Louisiana Agent SEPTEMBER 2018 A publication of the Independent Insurance Agents & Brokers of Louisiana
In this issue: New Cyber Hero in Town Being A Claims Advocate Remember the LAIP? Build vs. Buy
A publication of the: Independent Insurance Agents & Brokers of Louisiana
IIABL STAFF Jeff Albright Chief Executive Officer jalbright@iiabl.com Francine Berendson Director of Communications & Events fberendson@iiabl.com Mike Edwards, CPCU, AAI Director of Education medwards65@aol.com
In this issue:
There’s a New Cyber Hero in Town ................................. 5 Being a Claims Advocate ........................................... 6-10 State & Fed Regs on Assoc. Health Plans ...................... 11 Ask Mike: Public or Livery Conveyance Exclusion ..................... 12-17 What is Insurance Interest? ......................................... 18 LA Law: Adding New Vehicles During Storm Season ...... 19 Commissioner’s Column: Life & Long Term Care ....... 20-21
Karen Kuylen Director of Accounting kkuylen@iiabl.com Ed O’Brien Marketing Representative eobrien@iiabl.com Rhonda Martinez, CIC Director of Insurance rmartinez@iiabl.com
Jamie Newchurch Insurance Services jnewchurch@iiabl.com Lisa Young-Crooks Executive Assistant lyoung@iiabl.com
LDI Directive 213 ........................................................ 22 Remember the LAIP? ................................................... 22 Build vs. Buy: Organic Growth in a Rising Rate Environment .......... 24-25 JD Power Survey: Agent Satisfaction............................. 26 Wheeling & Stealing: Top 25 Most Stolen Vehicles.................................... 27-28 VU Webinar: Aftermath of the Storm: An Agent’s Perspective ............ 30 Rate & Rule Filing ........................................................ 33 Welcome New Members ............................................... 34 Calendar ..................................................................... 35 What Does IIABL Do For Me? ....................................... 36
There’s a New Cyber Hero in Town Big “I" Markets, the online market access system available exclusively to Big “I" members, has partnered with Coalition, the leading technology-enabled cyber insurance solution, to give agents access to the cyber and technology errors & omissions insurance markets. Coalition is underwritten by Swiss Re. Coalition is the first insurance-enabled technology firm built to help businesses before, during and after a cyber incident. During the online quoting process, your client's network and web properties undergo an automated risk assessment to identify known issues and potential security weaknesses. Actual cyber risk assessment and risk management is part of the Coalition underwriting process. Why Is this Product Different? Coalition cyber insurance is competitively priced and offers some of the broadest coverages available in the market. But what really set Coalition apart from the competition is that once coverage is bound, Coalition provides ongoing monitoring for new and emerging threats specific to the information technology used by the insured, which adds an extra layer of defense. All policies involve this technology-driven approach, which includes automated alerts, threat intelligence
and ongoing policyholder monitoring, along with a dedicated claims and security team in the event of a breach. How to Write This Product You can quote and bind insurance online through the Big “I" Markets platform. Throughout the sales and underwriting process, you will have direct access to Coalition's licensed agents and renowned cybersecurity experts via online chat. Watch the brief Coalition cyber insurance overview video and a demonstration of the streamlined cyber submission process to see how the quoting process works, and then log in to Big "I" Markets and select Cyber Insurance – Coalition. Need Cyber Resources to Protect Your Agency? Check out all of the information available on the Big "I" Cyber Resources webpage. If you have any questions about the new cyber product or would like to schedule a demo, contact Carla McGee.
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Being a Claims Advocate While Not Breaking Your Company Contracts By Chris Burand, Burand & Associates
Virtually every company/agency contract has the same clause regarding agents advising clients on claims. It states something like this, "Agent shall notify Company immediately of all claims or potential claims." It goes, or should go, without saying, this implies (and other provisions are often explicit) the agency is not to advise clients claims will or will not be paid. Most agents get this part clearly. What most agents in my experience have difficulty understanding is how the agent is not to advise clients they have the option of turning in the claim after the insured has already told the agent of the claim! The agent is to turn in ALL claims as soon as reasonably possible. The carrier contracts require agents do this.
Why do agencies forego reporting claims when clients ask them not to? 1. The ostrich: "I have never read the agency/company contract or at least not informed my employees so these clauses do not apply to my agency. We are free to tell clients claims can be reported to us and we won't report them unless the client tells us to."
2. Sgt. Schultz: A few readers may remember this character from the old "Hogan's Heroes" television show. He was famous for his line repeated in most episodes, "I hear nothing. I see nothing. I know nothing." I do not "know" a claim happened because it cannot be a claim unless the loss is turned in and besides, I do not know really the details of the claim so I do not have anything to turn in.
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3. Some agents take the hard opposite position of not giving any advice whatsoever to clients but still know nothing. They stick to their interpretation of the contract and advise, "I do not have any idea and cannot give you any idea of, if, when, how much will or will not be paid no matter what. I am turning in this claim, about which I know nothing, no matter what." If that perspective was 100% true, the agency person is likely quite new or ignorant or so risk adverse they really should find another occupation. Another example of this attitude is, "So, you have a claim and you want to know if you should turn it in. You say it is a small property claim. I would not turn it in but then again, I never heard you say you actually had a real claim." The professional agency would capitalize on this opportunity foregone by its lesser competitors. They would: Educate clients upfront about claims and deductibles. This is only a partial solution but progress.
