Kentucky IA - May/June 2014

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kentucky ia May/June 2014

What’s Next for Cyber Insurance – pg 12

John Funkhouser: A Passion for Education and Trusted Choice


S T R E N G T H

I N

N U M B E R S

Our 'Strength in Numbers' comes from our dedicated and highly-skilled employees along with over 33 years of our strong commitment to be a fiscally responsible fund. Everyday at KESA, we come to work with one goal in mind - to be the best. We want to provide the best service, underwrite accounts with precision, care for injured employees with clear and accurate communication, answer every question quickly and knowledgeably, and be the unequivocal first choice for workers' comp in Kentucky.

Contact us about our SAFETY W.O.R.K.S program at www.kesa.org. 200 Executive Park, Louisville, KY 40207 502.894.8484 | 800.367.5372 | www.kesa.org


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In the Spotlight

In Every Issue

6 Cover Story: Funkhouser Interview 11 How to Turn Data into Actionable Insights

4 From The Chair 5 Trusted Choice Freedom Campaign Benefits Spotlight: Important Update to Laws 16 Regarding Cyber Liability

12 What’s Next for Cyber Insurance? 17 Stop Wasting Time: Use Claims Download

16 Welcome New Members

Custom Agency Apps Can Enhance the Client 19 How Experience

24 What Makes a Great Agency Website?

26

The Digital Shopping Mall: Be There or Be Nowhere

22 People In The News 25 Classified Ads 25 Education Calendar 30 Industry Partners

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; E-mail IIAK@iiak.org; Fax (502) 245-5750.

Officers

Directors

Staff

John Funkhouser, CIC, CWCA Chair; Danville (859) 236-5922

Chip Atkins Louisville, (502) 585-3600

Peggy P. Porter President/CEO

Michelle L. Love Chair-Elect; Owensboro (270) 926-2806 David M. Houk Vice Chair; Horse Cave (270) 286-2724 James D. England, AAI Treasurer; Pikeville (606) 437-7361 Stephen R. Kinkade, CPCU, AAI National Director; Leitchfield (270) 259-5465 William S. Latta Immediate Past Chair; Henderson (270) 827-3543

Jason D. Billington, CIC Murray, (270) 753-4751 Allen J. Crawford, CIC Somerset; (606) 679-6311 Diana G. Hunt, CIC Barbourville, (606) 546-4132 Michael G. Johnson, CIC Lexington, (859) 233-1461

Crystal Brown Administrative Assistant Katie Freshley Education & Events Director Nikki Petrowski Communications Director Tara Purvis Marketing Director

Aaron LaRue Bardstown, (502) 348-0050 Skip McGaw, CIC Madisonville, (270) 821-3122

Kristie Weyer Insurance Services Manager

Mark “Ross” Richey, AAI, CWCA Bowling Green; (270) 754-4881 Ray A. Robertson, CIC Mt. Sterling; (859) 498-3410

The Kentucky Independent Agent welcomes all advertising and editorial submissions. Inquiries for advertising, news releases and editorial contributions can be directed to: Nikki Petrowski, 13265 O‘Bannon Station Way, Louisville, Kentucky 40223, Ph: (502) 245-5432, Fax: (502) 245-5750, Email: npetrowski@iiak.org

Mission Statement

The mission of the Independent Insurance Agents of Kentucky is to be the preeminent advocate for Kentucky Independent Insurance Agents and support their business and professional development needs.

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Kentucky IA

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From the A

Chair

dvocacy. Wow, what a show of force we had in April in Washington DC. Over 1,000 IIABA members from across this great land took

YOUR message to the hill. Democrat or Republican, it doesn’t matter, having your voice heard in DC does. We were received warmly and our KY delegation made us proud. Thanks to those who took time out of their busy schedules to make the journey. It was especially refreshing seeing so many of our young agents attend. “Be the preeminent advocate for the Independent Insurance Agent and support their business and professional development”. Yes, IIAK’s mission statement. In my opening paragraph, advocacy is working and continues to work. This process doesn’t stop once we are back from DC, or Frankfort for that matter. CAP is moving full steam ahead. While some may think or judge its success by getting leads through the portal from quotes, there are other ways that you may be getting leads today that you don’t even know. Through www.trustedchoice.com, consumers can search for IIAK member agencies. So, you may be receiving leads from Trusted Choice without realizing it. When your office phone rings or someone reaches out to you via email ask how they heard about you and your agency. IIAK would love to know when you have success through Trusted Choice.com.

John Funkhouser 2013 - 2014 IIAK Chair

Another exciting bit of news is the launch of a radio campaign throughout the state that started on May 19th and will continue through the end of July. Keep your ears open for these 30 second spots during the drive time hours this summer! This time of year means graduations and weddings for many. What a better time as a Trusted Choice agent to be reaching out to your current clients and prospects to show what they may need during these life changing events. Show them the real value of dealing with a Trusted Choice professional who does not have a “one size fits all” solution. Be safe and have a great summer. John A. Funkhouser

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www.iiak.org



cover story

anville is sometimes called the

D“City of Firsts”. It is home to

the first Kentucky courthouse, first post office west of the Allegheny Mountains, and the oldest college administration building sits on Centre College’s campus in downtown Danville. This year, Danville can add another first to its list. John Funkhouser is the first Danvillian to become an IIAK chair. John is Vice President at Johnson & Pohlmann, and he was able to set aside to time to talk to us about everything from his love to the Kentucky Wildcats and all bodies of water to his time as IIAK chair and his views on the future of our industry.

