A MONTHLY PUBLICATION OF THE INDEPENDENT INSURANCE AGENTS & BROKERS OF LOUISIANA
LOUISIANAAGENT MAY 2022
Bills Likely to Become Law
Bad Bills Killed
118th Annual Convention
Jeff Albright
Jeff Albright
June12-15, 2022
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IIABL STAFF JEFF ALBRIGHT Chief Executive Officer jalbright@iiabl.com (225) 236-1366
BENJAMIN ALBRIGHT Vice-President of Strategic Initiatives balbright@iiabl.com (225) 236-1357
KATHLEEN O'REGAN Director of Communications & Events koregan@iiabl.com (225) 236-1360
KAREN KUYLEN Director of Accounting & Finance kkuylen@iiabl.com (225) 236-1353
RHONDA MARTINEZ Director of Insurance Programs rmartinez@iiabl.com (225) 236-1352
JAMIE NEWCHURCH Director of Insurance Programs jnewchurch@iiabl.com (225) 236-1350
LISA YOUNG-CROOKS Director of Member Relations lyoung@iiabl.com (225) 236-1351
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LOUISIANAAGENT
CONTENTS TABLE OF CONTENTS & FEATURED STORIES
02 IIABL STAFF At your service!
18 UPDATED HURRICANE IDA DATA LDI News Release, April 29, 2022
20 COVID & THE COST OF BUILDING MATERIALS Stuart Powell
24 ENHANCING COLLABORATION & COMMUNICATION
Catalyit Corner, Tip #6 from Steve Anderson
26 THE INSURER OF THE FUTURE Alan Walker
34 TOP 10 WEBSITE MISTAKES
05
Trusted Choice
BILLS LIKELY TO BECOME LAW
37 FLOOD BARRIER BUSTERS National Flood Insurance Program
40 PLUG INTO THE POWER OF BIG "I" MARKETS
IIABL Membership Benefit
42 HOW VACANT IS VACANT? But What if it's NOT Vacant? By Chris Boggs
44 3 PERSONAL AUTO QUESTIONS
EVERY AGENT MUST KNOW HOW TO ANSWER Chris Boggs
10
BAD BILLS KILLED
15
118TH ANNUAL CONVENTION
48 IIABL EDUCATION UPDATE 50 ADVERTISER INDEX 51 INDUSTRY PARTNERS 52 IIABL BOARD OF DIRECTORS
18153 E. Petroleum Drive Baton Rouge, LA 70809 Ph: (225) 819-8007
www.iiabl.com
By: Jeff Albright & Ben Albright This has been the most difficult legislative session for the insurance industry in anyone’s memory. The industry has been under attack on a daily basis as legislators reflect the frustration and anger of their constituents over the slow and difficult resolution of claims from the four hurricanes over the past two years. IIABL set a new legislative session record, following 207 bills in the Louisiana Legislature this year. IIABL has deployed a two-part strategy to deal with the onslaught of bad insurance legislation.
IIABL Supports HB 317 (Matthew Willard) – Requires a signed disclosure form for wind deductibles. As originally filed, HB 317 and SB 150 made the disclosure part of the policy and was a E&O minefield for agents. Rep Willard accepted all IIABL amendments to protect agents and is now a simple signed disclosure. HB 317 has passed the legislature.
The first strategy has been to support reasonable insurance reforms in recognition of the real problems that policyholder faced in the catastrophe claims settlement process.
HB 521 (Mike Huval) – Requires insurers to have catastrophe response plans. IIABL asked Chairman Huval to file HB 521 to ensure that insurers have detailed catastrophe claims response plans in place before hurricane season. HB 521 has been sent to the Governor.
The second strategy is to educate legislators about the catastrophically difficult insurance markets in Louisiana at this time, and to urge them not to destroy our market with unreasonable legislative penalties on insurance companies.
HB 539 (Gabe Firment) – Building contractor reforms. HB 539 limits how contractors engage in the insurance adjustment and claim payment process. HB 539 is on the Senate floor.
Our strategy has worked remarkably well. As the session starts to wind down, we are pleased to report that most of the legislation that is likely to pass are bills that IIABL supports. Very few bills that IIABL opposed are likely to become law.
HB 558 (Matthew Willard) – Requires insurers to provide breakdown of claim payment by type of coverage under the insurance policy. IIABL opposed the bill as originally filed. HB 558 would have required all cat claims be paid within 90days. IIABL worked with Rep Willard to replace To be clear...insurance companies will not like the original language with language which some of the reforms passed by the legislature, but requires claim payments to distinguish payment the truly awful bills have been killed or amended to of different coverages, so that policyholders can make them reasonable. claim their personal property and ALE payments. HB 558 is on the Senate floor.
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LEGISLATIVEUPDATE
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Continued from page 5
HB 612 (Mike Huval) – Establishes the Fortified Homes Program, which will pay grants to homeowner’s who retrofit their homes to comply with the Fortified Home standards. HB 612 is in the Senate Finance Committee.
HB 866 (Larry Frieman) – SB 264 (Joseph Bouie) – Increases insurer minimum capital requirements from $3M to $10M. HB 866 has become Act 60. SB 264 has become Act 69.
HB 682 (Chad Brown) – SB 330 (Jeremy Stine) – Creates a LDI claims adjuster database which allows policyholders to obtain background information about adjusters. HB 682 is on the House floor for concurrence with Senate amendments. SB 330 is in the Senate Finance Committee.
HB 870 (Jeremy Lacombe) – SB 117 (Jay Luneau) – Requires coverage for temporary use of vehicles not owned by the insured. These bills overturn the recent Landry v. Progressive Louisiana Supreme Court case which allowed insurers to limit nonowned auto coverage. HB 870 has become Act 93. SB 117 has been sent to the Governor.
HB 831 (Gabe Firment) – Requires insurers to pay an advance on ALE coverage of at least 3 months in HB 936 (Mike Huval) – Requires insurers to the event of a total loss. adjust claims within certain time limits. The bill is HB 831 is on the Senate floor. based on a similar statute in Texas and is designed to keep catastrophe claims moving through the process in appropriate time frames. HB 936 is on the Senate floor.
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LEGISLATIVUPDATE HB 999 (Gabe Firment) – Expands regulation of public adjusters and establishes standards of care and performance. HB 999 is on the Senate floor. HB 1064 (Les Farnum) – Prescribes how mortgage holders must pay insurance claim proceeds to policyholders in an effort to make it easier for policyholders to receive funds. HB 1064 is on the House floor for concurrence with Senate amendments. SB 163 (Kirk Talbot) – Requires insurers to provide policyholders with a catastrophe claims process disclosure at the time of a claim. SB 163 was introduced at the request of IIABL to provide valuable claim information to policyholders at the time of the claim. SB 163 has been sent to the Governor. SB 198 (Kirk Talbot) – Requires insurers to provide a claims summary, contact person, and additional information if more than 3 adjusters have been assigned to a claim. This bill will help solve the “adjuster churn” problems experienced by policyholders. SB 198 has been sent to the Governor. SB 209 (Jeremy Stine) – Doubles the maximum fine the Commissioner can levy against insurers from $250,000 to $500,000. Stronger regulatory penalties are much preferred to increase bad faith damages which will generate more litigation against insurers. SB 209 is on the House floor. SB 212 (Jeremy Stine) – Establishes the Hurricane Mediation Program. SB 212 is on the House floor. SB 412 (Kirk Talbot) – Establishes the Insure Louisiana Incentive Program to provide financial incentives for insurers to write more property insurance in Louisiana. It is unclear whether the Legislature will fund this program. SB 412 is on the House floor.
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Continued from page 6 SB 446 (Fred Mills) – Prescribes how mortgage holders must pay insurance claim proceeds to policyholders in an effort to make it easier for policyholders to receive funds. SB 446 is on the House floor.
