Kentucky Independent Agent - September/October 2012 by Big I Kentucky

1046 Louisville, KY

13265 O’Bannon Station Way Louisville, KY 40223

SEPTEMBER

We offer independent agents commercial auto insurance at very competitive rates for almost any situation you may ﬁnd: long-haul, local and intermediate trucking, limousine service, ﬂeet and cargo.

OCTOBER 2012

We can Ànd coverage for almost any commercial auto situation that you can think of. Well, almost any.

No minimum volume is required. Just go to www.boltonmga.com to submit online.

BOLTON & COMPANY Tracking down the right coverage for over 45 years. 2400 Waterfront Plaza · 325 West Main Street · Louisville, Kentucky 40202 Telephone 502.583.8361 · 800.292.6597 · Fax 502.584.6131 · www.boltonmga.com

What You Need to Know About Mergers and Acquisitions New Technology — Learning to Adapt

E R A C H T I W E L HAND We believe "handle with care" means more than a stamp on a box. We believe the best way to handle a claim is to prevent it from happening in the first place. Our SAFETY W.O.R.K.S. program offers an array of tools focused on training, education and awareness of workplace risks. If you do have a claim, we handle your claims with the utmost care and personal attention. Our fair-minded claims adjustors will guide you through the process. And our financial results show proof of our commitment to "handle with care" our financial strength and stability.

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

6HSW2FW B,)&,%& LQGG

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 Oâ&#x20AC;&#x2122;Bannon Station Way, Louisville, Kentucky 40223, telephone (502) 245-5432; Toll Free # (866) 426-4425; E-mail IIAK@iiak.org; FAX (502) 245-5750.

Officers Tim Conder Chair, Louisville (502) 459-7500 William S. Latta Chair-Elect, Henderson (270) 827-3543 John Funkhouser, CIC, CWCA Vice Chair, Danville (859) 236-5922 James D. England, AAI Treasurer, Pikeville (606) 437-7361 Stephen R. Kinkade, CPCU, AAI National Director, Leitchfield (270) 259-5465 Phillip D. Hunt, CIC Immediate Past Chair, Prestonsburg (606) 886-2318

Directors Diana G. Hunt, CIC Barbourville, (606) 546-4132 John L. Ison West Liberty, (606) 743-4472 David M. Houk Horse Cave, (270) 286-2724 Michelle L. Love Owensboro, (270) 926-2806 Lloyd M. Stafford Lexington, (859) 253-1371 Chip Atkins Louisville, (502) 585-3600 Jason D. Billington, CIC Murray, (270) 753-4751 Michael G. Johnson, CIC Lexington, (859) 233-1461 Virginia D. Goff, CISR, CLCS, CWCA Louisville, (502) 895-5665

Staff Peggy P. Porter President/CEO Kristie Weyer Insurance Services Manager

ON THE COVER

Throughout this issue we feature the topic of mergers and acquisitions. Your agency may be in the process of being acquired or your agency might be merging with another. Whatever your situation is with mergers and acquisitions, this is a must read issue for you.

FEATURES

Get the Same Affordable Health Coverage Your Clients Do........................5 Experts Provide Insight on Agency Valuation ...........................................9 Cover Story: Buying, Selling and Merging an Agency - What Should You Do?....12 New Technology - Learning to Adapt ....................................................17 Selling More By Not Selling ................................................................27 When Mergers and Acquisitions Destroy Value .....................................29

Joy E. Holder Membership Manager Arlene Adonis-Hawkins Director of Communications Tara Taylor Marketing Director Megan Granger Member Services Director The Kentucky Independent Agent welcomes all advertising and editorial submissions. Inquiries for advertising, news releases and editorial contributions can be directed to: Arlene Adonis-Hawkins P.O. Box 436689 Louisville, Kentucky 40253-6689 Ph: (502) 245-5432 Fax: (502) 245-5750 Email: aadonishawkins@iiak.org

Mission Statement

The mission of the Independent Insurance Agents of Kentucky, working in the publicâ&#x20AC;&#x2122;s best interest, is to be the preeminent advocate for Kentucky Independent Insurance Agents and support their business and professional development needs.

DEPARTMENTS From The Chair..................................................................................4 Industry Partners .............................................................................10 Classified Ads ..................................................................................17 People In The News ..........................................................................23 Events & Education Calendar..............................................................28

This publication is intended to provide accurate and authoritative information on the subject matter covered and is distributed with the understanding that neither IIAK, nor any contributing author or publisher is rendering legal, accounting or other professional services and assume no liability whatsoever in connection with its use. The opinions expressed in the articles are those of the authors and does not necessarily reflect those of IIAK.

FROM THE Chair

Are you the pig, or do you choose to be

we are better able to be committed. At other

the chicken?

times involvement is the best we can do.

