November/December 2015
New Year, New Customer Base? Page 12
Convention Memories Page 16
KESA has been hitting the road in our beautiful state for 35 years. We have been meeting with our policyholders, handling claims, visiting our agency partners, conducting SAFETY WORKSTM seminars, and implementing loss prevention programs. KESA’s goal is simple - to reduce workplace injuries and keep Kentucky employees working safely and productively. KESA knows Kentucky.
200 Executive Park, Louisville, KY 40207 502.894.8484 | 800.367.5372 | www.kesa.org
Inside
What's
Page 9
Contents
12 New Year, New Customer Base?
Page 12
16 Convention Memories 22 How Wearable Tech Will Affect L-H and P-C Insurance in 2016 25 From Fountain Pen Ink to E-Files: Developing a Records Retention Policy
Page 25
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 Petrowski at the editorial office address or via email at npetrowski@iiak.org
In Every Issue 4 From the Chair
30 Advertiser Index
5 DOI News
30 Classified Ads
7 Education Calendar
30 Social Media Links
9 E&O
30 There’s an APP for that
18 Industry Partners
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 | November/December 2015 | 3
Chair
Officers
From the
David M. Houk Chair, Horse Cave 270.786.2724 George L. “Chip” Atkins Chair-Elect, Louisville 502.585.3600 Michael G. Johnson, CIC Vice Chair, Lexington 859.233.1461 James D. England, AAI Treasurer, Pikeville 606.437.7361 Stephen R. Kinkade, CPCU, AAI National Director, Leitchf ield 270.259.5465 Michelle L. Love Immediate Past Chair, Owensboro 270.926.2806
Directors Allen J. Crawford, CIC, CSRM Somerset, 606.679.6311 Neel Ford, AU, CPIA Owensboro, 270.926.2806 Sharon B. Hill Jamestown, 270.343.3144 Aaron LaRue Bardstown, 502.348.0050 Skip McGaw, CIC Madisonville, 270.821.3122 Crystal Reid, CIC Paducah, 270.442.3533 Ray A. Robertson, CIC Mt. Sterling, 859.498.3410 Laura Yount, CIC, CISR London, 606.878.0100
Staff Peggy P. Porter President & CEO
Convention has come and gone and we’re in full holiday mode and 2016 will be here before we know it. As I shared during convention, I am thankful that I was able to begin working with my father, Chris Houk, at his agency many years ago. While I’m still not sure what he was thinking when he asked his long-haired, hardheaded, hyper son to work for him, I am truly thankful for the fastastic experiences over these last 3 decades. I was lucky to be brought into this industry by my father and to have two of my children work with me. However, our industry is still in need of a bigger presence from younger generations and I encourage each of you to actively seek that breath of fresh air for your agency. Maybe its a bright young person you know from your church or they’re a friend of your children - maybe they’re YOUR child. In any instance, take time to show them what our industry has afforded you and the opportunities it holds. Just as thankful as I was for my father asking me to join his agency, I am also thankful that a conversation with Phillip Hunt several years ago turned into a board appointment. I can’t say enough good things about this experience. The friendships that my wife, Melinda, and I have made have been life-changing and I hope will last long after my time on the Board of Directors. In closing, I would like to say that I am not only excited about where our association has been, but also where we’re headed. From our E&O program, group health program, education opportunities and lobbying efforts in both Frankfort and Washington, D.C., we have placed ourselves in a very strong position to do great things. I am looking forward to the year ahead and honored to be your 95th chair. If there is anything that I can do, please don’t hesitate to reach out to me. Sincerely,
Crystal Brown Administrative Assistant Katie M. Freshley Education & Events Director Nikki S. Petrowski Communications Director
David M. Houk
Tara T. Purvis Marketing Director Kristie Weyer, CISR Insurance Services Director
4 | www.iiak.org | November/December 2015
DOI News
From the Commissioner By: Sharon P. Clark 2015 was a busy year for the insurance industry in Kentucky, and we face a number of challenges as we head toward 2016. The Department of Insurance (DOI) filed a motion in Franklin Circuit Court to place the Kentucky Health Cooperative (KYHC) into rehabilitation on Oct. 29. KYHC had earlier announced its plan to complete a voluntary runoff of its business. The rehabilitation order put DOI in place to oversee the day-to-day operations of the nonprofit health insurance company. Our primary goals at this point are to protect consumers and providers and assist with the effort to move current KYHC members to new coverage for 2016. The deputy rehabilitators and the Department continue to work with remaining KYHC employees to work through a backlog of claims issues. We appreciate your efforts in helping us move KYHC members to replacement coverage. The rehabilitation of the Kentucky School Boards Insurance Trust continues. The assessment of member school districts has been successful with payments received from all members paying on the installment plan. The open workers’ compensation claims are being administered by Kentucky Employers’ Mutual Insurance. The property/liability claims are being administered by Risk Management Services Corporation of Louisville. At this time, all property claims have been paid. The proposed mergers of Humana-Aetna and AnthemCigna are being analyzed by DOI staff and contractors. Other states and the federal Department of Justice are completing independent reviews of the deals. The Department anticipates holding administrative hearings on these mergers in 2016. Issues related to the sharing economy have taken center stage in 2015, and those discussions are expected to
continue into 2016. These include ridesharing (Uber, Lyft and others) and home-sharing (Airbnb and others). Insurance companies are beginning to market products to fill in the gaps between traditional auto and homeowners/renters insurance and these enterprises. This market is evolving rapidly. On a national level, the Federal Aviation Administration (FAA) estimates that more than one million drones will be sold during the holiday season. As drones become more affordable, drone insurance is expected to get more attention as companies discuss insurance issues and privacy concerns. The FAA says there will be 30,000 small unmanned drones used for business purposes by 2020 – this does not include the ones used by hobbyists. While hobbyists are generally covered under a homeowners policy, expect changes as insurers adapt to the more widespread use of drones for commercial purposes. Currently, the commercial use of drones is largely restricted, but requirements are expected to evolve as proposed rules are being debated. Cybersecurity continues to be one of the largest threats facing businesses today. The National Association of Insurance Commissioners has made this a major priority. We are concerned with the following issues related to consumer protections: • Knowing the types of personal information collected and stored by an insurance company, agent or any contractor. • Expectations of a privacy notice and reasonable steps to be taken to protect personal information from policyholders. • Notices to be sent in case of a data breach. • Offering identity theft or credit protection for the consumer. As many of you know, I begin my term as presidentelect of the NAIC on Jan. 1. I appreciate your support of me in that role, as well as your longstanding support of me as Kentucky’s Insurance Commissioner. I value your work and hope you will continue to contact my office if we can be of assistance. Best wishes for 2016!
