennials around, with enjoyment of work (96%) as a close follower. “The flexibility in our industry allows for different working models,” Weismantel says. “At a very basic model, it’s the ability to work from anywhere and be connected to your customers and understand what’s happening with claims, policy renewals and prospecting for new business. There’s a lot of flexibility that millennials we know in general really regard very highly in career choices.” Personal relationships. It’s hard to imagine someone jumping into the independent agency business if they aren’t a people-person, and millennials are no different. Developing close personal relationships with
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clients is a tried and true characteristic of the business, and it’s a trait Gen Y seems to value. “[Millennials] really value the personal relationships they develop and find that the insurance industry is a place that allows them to have those types of interactions and flourish in that,” Weismantel says. “Because it’s a very relationship-oriented business, oftentimes they have the opportunity to get out on the front line a lot sooner. If they’re on the producer side, they can really start to develop a client list and start to run their own business.” Embedded technology. Weismantel says last year’s survey revealed that the industry was “on the threshold of a tipping point” when it came to technology and improving millennial’s work experience. Looks like the industry paid attention to the generation’s expectations: This year’s results reveal positive results from the investment. “What’s happened in the succeeding 12 months is that technology is now becoming embedded in business process and now it’s a way for people to do business,” Weismantel says. “It’s gone from ‘I want my agency to be investing in technology to help me do business’ to ‘Technology is now how we do business.’” Social engagement. Millennials are reaping the benefits when using tech and social media to engage with potential customers and foster potential relationships: 34% of millennials use social media for lead generation and new business. It’s another segment that has seen a surge in involvement when compared to last year’s results as agencies are taking note of the benefits. Because the young generation is already so digitally involved—71% use their smartphones for work and 82% feel technology increases efficiency and the competitive edge—agencies who want to recruit the generation for fresh perspectives, engagement style and succession planning should stay digitally savvy. But 18% of older survey respondents still view technology as a detriment to productivity. “I think we see some inhibitors to widespread adoption, but I don’t know if it’s conflict as much as it is just generational resistance,” Weis16
The Oregon Agent • Fall 2016
mantel notes. “We do see a generational dividing line in terms of how the technology is being used, but less about a conflict and more of a different kind of channel that I think agencies are starting to adopt to attract these younger people to buy insurance in the first place when more and more of that’s a challenge for many agencies.” If the industry is to successfully compete against directs or outside industries for a boost in millennial employment and satisfaction, agencies need to take note. Weismantel says Vertafore has seen more and more agencies really start to tout their technology as a recruitment differentiator. “With digital sophistication being so high amongst millennials, there is an open, green field for younger people to chart a course,” Weismantel points out. “And that’s really appealing to a younger person because there’s not an inherent plan in place that they just have to follow and go do paint by numbers. They’re having a lot of ability with creativity to go after finding new customers. The use of technology not only arms them with great devices, for instance, but how technology is being used to attract and retain new customers—that’s a really strong message to get people involved.” Morgan Smith served as IA assistant editor.
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“With digital sophistication being so high amongst millennials, there is an open, green field for younger people to chart a course,”
Agents and brokers, for more information please contact: Sue Brennan - President P.O. Box 2011 Edmonds, WA 98020 (425) 954-2322
Ed Bukovinsky - President 1200 Fifth Ave., Suite 1910 Seattle, WA 98101 (206) 708-2000
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R-T Specialty, LLC (RT), a subsidiary of Ryan Specialty Group, LLC, provides wholesale brokerage and other services to agents and brokers. RT is a Delaware limited liability company based in Illinois. As a wholesale broker, RT does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from surplus lines insurers. In California: R-T Specialty Insurance Services, LLC License #0G97516. ©2016 Ryan Specialty Group, LLC
We Haven’t Raised Our Rates in 10 Years... Restaurant, Bar & Tavern Program Can your current pub, tavern & sports bar market make that claim?
We’ve had a restaurant, bar and tavern program for ten years and right now – today – it is Since 2000, have written program restaurants, pubs,accounts, taverns &wesports morewe competitive thananit exclusive has ever been. Onon “target” (preferred) have bars beenin Alaska, Oregon,consistently Washingtonable and,tomore recently, in Colorado. We've written over 10,000 policies and $50 beat expiring pricing by 20% and more and our bind-to-quote ratioover is more million inthan premium in this class of business. 70%. We’re stable. We’ve been with the same carrier for over 10 years and our loss and loss expense ratio is the–six priorfor to submitting this advertisement, we have only lost two renewals and right at In 40% so weeks we’re here the long haul. our written premium versus the same period in 2009 has more than doubled. Our application We have great rates. Because we have been so profitable, we haven’t been forced to take the big rate flow is up more than five-fold. Most accounts are quoted within 4 to 48 hours. increases that have plagued our competition. We haveOur a strong form. Wenon-admitted are usually silent on policy Assaultform & Battery on the we offer several carrierpolicy is rated A- IX, and our is strong. ThisCGL is a and package policy other coverage advantages over our competition. that includes Property, General Liability and Liquor Liability. We have a Property broadening dohave not exclude Medical Payments. Battery is of usually included We are endorsement. growing rapidly.WeWe a very high “hit ratio” and, inAssault the first&six months the year, our written limitation or over sublimit target premiumwithout is up almost 40% laston year. Weaccounts. do rushes.We offer Food Borne Illness coverage with sublimit. Our commission level is generally much higher than our competition’s. Regrettably, we are unable to consider nightclubs, adult entertainment, accounts with liquor serving issues or, in Oregon only, about accounts moreincluding than 75%program liquor. No or distressed business For details the with program, andsubstandard target account eligibility criteria, andplease. an
7.5X4.625 application, please visit: http://www.surpluslines.com/products/restaurant-bar-tavern.asp General JGS Umbrella Program ad We compete favorably with all the major programs!