John Funkhouser with his fellow Johnson & Pohlmann partners and longtime friends, Scott Burks and Ray Whitehouse

So, how did you first get involved with insurance? I worked at a bank in Lexington for two years after being at UK and moved my way up the ranks and was even the head teller in the main vault. After some other ventures, I found Johnson Pohlmann in 1996. But I knew I wanted to set myself apart, so I started taking the Certified Insurance Counselors (CIC) program in November and received my CIC designation 12 months later. Tell me a little bit more about Johnson Pohlmann. Our history goes back to the 1930s. It wasn’t Johnson Pohlmann back then, but we can trace our roots back to that time. The agency itself has a strong Travelers background. We do all lines, property, casualty, both personal lines and commercial lines. I am one of the few in our industry who do both sides of the business – the benefits, life and health, plus the commercial side. I enjoy both sides. I spend about 60% of my time doing life and health and about 40% doing commercial. Why a private agency versus one of those bigger names out there? It all goes back to our name – Independent. I like having the choices – or even a Trusted Choice. It may sound corny, but it’s true. No disrespect to the bigger insurance names of the world, but they are in a box. I know I’m sounding like the Trusted Choice commercials now, but they’re true. They know their products, but they do only have one of every product so there isn’t much of a challenge.

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What are some of the challenges you have faced during your career as an independent agent? Well, as I mentioned earlier us vs. the bigger names, they have one product and we have several. That is both a pro and a con. We are able to offer more, but that means we have to know more. Also, a big challenge is not just keeping up with technology but stay ahead of the curve. What does a typical day look like? Ha! Is there a typical day? That’s what I like the most; that we’re always changing. If someone gets bored in our industry, they’re not doing it right. But on a normal day I am in the office by 7:30 and leave around six, but I’ve been known to be here into the wee hours. How do you get involved in your local community? There is a local nonprofit here in town called the Wilderness Trace Child Development Center. They work with children with all types of developmental disabilities from birth to school age. I was fortunate enough to be on their board when they were newly formed back in the 80s. I have been blessed with four healthy daughters and now a healthy grandson. I know that not everyone is that fortunate. So doing things with kids has always been something that I’ve enjoyed being a part of. For example, I give talks at local high schools and participate in a real-life simulation called The Reality Store each year with middle schoolers. I have so much fun and enjoyment doing that. I have one teacher at Boyle County High School that invites me to her class a couple times each year.

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cover story

I also volunteer with Heart of Kentucky United Way. I’ve been on the steering committee and a chairperson for a number of years. I enjoy doing that because I think that helps touch so many throughout our community. I am also past president of a startup nonprofit here in Danville called SPAN, the Special Persons Advocacy Network. They employ people with special needs, from 18 years of age to those in their 60s. A lot of their caregivers were concerned about what would happen to their loved ones when the caregiver could no longer care for them. I’ve been very involved with the Home Builders Association. I have a construction background, my grandfather was a bricklayer so I learned how to lay brick when I was younger. I’m a roll up the sleeves kind of guy, so I enjoyed the work, but I just wanted to go a different route and become an insurance agent.

John’s passions are prominently displayed in this office: family and the University of Kentucky and a sampling of his bourbon collection.

It sounds like you’re really involved in the community. What about personal interests? I don’t discredit the game of golf by saying that I’m a golfer, but I do attempt to play golf. The golf course isn’t somewhere I can relax – I’m too competitive. Plus, I stink at golf! I love the water; lake, ocean, it doesn’t matter. How do you strike a balance between work and your family life? In that aspect, how has your family helped you with your career and daily work life? Ha! I’m not really sure I’ve figured that out yet. Have I mentioned I’ve been married 4 times? But seriously, I know that I’ve missed more family time than I would like to think, but at this point in my life I’ve also been able to take some special trips that I wouldn’t have been able to take otherwise. Like a couple of weeks ago, I took off and took my 8 year old daughter to Virginia Beach for a dance competition. The sacrifices that I made in my early career have allowed me to have that luxury. So how have you liked being Chair? What are your plans for afterward? I enjoyed the heck out of it. I’m still working on what I’m going to do with my free time when my tenure is up. My year as chair will be up in www.iiak.org

November, but I don’t think you’ll just see me ride off into the sunset. I’m working on getting on the Trusted Choice board at the national level. You’ll definitely see me stay pretty hands-on in education because that’s something that I believe in. I’m actually working on my CRM designation right now. What has been the most valuable benefit you have gained by being a member of IIAK? Hands down, the relationships that I have formed and built over the years. Both inside and outside of the industry. As many people know, I lost both of my parents within a 6 week time span last summer. This totally turned my personal world upside down. The support that I received from my dear friends throughout the great Commonwealth of KY was amazing. People from all across the state drove in to see me and my family during this time. The phone calls, cards, letters and emails were a blessing; you can’t put a price tag on something like that. I realize that our business and association are changing and will have to change because of the digital environment. The one message that I want to send out to our young people is not to let everything go digital, I Kentucky IA

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cover story

on the P&C side, I’m a big proponent of having an umbrella. I don’t think having a million is enough. I hear a lot of agents trying to sell an umbrella and they don’t have one themselves. I don’t know how you do that. I believe in what I sell. Do I like paying premiums? No, I don’t get a discount on anything, but I’ve seen too often what it does. What do you see as some of the key steps fellow members can take to enhance our association and the insurance industry both at the state and national level? Making what we’re doing with Project CAP tangible. It has been indicated that over 75% of users on the personal lines side start their research online but the majority want to finish face-to-face. When it comes to CAP, we need our members help in figuring out how CAP is working. We’ve got to get our members to ask, when the phone rings, “How did you hear about us?” If our membership isn’t asking, we’ll never know how effective it’s been. So many have been caught up in the ratings portion of the portal, and that’s only a small portion of the whole program. There’s 80 million members of Generation Y and they are making decisions based on online reviews. It’s important for independent agents to join CAP and to be a part of this movement. The staff at Johnson & Pohlmann have found an interesting way to boost morale – and a little friendly competition. Each staff member has a Nerf “weapon” and there are often impromptu battles on slow days.

believe you lose too much of the personal touch. Had it not been for the great relationships that I have formed over the years in the industry, last summer would have been a much more difficult time. If someone wants to be successful in this business what do they need to have? What do they need to be made out of? Thick skin. Being told “no” is not fun. But, being a guy, it’s no different than dating – you get turned down a lot then, ha! But in all seriousness, having a goal to go after and making that plan and working it will help more than anything. So, for the young person, they have to be dedicated to achieving that goal for it to pay off. One of the things that I was told early on is that it’s difficult to sell something if you don’t own it yourself. I see too many guys out there trying to sell stuff, I don’t care if its life insurance or auto. For example,

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Where do you see insurance going? What about the future? The industry is definitely changing hand over fist.