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Education Calendar ____________________________________________________________________________________
ABEN Webcasts - (http://iiak.aben.tv/) Below are the classes that will earn you CE credit. But don’t forget that there is also a vast selection of Professional Development classes available.
____________________________________________________________________________________
Annuity Basics and Where They Fit
Directors and Officers Liability Insurance
1 hour
2 hours
January 20 @ 12 pm EST February 10 @ 3 pm EST
January 14 @ 2:30 pm EST February 19 @ 11:30 am EST
Commercial Lines Claims That Cause Problems 2 hours
February 11 @ 11 am EST
Estate Planning Basics 2 hours
January 13 @ 12 pm EST February 18 @ 2 pm EST
Home Based Business Exposures Commercial Property Endorsements That Can Make You Money! 2 hours February 2 @ 2 pm EST
2 hours
February 24 @ 2 pm EST
Personal Lines Claims That Cause Problems 2 hours
Data Privacy Insurance 2 hours
January 6 @ 11 am EST February 18 @ 3 pm EST
January 12 @ 10 am EST
Professional Ethics in the Insurance Industry 3 hours
February 10 @ 11:30 am EST
For questions on any of these courses or IIAK’s education program, contact Katie Freshley at kfreshley@iiak.org or call 502-245-5432 www.iiak.org | November/December 2015 | 7
KEMI
8 | www.iiak.org | November/December 2015
“A Rejection Form, a rejection form, My Kingdom for a rejection form!” A cautionary tale with apologies to William Shakespeare In his play “Richard III”, William Shakespeare relates the tale of King Richard III in which Richard is unhorsed on the battle field at the most crucial moment. In a desperate attempt to save himself, he cries out: “A horse, a horse, my kingdom for a horse!” Unfortunately for Richard, no horse is delivered and Henry dispatches him, succeeds to the throne as Henry VII and marries Princess Elizabeth of the House of York.
By: Richard F. Lund, JD
insurance carrier expressly stipulated that the agency retain for the period specified in the underwriting requirements, all original, signed applications, driver exclusions, selections and rejections of optional coverage, premium discount documents, vehicle inspection reports, and power of attorney.
This very famous story highlights how one asset can be the most important factor in determining the success or failure of a person, especially when timing is critical. For Richard, it was his horse. For you as an insurance agent, while not as noble or glamorous, it can be the coverage rejection form. While certainly an agent won’t lose his life without this form, the financial impact can be devastating. And to the contrary, if such a form is obtained, not only may it save the day, it may also be financially rewarding if you are insured by Swiss Re Corporate Solutions.
After the primary and umbrella policies were issued, the customer was involved in a serious accident that resulted in a significant brain injury. The claimant sought the full $1MM umbrella limit from the carrier. (Notably under the law of the state, if an insurer fails to pay a first party UIM claim within thirty days, it may be subject to the assessment of double damages). The carrier contacted the agency to determine if any such waiver existed and after a thorough search, none was found. The carrier was required to pay the $1MM limit of the umbrella policy and then tendered a $1MM policy limit indemnification demand against the agency. Due to the agency’s inability to locate the waiver and the language of the agency agreement, the claim was paid.