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The DOL Overtime Rule:
Q&A
Background The federal law that regulates employment issues for most employees is the Fair Labor Standards Act (FLSA).1 The FLSA is enforced by the Department of Labor (DOL) Wage and Hour Division. The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees. States also have their own employment rules and regulations that may impose additional or different requirements beyond the federal requirements. On May 18, 2016, the DOL released an update to the regulation that exempts certain employees from overtime and minimum wage requirements, commonly referred to as the “white collar” exemptions.2 In short the rule requires that almost all employees who make less than $47,476 annually be paid overtime. However, workers who make more than $47,476 annually and meet certain requirements would be “exempt” and not generally entitled to overtime. Unless exempt, employees covered by the FLSA must receive overtime pay for all hours worked over a 40 hour workweek at a rate not less than one and one-half times their regular rates of pay. Under the updated rule, the $47,476 threshold will be automatically updated every three years, starting in 2020. The new rule will usher in sweeping changes to overtime regulation and require many employers to pay overtime to employees who were not previously legally entitled to overtime (i.e. exempt employees who currently make between $23,660 and $47,476). Employee salaries and overtime eligibility status must be reviewed and adjusted, as needed, to comply with the new rule. Below you will find a list of questions and answers that cover the changes to the overtime rule that will take effect on December 1, 2016, as well as basic information on how the changes interact with current law under the FLSA, as it is applicable to Big “I” member agencies.
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The Oregon Agent • Fall 2016
Who is exempt from overtime under the “white collar” exemptions? Effective December 1, 2016, with the exception of the narrowly defined outside sales exemption, to qualify for one of the “white collar” exemptions, employees must first earn a salary of at least $913 a week, or $47,476 annually. Currently, the salary threshold is $455 a week, or $23,660 annually. This means that any FLSA covered employees, except for outside sales employees, who earn less than $47,476 must be paid overtime for all hours worked over a 40 hour workweek at a rate not less than one and one-half times their regular rate of pay.
Executive (i.e. manager) To qualify for the executive exemption all of the following job duties requirements must be satisfied: (1) primary duty4 must be managing the business at which the employee is employed, or managing a customarily recognized department or subdivision (2) must customarily and regularly5 direct the work of at least 2 full-time employees or their equivalent (i.e. 1 full-time employee and 2 parttime employees) (3) must have authority or influence over the hiring, firing, or employment changes (i.e. promotions) of other employees Note: Certain business owner can satisfy an abbreviated version of the executive exemption requirements. 6
exemption. The “duties tests” for the “white collar” exemptions were not amended by the new rule, only the salary threshold was changed from $23,660 to $47,476. So the current laws and rules for the “duties test” will continue to apply moving forward. The “duties tests” for executive, administrative and outside sales exemptions (those exemptions most common for insurance agencies) are outlined below. The classification of any individual employee is a case-by-case determination. Also, there are two other “white collar” exemptions, the requirements for which are not covered here. Those exemption are the professional exemption which applies to learned professionals (i.e. practicing doctors or lawyers)
Administrative
Outside Sales
To qualify for the administrative exemption all of the following job duties requirements must be satisfied:
To qualify for the administrative exemption all of the following job duties requirements must be satisfied:
(1) primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s costumers
(1) primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s costumers
(2) primary duty must include the exercise of discretion and independent judgment with respect to matters of significance
(2) primary duty must include the exercise of discretion and independent judgment with respect to matters of significance
Note: Employees whose primary duty is inside sales do not generally qualify as exempt administrative employees. 7
Note: Employees whose primary duty is inside sales do not generally qualify as exempt administrative employees. 7
Generally, earning a salary means that an employee receives regular predetermined amounts of compensation each pay period and the predetermined amount cannot be reduced during that pay period because of variations in the quantity or quality of one’s work.3 Commissions alone cannot satisfy the base salary threshold. However, as explained further below, up to 10% of the minimum salary requirement can be satisfied by commissions under the new rule. If an employee earns a salary of at least $47,476 on an annual basis that employee is still entitled to paid overtime for all hours worked over a 40 hour workweek at a rate not less than one and one-half times their regular rate of pay, unless the employee qualifies for one of the “white collar” exemptions by satisfying the “duties test” for that individual
and creative professionals (i.e. actors or musicians), and an exemption for computer professions, such as a software engineer. The new rule also amended the compensation requirements for another exemption called the “highly compensated employee” (HCE) exemption. Effective December 1, 2016, under the HCE exemption an employee must earn at least $134,004 a year in total compensation. This is a 34% increase from the current threshold of $100,000. The “duties test” for the HCE exemption requires that the employee’s primary duty be office or non-manual work and the employee must customarily perform at least one of the duties or responsibilities of an executive, administrative, or professional employee. Fall 2016 • The Oregon Agent
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How are agency employees impacted by the new rule? While the rule did not make changes to the “duties test”, it is prudent to take this opportunity to review current employee duties and job descriptions for both those employees impacted by the rule and those who are not to ensure all employees are properly classified, and to periodically review employee status moving forward. •
•
•
•
For any employee who is properly classified as non-exempt (i.e. overtime pay is required), no change is required under the new rule, regardless of employee compensation. For any employee who is properly classified as exempt (i.e. overtime pay is not required) under either the administrative, executive, professional, or computer exemption and who makes less than $47,476, that employee’s status must be changed to non-exempt and overtime must be paid for all hours worked over a 40 hour workweek at a rate not less than one and one-half times their regular rates of pay, or their salary must be raised over the threshold. For any employee who is properly classified as exempt under either the administrative, executive, professional, or computer exemption and who makes more than $47,476, no change is required under the new rule. For any employee who is properly classified as exempt pursuant to the narrowly defined outside sales exemption, no change is required under the new rule, regardless of employee compensation.
