September 2018 e-Insight by Big I Illinois

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EMPLOYEE BENEFIT PROGRAM for ILLINOIS PUBLIC ENTITIES

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www.ipmg.com

Editor & Advertising - Deann French | Graphic Design - Rachel Romines

the journal of trusted choice independent insurance agents of illinois

September 2018

CONTENTS 12

Create a Sales Superstar Four Ingredients Needed for Sales and Business Success By John Chapin

Making Your Sales Proposal a Winner By John Graham

12 24

Making a Good Hire is a Complex Puzzle By Caliper Insuring Against Large Losses By Brian Butcher

In This Issue

7 30 31 34

10 33

Associate News

17 e-Insight

Regular Features President’s Message

CONVO 2018 Be Social. Get Connected. The Growth of the “Sharing” and Renting Economy By Chris Boggs

9 Trusted Choice

Government People in the News

IIA of Illinois News Classifieds

INSIGHT

Insight is the official publication of the Independent Insurance Agents of Illinois (IIA of Illinois). The magazine is published monthly for the members of the IIA of Illinois, with the office located at 4360 Wabash Avenue, Springfield, Illinois 62711-7009; Consumer Website: www.ChooseIndependent.com. The IIA of Illinois welcomes letters discussing concerns of the insurance industry, articles, editorials, other matters of interest to the membership. The editor reserves the right to edit and select submissions for publication. Address submissions for review to dfrench@iiaofil.org.

2009 • 2010 • 2011 • 2012 2013 • 2014 • 2015 • 2016 • 2017

info@iiaofil.org | www.iiaofil.org | (800) 628-6436 or (217) 793-6660 | Fax: (217) 793-6744 The Independent Insurance Agents of Illinois (IIA of IL) has been providing members with a sustainable competitive advantage since 1899.

ADVERTISERS

Board of Directors Executive Committee

Chairman of the Board | Rick Sutton (309) 692-8544 | ricks@was-irp.com

ABRC

President | Ryan Hite (309) 688-7316 | ryan.hite@eaglerockins.com

AMERISAFE

President-Elect | Patrick Muldowney (312) 595-7192 | patrick.muldowney@alliant.com

AMTRUST

Vice President | Bill Wirth (618) 939-6368 | billw@wirthagency.com

APPLIED UNDERWRITERS

Secretary/Treasurer | Bennie Jones (312) 960-6200 | bjones@rmsoa.com

IIABA State National Director Gregory A. Sandrock, CIC, AFIS (815) 438-3923 | sanins@essex1.com

BERKSHIRE HATHAWAY GUARD INS. GROUP

FCCI

Regional Directors

INDIANA FARMERS

Region 1 | Lisa Lukens (618) 942-2556 | salibainsurance@gmail.com

INSURANCE ASSOCIATES OF AMERICA

Region 2 | Joeseph Heneghan (618) 639-2244 | joe.heneghan@hwcrins.com

IPMG

Region 3 | Jay Peterson, AFIS, LUTCF (217) 935-6605 | jay@peterson.insurance

IPRF

ARLINGTON/ROE

Region 4 | Michael Gonet (815) 339-2411 | mike_gonet@hotmail.com

JM WILSON

Region 5 | Patrick Taphorn, CIC, CSRM (309) 347-2177 | ptaphorn@unland.com

SECURA

Region 6 | Rob Messer (815) 459-3300 | rmesser@marketfinancialgrp.com

THE IMT GROUP

Region 7 | Michael-Charles Hilson (708) 333-3378 | mhilson@gbgins.com

TRANSCOM GENERAL

Region 8 | Corbin Adams (312) 938-0900 | corbin@irsichicago.com

WEST BEND MUTUAL

IIA of Illinois Staff Education Director, CRM Manager Shannon Churchill - (217) 321-3004 - schurchill@iiaofil.org Vice President of Communications Deann French - (217) 321-3022 - dfrench@iiaofil.org Products & Services Administrator Melissa Hilgendorf, CIC, CISR - (217) 321-3012 - mhilgendorf.indep12@insuremail.net Accounting & Admin Services, Tradeshow Admin Tami Hubbell - (217) 321-3016 - thubbell@iiaofil.org Director of Human Resources/Board Admin Jennifer Jacobs - (217) 321-3013 - jjacobs@iiaofil.org Sr. Vice President/Chief Financial Officer Mark Kuchar - (217) 321-3015 - mkuchar@iiaofil.org Chief Executive Officer Phil Lackman - (217) 321-3005 - plackman@iiaofil.org

