The Kentucky Independent Agent - Jan-Feb 2012 by Big I Kentucky

JANUARY

FEBRUARY 2012

Meet Your Association Leaders for 2012 Inside: Agency Opportunities In A Time of Profound Change

Mining. Atomic Energy. Dating a Co-worker. There are some workplace risks we just don’t cover.

At KESA, we’re all about promoting safety and health in the workplace. And while we offer a wide range of coverage, there are a few things we just won’t touch. To find out why so many independent agents depend on us, call 800-367-5372 or visit KESA.org.

The KRF-SIF’s loss pr members of training at no charg

…the main r handling claims manag holding the policy. My advice is that if

www.kesa.org

JanFeb12_IFCIBC.indd 1

9/30/08 2/23/12 6:22:13 6:35AM AM

THE KENTUCKY INDEPENDENT AGENT is the official magazine of Independent Insurance Agents of Kentucky, and is published bi-monthly. Editorial offices are located at 13265 O’Bannon Station Way, Louisville, Kentucky 40223, telephone (502) 245-5432; Toll Free # (866) 426-4425; E-mail IIAK@iiak.org; FAX (502) 245-5750.

Officers Tim Conder Chair, Louisville (502) 459-7500 William S. Latta Chair-Elect, Henderson (270) 827-3543 John Funkhouser, CIC, CWCA Vice Chair, Danville (859) 236-5922 James D. England, AAI Treasurer, Pikeville (606) 437-7361

ON THE COVER

Stephen R. Kinkade, CPCU, AAI National Director, Leitchfield (270) 259-5465

This issue’s front cover depicts the collaboration between your association’s leadership board of 2011-2012. They are featured in this issue of the magazine. Together, they serve to benefit the association and it members. Read more about them on page 22.

Phillip D. Hunt, CIC Immediate Past Chair, Prestonsburg (606) 886-2318

Directors Diana G. Hunt, CIC Barbourville, (606) 546-4132 John L. Ison West Liberty, (606) 743-4472 David M. Houk Horse Cave, (270) 286-2724 Michelle L. Love Owensboro, (270) 926-2806 Lloyd M. Stafford Lexington, (859) 253-1371 Chip Atkins Louisville, (502) 585-3600 Jason D. Billington, CIC Murray, (270) 753-4751

FEATURES IIAK To Offer CRM Exclusively in Kentucky ....................................5 Auto-Owners Responds to IIAK Concerns Over Billing Statements....6 How Difficult Is It To Be Ethical? ...............................................11

Michael G. Johnson, CIC Lexington, (859) 233-1461

Online Insurance Quote Applications Now Initiate A Majority of New Policy Sales .................................................12

Virginia D. Goff, CISR, CLCS, CWCA Louisville, (502) 895-5665

Agency Opportunities in a Time of Profound Change....................15

Staff

Cover Story: Meet The Board of 2011-2012 ............................22

Peggy P. Porter President/CEO Kristie Weyer Insurance Services Manager Joy E. Holder Membership Manager Arlene Adonis-Hawkins Director of Communications Donna Boatright Executive Assistant

Invest In Your Best in This Tough Economy .................................25 Six Ways You May Be Failing Your Clients ..................................29

DEPARTMENTS

Megan Granger Member Services Director

From The Chair .......................................................................4

The Kentucky Independent Agent welcomes all advertising and editorial submissions. Inquiries for advertising, news releases and editorial contributions can be directed to:

Classified Ads..........................................................................5

Arlene Adonis-Hawkins P.O. Box 436689 Louisville, Kentucky 40253-6689 Ph: (502) 245-5432 Fax: (502) 245-5750 Email: aadonishawkins@iiak.org

Mission Statement

The mission of the Independent Insurance Agents of Kentucky, working in the public’s best interest, is to be the preeminent advocate for Kentucky Independent Insurance Agents and support their business and professional development needs.

Industry Partners ....................................................................7 People In The News ...............................................................19 Trusted Choice®: What Is A Great Relationship? .........................24 Education & Events Calendar ...................................................28 Welcome New Members ........................................................29 This publication is intended to provide accurate and authoritative information on the subject matter covered and is distributed with the understanding that neither IIAK, nor any contributing author or publisher is rendering legal, accounting or other professional services and assume no liability whatsoever in connection with its use. The opinions expressed in the articles are those of the authors and does not necessarily reflect those of IIAK.

FROM THE Chair

One of the perks of being your Chair is the ability to “sound off” in this publication.

the people we work with, compete with,

So, please allow me a few moments to

and socialize with, to get involved with this

explain to you, what’s important to me. I

association on a more active basis. The

simply and firmly believe we must payback.

rewards are too numerous to mention, not

Payback can take many different forms and

just for the association, but for the volunteer.

directions. In a church, it’s tithing and

Tim Conder 2011 - 2012 IIAK Chair

Every organization needs people, not

involvement. The church I belong to teaches

just for the heavy lifting, but for the ideas.

that we all must give of our time, talent,

CAP, the Consumer Agency Portal; was not

and treasure. I took that to heart and besides

thought of by a carrier, it was an idea put

the tithing, I spent almost 20 years as a

forth by IIA&B of NY. Changes in KY

committee member, chairman of the finance

regulations and laws that affect our

committee, and then chair of the governing

livelihood don’t come from just your

body of the church. My wife, Debbie, would

association CEO/President; they come from

occasionally get a little frustrated by all the

the board and other committee members.

meetings I had to attend. My response was,

Opposition to regulations that adversely

“I don’t play golf, this is my way of relaxing.”

affect us comes from grassroot lobbying

Now, the insurance industry is not a

efforts, not from phone calls by staff

church, however the philosophy is very

members. At the National Legislative

similar. I’ve never met anyone in this

Conference in DC, it’s the regular members

business who is successful and is looking

visiting their elected representative that

for a way to get out. Whether we come to

makes the difference.

this industry as a part of a family business,

My challenge to each of you is simple;

as several of my fellow board members

- identify at least one individual that you

have, or we come into this business as a

think would do a good job, or who would

“second shot at a career” as many of us

benefit from actively participating, and send

have. In either case, I think we owe

us their name or encourage them to volunteer

something back to insure that the same

for a committee, we’ll take care of the rest.

possibilities are there for the next generation

They say that it takes a village to raise

that follows. I’ve been in the business for

a child, well; it takes a committed

32 years; 16 of those as a direct writer.

membership to raise an association. With

When I converted to an independent agent,

your help we can continue the great work

I became active in my local community

of our association well into the future.

association. That led to an invitation to become involved with this association, and the rest is history. I was never a young agent, I joined too old. I think we are missing the

boat by not dragging, pulling or inviting

I thank you; I look forward to continuing working with and serving you.

