FYI Express - February 2014

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EXPRESS “What You Don’t Know Can’t Help You!” … Eddie K. Emmett, Editor / Publisher

Has your agency ever been the victim of a data breach?

A data breach is an incident that involves the unauthorized or illegal viewing, access or retrieval of data by an individual, application or service. It is a type of security breach specifically designed to steal and/or publish data to an unsecured or illegal location.

Table of Contents HAS YOUR AGENCY EVER BEEN THE VICTIM OF A DATA BREACH? ............ 1 DO YOU SELL BOPS AND GLS?...... 2 WHAT DOES CYBER LIABILITY INSURANCE COVER? ...................... 8 HOW MUCH DOES YOUR STATE FINE FOR TEXTING AND DRIVING? ........ 12 HOW TO BUILD A SOUND DATA SECURITY PLAN FOR YOUR AGENCY ................................................... 16 HOW TO GET GREAT AT SELLING .. 26 FREE INSURANCE CLASSIFIED ADS38

Does your agency …

•Obtain social security numbers, personal health information, driver’s license numbers, bank account numbers of insureds?

•Have access to confidential client records (financial statements, competitive information)?

•Use an agency management system?

•Store paper files or are considering going paperless?

•Provide online access for payment?

•Have a website?

•Rely on a computer network on a daily basis?

•Allow employees to use personal mobile devices for agency transaction?

If yes to any of the above, your agency carries a significant exposure to cyber risk.

Info at www.FYIExpress.com FYI Express

Has your agency ever been the victim of a data breach?

Page 1

The term “security breach” means a compromise of the security, confidentiality, or integrity of, or the loss of, computerized data that results in, or there is a reasonable basis to conclude has resulted in – “ (A) the unauthorized acquisition of sensitive personally identifiable information; or “ (B) access to sensitive personally identifiable information that is for an unauthorized purpose, or in excess of authorization.

SENSITIVE PERSONALLY IDENTIFIABLE INFORMATION. — The term “sensitive personally identifiable information” means any information or compilation of information, in electronic or digital form that includes— “ (1) an individual’s first and last name or first initial and last name in combination with any two of the following data elements: “ (A) home address or telephone number; Continued on page 2 February, 2014

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Data Breach Continued from page 1 “(B) Mother’s maiden name; “ (C) month, day, and year of birth; “ (2) a non-truncated social security number, driver’s license number, passport number, or alien registration number or other government-issued unique identification number; “ (3) unique biometric data such as a finger print, voice print, a retina or iris image, or any other unique physical representation; “ (4) a unique account identifier, including a financial account number or credit or debit card number, electronic identification number, user name, or routing code; or “ (5) any combination of the following data elements: “ (A) an individual’s first and last name or first initial and last name; “ (B) a unique account identifier, including a financial account number or credit or debit card number, electronic identification number, user name, or routing code; or

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“ (C) any security code, access code, or password, or source code that could be used to generate such codes or passwords

Do you sell BOPs and GLs?

So, have you ever thrown away a completed application and printed a new one with corrections? It should have been shredded.

If yes, can you answer the Top 5 Questions Clients Ask about Cyber Liability?

Have you ever had an employee leave and start soliciting policyholders? It is common for employees to deliberately take confidential information with them when they leave for a new job. That activity is considered a data breach.

If no, can you say “Would you like fries with that order?”

If no, do you have an E&O policy with maximum limits?

1. “Doesn’t my general liability policy cover me?”

They mistakenly feel they have an ownership in it.

They helped create the data, and therefore they feel like it’s theirs.

In a word, no. The ISO property form protects the physical presence of computers but not the data that is stored on them. The ISO general liability form specifically excludes claims of copyright, trademark and trade secret infringement. The personal injury provisions of a GL form generally rely on “publication”-- an undefined term. Although there have been limited instances of coverage for privacy breach under GL forms, relying on this for coverage is not in your client’s best interest.

Did you notify all the policyholders of the data breach and offer credit monitoring?

Do you always change the passwords to your companies’ websites as soon as an employee leaves your employment?

Have you read the “intangible” exclusions in your agency’s BOP, fidelity bond or crime insurance policy?

The above scenarios are usually not covered.

Business Interruption coverage, an essential part of any businesses risk management plan, will not respond to outages caused by computer viruses or hackers. In addition, 47 U.S. states now have laws requiring notification in the event of a potential loss of PII (personally identifiable information), as well as fines and penalties for not reporting the breach.

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Statutory Concerns

Data Breach

The federal Gramm-Leach-Bliley Act requires independent agencies and brokers to proactively implement administrative, technical, and physical safeguards to protect customer non-public personal information.

Continued from page 2 Many carriers offer policies that can cover regulatory fines or penalties your client might incur because of a data breach. Whether or not slim chances exist for liability coverage in other policies, one thing is for sure: none provide reimbursement for the costly first-party expenses required to comply with regulatory requirements and out-of-pocket legal expenses incurred to navigate the process.

Check out your state’s Data Breach Code www.perkinscoie.com/statebreachchart Some cyber policies will pay for costs associated with data breaches caused by employees, including the cost of notifying affected individuals if personal information is exposed; forensics costs; legal costs; notification costs; credit monitoring; and public relations costs associated with an employee theft of personal client information.

2. “How much is this coverage going to cost?”

Cyber liability insurance is still a fairly new concept, so there's a lot of variation among policies, and a lot of room for premium negotiation. Agents should be certain that their clients understand that if they don’t purchase this coverage, they will be liable for first-party expenses including hiring forensic IT experts, notification of customers, providing annual credit monitoring, lawyer expenses and any applicable state or federal fines or penalties.

3. “We have an IT department and we have firewalls. Isn’t that enough?”

Not usually. Many data breaches occur because of an employee error or an “inside job” from rogue employees. From passwords tacked on computer screens in plain sight and employees opening suspicious email and downloading malware to lost laptops and smart phones, a large portion of security breaches occur because of your employee actions. Also, keep in mind that a data breach can occur from paper records as well.

Outdated customer information, old credit card receipts and employee files that have been thrown into the Dumpster are just as vulnerable as if a hacker logged into your network.

Video: Cyber Liability Explained http://youtu.be/gj_y9x3_7Jw What do these scenarios have in common?

4. “We use a third party for reservations and credit cards. Do we still need this coverage?”

Employee opens e-mail with virus that crashes network and spreads virus to customers

Are your clients taking online reservations? Are they processing credit card payments online? Chances are they’re already utilizing a third-party or cloud vendor and your client’s network is not storing the data. However, their customers’ personal information, in case of a data breach, is still the responsibility of your client.

Policyholder’s website is hacked and all data is corrupted Disgruntled ex-employee logs into and blocks your client’s network None of the losses are covered under typical business insurance policies

5. “What are our state’s privacy notification laws, fines and penalties?”

ISO Building and Personal Property Coverage Form has a $2500 annual limit for very limited named perils including viruses and harmful codes, as long as it wasn’t done by an employee or someone you hired to work on your computer

Wherever your client is located, make sure that you know the regulatory requirements of the state. When it comes to the unauthorized release of personally identifiable information (PII), there is no federal mandate governing privacy notification, so each state has its own law.

Commercial General Liability Policies specifically excludes damage to data and damage caused by loss of data Continued on page 6

FYI Express

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February, 2014

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Data Breach

Take this Risk Controls Quiz

Continued from page 4

1. Do you have a firewall?

Personal Injury: some PI claims created by a website or other forms of electronic communication

Yes

No

Don’t Know

2. Do you have a virus protection program in place?

2 huge Exclusions: j. Insureds in Media and Internet Type Business

Yes

k. Electronic Chatrooms or Bulletin Boards

No

Don’t Know

3. Do you have a person responsible for information security?

Transmission of a Virus is not covered because of the Electronic Data exclusion language

Yes

Where is Digital Info Stored?