IIABL is Neutral HB 83 (Laurie Schlegel) – SB 134 (Kirk Talbot) – Statutorily expands the trigger for Civil Authority ALE coverage following a catastrophe on residential property insurance policies. This will benefit policyholders, but it very troubling to see the Legislature statutorily expand contract language, so IIABL has remained neutral. HB 83 is on the Senate floor. SB 134 is on the House floor.
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LEGISLATIVEUPDATE IIABL Opposes SB 186 (Cameron Henry) – Allows public adjusters to charge 10% fee. We expect this bill to be amended on the House floor to eliminate most or all of our objections to SB 186. SB 186 is on the House floor. SB 214 (Jay Luneau) – Requires Louisiana venue for out-of-state claims adjusters. SB 214 is on the House floor.
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By: Jeff Albright & Ben Albright This has been a difficult legislative session for the insurance industry. The industry has been under attack on a daily basis as legislators reflect the frustration and anger of their constituents over the slow and difficult resolution of claims from the four hurricanes over the past two years. IIABL normally has 8-12 really dangerous bills to deal with in a normal legislative session. This year there were more than 40 bills that could have caused significant problems for the insurance industry.
Bad Bills Amended to Be Reasonable HB 317 (Matthew Willard) – Requires a signed disclosure form for wind deductibles. As originally filed, HB 317 and SB 150 made the disclosure part of the policy and was a E&O minefield for agents. Rep Willard accepted all IIABL amendments to protect agents and is now a simple signed disclosure. HB 317 is on the House floor.
HB 539 (Gabe Firment) – As originally filed, HB 539 had statutory matching provisions strongly Part of our strategy has been to educate legislators opposed by insurance companies. Rep. Firment about the catastrophically difficult insurance agreed to remove these provisions, leaving very markets in Louisiana at this time, and to urge them positive building contractor reforms. HB 539 not to further destroy our market with limits how contractors engage in the insurance unreasonable legislative penalties on insurance adjustment and claim payment process. companies. Our busted tort liability system is a HB 539 is on the House floor. problem for insurers in casualty lines because of the frequency and severity of judgements, HB 558 (Matthew Willard) – Requires insurers to particularly in automobile insurance. In the wake provide breakdown of claim payment by type of of the 2020-2021 hurricanes, insurers are also coverage under the insurance policy. IIABL facing litigation and bad faith penalties on property opposed the bill as originally filed. HB 558 would insurance claims. Insurers have gone insolvent, have required all cat claims be paid within 90stopped writing new business, nonrenewed days. IIABL worked with Rep Willard to replace policies, and pulled out of the state, leaving the original language with language which Louisiana without the necessary market capacity requires claim payments to distinguish payment and resulting in severe problems with availability of different coverages, so that policyholders can and affordability of coverage. claim their personal property and ALE payments. We are pleased to report that, working with others in the industry, we have been able to kill or amend most of the bills that would have caused significant damage. It is important to note that killing bad bills is the most important part of the legislative process.
HB 558 is on the House floor.
HB 935 (Delisha Boyd) – As originally filed, HB 935 would have required all claims to be reviewed by Louisiana licensed adjusters. There are not enough Louisiana licensed adjusters to handle
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BADBILLS large catastrophes.The bill was amended to simply require LDI to provide a Louisiana education process for out of state catastrophe claims adjusters. HB 935 is on the House floor. SB 105 (Mike Fesi) – Requires all insurers (including surplus lines insurers) to provide 30days written notice of policy renewal terms. SB 105 was brought by LDI at the request of IIABL. Insurance companies HATED SB 105. Given how fragile the Louisiana insurance market is at this time, Senator Fesi decided to turn the bill into SR 90 (Mike Fesi) – LDI study on insurance policy renewal notifications. SR 90 passed the Senate. SB 162 (Kirk Talbot) – Prohibits insurers from nonrenewing storm damaged property until repairs can be made. SB 162 was introduced at IIABL’s request. The bill received national and international outrage by insurers. Given how fragile the Louisiana insurance market is at this time, Senator Talbot decided to turn the bill into SR 99 (Kirk Talbot) – LDI study on nonrenewal of storm damaged properties. SR 99 passed the Senate. SB 209 (Jeremy Stine) – SB 209 doubles the maximum fine the Commissioner can levy against insurers from $250,000 to $500,000. Although insurers don’t love higher penalties, these stronger regulatory penalties are much preferred to increased bad faith damages which will generate more litigation against insurers. SB 209 is on the House floor.
IIABL was Neutral HB 83 (Laurie Schlegel) – SB 134 (Kirk Talbot) – Statutorily expands the trigger for Civil Authority ALE coverage following a catastrophe on residential property insurance policies. This will benefit policyholders, but it very troubling to see the Legislature statutorily expand contract language, so IIABL has remained neutral. HB 83 is on the Senate floor. SB 134 is on the House floor.
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IIABL Opposed HB 87/HB 931 (Gabe Firment) – Statutory mandate to, in the case of a total loss, pay a percentage of personal property insurance limit as an advance without any proof of loss. Rep Firment did not move either bill after discussing the objections of the insurance industry. HB 109 (Kyle Green) – Extends prescription from 1 year to 2 years. HB 109 was never heard in the face of industry objections. HB 116 (Robby Carter) – Excludes insurer advertising expenses in rates. HB 116 failed to pass the House Insurance Committee. HB 220 (Kyle Green) – Disclosure of auto liability coverage limits to third party claimants.
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BADBILLS HB 220 was never heard in the face of industry objections. HB 268 (Tanner Magee) – Mandates payment of all claims within 60 days of first inspection. HB 268 was never heard in the face of industry objections. HB 290 (Robby Carter) – Mandatory 5% discount for dash cameras. HB 290 failed to pass the House Insurance Committee. HB 316 (Matthew Willard) – SB 331 (Jeremy Stine) - Transmission of all claim documents from insurers to insureds within 30 days. HB 316 failed to pass the House floor. SB 331 was heard by Senate Insurance Committee and deferred.
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Continued from page 11 HB 351 (Edmond Jordan) – Prohibits use of credit scoring in the rating of auto underwriting. HB 351 failed to pass the House Insurance Committee. HB 881 (Ryan Bourriaque) – HB 991 (Mandie Landry) – Bad faith penalties for LIGA. HB 881 failed to pass the House Insurance Committee. HB 991 was never heard in the face of industry objections. HB 951 (Edmond Jordan) – Mandates uninsured motorists coverage and removes the option to select lower limits or exclude UM coverage. HB 951 is stuck on the House floor because it does not have the votes to pass. HB 976 (Ed Larvadain) – Increases bad faith claims against insurers up to 200%. HB 976 was never heard in the face of industry objections.
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BADBILLS
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HB 1037 (Mandie Landry) – SB 238 (Cleo Fields) - SB 243 (Bret Allain) – Limits the process for LA Limits noncompete agreements. Citizens takeout. Neither bill has been heard. SB 243 was never heard in the face of industry objections. SB 13 (Joseph Bouie) – SB 345 (Gary Smith) – Limits insurers to 3 adjusters on a single claim. SB 253 (Regina Barrow) – Unfair trade practice if SB 13 was heard by Senate Insurance Committee insurer takes advantage of senior of special needs and deferred. person. SB 345 was never heard in the face of industry SB 253 was never heard in the face of industry objections. objections. SB 130 (Patrick Connick) – SB 149 (Kirk Talbot) – Extends prescription from 1 year to 2 years. SB 130 failed to pass the House Civil Law Committee. SB 149 was deferred in the House Civil Law Committee.
SB 301 (Regina Barrow) – Requires insurers to pay public adjuster fees. SB 301 was never heard in the face of industry objections.