How are producers impacted by the new rule? Producers—who are designated by the agency as employees and not independent contractors—will be impacted by the rule just as any other employee (as explained above), dependent on their current salary and status. There is no specific exemption from the FLSA for insurance sales.10 Whether or not producers are classified as exempt outside sales employees, exempt administrative or executive employees, or as non-exempt employees is a case-by-case determination that will depend on the agency and that individual producer’s specific job duties.11 Can commissions be counted toward the salary threshold? Yes, under the new rule employers for the first time will be able to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the $47,476 salary threshold, provided those payments are made on a quarterly or more frequent basis. If an employee does not earn enough commissions during a given quarter, an 20
The Oregon Agent • Fall 2016
employer may make a “catch up” payment no later than the next pay period after the end of the quarter. Any such “catch up” payment counts only toward the prior quarter’s salary. The new rule does not give specific date ranges for what the DOL considers to be a quarter. Under the HCE exemption, $47,476 of the $134,004 salary threshold must be earned on a salaried basis, however, the remainder of the salary can be earned from nondiscretionary bonuses and incentive payments (including commissions). Examples of nondiscretionary bonuses or incentive payments would be individual or group production bonuses.12 Commissions are considered nondiscretionary incentive payments as such payments are generally based on a prior contract or understanding and employees generally have a contractual right to the commission promised.13 Can comp time be offered in lieu of overtime pay? No, private sector employees are not permitted to offer comp time (i.e. extra time off for extra hours worked above a regular 40 hour workweek) in lieu of monetary overtime pay legally required under the FLSA. Comp temp can be offered generally, but not as an alternative to legally required overtime pay. How will the automatic updating of the salary threshold work? The new DOL rule puts in place a process for automatically updating the salary threshold every three years, beginning January 1, 2020. Future updates will take effect on January 1, 2023, 2026, etc. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest-wage census region (currently the south/southeast), estimated to be $51,168 in 2020. The HCE threshold will increase to the 90th percentile of full-time salaried workers nationally, estimated to be $147,524 in 2020. The DOL will post new salary levels 150 days in advance of their effective date, beginning August 1, 2019. Is there an exemption for small businesses? There is no small business exemption for the overtime rule or the FLSA. Generally, the FLSA and the overtime rule apply to employees of enterprises that have an annual gross volume of sales made or business done of $500,000 or more. However, if your business is under the $500,000 threshold, it does not mean that your employees do not enjoy any FLSA protections. Employees are still covered by the law if they are engaged in interstate commerce, which includes such activities as making out-of-state phone calls, sending mail, or handling credit card transactions. “Engaged in interstate commerce” has been interpreted broadly to cover almost all workers.14
How is the rule enforced? The FLSA is enforced by the Wage and Hour Division of the DOL. Investigators are stationed across the United States and are responsible for gathering data on wages, hours, and other employment conditions or practices, in order to determine compliance with the law. While some investigations are proactive, many are in response to an employee complaint. It is a violation to fire or in any other manner discriminate against an employee for filing a complaint or for participating in a legal proceeding under FLSA. Where violations are found, the DOL may recommend changes in employment practices to bring an employer into compliance. A common remedy for violations is to require employers to pay any back wages that employees may be owed. Generally, a two-year statute of limitations applies to the recovery of back pay. In the case of willful violations, a three-year statute of limitations applies.15 Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,000 for each violation.16 1. 29 USC § 201, et seq. 2. 29 CFR §§ 541.0-541.710 3. 29 CFR § 541.602 4. “Primary duty” means “the principal, main, major, or most important duty that the employee performs.” 29 CFR § 541.700. 5. “Customarily and regularly” means “a frequency that must be greater than occasional but which, of course, may be less than constant. Tasks or work performed ‘customarily and regularly’ includes work normally and recurrently performed every workweek; it does not include isolated or one-time tasks.” 29 CFR § 541.701. 6. If an employee is at least a 20% owner of a covered business and meets the first two requirements of the executive exemption, he or she need not meet the third requirement of the executive exemption or the $47,476 salary requirement. 29 CFR § 541.101. 7. See, 29 CFR § 541.203, “Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s financial products. However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption.” See also, DOL Administrators Interpretation No. 2010-1 (Mar. 24, 2010) which found that