PROFESSIONAL Development

IIAK to Offer CRM Exclusively in Kentucky

The Independent Insurance Agents of Kentucky (IIAK) and The National Alliance for Insurance Education & Research have come together to exclusively offer the Certified Risk Managers (CRM) Program in Kentucky. IIAK will conduct its first CRM course June 20-23, 2012, in Louisville. The 2012 Kentucky program schedule is available at www.iiak.org and www.thenationalalliance.com. The CRM Program consists of five courses of practical study featuring instruction about today’s highest priorities - strategic planning and identifying, analyzing, controlling, financing, and administering operational risks - as well as political risks, catastrophic loss exposures, third-party exposures, fiduciary exposures, employee injury exposures, juridical risks, legal risks and

more - whether insurable or not. “We are working closely with the IIA of Kentucky’s volunteer leadership and the association’s senior staff to meet the educational needs of the insurance and risk management community in Kentucky,” said William T. Hold, Ph.D., CIC, CPCU, CLU, President of The National Alliance. “With this new partnership, we are confident that CRM courses will have a wider reach and accessibility to industry professionals across the state.” “Offering these advanced programs to the insurance and risk management professionals of Kentucky will significantly enhance their career path opportunities and competitive position,” Peggy Porter, President and Chief Executive Officer of the IIA of Kentucky, explained.

Classified Ads Acquisitions Established Louisville agency interested in acquiring insurance

Acquisitions&Producers A well established regional agency is interested in individual

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producers and insurance agencies considering selling or merging.

selling, merging or need assistance with perpetuation, we would like to

Commercial lines & personal lines wanted in Louisville, Lexington,

talk with you in confidence. Call R. Alex Rankin, CPCU or Steve B.

NKY and BG. We represent the best and desired markets for

Thompson, CPCU, at Sterling G. Thompson, Co. at (502) 585-3277.

growing an agency or book of business. Confidentiality provided to all interested parties. Call Scott Ferguson at The Underwriters

Looking for

Group (502) 244 – 1343.

Producers Independent with top best markets looking to expand presence

Producer Wanted

in Jefferson, Oldham or Shelby counties. Wanting Personal lines,

Louisville Insurance LLC has producer opportunities with flexible

Producer or book of business to move or purchase. All arrangements

compensation plans while offering ownership in book of business

possible, in strict confidence. Please send inquiries to Turner

produced. Confidentiality provided to all interested parties. Contact

Insurance Agency, 2460 Shelbyville Road, Shelbyville, KY 40065

Glenn Pike at 502-473-5454 or glenn@louisvilleins.com.

or call Kurt Turner, CPCU at (502) 633-6060. To place a classified ad please contact Arlene Adonis-Hawkins at aadonishawkins@iiak.org or (502) 245-5432.

INDUSTRY Insider

In September last year, your association

Auto-Owners Responds to IIAK Concerns Over Billing Statements

on behalf of members, inquired into the

And as such Auto-Owners Insurance, which

“Agency Billed and Escrow Direct Billed

has been a valued long-time supporter of

Policies” section of Auto-Owners Kentucky

the association and the independent agency

Businessowners Policy Bulletin No. 11-D-

system, in a letter to IIAK, indicated that it

16. The bulletin stated “Agency Billed and

will be changing its policy so as to maintain

Escrow Direct Billed policies are not eligible

the position of independent agents.

for the Paid in Full discount. However, these

The association appreciates the open

customers will receive a notice advising that

dialogue between Auto-Owners Insurance

the discount is available if they choose to

and its efforts to respect the responsibilities

switch their policies to Company Bill.”

of independent agents and look forward to

IIAK expressed its concerns that this policy could interfere with the agent’s ability to

look out for the best interests of their clients.

continuing its relations with the company.

Thank you to the following companies that are supporting the association through its Industry Partners Program in 2012. Their support helps to make possible many of our events and meetings such as the IIAK Annual Convention, Big â&#x20AC;&#x153;Iâ&#x20AC;? Day, Legislative Day, KYIP Sales & Leadership Conference and KYIP Day. The Industry Partners Program is an opportunity for insurance companies, wholesalers and vendors to support the efforts of IIAK and bring to its members affordable, quality events geared towards enhancing the professionalism of association members. (As of 1/31/2012)

Premier Level

Gold Level Arlington/Roe & Co. Bolton & Company Silver Level Amerisafe, Inc. Kentucky National Insurance Company Keystone Insurers Group S.H. Smith & Company Travelers Bronze Level

Bituminous Insurance Companies Westfield Insurance

Ohio Casualty Group-Safeco Insurance Diamond Level Seneca Risk Services

If you are interested in becoming an IIAK Industry Partner or would like further information on this program, contact IIAK at (502) 245-5432 or email iiak@iiak.org.

