LOUISIANAAGENT A U G U S T 2 0 2 2 A M O N T H L Y P U B L I C A T I O N O F T H E I N D E P E N D E N T I N S U R A N C E A G E N T S & B R O K E R S O F L O U I S I A N A Story on page 6
KATHLEEN koregan@iiabl com (225) 236 1360 KAREN kkuylen@iiabl com (225) 236
Insurance Programs Administrator
KUYLEN Director of Accounting & Finance
Director of Member Relations
ALBRIGHT Chief Executive Officer
O'REGAN Director of Communications & Events
WAMBSGANS Agency Consultant
RHONDA rmartinez@iiabl.com (225) 236
ALBRIGHT Vice President of Strategic Initiatives
JEFF jalbright@iiabl com (225) 236 1366 BENJAMIN balbright@iiabl.com (225) 236
BRANDI PELT bvanpelt@iiabl.com (225) 236 1358 DUSTIN dwambsgans@iiabl.com (225) 236 1361
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IIABL STAFF
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NEWCHURCH Director of Insurance Programs
MARTINEZ Director of Insurance Programs
JAMIE jnewchurch@iiabl com (225) 236 YOUNG-CROOKS lyoung@iiabl.com (225)
1350 LISA
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CONTENTS LOUISIANAAGENT IT'SNOTJUSTTHE WEATHER06 TABLE OF CONTENTS & FEATURED STORIES 12 13 18153 E Petroleum Drive Baton Rouge, LA 70809 Ph: (225) 819 8007 www iiabl com YOUNG AGENTS CONFERENCE HIGHLIGHTS PAGE 4 02 IIABLSTAFF At your service! 20 LACITIZENSCOMMISSION STATEMENTS The location to view is changing! 22 UNDERSTANDINGTHEBASICSOF PROPERTYPROTECTIONINCOPE Chris Boggs 28 EXPANDYOURSTRIKEZONEWITHIMS Independent Market Solutions 29 YOURBONDMARKETSOLUTIONS Big "I" Markets 16 APOSTIVEIMPACT Burand's Insurance Agency Advisory STANDARD WIND DEDUCTIBLE DISCLOSURE 50 IIABLEDUCATIONUPDATE 49 ADVERTISERINDEX 52 INDUSTRYPARTNERS 53 IIABLBOARDOFDIRECTORS 32 HELPYOURCUSTOMERS BEATTHEHEAT Big "I" RLI Personal Umbrella Policy 38 WHATMULTIPLECANIEXPECT FORMYAGENCY? Carey Wallace, Agency Focus LLC 34 HOWCANTHEINSURANCEINDUSTRY WINOVERMILLENIALS? Brian Ambrosia 42 SHOULDYOUBUYTHERENTALCAR DAMAGEWAIVER? Insurance Journal 46 THECOMMERCIALINSURANCE VACANCYCLAUSE Important to Today's Commercial Real Estate Owners
Following entire report at APCIA Research Papers | APCIA.
The principal conclusion of our analysis is that crises in property insurance markets today frequently have little to do with Mother Nature. Instead, man- made crises in the form of legal system abuse, claims fraud, and regulatory interference are the root causes of most market instability. As is documented in this paper, each of these problems increases system costs, which in turn has led directly to higher premiums for policyholders. Market instability also increases uncertainty, forcing individual insurers to restrict coverage, cancel or non-renew policies and exit markets.
Weather-related disasters are becoming increasingly common—and costly. Disaster claim payouts by insurers now approach $50 billion per year, on average, up some 25 percent from a decade ago, adjusted for inflation. Climate change, rapid population growth in disaster-prone states and, more recently, inflation all play important roles in driving the cost of insuring natural disasters upward. Yet managing these risks is precisely what insurers are equipped to do, while bringing relief and protection to the millions of home and business owners impacted by these tragic events each and every year.
Report by American Property Casualty Insurance Association, Reinsurance Association of America, Association of Bermuda Insurers & Reinsurers
EXECUTIVE SUMMARY
are highlights of the report. You can download the
At the same time, property insurance markets in many states are showing signs of stress. Indeed, several markets are in a state of crisis, with a number of insurers recently becoming insolvent In this paper, we analyze the origins, root causes and consequences of increasing stress and instability in property insurance markets, using several of the most severely impacted states as case studies. The paper concludes with recommendations designed to relieve pressure and restore stability in those markets.
Louisiana has a well earned reputation as one of the worst states for lawsuit abuse. In the annual “Judicial Hellholes” Report prepared by the American Tort Reform Foundation, Louisiana ranks as the sixth worst state in America.46 The “Hellholes” report found that Louisiana’s lawsuit environment costs the state $3.87 billion in lost economic activity and 22,550 jobs, while imposing a “tort tax” of $451 per resident annually.
Just as with natural disasters, the cost of these man made crises is measured in billions of dollars. But unlike perils such as hurricanes, wildfires, and tornados which can be readily modeled and priced by insurers legal system abuses, fraud, and misguided regulation cannot. These unmodeled and largely uncontained risks are in some cases solvency threatening, obligating insurers to take drastic steps to protect and conserve capital, with predictably adverse consequences on price, coverage availability, and competition. Fixing the nation’s imperiled property insurance markets is an insurance industry priority. But insurers cannot restore these markets to health alone. To do so requires a focused and enduring commitment by state legislators and regulators to adopt meaningful legal system reforms, attack fraud at its source, and promote regulatory stability. To facilitate that objective, this paper concludes with a series of concrete recommendations for addressing each of these root causes of instability. Collectively, these recommendations form an action plan that, if adopted, can help restore stability to property insurance markets in the nation’s most disasterprone states.
Legal System Abuse
LOUISIANAAGENTPAGE 7 Continued from page 6
The report, entitled “Economic Benefits of Tort Reform,” was prepared for Citizens Against Lawsuit Abuse and Louisiana Lawsuit Abuse Watch. Insurers face a similarly difficult tort environment in Louisiana, and back-to-back severe hurricane seasons that resulted in significant government intervention and mandates, such as legislation imposing burdensome claims-related requirements on insurers, have further exacerbated conditions that can incentivize legal system abuse. Legislative and regulatory overreactions in the immediate aftermath of disasters have led to the destabilization of the insurance market, thus creating a man-made crisis.
LOUISIANA
NOTJUSTWEATHER
A report from local lawsuit watchdogs reported an even bleaker picture: Overall, excessive tort litigation in Louisiana results in direct costs of more than $3.2 billion, state gross product losses of nearly $4.7 billion and more than 46,000 lost jobs. Those costs are on top of state government losses of nearly $244 million and more than $203 million in losses for local governments each year, according to the report.
Louisiana’s onerous bad faith laws contribute significantly to inflated claims payments and awards. Insurers who fail to pay claims or make a written offer to settle within 30 days of proof of loss may face penalties of up to 50 percent of the amount due, even for purely technical violations. To avoid incurring these massive penalties, which are meted out pursuant to highly subjective standards of conduct, insurers sometimes feel compelled to pay more than the actual value of claims as the lesser of two evils. In addition, some of the harmful practices that proliferated in Florida, such as abusive lawsuits resulting from assignment of benefits to contractors, have been seen in Louisiana. These problems are exacerbated by an outsized amount of legal advertising compared to already inflated national averages. By November 2021, more than $46.6 million was spent on all legal advertising in Louisiana during that year. Louisiana accounted for 3.3 percent of all nationwide locally televised legal advertisements despite comprising less than 1.4 percent of the nation’s population.
