March/April 2017
What is your next step? Millennials in the Mix What you need to know about acquiring another agency Page 16
Page 13
Perpetuation Process: Advice from Kentucky Agents Page 32
Together... We’re making a difference to our members, to our agents, and in our community.
200 Executive Park, Louisville, KY 40207 502.894.8484 | 800.367.5372 | www.kesa.org
Inside
What's
Page 9
Contents
9 What We’re Not Telling College Grads 13 Millennials in the Mix 15 Is Bigger Better? 16 Buy Your Way to Growth:
Page 20
20 Young Agent Chair: Eric Harden 22 2016-2017 Young Agent Committee 25 Death of an Insurance Salesman
Page 34
28 4 Reasons Millennials See Insurance as a Lifelong Career 32 The Perpetuation Process - advice from your fellow agents 34 Be on the Lookout for these 5 Industry Trends
In Every Issue The Kentucky IA is the official magazine of the 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 Email: iiak@iiak.org Fax: (502) 245-5750 The Kentucky IA welcomes all advertising and editorial submissions. Inquiries for advertising, news releases and editorial contributions can be directed to Nikki Robins at the editorial office address or via email at nrobins@iiak.org
4 From the Chair
36 Industry Partners
5 DOI News
39 Advertiser Index
6 Education Calendar
39 Classified Ads
19, 21 Upcoming Events
39 Social Media Links
Mission Statement The mission of the Independent Insurance Agents of Kentucky is to be the preeminent advocate for Kentucky Independent Agents and support their business and professional development needs.
www.iiak.org | March/April 2017 | 3
Officers George L. “Chip” Atkins Chair, Louisville 502.585.3600 Michael G. Johnson, CIC Chair-Elect, Lexington 859.233.1461 Aaron LaRue Vice Chair, Bardstown 502.348.0050 James D. England, AAI Treasurer, Pikeville 606.437.7361 Stephen R. Kinkade, CPCU, AAI National Director, Leitchfield 270.259.5465 David M. Houk Immediate Past Chair, Horse Cave 270.786.2724
Directors Allen J. Crawford, CIC, CSRM Somerset, 606.679.6311 Kevin T. Desmond Bellevue, 859.491.5100 Eric S. Harden Young Agent Chair, Louisville 502.459.7500 Sharon B. Hill Jamestown, 270.343.3144 Skip McGaw, CIC Madisonville, 270.821.3122 Crystal Reid, CIC Madisonville, 270.994.3737 Ray A. Robertson, CIC Mt. Sterling, 859.498.3410 Laura Yount, CIC, CISR London, 606.878.0100
Staff Peggy P. Porter President & CEO
Chair From the
One of the greatest challenges we face as an industry is how to recruit and retain young talent. This issue is nothing new, we (as an industry) have been struggling with this for many years. Insurance is not viewed as a “sexy” industry. Many young professionals view insurance as “old” and “stale”. We must work to change this image in order to attract new, young talent. I have some staggering statistics I would like to relay: • The average age of an agent is 59 • 60% of the industry is over the age of 45 • 25% of the industry workforce will retire by the end of 2018 While these statistics are concerning, this is a great opportunity for young agents and those contemplating a career in the insurance industry since this creates a void of talent needing to be replaced. The challenges our industry faces can create career advancement opportunities for younger agents. Millennials (ages 20-36) are our largest working population. Over 65% of millennials polled have a poor perception of our industry. We must all do our part to change that perception and strive to make the ndependent agency system a first career choice, not a fallback option. We must ask ourselves: Are we responding to the workplace preferences of the new generation?” (see page 13) We must be willing to accept that the younger generation work’s differently. Be open to new ideas and concepts. Technology is very important to Millennials. They are the first generation who don’t know life without the internet or personal tech devices. They gravitate toward social media like Instagram, Snapchat, and Facebook. We must understand that every generation has both something to learn and something to teach. While our association has experienced significant growth in young agent involvement, we must continue to do what is necessary to build upon this trend. The future of our industry and association relies on attracting the younger generation. We need to be able to relay our value is a career, professional advancement along with leadership and skills development. Our industry landscape is changing. We must ask ourselves, “are we doing things that are a generation behind?” Change can either be a great challenge, or great opportunity! Sincerely,
Katie M. Freshley Education & Events Director Amy Good Administrative Assistant Tara T. Purvis Marketing Director Nikki S. Robins Communications Director Kristie Weyer, CISR Insurance Services Director
4 | www.iiak.org | March/April 2017
Chip Atkins
News Department
The Department of Insurance has an important staffing addition that I want to bring to your attention. Nancy G. Atkins joined DOI on Feb. 23 as deputy commissioner. She has numerous years of experience in the health insurance industry. Most recently, she was director of sales and marketing for Bluegrass Family Health Inc., now Baptist Health Plan. She began her insurance career in 1986 at MetLife Healthcare Network of Kentucky. She brings a wealth of knowledge of the insurance industry to DOI and I am excited about working with her. At this time, she also will be serving as acting director of the Health and Life division. Please join me in welcoming her to DOI and give either of us a call if we can be of assistance. I hope many of you will have an opportunity to meet her soon. The addition of a new staff member is relevant to your topic for this issue - Changes in personnel are something we all face whether it’s state government or your insurance agency. Regardless of the industry, many companies are grappling with the challenges of maintaining a qualified workforce as many baby boomers are retiring. The U.S. Bureau of Labor Statistics said 693,000 insurance professionals are now 55 years of age or older. This is a 74 percent increase in that age group during the last decade. By 2018, nearly a quarter of all insurance professionals will be within a decade of retiring.
Contact Commissioner Maynard It is crucial to recognize that the work environment embraced by the baby boomers may not appeal to millennials. This is going to require flexibility and a willingness to try new things. Agencies could consider mentoring programs, internships and reaching young people through social media. Experts suggest looking at the work environment and benefit structure to see if those are appealing to younger workers. It is positive to see that Eastern Kentucky University’s Risk Management and Insurance program has placed 80 percent of its graduates in a job following graduation. If your agency doesn’t have a plan for continuation in the case of the retirement, death or disability of the owner, I hope you will use the material in this magazine to consider doing so. I also hope you are open to welcoming young agents to your business entity. Our workforce at the Department includes young people and “more mature” adults. We learn from each other and we work together to get the job done.