SB 484 (Jay Luneau) – Prohibits surplus lines insurers from including venue provisions in their SB 150 (Jay Luneau) – Requires a signed disclosure policies. for wind deductibles which becomes part of the SB 484 failed to pass the House Civil Law policy (similar to UM selection form). Committee. SB 150 failed to pass the House Civil Law Committee. SB 186 (Cameron Henry) – Allows public adjusters to charge 10% fee. We expect this bill to be amended on the House floor to eliminate most or all of our objections to SB 186. SB 208 (Jeremy Stine) – Increases bad faith claims against insurers up to 150%. SB 208 was deferred in the Senate Insurance Committee. SB 214 (Jay Luneau) – Requires Louisiana venue for out-of-state claims adjusters. SB 214 is on the House floor. SB 231 (Cameron Henry) – Statutorily defines “uninhabitable” for ALE coverage to include loss of utilities. SB 231 was never heard in the face of industry objections.
ANNUAL CONVENTION
IIABL 118TH
IN THE SPOTLIGHT
The 118th IIABL Convention & Exhibition will be held at the Hilton Sandestin Beach June 12-15, 2022. “Together Again” will celebrate gathering after two years of isolation with Covid. The convention kicks off on Sunday with the Welcome Reception & Exhibit Exposition where attendees will enjoy food & drinks while visiting with our exhibitors. A great way to start off a great convention! Monday morning is the Opening Business Session where IIABL President, Don Stiel, will kick off the IIABL Annual Convention with the Installation of the IIABL Officers & Directors. We will also honor our Past Presidents: Brenda Case and Joey O’Connor. Steve Anderson with Catalyit will present Technology Solutions for Agents where he will share first-hand observations on the impact of technology on an agency’s value, operation, and culture. Plenty of great ideas to implement in your agency! Never Give Up. Never Quit is an inspirational story of Travis Mills who was critically injured in 2012 on his third tour of duty in Afghanistan losing portions of both legs and both arms. His larger-than-life personality, sense of humor, and incredible spirit for life will engage you as soon as he takes the stage and will inspire you to “Never Give Up. Never Quit” no matter the obstacles or circumstances. NOMADIC
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ANNUALCONVENTION Monday afternoon is the CE Seminar “Have a Plan: What is a perpetuation plan and why is it important?” Where should agents start when building the agency’s perpetuation plan? Carey Wallace with Agency’s Focus, LLC, is a Certified Exit Planning Advisor and will help agents start developing their own perpetuation plans and answer your questions! Monday afternoon everyone will enjoy frozen drink treats…frozen concoctions poolside with adult & kid-friendly varieties, and the Sunset Cocktail Reception poolside.
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Continued from page 15 year and we are rolling out the red carpet! Attendees will be welcomed by casino “show girls” and receive “funny money” that you can use to play real casino games that will be set up in the ballroom. We will have a delicious spread of food & beverages, a DJ playing your favorite tunes, and a photobooth to capture your favorite party pics throughout the night. As Casino night ends, winnings will be turned in for raffle tickets to win exciting prizes!
The convention will close on Wednesday with the Closing Business Session. Insurance Commissioner, Jim Donelon will talk about the Monday night is MoJEAUX Monday our Dancing & state of the Louisiana insurance industry and the Desserts party! New Orleans’ premiere party legislative session. There will be an update on the band, MoJEAUX, has a play list that is sure to IIABA Top Initiatives from IIABA Chairman Elect, excite attendees and get everyone on the dance John Costello. President, Don Stiel, will officially floor! Complete with drinks and desserts, your pass the gavel to Incoming President, Michael night is sure to end on a sweet high note! Scriber as they both give their addresses. The session will end with an IIABL Legislative Update Tuesday is fun day! The IIABL Convention Golf from our Jeff Albright & Ben Albright. Tournament will take place at the Raven Golf Club at Sandestin. Voted one of the “Best Courses You Can Play Golf” by Golf Week Magazine in 2014, the Raven Golf Club is a natural wonder that preserves drama and strategy on every tee. Prizes will be awarded after the tournament. For the more studious agents, there will be a CE Seminar, “The Data-Driven Agency.” There is no question that our industry is changing at a record pace. What is your agency doing to evolve and change with it? Carey Wallace will explore how other industries as well as some agencies have evolved given the rapid change we face in all aspects of our lives. Data, technology, and relationships are the key to the agencies of today and tomorrow! Tuesday afternoon is the IIABL Beach Tailgate with beach setups, Bocce Ball, Corn Hole, Ladder Ball, Music, along with the Ice Cream & Beer Party served poolside to enhance pool activities. Tuesday night is the extra special convention event…IIABL Casino Night! IIABL is celebrating being “Together Again” with a special party this
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Commissioner Donelon Releases Updated Hurricane Ida Data Louisiana Department of Insurance News Release April 29, 2022 Insurers have paid or reserved $12.1 billion on all types of Hurricane Ida-related claims in Louisiana through March 31, Insurance Commissioner Jim Donelon announced today. This data is the second measure of damage from Hurricane Ida, which struck the state on August 29, 2021, as a Category 4 storm and affected 25 parishes. Policyholders have filed 458,485 claims of all types from Hurricane Ida as of March 31, with 86% of claims closed. Of those claims, 286,588, or 63%, were closed with payment, garnering $8.5 billion in payments for damage caused by the hurricane. "As the 2022 hurricane season quickly approaches, it’s important to keep in mind that many of our friends and neighbors are still working to put their homes and lives back in order," said Commissioner Donelon. "In preparation for the upcoming hurricane season, I encourage all Louisianans to review your policy to confirm you are adequately insured, call your agent with any questions and consider purchasing a flood insurance policy."
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The updated Ida information was generated from a data call issued by the Louisiana Department of Insurance (LDI) for all authorized property and casualty insurers to submit their claims data on Hurricane Ida. The data call was also issued to surplus lines insurers. The figures include claims from personal and commercial insurance. Claims and payment data from the National Flood Insurance Program is not included as it is not regulated by the LDI. The data call figures released today represent the most comprehensive look to date of insured losses in Louisiana from Hurricane Ida. Data for Hurricane Ida through March 31, 2022, is available here. The data is also available by parish. The LDI will continue collecting data from property and casualty insurers to monitor the claims process. The final deadline for data is October 7, 2022.
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By: Stuart Powell Several months ago, I had a new roof put on my house (by the way, I paid for the new roof and did not make an insurance claim) and was shocked by the cost estimates. The roofer explained that the cost of shingles had increased substantially over the last year due to production interruptions caused by the Covid response.
Homeowners'
Just this week I was informed that the price of lumber has also tripled over the past year. Hopefully, this is a short-term situation, but it does raise a concern regarding the cost of construction compared to the property limits provided by a given f insurance policy. Granted, not all property losses are total losses, however significant increases in construction material could affect a large property loss, possibly exhausting the available amounts of coverage.
Inflation Guard (HO 04 46) The inflation guard endorsement increases the initial policy limit on a pro rata basis throughout the policy period. Unfortunately, choosing an inflation percentage is a lagging indicator and is a guesstimate that may not predict the increases from an event like a pandemic interrupting the material supply chain. Depending on the inflation guard percentage chosen, the additional premium for inflation guard protection can range from a 2 percent increase to about 6 percent.
What coverage options are available to mitigate a situation of rapidly increasing construction costs?
Within the homeowners' program, two options are available: Attach the Inflation Guard Endorsement; and/or Attach one of the two “Additional Limits" endorsements.
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BUILDINGMATERIALS “Additional Limits" Endorsements Two “additional limits" endorsements are available; both allow the insured to purchase an additional amount of coverage AFTER a loss occurs. The two available endorsement are: Additional Limits of Liability for Coverages A, B, C and D (HO 04 11). This endorsement allows the policyholder to purchase the necessary amount of additional limit for Coverage A to equal the property's replacement costs after the loss. Increasing Coverage A automatically increases Coverages B, C and D when this endorsement is attached; or Specified Additional Amount of Insurance for Coverage A (HO 04 20). This endorsement grants the policyholder the ability to access an additional percentage of the Coverage A limit to cover a loss. Two percentage options are available, 25% and 50%, but some carriers may not allow the use of the 50% option. Of the two, the Additional Limits of Liability for
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Continued from page 20 Coverages A, B, C and D is the preferred option because it allows the insured to purchase whatever additional amount is necessary and all other coverage limits increase in relation to the new Coverage A limit. However, some homeowners' insurance carriers will not use the HO 04 11, limiting the insured to only the HO 04 20. One major advantage of both additional limits endorsements is the removal of the insurance-tovalue (often referred to as the coinsurance) provision in the homeowners' policy. When either of these endorsements is attached, the insured is not subject to the provision. As expected, attaching either of these endorsements increases the premium. Use of the HO 04 11 increases the premium approximately 15%; attachment of the HO 04 20 increases the premium between three and six percent depending on which percentage option is chosen (25% or 50%).