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Ethics

Ask the public what it thinks of the insurance industry’s ethics, and you will hear that we are not ethical and not trusted. Ask the public if it thinks it is difficult to be ethical, and it will say that it is not difficult. Get into specifics with the public, and you may find that what you consider ethical and what the public considers ethical are not the same. A 2008 survey of U.S. high school students came up with some statistics that point out the different viewpoints on what is ethical. The Josephson Institute, a Los Angeles based ethics institute, surveyed 29,760 students in 100 high schools. Thirty percent of those surveyed said they had stolen from a store in the last year, 64 percent had cheated on a test in

How Difficult Is It to Be Ethical? By William C. Leuter, CPCU, CLU, ChFC

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the past year and 36 percent had used the Internet to plagiarize an assignment. Yet 93 percent of the students said they were satisfied with their personal ethics and character. Our ideas of what is, or is not, ethical are formed early in our lives. Different factors such as education, family values, religious upbringing and work experience cause us to form habits on which our ethical standards are based. Since each of these influencing factors is different for each of us, our perception of what is ethical and what isn’t ethical will vary. Some of these high school students will soon be replacing us in the insurance industry - and as CPCUs. Who is going to take up the difficult challenge of leading our future leaders to higher ethical standards? I recently attended a panel discussion sponsored by the University of Illinois College of Business on corporate responsibilities. Because it obviously was a “hot topic” in today’s business environment, there was a large crowd. In the end, the panel agreed that many problems in today’s business world are caused by corporate greed. Chief executives are treating company money as if it were their own. The panel was quick to point out that this unethical brought a huge amount of additional risk to their corporations. Who is going to take up the difficult task of challenging these leaders to maintain higher ethical standards? The May 12, 2008, Wall Street Journal published a section on corporate reputation called, “Does Being Ethical Pay?” In a series of experiments, consumers were shown the same products - coffee and t-shirts - but one group was told that the items were made using high ethical standards, and another group was told that low standards had been used. The test showed, among other things, that consumers were willing to pay almost $4 per pound more for coffee produced by a company with high ethical standards. Who is going to take up the difficult task of making sure that our companies know that high ethical standards translate into higher potential profits? In the March 2009 issue of Agent and Broker, Chris Amrhein raises the ethical question, “When is it OK to lie?” I urge you to seek out the article, as he gives compelling reasons why it is never OK to lie. He explains very vividly why ethical behavior translates into trust. I am in my 50th year as an independent agent. I have learned that there is nothing more valuable than trust. If your customers trust you, your employees trust you and your insurance companies trust you, success will be assured. Always being ethical is difficult. It is even more difficult to influence someone else’s ethical behavior. As a CPCU I am sworn to the highest ethical behavior. As ethical leaders in the insurance industry, we must lead by example. The public’s trust will follow. William C. Leuter, CPCU, CLU, ChFC, is president of Secure Futures Ltd. In Chicago, Ill. He has been a member of the CPCU Society’s Ethics Committee since 2007 and was a member of the Board of Governors in 1998-2000. He earned his CPCU designation in 1965 and is a member of the Chicago Chapter.

OIL & GAS

SALES & Marketing

J.D. Power & Associates Reports: Online Insurance Quote Applications Now Initiate A Majority of New Policy Sales

For the first time, a majority of new buyers of auto insurance initiated their policy purchase by applying for a rate quote online, according to the J.D. Power and Associates 2011 U.S. Insurance Shopping Study SM released today. The importance of an insurer’s website in generating new business among new buyers has been steadily increasing for the past five years, at the expense of more traditional local agency or call center sales channels. The study, now in its fifth year, examines consumer shopping and purchasing behaviors and overall satisfaction among buyers who recently purchased from an auto insurance provider across three factors (in order of importance): distribution channel; policy offerings; and price (http://www.jdpower.com/Insurance/ratin gs/Auto-Insurance-Purchase-Experience/). Within the distribution channel factor, the website now accounts for more than one-fourth of the importance weight, second to the local agent. In addition, more than one-half (54%) of insurance shoppers report

Workers’ Comp is about . . .

getting their quote online. “This transition to websites as the dominant lead-generation channel is an important shift for insurers to recognize and address in their marketing and sales strategies,” said Jeremy Bowler, senior director of the global insurance practice at J.D. Power and Associates. “While nearly one-half of all accepted Web quotes are closed by either an agent or call center representative, customers are clearly more often looking to insurers’ sites or third-party sites in the early stages of the shopping process, and this behavior is blurring the lines of how we traditionally think about the discrete sales channels.” The study also finds that the rate of policy churn in the U.S. market has increased during the past two years, returning to levels not experienced since 2008. This is driven both by an increase in the rate of shopping among insurance customers, which averages 33 percent in 2011 (compared with 27% in 2009 and 30% in 2010), as well as a significant

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increase in the rate of switching companies among shoppers. Among insurance customers who indicate shopping for insurance in 2011, 40 percent switched to a new insurer-up from 33 percent in 2010. “In 2010, the insurance industry spent $5 billion on marketing and advertising, with the top four companies alone spending more than $2.6 billion,” said Bowler. “As a result, the rate of shopping has increased significantly year over year, as has the policy defection rate. A majority of the customers shopping for a new insurer are doing so either because of a life event that has changed their insurance needs, or because they are looking for a better deal. However, no group

is more interested in switching than customers who are displeased with the service provided by their incumbent insurance company.” With a score of 864 on a 1,000-point scale, American Family Insurance ranks highest among auto insurance companies in satisfying new buyers with the purchase experience. American Family performs particularly well in the policy offerings and distribution channel factors, primarily driven by the performance of their exclusive agents. Rounding out the top three are Auto-Owners Insurance with an overall average satisfaction score of 860, and Erie Insurance with 857. The study also includes a management discussion that takes a closer look at the recent use of humor by Allstate and its key competitors-State Farm, GEICO and Progressive-to try to differentiate themselves and appeal to younger consumers. While comedic advertising such as Allstate’s “Mayhem” campaign have generated tremendous buzz in the marketplace and have led to higher unaided awareness and consideration rates, quote rates for Allstate have increased by only 2 percentage points. “Allstate is the only brand among these four that has achieved growth in its quote rate among the two younger age cohorts,” said Bowler. “In contrast, other insurers are quoting an average of 3 percentage points fewer Millenials and Gen X shoppers, compared with one year ago.” To view the management discussion based on the study findings, titled “When Did Personal Auto Insurance Become A Laughing Matter?”, please visit http://img.en25.com/Web/JDPower/Manag ement_Discussion.pdf. The 2011 U.S. Insurance Shopping Study is based on responses from more than 15,500 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past 12 months and includes more than 75,500 unique insurer evaluations. The study was fielded from March to April 2011.