Commissioner H. Brian Maynard
A recent story in PropertyCasualty 360 points out that many companies are making it a top priority to balance the recruitment of young talent with the importance of keeping an aging workforce engaged and contributing.
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Continuing Education
IIAK has a range of classroom and webcast continuing education courses as well as valuable designation seminars. See below for our latest offerings.
ON-SITE COURSE:
E&O Risk Management: Meeting the Challenge of Change October 5 • IIAK Education Center
ONLINE COURSES VIA ABEN: Date/Time
Seminar Name
May 8 @ 11 am
Agency Management Based E&O and Ethics
3
May 11 @ 2 pm June 13 @ 12 am
Annuity Basics and Where They Fit
1
June 13 @ 10 am
Business Auto Claims That Cause Problems
2
May 17 @ 3 pm June 15 @ 11 am
Business Fraud Protection
1
May 10 @ 11 am June 26 @ 11 am
Certificates of Insurance – Emerging Issues and Other Stuff that May Scare You!
3
May 17@ 12 pm
Commercial Lines Claims That Cause Problems
2
May 23 @ 2 pm
Commercial Property Endorsements That Can Make You Money!
2
May 10 @ 2 pm
COPE – Property Underwriting and Effective Loss Control
2
May 4 @ 10 am June 22 @ 1 pm
Data Privacy Insurance
2
May 4 @ 1 pm June 22 @ 11 am
Directors and Officers Liability Insurance
2
May 8 @ 1 pm June 12 @ 1 pm
Double Trouble - Certificates of Insurance and Business Auto Endorsements
2
May 2 @ 9 am May 18 @ 10 am
E&O Risk Management – Meeting the Challenge of Change (6 hour course)
6
May 23 @ 10 am
E&O Risk Management – Meeting the Challenge of Change (Part 1)
3
May 23 @ 2 pm
E&O Risk Management – Meeting the Challenge of Change (Part 2)
3
May 17 @ 11 am June 15 @ 11 am
Estate Planning Basics
2
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CE Credits
Date/Time
Seminar Name
CE Credits
May 16 @ 1 pm
Ethics and Business
3
June 22 @ 2 pm
Home Based Business Exposures
2
May 17 @ 1:30 pm June 16 @ 10:30 am
Hot Topics in Personal Lines
2
June 7 @ 2 pm
Liability Issues to Worry About – Indemnity Agreements and Additional Insureds
2
May 17 @ 9 am
Long Term Care Insurance
2
May 17 @ 10:30 am June 16 @ 1:30 pm
National Flood Insurance Program Basic Course - 2016
3
May 23 @ 2 pm June 5 @ 11:30 am
Personal Fraud Protection
1
June 28 @ 2 pm
Personal Lines Claims That Cause Problems
2
May 26 @ 10 am June 6 @ 1 pm
Professional Ethics in the Insurance Industry
3
May 3 @ 2 pm June 7 @ 2 pm
Property & Liability Concepts - Comp. Cov. Series
2
May 11 @ 10 am June 8 @ 10 am
Rental Cars: More Than Meets the Eye
2
June 7 @ 11 am
Those Kids and Their Cars!
2
May 23 @ 1 pm
Top 5 Life Insurance Uses
2
May 5 @ 11 am June 7 @ 12 pm
What you Need to Know about Employment Law & Coverage
2
June 22 @ 9 am
Workers Compensation Beyond the Basics
3
New Hire eLearning Training Available! Visit iiak.org/education for more information
www.iiak.org | March/April 2017 | 7
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What We’re Not Telling College Grads About Insurance
By: Christie Alderman
Google “college commencement speeches” and you’ll find more than 300,000 results outlining how to write a compelling graduation speech, complete with all the life advice graduates need. But while most commencement speakers recite lines from Dr. Seuss’ “Oh, The Places You’ll Go” and tell students to dream big, we’re failing to impart one critically important lesson: Some types of risk can get in the way of those dreams. Neglecting to teach the next generation how to properly manage their property-casualty risk exposure does our children a significant disservice. In the summer months post-graduation, here’s the advice every independent agent and broker should share with their clients’ young adult children. It could happen to you. Despite feeling invincible, sooner or later, all graduates will have to think about insurance as they “age off” their parents’ policies and face their first losses on their own. For graduates moving to new cities, that could be anything from a burst pipe in their new apartment to an auto accident while driving to work. Helping graduates understand the “when, not if” mindset will ensure they are prepared in their moments of need.
This is particularly important when it comes to liabilityrelated exposures. Graduates may be dismissive about the need to insure the discount-store furniture and handme-down contents of their apartments, but they may not realize they need personal liability coverage, which often comes with a renters policy. If a guest sustains an injury at their apartment, they could face significant out-of-pocket costs. You have a lot to lose. The millennial generation, which includes many new graduates, tends to be highly motivated by social responsibility. This mindset can be a useful way to help you explain the value of liability insurance. If a friend is injured in their apartment, sufficient liability coverage can help ensure graduates have the financial resources to care for them and take financial responsibility for their actions even when they make an honest mistake. Agents and brokers can give valuable advice by taking the time to clarify the concept of liability and related coverages to new graduates. Because most of them have little to no savings, recent grads often assume they’d have nothing to lose if someone sued them. Most don’t know projected future wages can be taken into account if they’re on the losing side of a lawsuit. Additionally, an
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M.D. or a J.D. in your signature, or even a well-known last name can make you more of a target of opportunistic lawsuits. Connect with graduates by taking the time to discuss how liability coverage can help pay for medical expenses and lost wages. Showing them their vulnerabilities helps ground an elusive concept like liability. One size does not fit all. Most graduates understand insurance as a simple four-step process: You take out a policy, something happens, you submit a claim, you get paid. While they have the theory right, agents and brokers must stress that not all insurance is created equal. Insurance is not a commodity, and if you can educate your clients when they are just beginning to need insurance, you are more likely to keep them in the independent agent channel throughout their lives. New graduate policyholders also often incorrectly assume the hard work is over once they select a policy. Advise young adults to reevaluate their insurance needs
after every major life change: buying a house, getting married, starting a family, acquiring valuable items, hiring household employees or setting up complex financial arrangements like trusts. As graduates chase their dreams and gain more professional experience—subsequently increasing their net worth—their changing risk profile will warrant enhanced protection. While some of those changes might seem far away for new graduates, it’s critical that agents and brokers stress the concept that insurance is fluid as early as possible. The first few months post-graduation can be stressful for new graduates. It often means big jobs, big moves and other major life changes. Sharing your unique perspective on risk management with your clients’ young adult children as they make this transition can help bring a sense of calm to the proverbial storm. With your guidance today, they might even become your clients tomorrow. Christie Alderman is vice president of Chubb Personal Risk Services.