Then, fewer clients will call asking if they should turn claims in and agents would not be squeezed between a rock and a cliff. Have procedures for those insureds who call and have a clear claim that must be turned in. The procedures should dictate the claim be turned in and include how to talk to insureds regarding why they have to turn it in, why it is likely in the insured’s best interest, and what the insured should expect in the claims process. For those clients who call with a claim in the grey area of whether they truly need to turn it in, a compromise between true, small, developed strictly property losses (not property claims per se because a property loss and a property claim are not necessarily synonymous) and all other claims is required. This is the middle ground many agents try to manage. For example, someone calls with a windshield claim and it is a true windshield claim where a rock from an unknown vehicle cracks the insured's windshield (as opposed to the claim I saw where the in-
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sured reported a windshield claim but failed to report the rest of the vehicle was totaled -- it truly pays agents to ask many questions about "simple" claims). In these cases with the fully developed data, maybe an option can exist at times. I know this is not the textbook answer, not a straight answer, but it is more aligned with reality. So many insurance companies are taking, without question, unrealistic underwriting positions relative to reported incidents. They have forced the creation of a grey area in many minds. Most of the time, the agency and the insured simply did not believe much of a claim existed. The examples I have are mostly of innocence and naivety. A few are, in my head at least, pure fraud on the part of the insured or the third party. Either way, the professional agency will develop the information upfront. For example, the simple bumper claim. Find out what they actually hit. The bumper might not have all that much
damage but the light pole that crashed probably did have considerable damage. Or the broken window caused by the neighbor kids that turned out to have been caused by a burglar who stole considerable expensive jewelry that was only discovered later. In other words, a professional agency will not just take the insured’s simple explanation at face value. Another reason to turn in the claims is because if an agency does not turn in a claim after learning about it, some insurance companies may take the position of paying the claim and then subrogating against their own agency for violation of the contract. I have many examples of where they have done this. Professional agents will be true advocates when claims are turned in. Being an advocate may not offset situations where companies take unfair positions, but having an agency advocate at least partially offsets the pain. By Continued page 12
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"advocating" I mean the agency will explain to the client what to expect. They will explain that they will follow the claim and if they see the adjuster is not responding timely, they will contact the company to learn what is happening. If they think the adjuster is interpreting the policy incorrectly, they will discuss the interpretation with the company without indicating to the insured the agency’s opinion of whether the adjuster is correct. Professional agents earn their money when a client incurs a claim. It is important to adhere to the company contract without using it as cover to abandon the client when they need you the most. Be an advocate for helping them through the painful claim process.
LDI Advisory Letter 2018-03 State & Federal Regulation of Association Health Plans U.S. Dept. of Labor Association Plan Final Rule
The purpose of Advisory Letter 2018-03 is to advise all issuers and producers of the interplay between existing federal regulations, the provisions of the final rule, and existing state law regarding MEWAs. Advisory Letter 2018 -03 cannot constitute a complete summary of a final rule that runs nearly 200 pages in its original published form, and any persons or entities seeking to utilize existing statutes, rules, or regulations, or the recently published final rule, are strongly encouraged to engage in a thorough review of all controlling legal authority regarding MEWAs. Advisory Letter 2018-03 outlines the options that exist for the formation of AHPs as well as non-AHP MEWAs under both state and federal law following the promulgation of the final rule. Click here for complete Advisory Letter
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IIABL Director of Education, Mike Edwards, CPCU, AAI is your source for technical questions. Contact Mike at medwards65@aol.com or 770.402.1011
Subject: Public or Livery Conveyance Exclusion in Personal Auto
Q. I wonder if you could give me some infor-
mation about the “public or livery conveyance” exclusion in the personal auto policy. This question comes up most often in the context of pizza delivery, but I have seen other situations where the exclusion was also applied by insurers. No one I’ve talked to seems know exactly what a “livery conveyance” is. Most people just say that the exclusion means “carrying persons or property for a fee.” Is it your understanding that this is an accurate interpretation of the exclusion?
A. We do not provide Liability Coverage for any "insured": 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.
[Used in the Family Auto Policy (a precursor to the ISO PAP): 1963 edition.] [Used in the ISO Personal Auto Policy: 1989, 1994, 1998, 2005, 2018 editions.] Version #2:
A. The term “livery” seems somewhat archaic, although it has deep roots in language, and the law. Here are three examples: (1) Black’s Law Dictionary (9th Ed.): “Livery: Cf. [confer/compare] delivery. [15c.]” (2) Webster's Third New International Dictionary, Unabridged: “Origin of Livery: From Old English liveree, literally, distribution, delivery. First known use: 14th century.” (3) Wikipedia: “Livery: a vehicle for hire.” persons or property for a fee” is because both phrases have appeared in various editions of personal auto policies. Here is a quick look at the exciting world of Insurance History. The excerpts below are from the Liability section of the respective coverage forms, but the exclusion is also found in the Medical Payments, Uninsured Motorists, and Physical Damage coverages. Excerpts and comments are based on coverage forms from ISO (Insurance Services Office), except where indicated below. Version #1:
Part A – Liability
Part A – Liability Exclusions A. We do not provide Liability Coverage for any person: 5. For that person’s liability arising out of the ownership or operation of a vehicle while it is being used to carry persons or property for a fee. This Exclusion (A.5.) does not apply to a share-the-expense car pool.
[Used in ISO Personal Auto Policy: 1977,1980, 1986 editions.]