A case in point: In 2011, an agent was retained to procure personal auto liability and umbrella coverage on behalf of his customer. The policy had UIM limits of $250,000/ $500,000 aggregate and an accompanying umbrella policy had a $1MM limit. At that time, according to the agent, the customer signed a UM/UIM rejection form for the umbrella policy. Under this particular state law, an applicant must execute a signed UIM waiver form during the application process in order to waive UIM coverage under an umbrella policy. Additionally, the agency agreement with the
There are two key points to remember from this tale: the first is to always read your agency agreements thoroughly and be fully aware of their terms. The explicit language of the agreement was that it was the agency’s duty to retain copies of certain documents and in particular to this case, the waiver of coverage form. Therefore, liability for indemnity to the carrier was absolute. Had the agency read and understood this provision, perhaps better care would have been taken to ensure that the document was retained. When you are presented with any written agreement that you www.iiak.org | November/December 2015 | 9
must sign in order to be able to do business with a company, be sure to read the document thoroughly and if you have questions concerning the provisions, consult with your own attorney to review and advise you of any provisions you may not understand. In many instances, some provisions may be negotiated if you or your attorney do not believe they properly state or protect your interests. The second key point is to properly document and retain rejections of coverages. Offers of higher limits can, and would have in this case, prevented a significant exposure in which a claim was later made as it related to the coverage limit. And, if you are insured under a policy issued by Swiss Re Corporate Solutions/Westport Insurance Corporation, you may reap a financial benefit. Under the Deductible Reduction feature of the policy, if an insured agency generates and maintains contemporaneous written documentation of a customer’s refusal to accept any type of coverage or limit recommendation made by the agency, and there is subsequently a claim alleging a failure to secure such recommended type of coverage or limit, then 50% of the deductible relating to that claim will be waived up to a maximum of $12,500, or until dismissal of the allegations, whichever is first. For example, in the case above, if the agency had the signed waiver in its file, and an action was brought against the agency and costs were incurred, the agency would have been responsible for only 50% of their deductible. Had the deductible been $10,000 for example, the agency would have saved $5,000, perhaps enough to buy a horse! For more information about how to properly document your files, go to www.iiaba.net/ eohappens and look under “Prevention Tools”. To learn more about the coverages that you should be offering to your customers, look for the “Virtual Risk Consultant” as well. Hopefully this has given you a little help so that when you are on the battlefield in your everyday business, you won’t end up like Richard III crying out “A Rejection Form, a rejection form, My Kingdom for a rejection form!”
This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re”) and/or its subsidiaries and/or management and/or shareholders. Richard F. Lund, JD, is a Vice President and Senior Underwriter of Swiss Re/Westport, underwriting insurance agents errors and omissions coverage. He has also been an insurance agents E&O claims counsel and has written and presented numerous E&O risk management/ loss control seminars, mock trials and articles nationwide since 1992. Copyright 2013 Swiss Re
KNOWLEDGE COMES FROM EXPERIENCE
“I have a passion and love for working with agents and writing transportation business. My 35 years of experience in underwriting and working with our markets helps me to be a valuable resource for our customers and the relationships we’ve built together are priceless.”
Sandi Fritz, CIC, TRS Vice President, Director of Transportation Underwriting
Managing General Agency Since 1920
800.666.5692
10 | www.iiak.org | November/December 2015
jmwilson.com
Brokerage/Professional Liability Property & Casualty • Personal Lines • Surety
Commercial Transportation • Premium Finance
© 2013 SECURA Insurance
Let’s make sure they’re safe at home.
Covering all the bases since 1900 Commercial • Personal • Farm-Ag • Specialty
www.iiak.org | November/December 2015 | 11
New Year, New Customer Base? Albert Einstein once said, “The definition of insanity is doing the same thing over and over again and expecting different results.” For independent agents, mixing things up is essential to growing the business. Besides waiting for the next “hard market,” dealing with agency management systems, certificates of insurance headaches and dealing with personnel issues, it is no bed of roses managing an independent agency. However, with the advent of another year, now is the time to consider what your agency might do differently in 2016. Before coming to a quick decision, take a 50,000 foot view of the situation. If one accepts the notion that an insurance agency should be first and foremost a marketing organization that utilizes the collective IQ of the staff and the agency’s resources to provide the solutions (and services) needed by their clientele, then at least there is a starting point. The next question: “Who is my clientele?” The reality is that most agencies haven’t focused on the changing demographics of the community they serve. And, even if the agency focuses on a particular commercial niche—e.g. providing workers’ compensation services to multi-state commercial carriers—understanding the evolving U.S. population is very relevant. To start, surf the U.S. Census Bureau’s website (www.census.gov) and review the national and state data (and be sure to check out their newsroom releases which summarize recent surveys) that can assist your agency in understanding changing 12 | www.iiak.org | November/December 2015
By: Dave Evans
demographics. For example, over the next few years, the number of older workers will increase 11.9 million, making up nearly one in four workers by 2016 as more seniors hold on to jobs, which can be partly attributed to decreased or flat home values and inadequate retirements savings. A related trend of more older workers is that many are continuing to live closer to urban areas where they can more easily find employment, mitigating the previous trend of migration to the south and to rural retirement communities. When the Census Bureau has digested its 2010 census, the information will be used to help redraw legislative boundaries and distribute more than $400 billion in annual federal aid. Another good source of information is the Population Reference Bureau (www.prb. org) which provides useful demographic data and trends both nationally and internationally. Currently, there is an informative discussion regarding the growth of the Latino population in the United States. The organization notes that while the U.S. population grew by 36% between 1980 and 2009, the Latino population more than tripled. Accordingly, the influence of the Latino population will only grow in coming decades. What may be a surprise to some people is that it will come mostly through natural population increases, not immigration. These are just two examples of demographic shifts that agencies should ponder in determining the impact on their business segments. Whether the agency concentrates on personal lines or ...continued on page 14
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commercial lines (or both), the changing composition of consumers and of the country’s workforce means that agencies should be positioning their resources to target and serve these segments of our population. The Diversity Task Force—is a cooperative industry group comprising Big “I”agents and brokers, several leading insurance companies and members of organizations representing Latin American, AfricanAmerican and Asian-American agents. The mission of the Diversity Task Force is to foster a profitable independent agency force that reflects, represents and capitalizes on the opportunities of the diverse U.S. population. Its objectives are to promote diversity within the agent community and the company ranks and increase the industry’s market presence in emerging urban and minority communities. During 2011, the Diversity Task Force will continue to work in these areas to provide independent insurance agents with insights and resources to meet this opportunity. Don’t wait another year to have your agency’s strategy reflect demographic trends. Dave Evans (dave.evans@iiaba.net) is a certified financial planner and an IA Life & Health contributing editor.