For the good? Some yes, some no. ACA, let’s go there first. Does it bother me? Yeah, it bothers me. But this isn’t my first rodeo. I really just look at ACA as a speed bump instead of a road block. I think the most crucial thing we have going on is getting new blood into the industry. Statistics say that over 50% of insurance agents will retire within the next five years. That is scary! We need to encourage young people to become agents in order for our industry to survive. We’re a profession that gives back, and our communities are better places with the involvement of independent agents – our responsibility as existing agents is to get those young people in here and build that excitement. Nikki Petrowski is the Communications Director for the IIA of Kentucky. She can be reached at (502) 245-5432 or npetrowski@iiak.org. www.iiak.org


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marketing

How to Turn Data into Actionable Insights by Phil Hatfield

C

an you distinguish between isolated facts (aka “data”) and actionable information?

If you find out Jack and Jill Smith live at 123 Elm Street, that’s an isolated data item and doesn’t prompt any action on your part. On the other hand, if your prospecting system tells you Jack and Jill Smith have just moved into 123 Elm Street from out of state, they both work and they have two children and two cars, that’s another story altogether. Past research and your experience have both shown that moving homes often triggers insurance shopping behavior. That should prompt an action on your part—you should probably introduce yourself to the Smiths. Equally important, when did you learn about these useful nuggets? The best answer would be just at the opportune time—as you are logging into your prospecting system and you’re ready to act on it. That’s an actionable insight. If you’re like most people, you’re drowning in data, but actionable insights are few. Why? It’s a relatively simple technical exercise to collect, store and distribute data. But that alone won’t help you gain a competitive edge or make better, actionable decisions. Here are four ways to stop dumping data and start taking effective action on it instead: • Governance: In order to manage data, not merely collect and store it, companies should designate a person or group to be responsible for marshaling the required resources. Then staff must evaluate the usefulness of corporate data assets and identify gaps in the data resources.

Likewise, carriers collect a vast amount of data but often don’t know what to do with it. Many would appreciate specific requirements for information that will help their agents. For personal lines, that might include any of the following:

• Integration: Gather data from multiple sources, both internal and external to the company, and then link it in a meaningful way to analysis.

• “I’d like a daily prospect list of personal lines prospects in my market area to appear in my prospecting database when I log in.”

• Analysis: Figure out the best means of breaking down data, transforming and recombining it in new ways that yield fresh knowledge.

• “I want a score indicating the prospect’s likelihood of being current active insurance shoppers.”

• Reporting: The best analysis in the world is useless if the insights don’t get into the hands of the decision-makers when they need them, in a format they can understand. What makes the process so challenging is matching the technical knowhow to the business need. For many companies, technical people can create amazing things if you tell them what amazing things you want them to create. But they typically aren’t going to have your business knowledge—and they certainly won’t know your needs. On the flip side, the business people often don’t have the deep technical or data experience to know what’s possible or adequately describe what they’re seeking—which means they end up making vague requests. www.iiak.org

• “I want any additional information about the prospect’s house, autos, family and geodemographic information that will help me understand their insurance needs and make a connection with them.” Will you get what you ask for? Perhaps not all of it and perhaps not all the time. But you may be surprised at what actionable information can be created once you begin the dialogue. Phil Hatfield, J.D., CPCU, leads the modeling data services group for ISO Insurance Products and Analytic Services (IPAS), a unit of Verisk Analytics. This insurance solutions business unit specializes in applying advanced analytic techniques and data management skills to the challenge of accurately assessing risk in the property/casualty insurance industry. Kentucky IA

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What’s Next for Cyber Insurance?

Back to the Beginning: Moving Beyond Breaches by Andrea Wells

T

here’s a saying in the cybersecurity industry that there are two types of businesses today: Those that have been breached and know it and those that have been breached and just don’t know it.

Stability. Longevity.

Cyber-related data breach incidents increased in frequency and severity in 2013, driving cyber insurance buying by double digits last year. The trend is accelerating, according to early signs in 2014 and a Marsh Risk Management Research briefing titled, “Benchmarking Trends: Interest in Cyber Insurance Continues to Climb.”

Integrity

In today’s cyber world everybody has been breached, says Rick Betterley, president of Betterley Risk Consultants Inc. based in Sterling, Mass. In reality, it’s more like continual breaches. “There’s folks that are phishing around in your network right now,” he says. The future of cyber insurance will move beyond data breaches and privacy concerns. In effect, experts say, the future of cyber coverage will mean going back to basics. I think the policy, which in the U.S. market has become privacy focused, will expand back out to become much more about first-party elements. “The U.S. cyber insurance market is being predicated on concept of data breach,” says Graeme Newman, director at CFC Underwriting. “People stopped talking about cyber as a concept and started talking about data breach and data breach response and privacy liability – the market became very fixated on that.” What’s beginning to take shape today and what some experts believe will evolve into the cyber market of the future is cyber coverage that goes back to original product concepts. “What we are seeing now is an expansion back to where we started with cyber in the late ’90s when cyber was much more of a first-party, system damaged, system interrupted product that also picked up some liabilities,” Newman says. Betterley agrees. “From a product development standpoint, breach is getting ho-hum. We are going well beyond good ‘ol breach,” Betterley says. While cyber coverage for data breach is very important, and there will continue to be a lot of data breach claims, in his opinion, the product has matured.