Comments: (1) The Family Auto Policy was a precursor to the ISO Personal Auto Policy (PAP.) (2) In the 1970s, the insurance industry began making major revisions to coverage forms and endorsements, in an effort to make insurance policies more readable for consumers, and more standardized for insurance regulators. (3) The first personal lines policy to be released in the “readable format” was the 1976 Homeowners Policy (“HO-76”). The following year came the 1977 Personal Auto Policy. Commercial Lines forms and endorsements were revised under the new readability regime in 1986, called the ISO
Exclusions Louisiana Agent 12
Commercial Lines Simplification Program. The “Simplification” designation spawned more than a few jokes from within the industry in the beginning, but overall, insurance policies were generally easier to understand. (4) For the new (first edition) 1977 PAP, the phrase “public or livery conveyance” from the 1963 Family Auto Policy was replaced with what was intended to be a more understandable version, which was “carrying persons or property for a fee.” (5) This readable language was carried into the next two revisions to the PAP (1980 and 1986). However, between 1977 and 1986, it became clear that the new phraseology was being interpreted more broadly than what was intended under the earlier “public or livery conveyance” language. (6) The majority opinion in case law had interpreted “public or livery conveyance” to mean transporting people or goods as a service available to the public at large. As one court put it, “To fall
within the exclusion, the insured must present his services indiscriminately to the general public for
hire.” (7) What caused the phrase “carrying persons or property for a fee” to be interpreted more broadly was the absence of any reference to the transporting activity being offered to the general public, only that a “fee” was paid. So in instances where a person might use his pickup truck to haul a refrigerator for a neighbor, and where a fee was requested, or simply given as an expression of appreciation, any accident was excluded in the PAP of the pickup truck, simply because a “fee” was involved.
(8) As a result, in the 1989 revision to the PAP, ISO reverted to the “public or livery conveyance” language, because there was a body of prior case law which generally interpreted the exclusion in the narrow way ISO had always intended. Therefore, the 1989 edition and every subsequent edition of the ISO PAP (including the new 2018 edition), used the phrase “public or livery conveyance.” So while many of us still might not know exactly what the phrase means, we have a
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lot better idea what it does not mean. Louisiana court cases of interest. Case #1: The case described as “the leading Louisiana decision on the meaning of ‘public or livery conveyance’” is Spears v. Phoenix Ins. Co. [149 So.2d 118 (La. Ct. App. 2d 1963.] The case is briefly summarized in the preeminent text, Louisi-
ana Civil Law Treatise, Insurance Law and Practice (McKenzie & Johnson, 4th Ed., at 3:36). Since the case dates to 1963, I was interested to find out what the court’s reasoning was back then, so I pulled the case from the internet.
The insured operated a funeral home, and in October 1961, purchased a 1960 Ford Country Sedan (which today we would call a “station wagon”), for personal and family use, insuring it with Phoenix Insurance Company. He subsequently converted it to an ambulance, including the installation of blinker lights and a siren, for use by his employees. While responding to an emergency call, Spears was injured by the ambulance. Phoenix declined the claim, citing the “public or livery conveyance” exclusion.
in its broadest sense is intended to cover such vehicles as taxicabs and buses which are used ordinarily for the purpose of public conveyances, but it is likewise the opinion of the Court that the meaning of the quoted phrase is not limited to taxicabs or buses, but that the same includes the using of any other vehicle where the operator uses the vehicle as a means of conveying members of the public, usually for a price, but without discrimination as to the persons within the class of persons to be transported, but indiscriminately for any who may call for such service.” Spears v. Phoenix Ins. Co., 149 So. 2d 118 (1963)
Comments (1) As an insurance nerd, I found it very interesting that the “public or livery conveyance” language goes back at least as far as 1939, and possibly earlier. This also highlights why insurers are reluctant to change terms in insurance contracts, where there is a favorable body of case law on the existing language.
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During the legal proceedings, the Court observed that “an examination of the law of this state fails to
disclose any decision by the Courts of Louisiana defining the term ‘public or livery conveyance’.”
Therefore, one case cited to the Court for review and guidance was a 1939 case from Texas, Clark v. Superior Lloyds of America, [147 S.W. (2) 1113 (Tex. App., 1939)]. It was very similar to the instant case in Louisiana, in that the insured modified a pickup truck to use as an ambulance in Dallas. Following an accident while in route to an emergency call, the insurer denied the claim, citing the exclusion for use of the insured auto “as a ‘public or
livery conveyance as for carrying persons for a consideration’.”
Therefore, the Louisiana Court upheld the exclusion in the Phoenix auto policy, with the following conclusion: "It is the opinion of this Court that the meaning of the phrase `public or livery conveyance' means the indiscriminate holding out of a vehicle for public use and that Louisiana Agent 14
Case #2: As you mentioned, pizza delivery is one of the most frequent questions that surround this exclusion. In 1992, the Louisiana Supreme Court ruled that the exclusion for “carrying persons or property for a fee” was not applicable to pizza delivery.
ance,” and therefore, the exclusion was not applicable to the accident.
[RPM Pizza, Inc. v. Automotive Cas. Ins. Co., 601 So.2d 1366 (La. 1992).]