.®
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There can be no doubt that all our knowledge begins with experience. – Immanuel Kant
www.summitholdings.com
Policies are underwritten by Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company, authorized insurers in AL, AR, FL, GA, IN, KY, LA, MS, NC, SC, TN and TX; BusinessFirst Insurance Company, authorized in FL, GA, KY, NC, SC and TN. ©2016 Summit Consulting LLC | 2310 Commerce Point Drive, Lakeland, FL 33801
10 | www.iiak.org | March/April 2017
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in connection with a decision to participate in thesponsor MEP andof other BIRS401(k) assumes fiduciary responsibility of sponsorship and limited administration unless ©2014 Big “I” Retirement Services, LLC (“BIRS”), the matters. Big I "MEP" Plan. Participating employers may retain otherwise delegated. Mesirow assumes certain fiduciary responsibilities as investment manager for investment selection and other similar functions.
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Millennials in the Mix: Responding to the workplace preferences of a new generation
By: William Harwood
As of April 2016, the number of millennials living on the planet exceeded all other generations. Meanwhile, the exit of the employed boomer generation is receding quickly in the rearview mirror. That means most independent agencies’ 2017 workforce will contain a very different mix of skills, work preferences and career expectations compared to just four years ago. Millennials bring a new sense of constant connectivity to their professional pursuits thanks to the “always on” mentality of extremely active networks and constant interaction with peers, associates, newsfeeds, blogs and information. As this new connectivity has become more normal and not limited to those under 30, our way of working, interacting and generating productivity has fundamentally shifted. How should organizations respond? As younger employees seek greater involvement in their workplaces, managers must recognize the need to engage more deeply in their staffs’ perspectives. As one agency principal said recently, “We’d agreed to a plan on Monday, but so much new information emerged that the original plan was totally out of date by Wednesday.” Another agency executive recently commented that her team created new, streamlined workflows as a result of closer, hands-on involvement from supervisors. Since many employee surveys note problems like “being overwhelmed” and inefficient workflows, staff members often welcome any simplification and register it as collaborative engagement. Successful organizations also deploy self-directed learning and career development resources to feed their millennial employees’ desire for constant job-related creativity and purpose. Employee-centric training is the answer to the 24/7-connected employee’s appetite for frequent, shortburst, on-demand learning.
For Generation Y, effective learning and development tools are critical elements of engagement and can lead to increased workplace productivity, as well as better, faster responses to clients and higher retention of professional talent. William Harwood is co-founder and managing partner of New Level Partners, LLC, a Princeton, New Jersey-based learning solutions provider focused on the insurance industry. IIAK endorses this product and can be used to train your new hires & job changes. Go to www.iiak.org/nlp for more information.
Engaging Elements Current workforce research cites “employee retention and engagement” as the No. 1 concern for companies, with more than 50% identifying the concern as “urgent.” Here are the top five critical elements of workplace engagement: 1. Active and involved managers who prioritize listening 2. Meaningful work and objectives 3. Positive work environment, including flexibility 4. Visible opportunities for growth 5. Trust in organizational leadership
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It’s a familiar tale: An agency has enjoyed great success, so its principals decide the time is right to expand their business and acquire another agency. After finding one that will blend in perfectly, they arrange meetings, sign contracts and the deal is done. Nothing left to do but enjoy the payoff, right? Not so fast. The assumption that “bigger is better” can lead to disaster if the agency’s focus is on growth alone, with no attention to E&O risks. What if the agency you’re acquiring made a few missteps that escaped attention? When those mistakes finally come to light, how can you ensure your agency isn’t stuck footing the bill? Here are a few steps to keep in mind. 1) Learn about the acquired agency’s policies and practices as soon as you can. Multiple locations increase exposure to professional liability claims: The larger the agency, the more people involved, and the greater the opportunity for error. 2) Establish a plan regarding each employee’s responsibilities. This should include a review of current responsibilities and training on how to handle business the acquired agency previously procured. 3) Actively integrate successful, well-established procedures into the merged agency. Meet with new employees and educate them on procedures and expectations. Consistent and uniform utilization of policies and procedures is imperative as an agency grows.
4) Before finalizing the deal, the acquiring agency should confirm that the purchase contract includes indemnification language protecting it from claims related to the negligence of the acquired agency, in case it committed a wrongful act prior to the acquisition. Similarly, the acquired agency should purchase tail coverage for its own protection. 5) Notify your E&O carrier about the acquisition. Acquiring another agency typically means a change in risk, so E&O policy language commonly requires reporting of all mergers & acquisitions within 90 days. But not all E&O policies are created equal: Effective Sept. 1, for example, Swiss Re Corporate Solutions will add an enhancement to its policy which increases the maximum reporting time to 120 days. Bigger can be better, but only if you take the proper steps to learn about the new agency, instill your culture, educate your people and clearly document that your firm is not taking on the liabilities of the acquired agency for past mistakes. Barbara Rocco is an assistant vice president and claims specialist at Swiss Re Corporate Solutions and teleworks out of the Chicago office. Insurance products underwritten by Westport Insurance Corporation, a member of Swiss Re Corporate Solutions.
For an E&O Quote Contact Kristie Weyer at kweyer@iiak.org or call 502-245-5432 www.iiak.org | March/April 2017 | 15
Buy Your Way to Growth
What you need to know about acquiring By: Robert J. Pettinicchi another agency In today’s demanding business climate, agencies have two options: grow and prosper, or just stay the course. But how to grow? Most agencies can grow organically, through plain old hard work, methodically attracting more clients and perhaps expanding markets. A few, however, accomplish it quickly, by acquiring another agency. In fact, hundreds of sizable independent agency mergers were recorded last year alone. Is a merger or acquisition in your agency’s future? Here are important considerations to help you craft a deal to your advantage.
Why consider a merger or acquisition?