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Consider how the industry went from focusing on the data breach to the response to that data breach. In 2000, when Betterley, author and publisher of The Betterley Report, a publication devoted to specialty insurance products for commercial insureds, began writing about cyber issues, the concept of breach response coverage was vague. By 2005, The Betterley Report mentioned data breach response coverage only as a “side coverage or add-on coverage.”

financial loss,” he says. “I think the policy, which in the U.S. market has become privacy focused, will expand back out to become much more about first-party elements and that’s going to start driving people’s buying behavior.” That move back to the beginning where cyber coverage focused more on first-party elements is already happening, according to John Wurzler, president of OneBeacon Technology Insurance. “Outside of the United States, the rest of the world has a less litigious legal climate and the emphasis of cyber coverage has been the firstparty elements,” he says. “Even within the U.S., the recent innovations in cyber coverage have been on the first-party side as companies recognize that remediation expenses and loss of business due to cyber incidents can have a large financial impact on their organization.”

Today, cyber is “all about breach response,” he says. Breach response will begin to take a back seat, in Betterley’s view. The cyber insurance “pendulum is swinging back to non-response, first-party coverages – such as loss of data, corruption of data and especially business interruption.” “So far, the real cost has been on the first-party side,” according to E. Stuart Powell Jr., vice president of insurance operations and technical affairs for the Independent Insurance Agents of North Carolina. But those costs have come from data breach response costs – credit monitoring, forensics, notification costs, crisis management, among others. In the next five years, the cyber insurance market will move away from data security and privacy issues – which is what everybody talks about right now – to a more all-encompassing cyber product for intangible assets and system availability, Newman says. Newman is already seeing the expanded coverage idea take hold in some companies. “We are seeing companies now understanding that they currently insure their physical assets of the business,” such as plants and machinery, he says. While insurance coverage for those tangible assets is in place, the costs of those assets – the physical equipment – has come down dramatically. “But the value of the data – the intangibles assets of the business – has grown exponentially, and yet they can still buy cover for the physical assets and not the intangibles,” he says.

Interconnected Dangers Underwriters predicting the exposures for the next 10 years have much to consider. “When we talk about how the internet and things are developing and in 10 years’ time, we will undoubtedly have everything from driverless cars to refrigerators and ovens that will be internet connected,” Newman says. As a result hackers will have lots of new crime targets. As an example, in the recent Target breach, hackers were able to get into the corporation’s point of sale software through a connection with a heating and air contractor, OneBeacon’s Wurzler says. Most commercial and new HVAC systems have external monitoring going through the internet to enable adjusting the settings remotely. That’s one of the drawbacks to the “internet of things” for underwriters.

Newman anticipates a mind-shift in the insurance industry and in the way commercial insureds view cyber coverage in five years. He expects cyber insurance to become the direct mirror to a property policy.

“We are currently concerned with the ‘internet of things’ where every electronic device is connected to – and managed through – the internet and can be used to infiltrate larger systems,” says Lloyd Takata, senior vice president of OneBeacon Technology Insurance.

“So right now businesses buy a property policy in case they have physical damage; cyber will become the mirror image of that, which will cover all things – the intangible loss – any non-physical damage giving rise to

Even restaurants can be a risk. “There have also been exploits where hackers introduced malware into the online menus of restaurants popular for

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takeout lunch, so when the menus were downloaded by local corporate employees, the hackers were able to gain access to their company’s network,” Takata says.

While it’s bad enough that cyber attacks cause loss of economic value and physical property, underwriters must also worry about attacks that could bring about bodily injuries as well.

COMMITMENT A PROMISE WE DON’T TAKE LIGHTLY

“We are also concerned that there is a serious potential for real, not virtual, harm if hackers can get into programs supporting healthcare devices,” Wurzler says. “Consider devices that monitor certain functions through an internet connection and automatically dispense medication or adjust body levels of a certain chemical. If these are hacked and disrupted, that person’s health could be at risk.” The bottom line is that there are new exploits every day. As cyber coverage continues to evolve, one coverage area – or loss of coverage – that will become increasingly important to corporations involves the war exclusion and cyber war, according to Betterley.

“With 37 years in the bond business, I know our response time can be the difference between our agent writing a new piece of business or not. I don’t go home at night until every phone call and email has been answered. ”

Steve Kuykendall Surety Manager

“If you think about insurance and you think about war exclusions, and cyber war, you think insurance policies that exclude war-type activities,” he says. Some of the cyber exposures where there have been losses are believed to be war-like acts by other countries. “At what point is the cyber insurance industry going to say that even though we can’t identify who the attacker is, it is believed to be under the sponsorship of a hostile nation and therefore we will deem it a war-like act and we will exclude it,” Betterley says. Right now, if an insured has one of those losses “you can’t really prove that it’s war; therefore you can’t deny the claims,” he says. “Some of us have concerns that the industry is not going to be able to tolerate that level of risk and is going to need to find a way to exclude it.”

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Property/Casualty • Professional Liability Commercial Transportation • Surety Personal Lines • Premium Finance

In Betterley’s view, that exposure presents an opportunity for an insurance product that will buy back that risk, similar to terrorism insurance. While the concept may seem “out there,” the exposure is real, he says.

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agency operations

“There are attacks that are done by ‘bad actors’ in China that appear to be closely aligned to the Chinese government,” he says. While it’s almost impossible to prove, he says, it’s almost certain that other countries are sponsoring cyber attacks on U.S. companies. Those cyber attacks are not about stealing credit card information. “Those attacks are more about breach on how you are designing your latest advanced machine tool, or military device, on and on. At some point you have to wonder how the insurance industry is going to respond because the industry is not in the business of protecting against war-like acts.”