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BUILDINGMATERIALS Commercial Property
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Technically, replacement cost, as used in most property insurance policies, replaces the damage For commercial property exposures, there is no structure with new materials. “You get your old option to purchase an “additional limits" type of building back constructed with new materials." endorsement. However, blanket coverage for multiple buildings and business personal property But most policyholders do not want their old does allow coverage to expand beyond the building building back rather they want a new building constructed with new materials. This sounds limit scheduled on the Statement of Values. In theory, the entire blanket limit could be expended semantic, but the difference in the old building and the new building are the changes in building on one component of covered property. codes. But use of the blanket option does not The property insurance policy is designed to pay automatically avoid a coinsurance problem. for things that are damaged by a covered cause of However, coinsurance can be suspended by using loss. If replacing the damaged building requires Agreed Value. Blanket Agreed Value is a favored building features mandated by building codes but approach to the limits problem and the not part of the “old" building, then the property coinsurance problem. insurance policy does not respond to these new building code mandated features. Additionally, if Beginning in approximately 2007, insurers began the undamaged part of the building must be attaching an endorsement that diminishes the demolished, the demolition of the undamaged value of blanket coverage, the Limitation on Loss part is cause by the mandate of the building Settlement-Blanket Insurance (Margin Clause). inspector, not by the covered cause of loss. This endorsement limits the amount available for any one building to a percentage of the amount scheduled in the Statement of Values. For example, a building scheduled in the Statement of Values at $500,000 is damage by a covered cause of loss and the actual replacement cost at the time of the loss is $650,000. If the damaged building is included on a policy providing a blanket limit of $1,000,000 then, in theory, the full $650,000 replacement cost would be recoverable. However, if the blanket policy is subject to the Margin Clause applying a 120% maximum limit, the recovery would be limited to $500,000 plus 20% - or $600,000. There are some proprietary versions of this type of endorsement that apply a limit per location. Be vigilant when reviewing commercial property policies written on a blanket basis, look for endorsements that can cap the recovery for a given item in the Statement of Values. One other issue that is not strictly related to the rising cost of building material but was central to a lawsuit against an agent in New Hampshire recently is Ordinance or Law coverage. What the insurance industry understands about the term replacement cost is not what the typical policyholder understands by the term.
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BUILDINGMATERIALS What most policyholders want after a loss is, in fact, reconstruction costs not just replacement cost. If the insurance policy does not pay the full reconstruction cost of the damaged building, the policyholder may be unhappy with the settlement and think that replacement costs as defined by the insurance policy is not what they thought they were getting. The policy did not meet their reasonable expectation. Where do you think the jury's sympathy will lie? This dichotomy between “replacement costs" and “reconstruction costs" is becoming an issue of growing concern. To protect themselves, agents should make sure that policyholders are advised as to what “replacement cost" means and what its limitation are. Additionally, there should be a discussion and offer of Ordinance or Law coverage. Some property policies are beginning to include limited amount and coverage for Ordinance or Law as Additional Coverages. But these Additional
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Continued from page 22 Coverage may not be adequate. “Fore warned is fore armed."
Watch Out for the Rising Cost of Building Materials COVID has created issues across the country. One that agents must be aware of is how this pandemic has affected the cost of building material. Supply chain interruptions and increased demand have caused the price of “common" building materials to increase dramatically. Agents must be prepared to address these issues with the available insurance options beyond updated replacement cost estimators. Offer and use the endorsements available. Last Updated: April 16, 2021
CORNER ENHANCING COLLABORATION & COMMUNICATION Tip #6 By Steve Anderson
Email is a very cumbersome and unproductive way to communicate with team members. It is slow and hard to keep track of multiple conversations and conversation threads. Several platforms have been created over the last few years that attempt to solve this problem. One example is Microsoft Teams. Microsoft has spent many resources over the last few years enhancing their Microsoft Teams collaboration platform. It is a tool your agency should consider adding. One reason is Teams are included as part of the Office 365 (recently renamed Microsoft 365) subscription. What is Microsoft Teams? Microsoft Teams is the hub for teamwork that allows employees to communicate and collaborate in a single and secure location. Teams is a four-inone solution. Messaging provides a rich chat-based experience, online meetings – similar to Zoom – where you can stay visually connected, phone calling capabilities built on Microsoft’s worldwide network, and native integration with the familiar Office applications. The Teams experience is built for the web browser as well as apps. So you can use all of your devices running Windows, Mac, iOS, and Android. Teams Tools The tools available in the Teams platform include:
Chat – If you are familiar with Slack, then this tool will be familiar. You can have private oneon-one chats as well as group chats. To keep organized, you can pin chats to the top. There are far too many ways to manage chat to mention here! External Partners – You are able to add external partners and vendors to a conversation. Attachments – Any type of document can be attached to a conversation and shared by all parties. Collaboration – If an attachment is an Office file, others can work on the document from within Teams. You no longer need to email documents to each other and determine which is the latest version. Third-Party Apps and Services – A variety of Microsoft applications as well as a growing library of third-party apps, services, and tools are available. Meetings – Microsoft Teams has a complete meeting solution that supports sharing video and audio conferencing. You can schedule a meeting from the platform, as well as create a live event. An interesting feature is a transcription. Transcription allows you to search for your name or keywords, and by clicking on the results, you will be taken to that part of the meeting recording. There is a lot in Microsoft Teams to like. Microsoft is spending the resources to build out a fullfunction single platform that will help your team be much more effective – especially in a virtual world.
Introduction
THE INSURER OF THE FUTURE By Alan Walker Last Updated October 25, 2019
The Digital Transformation of the Insurance industry is underway. Technologies such as the Internet of Things, Big Data Analytics, Robotics and Artificial Intelligence are already making an impact. But where will this end? What will the Insurer of the Future look like? What will be the impact of driverless cars? Of manufacturers providing customers with 'vehicles as a service'? How will Big Data and Artificial Intelligence (AI) engines impact Underwriting and Pricing? How about Customer Relationship Management (CRM) and Marketing? What will become possible in Claims? And in Products and Product Development? The insurance industry is, of course, broader than just the insurers themselves. What will be the impact on insurance intermediaries? And, finally, what does all of this mean for insurance industry employees? Answers below!
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FUTUREINSURER Auto / Motor Insurance
The Insurer of the Future will do very little business in the auto/motor market. Insurers that remain focused on this segment (whether personal or commercial lines) will either shrink dramatically or fail. Once fully driverless cars become the norm, then: 1. Accident rates will be diminished dramatically; and 2. There will no longer be drivers to insure. But it's actually even worse than that: 1. Thefts will be minimized too, as vehicles can be disabled remotely; 2. Fire and malicious damage cover will no longer be needed, as personal and business vehicle ownership is increasingly replaced by manufacturers supplying 'vehicles as a service'; 3. With the majority of vehicles still being owned by manufacturers, those manufacturers will increasingly self-insure - at best taking some reinsurance cover from the industry for catastrophic software failures. All of the above won't happened overnight - but the trends are already there.
Underwriting and Pricing
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Continued from page 26 And in the Insurer of the Future the AI engines will be wired directly into the sales and underwriting processes, which will operate 'straight through' with no involvement from humans. Behind the scenes, the Actuary's workload will be reduced through much greater use of automation and AI in capital modeling, prudential regulation compliance, reserving, and financial accounting. There will be room for some human oversight roles, to ensure that the AI engines don't 'go rogue' and generate crazy results - but the vast majority of Actuaries and Underwriters will no longer be required.