Technology

Agency Opportunities in a Time of Profound Change by Jeff Yates

About this article: We are living through a period where several major transitions are occurring simultaneously creating both opportunities and challenges for independent agencies. Consumer expectations and communications preferences are changing, and hybrid digital/personal relationships are creating enhanced experiences for consumers. Agencies have more choices regarding how they organize, the technologies they decide to utilize, and whether they outsource or not. The attributes of the agency managers of the future will have to evolve as well to succeed in this changed world. This is an exciting time to be involved in ACT because we have so many future oriented initiatives underway. What are the key consumer, technology and business trends that will impact our future? What will the agencies of the future look like and what will the attributes be for the most successful agency managers? How will the expectations of our clients change and how will they expect us to communicate with them? How will insurance processes change in an increasingly mobile world, opening up new ways to communicate among consumers, agents, carriers and other business partners? How will agency automation and agentcarrier interfaces continue to evolve, so that we can automate more of the routine processes and free up time for agents to be trusted advisors to their clients - the true “value add“ that independent agents provide? ACT has work groups or is participating in industry initiatives that are probing each of these issues. Stay tuned for future ACT articles as details emerge from these groups. One theme has struck me, however, that weaves its way through each of these groups and that is transition. We are seeing transitions happening with consumers, agencies, agentcarrier interfaces, agency management and other areas. What are some of these major changes and what kind of opportunities do they open up for agencies and brokerages? Consumers In the next five years, millennials (those born in the 1980s and 90s) will become a major client segment for most agencies, and for some agents already are. These consumers grew up with technology and expect to interact with their business partners when and how they choose - not in the manner that the business partner chooses. These clients may prefer texting,

mobile applications and/or using social media over traditional methods such as email. This is an exciting time to be involved in ACT because we have so many future oriented initiatives underway. What are the key consumer, technology and business trends that will impact our future? What will the agencies of the future look like and what will the attributes be for the most successful agency managers? How will the expectations of our clients change and how will they expect us to communicate with them? How will insurance processes change in an increasingly mobile world, opening up new ways to communicate among consumers, agents, carriers and other business partners? How will agency automation and agentcarrier interfaces continue to evolve, so that we can automate more of the routine processes and free up time for agents to be trusted advisors to their clients - the true “value add“ that independent agents provide? ACT has work groups or is participating in industry initiatives that are probing each of these issues. Stay tuned for future ACT articles as details emerge from these groups. One theme has struck me, however, that weaves its way through each of these groups and that is transition. We are seeing transitions happening with consumers, agencies, agentcarrier interfaces, agency management and other areas. What are some of these major changes and what kind of opportunities do they open up for agencies and brokerages? Consumers In the next five years, millennials (those born in the 1980s and 90s) will become a major client segment for most agencies, and for some agents already are. These consumers grew up with technology and expect to interact with their business partners when and how they choose - not in the manner that the business partner chooses. These clients may prefer texting, mobile applications and/or using social media over traditional methods such as email. The desire to have communications choices is not confined to just millennials, however. We are witnessing this transition in communications preferences across all the generations to some extent, requiring innovative agencies to offer several communications options to their clients and to begin to maintain these preferences in their systems. Agencies have the challenge

1521

Technology

of managing multiple forms of communications with clients at varying stages of transition to new communication methods. Agency management system vendors will need to make it easy for agents to retain these preferences in their systems and to integrate with all of the innovative forms of communication, so that agents can easily keep a record of these conversations. Consumers increasingly want to be able to go online to do research and perform other self-service transactions when they want to, as well as to consult with an agent when appropriate. It is “both/and,“ not “either/or.“ In fact, having a personal connection with the client is becoming even more important at this time of growing mistrust of large institutions and government, and independent agents excel at creating these relationships. Agencies, however, will need to free themselves up significantly from routine processes using automation and potentially outsourcing, so they can truly focus on creating enduring relationships as trusted advisors. “Era of Experience” At the Fall Big “I” Leadership Conference, Dr. James McQuivey of Forrester Research discussed how we have entered the “Era of Experience” where personal customer relationships are being enhanced by digital components that add value. For example, if an agency has contractor clients, having the ability for those contractors to issue routine Certificates of Insurance on the agency’s website, 24/7, according to preset agency parameters, is a highly valued enhancement to the traditional agency relationship. Another example is provided by those agencies which kept their clients well informed during the disasters we experienced last year using social media, taking advantage of its capability to deliver multiple messages to a broad audience instantly. McQuivey emphasizes that the personal relationship based on trust remains a core part of these evolving digital/personal relationships. The opportunity and challenge for agencies are to use digital tools to enhance the relationships they provide their clients, while using the automation provided to them by their agency management systems, Download, Real Time and electronic filing to free up their staffs to develop a binding personal connection with

each client. Demographic Changes We continue to see a major transition in many of our communities to a more diverse population. The opportunity and challenge for independent agencies are to be able to reach out to and develop personal relationships with these different groups. Some agencies are hiring producers from the various ethnic groups found in their community because these producers understand the culture of their particular groups, speak the language and know how they want to interact with the agency whether they want to come to the agency, have agents visit them, or deal remotely using email, the phone and the other digital communications offered by the agency. Changes in Agencies It is sobering to realize that over the next 10 years, as many as 50% of current agency employees and principals will have retired. How can agencies create an attractive work environment for the future generations who expect to have efficient and integrated technologies available to them? Agencies have more choices than ever before in how they organize for the future. They are able to decentralize into very local offices to be even closer to consumers, because of technology that can bind multiple offices together and allow producers and other employees to operate from anywhere. In today’s mobile world, we are starting to see producers in the field almost 100% of the time, using the agency office only when needed for conferences. Many agency employees are able to do their work from home, opening up new opportunities to hire employees who want and need a more flexible work environment. We are seeing a major trend among businesses in general to outsource functions to third parties that are highly efficient and expert in given areas. These outsourcing firms may employ domestic and/or foreign workers. We are likely to see agencies outsource more in the future, as they have already started to do with their technology and routine processing such as policy and download checking. The Challenge to Agency Managers The requirements for effective agency