Central/Southern Marketing Representative Lori Mahorney - (217) 415-7550 - lmahorney@iiaofil.org Vice President, Agents Insurance Services Brian McSherry, CIC - (217) 321-3018 - bmcsherry@iiaofil.org Office Administrator Kristi Osmond - (217) 321-3007 - kosmond@iiaofil.org Digital Communications/Web Administrator Rachel Romines - (217) 321-3024 - rromines@iiaofil.org Director of Membership Services Tom Ross, CRIS, CPIA - (217) 321-3003 - tross@iiaofil.org Communications Assistant Tyler Scott - (217) 321-3023 - tscott@iiaofil.org Products & Services Administrator Janet White, CISR - (217) 321-3010 - jwhite.indep12@insuremail.net Sr. Products & Services Administrator Carol Wilson, CPIA - (217) 321-3011 - cwilson.indep12@insuremail.net

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PRESIDENT'S MESSAGE

Ryan Hite - IIA of Illinois President - (309) 688-7316 - ryan.hite@eaglerockins.com

Swan Song This past year has been an incredible experience on both a personal and professional level. The amount of work and effort from our Association staff to our Board members is overwhelming to think about, yet they do it year over year. As such, I want to publicly thank our staff. I’m not going to lay out all the challenges we’ve faced, but the IIA of IL staff has stepped up every time we’ve needed them and has become a very efficient team fighting on our behalf. Looking back, the Convention (CONVO) gets a lot of press, but from there my year was only beginning. If I listed all of my travels and events/meetings attended, you’d be bored, and I’d run out of room! Several dates stick out in my mind though. Shortly after CONVO was our first Board meeting of the IIA year and we invited several of our top company partners to dinner to say ‘thank you’ and discussed our partnership as well as recent results of the election cycle. It’s always interesting to not only hear the differences, but also the similarities of issues, concerns, and perspectives from our carrier friends and continue to work on ways we can help each other. You might think the winter months slow down a bit, but not really. I attended a Chicagoland IIA event and saw my first Blackhawks game, which was outstanding! The atmosphere in the United Center during the National Anthem was electric and unlike anything I’ve experienced. The next few weeks had me going from National “Big I” Conferences to IL Farm Agents Meetings and everything in between.

In the spring, the DC Federal Legislative Conference is always special, and EDGE Conference is more impressive every year. I also enjoyed making new connections at the NAAIA Chicago luncheon. The summer brings countless golf outings, fundraisers, dinners and more. We have a diverse state in many different ways, and I’m thankful to be a small part. THANK YOU to each of you who has gotten involved along the way. Your participation, feedback, questions, concerns, and solutions have all helped me navigate this past year. While I am a better person as a result, more importantly you have made our Association and industry better. “When you do nothing you feel overwhelmed and powerless. But when you get involved you feel the sense of hope and accomplishment that comes from knowing you are working to make things better.” - Maya Angelou Completely Grateful,

All of that, however, was just an appetizer for the IIA of IL Roadshows, where the idea was to bring staff and Board to a location closer to members so we could meet in person and not just present the value of what your membership dollar provides, but to also listen to what’s going on in your corner of the state. We hustled and held nine events over three weeks! I loved going to new places, trying new food, and meeting agents from all around the map, and I know that if you attended you learned something new.

september 2018

insight

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Elk Grove Village September 30, 2018 Registration 9am | Event 10am Walk For Wishes® is a Make-A-Wish® fundraiser that celebrates the thousands of wishes that have already been granted, while raising funds for future wishes. It’s a family-friendly event powered by wish families, volunteers, companies, donors and friends. We are excited to walk and fundraise for this year’s Walk For Wishes. Together, we can raise money for Make-A-Wish to help grant the wishes of children with critical illnesses. A wish gives children renewed energy and strength, brings families closer together and unites communities. These life-changing wishes are only possible because of supporters like us. A wish experience can truly change a child’s life, and so can we. Participants are invited to celebrate the spirit of a wish by dressing up as their favorite hero or character. Join our team or make a donation today! www.iiaofil.org/About-Us/IIA-of-IL-Gives-Back

september 2018

insight

government

Governor Signs IIA of IL Legislation Authorizing Webinars for Ethics CE Requirement and Creating an Education Advisory Council Governor Rauner acted on several insurance related bills this week including SB 2513, an IIA of IL initiative creating an Education Advisory Council within the Department of Insurance. The purpose of the Council is to create a more consistent method of communication between the Department of Insurance and Producer and Company education professionals and make recommendations for regulations

regarding course materials, curriculum and credentials of instructors. The Council is comprised of 7 members appointed by the Director. Three members shall be recommended by the leadership of the 3 statewide producer trade associations, IIA of IL, NAIFA-Illinois and the Illinois State Association of Health Underwriters. Three members shall represent domestic insurance companies and one member shall be an educational instructor. The legislation also changes Illinois Ethics CE by authorizing webinars, in addition to classroom, as an acceptable method of completing the three hour requirement.