It’s all about creating value. Any proposed acquisition should help you create value in the agency for its owners and provide greater value-added to your clients. Larger agencies typically have more access to markets, can specialize, and may have a broader geographic reach. Therefore, an acquisition might be an appropriate way for you to efficiently: • Add qualified staff, functionality, or industry knowledge • Access more clients, or a new market • Increase market share • Reduce competition All of which should lead to enhancement of the value of your agency. Remember, however, that it is “better to be excellent than to be big.” You should not consider growing through acquisitions unless your existing agency is in good order. In particular, pay close attention to your agency’s financial health. Maintaining a proper working capital position and reasonable debt load are two places to start. Other challenges for agencies continue to be managing compensation, utilizing technology, and finding and retaining the right people. There are a number of very qualified industry-specific consultants that can help you to get your agency humming. You may also want to see how your agency “stacks up” against other similar agencies by reviewing “Best Practices” data.
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Identify a target
The best target agency may be across the street, across town or across state, however, don’t expect the ideal target to drop into your lap. Most mergers and acquisitions evolve slowly and are the result of months or even years of talks. Your top competitor may be your best target because you have a strong suspicion who their top clients are and who their most reliable markets are. Chances are you’ll have to do some networking and kick the tires on the deal before it all falls into place. Industry associations, insurance carriers, and consultants are good places to start when seeking potential candidates. Characteristics that may point to a viable agency target are those with aging principals with no readily apparent perpetuation path or agencies in a stagnant growth position. Remember that the hard market has enhanced the value of most agencies. Don’t expect to find a bargain. Next, ask yourself how a merged operation may look. Do you think there is a chance that the two firms can be successfully integrated into one from a financial, cultural and human resources perspective? If not, that target may not be a proper fit. Remember, time is money; the longer it takes to successfully meld the combined enterprise will dramatically impact the chances for success (and ultimately the opportunity for enhancing value).
Open talks
You’ll want to spend time with a target agency’s principals. Consider the desires of the selling party. Does the seller expect to stay in the business in some capacity? Does he or she want to ride off into the sunset with the most cash now? Is it possible to strike a deal based on retention? Is some degree of seller financing available? Be open and honest about your plans for the agency. Keep in mind that you are dealing with someone’s life-
long pursuit. Don’t underestimate the amount of feelings and ego that may be present during negotiations. Explain why you are interested, what your vision of the future is, and the potential opportunity for current owners.
Audit the financials
Ask for three years of fiscal year end financial statements from the target agency’s management system and a current interim statement with a comparison to the previous year. Get an overall production report by business line and carrier. Ask for production reports from all of the major carriers and get copies of the carrier agreements as well. Also, obtain an employee census with compensation details and copies of all producer anti-piracy and nonsolicitation agreements. A big red flag is the failure of the seller to produce any and all of the preceding items. While you may be asked to sign a confidentiality agreement, the items will be needed to formulate an offer.
Seek professional help
At this point you should consult with your accountant and attorney. Don’t forget to discuss this with your banker too, unless you have been a very diligent saver or don’t need to borrow money for the acquisition. You would also be well served to engage a consultant to prepare a business valuation. This could help you negotiate a better deal, identify business issues to be ironed-out and it may be required or at the least, appreciated by your banker. Many articles have been written about the advantages of purchasing assets versus stock, all cash deals versus seller financed or partially financed deals and those deals based on retention or any combination of the above. This article is not intended to provide advanced advice but is meant to point you in the right direction. Again it is best to see out the advice of qualified professionals. Don’t cut corners by choosing professionals that don’t adequately represent your needs and don’t choose professionals based solely on price. There is usually some form of tax consequence to your actions. The cost of bad advice is one that you will keep paying for over time. The attorney that handled your sister’s divorce may not be your best choice for your next strategic acquisition.
Set the terms
Every deal is different. And, the more astute your lender, especially about the agency business, the more financing options you’ll have. For starters, how much credit is
your lender likely to extend to you? Specialized lenders are better able to assess the full value of your agency, represented by your book of business. If your current lender is unwilling to provide a loan based on the value of the agency you are acquiring, you may want to look elsewhere. Most importantly, never force the numbers. From the outset, be sure you have defined the maximum amount you can invest and still achieve an acceptable return. Don’t take on an acquisition if the adjusted cash flow of the target cannot support the debt required to buy it. And remember, the sales price is not your total cost – you have to factor in any debt you will be acquiring.
Talk to your bank
Talk to your bank and do it early. You’ll get more support and valuable advice the better your lender understands your business and your track record. Does your banker understand that insurance agencies typically have little in the form of hard assets? Would your banker be willing to make a loan that is secured solely by the agency’s book of business and its associated cash flow? If the answer to both questions is no, then you need to consider changing banks. The best time to do so is well before an acquisition opportunity arises. A bank that specializes in your industry is better able to serve your needs. Ask your banker: • Is the bank willing to count your book of business when determining loan collateral? • Does the bank offer a range of terms tailored to the nuances of the agency business and help you select the ones best suited to your needs? • Does the bank have a suite of lending and depository products designed specifically for my industry? • Does the bank sell insurance and compete with my agency? Pulling off a successful merger or acquisition can be one of the most rewarding exercises an agency owner can pursue. It can also be one of the most frustrating. Be sure to put a strong ally on your team by selecting a banker that knows your agency, your industry, and who can be fair and disciplined in their analysis, yet flexible and creative in their solutions. Robert J. Pettinicchi is chief lending officer of InsurBanc, a federal thrift dedicated to providing banking products and services to Independent Insurance Agents. Additional information about the Connecticutbased bank is available at www.insurbanc.com or by calling 1-866467-2262.
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Become an IIAK Young Agent The future of the industry
What is a Young Agent? The Young Agents Committee of Kentucky serve as the unified voice for all young agents in Kentucky. We foster the professional development needs of our members in the state to perpetuate the future of the independent insurance agency system. Young Agents are vital to the success of our membership and our association. They are the individuals who will become the future leaders of the association, their businesses and their communities.