Recent Catastrophe Losses
LOUISIANAAGENTPAGE 8 Continued from page 7
Compounding the state’s difficult legal environment, Louisiana has experienced two consecutive severe hurricane seasons, which resulted in significant insured losses that triggered a wave of hostile legislation for insurers. According to the Louisiana Department of Insurance (LDI), insurers have received over 800,000 insurance claims in the wake of recent hurricanes, including Hurricanes Laura, Delta, and Zeta in 2020 and Hurricane Ida in 2021, the latter of which resulted in $36 billion in insured losses and has been deemed the second costliest insured natural disaster in U.S. history. While insurers have worked to diligently process the extensive volume of claims as timely and safely as possible amid the COVID 19 pandemic, a relatively small number of consumer complaints (representing less than 1 percent of overall claims) resulted in a disproportionate level of legislative and regulatory attention and response. According to data from LDI, the highest volume of complaints stemmed from Hurricanes Laura and Ida, both strong category 4 storms, which resulted in individual complaint ratios of 1.0 percent and 1.2 percent, respectively. This means insurers handled roughly 99 percent of claims to consumer satisfaction in a very challenging post-hurricane situation that was further complicated by pandemic-related issues, including periodic labor shortages during heightened levels of COVID-19 infections and implementation of strict social distancing measures and new virtual tools to help safely handle claims.
Government Interference
NOTJUSTWEATHER
Nevertheless, to appear responsive to growing public concerns and media coverage, state lawmakers passed a flurry of bills intended to tighten the rules on insurance companies. Such actions create a more costly and adversarial claims handling environment for insurers, conditions which have historically led to increased premiums
Market Impact
and less consumer choice in the marketplace as insurers face new, more challenging litigation rules post disasters. Separately, in the immediate aftermath of Hurricane Ida, following heightened political pressure from state and federal officials, the Insurance Commissioner issued Directive 218, which ordered insurers in the state to set aside the plain language of an insurance policy filed with and approved by the Department of Insurance and provide extracontractual coverage for certain evacuation related additional living expenses, thus undermining the sanctity of the contract. A legal challenge ruled Directive 218 was invalid and unenforceable. The judge noted in his ruling that Directive 218 was an “improper exercise” of the Commissioner’s discretion and further called the Commissioner’s interpretation of the Prohibited Use policy language “ wrong, manifestly erroneous, and shocking to the conscience of the tribunal”.
PAGE 9 LOUISIANA
Continued from page 8 insurers to remain, recent actions by state lawmakers and the Insurance Commissioner have led to increased volatility and cost burden for insurers, compounding the effects of rapidly rising reconstruction costs due to severe inflation and demand surge, while insurers are still working to resolve claims from the 2020 and 2021 hurricane seasons. The effects of growing uncertainty amid deteriorating market conditions have resulted in at least 10 companies withdrawing entirely from the state since the calendar year 2020 and 2021 hurricanes, and at least five more ceasing to write new policies, according to LDI staff in a report issued in May. The May report further noted five additional insurance companies have become financially insolvent in the aftermath of recent storms and placed into receivership by LDI,56 though more recent reports indicate this number has continued to grow, with up to seven insolvencies as of early August.
NOTJUSTWEATHER
Contrary to the actions taken in the state following the 2004 and 2005 hurricane seasons, which aimed to stabilize the market and incentivize AGENT
EXAMPLES OF RECENTLY PASSED LEGISLATION IN LOUISIANA 2021 • stricter claims handling standards (HB 457) • stricter claims payment and settlement requirements + new penalties (HB 585) • adverse appraisal provisions + limitations on vendor referrals (HB 591) • expanded DOI emergency powers (SB 29) 2022 • adverse appraisal language + stricter claims handling & settlement timeframes (HB 936) • expanded ALE coverage benefits (HB 83, HB 831) • new catastrophe claims process disclosure form (SB 163) • additional requirements imposed on out of state adjusters (HB 682, HB 935) PAGE 10 LOUISIANAAGENT Continued from page 9NOTJUSTWEATHER
August 15, 2022
Executive Summary
On ALL new Homeowners policies with an effective date after January 1, 2023 and on any Homeowners policies that experience a change in any wind deductibles after that date, agents should: Provide the form to the insured Get a signature from the named insured Maintain a copy of the signed form in their agency management system (this is an excellent E&O defense in the event of a claim on that policy)
Technical Advisory Notice
A law passed in Louisiana’s 2022 legislative session requires insurers to provide policyholders with a standardized form which states the amount of any applicable Hurricane, Named Storm, or Wind/Hail deductibles on new Homeowners’ insurance policies and request that the insured sign the form A new copy of the form is required to be sent to the policyholder any time the amount of the deductible is changed, but it is not required to be sent on every renewal, if there was no change in the deductible. Changes in the amount of the insured value (which would by default change the amount of a percentage deductible) do not require a new form only changes to the percentage (i.e. moving from 2% to 3%).
TA 354: Standardized Hurricane/Windstorm Deductible Form
Although the statute says that “insurers” must send the form, IIABL anticipates that most insurance companies that rely on independent agents for distribution will include the form in the documents that agents must get signed at the time a policy is bound. The Department of Insurance promulgated a regulation which included the template for the form to be used.
Necessary Action Read TA 354
The legislation and the Department’s subsequent bulletin both clearly indicate that there is NO cause of action in the event of a failure to provide or secure a signature on the form, but agents should still get the form signed as a matter of compliance and best practices. All personal lines agents and staff should be made aware of the new form requirement
Young Agents Conference Highlights
IIABL and IIAM partnered up again for a weekend full of education, networking and fun in New Orleans! We kicked off the Young Agents Conference with the Big I Ryder Cup at English Turn Golf & Country Club. Louisiana took home the Big I Ryder Cup again after defeating Mississippi on the fairway! Better luck next year Mississippians!
The Conference continued with 6 hours of continuing education on reinsurance, markets and required ethics. We spiced up our Q&A by throwing around a "Chatbox" microphone and had fun roundtable discussions while playing Kahoot!
Friday night concluded with our Opening Reception with Exhibitors! The food was delicious, the drinks were flowing, and the swag was on point. Everyone had a wonderful time networking with old friends and making new ones. Our Saturday Cocktail Reception helped us draw the event to a close on the balcony of the Sheraton New Orleans overlooking the busy streets of New Orleans.
A POSITIVE IMPACT
Burand's Insurance Agency Advisory
J U L Y 2 0 2 2 V O L U M E 2 7 , N U M B E R 5
In the insurance industry, you can have a phenomenal career in which you can make a personal difference to clients, especially as an agent. The price, however, is making the world a better place client by client rather than globally, and to do this you must become a coverage expert. You must care about your clients. You must deal with the frustration you will experience when you see how sloppy other agents are and sometimes, how much more money they make by being sloppy. I will use the recent Colorado fires as an example of how a great agent makes the world a better place. Before going further, I want to confront experienced readers who will dismiss the following as being enviable but impossible. I have been gifted with the opportunity to work with thousands of agents. The following is only impossible if you do not care enough and do not know enough. Not knowing enough includes not knowing what is truly possible. What I describe below is being done by many of my clients who care enough and have spent the time, energy, and money to become true professionals. When a fire occurs, especially a large fire, a family will most likely lose everything. They lose 100% of everything. They lose memories in the loss of photos, mementos, and computer memory. They lose all of their possessions, some of which they may be happy to lose, but mostly not. They must find a new place to live. If they have children, they must find a place to live, hopefully, within the same school district and, hopefully, without a longer commute. With luck they can maintain a normal grocery shopping routine at the very least. The ability to preserve some sense of normal becomes vital. Recovery becomes a second full time job for an exceptionally long time. Hobbies go away. Socializing goes away. Dealing with insurance adjusters, contractors, building permits, debris removal, and architects becomes their new life. Finding clothes for everyone and finding a place to wash those clothes becomes the new norm. Finding all the passwords and account numbers tucked away so you can do your banking and pay for your insurance, healthcare and such might require weeks' worth of work.