mortgage loans officers whose primary duty is sales are production employees and do not qualify for the administrative exemption, available at: https://www.dol.gov/whd/ opinion/adminIntrprtn/FLSA/2010/FLSAAI2010_1.pdf 8. “Sales” means “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition” which includes “the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property.” 29 CFR § 541.501(a). 9. “The outside sales employee is an employee who makes sales at the customer’s place of business or, if selling door-to-door, at the customer’s home. Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls.” 29 CFR § 541.502. 10. The DOL does not consider most insurance sales to qualify for the retail sales exemption, which exempts certain commissioned employees from overtime pay. See, DOL Fact Sheet #6, available at: https://www.dol.gov/whd/regs/ compliance/whdfs6.pdf and 29 CFR § 779.317 “Partial list of establishment lacking “retail concept” (“Insurance; mutual, stock and fraternal benefit, including insurance brokers, agents, and claims adjustment offices.”), available at: https://www.gpo.gov/fdsys/pkg/CFR-2010-title29-vol3/pdf/ CFR-2010-title29-vol3-sec779-317.pdf. See also, Mitchell v. Kentucky Finance Co., 359 U.S. 290, 295 (1959). 11. “[D]epending on the duties actually performed, an insurance agent may qualify for either the outside sales or administrative exemption…. Each agent must be evaluated on an individual basis…” DOL Opinion Letter FLSA 2009-28 (Jan. 16, 2009), available at: https://www.dol.gov/whd/opinion/ flsa/2009/2009_01_16_28_flsa.htm 12. DOL analysis of the rule on page 116 footnote 65, provides these as examples and is available here: https:// s3.amazonaws.com/public-inspection.federalregister. gov/2016-11754.pdf 13. In conjunction with the rule DOL issued a Small Entity Compliance Guide, which explains why the DOL considers commissions nondiscretionary on page 5, available here: https://www.dol.gov/whd/overtime/final2016/SmallBusinessGuide.pdf 14. 29 USC § 203(s). See also, DOL analysis of the rule on pages 25 and 231-32. 15. See, DOL website page on backpay, available here: https:// www.dol.gov/general/topic/wages/backpay 16. 29 CFR §§ 578.1-578.4 Reprinted with permission by the Independent Insurance Agents & Brokers of America. This document is for informational purposes only and should not be relied upon as legal or compliance advice.
Fall 2016 • The Oregon Agent
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Succession or PERPETUATION? By Al Diamond
I
It would seem to be easy to create a succession plan if an agency has a sibling or siblings in the business or even if the agent has younger partners who know the insurance business and expect to be the next generation to own the agency once you retire. But a HUGE number of agents don’t have children in the business and are “Lone Rangers,” having managed their business on their own since starting the insurance business or became owners. What do they do? Many agents with successors in place are not so sure that their successors can manage the business as well as the older agents or sufficiently enough to assure the older agent a secure retirement payout. What do THEY do in this very sensitive situation? Until now the “Lone Rangers” simply sought the highest price from a buyer and sold out. That has been the simplest way out and the agent didn’t have to do what they have never done before - bring someone else into their business, train and spend time with people who may have different ideas about running the agency. Most ‘Lone Rangers’ are comfortable enough with their clients and can even spend time with employees and company folks. But the idea of
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mentoring someone who will eventually own their businesses is foreign to them. Many of them are so averse to this concept that they will sell their agencies at a value below what they deserve to avoid this “unknown universe.” What the ‘Lone Rangers’ don’t consider is the ramifications of a sale if they intend to remain in their communities. Over the long years spent in a business, we find that our best and long term clients either are or become our friends, especially in rural areas. Selling out to the highest bidder (often banks, regional agencies, nationals or foreign competitors seeking a foothold) puts your “friends” into the hands of folks you (and they) might not find as friendly and service-oriented as you have been. No one thinks about how they will face their friends in the future having “sold” them with the agency. So selling to the highest bidder works well if you’re going to leave the area (and have the time to set up your agency for maximum value). Otherwise you may not get the full value for your agency in the sale. And, you have to deal with your
client/friends after the sale if the service levels are not up to yours.
Whether or not you have time before you turn over the reins to your next generation or if you still haven’t identified that next generation, a management reporting process can be established that will require the next owners of the business to operate it in a manner that will assure you of its ability to make payments to you in a buy-out.