Do YOU qualify? To qualify as a Young Agent, you must: • Belong to an IIAK member agency or associate member company/vendor • Be less than 40 years old and/or • Have less than five years experience in insurance
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UPCOMING YA EVENTS Big “I” Sales & Leadership Conference June 14 & 15 • Lexington
Want more information? Contact Katie Freshley, Education & Events Director at: 502-245-5432 or via email at kfreshley@iiak.org
Big “I” Sales & Leadership Conference Lexington, KY • June 14 &15, 2017
Join us for FREE C.E. and Lunch near YOU! May 16
May 17
Kentucky Dam Village Bowling Green
May 18
May 23
May 24
Owensboro
Louisville
Northern KY
www.iiak.org | March/April 2017 | 19
20
ERIC QUESTIONS HARDEN 2016-17 Young Agent Chair
with
6. What about your family? I married my wife Lindsay in 2007. We have three children: Harper (6), Molly Frances (4) and Wells (16 months) 7. Pets? Pearl the beta fish
1. What is your job title? Partner & Commercial Lines Insurance Agent 2. What does your position entail? My job is to develop an insurance & risk management program for clients based on their specific industry exposures. 3. What do you enjoy most about your job? Meeting new people every day and getting the chance to learn about all types of industry and business. Secondly, it is fulfilling to me to know that should our client suffer a loss we have them protected with the proper coverage to make them whole again. 4. Age and Hometown: 34 years old, Louisville Kentucky 5. Educational background: University of Kentucky, BA, Marketing & BA, Management (2005); Hartford Insurance Company, School of Insurance (2005) – CLCS: Commercial Lines Coverage Specialist. AAI Designation (Accredited Adviser in Insurance) 2016
20 | www.iiak.org | March/April 2017
8. What personal accomplishment are you most proud of? On January 1, 2015 I became a Partner in Insuramax. I had earned the opportunity to become an Agency owner. Working the last 10 years in the insurance industry had paid off. It was an incredible feeling knowing that my hard work and perseverance had come to this crowning achievement. Honestly, the last 3 years of my career have been the most successful with exceeding my new business goal and renewal retention within the agency. 9. Something others don’t know or would be surprised to know about you: I was a starting Mid-Fielder on the 1999 State & National Champion soccer team for Ballard High School. 10. Biggest influence (personally or professionally) I contribute a majority of my success to my mentor Russ Wardlaw. Without his introduction into the business, constant education and guidance I would not be the insurance professional I am today. Russ has not only been a mentor to me in business but in life as well. I have learned that his Christian values have led him to become the successful businessman he is today but also as an amazing father, grandfather and friend. Another leadership quality I have learned from Russ is his ability to build relationships and we all know selling insurance is based on relationships. 11. What was your first job? I was a cashier/cart attendant at Target.
12. What’s something unique about yourself? I cheer for both UK and UL 13. Hobbies? Spending time with my family; playing golf, soccer and tennis; cheering for UK & UL sports
17. Favorite movie/TV show: Movie: Back to the Future. TV: House of Cards 18. Favorite music/band: Country/Thomas Rhett
14. Bad habit: Dairy Queen Blizzards
19. Favorite restaurant in your hometown: Jeff Ruby’s Steakhouse
15. Pet Peeve: People with pet peeves
20. What’s something that you’re really bad at that you would love to be great at? Singing
16. Farthest place you’ve traveled: Petit St. Vincent (South Caribbean)
Save These Dates Check out these great events near you!
Big “I” Legislative Conference
Road Show
Renaissance Downtown • Washington, D.C.
Louisville
May 3-5
May 23
Road Show
Road Show
Kentucky Dam Village
Northern Kentucky
Road Show
Big “I” Sales & Leadership Conference
Bowling Green
Marriott Griffin Gate, Lexington
Road Show
121st Annual Convention & Trade Show
Owensboro
The Brown Hotel, Louisville
May 16
May 17
May 18
May 24
June 14 & 15
November 8-10
www.iiak.org | March/April 2017 | 21
Chair ERIC HARDEN
Insuramax, Inc. Louisville Email: erich@insuramax.com
Immediate Past Chair NEEL FORD, AU, CPIA E.M. Ford & Company Owensboro Email: nford@emford.com
Committee Member TRIPP HUMSTON, CIC
Secura Insurance Company Versailles Email: tripp_humston@secura.net
22 | www.iiak.org | March/April 2017
Chair-Elect DANNY NEELY
Neely & Wade Insurance Agency, LLC Winchester Email: danny@neelyandwade.com
Board Liaison AARON LARUE
Larue Insurance, Inc. Bardstown Email: aaron@larueinsurance.net
Committee Member STEPHEN HILL
McKinney & Blair, Inc. Jamestown Email: mckinney-blair@duo-county.com
Vice Chair NICHOLAS ROLF
Gross Insurance Agency, LLC Ft. Thomas Email: nicholas.rolf@gross-ins.com
Committee Member LOGAN EDELEN
Roeding Insurance Lexington Email: ledelen@roeding.com
Committee Member QUIN LYNCH
Greer Insurance, Inc. Brandenburg Email: quin.lynch@greer-ins.com
Committee Member DIANA NORWOOD, CIC, CPIW, DAE Liberty Mutual Insurance Lexington Email: diana.norwood@libertymutual.com
Committee Member ADAM SHERIDEN, CLCS
Reed Brothers Insurance Services Somerset Email: asheridan@mikrotec.com
Committee Member LINDSEY PRUITT
Risk Placement Services, Inc. Lexington Email: lindsey_pruitt@rpsins.com
Committee Member DANNY YACKEY
Insuramax Louisville Email: dannyy@insuramax.com
Committee Member JARED PURSLEY
Pedigo-Lessenberry Insurance Agency, Inc. Glasgow Email: jpursley@plinsurance.com
Staff Liaison KATIE FRESHLEY
Independent Insurance Agents of Kentucky Louisville Email: kfreshley@iiak.org
Pitchin’ for PAC Corn Hole Tournament We had a great turnout last year, so you know we had to bring this event back for a second year! Recruit a partner and sign up for our the 2017 Pitchin’ for PAC Corn Hole Tournament on June 14 during the Big “I” Sales & Leadership Conference. The Young Agents are sponsoring the event and all proceeds go to benefit our PACs. Visit www.iiak.org for details. www.iiak.org | March/April 2017 | 23
www.iiak.org | March/April 2017 | 24
Death of an Insurance Salesman
Perpetuation Planning for the Unthinkable By: Chris Burand
I have unfortunately worked with the families, estates and partners of several agency owners who have passed away. Most, but not all, of the deaths occurred unexpectedly. In all cases, the person who passed left their families, estates and partners with far more problems than necessary. If you passed away tomorrow, would you leave the people around you with unnecessary problems?