All these points are reality and this list does not include any personal trauma or injuries that might have occurred. A really good insurance agent can make an enormous difference. A sloppy agent can make their clients’ lives miserable. As an example let me show the contrast between two agents. I will begin with the issue of insuring homes to value. Two parts are required to insure homes to value. The first part is to make the commitment to insure homes to value. That may sound obvious but many agents are taught to tell insureds they only need to insure their homes to the co insurance requirement so they can save money without losing coverage. Neither point is true and quite possibly is the work of a sloppy, perhaps unethical agent, but most likely it was an ignorant agent with good intentions. In today's inflationary construction environment, cutting coverage to the co insurance level is a fool's errand because with virtually 100% certainty the result is coverage that is less than the co insurance requirement. Also, the insured is not going to save any money. They are simply buying less coverage. To save money the insured would need to buy the same coverage for less money. It is like saying "I'm saving money by buying half a sandwich instead of a whole sandwich." Of course half a sandwich will cost less, but does it do the job? If I had my way, I would make it illegal to use this sales approach because to me it is patently unethical and is only used by sloppy agents. Good agents know that inadequate coverage can leave an insured holding the bag. Replacement Cost Estimators (RCEs) are the second part and this is more of a gray area. Without getting into the morass that all RCEs are wrong (true), some are more wrong than others. Good agents can account for that in the policy and it is at this point that deep knowledge is
POSITIVEIMPACT
LOUISIANAAGENTPAGE 17 Continued from page 16
POSITIVEIMPACT AGENT
PAGE 18 LOUISIANA
Continued from page 17 imperative. No one should expect an agent to be a construction expert. When completing RCEs, do not suggest to clients that you are an expert and reiterate to them that RCEs are estimators for insurance purposes only. However, if you learn to use them well, your clients will be better protected. For example, be thorough when completing them. Also, use common sense because sometimes the numbers calculated are nonsensical. Do not leave anything out. Some fires become so hot that concrete foundations are damaged. This means the foundations must be removed (more debris removal) and re poured which means dirt work is also required. Include the foundations and dirt work in your replacement cost estimators. Many agents forget to do this or don’t know to do it. Offer and really try to convince all insureds to buy replacement cost coverage on the structure. In my experience, the margin of error with RCE’s is between 10% and 50%. The replacement cost coverage gives the insured coverage for at lea the lower end of the errors. Also, be aware th difference between carriers’ replacement cos coverage varies significantly. Some are cappe some are not. Also pay close attention to how the replacem cost endorsement works with co-insurance a improvements. During COVID many people improved their homes and forgot to tell their agents. Generally, improvements are exclude from the replacement cost endorsement, but factor into the co-insurance factor. That wou a problem. Really good agents, on this point alone, must dedicate themselves to deep coverage knowl carrier form by carrier form, because the difference may transform the ease with which person recovers from a fire, versus a person w discovers they lack adequate coverage. Such coverage knowledge must be paired with caring enough about your clients to talk to them. In today's world where we have geniuses telling us they can solve all problems with data, remembering to talk to clients can get lost. Talking to clients gives you the knowledge you need to offer the right coverages that will help them enormously through difficult straights. In talking to your customers you also get the opportunity to educate them. Consumers often buy the wrong insurance because they lack insurance knowledge and sloppy agents take advantage of them. A key coverage that can make a wonderful difference when rebuilding is offering adequate Ordinance and Law coverage. Every agent I have ever spoken to about ordinance and law coverage tells me they have it covered because the policies they sell automatically include it. Whether it is or is not included is a moot point because the automatic throw in coverage is almost always inadequate in a fire loss. Insureds need 50%
The best part is this: For every client a professional insures well, there is one less client who a sloppy agent cannot leave hanging. The industry needs to help change the world and a great place to start is one client at a time. Professional agents are the people who can make that difference.
POSITIVEIMPACT
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Continued from page 18 to even 100% coverage. A really good agent who is dedicated to making the world a better place will emphasize and sell this extra coverage. Besides, this coverage is usually incredibly inexpensive. I have worked with many agents through many catastrophes. I have worked with many agents in the same cities during the same catastrophes. The insureds of the most professional agents have always, in my experience, been able to rebuild their lives more quickly with much less angst, frustration, anger, and time spent. These agents have indeed made the world a much better place, client by client by client. You can join that club too.
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Louisiana Citizens Property Insurance Corporation
Provide comprehensive coverage to policyholders at rates that are not competitive with rates charged in the voluntary market.
Facilitate the ability of policyholders to obtain property insurance from private insurers and encourage the depopulation of the company. Developing superior procedures to meet regular operating requirements.
Respond timely and efficiently to the everchanging property insurance marketplace with due consideration to the needs of Louisiana Citizens policyholders.
Establishing procedures to secure necessary financial resources in the event of a catastrophe.
Louisiana Citizens Property Insurance Corporation will: Meet and maintain its fiscal obligations to policyholders by: User Maintenance for Agency Admins (video)
Commission statements will be available on both platforms through March 31st, at which time, the agent portal will no longer house the statements. Please contact our office if you have any further questions.
Louisiana Citizens is the insurance of last resort and is state-mandated to be more costly than private property insurance companies.
The Louisiana Citizens Property Insurance Corporation is a nonprofit organization created to provide insurance products for residential and commercial property applicants who are in good faith entitled, but unable, to procure insurance through the voluntary insurance marketplace.
Commission statements will be moving from the Agent Portal to EPIC in efforts to provide better security and to eventually move away from using the Agent Portal. You will need to assign permissions to individual users in order for them to access the statements. Please watch the training video below for a quick tutorial on how to access this new feature and assign permissions.
Marsha LeBlanc Manager of Financial Planning & Analysis policyadmin@lacitizens.com
Additional Resources: About LA Citizens Property Insurance Company
By Chris Boggs Last Updated 2021 Construction; Occupancy; Protection; and Exposures. Public or private; and Active or passive. For almost 400 years commercial property underwriters have used the same general information when evaluating a property risk: Collectively, these are known as the “COPE" data. Although the VU has written and taught sessions on all four parts of COPE, this article provides a general overview if just one part Protection. Local fire departments, sprinkler systems, fire extinguishers, alarm systems, and fire doors/fire walls are the five main property protection features potentially available to property owners. Each of the five features is classified as either:
UNDERSTANDING THE BASICS OF PROPERTY PROTECTION IN COPE UNDERWRITING
Jan. 29,
N O M A D I C | 2 4
ISO's current countrywide PPC breakdown (as shown 12/1/2020): Occasionally fire departments are assigned two PPCs. These are referred to as split classification departments. The ultimately assigned classification is a function of the closest fire hydrant or other creditable water supply. If the closest hydrant or other creditable water source is within 1,000 feet, the lower (better) PPC is used; if over 1,000 feet, the higher class is applied.