Technology

management are also evolving. Agency strategic planning has become more important today as agencies have more options with regard to how they will organize and operate in the future. Managers will also have to take advantage of more business intelligence tools in order to effectively manage a more distributed workforce and potentially outsourced noncore functions. The Managers of the future will also

have to think through how they will create an online brand and digital/personal relationship with their clients that effectively differentiates their agency from their competitors. In addition, these managers will need to use their technology to the fullest, so that routine processes are automated to the maximum extent possible and their employees have the time to develop lasting personal relationships with their clients. ACT’s Agencies of the Future Work Group has started to discuss what it believes will be the critical attributes of tomorrow’s successful agency managers. These attributes include leadership skills (managing a business, not just an insurance technician), strategic thinking, anticipatory, agile, knowledgeable, social, knowing your consumer, good marketing and sales skills, having a communications plan (clear brand positioning), efficient processes, and financial management. Not only is this an exciting time for ACT as a forum where many of these defining issues are being discussed; it is an exciting time to be an independent agent. Creating that personal connection and relationship is becoming more and more important to today’s consumer and independent agents excel in this arena. At the same time, agencies have more choices available to them as to how they organize, manage their staffs, create an effective online brand and establish enduring digital/personal relationships with their clients in order to thrive in tomorrow’s insurance market. Yates is Executive Director of the Agents Council for Technology (ACT) which is part of the Independent Insurance Agents & Brokers of America. Jeff can be reached at jeff.yates@iiaba.net. ACT’s website is www.iiaba.net/act. This article reflects the views of the author and should not be construed as an official statement by ACT.

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PEOPLE In The News

Stephen R. Kinkade, CPCU, AAI

Kinkade To Serve as New National Director Stephen R. Kinkade, CPCU, AAI is the new National Director for the Independent Insurance Agents of Kentucky. He was appointed the position on November 17th at the 115th IIAK Annual Convention in Louisville. Kinkade is the vice president of KinkadeCornell Insurance Agency, Inc., in Leitchfield and has been with that agency since 1982. He attended the University of Kentucky. Prior to serving as National Director for the association, Kinkade served as President in 2008-2009. His involvement with the association is extensive having served on the Separation of Banking & Insurance Task Force, Benefits & Services Committee and Government Affairs Committee. In his community, Kinkade serves as the chairman of the Leitchfield Planning Commission, vice chairman of the Leitchfield Board of Adjustments and is the planning commissioner representative to the executive committee of the Kentucky chapter of the

American Planning Association. Kinkade will serve as National Director for a three-year term. In Memorium Bruce Blanton Coates, CPCU, CIC a Past President of the association who served his term in 1991 passed away on February 1, 2012. More recently, Coates was the vice president of market development at LexisNexis Risk Solutions, a data and solutions provider to the insurance industry. Prior to this, Coates served as the vice president of strategy management at Insurity, and served as CEO for the Oklahoma Association of Insurance Agents. He was also an independent insurance agent for over 16 years. Bruce also served his community in several areas including President of the Winchester KY Chamber of Commerce and was an active member of the Winchester First United Methodist Church.

Bruce Coates, CPCU, CIC

Bringing the Best Together

IN KENTUCKY

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David & Bob Fenner, Columbus, OH

Tommy Adams, Bowling Green, KY

Greg Carlton, Roy Riley, Keith Riley, Benton, KY

Doug Walker, Indianapolis, IN

Craig Katzman & David Swimmer, Charlotte, NC

Sandra Torstrick Blain, Lexington, KY

Rick Spreng, Ashland, OH Jerry Simonton, Springfield, OH Cloyce Anders, Raleigh, NC

Virginia Goff, Louisville, KY

Mark Bates, Crown Point, IN

Ben, Brett, Kenan & Bud Schultheis, Evansville, IN

Carl Schlotman III, Cincinnati, OH

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COVER Story

Meet the Board of 2011-2012

Each year the Kentucky Independent Agent magazine produces a profile of IIAK’s current Board of Directors, along with some facts about how the Board works. This serves as a great resource for IIAK members to become familiar with the leadership body of the association and offers an exchange of information and communication between board members and members. • In 2010 the association changed its bylaws to reflect continuity between state and national officer titles. As a result it now has a Chair, Chair Elect, and Vice Chair, whereas previously these officer titles were President, PresidentElect and Vice President. In addition to this, the position formerly known as Executive Vice President is now President/CEO. • The Board usually meets five times in a fiscal year. Included in those meetings is a strategic planning retreat. The meeting helps the Board produce the association’s strategic plan for that year. Another board meeting is commonly held at the Chair’s home town. This meeting includes some social functions of which during this time, guests and spouses are invited to attend and participate. In cases where an urgent matter is needed to be discussed, the President will call for a special meeting. • The Kentucky Young Insurance Professionals is represented on the Board by its Chair, who is also a voting member. • When there is a new agency or associate member applicant, votes are taken from the entire Board of Directors to determine membership of that agency or company/vendor. There is a majority vote rule for that potential member to have membership into the association. • Any association agency member in good standing may serve on the Board of Directors. There is always an attempt to get representatives from all regions of Kentucky and

from varying size agencies. • The Chair serves a one-year term and the directors, who are appointed by the Chair, serve a three-year term unless that individual is going through the chairs or serving an unexpired portion of a term. The positions of Treasurer and National Director are elected by the Board of Directors, while the positions of Chair, Chair-Elect and Vice Chair are elected by the membership.