Agency Value
One of the worst situations I absolutely dread is when I have to tell a family the agency is not worth anything near what the recently passed relative (usually the father) told them it was worth. Agency values are not what they once were. So telling your family they can get two times is wrong, and while possibly innocent, it is still cruel. Get your agency valued using real world values so everyone’s expectations are realistic. Put yourself in their shoes. The income from the agency will be eliminated upon the sale. Will the agency’s sales price be enough to support their standard of living? Being proactive also brings to light things that can be done to increase the value. One of the saddest examples is bad debt. I have seen a number of agency owners die with sizable accounts receivable that were totally uncollectible and quite old. I have seen these debts total 20 percent, 25 percent, even 30 percent of the agency’s commissions. Even if an agency is worth some high multiple, those bad debts have to be deducted. Another horrible situation is a widow learning that her
husband did not really own all the business on the books. He always meant to get around to fixing his producers’ contracts but died before he did. Also, there have been situations where all the important accounts are written by the deceased and there is no one in the agency to take over those accounts. Those key accounts most likely will not stay with the agency and, therefore, the value is not going to be what the estate may have thought. Or another example: keeping lousy books. It is not imperative for an owner to keep good books and good data. It is smart, and it is a good business practice, but it is not imperative. However, if a person dies and the books are poor, the agency is not going to sell for full price. Who will pay full price for an agency for which no one knows the true income and the true state of its balance sheet? I know many readers are thinking these things never happen, but they do. How do you know you do not have similar issues if you have not gone through the process of having your agency valued by a competent agency appraiser? As one client said not long ago, “I didn’t realize I had so many holes in my data until you valued it and I understood why you need that information.”
Agency Ownership
Do you really own your agency? I have seen a number of situations where the agency’s contracts were so poorly written that the agency did not clearly own the business on its books. Maybe the owner knew this at one time and had forgotten because nothing bad had happened. On a day-to-day basis, it didn’t really matter. But when the www.iiak.org | March/April 2017 | 25
agency is being valued, especially when it is being valued because the owner has died, it does matter, and that is not when anyone wants to discover the problem. As more and more clusters develop and even age, this is going to be a bigger and bigger problem.
Buy-Sell Agreements
What happens when a person dies with a bad buy-sell agreement with their partner? Unless luck and goodwill are in plentiful supply, nothing good happens. The partner may have been the greatest, most unselfish person on earth, but is his or her family just as unselfish? This is important because at least for a time, the dead partner’s family will be partners too.
63
For example, what happens when the surviving partner realizes the buy-sell agreement poorly defines value? This may leave the door open for the dead partner’s estate to claim whatever value they desire. I have seen, more than once, claims of two times PREMIUMS! It is not always that the other side is greedy; often they are just uneducated about the insurance world. Combine that with grief and a feeling of immense vulnerability, and it may mean they won’t want to settle for a reasonable value. Another great example is where the agency’s balance sheet is poor and the estate’s trusted advisor discovers some rule of thumb that agencies are worth some multiple of commissions, but he fails to understand that balance sheet deficits, especially trust ratio deficits, must be deducted. If you have ever tried to buy out a partner at full price while the agency has a trust ratio deficit, you will know how difficult it is to make payroll and other payments.
40%
DECADES
of J.M. Wilson underwriters play a musical instrument
of combined underwriting experience
KNOWLEDGE MORE THAN JUST A PRETTY FACE
1 in 2
Last but not Least
The readers of this article have the opportunity to fix a wrong before the wrong occurs. The pain survivors feel when a loved one and partner dies is already immense. Why exacerbate it by leaving them a business in a mess? Chris Burand is president of Burand & Associates,LLC, an insurance agency consulting firm. Readers may contact Chris at (719) 485-3868 or by e-mail at chris@burand-associates. com. NOTE: None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules and regulations.
J.M. Wilson associates have earned an insurance designation
MGA and E&S Broker since 1920
(800) 666-5692 | JMWILSON.COM
26 | www.iiak.org | March/April 2017
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www.iiak.org | March/April 2017 | 27
4 Reasons Millennials See Insurance By: Morgan Smith as a Lifelong Career More than three-quarters of millennials view insurance as a lifelong career and 82% are optimistic or very optimistic that the industry will evolve to attract the next generation, according to Vertafore’s Millennial Revolution survey.
marketing at Vertafore. “Our industry is well set up to have a lot of those things that people are looking for that are going to be attractive to them: freedom, responsibility, work-life balance.”
After surveying 3,000 young professionals—10 times last year’s respondent pool—the second annual report found work-life balance and technology to be top traits of overall job satisfaction for millennials in insurance.
What’s contributing to the long-term outlook? Here are four things independent agencies are doing right:
And whatever the industry is doing seems to be working: 77% of millennials plan to stay in the industry as long as possible. “Without having a silver bullet, a few key things [for agencies] to recognize is the types of environments and opportunities that are attractive to millennials in the first place,” says Guy Weismantel, vice president of
28 | www.iiak.org | March/April 2017
Work-life balance. The survey found that work-life balance and compensation (both 98%) are the most important factors keeping millennials around, with enjoyment of work (96%) as a close follower. “The flexibility in our industry allows for different working models,” Weismantel says. “At a very basic model, it’s the ability to work from anywhere and be connected to your
Not a complex point of view. At UFG, we have a national footprint, but operate with the service-oriented personality of a hands-on regional carrier. Our people know your region, and are empowered to make decisions specific to your area. We know your space. It’s that simple.
Visit ufgSolutions.com or call 800-877-5002.