Case #4: A hotel “courtesy car” operated in Baton Rouge to transport hotel guests to and from the airport, and occasionally to other locations within the city. On a run to the airport, the courtesy car driver had an at-fault accident with another vehicle, injuring that driver. The hotel’s auto insurer denied the claim, relying on the policy's exclusion for “public or livery conveyance unless such use is specifically declared and described in this policy.” The Court disagreed, citing the decision in Spears v. Phoenix Ins. Co. [see Case #1 above] as guidance. Specifically, the Court referred to and quoted an excerpt from Spears: “...the meaning of the
Numerous other courts around the country have concurred. The rational for most courts is that if a delivery charge is added to the price of the pizza, it is not a “fee” paid to the delivery person. In addition, the pizza delivery service is available only to customers, not the public at large. Case #3: The insured owned an auto which he used part-time as a taxi. One night he loaned it to a friend for personal use, and the friend subsequently had an at-fault accident while driving the auto. The insurer cited the exclusion for “public or livery conveyance.” The Court noted (with emphasis) that the actual language in the exclusion was “...while being used as a public or livery convey-
[Leonard v. Travelers Insurance Company, 183 So. 2d 447 (La. Ct. App. 2d Cir.,1966).]
phrase `public or livery conveyance' means the indiscriminate holding out of a vehicle for public use...” The Court determined that the courtesy car was available for a specific group (hotel
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guests), and not the public at large. [Lakeshore Development Corp. v. Gulf Ins. Co., 353 F2d 163 (5th Cir. 1965).] Proprietary (Non-ISO) Versions Insurer “A”: Coverage under this Part will not apply to any insured person for: 1. Bodily injury or property damage arising out of the ownership, maintenance or use of any vehicle or trailer while being used: a. to carry persons or property for compensation or a fee; or b. for retail or wholesale delivery, including, but not limited to, the pickup, transport or delivery of magazines, newspapers, mail or food. This exclusion does not apply to shared-expense car pools.
for hire. However, a vehicle used in an ordinary car pool on a ride sharing or cost sharing basis is covered. Insurer “C”:
There is no coverage under this part: 1. for bodily injury or property damage arising out of the ownership, maintenance, or use of an insured car or trailer while being used for “commercial purposes,” except shared expense carpools. General Definitions: E. “Commercial Purposes” means: 2. vehicles used to deliver or pickup any tangible product, or to carry persons or property, for compensation or a fee. This includes but is not limited to pickup or delivery of food, newspapers, periodicals, packages, or film. The definition of delivery and pickup includes going to or returning from the delivery or pickup. 3. vehicles used for shuttle services; or 4. vehicles used by employees of an insured’s business.
Insurer “B”:
Section I Does Not Apply:
Comments:
2. To any vehicle used to carry passengers or goods
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(1) The ballgame changes dramatically when proprietary coverage forms are in play, as these three excerpts demonstrate. (2) E&O experts are often criticized for their Ivory Tower viewpoint and recommendations. But their advice to “read the policies you sell” is more than amply demonstrated when comparing ISO and proprietary coverage forms.
that driving for such community organizations as Meals on Wheels, or transporting kids to sports events, field trips, deliver Girl Scout cookies, etc., should not be considered “public or livery conveyance.” ISO did a great service to millions of Americans who do such important volunteer work for their communities by inserting a specific exemption for them.
ISO has recently revised their Personal Auto Policy, which carries a 2018 edition date, and is effective in most states (including Louisiana) on September 1, 2018. Here is one change that is pertinent to the discussion of exclusion A.5.
(3) One comment about car pools. There is an exception to the “public or livery conveyance” exclusion for a “share-the-expense car pool.” [A.5.a.] But there are “car pools,” and then there are “share-the-expense car pools.” While no change was made to this provision in the 2018 PAP, there are situations where certain car pool arrangements will be excluded under A.5. See article below.
(New language underlined.)
Additional information:
Part A – Liability
“The Public or Livery Conveyance Exclusion”
Exclusions
“Does the ISO Personal Auto Policy Cover Pizza Delivery?”
Version #3: 2018 PAP:
A. We do not provide Liability Coverage for any "insured": 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 includes but is not limited to any period of time a vehicle is being used by any "insured" who is logged into a "transportation network platform" as a driver, whether or not a passenger is "occupying" the vehicle. This exclusion (A.5.) does not apply to: a. A share-the-expense car pool; or b. The ownership or operation of a vehicle while it is being used for volunteer or charitable purposes.
“PAP Delivery Exclusions” “PAP Coverage for ‘Meals on Wheels’ Deliveries” “Coverage While Transporting Kids to School Athletic Events” “Transporting Clients of Nursing Homes or Social Services Agencies” “Share-the-Expenses Car Pools” “ISO Introduces a New 2018 Personal Auto Policy”
Comments: (1) The first change to exclusion A.5. in the new 2018 PAP is the inclusion of the “transportation network platform” driver situation in the exclusion for “public or livery conveyance.” This brings insureds that drive for Uber, Lyft, and similar “ride sharing” services under the exclusion. Prior to the 2018 edition, this exposure was excluded by endorsement PP 23 40 10 15 Public or Livery Conveyance Exclusion, now withdrawn.
These materials are intended for educational purposes only and should not be relied upon as legal advice. Please consult a qualified attorney for legal advice.
(2) The second change to exclusion A.5. is the addition of an exemption from the exclusion for vehicles used for “volunteer or charitable purposes.” [A.5.b.] Most experts have long held the view Louisiana Agent 17
What Is Insurable Interest? Q. What is the definition of “Insurable Interest,” and when does it apply? Response 1: The International Risk Management Institute defines insurable interest as “an interest by the insured person in the value of the subject of insurance, including any legal or financial relationship. Insurable interest usually results from property rights, contract rights, and potential legal liability.” That should be a reliable definition for your purposes, but here’s another one from a legal dictionary: “A person is usually regarded as having an insurable interest in the subject matter insured when he will derive pecuniary benefit or advantage from its preservation or will suffer pecuniary loss or damage from its destruction.” Response 2: In general, anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction. For more detail check out the case Crook v. Hartford Fire Ins. Co., 175 S.C. 42, 48 (S.C 1934).