Executive Committee Timothy X. Conder – Chair Insuramax, Inc. Louisville Ph: (502) 459-7500 timc@insuramax.com

William “Bill” S. Latta – Chair-Elect Latta Insurance Services, Inc. Henderson Ph: (270) 827-3543 wslatta@lattainsuranceinc.com

John Funkhouser, CIC – Vice Chair Johnson-Pohlmann Insurance Danville Ph: (859) 236-5922 jfunkhouser @johnsonpohlmann.com

James D. England, AAI – Treasurer Wells Fargo Insurance Services Pikeville Ph: (606) 437-7361 james.england@wellsfargo.com

COVER Story

Stephen R. Kinakda, CPCU, AAI â&#x20AC;&#x201C; National Director Kinkade-Cornell Insurance Agency, Inc. Leitchfield Ph: (270) 259-5465 steve@kinkadecornell.com

Diana G. Hunt, CIC Mountain Valley Insurance Barbourville Ph: (606) 546-4132 dhunt@mviaweb.com

Directors George L. (Chip) Atkins, III R. H. Clarkson Insurance Agency, LLC Louisville Ph: (502) 585-3600 catkins@rhcgroup.com

Jason D. Billington, CIC The Murray Insurance Agency Murray Ph: (270) 753-4751 Jason@themurrayinsuranceagency.com

Virginia D. Goff, CISR, CLCS, CWCA Durrett Insurance Agency, LLP Louisville Ph: (502) 895-5665 vgoff@durrettinsurance.com

David Houk Houk Insurance Agency Horse Cave Ph: (270) 786-2724 davidmhouk@gmail.com

John L. Ison Ison Insurance Agency West Liberty Ph: (606) 743-4472 insjohn@mrtc.com

Michael G. Johnson, CIC Al Torstrick Insurance Agency Lexington Ph: (859) 233-1461 mjohnson@altorstrick.com

Michelle L. Love E.M. Ford & Company Owensboro Ph: (270) 926-2806 mlove@emford.com

Lloyd M. Stafford Creech & Stafford Insurance Agency Lexington Ph: (859) 253-1371 lloyd.stafford @creechandstafford.com

TRUSTED Choice®

What Is A Great Relationship?

Remember that your brand is a relationship: the relationship between your firm and your customers and prospects. When well understood, it’s your path to new sales, growth and success. Ultimately, it’s the single-most important driver of agency value. “We have a great relationship with our customers,” independent agents and brokers often say proudly. Fine. But as an agency owner, do you truly understand what that great relationship really means from the customer’s point of view? How it then relates to your sales and retention performance? How it translates to building and burnishing your agency value? There is a more objective way to answer these questions. Author and sales coach Todd Youngblood with Atlanta based YPS Group, says we must first agree on a precise definition of the term relationship. And second, he notes, we need to measure the quality of our own business relationships. “Only then can we have an intelligent discussion about it,” he says. Agents say clients are like their friends. But Youngblood argues that isn’t enough. “Like it or not, friendship is not particularly relevant except at the very beginning of a business relationship,” Youngblood says. “In today’s highly competitive environment, relationships are grounded in how reliably you can deliver value. As value delivered increases, so does the friendship and vice versa.” Youngblood offers five levels of customer relationship that provide a more objective, measurable way to look at your agency value with commercial accounts: • Level 0, Hope: You have no relationship. And in your prospect or customer’s mind, you’re just another agency name rather than a strong brand. • Level 1, Price: Your customer buys from you because of your low price. This is not a place most independent agents and brokers want to be, although it can be a foot in the door

to growing accounts beyond a lowcost auto or BOP product. • Level 2, Features and Benefits: Your customer justifies buying from you based on how the features and functions you provide fulfill his or her expectations. • Level 3, Value Added: Justification is grounded in improvements to the customer’s business processes, and one of the following also is true: The customer is willing to pay a premium because of extra services you provide, or the customer always calls you first for help and gives you the last chance to bid. • Level 4, Total Cost of Ownership: Justification for your products and services is based on hard-dollar analysis of the impact you have on the customer’s financial statements. Note how these levels replace the term great service, which is subjective, with a more measurable and objective approach. Take a sampling of your commercial accounts, and assign scores. Be brutally honest, especially with regard to a level 3 rating. If you have any doubt, drop it down to a level 2. Review your scores every quarter. Keep driving them upward. Remember, what gests measured, gets done. Over time, you’ll see how this scoring compels you and your staff to get better. You’ll think of new ways to provide valueadded services. For instance, dropping off a policy to a busy commercial account might seem impossible now, but when you’re trying to move from an average score of 2 to 3 (and hopefully to a 4), it could be an obvious activity for your staff. Go beyond great service to be a truly great brand. You can do it; you already have momentum. Great brands can lock clients up for life. And the best part of it is, your clients gladly will ask for handcuffs.

AGENCY Management

Invest in Your Best in This Tough Economy By Herb Greenberg, Ph.D., Founder & CEO of Caliper

Every leader knows that surrounding yourself with the right people is one of the most important parts of running a successful business, especially as times become more difficult. Companies are looking to cut back in every way imaginable. Competition is fiercer than ever, as products are being duplicated and promoted at lower costs. So what differentiates you from the competition? Why should a customer go with Company A versus Company B? The answer is...it’s about the people you have on board. They are your differentiators. So now is the time to make an investment in the people who will pull you through this difficult time. The following model outlines a stepby-step approach to investing in your people. Using these tactics, you can learn to boost your top performers to higher levels of accomplishment, as well as tackle the most troublesome performance issues. Whether gearing up for performance reviews or engaging in the daily mentoring process, learning to be an effective coach is a critical task most effective leaders consider one of their main objectives. But successful coaching is not always an easy assignment, nor is it a process to approach haphazardly. To be effective requires foresight, planning and commitment. The following model outlines a stepby-step approach to better coaching. Using these tactics, you can learn to boost your top performers to higher levels of accomplishment, as well as tackle the most troublesome performance issues. Planning For Productive Coaching There are three major stages to effective coaching; the planning stage in which managers must familiarize themselves with the issues and prepare a course of action; the coaching stage in which leaders must take action; and the third stage, the review and follow-up stage in which the manager must ensure that any corrective measures were effective and any rewards adequate. In the planning stage, your first course of action is to gather information. To be a successful coach you must be well informed. This includes documenting and investigating sources of information such as the employee’s work history, relevant input from co-workers, clients or customers, and