No

Don’t Know

4. Do you outsource a critical part of your internal network/computer system or internet access/presence to others? If yes, please explain:

Computers Cameras Fax / Copier / Printer

Yes

iPod, GPS, PDA

No

Don’t Know

5. Do you have a written privacy or security policy?

Cell phones Yes

How do Breaches Occur?

No

Don’t Know

6. Do you control access to your computer systems?

Accidents or Mistakes Hackers

Yes

Equipment Theft

No

Don’t Know

7. Does your hiring process include criminal background checks?

Employees

Yes 3 Biggest Agency Security Threats

No

Don’t Know

8. Have you ever experienced a privacy breach or security breach?

•An employee theft or inadvertent mistake that exposes customers’ personal information to unauthorized parties. (An example of an inadvertent mistake would be opening an email attachment containing a virus from an unknown source.)

Yes

No

Don’t Know

9. Do you have a program in place to test your security/privacy controls?

Yes

No

Don’t Know

10. Do you have a program in place to test security/privacy controls of your vendors?

•Physical loss or theft of a computer, portable device, back up tape or other removable media—all containing customers’ non-public personal information. As these devices have become more portable, and they are regularly taken outside the agency premises, this security risk has multiplied significantly. Also, the substantial risk of a break-in to the agency’s offices and the theft of its computers are often overlooked when an agency develops its security policy.

Yes

No

Don’t Know

11. Do you allow employees to download Personally Identifiable Information of customers or confidential information in your care belonging to third parties onto laptops or other storage media?

Yes

No

Don’t Know

If yes, is the information encrypted?

•Loss or theft of a password permitting unauthorized individuals to gain access to customers’ personal information.

Yes

No

Don’t Know

Continued on page 8 FYI Express

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February, 2014

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9

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Data Breach Continued from page 6 How to avoid losses Do a review with your clients of their business cyber risks Discuss “cyber-risk” coverage for loss of or damage to data Have a data security risk assessment performed by an IT professional who specializes in data security Steps you can take to protect your data Change your password on every website once every few months Do not use the same password for multiple sites or accounts Create a strong password that includes letters, numbers, and other characters Watch out for phishing e-mails and spam emails requesting personal or sensitive information Check out www.LastPass.com 4 Situations Where Cyber Insurance Can Save Your Agency 1.

Cyber Insurance Protects Site Content

2.

Cyber Insurance Guards Against Data Breaches

3. Cyber Liability Insurance Covers Employee Gaffes 4.

Cyber Insurance Works Offline As Well

What Does Cyber Liability Insurance Cover?

Like any type of insurance policy, the actual options and details of the policy vary according to the insurer.

Additionally, what a business will need as far as coverage will vary—some companies may just use computers to store finance and billing information or may use a computer for anything and everything.

Despite the differences in insurance policies by different insurers and the different needs of businesses, cyber liability insurance typically provides coverage for six main areas: Business Interruption—If a business is the victim of a cybercrime, such as a hack or a virus, this would cover any loss of revenue experienced as a result, whether a temporary shut-down is needed or even a long term interruption of operations.

Notification Expenses—Most states have notification requirements, which dictate how and when a business must notify any parties whose private information was possibly compromised in a breach or if it was obtained by someone without authorization or permission.

FYI Express Page 8

In some cases, a business must provide ongoing credit monitoring or identity theft insurance or monitoring to those whose information was compromised. When Sony was hacked, for example, the company had to provide $1 million dollar identity theft insurance policies to all customers in the database that was hacked.

Notification expenses and any required monitoring or protection for customers can quickly add up and be a huge addition to already costly expenses of a cybercrime.

Content Liability—You may want to think of any content you put online like personal property you insure at your place of business. You buy insurance to protect personal property if it’s stolen or damaged, and the content you place on your website, blog, or any other kind of web presence is your property as well. Content liability would help pay for anything that’s related to your online content and provide protection from copyright claims, slander, invasion of privacy, and other IT claims.

PR and Crisis Management—If your company has just experienced a security breach and has had to send out notifications to customers and clients, on top of being out of operation to clean up the mess, there’s no doubt the company image has been tarnished and stands to lose future business to at least some degree. When Sony was hacked, there were undoubtedly many customers who were too scared to place their billing info and private information into the PlayStation Network that was compromised, so Sony had to do some quick and fantastic PR work. This coverage would help pay for subsequent public relations and marketing efforts needed to prevent extreme damage to your company’s brand.

Data Loss and System Damage—If you’ve assumed your current commercial liability policy provides coverage to computers under personal property coverage, you’d be sorely surprised to find it only covers the actual computer itself—not what’s in its memory. Any data on the computer isn’t protected under any other type of insurance, and for most businesses, this can be devastating. Protection for what’s really just a hunk of plastic or other synthetic materials won’t do you much good if everything inside is stolen or damaged.

Regulatory Investigation Expense—With the evolution of technology continuing to grow, there will undoubtedly be more regulations and laws surrounding any offline or online data and property. It’s only been recently that new notification laws were enacted and privacy laws are constantly being changed, so there will probably be a whole new set of audits created to ensure compliance. Just like personal lines of insurance which can exclude coverage for anything related to acts of war or government regulations, so do commercial policies.

However, cyber liability insurance can provide coverage for regulatory investigation expenses.

Continued on page 10 February, 2014

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Data Breach Continued from page 8 Cyber liability insurance can also provide coverage for situations such as: Internet liability—protection from damages that arise if an internet service provider (ISP) is hacked or is suddenly out of operation. This could also include damages resulting from a website host or server shutting down, experiencing a loss in data or a loss from a security breach, or lapses in operation.

Intangible assets—protection for any damages to code or data. For example, if a business’s website was hacked resulting in code and content being stolen, this coverage could help pay for the costs of replacing them.

Web content liability—would help pay for damages and defense costs resulting from libel or copyright claims, trademark infringement, defamation claims, or damages done to a website by a hacker or someone else.

ISO's E-Commerce Program helps you offer a variety of coverage options for commercial companies and financial institutions that do business online. The program will benefit organizations that: use e-mail rely on the Internet to promote products and services operate a website provide online transactional services, such as banking or trading store confidential customer information — whether credit card, financial, or medical EC 00 10 11 09, the Information Security Protection Policy (for commercial entities) and the Financial Institutions Information Security Protection Policy offer eight separate insuring agreements, giving you the ability to tailor coverage to fit the specific insurance needs of your customers. The insuring agreements include:

So, for example, if the insured exposes a person's private medical records and that person sues the insured, EC 00 10 will provide a defense for the insured and pay the damages for which the insured is liable.

Security breach liability — liability arising from the unauthorized acquisition or disclosure of client information held within a computer system or otherwise (for example, hard copy); transmission of a virus to a third party by e-mail or other means The second insuring agreement pertains to security breach liability. If the insured is held liable for the acquisition of personal information (held within its computer system) by an unauthorized person, this insuring agreement offers insurance coverage to the insured. This agreement also applies to the unauthorized disclosure of such personal information.

Programming errors and omissions liability — liability arising from programming errors or omissions that ultimately disclose clients' personal information held within a computer system The next insuring agreement pertains to programming errors and omissions liability. Any actual or alleged programming error or omission that results in the disclosure of a client's personal information held within the insured's computer system may lead to a claim or a lawsuit against the insured. Insuring agreement three provides coverage for the insured. This agreement acts as complementary coverage for the previous insuring agreement.