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There were 258 attendees who ventured out to Learn, reach and grow with IIAK at the Hyatt Regency in Louisville, Ky. Many agents and company representatives began the convention with a day of betting on the ponies and getting to know each other at Churchill Downs. The 4th race was the Kentucky Trusted Choice Classic. IIABA Chair-Elect Spencer Houldin, was on-hand to present the trophy. The conference officially kicked off with a combination of the Opening Reception and Trade Show in the Crystal Ballroom. Exhibitors and attendees alike seemed to enjoy the time as well as the turnout. The evening concluded with a dessert reception sponsored by Liberty Mutual/ Safeco that allowed attendees to gather with peers and satisfy their sweet tooths.
industry, or made a significant contribution to his or her community, state or country. This year’s award was presented to Mike Hepp of Charles M. Moore Insurance in Bowling Green. Michelle Love presented Chair Awards to Chip Atkins (pictured left, below), Steve Kinkade (pictured center, below) and Steve Ford (pictured right, below) for their help during her year as Chair.
The next presentation was from Make-A-Wish®, the Thursday commenced with the Welcome Breakfast chosen philanthropy for Trusted Choice. This year and General Session. Michelle Love introduced your Trusted Choice has committed more than $530,000 leadership for 2014-2015 and gave her State of the to the foundation and more specifically $11,000 for Association Address. Spencer Houldin followed with the Kentucky Chapter. Board Chair Craig Peterhansen notes on the newest happenings with IIABA. shared the high points of 2015, including being able to grant 150 wishes - a new record for the chapter! Over A very special award is $640 was raised that morning for the charity, and as given to the person working with all the money raised in Kentucky, it will stay in the in an IIAK member agency state to grant more wishes. If you would like to donate as a customer service to the Kentucky chapter of Make-A-Wish, please representative who typifies contact Michelle Dayvault at michelled@makeawishky. the ideals of service. The person’s experience, education, org community service and After breakfast, keynote speaker Kelly attitude are taken into McDonald presented “Crafting the Customer consideration in the judging of this award. The wellExperience for People Not Like You” and deserved 2015 CSR of the Year award went to left attendees with tools to foster long-term Carolyn Belt of Partners loyalty by learning how to effectively Insurance Agency, LLC in listen for what their customers want, not Marion. just what they ask for and how to train their staff to deliver exceptional customer Next the E. Starling service. Holloway Award was presented to an individual As with all Conventions, we never leave our guests who has made a significant and spouses without something to do. This year, 12 industry contribution, people enjoyed a private cooking lesson at Cooking at enhanced the ideals and reputation of the insurance the Cottage and were then able to dine on their hard work.
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Meanwhile, back at the Hyatt, the Conferment Lunch followed our keynote presentation. Ray Robertson, CIC of Limestone Agency, LLC in Mt. Sterling spoke about the CRM designation and what it entails. He then awarded conferees Michelle Pfeffer, CRM of USI Insurance Services (pictured left, above) and David Livingston, CSRM of Roeding Insurance (pictured right, above) with their respective certificates and completion pins. Following these awards Deputy Commissioner of the Department of Insurance, Maggie Woods was on-hand to give an update on the Kentucky market including the recent Aetna-Humana merger, possible changes to the Kentucky Health co-op and cybersecurity, just to name a few. After lunch, attendees chose between two tracks that could earn them 3 hours of continuing education credit: Insurance in the Headlines with Bill Wilson, who covered hot topic issues and their implications; or How Insurance Agents Can Become Invincible to Lawsuits and Save Thousands in Taxes in which Larry Oxenham covered a variety of topics from sources of lawsuits to estate planning strategies. Everyone gathered back in the Regency Ballroom for a cocktail reception and silent auction to support our InVEST program. Following the reception, it was time to honor all of our past leaders and welcome our newest.