Historically, split classes were listed as 6/9 or 5/9 (examples only). However, in 2013, ISO changed how split classes are assigned Now an “X" or “Y" replaces the historical “9" or “8B" assignments For example, an historical 6/9 split classification is now shown as 6/6X; an historical 5/8B is now a 5/5Y Beyond these split class changes, ISO also created a new PPC 10 option 10W. A “10W" is assigned to properties located more than five miles but less than seven miles from the closest responding fire department AND less than 1,000 feet from a creditable water source. According to ISO, properties meeting these parameters are a lower fire risk than is indicated by the traditional PPC 10. If these conditions aren't met, the property is assigned the traditional 10. North Carolina is the only state that has not adopted either classification change. Private Protection Alarm systems, sprinkler systems, fire extinguishers, and fire doors/fire walls are limited to one location or one property, thus each is considered private protection. No party other than the building owner benefits from these protection features.
LOUISIANAAGENTPAGE 23 Continued from page 22PROPERTYPROTECTION
Public Protection Fire departments are the only protection feature considered as “public" protection. Fire departments are funded by local governments and protect somewhat large areas, responding to fires and other public emergencies.
Each fire department is inspected and assigned a grade its public protection class (PPC). Most fire departments are inspected and graded by Insurance Services Office (ISO), but some are inspected and graded by the state Departments of Insurance. Upon inspection, each department is assigned a number grade ranging between 1 and 10. The lower the number, the more effective ISO (or other jurisdictional authority) considers the department. Public protection grades are based on factors such as fire department response times, water supply, personnel training, available equipment, communications, and mix of paid versus volunteer personnel. Countrywide, the most common PPC grade is 5. Not surprisingly, the least common, and most coveted, class is 1. (Note: Public Protection Class 10 is assigned to locations more than five miles from the closest responding fire department.)
Alarm Systems. Fire, burglar, carbon monoxide, medical emergency, and other alarm systems are readily available to protect property and persons. Whether an alarm system is adequate is a function of several factors: Sprinkler Systems. Having a sprinkler system is beneficial, but simply “having" a sprinkler system isn't always enough. Can the system meet the demands of the current operation?
Using the correct type. Different types of fire extinguishers are needed for different exposures. There are five primary classes of fire extinguishers based on the types of fire on which they are intended to be used: Class A: Used to extinguish anything producing ash (thus an “A" classification). This is for materials such as wood, paper, furniture, etc.); Fire Extinguishers: Like sprinkler systems, fire extinguishers are great to have; and like sprinklers, just having a fire extinguisher is not enough. To gain any benefit from a fire extinguisher requires:
Who receives the alarm? Does it sound locally or is it monitored by a central station? Is the central station listed by Underwriters Laboratory (UL)? What type of external communication is used? Is a tape dialer still in use or is it digital? What protection exists if the power is off? Are there any unprotected areas? Are there any special features? Is the system installed properly?
PROPERTYPROTECTION PAGE 24 LOUISIANAAGENT Continued from page 23
Over time, buildings may be repurposed. What was originally built and used as an office with minor assembly may now be a cabinet shop. Unless the sprinkler system was updated to account for this increased fire load, it may not be effective; it certainly won't be as effective as a system designed for a woodworking operation. Sprinkler systems must be inspected thoroughly to assure the system can do what it was designed to do controlling and, maybe, extinguishing a fire. Proper evaluation of a sprinkler system requires review of:
The type of system (wet, dry, deluge, preaction, foam, chemical, etc.); The system's condition (in good working order or with deficiencies); The water supply (adequate to meet the needs of the occupancy); The system's ability to meet the current fire load; However, simply having any or all of these protection features is not enough. Does the protective feature adequately protect the location or provide any benefit?
Any non sprinklered areas: Clearance below the heads (any materials too close to the sprinkler heads retarding its flow); and Any high rack storage (are there in rack sprinklers).
Having the correct size An undersized extinguisher puts the user in danger more than it helps extinguish a fire Training employees on how to properly use the fire extinguishers Placing fire extinguishers in the natural path of exit. Users and potential users should be able to access the extinguishers as they are leaving the area; they should not have to go into the room (fire) to find an extinguisher. Properly locating fire extinguishers. Extinguishers should be hung at eyelevel with no more than 75 feet of travel distance from any point. (Note: A, B, and C are often combined into one extinguisher.)
Class B: Used to extinguish anything that “boils" (thus “B"). Class B extinguishers are used to fight flammable and combustible liquid fires; Class C: Used to extinguish anything that has a “charge" (thus “C"). Class C extinguishers are used to battle electrical fires; Class D: Used to extinguish combustible metal fires (no good way to get to “D"). Metals such as magnesium, titanium, sodium, and potassium burn when not in solid form (such as a pile of shavings or other loose form). No other class of extinguisher can be used on these fires. Class A, B, and C extinguishers can spread these fires or react negatively; and Class K: Used to extinguish kitchen fires (thus “K") Class K extinguishers can be handheld or part of what is often referred to as “Ansul systems " Class K extinguishers and systems are used to extinguish grease laden fires
PROPERTYPROTECTION
Fire Walls and Fire Doors: The size of a building has a direct effect on the difference between the structure's Maximum Possible Loss (MPL) and Probable Maximum Loss (PML). One method to lower the PML is to divide the building into smaller sections (compartmentalization) by constructing fire walls and using fire doors. Be one continuous masonry wall; Be a minimum of 6 or 8 inches thick (the difference in thickness is a function of the materials used); Come into direct contact with fire resistive masonry or noncombustible walls and roof; and fully pierce “slow burning" or combustible walls and roof;
Fire walls and fire doors are effective only when minimum standards are met. Lacking in any of these standards makes such walls and doors nothing more than fire stops or merely an obstacle that slows the fire. For a wall to qualify as a “fire wall," it must:
LOUISIANAAGENTPAGE 25
Continued from page 24
Compartmentalizing a building using fire walls and fire doors reduces the possibility or probability of widespread fire damage, ultimately lowering the PML.
Property Protection
Does the protection feature act or react in the absence of humans or is human intervention or action required? This is the difference between “Active" and “Passive" protection. Active protection features don't require human presence to do what they are designed to do. However, humans must eventually react to an active protection feature to successfully mitigate the situation. Sprinkler systems and alarm systems are the two active (self-actuating) protection features. Even when no one is around, a sprinkler system “reacts" (provided it is in good working condition Likewise, an alarm system sounds or sends a noti when a monitored situation occurs. Ultimately humans must do something, but they are not required to activate either of these systems.
Effective property protection requires use of the appropriate protection options. Which protection features are necessary is a function of the building and the operations. Although every building is protected by a responding fire department, not every building requires a sprinkler system. Likewise, every building should be supplied with the proper fire extinguishers, but a particular building may not require compartmentalization by use of a fire wall/fire door combination. Regardless the protection features in use, every worker on the premises must know and understand the need for and the use of the protection features present.
Have any openings protected by self closing, 3 hour rated fire doors (aka Class “A" doors). If such a door is blocked open or unable to fully close, the wall is no longer considered a fire wall; and Protect any openings through which HVAC ducts pass with a 1 ½ hour rated damper.
Active vs. Passive Protection
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Fire walls and fire doors are truly just there the ultimate in passive protection Fire walls and fire doors don't act in any way; they exist solely to get in the way of the fire
Passive protection features are the local fire departments, fire extinguishers, and fire walls/fir doors. They are just “there."
Fire departments stand ready to respond to emergencies, but since the fire department is away from the building and human action is required (the firefighters have to get suited u get on the trucks, and drive to the scene), a fi department is considered passive protection Fire extinguishers are fully passive. An extinguisher is of no benefit until a human takes it, pulls the safety pin, and applies the extinguishing chemicals onto the fire.