personal observations. This stage also includes documenting any standards of expectation relating to the work or employee’s performance. Once this information is gathered, a coach must then decide whether the employee’s performance meets, exceeds or falls short of expectations. The next step of the planning stage requires coaches to assess the individual’s performance, and consider these three questions: • What is the likely future for this employee? Does his or her performance merit promotion? Will the person likely stay at the same level? Or is the individual facing probable termination? • What is your coaching objective? To consider other opportunities or expanded responsibilities for top performers? To improve mediocre performance? To gain commitment and save a struggling employee? • Which coaching strategy should be used? Corrective coaching to address performance issues? Developmental Coaching to encourage higher levels of productivity? In addition, other mitigating factors need to be considered. External influences such as competing priorities might be contributing to the problem, or a possible knowledge or skill deficiency might be causing performance issues. The problem could be with the structure or nature of the work itself. For example, standards or quotas that are too high cause frustration and undue stress, while low standards can haunt achievers, producing little challenge to top performers and encouraging sub-standard employees to “aim low.” The Coaching Discussion Called a “discussion” to highlight the interactive nature of this dialogue between coach and employee, the coaching session should be an open exchange, never a onesided confrontation. But, before entering in to this dialogue, coaches should first consider three things. One, is the encounter really important? If the answer is “no” and the performance problem is a minor infraction or the result of a one-time insignificant breech of conduct, it may not

AGENCY Management

be in your best interest to make a mountain out of a mole hill. On the other hand, if the answer is “yes,” or the behavior indicates a pattern of misconduct, coaches should consider the following issues. In determining the proper coaching approach, managers must consider possible performance inhibitors which may be out of the employee’s control such as ignorance to certain expectations or requirements, obstacles to performance, inadvertently punishing good behavior or non-performance being rewarded. Also, coaches should consider the “fit factors” such as whether or not the employee “can do” the work, meaning they are appropriately trained and qualified, or whether or not the employee “will do” the work, meaning they are properly motivated to do the work. If motivation is an issue, coaches need to consider their own part in providing proper motivation before addressing any problem issues. Has management provided adequate training, motivation or encouragement to this employee? Considering all these factors, the coach must now determine whether the interaction with the employee will be corrective or developmental. In a developmental session, coaches give positive feedback and discuss expectations for the future. In corrective situations, coaches provide constructive feedback, address performance problems, elicit reactions and causes, and discuss required behavioral changes. Whether developmental or corrective, there are basic guidelines to conducting an effective session and those standards include; setting a productive climate; identifying an expected outcome; providing feedback -either positive or constructive; discussing any relevant behaviors or changes required; mutually developing a plan for improvement; and perhaps most importantly, providing support and follow-up. To set a productive climate, coaches should address behavior, not other issues such as personality. Coaches should be direct, but not confrontational. Remember the best leaders know that the overall objective is, even in cases where termination is probable, to help the employee change and grow. Identifying an expected outcome gives direction to your encounter. It targets behavioral expectations and sets reasonable

and achievable parameters for development. Providing feedback, whether positive or constructive, seems to be one of the most difficult areas for coaches. Although this step may be challenging, the simple formula for providing constructive feedback is to describe the behavior, describe the impact of that behavior, ask for alternatives to that behavior, decide on a plan and provide support. Coaches should then discuss behavior with the employee. In the case of good performers, coaches should review past performance, and discuss possible motivators which may encourage even better performance. In the case of poor producers, discuss past performance issues and any required behavioral changes. Following this, a mutually designed development plan needs to be set into motion. Most importantly, this step must be the result of cooperative effort between the coach and the employee. Mutual involvement serves to establish “buy-in” which reinforces the employee’s commitment. Although often neglected, perhaps the most important stage is the review and follow-up. If you’ve committed yourself to taking actions to support the changes agreed on, you must follow through with these commitments. This could include scheduling the employee for related training or taking steps to ensure the development plan is put into motion. Neglect at this stage sends a clear message to employees that performance issues are not taken seriously. Coaches need to monitor results through a review process. During this stage, coaches must ensure that corrective measures were adequate and incentives appropriate. If the results are not what were expected, the planning and coaching stages must be revisited. Again, while productive coaching may not be easy for every leader, it is a critical role every leader must assume. Making an investment to develop your top performers will not only bring you a substantial return, but it will also put you in a position to grow and outlast your competitors. Caliper offers special discounts to IIABA members. For more information about how Caliper can help you invest in your top performers and help you succeed in this tough economy, visit www.caliperonline.com or call 609-524-1200.