Tip of the Iceberg The opportunities for the future cyber insurance market are plentiful, the experts say. “If you wanted to use privacy as the tip of the iceberg, then 75 percent of the rest of the iceberg has gone unexamined, at least by the insurance community,” says Bob Parisi, Network Security and Privacy Practice leader for Marsh. The significant increase in interest for cyber coverage, as well as new business that was initiated during the third quarter of 2013 as a result of high profile cyber events, has continued and even accelerated so far in 2014, according to a recent Marsh report (see page 32). “The exposure that companies have because of their reliance upon technology – whether it’s point of sale devices, inventory, or even just something as small as email – there’s no company that doesn’t have that technology-related risk as part of their operations,” Parisi says. Businesses that don’t hold privacy risk haven’t been looking at cyber exposures as aggressively as other industry sectors, until now. The technology used by various industries and how that affects cyber risk will be a focus for the next few years, Parisi says. “What you are going to see – and the market has started to respond and provide some solutions – is the industry looking at what happens when technology doesn’t work, when data is corrupted, what happens when the supply chain or manufacturing process because of a technical failure or because the vendor that a business relies on – whether it’s a technology provider or cloud provider or some other vendor – isn’t there when needed and they provide some aspect of the corporate infrastructure?” he asks. When businesses and the insurance industry begin examining that type of risk, then a much broader spectrum of industries will start to embrace cyber coverage, Parisi says.

www.iiak.org

“Financial institutions, retail, healthcare, higher education, all of those industries are very much attune to privacy-related risks. But when you start to talk about technology as the driver behind risk, you start to realize and look at manufacturing, life sciences, pharmaceutical firms – every other industry in addition to those that are concerned about privacy.” People have always thought about online sales as being the driver for cyber but that psychology is changing now, according to Newman. The Target breach, as an example, had nothing to do with online sales. “It was their traditional point of sale software,” Newman says. “Whether you are a small retailer on a corner shop or a huge global retailer it is irrelevant, you are as exposed, you are a target for cyber criminals. While the cyber insurance industry has seen a huge influx of buyers since the Target breach, Newman predicts that within the next five to 10 years cyber coverage will be the norm in all industries. “Cyber as a product will be as mainstream as buying a property or commercial general liability policy,” Newman predicts. “It will be seen as a core pillar of anybody’s insurance program whereas now it’s seen as a niche product or an ancillary product.” Newman believes fewer than 15 percent to 20 percent of businesses purchase cyber coverage today. “But my guess is that percentage will move to 70 percent to 80 percent in five to 10 years’ time.” What happens in the future is anyone’s guess, and predicting can be a dangerous game, says Powell. But based on his decades of insurance industry experience, Powell believes the future of cyber insurance might follow the path of other insurance products. “I remember 20 years ago now when employment practices liability was first coming on to the scene and it was all surplus lines market business,” Powell says. Coverage was very expensive, with high deductibles. EPLI forms differed tremendously and policy applications were complicated. “Within 20 years employment practices has evolved to be included into most standard package policies,” he says. Powell believes that it’s reasonable to assume that cyber insurance will follow a similar track. “Right now the problem with cyber is we don’t have a lot of experience; it’s a little bit risky to price because you don’t have historical data,” Powell says. In a few more years that will change. “Once experience develops and pricing becomes more precise, I think you’ll see it become a more standard coverage issued by standard markets.”

Kentucky IA

| May/June 2014 | 15


benefits spotlight

Important Update To Laws Regarding Cyber Liability

O

n April 10, 2014, Kentucky Governor Steve Beshear signed H.B. 232 into law, making Kentucky the 47th state to enact data breach notification legislation. This bill requires consumer notification when a data breach reveals personally identifiable information. The bill applies to any person or entity conducting business in the state or any public agency. H.B. 232 also includes a separate section addressing the protection and processing of student data by cloud computing service providers. This law goes into effect on July 15, 2014.

What does this mean for you and your agency? Responding to a breach is a complicated process that requires the assistance from many different professionals. Failure to notify the affected individuals “without unreasonable delay” could cost your agency up to $1,500,000 in fines from government agencies. Add this to the $200,000 average cost to comply with notification laws, the legal liability and the reputational harm caused by the breach and you can quickly see how this exposure can be devastating to your agency.

Welcome New Members We welcome the following to membership in the Independent Insurance Agents of Kentucky since our last report: Agency Members

Lex Insurance – Lexington Lexington Equine Insurance – Lexington

The Independent Insurance Agents of Kentucky, its officers and staff look forward to serving these new members with the best membership benefits and related products and services available. 16 | May/June 2014 | Kentucky IA

Independent Insurance Agents of Kentucky has partnered with Arlington/Roe & Co., Inc. to offer our members an exclusive program to help protect their agencies from information security breaches. This program is a holistic risk management process that will help train your staff on privacy compliance in addition to handling data breach notification and third party suits. This program offers the following benefits: •

No Encryption Requirement

HIPAA Compliance Tools

Step-by-Step Procedures for Compliance

Data Breach Coach to help with notification

Forensic Investigators

Privacy Counsel

Call Center

On-line compliance materials

Staff training programs

Credit Monitoring

Security & Privacy Liability

If you would like additional information or have any questions regarding this program, please contact Kristie Weyer at IIAK at (502) 245-5432 or via email at kweyer@iiak.org. www.iiak.org


agency services

Stop Wasting Time: Use Claims Download by Donna Lagoy

A

s technology continues to improve agency operations, independent

to look at anything that has transpired during the

agents and brokers are enjoying more opportunities to serve their

current day. For example, the adjuster had not been

clients more promptly and effectively in claims situations. Promising to

assigned when the claim was downloaded, and you

make agency workflows more efficient, most of these new capabilities have

need that information today.

already been introduced by some carriers—and agents will play a critical role in expanding their usage.