Your customers. Our promise.

One of IIA of IL’ primary missions is to provide innovative and quality educational offerings to our members. The creation of the council will work to further our mission. The bill has an immediate effective date, 8/14/2018.

FCCI Insurance Group has been insuring businesses and doing what we say we’ll do for nearly 60 years. Our expertise in underwriting, risk management and claims handling helps businesses thrive and face the future with confidence.

Additional Bills Signed by the Governor: HB 4846- Provides that it is a violation of the Illinois Vehicle Code to use an electronic communication devise while operating a motor vehicle. Current law provides it is a violation on the second or subsequent offense. The change takes effect July 1, 2019.

Stephanie Hipskind Senior Risk Control Consultant Midwest Region FCCI Insurance Group 800-226-3224, ext. 4103

SB 2437- Makes changes to the beneficiary designation on a life insurance policy of an insured’s spouse after a judgement of dissolution of marriage has been entered. Effective 1/1/2019 SB 2439- Eliminates current provision requiring the Director of the Department of Insurance to revoke a producers license for defaulting on an educational loan provided by or guaranteed by the Illinois Student Assistance Commission. Effective 8/14/2018.

10 III18_Hipskind_4.75x7.indd insight

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The

EA T A E CR ALES AR S RST PE SU

FOUR INGR Needed for

SALES AND BU

It happened again two weeks ago. I met with someone struggling to get their business going. One of the first questions I asked, and always ask: “What are you doing to bring in revenue (sell something)?” “I have a display at the local Walmart, and I belong to five Chambers of Commerce.” “And how long have you been doing that?” “Five years.” “And how much business have you gotten from each one?” “Pretty much zero from all.” I’m not kidding. I also wish I could say this experience is the exception to the rule. Actually, it is more the rule than the exception when I talk to a struggling salesperson or solopreneur. What’s the definition of insanity? Right. For five years. Look, it really only takes four things to be successful in sales and business. If you have all four, success is virtually guaranteed. If you are missing even one, eventual failure is guaranteed.

Four Items for Sales and Business Success Item #1: Good people skills If you’re good with people, in other words, people like you because they feel good around you and believe you care about them, you’re off to a good start. If people like you, they’ll buy from you. The best salespeople and business people always have great people skills. They can connect and carry on a conversation with anyone at any level or any age. They have a charisma about them and their conversions flow smoothly and easily. They are able

to make people feel important by talking about what’s important to them, being a good listener, and focusing completely on the other person as if they are the only person in the world. Even in a crowd, they can make you feel as if the two of you are the only ones there. That relationship, that connection, is usually the most important aspect when selling most items. Item #2: A great attitude A great attitude includes: passion, confidence, conviction, commitment, and perseverance. It also includes being positive. The former attributes ensure you have the mental wherewithal to go out into the world with enthusiasm and remain that way while suffering the slings and arrows necessary to succeed in business and sales. The latter attribute, being positive, ensures that you present well to people. Your objective is to be a pleasure to interact with, to be the most pleasant person that people encounter during the day, and to be a joy to do business with. You want people to enjoy the experience of working with you. This means going above and beyond, doing more than people expect, and always doing everything in your power to make sure the client feels important. You want to have a can-do, happy-to-help-you attitude. Item #3: The right activities Activity starts by having a plan which includes how much business you need, how many people you need to talk to, and where to find those people. In addition, you need the self-discipline to stick to the plan and ensure that you spend your time and money on the right activities and resources. The most important activities you spend time on during the day are the ones that bring money into the business. It isn’t working on your logo, driving to the post office, or entering information into the computer. During business hours 90+% of your time should be spent on activities that generate cash flow.

Business is a contact sport and is all about relationships. In order to build relationships and connect wit you need to be talking to them live, not sending spam e-mails, LinkedIn messages, or connec 12

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september 2018

GREDIENTS

USINESS SUCCESS

By John Chapin

The fastest way to build business is by calling on people in-person or on the phone. Business is a contact sport and is all about relationships. In order to build relationships and connect with people, you need to be talking to them live, not sending spam e-mails, LinkedIn messages, or connecting on Facebook. Also, your activities should be focused on meeting new people (strangers). Going to the same networking events and seeing the same people over and over again is a mistake.

John Chapin is a sales and motivational speaker and trainer with over 26 years of sales experience. He is the author of the 2010 sales book of the year: Sales Encyclopedia. He can be reached at johnchapin@completeselling.com.