Continued from page 25PROPERTYPROTECTION
Our
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Many IMS markets require low to no volume commitments, offer competitive commissions, and can help you establish a clear pathway to direct appointment. IMS agents also own 100 percent of expirations and can participate in any earned program contingencies. And because IMS offers a mix of standard and niche markets, you don’t have to turn away a client’s request on a risk that your agency doesn’t currently write. To start taking advantage of this exclusive member resource and expand your strike zone, get started on IIABL’s market access application HERE Insurance Company Partners Include:
Are you taking advantage of our Independent Market Solutions (IMS) program? The larger your strike zone, the easier it is to hit a home run, so we’ve made market access a part of your membership at no additional cost. Whether you are a new or smaller agency with few or no direct appointments or a mid to large sized agency, IIABL’s member exclusive program allows you to quickly connect with carriers and find insurance products suitable for your clients’ needs. Through the IMS program, we have grown market availability in Louisiana to include participating carriers offering personal, commercial, and specialty lines.
BIG I MARKETS HAS YOUR BOND MARKET SOLUTION
Big "I" Markets As the world adjusts to a “ new normal," construction projects continue to move forward and certain things remain the same. Contractors continue to bid and receive awards for new construction contracts. Project owners continue to require bid bonds, performance bond and payment bonds. Governmental entities continue to require license and permit bonds. And Big “I” Markets’ bond partner Goldleaf Surety continues to be here to assist your agency with all of these bond needs. Goldleaf Surety prides itself on being there when agents have questions about or need help navigating the world of surety bonds. For over 20 years, Goldleaf's experienced and knowledgeable staff has been working with independent agents. And as we move forward in ever changing and uncertain times, Goldleaf Surety will continue to be here to assist your agency.
Continued from page 29 free registration online at www.bigimarkets.com. This article is intended for general informational purposes only. IIABA and its subsidiaries and affiliates shall not be held responsible in any way for, and specifically disclaim, any liability in any way relating or connected to any reliance on or use of this article. The information contained or referenced herein is not intended to constitute and should not be considered legal, accounting or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific legal or other expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought. Copyright © 2020, Big I Advantage, Inc. All rights reserved. No part of this material may be used or reproduced in any manner without the prior written permission from Big I Advantage. For permission or further information, contact Big “I” Markets, 127 South Peyton Street, Alexandria, VA 22314 or email at bigimarkets@iiaba.net.
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Goldleaf Surety and its team of bonding specialists go beyond the normal process of simply gathering paperwork and placing a bond. They form lasting relationships that provide you with support throughout the initial bonding process. And they continue to support their customers and their companies as their surety needs change and evolve over time. Whether it is a company with existing surety support or a company new to bonds, Goldleaf Surety can help answer all the questions and obtain the bonds needed. For assistance with all your bond needs, access Goldleaf Surety through Big “I" Markets. Simply log in to www.bigimarkets.com, or email bigimarkets@iiaba.net and an underwriter will contact you. Not yet registered for Big “I” Markets, the online market access program available exclusively to Big “I” members featuring no fees, no minimums and ownership of expirations? Complete a simple and
BONDMARKET
By Steve Anderson
Tip
Hackers are targeting insurance agencies to obtain passwords to access client information. It appears that: Make sure your staff is aware of possible indicators of an intrusion: Your agency should be using a password management program for every computer in the office (or at home) so every employee can have a unique, complex, non repeatable password for every site. Inform employees of the potential for suspicious emails. Make sure before anyone clicks on a link in an email that they understand where that link is taking them. In Outlook, you can do this by hovering your mouse over the link. A small pop-up will show the actual link address. If suspicious, delete it. If you think it is legitimate, type the address in a browser tab. Don't click the email link. Have a short employee meeting to emphasize the importance of protecting client information. Can You Spot When You’re Being Phished?
PROTECT YOUR AGENCY FROM HACKERS
CORNER
Unusual online quote activity during non-office work hours. Hundreds of quotes attributable to a single employee ID in one day. Continue to be careful about emails that have links or attachments from unknown sources.
If You Are a Victim of a Cybercrime File this Report Immediately The Importance of Strong Passwords Why Your Office Needs a Password Management Solution Steps you can take to make hacking your systems more difficult: Additional Resources
#9
Hackers have been systematically tracking and collecting the email addresses of insurance agency employees. They are now targeting the passwords used by insurance agency employees, and data shows that in some cases, passwords can be acquired. When successful, hackers can access the quote applications. Phishing emails are sent to consumers using false company identity, email address, and insurance company logos to collect additional information. Avoid password reset requests that you did not initiate.
H E L P Y O U R C U S T O M E R S B E A T T H E H E A T W I T H A N R LI P E R S O N A L U M B R E LLA P O LI C Y
Summer is here which means many people turn to backyard water fun to beat the heat. And while playing in pools, skipping through sprinklers and winging water balloons are great ways to stay cool, accidents can happen. That’s why it’s important to educate your customers about the importance of a personal umbrella policy from RLI. A serious injury as a result of water play on your customer’s property can be catastrophic to both the injured party and the homeowner. With proper underlying coverage in place, a personal umbrella policy increases overall liability coverage with an extra layer of protection beyond what’s covered by homeowners and auto insurance policies. A low cost personal umbrella can take the heat off your customers and their families, protecting them from hefty judgements stemming from catastrophic lawsuits. Hot summers and cool water go together but before your customers turn on that hose or fill that pool, make sure they know about the protection a personal umbrella policy from RLI can provide. Learn more about RLI’s Personal Umbrella Exposures. For more information about an RLI Home Business Insurance policy, contact your state's administrator or visit www.independentagent.com/rli
. B I G i P e r s o n a l U m b r e l l a
Millennials in insurance. All companies are searching for the brightest and the best employees to fill one of the 11 million open positions in this country, and millennials are the sweet spot for middle management and
By Brian Ambrosia July 19, 2022
All of this presents a double problem for most companies who are being challenged to recruit and retain employees while also managing the overall cost of doing business because of rising payrolls. But it’s an even bigger problem for those in the insurance industry. Because millennials don’t want to work in insurance.
The insurance industry is struggling to recruit the brightest and the best especially amongst millennials. Blame rising wages. Or the tight job market. Or maybe it’s a branding problem. Here are 5 strategies to help insurance brokers attract (and keep) the best talent. Wages are going up. We know that. As inflation soars, and as the cost of living rises, and as unemployment continues to touch historic lows employees are basically in the driver’s seat. And their demands are higher wages and more flexible work cultures. We’re seeing it across the board. Low, medium, and highly skilled workers are all experiencing salary increases at the same rate with an overall average of 5.3% (as of June 2022) the highest rate since June 2001 (also 5.3%). Millennials (age 26 41 in 2022) represent the largest population of the US workforce at 35%. But with the speed at which baby boomers are retiring, the percentage of millennials in the workforce are expected to go from 35% to 75% in the next 3 years (by 2025).1
HOW CAN THE INSURANCE INDUSTRY WIN OVER MILLENIALS?
AGENTPAGE 35
leadership roles. These are individuals who were born between ‘81 and ‘97. They grew up in the digital age and currently embrace and understand the importance of technology, data, mobile and social very well.
WINMILLENNIALS
Do you know how many millennials are interested in getting into insurance? According to the Pew Research Center only 4% of them. Artificial Intelligence. Augmented Reality. Robotics. Cybersecurity. SaaS. Gaming. Telehealth. These are just a few of the hot industries that the insurance industry is competing against to woo the best talent. Combine these exciting industries with the defining characteristics of your typical millennials (tech savvy, crave work life balance, hungry for advancement, tend to job hop) and you’ve got a good match. Millennials want action and adventure. Five strategies to help insurance companies attract (and keep) the best talent.