One of the perks of holding this position

Tim Conder 2011 - 2012 IIAK Chair

is you get to write this column several times

no doubt been informed over the years,

during your year. If you don’t like to write,

your association does not just get by on

then it’s a curse! I’ve always enjoyed putting

your dues. There are many types of causes

my thoughts down. Recent events have

that come up that require additional help.

reminded me of an old analogy that I used

The BIG issue now is InsurPac. As you

on my kids a few times during their

know, at one time, that PAC was the largest

formative years. It came up during those

insurance PAC. Not anymore, the direct

times when they get tired of practice, or

writers have passed us. We are earnestly

the club they’re involved in is not going

trying to get back to being a Million Dollar

right, and they want to bail out or slow

PAC. That designation carries a lot of weight.

down. During our conversation about not

In politics, money = weight.

being a quitter, I would bring my favorite

In order to be influential, you have to

analogy up. It goes like this - “you can’t

have access. Contributions = access. It’s an

quit, you have to hang in there, and you

election year; there are many congressional

have to redouble your effort. It’s kinda like

seats that can be won by folks that your

breakfast, the pig is committed, and the

association does not know. We need to be

chicken is just involved!” After a good roll

able to meet with them, explain our

of the eyes from them, we would discuss

positions, and hope to convince them to

further and come to an understanding, a

our side. Do you want your positions out

successful life, career or relationship is not

front, or do you want Flo and the lizard

for bystanders, it’s for participants.

telling members of Congress how they

How does that apply to us? Well many levels, many ways. We don’t sell a client on our services by not getting involved,

should vote? That is really how it boils down. If you have contributed, I say a huge

understanding their business, and

Thanks. Now, walk across the hall, or down

recommending the best product and price.

the street, or pick up the phone and ask an

We cannot belong to a successful

association friend of yours to contribute.

association by just paying dues and perhaps

We are almost there. It’s time to be the Pig,

purchasing E&O or health insurance. It

not the Chicken!

takes more than that. It takes a service

It continues to be an honor to serve as

mentality. A commitment to make a

your Chair, see you at the convention in

contribution, perhaps to even make it a

Louisville November 7th- 9th at the Marriott

better association!

Downtown.

At different points in our life and career,

That’s how it works. As most of you have

PRODUCTS & Services

Get the Same Affordable Health Coverage Your Clients Do Exclusive offer for IIAK Members

Value you can count on. As with your clients, you want what’s best for your colleagues and employees. So where do you find reliable health coverage at a smart value? Your IIAK membership gives you access to affordable, quality coverage from Anthem. That means you get access to: • Provider networks that are among Kentucky’s largest and most comprehensive. • Doctors and hospitals across the country and around the world through the BlueCard® Program and BlueCard® Worldwide • 360˚ Health®, Anthem Care Comparison and Time Well SpentSM, three innovative programs that can help reduce health care costs and help members make more informed health care choices. As an IIAK member, you also get: • Full vision plan at no extra charge • Savings on fully insured plans like Blue AccessSM PPO, and Lumenos consumerdriven health plans • Competitive association-specific pricing Every Anthem plan includes important preventative care such as: • Annual routine physicals • Well-baby and well-child care • Immunizations • Routine eye exams • Annual diabetes eye exam

WELCOME WELCOME NEW NEW MEMBERS We welcome the following to membership in the Independent Insurance Agents of Kentucky since our last report: Agency Members T.R.U.S.T. Insurance Agency - Georgetown Reeves Insurance - Louisville The Association, its officers and staff look forward to serving these new members with the best membership benefits and related products and services available.

• Various routine cancer screenings • Members-only savings for healthy lifestyle programs • Personal health information and tools at anthem.com Better options lead to better decisions. Only you know which type of plan best fits your business. Choose from a variety of Anthem plans, including our industryleading Lumenos consumer-driven health plans with HSAs, HRAs; and traditional PPOs, HMOs and point-of-service products. Your employees have even more options with Anthem’s network. Try over 9,800 doctors and specialists and 110 hospitals in Kentucky. And they’re covered virtually anywhere they travel. Through the BlueCard® Program and BlueCard® Worldwide, they have access to 80% of doctors and 90% of hospitals in America, and providers in more than 200 countries. What’s the bottom line? Everyone has the flexibility to make smart choices. Surround yourself with better health. You’ll also benefit from Anthem’s 360˚ Health wellness programs, which combine cutting-edge innovation with access to highquality, individualized, coordinated care. 360˚ Health is a total health solution that pulls all aspects of care coordination, health improvement and preventative care together into a centralized user-friendly resource to help keep your employees healthy and productive. Coverage that sets you apart. Your benefits package can separate you from the pack - and help you compete for the best talent. You can offer integrated coverage and take advantage of the administrative ease of working with one carrier. Complete your benefits package with: • Dental • Life Insurance • Long-term and short-term disability • Employee assistance programs How can we help? We want to make it easier than ever for IIAK members to afford health coverage. For a free quote, contact IIAK at iiak@iiak.org or call (502) 245-5432.

, g n i r u s n i h t r o If it’s w insuring well. h t r o w it’s are usinesses b ’ rs e m ake Your custo rtant to m o p im ’s it cted. special.So well prote e ’r y e th sure at NSI, fessionals ro p e c n n ivision, ca The insura d y lt ia c e r d’s sp West Ben program fo e c n ra u s the right in We have . create the s e s s e in d bus tect specialize nce to pro e ri e p x e e and from knowledg sinesses, u b f o s d care many kin As to child C M Y to s lon on and beauty sa s preventi s lo r u o g d n at designin centers. A s rt e p x e are s claim reps dling claim n a h d n a s. grams businesse safety pro y lt ia c e p s for at NSI fessionals ro p e th \RXU So talk to H FDQ KHOS Z Z R K W X . WR ÀQG R customers

ring, orth insu w ’s it if Because ring well. u s in h t r it’s wo

Experts Provide Insight on Agency Valuation Document available to all Big “I” members.