Claims Handling
William Gibson, the author, once said, "The future is already here; it's just not very evenly distributed." So what is 'already here' in relation to Claims handling? Two data points: Lemonade, the new US insurer, says it uses AI to complete the entire claims process in under 3 seconds Fukoku Life, in Japan, expects 30% efficiency gains from replacing employees with an artificial intelligence system that can calculate payouts to policyholders.
If I was a young Actuary or Underwriter I'd be worried because the Insurer of the Future won't have much The Insurer of the Future will handle almost all of its need for my skills. Claims automatically, without human intervention. It will: What do these professionals do for a living? They rely Detect Claims, using sensors on the Internet of on their personal experience plus various data sources Things (IoT) and data feeds from, for example, to understand and price a risk more accurately. death registries Sometimes they carry out complex statistical Analyze those Claims, drawing on multiple internal calculations in support. and external data sources, and applying Artificial Intelligence (AI) to establish what needs to be done But the Insurer of the Future will have its experience Assess appropriate reserve values, and input them data captured on its internal systems. It will also tap to the insurer's financial systems into vast amounts of additional data available from Trigger external supply chains, such as clean-up external sources - some structured, some unstructured. and restoration services, bodyshops, and online And it will channel all of this data, far more than a retailers, to return the policyholder to their prehuman Actuary or Underwriter could ever handle, to its loss state Artificial Intelligence (AI) engines. Instruct loss adjusters where necessary, ingest their subsequent reports, and act on their findings These AI engines will examine the data for patterns, Make payments directly into policyholders' bank apply multiple statistical models, and add their own accounts where appropriate experience from previous analyses to come up with a Trigger, and follow up, recoveries and reinsurance much more accurate price, massively quicker than a claims as needed human ever could.
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FUTUREINSURER In the early days, this will happen for simpler Claims only. But in due course, as the abilities of Cognitive / AI systems surpass those of humans, Claims personnel will be required by the Insurer of the Future for only the most complex of Claims. And even for these, workloads will be reduced through the use of new capabilities such as multi-party collaborative environments to speed access to data and decision-making.
Blockchain
If the Insurer of the Future is a new entrant, blockchain will be at the core of both its business model and its operating model. It will use blockchain to: Underpin a series of smart-contract enabled parametric insurance products (if event X happens, and 'oracle' Y confirms that, then pre-agreed sum of money Z is paid out automatically); and Maintain secure policy records significantly more cheaply than its legacy competitors. If the Insurer of the Future was a traditional player, it's more likely to be using blockchain as a 'bolt on', supporting new products that wouldn't otherwise be cost effective. It might, for example, use blockchain ledgers to support micro-insurance policies. An example product could be insuring jewelry just for the time its owner plans to wear it this evening. Or providing top-up insurance to participants in the gig economy, lasting just for the length of each gig. But whether the Insurer of the Future is a new entrant or an existing insurer, blockchain will be just one of a number of new tools at its disposal. This is one area in which new technology will be incremental to the industry rather than truly disruptive. Indeed, it may well be that the biggest impact will be at the pan-industry level, taking advantage of a blockchain ledger's ability to serve as a system of record for multiple participants. We can already see experimentation along those lines - two examples being the Marine market pilot in the UK and the formation of the RiskBlock consortium in the USA.
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CRM and Marketing
CRM was always a challenge in the past because, unlike banks and retailers, Insurers had only small numbers of interactions with their end customers. That made it hard to gather data on their customers' needs and wants, and limited their ability to build relationships. But the Insurer of the Future has access to enormous quantities of data about its customers, available from a wide range of external sources. So it ports this data into its own systems, fueling more powerful and accurate analytics. It uses the insights gleaned to reach out proactively to customers; not just to sell them products, but to provide genuine value adds. Providing value adds to customers, free of charge, enhances its customer relationships. So when the Insurer of the Future makes an occasional offer to a customer, it's the right offer, at the right time, through the channel and device of the customer's choice. As a result of the Insurer of the Future's expertise, the customer is significantly more likely to buy. Compared to its predecessors, the Insurer of the Future has a loyal customer base - driving lower lapse/churn rates, a greater share of wallet, and higher Net Promoter Scores.
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FUTUREINSURER Products
The Insurer of the Future's customer won't have to buy individual products. Instead, she'll buy a total risk management solution which flexes to her needs month by month, day by day, and hour by hour. And she'll be billed according to her actual usage, so she'll never be under, or over, insured. When the Insurer of the Future's customer leaves her house, the accidental damage element of her home cover will decrease - because she's no longer there to damage anything. But her flood and fire cover will go up, as she's less likely to spot such events early. If she buys a new TV, her Insurer will know that, and add it to her policy. They will also ask what's happening to the old one, and remove it from the policy if no longer relevant.
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Continued from page 28 current and future Search history and Social Media accounts to its systems. That way the Insurer of the Future can monitor what she's thinking about doing (bungee jumping, getting married, having a baby?) and step in with timely advice and support. Some of the Insurer of the Future's older employees remember when 'customer lifetime events' were the elusive holy grail. Not any more. Now the Insurer knows about all of these events, often before they even happen.
Product Development
At the Insurer of the Future, we said that Products will be very different from nowadays. But how will they be developed? Certainly not the same way as now.
If the customer goes hiking in the wilderness, the Insurer of the Future will pick that up and increase her life cover. If her hiking is abroad, travel covers will kick in automatically. And once the customer is back home safely, her cover, and her premium, goes down again.
To begin with, all products will be created as a series of modules. Modular design enables myriad new products to be developed quickly and easily. Even with just three modules, A, B, and C, the Insurer of the Future can generate seven different products (A, B, C, A+B, A+C, B+C, A+B+C) and the options grow exponentially as more modules are added.
Once the Insurer of the Future has earned its customer's trust, she might choose to open up her
How does the Insurer of the Future know when a new module is required? Because its real time analytics
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FUTUREINSURER tell it what customers want, or might want, and an artificial intelligence system can figure out whether that can be met from the existing modules, or whether another one is required. If a new module is needed, those same artificially intelligent systems can carry out the coding required to build the new module, configure the new combination, and publish the new product as an option available to be bought. It will then monitor take-up of the new product, and iterate it as needed until sales are optimized. Of course, in this world, products are no longer siloed. Elements of what used to be called P&C, life, health, investment, and decumulation products, together with covers yet to be dreamt up, are all now modules that can be combined to meet the precise needs of any individual, employee, or business customer of the Insurer of the Future.
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Continued from page 29 open to one-person businesses such as Uber drivers, as well as employees of larger companies. This, of course, broadens the customer base served by the provider yet further. In time, workers' loyalty will perhaps become more focused on their employee benefits provider than on their individual employers - re-positioning this segment of the industry and opening up further opportunities for innovation.
Smart Automation
So far, I've talked about the specifics of Claims, Underwriting and Pricing, and Product Development but I haven't really talked about the back office administration functions. If you've been with me so far, you won't be surprised to hear that I think AI, robotics, and other automated systems will transform those functions as well, and empty them of people.
The Insurer of the Future will reorganize its back office Given that the 'customer of the future' wants solutions using automation - but it will do so "smartly." By rather than products, the employee benefits provider of smartly, I mean that it will figure out how and where to automate to gain the greatest commercial benefit. the future will offer a wider range of products, all designed to work together. And, knowing that careers are becoming increasingly more fragmented (shorter tenure, parallel income streams, the gig economy) the employee benefits provider will also reduce its dependence on employers.