Response 3: Any interest where the loss of the property would cause damage to the person. Response 4: Generally, insurable interest refers to property insurance—not liability insurance. Look to your state’s insurance code for a precise definition, which might include inchoate interest. Response 5: This is a great and debatable question. Barron’s Dictionary of Insurance Terms defines it as an “expectation of a monetary loss.” This definition would provide coverage if the cause of the loss is covered by the policy. It may include damaged property and covered peril. This question was originally submitted by an agent through the VU’s Ask An Expert.
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LA Law: Adding New Vehicles During Storm Season One of the many challenges IIABL members face during storm season is managing the addition of new properties when insurance companies impose underwriting restrictions while Louisiana is under the threat of a tropical storm or hurricane.
automobile from a duly licensed motor vehicle dealer, to one of the insurer's existing automobile policyholders who is an otherwise qualified purchaser, based solely upon a named tropical storm or hurricane in the Gulf of Mexico.
We recently became aware of a Louisiana statute which may be helpful to IIABL members and their customers when it comes to adding physical damage coverage to newly purchased automobiles when a storm approaches.
Please note that this statute only applies to “… newly purchased motor vehicle, at the time of purchase of the automobile from a duly licensed motor vehicle dealer, to one of the insurer’s existing automobile policyholders…”
Louisiana Revised Statute 22:1289.1 states:
The law only applies to newly purchased vehicles, purchased from a duly licensed motor vehicle dealer, and added to an existing policy at the time of purchase.
§1289.1. Automobile insurance policies; policy
issuance based upon impending weather conditions No insurer shall refuse to issue an automobile insurance policy providing collision or comprehensive coverage on a newly purchased motor vehicle, at the time of purchase of the
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Commissioner’s Corner
Life and Long-Term Care In a sea of insurance products that pull headlines like health and auto, life insurance is one that doesn’t get much coverage. That’s a shame because it provides a vital lifeline to many Louisiana families. This fall, the department is recognizing Life Insurance Awareness Month in September and Long-term Care Insurance Awareness Month in November. I’m pleased to be able to spotlight such important parts of financial planning in my monthly column. According to the American Council of Life Insurers, the life insurance industry employs more than 10,000 people in Louisiana directly, with 474 life insurers licensed to do business in the state and 30 domiciled here. Louisiana families own 4 million individual life insurance policies, with coverage averaging $70,000 per policyholder. Life insurance companies invest about $64 billion in Louisiana’s economy. Life insurers are also a large provider of retirement solutions for American families with more than 16 percent of American’s long-term savings in permanent life insurance and retirement annuities. With so much of the future riding on these products, consumers need to be able to have faith in their longevity. While life insurance is a product that has been around long enough to inspire confidence in consumers, insurers admit that they made mistakes when pricing long-term care policies since their introduction in the 1960s. Actuarial assumptions made about longevity and the cost of care were severely underestimated in the original pricing structure of these policies. Not only are people living longer now, but they are not dropping their coverage despite fast- rising rates. According to the U.S. Department of Health and Human Services, about 12 million of America’s senior citizens will require long-term care by 2020. Also leading to incorrect pricing was the relative unknown of the incidence of cognitive memory disorders such as Alzheimer’s disease. Policyholders with cognitive memory disorder may need quite a bit of care while their physical health remains good.
The National Association of Insurance Commissioners (NAIC) created a task force to consider protections related to product design and to address historical problems encountered in the marketplace. To get into alignment with the NAIC, the Louisiana Department of Insurance (LDI) worked with the legislature during the 2018 Regular Session to pass Act 7 to adopt amendments to the NAIC Life and Health Insurance Guaranty Association Model Act. Act 7 expands the members of the Louisiana Life and Health Insurance Guaranty Association to include health maintenance organizations (HMOs). The legislation also expanded the assessment base for long-term care insurers by including both life and annuity accounts and health accounts. There is no question as to how important these policies are but this is an issue that has reached crisis proportions – not only here in Louisiana, but nationally as well. The statistics all point to the clear challenges ahead. It’s projected that nationwide we will see a total of 10 million seniors needing long-term care in another fifteen years. The average cost of a one-year stay in a nursing home will increase from $81,000 today to $146,000 in 2030, according to the American Council of Life Insurers. With projections that the need for long-term care and the cost of that care are only increasing each year, long-term care insurance can be a big part of the puzzle for people approaching retirement. By adopting the NAIC Model Act amendments, we are safeguarding the investments of Louisiana families and protecting policyholders from losses due to insolvent insurance companies. Long-term care is not covered by health insurance, disability income insurance or Medicare and how to finance this care is an issue that many families are facing today. Sales of longterm care policies have been down across the country as consumers respond to higher prices. We are seeing insurers responding to this trend by offering hybrid products, combining long-term
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care benefits with life insurance and annuities. This kind of innovation is vital to both the industry and to the families it provides for. We will continue to work to stabilize the longterm care market and to bring consumer attention to it and to other life insurance products that can help them sustain their homes and families through tough times. The peace of mind these products can bring are important blocks for Louisiana to build upon now and in the future.