Replacement or restoration of electronic data — expenses incurred to replace or restore electronic data or computer programs affected directly by a virus Suppose the insured is responsible for the loss of the electronic data or a computer program stored within its computer system? Such a loss could force a shutdown in services provided for a client's customers and cause a loss of business for the client. EC 00 10 offers coverage for replacement or restoration of electronic data wherein the policy will pay the cost to replace or restore the data or programs, the cost of data entry, and reprogramming costs.

Website publishing liability — liability arising from an infringement of another's copyright, trademark, trade dress, or service mark; defamation against a person or organization; or violation of a person's right to privacy The first insuring agreement declares that the insurer will pay for loss that the insured becomes legally obligated to pay (and defense expenses) for a web site publishing liability. The scope of this coverage includes any actual or alleged error, misstatement, or misleading statement posted or published by an insured on its web site that results in: an infringement of another's copyright, trademark, trade dress, or service mark; any form of defamation against a person or organization; or a violation of a person's right of privacy.

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Extortion threats — ransom payments and other expenses incurred resulting directly from threats to send a virus to a computer system; disseminate the insured's proprietary information; inflict ransomware or other types of viruses to destroy, corrupt, or prevent normal access to the computer system; or publish clients' personal information

Continued on page 12 February, 2014

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Data Breach Continued from page 10 It is common knowledge that a company can be subject to an extortionist's threat to attack the company's computer system with a virus or some malicious code or a threat to prevent normal access to the system. The fifth insuring agreement in EC 00 10 offers to pay for the costs of hiring an entity to determine the validity and severity of an extortion threat, plus reward money paid to an informant that leads to the arrest and conviction of the extortionist. Any other reasonable expenses incurred by the insured for the fees and costs of negotiators and for the fees and costs of a company hired to protect electronic data from further threats are also covered.

Business income and extra expense — actual loss of business income and/or extra expenses incurred because of the interruption of the insured's e-commerce activities resulting directly from a virus or extortion threat

The seventh insuring agreement applies to public relations expense. If the insured has suffered negative publicity because of its responsibility for e-commerce security breaches or programming errors, or because the insured itself has allowed its private information to be publicized, there may be a decline in the reputation of the insured. In order to recapture the public's trust and future business, the insured will need a public relations campaign. EC 00 10 will pay for the fees and costs of a public relations firm to protect and restore the insured's reputation.

Security breach expense — expenses incurred to notify parties affected by a security breach, including overtime salaries paid to staff; fees and costs of the insured hiring a company to operate a call center; and reimbursing the insured for post-event credit-monitoring costs for victims of the breach

FYI Express

Exclusions There are only 26 exclusions Selected Exclusions: Unintentional errors or omissions in the entry of “electronic data” Lightning, earthquake, hail, volcanic action, or any other act of nature

EC 00 10 will pay for the loss of business to a client for which the insured is liable due to breaches of information security. The policy will also pay for a loss of business income the insured itself suffers due to the interruption of the insured's business resulting from an ecommerce incident. If the insured business itself has to cease operations or suspend e-commerce activities because of a threat against it with a computer virus or code, EC 00 10 will pay for the business income loss and for extra expense paid by the insured to get its business activities back in order.

Public relations expense — expenses incurred to restore the insured's reputation after being subject to negative publicity resulting directly from a virus or security breach

The final insuring agreement of EC 00 10 is to pay for loss resulting from a security breach. The payment here would include costs to notify all parties affected by a security breach, the fees and costs of a call center to handle inquiries from parties affected by a security breach, and post-event credit monitoring costs for victims of a security breach. Since laws now require such activities, any insured that suffers a cyber-security event will need insurance to pay the costs of the activities.

Dispersal or application of pathogenic or poisonous biological or chemical materials Bodily injury or physical damage to or destruction of tangible property Unexplained or indeterminate failures Insufficient capacity, except for an “e-commerce incident” Shutdown of the internet, regardless of cause Power failure, reduction, or surge Threatened discharge of pollutants Employment practices Costs, fees, and other expenses incurred in establishing the existence of a “loss”

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February, 2014

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Download software only from websites you know and trust. Free stuff may sound appealing, but free downloads can hide malware. Make sure your web browser's security setting is high enough to detect unauthorized downloads. For example, use at least the medium security setting.

Even if you take precautions, malware can find its way onto your computer. So be on the lookout for these signs. Your computer runs slowly, drains its battery quickly, displays unexpected errors or crashes, it won't shut down or restart, it serves a lot of popups, takes you to web pages you didn't visit, changes your home page, or creates new icons or toolbars without your permission.

If you suspect malware, stop doing things that require passwords or personal info, such as online shopping or banking. Use a different computer, maybe one at work or at your local library, to change your passwords. Update your security software and run a system scan. Delete files it flags as malware.

Protect Your Computer from Malware Malware is short for “malicious software." It includes viruses and spyware that get installed on your computer or mobile device without your consent. These programs can cause your device to crash and can be used to monitor and control your online activity. Learn more about how to avoid, detect, and get rid of malware.

If you can't fix the problem on your own, get help from a professional. Your computer manufacturer or internet service provider may offer free tech support. If not, contact a company or retail store that provides tech support.

Would it surprise you to learn that millions of computers in the US are infected with malware? That's a lot of computers. So what's malware, and why should you care?

Keep in mind, the most important thing you can do to prevent malware is to keep your computer software up to date. And remember, it's easy to find trusted information about computer security. Just visit onguardonline.gov, the federal government site to help you stay safe, secure, and responsible online.

Malware, short for malicious software, includes viruses and spyware that get installed on your computer or mobile device without you knowing it. Criminals use malware to steal personal information and commit fraud.

For example, they may use malware to steal the login information for your online accounts or to hijack your computer and use it to send spam. An infected computer can lead to serious problems, like identity theft.

The good news, there's a lot you can do to protect yourself and your computer. One of the most important steps you can take, install security software from a reliable company and set it to update automatically. The bad guys constantly develop new ways to attack your computer, so your software must be up to date to work.

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Set your operating system and your web browser to update automatically too. If you're not sure how, use the help function and search for automatic updates. Don't buy security software in response to unexpected calls or messages, especially if they say they scanned your computer and found malware. Scammers send messages like these to trick you into buying worthless software, or worse, downloading malware.

What else can you do?

Use a pop up blocker, and don't click on links and popups. Don't click on links or open attachments in emails unless you know what they are, even if the emails seem to be from friends or family.

FYI Express

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February, 2014

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How to build a sound Data Security Plan for your Agency

What kind of information do you collect at each entry point, and where do you keep it?

Most companies keep sensitive information in their files, whether it's names, Social Security numbers, credit cards, or other account data that identifies customers or employees. Businesses often need this information to fill orders, meet payroll, or perform other business functions. But if the information falls into the wrong hands, it can lead to fraud or identity theft. The cost of a security breach can be measured in the loss of your customers' trust and perhaps even a lawsuit, which makes safeguarding personal information just plain good business.

We get credit card information from clients. Our accounting department keeps customers' checking account numbers. And the information can be stored in, well, a lot of places -- in our central computer databases, on individual laptops, on disks and tapes, in their file cabinets, in our branch offices. Some employees might even have that information at home.

So, let's get started. A sound data security plan is built on five key principles.

Remember to ask who has access to the information.

Which employees have permission to have it? Can anyone else get a hold of it? What about vendors who supply and update the software you use to process credit card transactions? Or contractors who operate your call center?

Take stock. Know what personal information you have in your files and on your computers.

That's a lot to keep track of, but I can see that it's worth it.

Scale Down. Keep only what you need for your business.

It's a new way to think about information and security.

But it's not only do-able, it's essential.

Lock It. Protect the information that you keep.