LOUISIANA
1) Offer higher wages (than other industries and competitors). Crazy, right? Salaries are already through the roof. Look the insurance industry can’t compete with Google or Meta when it comes to (promises of) action and adventure. After all, risk assessment is part of what makes the insurance industry so stable and successful. Furthermore, the insurance industry lags the IT industry (“Information Sector” according to BLS) by 13% in average hourly earnings; and lags the “Professional, Scientific & Technical Sector” by 20%. So higher salaries for the right talent needs to be part of the recruiting pitch.
Continued from page 34
The insurance industry has a long and proven history of stability, is very resilient relative to other industries, and has been practically immune from recessions. But that still may not be sexy enough for your typical millennial. Here are five alternative strategies for attracting (and keeping) the best talent.
MarshBerry’s 2022 Insurance Brokerage Compensation Study has shown that a well designed compensation strategy can have a huge impact on hiring and retention, perpetuation, culture, value creation and the overall performance of an insurance brokerage. The study shows that the highest performing firms have higher payroll per employee than the average firm.
3) Create better training and development for advancement opportunities. Getting the best talent is one challenge. Retaining that talent is even more difficult. Data shows that wage growth for people who switch jobs is 6% (vs. 4.5% for job stayers). So, even if you can attract the right people, ensuring you have the right culture and growth opportunities in place to keep them is just as important. The silver lining for insurance brokerage firms is that the insurance industry boasts one of the highest average tenures among both private and public sectors. Insurance firms who take a proactive approach to establishing strong training and development programs are
High growth firms are willing to spend more money for top talent which drives efficiencies and scale in all other critical expense categories. Even in a tight labor market, these firms continue to produce outsized results.
WINMILLENNIALS
PAGE 36 LOUISIANAAGENT Continued from page 35
2) Be more flexible (and understanding) with your work culture. A work culture that understands where people’s priorities are will always be more attractive. Since COVID, people have looked at their health, their family, their travel, and their overall priorities differently. Flexible work arrangements are very attractive and are quickly becoming the new normal. Recent data projections (by the job search service Ladders) estimate that 25% of all professional jobs in North America will be remote by the end of 2023. Furthermore, in this global economy, “9am 5pm” doesn’t mean much or may not matter at all. The firms that embrace performance over policy will win (and retain) the best talent and reap the rewards of that talent.
Now is the time to start implementing strategies that will help your company hire and retain the best talent to thrive. MarshBerry’s talent acquisition services can help. If you have questions about Today’s ViewPoint or want to learn how to win over millennials to join your firm, please email or call Brian Ambrosia, Director at 440.220.5430. 1 https://teamstage.io/millennials in the workplace statistics/ 2 http://insurancecareerstrifecta.org/wp content/uploads/2015/11/IndustryOpenLetterNove mber2015.pdf
PAGE 37 LOUISIANAAGENT Continued from page 36WINMILLENNIALS
industry experience. According to the MarshBerry 2022 Compensation Study, high growth firms tend to hire more employees newer to the industry which not only fosters growth but also presents coaching and mentoring opportunities and ensures perpetuation of talent as people move up or retire. more likely to have better staff retention, with higher job satisfaction and better productivity from employees.
5) Invest in millennials. Don’t make your open positions about “insurance.” Make them about “marketing” or “finance” or “operations” or “human resources.” Hire talent based on skillset, not
4) Be better at branding your firm. In an open letter from several insurance company CEOs, as part of the Insurance Careers Movement initiative, they stated: “What’s clear is that the critical role our industry plays is not fully understood, particularly among millennials. We need to do more to engage, educate and enlist the best and brightest to join us.”2 While this is an industry wide problem, and needs to be addressed at that level, it doesn’t mean it can’t be done better at the firm level. What does your company represent? How well do you explain what you do? What is your culture like? How well do you leverage your people in creating awareness of your business? Look towards your human resources, recruiting, Diversity, Equity, and Inclusion (DE&I), and professional development teams to help create a unique corporate brand and vibrant culture that helps attract the best talent despite being an insurance company.
Why do you need the best talent? Seems like a strange question. But here’s the answer: because even with the headwinds of a tough economy that is demanding higher wages for everyone, plus a competitive job market, the firms with the best talent can continue to organically grow.
W H A T M U L T I P L E C A N I E X P E C T F O R M Y A G E N C Y ?
It is no secret that merger and acquisition (M&A) activity in the independent agency space is at an all time high. While it took a brief pause in the first quarter of 2020, it has been going strong through the end of 2020 and continues at a record pace in 2021. The M&A marketplace is not unlike the housing market that we are experiencing across the country. In many areas, there is great demand for homes due to low interest rates. That, combined with low inventory has caused housing prices to soar. In the independent insurance marketplace, the low interest rates, strong balance sheets, high customer retention rates, and continued overall performance despite the pandemic have also increased demand for agencies that are run well. The headlines are full of named transactions selling at record multiple levels, so as one of the 56% of agency owners that may be nearing retirement and contemplating selling your agency, you must be wondering what this all means when it comes to you and your agency.
Agency Focus LLC June 10, 2021
Types of transactions There are two main types of transactions when it comes time for an agency owner to transition: internal & external. An internal transaction is just a transition of leadership to a current employee, family member or current partner of the agency, which will continue to operate under this new leadership. An external transaction can include a sale to another retail agency or a sale to large broker or private equity backed entity. The factors that impact the multiples for each of these types of Wallace
By Carey
transactions are vastly different. The financial impact of those factors is what cause the expected multiples in each of these types of transactions to vary greatly. Let’s take a closer look at each of these types of transactions.
Private Equity Backed transactions
These are the transactions that make the headlines and command multiples of 12-15x earnings before interest, taxes, depreciation and amortization (EBITDA). In these transitions, agency owners can expect to receive the highest possible price for their agency. However, typically this is not all paid in cash at close, as there is generally an earn out or deferred portion. These transactions are typically targeted at large platform agencies that are being bought to enter a marketplace, niche, or area of the country as an overall growth and investment strategy, but in some cases smaller agencies are also targeted if they are a fit. These transactions are backed by private equity funds that have long term goals for a require a return on equity but are not dependent on the cashflow of the agency being purchased to makeup that return in the short term or to fund the transaction buy out. In these transactions often there is an earn out bonus available, and the current owners or leadership stay engaged for a period to ensure that key accounts remain, and the value and performance of the book remains strong during transition. In many cases the opportunities to realize economies of scale are incredibly high in these types of transactions. That means that the agency location, staff, systems, technology, and infrastructure is folded into a larger entity, making the return on investment much higher than if the agency continued to operate on its own. In some cases, the culture of the agency is completely changed in this type of external sale transaction. Not all transactions require all these changes, so it is important to weigh all the terms of the deal to make sure it fits with your overall goals and what is most important to you.