Meanwhile the ‘Lone Rangers’ are envious of their friends who have children, partners or employees who are capable of taking over the business someday. What the “Rangers” don’t realize is the panic faced by many of these owners with default succession plans. They have watched their children and/or partners/employees grow into their roles in the agency and they well-know the weaknesses of each of them. They wonder whether or not their successors can fill their shoes once the older owner departs. Many times there is truly no cause for this concern. Every parent and elder has periods during which he thinks of his successors as the “idiot children.” Their mistakes have been magnified to the point that the owner is concerned over the well-being of the firm and the security of his retirement payout. That’s why so many agents have required third party loans to fully pay them with the debt carried by a financial institution for the payments he could have engineered for him or herself. But the agents have convenient memories, remembering the faults of others and forgetting their own mistakes as they grew from their 20’s and 30’s into ownership positions.
No, most are not ‘Idiot Kids,’ they are the same kind of people as their elders, learning more from their own mistakes than from the teachings of their elders. But it is hard for the older owner to distinguish between youngsters growing up and those real Idiot Kids who have been spoiled and will take over the agency long enough to realize that they don’t like it even without the older owner (who they always thought was holding them back). Within a few years to a decade, these new owners will have secured their future by merging or selling their predecessors’ businesses at a tidy profit. This is only a shame and a problem if the older generation gave the younger generation a break on the price to allow them value benefit in the ownership transfer. In that case, the old owner discounted the value of the agency in favor of the new generation of owners only to have it sold at a tidy profit shortly thereafter. However, if the ownership transfer was at a fair value, then the new owners have every right and privilege to merge or sell if they are not up to growing the agency’s value as an independent entity. The problem is not the eventual sale or merger of agencies. Sales and mergers are actually a part of agency life-cycles that is healthy for the industry. The problem is that the original
owners knew that the new generation of owners were not capable of managing the growth and value of the agency and still sold it to them BECAUSE MOST OWNERS DON’T FEEL THEY HAVE ANY CHOICE.
So the ‘Lone Rangers’ sell their agencies because they feel they don’t have the option of internally succession and the multi-generational owners are concerned because they feel obligated to their children (or other successors) and feel they have no choice. Do you see the commonality? All of these agents, small, medium sized or large, urban, suburban or rural -- ‘Lone Rangers’ and agencies with successors -- all of them feel trapped with no options besides selling and hoping for the best.
BUT IT DOESN'T HAVE TO BE THAT WAY.
No, we can’t rule from the grave (or from retirement), but tools are in place to secure the future of your agency (and the future of the payments to you) whether you are alone in ownership or have generations behind you. If you have time (several years before you either retire or want to cash out), there’s a plan of action you can take to make your retirement or withdrawal from ownership more secure. If you waited too long (you’re in the process of selling down or need to do something within the next year), there are still tools that can be implemented that can secure your payout to maximize the value of your asset. In a nutshell, whether or not you have time before you turn over the reins to your next generation or if you still haven’t identified that next generation, a management reporting process can be established that will require the next owners of the business to operate it in a manner that will assure you of its ability to make payments to you in a buy-out. This reporting requires the new owners to retain sufficient business and to grow the agency sufficiently to sponsor the payments to the retiring owner. If it doesn’t happen, they have pre-agreed in the purchase agreement that the agency will have to be sold once again to satisfy the old owners (or they must secure full payment of the remaining balance due to the retired owner). The reporting system mandates both retention and growth to minimum levels AND the prudent spending habits that keep the agency’s balance sheet liquidity ratios at levels that will assure any financial auditor of the agency’s continued ability to support it debt. Fall 2016 • The Oregon Agent
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The difference between having the luxury of time and doing this shortly before an ownership transfer is the training and implementation that can be done prior to (and proving the validity of) and ownership transfer and the need to establish the reporting system without any evidence that the new owners are capable of achieving the requisite goals to assure sufficient success to manage the value paid for the agency. If you have the time, you establish the management reporting program as a test of the ability of the agency (and its potential new owners) to support the financial strength needed to buy out the old owner(s). If the agency with its younger owner-potentials can accomplish this in the years available to them prior to the buy-out, the older owner can be reassured of the agency’s continued stability. The achievement of the objectives can be the pre-requisite for the ownership transfer and could, potentially, provide a ‘way out’ for an ownership change that could be disastrous if actually implemented. Doing what’s best for the old owner is also doing what’s best for the new generation. If they are capable of handling the ownership change, it’s wonderful. If not, we know this prior to any change in ownership and other avenues can be explored. If you are a ‘short-timer’ and need to make a transition quickly, this same management reporting requirement can be used to sell to a new owner who will either retain and build the business or have to re-sell it to satisfy the retired owner. No owner
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will ever be surprised again by their payments suddenly stopping and a sorrowful letter explaining the cash shortfalls that make further payments difficult. The reporting process and balance sheet liquidity reporting requirements will reflect any negative changes very quickly and the Sale Agreement will contain very specific remedies if the agency cannot support its payments. Plan ahead and any change of ownership can be managed to provide the maximum value to the old owner with a payment schedule that makes the burden bearable without sacrifice to the new owners. If you would like to explore Succession and Perpetuation Planning with Agency Consulting Group, Inc., please call us at 800-779-2430 and we’d be happy to discuss your specific situation in complete confidence and confidentiality. Copyright 2011-2014 by Agency Consulting Group, Inc. All rights reserved. Reprinted from The PIPELINE, the national newsletter for agency principals. The PIPELINE is published by Agency Consulting Group, Inc., a leading consulting firm for independent agents in the U.S. for over 30 years. Call 800-779-2430, E-mail info@agencyconsulting.com, or visit www.agencyconsulting.com for information about the content of this article or PIPELINE subscription information.