Pitch It. Properly dispose of files or data you don't need anymore.

Plan Ahead. Create a plan to respond to security incidents. Let's walk through those five principles so you can see how your company's practices measure up -and where you might want to make some changes.

Ready?

Effective data security starts with an assessment: Taking stock of what information you have and who has access to it. Understanding how personal information moves into, through, and out of your business and who has -- or could have -- access to it is essential to figuring out your security vulnerabilities.

So where do I begin?

Start by taking an inventory -- do an audit of what you've got. Your file cabinets and computers are a good place to start, but remember: Most businesses get personal information in a lot of different ways -- through websites, from contractors, from call centers. Inventory all computers, laptops, flash drives, disks, home computers, cell phones, and other equipment to find out where your company stores sensitive data.

But how can I keep track of all that personal information?

Talk to your sales department, your IT staff, and your HR office. Don't forget your accounting staff and any outside service providers you use. Then ask a few questions. Who sends personal information to your business and how do you receive it?

Should I be handling all information in the same way?

Different types of information present different levels of risk. The fact is some information is more valuable to thieves. You need to pay special attention to how you keep personally identifying information: those Social Security numbers, that credit card or financial information, and other sensitive data. That's what crooks usually use to commit fraud or identity theft. REAL ESTATE AGENT: Do any laws require my company to keep sensitive data secure?

Yes. Federal laws like the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act, and the Federal Trade Commission Act may require that businesses in your industry provide reasonable security for sensitive information. And you'll want to check into state and local laws, too.

The question I keep asking myself is what kind of information should I keep, and of course, what kind of information shouldn't I keep.

That's the second principle -- Scale Down. Keep only what you need for your business. If you don't have a legitimate business need for sensitive information, don't keep it. In fact, don't even collect it in the first place. And if you do have a legitimate business need for the information, keep it only as long as necessary.

We usually create a permanent file about our customers. That's where we keep information from the magnetic stripe on their credit cards. Are we putting their information at risk?

Yes, you are. Keep sensitive data only as long as you have a business reason to have it. Once that business reason is over, dispose of the data properly. If it's not in your system, it can't be stolen.

We get personal information from customers, credit card companies, banks, and credit bureaus. Sometimes, it's sent through websites, sometimes by e-mail, and sometimes the U.S. Mail.

FYI Express Page 16

Continued on page 18 February, 2014

More “Tips ‘n Tools� for Insurance Agencies at www.FYIExpress.com

Train your employees to put files away, log off their computers, and lock their file cabinets and office doors at the end of every day.

How to build a Sound Data Security Plan Continued from page 16 That makes sense to me. But we also collect a lot of Social Security numbers. How do I handle those?

Control who has access to your offices. Tell employees what to do and who to call if they see somebody unfamiliar on the premises. If you have offsite storage facilities, limit access only to employees with a legitimate business need. Know if, and when, someone accesses the storage site.

Use Social Security numbers only for required and lawful purposes -- like reporting employee taxes. In this day and age, don't use Social Security numbers unnecessarily -- for example, as an employee or customer identification number or just because you've always used them.

What about computer security?

But what if I have to keep certain information?

If you must keep information for business reasons or to comply with the law, develop a written record retention policy. Identify what must be kept, how it should be secured, guidelines on how long to keep it, and ways to dispose of it securely when you don't need it anymore.

I think our software saves credit card numbers. What can I do about that?

Check the default settings. Sometimes they're preset to keep information permanently. Change it to make sure you're not keeping anything you don't need.

Don't keep customer credit card information unless you have a business need for it. For example, it's not necessary to keep the account number and expiration date unless there is an essential business need.

Keeping this information -- or keeping it longer than necessary -- raises the risk that the information could be used to commit fraud or identity theft.

What's the best way to protect information that you absolutely have to keep?

The answer really depends on the kind of information you're dealing with and how it's stored. The most effective data security plans deal with four important elements: physical security, electronic security, employee training, and the security practices of your contractors and service providers. Many data compromises happen the old-fashioned way-- through lost or stolen paper documents. So much of the time the best defense is a locked door or an alert employee.

Store documents and files, CDs, floppy disks, zip drives, and tapes with personal information in a locked room or in locked file cabinets. Don't forget to include backup files, too. Then limit access to employees with a legitimate business need to have it. Keep track of how many keys there are and who has one.

Require that all files containing personal information be kept in locked cabinets, except when an employee is working on the file. Remind employees not to leave out sensitive papers when they're out of the office, whether it's for a short break, the day, or while they are on vacation.

FYI Express

Computer security is everyone's business, not just the IT staff. Make sure you understand the vulnerabilities of your computer system, and follow the advice of experts in the field to make it safe.

Identify which of your computers or servers store sensitive information.

Then identify all connections to these computers and servers. Connections could include the Internet, electronic cash registers, computers at your branch offices, computers used by service providers that support your network, and wireless devices, such as inventory scanners or cell phones.

Assess how vulnerable each connection is to known or reasonably foreseeable attacks. Depending on your circumstances, appropriate assessments could range from a knowledgeable employee running off-the-shelf security software to an independent professional conducting a full-scale audit.

Don't store sensitive data on any computer with an Internet connection unless it's essential for conducting your business.

We encrypt the financial data customers submit on our website. But once we receive it, we decrypt it and then e-mail it to our branch offices. Is there a safer way for us to do this?

Glad you asked. Regular e-mail is not a safe way to send sensitive data. Any e-mail with information that could be used by fraudsters or ID thieves should be encrypted.

Another question. Do you have any tips on what kinds of computer passwords are best for security's sake?

Experts say the longer the password, the better.

Because simple passwords, like common dictionary words, can be guessed easily, insist that employees choose passwords with a mix of letters, numbers, and characters. Require that an employee's user name and password be different and that your employees change their passwords often.

Continued on page 20

Page 18

February, 2014

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How to build a Sound Data Security Plan Continued from page 18 Use password-activated screen savers to lock employee computers after a period of inactivity. Lock out users who don't enter the correct password within a certain number of log-on attempts. When installing new software, immediately change the vendor-supplied default password to a "strong" password that's at least eight characters long and contains both numbers and symbols.

You also need to talk with your employees. Be sure to explain to employees why it's against company policy to share their passwords or post them near their workstations.

Warn employees about callers who may try to trick them into giving out their passwords by pretending to be a member of your IT staff. Let employees know that these kinds of calls are always fraudulent and that no one in the company should be asking them to reveal their passwords.

Our account staff needs access to our database of customer financial information. To make it easier for people to remember, we use our company name as the password. Sounds like that could create a security problem?

Yes, it could. Hackers try words like "password," your company name, the software's default password, and other easy-to-guess choices. They also use programs that run through common words and dates.

Everyone in our office uses a laptop. Are there different rules for protecting laptops?

Before you look at how to protect sensitive information on a laptop, think about whether the information really needs to be stored on one at all. If not, delete it with a "wiping" program, which will overwrite the data on the laptop. Deleting files using standard keyboard commands isn't good enough because they may still be on the laptop's hard drive.

Even if you must allow employees to work with sensitive data on laptops, you don’t have to store it on their machines. Consider storing sensitive information on a secure central computer that employees can access with their laptops. That way, the laptops function as terminals that display information from the central computer, not as storage sites. Add extra protection by requiring the use of a token, such as a "smart card," a thumb print, or some other biometric -- as well as a password -- for access to the central computer.

If a laptop will contain sensitive data, encrypt the data and configure it so users can't download any software or change the security settings without approval from your IT staff. Consider adding an "auto-destroy" function so that data on a computer that is reported stolen will be destroyed when the thief tries to get on the Internet.