The American Association of Insurance Management Consultants (AAIMCO) is proud to announce the publication of “The Standards & Guidelines for Appraising Insurance Agencies/Brokerages.” This publication, three years in development, responds to the crying need for a standard of valuation for the retail and wholesale agency and brokerage community in the United States and Canada. For generations, insurance businesses have been generally valued by the WAG (widely accepted guess) system-somewhere between a buyer’s and seller’s hope and expectation of value, with no better basis than having heard that a range of measurement (commission, revenue, earnings, EBITDA) has been used historically to determine value. Of course the experienced appraisers

of insurance agencies and the most intelligent buyers follow a different and more reliable course in establishing a value, estimating the future earnings potential of the agency being valued under the circumstances of the valuation. Then, for the convenience and comfort of the agents being valued, they converted the projected earnings potential into whichever multiple was acceptable to the agent. The value, nonetheless, was the real value of the projected earnings of the agency in question under the specific condition of the valuation. The consultants to AAIMCO, some of the most experienced appraisers, experts and consultants working in the industry, defined the “The Standards & Guidelines for Appraising Insurance Agencies/Brokerages,” combining all of their experience and expertise, in order to

provide guidance for agents, for courts and for future valuers regarding the proper methods for ascertaining agency value. Several Big “I” University experts were involved in the process. There is no magic number, no quick multiple that can take into account all the vagaries and differences among the tens of thousands of agencies in the U.S. and brokerages in Canada. But each one of them analyzed properly can be assigned a value based on their reason for valuation. By perusing and using the Standards of Valuation, anyone may understand why the same agency may have different values

Thank you to the following companies that are supporting the association through its Industry Partners Program in 2012. Their support helps to make possible many of our events and meetings such as the IIAK Annual Convention, Big “I” Day, Legislative Day, KYIP Sales & Leadership Conference and KYIP Day. The Industry Partners Program is an opportunity for insurance companies, wholesalers and vendors to support the efforts of IIAK and bring to its members affordable, quality events geared towards enhancing the professionalism of association members. (As of 9/21/2012)

Silver Level Acuity Amerisafe, Inc. Grange Insurance KEMI Kentucky National Insurance Company Keystone Insurers Group S.H. Smith & Company Travelers

Premier Level

Bronze Level

Ohio Casualty Group Safeco Insurance Diamond Level Seneca Risk Services Platinum Level Progressive Gold Level Arlington/Roe & Co. Bolton & Company Risk Placement Services

under different circumstances to the same appraiser and, certainly, different values to different individuals based on the circumstances of each buyer or appraiser. Big “I” members may login to the Big “I” Virtual University’s website and download their copy of “The Standards & Guidelines for Appraising Insurance Agencies/ Brokerages” today. Visit www.aaimco.com/ to be taken to AAIMCO’s website, where the Standards can be also viewed and downloaded and where a list of consultants, experts and appraisers can be found.

Auto-Owners Insurance Bituminous Insurance Companies Countryway Insurance FCCI Insurance Group Kentucky Agents Insurance Company Midwestern Insurance Alliance, LLC. Secura Insurance State Auto Insurance Company Westfield Insurance

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

Bringing the Best Together IN KENTUCKY Partner with the best and distance yourself from the competition.

Greg Carlton, Roy Riley & Keith Riley Peel and Holland Financial Group Benton, KY

Sandra Torstrick Blain Al Torstrick Insurance Agency Lexington, KY

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

Tommy Adams CM Moore Insurance Agency Bowling Green, KY

Matt Swallows Swallows Insurance Agency Cookeville, TN

Tom Strate Strate Insurance Group Morristown, TN

Virginia Goff Durrett Insurance Agency Louisville, KY

Bob McIntire McIntire & Associates Insurance Cleveland, TN

Carl Schlotman III CAI Insurance Agency Cincinnati, OH

David & Bob Fenner Thomas-Fenner Woods Agency Columbus, OH

Hugh M. McGowan & Hugh B. McGowan McGowan Insurance Group Indianapolis, IN

Tom Chappell & Chris Turnbull Chappell, Smith & Associates, dba. CS&A Insurance Franklin, TN

Partners in Pennsylvania, North Carolina, Virginia, Indiana, Ohio, Kentucky, Tennessee and Georgia. • Increasing Agency Value for Over 235 Partners in 8 States • Perpetuating & Strengthening the Independent Agency System • Individually Owned & Operated

Doug Walker Walker & Associates Insurance Indianapolis, IN

Call Nancy Tehan at ntehan@keystoneinsgrp.com 888.892.5865 Or visit www.keystoneinsgrp.com

COVER Story

Buying, Selling and Merging an Agency - What Should You Do? by Ronald Kettner, CPCU and Richard F. Lund, J.D.