After recognizing all of Past Chairs and Presidents in attendance, David M. Houk of Houk Insurance Agency in Horse Cave was inducted as our newest Chair. Installed alongside Houk were George L. “Chip” Atkins, III of R.H. Clarkson Insurance Agency, LLC in Louisville as Chair-Elect and Michael Johnson, CIC of Al Torstrick Insurance Agency in Lexington as Vice Chair. Finally, everyone was dazzled with the talents of Owensboro native and speed painter Aaron Kizer. To round out the night, many ventured out to the Sports and Social Club for a night of fun and bowling. More than 70 people gathered Friday morning to hear state reporter Ronnie Ellis give a bipartison recap of the recent elections and get a true insider’s perspective on what the next legislative session holds. The young agents committee inducted their newest Chair, Neel Ford, AU, CPIA from E.M. Ford & Co. in Owensboro. Michelle Love presented the Outstanding Young Agent of the Year to Adam Murphy of Lake Barkely Insurance Agency in Cadiz. The conference wrapped up with Ron Smedley and his three hour Professional Ethics course. Of course, none of this would have been possible without the help and support of our Industry Partners. Thank you! We would like to thank all who attended and we hope to see you plus many more on November 9-11, 2016 at the 120th Annual Convention & Trade Show at The Brown Hotel in Louisville. www.iiak.org | November/December 2015 | 17
Thank You 2015 Industry Partners Premier
Platinum
Gold Acuity Bolton & Company Grange Insurance KEMI Progressive Risk Placement Services Silver Amerisafe Bailey Special Risks, Inc. Kentucky National Insurance Company Keystone Insurers Group Motorists Insurance Group Secura Insurance State Auto Insurance Company Bronze Anthem Blue Cross & Blue Shield Auto-Owners Insurance Company Countryway Insurance Company FCCI Insurance Group Kentucky Agents Finance Company KESA KY Associated General Contractors Midwestern Insurance Alliance Inc. Summit Swiss Re Corporate Solutions Travelers Westfield Insurance Sterling Burns & Wilcox Ltd Columbia Insurance Group InsurBanc
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Thank You Trade Show Exhibitors AFCO Market Finders Ins. Corp Amerisafe The Moberg Group Anthem Blue Cross & Blue Shield PA & IN Lumbermans Mutual Ins Applied Systems, Inc. Patriot National Arlington Roe Philadelpha Ins. Companies Black Diamond Pest Control Premium Assignment Corp Bolton & Company Prime Insurance Company Capital Premium Finance Progressive Insurance COIT Cleaning & Restoration Risk Placement Services Commercial Sector Ins Brokers Safeco Insurance Eastern Kentucky University Safehold Special Risks Equipment Ins International Safelite AutoGlass FCCI Insurance Group Sagamore First Call Free Legal Seneca Insurance Hallmark Specialty Personal Lines StateAuto HCC Surety Group Travelers Houston Intl Ins Group (HIIG) Trusted Choice/TrustedChoice.com J.M. Wilson WAHVE KEMI WestBend Mutual Insurance KentuckyOne Health Partners Westport/SwissRe Corp KRF-SIF Wright Flood MAPFRE Insurance X-Dimensional Technologies
www.iiak.org | November/December 2015 | 19
People who run a not-for-profit organization know. The most valuable things
are also the hardest to get.
This organization didn’t grow overnight. It came from years of hard work, confidence in what they could do, a strong commitment to the community, and making smart decisions. That’s why an insurance policy from West Bend makes sense. It protects these valuable and hard-earned businesses so your customers can focus on doing what they do best ... helping children, families, and individuals reach their full potential. And as an Official Supplier of The Silver Lining, it’s backed by your knowledge and experience. West Bend. Insurance your customers buy when they can’t afford anything less.
“I’m back with the Big ‘I’. It feels good to come home.” Prevent.
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Risk Management Moment When a client calls to report an E&O incident, is your staff prepared?
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We developed a handy printable wallet card to ensure that when an E&O incident occurs, there are clear instructions at your �ingertips for how to handle the conversation with your client.
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Big “I” members may access this and other key risk management materials at our exclusive agency risk management web site, www.iiaba.net/EOHappens.
What to Do When an E&O Incident Occurs
All agency staff should consider the following when responding to customers when faced with an E&O situa 1. Never admit liability. You can be empathe ver admit you’ve done anything wrong.
ate in any se lement discussions or enter into a se lement without wri en consent from your E&O carrier. 3. Ask them to explain what they think it is you’ve done wrong and write it all down including names, dates, and telephone numbers. 4. Don’t tell them you have E&O liability insurance unless they ask you specifically if you do. Then, only advise them that you do and that you will provide all the informa to your insurance carrier and they will be in touch with them. 5. Report the incident immediately to management so they can submit it to your E&O carrier.