FYI Express

And don’t forget about physical security. Restrict the use of laptops to employees who need them to perform their jobs, and require those employees to store laptops in a secure place. Even when laptops are being used, think about using cords and locks to secure them to employees' desks.

Train employees to think of their laptops as they would their wallets or cash. When they're on the road, they should never leave them visible in a car, sitting at a hotel luggage stand, or packed in checked luggage, unless they're told to by airport security.

What is a firewall? And how do I know if ours is good enough?

A firewall is software or hardware designed to block hackers from getting into your computer.

I've heard of a "border" firewall. What's that?

A "border" firewall separates your network from the Internet and could prevent an attacker from getting to where you store sensitive information. It's important to allow only trusted employees with a legitimate business need to access the network. To do this set the "access control" settings to determine who gets through the firewall and what they will be allowed to see. The protection a firewall provides is only as effective as its access controls. So review them periodically.

Maintain central log files of security-related information to monitor activity on your network so that you can spot and respond to attacks. If an attack occurs on your network, the log will help you identify which computers are compromised.

Monitor traffic for signs that someone is trying to hack in. Keep an eye out for activity from new users, multiple log-in attempts from unknown users, and higher-thanaverage traffic at unusual times of day (like nonbusiness hours).

Also look at outgoing traffic for signs of a data breach. Watch for unexpectedly large amounts of data being transmitted from your system to an unknown user.

Investigate to make sure the transmission is authorized.

Most importantly, have a breach response plan in place.

Find out if you use wireless devices, such as inventory scanners or cell phones, to connect to your computer network or to transmit sensitive information.

If you do, consider limiting who can use a wireless connection to access your network. You can make it harder for an intruder to access the network by limiting the wireless devices that connect to it.

Better still, consider encrypting the content to make it tougher for an intruder to read it. Encrypting transmissions from wireless devices to your computer network may prevent an intruder from gaining access through a process called "spoofing" -- impersonating one of your computers to get access to your network.

Page 20

February, 2014

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account numbers to process an order or asking for customer or employee contact information. Make it office policy to double-check by contacting the company using a phone number you know is genuine.

How to build a Sound Data Security Plan Continued from page 20 You also should consider using encryption if you allow remote access to your computer network by employees or service providers, such as the companies that troubleshoot and update the software you use to process credit card purchases.

Require employees to notify you immediately if there is a potential security breach, like a lost or stolen laptop.

Discipline employees for security policy violations.

Your company's security practices depend on the people who implement them. That includes contractors and service providers, in addition to your employees.

Your data security plan may look great on paper, but it's only as good as the employees who implement it.

Take time to explain the rules to your staff, and train them to spot security vulnerabilities. Periodic training emphasizes the importance your business places on data security. A well-trained workforce may be the best defense against ID theft and data breaches.

Before you outsource any of your business functions -- payroll, Web hosting, customer call center operations, data processing, or the like -- investigate the company's data security practices and compare its standards to yours. If possible, visit its facilities.

Check references and do background checks before you hire employees who will have access to sensitive data.

In your contract with service providers, address security issues for the type of data they handle. Agree that they will notify you of any security incidents they experience, even if the incidents do not lead to your data being compromised.

Ask every new employee to sign an agreement to follow your company's confidentiality and security standards for handling sensitive data. Make sure they understand that abiding by your company's data security plan is an essential part of their duties and the terms of their employment. Regularly remind employees of your company's policy -- and any legal requirement -- to keep customer information secure and confidential.

Trash can be a gold mine for an identity thief.

Leaving credit card receipts, credit reports, papers, or CDs with personal information in a dumpster exposes your customers to the risk of identity theft and fraud. By properly disposing of sensitive information, you're doing your part to ensure that it can't be read or reconstructed.

Know which employees have access to consumers' sensitive information. Pay particular attention to data like Social Security numbers and account numbers. Limit access to employees with a "need to know."

So what's the safest way to get rid of documents or files we don't need any more?

It depends on the sensitivity of the information, the costs and benefits of different disposal methods, and changes in technology, as well as the nature and size of your business.

Have a procedure in place for making sure that workers who leave your employ or transfer to another part of the company no longer have access to the sensitive information they once did. Terminate their passwords immediately, and collect their keys and identification cards as part of the check-out routine.

So with paper?

Create a "culture of security" by implementing a regular schedule of employee training. Update employees as you find out about new risks and vulnerabilities. Make sure training includes employees at satellite offices, temporary help, and seasonal workers. If employees don't attend, consider blocking their access to the network.

Train employees to recognize security threats. Tell them how to report suspicious activity and publicly reward employees who alert you to vulnerabilities.

Tell employees about your company policies dealing with keeping information secure and confidential. Post reminders in areas where sensitive information is kept, as well as where employees congregate. Make sure your policies cover employees who telecommute or access sensitive data from home or an offsite location.

Alert employees to phone phising. Train them to be suspicious of unknown callers who claim to need FYI Express

Get rid of paper records by shredding, burning or pulverizing them before discarding. Put shredders throughout your office, including next to the photocopier.

What about computers?

When you're getting rid of old computers and portable storage devices, use wipe utility programs.

They're inexpensive and can overwrite the entire hard drive so that the files can't be recovered.

Can I just delete files using the delete key?

Deleting isn't good enough because the files can remain on the computer's hard drive, which means they could be retrieved easily.

What about employees who work from home?

Good point. Make sure employees who work from home follow the same procedures for disposing of sensitive documents, old computers, and any portable storage devices.

Page 22

February, 2014

Check it out at www.SehMobile.com

More “Tips ‘n Tools” for Insurance Agencies at www.FYIExpress.com

How to build a Sound Data Security Plan Continued from page 22

Scale Down. Keep only what you need for your business.

Lock It. Protect the information that you keep.

My company collects credit applications from customers. The form they use asks for a lot of financial information. Once we're finished with the applications, we're careful to throw them away. Is that good enough?

Pitch It. Properly dispose of what you no longer need.

It's not, at least not for smart, security-minded companies. Ensure that sensitive paperwork is unreadable before you throw it away. Like I said, burn it, shred it, or pulverize it to make sure ID thieves can't steal it from your trash.

For more computer security tips, tutorials, and quizzes for everyone on your staff, visit www.onGuardOnline.gov.

Security is important to your business and your customers. Taking steps to protect the data you're holding can go a long way toward preventing a security breach. Have a plan in place to respond to security incidents. Start by designating a senior member of your staff to implement it.

Plan Ahead. Create a plan to respond to security incidents.

BTW … all of these topics will be discussed in upcoming webinars, “How To” videos and our annual convention.

If a computer is compromised, disconnect it immediately from the Internet.

Investigate security incidents immediately, and take steps to close off existing threats to personal information.

“Licensed to Sell!”

Secret Agent Training Info at www.FYIExpress.com

Consider whom to notify in the event of an incident, both inside and outside your organization. You may need to let consumers, law enforcement, customers, credit bureaus, and other businesses know they could be affected by a breach. In addition, since many states and the federal bank regulatory agencies have laws and guidelines dealing with data breaches, you should talk to your lawyer.

I own this business. Will these precautions cost me a fortune?

Attention: Insurance Companies, MGA’s, Premium Finance Companies & Insurance Industry Vendors:

I've got good news for you. No, they're not going to cost you a fortune. And frankly, a breach can be much more expensive than implementing a plan up front. But there's no one-size-fits-all approach to data security.

What's right for you depends on the nature of your business and the kind of information you collect. Some of the most effective security measures -- using passwords, locking up sensitive paperwork, training your staff -- will cost you next to nothing. In fact, you'll find free or low-cost security tools at non-profit websites dedicated to data security. As I said, good security is just good business.