Incidentally, discomfort and fear of calling on people, both strangers and people you know, is what stops most people and causes them to fail in sales and business. If youâ&#x20AC;&#x2122;re going to be successful, you need to get over that. Bottom line: focus on meeting strangers and making lots of contacts. Business is a numbers game, if you talk to enough people during the day you will eventually run into someone who needs what you have or knows someone who needs what you have. So go out there and take massive action. Item #4: A good product and support This one goes without saying. If you have good people skills, a great attitude, and are focused on the right activities, youâ&#x20AC;&#x2122;ll make your share of one-time sales. But if you have a bad product, or are lacking support, the word will get out and any success will be short-lived.

ps. with people,

necting on Facebook. september 2018

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Making Your

Sales Proposal a Winner What to do before, during and after presenting By John Graham To put the importance of proposals in proper perspective, they are far more than a vehicle for conveying your message. They are your message. Sadly, proposals that could be winners are often rejected. They may be filled with information, but the message gets lost and they fail to capture the recipient’s imagination. To make sure your proposals get the attention they deserve, it helps to view them in three phases, before, during, and after the presentation. Each one plays a part in moving your proposal closer to winning the business. I. Preparing Your Proposal Proposals should be easy to follow. But watch out. What’s clear to you, can be a mystery to others. Stay away from jargon, too. The ability to explain something simply earns you points. How you structure your proposal makes a difference. Whether someone is reading or listening to it, organize it so the main points stand out. Of all proposal outlines, Problem-Solution works well because it keeps the focus where it belongs: on the customer. The problem expresses your understanding of what the customer wants to correct, implement, or improve. It’s your grasp of the situation, so it’s critical to get it right because your credibility is at stake. If you fail to read the problem correctly, you’re done! So, take it seriously and present a clear, thoughtful, and complete understanding of what the customer wants to accomplish. The way you handle the september 2018

problem lets the customer know if you want to solve it or just sell them something. If you’ve described the problem accurately, the customer will pay close attention to your solution. You want it to be viewed as thoughtful, efficient, and cost effective. A good way to do this is by proposing options, preferably three. This way you avoid putting all your eggs in one basket, which makes it easy to get your proposal turned down. With options, you can argue the benefits and limitations of each one in terms of good, better and best or low, medium and high cost, for example. Offering options has another plus. It opens the door for involving the customer in a helpful give-and-take, rather than putting you in the position of defending just one solution. That’s not all. Options can also help uncover issues the customer may not have considered. II. Presenting Your Proposal For presenters, their proposals can be more important than how they present it. This is a huge mistake. They’re a whole package. In the customer’s mind, you and your proposal are one. If one is weaker than the other, the proposal suffers. It’s your show so do everything possible to position it to your advantage. Here’s how to do it: continued...

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• Set the stage. Don’t allow your customer to guess where you’re going. Make it clear you understand the customer’s problem and lay it out clearly. Then, indicate that you and your solution reflects your company’s competence for solving it. • Maintain eye contact with your customer. You want to make your presentation an engaging experience for you and the customer. This is why handing out hardcopy is a mistake; do it at the end. You want the customer to listen carefully and not be distracted by flipping back-and-forth through the proposal looking for the cost information. When you lose eye contact, you lose control. If you use PowerPoint, don’t replicate your proposal, maintain eye contact by using only a few key words on each slide. • Communicate confidence. Your proposal is designed to be persuasive. You’ve built your case as your presentation moves from understanding the problem to an on-target solution and then to the climax of asking for the order. At no point in the presentation is confidence more critical than it is here. This is where the last impression is the lasting one.

Sure, you’ll find a way to thank your customer for the opportunity to make a presentation. Even though you should do it because it’s is only polite, it seems rather weak and ineffective. Some way or other, you want do more, but not something inappropriate. But now is not the time for a sales pitch. Stay on message. Since it’s likely your customer is considering several proposals, the task is making yours stand out. Simply and clearly in a few sentences (keep it short) reaffirm the accuracy of your problem analysis, along with the benefits of your solution. No waffling. You believe in your proposal, so stand by it. From start to finish, from preparation to presentation to follow-up is a seamless process that can make your proposal a winner. John Graham of GrahamComm is a marketing and sales strategy consultant and business writer. He is the creator of “Magnet Marketing,” and publishes a free monthly eBulletin, “No Nonsense Marketing & Sales Ideas.” Contact him at jgraham@grahamcomm.com or johnrgraham.com.

If the customer perceives your presentation as the expression of who and what you are, you’re well on your way to winning. III. Following Up After Presenting Your Proposal Follow up is often a presentation’s forgotten phase. Yet, it’s the most important. The show’s over. You worked to maintain control and now you’ve lost it. Your presentation’s fate is now in the customer’s hands.

If the customer perceives your presentation as the expression of who and what you are, you’re well on your way to winning.