Employee Benefits
The employee benefits provider of the future will offer a broad 'platform' offering multiple products (not least life, retirement, health, auto, and home) open to employees of multiple companies. That doesn't mean every employer's scheme will be the same, as there will still be specifics tuned to the desires of individual companies. But all of the core covers will be the same, allowing the benefits provider to leverage massive buying power, securing excellent deals for employers and employees alike. Because the core benefits are the same across companies, they're also portable - very helpful in a world where employees hop regularly from job to job. When an employee leaves company A, they can port their entire benefits package to company B. If there's any premium shortfall, they can pay that personally. And the employee benefits provider retains the end customer for longer. But the new proposition goes even further - because the model recognizes the gig economy and is therefore
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FUTUREINSURER Some processes will need to be transformed by using stronger, more automated, core systems. Some processes, or sub-processes, will gain most from the use of AI/Cognitive capabilities: chatbots, vocalbots, machine learning, recommendation engines, etc. And any gaps might best be filled using Robotic Process Automation (RPA) or even non-technology tools such as Lean. There will be instances where it makes sense to use more than one of these techniques - perhaps capturing short-term efficiency gains through interim RPA of a sub-process, while a more comprehensive longer-term solution is being developed. The source of success for the Insurer of the Future, however, will be figuring out (smartly) exactly what to apply where, and in what order, to create the highest return on investment.
Agents and Brokers
A few years ago, I moved from the UK to the US. I tried to arrange insurance directly with the brand names I knew best - but it quickly got difficult. I didn't have a US credit history, I didn't have a US insurance history, and I'd only just got a US job. So I realized I needed a broker. That broker was Michelle, and she worked wonders for me. She got me the covers I needed, at a good price, at the right insurer for my circumstances. She was thoughtful, courteous, and speedy, and I've been delighted by her service. As far as I'm concerned, Michelle earned every cent of her commission. But I never met Michelle. I never even spoke to her. Everything we did, we did by email. Which got me thinking - how do I know Michelle isn't an Artificial Intelligence (AI) system? For the Insurer of the Future, I think she will be. In the future, there's nothing Michelle did for me that couldn't be done by a properly trained, and properly connected, machine. In the Insurer of the Future's world, human brokers won't be needed any more.
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Continued from page 30 I can guess what many of you are thinking: "Hah! Let's see how much he likes a remote machine when his basement floods." And you're probably right. In those circumstances, I might indeed want someone to come and (metaphorically) hold my hand. But if my basement floods, and a real person does turn up, and she tells me her name's Michelle - won't that give me what I need? I think so. If I need a real person, then I'll be happy that a real person turns up. They don't even need to be an agent or broker - the Insurer of the Future's on-site claims handler will be fine, thank you very much. Some tell me I might be right for personal lines, but that commercial lines is more complicated. Well yes - a lot more data will typically need to be located, analyzed, and acted upon. But locating, analyzing and acting on data is exactly what machines can usually do better than humans. Which means it's even more likely that commercial lines brokers will disappear.
Human Capital
As we've seen in previous parts, the Insurer of the Future will have far fewer employees in Pricing and Underwriting, and Claims, in Product Development, and throughout the Back Office. Overall, therefore, the Insurer of the Future will have far fewer employees per million of premium than its predecessors. Many tasks previously performed by humans will now be delivered by software.
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FUTUREINSURER But that means that the remaining humans, fulfilling key strategic and risk management roles, are far more important than they were. They will have to be the very best professionals available. Their recruitment, training, development, and motivation will have to be top notch. They'll need the very best of support to help them be successful. They'll have self help tools at their fingertips, together with expert systems support, world class knowledge management capabilities, and collaboration tools, all designed to ensure they can deliver to their full potential. They'll be part of a culture that is dynamic and exciting, in an environment of constant change - and they will relish every minute of it. Chances are that, on average, they'll also be significantly better paid.
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TOP 10 WEBSITE MISTAKES Trusted Choice
1) No Social Presence Listing Facebook, Twitter, Google + and LinkedIn pages are essential in increasing SEO efforts, growing website traffic and establishing and online presence. 2) Poor SEO Search Engine Optimization (SEO) is vital for creating website traffic through increasing visibility in web search engines. 3) No Visible Contact Information Listing contact information visibly is extremely important. Visitors need to be able to easily identify and contact your agency. Contact is the first step in closing a deal. 4) No Analytics Tool An analytics tool is essential in tracking and reporting on website traffic. This helps your agency identify what works and doesn't in marketing techniques and other website initiatives.
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WEBSITEMISTAKES 5) No Blog A personal and regularly-updated blog is extremely beneficial to SEO efforts. An active blog builds an online audience and increases website visits.
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Continued from page 34 8) Broken Links Broken links negatively effect SEO and give the website an overall poor image.
9) No Mobile Website Creating a website that is mobile responsive is 6) No "About Us" essential in today's technologically-fueled Allowing visitors to familiarize with the agency and marketing environment its staff is important for establishing trust in future clients. An "About Us" or "Meet the Team" section 10) No Agency Reviews or Testimonials increases website personalization and credibility. Reviews build agency credibility and give future clients the assurance they need to pursue a 7) Lack of a Clear Call-to-Action relationship with your agency. A call-to-action (CTA) tells visitors: who, how, and why. Validating potential client's motives will directly increase closing rates. A quote generating tool is an excellent CTA.
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National Flood Insurance Program I already have homeowners insurance. Most homeowners insurance does not cover floods. It does, however, cover fires. Now consider this: in a highrisk area, your home is more than twice as likely to be damaged by a flood than by fire. Floods? That's what disaster assistance is for. Available only when the President declares a disaster, Federal disaster assistance is usually a loan that you must pay back with interest. For a $50,000 loan at 4% interest, your monthly payment would be around $240 a month ($2,880 per year) for 30 years, in addition to your mortgage loan that you still owe on the damaged property. Plus you would need to buy and maintain flood insurance for the life of the loan. Compare that to the average premium for flood insurance coverage, which is about $600 a year (and even less outside of high risk zones). Plus, when you submit a flood insurance claim, you are compensated for all covered losses whether or not a disaster has been declared - and you do not have to pay it back.
I live on a hill and am not at risk. If you live on a hill or in an area that has never been flooded, your risk may be significantly reduced, but it is not eliminated. Aside from major storms like hurricanes and tropical storms, flooding can be caused by heavy rains, melting snow, inadequate or clogged drainage systems, and failed protective devices such as levees and dams. I do not live in a flood zone. Everyone lives in a flood zone - it is just a question of whether you live in a moderate-to-low or high risk area. While flood insurance is required in high risk areas, people outside of high-risk areas file over 20% of NFIP claims and receive one-third of disaster assistance for flooding. Flood insurance is too expensive. The average flood insurance premium is about $600 a year (less than $48 per month). If you live in a moderate-to-low risk area, you may qualify for a Preferred Risk Policy with a premium starting at $129 per year. Considering that even a few inches of water can cause tens of thousands of dollars in damage, the annual premium is well worth the financial protection from floods.
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FLOODBUSTERS
Continued from page 37
My area has never been flooded. The fact that a flood has not occurred recently doesn't mean one has not happened in the past or that one will not happen in the future. Flood history is just one element used in determining flood risk. Other factors include your community's rainfall and river flow data, topography, wind velocity, and building development (existing and planned).
Many areas of the country experience more than one major flood in a lifetime. Some areas experience repetitive loss – two floods in a 10-year period. Over the years, FEMA has paid almost $3.5 billion dollars in claims for repetitive loss properties. If you experience a flood, receive federal disaster assistance, and choose not to purchase and maintain flood insurance, you may become ineligible for federal disaster assistance if a flood occurs again, if it is determined that flood insurance would have paid for the damage. If you have a mortgage, your lender may now require you to purchase flood insurance.
I have already experienced a flood - that will not happen again in my lifetime. You may have heard of the "100-year flood" and may be thinking that it only happens once every 100 years. However, this term is misleading and actually refers to the flood elevation that has a 1% chance of being equaled or exceeded each year. It has nothing to do with the number of floods that may happen over the course of a lifetime. Thus, the 100-year flood could occur more than once in a relatively short period of time. Here are some additional thoughts to consider:
I cannot purchase flood insurance, because I live in a floodplain. Except in certain specific cases, you are eligible to purchase flood insurance, as long as your community participants in the NFIP. So, whether you are in a high-risk or low-risk area, flood insurance from the NFIP is available.