Remember the Louisiana Automobile Insurance Plan? Do you remember the Louisiana Automobile Insurance Plan (LAIP)? For most Louisiana agents it has been a long time since they have needed to place business with the “assigned risk auto plan.� However, in recent months IIABL has received several inquiries about how to write personal or commercial automobile insurance policies with LAIP. The LAIP is now managed by AIPSO. Information about the LAIP can be found on the AIPSO website: https://www.aipso.com/Plan-Sites/Louisiana
Louisiana Department of Insurance Directive 213 Issuer Practices Regarding Small & Large Employer Enrollment The purpose of Directive 213 is to advise health insurance issuers and health maintenance organizations (issuers) that in order to be in compliance with the plain text with both state and federal law, issuers must utilize a standardized method or process to determine whether a prospective employer group is either a small employer or a large employer. Furthermore, that method or process must result in a determination that relies upon data that demonstrates the number of employees that an employer employed on business days during the preceding calendar year. Click here for the entire Directive.
An introduction to the LAIP can be found HERE. The Louisiana Automobile Insurance Plan was created in 1972 and is a voluntary agreement to provide automobile insurance coverage to eligible risks who seek coverage and are unable to obtain such coverage through the voluntary market (for complete eligibility requirements, see Section 2 and 19 of the Plan Manual). Any insurance agent holding a valid license to transact automobile insurance business in the state of Louisiana may write business through the AIP. Mailing Address Louisiana Automobile Insurance Plan 302 Central Avenue Providence, RI 02919 Office Hours Monday - Friday 9:00 am - 5:00 pm ET Phone (866) 989-9902 Fax (401) 528-1361 Email laip@aipso.com Applications can be submitted online: https://easi.aipso.com/
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Build vs. Buy: Organic Growth in a Rising Rate Environment Now that interest rates are rising again, it’s time to re-examine whether buying an insurance agency is the smart choice for growth or whether building an agency makes more sense. While lots of factors come into play when agents want to start their own agency or an owner wants to expand, it generally comes down to three questions:
1. How much time do you have to grow your busi-
ness? 2. How much sweat equity are you willing to put in? 3. What is your exit strategy when you’re ready to retire? For nearly a decade, we had some of the lowest interest rates in modern history. Money was cheap, and it made sense to finance a merger or acquisition by borrowing. The cost of borrowing used to be around 5 percent (prime plus 1-2 percent), but as prime moves closer to its historical average of 7 percent, your borrowing costs could jump up to 9 percent.
This leads me to my first point: How much time do you have to grow your business? Assuming you’re not in a rush to acquire an agency or new book of business, organic growth may be your best bet. Organic growth is the value you create when you invest in your own agency. Inorganic growth occurs when you purchase another agency or a book of business. With inorganic growth, you earn a return on your investment, but you carry the expense of the capital to acquire it. Organic growth has the best return because you’re not borrowing money and tying up your capital. As interest rates rise, organic growth becomes more attractive. Organic growth takes time and discipline. You grow organically by investing in marketing and advertising, your producers and your staff. You also create value by watching your expenses and being smart in how you generate income. Agencies that are willing to invest back in the business will be more attractive to a buyer. Those
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are the agencies that will have more options to grow, increase value and transfer ownership. Regardless of whether you grow organically or inorganically, you need to get your house in order. Three factors to keep in mind are creating a topnotch team, updating your office management and CRM systems, and instituting financial controls. Having a stable, reliable team makes all the difference in the world. This includes your top managers, producers and customer relationship team. You can’t grow if your producers aren’t producing. You also can’t manage new accounts if you don’t have the infrastructure in place to meet your customers’ needs. Make sure you have the computer systems you need to automate and efficiently market to customers. Cash flow is important, too. Do you have strong financial controls? How well are you managing expenses? As you start to grow, there will be stress on your working capital. Don’t underestimate the cost of growth and expansion, from the cost of new equipment and software to training and marketing. At the same time, have a plan for reinvesting in
your agency. Sometimes borrowing may be to your advantage. Rather than draining your working capital, you may wish to borrow to pay for the cost of bringing on a new producer or acquiring new office equipment. Even fast-growing agencies may decide to borrow for some expenses such as buying a building versus leasing space. Finally, as agency principals approach retirement, they begin to consider ways to pass their firm on to the next generation, whether that’s family members, their partners or an outside buyer. These types of succession plans may involve borrowing. Your exit strategy will be the single most important business decision you make, save the decision to start your agency to begin with. If you’ve invested in your agency, you should have no problem selling it at an attractive price. But building your agency organically has many rewards and may make the most sense in a rising interest rate environment. Tralka is the president and CEO of InsurBanc, a division of Connecticut Community Bank, N.A.
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Agent Satisfaction Survey through J.D. Power Important Survey Released This Week!
Make Sure Your Voice is Heard and Earn $50 Amazon Gift Card J.D. Power and the Independent Insurance Agents and Brokers of America (the Big “I”) are excited to announce this week’s release of the second annual Independent Agent Satisfaction Survey.
Click here to login and take the survey To be sure you’re able to participate, or to ask any questions, please contact Tom Super from J.D. Power at Thomas.Super@jdpa.com. Madelyn Flannagan, VP Agent Development, Research and Education
The study has emerged as the go-to source for top carriers seeking to improve their performance with you, the Agent. The results are shared with top executives across the industry, and if last year’s reception is any indication, your feedback will help influence the agenda of many leading carriers and can be a driving force for change in the industry. The main objective of the survey is to capture your experiences, satisfaction level and potential areas for improvement across your carrier relationship. The study will address numerous facets of the insurance process – from the quota/underwriting process and claims processes to policy servicing and insurer risk appetite, as well as commission management, product/service offerings, and communication.
Insurance Products for your Customers Why is membership in IIABL important?