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september 2018

e INSIGHT -

online journal at www.iiaofil.org/Resources/Insight

SE PT EM BE R

20 18

INSIGH T

MAKIN

GOOD - a com plex p HIRE Crea uzzle S u p etres a S a le s tar

Insurance is a ‘Well-Kept Secret,’

and Other Millennial Insights In this month’s e-Insight. september 2018

insight

MAKING A GOOD HIRE COMPLE

E IS A

EX PUZZLE

How Psychometrics Improve Hiring and Development By Caliper

“Do psychometrics really work with regard to hiring and development?”

1. Psychometrics improve consistency in hiring practices

After all, people are the most valuable asset in an organization, so it makes sense to explore all avenues for hiring the best talent. In considering personality tests for that purpose, everyone is looking to gain a competitive advantage, but no one wants to waste money.

Companies that use psychometrics-based assessment tools on an enterprise-wide basis are able to ensure all applicants, regardless of functional area, are screened on identical criteria.

However, companies may be asking the wrong question. They shouldn’t be wondering whether psychometrics instruments work; they should be asking, “Are we using psychometrics instruments correctly?” Most companies are using scientifically validated instruments offered by legitimate assessment companies, not some dollar-store questionnaire or a free phone app. The purpose of an authentic psychometric tool is to quantify personality drivers, and a well-designed and properly constructed assessment will do just that. How companies apply the findings determines whether it “works” or not.

A properly constructed assessment instrument is EEOC compliant and removes race, gender, age, and disability factors from a job candidate’s psychometric profile. While no hiring or promotion decision should ever be based solely on the results of an employment assessment, such a tool can act as an internal filter in limiting unconscious assumptions. 2. Psychometrics reduce hiring-manager bias Some managers have slightly inflated egos and believe the true and only path to great performance is by hiring people just like them. If they’re perfect as managers, it only makes sense to bring in others who are almost as perfect!

Unfortunately, some users of psychometrics-based assessments view the tool as a crystal ball that can magically reveal whether a job candidate is “good” or “bad.” In fact, assessment results are merely data, and the results are neutral without context. It’s what businesses do with the data that makes assessments useful.

The problem with that approach, besides its utter subjectivity, is that it overlooks some important facts: It takes different sets of motivators to successfully perform different jobs within a department and having a team with a diversity of talent always trumps putting a bunch of people in a room with redundant skill sets.

On a fundamental level, companies would use the tool by comparing an applicant’s personality drivers to the known requirements for the position they are looking to fill. Consider a Staff Accountant role in this scenario. Ideally, management would look for applicants with detail orientation, extended task focus, and responsiveness to rules and structure. On the other hand, a CFO candidate should display strategic thinking, business acumen, and influential communication as drivers. Even within the same functional area--accounting in this example--different motivators are needed for different roles.

Once the attributes required for success in a given role are known, teams can hire based on objective job models instead of on biased “gut feelings.” And on the subject of job models…

But treating assessment results as a one-and-done value is selling short all the ways psychometrics tools can improve and support overall hiring and talent-management effort. Here are five reasons to incorporate them into the hiring process that go beyond simply identifying strong candidates:

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3. Psychometrics enable management to measure applicants against top performers in similar roles Pre-employment assessment results would be useless if there was no way to sort the information in a meaningful way. The good news is that the practice of psychometrics has been around for quite a while, and extensive research has gone into connecting the results of past assessments with top performance in different jobs and industries. In a study conducted of 300 new sales hires across a range of industries and company sizes, researchers found that companies, by integrating a valid assessment into the hiring process, can double their chances of hiring a top-quartile salesperson. continued... insight

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september 2018

What this means for HR professionals and hiring managers is that their applicants’ psychometric profiles can be compared to top-performance metrics for critical positions. For example, if a company is hiring a salesperson, they can see how well the applicant’s personal drivers measure against the ideal-performer job model. 4. Psychometrics provide a foundation for analytics data This is the age of big data, an unstoppable wave of complex statistical analyses that are informing everything from athletic performance to marketing strategies to the development of artificial intelligence technology. Many companies are collecting and utilizing big data on all aspects of their businesses, including talent management. By collecting psychometrics data on existing team members, it’s possible to identify high-potentials and future leaders, reorganize for improved performance, and spot organizational talent gaps.

In an ideal world, applicants would always line up perfectly with the top-performer job model for a given role. In reality, people have weaknesses and often need coaching and support to overcome them. With psychometrics results on hand, companies skip the painful step of finding out the hard way what new hires’ limitations are. Such data can support onboarding and training plans, coaching and development, and grooming for future promotion. To learn more about how to enhance your hiring process, visit www.calipercorp.com or email info@calipercorp.com. Caliper is a human capital analytics company leveraging decades of data and validated assessment results to predict and select high-quality candidates. Caliper partners with all types of organizations, industries, and sectors - from Fortune 500 companies to small businesses and from government agencies to non-profits.