29 |Mammoth www.iiak.org March/April Cave |National Park 2017
customers and understand what’s happening with claims, policy renewals and prospecting for new business. There’s a lot of flexibility that millennials we know in general really regard very highly in career choices.” Personal relationships. It’s hard to imagine someone jumping into the independent agency business if they aren’t a people-person, and millennials are no different. Developing close personal relationships with clients is a tried and true characteristic of the business, and it’s a trait Gen Y seems to value. “[Millennials] really value the personal relationships they develop and find that the insurance industry is a place that allows them to have those types of interactions and flourish in that,” Weismantel says. “Because it’s a very relationship-oriented business, oftentimes they have the opportunity to get out on the front line a lot sooner. If they’re on the producer side, they can really start to develop a client list and start to run their own business.” Embedded technology. Weismantel says last year’s survey revealed that the industry was “on the threshold of a tipping point” when it came to technology and improving millennial’s work experience. Looks like the industry paid attention to the generation’s expectations: This year’s results reveal positive results from the investment. “What’s happened in the succeeding 12 months is that that technology is now becoming embedded in business process and now it’s a way for people to do business,” Weismantel says. “It’s gone from ‘I want my agency to be investing in technology to help me do business’ to ‘Technology is now how we do business.’” Social engagement. Millennials are reaping the benefits when using tech and social media to engage with potential customers and foster potential relationships: 34% of millennials use social media for lead generation and new business. It’s another segment that has seen a surge in involvement when compared to last year’s results as agencies are taking note of the benefits. Because the young generation is already so digitally involved—71% use their smartphones for work and 82% feel technology increases efficiency and the competitive edge—agencies who want to recruit the generation for fresh perspectives, engagement style and succession planning should stay digitally savvy.
30 | www.iiak.org | March/April 2017
But 18% of older survey respondents still view technology as a detriment to productivity. “I think we see some inhibitors to widespread adoption, but I don’t know if it’s conflict as much as it is just generational resistance,” Weismantel notes. “We do see a generational dividing line in terms of how the technology is being used, but less about a conflict and more of a different kind of channel that I think agencies are starting to adopt to attract these younger people to buy insurance in the first place when more and more of that’s a challenge for many agencies.” If the industry is to successfully compete against directs or outside industries for a boost in millennial employment and satisfaction, agencies need to take note. Weismantel says Vertafore has seen more and more agencies really start to tout their technology as a recruitment differentiator. “With digital sophistication being so high amongst millennials, there is an open, green field for younger people to chart a course,” Weismantel points out. “And that’s really appealing to a younger person because there’s not an inherent plan in place that they just have to follow and go do paint by numbers. They’re having a lot of ability with creativity to go after finding new customers. The use of technology not only arms them with great devices, for instance, but how technology is being used to attract and retain new customers—that’s a really strong message to get people involved.” Morgan Smith served as IA assistant editor.
www.iiak.org | March/April 2017 | 31
The Perpetua
Answers to you
What were your first steps in the process?
the partners to talk through the perpetuation process and get a better understanding of how we would like to see it play out. Once this was done, we met with lawyers to formalize the process and get everything on paper. There are a lot of scenarios that can come up, so this can be a very detailed and lengthy process. Neel Ford, AU, CPIA E.M. Ford & Company, LLC
What was the biggest hurdle you had to overcome? 32 | www.iiak.org | March/April 2017
ation Process
ur questions - from agents just like you!
What is something that you would have done differently?
What was the best piece of advice you received? www.iiak.org | March/April 2017 | 33
Be on the Lookout for These 5 Industry Trends By: Rick Pitts This was supposed to be a column about baseball. As I write this, it’s February, it’s snowing, and some of us just heard the words that sports fans and winter-haters (me, on both counts!) wanted to hear: “Pitchers and catchers report to spring training.” I was going to do something around baseball, and maybe sports risk management, but then my editor reminded me that we need to keep with the theme of young agents and perpetuation. I started looking for trends and themes and hot topics, and couldn’t decide on just one. So, I thought I’d include five of them that came to mind. What trends can we identify for young agents that will complicate and excite their professional development for years to come? This handful may be bold statements of the obvious and not particularly controversial, but I do think that they add up to quite a collection.
1. Fewer offices, fewer office parks?
Companies are embracing telecommuting. GlobalWorkplaceAnalytics.com has statistics that show about half of the American workers have a job that can be, in some form or fashion, subject to telecommuting. Between a fifth and a quarter of the workforce “teleworks,” with some frequency, says the company. Global Workplace Analytics also reports, “Fortune 1000 companies around the globe are entirely revamping their space around the fact that employees are already mobile. Studies repeatedly show they are not at their desk 5060% of the time.”
34 | www.iiak.org | March/April 2017
Telecommuting is a revolution in the workplace, there’s no doubt. Whether it works for any given company or not, one of the trends is clear - employers are reducing office space as they contemplate longer term leases and are less willing to commit to the big square footage “buys” they once did. Here’s where the excitement and complication for the young agent comes in. Smaller, flexible businesses may now have the multiple location problems that used to be reserved for the big-hitter (ok, I’m still stuck on sports) clients or insureds. Even the smallest of businesses can now have the insurance need for multiple location coverage. It’s just that one or two or three of those locations might be employees’ homes.
2. Revitalization of existing space?
This is an offshoot of the first one. When we reimagine what we mean by an office, we also reimagine where the office might be. A presentation of Westport’s E&O seminar recently took me to visit an agency near St. Paul, Minnesota. It’s a terrific agency filled with vibrant young professionals. It’s also housed in what used to be a furniture store. It has eye-catching décor, such as decorative brick repurposed from an old factory and huge exposed wooden beams in the ceiling. It is also thoroughly modern and has all the amenities (and then some) of the kind of office that used to be located in downtown high rises or suburban office parks. The challenge and the excitement from the insurance perspective? I think it may be in the underwriting of the
risk. How do we determine values in a fluid property environment? A revitalized or gentrified area? Have we adequately captured what we’ll need to do (heaven forbid) to repair or replace?
3. Fewer retail stores, too?
The bricks-and-sticks trends in the workplace extend over to the retail side of things, too. For illustration purposes, let’s use the giant – Amazon and Amazon Prime. CNN’s Money reports that Amazon has over 150 million cubic feet of storage space. It reported revenue in excess of $100 billion for 2015. Perhaps most importantly for our purposes, about half the U.S. homes are Amazon Prime members. It seems fair to say that we’re not going to the store anymore, or at least nearly not as much as we used to.