Check out the rates for the most cost effective method of keeping your message in front of your customers …

The Independent Insurance Agent.

So when it comes to protecting personal information for your business, remember the following principles:

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Take Stock. Know what personal information you have in your files and on your computer.

Questions? Contact Eddie K. Emmett at eddie@fyiexpress.com or (770) 312-2342.

HU

FYI Express

Page 24

UH

February, 2014

Smart Solution For Smarter Agents!

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Stay on top of the latest innovations and technology.

Study the companies and individuals to whom you’re selling via the Internet and company websites.

How to get Great at Selling

by John Chapin

4) Work on yourself.

The good news is: There is a clear, proven path to becoming great at selling, the bad news is: There are no short-cuts or magic bullets, it’s going to take some time, effort, and energy to get there.

No one is going to put a gun to your head and make you develop yourself personally and professionally. You have to take responsibility for that yourself and you must push yourself harder than anyone else can possibly push you.

Ten Steps to Sales Greatness

Note: It is important to own a knowledge library with sales and motivational books, audio and video programs, and other related information.

1) Do what the top salespeople do.

This is the most important step to becoming a top salesperson. It’s simple: If you take the same actions as the top salespeople, you will eventually also be a top salesperson. If you do the same things as a mediocre salesperson, you will be a mediocre salesperson. Find the top salespeople in your company and pick their brains. Next, find top salespeople in other industries.

Call these people on the phone, e-mail them, take them to lunch or dinner, do whatever you have to do to find out what they do and then do the same things.

Note 2: Find a mentor, hire a personal coach, or do both. You need someone to give you direction and hold you accountable.

5) Set goals.

You need goals to give your life direction and to give yourself a target. Your goals can be as simple as doing 125 percent of quota and making the annual awards trip, or as complex as a list of daily, weekly, monthly, and annual goals in all the major areas of your life.

Note: You also want to find out what they did to initially build their businesses. For example, top salespeople may not be doing massive cold calling or working crazy hours anymore, but that’s initially how they got to the top. Initial actions like these are some of the ones you want to copy.

Note: While it’s nice to have material goals, it is more important to have goals in which you become something.

“Becoming” goals do much more for your happiness, self-confidence, and self-esteem.

2) Learn everything you possibly can about the subject of selling.

6) Record new ideas and develop new information.

Read, listen to programs, watch videos, and study everything you can get your hands on that relates to selling. Be a sponge and absorb as much information as you can. Realize that no matter how much you know, there’s always more to learn.

Always have a recorder and/or pen and paper in your car, by your bed, at your desk, and everywhere you go so you can record good ideas as soon as they hit you.

Once you’ve captured some good ideas, develop them further and review your notes regularly.

3) Learn everything you can about your industry and your prospects.

Join industry organizations. Read industry publications, newsletters, and magazines. Read “local” sources such as newspapers and other news bulletins that are printed in the geographic proximity of the companies you’re interested in. Look for breaking news, new products, new laws, regulations, or changes in legislation, interesting articles, stories on people making an impact in the industry, and other pertinent information.

FYI Express

7) Practice, drill, rehearse, and apply new ideas.

Take sayings, closes, and other information you like and make them your own. Practice them on peers, family members, and friends. Most important, look for places to use these new ideas in real-world selling situations.

8) Review motivational and educational information often.

Continued on page 28 Page 26

February, 2014

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d) Use your time effectively.

John Chapin

e) Stay organized.

Continued from page 26 Actively listening to tape and CD programs while taking notes is the optimal way to learn, however, passive listening in the car or elsewhere will also work.

To absorb tape and CD programs through passive listening, listen to them ten to fifteen times. With books and other written material, read them, take notes, highlight sections, and then review your notes and highlighted sections ten to fifteen times. With videos, watch them, take notes, and then review.

Again, you also want to be looking for ways to apply the new information.

9) Work hard and smart.

Obviously it’s better to work smarter than harder and yet, there are some areas, especially when you are just starting out, where smart work won’t replace hard work.

That said, here are the best ideas for working hard and smart: a) Do what the top salespeople do, as we’ve already discussed. b) Make more calls and work longer than anyone else. c) Be persistent.

FYI Express

f) Come up with “smart” ideas and alternatives.

Note: Your overall objective early on is to be known as the hardest worker in the office. The fastest way to do this is by making more calls than anyone else and putting in more hours.

10) Pick the right product and company.

To be successful takes a good product and good support. If you are missing one or both, any success will be short-lived. Pick a product you can believe in and a company with people and support that will back you up.

It’s important to represent a product or service that works well, provides value to your customers, and makes you and your company look great. It’s also important to be able to get along with your manager and other people you work with.

John Chapin is an award winning sales 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.

Page 28

February, 2014

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Only $160 per year for one office plus $75.00 for each additional office under common ownership Free Online CE for entire staff Free Classroom CE for entire staff Free Micro-Mobile Site & QR Code Marketing Strategy. Scan this QR Code for a current example. This could be your agency!

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3 hours FREE CE

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3 hours FREE CE

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Presented by the National Flood Insurance Program

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February 21, 2014 in Norcross, GA

February 18, 2014 in North Charleston, SC

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http://www.h2opartnersusa.com/register/norcrossgaagents.shtml WHAT YOU WILL LEARN This seminar addresses basic flood insurance issues as well as some more detailed components. At the conclusion of this seminar, attendees with little or no prior NFIP experience will understand how to build a flood insurance policy from the ground up. Topics to be covered include: Standard Flood Insurance Policy's major coverage areas

http://www.h2opartnersusa.com/register/northcharleston sc-agents.shtml WHAT YOU WILL LEARN This seminar addresses basic flood insurance issues as well as some more detailed components. At the conclusion of this seminar, attendees with little or no prior NFIP experience will understand how to build a flood insurance policy from the ground up. Topics to be covered include: Standard Flood Insurance Policy's major coverage areas FEMA's Elevation Certificate

FEMA's Elevation Certificate

Grandfather Rating Rules

Grandfather Rating Rules

Increased Cost of Compliance coverage

Increased Cost of Compliance coverage

Preferred Risk Policy

Preferred Risk Policy

Biggert-Waters Reform Act

Biggert-Waters Reform Act And Much More CONTINUING EDUCATION This seminar is approved for 3 hours of Georgia continuing education credit. It meets the minimum flood insurance training requirements for this state.

REGISTRATION INFORMATION 8:30 - 9:00 am (Sign-in) 9:00 am - noon (Seminar) This course is FREE, but space is limited so register early.

To register, please use the link above.

FYI Express

And Much More CONTINUING EDUCATION This seminar is approved for 3 hours of South Carolina continuing education credit. It meets the minimum flood insurance training requirements for this state.

REGISTRATION INFORMATION 8:30 - 9:00 am (Sign-in) 9:00 am - noon (Seminar) This course is FREE, but space is limited so register early.

To register, please use the link above.

Page 30

February, 2014

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Go to www.EandOQuote.com for more information

More “Tips ‘n Tools” for Insurance Agencies at www.FYIExpress.com

We are Expert Witnesses on the subject of agency valuation as well as on other topics of insurance agency norms and common practices. When we encounter accountants or appraisers in courtroom situations, we can quickly discount those claim to valuations based on multiples is simply “industry averages” taken from articles published by others. When we encounter agency valuation professionals who understand the nuances that could make your $1 Million agency worth $400,000 or $4,000,000 but still try to oversimplify their results by multiples, we simply ask them how a single multiple addresses issues like:

DEBUNKING AGENCY MULTIPLE CALCULATIONS Every generation of agency owners try to identify the value of their agencies – for estate planning, for buy-ins and buy-outs, for mergers, acquisitions, sales and internal perpetuation. They simply want to know how much they can expect to receive for the value of their asset when it comes time to cash out.