5. Psychometrics lay the groundwork for employee development Many HR professionals fail to get their money’s worth from assessment results by discarding the findings once the hire has been made. Here’s a secret about psychometrics data: They don’t just show performance drivers and motivators; they reveal inhibitors as well. Imagine someone is hired to oversee a branch location or a small business unit. This individual’s assessment results suggest strong communication, an ability to influence customers, and composure in challenging situations (all desirable attributes in such a role). However, the results also indicate the new hire might have difficulty getting organized and coordinating people and resources. Such findings would enable management to know where the support is needed and where coaching efforts should be focused.

Many HR professionals FAIL TO GET

THEIR MONEY’S WORTH

from assessment results by discarding the findings once the hire has been made. september 2018

insight

Today, more and more people are becoming concerned about protecting themselves and their families from liability exposure and damages they might incur in the wake of a serious accident. More people are purchasing personal umbrella policies to cover those large exposures should the worst happen. The well-trained insurance professional will take great care in procuring such a policy, and with good reason. Significant E&O claims have arisen out of the marketing and procurement of personal umbrella policies and the lack thereof. Letâ&#x20AC;&#x2122;s take a look at some landmines that we have seen blow up on an agent placing personal umbrella coverage. 1. UM/UIM - Does the personal umbrella policy provide coverage above the primary auto policy on an underlying Underinsured Motorist (UIM) or Uninsured Motorist (UM) claim? Personal lines carriers vary on whether their policies cover this exposure. The cautious insurance professional should always check with the umbrella carrier to see if 22

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their policy covers UIM or UM coverage above the primary limits and advise the customer in writing if it does not. Otherwise, if the customer is involved in a catastrophic accident and the umbrella does not provide coverage, they could - and often do - turn to the agent and their E&O carrier for relief. This is a growing area of concern in the E&O world because umbrella claims tend to involve substantial damages. 2. Late notice - Failure to promptly report claims to the carrier is another common trigger of E&O claims. That includes those involving umbrella policies. The agency notifies the primary carrier of an accident or loss involving one of its policyholders, but fails to notify the personal umbrella carrier at the same time. The most common reason for such failure is that the underlying loss does not appear serious at first blush. Sometimes the initial investigation is inaccurate or the facts change as the investigation progresses. Another possible scenario - the policyholder confidently assures the agent that he or she was not at fault for the accident. Invariably, the agency is never made aware of a change in circumstances with respect to the underlying claim and therefore does not report the loss to the personal umbrella carrier. The problem is, most personal umbrella policies contain language requiring the loss to be reported to them as soon as possible or as soon as practicable.

september 2018

nsuring Against Large Losses: What Size is Your Umbrella? By Brian Butcher

To avoid this exposure, it is critical to report every claim to every potential carrier as soon as the agency is aware of the claim. This way, the agency has satisfied their duty to report the claim, eliminating a potential future E&O exposure for failure to timely report. 3. Mind the gap - The thorough insurance professional will determine whether the primary policy limits satisfy the requirement of the umbrella policy. That is particularly true if the primary and umbrella policies are with different carriers. A common example: the customer procures his own primary auto policy from one of several ‘direct’ carriers, while the independent agent places homeowners and personal umbrella coverages. Umbrella policies usually have an attachment point that requires a certain amount of underlying coverage before their coverage will attach. The agent should always get a copy of the declaration pages for all primary policies and should advise the customer in writing of potential gaps in coverage. 4. Changes in circumstances - The agency should handle any policy change request from the customer with fresh eyes. For example, if an insured couple gets divorced, the agent should follow state law in executing any policy changes. Information regarding who is to be insured following the divorce has to be received in writing, clearly stated. Any policy change with respect to named insureds should be communicated to all parties in writing, especially if a separated spouse winds up with less coverage than they had in the marriage.

september 2018

5. Limits - Does the umbrella policy provide the amount of protection needed by the client? For example, is a $1 million umbrella enough? The savvy insurance professional will carefully review the umbrella policy with the client to confirm that the umbrella policy meets the client’s expectations with respect to limits and the exposures it covers. As in many other lines of insurance, personal umbrella policies differ in the amount of limits they offer and whether they “follow form” to cover the underlying risks covered by the primary policy. Placing personal umbrella policies can result in large E&O claims if the placement is not handled with care. Imagine a storm is coming and you hand your customer an umbrella that is too small, has holes in it, or simply does not open. Will they be pleased with the service you provided? Doubtful. Experience tells us that your agency is likely to be soaked financially by the time that customer is through with you. Brian Butcher is a vice president, claims expert with Swiss Re Corporate Solutions and teleworks out of the office in Overland Park, Kansas. Insurance products underwritten by Westport Insurance Corporation, Overland Park, Kansas, a member of Swiss Re Corporate Solutions.