One of the biggest decisions of your professional insurance career comes when you decide to either sell the agency you’ve worked long and hard to create, or to buy another agency that someone else has worked long and hard to create. You’ve met with the owners of the agency, you’ve looked at the book of business, you’ve agreed on a price, hopefully you’ve contacted your attorney to help you draft the buy/sell agreement, and you’re a few short days away from closing the deal when suddenly someone asks: what about E&O coverage? Who’s doing what? Are you going to pick up the prior acts or am I? Can we just transfer the E&O policy to the new owners? What kind of losses have you had? All of these questions should be asked at the beginning of the talks regarding the sale/purchase, but unfortunately they usually aren’t discussed until the last minute and they can have a big impact on the deal. Think about this, when you buy a new car or are selling your current one, one of the first things you should do is contact your insurance provider. It’s no different

Workers’ Comp is about . . .

when you are buying or selling an insurance agency. It also applies when you are only buying or selling a book of business. In most, if not all cases, your E&O policy states that you must notify your E&O provider within 90 days of a merger or acquisition (check your policy for verification of the time limits). Failure to notify your carrier in a timely manner could result in a gap in coverage. So let’s go through the steps you should follow when you are making a life and business changing decision regarding your agency. Buying an agency You’ve been talking with a fellow agent about buying their agency for some time and now you’ve both decided that the time is right. There are many details to consider and the first of which is to do your due diligence to review the other agencies operations, book of business, finances and E&O Policy. At this point it is advisable to retain an attorney to help you through the process. Remember, an attorney can only represent one party, not

Your wish is granted! You want/we offer: 1- Ease of doing business ! Same-day (often same hour) responses ! Sophisticated technology (including a nationally recognized agency portal) PLUS personalized attention 2- Competitive price 3-Broad underwriting appetite targeting small- to mid-sized risks 4- Unique product ! Specialized approach to service ! Payroll-based billing via the GUARD Reporting Interface for Payroll (GRIP) 5- Superior claims handling that promotes customer retention 6- Favorable compensation

A number of agency appointments are available. Contact us to learn more:

www.guard.com/apply ®

Your Business Is Our Business!

COVER Story

both. You and the seller should each seek separate counsel. It is a good idea to have a confidentiality agreement with the seller so that you can freely review all of the documents necessary to begin the change of ownership. After you have completed your due diligence and you and the seller are comfortable with all aspects of the agency, the attorney’s will draft the buy/sell agreement. Included will be such things as the timing of the sale, the assets to be transferred, the price, and of particular importance is who is responsible for the liabilities of the selling agency. The cleanest way to do this is for each party to retain their own liabilities. In regard to the seller’s E&O policy, they will purchase tail coverage and the buyer will add the new agency’s book of business to their current E&O policy. The reason this is the cleanest way to make the change, is because the seller will have the peace of mind of knowing that should a claim arise after the sale for acts while they owned the agency, their E&O policy will provide coverage for them. For the buyer, they know that they will not be responsible for any acts that may have occurred prior to the purchase of the agency. This is true whether or not the selling agency will continue as a separate entity or location for the buying agency. In most cases, even if the buyer maintains the new agency as a separate entity or location, it can be included on their current E&O policy for errors and omissions that are made after the sale. Another option, while not the best way to transfer the ownership, is for the purchasing agency to agree to accept responsibility for prior acts. This is accomplished by adding the selling agency to the buying agency’s E&O policy. However, please remember that this must be approved by the E&O carrier before the sale is completed. It is imperative that you contact your E&O agent as soon as you begin the buy/sell process. You will be required to provide a loss history of the seller, and the carrier may require an application providing information about the mix of business, gross annual premium, commissions, staff, etc. In some cases the carrier may not agree to provide prior acts due to claims history, nature of the book of business, etc. in that case the seller should purchase tail coverage from their current E&O carrier. One thing to keep in mind is that the cost of tail coverage or additional premium expense if the prior acts are provided by the buyer can, and should, be considered in determining the sale price of the agency.

Selling an Agency As a seller of an agency, you may feel that it is important to maintain your agency’s legacy. If this is important to you, be sure to discuss this with your attorney so that it is properly addressed in the agreement. If you have valued employees that you wish to provide for, you should include how they will be take care of in the agreement. This may be a source of negotiation as the seller may not wish to add any permanent staff, so make sure this is brought up in your discussions with the buyer. An important aspect that was mentioned previously is protection for you if a claim should arise after the sale. As stated before, the best way to ensure this is to purchase tail coverage from your current E&O carrier. While you may not want to add the expense of tail coverage and you believe you are protected because of your agreement with the buyer that they will provide coverage for prior acts and will maintain an E&O policy, you have no guarantees that it will be done. It is not unheard of after an agency sale for the buying agency to either go out of business, sell their agency to another party who will not agree to provider acts, or have their E&O policy terminate either voluntarily or involuntarily. In each of these cases you could be left without coverage. Another thing to consider should your agency be added as an additional insured on the buyers’ policy is that any claims, whether they are for your agency or the buyer’s agency, will be subject to the policy limit of the buyers’ policy, regardless of whether there are multiple claims as a result of either agency. In other words, are you comfortable that the policy limits of the buyers E&O policy are sufficient to cover both your and their claims? Also, it should be made clear who will be responsible for any deductible payment. Mergers If you are merging with another agency to either form a new agency or be a continuation of one of the two, there are a couple of different ways to handle this in regard to your E&O coverage. One way is to have a new E&O policy for the newly created entity. This ensures a clean slate for all involved. If a new policy is created, each of the former agencies can purchase tail coverage or they can be added as additional insureds on the new entity policy. Again, keep in mind that any claims will be subject to the limits of the remaining policy and remember that this must be approved by the