iiaba.net/EOContact
Endorsed by 51 Big “I” state associations. Get in touch today! Alabama 205-326-4129 hunt@aiia.org Alaska 406-442-9555 msell@iiamt.org Arizona 602-956-1851 joni@iiabaz.com Arkansas 501-221-2444 dball@iiaar.org California 800-772-8998 info@ibawest.com Colorado 303-512-0627 carrie@piiac.com Connecticut 860-563-1950 lszatkowski@iiac.org Delaware 800-998-9644 iab@iabgroup.com District of Columbia 703-706-5446 mwaiia@iiaa.org Florida 850-893-4155 bconnell@faia.com Georgia 770-458-0093 emarion@iiag.org Hawaii 808-531-3125 hiia02@aol.com Idaho 406-442-9555 msell@iiamt.org Illinois 217-793-6660 cwilson.indep12@insuremail.net Indiana 317-824-3780 teameo@bigi.org Iowa 515-223-6060 marilyn@iiaiowa.org Kansas 785-232-0561 lisa@kaia.com Kentucky 502-245-5432 kweyer@iiak.org Louisiana 225-819-8007 rmartinez@iiabl.com Maine 207-623-1875 gaylemmiaa@aol.com Maryland 410-766-0600 carla@iiamd.org Massachusetts 508-634-2902 estoppel@massagent.com Michigan 517-323-9473 ebennett@michagent.org Minnesota 952-835-4180 swaldhauser@miia.org Mississippi 601-939-9909 kroberts@msagent.org Missouri 573-893-4301 t�lippin@moagent.org Montana 406-442-9555 msell@iiamt.org Nebraska 402-476-2951 brenda.kaiser@biginebraska.org Nevada 775-882-1366 amii.lockhart@niia.org New Hampshire 603-224-3965 joan@nhaia.com New Jersey 609-587-4333 pcampbell@iiabnj.org New Mexico 505-843-7231 suzie@iianm.org New York 800-962-7950 bstrong@iiabny.org North Carolina 919-828-4371 spowell@iianc.com North Dakota 406-442-9555 msell@iiamt.org Ohio 614.552.8000 terry@piaaohio.com Oklahoma 405-840-4426 lyra@iiaok.com Oregon 503-274-4000 abbyk@insureoregon.org Pennsylvania 800-998-9644 iab@iabforme.com Rhode Island 401-732-2400 hcollins@iiari.com South Carolina 803-731-9460 lcornell@iiabsc.com South Dakota 605-224-6234 chofer@iiasd.org Tennessee 615-385-1898 sholmes@insurors.org Texas 512-476-6281 mreed@iiat.org Utah 801-269-1200 joycekalmar@uaiia.org Vermont 802-229-5884 bwood@viaa.org Virginia 804-747-9300 lloving@iiav.com Washington 425-649-0102 akuaea@wainsurance.org West Virginia 304-342-2440 vtoney@iiawv.org Wisconsin 608-256-4429 mary@iiaw.com Wyoming 406-442-9555 msell@iiamt.org
How Wearable Tech Will Affect L-H and P-C Insurance in 2016 By: Morgan Smith Did your Cyber Monday purchase this year include a smartwatch or lifestyle activity tracker?
prescription lenses for smart glasses to VSP insureds.
According to a new report from Signals and Systems Telecom, global machine-to-machine (M2M) and wearable devices could help “internet of things” service providers pocket as much as $231 billion in service revenue by the end of 2020.
“Next year, I expect to see many life-health insurers either giving discounts or giving away different kinds of health monitoring devices,” Breading predicts. “It’s an information exchange thing because the policy holder is saying, ‘I agree to give you information about my body and health on a real-time basis in exchange for a premium reduction, or maybe advice on healthy living and helping me to stick to my treatment plans.’”
And while the average consumer probably thinks fitness bands or Apple watches when they hear “wearable tech,” new innovations abound in the area. Sub-categories of wearables—coined “hearables” and “implantables”—are within grasp, introducing futuristic capabilities and possibilities as well as a host of insurance implications. Businesses are now presenting employees with implantable chips to replace ID cards and passcodes. Wristbands will soon measure nearby chemical exposures—ideal for catastrophic or chemical spill scenarios. Medical companies are looking into “smart band-aids” to inject medicine when needed. And there’s hope that new devices will give audio cues and voice activated commands to the visually impaired. “There is an explosion of activity in terms of what’s available in the marketplace and how rapidly the devices are evolving,” says Mark Breading, partner at Strategy Meets Action. “Insurers in general are taking it pretty cautiously in terms of investigating and doing pilots. There isn’t a lot that’s visible out there in terms of companies who have fully embedded something in coverages that’s related to wearables, but I think 2016 is going to be the year when we start to see that happen in waves.” Personal Effects The life-health side of wearables is already on fire. John Hancock Life Insurance has partnered with the Vitality wellness program to distribute Fitbit bands to policyholders alongside discounted coverage. Meanwhile, Google and optical coverage specialist VSP offer subsidized 22 | www.iiak.org | November/December 2015
This last point comes in handy for the workers compensation and disability market in particular. With access to how strictly an individual is following a recovery or treatment plan, insurers and employees have proof regarding appropriate timing for return to work. “We’ve all heard the workers comp stories where someone is out, they’re getting payments and then they post a picture on Instagram of them skiing,” Breading says. “It’s a lot easier to [avoid] that when you have some wearables tracking location and activity levels. There are two sides of it: Are you taking your medications, are you following the treatment plans? And are you engaging in activities that indicate that you really should be going back to work?” Breading anticipates wearable developments akin to usage-based insurance from a risk, underwriting and pricing standpoint. “We know more about your real-time risk, and in exchange we’re going to give you a premium discount—I think that’s going to be the value proposition in this first wave,” Breading says. “But then just like telematics, it will expand into more of a relationship where there is advice given and potentially it will be a true usage-based insurance where the premium might vary by month, where real-time advice might be given and things like that.”