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BE SO GET C

SOCIAL. CONNECTED.

or CONVO 2018 now n-site registration fee.

BIG PARTY Wednesday, Oct. 3 7:00 - 11:00 pm

Food Stations Live Music presented by “The Mix” Drinks Fun & Games

See article by CONVO presenter Chris Boggs, page 26.

The Growth of the

“SHARING”

Property ownership, or rather the desire to own some types of property, is changing. More and more people see less and less the need to own something they don’t use on a regular basis, choosing to rent instead. As the saying goes, “I don’t need a drill, I just need a hole.” The insurance industry needs to prepare for this shift in attitude and desire; and agents must know how to respond. Unfortunately, this article creates more questions than answers. Let’s look at the insurance implications faced by both sides of this “sharing” and renting economy: • The owners; and • The nonowners. The Owners Those who actually own the property or capacity want to derive income from their stuff. Such profit motive has long driven businesses to invest in property to accomplish internal tasks, but now individuals and businesses are looking for ways to earn extra income from under-utilized property.

Collectively the industry seemed to agree that the personal auto policy’s (PAP’s) public or livery conveyance exclusion applied to ridesharing. But the unanswered (or unclear) question was, at what point was the car being used as a public or livery conveyance? Was it: 1) When the driver turned on the app and made himself “available” to those needing a ride? 2) When the driver accepted a request for the ride? or 3) When the driver actually picked up the passenger? Insurance Services Office (ISO) created three endorsements to address the point at which the PAP ceases to provide coverage:

If the Carrier Wants to End Coverage…

They attach the…

When the driver turns on the app…

Public or Livery Conveyance Exclusion

When the driver has logged Limited Transportation in to the app but has NOT Network Driver Coverage accepted a request… (No Passenger)

Personal lines clients are currently earning income from their property such as: • Cars (ridesharing and car sharing); • Homes (Airbnb and others); • Boats; • Tools; • Jewelry; and • Clothes.

Once a rider is on board, the PAP coverage ceases and there is no ISO option to garner coverage.

Commercial lines clients are also profiting from the renting economy, looking to make extra money from: • Idle construction equipment; • Unused production capacity; and • Employees.

Regardless when the PAP coverage ceases (based on the endorsement attached), it’s incumbent upon the driver to confirm that the rideshare company’s policy picks up at that point. There a potential for a gap in protection, but the owner may never know until it’s too late.

The Personal Lines Exposures

This leads to an agent errors and omissions (E&O) question: Should you try to interpret the point at which the rideshare company’s auto policy responds? How comfortable are you explaining your interpretation in court?

Ridesharing Ridesharing was the insurance industry’s first major introduction to the “sharing” economy. The growth of Uber, Lyft and the myriad other rideshare companies required the industry to make a coverage determination and draw a coverage line in the sand.

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When the driver accepts a request but has NOT picked up the rider

Transportation Network Driver Coverage (No Passenger)

NOTE: The wording in the Public or Livery Conveyance Exclusion was incorporated into the PAP base wording effective 9/1/18. Now there are only two available endorsements.

september 2018

AND RENTING Economy

Car Sharing Making money driving people around wasn’t good enough; the next natural step was to turn the car into a profit center when the owner isn’t using it. Car sharing is a bit more difficult to manage from an insurance perspective because: 1) Insurance follows the car; 2) The PAP’s definition of insured includes anyone using the covered auto with the named insured’s permission; and 3) Whether the vehicle is a public or livery conveyance when “shared” is not clear. The concepts of public or livery conveyance seems to intimate the named insured is driving. In car sharing, the owner isn’t even in the car. The key question in a car sharing situation, is the vehicle owner covered for his/her vicarious liability for the actions of the driver/renter? ISO created an endorsement to clarify the answer – the Personal Vehicle Sharing Program Exclusion Endorsement. If this endorsement is attached, there is no coverage for the vehicle owner or the person driving when the vehicle is being “shared.” Home Sharing Airbnb, and similar home sharing opportunities, hit the insurance industry about the same time as ridesharing. The difference, the renting of space in a house (or the entire house) was not as contentious or riddled with questions as ridesharing or car sharing seemed. ISO developed two endorsements for the home sharing client: • Home Sharing Host Activities Endorsement; and • Broadened Home Sharing Host Activities Endorsement. Other Renting Exposures What about all the other “stuff” being rented to others? What possible problems exist for the owner when he or she “shares” his/her boat, jewelry, clothes, tools and anything else that can be shared? Let’s propose a few exposures: • Theft: Is this covered? • Bodily injury or property damage: Could the owner be held legally liable if he/she does not take proper care of whatever is rented leading to injury of the renter or another person? • Value: Does renting the property to someone else affect the value of the property? Will carriers eventually create an actual cash value endorsement for (regularly) rented property?