7. Any updates to the claim will download each night (or at given intervals during the day, if the carrier and vendor

Claims Download: automatic downloading of new

provide this feature). Again,

claims and claims status information into agency

this download information

management systems. An ACORD standard is already

will populate a log for

in place for claims download, and several vendors and

review.

carriers have begun to implement the new capability.

8. The agency is now in

Claims download, which could save the typical agency

the position to run reports

hundreds of hours per year, allows for all of claims to be: •

from the agency management system to track losses.

Automatically entered into the agency management

Additional tools not represented in the

system • •

above process include the following: First

Updated as the status is changed

Notice of Loss (FNOL) Claim Reporting, which allows the agent to submit the claim

Closed when the carrier closes it

Recommended Claims Workflow: how do claims download, Real Time claims inquiries and email or Activity Notes work most efficiently together? Consider the following workflow:

to the carrier and instantly receive the claim number and adjuster for the claim—and therefore the ability to provide the client with the necessary information on the spot; and Real-Time Loss Runs, which allows the agent to request loss runs through the agency management system and

1.

2.

The claim is reported directly to the carrier by the

receive them back from the carrier in Real Time, providing clients with

client.

immediate service and saving considerable time for the agent.

The agency receives an instant notification of loss in the form of an email message or Activity Note.

3.

Overnight, the claims are processed via a batch process and downloaded into the agency management

4.

5.

Agents Council for Technology website. Agents, carriers and vendors must continue to work toward harnessing the exciting technologies that are already available to us, in order to make our distribution system more

system.

efficient and responsive.

A log is waiting for the agent in the morning, when he

Donna LaGoy, a former independent agent, is now a client partner of

or she comes in to review what was attached (similar

Applied Systems, Inc. and chair of the ACORD Claims Download Working

to policy download) and what went to suspense to be

Group. She is involved with the Big “I” Agents Council for Technology (ACT),

attached.

AUGIE, ACORD and ASCnet.

The claim is now in the agency management system and is ready to be serviced.

6.

Additional details about these new technologies are available on the

This article reflects the views of the author and should not be construed as an official statement by ACT.

If necessary, agents can use claim inquiry at this point

www.iiak.org

Kentucky IA

| May/June 2014 | 17


18 | May/June 2014 | Kentucky IA

www.iiak.org


How Custom Agency Apps Can Enhance the Client Experience

mobile technology

by Sydney Roe

Why have so few independent agents ventured into the world of app development? Concerns about financial investment and time commitment aside, many still view the app world as an enigma. “I think there was some confusion—and there still is—in the industry about how to get started,” explains Ron Berg, executive director of the Big “I” Agents Council for Technology (ACT). Focusing on a solid goal can help provide clear direction. A good place to start? Striving to optimize apps for the consumer experience. Berg encourages agents to ask themselves: “What are the expectations for having service and opportunities delivered to customers through the insurance discovery, the insurance research, the insurance buying and the insurance servicing journeys?” A few independent agents have already explored this question. Eric and Marc Petersen of Petersen & Associates contracted with a general app developer to create a product that would streamline common processing requests through fillable forms, help create a home inventory utilizing a smartphone’s camera, provide the Web links and phone numbers of their companies for billing purposes, and assist customers with reporting a claim. “It was a good way to differentiate ourselves in our local market, as well

W

hile using apps has become increasingly more common among independent agencies, developing custom apps at the agency

as make our customer service more seamless,” explains Eric Petersen, commercial lines manager at Petersen & Associates.

level is a fairly new frontier—especially apps designed to enhance the

While general app developers welcome any design request, third-party

client experience. “A lot of the companies have apps they’re coming out

developer Blue I caters specifically to the insurance industry. Those

with now, but we still don’t think any other agency in our area has an

concentrated efforts allow the Charlotte, N.C.-based company to constantly

agency app,” says Marc Petersen, personal lines manager at Petersen &

push the line of technology forward.

Associates in New Berlin, Wisc. www.iiak.org

Kentucky IA

| May/June 2014 | 19


mobile technology

Claudia McClain, president of McClain Insurance Services in Everett,

Still, it’s not enough. Bridging the app with the agency’s management

Wash., says the Blue I app is one her clients can “really use as a tool,

system, QQ Solutions, is Paradiso’s next step—doing so would allow

not just a glorified rolodex.” In addition to an agent dashboard, features

information from the agency management system to upload directly into

include tying the geo-locator to claim reporting, allowing the home

the app. It’s still in the development stage, but Blue I and QQ Solutions are

inventory to access the cloud and increasing communication through

working hard to make bridging a reality.

push notifications—all of which provide greater flexibility to client and agent alike.

“You cannot ask your customers to take photos of their insurance cards and think that that’s the future—it isn’t,” says Paradiso. “Every year or

Chris Paradiso, president of Paradiso Insurance in Stafford, Conn., also

every six months, they’re going to have to update it. The future is the

uses the Blue I app. “Apps are great—the problem is agencies are buying

bridge.”

the wrong apps that do nothing for them or their clients,” he explains. To rectify that, Paradiso is currently working with Matt Aaron, Blue I president, to develop an app feature specifically for the commercial trucking industry, which will help streamline documentation procedures during inspections.

Want more on app development? The Big “I” has created a tablet app for IA magazine, and ACT has created multiple work groups to help agents expand their understanding of the app world. For more information, contact Ron Berg or visit the ACT website. Sydney Roe is Big “I” public relations intern.