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Coverage

of a Toyota Camry. So right from the start, the agent is failing a client, through nothing more really than sheer laziness. Take time to walk the site to make sure you are familiar with the operation, what they do, and who does it. 2. Agents who ignore valuation dates. Six months after a Workers’ Comp policy’s expiration date, the insurance company takes a snapshot of the current status of both paid and reserve losses, the Experience By Kevin Ring Modification Rate, and other pertinent data on all Workers’ Compensation claims. But those numbers may not be correct. Maybe the reserves are too high because they thought an injured employee was going to need $25,000 for surgery, but only required $5,000 of physical therapy. Maybe another employee was deemed by a doctor eligible to return to work, but this was ignored. Agents should take advantage of their agency management system to keep track of upcoming valuation dates and to speak with the adjuster at least 60-90 days before the date to better understand all the facts and figures. Otherwise, once the date has past it can take up to a year to correct any mistakes, and your client will have to pay the price. 3. Agents who don’t get involved in the premium audit from the beginning. When agents don’t get involved in helping clients with their premium audits until after the fact, there’s a problem when the employer receives an unexpected bill. But by then it’s like trying to put toothpaste back in the tube. It’s important that agents be more proactive and more involved in the process before the auditor shows up. We welcome the following to membership in the Independent By doing so, they can educate the Insurance Agents of Kentucky since our last report: employer before the fact on such items as what percentage of the payroll Agency Members applies to Workers’ Compensation Middlefork Insurance Agency, Inc. - Whitesburg and what doesn’t. Middlefork Insurance Agency, Inc. - Hazard But you can’t leave it up to the employer to draw you into the process Associate Members before it happens. Times have changed. Accident Insurance Co., Inc. - Columbia, SC When the economy was booming, and J.H. Ferguson & Associates, LLC. - Chicago, IL rates were going up, you might get a Prime Insurance Company - Chicago, IL call from an employer questioning why Kentucky Young Insurance Professionals a $5,000 bill arrived in the mail. The Burman & Tabb Insurance - Elizabethtown agent would review the account, Whitaker Insurance Group - Lexington explain the situation to the client, and even if the bill still had to be paid, The Association, its officers and staff look forward to there was good will because at least serving these new members with the best membership the agent made the effort. benefits and related products and services available. Today, as Workers’ Comp rates

Six Ways You May Be Failing Your Clients

Like most agents, you work hard at writing new accounts, what salespeople through the years have referred to as “getting the fish in the boat.” But it doesn’t take a master angler to know that once you get the fish, you must still make sure it doesn’t jump out. Then it’s back to square one. Whether agents spread themselves too thin, lack the resources to follow up efficiently or are just too darn complacent, they can fall into the trap of not servicing their client’s Workers’ Compensation needs properly. And perhaps they don’t even realize it. Anyone of these possibilities can cost a customer money, an increase in Workers’ Compensation costs, and potentially your agency their business. 1. Agents who blindly copy other agent’s work. Think of it as taking over as manager of a baseball team and doing nothing more then copying the old manager’s lineup. Maybe the guy playing third base should really be playing first base. This happens when an agent gets a new commercial account and does little more than copy the Workers’ Comp employee classifications the previous agent used, never taking the time to note that perhaps the company secretary at an auto body shop shouldn’t be classified the same as the guy yanking a 600-pound engine out

WELCOME WELCOME NEW NEW MEMBERS

Coverage

decline and payrolls have thinned out, employers are likely to receive a check in the mail for a Workers’ Compensation rebate check instead of a bill. Since it’s a check, they aren’t asking the agent about it. By not having that conversation, the agent is denied the opportunity to determine if the employer qualifies for additional funds. Be proactive from the outset. 4. Agents who let insurance companies handle 100% of the claims. When a worker is injured on the job, the employer automatically calls the insurance company. Makes sense since the agent isn’t the one who cuts the checks. But in truth, the agent should be involved when there is an injury to monitor the process. By doing so, the agent can stay updated on all communication between the medical staff and the employer and the adjuster, find out when the injured party can return to work, make sure there is a plan in place for that to happen, and generally keep the flow of communication moving between the doctors, HR department and insurance company. By not getting involved, the agent is pushing all the responsibility to the insurance

company, a third party that the employer has no direct relationship with. What employer would not appreciate an agent’s participation in the process? What employer would not want another set of trained eyes keeping track of claims? It’s an expense to have an employee off the job when it isn’t necessary. Helping to facilitate getting an injured employee back to work as quickly as possible can only benefit a client. 5. Agents not educating the Human Resources Department. Agents who build a positive relationship with HR personnel are doing everyone a favor. Most HR departments are under staffed and in some companies, the person with HR responsibilities was “assigned” the job without training. Unintentionally, it’s easy to hire what is known as a “Workers’ Compensation claim,” someone who has a track record at other jobs of filing claims, particularly those of the “soft tissue” variety. Agents can be helpful by sharing their pre-employment experience in medical and drug screening, background checks, and knowing not only what to ask in the interview process, but how to ask it, based on the physical requirement of a position. How not to assume that a 6-foot, 240-pound man can easily lift 50-pound boxes off a truck, when a simple medical test may show that there’s a past history of back trouble that limits lifting to only 20-pound boxes. And the knowledge of how to withdraw a job offer may be very helpful to clients. Everyone appreciated the gesture, the contractor made some sales, and with so many competitors vying for his business, the agent was able to build what Preston Diamond, president of the Institute of WorkComp Professionals once labeled “an alligator-filled moat around the client.” Use the Workers’ Compensation skills you’ve been taught to benefit your customers. Be involved in the process from the start and chances are you will both reap the rewards. Kevin Ring is the Director of Community Growth for the Institute of WorkComp Professionals, which trains insurance agents to help employers reduce Workers’ Compensation expenses. A licensed property and casualty insurance agent, he is the codeveloper of a new Workers’ Comp software suite that will help insurance professionals in working with employers. He can be contacted at 828-274-0959 or Kevin@workcompprofessionals.com.

Our Members Say It Best

The KRF-SIFâ&#x20AC;&#x2122;s loss prevention and safety training has meant the world to our company. Prior to becoming members of the Fund, we spent quite a bit on annual safety training. Since the Fund provides this type of training at no charge to its members, we have been able to significantly decrease our training expenses. Jennifer Shaw, HR Manager, Kentucky Lake Oil Company â&#x20AC;Śthe main reason we went with the KRF-SIF workersâ&#x20AC;&#x2122; comp program is because of their reputation for handling claims management in a manner that is fair not only to the individual, but also to the company holding the policy. The Fund has proven to be able to reduce the cost per claim and overall claims costs. My advice is that if claims management counts, you can count on KRF-SIF. If not, you can go anywhere. Bruce Pieratt, President/CEO, Pierattâ&#x20AC;&#x2122;s

Want to have a voice in your workersâ&#x20AC;&#x2122; comp? For more information, contact your independent agent or: Mary Carney, KRF-SIF Program Manager Â&#x2021; /RXLVYLOOH DUHD )D[ e-mail: mcarney@ccmsi.com www.krfsif.org

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