PAGE 39 LOUISIANAAGENT Continued from page 38WHATMULTIPLE
External sale
PAGE 40 LOUISIANAAGENT Continued from page 39WHATMULTIPLE
External sale Retail agency To provide agency owners with an idea of what the common multiple are for these types of transactions, I combined the information that I have gathered from my own experiences, the industry published information, databases that are available through the NACVA and reached out to some industry banking firms who specialize in lending to agencies for these types of transactions. When an agency owner decides to sell to another retail agency, there is also an opportunity for the combined entity to realize some economies of scale. The degree to which expenses can be reduced depends on the structure of the transaction. In these types of external sale transactions, the purchasing agency must be sure that the transaction will “cashflow”. According to Mike Strakhov at Live Oak Bank, “Many agencies must obtain a loan to fund these sales, and it is our practice to require that the deals that we approve “cashflow”. That means that the expected revenue from the agency that they are buying will cover 1.25x the expected expenses.” This can be achieved with the elimination or reduction of the compensation of the current owner as well as the reduction or elimination of other expenses that can now be shared. The decision to utilize the same systems, administrative support or even location can impact the profitability of the transaction. With these types of sales, agency owners can negotiate factors such as the ongoing employment of staff, involvement of the current agency owner or maintaining a presence in their community. With each of these decisions the profitability and multiple that can be supported changes. Both Mike Wagar of Westfield Bank and Mike Strakhov of Live Oak Bank concur that the multiples that can be expected for an agency under $1.5M in Commission Revenue that is selling externally to another agency typically range between 5.75 7.5x EBITDA. Internal sale In an internal sale, the economies of scale are limited to the reduction or elimination of the compensation for the current agency owner and
WHATMULTIPLE
PAGE 41 LOUISIANAAGENT
Continued from page 40 eliminating any non recurring expenses of the current owner. In many cases, for the new owner to take over the operations of the agency, the current owner must move into a mentorship role for a period to ensure that the transition is smooth, and the agency is setup for success. There may also be a need to hire additional resources upon the exit of the current agency owner to cover all the roles inside the agency. This will limit the profitability of the agency and minimize the ability to reduce or eliminate enough expenses to cashflow a higher multiple or price for the agency in an internal sale. This is the main reason why internal sales typically see a multiple of 5.0 7.0x EBITDA. Over 40% of internal transitions to the next generation are not successful because of the financial strain on the agency. It is critical to setup the next generation for success and make realistic decisions about the price and multiple for an internal transition based on the specific situation in your agency. The multiples that you can expect to receive in the sale or transition of your agency is largely dependent on what is most important to you as an agency owner. For those that wish to continue transition to the next generation and remain in their community, price is not the most important factor. For those that wish to obtain the highest price, they will need to be willing to accept changes in their agency operations that may be vastly different than what it is prior to the sale of their agency. For those that want a blend, there are many different options available that must be weighed and considered. Mike Wagar offered this advice to any agency that is looking to sell either internally or externally: “For all agencies that are preparing for an ownership transition, the best thing you can do is focus on cleaning up your financials.” By eliminating expenses that are not essential you will increase your profitability, increase the value of your agency as well as increase the ability to properly fund an internal transition. For more information on setting realistic expectations for your agency transition, visit www.agency focus.com.
Should You Buy the Rental Car Damage Waiver? own auto insurance or a credit card is sufficient to cover any damage to a rented auto. Almost all of these articles are full of misinformation and bad advice as many individuals who have paid thousands of dollars out of pocket can attest. I published my first article over 25 years ago telling the truth about why it is almost always advisable to purchase the damage waiver, even if you have insurance and think you have coverage under a credit card or another option. If you Google “top 10 reasons to purchase the rental car damage waiver” you’ll get about 90 million hits … many of them are my original article or an updated version. Space does not permit addressing all 10 reasons to buy the damage waiver here but let me elaborate on a couple of them and then introduce you to a rental car issue you may not be aware of. My auto policy has excellent coverage for the use of nonowned autos. A notable exclusion found in almost all personal auto policies is that coverage for damage to the vehicle is limited to private passenger cars, pickups (most of the time), and (with a dollar limit) trailers. If I rent a U Haul
As I have expressed on many occasions, I believe the myth that insurance is a commodity differentiated only by price is the greatest misconception perpetrated on the public. Sadly, most of the misconception comes from our own industry in the form of price-focused advertising. But, if I had to pick a second-place contender, it would probably be the recommendation that there is no need to purchase the damage waiver when renting a car. There must be thousands of consumer articles written on this subject, most advising that your
truck or an RV, I have no coverage if the vehicle is damaged. If I rent a really nice camper trailer, I have very limited coverage, most often about $2,000. But, even if I rent a private passenger auto, my policy has exclusions and limitations for certain things. For example, I have limited coverage for loss of use of any auto. “Loss of use” refers primarily to the rental car company’s loss of revenue. There are per-day and maximum limits on my policy that can be increased by endorsement, but few insureds elect to do so. Even if the limits were adequate, sometimes the rental company and insurer (or credit card company) can’t agree on what the appropriate charges should be. In one case, that resulted in the renter paying $2,000 out of pocket.
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Solution? Buy the rental car company’s loss damage waiver. If you damage a rental car, the likelihood that you’ll be hit with a diminished value charge is high and, again, most insurance policies won’t cover this. The same is true for many, if not most, credit cards and certain supplements you can buy from web sites like Expedia and Orbitz. Yes, the loss damage waiver is expensive, sometimes half or more of the daily rental rate. For
Solution? Buy the rental car company’s loss damage waiver and as long as you are in compliance with the rental agreement, there are no loss of use charges The main reason, though, that I always buy the loss damage waiver is because every rental agreement I’ve seen over at least the last 10 years makes the renter responsible for the reduction in value of a rental car, otherwise known as diminished value.
LOUISIANAAGENT
Continued from page 42 about a $15,000 diminished value claim on an upscale SUV rental. A business acquaintance was hit with a $3,500 diminished value charge that he negotiated down to $1,500.
Worse, the limits are sometimes grossly inadequate. One renter of an upscale vehicle was hit with a $9,000 loss of use charge that cost him $4,500 out of pocket. Everyone is probably aware of supply chain issues that have affected many businesses, including the automobile industry. Delays in obtaining repair and replacement parts can drive costs up. Due to the unavailability of Japanese auto parts following the 2011 tsunami, one renter incurred a $6,000 loss of use charge in excess of his policy limits
RENTALCAR
David Thompson, CPCU, tells the story in his seminars on rental cars about an insured who was sued by a rental car company and incurred a diminished value charge of $3,100 plus court costs and attorney fees in his fruitless defense.
The majority of auto policies exclude this, though I’ve seen a few insurers who cover it, most often as an option. I’ve personally been involved in assisting agents with uncovered claims for diminished value that range from $3,000 to $8,000. I read an article
issue? More from Insurance Journal Today's Insurance Headlines | Most Popular | Features PAGE 44 Continued from page 40 RENTALCAR
that reason, when I’m comparing the cost to rent a car, I include their damage waiver expense. For the peace of mind I get, I’m willing to pay the extra $100 to $300 expense on a short term trip. I view it as just part of the cost of the trip. Here’s one final recommendation on rental cars even if you buy the damage waiver. Don’t valet park a rental car at a hotel, restaurant or other venue. The damage waiver may be voided by allowing an unauthorized person to drive the vehicle. In addition, many auto policies only cover nonowned autos “while in the custody of or being operated by you or a family member.” If you relinquish possession of the rental car, you may also relinquish your insurance and your coverage under the loss damage waiver. Hopefully, the venue has some form of garagekeepers coverage or otherwise will cover damage to an auto being valet parked, but it is foolhardy to rely on the insurance or goodwill of others. What are your thoughts and experiences on this
NancyGermond
The Vacancy Clause in Commercial Policies Apply to Commercial Real Estate (CRE)
What is the Function of the Vacancy Clause? Because insurers know there is a correlation between vacant property and vandalism and losses such as water damage and fire, insurers developed a vacancy clause. In vacant properties, maintenance and premises management typically suffer. When underwriters price property coverages, they rely on “normal" conditions when they quote the risk. This means the rate will reflect a fully occupied building unless you inform the underwriter of anything else. Insurers insert vacancy clauses in policies to “encourage" building owners to properly manage and maintain their locations. May13,2022
After a loss, the adjuster assigned to the claim usually visits your insured's property to prepare a loss scope and develop a repair estimate. Whether a property is “vacant" or “unoccupied" can cause red flags in that claim person's mind. If a property is vacant or unoccupied, the adjuster will review the policy form to determine the exact wording that applies to any vacancies. Wording about vacancies appears in the loss conditions section of the commercial property policy. Here is the wording from the CP 0010 (10/12) edition of the Insurance Services Office (ISO) commercial property policy.