Only IIABL members have access to the following programs:
The results will address the following areas: •
• •
How does each service event you have with an insurer impact the overall perception of that insurer? Which critical service standards are most likely to drive high satisfaction? What should insurance carriers do to better meet your needs – and, in turn, the needs of your customers?
We aim to have truly robust results. Simply put, the more responses we receive, the stronger and more encompassing the information will be. Thus, better decision-making will be possible. What’s more, participants will receive a complimentary summary report of the study results and a $50 Amazon gift code for taking the time to complete. Any licensed agent who works with insurance carriers in any member agency are eligible to participate!
Personal Umbrella Insurance In Home Business Insurance Flood Insurance
Premium Finance Program Big I Markets Program
Health Insurance Brokerage
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Wheeling and stealing: America's 25 most stolen vehicles By Denny Jacob Staff reporter: PropertyCasualty360.com The National Insurance Crime Bureau (NICB) has identified the 25 most stolen vehicles in the United States in its annual Hot Wheels report. The report examines vehicle theft data submitted by law enforcement to the National Crime Information Center and determines the vehicle make, model and model year most reported stolen in 2017. Even with the slight increases in the last few years, the national vehicle theft problem today is at levels not seen since 1967. Enhancements in vehicle security and manufacturing are having a positive impact, but thousands of vehicles continue to be stolen each year because owners leave their keys or fobs in their vehicles. Vehicle theft is an economic hardship for its victims — especially if a vehicle is uninsured. Here are four tips from NICB.
•
Lock your car and take your keys. It’s simple enough, but many thefts occur because owners make
it easy for thieves to steal their cars. • Having and using a visible or audible warning device is another item that can ensure that your car remains where you left it. • Generally speaking, if your vehicle can’t be started, it can’t be stolen. “Kill” switches, fuel cut-offs and smart keys are among the devices that are extremely effective. • A tracking device emits a signal to the police or to a monitoring station when the vehicle is stolen. Tracking devices are very effective in helping authorities recover stolen vehicles. Some systems employ “telematics,” which combine GPS and wireless technologies to allow remote monitoring of a vehicle. If the vehicle is moved, the system will alert the owner and the vehicle can be tracked via computer. With this in mind, here are the 25 most stolen vehicles in 2017:
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Vehicle year: 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017
Make/Model: Honda Civic Dodge Journey Chevrolet Impala Chevrolet Camaro Hyundai Accent Nissan Versa Chevrolet Cruze Ford Explorer Chevrolet Malibu Ford Escape Dodge Charger Jeep Grand Cherokee Nissan Rogue Nissan Sentra Honda Accord Hyundai Sonata GMC Savana Toyota Corolla Ram Pickup (full size) Ford Pickup (full size) Ford Fusion Hyundai Elantra GMC Pickup (full size) Toyota Camry Nissan Altima
Total thefts: 388 408 423 431 432 433 449 452 468 488 489 491 504 583 725 759 774 832 835 842 874 929 957 1,100 1,153
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In the Aftermath of the Storm: An Agent’s Perspective Virtual University upcoming webinar In the Aftermath of the Storm: An Agent's Perspective November 14, 12 - 2 p.m. CST $79 - Register In October 2016, Hurricane Matthew devastated Lumberton, North Carolina with record setting rainfall and subsequent flooding, the likes of which Lumberton had never seen before. Danny Cook, an agent for more than 20 years, will share his experiences of life after the storm and how you can better prepare your agency if it happens to your town. During this session, you will learn:
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What your agency should expect as the storm skies turn to blue skies
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How to deal with flood claims
Other important things an agent should know like helpful endorsements and common misconceptions, and If your agency is truly ready for the next disaster
Company
Coverage Type
Overall % Impact:
Overall $ Impact:
Number of Policyholders:
Changes
Berkley Regional Ins Co Starnet Insurance Co Riverport Insurance Co
19—Commercial Automobile
+14.50%
$682,361
126
New: 1/1/2019 Renewal: 1/1/2019
Liberty Mutual Ins Co Revised Rate only
Personal Umbrella & Excess
+19.1%
$399,883
3,927
New: 11/13/2018 Renewal: 1/4/2019
United Fire & Casualty Co United Fire & Indemnity Co
19—Commercial Auto
+14.9%
$1,855,260
898
New: 3/1/2019 Renewal: 3/1/2019
Pennsylvania Lumbermens Mutual Insurance Co
19—Commercial Auto
+19.2%
$411,793
68
New: 11/1/2019 Renewal: 11/1/2018
American Security Ins Co Revised Rate Only
1—Property Commercial Property (Fire & Allied Lines)
+10.0%
$2,306,576
13,603
New: 2/1/2019 Renewal: 2/1/2019
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All Additional Insured Endorsements Are Not Created Equal I recently had an email exchange with Missouri agent Tim Wahl, CIC. Tim advised: “I’ve been researching and I’ve found that many, many, many automatic AI endorsements that come on various bops and packages do NOT grant AI status on a primary basis. This really becomes a Bill Wilson, CPCU, problem when adding a landARM, AIM, AAM lord and other entities that want primary AI status.” My experience for over 10 years is that SOME additional insured endorsements provide only excess coverage, not primary and noncontributory coverage. Since most contracts today, especially in the construction industry, require primary coverage, providing an AI endorsement with only excess coverage likely places the customer in breach of contract and, as a result, can cause significant penalties to be assessed (e.g., not getting paid for work). ISO AI endorsements are silent on the primary vs. excess issue…ISO uses a separate CG 20 01 endorsement in an attempt to establish primary and noncontributory coverage for AIs. My experience for over 10 years is that MANY additional insured endorsements cover only vicarious liability and not the direct liability required by most contracts. One problem with such endorsements is that this may not be readily evident. For example, here are excerpts from four different AI endorsements: •
•
•
Coverage is provided “…only to the extent that ‘additional insured’ is being held responsible for the acts, omissions and/or negligence of the ‘named insured’.” “The person or organization does not qualify as an additional insured with respect to the independent acts or omissions of such person or organization.” “The coverage afforded hereunder is limited to imputed liability resulting solely from the conduct of the named insured for which the additional insured is held responsible and liable.”