COVER Story

E&O provider prior to the completion of the agreement to ensure that the carrier can comply with your wishes. Another way to handle a merger is to terminate one policy and have that agency added as an additional insured to the policy of the “surviving” agency. The agency that is terminating their policy can either purchase tail coverage or be added as an additional insured upon approval by the E&O provider. Internal Sale Many times an owner has a key agency employee who they believe is qualified to take over the agency. Everything that has been stated before applies just the same in these situations. There should be due diligence by both parties, attorneys should be retained, agreements drafted and entered into, and all other aspects of the change of ownership should be carefully contemplated and resolved. Transfer of a Book of Business Remember that even if all you are doing is transferring a book of business, either as a buyer or seller, all of the things mentioned

previously apply. While you might think that a transfer of only a small book of business should be uncomplicated, as soon as a claim is made it can become very complicated. Key Points to Remember 1. Consult your attorney and have a formal written agreement outlining the duties and responsibilities of all of the parties. 2. Contact your E&O provider as soon as you can to ensure that coverage can be provided as you intend and that there are no gaps in coverage. 3. Giving timely notice to your E&O provider is of utmost importance as many carriers may be unable to comply with your intent after the transaction has already been completed. You’ve spent your professional insurance career building a business that has provided you with a livelihood and personal fulfillment. If you are either growing or selling your agency, you want the peace of mind of knowing that you have adequately protected yourself. This article is intended to be sued 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. *Ronald S. Kettner, CPCU is a vice president and senior underwriter of Swiss Re/Westport underwriting insurance agents errors and omissions coverage. He has over 30 years’ experience in the insurance industry, underwriting personal and commercial lines insurance as well as professional liability insurance during his career. 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.

TRUCKING

CONSTRUCTION

MANUFACTURING

Some Agents Have Seen It All. That's When They Call On Us. WORKERS' COMP INSURANCE American Interstate Insurance Company Silver Oak Casualty Inc. Toll Free: 1.800.317.0876

USL&H

AGRIBUSINESS

Fax: 1.800.450.1091

Amerisafe.com

OIL & GAS

New TechnologyLearning to Adapt By Marty Agather, CPCU, ARM

Mobile, cloud, and social technologies are quickly evolving, causing societal transformation and giving rise to a new empowered and connected consumer. How well an agency understands this change, learns to adapt, and effectively engages the new connected consumer will determine their future viability. Keeping up and adapting to new technology and the changing demands of customers and prospects has always been a challenge for business. What is different today is that advancements in technology and changes in consumer behavior are happening “scary” fast, and are now being driven by the consumer rather than the corporation. As you already know, many of the old ways of doing business are no longer effective. As an example, traditional Yellow Page advertising is no longer effective in reaching most consumers. Email is passé for many of the younger generations who prefer texting instead. Today, consumers are demanding that their business partners be online, transparent,

accessible, open, socially responsible, and honest. They want to feel that they know their favorite brands on a personal or personalized level. The challenge facing our industry is not just about making sure agents have blogs, Facebook pages, Twitter accounts and are using Pinterest to curate relevant business information. Yes, it is important to learn how to effectively use new technology. But it is critical to pay close attention to the evolution of consumer behavior. Successful agents have learned to use the new technologies as an effective way to grow a community of online relationships to convert employees and followers into brand advocates. Rather than use the tools to simply amplify their sales message, these firms use social networking to build and strengthen relationships, connect and build trust. It’s a subtle but powerful difference in approach. Equally important, a good social networking implementation must be more than a marketing department project. Social

Classified Ads Acquisitions Established Louisville agency interested in acquiring insurance

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

agencies in Jefferson and surrounding counties. If you are interested in

producers and insurance agencies considering selling or merging.

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

Commercial lines & personal lines wanted in Louisville, Lexington,

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

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

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

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

Looking for

Group (502) 244 – 1343.

Producers Independent with top best markets looking to expand presence

Producer Wanted

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

Louisville Insurance LLC has producer opportunities with flexible

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

compensation plans while offering ownership in book of business

possible, in strict confidence. Please send inquiries to Turner

produced. Confidentiality provided to all interested parties. Contact

Insurance Agency, 2460 Shelbyville Road, Shelbyville, KY 40065

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

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

networking does not magically transform or solve an agency’s marketing or communication problems. Adapting to the new business environment requires that social networking initiatives be an integrated part of a comprehensive business strategy, as it will involve and impact all business units within the agency. There are many social tools (Facebook, Twitter, LinkedIn, YouTube, Google+, and Pinterest, etc.) that

RELATIONSHIPS IT’S WHY WE STAND OUT FROM THE CROWD “I’m a mom, and for me excellent communication is important. The same holds true for my role as a Bond Underwriter. Developing personal relationships with our customers is essential—it’s who we are.”

Robyn Shepherd Bond Underwriter—professional listener and “customer care” expert Connect with Robyn on LinkedIn!

PIA National 2011 MGA of the Year Property/Casualty t Professional Liability t Surety Commercial Transportation t Personal Lines t Premium Finance