And, in every generation, some professionals with lists of initials next to their names try to provide the simplification that the agency owners desire by offering various methods as a solution to the valuation dilemma.

The most incompetent pseudo-professionals simply state one or several multiples and would lead you to believe that if you have a business called an insurance agency, that this multiple defines your value regardless of the complexion, location, history, size, staffing, or customer base of your particular business.

Personal Lines and Small Commercial agencies vs. Specialty and large lines agencies Agencies in which several accounts (potentially related to the agency owner) comprise high percentages of agency income.

The competent, but misled appraisers, who understand the methods of determining future earnings of a business to determine its value, still try to simplify the process by averaging the work that they have done to establish average multiples of a variety of measurements to try to help the agency owners determine their own values.

Agencies that are consistently profitable and growing vs. agencies of similar size who are stable, stagnant or shrinking or who overspend their revenues annually.

Agencies whose owners are the primary relationship manager for the majority of its specialty accounts vs. agencies whose owners are drivers and managers but whose customer base forms relationships with producers and other agency staff and would stay regardless of the continued presence of the current owners.

How much credibility would you allow me if I told you that every 3 bedroom house was worth $200,000? After all, if I’ve valued 10 or 100 or 1000 houses (properly) and the average was $200,000, would you feel comfortable buying your next house (or selling your current one) based on that valuation alone?

If not, why would you consider buying or selling an agency for two times (anything) based on someone telling you that it is an ‘industry average’ or an average of the transactions they have done in a year, five-year or ten year period? Who creates the industry average? We appraisers of insurance businesses certainly don’t share our results with each other? There is NO central resource for privately held business transactions in our industry and no one has the temerity to start one for fear of accusations of collusion. The only transactions that are readily available are those of the major publicly held companies who purchase $10 million and $20 million revenue (not premium) firms and above in which the price is made public (but not the conditions affecting the price that certainly changes the net value of the business being transacted over time).

Realistically, the professional appraisers will take every one of these (among several hundred other factors) into consideration when creating a potential future earnings stream and a Risk Discount to apply to those potential earnings when creating a proper valuation for an agency. This process takes time and a great deal of data and questions and answers with the agency principals. Simplifying this process into a single or series of “multiples” does a disservice to the agency force because they might actually believe that a 1.75 or 2 times multiple would work as well as the valuation process, itself.

Continued on page 34

Secret Agent Training Info at www.FYIExpress.com FYI Express

Page 32

February, 2014

As fourth quarter quickly approaches, we will utilize this time to place an emphasis on training & development for our agents. Our Marketing team will be offering onsite training along with webinars. Our goal is to have all agents utilizing E-Signature 100%.

As our corporate office is a paperless environment, we want to encourage agents to attach photos and documents directly to the policy in lieu of faxing. This will reduce agency suspense, distorted photos and policy up-rates and/or cancellations.

Electronic Signature

Business practices that impact the customer. This year we introduced the Insured Website and Text /Email program. Allow your customers to help themselves.

Insured Website

Text Alerts / Email Alerts



Marketing Jim Childs (770) 840-5077 Jim.Childs@aggressiveusa.com Janice Cantrell (912) 398-5295 Janice.Cantrell@aggressiveusa.com David Emmett (770) 490-7861 David.Emmett@aggressiveusa.com

SCAN TO SMARTPHONE ACCESS TO MAKE PMT & ID CARD

More “Tips ‘n Tools” for Insurance Agencies at www.FYIExpress.com

DEBUNKING AGENCY MULTIPLE CALCULATIONS Continued from page 32 They will not. Valuations created by the multiples averages of revenue, net income (profits), earnings, or EBITDA (Earnings Before Interest, Depreciation and Amortization) are VALUATION VOODOO. Valuations done properly may be defined as a multiple for simplicity, but must be created by actually doing the work of revenue and expense trending and risk analysis to create the Future Earnings Potential that forms the basis of all proper valuations.

If you have a valuation done on your agency, demand to see the actual work effort and the assumptions made by the appraiser as a part of the published appraisal. If any of that work is defined by a multiple (instead of defined by the work effort and converted into a multiple), decline the valuation. If audited by the IRS, they will likely ask for the proof of that multiple. If you or the appraiser can’t provide that proof, they will invalidate the valuation and demand a different value for tax purposes.

We charge fairly for our valuation services. Many appraisers charge much more but few can afford to charge less because we do so many every year. But be warned. If any accountant or appraiser charges you more than a few hundred dollars for his time to provide you with a letter indicating that your value is defined by a certain “multiple” of some financial factor, you have been sold the equivalent of a bottle of Valuation Snake-Oil.

WHY VALUE YOUR AGENCY? When does agency value begin to carry a level of importance instead of being a ‘footnote’ in your business life?

Most agents are too busy making a living and putting out fires to worry about the value of their agencies. The value is only important when we die or if we’re ready to sell the agency! Most of us consider ourselves in the prime of life, certainly not worried about the esoteric “value” of a business that is making us a living every year.

The average of insurance agency owners increases every year. One day you are busily taking care of your clients then, when your 50th, 55th, or 65th birthday celebration happens, you realize that, like it or not, you’re no longer a ‘spring chicken’ and you have more years behind you in your career than in front of you.

Suddenly the value of your business asset becomes a higher priority!

Birthday progression and cakes that look more like brush fires than birthday celebrations every year are the easiest and most pleasant reminders that your agency value REALLY MEANS SOMETHING. A worse indicator that you should be paying attention to your agency’s value occurs when friends of yours – contemporaries – FYI Express

start retiring or dying. THAT WILL SHOCK YOU AWAKE! Even worse is that first major illness that either you or a loved one experiences that is God’s way of telling you there are more important things in the world than coming to work every day.

The simplest definition of AGENCY VALUE:

At some point every agent will consider what his asset is worth -- now and for the future. And, “No, Virginia, there may be a Santa Claus, but there is no standard multiple that properly defines the value of any insurance agency.” The stories you’ve heard about 1.5 times, 2 times, or more is fiction. Someone has actually determined how much they can earn from an agency and defined it (backwards) in terms of a multiple (of something intelligible to the audience) to make it easier for an owner to understand. And, in its simplest terms, that is exactly what the value of your agency is, the earnings potential over a reasonable period of time for the person doing the valuation (whether that’s the existing owner or someone looking to purchase an agency).

If you are in your 30’s and 40’s and just getting into agency ownership your major awareness is that the agency that you are building will someday have a value that can provide you and your family with a more comfortable future. You need to determine the on-going value of your asset for purposes of estate planning while you and your family are still young.

If you are in your 50’s it’s time to posture your agency for a time in the future that you either internally or externally perpetuate your business either when you retire or while you are still young and vigorous enough to enjoy the fruits of your labors without necessarily stopping working. You may not be ready now for (or ever want) the rocking chair or golf clubs every day but wouldn’t it be nice (while you are still working) to have that nest egg mature and throw off money for you to invest or spend?

If you are in your 60’s or later, you have a more serious and pressing issue. You are ten or less years away from wanting or needing to retire and you have built an asset the value of which you must identify to determine how and what you are going to do with it. I have met many agents who have made their fortunes and careers without the need for the value of the agency. That value will accrue to their beneficiaries, families or next generations of owners. Yet, without knowing the value of the agency you may be passing more taxes and liabilities than assets to generations to whom you think you are performing a favor.

Continued on page 36

Page 34

February, 2014

Why Do Agency Management Systems Cost So Much?