•
“The coverage afforded to the additional insured is limited solely to the additional insured’s ‘vicarious liability’ that is a specific and direct result of your conduct.”
Each of the provisions above effectively limit coverage to vicarious liability, yet only one of them actually uses the term “vicarious liability.” Many non-ISO AI endorsements are riddled with provisions that make them inferior to ISO forms and these provisions are not always (or even often) readily apparently. This is another reason why making a statement on a certificate of insurance that someone IS an additional insured in accordance with a contract is exceedingly dangerous. Processing certificate of insurance and AI requests is not the clerical function it was many years ago. Do your staff members KNOW the limitations that might be in your carriers’ forms? Bill Wilson, CPCU, ARM, AIM, AAM Founder & CEO, InsuranceCommentary.com Bill@InsuranceCommentary.com or InsuranceCommentary@outlook.com
Com•men•tar•y … an expression of opinions or offering of explanations William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of InsuranceCommentary.com. He retired from the Independent Insurance Agents & Brokers of America in December 2016 where he served as Assoc. VP of Education and Research and was the founder and director of the Big “I” Virtual University for over 17 years. He is the former Director of Education & Technical Affairs for the Insurors of Tennessee and, prior to that time, he was employed by Insurance Services Office, Inc. He is a graduate of the Illinois Institute of Technology with a B.S. degree in Fire Protection & Safety Engineering.
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IIABL NEW MEMBERS
Richard Ingram Brightway, The Ingram Agency Baton Rouge, LA
Fred J. Ruggles Trinity Insurance Alexandria, LA
Jeremy Robicheaux Coastal Louisiana Insurance, LLC Baton Rouge, LA
Perrin J. Watkins The Highland Insurance Group Baton Rouge, LA
For information on membership contact: Jamie Newchurch, jnewchurch@iiabl.com, 225.236.1350
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Webcasts E&O Risk Management October 18, 23 & 25 Available on Demand
Ethics October 22, 26, 29, 30
Available on Demand
Virtual University
Flood October 18
Available on Demand
Commercial & Personal Lines Courses Click above for courses & dates for 2018
October Webinars
10/17/2018 Inland Marine—Wrap-ups, OCIPs an CCIPs
10/15/18 Cyber Liability: the 21st Century Peril 12pm-3pm
October Lightning Learning: Beggars, Bloggers and Building Codes
10/23/18 Home Business vs. Homeowners Insurance 12pm—3pm
10th—The Trouble with Trick or Treaters 24th—Do Your HO Clients Blog—You Better Know 31st—Ordinance or Law Problems for Homeowners
10/27/18 Scary CGL Exclusions 8am—11am 10/30/18 Current Trends & Changes: The Homeowner & Auto Market 1pm—4pm
10/24/18 New Technologies, New Risks 12pm—3pm
Seminars E&O Risk Management 10/16/2018 –Shreveport 10/17/2018—Lafayette 10/18/2018—Kenner 10/19/2018—Covington
Events IIABR Fall Social October 11, 2018 Drusilla Seafood
IIAGNO Company Appreciation Event October 18, 2018 Coconut Beach
On-Demand Webcasts
Pre-Licensing
Click here for the course catalog of all of the on-demand webcasts. Reminder– all of the IIABL online courses do not require a test for CE Credit
Online prelicensing 3 optional study packages Click here for additional information
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What does IIABL do for Me? By: Francine Berendson, Director of Communications & Events
We get this question from long time members, new members and prospective members.
gram alone was a great selling point to members & prospective members.
It is a new world today in this age of digital everything. So much communication is done via email, text, web chat, etc. that it causes me to step back and really exam this question and not just blurt out the “company line.�
Webinars, Webcasts, Self-study Programs, etc. have changed the way we approach insurance education. Competition is fierce, but we are committed to providing high quality, technical and/or management education to IIABL members. Topics that you will not find from any on -line sources.
I have been employed with IIABL (it was IIAL when I started) for almost 30 years and a lot has changed in this time period. In the early days of my tenure was the infant stage of our Education Program. IIAL Education Director, Jeff Albright traveled the state teaching technical insurance seminars to IIABL members. It was our claim to fame! Our Education Pro-
One member benefit that stands the change in time is our Professional Liability Program. It was one of our strongest selling points 30 years ago and remains that way today. But enough history for now...What can we do for you today??
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GOLD LEVEL
SILVER LEVEL
BRONZE LEVEL
ACCIDENT FUND
AMERISAFE
AMERICAS INSURANCE
BANKERS INSURANCE
EMC INSURANCE
EMPLOYERS
FCCI GROUP
FOREST INSURANCE
GULFSTREAM P&C
HOMEBUILDERS SIF
IROQUOIS SOUTH, INC.
LANE & ASSOCIATES
RPS COVINGTON
STONETRUST INSURANCE
LUBA WORKERS’ COMP
MARKEL FIRST COMP
SUMMIT CONSULTING
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IIABL 2018—2019 BOARD OF DIRECTORS & OFFICERS
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