800.538.4796

jmwilson.com

can be used by an agency to build and strengthen its brand. Yet, like any successful agency initiative, it must be well managed, monitored, measured and evaluated. Getting Ready Creating a good agency Social Media policy guide is an important first step. Such a guide clearly lays out what is and isn’t permissible when employees are formally presenting themselves as agency representatives online. Many agents and brokers already have guides outlining use of the Internet and email at work. For these businesses, additional guidelines covering use of the social web may suffice, and for those that do not, a newly created guide can cover employee use of all of these tools. The IIABA’s technology working group known as ACT (or Agents’ Council on Technology) has sample Social Media policies available on its section of the IIABA.net website. Another important step in implementing a social media initiative is making sure you have someone responsible for overseeing and managing the initiative, someone to take on the responsibility as “Community Manager”. Ideally, the Community Manager manages the communication flow between the company and its engaged online users. Ultimately charged with implementing the company’s online strategy, this digital-savvy employee provides vital oversight for all communications, PR, social media, events, and content creation. Once you have your guide and your manager in place, the company will be ideally positioned execute consistent use of online tools and in-person networking to create relationships and seamlessly project the company’s brand, both online and off. For more information on Project CAP, visit ProjectCAPMarketing.com. Marty Agather (MartyAgather@ProjectCAPMarketing.com) is vice president, client development, for Project CAP. Project CAP provides digital marketing tools and services to help independent agencies, brokers and insurance carriers build their online brands and visibility in order to attract and interact with today’s digital consumers. Project CAP was created through an alliance of the Independent Insurance Agents and Brokers of America (IIABA or the Big “I”), Trusted Choice®, state associations and key insurance carriers to expand the independent agent’s share of the personal lines insurance market.

I’m celebrating our 100th year by planning for our next 100 years. Jason Bogart, CPCU, ARM, Vice President of Branch Operations Our future will be marked by the relationships we forge with you—the independent insurance agents who represent us. You’re the reason we’ll continue to investigate new market opportunities. Why we’ll develop competitive products. Why we’ll maximize the use of new technologies. Why we’ll emphasize ongoing professional development for our staff. By helping you proﬁtably and efﬁciently grow your agency, EMC Insurance Companies will continue to serve you and your customers today and in the future.

Cincinnati Branch: 800.732.5595 | Home Ofﬁce: Des Moines

Our Members Say It Best

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

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

Administered by CCMSI

We offer independent agents mobile home insurance at new competitive rates that will help you compete and expand your base.

We can Ànd coverage for homes that have something most homes don’t. Wheels.

Online quotes are available and no minimum volume is required. Just go to www.boltonmga.com and click “Online Rating.”

PEOPLE In The News

IIABA Install New Leadership Team

Independent Insurance Agents & Brokers of America (IIABA) installed new officers at its recent Big “I” Fall and Leadership Conference on September 8 in Atlanta. This new leadership team includes: • Bobby Bramlett who serves as the new IIABA chairman. Bramlett is president & CEO of the Bramlett Agency in Ardmore, Okla. He began his insurance career with The Bramlett Agency in 1975 and has served as its president and CEO since 1983. He is past president of Independent Insurance Agents of Oklahoma (IIAO) most recently served as vicechairman of Bobby Bramlett, IIABA. In 2008, IIABA chairman Bramlett received the IIABA’s highest Government Affairs award, the Sydney O. Smith National Legislative Award. He was also given IIAO’s highest award, The Eagle of Excellence Award, in 2009. In his community, he serves as a Director of First National Bank and Trust Company, Trustee of The Glen Foundation, and as a Trustee of St. John’s Northwestern Military Academy. Bramlett is a graduate of St. John’s Military Academy in Delafield, Wis., and earned his Bachelor of Business Administration degree from the University of Oklahoma. • Tom Minkler who serves as IIABA chairman-elect. Minkler is president of the Clark-Mortenson Agency in Keene, N.H. Minkler is a past chairman of the New Hampshire Association of Insurance Agents, past New Hampshire director on the Big “I” national board and past Tom Minkler, president of the IIABA chairman-elect Massachusetts Association of Insurance Agents. At the national association level, Minkler has

championed the Consumer Agent Portal (CAP) project since 2009 and is past chairman of the Big “I” Government Affairs Committee. He has also served on various other Big “I” committees including the Professional Liability Committee, the Agents Advocacy Fund, the IIAA Agency Administrative Services board of directors, and the Captive Study Committee. He is a frequent speaker for the insurance industry and has provided testimony before the U.S Congress on behalf of the Big “I” on a variety of topics. • David Walker, CIC, AAI, LIC, who serves as IIABA vice chairman. Walker is president of Hartland Insurance Agency in Hartland, Mich. He began his insurance career in 1979, joined Hartland Insurance Agency as a producer and rose through its ranks. Walker has served on the Michigan Association of Insurance Agents (MAIA) Young Agents Council, Education Committee, Legislative Affairs Committee and Agency-Company Relations Committee. Additionally, he has served on the board of directors and as president of MAIA and the Genesee County Independent Agents. At the national level, he has served on the boards of the Big “I”, CAP and Big “I” Advantage, and as a member of the Big “I” Professional Liability Committee. Walker has received numerous MAIA awards, including the W.O. Hilderbrand Award in David Walker, 2006 for his lifetime service and achievement IIABA vice-chairman in the insurance industry and MAIA. Walker is active in his community, having served on the board of directors for the Harland Area Chamber of Commerce and as a trustee and president of the Fenton Area Public Schools. He is also a founding member of the Hartland Rotary. • Vaughn Graham who serves as an atlarge executive committee member. Graham is president of Rich & Cartmill, Inc. headquartered in Tulsa, Okla. He is a past chairman of the IIAO and has served on the Big “I” national board of

PEOPLE In The News

directors. Graham was recognized in 2012 with IIAO’s highest honor, The Eagle of Excellence Award. At the Vaughn Graham, national IIABA at-large executive committee member association

level, since 2009 Graham has chaired the IIAA Member Services Board, served on the Big “I” Advantage Board, was a Trustee on the InsurPac Board, and was a member of the Agents & Brokers Roundtable. Graham remains active in his community with charitable and civic organizations. He is a graduate of the University of Oklahoma.