september 2018

By Chris Boggs

• Coverage territory: Personal property in the HO policy is covered while anywhere in the world. Will carriers create and adopt a narrower extension of coverage for property being rented to others? • Income loss. Even if the property is covered, is there a way for the owner to recover the lost income resulting from the damaged, lost or destroyed property? • Business use. Will business use exclusions apply or be expanded? Owner exposures are not likely limited to these few; there are certainly more. But what about the renter, what exposures does he or she have? The Renters/Non-Owners Does the renter face any coverage issues in this sharing economy? Do currently available “standard” personal lines insurance policies protect the renter? Unfortunately, this will continue as a series of questions because the real answer generally is, “it depends.” • A passenger in a “ride share” vehicle is involved in an accident where the ride share driver is at fault; from which policy or policies can the rider expect payment? The driver’s PAP will NOT respond to the rider’s injury, but his/her ride share company policy might. IF the rider is a named insured on his/ her own PAP or covered as a “family member,” (s) he may be eligible for Medical Payment coverage. Likewise, if the ride share driver’s auto coverage does not exist, the rider may be able to recover from his/her uninsured motorist (UM) coverage. • If the insured rents any type of personal property and subsequently loses, breaks or otherwise causes loss to the rented property, is there coverage? o Coverage C in the HO policy extends coverage to property of others; but the extension is limited to apply “while the property is on the part of the “residence premises” occupied by an ‘insured.’” When taken off premises, the HO policy provides no coverage. o Does the HO’s liability side respond? Coverage E states there is no coverage for, “’Property damage’ to property rented to, occupied or used by or in the care of an ‘insured.’” o The renter’s last hope is the inland marine policy/personal articles floater (PAF). ISObased personal inland marine forms cover only listed items. Unless the non-owned property is listed, there is no coverage. continued... insight

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september 2018

Commercial Lines Happenings Commercial lines clients are starting to explore the renting economy. Like personal lines clients, businesses are looking for alternative methods of generating income; one way is to “rent” underutilized equipment to others. Current and possible exposures have not yet caught the attention of the insurance industry, but they will. Reports are that contractors are renting out their idle construction equipment to other entities. Another renting situation is becoming more common in the manufacturing space. Manufacturers not running a 24-hour production schedule are beginning to rent out the use of their facility to other manufacturers during non-operational periods. They are “renting” their production capacity. Like the contractor situation, the manufacturer earns revenue during otherwise non-productive time and the renting party does not have to invest in a building and its own manufacturing machines.

The saying goes, “I don’t need a drill, I just need a hole.” The insurance industry needs to prepare for this shift in attitude and desire; and agents must know how to respond.

As on the personal lines side, how might these transactions ultimately affect the insurance programs of entities involved in renting or “sharing” - on both sides? What are the coverage ramifications? Street Corner Economics Regulations, lack of regulations, contracts, the lack of contracts and other issues create an interesting insurance landscape in this new renting and “sharing” economy. The change is coming, what is an insurance professional to do? Chris Boggs is the Executive Director of the Independent Insurance Agents and Brokers of America (Big “I”) Virtual University. His current duties involve researching, writing, and teaching property and casualty insurance coverages and concepts to Big “I” members and others in the insurance industry. He will be presenting “A Little of This a Little of That: Connecting Threats to Possibilities in Commercial and Personal Lines Insurance” at CONVO 2018.

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associate bronze level KPA, LLC dba Succedd/KPA Malvern, PA Midwest Insurance Company Springfield, IL NHRMA Mutual Workersâ&#x20AC;&#x2122; Compensation Champaign, IL PuroClean Caseyville, IL For information regarding IIA of Illinois membership or company sponsorship, contact Tom Ross, Director of Membership Services, at (217) 321-3003, tross@iiaofil.org.

Online Education www.iiaofil.org September & October Featured Online Classes General PAP Parts A & B | E&O: Roadmap to Policy Analysis 10 Things Every Commercial Ines Agent Ought to Know Farm Liability | Contractors Liability | Workersâ&#x20AC;&#x2122; Comp Property & Liability Concepts | Personal Auto Who Is An Insured | General Homeowners | Business Income National Flood Insurance Program Basic Course Ethical Dilemmas... Making the Right Choices | And More! september 2018

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