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FLOODBUSTERS Building coverage includes: Furnaces, water heaters, air conditioners and heat pumps Electrical junction and circuit breaker boxes and required utility connections Unpainted drywalls and drywall walls and ceilings, including fiberglass insulation Foundation elements and structural support equipment Sump pumps Well water tanks and pumps, cisterns and the water in them Oil tanks and the oil in them, natural gas tanks and the gas in them Pumps and tanks used in conjunction with solar energy Stairways, staircases, elevators and dumbwaiters Debris cleanup Examples of contents included in coverage are: Washers Dryers Freezers Food contained in freezers
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Continued from page 38 Flood insurance does not cover common issues like seepage or leaks. Generally, neither homeowners nor flood insurance policies cover damage caused by seepage, dry rot, or animal pests, as they are considered the result of poor home maintenance, and therefore preventable. However, flood insurance will cover damage caused by sewer or drain backup, or overflows from a sump pump or related equipment, if the event is a direct result of flooding. I cannot buy flood insurance right before or during a flood. Unlike some other lines of insurance, an approaching storm does not trigger a moratorium on flood insurance purchases. However, once you have applied and paid the premium, there is usually a 30-day waiting period before the policy becomes effective. Though it cannot cover a "loss in progress," your newly-effective flood insurance policy will provide coverage for any future flooding. The bottom line? Do not wait until after the storm warnings to buy flood insurance!
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BIG"I"MARKETS As a member of the Big “I” through your state association, you’re invited to plug into the power of this program and see how we can help you grow your agency. You can access the markets you need once a year or multiple times per day; the price to access products through Big "I" Markets remains the same: zero. Where do I sign up? Visit www.bigimarkets.com to quickly register and begin submitting business. Start by viewing brief minute demonstration videos on how to register and how to submit a quote. Need more help? Contact Big "I" Markets at bigimarkets@iiaba.net or (703) 647- 7800. Don’t waste another moment – log in to Big “I” Markets today and see what you’ve been missing!
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HOW VACANT IS VACANT? But What if it's NOT Vacant? Vacant land, or what qualifies as vacant land in the homeowners' policy, is a common question for the VU. Two recent "Ask an Expert" questions specific to vacant land indicated the need to address the question again. So, what is vacant land? Unfortunately, there is no definition of vacant and the courts don't always agree. Essentially, vacant land is land "in its natural state." In essence, land is vacant when it is untouched and with no man-made improvements, additions (such as fences) or uses (such as for growing crops or cutting timber). The existence of trees is land in its natural state, unless there is a business exposure (including selling the timber). Here are links to a couple more VU articles on this topic: What is "Vacant Land"? Vacant Land But what if the land isn't vacant as described above, does that automatically mean there is no coverage if the location isn't specifically listed on the policy? Let's look. The definition of "Insured location" includes a coverage extensions for premises away from the residence premises that requires review. Definition "6.c." applies to: "c. Any premises used by you in connection with a premises described in a. and b. above;" Many explain "6.c." as a provision that extends coverage to locations such as self-storage facilities – which it does; but is that the sole use of this coverage extension? The first phrase is "any premises." Property (premises) not located adjacent to the insured's "residence premises" but used in connection with the residence premises qualifies as "any premises." If the insured has storage buildings and other such structures on that land, and
Chris Boggs Last Updated March 31, 2017
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VACANTLAND there is no business operations (or other excluded operation), that is an "any premises" used in connection with the "residence premises" (which is the "a." referenced in the wording). It looks like coverage would extend to such locations. However, there is a specific liability exclusion that appears to preclude the needed coverage for such nonvacant land owned and used by the insured. Exclusion E.4. excludes coverage as follows: 4. "Insured's" Premises Not An "Insured Location" "Bodily injury" or "property damage" arising out of a premises: a. Owned by an "insured"; b. Rented to an "insured"; or c. Rented to others by an "insured"; that is not an "insured location" Note that provision "c." within the definition of "Insured Location" extends coverage to premises "used" by the insured. The exclusionary wording applies to premises "owned" by an insured. "Used" and "owned" are not interchangeable and connote different relationships to the property. Because of this more-than-semantic difference, if the land is not vacant - as described above or defined by the court - there is no liability coverage extended to the premises. The exclusionary wording applying to "owned" premises that is not an insured location applies to such property. Regardless whether the policy "automatically" extends coverage to land away from the residence premises or not, you should not depend on the provisions of the homeowners' policy to extend coverage to any nonadjacent property (vacant or not). Always specifically list the location on the homeowners' policy if the underwriters allows it – this avoids any question of coverage.
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THREE PERSONAL AUTO QUESTIONS EVERY AGENT MUST KNOW HOW TO ANSWER By Chris Boggs Agents field dozens of questions from unknowing clients every week; that's just part of the job. We don't and shouldn't expect our clients to know anything about insurance, and they don't disappoint us in this regard (which makes it all the weirder that so much coverage is purchased on line). This article, the first in a series of articles intended to help agents be ready for the coming questions, focuses on three personal auto coverage questions. 1. If a child owns a vehicle in his/her personal name, can or should their vehicle be listed on the parent's PAP? Technically - NO! To be eligible for a PAP, the vehicle must be owned by the named individual or jointly by spouses. And if the PP 03 34 is attached, one of the owners must still be a named insured.
Because the child is not a named insured on the policy, their auto cannot technically be included as an auto on the PAP. The child must have a separate PAP if the vehicle is owned solely by him or her. But if the vehicle is listed on the policy, there may still be coverage. Here is relevant policy language contained in the parent's policy that must be considered: B. We do not provide Liability Coverage for the ownership, maintenance or use of: 3. Any vehicle, other than "your covered auto", which is: a. Owned by any "family member" or b. Furnished or available for the regular use of any "family member". However, this exclusion (B.3.) does not apply to you while you are maintaining or "occupying" any vehicle which is: (1) Owned by a "family member" or (2) Furnished or available for the regular use of a "family member".
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PERSONALAUTO
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Vehicles listed on the policy qualify as a “your covered auto" even if it is not owned by the you because the policy partially defines a “your covered auto" to mean one that is listed in the declaration. So, by default, the vehicle owned by the child appears to qualify as a “your covered auto."
If the Carrier Wants to End Coverage When...
Although there may be coverage, this is in violation of all eligibility rules. And for this to get past the underwriter (or the underwriting system), the agent would have to incorrectly (or fraudulently) answer the application question, “WITH THE EXCEPTION OF ANY ENCUMBRANCES, ARE ANY VEHICLES FOR WHICH INSURANCE IS REQUESTED NOT SOLELY OWNED BY AND REGISTERED TO THE APPLICANT?"
When the driver has logged into the app but has NOT accepted a request...
Limited Transportation Network Driver Coverage (No Passenger) (PP 23 93)
When the drive accepts a request but has NOT picked up the rider...
Transportation Network Drive Coverage (No Passenger) (PP 23 92)
Don't assume the answer for the insured, the question must be asked. Once it is discovered that the named insured (individually or jointly) does not have an ownership interest in the vehicle, a separate policy must be written. 1. How does the policy respond to insureds involved in ridesharing activities (Uber, Lyft, Curb, etc.) The industry seems to collectively agree that the public or livery conveyance exclusion in the personal auto policy (PAP) applies to ridesharing. But the unanswered (or unclear) question is (or was), at what point was the vehicle being used as a public or livery conveyance? Was it: When the driver turned on the app and made himself "available" to those needing a ride? When the driver accepted a request for the ride? or When the driver actually picked up the passenger? Insurance Services Office (ISO), in an attempt to clarify the application of the public and livery conveyance exclusion and offer options, created three endorsements to address when the PAP ceases to provide coverage. Depending on the endorsement attached, PAP coverage may cease: When the driver turns on the app; When the driver has logged in to the app but has NOT accepted a request; When the driver accepts a request but has NOT picked up the rider; or When the driver picks up the rider.