The complication and the excitement for our young professionals? Delivery. For an example of this, we shift to another giant: Uber. Uber drivers are independent and drive their own vehicles. That creates, especially in today’s world, an insurance complexity that is only now beginning to be resolved. Kentucky has mandated certain amounts of coverage depending on where in the process (pre- and post-pickup, or with a passenger on board) a driver is. Other states have done so by statute. The problem is, in most cases, whether the private passenger auto coverage can be used to satisfy some or all of these insurance requirements. Moreover, the same can be said of independent folks who drive their own vehicles to make the deliveries for smaller companies, food delivery services, grocery services like Insta-Cart, and more. Are they engaged in a “public livery” when they do so? Sure, it’s an offshoot of the pizza delivery problem insurance professionals have been dealing with for years, but it is nevertheless going to grow larger over time.
4. Fewer hotels and motels?
YOUR CUSTOMERS. OUR PROMISE. FCCI Insurance Group has been insuring businesses and doing what we say we’ll do for more than 57 years. We partner with our agents to provide expertise in underwriting, risk management and claims handling that help businesses thrive and face the future with confidence. Craig Johnson, MBA Chairman of the Board, President & CEO
Once again, we’ll use the giants of the fledgling industry to illustrate the point. They are AirBnB and VRBO. AirBnB describes itself as a, “community marketplace [that] provides access to millions of unique accommodations from apartments and villas to castles and treehouses in more than 65,000 cities and 191 countries. …Airbnb is people powered and the easiest way to earn a little extra income from extra space in a home or from sharing passions, interests and cities.” VRBO, on the other hand, stands for Vacation Rentals by Owner. The website techboomers.com describes VRBO as being a site “…where you can book a stay at a property that the owner or manager is not personally using at the moment, and has instead made available for rent. If you have a property like that, then you can also use VRBO to advertise it and let other VRBO users rent it.” The website Skift states, “Airbnb’s growth is significant, but the unanswered question so far is whether the growth comes at the expense of traditional hotel business or if it is carving out its own, new business.” Complications and excitations abound for the young insurance professional from the advent of companies like AirBnB and VRBO. (By the way, “fledgling” and “advent” are probably not good words in this context – Skift reports that AirBnB has a market valuation in the
General liability • Auto • Property • Crime Workers’ compensation • Umbrella Inland marine • Agribusiness • Surety Coverage available in 18 states and D.C. © 2017 FCCI
www.iiak.org | March/April 2017 | 35
neighborhood of traditional hotel brands like Hilton and Marriott.) The insurance complications include whether the traditional homeowner’s policy (ISO’s HO-3, for instance) will cover the intermittent rental of a property without some sort of acknowledgement of the “business” aspects of all of this. Because the model involves a private residence being rented, there are also issues of whether the renter / guest has coverage under their policy as well. These insurance issues are largely unresolved now.
5. More toys and more computing devices.
The last one is an easy one, but an important one, too. From an insurance perspective, we’ve probably all used the term “toys” as a colloquial way of referring to things like jet skis, ATVs, and mopeds and we’ve probably looked at them through the prism of coverage under a personal lines policy (be it homeowner’s or auto or umbrella). From a macro perspective, the new “toys” such as drones and enhanced personal computing devices may have some of the same challenges for insurance professionals to face. What may be different, though, are two things. One, new “toys” like drones may be personally owned, but used in a business. A semi-professional wedding videographer is a possible example of this. Two, the consequences of not getting coverage right – business versus personal coverage, the amount of coverage, and questions like it – might be much more severe as the value of the toy increases. Richard S. Pitts, IIAK’s General Counsel is also part of our newest member benefit, First Call Free Legal. Members receive up to a 30- minute phone consultation on an insurance or agency-related matter once a year at no charge. Contact IIAK for more information.
Want to be an Industry Partner? Contact Tara Purvis Marketing Director tpurvis@iiak.org 36 | www.iiak.org | March/April 2017
Thank You 2017 Industry Partners (as of 03/16/17) Diamond
Platinum
Gold Acuity KEMI Liberty Mutual Risk Placement Services, Inc. Safeco Silver AFCO Amerisafe, Inc. Keystone Insurers Group KY Associated General Contractors Motorists Insurers Group Secura Insurance State Auto Insurance Company
Bronze Alexander J. Wayne & Associates Anthem Blue Cross & Blue Shield Auto-Owners Insurance Company BITCO Insurance Companies Burns & Wilcox LTD Columbia Insurance Group FCCI Insurance Group FFVA Mutual Insurance Company Frankenmuth Mutual Insurance
InsurBanc J.M. Wilson KESA Market Finders Insurance Corp Midwestern Insurance Alliance Prime Insurance Companies SwissRe Corporate Solutions Summit Westfield Insurance
We know what it took to build this unique business. And we know what it takes to protect it. Underwriters who know and understand what coverages are necessary for each unique business. Loss prevention professionals who use a hands-on approach to help develop programs tailored to each specialty business. Claim reps with the expertise and technology to process claims quickly and efficiently. As an Official Supplier of the Silver LiningÂŽ, you and West Bend will find a specialized insurance plan for your valued customers. To find out more, talk to your West Bend underwriter.
Relax...
You’ve offered each of your clients a personal umbrella policy.
Right? It might not be quite as relaxing as a day at the beach, but knowing you’ve done everything in your power to protect the customers who trust you to help them will go a long way towards easing your mind. Offering each and every client an umbrella not only protects those who choose to purchase the coverage. It protects your agency from liability. And it protects your book of business, since studies show that customers who have multiple policies are less likely to move their business elsewhere. As a Big “I” member, you have access to a stand alone personal umbrella program from A+ rated carrier RLI, featuring: Limits up to $5 million available Excess UM/UIM available in all states You can keep your current homeowner/auto insurer New drivers accepted - no age limit on drivers Up to one DWI/DUI per household allowed Auto limits as low as 100/300/50 in certain cases
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Established Louisville agency interested in acquiring insurance agencies in Jefferson and surrounding counties. If you are interested in selling, merging, or need assistance with perpetuation, we would like to talk with you in confidence.
Independent with top best markets looking to expand presence in Jefferson, Oldham or Shelby counties. Wanting Personal lines, Producer or book of business to move or purchase. All arrangements possible, in strict confidence.
Call R. Alex Rankin, CPCU or Philip Anderton, CIC, at Sterling G. Thompson, Co. at 502-5853277
Please send inquiries to Turner Insurance Agency, 2460 Shelbyville Road, Shelbyville, KY 40065 or call Kurt Turner, CPCU at 502-633-6060.
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