E&O
and Recording Phone Conversations
By IIABA Big “I” Virtual University Faculty
A
An agency’s new phone system allows them to record incoming and outgoing conversations. The agency thinks this will be good for E&O and be better than relying on handwritten notes. What do you think? The agency also wants to know if they are obligated to advise the other party that the conversation is being recorded. QUESTION: “This week we met with both our phone vendor and our management information system vendor to discuss our ability to record incoming and outgoing telephone conversations and being able to save the conversations in our computer system. Our phone system can do this and our computer
server has the capacity to handle the additional data. Currently, all voice messages are captured on our telephones and in our computer. Most voice messages get deleted after we listen to the voice message unless there is some material information on the voice message. It is my understanding that with telephone conversations we will not be able to delete them once they get into our computer system. “I believe recording of phone conversations will be a good thing relative to our E&O. It will be better than relying on handwritten notes and will certainly be able to clearly determine what was or Fall 2016 • The Oregon Agent
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was not said, good or bad. I would like know whether you have other insureds that are doing this. Is this something E&O insurers encourage their insureds to do? Has this helped or hurt agents in E&O situations? “I would also like to know if you are aware whether we are obligated to advise the caller we are recording the conversation in Wisconsin. Our telephone vendor says we are not obligated to notify the caller they are being recorded. With our new phone system, each employee has their own direct line. When a call goes to a direct line we do not have any recording indicating the call may be recorded for quality control purposes before our employee begins the conversation.” ANSWER: We ran this by the VU faculty and some E&O gurus. Below are their responses, collectively referred to as “Faculty Response” in each instance. This is an emerging issue so we don’t have any definitive recommendations, just some preliminary thoughts. We suggest seeking competent legal counsel.
priate follow-up and verification procedures are key along with good documentation. Documentation is the most important item in being able to successfully defend a claim. With that said, a recording of customer conversations and voice mails can be a double-edged sword that could help or hurt an agency’s claim. If an agency procures the coverage requested by the customer, offers additional coverage options, provides increased limits, etc. and it is documented via an voice electronic system then great. But, what if the agency does not and a claim occurs and those voice files are subpoenaed and clearly show that the customer requested something that was not delivered? The “he said, she said” claims will be settled more definitely and let’s hope the agency is on the right side. I think retaining customer conversations could prove helpful but only as a supplement to written documentation and follow-up with the customer. At this point we do not have any specific E&O procedures for implementing a voice recording system. The next generation E&O seminar material which are already thinking about will explore technology related issues such as this one so we can better provide risk management guidance for the way today’s agents do business.
FACULTY RESPONSE: FACULTY RESPONSE: I’m quite sure they need a disclaimer about the recording but in general I think having the voice documentation saved is so much better than written documentation if an E&O claim were to come up with a client. FACULTY RESPONSE: There are several angles to approach the issue of retaining conversations and voice mails with customers. I believe the first question is if there is a legal obligation to provide the customer with notification that the call is being recorded. I’m not sure if there is a legal requirement but based on the number of times you hear “this call may be recorded for quality assurance,” it is certainly a common practice if not a legal requirement. The key to preventing E&O claims is follow-through and doing what you say you are going to do to meet your customers‘ needs. Sound agency procedures with appro26
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I Googled this though I can’t attest to its accuracy: Wisconsin is currently a one-party state though recent attempts in the legislature there have attempted, unsuccessfully so far, to change it to two-party. Even so, any evidence gathered by a one-party consensual recording is inadmissible except in murder or drug cases, as they say. The Wisconsin Stats 885.365 Recorded telephone conversation (1) states “Evidence obtained as the result of the use of voice recording equipment for recording of telephone conversations, by way of interception of a communication or in any other number, shall be totally inadmissible in the court of this state in civil actions, except as provided by 968.28 to 968.37.” Exceptions are it the party is informed before the recording is informed at the time that the conversation is being recorded and that any evidence thereby obtained may be used in a court of law or such recording is made through a recorder connector proved by the telecommunications utility as defined in WI Stats 968.28 - 968.37 (which is the stat for court ordered wiretaps) which automatically produces a distinctive
recorder tone that is repeated at intervals of approximately 15 seconds. Fire department or law enforcement agencies are exempt as are court ordered wire tapes. Also a recording on the phone made from an out-of-state call or made to an out-of-state party, has to have the party informed of the recording and his consent or the tone on line, every 15 seconds, or a consent in writing before the recording is started. Needless to say this does not allow a person not a party to the conversation to record any part of the conversation without the parties to the conversation being informed the third party is recording the conversation. (Source: http://www.callcorder.com/phone-recording-lawamerica.htm)
Aside from the legality issue, if my agent was permanently recording my phone calls without my knowledge or option to opt out, I would not be happy at all. I suspect that unhappy customers that feel aggrieved are more likely to sue. As for the E&O perspective, as you say, the recording could either be a lifeline that saves the agency from drowning in an E&O claim or could be used to form a noose and hang them. I’d have a concern about over-reliance on an audio confirmation instead of a written one in so far as the former might make it less likely that the agency staff member would actually follow up on a request as opposed to having something written and in the agency management system to prompt them. FACULTY RESPONSE: I will weigh in based on my general understanding, without the benefit of special research. It is my general understanding that there are a number of states where it is illegal to have a call recorded without prior notice, permission to record it, and/or a regular signal on the call to indicate recording. If it is not known where someone is calling from when a call is placed or where they are when a call is received (such as if generated by or made to someone using a cell phone), there is no way to know what state law is applicable as the laws of state where the call is made and where it is received can apply, and may differ. Thus, to avoid having to sort through and remain current on possibly changing state laws on this issue, risk failing to comply with applicable laws, and uncertainty around which state law applies, it has become common practice for businesses that record calls to notify callers that a call may be recorded.