QuikFuzion asked the same question. After all…computers, hardware, software and broadband costs have all dropped over the years….so why do the agency management systems keep increasing in price?

Let’s face it….some of the large agency management system vendors have been bought and sold so many times over the years, it’s really hard to keep track who really owns them anymore. Every time they are sold again, the new buyer wants to increase revenue. You guessed it! Just keep raising the prices to the agencies again. At what point, is enough is enough?

Announcing AJUNT!

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For more information about this exciting agency platform, please visit us at www.QuikFuzion.com or: Call us Toll Free at: (855) EZ TO USE (855) 398-6873

Check Out The AJUNT Features! 

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CRM

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E-Signature

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Introducing Workspace

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Introducing The Stream

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Introducing Pinboard

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Take Payments/Receipts

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Reports/Executive Report Dashboard

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Letters/Notes/Alerts

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Social Integration And a lot more!

More “Tips ‘n Tools” for Insurance Agencies at www.FYIExpress.com

http://www.accuauto.net/insuresign-electronic-signature.html Partnership retirement and funding those buy-outs require valuation ahead of the buyout to properly assure funding options.

Why Value Your Agency?

Continued from page 34 Whether or not you are ready or serious about selling or perpetuating your agency, I recommend that you either create your own valuation or assign us to identifying the value of your agency – NOW while the pressure for taking action may not be imminent. The cost is not high and annual valuation updates are minimal compared to the pressing need that will occur if something bad happens that requires an immediate valuation.

Valuation Types: Agency Consulting Group, Inc. values agencies annually for internal purposes (estate planning, key man insurance, buy/sell agreements, partnership values and buy-ins, ESOPs). If you’d like to do it yourself, we even have a tool that will allow you to estimate your own value. Call us and we’ll talk to you about the best way to value a Going Concern.

Of course, acquisitions, mergers and sales of agencies seriously require third party valuation to assure both buyer and seller of the value of the asset under the specific circumstances of the transaction being considered.

Call Al or David at 856 779 2430 and we’ll be happy to discuss your particular situation and how best to determine the value of your business.

I’ve never seen a headstone that read “He Was A Great Insurance Agent” and working every day until he’s 90; is not a testament to hard work, it’s a definition of someone who didn’t plan his life very well.

Agency Consulting Group, Inc. THE PIPELINE | DEBUNKING AGENCY MULTIPLE CALCULATIONS | Copyright © 2014 Agency Consulting Group, Inc. Agency Consulting Group, Inc. | 800-779-2430

Perpetuation plans that transition ownership from one generation of owners to another also requires regular valuation. Both old and new owners become very aware of the ingredients that increase or decrease the value of the business.

FYI Express

http://agencyconsulting.com

Page 36

February, 2014

More “Tips ‘n Tools” for Insurance Agencies at www.FYIExpress.com

How Does the ACA Affect our W-2 Forms? Q&A

By Robin Thomas, Managing Editor W-2 forms must be provided to your employees by January 31, and this is the second year health insurance should be reported on them. Make sure you know what the ACA requires employers to report and find out if your organization is exempt from the requirement.

Q: We know we have to provide W-2 forms to all of our employees by the end of this month. However, are we required to provide information about our health insurance on the form? We have fewer than 250 employees.

A: Probably not. The Patient Protection and Affordable Care Act (commonly referred to as the Affordable Care Act or ACA) does require most employers to report the cost of health care coverage under an employer-sponsored plan on employees’ Form W-2, Wage and Tax Statement, but it exempts smaller employers at least temporarily. (As a reminder, you are required to provide the Form W-2 to each employee every year by January 31. The form details how much compensation the employee earned and the income, Social Security, and Medicare taxes withheld.)

The provision was supposed to take effect for taxable years beginning on or after January 1, 2011, meaning that W-2s issued for 2011 earnings would have been affected (the W-2s due by January 31, 2012). The Internal Revenue Service (IRS) delayed the requirement until January 2013 because it determined that employers needed additional time to make necessary changes to their payroll systems and procedures to comply with this new requirement. See IRS Notice 2010-69; IRS Notice 2012-9.

This year, employers must continue to report the cost of employer-provided health insurance to employees on the Form W-2. The health care costs should be recorded in section 12 of the Form W-2, using code “DD.” In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. The IRS indicates that the reporting is intended for informational purposes since employerprovided health care currently is not taxable and that it provides employees useful and comparable consumer information on the cost of their health care coverage.

See IRS Notice 2012-9.

Tax experts have suggested the purpose of the Form W-2 reporting requirement is so that the IRS can verify that individuals have health care coverage as required beginning in 2014 under the ACA.

For certain employers, the IRS continues to delay the health care costs reporting requirement for an indefinite period. These temporarily exempted employers will not have to report the costs for future calendar years until the IRS publishes guidance giving at least six months advance notice of any change to this so-called “transition relief.” The IRS has not yet published any guidance, so if an organization falls into any of the 7 categories covered by the transition relief (listed below), it does not have to report the health insurance on the W-2s. However, these employers still may report the costs on a voluntary basis.

See IRS Notice 2012-9.

The transition relief applies to the following: (1) employers filing fewer than 250 Forms W-2 for the previous calendar year; (2) multi-employer plans; (3) Health Reimbursement Arrangements; (4) dental and vision plans that are not integrated into another health care plan or give participants the choice of declining the coverage or electing it and paying an additional premium; (5) self-insured plans of employers not subject to COBRA continuation coverage or similar requirements; (6) employee assistance programs, on-site medical clinics, or wellness programs for which the employer does not charge a premium under COBRA continuation coverage or similar requirements; and (7) employers furnishing Forms W-2 to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year. See IRS Notice 2012-9.

So, since your organization has fewer than 250 employees, and assuming you filed fewer than 250 Forms W-2 for 2012, then you likely do not have to report your health insurance information on the forms.

The IRS has provided guidance on the health care reporting requirements online at http://www.irs.gov/uac/Form-W-2-Reporting-ofEmployer-Sponsored-Health-Coverage.

YOU CAN TRUST PPS Information provided in HR Matters E-Tips is researched and reviewed by the HR experts at Personnel Policy Service as well as employment law attorneys. However, it is not intended as legal advice.

Readers are encouraged to seek appropriate legal or other professional advice.

Please note that the information in every issue of HR Matters E-Tips is the original, copyrighted work of The reporting requirement also will make it easier for Personnel Policy Service, Inc., and is protected under the IRS to impose the 40% “Cadillac tax” required by the U.S. copyright laws. As such, you may not reprint or ACA that takes effect in 2018 on employer-provided publish in any format any article or portion of article from health insurance benefits that cost more than $10,200 HR Matters E-Tips without the express permission of for individual coverage and $27,500 for family coverage.

Personnel Policy Service, Inc. FYI Express Page 37 February, 2014

More “Tips ‘n Tools” for Insurance Agencies at www.FYIExpress.com

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Contact Daniel Ochoa // VP of Sales

Agency Matrix, LLC

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Phone: 800-456-2874 ext. 399 Fax: 678-957-7468 dochoa@AgencyMatrix.com

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Secret Agent Training Info at www.FYIExpress.com

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We are seeking highly motivated individuals with great attitude and work ethic for a Sales & Service position. Candidates must be self-starters and ready to work in a fast-paced environment. Advanced communication skills and a thorough knowledge of both commercial and personal lines products are required.

Applicant should be capable of pursuing and closing sales of new commercial & personal accounts in the Gainesville Georgia area.

Must have valid Property and Casualty Insurance License issued by the state of Georgia.

This position is 100% commission, with unlimited earning potential.

FYI Express

http://www.fyiexpress.com/insurance-expo-2014info.html Page 38

February, 2014

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