With many employers now fully convinced at least some “work from home" is here to stay, ensuring vacant properties have proper protection can mean the difference between a happy customer and one who faces a reduced post loss payout, or even an outright claims denial in some instances.
Description of Terms
VACANCYCLAUSE
(a) When this policy is issued to a tenant, and with respect to that tenant's interest in Covered Property, building means the unit or suite rented or leased to the tenant. Such building is vacant when it does not contain enough business personal property to conduct customary operations.
PAGE 47 LOUISIANAAGENT Continued from page 46
(b) When this policy is issued to the owner or general lessee of a building, building means the entire building. Such building is vacant unless at least 31% of its total square footage is: (i) Rented to a lessee or sublessee and used by the lessee or sublessee to conduct its customary operations; and/or (ii) Used by the building owner to conduct customary operations. (2) Buildings under construction or renovation are not considered vacant. However, the policy continues by stating the following. Vacancy Provisions If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs: (1) We will not pay for any loss or damage caused by any of the following, even if they are Covered Causes of Loss: (a) Vandalism; (b) Sprinkler leakage, unless you have protected the system against freezing; (c) Building glass breakage; (d) Water damage; (e) Theft; or
(f) Attempted theft. (2) With respect to Covered Causes of Loss other than those listed in b.(1)(a) through b.(1)(f) above, we will reduce the amount we would otherwise pay for the loss or damage by 15%.
If the property adjuster believes the vacancy clause may apply, he or she will want more information from your insured. If this happens and your insured contacts you, always recommend they cooperate fully with the adjuster and avoid becoming defensive.
(1) As used in this Vacancy Condition, the term building and the term vacant have the meanings set forth in (1)(a) and (1)(b) below:
Proprietary property forms may have different wording, including wording that defines vacancy as “active use" for the building's “intended purpose." This is just one example of how wording may differ in proprietary commercial property forms. How the Vacancy Clause May Impact the Investigation
Reminding your insureds about vacancy clauses, not only in CRE but in personal lines property policies, is a good idea. If your insureds lose occupancy or change operations at the building, you'll want to know. Vacancy permit endorsements can protect your clients if their occupancy status changes, but only if you know their situation. With extended periods of vacancy, a switch to a more appropriate commercial form can solve the problem. Carriers that specialize in CRE may offer the coverage your insured would require for a vacant commercial building.
Police or fire reports, which the adjuster will usually order directly from those agencies
The adjuster may request the following information from your insured. The adjuster may contact any tenants in the building to learn more about occupancy histories. These are all normal parts of an investigation where occupancy may be an issue.
LOUISIANAAGENTPAGE 48 Continued from page 47
Utility bills and agreements with utility providers
Lease copies
VACANCYCLAUSE
Vacancy Clauses in Brief
Accident Fund Insurance Company Agile Premium Finance Allied Trust Insurance Company Amerisafe AmTrust North America AmWINS Access Home Insurance Berkshire Hathaway GUARD Insurance Burns & Wilcox Ltd Commercial Sector Insurance Brokers EMC Insurance FCCI Insurance Group Foremost Insurance Group Forest Insurance Facilities The Gray Insurance Company Homebuilders Self Insurers Fund Imperial PFS 44 9 47 49 19 21 24 48 43 27 7 18 37 30 44 5 LOUISIANAAGENT ADVERTISERINDEX PAGE 49 COMPANY PAGE Iroquois Lane & Associates, Inc LCI Workers' Comp LUBA LWCC National General, an Allstate company Progressive RISCOM RLI RPS/Risk Placement Services SafePoint Insurance Stonetrust Summit United Fire Group UPC Insurance Wright Flood 39 23 36 40 3 25 33 17 10 8 11 41 15 35 45 26 CPAGE OMPANY
7 IIABL EDUCATION Aug 28 29 30 31 4 5 6 11 12 13 14 18 19 20 21 25 26 27 28 LIVE WEBINARS! 2 3p Condos & How to Insure Them Luncheon 11:30am - 1:00 pm Shreveport Club
E&O Risk Management Ethics Flood Commercial Lines Courses Personal Lines Courses Professional Development August 18 20, 2022 Sheraton New Orleans Hotel 8 22 & EVENTS 23 9 10 224 3 30 29 Sept 1 29 IIABL CE ON DEMAND OTHER EDUCATIONAL RESOURCES Oct 1 LIVE WEBINARS! 8 10a Lurking: Surprises In the Contractor's CGL Policy & Endorsements to Watch Out For 12 3p Ethics: Essentials for the Insurance Producer LIVE WEBINARS! 8 11a Personal Lines Coverage Concerns: Annoying but Important 12 3p Agent's E&O: Defenses & Preventions for the Insurance Professional 15 16 17 LIVE WEBINARS! 12 3p More Money, More (Insurance) Problems? LIVE WEBINARS! 8 11a Commercial Property: Direct vs. Indirect Damage Luncheon 11:30 am 1:00 pm Drusilla Seafood
LOUISIANAAGENTPAGE 53 PRESIDENT, MICHAEL SCRIBER PRESIDENT-ELECT, ARMOND K. SCHWING SECRETARY TREASURER, BRET HUGHES NATIONAL DIRECTOR, JOHNNY BECKMANN, III PAST PRESIDENT, DONELSON P. STIEL YOUNG AGENT REPRESENTATIVE, KRYSTAL GATHE ANN BODKIN-SMITH MATTHEW DEBLANC CHRISTY DESOTO ROB W. EPPERS MATT GRAHAM CHRISTOPHER S. HAIK STUART HARRIS ROSS HENRY CHARLES H. LEBLANC CRAIG MARTEL LYDIA MCMORRIS A. EUGENE MONTGOMERY, III JOE KING MONTGOMERY HARTWIG "ROBBY" MOSS, IV ROBERT LOUIS PALMER, JR. RANDY PERISE ROBERT G. RIVIERE ROBERT STONE Scriber Insurance Ruston Schwing Insurance Agency, Inc. New Iberia Hughes Insurance Services, Inc Gonzales Assured Partners Metairie David H. Stiel, Jr. Agency Franklin HUB International Gulf South, Ltd. Baton Rouge Thomson Smith & Leach Insurance Group Lafayette Continental Insurance Services Marrero 1st Insurance of Marksville Marksville Risk Services of Louisiana - Shreveport Lincoln Agency Ruston Higginbotham Insurance Lafayette McClure, Bomar & Harris, LLC - Shreveport Henry Insurance Service, Inc. Baton Rouge Bourg Insurance Agency, Inc Donaldsonville Insurance Unlimited of LA, LLC - Lake Charles Alliant Insurance Services Baton Rouge Community Financial Insurance Center, LLC Monroe Thomas & Farr Agency, Inc. - Monroe Hartwig Moss Insurance New Orleans Insurance Underwriters, Ltd. Metairie Blumberg and Associates Ponchatoula Riviere Insurance Agency Thibodaux Stone Insurance, Inc. Metairie BOARD OF DIRECTORS & OFFICERS IIABL 2022 2023