Penalties for violating these laws can be quite significant; I have not researched this for quite a while but recall that in some states there used to be criminal penalties for violations. It also is unpredictable if and where any E&O or other claims may be made, and again, state laws may differ on the admissibility and/or weight of recorded calls as evidence, so it would seem prudent to maintain appropriate records in the ordinary course of business distinct from whatever practices are adopted relative to recording calls. I hope my comments are helpful but let me know if you need any clarifications. FACULTY RESPONSE: I’m not aware of agents recording conversations at this point, but I will check further into it. If an agency adopts this practice with all the precautions that have been mentioned, will all the conversations involving principals and producers on cell phones in the field also be recorded? If not, the agency would not have a consistent approach which is such an important principle for agency E&O risk management. In addition, even if the agency records telephone conversations, it will be important for the agency to continue to document the phone conversation in the agency management system so there is a consistent formal record of all client conversations and this also applies to agency principal and producer cell phone calls in the field. (It will also enable the agency to pinpoint the phone call if saved.) Text messages and emails also need to be documented in the agency management system just as phone conversations are so all client communications are together. I believe agents are starting to convert text messages into email and attaching them to their agency management systems as they are attaching emails. Available to IIABO agency members, the Virtual University (iiaba.net/vu) is an online resource offering access to technical insurance and agency management articles, sample ISO forms, white papers, monthly webcasts and other information on issues affecting today’s insurance marketplace. The following is from the popular “Ask an Expert” service where members can submit a question not already answered in the Research Library and get responses from the volunteer faculty of experts. Copyright © 2016 Independent Insurance Agents & Brokers of America, Inc. All rights reserved. Reprinted with permission.
Fall 2016 • The Oregon Agent
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How To Bring
YOUTH
Into Your Agency By John Chapin
A
Almost every industry I talk to these days is struggling with bringing youth in. How do you get them interested in your industry? How do you get them to take you seriously? How do you get them to work hard without thinking they’re entitled to everything without actually having to work for it? Here are some answers.
STEP 1
REALIZE THERE ARE SOME GREAT MILLENNIALS OUT THERE. The fact that most of the youngest generation in the workforce seems to be entitled, self-centered, has no work ethic, and expect success overnight is first, not as quite as bad as it seems and second, nothing new. Those aspects aren’t generation dependent, they’re age dependent. When I was in my 20s, I was pretty much the same. Let’s face it, at that age most of us don’t have spouses and kids to worry about yet, we tend to think that we know everything, are immune to life’s pitfalls, and that there is plenty of time to have fun now and get serious later. That said, there are career-minded, hard-working millennials who are 28
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looking for a long-term, fulfilling career but you’re going to have to be committed to seeking them out, digging deep, and working hard to find them.
STEP 2
TALK ABOUT WHAT’S IMPORTANT TO THEM AND SELL THE DREAM. Ask them what they want and show them how a career, not a job, in your industry will provide what they’re looking for. If you’re the typical person who comes to me about bringing youth into your business, you’ve been in the industry for decades and have had a good degree of success. Let the younger people know that they can follow in your footsteps and enjoy the same success. They too can have nice cars, nice houses, and live an extraordinary lifestyle all while providing for a family now or in the future. Generally speaking, younger salespeople will be more focused on the material rewards and money, as you probably were at their age, so you can put a little more emphasis there, letting them know they’ll be more than prepared to provide for a family down the road
too. The most important thing is to let them know that a career in your industry can provide them with everything they need to be successful and fulfilled.