Not just customers.

Relationships. Every commercial insurance company wants to build its customer base, increase retention and inspire loyalty. We do, too. But at FCCI, we focus on getting to know our customers. Because the more we know, the more we can help you protect business, property and people. And that’s what we do best.

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

Sell More By Not Selling By Steve Anderson

Your prospects and customers are bombarded with hundreds, if not thousands, of advertising messages every day. It wasn’t that long ago that you had to watch TV commercials because there was no other option. Today, Karen and I complain about having to watch “live” TV because we aren’t able to skip through the commercials. The connected consumer is able to ignore your marketing messages better than any consumer in the past. Getting attentionwhether online, using direct mail, or meeting someone at a networking event-is harder today than it ever has been. I am convinced that the way to grow your agency and market the products and services you offer in this new environment is to do less selling. People continue to want information. They just will not put up with being “sold.” In this new environment, it is becoming apparent that people who educate and inform their prospects and clients are more successful. They highlight their expertise with videos, content-rich websites, social streams, blogs, ebooks, special reports, and images. This is called content marketing. Content marketing means creating and sharing valuable free content to attract and convert prospects into customers, and customers into repeat buyers. The type of content you share is closely related to what you sell; in other words, you’re educating people so they know, like, and trust you enough to do business with you. While copywriting techniques are often applied to content created for marketing purposes, we’re not talking about advertising in the traditional sense. In contrast to “interruption” marketing such as television commercials or direct mail, content marketing involves delivering requested information with independent value that creates trust, credibility, and authority for the business that provides that value. Insurance agents play a key role in protecting a client’s financial future. Trust is a key factor in their buying decision. You have the power to elevate yourself on the Web to a position of trust and authority. You can interact and participate in conversations that other people begin on social platforms

like Twitter, Facebook, LinkedIn, chat rooms, and forums. The primary goal is to obtain their permission to deliver content via email or other media over time. Repeated and regular exposure builds a relevant relationship that provides multiple opportunities for conversion, rather than a “one-shot” all-ornothing sales approach. The key is to focus on buyers’ needs, not your own ego. Stop trying to sell your products and services. Don’t rely on interruption techniques. Instead, you should seek to deliver the right information to the right buyers at the right time when they are most receptive. Content drives the Internet, and consumers are looking for information that solves a problem, not for immediate sales pitches. The trust, credibility, and authority that content marketing creates knocks down sales resistance, while providing a baseline introduction to the benefits of a particular product or service. Agencies can gain credibility and loyalty with consumers through content, and smart marketers think and act like publishers in order to create and deliver content targeted directly at their audiences. Don’t simply push product or low price. Teach people something. Share your expertise. It is counter-intuitive: You sell more when you stop selling. Be sure to catch Steve Anderson at the 116th IIAK Annual Convention on November 8, where he will be presenting a continuing education seminar titled, “Cyber Liability Protecting Your Customer Data.” Steve Anderson wears many hats these days. He has been a licensed independent agent for 30 years and is Executive Editor of The Anderson Agency Report (TAAR), a monthly newsletter dedicated to providing independent agents with the insurance technology information they need to more effectively manage and grow their agencies. He is also president of The Anderson Network, Inc. which was formed to help agents and brokers maximize productivity and profits using practical technology. He can be reached via email at steve@steveanderson.com.

EDUCATION & Events Calendar

# " ! * !! ! . . = "'$% " 4 "$ ! !%&$' &"$- $ % & % 4 " & "!%- &" $ 9: 1 $ !!, ) !% "$" &" $ 9; 1 ! (. " " ! *, "' %( &" $ 9< 1 $ "! "& , * ! &"!

!"! !! " ! " !# #!" & " ' : "'$% "' : "'$% " ! * !' â&#x20AC;¢ '$% + / "( $ 8<, 9789 / 87 . . " ! ! "& !# " ' 9 "'$% "' 9 "'$% " ! * !' â&#x20AC;¢ $ + / "( $ 9, 9789 / 87 . . " " ! !# " ' : "'$% "' : "'$% " ! * !' â&#x20AC;¢ '$% + / "( $ >, 9789 / 87 . .

$ " " ' " ! ! ( ) $ & " % ! !& '! 8908<, 978:, "' %(

$ "! ,,-" # $ " * %

www.iiak.org

"' ! $ %& $ "$ & % ( !&% ! ' & "! % ! $% "$ ! "'& "$ ! "$ & "! + ( % & ! ))). ."$ . "' ! %" + # "! & 2<793 9;<0<;:9 "$ 5 ."$ .