Virtual Reality But wearables can also impact more than just individuals. According to Breading, on the property-casualty side, “there’s a huge amount of activity testing of emerging technologies like the Internet of things, gamification and drones.” He adds that the commercial p-c market could also experience wearable infiltration as businesses and insurers begin to work together to use the tech for improving internal development. Companies are already using wearable technology to do business better, increase internal operational efficiency and produce fewer loss control claims. But coverage advances are still in the development stages. The new capabilities
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create a host of options when it comes to policy construction, and insurers are taking their time testing the tech and considering their alternative uses. “When you’re putting together a loss control program for a midsize or large commercial account, there will be a lot of things for insurers to do to collaborate with these customers to understand, ‘We’ve seen these kinds of wearable devices used to protect workers or improve safety or to reduce fraud,’” Breading says. Looking at the industry internally, Breading sees insurers capitalizing on the advancements by using virtual reality to train claims adjusters. New adjusters typically learn how to appropriately assess damage in a training facility or warehouse with access to physical sites, but Breading says insurers can now use augmented reality to replace a physical space and improve the adjustment process. “You can do all of that with virtual reality—and more, because you can continue to change the scenarios and have them walk through different accident sites and damage areas to give them the chance to see and react in a virtual reality mode,” Breading explains.
“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. General liability • Auto • Property • Crime Workers’ compensation • Umbrella Inland marine • Agribusiness • Surety Coverage available in 18 states. © 2015 FCCI
As insurers continue experimenting with these fast-moving developments, Breading says it’s OK for independent agents to take a back seat approach and simply stay educated about the impact of wearables on coverages, discounts and consumer uses. “If I were an independent agent, there would be a lot of other things in terms of emerging technologies that I’d be more concerned about that are going to be disruptive to the market,” Breading says. “Telematics and the move toward semiautonomous and driverless vehicles is going to change everything, and it’s a big impact. But they should just be trying to make sure they keep abreast of generally what’s happening in that space.” Morgan Smith served as IA assistant editor.
www.iiak.org | November/December 2015 | 23
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From Fountain Pen Ink to E-Files: Developing a Records Retention Policy
By: Richard S. Pitts
(Editor’s Note: This is the third in a series of three articles examining records retention policies for insurance agencies.) Andy DeClair, owner of The DeClair Insurance Agency in Quincy, Kentucky, settled into a side chair in the office of his lawyer, Sarah Comfore. “Sarah,” Andy said, “This records retention issue has been a lot more work than I thought.” “Well, take some comfort, Andy,” Sarah replied. “This is our last meeting and I’m going to do a lot of the talking. Take some notes.”
Litigation or Administrative Holds
Andy settled in with a notepad. Sarah started: “As we’re putting together our records retention policy, there’s an easy place to start. First and foremost, our policy needs to say that in the event that there is any form of litigation or claim, all bets are off. What I mean by that is this: any time that there is a complaint from a department of insurance, or there is an errors and omissions claim, or if there is even a substantially disgruntled customer or claimant, then all records destruction policies do not apply. Most records retention policies call this a ‘litigation hold’ or an ‘administrative hold.’ “This will help solve the problem that we discussed last time, Andy. We do not want to be in a position in which we have destroyed documents even knowing that there is the prospect of litigation or an administrative proceeding with regard to the placement of insurance or even claims adjustment. “When there is a litigation hold on a file, no documents should be destroyed until there has been approval by someone such as yourself, or perhaps even counsel outside the organization. This will likely be fairly rare, so it will not substantially add to your burden or the cost of keeping records.
“How do we know when to institute a litigation hold or an administrative hold? To a certain extent, this is a matter of knowing it when you see it. Certainly problems which rise to the level of an administrative complaint or possible litigation are rare enough that they do not occur in a vacuum. “Take your situation with respect to the amusement park. Your producers certainly had information which would suggest that the underwriting was going to be quite difficult, but certainly did not have information which would suggest that the client was going to be unhappy about the services rendered. The triggering event for the administrative hold in that situation would be the first time that the producer had information that the client was unhappy.
Manageable and Effective
“Now, I do remember that the problem with the records in this particular case may be that the transmittal of the underwriting requirements of a liability waiver form was not communicated to the insured. And, given that the complaint of the customer does not occur until much later, it is proof positive that our records retention policy will not be perfect. Perfect, however, is not what we are striving for. Manageable and effective is what we are really seeking to achieve. “That’s where the balance of the policy comes into play. If there is not an administrative or litigation hold on the file, then the policy will dictate that routine correspondence and the like will not be stored as permanent records. For instance, the Donor’s Forum of Chicago suggests the following should be discarded or purged rather quickly: • General, routine letters and items such as, ‘Notes of appreciation, congratulations, letters of transmittal and plans for meetings’ • Form letters not requiring follow-up • Letters of general inquiry • Correspondence to which no further reference is necessary www.iiak.org | November/December 2015 | 25
Andy looked comfortable with the concept, so Sarah continued on: “Here’s a suggestion from an insurance carrier to try to encourage rapid deletion of unnecessary material: Non-Record Material – includes information which has no ongoing documentary or evidentiary value to the Company. Information falling into this category need not be retained beyond the immediate purpose for which it was created. Examples of non-record material may include: • Meeting reminders. • Company wide communication. • Extra copies of documents, which have been kept for convenience or reference and have no further documentary or evidential value. • Reading materials or publications, trade journals, and magazines, which require no action and have no further value to the Company. • Correspondence, memo, draft and interoffice communications, which have been completed and have no further evidential or informational value. • Handwritten copies and drafts of documents on which no action was taken and requires no follow up. • Personal correspondence and documents not relating to Company business. “The idea behind all of this is to take pressure off of e-mail files and to have your producers and staff understand that the e-mail system is not designed to be a permanent records archive. Also I should note that these apply to both hard and electronic copies of documents.