STEP 3
SET EXPECTATIONS AND PREPARE THEM FOR WHAT’S AHEAD. Now that you’ve sold the cars, houses, and luxurious lifestyle, it’s time to talk about the price of success. Let them know this is not a 9-to-5 job and that if they’re going to have it all, there will be sacrifice. Inform them that they’re going to have to pound the pavement, get beat up, and encounter pain and failure before success. Make them aware of the fact that, especially in the beginning of their career, life will be out of balance, weighted heavily toward the work side. Let them know their friends will be out drinking and asking why they’re working so hard and they might think that they’re missing out and that the long hours aren’t worth it, but in the end, they will be. Say, “Five or six years from now your friends will think you’re lucky or were simply in the right place at the right time because your business will be taking off and success will be obvious. You’ll be taking great vacations, buying the nice new house, and driving your family around in the nice new car, and your friends will be toiling away in a job that they most likely hate, without a lot of financial or other rewards. Yes, in the beginning it will be tough, but if you’re willing to work like no one will for the next 5 to 6 years, you’ll live like no one can for the rest of your life. But all of that is going to take determination, hard work, self-discipline, and a commitment that you are absolutely going to make this happen and be successful no matter what. Success or failure is completely in your hands.”
experience with technology. Take them seriously, treat them as equals, and value their input and opinions. Remember, good salespeople are hard to find at any age. Do the work necessary to get the right people on the bus. Let them know what’s in it for them, let them know what you expect in return, and make sure it’s a win-win for all involved. And now a quick note for younger people reading this… You are at an age in which it is extremely easy to stand out and get a huge head start. Look for a career, not a job, and take it seriously now. It will pay off tremendously down the road. If you’re going to be successful, you have to pay the price at some point. Pay it now while you still have tons of energy. John Chapin is a sales and motivational speaker and trainer. For his free newsletter, or if you would like him to speak at your next event, go to: www.completeselling.com John has over 26 years of sales experience as a number one sales rep and is the author of the 2010 sales book of the year: Sales Encyclopedia. For permission to reprint, e-mail: johnchapin@ completeselling.com. A&M Assoc Ad OR PRINT.pdf
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STEP 4
BE AN ORGANIZATION COMMITTED TO THEIR SUCCESS. Bring them into the right environment and have an effective on-boarding and training program. The right environment is one of professionalism and high standards. It’s a competitive environment in which everyone gets along, supports one another, knows what is expected of them, and gets the job done. You can’t allow negativity or slacking. Establishing good habits is the first step in developing a new salesperson. Do this with a solid training program which may include sending them to outside classes and training. Work with them to develop production goals and daily activity. Help them calculate the numbers and make sure they do what needs to be done. Chart a course for them to follow for personal and professional success. Ensure your company is progressive, up-to-date, and open to new technology and change. Embrace the unique strengths that millennials bring to the table: energy, new ideas, and Fall 2016 • The Oregon Agent
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You Don’t Know What You Don’t Know By Dave Evans
I
I recently found myself in need of a pair of running shoes. I did an online search and found a couple of “running store aggregators”—virtual catalogs offering several brands of running shoes. The website functionality allowed me to view the sneakers, rotate them 360 degrees and look at them from different angles. I could buy them with the click of a button and they would ship directly to my door—no sales tax or shipping charges involved. I didn’t buy at that point, but I was favorably impressed. Later, during a business trip, I went into a running shoe store to take a look around. An associate greeted me with a friendly inquiry: “Tell me about your running habits.” I responded there wasn’t much to tell—I’m a Clydesdale type of plodder who wears a size 14. I also mentioned I was recovering from a calf strain. The associate asked my current brand of running shoe and informed me that I should be wearing a running shoe with a higher heel, which reduces the strain on the calf. He then recommended a different brand, which I purchased and which appears to be working. Buying insurance is obviously a tad more complicated than buying running shoes. But there’s a lesson here. When it came to a topic in which I wasn’t an expert, I fell into the category of someone who doesn’t appreciate the nuances. I didn’t know what I didn’t know. Instead I focused on superficial appearance and convenience. Direct writers are spending billions of dollars convincing consumers that insurance is a simple purchase that should be determined by price and convenience alone. As indepen-
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The Oregon Agent • Fall 2016
dent agents know well, many consumers don’t realize their insurance coverage doesn’t fit their needs until the time of a claim—when it’s too late. My experience buying running shoes serves as a reminder of a few key sales and marketing strategies: 1. Spend time with the customer. Don’t just ask what they want—invest some time in learning about their specific situation and objectives so you can help them arrive at the right fit. 2. Since consumers don’t know what they don’t know about insurance, refresh your agency’s website and use social media to educate them about relevant insurance topics. 3. Most consumers start their search online, so make sure your agency takes steps to show up in search engine results. Participating in TrustedChoice.com as an Advantage subscriber is a great place to start. There is a “new normal” when it comes to marketing, and it requires investing in tools and capabilities to reach potential clients. Once you attract prospective clients to your agency, be sure to take the time to extoll the advantages independent agents provide. Don’t procrastinate—hit the ground running and embrace a new approach while emphasizing your unique value proposition. Dave Evans is a certified financial planner and an IA contributor. This article was originally published in IA magazine.
Fall 2016 • The Oregon Agent
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