When Mergers and Acquisitions Destroy Value By Al Diamond

Half or more of all mergers and acquisitions result in decreased values of the combined entities. How can that happen? Here’s a recent example in which we were called upon to value a combined operation after an acquisition.... Every large agency we know is involved in acquisitions or wants to be. Most medium size agencies are seeking acquisitions or mergers to strengthen themselves. Many smaller agents find themselves continuous targets of other agencies acquisition marketing, getting some welcomed and other unsolicited offers that sometimes sound too good to be true. What we don’t hear is that 50% to 65% of all mergers and acquisitions actually result in decreased values of the remaining or combined entities. How can that happen? Here’s a recent example in which we were called upon to value a combined operation after an acquisition: A $3 million (value, not income) agency purchases a $1 million (value) agency. One year later the combined business is valued (the same way each was valued previously, based on the entities future earnings potential). It is valued at $3.5 million, a $500,000 loss of value in one year. WHY? To find out why these happen, we collected what some of our clients told us when they invited us to help them reconnect with growth, profit and value AFTER each implemented a business combination (merger or acquisition). 1. So much time was taken by management in the consolidation that we forgot to sell some insurance. 2. In the attempt to “integrate” one organization into a larger organization we destroyed the creativity and chased way the innovators that attracted us to the acquisition in the first place. 3. We never communicated properly with our employees and with our customers. We knew what we wanted to do in the merger, but we never shared our goals and strategies with the folks who we count on most to make us successful.

4. We consistently searched for and found weaker or failing companies that we could get at a bargain. They imbued us with their negativity. It turns out that it wasn’t such a bargain after all. 5. We were two companies, both facing their own institutional problems, that merged creating a single, larger troubled company. How do you avoid this scenario and still grow through mergers and acquisitions? 1. Plan your organizational growth STRATEGICALLY. Don’t even consider merging or acquiring unless you have determined that it fits your long term goals as an organization. What’s “long term”? At least five years and often 10 years. Does it make any sense to take on the responsibility for a merger or acquisition if you have just a few years before you want to retire? It may sound great to retire with a larger book of business under you, but are you ready for the work of integration at your stage in your career? Do you have the staff to handle a transaction now and again when you retire? Do you have your own perpetuation plan in place? However if you have a cogent Strategic Plan that identifies the market trends that you are pursuing (product, carrier, lines of business, geography) and expansion through merger and/or acquisition will help you reach those goals, then go for it! 2. The only agencies who should be considering mergers or acquisitions are ones who already understand their customers’ needs are meeting them. Don’t lead with your weaknesses, lead with your strengths. An agency ready to acquire or merge has customer retention rates consistently above 90% (better at 95%). This means that you have strong customer loyalty and they “want” to stay with you. You lose them when they retire, die or sell their businesses. An agency ready to buy and merge experiences growth through referrals and wants to multiply their referral strategy by forming similar relationships with a whole new set of customers for whom they can offer

similar services. 3. Benchmark yourself. Do you know how you stack up against similar sized agencies (overall, or in your State)? Do you keep records of your own productivity growth historically? If you don’t know yourself, how will you know if an association with another firm improves or decreases your metrics? We’ve known for years that we pay attention to what we measure. So if all we look at is commission dollars, we might beat ourselves unmercifully when our revenues decline in a period of soft insurance economy during which the market depresses by 10% or more in a given year. Agencies that pay attention to their own metrics understand and react to market fluctuations but measure the real signs of growth or shrinkage, customer counts. 4. Are you like the Buggy Whip manufacturer who bought up other failing buggy whip manufacturers as the automobile gained leverage on the personal transportation industry or could you expand into other categories of your industry? Most of our readers are insurance agencies. Have you looked to your merger or acquisition appetite for other dimensions in our industry beyond personal and small commercial lines property/casualty insurance? If not, consider Dimension Extension within your strategy for growth. 5. Don’t acquire or merge beyond your physical (or staff) capabilities to manage that growth. We encounter agencies every year that acquired or merged with the “hope” that they would gain the skills and talent to manage the resultant organization because they knew their own weaknesses. If you don’t have the strength to integrate and manage the combined operation, do your Due Diligence (including long term employment commitments) for the management and other talents needed to bolster your organization. 6. Define your technical competence before you venture into acquisition.

We recently encountered a young Personal Lines agent who had the means and desire to acquire. But he wasn’t computer literate enough to understand his own basic agency management system. Nor did he have (or understand) the need for Internet presence for agencies expecting to remain in the personal lines business for more than one more generation. The more technically competent you are and the more you understand the relationship between internet technology and the customer in a service industry like ours, the more likely you are to make and implement successful acquisitions. The world is changing - quickly. You needn’t change to continue your career. But you can’t grow by acquisition or merger without a deep understanding of technological strategies around customer portals and remote access service. There is a subset of large, medium and smaller agencies whose owners and drivers are prepared to plan for growth instead of following every scent toward potential acquisition or merger “prey”. The untrained ‘nose’ may find the scent may turn into a vicious odor once they pounce on their target. But if you take the time (before you acquire or merge) to strategically plan for your growth; if you understand and please your current customers; if you know your own metrics and benchmark yourself to assure that you are efficient and effective enough to enjoy value growth in a merger or acquisition; if you have examined your products and what will be the successful insurance products (or financial security products) of the future; if you have strong management and staff and if you are technically savvy, you are well prepared to enter the fray. Seek a merger or acquisition and gauge your success in the baseline terms of value to you over time. Otherwise, gain knowledge and get assistance BEFORE the acquisition or merger to keep from following a proverbial “skunk” down a hole (your worst case scenario occurs if you actually catch it).

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

6HSW2FW B,)&,%& LQGG

1046 Louisville, KY

13265 O’Bannon Station Way Louisville, KY 40223

SEPTEMBER

OCTOBER 2012

We can Ànd coverage for almost any commercial auto situation that you can think of. Well, almost any.

No minimum volume is required. Just go to www.boltonmga.com to submit online.

What You Need to Know About Mergers and Acquisitions New Technology — Learning to Adapt