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20 | May/June 2014 | Kentucky IA

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people in the news

Petrowski joins the team at IIAK Nikki S. Petrowski has joined the team at IIAK as Communications Director. She is a 2008 graduate of Western Kentucky University with a BS in Public Relations and Interactive Advertising. Prior to joining IIAK, Petrowski worked in the lottery industry as a graphic designer. An Alabama

Nikki Petrowski Communications Director

native and diehard fan of the Crimson Tide,

Dexter receives Distinguished Agency Award Matt Caudil, regional field manager with Allstate Insurance Co., recently presented Mark Dexter of Sam Dexter Insurance Agency, Inc. the

she resides in Louisville with her husband and three beagles. She can be contacted at IIAK via email at npetrowski@iiak.org.

“Distinguished Agency Award” for 2013. The award is based on exceptional growth in the number of new customers and high levels of customer satisfaction. Out of 75 independent Allstate agencies in Kentucky and Tennessee, only 10 attained the “Distinguished Agency Award.” Sam Dexter Insurance Agency, Inc. was founded in 1954 by Sam Dexter after a career in law enforcement. As an independent agency, Sam Dexter Insurance Agency, Inc. represents many insurance companies to offer clients more choices. The agency is at 461 W. Main St. in downtown Danville.

22 | May/June 2014 | Kentucky IA

Steve Ford, Denny Desmond, James England, Tim Conder and John Funkhouser came to say goodbye to Arlene and wish her well.

www.iiak.org


people in the news

IIAK bids a fond farewell to longtime employee On April 24, IIAK gathered for a luncheon in honor of Arlene Adonis-Hawkins to say goodbye before she makes the move back to her native Australia. She worked with IIAK for over 11 years as Director of Communications. She will be greatly missed!

Tee Cee looks on as Arlene opens some gifts from the team. He gave this horse necklace two hooves up! Tara Purvis conducts an Australian vocabulary game to make sure that Arlene is still up to date on her Aussie lingo.

The IIAK team (L-R): Nikki Petrowski, Peggy Porter, Arlene Adonis-Hawkins, Katie Freshley, Tara Purvis, Crystal Brown and Kristie Weyer

www.iiak.org

Kentucky IA

| May/June 2014 | 23


agency management

What Makes a Great Agency Website? by Marty Agather

A

2014 report by the Hinge Research Institute found that previewing a provider’s website is the primary

method consumers use to research professional services, with 81% of survey respondents using a website review to determine the quality of a business. That means if you’ve been neglecting your agency’s website design or performance, you’re doing it wrong— and you need to seriously consider the steps you should take to make your website great.

Be Professional If you invited your neighbors and professional acquaintances over for a holiday gathering, you’d want your home to be clean, well-decorated and welcoming. The same mindset should apply to your agency website. Does it display your agency in the best possible light? A professional website exhibits a number of attributes:

by typing the agency name into a search engine. Considering recent

• Appealing visual design with plenty of original images

comScore data reports that 70% of insurance shoppers start their research

• Relevant, original content for the target audience

Yahoo, that means anyone who doesn’t already know your brand won’t be

• Lack of errors • Evidence of honesty and integrity • Prominent display of agency contact information • Customer testimonials • Brand differentiators

on the Web, primarily through a search engine like Google, Bing or able to find your website. Here are a few ways you can improve your website’s rankings on search engine results pages: •

Cost Per Thousand (CPM) mediums •

The only way your website will provide any value to your clients and prospects is if they see it. The No. 1 challenge for too many independent insurance agencies is that potential visitors cannot find their website— leaving the number of visitors per month at a few dozen.

Carefully engineer your website using search engine optimization (SEO) techniques

Drive Traffic

Purchase advertising through Pay-Per-Click (PPC) or

Develop your social media presence

Participate in local directories

Invest in producing unique rich media/video

And don’t forget mobile. A recent Big “I” Young Agents webinar reported For most insurance agencies, the only way buyers find them online is

24 | May/June 2014 | Kentucky IA

that 50% of insurance shoppers now start their shopping on a mobile www.iiak.org


device—and 64% of them will leave your site if you have not optimized it for mobile use.

Call to Action A common misconception regarding insurance websites is that as soon as a visitor arrives, they’ll buy a policy. While this might happen once in a blue moon, most visitors arrive at a website and immediately do one thing: hit the “back” button. Think about your own recent Web browsing experience. Many of the links you clicked took you to a page that had little if anything to do with your interest, and you immediately hit the “back” button. But if you find a page or site that matches your interest, you scan, read a bit and perhaps click to another page on the site. The first action you want visitors to take upon landing on one of your Web pages is to not back away. Then, you’d like them to stick around a bit and find out if your agency can help them. One way to encourage action is to talk specifics rather than generalities. Which of these two statements is more powerful? “The Doe Agency specializes in managing our clients’ risks. Ask us to help.” “The Doe Agency’s long association with the Injection molding Society of Illinois has taught us that many molders don’t have enough coverage for clients’ molds. Call today for an explanation of how the destruction of customers’ molds could cost you thousands of dollars.” The specificity of the second statement suggests plastic injection molding accounts might have an exposure lacking adequate coverage while also revealing the agency’s expertise. It’s a stronger call to action than the first statement and a great example of why it’s important to have several pages on your website devoted to the niches of your agency’s specialties. If your existing website isn’t generating sales opportunities for your agency, you should begin the process of identifying the goals for a new website sooner rather than later. www.iiak.org

Classified Ads

Acquisitions

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. Call R. Alex Rankin, CPCU or Steve B. Thompson, CPCU, at Sterling G. Thompson, Co. at (502) 585-3277.

Looking for Producers

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. Please send inquiries to Turner Insurance Agency, 2460 Shelbyville Road, Shelbyville, KY 40065 or call Kurt Turner, CPCU at (502) 633-6060.

Producer Wanted

Louisville Insurance LLC has producer opportunities with flexible compensation plans while offering ownership in book of business produced. Confidentiality provided to all interested parties. Contact Glenn Pike at 502-473-5454 or glenn@louisvilleins.com.