They attach the...
When the driver turns on the Public or Livery app... Conveyance Exclusion (PP 23 40)
ISO has filed a revised personal auto policy to be effective September 1, 2018. When the new policy wording becomes effective, the exclusionary wording found in the PP 23 40 is being incorporated into the base policy wording leaving only the Limited Transportation Network Driver Coverage (No Passenger) and the Transportation Network Driver Coverage (No Passenger) endorsements.
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PERSONALAUTO 1. My insured uses his/her auto for business purposes (can be his own or for someone else's), are there coverage gaps created by such use? Four business-use exclusions are found within "Part A – Liability" of Insurance Services Office's (ISO's) personal auto policy (PAP). The first is a workers' compensation exclusion not necessarily relevant to the reason for the question. However, the three remaining exclusions specifically relate to the business use exposure that is the purpose for the question. The three relevant exclusions read (emphasis provided): 5. For that "insured's" liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This Exclusion (A.5.) does not apply to a share-the-expense car pool. 6. While employed or otherwise engaged in the "business" of: a. Selling; b. Repairing; c. Servicing; d. Storing; or e. Parking; vehicles designed for use mainly on public highways. This includes road testing and delivery. This Exclusion (A.6.) does not apply to the ownership, maintenance or use of "your covered auto" by: a. You; b. Any "family member"; or c. Any partner, agent or employee of you or any "family member". 7. Maintaining or using any vehicle while that "insured" is employed or otherwise engaged in any "business" (other than farming or ranching) not described in Exclusion A.6. This Exclusion (A.7.) does not apply to the maintenance or use of a: a. Private passenger auto; b. Pickup or van; or c. "Trailer" used with a vehicle described in a. or b. above. Exceptions to these exclusions give back necessary protection so in practical application, ISO's PAP extends coverage for the business use of a "your covered auto" provided it's not used to carry people or property for a fee (i.e., Uber or Lyft) (see question #2). Absent material misrepresentation in the application regarding the use of the vehicle, the PAP responds to an incident arising from business use. So, then, what constitutes covered "business use" of a personal auto? I almost hesitate to answer for fear that the responses be viewed as a full list of possibilities. Note that these are only examples of use that can be considered "business use":
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Continued from page 45 An insured using his or her personally-owned auto in a Mary Kay, Avon, Rainbow Vacuum or other direct sales type business; A contractor using his personally-owned vehicle to go from job site to job site; An officer of a closely-held corporation or member/manager of an LLC using his/her personally-owned auto on company business; An individual using his or her personally-owned vehicle on behalf of a non-profit organization; or An employee using his or her personal auto on behalf of his employer to conduct business, run errands, or otherwise benefit the employer. As previously stated, this is but a sample of the possible business uses of a personally-owned auto. Further, all of these examples of "business use" are covered by ISO's unendorsed PAP. In fact, no special steps are required to garner protection for business use. Wait, you say, what about the Business Use classification? Isn't the insured required to apply the "Business Use" classification to the policy to have coverage for business use? Use class affects premium,
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PERSONALAUTO not coverage. Again, provided the insured does not attempt to misrepresent the use of the vehicle, the use classification does not affect protection – in the ISO world. But be warned, if the insured is not covered using an ISO form, different business-use policy language may apply. Following is an example of a proprietary form that is much more restrictive than ISO's language: Coverage and our duty to defend under Part I- Liability to Others, Part II- Excess Medical Expense Coverage, Part IllUninsured/Underinsured Motorist Coverage, and Part IV Physical Damage Coverage do not apply to a loss: 8. arising out of the ownership, maintenance or use of any motor vehicle during the course of any business or employment, unless you have paid a specific premium for business coverage; If your insured is subject to this kind of language, there is no business use coverage unless an additional premium is paid. This is just one example why the coverage language must be reviewed.
LOUISIANAAGENT
Continued from page 46
Conclusion
As mentioned initially, this is the first of a series of articles intended to help agents prepare for the questions they are sure to receive. Be on the lookout for this ongoing series.
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LOUISIANAAGENT
IIABL EDUCATION JUNE 2022 CALENDAR OF EVENTS SUNDAY
29
MONDAY
30
TUESDAY
WEDNESDAY
31
1
8
IIABL Office Closed
5
6
7
12
13
14
15
19
20
21
22
26
27
28
29
LIVE WEBINARS! 12-3p Certs of Insurance & the Coverage Issues That Go With Them
LIVE WEBINARS! 9-11a Why Business Income is the MOST Important Property Coverage
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LOUISIANAAGENT
& EVENTS THURSDAY
FRIDAY
SATURDAY
2
3
4
9
10
11
16
LIVE WEBINARS! 8-11a Is This Stuff for Real? Understanding & Insuring Emerging Risks
17
18
12-3p Agent's E&O; Duties, Best Practices, Operations...
23
LIVE WEBINARS! 10am-12pm ISO's 2022 Homeowners' Changes
24
25
Jul 1
29 2
8-11a Flood Insurance, FEMA, & the NFIP 12-3p Homeowners in Real Life: Tales of Claims & Coverage
30
LIVE WEBINARS! 8-11a Nailed It: Understanding Insurance Requirements in Construction Contracts
IIABL CE ON DEMAND E&O Risk Management Ethics Flood Commercial Lines Courses Personal Lines Courses Professional Development
OTHER EDUCATIONAL RESOURCES
PAGE 50
LOUISIANAAGENT
ADVERTISER INDEX COMPANY
PAGE
COMPANY
PAGE
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
43 29 7 6 23 33 16 12 45 3 28 13 31 35 46 14
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
38 11 41 47 17 22 9 21 39 30 19 8 25 32 36 18
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LOUISIANAAGENT
IIABL 2021-2022
BOARD OF DIRECTORS & OFFICERS PRESIDENT, DONELSON P. STIEL David H. Stiel, Jr. Agency - Franklin PRESIDENT-ELECT, MICHAEL SCRIBER Scriber Insurance - Ruston SECRETARY-TREASURER, ARMOND K. SCHWING Schwing Insurance Agency, Inc. NATIONAL DIRECTOR, JOHNNY BECKMANN, III Assured Partners - Metairie PAST PRESIDENT, BRENDA CASE Lowry-Dunham, Case & Vivien - Slidell YOUNG AGENT REPRESENTATIVE, BRITTNI LAGARDE Southern Insurance Agency - New Orleans ANN BODKIN-SMITH Thomson Smith & Leach Insurance Group - Lafayette MATTHEW DEBLANC Continental Insurance Services - Marrero ROB W. EPPERS Risk Services of Louisiana - Shreveport MATT GRAHAM Lincoln Agency - Ruston CHRISTOPHER S. HAIK Haik Insurance Holdings, LLC - Lafayette STUART HARRIS McClure, Bomar & Harris, LLC - Shreveport ROSS HENRY Henry Insurance Service, Inc. - Baton Rouge BRET HUGHES Hughes Insurance Services, LLC - Gonzales CHARLES H. LEBLANC Bourg Insurance Agency, Inc. - Donaldsonville LYDIA MCMORRIS Alliant Insurance Services - Baton Rouge A. EUGENE MONTGOMERY, III Community Financial Insurance Center, LLC - Monroe JOE KING MONTGOMERY Thomas & Farr Agency, Inc. - Monroe HARTWIG "ROBBY" MOSS, IV Hartwig Moss Insurance - New Orleans PAUL R. OWEN John Hendry Insurance - Zachary ROBERT LOUIS PALMER Insurance Underwriters, Ltd. - Metairie MARTIN "TEENY" PERRET Quality Plus - Lafayette ROBERT G. RIVIERE Riviere Insurance Agency - Thibodaux ROBERT STONE Stone Insurance, Inc. - Metairie