Once Again, How Long is Long Enough?
“Now, Andy, we finally get to the question that you asked me several weeks ago, which is: how long should I retain documents? The best approach with regard to this question is to segregate your documents by type for purposes of determining a records retention policy. Here again, we are not striving for perfection but are striving instead toward manageability and 26 | www.iiak.org | November/December 2015
efficiency. We know that there are certain types of files that are going to be created and accessed later on, simply by virtue of the nature of your business. Those are the types of files that we should focus on first. “Even this category of records breaks down into two components. The first is what you’re actually in business for, which is the marketing and sale of insurance policies. This goes to your question of the lumber mill in the 70s. With the advance of environmental liability has come a desire to make claims on policies that are substantially beyond the pale of most records retention policies. This is why, with respect to the lumber mill, I am not surprised nor am I particularly concerned by the fact that you cannot find policies back to the 1970’s. “At the time that those policies were written, and at the time that many records retention policies were put in place, no one had any idea that there could be as much as a 20 to 30 to perhaps even 40 year lag between the issuance of the policy and the time that a claim is made for an ‘occurrence’ under it. Now, though, I think that we need to develop a policy that would permit us to re-create on behalf of an insured the policies that were issued.
Policy Re-creation
“This may mean that we have a single record point of any particular company’s standard commercial general liability policy form, or their homeowner’s forms, or we simply retain a record that said that they were a subscriber to ISO and used ISO forms at this time. Then, we do not need to create the actual body of the policy in each individual file, which should cut down on the volume of records that we need to store. It also allows us to re-create the policy for the insured, which is really what the insured would be expecting at that point in time. I hate to say it, but given the status of the law presently, I’m almost inclined to keep these records permanently as well. ...continued on page 28
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“If you’re retaining records with respect to claims separately from the insured placement files, and I think that we can truly carve out claims as being in a substantially different class of record. Once a claim has been instituted on the policy, we do not have as substantial an amount of concern with regard to the being able to access it once again. Let’s face it -- most of those situations are going to end with a release that will bar further claims over the same subject matter in the future. Consequently, your claims files, again to the extent that they are kept separate from your policy placement files, could have a much shorter retention, perhaps as little as two or three years after the files are closed. “After that, we can start to look at the records which every company is likely to have and create some of the more boilerplate aspects of the records retention policy. I’ll just run through a brief list for you and give you some of the suggested retention periods.
The Usual Suspects – Like Agency-Company Contracts
“Let’s start with something easy, such as the records that you should keep permanently. This would include the usual suspects, such as the Company’s articles of incorporation, records of transactions between shareholders, bylaws, corporate minutes, and those sorts of documents. Any documentation with respect to the ownership of the company like why should probably be retained, even if the company is not a party to it. “Of course, your contracts with your various carriers fit within this category. In fact, I would actually like it if they were kept in separate files and actually reviewed from time to time! “To this list we can add also the records in connection with any significant corporate transaction, such as when you purchase another agency, buy real estate, or borrow a substantial amount of money. Essentially, every transaction that is not in the ordinary course of business should be evaluated on its own
to see if it falls into the category of permanent retention.
Accounting Records
“Next, let’s discuss your accounting records. Many different draft records retention policies will have varying lengths of retention for accounting records, such as having a long retention for check registers (maybe even as much as 10 years) but having a shorter retention. For items such as bank deposit slips (maybe even as little as three years). Certainly there is a philosophy that will support this type of dissection of accounting records, because a check register will allow the tracing of the transaction and may provide threads into other accounting records, where a bank deposit slip will not. “The problem with this type of differing treatment for accounting records is that it requires more effort with regard to the records retention and destruction schedule then you will likely be able to use. Also, I do not have the sense that your accounting records are causing you a substantial burden with respect to your storage costs and the like. Rather, they’re becoming much more likely to be stored electronically, and so therefore are not costing you nearly as much as your work, day-to-day client files are. Consequently, I would recommend that we take a long period of time
for a records retention schedule for accounting records and simply leave it at that. “One area that you’re going to have for sure is going to be human resource records. This will of course include employee files, employment agreements and also information with regard to benefits. Most sources recommend keeping general information, such as information on benefit programs applicable to everyone, for a period of seven years. That makes sense and is a good rule of thumb.
Human Resource Records Treatment
“Here is where I am going to differ with respect to the approach that we are taking on the accounting records. With respect to individual employee files, including information with respect to performance evaluations, increases, and other information, I would prefer that we keep those records for a long period of time. Unlike the accounting records, these are already segregated and are already being treated confidentially, so I know that they are being stored differently than the general filings. However, they are like accounting files in the sense that I do not think that they are taking up a substantial amount of space.
“Although there has been some question recently, employee related claims, such as discrimination, generally have been subject to a short statute of limitations. This means that the retention period does not need to be a long period after the employee has departed. However, I would prefer that we keep these records for a substantial period of time, perhaps even as long as 10 years after an employee departs. The reason that I would keep these records is that even though that particular employee may not be able to make out a claim, we may nevertheless find ourselves in a situation in which that employee’s performance and treatment become relevant to the current, claiming employee.” 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.
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