Commercial Property/Casualty Producer/Partner

. Excellent opportunity for right person. Commissions over 50% to producer. Ownership from day one. Excellent markets and support. Contact Frank at Mutual Underwriters at 502-550-6791 (in Strict Confidence). To place a classified ad please contact IIAK at IIAK@iiak.org or (502) 245-5432. Kentucky IA

| May/June 2014 | 25


project cap

The Digital Shopping Mall: Be There or Be Nowhere

by Marty Agather

T

hink your agency website only needs to provide a general overview of services, essentially acting as an online brochure? Consider

these facts: • 20% of all consumers currently purchase their auto insurance online. • 58% of Generation Y, or millennials (everyone born from about the early 1980s to the early 2000s), use carrier websites to gather information on insurance. • 48% of younger users gather quotes directly from carrier websites. • While 52% of all life insurance purchasers prefer to buy directly from an agent, 21% prefer to make this

better about their purchase decision and are more likely to remain loyal. Steady, valued communication is a key element to building this trust. It doesn’t happen overnight. Update your website regularly through news content and links. Liking, following or leaving replies on other sites are simple ways to build your online footprint. Select online tools that best suit your purposes. If you are seeking to engage the public through a community service project, Facebook is a natural choice. Trying to entice major business clients? Focus on LinkedIn, or post whitepapers on topics that demonstrate your expertise in a particular specialty. The goal is to make your agency visible, accessible and relevant.

important financial purchase online. Sources: Comscore 2011 Online Auto Insurance Report, 2011 JD Power Shopping Study, Accenture. As your youngest prospects—those most comfortable with online shopping—continue to age, the volume of online business transactions will likely continue to rise. So what are the minimum requirements to compete in this virtual mall? Make your agency easy to find online. This requires you to produce and update content for your site. If you have a blog, at a minimum post weekly. Keep your blog conversational, fresh and relevant. Avoid a hard sell, positioning yourself instead as a trusted resource, so that a customer ready to buy will think of you first. An Accenture study found that 75% of purchasers rank trust as a primary measure of selection. Ultimately, if consumers trust the agent, they feel

26 | May/June 2014 | Kentucky IA

Tools from Project CAP can help simplify your task. As the launch of its consumer portal nears, get your other online material in place and ready for customer review. Ensure that you’re speaking with one voice, and presenting your brand www.iiak.org


project cap

with a consistent, positive, cohesive effort. If you feel as if you have too

Project CAP was created through an alliance of the Big “I” and affiliated

much on your plate, concentrate on only one or two online efforts. It’s

state associations, Trusted Choice® and insurance carriers to expand the

better to execute a few online projects well than to dabble half-heartedly

independent agent’s share of the personal lines insurance market.

in many. Any work now will pay off later. When the consumer is ready to shop those virtual shelves for insurance, your products and your brand will be right at eye level— ready to be pulled and put into that prized

800-226-3224 www.fcci-group.com

shopping cart. So, ready or not, the online, virtual shopping mall is in place. People are already accustomed to making purchases, or at least window shopping virtually. And this trend isn’t slowing—it’s accelerating. In fact, statista.com found that in 2010, 172.3 million Americans were online shoppers and had at least once browsed products, compared prices or bought merchandise online. During that year, e-commerce sales amounted to $228 billion. What’s more, the researchers at Statista project a 20.6% increase in just six years to 206.8 million online shoppers by 2016. The train, as they say, has left the station. Are you on board? Marty Agather is vice president of client development for Project CAP.

“Local presence is the key to FCCI’s claims resolution. I’m able to meet with our agents, policyholders and injured workers and help them through the claims process. Each claim is different, but in each one I listen to the customer’s or claimant’s issue and offer resolution that considers the entire scenario. FCCI empowers me with decision making authority, and that allows me to build trusting relationships and to resolve issues fairly.” Lisa Dalton, AIC Claim Specialist FCCI Insurance Group Midwest Region St. Louis, Missouri Now, let’s talk about your business.

Project CAP provides digital marketing tools and services to help independent agencies, brokers and insurance carriers build their

General liability t Auto t Property t Crime Workers’ compensation t Umbrella Inland marine t Agribusiness t Surety Coverage available in 18 states. © 2014 FCCI

online brands and visibility in order to attract and interact with today’s digital consumers. www.iiak.org

Kentucky IA

| May/June 2014 | 27



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industry partners

Calling All Companies, Wholesalers and Vendors – Support Independent Agents Today!

The Independent Insurance Agents of Kentucky invites your company to become an Industry Partner.

T

he Industry Partners program allows insurance companies, wholesalers and vendors, to support IIAK on an on-going basis. IIAK Partners receive year-round exposure to members of the Independent Insurance Agents of Kentucky through a wide range of benefits and signifies you as a supporter of the Independent Agency System. Your backing makes it possible for IIAK to develop affordable, quality programs that enhance the professionalism of Kentucky’s independent insurance agents. The value you receive as a Partner for the year far exceeds the cost, and the benefits you receive are exclusive only to Partners. There are seven levels of participation available: Premier, Diamond, Platinum, Gold, Silver, Bronze and Sterling. Each level has a sponsorship value, with benefits allocated to it.

IIAK Partners receive year-round exposure to members of the Independent Insurance Agents of Kentucky through a wide range of benefits and signifies you as a supporter of the Independent Agency System.

Benefit to you:

Year-round exposure and access to member agents of the Independent Insurance Agents of Kentucky.

Savings:

The value you receive from the benefits of your participation as a Partner, far exceeds the cost.

Exclusive:

Many of the benefits you receive as a Partner are not available to other companies, wholesalers and vendors—at any cost!

Convenient:

This is an annual, one-time solicitation. No hassle.

Questions?

Contact IIAK by phone at (502) 245-5432 or email iiak@ iiak.org.

30 | May/June 2014 | Kentucky IA

(as of 5/16/2014)

Premier Level

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Acuity Keystone Insurers Group Bronze Level

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